Announcement
The person selling you insurance with your car loan is often not your adviser
Source: FMA, Credit transfer creates single conduct regulator for financial markets
Cover arranged beside a car loan or a mortgage is usually not regulated financial advice, so the seller owes you none of an adviser's duties. From 1 July 2026 one regulator watches both halves of that deal, and it has put commissions first on its list.
By Henry Smith · Regulation · 2026-08-20
What this means for you If you hold add-on cover that was sold alongside a car loan or a mortgage, such as mechanical breakdown insurance, payment protection or guaranteed asset protection (which pays the shortfall when a written-off car is worth less than the loan against it), the law often treats that seller as an arranger rather than your adviser, so the duty to treat you fairly sits with the insurer named on the policy rather than the person who sold it. Since 1 July 2026 a single agency, the Financial Markets Authority, has overseen both the loan and the insurance in that transaction, and it no longer needs a second agency's consent before taking a lender or insurer to court. Nothing about cover you already hold changes, but a complaint about how it was sold now sits with one regulator that has named commission structures and sales oversight among its first priorities.
Buy a car on finance and someone usually slides an insurance form across the desk at the same time. Mechanical breakdown cover, payment protection, an extended warranty. Here is the part nobody says out loud: in law, the person recommending it is frequently not your adviser. Cover arranged as a sideline to selling you a car, or by a lender ticking off its own lending obligations, is lifted out of the category called regulated financial advice. The seller does not owe you care, competence, or the duty to put your interests ahead of their own commission. From 1 July 2026 a single agency watches both the loan and the insurance in that transaction, and how the seller gets paid is on its short list of first concerns.
What does that mean if you were sold cover with a loan?
Nothing about a policy you already hold changes. It pays or does not pay on its own terms, and no premium moves because a regulator changed.
What changed is who answers for the way it was sold. If you believe an add-on policy was pushed on you, or sold to you when you could never have claimed on it, the duty to treat you fairly sits with the insurer named on the policy rather than with the dealer or the loan officer who did the talking. That complaint now lands in front of one regulator instead of two, and it has already said commission structures and sales oversight are where it expects the most harm.
Who is watching now?
On 1 July 2026 the Financial Markets Authority, the regulator that polices how financial products are sold, replaced the Commerce Commission as the regulator for consumer lending, "becoming the single conduct regulator for financial markets in New Zealand" (FMA, MR No. 2026-32, 1 July 2026). Until then that one transaction had two watchers: the loan belonged to the Commerce Commission, the insurance sold beside it to the FMA, and add-on cover sat in the gap.
Clare Bolingford, who runs licensing and conduct supervision at the FMA, said it will "be focusing our efforts on the areas where we see the greatest potential for harm", and named three starting points (same source):
- "lending practices, particularly suitability and affordability assessments", meaning whether a loan suits you and whether you can actually afford the repayments
- "remunerations structures and how conflicts of interest are managed", meaning how the person selling to you gets paid
- "complaints handling processes"
Two of those three describe exactly how an add-on sale works.
Why is the seller not your adviser?
Because Schedule 5 of the Financial Markets Conduct Act 2013, the main law on how financial products are sold here, lifts several situations out of regulated advice.
Clause 9 covers credit arranged as a sideline. Advice "given in connection with providing credit under a credit contract" is not regulated advice when the credit is "an incidental part of a business the principal activity of which is not the provision of a financial service". A car yard's main business is selling cars, so its finance desk fits.
Clause 10 covers lenders. Advice a lender gives about "a consumer credit contract or relevant insurance contract" also sits outside the regime when it is given to meet the lender's obligations under the Credit Contracts and Consumer Finance Act 2003, the law that requires lenders to check a loan is suitable and affordable. That exit carries one condition. The lender must take "reasonable steps to ensure that the borrower understands that the advice is not regulated financial advice and the implications of that" (Financial Markets Conduct Act 2013, Schedule 5, as at 1 July 2026). Either way, the adviser duties in sections 431I to 431P, including the duty to put your interests first, never attach to the person across the desk.
So who does owe you something?
The insurer. A separate rulebook in the same Act, the Conduct of Financial Institutions regime, binds the company behind the policy rather than the person selling it. Section 446C sets the standard, known as the fair conduct principle: a financial institution "must treat consumers fairly", which includes "paying due regard to consumers' interests", "assisting consumers to make informed decisions", making sure its products are likely to suit the customers it sells them to when judged as a group, and "not subjecting consumers to unfair pressure or tactics or undue influence". Sections 446D and 446Q push that duty out to sales made through an intermediary, meaning a person who helps provide the product and is paid a commission for doing so, and section 446J tells the insurer to control those channels, review whether they are working, and fix what is not "within a reasonable time". So the car dealer is the intermediary. The insurer carries the duty.
| Who is across the desk | What they owe you directly | Who answers to the regulator |
|---|---|---|
| A lender advising you to meet its own lending obligations | Reasonable steps to tell you this is not regulated advice, Sch 5 cl 10 | The lender, under the Credit Contracts and Consumer Finance Act and now the FMA |
| A car dealer arranging finance as a sideline to selling you a car | Nothing as a regulated adviser, Sch 5 cl 9 | The insurer, through the sales controls it must keep, s 446J |
| A commission-paid intermediary selling add-on cover | No adviser duties under ss 431I to 431P | The insurer, because the intermediary is caught by ss 446D and 446Q |
| A licensed financial adviser | The full duties in ss 431I to 431P, including putting your interests first | The financial advice provider that engages them |
Sourced to the Financial Markets Conduct Act 2013, sections 431I to 431P, 446C, 446D, 446J and 446Q and Schedule 5 clauses 9 and 10. This is our reading of the statute, not legal advice. Which exclusion applies depends on the facts of the sale.
One more thing left that Act on 1 July. Section 446N used to make the FMA get the Commerce Commission's consent before starting certain court proceedings against a financial institution, because the two agencies' patches overlapped exactly where credit met insurance. Section 61 of the Credit Contracts and Consumer Finance Amendment Act 2026 deleted it. No second opinion is required before the FMA acts now.
It has already shown where it intends to look. On 20 August 2026 it published a review of insurance sold alongside other purchases: mechanical breakdown cover, extended warranties, payment protection, and guaranteed asset protection, which pays the shortfall when a written-off car is worth less than the loan against it. The review found "distribution oversight was the area where industry uplift is most needed" and "limited evidence of monitoring and oversight proportionate to the risks associated with commission-based and intermediated sales models" (FMA, MR No. 2026-35, 20 August 2026). We cover that report separately in our piece on the FMA's add-on insurance review.
What should you ask if cover is offered with your loan?
Three questions. Write the answers down.
Is this regulated financial advice? If the answer is no, ask for that in writing. Clause 10 already requires a lender to take reasonable steps to make sure you understand it, so paper is fair to ask for.
What commission is paid on this policy, and to whom?
Who is the insurer? Not the dealer, the insurer. That is the company bound by the fair conduct principle, and the one your complaint eventually lands with.
You are also free to say no. Nothing in a credit contract requires the insurance to come from the lender, or to be bought at that desk, on that day, or at all. For anyone already holding cover bought that way, the practical change is narrow but real. The standard your sale had to meet did not move. What moved is that one agency now enforces it across the whole transaction, and it has said this corner is where it starts.
What could we not check?
We read the public documents. We were not briefed and we spoke to nobody.
The removal of section 446N is plain on the face of the legislation. Whether it changes any real outcome, we cannot say. The FMA has not published how often the consent step was used, or whether it ever delayed a case.
The release does not name a first enforcement target beyond the three focus areas and gives no timetable. We have not seen the Credit Contracts and Consumer Finance Amendment Act 2026 in full; we worked out its effect from the amendment notes in the current version of the Financial Markets Conduct Act. And nothing here describes any individual insurer's conduct, because the FMA's review names none.
What this means for your cover
What a policy pays, how to size it, and how a rule change reaches an existing policy. Life insurance in New Zealand
Sources
Every source below was read and checked on 21 August 2026.
- FMA, Credit transfer creates single conduct regulator for financial markets
- Financial Markets Conduct Act 2013
- FMA, Add on insurance review highlights insurers' responsibility to deliver fair outcomes
- FMA, Add-on insurances and extended warranties review
Talk to a licensed adviser about what this means for you · free, no obligation.
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