Just reading Gareth Morgan's round up, I was interested to find the following on regulation:
It's long overdue. I hope it cleans out the bad portfolio construction practices, separates commission salespeople from advisors in the public's awareness, helps the public realise that insurance has nothing whatsoever to do with investment, and neither insurance nor investment has anything to do with budget advice or so-called financial planning. But mostly, I hope it helps restore the public's confidence in a sector that has behaved so badly over recent years... Link
Which is all good. If you mean that insurance shouldn't be wrapped up and confused with investment making the proper costs of each hard to figure out. AMP recently withdrew it's old whole of life range. Fidelity has withdrawn it's insurance and investment plans also. Others have done likewise. This makes sense and is, perhaps, a benefit of regulation. Or maybe it would have happened anyway - the volume of whole of life sales was dropping even in my first year at Sovereign, in 1989, and was very, very small recently. So maybe not.
But hang on a minute... does insurance have "nothing" to do with investment? Let's turn to Gareth's next commentary to get a lesson on that.
A recent Dominion Post story raised concerns about the role of KiwiSaver providers and trustees when it comes to early withdrawal claims. A KiwiSaver member who had a brain haemorrhage-and now suffers seizures and can't work or drive-was twice refused permission to withdraw his KiwiSaver money under the serious financial hardship and serious illness clauses. On his third attempt, with the help of a consultant and some media attention, the trustee approved the withdrawal... Link.
Maybe insurance is useful after all!
If this KiwiSaver had had income insurance then he would not need to be asking for what is probably quite a small sum of money from his KiwiSaver scheme. Not that I don't think he should have it - I just don't know enough about his case to tell. Worse yet, what if his injury is permanently debilitating, but doesn't affect lifespan? If he had insurance on his contributions his KiwiSaver would have carried on being paid and he could look forward to a retirement nest egg.Cover on contributions like that typically costs around $5 a month - but you can't do that, because lobbyists like Gareth made sure you can't insure your KiwiSaver contributions.
You see, insurance and investment are linked like this: If you aren't already rich, then while you are saving, insurance can plug the gap if anything bad happens. It's not hard is it?