From Rob Stock: a thought provoking article on the value of advice

Rob Stock has a great piece on the value of advice. Do check out the full article at the link here, but I have also pulled out some quotes that illustrate the differentiation available within advice contexts. 

"Within 30 seconds an independent insurance adviser identified Dion Knill​ how to trim 30​ per cent off his life insurance premiums without reducing his cover."

This is a tough one - after all, advice isn't all about price, but the willingness to do a comparison tends to be a hall mark of a full service adviser, and acts as a major proof point for the client. They are impressed when advisers are happy to engage in the pros and cons of different solutions, and, as the article progresses, you can see that the discussion broadens out later on. Many banks do not give their staff the ability to produce fast comparisons - fearing that comparison invites switching. It doesn't need to, that's kind of the first use case, but overwhelmingly it is really about demonstrating that you are conversant with the market. 

Much of the savings turn out to be in the form of discounts and benefits from an additional service. I feel that proves my point about comparison. This adviser was creatively repackaging a basic life insurance contract with a wellbeing service. The client obviously got on board with that because they achieved some goals and got some extra rewards: 

"The savings came from applying a multi-policy discount, which he had not been getting, and by joining the Vitality health scheme run by AIA, which bought Sovereign from ASB's parent company in 2017 in a $4.15 billion deal, and took over its policies.

“In the last 87 days I have received about $100 in Airpoints, and 15 per cent off my insurance premiums (through the Vitality scheme), and I will keep saving money based on my fitness levels. None of this stuff has been pointed out to me over the last three or four years,” Knill said."

I can appreciate why ASB did not offer the service - many full-service advisers also choose not to offer AIA Vitality - but different advisers are welcome to package their services in different ways. That can have a big impact, especially on smaller policies, which are more common in a bancassurance context. In this case it wasn't a simple price comparison plus switch. In fact, it seems like there was probably no switch at all, but the addition of some services, and a powerful brand story about the value of full service advice.

I felt it also underlined a consequence of the place that legislators have drawn the line between no-advice and advice. Many bank services are categorised as advice within the meaning of the law, but there can still be a large difference between the advice offered by a full-service adviser and a low-service one. That's something that Cecilia Farrow talks about in her comments near the end of the article. It is a place where independent advisers can really exploit their advantages: being agile, access to a wider range of tools and services, and creating new packages of value for clients on a truly individual basis. Instead of grumbling about the advantages that the 'big end of town' have, some small advice businesses appear to revel in the joys of asymmetrical competition. 

Grateful thanks to the adviser who drew this article to my attention. 


Fidelity Life purchases Westpac Life, and more daily news

Fidelity Life has announced that they have signed a conditional agreement to purchase Westpac Life and distribute Fidelity Life products exclusively to Westpac customers for the next 15 years. NZ Super Fund: Ngāi Tahu Holdings has joined as a shareholder to help with the $400 million acquisition of Westpac Life. Fidelity Life has highlighted that they are awaiting regulatory and shareholder approvals but expect the deal to be completed by the end of the year. As part of the purchase, the Westpac Life team and 150,000 policyholders will join Fidelity Life. This will increase Fidelity Life’s in force market share from 12% to approximately 17%.

“Today we’re announcing some big news: we’ve signed a conditional agreement to buy Westpac Life and enter into a 15 year strategic alliance with Westpac to distribute our products exclusively to their retail customers.

To help fund the $400 million acquisition we’re absolutely delighted to be welcoming another large shareholder to join our cornerstone investor the NZ Super Fund: Ngāi Tahu Holdings – the investment arm of Te Rūnanga o Ngāi Tahu, one of New Zealand’s largest iwi. Ngāi Tahu Holdings are a fantastic addition to our shareholder base and further strengthen our NZ-owned credentials.

The agreement is still subject to regulator and shareholder approvals, and we expect it to be completed by the end of 2021.

A true partnership.

This new alliance with Westpac, who share our aspiration to reimagine life insurance, aligns with our plans to diversify our channel mix to help us reach even more New Zealanders.

Once the deal’s completed we’ll be welcoming the Westpac Life team and 150,000 policyholders to Fidelity Life and will boost our in force market share from 12% to nearly 17%.”

In other news

nib: nib Health Insurance Protect, Connect & Empower Seminar Series will be held in  Timaru and Dunedin

FSC: Outlook 2021/22 with Geoff Bascand

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"

Partners Life to acquire BNZ Life from NAB

Partners Life will acquire BNZ Life from NAB (ASX:NAB) for $290 million. 

Congratulations to Partners Life on the acquisition and NAB on the disposal. This continues the trend in the industry for bancassurers to be sold into specialist insurance company ownership. That process began with AIA's acquisition of Sovereign and was continued by Cigna's acquisition of OnePath Life. 

Naomi Ballantyne's comment (see the story below) on the acquisition covers the territory well highlighting aspects of Partners Life's product management that will benefit BNZ Life customers. 

A couple of useful links for more information: additional links added 17 December - the video announcement by Naomi Ballantyne, CEO, Partners Life


Australia: NAB to pay $49.5m in compensation related to credit insurance sales

Elouise Fowler writes in the AFR that NAB will have to pay compensation of $49.5 million to clients sold unsuitable credit insurance contracts.Link

Credit insurance as a brand has been devastated by conduct issues in Australia and New Zealand. Here new sales are virtually nil and the in-force book is shrinking fast. 

Are sales always inconsistent with good customer outcomes?

Of course, my personal answer is 'no'. In fact, I quite like buying things. When I meet an excellent sales-person, who helps me through the process, I am usually very happy. Equally, most people don't like the idea of very pushy salespeople, or those that use very obvious 'sales' approaches. None of us want a world in which it is okay to use power imbalance, coercion, lies and other manipulative or unfair techniques to get people to buy things. But those last things are rare, and almost unheard of in large, conservative, organisations that must maintain a good reputation over decades. They actively try to find and get rid of dangerous people and practices. I think there has been some news about that recently. 

Reading about a union organiser, complaining that banks are relying on branch and call centre employees to follow a script to sell products like KiwiSaver, insurance, mortgage top-ups, credit cards, overdrafts and personal loans, I got the feeling that the only acceptable outcome was zero sales. Click here to read more in Rob Stock's article on

Of course scripts and empathy statements are cheesy if used badly, and awful if used inappropriately. But don't kill sales because somebody needs a sticker on their monitor to remember to offer additional services. Given that most New Zealanders could do with saving a bit more, and having a bit more financial protection in case of a loss of income, I am happy to see more effective selling on those things. Even products that are not normally associated with good financial outcomes can be a force for good. A credit card or overdraft is cheaper and better than a payday lender - and I would rather it was sold responsibly by a well-regulated organisation than not. Even this misses a wider benefit to society. When there is a dynamic and competitive market-place for credit products the consumer wins. So, less sales activity means less competition and poorer products for all of us.


It’s not just banks; insurers and advice businesses need to read the latest FMA report on banking conduct

No media report I have yet seen appears to have identified that the issues and FMA requirements outlined in the report will be relevant to all financial services providers, not just the banks. That includes companies contemplating Financial Advice Provider licences, and those intending to distribute insurance on a no-advice basis too.

If you are in financial services, read the banking report, and measure your financial services business against the findings and clear requirements that the FMA and RBNZ are headlining. You might also assume that these requirements will form part of the licensing requirements for financial advice providers.

Take particular note of the following:

  • Sales incentives – clear message that either these have to be removed or bank managers are going to be required to explain how they will strengthen their control systems to sufficiently address the risks of poor conduct that arise with such incentives.
  • Contemplate the implications for other sales incentives and commission payments throughout the wider financial services industry. Note also a further report focused solely on bank sales incentives is going to be released on 15 November. I am expecting it will be similarly tough
  • Compliance assurance – if you have not already done so, measure your business against the FMA 2017 Conduct Guide
  • Need to be measuring and reporting on “lead” as well as “lag” indicators to identify and mitigate emerging risks early, rather than simply identifying things that have already gone wrong.

Quotes – emphasis added by me:

  • “Banks cannot rely on the absence of identified issues as an indicator of good conduct.”
  • “Boards must be proactive in considering what information they require to obtain assurance of good customer outcomes.”
  • “The lack of conduct requirements in the delivery of banking products (particularly those distributed without financial advice) has hampered the FMA’s regulatory oversight and the development of consistently strong governance and management of conduct risk across the industry.”
  • “More work is required to ensure banks are comfortable with the quality of conversations and advice that occur via intermediary channels, and that the incentives offered to intermediaries are aligned with good customer outcomes.”

Trauma Product: BNZ LifeCare changes, but severe heart attack definition remains limited

BNZ made a number of changes to their LifeCare products on the 1st of September. Critical conditions such as benign brain tumour, major head trauma and out of hospital cardiac arrest have been added to their Critical Condition benefit. However, the severe heart attack definition remains tough by industry standards with a requirement to meet at least three of four defining factors or alternatively have a substantially ventricular ejection fraction. A couple of exclusions have also been removed from some benefits including an exclusion for war and one for HIV. Click here to read more.

Australia: Banks and their Insurance Businesses


Updated post: 

Although I have a convention of tagging news from Australia in the headline, this post has a great deal of relevance to our market, as it accounts for the fact that insurers representing nearly half of the market are for sale. The AFR has a detailed piece which I will make a few quotes from below, but you can find at this link, on why they think that banks owning insurance companies has become a headache - hence the rush to sell them. First, the AFR says that the news CommInsure was for sale was greeted with indifference by the market because of the 'state of the industry, which has been hammered by rising lapse rates and more lately, soaring claims'.

Obviously, the situation in Australia has been quite different for a number of insurers, to the experience of the same brands in New Zealand. Sovereign is not CommInsure, Asteron Life in New Zealand contributes well to Suncorp's group profit. Overall lapse rates and claims performance differ between the countries, in part, for structural reasons. We don't have a lot of TPD in superannuation, which appears to have caused some particular problems in Australia. 

The AFR went on to list the companies sold: NAB sold to Nippon Life, Macquarie to Zurich. Then to list those for sale - they name ANZ, the life businesses of Suncorp, and quote AMP as saying it is "open-minded" - although I always felt that's the proper attitude of any business, pretty much all the time. But because these businesses are often quite closely linked behind the scenes (systems, staff, brands, reinsurance, and more). Therefore, if the Australian business is sold, it is common that the New Zealand one goes with it. Not all businesses will be sold, of course. In addition, when a business is under review sometimes a bias towards a sale can uncover an opportunity to buy. But some transactions seem likely in the coming year. If the number was two, or three, it would represent an incredible period of change. 

AFR then contemplates the question - how did it come to this? You can check out their full article for details, but two issues they list are worth contrasting with the situation in New Zealand.

The first is the ASIC report that "found 37 per cent of advice on life insurance was in breach of the law and almost half failed when high upfront commissions were charged". I read that report and it has some problems, small sample sizes, and arguable definitions of what constitutes 'failing' advice. But here in New Zealand we have an advice law which barely even makes the comparison possible. Since a written record of advice is not explicitly required under our current law it may not be possible to conduct the same kind of investigation here. But the FMA has gamely tried, and by analysing five years of data they have found a strong statistical link between incentive travel offered by insurers and higher new business and lapse rates. The insurer's might say, 'well that's what we were hoping for when we offered the incentive' but that brings us back to the quality of advice.

The second is the issue of poor systems - some so poor, AFR says, that they cannot provide good information, or hamper the ability of the insurer to report, or provide effective claims service. That sounds familiar too - and some of the systems will be common across the two markets. Replacing those systems requires new capital. So even after a transaction, that will not be the end to the change in the market. It will be the beginning.