The Government wants insurance companies and banks to stop up-selling customers products and services they don't need.
But it won't be banning commissions for salespeople, instead suggesting different ways they can be incentivised to perform well.
"People were being sold insurance policies that they simply didn't need," Commerce and Consumer Affairs Minister Kris Faafoi told Newshub Nation on Saturday.
The Ministry of Business, Innovation and Employment has identified a number of problem areas in the banking and insurance industries, including:
- "an imbalance of power between financial institutions and consumers"
"some products are not designed with good customer outcomes"
"sales are prioritised over good customer outcomes"
"there are weak systems and controls to manage conduct risk"
and "there is a lack of accountability to ensure good conduct".
Faafoi said the problem goes right to the top.
"There is little or no responsibility or accountability for senior managers or directors either of life insurers or banks," he said.
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He's been talking with senior executives, telling them stiffer penalties could be on the way if they don't clean up their act.
"They're taking it seriously… some serious discussions are being had around board tables because there is going to be more accountability on them… I think there will be harsher penalties because of some of the behaviour we've seen," he said, citing an Australian royal commission which found "abhorrent behaviour" driven by the desire for bigger profits and commissions.
That investigation, which wrapped up in February found 24 instances of potentially criminal corporate behaviour in Australia's banking sector and resulted in more than 75 recommendations for change.
"If we don't act now, we could get to that stage," said Faafoi.
Consultation with the industry and public is ongoing, but Faafoi said one change is certain - 'soft' commissions will be banned.
"You get a set of steak knives if you sell 20 policies, trips to Rome, Queenstown - all those kinds of things - all those incentives are driven not by what the customer wants, but what the people who are selling those products want to achieve."
Instead, staff might instead earn commissions that get paid out over time, and depend on continued customer support and satisfaction.
Newshub.
