New Zealand's Financial Markets Authority (FMA)on Thursday urged insurers to adopt a proactive and outcome-focused approach to manage risks associated with short-term sales campaigns and incentives, pointing to potential conflicts of interest that can jeopardize the fair treatment of consumers.

Although the majority of insurers have processes in place to identify and manage such risks, their approaches to risk mitigation vary, the FMA said.

The regulator outlined multiple areas of focus, including the need for greater stakeholder involvement when designing incentives, clear governance and approval processes, enhanced monitoring of how incentives impact consumer outcomes, and more use of proactive reviews as opposed to relying only on complaints or feedback.

According to the FMA, the risks include insurers potentially recommending a product or value of insurance cover that is not suited to the customer's needs, or recommending a policy replacement just to increase the chance of the adviser receiving a soft commission.

"These benefits and campaigns, or soft commissions, have a place, but insurers should actively consider these risks to ensure their fair conduct programs are designed to support fair treatment of consumers," said Michael Hewes, the FMA's director of deposit-taking insurance and advice.

"We want these insights to support insurers to take consumers' interests into account when designing, offering, and managing benefits and campaigns," Hewes added.