New Zealand life insurers and banks have paid about $NZ150 million ($132 million) in customer remediation, the result of Conduct and Culture reviews commenced by the Financial Markets Authority (FMA) and Reserve Bank of New Zealand between 2018 and 2019.

The update from the FMA comes as life and non-life insurers, together with banks and non-bank deposit takers, prepare for a new conduct regime that is set to come into force in early 2025.

Legislation for the Financial Markets (Conduct of Institutions) Amendment Bill – or CoFI for short –passed in June, requiring them to treat consumers fairly.

FMA Director Banking and Insurance Clare Bolingford says “the remediation work shows the extent of weaknesses in the systems and processes across banks and life insurers”.

“This demonstrates the significant amount of work required by financial institutions to ensure they are identifying, rectifying, and remediating issues which, to date, have impacted over 1.5 million customers with a total sum of $NZ150 million returned so far,” she said.

For the life insurance sector, about 225 issues resulting from creaking systems and weak controls impacted nearly half a million customers with more than $NZ43 million ($37 million) paid in remediation.

FMA says the figures represent just the one-third of issues whose impacts have been fully assessed to date.

“We acknowledge the substantial work by banks and insurers to date to fix their customer issues – especially those firms tracing back further than they had to,” Ms Bolingford said.

“We note that over the past 12 months boards have displayed a greater understanding of what needs to occur to achieve consistent fair customer treatment.

“It is likely there’s more self-reporting to come as firms continue these efforts.”

She says the FMA’s ongoing work with life insurers and banks will support the implementation of CoFI, shaping conduct principles and practices.

“Firms will be in a better position to demonstrate how they are treating customers fairly through their fair conduct programs,” Ms Bolingford said.