Australia: dramatic reduction in accessibility of advice on life insurance

Research in Australia shows underinsurance increasing and predicts that in the near future only the very wealthy will be able to access personalised advice from an adviser, due to recent regulatory changes. This is the consumer version of those stories we have been sharing about the number of Australian advisers leaving the sector. 

“On the current trajectory, within three years, only the wealthiest 15 per cent of Australians will be able to access life insurance with personal advice,” the group said.

Read more here, by Sarah Kendell, at Independent Financial Adviser. 

 


What is your advice business like?

Seth Godin, in one of his pieces describing the shift to online absolutely nails the definition of which businesses can most effectively compete with big tech, and which cannot: 

What if the work you do is:
compliance-based
standardized
repetitive
not based on innovative or flexible customer interaction…
If it is, it’s pretty likely that you’ll be replaced by a combination of robots, AI and outsourcing.
If they can find someone or something cheaper than you, they’re going to work overtime to do so.
The alternative is to be local, creative, energetic, optimistic, trusted, innovative and hard to replace.

If your compliance process makes your business compliance-based, standardised, and repetitive... then it is turning you into robot food. On the other hand, if it is helping you deliver that business described in the last line, you are future-proofing your business. 

 


It's great information, but it isn't financial advice:

I was asked by a compliance guru at one of the insurers about Quotemonster, and in particular Quality Product Research, and how that relates to product selection, and whether you can rely on it as information from a third party as the Financial Advice Code requires. 

You can rely on QPR to be a good assessment of differences between products, compare prices accurately, but it isn’t giving advice, only advisers do that, given their superior knowledge of the client. Research reports on products are there to help inform good advisers, not replace them.

Incidentally, in a related subject - Quotemonster is not a record-keeping system. It is a comparison system. Although we retain comparisons for your convenience, and so you can replicate similar comparisons, it is, obviously, not a CRM system. 

Our comparison business is to help advisers.


Industry participants react to gastric cancer claim denial, and more daily news

Ailepata Ailepata’s gastric cancer claim denial as a result of a New Zealand Home Loans broker suggesting Ailepata change insurers has caused division within the industry. While some have sided with Fidelity Life’s decision to deny the trauma claim, others have contested the decision. Tony Vidler described the incident as a shocker and hoped it would highlight the duties of advisers by stating that advisers need to act as front-line underwriters since they are better judges of insurer criteria than clients. 

“Vidler said: “Clients often, with the best of intentions, tell you everything they think you want to know then later say ‘I didn’t think that would matter. A doctor told me I needed to get my blood pressure under control 17 years ago but that doesn’t matter, does it?’

Clients were in a poor position to judge what would be important to an insurer, he said, and it was the adviser’s job to step up.

“I always take the view that the adviser should be the frontline underwriter … if there’s any doubt or questions you’ve got to draw attention to it.”

If there was a concern about something from a client’s past, the adviser could suggest the insurer requested medical files, he said.”

Katrina Church has stated that they isn’t enough information to condemn the advice provided to Ailepata Ailepata by the mortgage broker. Instead Katrina said that in her experience clients don’t usually understand their disclosure obligations. While advisers work to minimise risk of each application but she suggests that advisers consider the question do clients understand what they have to do when applying.

“Church said there was not enough in the articles written about the case to condemn any adviser. “My experience is most clients don’t truly understand what their obligations regarding disclosure are. And as advisers I would ask do we do enough here to help out clients? Are we training this as well as we can in the industry?

“Advisers are the first underwriters and we should do all we can to derisk the situation for clients – this is something that online or applications made direct to providers can't. That’s our point of difference. 

“Advisers should be thinking, is this client really understanding what they have to do when they are filling out this form? That’s the first thing. The industry could do better, insurers could do better.” Click here to read more 

In other news:

Financial Advice: Financial Advice formed a group called Corporate Associates

Financial Advice: consultation of the Trusted Adviser mark closed July 22 2020

Financial Advice: Applications invited to be a Corporate Associate

FMA: Kiwis confident financial markets will recover from COVID-19, plan to increase investments


Fidelity Life appoints new head of adviser distribution

Todd Allan has been appointed as the Head of Adviser Distribution. This promotion comes after the departure of Craig Winterburn, who was the General Manager Distribution. In his new role Todd will be focused on supporting advisers.

“A key focus for Allan and his team of business managers and business account managers will be supporting advisers through a period of change.

“The new financial advice regime, conduct and culture changes and, more recently, Covid-19 are all having an impact on our business, our distribution partners and the broader industry.” Click here to read more

In other news:

Adviser stops scam: Saves client $60,000 - and excellent example of a vulnerable client saved by good process

FSC webinar: Get In Shape Session 5: Hear directly from the Government and regulatory leaders delivering FSLAA

FSC webinar: FSC Connect - Insights from Journalists and the Media

FSC webinar: Get In Shape Session 6: An opportunity to redesign your advice process


Finding the balance between marketing and compliance, and more daily news

With the regulatory changes set to be implemented in early 2021, Karty Mayne from Rosewill Consulting is warning advisers to take precautions with advertising as this is an area that causes issues with compliance. Karty has suggested that advisers pay attention to their online activity. David Greenslade, executive director of Strategi has echoed Karty’s point by saying that although advisers have room to be creative they must carefully review the material.

“Karty Mayne, compliance consultant at Rosewill Consulting says that marketing and adverts are the areas where advisers can often trip up when it comes to compliance, and so they should be taking extra care to review their online activity.

David Greenslade, executive director of Strategi Group says the new disclosure regime will allow advisers to get more “innovative” with how they convey information - but it will also mean that every piece of marketing material will need to be looked at, and potentially revised.”

Karty has suggested advisers can improve current practices by updating their websites and reviewing how social media platforms are used. Additionally, Karty has suggested advisers create a compliance procedure that is simple to follow. Chatswood offers a Digital Advice Strategy service as well as an Advice Process Management service that helps advisers achieve what Karty is suggesting. If you wish to find out more email your interest to Jerusalem.Hibru@chatswood.co.nz or Russell.Hutchinson@chatswood.co.nz

““It’s also a really good opportunity to have a look at modernising your website and how you communicate on social media, because the FMA will look at all of that,” she explained.

Karty Mayne says the easiest way to stay on top of compliance is to create a series of policies, and document their implementation as simply as possible. She noted that if not for COVID-19, we would all be operating within the new regime right now - and so she urges advisers to use this extra breathing space ‘wisely’ and not get left behind.” Click here to read more

In other news

BNZ: Darrin Bull has been appointed as Head of Product and Distribution at BNZ

Cigna: Cigna appoints chief risk officer

Quarters two and three will see clients at their “most demanding”

Climate change may soon render some beach houses uninsurable


Changes to dealer groups, and more daily news

With regulatory changes finalising, the industry is working to adjust. This has resulted in a number of changes being contemplated as well as being implemented. Dealer groups have had to reconsider may aspects of their business to ensure that they are prepared for the upcoming changes. One potential change is the acquisition of a group by another.

“In the past week rumours started swirling around the market that one of the bigger groups was about to takeover/merge/acquire one of the mid-size groups.”

The impending changes to the current law has meant changes to Newpark have had to be made. Newpark is expected to announce changes to their model towards the end of next month.

“Meanwhile, Newpark is regrouping its army, but how big it will be after Partners Life new FAPO model where override commission is paid to FAPs is unknown.

Good Returns understands that Newpark will be announcing its new model around August 23. If Covid-19 hadn't rolled its dice and pushed licensing back a year it's questionable if the group would still be on the board.”

Alongside making changes to align with new regulatory standards dealer group must work to ensure that they offer advisers attractive membership services.

“For advisers there is a growing imperative to ensure they find a group that fits with their own beliefs and business practices.

For dealer groups the pressure is coming on to deliver appropriate services to their members at the right price points.”  Click here to read more

In other news:

FSCL: Dispute service sees complaints rise by 40%

Southern Cross: Insurance companies among finalists for awards championing diversity

FANZ: Trusted Adviser mark attracts “strong and supportive” feedback

Commerce Commission: Commerce Commission release advising the Court of Appeal issued a ruling in the case regarding Harmoney’s lending model. In a judgment issued on 8 July the Court said that: Harmoney Limited is a creditor, its contracts are consumer credit contracts which are subject to the requirements of the CCCF Act, its platform fee is therefore a credit fee that is required by the CCCF Act to be reasonable. 


Compliance culture

While not necessarily immediately obvious, everyone in financial services needs a compliance culture to meet the expectations of the regulatory environment now in place, even while noting it is being developed further to capture conduct concepts.

Further, Boards and management often have their own additional internal requirements that are expected to be met. Regardless of size, all businesses need compliance culture in place, even if that simply means ‘ensuring that things are done the way we decided to get them done’. A good friend, who is also a business coach, puts it this way: ‘never put in place a rule you aren’t prepared to enforce’. New law and regulation ask us to put in place rules and policies – so we must have a way of forcing ourselves and others working in the business to observe them.

The customer-focused nature of most governance requirements means that the implementation of a compliance culture ensures that you focus on them. If we take a look at financial adviser businesses, they deal with risk, may handle client money, and now have new requirements to abide by, it is evident that a compliance culture necessary to have in place to ensure that regulator’s expectations are met.

How do you build a compliance culture?

  1. Start with a whole of business approach – Compliance needs to be a focus from the Board down through management and on to the individual workers at all levels.
  2. Commence with an emphasis on higher risk business operations – Identify those risks with the greatest probability of occurrence and/or the potential to have the greatest impact, and concentrate management and mitigation on those risks
  3. Build from your core activities: if you give advice, advice process is the heart of your operations.
  4. Learn – read the guides, laws, contracts, and regulations that together form the sum of the commitments that your business must meet.
  5. Challenge yourself: what level of risk, in financial terms is unacceptable to you? If a dollar loss of $100,000 is unacceptable, you will need to eliminate the risk of that happening.
  6. Fraud is real, people can be very self-interested: ask yourself – if someone else was doing your job, how to you think they could rip off the company, your suppliers, and your clients?

If you want to know more about how to test whether your culture is supportive of compliance, make contact with one of the team.


nib Putting Health into Life seminar, and more daily news

nib will be holding seminar series, Putting Health into Life and Work from July 28 to August 14. The seminars will include different speakers that will touch on different healthy living points. As part of the series group insurance as well as the benefits in the current climate will be discussed.

"Our speakers will explain the powerful reasons you can share with your clients around why health comes first and where it fits in the advice process. 

Our Group Sales team will also join our speaker panel to explain why group health is even more relevant as an employee benefit and equip you to access this market with confidence in a post COVID-19 lockdown world."

Different topics relating to health in life and work will be explored in the seminars. Topics include:

"Putting Health into Life

  • Health insurance and the public health services
  • How health insurance meets client’s needs and expectation at various life stages, while complementing other living insurances
  • Understanding life circumstances and expectations
  • Assessing value through premiums and claims

Putting Health into Work

  • Why health insurance is important to employers and their employees
  • How group health can accelerate your business growth
  • nib’s group health value proposition: putting the wellbeing of employees first
  • Supporting you to access this market with confidence"

Click here to register

In other news:

Expert says financial advice is key to emerging from a downturn

FMA:CONSULTATION: Review of 16 class exemption notices expiring in 2021

What I'm seeing at the moment - Philip Macalister's Blog

 

 


Vulnerable customers

Understanding what vulnerability is, identifying vulnerable customers as well as

considering the needs of your vulnerable customers should be an integral part of your adviser business service. But sometimes this isn’t the case.

Let’s begin by first looking at what a vulnerable customer is. Although vulnerability is difficult to define as well as difficult to attribute, the New Zealand Human Rights Commission broadly defines vulnerable customers as being people who are less likely to cope with and recover from stresses and pressures. Determining vulnerability within the insurance industry is equally difficult to pinpoint. The Human Rights Commission suggests that those working in the insurance industry exercise flexibility to ensure accommodation.

Now that we have broadly defined vulnerable customers, let’s take a look at the proportion of insurance customers that are vulnerable customers. Insurers consistently identified around eight percent of their customers to be vulnerable. That is a significant number. They probably work with advisers in the usual proportions - so you may expect that about 8% of your clients are vulnerable at any given time. With information insurers supplied, the Human Rights Commission was able to generate a suggestive list of vulnerability criteria. Two categories were created. The first category identified that customers can be vulnerable irrespective of other factors. Identified factors are:

  • Health or disability situations
  • Living situations
  • Family situations
  • Age
  • Geographic and or environmental factors
  • Living in non-English-speaking households

Insurance advisers should be particularly concerned about vulnerable customers as most clients that have experienced a claimable event will probably qualify due to health, financial circumstances, and possibly living situation.

In the second category, vulnerability was found to result from intersecting factors. This means that customers are vulnerable not because of one or more overarching

factors of vulnerability, but because several ‘milder’ factors of vulnerability intersect. Identified factors are:

  • Health or disability situations
  • Living situations, including employment, geographic location and dwelling
  • Family situations, including support provided by family, friends or support services
  • The degree of support they provide to other people, especially family members
  • Age
  • Ability to understand insurance policies and processes.

Keeping vulnerability at the forefront of our minds allows us to accommodate vulnerable customers at all stages. The Human Rights Commission notes that consideration of vulnerability can be built into business operations from the point of sale to the time of claim. This works to add value to business by valuing customers and better managing risk.

It is paramount to understand that the same factors can impact people very differently. This means that we cannot state the severity or mildness of a certain factor. It is equally important to understand that people aren’t limited to the number of factors they are exposed to at a single period. In some circumstances, people can be exposed to multiple factors of vulnerability. And lastly, the factors of vulnerability and periods of vulnerability can change over time.

This fits well with the FMA’s view that vulnerable customers are not so much ‘types’ as circumstances.