Aon to offer clients free wills, and more daily news

Aon has partnered with Footprint to offer current and new clients with corporate life insurance policies the option to have their wills drawn up free of cost. This partnership is designed to save clients estate admin fees and increase the number of full-time employees with wills in New Zealand.

“Aon is the first company in the sector to provide and cover the cost of Wills to all existing and new clients with a corporate life insurance policy through employee benefits – and already, several group insurers are engaged, with more to come. This industry-first move will see Aon provide security and education for all aspects of life insurance and end of life planning, saving people on average $5,000 in estate administration fees in instances where a life insurance policy has no Will attached to it.

Footprint chief executive Angela Vale says, “The data tells us New Zealanders are consistently under-Willed, especially in certain age groups. Only 37% of full-time employed people in New Zealand have a valid Will."”

Anson Davies, Aon Life general manager has said that the insurer has worked to understand what clients are looking for, while Geoff Blampied, Aon CEO stated that the industry has responded positively. Geoff continued by saying that the initiative could potentially reach 70,000 policyholders in the first phase.

“Aon Life general manager Anson Davies says, “We have done extensive due diligence to ascertain what our clients are looking for and what their employees value, and we are pleased to be launching this offer through our partnership with Footprint and in collaboration with key partners in the insurance industry”.

 

This is further supported by Aon NZ chief executive Geoff Blampied who says, “We are excited that the industry is responding positively to the initiative, which has the potential to reach around 70,000 Kiwi policyholders in the first phase.” Click here to read

In other news:

Asteron Life: Covid-19 support extended until 31 October 2020 for customers facing financial hardship

Asteron Life: MedScreen is currently not operating in Auckland while visits outside of Auckland will continue 

Nib: nib member support package has been extended to the end of September.

Financial Advice: Update on the Privacy Act webinar

What does ‘treat fairly’ mean in new conduct law?

 

 


Compliance Assurance – How to obtain it in relation to third parties?

As previously blogged, on 5 August 2020, the Commerce Commission released two reviews into an October 2019 security incident arising from the theft of computer equipment belonging to one of the Commission’s external providers in a burglary. The equipment contained a range of documents relating to the Commission’s work including confidential information provided to the Commission by businesses and individuals.

More details can be found at https://comcom.govt.nz/about-us/strategic-planning-and-accountability-reporting/security-incident-october-2019

A common contractual term relating to confidentiality between two parties might state that they will both, “take all steps practically possible to prevent any unauthorised use or disclosure of any Confidential Information.” 

The question then arises as to how each entity can obtain ongoing assurance that the other is acting in compliance with this agreement.

With the Financial Markets (Conduct of Institutions) Amendment Bill progressing through Parliament, this question can be extended to consider how banks, insurers and non-bank deposit takers will be able to obtain the required ongoing assurance that their respective intermediaries are fulfilling the conduct obligations being imposed by this proposed legislation.


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.


New financial advice regime start date set, disclosure regulations resources, and more daily news

After being delayed because of COVID-19, MBIE have announced that the new financial advice regime will begin on 15 March 2021. In addition to the new date being set, the Government has set new disclosure requirements as part of the Financial Services Legislation Amendment Act to ensure that customers have the ability to make more informed decisions. Advisers will be required to disclose their services and other relevant information. This will allow potential clients to decide if the service on offer is right for them.

“The new disclosure requirements will require businesses and individuals who give financial advice to disclose important information about their services to their clients.

“The disclosure requirements are set in regulations under the Financial Services Legislation Amendment Act, which introduces a new regulatory regime for financial advice,” said Sharon Corbett, manager financial markets at the Ministry of Business, Innovation and Employment.”

On disclosure, the details confirm that as expected a progressive disclosure regime is being put in place, much along the lines suggested by the consultation. We think that is good - it makes sense, and it allows the right level of information for each stage of the sales process. It will not please everyone, some prefer the certainty of fixed requirements that are all dealt with at a specific point in time, especially if they have a very simple (and short) advice process.

UPDATE: because I was asked: yes, dollar disclosure of commission payments is required. A range might be disclosed at one point and a specific figure disclosed when known. 

More important, perhaps, is the start date for the new regime. I cannot underline enough how important compliance assurance is as you come up to this date. There are some simple steps you can take to get yourself to a point of comfort. 

  1. Refer to a detailed list of all the reference standards required to achieve compliance - call or write to ask me for such a list if you need one.
  2. Conduct a gap analysis against the full range of requirements.
  3. Start at the top - ensure your governance structures are in place, this is the engine that drives all effective compliance practice
  4. Fill in the processes required against the gaps identified, reporting into your governance process on a regular basis

Much of the commentary does not link directly to the documents, so here is a good digest of links for you: 

The MBIE media release: https://www.mbie.govt.nz/about/news/disclosure-requirements-and-commencement-date-set-for-new-financial-advice-regime/

The disclosure requirements page on MBIE's website: https://www.mbie.govt.nz/business-and-employment/business/financial-markets-regulation/regulation-of-financial-advice/regulations-to-support-the-financial-services-legislation-amendment-act/disclosure-requirements/

The overview of the disclosure regulations: https://www.mbie.govt.nz/dmsdocument/11508-regulations-setting-out-disclosure-requirements-in-the-new-financial-advice-regime-overview

The FMA's media release on the start date for the new regime: https://www.fma.govt.nz/news-and-resources/media-releases/fma-welcomes-start-date-of-new-financial-advice-regime/

The regulations in full: http://www.legislation.govt.nz/regulation/public/2020/0132/latest/whole.html#LMS177125

 

In other news:

Fidelity Life: New Learning Management System for product accreditation and eLearning to be launched soon, Fidelity Life: New Sharecare challenges will begin 1 July 2020

Fidelity Life: Golden Life Plan will be no longer be offered to new applicants from 1 July 2020

Financial Advice NZ: Bring in the Experts: Disclosure Requirements with MBIE

Mixed response to full licensing details


Daily news update: overview of main points from CoFI select committee hearing, and more stories

Insurance and industry associations representatives shared their views on CoFI during the select committee hearing held on 10 June 2020. Participants included, Cigna head of legal Michael Burrowes, AIA general counsel Kristy Redfern, Financial Advice New Zealand CEO Katrina Shanks, Partners Life chief legal, risk and conduct officer Rebecca Sellers, industry expert David Whyte and Anna Black Fidelity Life chief risk officer.

Michael Burrowes head of legal said that the bill was a good idea but was rushed and complex. Michael and AIA general counsel Kristy Redfern both suggested that the bill be delayed. Kristy highlighted that unlike Australia, New Zealand had time to get the bill right. She also warned that the reform was affecting the mental wellbeing of advisers, which could lead to New Zealanders becoming even more underinsured.

“Michael Burrowes, head of legal at Cigna, said the bill was a good idea but there had been a lack of consultation with the industry for what would be a substantial and important regime. The result was rushed, complex and lacked the appropriate clarity and detail.

He and AIA general counsel Kristy Redfern called for the bill to be delayed until FSLAA had bedded in.”

“Redfern said changes to commission rules in Australia had affected the availability of advice and given that New Zealand was underinsured already, that outcome should be avoided. She said the threat of significant reform was affecting advisers’ mental wellbeing. “It’s more important than ever that any additional regulation is fit for purpose and doesn’t create unintended consequences and anxiety.”

She said, because there was no evidence of widespread misbehaviour New Zealand had time to get the bill right.”

Katrina Shanks shared Financial Advice’s concerns as well as saying that it was hard to understand the implications of CoFI as a lot was left to regulations. Katrina also highlighted that that unlike other sectors, the power to prohibit incentives was very strong. Similarly, David Whyte said that it was unclear if advisers were caught by providers’ fair conduct programmes.

“Shanks said Financial Advice NZ had six main concerns: the bill’s power to regulate sales incentives, no definition of “fair”, confusion over whether financial advisers are included in fair conduct programmes, the definition of intermediary, the claims process, and the timing of the bill’s enactment.”

“David Whyte, speaking on behalf of a group of sector participants including Financial Advice New Zealand, the TripleA Advisers Association and Wealthpoint, said the drafting was confusing because it was not clear whether financial advisers were caught by providers’ fair conduct programmes.”

Rebecca Sellers, chief legal, risk and conduct officer at Partners Life highlighted that incentives played an important part in the livelihoods of many advisers. While Anna Black Fidelity Life chief risk officer said that the outcome of CoFI needs to increase customer trust and ensure sustainability

“Partners Life chief legal, risk and conduct officer Rebecca Sellers said incentives played an important part in the livelihoods of many businesses and were a matter of substantive policy that should not be delegated to regulation – though committee member and Labour MP Duncan Webb asked AIA how the rules could be kept up-to-date with a changing industry if they were not in the regulations.”

“Anna Black, chief risk officer at Fidelity Life, said the outcome of the bill needed to increase customer trust and ensure sustainability of the industry over the long term. “Pausing is appropriate.”” Click here to read more

In other news:

Commerce Commission: The Commerce Commission:  announced that it has finalised the criteria it will use to assess whether a lender is “fit and proper” under the Credit Contracts and Consumer Finance Act

Partners Life: Partners Life sponsored the filming for Fight For Time, a story of the Pink Dragons

FSC: FSC 2020 Awards will be held at the FSC Generations Conference Gala Dinner

FSC: Generations Conference earlybird tickets now available

FSC webinar: Introduction to Generations webinar

FSC: FSC’s partner Voices of Hope will be the charity partner for the 2020 Conference


Daily news update: CoFI submitters areas of concern, and more stories

There have been many submissions on the topic of CoFI. AIA, Cigna, Fidelity Life, Partners Life and AMP have shared their views in regard to the implications CoFI will have on advisers, commission as well as the scope of COFI and the time needed.

Fidelity has stated their concern for potential adviser issues and customer confusion relating to advisers having to comply with different fair conduct programmes. Gail Costa, CEO of Cigna, has said that because of CoFI, advisers could end up preferring one provider's conduct programmes to simplify their compliance obligations, causing a conflict of interest. Partners Life have said that advisers should not be caught by the bill at all. While AIA have said that advisers that were not licensed under FSLAA should be the only ones affected by CoFI.

“While submitters voiced support for the overall intention of the bill, all raised concerns about how it has been drafted.

Significant concern related to how advisers will be dealt with under the bill. There is a carve-out for financial advice providers, but not necessarily for individual advisers, in its current form.

That could mean all advisers had to show compliance with the financial advice providers’ conduct programme, as well as meeting their own obligations under FSLAA.”

When discussing commission, Fidelity said that CoFI could create uncertainty and affect participants’ ability to plan for the future. Nick Stanhope has said that change in commission, will create very high levels of regulatory risk.

“Submitters were concerned that the bill left open the option of regulators introducing new rules for commission structures, without any legislation change being required.”

Another area or concern was the scope of CoFI. AMP stated that they were concerned that being considered a financial institution would increase costs. And Partners Life has said that there is a risk that CoFI is going to create an uneven playing field. KiwiSaver customers would have protection through the bill if they were with a bank but not through a fund manager.

“Many submitters were worried about the scope of the new bill. Some said it was too broad – AMP Wealth Management New Zealand said it was concerned about being included as a financial institution – the cost of licensing would affect its ability to keep costs down. The Securities Industry Association said it seemed that NZX trading, and advising market participants, had been inadvertently captured as intermediaries.

But Partners Life said there was a risk it would create an uneven playing field – a customer would have protection through the bill if they were in KiwiSaver through a bank but not through a fund manager.”

The last area that has created mass concern is time. Nick Stanhope has said that FSLAA should be given enough time to be implemented before more regulations are introduced. David Ireland, partner at Dentons Kensington Swan has also expressed his concern saying that CoFI hasn’t gone through the same level of consultation as other significant regulatory changes.

““No consultation draft was released for public feedback, with no opportunity to debate the outcome of the one round of consultation on the issues paper released last year. The outcome is a bill that provides a framework for a new regime, but with many of the details not fully formed and with many uncertainties as to scope and practical application.

“Conduct licensing is complex. A new regime as significant as this one ought not to be rushed through.”” Click here to read more

In other news:

FSC set to host Reserve Bank on CEO Roundtable 11 June 2020

FSC to make oral submission to the Finance and Expenditure CoFI 10 June 2020

FSC: Big Trends in Tech, Innovations and Investing Webinar to be held 9 June 2020

FSC: Get In Shape Advice Session 2 webinar with Karty Mayne and David Greenslade to be held 12 June 2020

BNZ: OMNIMax and BNZ work together to help BNZ customers get the most out of KiwiSaver


How to participate in the select committee proceedings on COFI

There have been a number of changes made to the way select committees are conducted. The changes are as follows. To comply with Alert Level 2 restrictions, public attendance of committee hearings will not be permitted. Those that wish to make submissions will need to do so via video or telephone. This applies to witnesses as well. If a member of the public wishes to be physically present, they must first seek approval from the Speaker of the House. Hearings that would have been normally been opened to the public can be views on the Parliament website and committee Facebook pages. Those that attend the select committees will need to practice social distancing. Some committees meetings can be held remotely.

Select committees Open to the public:

10 June 2020

9:00am - 11:00am: Inquiry into the operation of the COVID-19 Public Health Response Act 2020

11:20am - 11:50am: 2020/21 Estimates for Vote Pike River Re-entry

1:00pm - 5:00pm: Financial Markets (Conduct of Institutions) Amendment Bill

9:00am -TBC: Local Government (Rating Whenua Māori) Bill

Click here to find out more

Watching committee meetings: 

Open for submission:

Inquiry into the operation of the COVID-19 Public Health Response Act 2020

Overseas Investment Amendment Bill (No 3)

Select-committee-c19.E0SPFA


From 1 February, OnePath becomes Cigna

Cigna formally absorbs OnePath from 1 February. Quoting from an email sent to advisers recently they announced: 

"We’re pleased to let you know that we have received approval from the Reserve Bank of New Zealand, and on 31 January 2020 the OnePath business will be transferred to Cigna. This means the two businesses will begin operating as one – Cigna"

Congratulations to Cigna on the successful completion of the merger. Adviser familiar with other mergers will be able to appreciate how quickly, and in many respects smoothly, this has gone. Also announced under the same email are changes to the agency agreements. These, like AIA's recent changes, introduce new obligations for both advisers and Cigna. These relate to the expected requirements under the Conduct of Financial Institutions Bill. Although these requirements will probably undergo some change, the transfer of all OnePath business to Cigna means that a new agreement was required.


UPDATED - CoFI introduced to Parliament

The daily progress report for parliament yesterday shows the introduction into Parliament today of the Financial Markets (Conduct of Institutions) Amendment Bill.

https://www.parliament.nz/en/pb/daily-progress-in-the-house/daily-progress-for-wednesday-11-december-2019/

The draft bill can be found on the legislation.govt.nz site - or you can just download your copy at this link. Download Financial Markets Conduct of Institutions Amendment Bill

David Chaplin has his brief take on it all at this link: https://investmentnews.co.nz/investment-news/fair-cop-government-sneaks-in-conduct-bill-before-year-end/ 


New exclusions: cancellation due to sanctions

A new type of exclusion has appeared. The average policyholder has nothing to worry about. Perhaps it would be more accurate to say - only the most extraordinary policyholders have any concerns, and if they did, we should probably have concerns about them.  That's because the new exclusion is to remind people that if they - or a related party - are subject to sanctions from a range of western economies or the United Nations, then the policy may be cancelled. Here is the section from AIA's policy document: 

Cancellation due to Sanctions
We shall not provide cover for any risk and/or activity and shall not be liable to pay any claim or pay any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would be in respect of a person who is the subject of any sanction, prohibition or restriction under United Nations resolutions or trade or economic sanctions, laws or regulations of New Zealand, the European Union, United Kingdom or United States of America, or any of its states and/or any other applicable economic or trade sanction laws or regulations.
This provision applies without limitation not only to the policy owner or holder, but to the life assured and any assignee, other third party, related party or beneficiary of the policy.
Should we determine that the above is applicable, we may at our sole discretion terminate the policy with immediate effect.

This should probably be seen in the context of the conduct conversation. If you have been following the concerns about Westpac Bank in Australia raised by the AUSTRAC, the regulator responsible for enforcement of the equivalent of our AML-CFT laws you will see that context is no longer purely local. Regulators expect companies to have oversight mechanisms in place, and tools to manage actions that the regulator may require. That's what AIA's new cancellation mechanism is about. Hopefully it may never get used, but a prudent approach is to have the tools available just in case.