In June this year, the Financial Markets Authority (FMA) published a guidance note for licensed insurers titled Insurer benefits and campaigns insights. The note shares the FMA’s observations on how insurers are managing incentives, in particular, non-monetary benefits such as gifts, prizes and trips, and internal short-duration sales campaigns, to ensure fair treatment of consumers under the new Conduct of Financial Institutions (CoFI) regime.
FMA’s message: Compliance with the regulations is not enough
The FMA’s key message in its June 2026 publication is that compliance with the specific incentives regulations may not be enough, given Conduct of Financial Institutions’ (CoFI) more general overlay requiring insurers to treat consumers fairly. Whilst a bright-line rule provides apparent certainty, it cannot capture every way in which a non-monetary benefit or a time limited campaign might distort behaviour toward consumers.
Under CoFI, financial institutions must maintain a written fair conduct programme (FCP) with effective policies, processes, systems and controls (PPSCs). For insurers, PPSCs should ensure incentives are designed and managed to mitigate or avoid adverse effects on consumers’ interests. Where an incentive carries a potential adverse effect on consumers that cannot be managed under the FCP, even if the incentive is not itself prohibited, the FMA may take the view that the benefit or campaign is not appropriate.
What counts as a prohibited incentive
To recap, under the new CoFI regime and the updated Financial Markets Conduct Regulations:
- Incentives are a commission, benefit, or other incentive (whether monetary or non-monetary and whether direct or indirect).
- Incentives are prohibited if a person’s entitlement to the incentive is based on a direct reference to a target or other threshold that relates to the volume or value of the services or products sold, such as a NZD1000 bonus upon selling 100 life policies.
- Incentives are not prohibited if the entitlement is determined on a linear basis and is not tied to such a target or threshold. For example, a flat 5% commission payable on each insurance contract sold.
Australian comparison: ASIC v Cohen
In Australia, “conflicted remuneration” provisions were incorporated in legislation on 1 June 2013 following a parliamentary joint committee report. Conflicted remuneration is defined as any benefit that could reasonably be expected to influence the choice of financial product recommended or the financial product advice given. This definition is broader and more flexible than the bright-line approach adopted in CoFI and is therefore illustrative of how courts may approach potential claims that fall outside the explicit prohibition.
In Australian Securities and Investments Commission v Cohen [2025] FCA 1255, incentives were paid to insurance sales agents, including a Vespa scooter awarded to the top-selling agent and Bali trips awarded to sales agents who met individual sales targets. ASIC argued this conduct fell within the conflicted remuneration definition. The Court held that, even though the incentives caused sales agents to work harder and sell more policies, this did not establish that the content of what was said to customers was influenced. Accordingly, the conflicted remuneration case was not made out. This case is on appeal and judgment is awaited.
New Zealand’s likely approach
The incentives which were the subject of the claim in Cohen would, on their face, fall within the prohibited incentive definition in New Zealand, since access to the Vespa and the Bali trips was tied directly to individual sales targets rather than being paid on a linear basis. However, if a New Zealand insurer structured a similar campaign so that it fell outside the prohibited incentive definition (for example, by paying a flat rate per sale with no target), the insurer may also need to show that its FCP and PPSCs had considered whether the campaign could produce the same kind of behavioural pressure that ASIC alleged but could not prove in Cohen. It seems likely that, if an action was taken, the Court would look at whether customers may have been influenced by the campaign.
In practice, insurers should:
- Include a wide range of stakeholders when designing a benefit or campaign, not just distribution, marketing and campaign managers. This will highlight any potential risks earlier in the process.
- Consider whether the campaign’s likely outcomes could affect the fair treatment of consumers and, if so, whether that risk can genuinely be managed under the FCP.
- Undertake a documented FCP/PPSC risk assessment for each benefit or campaign and consider whether the arrangement could be defended if needed.
- Keep records of design, approval, and ongoing monitoring decisions, so they can be produced on request.
- Build in proactive, outcomes-focused monitoring throughout the life of a campaign, rather than relying on complaints as the trigger for review.
What’s next?
The FMA has said that it will actively test insurers’ incentive arrangements through its supervisory and monitoring activities under the CoFI regime, and will expect remediation, including changing or stopping a benefit or campaign, where its PPSCs prove inadequate. Even if an insurer’s benefits and campaigns comply with the specific incentives regulations, that still might not be enough to comply with wider CoFI obligations.
The FMA has clearly signalled that insurers should be prepared for further scrutiny.
