Government proposals to overhaul insurance contract laws should make the whole process of taking out insurance easier and simpler to understand for consumers, says Financial Advice New Zealand.

Chief Executive Katrina Shanks says the changes should go a long way towards seeing the end of policies that confuse consumers.

“These proposed changes are not before time.

“A recent survey of our 1680 adviser members showed that among the most common mistakes consumers make when it comes to insurance is not understanding their policy limitation.

“That generally comes down to how they are written.

“In fact, some 95% of advisers said the language and complexity of policies make it difficult for consumers to understand them, without specialist advice, while 97% said the language and complexity makes it difficult for consumers to compare policies.

“Anything that makes policies more user friendly has to be good.

“We also welcome the proposal to put the onus on insurers to ask consumers the right questions when signing them up rather than relying on them to know what to disclose.

“This is something else many people have trouble coming to grips with.

“We also favour ironing-out the rules surrounding unfair contract terms and making insurers respond proportionately if a customer fails to disclose something they should have disclosed, so claims cannot be rejected based on unfair contract terms.

“Overall, these proposals will take a lot of the uncertainty and confusion out of insurance policies.

“From what our advisers tell us, there is clearly a high level of misunderstanding and a lack of understanding when consumers look at insurance, and I’m confident these proposals will help deliver solutions that work and meet consumers’ needs.”