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Wednesday, March 4, 2015

Fair Insurance Code FAQ – Part 1

The FAQ (Frequently Asked Questions) is not part of the Revised Code, just an explanation of the Review process and some of the positions taken by ICNZ on particular issues.

While the FAQ may give an idea of what is intended in the Revised Code, it cannot be used to make an insurer interpret the Revised Code in any particular way.

Parts of the FAQ are purely background information so there is no reason to comment on them. Other parts are revealing, and a few give reason to believe that some of what is promised in the Revised Code is shadow rather than substance.

We will do this in three posts to keep the amount of reading down.

Please click on the link to continue.

FAQ - 1: What is the Fair Insurance Code?

No comment.

FAQ - 2: Why was the Code reviewed?

No comment.

FAQ - 3: What are key revisions that have been made to the Code?

The first paragraph has an element of exaggeration about it: “The Code sets a high benchmark for self-regulation ...”. As the comments on the Revised Code show, the benchmark is neither particularly high nor fairly constructed.

The second paragraph raises the benefit of the Revised Code committing insurers to effective communication with customers. This is demonstrably not the case.

While insurers may feel that sending letters or e-mails when policies are agreed, renewed, or claims are made constitutes effective communication they are dealing with only part of the issue. Missing from the changes is any stated intention to communicate key policy information at the beginning and during the life of the policy: what the words mean and the detail of the information required.

Parts of the Revised Code and FAQ quite clearly show a significant reluctance on the part of insurers to state in full what they need to know, and to be clear about what important terms or expressions mean in their insurance policies (more on this soon).

FAQ - 4: When does the Code come into effect?

No comment.

FAQ - 5: What issues arising from the Canterbury earthquakes experience were addressed in the revised Code?

The issues arising from the post-earthquake experience fall into two categories. The first is about processes – the way claims are handled and what can be done where there are complaints. The second concerns how well customers understood what their policies meant, and the extent to which insurer interpretations differed from the understandings of their customers.

On the process side there have been positive changes that give more clarity about how claims will be handled, what sort of communications customers can expect, and the timeframes to be used.

Nothing has been done to improve the issue of making policies clearer and more specific to allow customers to understand their policies. 

A more interesting question is that of what has been ignored by the Review and omitted from the Revised Code?

Frequent complaints were made post-earthquake about issues concerning insurer conduct and competence. There is nothing about this in the Revised Code. Amongst the issues were:

  • ill informed, poorly and badly behaved staff and agents

  • poor access to insurers

  • the use of some assessors who were inadequate to the task

  • indecisive decision making

  • inability of insurers to communicate in a sensitive way

  • reluctance of insurers to release information to customers

  • reluctance of insurers to comply with dispute processes

  • quality issues with repair and rebuild work organised by insurers

In the Revised Code insurers are committed to high standards and will act in certain ways but there is nothing about treating customers with respect, and ensuring that communications are written by those who understand the circumstances of the customer.

Problems with communications have the potential to increase as insurers centralise their activities and face to face contact becomes difficult. This is not a Code issue, but works against endeavours to provide quality service.

The establishment of a vulnerability index is a positive and important change (Para 38 of the Revised Code).

Reference to Human Rights issues in the third paragraph gives the appearance of window dressing. To quote the paragraph in full:

The Revised Code also recognises that circumstances can give rise to concern about human rights breaches, so information about contacting the Human Rights Commissioner has been included. This will also assist those who may not be aware that some exemptions apply to insurers when cover is applied differently to individuals based on underwriting risk as well as situations where people genuinely feel their human rights have been breached. ICNZ members take their customers’ human rights obligations seriously.

While these are fine words there is only one reference to the Human Rights Commission throughout the Revised Code. Where it does occur, in Para 45, it is merely providing contact details should a human rights complaint arise. There is nothing about insurance cover exemptions in the Revised Code.

While ICNZ members may feel they take customer human rights obligations seriously this is not clear from the Revised Code. For instance, there is no mention of human rights training in Revised Code. See also the comments on Paras. 45 and 10.

FAQ - 6: What other major issues have been addressed in the revised Code?

The second sentence says:

“Sanctions have been beefed up, as well as reporting of breaches and the presence of independent experts sitting on a Code Compliance Committee to ensure it is upheld.”

This is not yet certain as we have still to see the range of sanctions available, how they will be applied to particular code breaches, and whether there will be a compensation component to help compensate for harm done to the customer.  It is also unclear how quickly the process will work 

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