Insurance & Financial Services Ombudsman (IFSO) looks forward to updates in legislation regarding 'non-disclosure', and other news
Insurance & Financial Services Ombudsman (IFSO) Karen Stevens is looking forward to the Insurance Contracts Bill. The bill aims to update and consolidate NZ’s existing insurance laws and make insurance contracts easier to understand and fairer to consumers.
“As long as they don’t deliberately try and mislead the insurer by giving them wrong information or withholding information they know about, then they should not be penalised. At the moment, the law [is that] it doesn’t matter whether or not you innocently failed to disclose.”
Under the law in place at present, forgetting is enough to be denied compensation…. “If they actively mislead the insurer, then the insurer can respond by avoiding the policy or declining the claim. But if they don’t actively mislead the insurer, then the insurer can’t take that very harsh action that they currently do now.”
According to the ombudsman, over the years they have seen a lot of policyholders who have not actively tried to misrepresent the situation but have suffered the consequences of non-disclosure…. “That means that they’re uninsurable. As well as being uninsured, they’re uninsurable.” …
“Some insurance contract terms will be deemed to be unfair going forward, and I think that’s going to cause a degree of consternation to insurers in terms of looking at policies carefully and working out how that’s going to impact on the current policy documentation.”
“… the government has said that to help consumers better understand what their policy covers basically, they want them to be presented and worded clearly. So, the government’s thinking about how to regulate in that sort of space to make sure that they are easier to understand.”
We asked Karen Stevens to give examples of possibly unfair contract terms. Of course, this is difficult to do as a category, because ‘unfair’ will be judged in the courts in ways which can only ever be specific to a contract and a specific person. Having said that, what emerges from our discussion and some of the case examples provided is that blanket exclusions, for example, for mental health conditions; or all pre-existing conditions; or blanket provisions allowing an insurer to revise terms and conditions (such as changing the definitions for trauma or health conditions that define the threshold for payment) have been successfully challenged overseas, like the example here. Following our review of these issue in our last quarterly life report this suggests that it will be sellers of short-form underwritten contract that will probably have the most challenges in managing the transition required by the new law.
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