The New Zealand insurance industry has a lot of work to do to enhance its reputation, and regulation should help consumers have more faith in the industry, according to Insurance Council of New Zealand President David Smith.

Mr Smith – who is also the CEO of IAG NZ – told Sunrise Exchange News the largely unregulated NZ insurance market needs to restore the faith of consumers, especially after events like the collapse of HIH and the overhaul of the American industry by New York Attorney-General Eliot Spitzer.

“It’s time for us as an industry to sit back and think about pushing what we really provide the community with,” he said.

While the insurers are maintaining an upbeat approach to regulation – which has a target start date of 2008 – it needs to be manageable for the NZ market, Mr Smith says.

“We’re largely unregulated, and we’ve got to think if we really want to be part of global capital markets then we have to have the right systems in place to boost community confidence in the industry.”

Mr Smith says he’s been encouraged by some of the consultation the industry has had with the NZ Government, and the intermediaries’ task force has assisted the Government to understand some of the intricacies of insurance.  

“What we don’t want to see is the Government grouping fire and general classes with life insurance,” he said. “We have seen some very good models out there for regulation, but we don’t want to see the overly costly regulation that Australia has had with the Financial Services Reform Act.”

While the NZ industry is “happy to align with Australia where it makes sense”, industry regulation isn’t necessarily one area that it wants to take a leaf out of Australia’s book.

“At the end of the day regulation needs to be about consumers and restoring their faith,” he said.