New Zealand Labour’s plans for targeting add-on insurance need evidence and careful consideration, with regulations already covering the sector, the Financial Services Federation says.

“The vast majority of providers, including our members, operate with integrity and focus on providing products that meet their customers’ needs,” federation executive director Lyn McMorran said.

“Any proposed changes should build on good practice and address areas where consumers are not being well served.”

If it wins the November 7 election, Labour plans to ban “junk” add-on car insurance, including paint and mechanical breakdown cover “that excludes almost everything that could break down”.

It is also focusing on secret commissions, disclosure of total costs over the life of an agreement, and cancellation rights.

The FSF says the Credit Contracts and Consumer Finance Act already requires consumers to be given upfront information about the total cost of a credit contract, and the Secret Commission Act also applies. Under the credit-related insurance code, members must give consumers at least 14 days to cancel relevant insurance without penalty, it says.

“It is important to distinguish between issues raised requiring new regulation, and those already addressed under existing rules,” Ms McMorran said.

The FSF says last year its members approved an average of 97.5% of mechanical breakdown claims, helping thousands of people manage unexpected repair costs and demonstrating the protection’s value.

Ms McMorran says where poor practices occur, they should be addressed, and the FSF supports regulators taking on businesses that fail to meet their obligations.

“This protects consumers and supports responsible providers who work hard to earn and maintain their customers’ trust,” she said.