Insurance Council of NZ Speech

Commerce and Consumer Affairs

ICNZ Speech 7 March 2024, Auckland

Acknowledgements and opening

  • Mōrena, ngā mihi nui. Ko Andrew Bayly aho, Nor Whanganui aho. 
  • Good morning, it’s a privilege to be here to open the ICNZ annual conference, thank you to Mark for the Mihi Whakatau
  • My thanks to Tim Grafton for inviting me here to speak to you all, and my thanks to Tim for the great work he has done as ICNZ’s Chief Executive over the past 12 years and the significant contributions he has made to the development of government policy. It is only appropriate to also acknowledge the ICNZ board at this time. And particularly Amanda Whiting as the Chair.
  • And coming in to take up the mantle as Chief Executive, I extend my congratulations to the Honourable Kris Faafoi.
  • To Mark Solomon and all of the sponsors thank you all
  • I am eager to be working with you all over this term, and to help support your mission to improve the insurance sector for New Zealand.

My background

  • As you may be aware, before entering politics, I was involved in the financial services sector and I owned  a merchant bank, and a number of other businesses. I additionally held a number of board roles. I also undertook a number of mergers and acquisitions across the insurance sector. 
  • I am committed to serving the best interests of all New Zealanders through promoting financial responsibility, increasing productivity, facilitating competition and innovation, and enabling small businesses to thrive.  
  • As a keen collaborator, I want to hear from you about how we can drive positive change and find effective solutions to the challenges facing Kiwi businesses and communities.

State of play

  • New Zealand has faced its fair share of challenges over the last few years, especially last summer with the Auckland Anniversary floods and Cyclone Gabrielle wreaking havoc. I had more than my fair share in my local electorate.
  • During those tough times, the insurance industry stepped up to provide invaluable support and security to Kiwi businesses and communities grappling with those weather events. It is clear that, as a country, we will need that security more than ever, as we face increased frequency and severity of climate events and other natural disasters.
  • Looking ahead, it’s evident we need to remain adaptable to meet the evolving needs of Kiwis, Kiwi businesses, and New Zealand itself. The insurance industry has a big role to play in this.
  • Today’s theme of ‘challenges and opportunities’ has hit the nail on the head. While insurance affordability and reinsurance are big challenges, how we overcome them will take some creative thinking. It’s great to see the sector coming together to tackle these challenges head on.

Government priorities

  • I want to talk about some of our broader economic priorities that are shaping our agenda as a Government. In our first 100 days, we have been focused on laying the groundwork for a strong and sustainable economic recovery, one that creates jobs, boosts productivity, and ensures that all New Zealanders have the opportunity to prosper.
  • Our 100-point plan for Rebuilding the Economy outlines a range of initiatives aimed at achieving these goals, from investing in critical infrastructure, to cutting red tape and supporting small businesses.
  • We have already made great progress on these initiatives.
    90-day trial periods have been re-enacted. Fair pay agreements have been repealed. The Reserve Bank’s dual mandate has been amended to focus only on reducing inflation. 
  • But there is still plenty to be done, including in the insurance sector, and we’ve already kicked into gear work on these.

Business Payment Practices Act

  • I know the ICNZ has been looking for some news on the Business Payment Practices Act.
  • You may have seen 10 days ago I announced that the Government will repeal the Business Payment Practices Act, for a few reasons. The Act stood to impose unnecessary compliance costs on thousands of businesses without speeding up business payment times, backed up by an independent review of Australia’s scheme.
  • However, I think more can be done to improve payment times without regulatory intervention – and have a plan for this. We will enforce  government department payment targets, extending these to some crown entities, encouraging the adoption of eInvoicing,by requiring government agencies to pay within 5 working days,  as well as working with BusinessNZ to establish a voluntary code for larger firms to pay more regularly.
  • I am pleased to announce the bill was formally repealed yesterday.

CCA portfolio priorities

  • I want to give you an idea of what delivering the Government’s wider priorities through the Commerce and Consumer Affairs portfolio will look like. My focus will be on making financial policy  and regulatory settings simpler, removing unnecessary barriers and transactional costs.
  • At the same time, I intend to push forward with reforms in capital markets to open more avenues for businesses to access the capital they need.
  • Our immediate focus is to deliver outcomes for all New Zealanders. Work on CoFI, CCCFA and the Companies Act will be prioritised in the first instance to deliver on these goals.
  • When we look at the challenges businesses face, one of the standout issues is always regulatory burden. I’m keenly aware of this and want it minimised.
  • I’m advocating for a regulatory framework that is both proportionate and based on risk, ensuring that regulations are applied sensibly. I’m working on changes to streamline the regulatory landscape, making it easier for businesses to navigate.
  • Another objective is reducing the overlap between regulators, ensuring clarity in oversight and accountability, and finally, setting clear, grounded expectations for market participants. These changes will ideally lighten the regulatory load on businesses, with a balance of effective oversight and protections for stakeholders.

Conduct of Financial Institutions

  • The Conduct of Financial Institutions reform – or CoFI – has been in the works for some time now. Its original intent was to ensure customers are treated fairly and conduct is held to a high standard.
  • While I support the intent behind the legislation, I’ve heard from industry that there is room for improvement.
  • I want to ensure that the conduct obligations on financial institutions are proportionate to the risk of harm, are clear, and flexible, putting the onus on institutions themselves to implement into their own conduct plans that reflect the demands of their customers
  • To that end, I’m reviewing CoFI and wider conduct regulation in New Zealand, focusing on three key areas;
  • First, I want to revert to a twin peaks regulatory model. Over time the roles of Financial Markets Authority and the Reserve Bank as conduct and prudential regulators have blurred, causing unnecessary duplication of responsibilities. I think there is opportunity for better coordination between regulators and clarity for the industry. To this end I propose transferring the responsibility for monitoring the CCCFA conduct from ComCom back to the FMA, making the FMA the sole regulator of conduct
  • Second, I want to consolidate and standardise financial markets conduct licensing requirements. This will involve a move to a single conduct licence, and a separate prudential licence. Currently some institutions have to hold up to 5 licenses, CoFI requirements mean financial institutions have to apply for a further license. Moving to a single conduct licence issued by the FMA means less duplication and reduced operational burden for institutions without compromising conduct requirements. I propose to implement this change next year
  • Lastly, I am reviewing the CoFI Act itself. While the framework is solid enough, there may be opportunities to simplify certain obligations and reduce compliance costs – for example, what a fair conduct programme requires, giving firms more certainty and flexibility on implementation. I believe that it is essential financial institutions have in place fair conduct programmes that  at a minimum, cover the following aspects of their businesses
    1. Customer engagement
    2. Development of new products and services
    3. Complaint Resolution
    4. Fees, particularly where you have intermediaries
  • All  insurance companies should continue to make your applications with FMA, CoFI will be coming into force 31 March 2025. In respect to smaller insurance entities I’ve requested that the FMA  issue clear guidelines on the minimum requirements of conduct. This will allow for a tailored, proportionate approach
  • Samantha Barrass has also confirmed, that it is the responsibility of the financial institutions to determine what is the appropriate fair conduct programme to be put in place.
  • In essence, responsibility for disclosing what is appropriate is the responsibility of the management or board of the company. It is not the responsibility of the FMA to tell you what is right or wrong.

Insurance Contracts Bill

  • You will be keen to hear what is happening with the Insurance Contracts Bill under the new Government.
  • I am keen to ensure this work is progressed, so insurers and policyholders have greater certainty about the deals they’re striking.
  • That’s why I plan to seek cabinet approval to introduce the bill  shortly.
  • Insurers will need to know what their obligations will be under the new Bill, and be assured I am working with officials and stakeholders to finalise my views on the Bill. To this end, I would like to acknowledge Tim Grafton’s role in this.
  • My decisions will be guided by my goals to promote clarity and certainty for insurers and policy holders, while also ensuring that regulations remain proportionate and risk-based.

Consumer data right

  • There is some interest in other developments within my portfolio, such as the introduction of a consumer data right.
  • I am expecting to introduce the Customer and Product Data Bill, as soon as possible and anticipate your engagement with the Bill as it progresses through the House.
  • While banking is likely to be the first sector designated under the consumer data right, no decisions have been made on who else it may apply to afterwards.
  • Any decisions about what sectors are brought into the framework will be carefully considered alongside the criteria that will be outlined in the Bill.

Climate resilience – managed retreat and insurance claims handling

  • As I mentioned earlier, increasing severe weather events means that our insurance sector is more important than ever.
  • A number of key issues like affordability and availability will be discussed further today.
  • While the Minister of Finance and the Minister for Climate Change are leading the charge here, it is important that both the government and the sector are aligned on how we approach climate resilience.
  • The Government is currently working on a Climate Adaptation Framework that will invite input from banks and insurers. Consultation on this will occur over the second half of 2024.

Closing

  • In closing, The Government is steadfast in our commitment to improving outcomes for all New Zealanders. I’m very confident the work I’ve discussed today will move us closer to realising that vision, and whole-heartedly believe that New Zealanders will be better off because of them.
  • This year’s conference theme is more relevant than ever. The four big issues being discussed today; resilience, AI, reinsurance and affordability of insurance  will help create a unified approach to these challenges that lie ahead for New Zealand.
  • I have full confidence that you will all be instrumental in shaping a responsive and sustainable insurance industry, and that discussions between the Government and industry will continue to be constructive and productive.
  • Thank you once again for the opportunity to speak here today, and I look forward to our future. Today marks the beginning of many conversations to come.
  • Tēna kotou, Tēna kotou, Tēna kotou katoa