The Reserve Bank of New Zealand (RBNZ) and Financial Markets Authority (FMA) recently released their findings on life insurers’ responses to the joint Conduct and Culture Review. The regulators were disappointed by the information provided. Both the RBNZ and FMA say the insurers have much work to do in order to address weak governance practices and ineffective conduct risk management.
Sixteen life insurers provided work plans to the regulators outlining the steps they will take to improve their existing compliance and risk management processes. The plans varied widely in terms of comprehensiveness and maturity.
The quality and depth of the systematic review of policyholders and products also varied significantly. And though some insurers have committed to removing sales incentives for employees and managers, not all committed to removing or altering indirect sales incentives.
In response, Adrian Orr, Reserve Bank Governor said, “Good governance within insurance firms requires the effective management of conflicts of interest. We need to see much better systems and controls in place to manage the inherent conflicts where advisers or sales staff are offered incentives to sell or replace insurance policies.”
The FMA and RBNZ have asked the insurers with less than complete work plans and who didn’t perform a review of policyholders and products to remedy those issues by December 2019.
For more information, read the regulators’ press release and a recent article in Regulation Asia.