NZ CFS L5 General Insurance key terms

The main New Zealand statute regulating financial products and financial advice services. It imposes licensing, disclosure, conduct and fair dealing obligations on insurers and financial advice providers, and is enforced by the Financial Markets Authority.

A business licensed by the Financial Markets Authority to give regulated financial advice through advisers or nominated representatives. The provider holds the licence and is accountable for the advice given under it.

The conduct code for financial advice made under the Financial Services Legislation Amendment Act 2019. It sets standards covering ethical behaviour, client care, competence, knowledge and skills that advisers and providers must meet.

Information a financial advice provider must make publicly available and give to clients: what advice it gives, its fees, conflicts of interest, complaint handling and dispute resolution arrangements, and how it is regulated.

An independent approved scheme, such as Financial Services Complaints Limited or the Banking Ombudsman Scheme, that resolves complaints about insurers and advice providers at no cost to consumers. Membership is compulsory for licensed providers.

New Zealand's privacy law, built on information privacy principles. It governs how personal information is collected, used, stored and disclosed, gives people access rights, and requires notification of serious privacy breaches.

Law requiring insurers and other reporting entities to identify and verify customers, monitor transactions, keep records and report suspicious activity to the Financial Intelligence Unit. It targets money laundering and terrorism financing.

A code of practice issued by the Insurance Council of New Zealand. Member insurers commit to fair and transparent dealing, clear policy documents, defined claims handling standards and accessible complaints processes.

A relationship between the insured and the thing insured, such as ownership, possession or legal liability, where the insured benefits from its safety and suffers financial loss if it is damaged.

The principle that insurance restores the insured to roughly the financial position held before the loss, no better and no worse. It explains why depreciation and betterment are usually allowed for in settlements.

The mutual expectation that insurer and insured deal honestly and openly, disclosing material information and not exploiting the other's ignorance. It underpins disclosure duties and how policy terms are read.

A fact that would influence a reasonable insurer's decision to accept a risk, or the terms and premium applied. Claims history, previous declines and hazardous activities are typical examples.

The applicant's obligation to tell the insurer everything material to the risk before cover starts and at each renewal. New Zealand law limits avoidance where the matter was not material or the statement was substantially correct.

The insurer's right, after paying a claim, to stand in the insured's place and recover the loss from the party who caused it. It prevents double recovery by the insured.

Where two or more policies cover the same loss, the principle that each insurer pays its share, usually rateably. The insured is indemnified once and no insurer pays more than its proportion.

The dominant and effective cause of a loss, judged by a common-sense view of the chain of events rather than the final event. Cover depends on whether that cause is an insured peril.

The Crown entity, formerly the Earthquake Commission, that provides capped cover for residential buildings, contents and some land after natural hazards such as earthquakes, floods and landslides. A levy on home insurance funds it.

The cost of buying a new item of equivalent quality and specification today, with no deduction for age or wear. Many house and contents policies settle claims on this basis.

What the damaged property was worth immediately before the loss, allowing for age, wear and depreciation. Settlement on this basis may leave the insured short of the cost of buying new.

Cover for lost profit and continuing fixed costs when an insured event shuts down or disrupts a business. The sum insured reflects expected gross profit over the chosen indemnity period.

Cover for the insured's legal liability to compensate third parties for bodily injury or property damage, for example a customer injured at business premises or damage to a neighbour's property.

Cover for liability arising from negligent advice, errors or omissions in the insured's professional services, including defence costs. It is normally written on a claims-made basis.

A cover trigger where the policy that responds is the one in force when the claim is made and notified, not when the error occurred. Common for professional indemnity and liability covers.

A structured comparison of the client's circumstances, goals and risks against the cover available, used to identify gaps and recommend suitable insurance. The reasoning must be recorded.

The stated extent of the advice being given, such as full advice across all general insurance needs or limited advice on a single policy. It shapes what must be considered and disclosed.

Reassessing the client's circumstances, sums insured and cover at renewal and advising on any changes needed before the policy renews. It keeps cover aligned as values and risks change.

The dollar limit chosen by the insured as the most the policy will pay for a defined loss. It should reflect the cost of rebuilding, replacing or repairing at the time of loss.

The first portion of each claim that the insured bears themselves. Insurers use it to avoid small claims and administrative cost, and a higher excess usually attracts a lower premium.

Where the sum insured is set below the true cost of rebuilding or replacing the insured property. Under an average clause, the settlement is reduced in proportion to the shortfall.

The personalised section of a policy listing the insured's details, sums insured, excesses, endorsements, period of cover and premium. Where it conflicts with standard wording, it usually prevails.

A policy provision that removes specified perils, property, persons or circumstances from cover. Exclusions mark the edge of the insurer's promise and are read narrowly against the insurer.

A written clause added to a policy that adds, removes or varies cover, often for a particular situation such as a home business or a named driver. It overrides conflicting standard wording.

The insurer's process of assessing a proposed risk, deciding whether to accept it, and setting the premium, excess and conditions that reflect the likelihood and cost of claims.

The amount the insured pays for cover. It reflects expected claims cost, the insurer's expenses, reinsurance and margin, adjusted for the risk, the excess and the sum insured.

A specialist, often independent, appointed by the insurer to investigate a claim, establish its cause and circumstances, quantify the loss and recommend a settlement.

Damaged or recovered property that still has value. The insurer may sell it to reduce the cost of a claim, or leave it with the insured in exchange for a deduction.

The amount by which a repair or replacement leaves the insured with property newer or better than before the loss. Insurers typically deduct betterment when settling on an indemnity basis.

Insurance bought by an insurer to pass part of its risk to another insurer, protecting its solvency and freeing capacity for more business. It does not change the insured's own contract.

An intermediary who acts for the client rather than the insurer, advising on risks and arranging cover. Brokers may hold delegated authority to bind certain covers.

An arrangement where an insurer authorises an intermediary or agent to accept and bind risks within agreed limits and rules, without referring every case to the insurer.