SHIFT Advisory Lawyer Adam de Hamel on the Contracts of Insurance Act 2024

SHIFT Advisory lawyer Adam de Hamel kindly presented on the Contracts of Insurance Act 2024 during a recent call with our lawyers and consultants.

Below are the key takeaways from the session.

Key takeaways from the Contracts of Insurance Act 2024 session

The Contracts of Insurance Act 2024 (the Act) represents a significant modernisation of insurance contract law in New Zealand, with a clear policy intent to improve fairness, transparency, and balance in the relationship between insurers and policyholders. While it applies to both consumer and commercial insurance, the most immediate and practical impact is expected in the consumer space.

A shift towards “reasonableness”

A central feature of the new regime is its reliance on concepts of “reasonableness” across many of its obligations. Rather than setting rigid rules, the Act frequently asks whether parties have acted reasonably in the circumstances. This introduces flexibility, but also a degree of uncertainty, as the interpretation of “reasonable” will evolve over time through regulatory guidance and market practice.

Changes to disclosure obligations

One of the most significant reforms is the change to disclosure duties.

For consumers, the previous strict disclosure regime is replaced with a requirement to take reasonable care not to make a misrepresentation when entering into an insurance contract. This shifts the emphasis away from exhaustive disclosure obligations and towards ensuring that information provided is accurate and fairly reflects the insured’s circumstances.

For commercial insurance, the Act introduces a “fair presentation of risk” standard. This requires insured parties to present risk information in a way that allows insurers to properly understand and assess the nature and scale of the risk being underwritten.

New obligations on insurers

The Act also introduces clearer responsibilities for insurers. Insurers must take reasonable steps to ensure customers understand:

• their disclosure obligations, and

• the consequences of non-compliance.

In addition, insurers must disclose when third-party information will be used in underwriting or decision-making prior to entry into, renewal, or variation of a policy. This creates an important intersection with privacy obligations, particularly given that the Act does not precisely define what “information” includes.

Proportionate remedies for non-compliance

The Act moves away from an “all or nothing” approach to remedies. Historically, insurers could in some circumstances avoid a policy from inception due to non-disclosure. The new framework instead aims for proportionate outcomes that better reflect the nature and impact of any breach, supporting the broader policy objective of reducing imbalance between insurers and insureds.

Fair Trading Act amendments

Insurance contracts will now also fall within the unfair contract terms regime under the Fair Trading Act. This introduces an additional layer of regulatory and compliance consideration for insurers and reinforces the consumer protection focus of the reforms.

Key operational provisions (Sections 52, 54 and 55)

Particular attention was given to Sections 52, 54 and 55:

• Section 52 requires insurers to clearly communicate disclosure obligations and consequences before a policy is entered into, renewed, or varied.

• Sections 54 and 55 relate to the use of third-party information at inception and upon variation of contracts.

A key practical challenge will be determining what constitutes a “variation” and ensuring systems, processes, and documentation are aligned accordingly. It is also worth noting that the current Fair Trading Amendment Bill before Parliament proposes significantly increasing penalties under the Fair Trading Act.

Implementation timing and readiness

Although the Act is not due to come into force until 15 November 2027, regulators are already signalling expectations that insurers demonstrate meaningful progress well in advance. The practical takeaway is that organisations should be aiming to have frameworks, customer communications, and operational processes substantially in place by mid-2026 to allow time for testing and refinement.

Overall impact

The reforms represent a structural shift in insurance contracting rather than a narrow compliance update. They carry potential licensing, civil liability, and regulatory consequences for non-compliance and will require coordinated implementation across legal, compliance, underwriting, and customer functions.

Disclaimer:

This article is for general information only and is not legal or professional advice. Please seek advice before acting. SHIFT accepts no liability in connection with this content. If you would like to discuss any of the content further, please reach out to Prue Tyler in the first instance.