Planned changes to New Zealand’s insurance laws, including the duty of disclosure regime, will lead to better consumer protections, according to industry ombudsman Karen Stevens.

She says the Contracts of Insurance Bill, which has had its first reading in parliament, is “really overdue”.

One of the bill’s provisions shifts the disclosure duties onus to insurers from consumers, meaning it will be insurers’ responsibility to ask the right questions.

Ms Stevens says non-disclosure of information by consumers is “very common” in complaints to the Insurance and Financial Services Ombudsman Scheme.

“We see claims declined due to innocent mistakes. Many consumers don’t understand what information they are supposed to tell their insurer, and the consequences if they don’t disclose this information.

“Forgetting to tell the insurer something regarded as being material to the risk of providing a consumer with insurance ... can be fatal.”

She says requiring insurers to ask “clear and relevant questions” will help consumers know what information they must provide.

“At the same time, there is no option for a consumer to misrepresent the information to an insurer thinking they will get paid – any deliberately wrong information will mean an insurer does not have to pay a claim and can cancel the policy.”

The bill also requires insurers to respond “proportionally” if customers forget to disclose information. Another key change stipulates policies must be written in simple language.

“However, consumers still need to read the policy to know what cover it provides,” Ms Stevens said. “There is cover and there are exclusions. If consumers don’t know what the extent of cover is, or how it can be chopped out by an exclusion, it can cause real disappointment.”

The government is consulting on the bill and aims to pass it by the end of the year.

The closing date for submissions is June 3. Click here to make a submission and here to see the bill.