People who are considering taking up a financial relief offer from their insurer need to be wary about the potential fishhooks, the industry regulator is warning.
Insurers have responded to pleas for help from Kiwis left financially struggling by the coronavirus lockdown by offering a range of financial relief options.
Clare Bolingford, director of banking and insurance at the Financial Markets Authority, said while she had been impressed by the response of the industry consumers needed to be careful when taking up the offers.
"We all know when we are under stress our perception narrows, and we might not take it all in. So it is really important customers ask questions."
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She said people should look at what a relief offer might mean in practice.
It was unlikely people's coverage needs had changed much unless they had sold a car or house.
Instead, it was more likely to be people's financial circumstances that had changed.
"We think it is important they need to ask what they will be covered for so there are no nasty surprises."
One example where there were differences between the insurers was premium holidays.
Some insurers were offering to put a premium on hold for a certain amount of time but that could mean a person didn't have any cover for that timeframe.
Others were offering a premium deferral could mean the consumer was covered but may face a bill later.
She urged people to check how long a policy could be put on hold for and whether they would still be covered during the suspension.
Bolingford warned some consumers may need to fill out another declaration form if the policy is suspended for some time as things may have changed such as their health, over that time.
"You might need to fill our more declarations and it could change the cost."
She said people should get any changes spelt out in writing which would allow them to reflect on it at a later date when they may be calmer and less stressed.
Ditching the insurance
Some who had lost their job may be looking to ditch their insurance to cut costs to a minimum so they could survive off the job seeker benefit or the employer wage subsidy.
Bolingford acknowledged some would be making hard choices.
"It is really difficult when you have got to make hard choices between paying for a protection product for if the worst were to happen and lining that up against paying the mortgage or getting food on the table."
She urged people to hold onto their insurance if they could but said there would be situations where people had to cut costs.
"If you do have access to a financial adviser it will be something an adviser can support them through."
She said consumers should also consider whether their situation was just short-term or for a longer period.
There was no one type of insurance that people should prioritise over another.
"It comes down to personal risk and how much people are willing to take on."
Before the Covid-19 coronavirus pandemic, the FMA had been working with the industry to prevent churn where consumers are moved from one insurer to another allowing the adviser to earn a commission.
This has been of particular concern in the life insurance space.
Bolingford said there were genuine reasons for switching providers but consumers' insurance needs were unlikely to have changed.
"We would be surprised if we saw a higher level of churn."
But it was a risk that the regulator would be watching out for in the future.
It would also continue to watch the behaviour of insurers.
"We feel they have responded well but I think because we will continue to see an impact from lockdown what we want to see over the coming months, is this raised game continue."
She said relief offers may change over time.
"What we want insurers to continue to think about is the fact this might not be the end of the piece. They need to keep up the commitment to help customers."
And particularly those who were in vulnerable situations, she added.