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AIA initiative to combat underinsurance, and more daily news

AIA has announced that eligible policies allow customers to pay it forward by gifting life insurance.  In a study commissioned by AIA, it was found that New Zealanders are underinsured and rank poorly when compared to other OECD countries as they often don’t want to think about death and the financial implications of dying on loved ones.

“New eligible AIA policies come with the option to gift life insurance to a loved one

New independent research commissioned by life, health and wellbeing insurer AIA New Zealand highlights some of the reasons why New Zealand ranks near the bottom of OECD countries  when it comes to insurance protection.

The research reveals more than a third of Kiwis don’t want to think about the idea of dying and haven’t considered the financial impact it would have on their family.

Two thirds of those surveyed said that they’d never had a conversation with family about life insurance when they were growing up and one third 4 said that they don’t understand the benefits of life insurance. More than half 5 have never tackled the topic of what would happen to their finances if they were unable to work due to death, serious illness, or injury.”

Nick Stanhope, AIA NZ CEO, said that New Zealanders need to plan for the future. To help encourage the discussion and planning process AIA has announced the introduction of the Share the Love initiative. The initiative will run from 28 September 2020 and 28 February 2021 and will allow customers to gift a six-month $50,000 policy for free.

Nick Stanhope, AIA New Zealand Chief Executive, says New Zealanders need to become more comfortable with planning for their future and with having conversations about financial protection.

“Our research shows that New Zealanders generally don’t like to think or talk about these difficult but necessary topics. When it comes to protecting our finances and wellbeing our lack of financial planning is leaving us behind most other OECD countries.”

“At AIA, we want to make it easier for New Zealanders to have a conversation about why life insurance is important. It’s why we’re encouraging all new eligible policy holders to Share the Love.”

AIA’s Share the Love is a first-of-its-kind initiative in New Zealand where new policy holders are encouraged to gift a free six-month $50,000 policy to a loved one." Click here to read more

In other news

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Financial Advice: Special General Election Debate - 2020 Election Economic Debate

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Legal and regulatory review for the life and health insurance sector

28 Sept 2020 – Council of Financial Regulators published an updated table of deferred regulatory initiatives due to COVID-19, originally issued in April 2020. https://www.fma.govt.nz/assets/Uploads/CoFR-Timetable-of-Regulatory-initiatives-September-2020.pdf

28 Sept 2020 – The Ombudsman released the results of a survey on access to government information. https://www.ombudsman.parliament.nz/news/ombudsman-releases-access-government-information-survey

The Chief Ombudsman Peter Boshier says too many New Zealanders are still unaware of their rights to request information from Ministers, government agencies, and councils despite a growing thirst for information by the public.

The release of the data coincides with International Access to Information Day 2020 which acknowledges the importance of access to information laws and the community’s right to know.

28 Sept 2020 – The Privacy Commissioner released the submission completed to the Ministry of Justice on n New Zealand accession to the Budapest Convention on Cybercrime. https://www.privacy.org.nz/assets/2020-09-21-OPC-Submission-on-public-consultation-re-Budapest-Convention-A709592.pdf


New Zealand’s population nears 5.1 million

Stats NZ announce that population growth appears to have accelerated. 

New Zealand’s estimated resident population reached 5,084,300 at 30 June 2020, Stats NZ said today.

These are the first population estimates to fully incorporate the 2018 Census and 2018 Post-enumeration survey (PES) results.

"One of the purposes of running a census is to recalibrate national and subnational population estimates," population insights senior manager Brooke Theyers said.

"The census coverage results from the 2018 PES, also released today, are crucial to ensure the population estimates are the best possible measure of how many people live in every community across New Zealand."

This is a normal revision of population estimates that takes place after census and PES results are available. Estimates back to 2013 have now been revised. Estimates after 30 June 2018 now use the 2018-base estimated resident population as the starting-point.

New Zealand's resident population based on the 2018 Census is estimated to be 4,900,600 at 30 June 2018. This is higher by 60,000 than the previous estimate at that date. The population is estimated to have eclipsed 5 million in September 2019. Provisional estimates initially indicated the milestone was reached in March 2020 (see New Zealand’s population passes 5 million).

"The updated estimates confirm that the growth of New Zealand's population has been relatively high, averaging 1.9 percent a year in the 7 years ended June 2020," Mrs Theyers said.

"Growth in the previous 20 years averaged 1.1 percent a year."

The higher population growth since 2013 was driven by net migration (migrant arrivals minus migrant departures), which contributed two-thirds of the growth, or an average of 56,000 a year. Natural increase (births minus deaths) contributed the remaining one-third, or an average of 27,500 a year.

In updating market dynamics for modelling future opportunities the normally resident population is the defining variable for the boundary of the market. Growth means we expect added opportunity for insurers, although we look for that in the working age population sub-segment.

Two charts illustrate the growth: 

Annual population change
Annual population change

 

 


Partners to publish company insights, and more daily news

Rob Stock, writing for Stuff.co.nz tells that Partners Life has announced that it will be releasing a publication that reveals insight into many aspects of the business in the coming weeks. Chairman Jim Minto has said that information about complaints, unsuccessful claims, IP premium increases, and withdrawn products will be included in the publication.

“Life insurer Partners Life will begin publishing information about the $2.7 billion-a-year industry which is usually kept from the eyes of the public, and is challenging other insurers to do the same.

In about four weeks, Partners Life’s chairman Jim Minto said the company would begin publishing information including the number and types of complaints the company received from customers, and the proportion of claims not paid.

It will reveal 9 per cent of its claims made were not paid.

Other uncomfortable information it would reveal include the 12 per cent increase in premiums on its trauma and income protection policies, which had seen spikes in claims, and the 314 complaints it had from among its 201,000 policyholders.

It has withdrawn its funeral cover, a type of insurance the FMA and Reserve Bank criticised as poor value, and will reveal details of changes in its underwriting on policies to limit the risk presented by the Covid-19 pandemic when accepting new policyholders.”

Naomi Ballantyne said that the evidence Partners submitted to the FMA and RBNZ should also be shared with customers. Naomi suggested that the publication of such information would encourage competition to offer fair treatment and create a record of insurer promises, minimising backtracking.

“Naomi Ballantyne, Partners Life managing director, said in 2019 the FMA and Reserve Bank told insurers to provide evidence that they were not ripping off customers.

Insurers had to comply, leading to the September 2019 report in which no insurers were named and shamed.

Ballantyne said: “Having done that huge piece of work, and having the regulator know all of the things we do, we said, ‘Well, that’s great to tell the regulator, but no-one else knows’.”

“All that information we provide to them, we felt we should provide to our customers,” she said.

If all life insurers published the information it would encourage competition around good behaviour towards policyholders, but also create a public record of promises from insurers to policyholders, making it hard for companies to backtrack on them.” Click here to read more

This is a valuable initiative. Of course, much of this information is hardly confidential - but the level of detail in the disclosure is new. I know that the industry, working through the Financial Services Council, is keen to develop more data sharing. Meanwhile, pro-active disclosures of this type are valuable, adding to the transparency in the market and allowing journalists and consumers to understand what happens at insurers. 

Common claims payment reporting is a difficult area - defining what counts as a potential claim is critical to establishing an accurate and comparable number. For example: given Partners Life's high levels of income protection and trauma coverage a claim decline rate of 9% does not sound particularly bad, given the usual disagreements, misunderstandings, and that fraud is real. An insurer that issues only life insurance could probably report a much lower number - because death is harder to fake than, say, attempting to stretch out an IP claim because the jobs market is tough right now. An encouraging thought is that having a good conversation about what claims get paid, and what should not, gives confidence to consumers in what they are buying and its sustainability. 

In other news:

Suncorp: Customers only cutting insurance as an “absolute last resort”


FMA release supervision insight report, and more daily news

The FMA has published a supervision insight report that outlines its supervision activity. After 18 months of supervision, the FMA found that the majority of adviser businesses have been open, engaged and cooperative although it found that some firms weren’t disclosing important information and following requirements.

“The Financial Markets Authority (FMA) has released a report on its supervision activity over the past 18 months, and said that most adviser firms have been “open, engaged and cooperative” during its monitoring reviews.

However, it said that some firms were not disclosing important information, and were not taking the action required by the regulator. In one instance, it had to issue a notice under the FMA Act 2001 to access information which a firm had failed to provide.”

The report highlighted weaknesses in advice disclosure practices of some AFA and QFE. Rob Everett, FMA CEO noted that some of the issues identified were concerning and that the FMA would be taking stronger action when shortfalls aren’t addressed.

“Specifically, the FMA’s report revealed weaknesses in some AFAs’ and QFEs’ advice disclosure practices.

FMA chief executive Rob Everett said some of the issues identified in the report were “concerning,” and that the regulator would need to take stronger action where shortfalls were not properly addressed.

“We saw much good progress over the last year but were unimpressed by attitudes from one or two firms that suggested to us that they saw good conduct as something that only needs to be demonstrated when we visit,” Everett said.”

John Botica, director of market engagement said that advisers have an important role to play in the COVID-19 recovery process and the new regime will ensure corners aren’t cut as it is the industry’s responsibility to ensure New Zealanders are financially well informed.

“Director of market engagement John Botica said that advisers have a crucial role to play in the resilience of New Zealanders throughout the COVID-19 crisis, and that the new financial advice regime will not allow for “cutting corners.”

“Many New Zealanders are under insured, under saved and have too much personal debt,” Botica commented.

“It is our job, together, to guide consumers to make better decisions about their financial futures.” Click here to read more

FMA insights

In other news

FMA: No excuses for shoddy conduct

Co-operative: AM Best affirms stability of Co-operative Life’s ratings


Data rich global pandemic analysis: what is the real scale of COVID-19

What is the real scale of the pandemic? Over 600 million cases and 55% more deaths than recorded it seems. I like this data-rich analysis from The Economist, who make all their major COVID-19 reporting free as a public service - so no subscription required. Link: https://www.economist.com/briefing/2020/09/26/the-covid-19-pandemic-is-worse-than-official-figures-show 


Legal and regulatory update for the life and health insurance sector

25 Sept 2020 – Good Returns reports that the Australian government is set to axe responsible lending laws. https://www.goodreturns.co.nz/article/976517550/australia-to-scrap-responsible-lending-laws.html

23 Sept 2020 – IRD advised that the Public Guidance Work Programme 2020-21 has now been finalised. https://www.taxtechnical.ird.govt.nz/-/media/project/ir/tt/pdfs/consultations/work-programmes/public-rulings-work-programme-2020-2021.pdf

24 Sept 2020 – FMA released a report on its supervision activities over the past 18 months. https://www.fma.govt.nz/news-and-resources/media-releases/fma-issues-supervision-report-2020/

Commentary: 

The development in Australia where responsible lending rules are being axed is of considerable interest. In specific terms I do not know enough about the details of the Australian lending legal and regulatory framework to comment. In general terms there are some good questions to be asked about what rules are fit for purpose in an environment with very low interest rates for borrowing and with other consumer protections and processes available. I shall take a look at that development with some interest. Given the involvement of our current Minister of Commerce and his work on predatory lending practices I doubt this is going to appear on his agenda. 


New Asteron Life Head of Life appointed, and more daily news

Asteron Life has announced that Grant Willis has been appointed as the new Head of Life. In this new role Grant will oversee the core functions of product, pricing. sales, operations, claims as well as client servicing.

“I am pleased to announce the appointment of Grant Willis to the newly established Head of Life role, effective immediately.

He comes into the role from a career in financial services, including the past nine years at Suncorp New Zealand, most recently as Executive Manager – Life, in Insurance Solutions, and from 2011 to 2016 was Asteron Life CFO. Grant has also held senior roles at AIG NZ, Colonial Fiji (a subsidiary of CBA), ASB and Sovereign.

As Head of Life, Grant will oversee the core functions of product, pricing. sales, operations, claims and client servicing. His appointment will enable us to focus on continuously improving customer outcomes in partnership with you.”

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Asteron Life premium increases, and more daily news

Asteron Life has made changes to premiums effective 21 September 2020. The introduction of premium increases has been in response to claim costs being higher than expected. The premium increases will only impact customers on a stepped premium. Depending on customer segments, increases will be between 0% - 6%. Please refer to the table below. 

“These increases are in response to higher than expected claim costs observed in our most recent claims experience review. Based on this, we have adjusted our long-term claims outlook and updated premiums to ensure that our business will remain sustainable to support our customers both now and in the future. We perform regular reviews to keep any increases small, and as manageable as possible for customers.”

The new rates will not apply to quotes created before 21 September, but the quotes will be valid for only 30 days. The premium changes will affect existing customers after their next policy anniversary or after 21 October 2020.

“The new rates will apply for new customers from 21 September 2020 and will be reflected in policy documents. Quotes created before 21 September will be valid for 30 days.

The changes will apply for existing customers from their next policy anniversary on or after 21 October. Customers will not see any specific reference to the change in rates, but renewal notices will continue to mention that premiums can increase due to changes in market conditions.”  

 

The increases are higher, generally, for female lives than for male lives in trauma. They are also higher for both younger lives and older lives, across all product types, while the changes for lives at the main ages of acquisition (between about age 35 and 50) are more limited, probably constrained by competitive pressures. More details will be given in the forthcoming quarterly life and health report. 

 

Product 

Benefits 

Increase 

Personal Insurance 

 

Life cover 

0-6% 

Trauma recovery cover
Life cover buyback benefit Trauma reinstatement benefit Continuous trauma benefit 

Standalone 0-6% Accelerated 0-4% 

Income protection cover Mortgage and rent cover Mortgageandliving cover Immediate assist package Specific injury support benefit 10-hour benefit 

0-6% 

Business Insurance 

Life cover 

 

0-6% 

 

Trauma recovery cover
Life cover buyback benefit Trauma reinstatement benefit Continuous trauma benefit 

Standalone 0-6% Accelerated 0-4% 

SmartLife 

 

Life cover 

 

0-6% 

Trauma recovery cover Trauma (standard)
Trauma deluxe
Life cover buyback benefit Trauma reinstatement benefit Continuous trauma benefit 

Standalone 0-6% Accelerated 0-4% 

Mortgage repayment option (disability) 

 

0-6% 

SmartLiving 

SmartLiving value SmartLiving deluxe 

0-6% 

SmartBusiness 

 

 

Life cover 

 

0-6% 

Trauma recovery cover Trauma (standard)
Trauma deluxe
Life cover buyback benefit Trauma reinstatement benefit 

Standalone 0-6% Accelerated 0-4% 

 

Income Protection 

Income protection (personal and business) Specific injury support benefit 

0-6% 

 

 

 

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