Speech – The Maori Party

The Bill promotes the maintenance of a sound and efficient insurance sector, and public confidence in the insurance sector. It is a laudable goal, to promote confidence among policyholders and the general public. As a member of the Finance and Expenditure …Insurance (Prudential Supervision) Bill
Rahui Katene, MP for Te Tai Tonga
Tuesday 8 December 2009; 4.30pm

This Bill starts off with honourable intentions.

The Bill promotes the maintenance of a sound and efficient insurance sector, and public confidence in the insurance sector. It is a laudable goal, to promote confidence among policyholders and the general public.

As a member of the Finance and Expenditure Select Committee we have heard more than our fair share of uncertainties and financial anxieties amongst stakeholders and the general public alike.

I was interested, therefore, to learn that at the end of last year, while all other variables of the market were heading downwards, life insurers were sitting pretty, with a 9.5% increase in total premiums.

Statistics from the Investment Savings and Insurance Association showed that total premiums for life insurance policies to the year 30 September increased to $1.512 billion.

Apparently, this was all to be expected as people looked, and I quote, “for the safety, security and peace of mind that life insurance provides”.

And so with this grand setting, this Bill introduces a major change to the insurance sector, by clarifying and refining the legal, accounting and actuarial responsibilities of the proposed regulatory environment.

It is to be noted that this is indeed a major change, as historically, our insurance industry has been lightly regulated.

Over the last few years there has been a desire to bring the insurance sector more into line with the regulatory focus of their international peers, a desire given shape some six months ago, when the Reserve Bank released the draft Insurance (Prudential Supervision) Bill for stakeholder consultation.

The Bill will

• establish a system for licensing insurers;
• it will impose prudential requirements on insurers;
• it will provide for the supervision by the Reserve Bank of compliance with those requirements; and
• it will confer certain powers on the Bank to act in respect of insurers in financial distress or other difficulties.

In this respect, it has been described as a relatively light-handed approach to regulation; with the emphasis being placed on self-discipline.

In effect, compliance is largely self-administered although supervised by the Reserve Bank.

We welcome the move towards establishing certainty while at the same time encouraging an improvement in general practice.

The Maori Party has supported other bills to improve regulation of the finance sector, including: the Financial Advisers Bill; Financial Service Providers (Registration and Dispute Resolution) Bill; and Reserve Bank of NZ Amendment Bill.

And we are, of course, aware that the fact that this Bill is even on the books is that it indicates the failure of the market to regulate itself.

The House can be assured of our general support for this Bill to remove inconsistencies in application between different insurance sectors, and provide legislative regulation where no prudential regulation currently exists.

We see this as a safety mechanism, which is in the best interests of all those implicated in the insurance industry.

But I want to just raise a few questions around this whole issue of insurance.

We know that insurance can be a huge cost for Māori, iwi and hapū who have responsibility for a marae or local gathering place. Legal risk and/or indemnity insurance costs may be a disincentive for Maori. Better information about insurance may help to address this problem.
I also recall a report from the Ministry of Women’s Affairs which also suggested that most Māori women do not have private provision for health or sickness insurance.

So while we support the intention of moving to a sound insurance sector, we need to be clear that these issues are aired as we consider the take-up of insurance and the eligibility and access for Maori along with other New Zealanders.

Mr Speaker, the Maori Party agrees that the financial stability of insurers is essential to provide the level of protection which is necessary for a sound insurance sector.

We also all know the stories of constituents who have been ill-served and ill-informed by those in the insurance sector. Consumers must be well placed to monitor the financial strength of insurers, both on their own and collectively.

In the best interests of the people then we will vote to support the Bill for this first reading, and we look forward to subsequent debate.

ENDS

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