Among the new measures set to be implemented are a new conduct licensing system, which will affect insurers, banks and non-bank deposit takers (e.g. credit unions); a new regime under which all such entities will be mandated to meet the highest standards of treatment of customers; a ban on sales targets-based incentives. In order to meet the high standards of customer service required under the new regime, institutions will need to implement specific policies and processes, from scratch if necessary.
Additionally, the government said that the new regulations will be strongly enforced – the Financial Markets Authority (FMA) will be granted powers to direct financial institutions to change their behaviours if necessary, and licenses can be suspended, or conditions changed, in the event of non-compliance.
“Reviews by the Reserve Bank of New Zealand the FMA have also highlighted other problems in the banking and insurance sectors,” said Commerce and Consumer Affairs Minister Kris Faafoi, “which include weak systems for managing conduct risks and ensuring good conduct is a priority in their business. We will soon introduce new legislation to Parliament which will require insurers, banks and other financial service providers to put systems in place to make sure they treat their customers fairly.”
The Insurance Council of New Zealand said that it and its members were broadly supportive of the proposals, with the Council’s Chief Executive Tim Grafton saying that the changes are being introduced ‘at a time when it’s clear some parts of the financial services sector are not meeting the conduct standards expected’.
“General insurers support legislative changes to achieve this,” he said, “and are looking forward to seeing the detail of the legislation.”
Financial institutions are not always best pleased to receive government attention that might be uncharitably characterised as interfering, so it is positive to see a welcome reception to these proposals – especially if the results turn out to be improved processes and happier customers.