Major problems in life insurance industry

Consumer NZ is calling for reform of the insurance industry.

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Major problems in the life industry insurance are leading to consumers being sold poor-value products and paying higher premiums.

Consumer NZ chief executive Sue Chetwin said the Financial Markets Authority (FMA) and Reserve Bank review of the industry has found “extensive weaknesses” in the life insurers’ systems and a lack of focus on good customer outcomes.

Ms Chetwin said the review confirms problems in the industry that Consumer NZ’s own research has highlighted, including the major risk that commission-based selling has for consumers.

“Sales incentives increase the risk consumers will be sold a product simply because the sales rep will earn another commission. There may be no benefit to the consumer at all,” she said.

The report also singles out products, such as funeral cover and credit card repayment insurance, that provide very poor value to consumers.

“Our investigation of these products shows they provide limited benefit and can cost consumers more than the value of the cover.”

Ms Chetwin said major changes were needed in the industry to improve consumer protection. This needed to include stronger supervision of insurers and a shake-up of complaints schemes for the industry.

“The review shows insurers are doing an appalling job at addressing problems in the industry. The protections so far put in place for consumers aren’t working and we can’t rely on the industry to put its own house in order,” she said.

Insurers have been given to 30 June 2019 to report to the FMA and Reserve Bank on what they’re doing to address problems.

Consumer NZ is calling for reform of the insurance industry to be a priority.

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David C.
13 Mar 2020
Funeral Cover Insurance

I have insurance cover for my wife and myself with Cigna. The policies have been in force for a good number of years with premiums payable untill the life assurred reaches 85 years or if one is lucky enough to die before reaching that age. However, if a claim is not made and one lives past the premium cease date (age 85) the life assurred will have paid more in premiums than the sum assurred which is a blatant rort .For example my policy commenced on the 10th of June 2009. My monthly premium is $43.48 payable to the 28th June 2023 This represents approximately a total paid to Cigna of something in the region of $7304.64 assuming I am alive at 85 years in which I fully intend to do. Cigna have advised that the sum assurred of $5000.00 will be paid to my estate only and the balance of total premiums paid is forfieted and will be retained by Cigna.
This is blatant self indulgent result favouring Cigna and they should be able to advise why this is so! I have written for an explanation and as yet I have had no response. On reflection I am not surprised as I had to draw their attention to a condition that compromised what they were offering in their printed brochure at the time I took out the policies. I received a reply from their Head Office thanking me for pointing out this error and was advised that they would rectify their mistake. I cannot verify that they ever went ahead and did that, I rightly assumed that Cigna being a an insurrance
coy of merit would do it anyway! However, at the moment I am not sure if in fact they did. I have had 15years being a life agent for a large life coy and never did I come across where premiums paid would exceed the sum assured. To me this is a matter I believe should be investigated and a satifactory answer is achieved. Particularly as there is a competitor coy advising fairer and better cover arrangements than Cigna.
I await your response and answers please. I also intend advising the Insurance Ombudsan of my concerns if you believe my concerns are justifiable.
Sincerely,
David Christie