New Zealand’s insurance industry is being urged to improve its approach to customers facing vulnerable circumstances, as the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme) highlights a surge in disputes and the ongoing impact of natural disasters and economic pressures.
The IFSO Scheme defines vulnerability as a condition that may increase a person’s risk of disadvantage, whether due to financial hardship, health issues, language barriers, family violence, age, bereavement, addiction, or the consequences of severe weather events. These factors, according to the scheme, can affect anyone at any time.
Insurance & Financial Services Ombudsman Karen Stevens noted that vulnerability is not a permanent label but a situation that can arise unexpectedly.
“Vulnerability isn’t a label; it’s a situation that can affect anyone,” she said. “Insurers need to recognise when someone is struggling and respond with empathy, flexibility, and fairness.”
Recent data from the IFSO Scheme showed a record 600 disputes accepted for investigation this year, a 25% increase over the previous year.
While many complaints are resolved through insurers’ internal processes, a growing number are remaining unresolved and reaching the ombudsman.
Stevens observed that some insurers have proactively supported customers following the 2023 floods, including flexible claims handling and targeted assistance for those experiencing hardship.
However, she cautioned that continued vigilance is needed, as economic challenges such as the cost-of-living crisis persist and more people may find themselves in vulnerable positions.
“It’s important that insurers keep this focus,” Stevens said. “The cost-of-living crisis isn’t going away, and more people are experiencing financial hardship.”
A recent complaint reviewed by the IFSO Scheme involved a customer who, due to illness, relied on the insurer’s website to determine if a treatment was covered.
The claim was denied because the medication did not meet the policy’s definition of a subsidised prescription, a detail only found in the full policy document.
The scheme determined that, given the customer’s circumstances and reliance on summary information, the claim should be honoured, and the insurer agreed.
Stevens commented that many policyholders depend on summaries rather than full policy documents when making decisions.
“Many people rely on summaries, not lengthy policy documents, to make decisions,” she said. “Insurers need to make sure those summaries clearly highlight exclusions and conditions, especially as customers experiencing vulnerable circumstances may not be able to easily understand what’s covered.”
The IFSO Scheme has outlined several steps insurers can take to better support people in vulnerable situations:
Stevens emphasised that treating customers in vulnerable circumstances with dignity and respect is essential.
“People in vulnerable circumstances deserve to be treated with dignity and respect,” she said. “We expect insurers to be proactive, not reactive, in making sure their services are accessible and fair.”
