The Conduct of Financial Institutions (CoFI) regime, which became fully operative in New Zealand on March 31, 2025, has redefined the relationship between insurers, regulators, and consumers. Unlike the compliance-heavy frameworks of the past, CoFI moves away from box-ticking exercises and places emphasis on demonstrable outcomes that prioritize consumer welfare. At the core of this regime lies the Fair Conduct Programme (FCP), a board-approved and publicly accessible roadmap designed to ensure that insurers weave fair treatment into every layer of their operations, from product design to claims management.
This transition signifies more than just the introduction of another set of regulatory obligations. Instead, it represents a recalibration of how financial institutions interact with the public, shifting the focus from institutional privilege to consumer-centric responsibility. By embedding fairness into the operational DNA of insurers, CoFI reorients the industry’s priorities toward sustainable trust, accountability, and transparency.
The transformative power of CoFI, however, cannot be understood in isolation. It sits firmly within a broader global movement that is reshaping the financial services industry. Around the world, regulators are responding to a combination of consumer expectations, rapid technological evolution, and the erosion of public trust in traditional financial institutions. CoFI places New Zealand within this global conversation, demanding that insurers not only adhere to compliance norms but also demonstrate fairness as a measurable outcome.
There are three major themes where the impact of CoFI is most visible. The first is the rise of digitalization and artificial intelligence, as insurers lean on data-driven solutions to both meet compliance requirements and enhance consumer experience. Technology, when guided by CoFI’s fairness standards, becomes a tool for transparency rather than exploitation.
The second is the regulatory comparison with international markets, as New Zealand’s approach both borrows from and diverges from global practices, reflecting its distinctive balance between consumer rights and market freedom. The third, and perhaps most significant, is the emergence of a consumer-centric paradigm. Here, trust becomes the cornerstone of the industry, and insurers are required to prove their value not through profitability alone but through the tangible well-being of the policyholder.
To understand the future of insurance in New Zealand under CoFI, it is necessary to unpack these themes with nuance. Digital transformation, global regulatory alignment, and the consumer-first mandate are not isolated shifts. Together, they represent a reimagining of the industry’s future—one where fairness is no longer a slogan but an operational standard, and where the health of the sector is measured as much by consumer trust as it is by financial returns.
RISE OF DIGITALIZATION & AI IN INSURANCE
With CoFI mandating fair outcomes, insurers can no longer depend on traditional compliance processes that once sufficed as proof of accountability. The era of filling out forms, maintaining static policies, and relying on after-the-fact audits is over. Regulators now expect insurers to actively demonstrate that their practices result in tangible fairness for consumers.
This expectation places immense pressure on insurers to adopt systems capable of monitoring conduct, evaluating fairness in real time, and ensuring that every interaction with a customer is transparent and equitable. The answer lies in digitalization and artificial intelligence, which are rapidly becoming not just tools of efficiency but the backbone of compliance itself.
Artificial intelligence offers insurers an unprecedented ability to process information at speed and scale. Algorithms can sift through thousands of customer claims, analyzing them for delays, inconsistencies, or signs of systemic bias. For example, an AI system might detect that claims submitted by younger policyholders are processed faster than those from older customers.
Under CoFI, such discrepancies would need to be identified and corrected to meet fairness standards. AI can also highlight patterns in customer complaints, enabling insurers to address problems before they escalate.
Meanwhile, digital dashboards transform the way boards oversee compliance. Instead of receiving lengthy reports weeks or months after issues arise, directors can now access live data that reveals how conduct aligns with the commitments outlined in the Fair Conduct Programme. This creates a culture where fairness is monitored continuously and supported by evidence rather than assumed.
Technology is also reshaping customer engagement. In the past, policy documents were filled with jargon and complex exclusions that left consumers confused. Today, digital platforms offer multiple channels of interaction, from mobile apps to responsive chatbots. But CoFI sets a higher bar. These systems must be designed with fairness in mind. That means eliminating manipulative sales techniques and ensuring that options are presented in language anyone can understand.
Imagine a consumer seeking health insurance through a chatbot. Instead of burying critical exclusions in fine print, the system would be required to disclose limitations and available alternatives upfront. This shift changes the role of technology from one of concealing complexity to one of enhancing clarity. Consumers are no longer passive participants; they are informed decision-makers empowered by transparent tools.
However, digitalization is not without risks. Artificial intelligence, if poorly designed, can become a double-edged sword. Algorithms trained on flawed or biased historical data can reinforce inequities, leading to unfair pricing or discriminatory treatment of vulnerable groups. Marginalized communities, for instance, might face higher premiums not because of actual risk but because of embedded biases in data sets.
CoFI makes it clear that such outcomes would constitute a failure of fairness, no matter how efficient the system appears on the surface. This places a new responsibility on insurers to audit and stress-test their AI models. Ethical oversight becomes as important as technical precision. Transparency in how data is sourced, validated, and applied must be demanded at every stage, and boards must treat algorithmic fairness with the same seriousness as financial solvency.
Beyond compliance, digital transformation opens doors to innovation that could redefine insurance. Predictive analytics allows insurers to identify risks before they fully emerge, creating opportunities to design products that are more responsive to consumer needs.
A coastal community vulnerable to flooding might be offered specialized climate-related insurance that helps families recover faster from natural disasters. An aging population could see health policies tailored to the unique challenges of longevity and chronic illness. These innovations are not only commercially attractive but also aligned with CoFI’s principles, provided they are designed to serve fairness rather than exploit customer vulnerability.
Ultimately, digitalization and artificial intelligence under CoFI are about more than operational efficiency. They represent a cultural shift in the way insurers prove their value to consumers. Instead of hiding behind complexity, insurers are expected to use technology to promote clarity. Instead of reinforcing systemic inequities, they must leverage data to dismantle them.
And instead of treating compliance as a burden, they must recognize it as an opportunity to build deeper trust. In this way, digitalization becomes the bridge between regulatory ideals and consumer realities, ensuring that fairness is not just a principle but a daily practice.
TECHNOLOGY, ETHICS & ACCOUNTABILITY
The integration of AI and digital tools into insurance is not only about efficiency; it is about embedding ethics and accountability into technological systems. One of CoFI’s most profound implications is that it places responsibility for fairness directly on corporate boards. It is not enough for an insurer to claim ignorance about how an algorithm functions. Directors must ensure that every technological process aligns with the FCP and withstands public scrutiny.
This raises the bar for governance. Insurers must now demonstrate that their systems deliver outcomes consistent with consumer fairness, even when those systems rely on complex technologies. In practice, this means regular algorithm audits, transparent reporting, and mechanisms for consumers to challenge decisions. By elevating the standards for accountability, CoFI effectively forces insurers to align digital innovation with ethical responsibility.
Globally, regulators have been moving toward conduct-based frameworks, but New Zealand’s CoFI model is distinctive for its holistic approach. Instead of layering new rules atop old, CoFI seeks to integrate fair conduct into corporate DNA, requiring every insurer to develop a publicly visible FCP.
Australia’s reforms following the Royal Commission into misconduct in banking and insurance emphasized accountability and compensation but were largely reactive, addressing scandals after they had already occurred. By contrast, New Zealand’s CoFI regime is proactive, embedding fairness into operations before problems arise.
In Europe, the Insurance Distribution Directive (IDD) mandates that insurers act in the best interest of customers. While similar in intent, Europe’s approach relies more heavily on disclosure obligations. CoFI goes further, requiring insurers to demonstrate fair outcomes through board oversight and transparent reporting.
The United States presents a very different picture. Insurance is regulated at the state level, creating a fragmented landscape where consumer protections vary significantly. Some states, such as California, have strong consumer-centric laws, while others lag behind. Compared to this patchwork, CoFI’s centralized framework offers a consistent nationwide standard that may ultimately prove more effective.
By adopting CoFI, New Zealand positions itself as a regulatory innovator. Its framework may serve as a model for jurisdictions seeking to move beyond reactive enforcement toward preventive, conduct-based regulation. For multinational insurers, the challenge will be navigating these varied frameworks while adapting to the higher bar set by CoFI.
Historically, insurance has often been viewed as a grudge purchase—a product bought reluctantly and rarely tested until a claim arises. CoFI challenges this perception by demanding that insurers place consumer interests at the core of their operations. The relationship is no longer transactional but relational, built on trust, transparency, and fairness.
Under CoFI, the focus shifts from simply selling policies to ensuring fair outcomes throughout the policy lifecycle. This means fair pricing, fair treatment during claims, and fair handling of complaints. Every customer interaction is now a test of trust.
One of the major challenges is measuring fairness in a concrete way. Insurers are beginning to develop new metrics, such as claims processing times across demographic groups, the readability of policy documents, and the proportion of complaints resolved without escalation. These data points provide regulators, boards, and consumers with tangible evidence of whether fairness is being delivered.
Transparency has become a critical tool in building trust. Because FCPs must be publicly accessible, consumers and advocacy groups can hold insurers accountable. This external pressure encourages companies to uphold high standards, as deviations are easily exposed in public forums.
LONG-TERM TRANSFORMATION
The long-term transformation of the insurance industry in New Zealand under CoFI cannot be overstated. What is unfolding is not just a matter of compliance with a new law but the redefinition of an entire sector and the rewriting of its relationship with the public.
For decades, insurance has been viewed largely as a transactional safeguard, a mechanism by which people and businesses pay premiums in exchange for protection against uncertainty. That perception is shifting. With CoFI’s emphasis on fairness, transparency, and consumer outcomes, the future insurer may evolve into something far more significant than a mere financial buffer.
Those insurers that recognize this shift early and adapt swiftly will have a strategic advantage. By embracing digital tools, they can build systems that do not just sell products but anticipate consumer needs, personalize experiences, and respond with agility to changing circumstances. Transparency, long regarded as a regulatory checkbox, will become a powerful currency of trust.
And fairness, once confined to mission statements, will need to permeate every layer of decision-making, from product design to claims settlement. In this emerging landscape, trust itself becomes the ultimate differentiator. Customers will gravitate toward insurers they believe are acting not out of corporate obligation but out of genuine commitment to their welfare.
For those companies unwilling or unable to evolve, the consequences will be severe. Resistance to change may attract not only the scrutiny and sanctions of regulators but also a steady erosion of public confidence. And in a consumer-driven environment where reputation spreads rapidly through digital platforms and social networks, trust once lost may prove impossible to regain.
Over the long horizon, CoFI could redefine what it means to be an insurer. Rather than institutions narrowly concerned with transferring risk, insurers could reposition themselves as trusted partners in financial resilience.
This means not just stepping in after disaster strikes but actively helping individuals, families, and communities prepare for the unexpected, build stronger safety nets, and cultivate peace of mind. The role of the insurer expands from a silent protector in the background to an engaged advisor, collaborator, and even educator in the foreground of financial life.
But such a transformation does not come about through superficial gestures or clever marketing. It demands a cultural shift at the very core of organizational identity. The industry must move away from a profit-first mindset where fairness is treated as a secondary outcome, and instead embrace fairness as the primary lens through which all decisions are made.
This fairness-first approach does not negate profitability—it strengthens it in the long run, as trust and loyalty translate into sustainable growth. But it requires a depth of introspection and a willingness to dismantle entrenched hierarchies and practices that have long prioritized shareholder returns over consumer outcomes.
In essence, CoFI offers New Zealand the opportunity to reimagine insurance as an institution of social resilience. If insurers seize the moment, they will not only comply with regulation but also help to restore faith in the industry, elevate public trust, and ensure that the very concept of insurance evolves into a partnership between institutions and the communities they serve. This is the promise of a fairness-first future: an industry that does not merely cushion against life’s risks but actively contributes to building stronger, more resilient lives.
A BLUEPRINT FOR THE FUTURE
The CoFI regime represents far more than just another regulatory milestone; it is a watershed moment in the history of New Zealand’s insurance sector. For decades, fairness has often been relegated to the sidelines—acknowledged in principle but overshadowed by profitability and operational efficiency.
Now, with CoFI, fairness is no longer an optional virtue but the very foundation upon which insurers must build their strategies, products, and relationships. This is a transformation that calls for more than compliance—it demands cultural reinvention.
Technology, particularly digitalization and artificial intelligence, provides the mechanisms to embed fairness into everyday practice. Data analytics can help insurers understand customer needs more precisely, while automation can streamline services and ensure consistency.
Yet, these same tools can just as easily entrench bias if wielded irresponsibly. CoFI, therefore, places a dual responsibility on insurers: to embrace innovation while maintaining a steadfast commitment to equity and transparency.
When measured against international benchmarks, New Zealand emerges as a leader in regulatory foresight. Where other jurisdictions are still debating how to balance consumer protection with market freedom, New Zealand has chosen to act decisively, setting a higher bar for the industry. This willingness to prioritise consumer outcomes not only strengthens the domestic market but also signals to the global insurance community that New Zealand is willing to chart new paths.
Perhaps the most significant change lies in the paradigm shift from a transactional model of insurance—where policies are bought and claims processed—to one that is fundamentally trust-based. In this new order, insurers cease to be faceless institutions that merely transfer risk. Instead, they evolve into trusted partners in financial resilience, actively helping individuals, families, and communities prepare for uncertainties and recover with dignity when challenges strike.
For insurers themselves, the implications run deep. Adhering to CoFI is not about ticking boxes or satisfying regulators. It is about reimagining what it means to be an insurer in the 21st century. Business models must be rebuilt around principles of fairness, transparency, and trust—values that will increasingly define which companies thrive and which fade into irrelevance. In this light, CoFI becomes more than regulation; it becomes a vision, a blueprint for the future of insurance in New Zealand, and potentially a guiding framework for reform in markets far beyond its borders.