« May 2020 | Main | July 2020 »

Partners Life appoints Nadine Tereora, and more daily news

It has been announced that Nadine Tereora will join Partners Life as the new Chief Operating Officer. Nadine is set to join in 2021.

“It is my absolute pleasure to announce that Nadine Tereora is joining Partners Life in the role of Chief Operating Officer. While the details around her start date are still being worked out, we expect Nadine will be starting with us towards the beginning of 2021.

Having worked with Nadine in the past, and more recently having been in direct competition with her in her previous role as Chief Executive Officer at Fidelity, we are beyond delighted to be welcoming Nadine to the Partners Life team, and know that her unique mix of skills, experience and mana will be a huge asset to us as an executive team and to Partners Life as a whole.”

Naomi Ballantyne and Nadine Tereora

In other news:

Financial Advice NZ: Building on the stability of our banking system

Regulatory change needed, or halt to AMP Life sale, policyholder says

FSC webinar: Customers, complaints, code and claims - what have we learnt from COVID-19?

AIA: Progressive Care Claim Tool

Partners Life commission structure change, and more daily news

Partners revealed their updated commission structure. Advisers will receive their Medical commission in two parts, an initial commission and a bonus commission. As a result, this will reduce the initial Medical commission from 125% to 100%.

We communicated the introduction of the Customer Outcomes Matrix (COM) which has been very well received by both advisers and customers. We have finalised the development of the data capture component of COM and are now working on the development of the COM score thresholds for each of the measurement criteria. As a reminder your Bonus Commission rate is underpinned at your existing rate until 31 March 2021. 

As we initially communicated, we are also splitting Medical commissions between Initial and Bonus commission which means Medical Initial commission will reduce to 100% (from 125%) and introduce a Medical Bonus commission of 25%. This will enable us to reflect results of the COM for the medical component of a customer’s policy as it will do for Risk products.

Partners also recently announced that they will go forward with FAPO payments for businesses that have approved transitional licences and who have FAPO Commission Agreements in place.

“As well as the introduction of the COM and changes to Bonus Commission, we are also going live with FAP Override (FAPO) payments for those businesses who have an approved transitional licence and have signed their FAPO Commission Agreement with us. If you wish to progress in signing a FAPO Agreement with us, please ensure that you provide us with a copy of your transitional licence. You can email a copy to distributionsupport@partnerslife.co.nz.”

As a result of COVID-19 implications, Dealer Groups will receive FAPO payments for members without transitional licences as long as they have been members prior to 1 July 2020.

“Given the impacts of COVID-19 in delaying the FSLAA transitional licensing date, Partners Life has agreed to continue to pay override to Dealer Groups for those advisers who do not have a transitional licence and were members of the Dealer Group prior to 1 July 2020. We will continue to pay the Dealer Group override until such time as you provide Partners Life with a copy of your transitional licence and proceed with a FAPO agreement with us, or until FSLAA comes into effect in early 2021.”


Annotation 2020-06-26 105131

Annotation 2020-06-26 1051312

In other news:

Strategi Whitepaper: Embracing AML/CFT digitization

FMA: FMA urges financial advisers to apply for transitional licences

Financial Advice NZ: Bring in the experts webinar with Economist Cameron Bagrie 

Fidelity Life: results of financial impact of COVID-19 were shared. The main points were:

  • 15% of advisers felt that their business been financially impacted. 40% felt there was some business decline and 45% said they qualifies for assistance package.
  • 16% of advisers felt that their financial situation would become much worse within 3 months. 10% felt would become much worse in 6 months. 7% felt would become much worse in 12 months.
  • 3% felt that their financial situation would become much better within 3 months. 10% felt would become much better in 6 months. 22% felt would become much better in 12 months.
  • 53% of advisers were confident they’d get through current and future financial impacts while 1% of advisers didn’t think they’d get through current and future financial impacts


Trust discussion: the difference between insurers and advisers

Trust is so important to financial services because of two core reasons: one is that what we offer tends to be intangible, the other is that security is usually fundamental to the service. This explains the conservatism of most financial service brands. It also explains the marble entrance-ways and the appeals to consistency and continuous service that are constantly made in many more subtle ways: we will continue to be here. That is also why it is such a shame when a brand loses the attributes that have been gradually developed over years. Some brands have lost these - and it seems they were quick to lose, and will be hard to get back. 

But advisers are a bit different. In spite of news stories about poor sales practices, trust in advisers has generally been retained, only finally being broken when an adviser has been, say, taken to court. Otherwise, mistakes are often forgiven by clients. It really takes a lot to break that. 

This is a blessing and a risk. The higher the assumption of trust, the easier it can be to misuse it, so the good adviser must be more careful to ensure that they take care of the trust relationship. I think almost all do. Where they don't it often wasn't a deliberate decision to profit from a breach of trust (although that clearly does happen). It is more likely to be a mismatch between what was considered acceptable, or a blind-spot as to what the right standard is in some situations. That is where an external review can play a part - getting people from outside our culture to come in and see how the team culture works from a customer perspective can be immensely valuable from time to time. 


Gastric cancer claim denial, and more daily news

After taking out life and trauma insurance from Westpac in 2013, a family was denied a $100,000 insurance payout after Ailepata Ailepata was diagnosed with gastric cancer. His wife Shirley Farani has said this money would have helped raise her children.

“A South Auckland crane driver has been denied a $100,000 payout for his gastric cancer after a government-owned finance company switched his policy.

His wife is furious that on the basis of what she says is a salesperson's garbled pitch - and despite recent official warnings to the insurance industry about its practice of "churning", or replacing old policies with new ones - her family of three children has now been pushed to financial breaking point.”

The switch in policy resulted after they inquired about taking out a mortgage and a New Zealand Home Loans broker suggested they change insurers.

“The family, who live in Māngere Bridge in Auckland, had paid for life and trauma insurance cover from Westpac since 2013. When, in 2018, they enquired about a mortgage with government-owned New Zealand Home Loans, an agent visited their home. He suggested changing insurers. They did, but ended up with less cover.”

The change in insurer meant that their new cover was $100,000, half the amount they had with Westpac.

“They thought having their insurance with their mortgage provider might make sense, she admitted. The new policy provided just $100,000 trauma cover, half of the $200,000 they had under Westpac.She found that out when she made a claim for the gastric cancer, she told RNZ.” Click here to read more

I am always conscious that there will be another side to this story, and knowing New Zealand Home Loans, a statement of advice on file. It will be important to know about those. Of course, either way, this won't look good. It is a reminder that doing the right thing isn't just a question of what is correct from a procedural point of view, but how it will look from the public perspective. Nobody wants coverage like this.

In other news:

Asteron Life: Market insights and impact from Covid-19 webinar

Fidelity life: Updated agency agreement will come into effect 6 July

FMA: Financial advice's 'golden opportunity'

FMA: John Botica welcomes disclosure requirements and new regime start dates

Making a living will

Insurance is, of course, about planning for a future event before it happens. For life insurance, it is often described as a fundamentally altruistic purchase: you buy it to benefit someone else. Of course, the holder does enjoy a benefit, which is peace of mind. The planning helps us to relax a bit about the future, a future we know is coming for us: one day our life will end. Making a living will is also a kind of plan. A way to say some of the more difficult things, or put in focus some of the things you would most like to be remembered for. At this link you will find a beautiful article about a living will and what it meant to the family. https://www.huffpost.com/entry/ethical-will-legacy-letter-why-you-want-one_n_5eeb7a09c5b6c8594c7f2d03 About a ten minute read and well worth it. 

Financial Advice weigh in on disclosure regulations, and more daily news

Financial Advice New Zealand have voiced their approval of the new disclosure regulations that were announced by MBIE on 25 June 2020. Katrina Shanks has said that new regulations mirror what Financial Advice outlined in their CoFI submission.

“Financial Advice NZ chief executive Katrina Shanks said the new rules had picked up many of the points made in the association's submission.

“The focus of the sector during this process was to ensure the right balance between good consumer outcomes and a financial advice sector which isn’t encumbered by unreasonable red tape and adverse outcomes.

“We support regulations around disclosure made to clients – including on conflicts of interest, commissions and other incentives and disciplinary issues.”

The need for disclosure being limited to adviser fees, the products they offer advice on, their conflicts of interest, commission they receive, and how clients can contact dispute resolution services is something Financial Advice is please about.

““However, we are pleased to see a change from the draft disclosure requirements that now only requires disclosure of these matters when they would likely materially influence a client’s decision. This is something we strongly recommended in our submission to ensure disclosures were meaningful and not overwhelming for consumers.

“We were concerned the draft regulations required disclosure of product fees charged by unrelated third parties (e.g. insurance premiums) so the removal of the requirement to disclose fees for ‘acting on the advice’ was a sensible move."” Click here to read more

In other news:

FSC: FSC 2020 Awards - Nominations Open

FMA: FMA takes CLSAP NZ to court over alleged anti-laundering breaches

Westpac: Westpac to launch carbon footprint tracker

BNZ: BNZ launches banking support for domestic, economic abuse survivors

New financial advice regime start date set, disclosure regulations resources, and more daily news

After being delayed because of COVID-19, MBIE have announced that the new financial advice regime will begin on 15 March 2021. In addition to the new date being set, the Government has set new disclosure requirements as part of the Financial Services Legislation Amendment Act to ensure that customers have the ability to make more informed decisions. Advisers will be required to disclose their services and other relevant information. This will allow potential clients to decide if the service on offer is right for them.

“The new disclosure requirements will require businesses and individuals who give financial advice to disclose important information about their services to their clients.

“The disclosure requirements are set in regulations under the Financial Services Legislation Amendment Act, which introduces a new regulatory regime for financial advice,” said Sharon Corbett, manager financial markets at the Ministry of Business, Innovation and Employment.”

On disclosure, the details confirm that as expected a progressive disclosure regime is being put in place, much along the lines suggested by the consultation. We think that is good - it makes sense, and it allows the right level of information for each stage of the sales process. It will not please everyone, some prefer the certainty of fixed requirements that are all dealt with at a specific point in time, especially if they have a very simple (and short) advice process.

UPDATE: because I was asked: yes, dollar disclosure of commission payments is required. A range might be disclosed at one point and a specific figure disclosed when known. 

More important, perhaps, is the start date for the new regime. I cannot underline enough how important compliance assurance is as you come up to this date. There are some simple steps you can take to get yourself to a point of comfort. 

  1. Refer to a detailed list of all the reference standards required to achieve compliance - call or write to ask me for such a list if you need one.
  2. Conduct a gap analysis against the full range of requirements.
  3. Start at the top - ensure your governance structures are in place, this is the engine that drives all effective compliance practice
  4. Fill in the processes required against the gaps identified, reporting into your governance process on a regular basis

Much of the commentary does not link directly to the documents, so here is a good digest of links for you: 

The MBIE media release: https://www.mbie.govt.nz/about/news/disclosure-requirements-and-commencement-date-set-for-new-financial-advice-regime/

The disclosure requirements page on MBIE's website: https://www.mbie.govt.nz/business-and-employment/business/financial-markets-regulation/regulation-of-financial-advice/regulations-to-support-the-financial-services-legislation-amendment-act/disclosure-requirements/

The overview of the disclosure regulations: https://www.mbie.govt.nz/dmsdocument/11508-regulations-setting-out-disclosure-requirements-in-the-new-financial-advice-regime-overview

The FMA's media release on the start date for the new regime: https://www.fma.govt.nz/news-and-resources/media-releases/fma-welcomes-start-date-of-new-financial-advice-regime/

The regulations in full: http://www.legislation.govt.nz/regulation/public/2020/0132/latest/whole.html#LMS177125


In other news:

Fidelity Life: New Learning Management System for product accreditation and eLearning to be launched soon, Fidelity Life: New Sharecare challenges will begin 1 July 2020

Fidelity Life: Golden Life Plan will be no longer be offered to new applicants from 1 July 2020

Financial Advice NZ: Bring in the Experts: Disclosure Requirements with MBIE

Mixed response to full licensing details

AMP Life sale, and more daily news

After yesterday’s announcement of RBNZ approving the sale of AMP Life to Resolution Life, some consumers raised concerns that the conditions of the sale won’t be enough to protect the interests of customers.

“There are fears the conditions the Reserve Bank (RBNZ) has put on the proposed sale of AMP Life to Bermuda-based private equity firm, Resolution Life, don’t go far enough to protect the interests of the insurer’s 200,000 New Zealand policyholders.”

One policyholder expressed his fears that the contract terms were general and that Resolution Life wouldn’t have an incentive to uphold goodwill if they don’t write new polices. As a result, claims and bonuses would be at risk of not being paid out.  

“The RBNZ’s general manager of financial stability, Geoff Bascand, said: "Because AMP Life is a branch of an Australian business and intended to be in ‘run-off’ and not write new business, special arrangements were needed for the security of New Zealand policyholders."

However, an AMP Life policyholder with a background in investment banking, Andrew Body, was concerned that without writing new policies, Resolution Life wouldn’t be incentivised to maintain goodwill in the market. Accordingly, he worried any claims and bonuses owed to policyholders could be put at risk.

While Resolution Life will be required to honour existing policies, Body said contract terms were often “very general” and relied on “trust”.”

I do not think this is realistic. The requirement for a trust and Policyholder Advisory Committee will provide a level of additional protection for policyholders, and reflects the kinds of governance requirements around conduct soon to be implemented across the sector, when new conduct law is eventually passed. The problem for AMP policyholders is a mirror of the problem for AMP. Long-term contracts make it hard for both parties. For the insurer, the clients you end up with on your books after 20, 30, or 40 years can have quite different characteristics to those you underwrote all those years ago. The situation for policyholders is that AMP has decided it would prefer not to be in the life insurance business. Resolution Life wants to be. Even though Resolution Life will not be writing new business, their investment will fail if they experience very high levels of lapses - the substantial existing premium and the price they paid to own it are both substantial stakes in the future of the book. 

Click here to read more

In other news:

Monetary Policy easing to continue

Financial Advice NZ: Consultation: Trusted Adviser Financial Advice New Zealand

FSC: proposed standard licence conditions for financial advice provider full licences

Market movements: what changes the size of the market for insurance?

The market for insurance is affected by three main factors: 

  • The size of the eligible population 
  • Their need for insurance
  • Their ability to pay for it

Rob Dowler, our preferred compliance consultant for large projects, suggested that I expand on the role that immigration plays in the growth in our market and whether that places constraints on whether people can buy insurance. 

Some additional information about how the size of the eligible population changes can help to put this into the right context. Showing data from 2018 to illustrate how a more 'normal' year works, accepting that 2020 is far from normal and there has been a sharp rise in both long-term departures and long-term arrivals, and a sharp decline in short-term departures and arrivals.

New working age residents added about 44,000 people, plus there were about 62,000 children who reached working age. This addition of just over 100,000 was somewhat off-set by 44,000 people who reached retirement age and about 8,000 people who died during working life. These movements exclude those people on student or short-term working visas. Although a number of students eventually become permanent residents, they are only counted when they achieve that status. 

We have tended to assume that demand for insurance is constant on a per person basis. Of course, it isn't. Usually debt increases the demand for cover, but not all debt is equal. Household debt is usually insured, consumer credit debt often isn't - so as home ownership rates have dropped due to the high cost of housing, there has been some hit to demand. But this is a very small reduction in demand compared to the size of the underinsurance gap - which we estimate to be about a million people who are in-work. 

The ability to pay for cover receives only modest attention, usually as we consider the cost of cover relative to age. It will receive additional attention as the economic crisis associated with the COVID-19 pandemic plays out in New Zealand. Unemployment is forecast to rise from a little over 4% to about 10% under even the best case scenario. We can expect to see a reduction in average household income for the current quarter and very slow real wage increases in the next couple of years. Limiting the ability of New Zealander's to pay for cover will cause an increase in lapse rates. The interaction of the high cost of housing and lower wage growth will constrain a proportion of budgets.