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FMA offer insights into new regime progress, and more daily news

During a Financial Advice NZ webinar FMA director of market engagement John Botica concluded that the industry responded well to the regime change. Botica highlighted that over 3,000 financial advice providers, 10,000 advisers, and 12,000 nominated representatives are now on board. It was highlighted that there is now a steady flow of full licences applications. Botica made a note to discuss the lack of linking between advisers and FAPs on the FSPR. HE warned that it is important to link as there is the possibility of being deregistered from the FSPR from July. The assumption that the obligations of FSLAA don’t apply to the two-year transitional licence period was debunked,  it was made clear that all obligations of the new regime have been effective since March 15, 2021. Adviser website not reflecting the new disclosure rules was another issue discussed during the webinar. We offer a website review service for advisers looking to ensure they are compliant and have websites that are user-friendly. 

“Just over a month on from the start of the new regime, the FMA has shared a report card on how the financial services industry has adapted to the changes brought about by FSLAA.

Speaking at the Financial Advice New Zealand “Bring in the Experts” webinar, FMA director of market engagement, John Botica, said “The numbers tell us that [the industry] responded well.

“To see over 3,000 financial advice providers, together with 10,000 advisers and 12,000 nominated representatives tells us that the industry stepped up to the mark.”

According to Botica other factors on the positive side of the report card are that traffic of advisers applying for their full licence is starting to pick up.

“We are starting to get a good flow of full licence applications, and we are starting to see those licence approvals [coming] through which is great to see.”

But the report card was far from straight A’s.

On the negative side, Botica noted that many could be better at linking the advisers to the FAP on the FSPR.

“It is really important not to forget to do this. You really don’t want to get to the end of June and be facing the very real possibility of being deregistered from the FSPR.”

Another concern of the FMA is the misconception that the two year transitional licence period is a timeframe where the obligations of FSLAA do not apply.

Botica says, “This is just wrong. All obligations under the new regime took place on March 15. The transition period is in respect to moving to a full licence and to your approach to competency.”

The other low grade on the report card is related to adviser websites not being updated to reflect the new disclosure rules.

“Where we see genuine mistakes we will be sympathetic.” Click here to read more

In other news

FSC: Financial Services and the Climate Crisis with Hon James Shaw breakfast on May 14

FSC: FSC Connect Webinar on Cyber Security with Deloitte

Suncorp: Major insurer welcomes mandatory climate reporting


Growth in life expectancy slows - but there is plenty of room for improvement

New Zealand has relatively good life expectancy (compared to many OECD countries) but still has many opportunities to improve - estimate by our data scientist, Ed Foster, using the major causes of death occurring between age 16 and 65 show that:

If we assume there are factors which are influenceable in bringing New Zealand’s mortality rates down to that of the average of the OECD, we can say that 254 deaths could be prevented annually with 87% coming from the female population.

A huge number of those lives that could be saved are women who die from breast cancer. That's another reason why cancer care and access to non-Pharmac drugs is so important. It is also a good reason why real world data should be the underpinning for insurance product rating. 

Turning our attention to the gap to the best performing country for each of the 10 causes of death, we can see that 2,049 lives could be saved annually but now with the majority (53%) coming from the male population.

That shows that although life expectancy growth has slowed recently, see media release below from Statistics New Zealand, there remains plenty of opportunity for us to improve.  A major contributor in this larger number is road safety. Another major contributor is self-harm. Subscribers to our quarterly life and health report have access to the full analysis. 

Growth in life expectancy slows – Media release

20 April 2021

Life expectancy continues to increase, although the change over time has slowed, Stats NZ said today.

Life expectancy at birth for the population as a whole is 80.0 years for males, and 83.5 years for females, based on death rates in 2017–2019. Life expectancy for males has increased by 0.5 years since 2012–2014, and by 2.0 years since 2005–2007. Life expectancy for females has increased by 0.3 years and 1.3 years over the same time periods.

“While life expectancy is still increasing, the increase over the last few years is smaller than in the past,” population estimates and projections manager Hamish Slack said.

Visit our website to read this news story, information release, and methods paper, and to download CSV files:


Merely stating facts is not enough

In research covering more than 6,000 claims for trauma conditions across greater than 2.6 million policy years, recorded claims causes show that cancer accounted for more than 40% of male claims and more than 70% of female claims. That's a huge share. It astonishes me that claims cause was not recorded for over 1,500 claims - but this gap in the data is more likely to be due to poor /legacy management information systems, than actually paying claims without a cause, it is unlikely to affect the ratio of claims causes. 

Consider another pair of facts: in a 30 year period a male non-smoker may have about a 16% (or one in six) chance of claiming on their trauma policy. Trauma claims enjoy a high claim payment rate - it varies, but in the UK a figure of greater than 90% is common. Now consider how they interact: there is about a 1.6% chance that this person will be unable to make a claim. Trauma insurance is a good bet. 

Clients, living their lives, have little or no idea about the risks and odds. It is up to someone to tell them. What's more, if you are basing product selection decisions on long lists of things that have little or no bearing on whether a claim will be payable then the information is true, but of limited use. Weighting the features by claims likelihood is essential to helping the client make an informed decision. 


Legal and regulatory update for the life and health insurance sector

28 Apr 2021 – RBNZ published its guidance on what regulated entities should consider when building their cyber resilience - given their recent experience, and I mean this, the guidance is likely to be a fair reflection of their own practice and current approach. A high level guide for supervised organisations. https://www.rbnz.govt.nz/news/2021/04/reserve-bank-publishes-cyber-resilience-guidance


Southern Cross on future of the health sector, and more daily news

Southern Cross has described the change to the public health system as a positive step towards a more aligned health care system. Southern Cross noted that although the private health sector is highly efficient at delivering elective care, the sector needs to now work together to improve the overall service New Zealanders receive from public, private, and non-governmental providers. Southern Cross has highlighted that services must adapt to meet the demands of New Zealanders. Prioritising prevention has also been identified as key to achieving the best health outcomes.

“As the largest independent healthcare delivery network in the country, Southern Cross Healthcare welcomes the reform to the public health system.

It’s a positive step towards a more aligned system comprising public, private and non-governmental providers to achieve a better, fairer and more sustainable health solution.

The private health sector has a lot to offer and is well-recognised for highly efficient delivery of elective care. Now is the time to work in a whole of sector approach to maximise the contribution all facets of the health sector towards meeting the health needs of Kiwis.

The provision of services must adapt to meet ever-increasing and evolving demand. We only need to look at the growing mental health crisis, coupled with an ageing population where people’s latter years are often lived in a state of high health need, to see a strongly collaborative approach is required to deliver more efficient and cost-effective healthcare.

New Zealand simply cannot afford to have a health system that continues to operate at the bottom of the cliff. Changes need to happen now, and prevention must be a key focus for the new strategy to achieve the best health outcomes. 

This is why Southern Cross Healthcare has evolved beyond delivering care to patients in our wholly owned or joint venture hospitals and medical facilities and is investing in areas of growing importance. We now have invested in providing preventative, community-based services including occupational health, rehabilitation and mental health support, along with clinical wellness services.

While we know this is just the beginning, we look forward to receiving more information, and continuing to work in partnership to roll out the new health system.”

In other news

In Good returns: If in doubt - disclose

Partners Life: Andries van Graan now chief of adviser distribution at Partners Life

Russell’s piece in Good returns: Bancassurance – an opportunity for advisers?

Financial Advice New Zealand: Companies Office working to ensure FSPR process is "made simpler"


Legal and regulatory review for the life and health insurance sector

22 Apr 2021 – ASIC released its set of expectations of life and general insurers following a review of insurers’ responses to consumers experiencing financial hardship during the COVID-19 pandemic. This and vulnerable client issues are likely to be covered by the FMA over the course of the year so these expectations are well worth reviewing. https://asic.gov.au/about-asic/news-centre/news-items/asic-sets-expectations-of-life-and-general-insurers-following-a-review-of-insurers-responses-to-consumers-experiencing-financial-hardship-during-the-covid-19-pandemic/

22 Apr 2021 – Department of Internal Affairs released its AML/CFT Regulatory Findings Report 2020 together with its targeted compliance assessment on reporting entities’ policies, procedures and controls for relating to politically exposed persons (PEPs). Weblinks follow:

https://www.dia.govt.nz/AML-CFT-Regulatory-Findings-Report-2020-available and https://www.dia.govt.nz/AML-CFT-Targeted-Compliance-Assessments

22 Apr 2021 – Government, Treasury and the RBNZ advised that a Cabinet decision to adopt the final measures resulting from the Reserve Bank Act Review will see drafting commence for new legislation to be known as the Deposit Takers Act. This Act will create a single regulatory regime for all bank and non-bank deposit takers (such as building societies and finance companies). It will also introduce a new deposit insurance scheme that will protect up to $100,000 per depositor, per institution in the event of a failure. Relevant weblinks follow:

https://www.beehive.govt.nz/release/deposit-taking-measures-protect-financial-stability-and-new-zealanders

https://www.rbnz.govt.nz/news/2021/04/new-deposit-takers-act-a-step-closer

https://www.nzba.org.nz/2021/04/22/deposit-guarantee-scheme-provides-extra-security-for-depositors/


nib and Blues launch nib Little Legends Little Smiles initiative, and more daily news  

nib has partnered with the Blues to launch nib Little Legends Little Smiles initiative. nib CEO Rob Hennin been described this initiative as a key component of nib’s focus to encouraging New Zealanders to prevent injury, as well as to live longer and healthier lives. The nib Little Legends Little Smiles initiative is designed to provide 1,000 custom-fit mouth guards to PIC Junior Rugby players all aged 5-12 years. The focus on prevention is evident with this initiative centring around injury and illness prevention on the game field. Hennin has said that all partnerships are intended to protect New Zealanders from illnesses and diseases, ensure that we have access to healthcare, and help us navigate the healthcare system. Hennin has also noted that nib is excited about having opportunities to work with the community.

“nib New Zealand has partnered with rugby union team The Blues to launch its nib Little Legends Little Smiles initiative - something CEO Rob Hennin said is a key part of nib’s focus on encouraging New Zealanders to prevent injury, and live longer and healthier lives.

 

The initiative will give custom-fit mouth guards to 1,000 PIC Junior Rugby players aged 5-12 years, and six Auckland rugby clubs are taking part in the programme.

 

Commenting on the partnership, Hennin said that investing in injury and illness prevention is important in preventing both short- and long-term issues, and said the focus on prevention is a key part of nib’s direction.

 

“It’s been a tough year for everyone, and many sports clubs haven’t been able to train or play as planned,” Hennin said.

 

“As the new season kicks off, we wanted to give back and ensure that our junior players are protected by the best, so they can remain healthy both on and off the field.”

 

“Our partnerships are all about protecting New Zealanders against the risk of illness and disease, getting them access to healthcare, and helping them navigate the healthcare system,” he explained.

 

“It’s also about being proactive about health and looking to prevent illness, so we’re really excited about the opportunities we have to work with the community to improve health outcomes.” Click here to read more

In other news

Accuro: Accuro support Will&Abel to embracing sustainability and eco-friendly products

Accuro support Will&Abel April 3 2021

Accuro: Gareth Fleming has appointed to the Accuro board

Willis Towers Watson: Willis Towers Watson commits to net zero

CFFC: New umbrella group to boost money know-how

AIA: Lack of Financial Literacy Linked to Under-Insurance

From interest.co.nz: Government takes feedback on board and doubles coverage of proposed deposit insurance scheme to $100k per depositor, per institution

 


Accuro on how COVID-19 impacted the industry, and more daily news

Accuro CEO Lance Walker has shared insight on how COVID-19 impacted the industry. Walker has noted that Accuro saw higher than usual levels of policy suspensions and lower claims during the second quarter of 2020, then higher claims towards the end of the year. Regardless, Walker highlighted that Accuro remained resilient because of the business continuity process in place. New business sales has been described as remaining at good levels during the initial COVID-19 period in 2020 and continuing into 2021. Walker has said that there has been very strong direct sales for individual policies and strong growth in group sales. Accuro has concluded that there is now a heightened awareness of the benefits of health insurance.

“The insurance industry took a hit from the COVID-19 pandemic last year, with many insurance providers and their people forced to quickly adapt to the unstable environment and address emerging risks.

Now that New Zealand has largely eradicated the pandemic, Accuro Health Insurance (Accuro) chief executive officer Lance Walker shared with Insurance Business how it impacted Accuro and the health insurance sector, the current challenges in the industry, and how to address risks.

Walker (pictured), who joined Accuro as a CEO during the COVID-19 pandemic last year, said the pandemic’s most immediate impact was that hospitals were not performing elective surgeries during the lockdown. As a result, Accuro saw lower claims during the second quarter of 2020, then higher claims towards the end of the year.

 

“We also saw higher than usual levels of suspensions due to financial hardship – although most of these are now reverting to paid policies,” Walker continued.

Despite the impacts of the pandemic on the sector, Walker shared that Accuro remained resilient, thanks to its business continuity processes.

“Like many organisations, the COVID-19 lockdown was a live test of our business continuity processes, and the team came through that with flying colours,” he said.

“We were able to conduct business remotely from day one with minimal impact on our levels of customer service (our levels of customer satisfaction remained above 90% for the 2020 year). This remote working model has continued post-COVID-19, with many of our team now choosing to work from home from time to time in line with our flexible working policies.”

Accuro’s new business sales also remained at “good levels” through both the initial COVID-19 period in 2020 and continuing into 2021.

“In particular, we have seen very strong direct sales in the individual space and strong growth in group sales,” Walker said.

“Our conclusion is that COVID-19 has heightened awareness of the benefits of health insurance – both for individuals and employers (who are even more focused now on employee health and wellbeing).”  Click here to read more

In other news

From Good returns: If in doubt - disclose

From Good returns: Aussie advisers: Not keen on digital advice

Professional IQ: Claim v circumstance seminar

 

 


Legal and regulatory review for the life and health insurance sector

19 Apr 2021 – Dentons Kensington Swan advised that the international Financial Action Task Force (FATF) had consulted private sector stakeholders on an update to FATF guidance on the risk-based approach to virtual assets and virtual asset service providers, with consultation having opened on 19 March 2021 and with submissions closing on 20 April 2021.

https://www.fatf-gafi.org/publications/fatfrecommendations/documents/public-consultation-guidance-vasp.html

20 Apr 2021 – APRA and ASIC released a Life Insurance Claims and Disputes Statistics publication, covering a rolling 12-month period from 1 January 2020 to 31 December 2020. https://www.apra.gov.au/news-and-publications/apra-and-asic-publish-latest-data-on-life-insurance-claims-and-disputes-3

21 Apr 2021 – FMA media release stating that it was warning the funds management industry to avoid advertising large investment returns for the 12-month period to March 31, 2021, as this could mislead investors. https://www.fma.govt.nz/news-and-resources/media-releases/advertising-investment-returns-could-mislead-investors/

21 Apr 2021 – MBIE opened consultation on outstanding aspects of the upcoming regime governing conduct in the financial sector, including consulting on regulations covering matters such as requirements for claims handling and complaints processes, prohibitions of certain types of sales incentives, and the treatment of intermediaries, with submissions closing on 4 June 2021. https://www.mbie.govt.nz/about/news/consultation-opens-on-additional-measures-in-new-financial-conduct-regime/

21 Apr 2021 – Parliamentary website updated for the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Bill, showing submission closing date as 28 May 2021 and report date as 16 Aug 2021. https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_109905/financial-sector-climate-related-disclosures-and-other

21 Apr 2021 – IRD advised that it has identified several errors in the recent special report on the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021, and is currently in the process of updating it. An updated version will be published by early next week. https://taxpolicy.ird.govt.nz/news/2021/2021-04-21-updates-required-special-report


Quality Product Research: Medical - major review process commenced for Medical Amount Scores

Introduction

Medical costs in our country continue to rise significantly causing increases to Health Insurance. In New Zealand, the medical inflation rate is estimated to be around 9-11%

Although we update the amount scores with every product change it is time we reviewed all our medical amount scores.

We have therefore started the process of a major review.

Theme of review

The themes of this review are:

  1. A focus on how claims scenario differs between males and females
  2. Revising to ensure a clear and concise scenario used across all insurers

Review process

  • We have alerted advisers and insurers to our plan to do a review and asked for data on the themes above. Changes will be based on our view of all the information sent to us.
  • We will then publish our proposed scenario openly for feedback.
  • Further changes may be made at this stage.

Timeline for review

April – advise review started

May – review claims information

June – consult on claims scenario

July – implement revised scoring

Your feedback

We value getting your feedback on how these wordings are being applied to claims you may be aware of. Please email us with details of any recent claims to help us update our understanding.

Doreen Dutt, Research Analyst, Quality Product Research Limited, researcher@qpresearch.co.nz