The Conduct of Financial Institutions (CoFI) regime is the conduct licensing framework administered by the Financial Markets Authority for NZ banks, insurers (including life insurers), and non-bank deposit takers. CoFI sits alongside the existing prudential framework run by the Reserve Bank.
The legislation
CoFI was introduced through the Financial Markets (Conduct of Institutions) Amendment Act 2022, which amended the Financial Markets Conduct Act 2013 to add Part 6 ("Licensing of financial institutions for conduct of business"). Licensing obligations commenced 31 March 2025.
What it requires of life insurers
Under CoFI, a licensed financial institution must:
- Hold a financial institution licence from the FMA covering the relevant in-scope activity.
- Establish, implement and maintain an effective fair conduct programme — internal policies, processes, systems and controls aimed at ensuring the insurer treats consumers fairly.
- Comply with the fair conduct principle — treat consumers fairly across product design, distribution, sales, after-sales service, and claims.
- Disclose the existence of the licence and how to access the fair-conduct programme summary.
The FMA publishes detailed guidance for licensees at fma.govt.nz/business/services/conduct-of-financial-institutions.
How it changes the buyer experience
- Product design. Insurers must assess whether each product is appropriate for the consumer group it's being marketed to — relevant for niche life-cover variants and bundled benefits.
- Distribution oversight. Insurers carry obligations over the conduct of advisers and intermediaries who sell their products. This affects the relationship between insurers and FAP-licensed advisers.
- Claims handling. Claims processes are explicitly within the fair-conduct scope. Repeated unfair claim declines now have a conduct-licence consequence in addition to existing tort/contract remedies.
- Complaint handling. Insurers must have a clearly described complaint pathway and respond within defined timelines. External dispute resolution (via IFSO or FSCL) remains available.
How CoFI relates to existing regulation
CoFI is a conduct regime — it sits alongside, not on top of, the existing prudential regime that the Reserve Bank administers under the Insurance (Prudential Supervision) Act 2010. The two regimes solve different problems:
- RBNZ / IPSA — financial strength + solvency + capital adequacy. Can the insurer pay its claims?
- FMA / CoFI — fair conduct + product design + sales + after-sales + complaints. Is the insurer treating consumers fairly?
For a household choosing a life insurer, both regulators' supervision is a baseline assumption — all retail life insurers in NZ are licensed under both regimes.
Sources
- FMA — Conduct of Financial Institutions overview: fma.govt.nz/business/services/conduct-of-financial-institutions
- Legislation: Financial Markets (Conduct of Institutions) Amendment Act 2022 on legislation.govt.nz
- Underlying primary Act: Financial Markets Conduct Act 2013