Life Insurer Conduct and Culture

Aim: To present the findings of the review, undertaken by the Financial Markets Authority (FMA) and Reserve Bank of New Zealand (RBNZ), of conduct and culture in the New Zealand life insurance industry, and describe the FMA and RBNZ’s expectations of life insurers in addressing the identified issues relating to conduct and culture.

Outcomes: At the end of this module the reader will understand:

  • The serious weaknesses in the approach of insurers to identifying, managing and remediating conduct risks and issues;
  • The importance of delivering good customer outcomes and putting customer interests first;
  • The importance of conduct and culture governance;
  • The importance of conduct and culture risk management within the life insurance industry; and
  • The FMA and RBNZ’s recommendations for life insurers.

Abstract: The report forms part of the FMA and RBNZ’s broader investigations into the financial services industry. The review was undertaken to identify whether there are widespread conduct and culture issues within New Zealand life insurers and to understand how life insurers identify and remediate those issues.

Although the regulators did not, on the basis of the evidence and information presented, identify widespread incidents of misconduct of the kind uncovered in the Australian Royal Commission, their overall view was that life insurers have been too complacent when considering conduct risk, too slow to make changes following previous reviews by the Regulators, and not sufficiently focused on balancing customer and shareholder interests.

The report presents the regulators' findings under four themes - delivering good customer outcomes, conduct and culture governance, conduct and culture risk management, and issue identification and remediation.

The regulators have stated that all insurance sectors (not just life insurers) should be actively considering conduct risk within their business, and considering and acting on the relevant recommendations in the report.