April 18, 2024 • 57 mins
On today’s episode of the Law Down Under Podcast, we interview former lawyer and current member of Parliament, Dr Duncan Webb. Duncan has served as the MP for Christchurch Central since 2017. As a former insurance lawyer and Professor of Law, Duncan has also worked for the Public Interest Project, which seeks to free innocent people from jail, and the Howard League, an organisation that advocates for prison reform.
Duncan serves as the Deputy Shadow Leader of the House, a Member of the Justice Committee, and the Co-Chairperson of the New Zealand, Middle East and Africa Inter-Parliamentary Friendship Group. He is also the Labour Party Spokesperson for Christchurch Issues, Justice, the Earthquake Commission, and Regulation.
In this episode, we discuss Duncan’s bill, “The Insurance Contracts Bill,” which was drawn from the members’ ballot bill biscuit tin in Parliament. Duncan’s bill aims to modernize insurance laws in New Zealand, making insurance contracts fairer and clearer for consumers. We talk with Duncan about how the bill rectifies several issues in our existing insurance law framework and brings much-needed reform to the industry. I hope you enjoy this episode with the Hon Dr Duncan Webb.
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Episode Transcript
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Chris Patterson (00:00):
00:06 Hello and welcome to the Law Down Under podcast with barrister Chris Patterson. We will give you insights into the law in New Zealand and Australia, its application, and the law's future. Each episode features a new guest who will inspire interest in the law and give you a greater understanding of the legal issues that help shape our justice system here down under. We thank you for tuning in and enjoy the podcast. On this episode of the podcast, I'm joined by the Honorable Duncan Webb. He is the Labour MP for Christchurch Central. Duncan Webb currently has in the parliamentary schedule a member's bill seeking to reform and modernize certain aspects of insurance contract law. We discuss his pathway and his entry into the law. He shares with us some of his experience as an insurance lawyer before becoming a member of parliament. We discuss most of the key aspects of the Insurance Contracts Bill. This is a fascinating episode for anyone interested in some of the problems and challenges that arise with insurance contracts and the possible future modernization and reform of insurance law in New Zealand. I'm sure that you'll enjoy this episode with the Honorable Dr. Duncan Webb. Hi, Chris Patterson from the Law Down Under podcast. Can I have just a couple of moments of your time? I want to tell you about a very important legal resource. In fact, it is my favorite legal resource. I'm talking about NZLII. Jump on your browser, type in nzlii.org. You'll be taken to the New Zealand Legal Information Institute where you're going to find free, yes, free access to legal information in New Zealand. NZLII is part of AustLII, which is the Australian Legal Information Institute. NZLII is a joint project of the University of Otago Faculty of Law, the University of Canterbury, AustLII, and with assistance from Victoria University of Wellington Law School. So what does it contain? Well, it contains a lot of legal information, and you'll be amazed. It contains legislative material going back to 1841. Their historical acts and bills database is extremely popular not only with legal types but with social history researchers. So if you want to step back in time and have a look at New Zealand laws from the 19th and 20th centuries, you don't need a TARDIS. Most of them are there and waiting for you to connect with them. Also on NZLII, you'll find the New Zealand government because it's the other most popular database attracting over 5.3 million users in 2023 alone. NZLII has got 70 years of New Zealand government gazettes scanned; they just need a bit more funding, and they're going to try and go all the way back to 1840. NZLII has over 410,000 case documents on it. So if you're a lawyer and you just want to see how many times you've appeared in the law reports, just jump on NZLII; it'll find every single one. There are 563,000 documents in total, that's over half a million legal documents. The recent database additions include the Book of Awards, a database of all royal reports of royal commissions or reports, Royal Commissions. And if you really want to check out what life was like in 1912, check out the cost of living. They've also produced a guide to justice, the peace traffic courts, which will also join their ACC guide on the community's platform. And it was created with donations. NZLII lives and dies by donations and volunteers. Now, they get around 34 million users a year. Now, they're not tracking users, so you don't need to use a VPN or anything like that to hide your tracks. Privacy is very important to NZLII; they don't allow any of the search engines in there like Google, etc. Because it's free, it's basic, some call it ugly. I don't know why; I think it's fantastic. Now, the resources have gone into the content but not the aesthetics. The funding comes from Vice-Chancellors of the Law School of Otago, the New Zealand Council for Law Reporting, Auckland Council, and donations. Now, the legal profession provides some donations, but they need more. Okay, these things just don't run on themselves. There's so many things that Judy and a team of volunteers at NZLII wants to do if they can get more funding. They want to add some older High Court and Court of Appeal decisions. Some new easy-to-use guides. They're looking for volunteers; if you don't want to make a donation but you want to volunteer some time to add some new databases, they've got a very long list. Please get onto the NZLII website and click on contribute, and you'll see the link for contribute and $3 signs. NZLII is a great resource; it provides free access to our laws. Please support it. Thank you. Today's episode of the Law Down Under podcast, we are joined by former lawyer and current Member of Parliament, Dr. Duncan Webb. Duncan joined the New Zealand Labour Party back in 1999. He has served as an MP for Christchurch Central since 2017. As a former insurance lawyer and professor of law, Duncan has also worked for the Public Interest Project, which seeks to free innocent people from jail, and Howard League, an organization that advocates for prison reform. Duncan serves as Deputy Shadow Leader of the House. He's a member of the Judicial Committee of the Justice Committee and the co-chairperson of the New Zealand Middle East and African Inter-Parliamentary Friendship Group. He is also the party spokesman for Christchurch issues, justice, Earthquake Commission, and regulation. Today, we're going to be talking to Duncan about Duncan's bill, the Insurance Contracts Bill, which has been taken out of the cake term as being a member's a lot of bill, which was drawn from the member's ballot biscuit 10. And Parliament. Duncan's bill aims to modernize insurance laws in New Zealand, making insurance contracts fair and clear for consumers. We're going to talk to Duncan about the bill, how it rectifies several issues in our existing insurance law framework, and brings much-needed reform to the industry. Duncan, good morning. Welcome. Oh, actually, we've just gone mid-day. Good afternoon. How are you?
Dr. Duncan Webb (00:01):
06:34 Good afternoon. Good to be here. Yeah, no good to after a few technical issues. We're here. We're good to go. And we're really excited to talk about this insurance contract stuff. Yeah,
Chris Patterson (00:02):
06:42 look, I got you a little bit confused there, I suppose I should take it off mute. Got a team. Since the pandemic, we've all had to customize remote meetings to Zoom, MS Teams, and that, and boy, there's been some funny things happen. But I'm not.
Dr. Duncan Webb (00:03):
07:00 trying to throw me off for the piercing interview that we're having, right?
Chris Patterson (00:04):
07:05 Well, look, it's great to have you have you joined. Let's, let's just before we get into the topic of insurance law and insurance contracts, I'm going to challenge you about that, whether it is actually an area of the law, and then we're going to get there. Okay, and see if we get some debate going with that. Let's just talk a little bit about your background. And, look, your family originally immigrated from the UK, you landed in Christchurch. What was your pathway to the law? Were there lawyers in your family?
Dr. Duncan Webb (00:05):
07:41 No, not at all. But as I say, more of a pathway and sort of stumbling through your undergrad. I left school in a rush, didn't quite fit. I left very early on, what was in the seventh form, because it really wasn't for me. And then got on my bike and cycled across town in Christchurch, and asked at the registry desk where they I could still enroll. And it turns out I could. I then got the, you know, enrollment book, whatever it was, and ran my finger down it and picked a few random subjects, and law was one of them.
Chris Patterson (00:06):
08:20 So that's at the ripe old age of 17, 18, presumably.
Dr. Duncan Webb (00:07):
08:23 It was obviously at 13 times, not yet 18. And it, you know, I think I just muddled on, so to speak. I scraped through my first-year paper. And so, you know, that's interesting, and got into the second-year courses. And, you know, it was one of those things where I wasn't driven to be a lawyer, but I was more driven by a curiosity of what was a quite unusual kind of area of academic inquiry. It's a strange kind of social science, the law. And it drew me in.
Chris Patterson (00:08):
09:00 Right. And look, I understand that your undergraduate degree, you weren't exactly the A plus student. In fact, I hear through the grapevine that you may have even failed contract law on your first time around.
Dr. Duncan Webb (00:09):
09:12 Yeah, it is hard to smash an exam when you're asleep.
Chris Patterson (00:10):
09:20 Right, so you slept through the contract law exam, okay. There was a deliberate there was a there was an oversight and an omission. There was
Dr. Duncan Webb (00:11):
09:28 very much an oversight of the machine. There was a there was what we'd now call a scheduling error on my part. And by the time I woke up, and I lived in Brighton across the other side of town from the university, it was 40 minutes on my bike. I wasn't going to get there in any state to finish the exam in half an hour, so I had to forego that. But I must say, other than the lame law lecture jokes, the lectures were great a second time around.
Chris Patterson (00:12):
09:55 And of course, as probably permanently emblazoned on your mind, I entered the Law of Contract.
Dr. Duncan Webb (00:13):
10:01 Oh, that's right. It made me. That's why we're here today because, you know, that framework, that was Professor John Barrows back in the day who's a bit of a doyen of the law, you know, he was a great lecturer, actually. So insurance law is a subset of contract in many ways.
Chris Patterson (00:14):
10:19 Yeah, well, we will come back to that in a moment. Now, one of the things, Duncan, is that you obviously found that you liked studying because you went on and got a doctorate. So tell us about what sort of leads to that outcome.
Dr. Duncan Webb (00:15):
10:32 I've got a Doctor of Laws rather than a PhD, which is a funny little nook and cranny of academia where you submit work. It's the cheapest way to get a doctorate, right? You submit stuff that you've written already. So, you know, I've got it in professional ethics, where I wrote a book and I helped the Law Society write the professional rules. I wrote a number of articles and kind of submitted it as a body of work. So through the course of 10 or 15 years in academia, if you haven't written enough good material to show that you have mastered an area and have something to say, you're probably in the wrong job. But yeah, that's the doctorate I got. It was really good to do, and I must admit, I'm proud to have done a lot of that work in professional ethics as well. Fantastic.
Chris Patterson (00:16):
11:21 I actually happen to have it right here, as it so happens. Not your first edition, but the second edition, which I found a second, much greater improvement on the first. I mean, the first was outstanding, but the second edition is, I'd never have this book anywhere further than a couple of meters from me all the time. The people
Dr. Duncan Webb (00:17):
11:43 who aren't actually seeing anything but are only listening, it must be to hold up his screen, because it's absolutely untouched and pristine. Like it's never been out, but you just don't give a well.
Chris Patterson (00:18):
11:58 Actually, you know, this was one of the things that super disappointed me. When your assistant said, Oh, no, no, Duncan's going to join the podcast from Christchurch. And I said, What, but I want him to autograph my book. She said, the next time you're out here, I'm sure he'll do it. We can arrange.
Dr. Duncan Webb (00:19):
12:18 There's always someone out there who wants me to sign something every once every three or four months. Yeah.
Chris Patterson (00:20):
12:20 Look at it. Look, maybe that'll be another podcast at another time. But let's move into the area of insurance contracts. I think I very foreshadowed this and that is, is this such an area of law? And I know that there are literally hundreds of insurance lawyers out there, they say they're insurance lawyers, and your CV says that you're an insurance lawyer. Is there actually an area of actual Insurance Law? Or is it just a subset of contract law? That's
Dr. Duncan Webb (00:21):
12:55 a bit formalistic? Yeah, the question's presupposing that there are divisions in the law, you know, and obviously, there are lawyers who specialize in working for, say, insurance companies, or when I was a lawyer, I specialized in working essentially against insurance companies. And you certainly learn a set of skills that are really relevant in terms of the discipline at settling in those lawyers. You know, I became an expert in building law. So I was doing a whole lot of homeowners' stuff. So in I guess, you get this kind of conceptual boundaries, which can come into shapes, it's like either there's a practical area, transport, law, building law, whatever it might be, or there's a kind of conceptual area of contract law, tort law, constitutional law, insurance law is probably a practical demarcation that tells you about the industry you're working in, rather than conceptual tools you're working with. And of course, if you're an insurance lawyer, quite often you deal with a lot of tort law, a lot of contract law, and whole other areas of the law as well. But you know, I take your point, if you're talking about the way insurance works, at the end of the day, you're dealing with a contract. And I think sometimes that's one of the most, I used to give a whole lot of talks to homeowners, and probably the biggest tool I ever gave them was to tell them that, look, you're dealing with a contract governed, read the contract, then if you're argument.
Chris Patterson (00:22):
14:25 Now, I mean, look into the future, if we think about and we'll just say insurance, law, insurance, contract law, there is a difference between marine insurance principles and non-marine insurance, and your bill is very much focused on the non-marine side because the marine side has its own archaic set of rules that have come about over literally hundreds of years, mainly from the United Kingdom. We've adopted a few of those, but what I understand your bill to be very much focused on is the non-marine side, if I got that right, yeah?
Dr. Duncan Webb (00:23):
15:03 You know, absolutely. I mean, I'm not an expert in marine, although I have dabbled. But obviously, it's really important to have international consistency there. And so this is really looking at domestic insurance, buyer and general life, that sort of thing. And it has the bill overall around, I'm imagining you've had a cloud through it, it's got a real consumer focus.
Chris Patterson (00:24):
15:25 Yeah, it does draw it and we will do it, we'll get deeper into it at the moment, in a moment, it does draw that distinction between consumer and non-consumer insurance. But before we do, why don't we just talk about what an actual insurance contract is? And maybe let's use a little example. So we go to the racetrack and racecourse for the races, and we've got the main event and a horse as racing along now there are people there who are wagering, they're having bets on who's going to win. And of course, that's an event and the punter pays the money to the bookie, and the bookie goes, Okay, I'll accept this, on the basis that I don't think that horse is going to win. But if it does win, I'll pay you some money. What's the difference between that scenario? And me saying to my insurance broker, I've got a racehorse and I want to insure it, so it doesn't die during the third race at the racetrack. And
Dr. Duncan Webb (00:25):
16:27 yeah, I mean, I guess I give you the elephant, then you're making me dive dekat back into my law, littering days is the kind of interest that you've got, if all you've got is a speculative interest that it's a windfall. If, if the horse wins, and you just lose your stake if it loses, we know what it is, is gambling, right. Having said that, you know, as soon as you start stretching a bit further and deeper, becomes a little less clear. So if I purchase, or if I'm growing wheat, and I want to insure against the price of it falling, that looks like I've got an interest also looks a bit like a futures contract, and a derivative, which is a financial instrument, but it also looks a little bit like I'm gambling about the weather as well. So who knows, right? So
Chris Patterson (00:26):
17:17 look, I'll share with you and maybe we can build on this. It might have been a dinner in Sydney that I had with a couple of underwriters and we may have actually drank quite a lot of red wine. In fact, I know for a fact that I paid for it all so so there was actually quite a lot that they drank. But one of them said to me, and he was a very he was a very experienced underwriter was one of the large listed Australian underwriters. No longer there, but he did say, see, look, I'm paid this amount of money and it was it was almost eye-watering. I thought I've obviously made the wrong era of becoming a lawyer should have become an underwriter. They sit on paid a lot of money to be a professional gambler. And that I guess that's what got me thinking about the insurance, contract the nature of it. And if we just say, if most people who own a home will have their house insured, and you'll know a lot about this because of your background, you know, there's a gamble going on there that the insurance underwriter is saying, Well, I don't think you're gonna suffer a loss. And you as a homeowner is not really right. Well, it's not really your right. Yeah, yeah. What do you say
Dr. Duncan Webb (00:27):
18:23 is? Well, the gambling stopped. I forget the exact date but wasn't in the late 1700s when life insurance was invented by the Scottish Widows.
Chris Patterson (00:28):
18:33 You're familiar story, right? Yeah, no, no, please do. Yeah,
Dr. Duncan Webb (00:29):
18:37 someone went through the deaths in Scotland in worked out what the rough actuarial probability was of dying, gambling stopped on that day, because with a high degree of certainty, they knew that if they had a pool of people that was large enough, that were all telling the truth, roughly about their age, they could take money off them and profit from it. Actually, it was not for profit, which is a lovely thing as well, but in pay life insurance policies, and it's the same with house and home insurance, in fire in general, and all kinds of insurance. And we know now, this is one of the challenges for insurance now, because the information is so good. That, in fact, where the risks are too high, it no longer becomes possible to pull it in the way that previously previously. Here's both in respect of life and in respect of home.
Chris Patterson 19:29Yeah, and I guess with advancements in medical science and technology, those insuring, for example, for life or income protection, now have an unprecedented level of data that they're able to work out statistically. You know, Duncan Webb is, you know, X age, he doesn't smoke, etcetera, just literally when you're likely to die.
Dr Duncan Webb 19:52And of course, at the moment we've, I've done, we've got a moratorium on it, but a pinprick DNA test would give you a whole lot more information, which would raise real questions about the meaningfulness of life and health insurance.
Chris Patterson 20:08Yeah, and the privacy issues that go with that as well. Definitely.
Dr Duncan Webb 20:13I have got an email from a professor at the Auckland University Medical School to get back to me with this bill on those medical ethics issues or life insurance. I'm not sure that particular night I want to start; I'm tired.
Chris Patterson 20:27All right, let's, let's dive into this bill. Now, by way of background, you know, most pieces of legislation are there to, I guess, resolve some mischief or try to make the world a better place? What's the background for this bill? Like, why is it needed?
Dr Duncan Webb 20:46Yeah, like I guess there's a number of ways I could answer that. The kind of Law Commission way, I would say that for a long time, the prudent insurance test around misrepresentations was creating some real injustices in the way that insurers could treat policyholders if they made a mistake when they took their insurance out. I guess that in this is the funny thing about getting into politics, that's kind of the legal explanation. The other explanation is to stand back and say, insurance has transformed, it's no longer become a contract with roughly equal parties. It's a standard form contract, which the buyers never read, and the sellers spend enormous amounts of time and energy framing in such a way as to make their businesses work. So to kind of put the finger on the scales for the consumer, we need to have a really carefully drafted set of rules. And that's why there's more than just effects to the pregnant charities to hear.
Chris Patterson 22:01Okay, yeah. So it's trying to strike the right and fair balance, is that a good way of putting it?
Dr Duncan Webb 22:07Absolutely. And at the same time, making sure, and you know, because I was, briefly for a brief flicker of time Minister of Commerce and Consumer Affairs, and whilst I had a consumer focus when I was there, it's always important to make sure the market still works. So it's also about making sure that in terms of the machinery of how the insurance market works, and this is a large part of it, it's still effective and efficient and doesn't impose undue costs, which will just drive costs up for everyone.
Chris Patterson 22:37Well, also it's not just a cost issue, Duncan, would you agree with me that it's actually having insurance available full stop? Because if things become too difficult for insurance, they'll just withdraw? Maybe not completely, but certain products, and those products are necessary to, you know, to help, you know, whether it's the wheels of commerce, or just people feel safe that they are covered?
Dr Duncan Webb 23:04That's right. I think if we look at New Zealand, and I think this is a really important thing to do. Insurance plays a different part in our economy, then some other, our health insurance sector isn't as thoroughgoing as say, the United States because of our health system. Home Insurance System is supported by our EQC natural hazards framework, and I think we need to see it as an entire ecosystem. But you're right, there are some risks, but we need to be cautious that foot-stamping by large businesses doesn't lead to underprotection of consumers. Right?
Chris Patterson 23:49Absolutely correct. Now, has the United Kingdom addressed this whole issue of the duty of disclosure, particularly for consumers? Because it seems that that's a large part of this bill? It's the utmost good faith, you mentioned, power and balance. And, and I took it from what you were saying, Duncan, that, well, the insurers have got a lot of power, you know, they've got all the resources to draft these complicated contracts, and they can pretty much present them as a fait accompli. But there's a flip side on the disclosure side, a lot of the case law, which talks about the utmost good faith is that the insured, you know, the person who's wanting insurance, they have a lot of power as well, because they're the ones who come to the table or the relationship, knowing what they know, the insurer doesn't necessarily know what they know and hence, that's why there is this duty of utmost good faith. And is the bill attempting to strike a fair balance, so that the effect or the consequences of, you know, an individual failing to disclose something that they didn't appreciate at the time they should disclose results in their insurance, which they've been paying premiums for suddenly being canceled.
Dr Duncan Webb 25:20I think you'll probably remember the name of the case, but it escapes me right at the moment. Now, this duty of disclosure essentially came out of maritime insurance, right? And it came out of the basis that mariners and shipowners and merchants knew exactly what was going on. And they could insure cargoes whilst they were traveling in faraway places. And of course, they're going to know what the risks to the cargo are, they're going to know whether it's lost or not, they're going to know whether it's going through this strait or that strait or through pirate-infested waters, and so on. So yes, in the 1760s, way, before rapid communications, the knowledge imbalance favored the policyholder, favored the insured. But it's just not really accurate to say that that's the case anymore. So if we look at, you know, like you say, you take just about any area of insurance, health insurance, if you ask a series of questions about your age, your smoking habits, your gender, your ethnicity, and so on, the amount of knowledge that the insurer then has about your health prospects is far greater than you have yourself. And of course, the insurer has the ability to notice across populations, which is an additional factor in seizing it. So I think we need to be a bit cautious about saying there's this kind of imbalance. And of course, the real reforms here are around consumers who aren't sophisticated in insurance have no longer do insurers just say, well, what's the risk? They ask a series of detailed questions to assess that risk, and that's why I think the industry has changed radically. Since, you know, these rules were put into place, not only in the last hundreds of years, but even in the last tens and twenties of years, there have been a lot of this is done online now. So a lot, a lot of insurers pick boxes that the insurance have given to them on a basically a yes or no basis. So the whole kind of the insured has all of this knowledge and information that the insurer doesn't is not really as accurate as it used to be.
Chris Patterson 27:44Yeah, I was told quite a sad story by a colleague. I mean, obviously, the names have to be completely anonymized. But we'll just say that, you know, Jane, mother of three, has been paying income protection insurance for over a decade. When she took the policy out on any renewals, explained and gave all the disclosures about health, etc. But she had failed to disclose that as a teenager, she went through a period of depression, a bit of bulimia, I think, maybe even anorexia, and then suffered an accident years later, let's say 20 years later, and the insurer looks to avoid paying income protection because of a failure to disclose something that just did not cross her mind. That was years before the policy was taken out and was unrelated to the accident at all. Because of going well, you should have told us that. Yeah.
Dr Duncan Webb 28:45And that's exactly where this bill would almost sit? Well, it would make a real insignificant difference there. As long as we could say that Jane acted reasonably at the time, wasn't negligent, wasn't fraudulent, she would get a remedy. It might not be the whole lot. There might be some adjustments in light of the fact that the insurer might have changed the premium, say, but she would have been covered.
Chris Patterson 29:13I guess this is the point of striking the balance in a way that's not only fair, but it's also just reflects the practical realities, that most people filling out insurance declarations don't know every situation that the insurer may deem to be material and what it is that the insurer is looking for, and also the unfairness of failing to disclose something that actually ultimately wouldn't have altered the risk to the insurer, they would have ensured anyway.
Dr Duncan Webb 29:48Yeah, and I think that the real crux of it is that point that what it is fanciful to think that a consumer would know what a financial underwriter thinks as relevant to a risk, you know, whether that be, you know, depression in your early teens or, you know, a toothache, whatever it might be, or either all recurrent headaches is another one, right? Things like that. Now, they may well be relevant. I'm not a medical expert. But of course, a consumer shouldn't be expected to second guess those things. And increasingly, the fact is that insurers ask a series of questions. And of course, they throw in a catch-all "anything else." Now, they've asked 40 questions across eight pages, you're pretty much exhausted. You can't be expected to think, "Ah, yes, there's something else I should let you know about." Yeah.
Chris Patterson 30:44Now, not that I give legal advice on this podcast. But it would seem to me that if an insurer was asking some general, very generalized questions, that maybe a response to consider would be to say, "Well, I'd have to think about that and come back to you." Now, if the insurer carries on and insures you then maybe might help. Or
Dr Duncan Webb 31:09you could just be much more open and frank and say, "Well, is there anything else you want to know?"
Chris Patterson 31:14Yeah, yeah, exactly. Well, I mean, and of course, the great thing about this bill, and we will need to talk about, you know, the progress that you're hoping and others will be hoping it'll make is that it's got to hopefully avoid disputes, because disputes are pretty corrosive, and have a terrible effect on people. And you'll have seen that firsthand. And Christchurch back in when you were working.
Dr Duncan Webb 31:43It was always frustrating to sit down with a person whose house had been broken in the earthquake, and you're five years on, and you've given them all their advice about their claim, and then talk to them about the prospect of litigation, and what it really meant in how essentially litigating was losing by definition, right. And, you know, to finish that process, and notionally when but still be two or $300,000, worse off than you should have been, you know, those kinds of disputes. hopeless, and that's another little, that's a different and separate problem. And of course, there are dispute resolution mechanisms, which go a long way to sorting that out, at least in some circumstances, but the problem isn't solved yet. Yeah,
(00:50):
Chris Patterson 32:28and of course, for a family that has gone through a natural disaster, like an earthquake, to then be pushed into a, we'll call it a, you know, a human-made disaster, which is dispute resolution. I mean, it can be absolutely a double tragedy for them. But
Dr Duncan Webb 32:48yeah, you know, and I saw that happen, you know, through the Christchurch and Canterbury earthquakes, I saw marriages break up, and I saw people die. And whilst they are waiting for their claim, and all kinds of other things, I mean, we hit politically speaking, you know, the claims resolution service, which was built on the residential advisory service, that national put in place, and that's done a good job. I think, you know, that much more collaborative approach has made a huge difference. But that requires everyone in the room to take a collaborative approach homeowner, lawyers, experts, EQC insurance, and that's quite a magic flag. Yeah.
Chris Patterson 33:31I mean, if you can get everyone in the ecosystem that you're talking about working together, towards going look, there's an event that's occurred, there's a claim, let's get it out the you know, the other end as efficiently and as effectively there is a massive benefit to all involved there. I think there's few people that would say that delaying resolution is as beneficial to anyone.
Dr Duncan Webb 33:53You know that, right? There's very few people who benefit from delay. Yeah, and
Chris Patterson 33:57I just want to dispute resolution. Sorry, this is the litigator dispute resolution. Lawyer, I have a caveat. I did notice that your bill is going to prohibit arbitration clauses, but not prevent the parties agreeing to go to arbitration after the event. So it's just making sure that before the event, you don't have an insured who goes, "Oh, I didn't realize that. Now, I'm going to be stuck in a private process that can be even more expensive."
Dr Duncan Webb 34:25Yeah. Well, in a little gathering is clearly a bit more aware than some about how Arbitration can work. It can be very, not only expensive, but less procedurally fair, you know, can be driven quite quickly, in a way that a consumer would find quite alarming. But that's actually the law already in terms of consumer disputes in the Arbitration Act, and it's just putting it out there to make sure it's absolutely in abundantly clear that an insurer can't throw an insurer arbitration clause in which no one would ever read and then say, "Well, you can't sue me in court. I'm appointing an arbitrator. You've got seven days to object, then off you go, right." Yeah,
Chris Patterson 35:07yeah, absolutely. Look, I look 100%. I mean, arbitration is a fantastic mechanism for certain things, but not necessarily for an insurance claim and all circumstances. The other just on this topic of moving things along promptly, would it be fair to say that the bill isn't just addressing sort of that inequality or unbalanced to do around the duty of utmost good faith, but it's actually tidying up a number of areas to get insurance contracts working more efficiently, including having insurance companies responding to claims in a more timely manner?
Dr Duncan Webb 35:43I mean, full disclosure, this is a bill that was kicked off Law Commission at work. And I know, a long time ago, Chris Farley, when he was minister, commissioned the work of David Clarke's or through him, and I saw it, it was in pretty good shape as minister. But I didn't get a chance to introduce it into the house. And so when I got fired by the good people of New Zealand as the Labour government, I thought that I wanted to make sure to keep moving, so I put it in as a member's bill. So it is actually a row or a consolidation in reform of large parts of insurance law, which was pretty old, dusty, and disjointed, including, as you say, taking the duty of good faith, which is there already in the detractors say, "Well, you're not changing anything." I actually think it's really important to have it in legislation and point out that the duty to assess a claim, to decide a claim, because quite often insurers that I dealt with would say, "Well, we're still thinking about it, if you push us at night, might we don't have enough information," and it actually actually settle a claim in a timely manner is really, really important.
Chris Patterson 36:55You know, look, absolutely, I completely agree. Another area that the bill does tend to bring into, and I guess this is just trying to modernize but deal with relationships that have gone wrong in the past here are examples and the one that I'm thinking of is the relationship between an insured and a broker when they're paying premiums. And assuming that those premiums are actually going to the underwriter and the case that springs to mind is the Herbert insurance case where there, you know, there was millions of dollars of premiums paid to Herbert insurance, which never went to the underwriter and those people weren't insured. Yeah, we can't have that. No, yeah.
Dr Duncan Webb 37:36And I think one of the challenges is keeping putting yourself in the shoes of the consumer. If you pay your broker, for all intents and purposes, you think you've paid your insurer. And even though at law, and this is a whole bunch of agency law here, right, you're probably well familiar with it. Even though at law, the broker may well be the agent for the insured, not the insurer. That's not what it feels and looks like to the consumer who sees, you know, often insurance branding at the office of the broker and so on. And they act like they're an insurer. So, payment to the brokers got to be seen as payment to the insurer, right.
Chris Patterson 38:19Absolutely. And, of course, you know, most lawyers who have dabbled or work in insurance will have had conversations with clients where the client starts talking about their insurer, and you need to point out well, actually, no, they're not your insurer, the broker, okay, and they're the one who take a commission and clip the ticket on the way through, but they're not insuring you. They're not the one. Yeah. So. And I think understanding that relationship for people improves things, but I see your bill tighten that up to make sure that there are joints.
Dr Duncan Webb 38:53Yeah, the other funny thing that goes on there is that the brokers appear to make quite a lot of money out of holding onto those premiums for a while before they pass them on to the insurer. Now, that's a fight we could have got into. But I think we'll leave, they're all grown up so they can sort that out for themselves.
Chris Patterson 39:10Yeah, well, I guess in this high-interest environment, we're on, you know, if they're holding onto enough money for long enough, there's probably a bit of return there for them.
Dr Duncan Webb 39:20Track accounts for many millions of dollars. Some of the time. Yeah,
Chris Patterson 39:24yeah. Look, it looks absolutely. And look, the bill does tidy up, I guess also, some certain areas where it's not often as a lawyer that you have to dive down into the Law Reform Act of 1937. And look at the issue of third-party claims against insurance. But of course, this came up and well, that's what's coming up in a number of areas, but it came up a lot after the GFC with our second-tier finance company collapses. A lot of the directors had D&O (directors and officers) cover, but it was difficult for creditors to access it without engaging in a convoluted archaic pathway of the law, in some of these cases went all the way to the Supreme Court on this, but your bill does start tending to make it clear that, you know, third parties can bring claims. Yeah, absolutely.
Dr Duncan Webb 40:23I mean, I must say, when those cases started going up to the Supreme Court and discussing what kind of information parties were entitled to about the extent of insurance and so on, it did get, like you say, pretty complicated. And they were fine points that are fine points that were worth in many, many millions of dollars. When people do have insurance, like directors and officers insurance, we know that it should, it should survive insolvency. But you've got to have the tools to do it. And so what this essentially tries to do is tidy it up to make sure it's clear that a claimant against an insolvent insured party can essentially have a good look through to pursue that insurer for any losses, less insured losses that they've suffered. Yep.
Chris Patterson 41:13And at a more consumer level, take life insurance, for example. Very sad situation that I had a few years ago, I had a student come in and see me and told me a terrible, horrific story about a mother being killed in the UK, murdered, and just the hoops that she had to jump through to be able to access her mother's life insurance. Your bill provides a mechanism that is going to hopefully make that less of a drama, particularly at a time, which is really upsetting for people when they're having to make claims on life insurance.
Dr Duncan Webb 41:52Yeah. You talked about the interest. Interest register? Yeah. Because, obviously, what the trigger for payment in any insurance claim is, is the occurrence of an event, right. And it's always perplexed me as to why insurance, life insurance took so long to pay insurance. Look, I can understand that they want to make sure they're paying the right person. And you know, private probate is properly administered, and so on. But at the end of the day, the entitlement runs should run from the date of death. Now, there's going to be some administrative details are out there. But shortly thereafter, in this bill, interest will run, which will give an incentive but no, probably ran out a little bit more than the holding costs for the insurance company, which will encourage them to, to help help along that administration.
Chris Patterson 42:46Yeah, because I mean, to a certain extent, I'm taking it that those provisions, particularly around life insurance, reduce some of the friction that consumers experience, you know, at a time of loss, you know, they lost a loved one, etc, you know, you're not going to be able to get around necessarily, you know, you've got to apply for probate and all of those processes, but at least find those friction points and smooth them over so that those that are entitled to the insurance payout actually get it in a timely way without having to wait a long time or engage the services of lawyers, or having to deal too much with those that are administering estates.
Dr Duncan Webb 43:27Yeah. And that's exactly right. And I guess that's one of the jobs of law, it's achieving those things by a nudge, right. It's not coming down and saying, Here's exactly how you can do it. But it's creating a set of incentives, which makes it worthwhile to, like you say, oil, the wheels and remove the friction.
Chris Patterson 43:45Yeah, absolutely. Let's talk about the bill. And where from here. Now, it's been drawn as a member's bill. What are the next stages? Well,
(01:11):
Dr Duncan Webb 43:57the next, the next formal stage will be the first reading. So that's the first time it appears in Parliament. And I'll stand up and speak to several excellent volunteers and how I hope everyone will vote in favor of it. In fact, of course, the real next stage is happening right now. And in fact, in real time, because I consider this to be an important part of my lobbying process. Because I have got to get the most out of the house in the minority. So I have to get some support, at least from the other side of the house from national New Zealand First or act, and now reached out to everyone had some conversations, haven't got any commitments. The challenge is that the way the rules of Parliament work, you can't have two bills, the same in Parliament at any one time. So the Minister of Commerce was, you know, had this on his jobs list. But it wasn't clear to me and he couldn't tell me when he was going to get around to it. So I put it in there. And there's also a rule that says, if this bill gets defeated, you can introduce a substantially similar bill within a year. So you know, it's either this bill, or we wait a bit longer. Now, of course, if it gets passed first reading, we go off to select committee, and it will get knocked around. And I'm sure it will be changed in ways, possibly that I wouldn't approve of, but I've kind of got to give up ownership and be an advocate and give it to the ownership of Parliament who will make the changes that it sees fit to it? Well, I
Chris Patterson 45:35guess, in most negotiations, you've got to have a starting point and, and be open to a bit of compromise. And I guess, if it gets through to a select committee stage that so in the when the negotiation compromise in terms of cross-party support, I mean, are you getting any sense that there's any stern opposition to the bill? I mean, it doesn't appear to be anything that jumps out to say, oh, you know, if you were slightly right of center, you'd be really against these provisions, because so many of them make common sense. Well,
Dr Duncan Webb 46:07You know, obviously, I agree. There are a number of provisions in that bill, which head to head to make a choice that was either private insurer or pro-consumer. A really good example of that would be bringing the bill into the unfair contract terms in the Fair Trading Act. So bringing insurance contracts into the trading EQ framework. At the moment, they've got a total free pass. To me, that is, frankly, outrageous. The idea that of all the industries in New Zealand and insurers are the only ones who aren't in the unfair contract term provisions makes no sense. There was a decision to be made about if they come in, do we bring them in for the entire contract other than the Watson insured? Or do you have some wider carve outs? Now, I've gone for the broader approach, the insurance industry clearly would have liked a more restrictive approach. And I have absolutely no doubt that the Minister is having conversations with the insurance industry. And they will be talking about what they would like to see whether this bill goes forward or whether it gets voted down. In the finished reading,
Chris Patterson 47:25What would be an advantage, though, to the industry to have a bit of standardization put in? And we'll just go back to the issue of, you know, utmost good faith and disclosure, because I suspect that they, I guess the policy that one insurer might apply to "Okay, well, you didn't tell us about that. But look, we'll still cover you" might be different to another insurer down the road, they might take a harder approach, and having some standardization, one set of rules for everyone, wouldn't there be a benefit in that?
Dr Duncan Webb 48:04I can see your point. But at the end of the day, I think insurers like to have the choice. Because you know, from your experience that appears that insurance often will come across a nondisclosure. They'll recognize that it would be disproportionate to avoid the policy entirely. And they'll have a conversation, you know, now, sometimes their conversation will be well, we'll pay you half. Right? Rather than under this legislation, where they'll be told exactly what they have to do. Or the ones I've seen as we you see someone who's had a nondisclosure in insurance just needs another reason to decline a claim because they don't like it anyway. And they've got a sure thing. So they rely on the sure thing non-disclosure, rather than running out, you know, no damage argument or not an accident or whatever it might be. So there's a whole lot of reasons insurers like to have a little bit of fogginess around this area of the law.
Chris Patterson 49:07Yeah. And it costs that I mean, I've mentioned between insurance, but I mean, even within one insurer, I mean, you can have inconsistencies, and I might get hunted down by the claims managers on Queen Street about this, but you can have inconsistencies between claims handling between claims managers. And and that can be unfair. Yeah. Yeah.
Dr Duncan Webb 49:27That's right. But that's good internal processes as well. Right? But you're right. A good clear legal framework is a huge assistance if you're going to have good clear internal processes, okay.
Chris Patterson 49:37And look at zero scheduling, in terms of when the first reading of this bill is going to occur. Has that been been pinned
Dr Duncan Webb 49:45on parliamentary business? It's not going to be immediately, but there's essentially a queueing system and at the moment, I'm at the bottom of the queue because the most recently one of the most recently drawn bills, so it'll be a few weeks away yet, but it won't be Many, many months we'll see it. So I should sit down and make make an estimate and let you know.
Chris Patterson 50:05Yeah. Okay, are they, I guess a bit more time is probably a good thing in terms of being able to get some cross-party support and some commitment towards that. I mean, in many respects, it will bring New Zealand a bit more in line with some of our major trading partners, and particularly the UK and show a bit more consistency. So I mean, I do hope that that you can get the Duncan
Dr Duncan Webb 50:30Yeah, look, you're absolutely right, that this, this is not a radical bill, it's actually a catch-up. But it large parts of it, what the game equals stewardship, it's just keeping the house tidy, in bringing all those disparate old pieces of legislation together and modernizing them. So I'm really hopeful that, you know, across the house, the bits that they want tidied up, they'll look to the select committee and other processes to do that. And we'll get on and make making sure it's all better. Because as you say, insurance is so central to so many people's lives, make it better for everyone? Well,
Chris Patterson 51:05it does. And I mean, we're a country that is constantly reminded of the importance of insurance. I mean, particularly with climate change, you know, that with most New Zealanders, the main investment that they'll have as a home and and the veteran being able to insure that is just just critical having these things are important. Yeah.
Dr Duncan Webb 51:28And there's there's longer and bigger conversations about, you know, insurance in marginal communities, communities, which are subject to climate change, and foundation, or what have you, probably a bit beyond the scope of this bill and this conversation, but that's what we need to have as well.
Chris Patterson 51:42Yeah, and causes changes across the board in terms of our, you know, your health system. You know, I mean, I'm not making this as a political statement. But, you know, there is certain aspects of our health system that are very much under strain, if not at breaking point. So people are considering, you know, during our cost of living crisis, the issue of health insurance, that's an important part. And then, of course, you know, just protecting income, income protection and belongings, car. It's
Dr Duncan Webb 52:16what a health system and social security system, that means that the ordinary punter in the street doesn't feel the need to have comprehensive, you know, health and income protection insurance, I'd much rather have a much better safety net from the state. But certainly, I can entirely understand the concerns of people that they need those services, and certainly to maintain a lifestyle, you know, those things may well be necessary in some cases. Yeah. Well,
Chris Patterson 52:47I mean, as part of I mean, I mean, you and I are, at least in the same vintage that we went through high schools are still talking about forms. And when you mentioned, form seven, just for those of the younger generation, that's here 13. Finding financial literacy isn't really taught in our education system. Well, as well, I'll just I'm sure there are exceptions. But from what I do understand, you know, teaching financial literacy is a key part of that as insurance, and that is making sure that you protect, you know, your assets and your income in a certain way. Because, you know, certain events can ruin people financially, if they're if they're underinsured or not insured at all. So this does play an important part. And the average New Zealand has lives as making sure we have a good regulatory system around insurance.
Dr Duncan Webb 53:35Yeah, you're right in? Absolutely. I think we do need and I know, there's work done, the retirement Commissioner does work with, you know, sorted, and there's an app called bank, and that's in a lot of schools. I think that does great work. We do need to teach people about how, you know how finances work, and insurance is an important part of that. You know, and particularly, I think you've alluded to kind of catastrophic events, you know, losing your bike is one thing that losing houses entirely another
Chris Patterson 54:00look, absolutely. And look, you might be able to help me out here. I was trying to find the stats, but I seem to recall going back to the Christchurch earthquake, someone actually said to me that the amount of, you know, insurance payouts, so this is money flowing to insurers represented something like I think it was like 1.3% of the global payout. So we're paid across the globe, the planet, but the insurance premium take was something like 0.04%. So there was a massive inflow of money into Christchurch, because of that, does that kind of accord with your understanding of Yeah, I
Dr Duncan Webb 54:42know that was enormous. I forget the exact number was up because of course, you had EQC, which was billions of dollars in the insurance was a magnitude greater than that. And then, of course, on top of that there was government money for state assets that were rebuilt. The amount money coming in largely through insurance was absolutely enormous. And the commercial insurance as well was just phenomenal. And
Chris Patterson 55:07look, I mean, it was a tragedy in it and and I don't want to downplay it at all, but to the extent that there is some sort of silver lining have been in Christchurch recently within the last month or so, and I love visiting Christchurch, as you can really see some great development that's gone on and making Christchurch a better city to visit into. Yeah,
Dr Duncan Webb 55:29thanks for giving me the opportunity as Christchurch central MP to say, get down here, kind of have a look at the Avon River and the work that's gone on around the cash or more the transitional theatre or the you know, the building their new convention center, I could go on and on, on top of the Art Center, which is looking amazing as well, in a lot of its come out of, you know, good insurance. But in a lot of cases, of course, there's been a few top-ups, if anyone's got to be 100 million kicking around. I know the Christchurch Cathedral would be would appreciate it.
(01:32):
Chris Patterson 56:00Yeah, absolutely. We see that a lot on national TV and such go to and look at that I want to go from the cathedral to the law courts. But I'll just say that it's fantastic to be able to spend time in the Christ Church law courts in terms of public facility and resource. I just and I wouldn't wish there to be an earthquake in West Auckland, but the white hickory courthouses in desperate need of some funding, if you are ever in a position to to know it happens.
Dr Duncan Webb 56:32The funny thing is, you know, is on the Justice League committee we had the security for justice and, and one of the things we were asking about was what's going on with your property portfolio. And I'm pretty sure that that caught along with a number of others, but that is essentially priority priority one, because there's spaces that effectively are not usable, due to dilapidation What have you got to work on that
Chris Patterson 56:56we do. Hey, now, look, I've digressed and taking you away from the insurance contracts. Bill. Thank you very much for joining me on the lowdown under podcast Duncan Webb. It's been an absolute pleasure and we are going to watch the progress of that bill. Very carefully. So
Dr Duncan Webb 57:11good to be here. Thanks for having me.
Chris Patterson 57:13Thank you very much. Thank you for tuning in and listening to this episode of The Lord down under podcast. You're welcome to join in on the discussion via my podcast page which you can access@pedersen.co.nz That's a pa t t e r s o n.co.nz. Thanks for supporting the podcast and tune in again for more on the law, its application and the future of the law here down under.
00:06 Hello and welcome to the Law Down Under podcast with barrister Chris Patterson. We will give you insights into the law in New Zealand and Australia, its application, and the law's future. Each episode features a new guest who will inspire interest in the law and give you a greater understanding of the legal issues that help shape our justice system here down under. We thank you for tuning in and enjoy the podcast. On this episode of the podcast, I'm joined by the Honorable Duncan Webb. He is the Labour MP for Christchurch Central. Duncan Webb currently has in the parliamentary schedule a member's bill seeking to reform and modernize certain aspects of insurance contract law. We discuss his pathway and his entry into the law. He shares with us some of his experience as an insurance lawyer before becoming a member of parliament. We discuss most of the key aspects of the Insurance Contracts Bill. This is a fascinating episode for anyone interested in some of the problems and challenges that arise with insurance contracts and the possible future modernization and reform of insurance law in New Zealand. I'm sure that you'll enjoy this episode with the Honorable Dr. Duncan Webb. Hi, Chris Patterson from the Law Down Under podcast. Can I have just a couple of moments of your time? I want to tell you about a very important legal resource. In fact, it is my favorite legal resource. I'm talking about NZLII. Jump on your browser, type in nzlii.org. You'll be taken to the New Zealand Legal Information Institute where you're going to find free, yes, free access to legal information in New Zealand. NZLII is part of AustLII, which is the Australian Legal Information Institute. NZLII is a joint project of the University of Otago Faculty of Law, the University of Canterbury, AustLII, and with assistance from Victoria University of Wellington Law School. So what does it contain? Well, it contains a lot of legal information, and you'll be amazed. It contains legislative material going back to 1841. Their historical acts and bills database is extremely popular not only with legal types but with social history researchers. So if you want to step back in time and have a look at New Zealand laws from the 19th and 20th centuries, you don't need a TARDIS. Most of them are there and waiting for you to connect with them. Also on NZLII, you'll find the New Zealand government because it's the other most popular database attracting over 5.3 million users in 2023 alone. NZLII has got 70 years of New Zealand government gazettes scanned; they just need a bit more funding, and they're going to try and go all the way back to 1840. NZLII has over 410,000 case documents on it. So if you're a lawyer and you just want to see how many times you've appeared in the law reports, just jump on NZLII; it'll find every single one. There are 563,000 documents in total, that's over half a million legal documents. The recent database additions include the Book of Awards, a database of all royal reports of royal commissions or reports, Royal Commissions. And if you really want to check out what life was like in 1912, check out the cost of living. They've also produced a guide to justice, the peace traffic courts, which will also join their ACC guide on the community's platform. And it was created with donations. NZLII lives and dies by donations and volunteers. Now, they get around 34 million users a year. Now, they're not tracking users, so you don't need to use a VPN or anything like that to hide your tracks. Privacy is very important to NZLII; they don't allow any of the search engines in there like Google, etc. Because it's free, it's basic, some call it ugly. I don't know why; I think it's fantastic. Now, the resources have gone into the content but not the aesthetics. The funding comes from Vice-Chancellors of the Law School of Otago, the New Zealand Council for Law Reporting, Auckland Council, and donations. Now, the legal profession provides some donations, but they need more. Okay, these things just don't run on themselves. There's so many things that Judy and a team of volunteers at NZLII wants to do if they can get more funding. They want to add some older High Court and Court of Appeal decisions. Some new easy-to-use guides. They're looking for volunteers; if you don't want to make a donation but you want to volunteer some time to add some new databases, they've got a very long list. Please get onto the NZLII website and click on contribute, and you'll see the link for contribute and $3 signs. NZLII is a great resource; it provides free access to our laws. Please support it. Thank you. Today's episode of the Law Down Under podcast, we are joined by former lawyer and current Member of Parliament, Dr. Duncan Webb. Duncan joined the New Zealand Labour Party back in 1999. He has served as an MP for Christchurch Central since 2017. As a former insurance lawyer and professor of law, Duncan has also worked for the Public Interest Project, which seeks to free innocent people from jail, and Howard League, an organization that advocates for prison reform. Duncan serves as Deputy Shadow Leader of the House. He's a member of the Judicial Committee of the Justice Committee and the co-chairperson of the New Zealand Middle East and African Inter-Parliamentary Friendship Group. He is also the party spokesman for Christchurch issues, justice, Earthquake Commission, and regulation. Today, we're going to be talking to Duncan about Duncan's bill, the Insurance Contracts Bill, which has been taken out of the cake term as being a member's a lot of bill, which was drawn from the member's ballot biscuit 10. And Parliament. Duncan's bill aims to modernize insurance laws in New Zealand, making insurance contracts fair and clear for consumers. We're going to talk to Duncan about the bill, how it rectifies several issues in our existing insurance law framework, and brings much-needed reform to the industry. Duncan, good morning. Welcome. Oh, actually, we've just gone mid-day. Good afternoon. How are you?
Dr. Duncan Webb (00:01):
06:34 Good afternoon. Good to be here. Yeah, no good to after a few technical issues. We're here. We're good to go. And we're really excited to talk about this insurance contract stuff. Yeah,
Chris Patterson (00:02):
06:42 look, I got you a little bit confused there, I suppose I should take it off mute. Got a team. Since the pandemic, we've all had to customize remote meetings to Zoom, MS Teams, and that, and boy, there's been some funny things happen. But I'm not.
Dr. Duncan Webb (00:03):
07:00 trying to throw me off for the piercing interview that we're having, right?
Chris Patterson (00:04):
07:05 Well, look, it's great to have you have you joined. Let's, let's just before we get into the topic of insurance law and insurance contracts, I'm going to challenge you about that, whether it is actually an area of the law, and then we're going to get there. Okay, and see if we get some debate going with that. Let's just talk a little bit about your background. And, look, your family originally immigrated from the UK, you landed in Christchurch. What was your pathway to the law? Were there lawyers in your family?
Dr. Duncan Webb (00:05):
07:41 No, not at all. But as I say, more of a pathway and sort of stumbling through your undergrad. I left school in a rush, didn't quite fit. I left very early on, what was in the seventh form, because it really wasn't for me. And then got on my bike and cycled across town in Christchurch, and asked at the registry desk where they I could still enroll. And it turns out I could. I then got the, you know, enrollment book, whatever it was, and ran my finger down it and picked a few random subjects, and law was one of them.
Chris Patterson (00:06):
08:20 So that's at the ripe old age of 17, 18, presumably.
Dr. Duncan Webb (00:07):
08:23 It was obviously at 13 times, not yet 18. And it, you know, I think I just muddled on, so to speak. I scraped through my first-year paper. And so, you know, that's interesting, and got into the second-year courses. And, you know, it was one of those things where I wasn't driven to be a lawyer, but I was more driven by a curiosity of what was a quite unusual kind of area of academic inquiry. It's a strange kind of social science, the law. And it drew me in.
Chris Patterson (00:08):
09:00 Right. And look, I understand that your undergraduate degree, you weren't exactly the A plus student. In fact, I hear through the grapevine that you may have even failed contract law on your first time around.
Dr. Duncan Webb (00:09):
09:12 Yeah, it is hard to smash an exam when you're asleep.
Chris Patterson (00:10):
09:20 Right, so you slept through the contract law exam, okay. There was a deliberate there was a there was an oversight and an omission. There was
Dr. Duncan Webb (00:11):
09:28 very much an oversight of the machine. There was a there was what we'd now call a scheduling error on my part. And by the time I woke up, and I lived in Brighton across the other side of town from the university, it was 40 minutes on my bike. I wasn't going to get there in any state to finish the exam in half an hour, so I had to forego that. But I must say, other than the lame law lecture jokes, the lectures were great a second time around.
Chris Patterson (00:12):
09:55 And of course, as probably permanently emblazoned on your mind, I entered the Law of Contract.
Dr. Duncan Webb (00:13):
10:01 Oh, that's right. It made me. That's why we're here today because, you know, that framework, that was Professor John Barrows back in the day who's a bit of a doyen of the law, you know, he was a great lecturer, actually. So insurance law is a subset of contract in many ways.
Chris Patterson (00:14):
10:19 Yeah, well, we will come back to that in a moment. Now, one of the things, Duncan, is that you obviously found that you liked studying because you went on and got a doctorate. So tell us about what sort of leads to that outcome.
Dr. Duncan Webb (00:15):
10:32 I've got a Doctor of Laws rather than a PhD, which is a funny little nook and cranny of academia where you submit work. It's the cheapest way to get a doctorate, right? You submit stuff that you've written already. So, you know, I've got it in professional ethics, where I wrote a book and I helped the Law Society write the professional rules. I wrote a number of articles and kind of submitted it as a body of work. So through the course of 10 or 15 years in academia, if you haven't written enough good material to show that you have mastered an area and have something to say, you're probably in the wrong job. But yeah, that's the doctorate I got. It was really good to do, and I must admit, I'm proud to have done a lot of that work in professional ethics as well. Fantastic.
Chris Patterson (00:16):
11:21 I actually happen to have it right here, as it so happens. Not your first edition, but the second edition, which I found a second, much greater improvement on the first. I mean, the first was outstanding, but the second edition is, I'd never have this book anywhere further than a couple of meters from me all the time. The people
Dr. Duncan Webb (00:17):
11:43 who aren't actually seeing anything but are only listening, it must be to hold up his screen, because it's absolutely untouched and pristine. Like it's never been out, but you just don't give a well.
Chris Patterson (00:18):
11:58 Actually, you know, this was one of the things that super disappointed me. When your assistant said, Oh, no, no, Duncan's going to join the podcast from Christchurch. And I said, What, but I want him to autograph my book. She said, the next time you're out here, I'm sure he'll do it. We can arrange.
Dr. Duncan Webb (00:19):
12:18 There's always someone out there who wants me to sign something every once every three or four months. Yeah.
Chris Patterson (00:20):
12:20 Look at it. Look, maybe that'll be another podcast at another time. But let's move into the area of insurance contracts. I think I very foreshadowed this and that is, is this such an area of law? And I know that there are literally hundreds of insurance lawyers out there, they say they're insurance lawyers, and your CV says that you're an insurance lawyer. Is there actually an area of actual Insurance Law? Or is it just a subset of contract law? That's
Dr. Duncan Webb (00:21):
12:55 a bit formalistic? Yeah, the question's presupposing that there are divisions in the law, you know, and obviously, there are lawyers who specialize in working for, say, insurance companies, or when I was a lawyer, I specialized in working essentially against insurance companies. And you certainly learn a set of skills that are really relevant in terms of the discipline at settling in those lawyers. You know, I became an expert in building law. So I was doing a whole lot of homeowners' stuff. So in I guess, you get this kind of conceptual boundaries, which can come into shapes, it's like either there's a practical area, transport, law, building law, whatever it might be, or there's a kind of conceptual area of contract law, tort law, constitutional law, insurance law is probably a practical demarcation that tells you about the industry you're working in, rather than conceptual tools you're working with. And of course, if you're an insurance lawyer, quite often you deal with a lot of tort law, a lot of contract law, and whole other areas of the law as well. But you know, I take your point, if you're talking about the way insurance works, at the end of the day, you're dealing with a contract. And I think sometimes that's one of the most, I used to give a whole lot of talks to homeowners, and probably the biggest tool I ever gave them was to tell them that, look, you're dealing with a contract governed, read the contract, then if you're argument.
Chris Patterson (00:22):
14:25 Now, I mean, look into the future, if we think about and we'll just say insurance, law, insurance, contract law, there is a difference between marine insurance principles and non-marine insurance, and your bill is very much focused on the non-marine side because the marine side has its own archaic set of rules that have come about over literally hundreds of years, mainly from the United Kingdom. We've adopted a few of those, but what I understand your bill to be very much focused on is the non-marine side, if I got that right, yeah?
Dr. Duncan Webb (00:23):
15:03 You know, absolutely. I mean, I'm not an expert in marine, although I have dabbled. But obviously, it's really important to have international consistency there. And so this is really looking at domestic insurance, buyer and general life, that sort of thing. And it has the bill overall around, I'm imagining you've had a cloud through it, it's got a real consumer focus.
Chris Patterson (00:24):
15:25 Yeah, it does draw it and we will do it, we'll get deeper into it at the moment, in a moment, it does draw that distinction between consumer and non-consumer insurance. But before we do, why don't we just talk about what an actual insurance contract is? And maybe let's use a little example. So we go to the racetrack and racecourse for the races, and we've got the main event and a horse as racing along now there are people there who are wagering, they're having bets on who's going to win. And of course, that's an event and the punter pays the money to the bookie, and the bookie goes, Okay, I'll accept this, on the basis that I don't think that horse is going to win. But if it does win, I'll pay you some money. What's the difference between that scenario? And me saying to my insurance broker, I've got a racehorse and I want to insure it, so it doesn't die during the third race at the racetrack. And
Dr. Duncan Webb (00:25):
16:27 yeah, I mean, I guess I give you the elephant, then you're making me dive dekat back into my law, littering days is the kind of interest that you've got, if all you've got is a speculative interest that it's a windfall. If, if the horse wins, and you just lose your stake if it loses, we know what it is, is gambling, right. Having said that, you know, as soon as you start stretching a bit further and deeper, becomes a little less clear. So if I purchase, or if I'm growing wheat, and I want to insure against the price of it falling, that looks like I've got an interest also looks a bit like a futures contract, and a derivative, which is a financial instrument, but it also looks a little bit like I'm gambling about the weather as well. So who knows, right? So
Chris Patterson (00:26):
17:17 look, I'll share with you and maybe we can build on this. It might have been a dinner in Sydney that I had with a couple of underwriters and we may have actually drank quite a lot of red wine. In fact, I know for a fact that I paid for it all so so there was actually quite a lot that they drank. But one of them said to me, and he was a very he was a very experienced underwriter was one of the large listed Australian underwriters. No longer there, but he did say, see, look, I'm paid this amount of money and it was it was almost eye-watering. I thought I've obviously made the wrong era of becoming a lawyer should have become an underwriter. They sit on paid a lot of money to be a professional gambler. And that I guess that's what got me thinking about the insurance, contract the nature of it. And if we just say, if most people who own a home will have their house insured, and you'll know a lot about this because of your background, you know, there's a gamble going on there that the insurance underwriter is saying, Well, I don't think you're gonna suffer a loss. And you as a homeowner is not really right. Well, it's not really your right. Yeah, yeah. What do you say
Dr. Duncan Webb (00:27):
18:23 is? Well, the gambling stopped. I forget the exact date but wasn't in the late 1700s when life insurance was invented by the Scottish Widows.
Chris Patterson (00:28):
18:33 You're familiar story, right? Yeah, no, no, please do. Yeah,
Dr. Duncan Webb (00:29):
18:37 someone went through the deaths in Scotland in worked out what the rough actuarial probability was of dying, gambling stopped on that day, because with a high degree of certainty, they knew that if they had a pool of people that was large enough, that were all telling the truth, roughly about their age, they could take money off them and profit from it. Actually, it was not for profit, which is a lovely thing as well, but in pay life insurance policies, and it's the same with house and home insurance, in fire in general, and all kinds of insurance. And we know now, this is one of the challenges for insurance now, because the information is so good. That, in fact, where the risks are too high, it no longer becomes possible to pull it in the way that previously previously. Here's both in respect of life and in respect of home.
Chris Patterson 19:29Yeah, and I guess with advancements in medical science and technology, those insuring, for example, for life or income protection, now have an unprecedented level of data that they're able to work out statistically. You know, Duncan Webb is, you know, X age, he doesn't smoke, etcetera, just literally when you're likely to die.
Dr Duncan Webb 19:52And of course, at the moment we've, I've done, we've got a moratorium on it, but a pinprick DNA test would give you a whole lot more information, which would raise real questions about the meaningfulness of life and health insurance.
Chris Patterson 20:08Yeah, and the privacy issues that go with that as well. Definitely.
Dr Duncan Webb 20:13I have got an email from a professor at the Auckland University Medical School to get back to me with this bill on those medical ethics issues or life insurance. I'm not sure that particular night I want to start; I'm tired.
Chris Patterson 20:27All right, let's, let's dive into this bill. Now, by way of background, you know, most pieces of legislation are there to, I guess, resolve some mischief or try to make the world a better place? What's the background for this bill? Like, why is it needed?
Dr Duncan Webb 20:46Yeah, like I guess there's a number of ways I could answer that. The kind of Law Commission way, I would say that for a long time, the prudent insurance test around misrepresentations was creating some real injustices in the way that insurers could treat policyholders if they made a mistake when they took their insurance out. I guess that in this is the funny thing about getting into politics, that's kind of the legal explanation. The other explanation is to stand back and say, insurance has transformed, it's no longer become a contract with roughly equal parties. It's a standard form contract, which the buyers never read, and the sellers spend enormous amounts of time and energy framing in such a way as to make their businesses work. So to kind of put the finger on the scales for the consumer, we need to have a really carefully drafted set of rules. And that's why there's more than just effects to the pregnant charities to hear.
Chris Patterson 22:01Okay, yeah. So it's trying to strike the right and fair balance, is that a good way of putting it?
Dr Duncan Webb 22:07Absolutely. And at the same time, making sure, and you know, because I was, briefly for a brief flicker of time Minister of Commerce and Consumer Affairs, and whilst I had a consumer focus when I was there, it's always important to make sure the market still works. So it's also about making sure that in terms of the machinery of how the insurance market works, and this is a large part of it, it's still effective and efficient and doesn't impose undue costs, which will just drive costs up for everyone.
Chris Patterson 22:37Well, also it's not just a cost issue, Duncan, would you agree with me that it's actually having insurance available full stop? Because if things become too difficult for insurance, they'll just withdraw? Maybe not completely, but certain products, and those products are necessary to, you know, to help, you know, whether it's the wheels of commerce, or just people feel safe that they are covered?
Dr Duncan Webb 23:04That's right. I think if we look at New Zealand, and I think this is a really important thing to do. Insurance plays a different part in our economy, then some other, our health insurance sector isn't as thoroughgoing as say, the United States because of our health system. Home Insurance System is supported by our EQC natural hazards framework, and I think we need to see it as an entire ecosystem. But you're right, there are some risks, but we need to be cautious that foot-stamping by large businesses doesn't lead to underprotection of consumers. Right?
Chris Patterson 23:49Absolutely correct. Now, has the United Kingdom addressed this whole issue of the duty of disclosure, particularly for consumers? Because it seems that that's a large part of this bill? It's the utmost good faith, you mentioned, power and balance. And, and I took it from what you were saying, Duncan, that, well, the insurers have got a lot of power, you know, they've got all the resources to draft these complicated contracts, and they can pretty much present them as a fait accompli. But there's a flip side on the disclosure side, a lot of the case law, which talks about the utmost good faith is that the insured, you know, the person who's wanting insurance, they have a lot of power as well, because they're the ones who come to the table or the relationship, knowing what they know, the insurer doesn't necessarily know what they know and hence, that's why there is this duty of utmost good faith. And is the bill attempting to strike a fair balance, so that the effect or the consequences of, you know, an individual failing to disclose something that they didn't appreciate at the time they should disclose results in their insurance, which they've been paying premiums for suddenly being canceled.
Dr Duncan Webb 25:20I think you'll probably remember the name of the case, but it escapes me right at the moment. Now, this duty of disclosure essentially came out of maritime insurance, right? And it came out of the basis that mariners and shipowners and merchants knew exactly what was going on. And they could insure cargoes whilst they were traveling in faraway places. And of course, they're going to know what the risks to the cargo are, they're going to know whether it's lost or not, they're going to know whether it's going through this strait or that strait or through pirate-infested waters, and so on. So yes, in the 1760s, way, before rapid communications, the knowledge imbalance favored the policyholder, favored the insured. But it's just not really accurate to say that that's the case anymore. So if we look at, you know, like you say, you take just about any area of insurance, health insurance, if you ask a series of questions about your age, your smoking habits, your gender, your ethnicity, and so on, the amount of knowledge that the insurer then has about your health prospects is far greater than you have yourself. And of course, the insurer has the ability to notice across populations, which is an additional factor in seizing it. So I think we need to be a bit cautious about saying there's this kind of imbalance. And of course, the real reforms here are around consumers who aren't sophisticated in insurance have no longer do insurers just say, well, what's the risk? They ask a series of detailed questions to assess that risk, and that's why I think the industry has changed radically. Since, you know, these rules were put into place, not only in the last hundreds of years, but even in the last tens and twenties of years, there have been a lot of this is done online now. So a lot, a lot of insurers pick boxes that the insurance have given to them on a basically a yes or no basis. So the whole kind of the insured has all of this knowledge and information that the insurer doesn't is not really as accurate as it used to be.
Chris Patterson 27:44Yeah, I was told quite a sad story by a colleague. I mean, obviously, the names have to be completely anonymized. But we'll just say that, you know, Jane, mother of three, has been paying income protection insurance for over a decade. When she took the policy out on any renewals, explained and gave all the disclosures about health, etc. But she had failed to disclose that as a teenager, she went through a period of depression, a bit of bulimia, I think, maybe even anorexia, and then suffered an accident years later, let's say 20 years later, and the insurer looks to avoid paying income protection because of a failure to disclose something that just did not cross her mind. That was years before the policy was taken out and was unrelated to the accident at all. Because of going well, you should have told us that. Yeah.
Dr Duncan Webb 28:45And that's exactly where this bill would almost sit? Well, it would make a real insignificant difference there. As long as we could say that Jane acted reasonably at the time, wasn't negligent, wasn't fraudulent, she would get a remedy. It might not be the whole lot. There might be some adjustments in light of the fact that the insurer might have changed the premium, say, but she would have been covered.
Chris Patterson 29:13I guess this is the point of striking the balance in a way that's not only fair, but it's also just reflects the practical realities, that most people filling out insurance declarations don't know every situation that the insurer may deem to be material and what it is that the insurer is looking for, and also the unfairness of failing to disclose something that actually ultimately wouldn't have altered the risk to the insurer, they would have ensured anyway.
Dr Duncan Webb 29:48Yeah, and I think that the real crux of it is that point that what it is fanciful to think that a consumer would know what a financial underwriter thinks as relevant to a risk, you know, whether that be, you know, depression in your early teens or, you know, a toothache, whatever it might be, or either all recurrent headaches is another one, right? Things like that. Now, they may well be relevant. I'm not a medical expert. But of course, a consumer shouldn't be expected to second guess those things. And increasingly, the fact is that insurers ask a series of questions. And of course, they throw in a catch-all "anything else." Now, they've asked 40 questions across eight pages, you're pretty much exhausted. You can't be expected to think, "Ah, yes, there's something else I should let you know about." Yeah.
Chris Patterson 30:44Now, not that I give legal advice on this podcast. But it would seem to me that if an insurer was asking some general, very generalized questions, that maybe a response to consider would be to say, "Well, I'd have to think about that and come back to you." Now, if the insurer carries on and insures you then maybe might help. Or
Dr Duncan Webb 31:09you could just be much more open and frank and say, "Well, is there anything else you want to know?"
Chris Patterson 31:14Yeah, yeah, exactly. Well, I mean, and of course, the great thing about this bill, and we will need to talk about, you know, the progress that you're hoping and others will be hoping it'll make is that it's got to hopefully avoid disputes, because disputes are pretty corrosive, and have a terrible effect on people. And you'll have seen that firsthand. And Christchurch back in when you were working.
Dr Duncan Webb 31:43It was always frustrating to sit down with a person whose house had been broken in the earthquake, and you're five years on, and you've given them all their advice about their claim, and then talk to them about the prospect of litigation, and what it really meant in how essentially litigating was losing by definition, right. And, you know, to finish that process, and notionally when but still be two or $300,000, worse off than you should have been, you know, those kinds of disputes. hopeless, and that's another little, that's a different and separate problem. And of course, there are dispute resolution mechanisms, which go a long way to sorting that out, at least in some circumstances, but the problem isn't solved yet. Yeah,
(00:50):
Chris Patterson 32:28and of course, for a family that has gone through a natural disaster, like an earthquake, to then be pushed into a, we'll call it a, you know, a human-made disaster, which is dispute resolution. I mean, it can be absolutely a double tragedy for them. But
Dr Duncan Webb 32:48yeah, you know, and I saw that happen, you know, through the Christchurch and Canterbury earthquakes, I saw marriages break up, and I saw people die. And whilst they are waiting for their claim, and all kinds of other things, I mean, we hit politically speaking, you know, the claims resolution service, which was built on the residential advisory service, that national put in place, and that's done a good job. I think, you know, that much more collaborative approach has made a huge difference. But that requires everyone in the room to take a collaborative approach homeowner, lawyers, experts, EQC insurance, and that's quite a magic flag. Yeah.
Chris Patterson 33:31I mean, if you can get everyone in the ecosystem that you're talking about working together, towards going look, there's an event that's occurred, there's a claim, let's get it out the you know, the other end as efficiently and as effectively there is a massive benefit to all involved there. I think there's few people that would say that delaying resolution is as beneficial to anyone.
Dr Duncan Webb 33:53You know that, right? There's very few people who benefit from delay. Yeah, and
Chris Patterson 33:57I just want to dispute resolution. Sorry, this is the litigator dispute resolution. Lawyer, I have a caveat. I did notice that your bill is going to prohibit arbitration clauses, but not prevent the parties agreeing to go to arbitration after the event. So it's just making sure that before the event, you don't have an insured who goes, "Oh, I didn't realize that. Now, I'm going to be stuck in a private process that can be even more expensive."
Dr Duncan Webb 34:25Yeah. Well, in a little gathering is clearly a bit more aware than some about how Arbitration can work. It can be very, not only expensive, but less procedurally fair, you know, can be driven quite quickly, in a way that a consumer would find quite alarming. But that's actually the law already in terms of consumer disputes in the Arbitration Act, and it's just putting it out there to make sure it's absolutely in abundantly clear that an insurer can't throw an insurer arbitration clause in which no one would ever read and then say, "Well, you can't sue me in court. I'm appointing an arbitrator. You've got seven days to object, then off you go, right." Yeah,
Chris Patterson 35:07yeah, absolutely. Look, I look 100%. I mean, arbitration is a fantastic mechanism for certain things, but not necessarily for an insurance claim and all circumstances. The other just on this topic of moving things along promptly, would it be fair to say that the bill isn't just addressing sort of that inequality or unbalanced to do around the duty of utmost good faith, but it's actually tidying up a number of areas to get insurance contracts working more efficiently, including having insurance companies responding to claims in a more timely manner?
Dr Duncan Webb 35:43I mean, full disclosure, this is a bill that was kicked off Law Commission at work. And I know, a long time ago, Chris Farley, when he was minister, commissioned the work of David Clarke's or through him, and I saw it, it was in pretty good shape as minister. But I didn't get a chance to introduce it into the house. And so when I got fired by the good people of New Zealand as the Labour government, I thought that I wanted to make sure to keep moving, so I put it in as a member's bill. So it is actually a row or a consolidation in reform of large parts of insurance law, which was pretty old, dusty, and disjointed, including, as you say, taking the duty of good faith, which is there already in the detractors say, "Well, you're not changing anything." I actually think it's really important to have it in legislation and point out that the duty to assess a claim, to decide a claim, because quite often insurers that I dealt with would say, "Well, we're still thinking about it, if you push us at night, might we don't have enough information," and it actually actually settle a claim in a timely manner is really, really important.
Chris Patterson 36:55You know, look, absolutely, I completely agree. Another area that the bill does tend to bring into, and I guess this is just trying to modernize but deal with relationships that have gone wrong in the past here are examples and the one that I'm thinking of is the relationship between an insured and a broker when they're paying premiums. And assuming that those premiums are actually going to the underwriter and the case that springs to mind is the Herbert insurance case where there, you know, there was millions of dollars of premiums paid to Herbert insurance, which never went to the underwriter and those people weren't insured. Yeah, we can't have that. No, yeah.
Dr Duncan Webb 37:36And I think one of the challenges is keeping putting yourself in the shoes of the consumer. If you pay your broker, for all intents and purposes, you think you've paid your insurer. And even though at law, and this is a whole bunch of agency law here, right, you're probably well familiar with it. Even though at law, the broker may well be the agent for the insured, not the insurer. That's not what it feels and looks like to the consumer who sees, you know, often insurance branding at the office of the broker and so on. And they act like they're an insurer. So, payment to the brokers got to be seen as payment to the insurer, right.
Chris Patterson 38:19Absolutely. And, of course, you know, most lawyers who have dabbled or work in insurance will have had conversations with clients where the client starts talking about their insurer, and you need to point out well, actually, no, they're not your insurer, the broker, okay, and they're the one who take a commission and clip the ticket on the way through, but they're not insuring you. They're not the one. Yeah. So. And I think understanding that relationship for people improves things, but I see your bill tighten that up to make sure that there are joints.
Dr Duncan Webb 38:53Yeah, the other funny thing that goes on there is that the brokers appear to make quite a lot of money out of holding onto those premiums for a while before they pass them on to the insurer. Now, that's a fight we could have got into. But I think we'll leave, they're all grown up so they can sort that out for themselves.
Chris Patterson 39:10Yeah, well, I guess in this high-interest environment, we're on, you know, if they're holding onto enough money for long enough, there's probably a bit of return there for them.
Dr Duncan Webb 39:20Track accounts for many millions of dollars. Some of the time. Yeah,
Chris Patterson 39:24yeah. Look, it looks absolutely. And look, the bill does tidy up, I guess also, some certain areas where it's not often as a lawyer that you have to dive down into the Law Reform Act of 1937. And look at the issue of third-party claims against insurance. But of course, this came up and well, that's what's coming up in a number of areas, but it came up a lot after the GFC with our second-tier finance company collapses. A lot of the directors had D&O (directors and officers) cover, but it was difficult for creditors to access it without engaging in a convoluted archaic pathway of the law, in some of these cases went all the way to the Supreme Court on this, but your bill does start tending to make it clear that, you know, third parties can bring claims. Yeah, absolutely.
Dr Duncan Webb 40:23I mean, I must say, when those cases started going up to the Supreme Court and discussing what kind of information parties were entitled to about the extent of insurance and so on, it did get, like you say, pretty complicated. And they were fine points that are fine points that were worth in many, many millions of dollars. When people do have insurance, like directors and officers insurance, we know that it should, it should survive insolvency. But you've got to have the tools to do it. And so what this essentially tries to do is tidy it up to make sure it's clear that a claimant against an insolvent insured party can essentially have a good look through to pursue that insurer for any losses, less insured losses that they've suffered. Yep.
Chris Patterson 41:13And at a more consumer level, take life insurance, for example. Very sad situation that I had a few years ago, I had a student come in and see me and told me a terrible, horrific story about a mother being killed in the UK, murdered, and just the hoops that she had to jump through to be able to access her mother's life insurance. Your bill provides a mechanism that is going to hopefully make that less of a drama, particularly at a time, which is really upsetting for people when they're having to make claims on life insurance.
Dr Duncan Webb 41:52Yeah. You talked about the interest. Interest register? Yeah. Because, obviously, what the trigger for payment in any insurance claim is, is the occurrence of an event, right. And it's always perplexed me as to why insurance, life insurance took so long to pay insurance. Look, I can understand that they want to make sure they're paying the right person. And you know, private probate is properly administered, and so on. But at the end of the day, the entitlement runs should run from the date of death. Now, there's going to be some administrative details are out there. But shortly thereafter, in this bill, interest will run, which will give an incentive but no, probably ran out a little bit more than the holding costs for the insurance company, which will encourage them to, to help help along that administration.
Chris Patterson 42:46Yeah, because I mean, to a certain extent, I'm taking it that those provisions, particularly around life insurance, reduce some of the friction that consumers experience, you know, at a time of loss, you know, they lost a loved one, etc, you know, you're not going to be able to get around necessarily, you know, you've got to apply for probate and all of those processes, but at least find those friction points and smooth them over so that those that are entitled to the insurance payout actually get it in a timely way without having to wait a long time or engage the services of lawyers, or having to deal too much with those that are administering estates.
Dr Duncan Webb 43:27Yeah. And that's exactly right. And I guess that's one of the jobs of law, it's achieving those things by a nudge, right. It's not coming down and saying, Here's exactly how you can do it. But it's creating a set of incentives, which makes it worthwhile to, like you say, oil, the wheels and remove the friction.
Chris Patterson 43:45Yeah, absolutely. Let's talk about the bill. And where from here. Now, it's been drawn as a member's bill. What are the next stages? Well,
(01:11):
Dr Duncan Webb 43:57the next, the next formal stage will be the first reading. So that's the first time it appears in Parliament. And I'll stand up and speak to several excellent volunteers and how I hope everyone will vote in favor of it. In fact, of course, the real next stage is happening right now. And in fact, in real time, because I consider this to be an important part of my lobbying process. Because I have got to get the most out of the house in the minority. So I have to get some support, at least from the other side of the house from national New Zealand First or act, and now reached out to everyone had some conversations, haven't got any commitments. The challenge is that the way the rules of Parliament work, you can't have two bills, the same in Parliament at any one time. So the Minister of Commerce was, you know, had this on his jobs list. But it wasn't clear to me and he couldn't tell me when he was going to get around to it. So I put it in there. And there's also a rule that says, if this bill gets defeated, you can introduce a substantially similar bill within a year. So you know, it's either this bill, or we wait a bit longer. Now, of course, if it gets passed first reading, we go off to select committee, and it will get knocked around. And I'm sure it will be changed in ways, possibly that I wouldn't approve of, but I've kind of got to give up ownership and be an advocate and give it to the ownership of Parliament who will make the changes that it sees fit to it? Well, I
Chris Patterson 45:35guess, in most negotiations, you've got to have a starting point and, and be open to a bit of compromise. And I guess, if it gets through to a select committee stage that so in the when the negotiation compromise in terms of cross-party support, I mean, are you getting any sense that there's any stern opposition to the bill? I mean, it doesn't appear to be anything that jumps out to say, oh, you know, if you were slightly right of center, you'd be really against these provisions, because so many of them make common sense. Well,
Dr Duncan Webb 46:07You know, obviously, I agree. There are a number of provisions in that bill, which head to head to make a choice that was either private insurer or pro-consumer. A really good example of that would be bringing the bill into the unfair contract terms in the Fair Trading Act. So bringing insurance contracts into the trading EQ framework. At the moment, they've got a total free pass. To me, that is, frankly, outrageous. The idea that of all the industries in New Zealand and insurers are the only ones who aren't in the unfair contract term provisions makes no sense. There was a decision to be made about if they come in, do we bring them in for the entire contract other than the Watson insured? Or do you have some wider carve outs? Now, I've gone for the broader approach, the insurance industry clearly would have liked a more restrictive approach. And I have absolutely no doubt that the Minister is having conversations with the insurance industry. And they will be talking about what they would like to see whether this bill goes forward or whether it gets voted down. In the finished reading,
Chris Patterson 47:25What would be an advantage, though, to the industry to have a bit of standardization put in? And we'll just go back to the issue of, you know, utmost good faith and disclosure, because I suspect that they, I guess the policy that one insurer might apply to "Okay, well, you didn't tell us about that. But look, we'll still cover you" might be different to another insurer down the road, they might take a harder approach, and having some standardization, one set of rules for everyone, wouldn't there be a benefit in that?
Dr Duncan Webb 48:04I can see your point. But at the end of the day, I think insurers like to have the choice. Because you know, from your experience that appears that insurance often will come across a nondisclosure. They'll recognize that it would be disproportionate to avoid the policy entirely. And they'll have a conversation, you know, now, sometimes their conversation will be well, we'll pay you half. Right? Rather than under this legislation, where they'll be told exactly what they have to do. Or the ones I've seen as we you see someone who's had a nondisclosure in insurance just needs another reason to decline a claim because they don't like it anyway. And they've got a sure thing. So they rely on the sure thing non-disclosure, rather than running out, you know, no damage argument or not an accident or whatever it might be. So there's a whole lot of reasons insurers like to have a little bit of fogginess around this area of the law.
Chris Patterson 49:07Yeah. And it costs that I mean, I've mentioned between insurance, but I mean, even within one insurer, I mean, you can have inconsistencies, and I might get hunted down by the claims managers on Queen Street about this, but you can have inconsistencies between claims handling between claims managers. And and that can be unfair. Yeah. Yeah.
Dr Duncan Webb 49:27That's right. But that's good internal processes as well. Right? But you're right. A good clear legal framework is a huge assistance if you're going to have good clear internal processes, okay.
Chris Patterson 49:37And look at zero scheduling, in terms of when the first reading of this bill is going to occur. Has that been been pinned
Dr Duncan Webb 49:45on parliamentary business? It's not going to be immediately, but there's essentially a queueing system and at the moment, I'm at the bottom of the queue because the most recently one of the most recently drawn bills, so it'll be a few weeks away yet, but it won't be Many, many months we'll see it. So I should sit down and make make an estimate and let you know.
Chris Patterson 50:05Yeah. Okay, are they, I guess a bit more time is probably a good thing in terms of being able to get some cross-party support and some commitment towards that. I mean, in many respects, it will bring New Zealand a bit more in line with some of our major trading partners, and particularly the UK and show a bit more consistency. So I mean, I do hope that that you can get the Duncan
Dr Duncan Webb 50:30Yeah, look, you're absolutely right, that this, this is not a radical bill, it's actually a catch-up. But it large parts of it, what the game equals stewardship, it's just keeping the house tidy, in bringing all those disparate old pieces of legislation together and modernizing them. So I'm really hopeful that, you know, across the house, the bits that they want tidied up, they'll look to the select committee and other processes to do that. And we'll get on and make making sure it's all better. Because as you say, insurance is so central to so many people's lives, make it better for everyone? Well,
Chris Patterson 51:05it does. And I mean, we're a country that is constantly reminded of the importance of insurance. I mean, particularly with climate change, you know, that with most New Zealanders, the main investment that they'll have as a home and and the veteran being able to insure that is just just critical having these things are important. Yeah.
Dr Duncan Webb 51:28And there's there's longer and bigger conversations about, you know, insurance in marginal communities, communities, which are subject to climate change, and foundation, or what have you, probably a bit beyond the scope of this bill and this conversation, but that's what we need to have as well.
Chris Patterson 51:42Yeah, and causes changes across the board in terms of our, you know, your health system. You know, I mean, I'm not making this as a political statement. But, you know, there is certain aspects of our health system that are very much under strain, if not at breaking point. So people are considering, you know, during our cost of living crisis, the issue of health insurance, that's an important part. And then, of course, you know, just protecting income, income protection and belongings, car. It's
Dr Duncan Webb 52:16what a health system and social security system, that means that the ordinary punter in the street doesn't feel the need to have comprehensive, you know, health and income protection insurance, I'd much rather have a much better safety net from the state. But certainly, I can entirely understand the concerns of people that they need those services, and certainly to maintain a lifestyle, you know, those things may well be necessary in some cases. Yeah. Well,
Chris Patterson 52:47I mean, as part of I mean, I mean, you and I are, at least in the same vintage that we went through high schools are still talking about forms. And when you mentioned, form seven, just for those of the younger generation, that's here 13. Finding financial literacy isn't really taught in our education system. Well, as well, I'll just I'm sure there are exceptions. But from what I do understand, you know, teaching financial literacy is a key part of that as insurance, and that is making sure that you protect, you know, your assets and your income in a certain way. Because, you know, certain events can ruin people financially, if they're if they're underinsured or not insured at all. So this does play an important part. And the average New Zealand has lives as making sure we have a good regulatory system around insurance.
Dr Duncan Webb 53:35Yeah, you're right in? Absolutely. I think we do need and I know, there's work done, the retirement Commissioner does work with, you know, sorted, and there's an app called bank, and that's in a lot of schools. I think that does great work. We do need to teach people about how, you know how finances work, and insurance is an important part of that. You know, and particularly, I think you've alluded to kind of catastrophic events, you know, losing your bike is one thing that losing houses entirely another
Chris Patterson 54:00look, absolutely. And look, you might be able to help me out here. I was trying to find the stats, but I seem to recall going back to the Christchurch earthquake, someone actually said to me that the amount of, you know, insurance payouts, so this is money flowing to insurers represented something like I think it was like 1.3% of the global payout. So we're paid across the globe, the planet, but the insurance premium take was something like 0.04%. So there was a massive inflow of money into Christchurch, because of that, does that kind of accord with your understanding of Yeah, I
Dr Duncan Webb 54:42know that was enormous. I forget the exact number was up because of course, you had EQC, which was billions of dollars in the insurance was a magnitude greater than that. And then, of course, on top of that there was government money for state assets that were rebuilt. The amount money coming in largely through insurance was absolutely enormous. And the commercial insurance as well was just phenomenal. And
Chris Patterson 55:07look, I mean, it was a tragedy in it and and I don't want to downplay it at all, but to the extent that there is some sort of silver lining have been in Christchurch recently within the last month or so, and I love visiting Christchurch, as you can really see some great development that's gone on and making Christchurch a better city to visit into. Yeah,
Dr Duncan Webb 55:29thanks for giving me the opportunity as Christchurch central MP to say, get down here, kind of have a look at the Avon River and the work that's gone on around the cash or more the transitional theatre or the you know, the building their new convention center, I could go on and on, on top of the Art Center, which is looking amazing as well, in a lot of its come out of, you know, good insurance. But in a lot of cases, of course, there's been a few top-ups, if anyone's got to be 100 million kicking around. I know the Christchurch Cathedral would be would appreciate it.
(01:32):
Chris Patterson 56:00Yeah, absolutely. We see that a lot on national TV and such go to and look at that I want to go from the cathedral to the law courts. But I'll just say that it's fantastic to be able to spend time in the Christ Church law courts in terms of public facility and resource. I just and I wouldn't wish there to be an earthquake in West Auckland, but the white hickory courthouses in desperate need of some funding, if you are ever in a position to to know it happens.
Dr Duncan Webb 56:32The funny thing is, you know, is on the Justice League committee we had the security for justice and, and one of the things we were asking about was what's going on with your property portfolio. And I'm pretty sure that that caught along with a number of others, but that is essentially priority priority one, because there's spaces that effectively are not usable, due to dilapidation What have you got to work on that
Chris Patterson 56:56we do. Hey, now, look, I've digressed and taking you away from the insurance contracts. Bill. Thank you very much for joining me on the lowdown under podcast Duncan Webb. It's been an absolute pleasure and we are going to watch the progress of that bill. Very carefully. So
Dr Duncan Webb 57:11good to be here. Thanks for having me.
Chris Patterson 57:13Thank you very much. Thank you for tuning in and listening to this episode of The Lord down under podcast. You're welcome to join in on the discussion via my podcast page which you can access@pedersen.co.nz That's a pa t t e r s o n.co.nz. Thanks for supporting the podcast and tune in again for more on the law, its application and the future of the law here down under.
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