WITH REGULATORY changes to the NZ insurance industry imminent, insurance law expert Russell Adams delivered insights drawn from the Australian reform experience during a visit to NZ on 10 March.
In an interview with Lawyers Weekly’s sister publication NZ Lawyer, Adams, managing director of Phillips Fox’s insurance and risk management team, said the two main areas of recent regulatory reform in Australia were the introduction of a licensing regime for financial intermediaries and the tightening of disclosure requirements under the Financial Services Reform Act 2001 (FSRA). He described both changes as “significant and intense”.
In NZ, the Law Commission’s review of the Life Insurance Act, passed in 1908 and based on even older law, recommends that “the regulation of life insurance should be consistent with the regulation of other financial products”, but does not recommend an Australian-style licensing approach.
A taskforce has been established to examine the regulation of financial intermediaries. It has been charged with a review of the industry, identification of issues, and suggestions for change, which must pass a cost-benefit test. The taskforce will provide its recommendations in May.
All expert commentators are of the view that it remains to be seen whether NZ will follow the same regulatory and legislative reform path that has unfolded in Australia, Adams said, describing the Australian experience as “instructive” and “not without its challenges”.
“In an environment where the effects of legislative reform are still being understood and many major insurers continue to consolidate, a number of people in the insurance industry would say some of the reform and the regulatory requirements on financial intermediaries and service requirements now in place in Australia have gone too far,” Adams said.
While the Australian reforms were necessary, Adams said, they have been difficult to implement and most of the “pushback” around the reform process had arisen because of the complexity of the legislation and its requirements.
Many financial intermediaries, however, are now complaining of being “buried in a sea of paper due to all the procedures and requirements they have to ‘tick the box’ on,” Adams said. “This makes it difficult to do business in an efficient and effective way.”
Adams said Phillips Fox’s major general insurance clients, including AIG and Vero, had developed an interest in operating across the Tasman. He said they see “real benefits from an operational as well as from an information-sharing perspective in having a seamless existence for their trans-Tasman businesses, if not integrating them”.
Commenting on recent publicity of the move to a single trans-Tasman market economy, Adams observed that at the government and business levels, “there seems to be a real desire to get greater benefits out of the two countries operating more closely”.
Andrea Ruffell is editor of Lawyers Weekly’s sister publication NZ Lawyer