New financial services legislation will be unveiled in New Zealand soon to ban incentives such as overseas trips and bonuses that are tied to sales targets.

The new laws are part of the plans for a conduct regime unveiled last week by the Government.

Insurers selling add-on products through intermediaries that are not financial services providers will be made accountable for any conduct breaches.

Commissions for general insurance products are usually set at 10-30% of annual premiums, according to the Government.

Commerce and Consumer Affairs Minister Kris Faafoi plans to introduce the new legislation to Parliament by the end of the year.

“Under this new regime we are aiming to ban things like target-based sales incentives, which put profits ahead of people,” Mr Faafoi said. “Removing these types of incentives will provide better protections for consumers from misconduct.”

Strong penalties are in store for financial institutions who breach obligations governed by the new regime. The Financial Markets Authority (FMA) will have an expanded remit to oversee the regime.

The FMA has welcomed the initiatives, as has the Insurance Council of New Zealand (ICNZ).

“The changes come at a time when it’s clear some parts of the financial services sector are not meeting the conduct standards expected,” ICNZ CEO Tim Grafton said.

“General insurers support legislative changes to achieve this and are looking forward to seeing the detail of the legislation when it is released.

“We also welcome the news that sales incentives based on volume or value targets will be prohibited, especially as they apply to insurance brokers.

“Legislation in this area will address the first-mover disadvantage insurers struggle with. In removing these incentives it will help customers have confidence that both the sales and underwriting teams behind their policies have their needs front of mind.”