Regulator letter
The duty of disclosure has 452 days to live, and the FMA has already told insurers to stop waiting
Source: FMA, Letter to insurers outlining expectations regarding the Contracts of Insurance Act
The FMA's May letter confirms the Contracts of Insurance Act starts on 15 November 2027, and tells insurers to prepare now rather than wait for the regulations. That leaves 452 days as of 20 August 2026. What ends on the other side is an insurer's right to cancel your policy from day one over an honest mistake.
By Henry Smith · Regulation · 2026-05-18
What this means for you From 15 November 2027 an insurer can no longer cancel a consumer policy from day one over an honest mistake, because the response has to fit the error. On life cover, cancellation is off the table entirely once a careless answer is more than three years old. Each policy reaches the new rules at its first new contract, renewal or change after that date, and the old, harsher rules apply until it gets there.
Right now a New Zealand insurer can cancel your policy from day one over an honest omission. The rule that lets it do that is the duty of disclosure. As of 20 August 2026, that rule has 452 days to live.
Its replacement is the Contracts of Insurance Act 2024. The Act "comes into effect on 15 November 2027", says a letter the Financial Markets Authority sent insurers on 18 May 2026. The FMA polices how financial firms treat their customers, and its message was pointed: stop waiting, start preparing (FMA, 18 May 2026, retrieved 20 August 2026).
What did the regulator tell insurers?
The letter is signed by Clare Bolingford, the FMA's Executive Director of Licensing and Conduct Supervision. She calls the new Act "a significant reform", one that moves your obligations "away from broad and often ambiguous disclosure requirements" (FMA, 18 May 2026, retrieved 20 August 2026).
That matters at the kitchen table. Today you have to guess what an insurer might want to know. Under the new Act, "consumers are required to take reasonable care not to make a misrepresentation". Answer the questions honestly and carefully and you have done your job (same source).
The Act also "introduces proportionate remedies". If you get an answer wrong, the insurer's response "must be fair and appropriately aligned with the nature and impact of the breach". The punishment has to fit the mistake (same source).
On timing the FMA is blunt: "we expect insurers to be actively preparing now. This includes undertaking gap and impact assessments." Those are the formal stocktakes of what a firm has to change in its systems and its paperwork (same source).
Some insurers are waiting for the supporting regulations before they start. The letter tells them not to. The regulations "represent a small component of the reforms", and delay risks "compressed timeframes, incomplete implementation" and conduct failures (same source).
The FMA wants "tangible progress well in advance of commencement". It will police the new law with powers it already holds under the Financial Markets Conduct Act, the law that governs how financial firms behave (same source).
What the letter never says is what all this is worth to you. That is the part we work out below.
How close is the deadline?
The Act became law on 15 November 2024, the day it received Royal assent, the formal last step for new legislation. Section 2 says any part not switched on earlier starts automatically on the third anniversary of that day (Contracts of Insurance Act 2024, s 2, retrieved 20 August 2026). The FMA's letter landed almost exactly halfway through. Just under 15 months are left.
| Milestone | Date | Days after assent | Days before 15 November 2027 |
|---|---|---|---|
| Royal assent | 15 November 2024 | 0 | 1,095 |
| FMA letter to insurers | 18 May 2026 | 549 | 546 |
| Sources retrieved | 20 August 2026 | 643 | 452 |
| Latest commencement | 15 November 2027 | 1,095 | 0 |
QuoteHub arithmetic on the assent date in the Act and the commencement date in the FMA letter, both retrieved 20 August 2026.
Fifteen months is not long. The letter's own list of what must change covers product design, sales, underwriting, policy administration, claims handling and the governance over all of it. Underwriting is the health and lifestyle questioning an insurer does before it covers you. A regulator writing at halfway to say preparation should already be visible is telling part of the market that it is not.
What happens to the old rule?
Today, if you leave something out of an application, even innocently, the insurer holds a heavy weapon. It can "avoid or cancel the policy back to the beginning and treat it as if it never existed". Those are the words of the Insurance & Financial Services Ombudsman Scheme (IFSO), the free service that referees disputes between insurers and their customers. IFSO says the current law "is very harsh and does not distinguish between innocent and deliberate non-disclosure" (IFSO information sheet, Non-disclosure, 2024, retrieved 20 August 2026).
Insurers call that weapon avoidance. It is behind the classic technical decline: a claim refused, and a whole policy unwound, over an omission that had nothing to do with the loss.
The new Act pulls the old duty out at the root. Section 13 says you must take reasonable care not to make a misrepresentation, and section 59 wipes out the disclosure duties that came before it (Contracts of Insurance Act 2024, ss 13 and 59, retrieved 20 August 2026).
From there the tests stack in your favour. The insurer gets a remedy only if it proves your mistake changed the deal it would have offered (section 23). If it accuses you of lying, or of not caring whether your answer was true, it has to prove that too (section 26). And the remedies now sit on a sliding scale at the back of the Act, instead of at all or nothing.
| Situation at claim time | Today, under the duty of disclosure | From 15 November 2027 |
|---|---|---|
| Careless but honest answer, and the insurer would have added extra terms | Policy cancelled back to day one | Policy stands on those terms, with a higher premium or the claim cut in proportion, not cancellation (cl 5) |
| Careless answer, and the insurer would not have covered you at all | Policy cancelled back to day one | Cancellation allowed, but your premiums come back (cl 4) |
| Careless answer on a life policy, more than 3 years before the death or the cancellation | Cancellation available however old the answer is | No cancellation. The insurer may only adjust the policy to where it would have stood (cl 4(2)) |
| You lied, or did not care whether the answer was true | Policy cancelled | Policy cancelled, claim refused, premiums kept (cl 2) |
Left column as described in IFSO's non-disclosure information sheet (2024, retrieved 20 August 2026); right column from Schedule 2 of the Act, clauses 2 to 5 (retrieved 20 August 2026).
The three-year rule in the third row has had almost no consumer coverage. Once a careless answer on a life policy is more than three years old, cancellation is gone. The insurer can only adjust the policy to where it would have stood with the right answer. The most feared outcome in a life claim now comes with an expiry date.
Who does this help?
IFSO accepted a record 600 disputes in 2024-25, and 96% of them were about insurance (IFSO Scheme Annual Report 2025, retrieved 20 August 2026).
The caseload is climbing fast: up 25% on the previous year and 110% on 2022 (IFSO Scheme Annual Report 2025, retrieved 20 August 2026). Non-disclosure, meaning something left out of an application, is the third most common issue behind those disputes (same source).
IFSO publishes no count of non-disclosure disputes, but it does publish disputes by product. The products where an insurer asks detailed health questions are exactly where cancellation does its damage (IFSO Scheme Annual Report 2025, retrieved 20 August 2026):
| Product | IFSO disputes, 2024-25 |
|---|---|
| Health insurance | 89 |
| Life insurance | 27 |
| Income protection | 27 |
| Trauma | 25 |
| Total | 168 |
All product counts from the IFSO Scheme Annual Report 2025, retrieved 20 August 2026.
Those 168 disputes are 28% of the record 600. Travel insurance asks medical questions too, and adds another 107 we have left out (IFSO Scheme Annual Report 2025, retrieved 20 August 2026).
All of those fights move onto softer ground once the policy renews or is rewritten after 15 November 2027.
The clearest picture of the change is a case IFSO publishes itself. A man died of colon cancer at 31. His application had not mentioned a teenage colonoscopy or an anaemia diagnosis he barely remembered. The insurer could have cancelled the policy and paid nothing. Instead it paid half the life benefit, matching the smaller cover it would have offered had it known (IFSO information sheet, Non-disclosure, 2024, retrieved 20 August 2026).
Under the new Act that halfway outcome stops being a favour and becomes the remedy the law requires (Contracts of Insurance Act 2024, Sch 2 cl 5, retrieved 20 August 2026). Today's goodwill is tomorrow's legal floor.
What happens to my policy?
Nothing changes at your next claim if it lands before 15 November 2027. The old rules run right up to the start date.
The catch is in the timing. Schedule 1 says the new duties apply to contracts entered into on or after the start date, and that expressly includes renewals. Changes you agree to after that date count too (Contracts of Insurance Act 2024, Sch 1, cl 1, retrieved 20 August 2026).
So cover that renews every year, such as health insurance, crosses into the new rules at its first renewal. A life insurance policy that runs on unchanged keeps the old law attached to your original answers, potentially for decades.
That makes applications filled in between now and November 2027 the last group judged wholly under the old, harsher duty. It is a reason to take more care with the health questionnaire, not less. Our claims readiness tool covers what an insurer can test at claim time.
The reform does not protect dishonesty. A dishonest answer always fails the reasonable care standard (section 13(3)). And if the insurer asked a clear, specific question, the law assumes you knew the answer mattered (section 26(2)) (Contracts of Insurance Act 2024, retrieved 20 August 2026).
What we could not check
The FMA's page blocked our standard fetching tools with a 403 "access denied" error, so we read it by direct request on 20 August 2026. It carries "Page last updated: 18 May 2026" rather than a publication date, so we date the letter to that day.
15 November 2027 is the latest possible start date, not a fixed one. Section 2 lets the government start parts of the Act earlier by Order in Council, a government order that brings a law into force without going back to Parliament. We found none as of 20 August 2026, so the deadline can only move closer.
IFSO ranks non-disclosure third among its 2024-25 dispute issues but publishes no count. So our 168-dispute figure is the whole dispute book in the health-questionnaire products. It is an outer boundary, not a count of claims declined for non-disclosure. Some of those disputes are about what a policy covers or excludes, and some non-disclosure disputes sit in the travel line we left out. FSCL (Financial Services Complaints Ltd), the other big disputes scheme, publishes no comparable breakdown we could verify, so we have not used its figures.
The letter says nothing about how many insurers are behind. That is our inference from the FMA warning, at the halfway mark, against waiting for regulations it calls a small component of the reforms. No readiness survey has been published, and the regulations were not final when the letter went out.
Sources
- Letter to insurers outlining expectations regarding the Contracts of Insurance Act, Financial Markets Authority, 18 May 2026
- Contracts of Insurance Act 2024, New Zealand Legislation
- IFSO Scheme Annual Report 2025, Insurance & Financial Services Ombudsman Scheme, 2025
- Information sheet: Non-disclosure, Insurance & Financial Services Ombudsman Scheme, 2024
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