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ICNZ calls for enforcement of consumer protection laws

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The Insurance Council of New Zealand Te Kahui Inihua o Aotearoa (ICNZ) says vigorous enforcement of laws and regulations is needed to protect consumers from purchasing unsuitable insurance products.

"Vehicle insurance products, such as mechanical breakdown, and car loan related ones, such as repayment and gap protection, typically provide cover that people later rely on to avoid massive liabilities," ICNZ CEO Tim Grafton said.

But he says existing financial protection laws are not doing enough to protect consumers from being misled into purchasing products.

"The Fair Trading, Credit Contracts and Consumer Finance Acts are in place to protect people against being sold financial products that are inappropriate or that they can’t afford. These laws need to be enforced."

Mr Grafton praises the work of insurers who have self-regulated and set consumer protection guidelines.

"Providers have moved to cap the price at which third parties can sell these products to consumers to provide them with better value. They are also going beyond the statutory five day cooling off period, in which people can receive a full refund if they change their minds, voluntarily extending it to 14 days,” Mr Grafton said.

“This is a better approach than a deferred sales approach as that would lead to few people being protected and higher risks for lenders leading to higher costs for, and lower availability of, loans for borrowers.”

He referred to recommendations made by the Commerce Commission last year as potential changes to improve consumer protection.

“Better enforcement of consumer protection laws and tighter controls over commissions, selling practices and 14-day cooling-off periods will all help keep these insurance products in place for people who would otherwise be left with huge bills to pay in the event of a major breakdown or if they were otherwise no longer able to meet their loan obligations."