Underwriters and distributors are responsible for ensuring that their systems, processes and controls facilitate good outcomes for customers.
The New Zealand Financial Markets Authority (FMA) found in a review that credit card reimbursement insurance (CCRI) is a “low value product” for customers.
The CIRB is a form of insurance that covers a customer’s unpaid credit card refunds in certain circumstances, including bankruptcy, termination, injury, illness, or death.
In a review, the FMA has found that the CIRB poses an ongoing risk to those with existing policies regarding claim eligibility and ongoing adequacy. Loss-to-premium ratios have also been found to be low relative to the amount insurers pay on earned premiums.
“These can be as low as 10%, compared to loss rates of around 80% for health insurers and 47% for life insurers,” said the FMA. “CCRI products have narrow coverage definitions, which may not be fully understood by the customer. “
The FMA has also found that underwriters and distributors do not demonstrate a sufficient level of customer service in their suitability assessments and communications with customers.
In addition, the product reviews carried out identified “a large number of administrative errors” related to systems and processes, which also put customers at a disadvantage.
To address the gaps identified in the CIRB, the FMA has asked underwriters and distributors to ensure that their systems, processes and controls facilitate good outcomes for customers, including performing a root cause analysis of issues in order to avoid recurrence of administrative failures.
“The responsibilities in the agreements between distributors and subscribers must be clearly defined. Product improvements should bring real added value to customers, ”said the FMA.
The FMA said it expects underwriters and distributors to contact policyholders whenever their benefits or eligibility changes, or at least once a year, to ensure their CCRI coverage is still adequate. to their needs.
“The benefits, features and any change in coverage or eligibility should be clearly communicated. Regular fit testing should be performed and underwriters and distributors should make a real effort to ensure that customers are receiving timely and accurate information that they understand.
The FMA advises the estimated 200,000 New Zealanders who have the CIRB to check if they still need the product.
The regulator pointed out that providers only meet a limited level of underwriting when issuing a CCRI policy and generally do not assess a client’s medical and professional circumstances.
“These factors mean that many exclusions and prescriptive conditions apply when a person makes a claim on the policy, so clients may not receive the benefits they expect.”