A New Zealand couple’s underinsurance dilemma highlights why planned financial services licensing laws should extend to bank staff, according to the Insurance Brokers Association of New Zealand (IBANZ).

Pete and Claire Swann were left $NZ170,000 ($139,000) out of pocket when fire destroyed their $NZ320,000 ($262,000) home. An IAG insurance policy provided by the Bank of NZ provided cover of only $NZ146,000 ($120,000), according to the Sunday Star-Times.

The Swanns allege the bank failed in its role as lender and insurance agent to properly review and update their cover. The bank has offered $26,000 ($21,000) as a “goodwill gesture”.

IBANZ CEO Gary Young says such problems will become more common if NZ banks successfully negotiate an exclusion from upcoming legislation introducing financial services licensing which is expected come into effect in 2010.

“Banks offer policies to people, and the next question the borrower asks is how much cover they should take out,” Mr Young said. “That’s giving advice. They ought to be licensed.”