New Zealand’s conduct regulator has warned insurers over the use of non-monetary sales incentives such as gifts and prizes that could lead to adverse consumer outcomes.

Financial Markets Authority director of deposit-taking insurance and advice Michael Hewes says it is important risks are managed appropriately.

“These benefits and campaigns, or soft commissions, have a place, but insurers should actively consider these risks to ensure their fair conduct programs are designed to support fair treatment of consumers,” he said.

Non-monetary benefits could also include trips, sports tickets and professional development such as attending conferences. Short-term sales campaign incentives include entering employees, agents and intermediaries into prize draws for trips with every new policy sold.

The FMA wrote to insurers last year after seeing some insurers offer benefits and campaigns designed to drive business from third parties such as financial advisers.

Its follow-up report – titled Insurer Benefits and Campaigns Insights – outlines observations and reinforces expectations under Conduct of Financial Institutions rules.

The report finds most insurers have processes to identify and manage risks, but approaches vary.

“We will actively test insurers’ arrangements through our supervisory and monitoring activities,” the FMA said. “Where we identify weaknesses, we will expect insurers to address them promptly, including by changing or stopping benefits and campaigns that are inconsistent with the fair conduct principle or that expose consumers to unfair outcomes.”

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