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Legal and regulatory update for the life and health insurance sector

23 Dec 2020 - The Commerce Commission released its updated Authorisation Guidelines that explain its approach to assessing applications to authorise agreements or mergers in the public interest. https://comcom.govt.nz/news-and-media/media-releases/2020/commission-publishes-revised-authorisation-guidelines-and-application-forms

23 Dec 2020 – The Open Government Partnership released Progress reports for Third National Action Plan and Meeting Papers. https://ogp.org.nz/latest-news/progress-reports-for-third-national-action-plan-and-meeting-papers/

22 Dec 2020 – Courtesy of Dentons Kensington Swan, note the release of the following regulations and other information during this month, in addition to those items included in the FMA update or the MBIE release on 17 Dec 2020:

  • Financial Markets Conduct (Fees) Amendment Regulations 2020
  • Financial Markets (Derivatives Margin and Benchmarking) Reform Amendment Act Commencement Order 2020
  • Financial Markets Conduct (Licensing of Administrators of Financial Benchmarks) Amendment Regulations 2020
  • Financial Markets Conduct (Overseas Providers of Custodial Services – Assurance Engagement) Exemption Notice 2020
  • Financial Markets Conduct (Australian Licensees) Exemption Notice 2020

22 Dec 2020 – Courtesy of Dentons Kensington Swan, note the submission opportunities closing at the start of 2021 as follows:

Ministry of Business, Innovation and Employment:

  • Updating the Responsible Lending Code – submissions close 15 January 2021, 5pm.
  • Regulating to reduce merchant service fees – submissions close 19 February 2021, 10am.

Reserve Bank of New Zealand:

  • Review of the Insurance (Prudential Supervision) Act 2010 (scope of the Act and treatment of overseas insurers) – submissions close 18 February 2021.
  • Review of the Insurance Solvency Standards – submissions close 18 February 2021.
  • Reinstating Loan-to-Value Ratio restrictions – submissions close 22 January 2021.

Financial Markets Authority:

  • Proposed guidance on advertising offers – submissions close 16 February 2021.

Parliament:

  • Reserve Bank of New Zealand Bill – submissions close 4 February 2021.

Seasons greetings and best wishes for the break

Card screen grab for blog v1

Our best wishes for your well-earned break

After years of using the same Christmas-themed card with a traditional tree on it, planning well ahead, we took a much more clearly southern hemisphere approach in January, using some artwork that focuses on what New Zealanders tend to do in the summer: head to the beach. At the time we did not know how particularly appropriate that shift in focus was going to be!

How has the life and health insurance sector performed for its many stakeholders?

While many will want to say good riddance to 2020, reflecting on a challenging year shows that there is an awful lot to admire in how the industry has performed: Insurers were able to reassure clients that their policies would work. They were able to offer a wide range of methods to support clients – allowing premium holidays, refunds, rate increase deferrals, and cover changes that helped people manage through the economic disruption that was a big part of the year. Claims services continued even through a tight lockdown, with insurers finding workarounds for signatures, meetings, and examinations, to help meet clients needs. That was impressive.

Like many others we were grateful for flexibility when we had to reschedule meetings, shift them online, and other aspects of our usual service had to be rapidly reconfigured for delivery in a digital-only context. We are fortunate that we can operate almost all our business functions entirely online – although we will take the credit for making decisions to have most of our IT infrastructure in leading cloud facilities. We are most proud of how the Chatswood and Quality Product Research teams performed through this period to enable continued support to our customers.

Through a period of disruption, what opportunities can be found?

The effects of COVID-19 disruption are real and likely to take some time to flow through the economy and into the financial accounts of insurers. Recent results show what we can expect from others yet to report. Economic modelling suggests the worst period for unemployment lies ahead – although so far, we have outperformed the models. There are reasons for optimism: vaccines, the power of digital to enable change, and evidence of greater flexibility and resilience than expected.

The environment will improve but relying on that alone is insufficient. Plenty of our 2021 workplan is laid out for us due to the scope of legal and regulatory change but merely responding to that will also be insufficient. Every research paper highlighting underinsurance is really underlining an opportunity for growth – those growth opportunities are ones we must build. We must build them - hoping for a mere return to what once was fails to recognise market reality and environmental change.

So, as well as meeting the requirements of the new Privacy Act 2020 that came into force on 1 December; as well as playing our part in the implementation of FSLAA on 15 March; as well as working with RBNZ on the implementation of IFRS 17 and the IPSA review; and as well as working with MBIE on new conduct law, we have to invest in the new. We have to work to bring new products to the marketplace. We have to work with the changed distribution environment – realising the long-predicted increasing business size in advised distribution. We also have to work to build better digital: there is such a great opportunity to displace some of the low-quality online insurance offers with better – an opportunity to open new frontlines against ignorance and indifference through digital advice.

Happy holidays and opening hours information

Opening times: On Tuesday the 22nd of December we will close the office at midday, and open again on the 11th of January, but you can call Russell on mobile any time. Our best wishes to you for the holidays and the New Year.

Thank you for your support, from all the team at Chatswood: Fran, Jerusalem, Kelly, Rob, Ed, Wanyi, Melissa, and Russell


Legal and regulatory update for the life and health insurance sector

21 Dec 2020 – Privacy Commissioner Annual Report released. https://www.privacy.org.nz/publications/corporate-reports/annual-report-of-the-privacy-commissioner-2020/

21 Dec 2020 – Commerce Commission published a Statement of Issues relating to an application from Aon plc seeking clearance to acquire Willis Towers Watson Public Limited Company as part of a global transaction. Submissions close on 26 January 2021, with cross-submissions due no later than close of business 2 February 2021. The Commission is currently scheduled to make a decision on the application by 26 February 2021. https://comcom.govt.nz/case-register/case-register-entries/aon-plc-and-willis-towers-watson-public-limited-company

21 Dec 2020 – FMA released CPA Australia and NZICA accredited body reports, containing the findings of the FMA’s monitoring assessments of CPA Australia and NZICA for the period 1 July 2019 to 30 June 2020. https://www.fma.govt.nz/news-and-resources/media-releases/cpa-australia-nzica-accredited-body-reports/


Insights from Interim Report by the Royal Commission of Inquiry into historic abuse of children in state care  

The Royal Commission of Inquiry has realised its interim report on the historic abuse of children while in state care. The report provided insights into the occurrence of abuse on over a quarter of a million children. I'll repeat that: over a quarter of a million children. Here is the direct quote from the news article on this point: 

 

An interim report by the Royal Commission of Inquiry into historic abuse of children in state care estimated that up to 256,000 people were abused between 1950 and 2019. This accounts for almost 40% of the 655,000 people in care during that period.

The problem applies to 40% of the children in state or faith-based care. That means it wasn't occasional, exceptional, it was routine. It also extended to the modern period. I tend to think of 1950 in much the same way I think of another country. Irretrievably and obviously alien. Some of the attitudes that my father grew up with are simply baffling to us now. But plenty of kids went through care between the year 2000 and 2019. 

 

The report examined the extent of abuse from 1950 to 2019. The report is a result of Prime Minister Jacinda Ardern stating that we needed to address this aspect of New Zealand history. The report provided fist hand accounts of the abuse inflicted in state care and religious homes. Public Service Minister Chris Hipkins noted that report was difficult to read and that all children should have been safe when in care. The report reported that children as young as 9 months were victims of abuse although most victims were aged between 5 and 17. It was common for most children to endure the abuse for many years with the report noting that most were abused for 5 to 10 years. Abuse ranged from physical, sexual, medical and verbal including racial assault. 

“"The hurt and anguish that has been caused in New Zealand's history is inexcusable," said Minister for the Public Service Chris Hipkins, who described the report as a "difficult read."

 

"All children in the care of the state should be safe from harm, but as the testimony sets out all too often the opposite was true."

The report said most abuse survivors were aged between 5 and 17, but some were as young as 9 months and as old as 20. Most were abused over a five to 10 year period.

 

The abuse included physical assault and sexual abuse, with staff in some psychiatric institutions forcing male patients to rape female patients. It also included the improper use of medical procedures including electric shocks on genitals and legs, improper strip searches and vaginal examinations, and verbal abuse and racial slurs.”

  

Stuff has reported that Minister Hipkins has said that since 2000 changes in state care have already been implemented and more changes are yet to come. Minister Hipkins continued by saying the Government won’t wait until the final report is released to make legislative changes.

“Public Service Minister Chris Hipkins said there had already been improvements to state care since 2000 and more change was coming.

He said the hurt and anguish that had been caused in New Zealand’s history was inexcusable.

“We should never underestimate just how traumatic the experience will have been for the victims. And we should never underestimate what a long legacy that abuse has left.

“This is not New Zealand at its best, it is New Zealand at its absolute worst. I think we would all be horrified by some of their stories,” he said.

On specific changes to Limitation Act, Hipkins said he did not want to pre-empt the commission's final findings.

“But we are not going to just wait until the final report is received.” 

 

Click here to read more -  for a link to the international news item

Click here to find out more - for a link to the resources published by the commission

Why is this an issue for the life and health insurance sector? The life and health sector has a stake in the wellbeing of New Zealanders. What can be done to promote the health, happiness, and longevity of New Zealanders is literally our business. The impact of the abuse of those in care is very large. There are incredible costs (in suicide, for example) that are harder to quantify. But the commission attempted to quantify the costs of the abuse, and came up with these shocking numbers: 

Economic Cost of Abuse in Care: This report estimates abuse in care is estimated to cost an individual $857,000 over the course of their lifetime; the cost to society for abuse in care between 1950-2019 is up to $217 billion.

You can easily tot up the costs. A kid who is messed up by abuse as a child has difficulty learning, they have a lot of unmanaged pain from the trauma and loss of trust, they easily fall victim to drug or alcohol addiction, and then to being manipulated by gangs, and then to crime. Think of all the knock on costs. Our taxes must manage the increasingly high costs of each of those stages of failure - which began with the state failing to prevent a caregiver from abusing the child in their care. There is a very strong humanitarian and economic case for preventing this. 

 

It is not happy reading, but good holiday reading if you want to think about an important issue, close to home both literally and figuratively, that could do with some work. I think from a corporate affairs perspective there are some great engagement opportunities to be had in the short term while working for some great long-term outcomes. In the next quarterly life and health report we shall be identifying the top issues affecting life expectancy and quality of life as a guide for insurers looking for ways to engage in a more meaningful way with the causes affecting our customers. You can be sure that this will be on the list. 

 


Partners Life knowledge assessment, and more daily news

Partners Life has announced the development of a knowledge assessment to meet the competence requirements set by regulators. All advisers with Partners Life agencies will be required to undergo a knowledge assessment. Depending on the results of the initial assessment, advisers may be required to complete refresher training. Partners Life have noted that the assessment will not be a test of product features, instead is intended to ensure advisers provide suitable advice. The assessment will be based around the circumstances of a hypothetical family. This is intended to make the assessment more realistic.

“To meet the competence requirements set by the regulators, every adviser holding a Partners Life agency will be required to complete an initial knowledge assessment, as well as any subsequent refresher training that may follow.

The Partners Life philosophy is focused on professional development rather than just product accreditation. This means our knowledge assessment process will not just be a memory test of product features but will focus on helping advisers to deliver suitable advice. We believe that personalising assessments by including a fictitious family with their own circumstances, will make assessments more realistic, more relevant and more likely to support advisers deliver results that lead to good customer outcomes.”

The assessment will be completed online and is designed to be straightforward. Advisers will be provided with login details and will have the ability to store their personal records. As part of the initiative, Partners Life will provide advisers with additional professional development resources. Managing Agencies and FAPs will have the ability to oversee the progress of advisers.

“Partners Life has developed an intuitive online learning platform to ensure that the process will be straightforward. It provides each adviser with a unique login and the ability to store a personal record of their Partners Life learning.

As an added bonus there will be other professional development resources available to advisers through the portal.

If you are a Managing Agency or Financial Advice Provider licence holder, you will have the ability to view the progress of any sub-advisers or members.  It is therefore critical that you keep Partners Life up to date with any adviser changes in your business, so that our records are always accurate and current.”

Partners Life is set to send advisers emails with their usernames and a link to generate passwords. There are 10 modules for advisers to complete, with each module estimated to take 20-40 minutes to complete. All advisers will be required to complete the initial knowledge assessment before 26 February 2021.

“You will shortly receive an email with your username and a link to create your password that will give you access to the initial learning platform. The recorded introduction video has some tips to help you navigate through the process and we would strongly encourage you to watch the video before you start the assessments.

There are 10 modules to complete and we estimate it will take you between 20 and 40 minutes to complete each module. All advisers must have the initial knowledge assessment completed by close of business Friday 26 February 2021.”

In other news

Trail: Trail CRM to launch aggregator group


Southern Cross Travel Insurance appoints new CEO, and more daily news

Southern Cross announced that Jo McCauley will take on the role of CEO. McCauley was promoted from her role as Chief Customer Officer. McCauley brings with her years of experience in financial services and strategic leadership. Her previous roles include insurance portfolios management at Tesco Bank.

“McCauley was hired from within the business, previously heading up SCTI’s sales, product and marketing division as Chief Customer Officer since October 2017.

Bringing a wealth of experience in financial services and strategic leadership, McCauley’s background spans several years of international product and marketing experience, including managing direct-to-consumer insurance portfolios with Tesco Bank in the UK.”

McCauley has said COVID-19 has had a significant impact on the company and the travel industry but Southern Cross Travel Insurance is focused on members and employees. McCauley has noted that she is proud to have the opportunity to be the CEO. Greg Gent, Southern Cross Chairman, has said that McCauley's experience within the company will be an asset.

“McCauley said while the outbreak of COVID-19 this year has had a significant impact on SCTI and the whole travel industry, their focus is on looking after its customers and its people.

“I’m proud to have the opportunity to lead a fantastic team that continues to work hard to improve SCTI’s customer experience and processes for when the market returns."

Southern Cross Chairman Greg Gent said Jo’s experience working as part of the business will be a significant asset to SCTI.

“Jo has a diverse range of skills and leadership experience in the financial services sector, and her direct knowledge of Southern Cross Travel Insurance and its products will provide a strong foundation to lead from,” he said.”

McCauley has managed the launch of the domestic travel insurance product as CEO. As part of the product development, McCauley overlooked the policy wording to ensure that it was easy to understand. As a result, the company was the first travel insurer to be awarded the WriteMark plain language endorsement.

“In her first weeks in the CEO role, McCauley managed the launch of the business’ new domestic travel insurance product, ensuring that the policy was written in plain language. SCTI is the first travel insurer in New Zealand to have its domestic travel insurance policy awarded the WriteMark plain language endorsement.” Click here to read more

In other news

FSC: Outlook 2021 with FMA CEO Rob Everett

From Goodreturns: Adviser appears before FADC on record keeping charges

Katrina Shanks piece on Stuff: There are 150,000 unemployed, so why are we short of workers?


Legal and regulatory review for the life and health insurance sector

17 Dec 2020 – Law Commission newsletter released, including information on the following upcoming or ongoing projects:

18 Dec 2020 – Government announced expansion of the small business loan support package related to Covid-19. https://www.beehive.govt.nz/release/small-business-support-expanded

18 Dec 2020 – Commerce Commission released a consultation on a draft cartel leniency and immunity policy, resulting from the introduction of the new criminal cartel offence coming into effect in April 2021. A seminar will be held on Wednesday 27 January 2021 at the Commission’s Auckland office to talk through the key changes to the policy and to answer any questions submitters may have. Submissions close on 10 Feb 2021. https://comcom.govt.nz/news-and-media/media-releases/2020/commission-seeks-feedback-on-draft-cartel-leniency-and-immunity-policy


Southern Cross Travel Insurance appoints new CFO, and more daily news

Southern Cross announced the appointment of Amanda Yap-Choong as the new Chief Financial Officer. Yap-Choong is a Chartered Accountant and was previously the Commercial Finance Manager at Chapman Tripp. She has also worked at Broadspectrum and PwC. In her new role Yap-Choong will be responsible for overlooking the national finance function, business analysis, and improving efficiencies in processes and reporting.

“Southern Cross Travel Insurance (SCTI) has brought Amanda Yap-Choong into the role of Chief Financial Officer, where she will provide business operations and change management leadership to deliver to the business’ strategic priorities.
 
Yap-Choong is a Chartered Accountant and brings extensive experience leading diverse cross-functional teams and stakeholder groups in the infrastructure and professional services industries. She is well versed in providing financial assurance to financial services sectors including insurance, banking and funds management.
 
Most recently, Yap-Choong worked as the Commercial Finance Manager for law firm Chapman Tripp. In this role she was responsible for managing the national finance function, delivering business analysis in an advisory capacity and improving efficiencies in processes and reporting. Prior to that, she held roles at Broadspectrum and PwC in New Zealand and Ireland.”

Jo McCauley, Southern Cross Travel Insurance CEO has said that Yap-Choong will strengthened the capability of the executive team and add value to businesses. Yap-Choong has said that she is pleased to join the team as the new CFO.

“Southern Cross Travel Insurance CEO Jo McCauley said, “We were impressed by Amanda’s commercial acumen and track record of delivering strong results.

 

“Amanda’s appointment has strengthened the capability of our executive team and her experience of adding value to businesses amidst times of change will help us deliver to our business priorities amidst COVID-19.”   Yap-Choong said, “I’m pleased to step into the CFO role at SCTI and join a great team which is focused on delivering exceptional service to its customers. I am looking forward to contributing towards SCTI’s strategic direction as the leader in the industry.”

In other news

Financial Advice: Get In Shape Advice Summit 2021 registration open

FMA: FMA sets expectations for issuers of ‘green’ and ‘responsible’ funds

 


Legal and regulatory update for the life and health insurance sector

16 Dec 2020 – The FMA published its Annual Report for the year ended June 2020. https://www.fma.govt.nz/news-and-resources/media-releases/fma-publishes-2020-annual-report/

17 Dec 2020 – FMA released its latest regular monthly update, which included advice of two consultations expected to commence in the first quarter of 2021, being:

  • Review of the Wholesale Investor $750,000 Minimum Investment Exclusion Exemption Notice 
  • Potential exemption relief for restricted schemes from certain disclosure requirements

The FMA also advised in the update of the publication of two information sheets as follows:

Further FMA guidance identified as published on the FMA website during Dec 2020 includes:

17 Dec 2020 – MBIE advised of the publication of various regulations to support the Financial Services Legislation Amendment Act 2019 and other recent legislation changes, including:

• replacing terminology from the Financial Advisers Act 2008, such as references to “category 2” financial products and authorised financial advisers. Note:
The existing treatment under the Financial Markets Conduct Regulations 2014 in relation to category 2 products (for example in relation to whether a PDS needs to be given) is preserved.
Transitional provisions have been included to give affected providers time to update documents that refer to “authorised financial advisers” and “financial advisers”;
• carrying over the effect of the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014 with some updates and clarifications;
• prescribing limited circumstances in which client money and firm money can be held together, to reflect the effect of existing FMA exemptions for NZX brokers and Non-NZX brokers;
• prescribing when firm money that is held together with client money is to be treated as client money;
• prescribing the statement that lenders can give to make clear to consumers that the limited exclusion from the financial advice regime relating to lender responsibilities applies;
• prescribing requirements for the record of nominated representatives that must be maintained by providers;
• requiring AFAs and QFEs that continue operating in the industry to retain records that were required to be held under the Financial Advisers Act 2008;
• carrying over exemptions contained in regulations under the Financial Advisers Act 2008;
• updating a cross-reference in the financial advice disclosure regulations so that financial advice providers are able to refer to their website when disclosing information about their legal duties;
• enabling financial advice providers to provide contingency DIMS without being subject to DIMS licensing requirements. This carries over and updates an existing licensing exemption for contingency DIMS provided by authorised financial advisers. The regulations also include transitional arrangements where an authorised financial adviser named in a contingency DIMS investment authority is engaged by a financial advice provider;
as well as the following in relation to financial products more generally:
• providing that certain provisions of the Trusts Act 2019 do not apply to PIE call fund unit trusts and PIE term fund unit trusts;
• updating the disclosure information that must be given by managed investment schemes to reflect changes in the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 relating to tax refundability.

17 Dec 2020 – Privacy Commissioner released the December version of Privacy News, which included information on the release on 8 Dec 2020 of guidance to Ministers and departments to help them determine when personal information can be disclosed to a Minister by a government department. https://privacy.org.nz/publications/guidance-resources/guidance-to-ministers-and-government-departments/


Partners Life buys BNZ Life, and more daily news

Partners Life has announced the purchase of BNZ Life. Naomi Ballantyne revealed the news in a video update sent out on Thursday 17 December. In the video, Ballantyne highlighted that although BNZ is leaving the life insurance market, they wish that all policyholders are well looked after. As a result, BNZ has entered into a 10-year referral agreement with Partners Life, ensuring customer needs are met and brand reputation is maintained. Ballantyne mentioned in the video that BNZ policies will be fully integrated into Partners Life meaning similar treatment of BNZ Life customers and Partners Life customers. It has been announced that BNZ Life customers will not be locked into legacy products or legacy systems. Ballantyne has said that this acquisition will ensure that there is competitive pressure in the life insurance market. Click here to watch the full video

 

In other news

From Goodreturns: No appetite for PI any longer: compliance expert

Cigna: Cigna’s adviser network strengthens with swathe of new appointments