Insurance Council of New Zealand (ICNZ) members have agreed to a maximum fine of $NZ100,000 ($92,850) for unresolved significant breaches of the Fair Insurance Code, which takes effect on January 1.

ICNZ will establish a code compliance committee, with a majority of independent members to rule on breaches.

If the committee and the insurer cannot agree on a solution, the committee can report to the ICNZ board, which can impose the financial penalty, reprimand the member or expel it from the council.

Matters must first go through an external dispute resolution scheme.

New Zealand has a number of these, and ICNZ says if a scheme such as the Insurance and Savings Ombudsman (ISO) or Financial Services Complaints Ltd finds a significant breach has not been resolved through its processes, it will report the case to ICNZ.

The updated code commits insurers to act “reasonably” when faced with non-disclosure, and sets minimum timeframes for insurers to respond to claimants.

Ombudsman Karen Stevens says this test is a step in the right direction, but she wants legislation that tightens the rules around non-disclosure so an insurer can avoid a policy only if it can show non-disclosure was deliberate.

Ms Stevens says about 10% of complaints to the ISO involve non-disclosure – often accidental and usually relating to medical conditions and criminal convictions.

The Fair Insurance Code applies to general insurance products only.

ICNZ is holding workshops for insurers and other interested parties to examine changes in the code.

CEO Tim Grafton told insuranceNEWS.com.au the interpretation of non-disclosure is a key topic.

He says ICNZ plans to have the code compliance committee appointed “within weeks”.