Life insurance firms ordered to prove themselves clean

Regulators are asking for a written response that outlined the actions the insurer had taken to identify and address conduct risk from the company's actions. Photo / Getty Images

New Zealand's life insurance bosses have been told to prove there are "no material conduct issues" within their businesses by regulators.

Financial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr have written to the insurers demanding a response by June 22 in a bid to get the industry to prove it is clean in the wake of damning revelations from Australia's Royal Commission.

The letter follows an similar move by the regulators earlier this month when banks were called to Wellington for a meeting, sent a letter and told to respond in writing by May 18 to requests for information.

In the letter to insurers Everett and Orr said they had met with the industry body, the Financial Services Council, and discussed issues raised at the Royal Commission which related to life insurance providers.

"At the meeting we reiterated our views that the nature and extent of the issues within financial services in Australia and the obvious cross-over in terms of entities, people and practices into New Zealand demands a strong response from the industry here, and from the regulators."

The regulators also made clear the need to respond quickly.

"We consider that the window for you to demonstrate to consumers, regulators and other stakeholders that they can have full confidence in the financial services industry in New Zealand is narrow, and you will have seen we have encouraged proactive leadership from the retail banking sector."

The regulators have asked for a written response that outlined the actions the insurer had taken to identify and address conduct risk from the company's actions, including product design and distribution, incentives setting and claims performance.

"This should include any 'gap analysis' work against the expectations set out in the FMA's Conduct Guide."

They also want to know about any specific plans or actions taken to respond to the issues and themes which had arisen from the Royal Commission, any other work being done to identity potential conduct and culture risk and any work to remediate identified issues where conduct has resulted in "detrimental outcomes for customers".

New Zealand's life insurers are already facing pressure from the Financial Markets Authority to consider how they incentivise advisers to sell their products with the regulator highlighting $34 million in "soft" incentives including $18 million on trips spend by nine big life insures over a two-year period.

New Zealand's major life insurers include AIA, AMP, Asteron Life, Fidelity Life, OnePath, Partners Life and Sovereign.