Legal and regulatory update for the life and health insurance sector

11 Dec 2020 – IRD advised that the US IRS have just issued an FATCA News & Information alert to remind NZ Financial Institutions (NZFIs) registered for FATCA that the Responsible Officer (RO) Certifications are due by 15 December 2020.

11 Dec 2020 – Further to its initial response to the Minister of Finance on 24 Nov, the Reserve Bank published a copy of its updated detailed response to the letter from the Minister on house prices and the role of the Reserve Bank. https://www.rbnz.govt.nz/news/2020/12/reserve-banks-response-to-minister-of-finance

11 Dec 2020 - ASIC releases regulatory guide on product design and distribution obligations in Australia. https://asic.gov.au/about-asic/news-centre/find-a-media-release/2020-releases/20-320mr-asic-releases-regulatory-guide-on-product-design-and-distribution-obligations/

11 Dec 2020 – FMA published “The Auditor Regulation Act (Prescribed Minimum Standards and Conditions for Licensed Auditors and Registered Audit Firms) Notice 2020.” https://www.fma.govt.nz/assets/Reports/Auditor-Regulation-Act-Notice-2020.pdf

13 Dec 2020 – Good Returns reports on a case heard before the Financial Advice Disciplinary Committee on 10 Dec 2020 on “record keeping” charges, with the Committee decision reserved and with details yet to be published on the FADC website. https://www.goodreturns.co.nz/article/976517952/adviser-appears-before-fadc-on-record-keeping-charges.html

14 Dec 2020 – FMA released guidance on financial products that incorporate non-financial factors, such as ‘green’ bonds and ‘socially responsible’ managed funds. https://www.fma.govt.nz/news-and-resources/media-releases/expectations-green-investment-products/


Legal and regulatory update for the life and health sector

10-11 Dec 2020 – Government announced it is moving ahead with plans to regulate the bank payment system to make merchant service fees on debit and credit card fees fairer and less of a burden for Kiwis and businesses. MBIE published an Issues paper: “Regulating to reduce Merchant Service Fees”, with submissions closing at 10 a.m. on 19 Feb 2021. https://www.mbie.govt.nz/have-your-say/regulating-to-reduce-merchant-service-fees/

10 Dec 2020 - The Australian government announced its intention to expand the operation of the Financial Services and Credit Panel (FSCP) within the Australian Securities and Investments Commission to encompass the functions of a single, central disciplinary body for financial advisers. The Australian government further proposed that the standard-making functions of FASEA would move to Treasury. The remaining elements of FASEA’s legislative functions, including administering the adviser examination, are proposed to be incorporated into the FSCP’s expanded mandate. Legislation implementing these reforms is intended to be introduced into the Australian Parliament in the first half of next year. https://www.fasea.gov.au/government-proposal-to-simplify-the-regulatory-framework-applying-to-financial-advisers/

10 Dec 2020 – Treasury released the Annual statement by the Trans-Tasman Council on Banking Supervision. https://www.treasury.govt.nz/publications/information-release/trans-tasman-council-banking-supervision-2020-statement-release


Legal and regulatory update for the life and health sector

28 Oct 2020 – Financial Services Council media release at the time of the AGM advised of a solid year of member growth and increased revenues. https://www.fsc.org.nz/site/fsc1/Media%20Releases/Financial%20Services%20Council%20-%20Annual%20General%20Meeting%20-%20Media%20Release.pdf

30 Oct 2020 – RBNZ signed the ‘IBOR (Inter-bank offer rates) Fallbacks Protocol’ published by the International Swaps and Derivatives Association (ISDA). https://www.rbnz.govt.nz/news/2020/10/rbnz-signs-isdas-ibor-fallbacks-protocol

30 Oct 2020 - The Commerce Commission published a statement of preliminary issues relating to an application from Aon plc seeking clearance to acquire Willis Towers Watson Public Limited Company as part of a global transaction. https://comcom.govt.nz/case-register/case-register-entries/aon-plc-and-willis-towers-watson-public-limited-company

30 Oct 2020 – AMP announced the receipt of an indicative, non-binding, conditional proposal from Ares Management Corporation, a US-based company, to acquire 100 per cent of the shares in AMP Limited by way of scheme of arrangement. http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/AMP/362281/333930.pdf


Core services focus by banks sees them exit insurance

Current economic conditions are accelerating a recent trend in banking - a focus on core services - as evidence, we offer this series of announcements:

Alongside this, traditional branch services are being cut or slimmed down. This shift to digital was given a further shove by lockdowns so the time is right to re-appraise the value of each branch in the network. In addition to that, the value of each service in the branch is being reconsidered as well. With the decision by ANZ to withdraw from offering cash foreign exchange services being announced: https://www.stuff.co.nz/business/123131192/anz-to-stop-offering-foreign-currency-citing-drop-in-demand-due-to-covid19 

Although perhaps this is not just about economic conditions, but also competitive ones. Digital disruption is coming to the world of banking. A slew of online and consumer lenders has been grabbing attention (and high valuations) on the ASX. More challengers are likely to come. This is prompting a strategic rethink by several banks. The regulatory environment is shifting as well, creating more space for the change:


Legal and regulatory update for the life and health insurance sector

25 Sept 2020 – Good Returns reports that the Australian government is set to axe responsible lending laws. https://www.goodreturns.co.nz/article/976517550/australia-to-scrap-responsible-lending-laws.html

23 Sept 2020 – IRD advised that the Public Guidance Work Programme 2020-21 has now been finalised. https://www.taxtechnical.ird.govt.nz/-/media/project/ir/tt/pdfs/consultations/work-programmes/public-rulings-work-programme-2020-2021.pdf

24 Sept 2020 – FMA released a report on its supervision activities over the past 18 months. https://www.fma.govt.nz/news-and-resources/media-releases/fma-issues-supervision-report-2020/

Commentary: 

The development in Australia where responsible lending rules are being axed is of considerable interest. In specific terms I do not know enough about the details of the Australian lending legal and regulatory framework to comment. In general terms there are some good questions to be asked about what rules are fit for purpose in an environment with very low interest rates for borrowing and with other consumer protections and processes available. I shall take a look at that development with some interest. Given the involvement of our current Minister of Commerce and his work on predatory lending practices I doubt this is going to appear on his agenda. 


Ditching the life insurance business appears to be just the start of a long process for AMP

David Chaplin of investmentnews.co.nz reports that the Just-appointed AMP Capital chief, Boe Pahari has resigned along with AMP chair, David Murray, following intense pressure over a sexual harassment incident. The scandal has also claimed AMP director, John Fraser, who resigned at the same time. More details at this link https://investmentnews.co.nz/investment-news/pahari-murray-gone-as-amp-capital-scandal-bites-back/


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. 

 


Australia: insurers responding to the post-Hayne world

Reporting in the AFR highlights the impact of Hayne on different insurance sales models. iSelect has cut staff and outsourced most administrative functions to TAL's Lifebroker. Most banks have exited, or are in the process of exiting, the insurance sector. The fact that these changes are concentrated in the no / low advice portion of the market should be of most interest to us. Similar themes have played out here, whether it was large banks selling life insurance operations (such as CBA and ANZ) or TradeMe selling Lifedirect back to Mark Solomon. Insurance assets are returning to specialist hands - those more likely to see long-term value emerging from them.