The New Zealand Financial Markets Authority has published a thematic review finding that insurers’ arrangements for add-on insurance and extended warranties do not always provide assurance of fair consumer outcomes under the Conduct of Financial Institutions regime. The review covered seven insurers, including all larger providers, and found recurring gaps between firms’ stated policies and controls and their operation in practice. Intermediated distribution was the clearest area requiring improvement. Insurers showed limited risk-based monitoring of commission-based sales channels, while some sales practices could pressure consumers or fail to establish their understanding and product suitability. Product oversight was also inconsistent, with claims and loss ratios not always translated into action. Loss ratios for some guaranteed asset protection, consumer credit and payment protection products were as low as 3% to 6%, raising questions about whether consumers receive meaningful benefits. The authority also considers that extended warranties can fall within the regime under specific arrangements. The authority has given targeted feedback to participating insurers and expects the wider sector to assess whether similar issues exist in their operations. It will test firms’ responses through ongoing supervision and may use its regulatory tools where conduct is inconsistent with legal obligations.
2026-08-20New Zealand Financial Markets Authority
New Zealand Financial Markets Authority finds add-on insurers need stronger oversight of intermediated sales
The New Zealand Financial Markets Authority found that add-on insurers need stronger oversight of intermediated and commission-based sales to ensure fair consumer outcomes. It also identified weaknesses in assessing consumer understanding, product suitability and performance, with loss ratios for some products as low as 3% to 6%. Insurers must assess their operations, and the authority will test remediation through ongoing supervision.