Why the FMA’s conduct focus matters for life insurance buyers

The regulator’s concerns are not limited to one product type. It has pointed to potential fraud across mortgages, insurance and KiwiSaver, including misrepresentation during insurance applications or claims. For life insurance customers, that is a timely reminder that accuracy is not a box-ticking exercise. Details about health history, occupation, income, smoking status and past claims can affect whether a policy is accepted, priced differently, excluded in part or later challenged at claim time.

The FMA is also paying close attention to commission conflicts. Commission-based insurance advice remains common in New Zealand and can help people access advice without paying an upfront fee. The issue is not necessarily that commissions exist, but whether customers are clearly told how advisers are paid and whether those incentives could influence a recommendation. Upfront commissions, replacement policies and sales-focused incentives can create risks if they encourage a product switch that is not genuinely in the client’s interests.

For consumers, this makes transparency a key part of any life insurance conversation. Before accepting a recommendation, ask what providers were considered, why the chosen policy fits your needs, what exclusions or stand-down periods apply, and how the adviser or business will be paid. If replacing an existing policy, ask for a side-by-side explanation of what you may lose as well as what you may gain. Older policies can contain definitions, premium structures or benefits that are not easy to replicate.

This is also a good moment to compare life insurance options with a broader lens than price alone. A lower premium may be attractive, but value depends on the policy wording, claims definitions, future affordability and whether the cover amount still reflects your mortgage, dependants, income and debts.

If you are unsure, working with a licensed adviser can still be valuable, provided the advice process is clear and documented. Keep copies of your application, needs analysis, disclosure statement and policy schedule. Strong records help reduce misunderstandings and make future reviews easier.

For New Zealand families, the FMA’s focus should be seen as a consumer protection signal rather than a reason to avoid advice. The best outcome is not less advice, but better advice: recommendations that are transparent, suitable, well explained and built around the financial security of the people your policy is meant to protect.