Insurance companies will have greater responsibilities to their customers and will no longer be able to reject claims based on unfair contract terms under changes proposed by the government.
Insurers will have fewer options for getting out of paying a claim as rules surrounding unfair contract terms are tightened. Photo: 123RF
The government confirmed on Wednesday it will push ahead with a rejig of the law governing insurance contracts, after a review carried out by officials.
Commerce and Consumer Affairs Minister Kris Faafoi said the law was outdated and difficult to follow.
"This means consumers can be buying insurance products they don't understand, which can be poorly suited to their needs, and can leave them in the dark about what they should disclose to their insurer."
Changes to the law would include putting the onus back on insurers to ask consumers the right questions when they sign up new customers, rather than relying on consumers knowing what to disclose.
The rules surrounding unfair contract terms would also be ironed out, so insurers would have fewer options for getting out of paying a claim by using a loophole in the law.
Insurers would also have to make sure policies were written clearly and would be required to respond proportionately if a customer fails to disclose something they should have disclosed.
The Insurance Council welcomed the changes and agreed the law was due for an update, but said many of the changes were already covered by the industry code of conduct.
It indicated it would work with the government on drafting the legislation.
"Consultation will allow us to ensure the strengthened consumer protections in insurance contracts provide clarity and certainty for all parties," ICNZ chief executive Tim Grafton said.