Jacinda Ardern has slammed New Zealand's life insurance industry saying "some practices are simply shocking" after a damning report focusing on the industry was released today.
Her comments come as the Reserve Bank and Financial Markets Authority conducted a review into the industry, following multiple issues raised in Australia.
The Government says they will now act to protect consumers using banks and insurance companies.
Speaking to media in her first post-Cabinet address of 2019, Jacinda Ardern didn't hold back on her assessment of New Zealand's life insurance industry.
"We are all concerned at what the Reserve Bank and the FMA report into conduct and culture in the life insurance sector found.
"To hear that our consumers are paying effective commissions that are double and even four times that of many countries seems to me to be fundamentally wrong," Ms Ardern said.
"My colleagues have also made me aware of some practices that are simply shocking.
"Life insurers need to be doing much better by the customers they serve."
A statement released by the Government today promises to look into the concerns raised by the report.
"There are gaps in the regulation of the sector that are exposing consumers and we are going to address them.
We need a regime where banks and insurers are focused on good outcomes for the consumer and are not conflicted by sales rewards, Kris Faafoi, Minister of Commerce and Consumer Affairs says.
"The report has found New Zealand life insurance industry has a culture that prioritises sales over customer interests and customers deserve better.
"Cabinet today agreed we are going to get rid of sales incentives in the insurance industry that are driving behaviour that is not in the best interest of consumers."
Minister of Finance Hon Grant Robertson outlined a list of things the Government wants to see changed in the life insurance industry.
"We want to see:
- Clearer duties on banks and insurers to consider a customer’s interests and outcomes, and to treat customers fairly.
- An appropriately resourced regulator to monitor the conduct of banks and insurance companies, with strong penalties for breaching duties.
- Changes applied to both banking and insurance, since the issues identified in both are similar. There are also overlaps between the sectors, with banks often selling insurance products.
- A strong response to internal sales incentives and soft commissions.
According to the Government's statement today: "A comparison of life insurance commissions worldwide shows New Zealanders are paying a high rate of commissions – more than 20 per cent of the cost of the premium.
"In comparison, consumers in Many European countries pay less than 10 per cent, and in Australia just over 10 per cent. Annual premiums paid by consumers for life insurance total $2.57 billion, with 4 million life insurance policies in New Zealand."