The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko – has released a thematic review on financial institutions’ product and services reviews.
Executive Director, Licensing and Conduct Supervision, Clare Bolingford, said: “When financial institutions proactively review products and services, they can identify and respond to consumer harms, and help promote improvements in the provision of financial services that meet the needs of consumers. This supports some of the key outcomes we want to see for consumers and financial markets, including fair services, quality ongoing service, and well-informed consumers.
“Institutions such as insurers and deposit takers should treat this report as a guide for continuous improvement. But it does not create new legal obligations.
“As part of our normal supervisory activity, financial institutions can expect proactive reviews of existing products and services to be a continued area of interest for the FMA,” said Ms Bolingford.
“Companies should ensure consumer requirements and objectives are central when they design and carry out reviews, and should adopt a risk-based and flexible review schedule that can respond to internal and external factors.
“They should also incorporate consumer vulnerability considerations and ensure products and services remain accessible and fair.
“Strengthening governance and board reporting to ensure accountability and oversight is key, as is improving consumer communication strategies to build trust and transparency.
“And finally, companies should ensure they have established clear processes for tracking and implementing review outcomes, including post-review monitoring.”
Ms Bolingford said the FMA was pleased all 20 participating institutions confirmed they conduct reviews, with varied approaches reflecting their size and complexity.
Firms could learn from good practice examples in the report, she said.
“Communication with consumers about review outcomes is inconsistent; some firms have mature strategies although some lack clarity on when and how to inform consumers.
“Action tracking from reviews is a developing area, with good practice involving structured follow-up, ownership, and effectiveness monitoring."
Firms could also learn from opportunities for improvement in the report, Ms Bolingford said.
“For example, off-sale and legacy products and services were often reviewed less frequently than on-sale products and services. Risks may be heightened where consumers interact with the product or service less frequently, as it is less likely issues will be surfaced by consumers. The FMA’s fair dealing enforcement activity has often related to off-sale or legacy products. Conducting regularly scheduled Reviews may help prevent the types of issues that lead to consumer harm and potential enforcement action.
“The report also highlights the importance of proactive detection of systems weakness. As noted in our Financial Conduct Report, conduct risks in the deposit taking and insurance sectors remain high from reliance on legacy technology, systems, and manual controls and processes, as well as inadequate staff training. Failures in systems and technology have led to consumer harm in the past.
“Dispute Resolution Services were overlooked as a source of insights by the majority of participants, although we consider them to be a valuable resource. As noted in our complaints info sheet, complaints can offer important insights into what is and isn’t working well.”
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Thematic review of financial institutions’ product and service reviews
