The “light touch” regulatory regime that New Zealand’s insurance industry has enjoyed for so long may be coming to an end. The Government has made it obvious that tighter regulation is only a matter of time.

At present NZ’s life insurance industry is the one under scrutiny, but Commerce Minister Margaret Wilson says once that inquiry by the country’s Law Commission is sorted out, the NZ Government will move its focus to general insurance.

Insurance Council of New Zealand CEO Chris Ryan says issues within the country’s life industry have led to an indication by the Government that all financial services products should be regulated under the same banner, in much the same way as Australia’s Financial Services Reform Act (FSRA).

“It’s not really a big surprise that the Government would want to do this,” he said. “From what we’ve seen, it wants to operate under a similar regime to Australia’s.”

At present general insurers only have to undergo financial strength ratings each year and file annual financial statements.

Ms Wilson says she will postpone regulatory changes to the life insurance sector to see if research conducted by the Law Commission will have any effect on the way the general insurance industry operates. She says the Government is “aware of the impacts the proposed changes to non-life insurance regulation will have – particularly on smaller insurers. This government is very aware of the need to reduce unnecessary compliance costs for business.”

Mr Ryan says the NZ general insurance industry believes it already operates “very well” under self-regulation and problems relating to “the sometimes outdated practices of the life industry” have lead to calls for the Government to streamline the regulation of the entire financial services sector.

“Many companies already adhere to Australia’s FSRA requirements, so it wouldn’t take too much for them to adapt to similar requirements.”

If the system does change, the insurers would no longer be required to lodge deposits. Funds currently held by the Public Trustee would be refunded to the insurers.