Parliamentary Debate on Part 4: Intermediaries in Insurance Bill

In a recent parliamentary session chaired by Greg O'Connor, lawmakers engaged in an extensive debate over Part 4 of the insurance bill, which focuses on intermediaries. The discussion featured contributions from key figures including Dr. Duncan Webb (Labour—Christchurch Central), Arena Williams (Labour—Manurewa), Helen White (Labour—Mt Albert), and Minister Andrew Bayly of Commerce and Consumer Affairs.

Legislative Necessity of Clauses 104 and 105

Dr. Duncan Webb raised concerns about the inclusion of clauses 104 and 105, which set default provisions for brokers to pay premiums to insurance companies within 50 days. He argued that these clauses are superfluous since they merely provide a default contractual position that can be overridden by private agreements.

Minister Andrew Bayly defended these clauses, emphasizing their importance as a statutory backstop. He explained that without such regulation, insurers might not receive payments if brokers fail to fulfill their obligations, thus highlighting the necessity of legislative inclusion for consumer protection.

Changes to Subclause 2A in Clause 104

Arena Williams questioned the adequacy of stakeholder engagement regarding changes made to subclause 2A in clause 104. She expressed concern about whether the change was sufficiently representative of broader interests and criticized the limited number of submissions from stakeholders, particularly consumers.

Bayly responded by noting his consultations with insurers and brokers, asserting that these discussions informed his decision to retain clause 104 and emphasized its role in establishing a regulatory backstop.

Treatment of Brokers in Paying Policyholders (Clause 108)

Dr. Duncan Webb highlighted the inconsistency between consumer policies, which require payment within seven days, and non-consumer contracts, where payments are made 'as soon as is reasonably practicable.' He questioned why small businesses should be subject to potentially longer wait times for insurance payouts.

Minister Bayly explained that commercial insurance products often require more time due to their complexity. While acknowledging variability in timelines, he assured that the timeframe would be contextually appropriate and could sometimes be shorter than seven days.

Financial Impact on Small Businesses: A Call for Clarity

Helen White expressed concern about brokers withholding money from small businesses, referencing research indicating a significant financial burden caused by delayed payments. She noted an increase in costs to small businesses from $456 million in 2021 to $827 million, suggesting that the practice of holding funds for extended periods was becoming normalized.

Bayly clarified that clause 108 relates to arrangements between insurers and brokers, not policyholder payments, which are separately mandated to be prompt. He acknowledged general concerns about late payments but distinguished them from insurance-specific issues.

Conclusion: Part 4 Agreed Amidst Debate

Despite the robust debate, a party vote resulted in the agreement of Part 4 as a whole. The votes were split along party lines with New Zealand National (49), ACT New Zealand (11), and New Zealand First (8) voting in favor, while Labour (34) and the Green Party (15) opposed it.

The session highlighted ongoing tensions between legislative intent and practical business implications, emphasizing areas where further scrutiny may be warranted. As the bill progresses, stakeholders will continue to monitor its impact on industry practices and consumer protections, ensuring that regulatory frameworks evolve in response to emerging challenges in the insurance landscape.