Dr. Michael Naylor has written a response to the NZIER report. His introductory view is "The report has some good aspects but it suffers from major weaknesses" and highlights repeatedly a problem of trying to draw a big conclusion from limited, flawed, available data: such as OECD data comparing premiums to GDP which fail to account for differences in market structure (such as other markets paying lots of whole of life premiums). Here are some highlights:
"It is worth repeating that OECD statistics do not show that NZ has the third-lowest rate of life cover in the OECD."
"The NZIER report was not able to find a conclusive answer to the elasticity question and therefore cannot make any argument as to whether a reduction in distribution costs would increase insurance cover."
- There is strong academic evidence that intermediated personal insurance better suits the client than directly sold insurance, with better quality policy conditions.
- Given the low price elasticity of insurance and a reasonable high adviser elasticity, it could be argued that any regulation which reduces adviser commission income would actually reduce the quantity of insurance sold. It would certainly reduce the quality of insurance sold. There is no evidence of the simple price elasticity effect which the NZIER report assumes as the basis of their argument to support commission reduction.