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

Financial Advice: Bring in the Experts: Unlocking the Code in the New Financial Advice Regime - Part 2

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

FSC: Get In Shape Webinar Series: Session 10 - Privacy - Reviewing your obligations under the Privacy Act


Southern Cross experience a surplus, and more daily news

Southern Cross has reported a surplus of $32.4 million for the year ended 30 June 2020. This financial reporting comes after the $50 million return to members. $972 million was returned in claims in the last financial year, this equals to 85 cents in claims being returned for every dollar received in premiums.

“Southern Cross Health Society Group has today released its annual financial results, posting a surplus of $32.4 million for the year ended 30 June 2020.

The announcement follows Southern Cross Health Society’s pledge during the Level Four lockdown in April to return $50 million to its members.

In the last financial year, the Society returned $972 million in claims and received $1.138 billion in premiums.

For each dollar received in premiums, it returned 85 cents in claims to members, compared with an average of 62 cents in the dollar among other New Zealand health insurers.”

“The business paid out 72 per cent of all private health insurance claims, significantly more than its 62 per cent market share based on Health Funds Association of New Zealand data.

Nick Astwick said that Southern Cross was focused on members during the last financial year. This included pledging to return $50 million, setting up employees to effectively working from home and ensuring the business digitisation process is on track.

Chief Executive Nick Astwick said the Society’s focus during the last financial year was on taking care of its members: “We were with our members from the start of the pandemic, returning $50 million to them, and introducing a significant range of options for those in need of hardship relief.

“At the same time, our workforce was very quickly set up to work remotely, ensuring service levels were seamlessly maintained.”

Astwick said cost-saving digitisation of the business had continued at pace, with 82 per cent of customer channels now fully digitised, and more than 96 per cent of claims submitted digitally.” Click here to read more

In other news

Southern Cross: Woman who lives in fear of jaw dislocation determined to get replacement

Southern Cross: Southern Cross gives support to students' mental health programme

AIA: Depressed man wins $173,000 battle with insurer AIA - there will be more discussion of media claims coverage in the forthcoming quarterly life and health sector report. 


AIA digital makeover driven by COVID-19 crisis, and more daily news

Sam Tremethick, AIA distribution executive, revealed that AIA is in a better position now that it was a year ago. This has been credited to people being more risk averse and understanding the need for protection.

“When New Zealand went into the first lockdown, AIA settled into a period of big business and even bigger change. Since then, innovation and technology have reshaped the way that the business functions.

AIA distribution executive Sam Tremethick told Good Returns that like a lot of industries AIA took a hit in the April/May period, but quickly bounced back to a point where “year on year as of today we are doing better than this time last year”.

Tremethick attributes the rise in the insurance business to “a direct result of people being more risk averse than normal and just being conscious of the need for protection”. But along with a rise in business came a chance to reshape their processes for the company that during lockdown shifted to being almost 100% of staff working from home."

Sharron-Moana Botica, chief customer officer, said that understanding how to offer advisers support during lockdown was key. Last August’s launch of AIA hub resulted from adviser feedback and has been continuously enhanced. The current platform, eApp Share, is described as revolutionary. Through the use of eApp, margins of error have been minimised, application times has been accelerated, and customer experience has been improved. The introduction of eApp has also allowed AIA to reflect on processes and current practices. Currently, 75% - 80%  of all applications are submitted through the app, AIA is considering whether to move the application process solely to eApp.

“AIA chief customer officer Sharron-Moana Botica said that during lockdown, figuring out how to support advisors was key. “In August last year we launched our new online platform AIA hub into the New Zealand market. But when you have a digital tool you always need to be enhancing it. So this latest development is what we call eApp Share.”

eApp Share is a tool that may prove revolutionary for advisers. Botica said that the digital program “was developed in response to feedback from advisers who wanted to continue the collaborative process of filling out an application.” Collaboration is key to the program which allows the adviser to push out documents to the client, the client to fill out the disclosures in their own time, and for the conversation to continue between client and advisor during the entire process.

Moving the processes online have also meant huge strides forward in narrowing down margins of error. While paper applications have a 30% error rate, the eApp Share program’s internal validation systems have managed to remove the bulk of these errors. This is because the system prompts users to submit accompanying information and the forms show where information is required before they can be submitted.

It has also increased speed, whereas paper applications took around five days, the digital system has no such reliance on printing, scanning and signing. Typically it takes customers between 10-30 mins to complete their part of the eApp form.

Botica says as well as improving the customer experience, eApp Share has aided AIA internal systems. “It helps us to look at what are the types of disclosure that are coming through. We can do a lot of analytics on our underwriting and the types of question sets that we use.”

With 75-80% of applications now processed through the eApp system it looks like it is here to stay. On whether we could see AIA moving to a 100% eApp system any time soon Botica said that “we are in conversation with their advisers on the ground. Becoming more digital is part of our future, not only in the business space but also in our servicing and claims side.” Click here to read more

In other news

Suncorp New Zealand a finalist for Sustainable Business Awards

AIA: AIA awarded Insurance Employer of the Year in NZ Women in Insurance Awards

FSC: Get In Shape Session 9  - Risk Management and Implementing a Risk Framework in your Business

Financial Advice webinar: Unlocking the Code in the New Financial Advice Regime Part 2


Reserve Bank of New Zealand on insurers paying dividends

Jenée Tibshraeny, writing at interest.co.nz says that The Reserve Bank of New Zealand (RBNZ) is advising insurers against paying dividends:

“Our stance in relation to prudential risks to insurers from Covid-19 is that there are many unknowns still to play out in terms of flow-on impacts from what we have already experienced, as well as the potential for new outbreaks,” Bascand said in a speech to the Insurance Council of New Zealand (ICNZ) on Monday.

“This caution is also reflected in our stance on capital retention and dividend payments, which we regard as being imprudent under these conditions.

"We will update insurers on our stance on this at or before publication of the next Financial Stability Report in November.”

Although this is guidance, and tougher instructions were issued to banks, it would be very difficult for an insurer to ignore such advice. It should be hoped that it is temporary. Well-capitalised insurers would be justified in wondering why they were being treated the same as a thinly capitalised business. In the medium term, the absence of a the ability to pay a dividend may make it materially harder for an insurer to raise capital, acting against the intention of the advice. I therefore expect that the suspension will have a limited duration allowing for assessment of the difficulty of transitioning to an environment of negative interest rates. 

 


Reserve Bank announces review of the Insurance (Prudential Supervision) Act and more daily news

RBNZ has announced that it will be relaunching its review of the Insurance (Prudential Supervision) Act next month. The review comes after an industry consultation begun in 2017. The same consultation was set to continue earlier this year but was delayed as a result of COVID-19 related regulatory relief being implemented. Geoff Bascand, Deputy Governor and General Manager of Financial Stability, has said that maintaining an efficient insurance sector is important as customers expect to insure their assets and themselves.

“The Reserve Bank – Te Pūtea Matua will be relaunching the review of the Insurance (Prudential Supervision) Act (IPSA) in October.

The review began with an industry consultation in 2017 and was set to resume in March this year, but was delayed in-line with the regulatory relief implemented to free up the Reserve Bank and industry participants to support our economy and tackle the challenges created by COVID-19.

“Maintaining a sound and efficient insurance sector is important for New Zealand,” Deputy Governor and General Manager of Financial Stability Geoff Bascand says.

“Customers expect to be able to insure their homes and possessions and obtain life and disability insurance, and businesses utilise a range of insurance products to protect their assets and business interruption exposures,” Mr Bascand said in an address to the Insurance Council today.”

In 2010 the original Act was enacted to ensure that New Zealand was up-to-date with international standards for prudential regulation. The reason behind the enactment has not changed. The first Christchurch earthquake influenced that Act. International Monetary Fund assessment in 2017 and the independent review of Reserve Bank Supervision of CBL in 2019 have also influenced the Act. A policy paper is set to be published early next month and will detail the resumption, objectives topics, and timetable.

“The original IPSA was enacted in September 2010 to bring New Zealand up-to-date with international standards for prudential regulation. The reasons for enacting IPSA have not changed, and it is good regulatory practice to review legislation to ensure it is working effectively and update it for the lessons learned over the past 10 years, Mr Bascand says

The first Canterbury earthquake, for example, devastatingly occurred just a few days before the enactment of IPSA, resulting in intense supervisory activity and application of IPSA provisions over many years.

Other recent experiences that will help inform the IPSA review include an International Monetary Fund assessment in 2017 and the independent review of Reserve Bank Supervision of CBL in 2019. Further background and context has been provided by the joint Reserve Bank/Financial Markets Authority review into insurer conduct and culture, and the Thematic Review of the Appointed Actuary regime. The associated Solvency Standards need to be updated for impending changes to accounting standards and the review will consider adopting a mandatory buffer above the minimum solvency level.

A policy paper outlining the of the IPSA Review, and objectives and topics to be covered, will be published in early October. It will provide an updated overview explaining objectives, topics to be covered and an indicative timetable. At the same time, we will also release a consultation paper on principles to guide the review of Solvency Standards.” Click here to read more

 In other news

Accuro: Mel Stevens appointed as People and Culture manager

AIA: AIA has earned a place in the Hang Seng Corporate Sustainability Index, receiving an A+ rating and increasing its overall score

FMA: Pegasus Markets And Director Found Guilty Of Abusing FSPR


Industry reacts to disclosure regulation draft, and more daily news

The submissions on disclosure regulations have been released by MBIE. Although the response was largely positive, some concerns were raised about the disclosure requirements set to come into place on 15 March 2021.
 
AMP highlighted the risk of repetition without addressing issues currently being undervalued by consumers. To ensure value is added AMP suggested that disclosures need to be simple and brief, something AMP doesn’t believe has been achieved by the current draft.

“AMP said there was a risk that the disclosure would end up being repetitive and not address the issue of long, impenetrable disclosures not currently being valued by consumers.

 

“For benefits to be delivered to New Zealand consumers it is essential for disclosures to be simple, meaningful, very brief and unobtrusive. We do not consider that these aims would be met with the regulations as drafted.”

 

Under the new rules, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.”

While Financial Advice said that a reasonable person wouldn’t have a good grasp of identifying conflicts of interest within the industry and that the regulation could be strengthened by having higher standards in place. Financial Advice highlighted that there are many references to ‘incentives’ so including a definition and reference to ‘disincentives’ would be valuable. 

“But Financial Advice NZ said a reasonable client would not expect to have a good grasp of identifying conflicts of interest in the sector.

 

“The regulation could be strengthened by having a higher standard, such as – ‘any interest of A, P, or any other person connected with the giving of the advice that has the potential to influence the advice given by A’.

 

“There are various references to ‘incentives’. We recommend including in the regulation a definition and reference to ‘disincentives’ as well. For example, a reduction of commission rates for low volumes could escape the disclosure regime. Disincentives is an area that is often overlooked and should be drawn attention to, so FAPs and advisers cannot avoid their disclosure obligations by saying ‘this disincentive is not technically an incentive’.”” 

AIA stated that there should be further clarification on was is “practicable” for advisers to include and highlighted that this would cause significant issues for financial advice providers. Although AIA doesn’t see this as an issue as they are prepared to invest in the appropriate systems to aid advisers. 

“AIA said there should be more detail on when it was considered “practicable” for advisers to include in their disclosure the amount of fees payable by a client connected to the advice recommendation.

 

“This is a significant issue for financial advice providers. For AIA NZ, significant system investments will be required to provide estimates. While AIA NZ anticipates making this investment, we are concerned that other providers may choose not to do so, and instead elect not to provide estimates on the basis that it is not practicable to do so. This is an undesirable outcome for consumers which we consider could be avoided by better articulating the circumstances when providers may elect not to provide estimates.” Click here to read more

In other news

FSC: Generations Conference will no longer take place

Kepa: Kepa Compliance Officer’s Course was held in partnership with Rosewill Consulting  

Fidelity Life: Fidelity Life were announced as finalists in Best ICT Team Culture category in the 2020 CIO Awards

Fidelity Life: new applications are encouraged to be done through e-App

Fidelity Life: options for alteration requests are:

·       emailing signed alteration requests to admin.services@fidelitylife.co.nz

·       email from the individual policy owner’s email address

·       Mailing to Customer Care, Fidelity Life, PO Box 37-275, Parnell, Auckland 1151


Applications near the 1,000 mark, and more daily news

Information realised by the FMA show that 949 transitional licence applications had been approved as of 21 August 2020. The approved licences represent over 7,000 advisers. Katrina Shanks said that she expected more applications to be processed as she doesn’t see a sign of an exodus.

“The FMA said that, as of August 21, it had approved 949 transitional licence applications, representing more than 7,000 financial advisers.

Everyone offering personalised financial advice must have their own financial advice provider licence by March 15, or work under the umbrella of another provider.

Financial Advice New Zealand chief executive Katrina Shanks said she expected more applications were still to happen.

She said there was no sign of an “exodus” from the sector and there were 10,000 financial advisers registered.” Click here to read more

Chatswood produces a running estimate of the total number of financial advisers we expect to be covered by the regime which will be updated and shared in the forthcoming life and health sector quarterly review. 

In other news

Asteron Life: Ahead of next week’s launch, Asteron Life have made information and resources available at Showcase. Advisers can initially use the password AsteronLife2020 

AIA: AIA reveals grant winners

FMA: FMA appoints director of investment management

How to write about money

Partners Life: Partners Life Employee of the Year held virtually


Insurer wins argument over chronic pain claim, and more daily news

The Court of Appeal revealed its verdict on the case between Asteron Life and financial adviser Peter Taylor. According to the story: Peter Taylor made an Income Protection claim in 2010 saying that as a result of his bone cancer he was suffering from chronic pain. Peter was able to get payments after supplying the required information on his medical condition and ability to work, but in 2014 Asteron Life suspended the payments stating Peter’s earnings made him ineligible for payments.

"The Court of Appeal released its judgment on Wednesday.

Taylor first took an Asteron Life income protection policy in 1994 and made a claim in 2010, saying he had bone cancer and suffered chronic pain.

Taylor was required to provide progress reports to Asteron describing the current state of his medical condition, whether he had been able to work, what income he had earned from working, and certain other matters.

He received payments until September 2014, when Asteron suspended them. It was concerned that he was earning at a level that would make him ineligible.”

Unhappy, Peter went to court arguing that he was still entitled to payments.  Asteron Life stated that he was no longer entitled to payments and counterclaimed for repayment of the amount paid out to Peter. The court noted that Peter used the payments for holiday homes, cars and overseas trips and ruled in favour of Asteron Life. The insurer was awarded $371,286.70.

“Taylor went to court seeking a declaration that he was entitled to continuing benefits under the policy, and wanting arrears of payments.

Asteron denied he was entitled to any further payments and counterclaimed for repayment of all sums previously paid.

It said he had made false statements about the extent to which he worked while on claim.

The High Court sided with Asteron and it was awarded $371,286.70. That court noted that he had used his insurance payouts to fund a holiday home, cars and overseas trips.”

Peter then took the case to Court of Appeal. The judge again ruled in favour of Asteron Life saying that Asteron Life was entitled to a reduced counterclaim payment of $51,835.64.

”The Court of Appeal said Asteron was entitled to succeed in its counterclaim but could only recover payments made in respect of the periods about which Taylor was found to have dishonestly provided false information.

“The judge declined to find that the initial claim made in July 2010 involved false statements that breached Taylor’s obligations in relation to making claims. So Asteron’s claim as pleaded, which was founded solely on the allegation of breach of utmost good faith, could not succeed in respect of the initial period from January 2010 to July 22, 2010.

“There may well have been another basis on which the payments made in respect of that period could have been recovered. But they were not pleaded by Asteron, and Asteron did not give notice that it intended to support the High Court judgment on grounds other than those accepted by the judge.”

That reduced the amount owed to Asteron by $51,835.64. Taylor has since sold his insurance broking business. Click here to read more

In other news:

Financial Advice webinar: Economic Update by Economist Tony Alexander

Financial Advice: 2020 Conference registration

AIA: COVID-19 UPDATE


Further clarification of disclosure requirements, and more daily news

MBIE has finalised the disclosure requirements for advisers. Sharon Corbett, manager financial markets has acknowledged that this year hasn’t gone as planned but regulators still want the transition into the new regime to be a seamless one, with the disclosure requirements being designed to be user friendly and informative for clients.

“Regulators have finalised the new disclosure requirements for advisers, and MBIE says they successfully address the “legalistic” disclosure documents that clients have often received in the past by giving advisers flexibility in how and when they can provide certain information.

MBIE’s manager financial markets Sharon Corbett acknowledged that 2020 has not gone as expected, and advisers are busy making sure their clients are adjusting to any financial difficulties - however, she says that government and regulators are also keen to make the transition into the new regime as smooth as possible.

She says the new disclosure structure has also been designed for ease and simplicity, and to enable advisers to offer relevant information to clients at the right time.”

Sharon highlighted that the new requirements is a shift in approach to minimise the production of legalistic disclosures. She continued by saying that advisers will have guidance on what information to provide and when to provide it to clients.

“The new disclosure requirements are really a shift in approach from where everything is prescribed in law, and the problem with that is that it leads to really legalistic disclosures,” she explained.

“If you’re giving each client the same information just with a different box ticked, chances are it’s not going to be overly helpful. Instead, the new regulations are about telling you the kind of information you need to provide, and they give you some points in time where you should provide it. That gives you the flexibility to offer that in a way that makes the most sense for you and your clients.” Click here to read more

In other news:

Cigna: Cigna is currently reviewing applications that may be impacted by tests and examination delays

AIA: COVID-19 has no impact on existing AIA policies

FMA: Consultation - review of 16 class exemption notices expiring in 2021

RBNZ: Reserve Bank welcomes new assistant governor

FMA: FMA issues warning against The Mayhill Agency


Key findings of FSC Money and You study, and more daily news

Money and You – Literacy, Insight & Advice, the second in the three-part study commissioned by the FSC has revealed that people that receive professional advice are generally better off than those that do not. Of the 2,000 participants, those that receive advice travel more frequently, save more and invest more. The findings highlight that New Zealanders are not in a great position financially, although they believe that they are. Findings relating to insurance reveled that those that have access to professional advice have higher sum insured for life insurance, income protection insurance and critical illness insurance - but most notably in income protection.  

Ryan Bessemer, Trustees Executors CEO and Money and You sponsor said that this study was key in helping New Zealanders’ understand the importance of seeking and receiving financial advice. Click here to read more

FSC key findings

In other news:

AIA: AIA have matched customers’ AIA Real, AIA Living, and Sovereign TotalCare Max policies using the customer’s first name, last name, date of birth, and gender to ensure they receive the correct discounts to eligible policies

RBNZ: The Reserve Bank is publishing an amended Insurer Solvency Return and Guidance Note