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NZILA President’s message – Petra Lucioli

In this edition of Resolve, we highlight the changes that will come into effect with the passing of New Zealand’s Contracts of Insurance Act. 

It’s one of the biggest changes to our industry in recent history, and I’d be lying if I said I didn’t have reservations about how these changes will all play out.

Consolidating our insurance legislation into one Act makes things easier for we lawyers, which is certainly a plus. And putting the onus of Disclosure of Information on insurers is a win for consumers.

However, for those of us that work in liability insurance there are some red flags, particularly around notification processes.

Under the new laws, insurers can decline a claim based on late notification of circumstances. Under the current law, if something happened three years ago and you didn’t advise your insurer, and then a claim is brought against you in relation to that, the insurer would still cover it provided there hasn’t been any prejudice.

Now insurers can decline the claim on the basis that they hadn’t been advised of the issue. This is a critical change for me and although it’s theoretically a change that will be beneficial for insurers, I think it's going to be disproportionately unfair on customers.

Typically, insurers will put a provision in a policy which says you must notify them as soon as possible and, in any event, within 28 days of the end of the policy period. That’s a typical provision in New Zealand, however that provision doesn’t work in a liability policy.

To put this into perspective, over the last eight years three percent of claims to Delta Insurance have been paid out on a late notification – these claims would likely be excluded under the new rules.  And while that percentage is small in comparison to the bulk of claims received, those clients would be seriously impacted under this legislation.

This change also creates complex problems for people wanting to change their insurance provider, because they will need to advise the company of every potential issue to ensure they’re covered.

It’s what we call a “laundry list” – tiny issues that might turn into something but must be disclosed on the last day of the policy to make sure they are covered in the event something happens.

It’s a poor outcome for both the customer and the insurer, because they must address the laundry list which, at the end of the day, is probably going to be utterly irrelevant.

I question if there are any winners in this scenario. While the Act has been passed, it won’t be brought into force until a series of regulations have been drafted. Hopefully those regulations mitigate these negative impacts so that our Contracts of Insurance Act is truly beneficial to all.