Insurance stakeholders, including brokers, see the Contracts of Insurance Act 2024 as a watershed moment for New Zealand’s industry. The new rules are transformative for brokers because they include fundamental changes to disclosure duties, dispute frameworks, claims handling – and greater regulatory oversight. The sweeping reforms are due to come into effect by 2027 at the latest and modernise the insurance regime, aligning it with international standards like those in Australia and the UK.
With such significant changes on the horizon, insurance experts are urging brokerage and insurance firms to begin their preparations now. Early engagement with the new rules is seen as essential to avoid major disruptions and compliance issues down the track.
“It doesn't come into effect until 2027 so we've got a couple of years to get used to it - but that time will go quickly,” warned Caroline Laband, partner at Wotton + Kearney (W+K). “There's a lot of work that the industry needs to be doing to get its products and systems up to scratch to be ready effectively for when that comes into force.”
For many in the industry, the challenge will not only be the scale of the reforms, but also the resources required to implement them - especially for smaller brokers and insurers. Auckland-based Laband anticipates that one big challenge could be marshalling the time and resources to digest and understand the new rules. “I think particularly for our insurer clients who may not have a lot of resources to put whole teams of people on there,” she said.
Laband suggested the new Act will have far-reaching impacts on the way insurers and brokers do business. She said it requires a thorough review of insurance policy wordings and products.
“[So] Do they comply with the new Act and what changes need to be made?” she said.
This review process will extend beyond policy documents themselves. The way insurance policies and related information are shared with consumers will also need to change, with brokers playing a critical role in client communication. Laband noted, “It’s not just policies, it's also, for example, lists of underwriting questions that we need to review and also that collateral and communication,” she said.
To help brokers prepare for the coming changes, industry experts have outlined a series of practical steps:
Review and update disclosure processes
Consumer insurance contracts: Brokers must ensure that clients know their new, lower disclosure obligation — policyholders only need to take reasonable care not to make a misrepresentation and only need to answer questions asked by the insurer. Brokers should review proposal forms and ensure questions are clear, specific and comprehensive, as generic requests for information will no longer suffice.
Non-consumer insurance contracts: Brokers must help clients understand and comply with the duty to make a “fair presentation of the risk,” which includes disclosing all material circumstances known or that ought to be known, including those known by the broker and their employees.
Amend documentation and communication
Proposal forms and policy documents: Update all forms, templates and communications to reflect the new disclosure standards and the consequences of non-compliance.
Client communications: Clearly explain the new duties to clients, including the distinction between consumer and non-consumer contracts and the implications for disclosure and remedies.
File management and record-keeping
Material information: Ensure robust systems are in place for collecting, storing and retrieving all material information that may need to be disclosed to insurers. This includes information held by brokers and their staff.
Disclosure tracking: Maintain records of what has been disclosed to insurers, by whom and when, to demonstrate compliance with the Act.
Staff training and process changes
Training: Conduct comprehensive training for all staff on the new legal requirements, especially regarding the new disclosure duties and intermediary obligations.
Process Overhaul: Review and update internal processes to ensure compliance, including how disclosures are handled, how client funds are managed and how third-party information requests are processed.
Client account management
Insurance broking client accounts: Ensure that all client money is handled in accordance with the new requirements, including timely payments to insurers and policyholders and proper segregation of funds.
Third-party claims and information requests
Direct claims: Prepare for the new regime allowing third parties to claim directly against insurers of insolvent or deceased policyholders. Brokers may need to assist with information requests from third parties and ensure compliance with the 28-day response period
Charging for information: Develop a policy on whether and when to charge third parties for providing information, as permitted by the Act.
Contractual arrangements with insurers
Specified intermediary liability: Review contracts with insurers regarding liability for disclosure failures. The Act allows some ability to contract out of intermediary liability, but this may be subject to negotiation.
As the industry begins to grapple with these changes, some firms are already taking proactive steps. “We’re already reviewing policies for clients, so those people are reasonably quick off the mark,” said Laband. “We expect that there's a lot more to come as the deadline gets closer and people start to focus on it.”
The next few years will be critical for New Zealand’s insurance sector. By starting preparations early and following clear, practical steps, brokers and insurers can position themselves to thrive under the new regulatory regime - rather than scramble to catch up as 2027 approaches.
Are you a brokerage? What are your main challenges coming to grips with the Contracts of Insurance Act 2024? Please tell us below
