Fair insurance
Why we need to fix the insurance market.
Update: Watch this space – a draft copy of the Insurance Contracts Bill has been released for comment. We’ll be putting in a submission and updating this page soon.
Consumers are paying more than ever for insurance. But they’re not getting a fair deal.
Our latest survey research found:
Our investigation also found consumers who bought insurance through an adviser or broker were getting a worse deal. They were significantly less likely to be satisfied with the service they got compared with those who bought direct from an insurance company.
For an industry that markets its products as providing “peace of mind”, trust in insurers is low.
Our research found just 13% of consumers strongly agreed they can trust insurance companies to give them good advice.
An insurance policy should clearly set out what your insurer will provide if you need to make a claim.
However, our survey found only 18% of consumers felt confident they fully understood their policy.
For many, complex terms and conditions made weighing up different insurers’ policies hard work. One in four said they found comparing insurance companies and policies difficult.
The result for consumers? It’s that much harder to shop around and make an informed choice about the best policy.
Comparing complex terms and conditions isn’t the only issue consumers face. Twenty-four percent had experienced a problem with their insurer.
The most common complaint was having a claim unreasonably declined. Insurers can decline a claim if they think the customer hasn’t told them something they consider material. It doesn’t matter whether the omission was innocent or deliberate.
While other countries have beefed-up their laws to protect consumers in cases of accidental or innocent non-disclosure, that hasn’t happened here. The result? More claims are likely to be declined because of innocent slip-ups, whether it’s forgetting to disclose an old sports injury to your life insurer or a speeding ticket to your car insurer.
Poor customer service and steep premiums were the next most common causes of complaint.
Pressure to accept a settlement with their insurer was reported by one in 10 of those who experienced a problem.
Six percent had been sold a policy that wasn’t suitable for them while 5% had been stung with incorrect charges.
Consumers who buy insurance through an adviser or broker are more likely to feel they’re getting a raw deal.
Our research with Consumer NZ members found those who purchased insurance through a broker were significantly less likely to be satisfied with the service they got, compared with those who bought direct from an insurance company.
This difference was the most pronounced among respondents with life insurance policies.
Just 28% of those who bought life insurance through a broker were happy with the customer support provided, compared with 44% who bought direct from an insurance company.
Similar differences were seen in satisfaction ratings for price and policy information. Only 34% of those who bought life insurance through a broker felt their policy was easy to understand, compared with 49% of respondents who bought direct from an insurance company.
Why the difference? Insurance brokers typically work on commission. In the life insurance industry, these commissions can be as high as 200% of the premium. Bonuses for meeting sales targets and other incentives can also be paid.
Commission-based selling inevitably raises the risk an adviser will put their interests ahead of the consumer’s. Our research suggests commission-based selling is leading to less satisfied customers.
It seems to have been a great way for advisers to boost their income by getting clients to ‘upgrade’ their policies … my adviser told me [that I’d] be best to move my life cover – he would save me quite a lot on premiums … now my life cover is nearly twice the price!
I have recently discovered that I have been overpaying on my insurance for years and was sold two different kinds of life insurance policies. I’ve been over-insured for at least 15 years.
I stupidly got conned by a broker and changed [insurers] (being told we would save $100 per month!!) WRONG! We saved $20 per month and then, after the first year, our premiums cost us nearly $40 per month extra!!
It's too hard to compare prices with other insurers. I suspect I'm paying too much but don't know how to find out prices for alternatives. None of them publish them on the website. Also too difficult to compare the cover.
It really is quite impossible to compare any insurance product with constantly changing market offerings, ultimately measured only by response to honest claims.
Hate the fine print. Too hard to understand especially when trying to compare one with another.
[My insurer] rolls over our policy every year, premiums are increased and yet we have never been contacted as to whether we have enough cover.
Over the past decade, insurance costs have risen sharply. Statistics NZ data show a 40% hike in the combined household cost of car, contents, home, health and life insurance cover.
The insurance industry needs to work better for consumers. We’re proposing simple changes that will help ensure consumers get a fair deal and advice that isn’t skewed by commissions.
Consumer NZ is non-profit. To help us get a fairer deal for all New Zealand consumers you can make a donation. We’ll use your contribution to investigate consumer issues and work for positive change.
As a member and fan of Consumer, I'm disappointed with Consumer's comments in relation to insurance. Your survey research doesn't appear to be well designed and you make conclusions that aren't fully justified by the findings. There are also lots of changes relating to insurance taking place, that have been underway for a long time. For example, the Financial Markets (Conduct of Institutions) Amendment Bill (CoFI) and the Insurance Contract Law Review. The Financial Services Legislation Amendment Act 2019 (FSLAA) also provides a lot of consumer protection in relation to financial advice relating to insurance that didn't exist before. If Consumer is promoting this as a current campaign, can it please acknowledge these changes and also what Consumer wants to see in relation to these regulatory changes? Also, does Consumer believe it is helping consumers out by dissuading people from receiving insurance advice via an adviser or broker? I am NOT an insurance adviser/broker, but know a fair amount about insurance – and use an insurance adviser myself, because I know that it's a complex area and that it's dangerous to pretend otherwise. I'd also urge friends/family members/loved ones do the same. More of my thoughts are here: https://wealthandrisk.nz/anti-consumer/.
My Rothbury broker recommended for me to have NZI middle tier insurance called Echelon (who knew NZI has three tiers?) which has benefits lower than Consumer has published for other companies. Little wonder they rank at the bottom of your comparison table. I have been with Rothbury's for 7 years with no claims and the service I get is a brief email just before my annual premium is due.
This year I saw that the "agreed price" I had been required to nominate if my car was written off was too low as there is a shortage of secondhand and new cars. I suggested a higher agreed price be looked at. My broker came back around a month later with a much higher fee for the increased agreed price. I decided to revert to my original cover and the broker said she would cancel. I checked the Rothbury app. on my phone and my motor insurance was there and remained the same.
On renewal this month I found that my Motor Insurance had been cancelled for six months. Perhaps the misunderstanding was mine but it shocked me to think I had been driving six months uninsured, fortunately without an accident.
I have now changed my house, contents and motor insurance to a company recommended by the Consumer responses in the recent survey and I have much better cover at a considerably lower price. The new company does not even require an agreed price on my car as it pays "Fair market price"! I also have a much higher value on my house rebuild by using the free core logic tool.
Thank you Consumer for your survey and jolting me to change.
I encountered this problem: "The most common complaint was having a claim unreasonably declined. Insurers can decline a claim if they think the customer hasn’t told them something they consider material. It doesn’t matter whether the omission was innocent or deliberate."
I explained to them and submitted the previous records, but they still rejected me. Their work attitude is nasty, and they often can’t contact the staff responsible for handling insurance.
I'm concerned many houses in NZ do not have adequate 'rebuild' or replacement cover. With building costs subject to high inflation, the calculator used by insurers is significantly behind the actual cost if a house was destroyed. We got my own valuer and while we are paying more for cover, at least I feel we might get something close to what we would need.
They have always been great to deal with. No pressure at all to switch to them when we enquired but were lower cost than State for our rental property when we had it. Quick to answer phone and New Zealand accents. No problems with speed of response and paying for repairs. They did recently slip up on our change of address, completely admitted it, then gave us a handsome credit. And, the profit stays in New Zealand.
LANTERN NZ IS OUR COMPANY FOR CONTENTS AND CAR
TRIED PHONING THEM TWICE YESTERDAY AND AFTER FRUSTRATING WAIT WITH COMMENT HAD TO DISCONNECT BOTH TIMES AND SAME TODAY
“THE STAFF ARE BUSY ATTENDING OTHER CUSTOMERS PLEASE CONTINUE TO HOLD AND WE WILL BE WITH YOU SHORTLY “ WAIT HOW LONG. WHY NO WAITING NUMBER AND NO CALL BACK
YESTERDAY I FOLLOWED UP WITH AN EMAIL AND RECEIVED AN AUTOMATED REPLY
IT MAY TAKE UP TO 15 DAYS AND
IF IT IS URGENT TRY CALLING ON PHONE
I THINK THEY INSTEAD SHOULD TRY REACHING THE MOON
VERY POOR SERVICE,
REGARDS,
AMARJIT
TO OTHER
The only trouble I've had with my insurer is when my car was hit from behind when I stopped at a pedestrian crossing. The other driver asked me why I stopped too quickly - he'd been too close behind me for a while. Had suspicions about his character by his aggressiveness, so reported the accident to the police. Then my insurer said I would have to pay the excess! I said it wasn't my fault and had reported it to police. I think they (insurer) already decided he was not going to pay up because he was uninsured, and put the burden on me. I rang the police back and after talking with them - they said that the insurer had to pay - and I should not have to pay the excess. Called insurer back, told them what police said and lo and behold - I was off the hook for excess! Just an example of how they will try to get out of whatever they can.
having paid for full insurance cover on her house, she has a earth slip in the basement. The EQC paid out $27K (take it or leave it) for repairs that will cost $45K. Her insurer will not top up the difference. Neither EQC nor her insurer care that she is being so poorly covered despite her full cover and perfect payment of the premiums. In fact her insurer threatened that if she did not drop her challenge then they would note issues on the cover that would cause trouble for her in the future! Really appalling.
Kiwis should be very careful when purchasing travel insurance, particularly travel insurance through Australian company Flight Centre as agents for CoverMore which is really Zurich Australia Ltd. Zurich is notorious world wid
e for declining to pay, ignoring, stalling and delaying claims through a variety of administrative and bureaucratic ruses. The lack of proper governance and regulation is exemplified by the failure of the Insurance and Financial Services Ombudsman to properly hold the insurer to account by meekly accepting week and pathetic assertions as facts. BEWARE. I spend many thousands annually on insurance. I'll be asking my property and marine brokers just who is the ultimate insurer in future. If it is Zurich Australia I'll change, it's not just a matter of price, it's a matter of trust.
Paul Unger, Napier.
I have experienced flight centre staff making mistakes & errors, Then not admitting to or taking on board learning or that the they have made mistakes, their management do not hold them to account. All of this ensures that offen flight centre selling in travel insurance is often no more than $ collection with often no guarantee that the customer has good and proper cover for what they think they have purchased...
Likely for flight centre this is never found out... as most insure is not claimed against...
I have just had a 43% increase across the whole policy for Landlords insurance. The only disclosure I have been given is that the EQC cover increased by 33%, but across the whole policy that only equates to a 5% increase. I cannot get an explaination for where the other 38% increase has come from. It turns out that this is across the board from all insurance suppliers, I could not get the policy premium down by switching suppliers. This in turn means that we will need to increase weekly rent
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