The Reserve Bank says the overall level of compliance with disclosure rules on the part of licensed insurers falls well short of minimum requirements and needs to "markedly improve".
"The level of compliance was generally disappointing," the central bank said after a review on compliance with financial strength rating and solvency disclosure requirements undertaken during February to June 2017. Of 36 surveyed licensed insurers, 53 per cent of participants were assessed as complying at a low or poor level. Only 22 percent of the sample - or eight insurers - performed relatively well, ranking good overall, but with some room to improve further. In this group, only three insurers demonstrated excellent compliance.
The survey was wrapped up after the central bank's six-monthly Financial Stability Report published in May but the report made no mention of it or any concerns around compliance. Rather it underscored New Zealand's financial system remains sound and is operating effectively.
While Reserve Bank Deputy Governor Grant Spencer underscored that compliance needs to improve, he said the survey "should not be read as indicating underlying viability issues".
The central bank said the most common issues were around not meeting the requirements to disclose the financial strength rating in writing prior to policyholders entering into and/or renewing a contract of insurance; solvency disclosure in financial statements being incomplete or incorrect; and website disclosures being incorrect, incomplete or not updated within the required time-frame.
Insurers that performed the worst have been provided with specific feedback and asked to provide a written response on the issues identified, the central bank said. Other insurers have been informed of their assessment and urged to refer to this report to identify improvements that can be made.
"The Reserve Bank will undertake further assessment of compliance with disclosure obligations to ensure that standards improve and compliance obligations are being met," it said.