How to Choose an Insurance Broker in New Zealand

How to Choose an Insurance Broker in New Zealand

The most useful thing to know about insurance brokers in New Zealand is that commissions are still allowed. Nobody has banned them. Instead, since 15 March 2021, anyone giving regulated financial advice to a retail client has had to do it through a Financial Advice Provider licensed by the Financial Markets Authority, and follow a code that says where there's a conflict of interest, your interests come first.

That's the whole game in one sentence. A broker's legal duty is to recommend the product most suitable for you regardless of the commission they earn. The FMA's own framing of the test is whether the advice would be the same in the absence of the conflict. That's the question to hold in your head when you sit down with one.

We've pulled together what the rules actually require, where a broker earns their keep, and the questions that separate a good one from a polite order-taker.

How We Researched This Guide

We went to the regulator and the legislation rather than to anyone selling advice about advice. The conduct duties, the disclosure requirements and the FMA's stated areas of focus come from the FMA and from the Financial Markets Conduct Act 2013 as amended by the Financial Services Legislation Amendment Act 2019 — the duties and disclosure rules have applied since 15 March 2021, and the detail is set out in full on legislation.govt.nz.

What surprised us was how much has to be disclosed and how rarely clients ask for it. Advisers must tell you the licence they hold, the range of products they can advise on and any limitations on that range, their fees, their commissions and other conflicts, their complaints and dispute resolution process, and any disciplinary history. It has to be given in a clear, concise and effective way, free of charge, at two points — when it becomes apparent what advice you're after, and again when the advice is given.

The FMA has said it is specifically targeting unmanaged upfront and ongoing commission conflicts, unsuitable replacement business, and inadequate disclosure.

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The Quick Summary (60-Second Version)

If you read nothing else, read this.

• Anyone giving regulated financial advice to a retail client must do it through an FMA-licensed Financial Advice Provider, or on behalf of one.
• Commissions are permitted in New Zealand. The safeguard is disclosure, not prohibition — so ask what your broker is paid on this policy.
• Conflicts extend beyond the adviser to their associates, the provider they advise for, and that provider's associates. The duty to prioritise you covers all of it.
• Buying direct is often cheaper on simple, standard risks like a single car or a standard house, because there's no commission in the price.
• A broker earns their place on complex or unusual risks, on commercial insurance, and when a claim turns difficult.
• Ask which insurers they hold accreditations with, because that can quietly narrow the market they show you.

What a Broker Actually Does, and When You Need One

An insurance broker arranges cover on your behalf and can access insurers and policy wordings that aren't sold direct to the public. That's the structural difference from buying online. A broker can also place harder risks — the ones a direct insurer's online form quietly declines — and can argue a claim on your behalf when it turns difficult.

The cost question is separate, and it's the one people skip. Because commissions are still permitted here, the honest test isn't whether your broker is paid by commission. It's whether their accreditation arrangements narrow the market they show you. A broker accredited with three insurers can only really show you three insurers, however good their intentions are.

Where a broker genuinely earns their fee

Complex and unusual risks, commercial insurance, and claims that turn difficult. A plumber mainly needs public liability and tool cover. An accountant mainly needs professional indemnity. A retailer wants a pack combining material damage, theft, stock and business interruption. Buying someone else's package is the most common way to pay for cover you don't need while missing the cover you do.

On the personal side, the case is thinner. If you're insuring one car or a standard house, buying direct is often cheaper because there's no commission or fee built into the price. A broker's value shows up when your situation stops being standard — multiple properties, a high-value home, a claims history that makes the online forms close over.

What the Rules Require, and What to Ask

Every adviser must exercise care, diligence and skill, give priority to your interests, disclose prescribed information, avoid recommending products under a regulated offer that contravenes the Act, and avoid disclosing information that is false or misleading. The conflict duty is broader than most people assume — it covers conflicts involving your adviser's associates, the provider they give advice for, and that provider's associates.

Disclosure has to be clear, concise and effective, given prominence if it's presented alongside other information, in an easily readable format and font if it's in writing, and free of charge. It must also cover any previous disciplinary history, certain criminal convictions or civil proceedings, and bankruptcy proceedings within four years of discharge.

Questions that do real work

Which insurers do you hold accreditations with, and does that mean you can't show me others? How are you paid on this policy, and is there a fee as well as a commission? What's your complaints and dispute resolution process? Will you review the cover at renewal? And the one that tests the conflict rule directly: would your recommendation be the same if you earned nothing on it?

The Claims Test and the Conflict Test

The real test of a broker is what happens when you claim, and that's hard to assess before you need it. Ask who your main point of contact will be, whether there's a dedicated claims team, and how they've handled a disputed claim before. A broker who simply passes your claim to the insurer and steps back isn't adding much to the price you're paying.

The conflict test is easier to run up front, because the law gives you the tools. Where a conflict exists, your adviser must give priority to your interests. So ask for the disclosure in writing, ask what they're paid, and ask whether the recommendation would change if the commission didn't exist. A broker who answers that plainly is worth the conversation. One who deflects has told you something too.

Review the terms of engagement

Before you commit, read the terms of engagement. It should set out what services they provide, how they handle conflicts of interest, your rights to cancel, and their complaints process. If it's vague or they won't put it in writing, treat that as the answer.

Questions You Might Have

Do I actually need a broker?

Not for simple, standard cover. A single car or a standard house is usually cheaper bought direct, because there's no commission in the price. A broker earns their place on complex or unusual risks, on commercial insurance, and when a claim turns difficult.

How are brokers paid in New Zealand?

Usually by commission from the insurer, sometimes a fee, and often both. Commissions remain permitted here, so the safeguard is disclosure rather than prohibition. Ask for the commission and any fee in writing before you sign anything.

What must a broker disclose to me?

The licence they hold and its duties, the services and product range including any limitations, their fees, their commissions and other conflicts, their complaints and dispute resolution process, and any disciplinary history. It must be clear, concise, effective and free.

Can I check whether someone is licensed?

Yes. Anyone giving regulated financial advice to a retail client must do so through a Financial Advice Provider licensed by the FMA, or on behalf of a licensed provider. Ask which provider they operate under, then confirm it.

What if the advice turns out badly?

Start with the broker's own complaints process, which they're required to disclose to you. If that doesn't resolve it, the dispute resolution scheme they belong to is the next step. Both should be set out in the disclosure you were given.

What Matters Most

A broker's legal duty is to put your interests first and recommend what suits you regardless of what they earn. That's a real protection, but it only works if you use it. The disclosure rules exist so you can see the conflict and judge it, which means asking is not rude — it's the point.

Ask what they're paid, which insurers they can actually access, and whether the advice would be the same without the commission. If the answers are clear, you've probably found someone good. If they're not, keep looking.