Duncan Grieve writes about the media situation in New Zealand after the incredible news of Stuff being sold for $1 to management. The article is well worth a read. In an economic sense I felt it was awesome advocacy for Schumpeter's creative destruction - a celebration of how new ideas emerge in surprising places, and times. Innovation does occur in large companies, but not usually in very comfortable and monopolistic ones. Disturbance, challenge, and necessity - these drive change. What changes shall we see in the insurance sector as a result of the great shove that 202 has given everything? Well, finally digital moved to the top of the queue for many companies, after languishing for a long time. Product design is definitely under pressure. FSLAA and COFI are going to deliver additional shocks - on top of the economic ones to distribution.
In light of the past two months, Martin Stokes, MAS CEO, has said that the insurer is open to the idea of remote working. Stokes highlights the slow adoption of flexible work options in past years has been accelerated by the lockdown. MAS will use events during the lockdown to inform future working arrangements.
“Medical Assurance Society (MAS) chief executive Martin Stokes (pictured) says that the past six weeks have been a kind of mass social experiment, and, as a result, the workplace flexibility trends that were already emerging have been accelerated massively. He says the level of productivity in some areas has been surprisingly high in a remote environment, and, as a result, a much higher level of flexibility will become the norm.
“This situation has identified for us the opportunities that would otherwise likely have emerged over a much longer period of time,” Stokes told Insurance Business.
“Social trends would have influenced people’s thoughts around where they wanted to work, flexibility, different working arrangements, etc. But that’s really been concentrated into a six week-long social experiment where everybody’s had a taste of what that’s like enforced upon them.” Click here to read more
In other news:
The Australian financial advice industry has declined by almost 18% when compared to the number of advisers in the market this time last year. The introduction on mandatory qualifications, the change in commission structure and monitoring of activity has pushed advisers out of the market.
“Five thousand and twenty-five advisers have left the industry in the last 12 months, while a meager 78 new authorised representatives joined the industry during this period, analysis of ASIC’s financial adviser register conducted by CoreData will show. The researcher pointed out that the number of new entrants to the industry is inflated considering at least half have joined timeshare schemes, an area that for the regulator.
But it’s the bloodletting of advisers from the institutionally-owned licensees that will be a feature of this year’s list and subsequent analysis.”
Below is a press release from the FMA on business debt hibernation.
“Last week, the Government passed the COVID-19 Response (Further Management Measures) Legislation Act 2020, which introduced the business debt hibernation (BDH) scheme. Business debt hibernation may help eligible businesses affected by COVID-19 manage their existing debts until they can start trading normally again. For example, businesses may agree with creditors to delay repaying some of their debt.
BDH is available to a wide range of businesses (including companies, trusts and partnerships), some of which are regulated by the FMA. BDH does not extend to registered banks, licensed insurers, non-bank deposit takers, licensed derivatives issuers, operators of designated settlement systems or sole traders.
Conditions to enter and remain in BDH include director approval, notice to the relevant Registrar, and creditor agreement. These and other conditions that must be satisfied are set out in Schedule 13 of the Companies Act 1993.”
In other news:
During the Financial Advice NZ webinar, Minster Faafoi spoke about his commitment to ensuring that the conduct bill progresses while also highlighting that he is conscious of the importance of having enough lead-in time. During the webinar, the Minister spoke of how the Government understands that commissions are a legitimate way of paying advisers and as a result, the Government isn’t seeking to ban commissions, instead is looking to end target-based incentives.
“In a webinar with Financial Advice NZ, Faafoi acknowledged that concern and said he did not want the conduct regime to add another layer of complexity of regulation on top for advisers.
The bill in its current form also allows regulations to dictate remuneration structures, which some industry participants have expressed concern about.
Faafoi said Government recognised that commissions were a legitimate way of paying advisers for their “important work” because consumers were generally unwilling to pay for financial advice. He said the Government was aware that commission structures were the way the sector had operated for decades.
“It is not the Government’s intention to ban all commission.” Click here to read more
It would be a great relief to advisers and insurers if it could be clearly discerned from the Bill that the power to ban commissions is reserved. At present the definition of incentives in the law can be read as including all normal commission payments, which is unnerving when long-term decisions need to be made.
In other news:
We have seen unprecedented change occurring all around us. These changes may lead to re-evaluating our plans and considering other pathways. Regardless of your need for change, we can assist you understanding the value of your adviser business. We offer several different valuations to suit your valuation needs. We offer basic, complex and full sale valuation services. Additionally, we work with our preferred chartered accountancy vendor to offer a unique valuation service.
Reasons why you might get a valuation:
- Sale purposes
- family buy-outs
- Succession planning
- Staff share schemes
- bank lending
- Transferring shares into a trust
- Shareholder/partnership disputes
Lloyds of London has reported that COVID-19 will likely cost the global insurance industry over NZ$336 billion (US$200 billion). It is predicted that the industry will experience a greater loss if lockdowns around the world continue into the next quarter.
“The pandemic will cost the insurance industry over US$200 billion (NZ$336 billion), according to Lloyds of London, who estimated that its own payouts are now on a par with the Sept. 11, 2001 attacks or the combined impact of hurricanes Harvey, Maria and Irma in 2017.
Lloyds, which as an insurance market pays out to insurers affected by disasters, said it expects to pay between $3 billion and $4.3 billion to insurance companies to help them cope with the COVID-19 pandemic.
Losses could widen if lockdowns continue into the next quarter, which would push the overall cost to the insurance industry to $203 billion. Unlike the storms, for example, the pandemic's impact is global, systemic and long term.” Click here to read more
While most of those impacts are for catastrophe cover, there will be impacts on life insurers, especially in those markets where control measures were less successful.
In other news:
nib will be hosting a webinar on May 20, 2020, from 11:30 am – 12:15 pm. During the session, nib NZ CEO Rob Hennin, RMA Financial’s Shaun Vining, and nib Customer Care team leader Hannah Larking will be sharing their experiences on non-PHARMAC drugs and the importance of including them in medical policies.
"Join our webinar where we’ll be focusing on why cover for treatment with non-PHARMAC drugs is so important for your clients. We’ll be bringing you the insights of adviser, Shaun Vining, and nib Customer Care Team Leader, Hannah Larking. There will be opportunity to discuss why it’s so important your clients have health insurance with non-PHARMAC cover." Click here to register
in other news:
Here you can listen to a podcast from Australian Unity Advice’s executive general manager, Matt Brown, who discusses the impact of the government’s relief measures on advisers in the wake of the coronavirus crisis.