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Checklist: what you should consider when buying professional indemnity insurance:

The following points highlight some key aspects an adviser should consider when looking at purchasing professional indemnity insurance.

The Insured

  • Who are the parties named as covered by the policy?
  • Does this include all advisers and entities under which they operate?
  • Does this include cover for administration staff?
  • What happens if I bring someone into the business? When do they need their own cover?

Operative or Insuring Clause

  • Does the insuring clause clearly describe what is insured?
  • Does the cover you understand you have bought meet the cover you need?
  • Are there any activities which you undertake that would not be seen to be included by the business description?

Territory and Jurisdiction

  • Do you offer advice to clients outside of NZ? Does the policy include cover for this advice?

Limit of Indemnity

  • What level of cover are you required to carry under your agency agreements?
  • Does the limit of indemnity you hold reflect the mix of product advice you give now?

Definitions

  • Do any of the definitions change the meanings of the words or expressions in the insuring clauses or exclusions?

Exclusions

  • Do any of the exclusions remove cover for any activities necessary to conduct your core business?
  • Do any of the exclusions remove cover for any activities necessary to conduct your non-core business?

Excess and related clauses

  • Do you understand how the excess operates in practice?
  • Does the insurer pay the costs and expenses incurred in defence of a claim (or does this fall within the excess)?
  • Is there are a higher excess or deductible for some activities? E.g. Fire & General advice

Other insurances

  • Does your cover extend to other types of insurance, E.g. Public Liability, Statutory Liability?
  • Is Internet Liability the same as Cyber Liability Insurance?

We would like thank Clinton Stanger of Curated Risk Limited for supplying us with the content.


Insurance reporting 101: insurer bad, client good

Take the article at this link, as an example: "Insurers may not pay out for coronavirus-related claims" Click here to read it at the site of Insurance Business NZ. The depressing thing is that the people interviewed in the article were actually talking about all the ways they will pay out - for example, if your travel is disrupted. The one circumstance under which they won't pay is this: 

“If your travel arrangements aren’t affected by the outbreak, but you have changed your mind or are nervous about travelling, there is no provision to claim under your policy.”

That's it. Horror of horrors, you aren't insured for changing your mind, but that gets made into the headline. One might be forgiven for thinking that the media had some sort of briefing card which says "insurance companies are always - always - to be painted in the worst possible light - select your headlines accordingly"


FSC Message 17

Here you can find the seventeenth message from the FSC about future changes coming to financial advice regulation. This message contains an invitation to attend the Get in Shape Summit in February 2020, along with a reminder about transitional licence applications and links to the two latest MBIE fact sheets. 


Partners Life product enhancement workshops

Partners Life have announced they are doing a number of workshops are the country to discuss their recent product enhancements and how they will benefit clients. This will be followed by a discussion on what the new Laws and Code of Conduct might mean in a practical sense for Life and Health Insurance advisers. 

Click here for dates and venues.


FMA fee consultation - a big increase is sought

FMA Funding consultation by MBIE is announced below. In summary, and very broadly, if the enhanced funding model is adopted with all of the increase funded by increased levies, all current levies would, very roughly, approximately double. 

“As the financial markets regulator, the FMA plays a crucial role in ensuring New Zealand’s financial markets are fair, efficient and transparent,” Sharon Corbett, Manager Financial Markets at the Ministry of Business, Innovation and Employment (MBIE), says. The FMA’s funding was last reviewed in 2016. Since then, the FMA’s remit has broadened and now is the right time to look at its funding."

You can find out more at this link: https://www.mbie.govt.nz/about/news/consultation-opens-on-fma-funding-and-levies/ 

 


Product Research

The Quality Product Research database V130 has now been distributed to all subscribers. This version includes the following changes:

  • Southern Cross and nib added to Standalone Trauma
  • Partners Life documents and rating update V14.5 – effective 09.12.2019 (personal and business)
  • Fidelity Life remediation of booster benefit

What really affects a multiple of renewals?

Although 4 times is usually taken as an industry standard, not all “4 x” are equal. The difference can be accredited to things like:

  • Cash now with mechanism for claw back issues
  • Documentation - especially of privacy and scope of service issues
  • Age of clients
  • Products
  • Persistency
  • Problems of enforcement affecting deal structure           
  • Cash and shares mix

Other factors that affect the multiple of renewals include:

  • X factors - such as brand, referral deals, and technology
  • Bargain basement factors - such as a poor reputation, location, or form of lock-in to an unpopular product provider
  • Age and type
  • The product mix

Increasingly, issues that relate to compliance under the new regime are being named, but these appear premature, as no-one is yet in the market to buy a Financial Advice Provider.

We record, source, comment on books, persistency, size of renewals, comment on transactions – and have dozens from the last two years to generate a range of multiples.  If interested, feel free to email your interest to Jerusalem.Hibru@chatswood.co.nz

Ran


From 1 February, OnePath becomes Cigna

Cigna formally absorbs OnePath from 1 February. Quoting from an email sent to advisers recently they announced: 

"We’re pleased to let you know that we have received approval from the Reserve Bank of New Zealand, and on 31 January 2020 the OnePath business will be transferred to Cigna. This means the two businesses will begin operating as one – Cigna"

Congratulations to Cigna on the successful completion of the merger. Adviser familiar with other mergers will be able to appreciate how quickly, and in many respects smoothly, this has gone. Also announced under the same email are changes to the agency agreements. These, like AIA's recent changes, introduce new obligations for both advisers and Cigna. These relate to the expected requirements under the Conduct of Financial Institutions Bill. Although these requirements will probably undergo some change, the transfer of all OnePath business to Cigna means that a new agreement was required.