Commerce and Consumer Affairs Minister Kris Faafoi announced stricter controls on banks and insurers today.
New regulations will ban things like target-based sales incentives. In the past, financial advisors have been given overseas trips or bonuses as a reward for selling banking and insurance policies. This has resulted in banks and insurers selling products to customers who don’t need them.
Kris Faafaoi said, “Incentives such as overseas trips or bonuses for selling a certain amount of insurance policies can lead to sales staff pressuring customers into buying unsuitable products, like policies they can never claim on.”
Mr Faafoi said that banning these incentives will help to make sure that New Zealanders will be given the right financial advice and sold the right products to meet their needs. He said that having a well-functioning financial sector will help individual New Zealanders, but it will also help the economy of the country.
consumer affairs: consumers are ordinary people who buy things. Consumer affairs are questions about making sure that people are not cheated when they buy things.
regulations: small laws
target-based: this is a compound adjective to describe something which is based on a target. A target is a goal. If an incentive is based on a target, it means that the incentive changes depending on whether you meet a target.
incentive: a reward that motivates you is an incentive. Money could be an incentive for people, or a carrot could be an incentive for a rabbit.
policies: the plural for policy. In this story, a policy is an insurance contract or some other kind of financial product.
well-functioning: this is a compound adjective to describe something which is functioning well. Functioning means working in an automatic way. A machine, a computer, a body organ or an organisation can function or malfunction.
to claim on a policy: if you buy some insurance on a car and then someone steals your car, you can go to the insurance company and ask them to give you money for a new car. You make a claim on your car insurance policy.
financial sector: the group of industries that deal with money, such as banks and insurance companies.