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Legal and regulatory update for the life and health insurance sector

28 Aug 2020 – FMA released updated guidelines for financial services businesses and staff under Covid-19 Alert Level 2.


31 Aug 2020 – DIA released three AML/CFT items as follows:

  • Real Estate regulatory findings
  • FIU Suspicious Activity Report for July 2020 (Previously noted on this blog)
  • Webinar available on Independent AML/CFT audits


Industry reacts to disclosure regulation draft, and more daily news

The submissions on disclosure regulations have been released by MBIE. Although the response was largely positive, some concerns were raised about the disclosure requirements set to come into place on 15 March 2021.
AMP highlighted the risk of repetition without addressing issues currently being undervalued by consumers. To ensure value is added AMP suggested that disclosures need to be simple and brief, something AMP doesn’t believe has been achieved by the current draft.

“AMP said there was a risk that the disclosure would end up being repetitive and not address the issue of long, impenetrable disclosures not currently being valued by consumers.


“For benefits to be delivered to New Zealand consumers it is essential for disclosures to be simple, meaningful, very brief and unobtrusive. We do not consider that these aims would be met with the regulations as drafted.”


Under the new rules, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.”

While Financial Advice said that a reasonable person wouldn’t have a good grasp of identifying conflicts of interest within the industry and that the regulation could be strengthened by having higher standards in place. Financial Advice highlighted that there are many references to ‘incentives’ so including a definition and reference to ‘disincentives’ would be valuable. 

“But Financial Advice NZ said a reasonable client would not expect to have a good grasp of identifying conflicts of interest in the sector.


“The regulation could be strengthened by having a higher standard, such as – ‘any interest of A, P, or any other person connected with the giving of the advice that has the potential to influence the advice given by A’.


“There are various references to ‘incentives’. We recommend including in the regulation a definition and reference to ‘disincentives’ as well. For example, a reduction of commission rates for low volumes could escape the disclosure regime. Disincentives is an area that is often overlooked and should be drawn attention to, so FAPs and advisers cannot avoid their disclosure obligations by saying ‘this disincentive is not technically an incentive’.”” 

AIA stated that there should be further clarification on was is “practicable” for advisers to include and highlighted that this would cause significant issues for financial advice providers. Although AIA doesn’t see this as an issue as they are prepared to invest in the appropriate systems to aid advisers. 

“AIA said there should be more detail on when it was considered “practicable” for advisers to include in their disclosure the amount of fees payable by a client connected to the advice recommendation.


“This is a significant issue for financial advice providers. For AIA NZ, significant system investments will be required to provide estimates. While AIA NZ anticipates making this investment, we are concerned that other providers may choose not to do so, and instead elect not to provide estimates on the basis that it is not practicable to do so. This is an undesirable outcome for consumers which we consider could be avoided by better articulating the circumstances when providers may elect not to provide estimates.” Click here to read more

In other news

FSC: Generations Conference will no longer take place

Kepa: Kepa Compliance Officer’s Course was held in partnership with Rosewill Consulting  

Fidelity Life: Fidelity Life were announced as finalists in Best ICT Team Culture category in the 2020 CIO Awards

Fidelity Life: new applications are encouraged to be done through e-App

Fidelity Life: options for alteration requests are:

·       emailing signed alteration requests to admin.services@fidelitylife.co.nz

·       email from the individual policy owner’s email address

·       Mailing to Customer Care, Fidelity Life, PO Box 37-275, Parnell, Auckland 1151

Applications near the 1,000 mark, and more daily news

Information realised by the FMA show that 949 transitional licence applications had been approved as of 21 August 2020. The approved licences represent over 7,000 advisers. Katrina Shanks said that she expected more applications to be processed as she doesn’t see a sign of an exodus.

“The FMA said that, as of August 21, it had approved 949 transitional licence applications, representing more than 7,000 financial advisers.

Everyone offering personalised financial advice must have their own financial advice provider licence by March 15, or work under the umbrella of another provider.

Financial Advice New Zealand chief executive Katrina Shanks said she expected more applications were still to happen.

She said there was no sign of an “exodus” from the sector and there were 10,000 financial advisers registered.” Click here to read more

Chatswood produces a running estimate of the total number of financial advisers we expect to be covered by the regime which will be updated and shared in the forthcoming life and health sector quarterly review. 

In other news

Asteron Life: Ahead of next week’s launch, Asteron Life have made information and resources available at Showcase. Advisers can initially use the password AsteronLife2020 

AIA: AIA reveals grant winners

FMA: FMA appoints director of investment management

How to write about money

Partners Life: Partners Life Employee of the Year held virtually

Legal and regulatory update for the life and health insurance sector

27 Aug 2020 – MBIE issued a reminder that the “Covid-19” safe harbour for company directors from their insolvency related duties will expire on 30 Sept 2020 as planned.

28 Aug 2020 – Minister of Commerce and Consumer Affairs, Hon Faafoi, diary for July 2020 released, with the following potential financial services sector related meetings noted:

  • 1 July 2020 - Meeting with Christians Against Poverty (Aimee Mai and Michael Ward)
  • 1 July 2020 – Meeting with Vero (Marie Hosking, Adrian Tulloch and Helen McNeil)
  • 2 July 2020 – Meeting with AIG (Toni Ferrier and Bhairav Shah)
  • 22 July 2020 – Phone call with FMA (Mark Todd)
  • 30 July 2020 - Meeting with FSC (Richard Klipin and Rob Flannagan)
  • 30 July 2020 - Meeting with ‘Buy Now, Pay Later’ providers (Shaun Quincey, Neil Simons, Michael Saadat, John O'Sullivan, Julian Grennell)
  • 31 July 2020 – Meeting with Insurance Brokers Association of New Zealand (Melanie Gorham, Tony Bridgman and Barry Hellberg)

28 Aug 2020 – Good Returns reported that on 27 Aug 2020 MBIE released submissions made on the exposure draft of the disclosure regulations applicable to Regulated Financial Advice.

COVID-19 crisis lessons for risk planning, and more daily news

After the Alert Level was eased to Level 1, New Zealanders returned to life as normal but after months of normalcy we were all shocked to discover that there was a COVID-19 resurgence and Aucklanders found themselves in lockdown once again. Adviser Peter Leitch recently spoke of the importance of having insurance. Peter said the recent developments has worked to remind people of the very real chances of unexpected events occurring and the consequences the will follow if people don’t have protection in place. 


When discussing the recent events Peter highlighted that people are often aware of the best course of action after the fact. During Financial Advice’s Money Week, Peter highlighted the importance of consulting a professional adviser and encouraged the public to seek out information relating to different insurance types and the cover they offer as well as understanding the claims process. 

“Money Week 2020 wrapped up earlier this month, and at the same time, New Zealand experienced its second outbreak of COVID-19 in the community - something financial adviser and insurance expert Peter Leitch says has once again demonstrated the importance of having protection, and of making good financial decisions.


With Auckland back in Alert Level 3, Leitch says this fresh outbreak has reminded everyone that unexpected events can happen overnight, and have potentially significant consequences. Partnering with Financial Advice New Zealand for Money Week, he urged consumers to inform themselves about different types of insurance, what they protect against and the claims process, and he also emphasised the value of having an adviser guiding them along the way.


“Recent events have shown us that things can happen unexpectedly, and we’re hoping for the best with the developing situation here in New Zealand,” Leitch commented. “We’re always cleverer in hindsight, and we always wish we may have done something prior to an event occurring.”” Click here to read more

In other news:

Pinnacle Life: Pinnacle Life offering 30 second quotes to find the right cover

Financial Advice NZ: Dr Angus Hervey and Tane Hunter from Future Crunch have been announced as speakers at the Bounce Conference  

Buying insurance can be a reassuringly normal thing to achieve





Legal and regulatory news update for the life and health insurance sector

27 Aug 2020 – FMA announced the appointment of Paul Gregory to the newly created role of Director of Investment Management.


27 Aug 2020 - RBNZ have issued advice to the financial services sector from the National Cyber Security Centre regarding recent cyber attacks that appear to be aimed at the financial services sector. The most high profile example has been the NZX experience. However, other companies may expect to be attacked.

Legal and regulatory news for the life and health insurance sector

25 Aug 2020 – NZX decided to halt trading early as it “experienced a volumetric DDoS (distributed denial of service) attack from offshore, which impacted NZX system connectivity.”

26 Aug 2020 - ANZ Investment Services (New Zealand) Ltd announced it will stop accepting new investment into the Bonus Bonds Scheme and, following two further prize draws, will wind up the scheme over the next year.


26 Aug 2020 – RBNZ advised that the Ministry of Health granted an exemption to enable registered banks and licensed non-bank deposit takers to carry out critical financial services at Alert Level 3.


26 Aug 2020 – Stats NZ reported that incomes fell for the first time since records started in 1998.


The implications for insurance planning from KiwiSaver experiences and more daily news

A story has emerged of a man who applied to withdraw the full amount from his KiwiSaver account after getting into a car crash, losing his job and failing to keep up with his mortgage repayments and help his mother living in Japan. His bank allowed him to withdraw just $11,000 from the $40,000 he had saved.

“A man who was only allowed to withdraw $11,000 from his KiwiSaver account after crashing his car, losing his job and struggling with his mortgage is a good example of misunderstanding about what the retirement savings scheme is for, experts say.

The man complained to Financial Services Complaints Ltd (FSCL), an external disputes resolution scheme for financial services providers, unhappy he could not withdraw more.

He had about $40,000 in his KiwiSaver account and applied to his bank, also his KiwiSaver provider, to withdraw the full amount so he could buy a new car to allow him to get to job interviews more easily, pay off some of his mortgage to reduce his payments and help his mother, who was living in Japan.

He was only allowed to access $11,000.”

The KiwiSaver trustee informed him that they would give him money to help with the minimum repayment for his mortgage but said that he didn’t need a new car as he could use public transport. The trustee concluded that paying for his mother to visit wasn’t a minimum living cost.

"The man said the money in KiwiSaver account was his and it was ridiculous he was not allowed to withdraw it to help him in a difficult time.”

Upset the man took his case to the FSCL. But the FSCL backed the decision of the trustee saying that it was reasonable. The FSCL highlighted that KiwiSaver withdrawals are intended for first home purchases and relief from serious financial hardship, and believed that the man qualified to accessing a portion of his funds to cover his living expenses.

Financial adviser Liz Koh commented saying that she didn’t believe that rules around KiwiSaver withdrawals should change as there are always ups and downs in life. Instead, Liz believes that people should be prepared for unexpected events.

“Financial adviser Liz Koh said she did not think there should be more flexibility around withdrawals. Life always has ups and downs, and people need to learn to be prepared for the times in life when things don’t go so well. When times are good, savings should be built up as a buffer for when things change for the worse, as inevitably they do.” Click here to read more

Koh makes a good point, with important implications for wider financial planning, and also for insurance planning: an emergency fund is probably the foundation for all financial planning. The immediate buffer between the unfortunate realities of chance and misfortune in the real world and your own quality of life. Many people are finding this buffer to be inadequate. It also highlights an issue with KiwiSaver that reduces flexibility - Kiwi savers cannot expect to treat the fund as if the money is their own. In addition to an emergency fund, to provide any comfort above that necessary for 'minimum living costs' as seen through the eyes of a KiwiSaver trustee, then savers will require substantial additional resources and ideally, a good insurance plan. 

In other news:

The Digital Actuary Virtual Summit

FMA: FMA not backing an investment style despite report

Coronavirus: a comparison of excess deaths

Around the world deaths from COVID-19 are probably being significantly under-counted. The Economist makes its coverage of COVID-19 available to non-subscribers - this data-rich post shows how across many economies deaths have exceeded statistical norms. That is to be expected in a pandemic, but also that there is an excess over the number expected, plus the number categorised as COVID-19, and that those deaths follow the same pattern as COVID-19 deaths - i.e. that they peak at the same time. Therefore these are highly likely to be COVID-19 or at least strongly related to COVID-19: such as death from another cause, which may have been averted had the person sought hospital treatment, or had hospital treatment been available but for the pandemic. Much more detail on methods for effectively comparing excess death rates is available in this article from Our World in Data by Max Roser: https://ourworldindata.org/covid-excess-mortality 

A weakness of this article is the lack of data from countries that have more successfully managed the pandemic, except for Norway, see below. China and Vietnam may not publish their data, or it may not be considered as reliable by The Economist. But I am sure South Korea, Japan, and Taiwan all have good data - it would be interesting to see how that compares. New Zealand data is also missing, but a good article from Charlie Mitchell and Michael Day at Stuff.co.nz has that information: click here to read more. Like Norway, in The Economist's analysis we have had fewer deaths than expected - meaning that our COVID-19 response has not just squashed the pandemic, but also other deaths: road deaths, seasonal flu, industrial accidents, and so on. Of course, downstream effects on the economy, debt, and deferred medical treatment (especially from the earlier, more restrictive lock-down) may still emerge in the coming years. This is far from over.

nib financial growths amid COVID-19, and more daily news

nib New Zealand announced that the 12 months to June 30 2020 has been an overall successful year for the insurer. nib experienced a 10.2% growth in revenue to NZ$253.1 million while also prioritising their efforts to support members and the community through COVID-19 related relief and other initiatives. The underwriting results also increased 11.2% to a total of NZ$25.9 million.

“nib New Zealand today announced an improved operating performance for the 12 months to 30 June 2020 (FY20) lifting membership, revenue and earnings.

nib New Zealand premium revenue grew 10.2% to NZ$253.1 million while underwriting result was NZ$25.9 million, up 11.2%. The FY20 underwriting result includes a NZ$9.0 million COVID-19 deferred claims provision for an expected claims catch-up in healthcare treatment deferred during the peak of the COVID-19 that is expected to occur in FY21.

nib New Zealand Chief Executive Officer, Rob Hennin, said nib performed well in FY20, reporting good financial results alongside its strong focus on supporting members and the community throughout COVID-19.

“Helping our Kiwi members stay safe and healthy throughout the COVID-19 pandemic has been a priority, which is why we moved quickly to implement an extensive support package,” Mr Hennin said.”

As part of their member support initiative nib has provided COVID-19 financial hardship support to over 2,000 members, premium relief and suspension options to over 5,000 members, extended cover for COVID-19 related treatments, expanded GP and specialist consultations through telehealth, and extended treatment pre-approvals.

““To date, we’ve provided more than 2,000 Kiwis members with access to financial hardship support, including premium relief and suspension options, postponed premium increases for over 50,000 members and extended coverage for COVID-19 related treatment across all levels of hospital cover, at no extra cost.

In addition, we expanded cover for consultations with GPs and specialists through telehealth, ensuring members could continue to see their medical practitioner during severe lockdown restrictions. We also extended treatment pre-approval from three to six months, meaning over 1,000 members did not have to reapply for surgery approval if they experienced delays in accessing hospital treatment."

In partnership with nib foundation, nib has donated $1 million to Lifeline Aotearoa and Clearhead as part of their community support initiatives.

"Further, we made a $1 million donation, together with nib foundation, to Lifeline Aotearoa and Clearhead, helping support our communities and the ongoing mental health needs of New Zealanders,” he said." Click here to read more

In other news:

Nib: Episode 4 of nib’s webinar series is set to stream September 2 2020 at 11:30am 

AMP: AMP makes top-level changes amid allegations

Asteron Life: Asteron Life profit drops

RBNZ: RBNZ to lead Asia-Pacific Central Banks working group

Financial Advice: Economic update by Economist Tony Alexander