Contracts of Insurance Bill: Committee Deliberations on Disclosure Duties

During a committee session held on October 23, members deliberated over Part 2 of the Contracts of Insurance Bill, focusing particularly on disclosure duties. This debate brought to light significant concerns regarding consumer protection and legal standards for misrepresentation within insurance contracts.

Consumer Protection and Small Businesses

Arena Williams from Labour—Manurewa highlighted issues stemming from the removal of clause 11, which was initially intended to define consumer insurance contracts more clearly. She expressed concern that its absence could leave both consumers and small businesses vulnerable, particularly those relying on indemnities provided by these contracts. Williams emphasized the need for clarity in how changes might affect downstream consumers who depend indirectly on these contracts.

Burden of Proof in Insurance Claims

Dr. Duncan Webb from Labour—Christchurch Central proposed an amendment to clause 30 concerning the burden of proof required for insurers alleging misrepresentation as deliberate or reckless. His suggestion was that courts should consider both the balance of probabilities and the seriousness of allegations, ensuring a fair assessment when evaluating such claims.

Dishonesty vs. Fraudulent Misrepresentation

Lan Pham from the Green Party advocated changing the term "dishonestly" to "fraudulently" in clause 14(2A). She argued that this change would set a clearer standard for policyholders by distinguishing between dishonest acts and those with fraudulent intent, which typically involve personal gain.

Broad Application of Insurer Remedies

Arena Williams raised concerns about the potential broad application of insurer remedies under Schedule 2, specifically clause 2(a), which allows insurers to avoid contracts based on misrepresentation. She questioned whether a standard of dishonesty could lead to the voiding of entire insurance relationships due to honest mistakes.

Contextual Understanding in Disclosure Requirements

Dr. Duncan Webb proposed an amendment to clause 35(1)(a) to allow for a more subjective assessment of what policyholders "ought to know." This approach aimed to consider each individual's specific knowledge and circumstances, promoting fairness by recognizing varying levels of understanding among consumers.

Voting Outcomes

The debate concluded with several amendments proposed during the session not being approved. The voting patterns reflected a division along party lines: 68 Ayes from New Zealand National (49), ACT New Zealand (11), and New Zealand First (8); against 55 Noes from New Zealand Labour (34), Green Party of Aotearoa New Zealand (15), and Te Pāti Māori (6).

The discussions highlighted the complexities of reforming insurance law, balancing consumer protection with fair industry practices. As the bill progresses, these debates will continue to influence its final form, reflecting diverse perspectives on consumer rights and responsibilities.