Numbers are numbing - it is stories that get us, and our clients, to make good choices

I am not thrilled with checking on COVID-19 numbers. You have probably done this quite a bit over the last year. It is hard to believe that at this date last year was the first point at which human to human transmission was confirmed by a Chinese scientist. There would still be weeks before it became clear that this was going to be a global pandemic, and it was not until the end of March that we realised how bad, and therefore how serious the response would need to be. Things changed rapidly. Throughout that period I have checked various statistics sites, built models, talked with insurers about impacts, reinsurers, and gathered information that is relevant to the sector. I am not exactly sick of it, but the grim reality does weigh one down.

But these are merely numbers. I know, of course, that each number is a precious life lost. Even for many of the survivors there are very long-lasting effects. But the numbers never quite make it real, in some way, they overwhelm. This is a lot like using statistics to try and convince a young couple that they might need insurance. It is simply too hard to see themselves as one of those numbers. It is the emotional pull of real life that brings the issues home to me:

In March last year, my first experience of a friend with Covid-19: they flew back from the United States sitting next to someone on the plane 'who coughed a bit' - a few days after landing here, in isolation, they found they had Covid-19. That was months ago, she still has difficulty walking any significant distance. 

A distant relative, elderly, hospitalised during the first wave in the UK, caught Covid-19, and impressively, at 98, survived. My father does volunteer work collecting food for his church to distribute through their food bank. It is a great job to have in retirement. He's in his late 70s and still collects - even though it isn't safe, really, for him to do so. Three of his friends have had Covid-19 - fortunately they all survived. A friend in the church, her son who worked in Spain was critically ill - fortunately he survived. 

But so many don't live through it. You can see accounts of lots of people. Check out the BBC website. But again, more directly: last night I was on a zoom call which largely hosted people in the UK. There were 88 people on the call. Two who spoke had family members die in the last week. One woman's mother died during the week from Covid-19. One man lost his best friend 'choked to death' he said by Covid-19. Both in the last week. 

 

 


The essentials for overcoming future catastrophes, and more daily news

Diana Clement wrote a NZ Herald article on the need for being prepared in case of unexpected circumstances. Clement highlights that we need to be mentally prepared for the occurrence of personal or societal catastrophes. Clement continues by noting that getting out of debt and having savings is essential to overcome future crises. The need for budgets is highlighted by using the events surrounding COVID-19. Steve Morris, a financial adviser at SW Morris & Associates notes that we would all benefit from using digital tools such as free digital tools for personal cashflow forecasting such as PocketSmith. Insurance is highlighted as being another essential thing for New Zealanders to have in place to ensure protection. Income protection, mortgage protection, trauma/critical illness, permanent disability, business interruption, medical, and life insurance are all mentioned, with Clement saying each offers different types of cover that are useful in different circumstances. Although insurance is deemed as essential, Clement concludes by saying that no insurance policy is completely fool proof.

“My usual New Year articles are all about the positive stuff and how you can turn your year around. But after 2020, let's talk about preparedness. That includes being mentally prepared for curved balls, having savings, and taking out insurance.

Mental preparedness. Do you have a plan for the next time the world turns to custard? Unpredictable (black swan) events such as the Global Financial Crisis and now pandemic, hit us every 10 years or so. We can have personal black swan events such as divorce, or illness. Financial adviser Steve Morris of SW Morris & Associates has seen an upswing in couples separating after lockdown. This can be financially crippling. He recommends getting help from organisations such as The Parenting Place before the relationship ends up on the rocks.

Savings. Getting out of debt and building up some savings is essential if you want to ride out the next financial crisis. If you're constantly a few weeks from financial meltdown then this applies to you. It's hard, but you need to change your thinking and create a budget. People can and do turn their finances around. Use Covid-19 as the financial catalyst to get you started.

In an ideal world you need three to six months living costs (not income) squirrelled away. Providing you are still able to work and willing, most people will find a job within that period.

The best tool for this is a budget. I know it sounds boring, but it's simple to write your first budget and the outcome can be truly life-changing. I follow a number of investing and get out of debt forums and see ordinary Kiwis celebrating cutting up their last credit card or beginning an emergency fund. Don't write it off. It can happen.

Morris also recommends using the free digital tools for personal cashflow forecasting from PocketSmith.

Insurance. The whole point of insurance is to cover yourself financially when unexpected events hit. That's insurance cover for your health, income, and property.

A variety of insurances can cover your income/outgoings. They include income/mortgage protection, trauma/critical illness, permanent disability, business interruption, medical, and life insurance (which often pays out if you're diagnosed with a terminal illness. Each covers different risks and it's a good idea to seek advice from a financial adviser. Everyone is covered by ACC for accidents, but you're more likely to become disabled by illness, and only qualify for Work & Income benefits if you don't have insurance. When insuring yourself, make sure you think about the non-working or lower-earning partner, says Morris. All too often a higher-earning spouse has to reduce hours to pick up parenting duties if the other spouse becomes ill, is disabled, or dies, says Morris. Trauma cover is very good in this situation because it usually pays a lump sum, he says.

Insurance is essential in our modern world, but no insurance policy is 100 per cent foolproof. Because the things you will claim on are unexpected, they could fall outside the policy wording.” Click here to read more

In other news

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nib views on financial advice, and more daily news

nib has said that members that receive financial advice are better off. In addition, nib CEO Rob Hennin noted that half of nib’s members join via financial advisers. Hennin credited nib’s view by highlighting the findings from an internal study which found that members with advisers have more financial certainty and more health benefits. Hennin used the findings of nib’s internal study and studies commissioned by the FSC to conclude that people who receive financial advice are better off, saying that people with financial advice experience an improvement to their overall health.

“Health insurer nib says it is “absolutely clear” that customers with insurance advisers end up better off, and says advisers have done an “extraordinary” job adapting to the challenges that have come with COVID-19, and multiple lockdowns.

According to nib New Zealand CEO Rob Hennin, approximately half of the insurer’s business currently comes through its adviser channel. He says its internal studies have been clear – customers with advisers have more financial certainty, and also see increased health benefits as a result.

“It’s absolutely clear from our research and the work the Financial Services Council has done that Kiwis who receive financial advice are better off,” Hennin told Insurance Business.

Hennin acknowledged the work advisers have done saying that their response to COVID-19 was extraordinary. Hennin mentioned the increased use of digital tools and other methods to reach and assist clients.

“Advisers have just pivoted and done an extraordinary job throughout COVID-19,” Hennin added.

“They’ve really embraced digital tools and they’ve gone out, consulted with their clients and done whatever they can to ensure they all have access to the care and protection that they need.”” Click here to read more

In other news

Southern Cross: Insurer promises to “build momentum” and enhance products at AGM

AIA: Belief in oneself key to empowering women


Covid-19 Management and Vaccination Rates

How is the world doing managing COVID-19 and its effects? This time, a story in just two parts: infection rates per million of people, and progress on vaccination: 

First, infection rates per million. I think it is pretty clear that there are three groups in this chart. Those with awful records of infection control (UK, US, Netherlands, and historically, Spain and Italy) those with middling records (Canada, Germany), and lastly those with a great record: Australia, Taiwan, South Korea, and arguably best among them: New Zealand.

Then to vaccination. There are some leaders. One of the UK's weaknesses in infection control (an obsession with Brexit) is suggested as a strength in early approval and distribution of the vaccine. The National Health Service also provides a strong infrastructure for a vaccination effort - everyone has a record, there is a clear national programme for vaccination, and so on. But it is very early in the whole process - note the scale and that even leaders in vaccination are only at about 2% of the population - and even if you add the vaccinatin rate to the proportion of the population that have had Covid-19, they are a long way from herd immunity. That leaves 'room' for death rates to soar unless infection is controlled. Hence the return to lockdown in the UK. The real effect of vaccination won't be felt until over about 70% of the population has received a vaccine - including a booster shot. If you want to see who is closest to that, check out the interactive controls in the chart below. While vaccination offers hope for a way out of this mess, infection control is likely to be the more important public health measure until much later in 2021.


Seasons greetings and best wishes for the break

Card screen grab for blog v1

Our best wishes for your well-earned break

After years of using the same Christmas-themed card with a traditional tree on it, planning well ahead, we took a much more clearly southern hemisphere approach in January, using some artwork that focuses on what New Zealanders tend to do in the summer: head to the beach. At the time we did not know how particularly appropriate that shift in focus was going to be!

How has the life and health insurance sector performed for its many stakeholders?

While many will want to say good riddance to 2020, reflecting on a challenging year shows that there is an awful lot to admire in how the industry has performed: Insurers were able to reassure clients that their policies would work. They were able to offer a wide range of methods to support clients – allowing premium holidays, refunds, rate increase deferrals, and cover changes that helped people manage through the economic disruption that was a big part of the year. Claims services continued even through a tight lockdown, with insurers finding workarounds for signatures, meetings, and examinations, to help meet clients needs. That was impressive.

Like many others we were grateful for flexibility when we had to reschedule meetings, shift them online, and other aspects of our usual service had to be rapidly reconfigured for delivery in a digital-only context. We are fortunate that we can operate almost all our business functions entirely online – although we will take the credit for making decisions to have most of our IT infrastructure in leading cloud facilities. We are most proud of how the Chatswood and Quality Product Research teams performed through this period to enable continued support to our customers.

Through a period of disruption, what opportunities can be found?

The effects of COVID-19 disruption are real and likely to take some time to flow through the economy and into the financial accounts of insurers. Recent results show what we can expect from others yet to report. Economic modelling suggests the worst period for unemployment lies ahead – although so far, we have outperformed the models. There are reasons for optimism: vaccines, the power of digital to enable change, and evidence of greater flexibility and resilience than expected.

The environment will improve but relying on that alone is insufficient. Plenty of our 2021 workplan is laid out for us due to the scope of legal and regulatory change but merely responding to that will also be insufficient. Every research paper highlighting underinsurance is really underlining an opportunity for growth – those growth opportunities are ones we must build. We must build them - hoping for a mere return to what once was fails to recognise market reality and environmental change.

So, as well as meeting the requirements of the new Privacy Act 2020 that came into force on 1 December; as well as playing our part in the implementation of FSLAA on 15 March; as well as working with RBNZ on the implementation of IFRS 17 and the IPSA review; and as well as working with MBIE on new conduct law, we have to invest in the new. We have to work to bring new products to the marketplace. We have to work with the changed distribution environment – realising the long-predicted increasing business size in advised distribution. We also have to work to build better digital: there is such a great opportunity to displace some of the low-quality online insurance offers with better – an opportunity to open new frontlines against ignorance and indifference through digital advice.

Happy holidays and opening hours information

Opening times: On Tuesday the 22nd of December we will close the office at midday, and open again on the 11th of January, but you can call Russell on mobile any time. Our best wishes to you for the holidays and the New Year.

Thank you for your support, from all the team at Chatswood: Fran, Jerusalem, Kelly, Rob, Ed, Wanyi, Melissa, and Russell


Legal and regulatory review for the life and health insurance sector

17 Dec 2020 – Law Commission newsletter released, including information on the following upcoming or ongoing projects:

18 Dec 2020 – Government announced expansion of the small business loan support package related to Covid-19. https://www.beehive.govt.nz/release/small-business-support-expanded

18 Dec 2020 – Commerce Commission released a consultation on a draft cartel leniency and immunity policy, resulting from the introduction of the new criminal cartel offence coming into effect in April 2021. A seminar will be held on Wednesday 27 January 2021 at the Commission’s Auckland office to talk through the key changes to the policy and to answer any questions submitters may have. Submissions close on 10 Feb 2021. https://comcom.govt.nz/news-and-media/media-releases/2020/commission-seeks-feedback-on-draft-cartel-leniency-and-immunity-policy


Legal and regulatory review for the life and health insurance sector

15 Dec 2020 - Government has announced a package to support businesses and individuals in the event of a change in COVID-19 alert levels. The package contains a proposal for a one-off resurgence support payment which businesses can apply to Inland Revenue for, with legislation to be introduced in the New Year and details as follows:
• The one-off payment will be $1,500 plus a $400 payment per employee up to a total of 50 FTEs.
• Businesses will need to declare a drop of 30% or more in income over a 14-day period as a result of an increase from Alert Level 1 to Alert Level 2 or higher.
• They must have been in business for at least six months in order to apply.
https://taxpolicy.ird.govt.nz/news/2020/2020-12-15-resurgence-support-payment-proposed 

15 Dec 2020 – RBNZ released its post-election “briefing to the incoming Minister”, Finance Minister Hon. Grant Robertson. https://www.rbnz.govt.nz/news/2020/12/reserve-bank-focused-on-responding-to-long-term-challenges-and-opportunities


Partners Life study on effects of COVID-19 on perceived value of insurance, and more daily news

A survey conducted by Partners Life and Kantar found that regardless of COVID-19, the majority of participants didn’t see the significance of insurance. The survey results were based on the response of 900 participants aged between 18 and 54. Of those surveyed, 74% stated that their views hadn’t changed regardless of COVID-19. The survey found that the majority of those that didn’t believe they needed insurance shared this view. Participants that said that they were likely to take out insurance were more likely to be of Asian descent (40%), between the age of 24 to 35 (35%), be in the $75,000-$100,000 income bracket (35%), and male (27%). In response to the survey results Unhappily Ever After was launched to challenge the current thinking of New Zealanders.

“Despite the huge impact of the COVID-19 pandemic on daily life, a significant number of consumers reject the concept of insuring their lives, health and income.

This was revealed by a survey conducted by Partners Life and Kantar in October.

The survey polled 900 consumers in New Zealand, aged 18 to 54. It found that 74% said their feelings around insurance have not been impacted by COVID-19. This was especially pronounced among the rejecter group at 84%, while only 54% said so among those who were considering buying life insurance in the next 12 months.

Those who became more open towards insurance as a consequence of the pandemic were more likely to be male (27%); younger people of 24 to 35 (35%); people of Asian ethnicity (40%); and people in the $75,000-$100,000 income bracket (35%) – compared with a figure of 24% for overall respondents who said so.

In response to the results of this survey, Partners Life launched a new advertising campaign known as “Unhappily Ever After”, which features familiar nursery rhymes and appealing to those with young families and middle-aged individuals - the life stages where responsibilities are at their heaviest.” Click here to read more

In other news


UniMed announces new CEO, and more daily news

UniMed has announced that a new CEO will be appointed in January 2021. Louise Zacest is set to take over from Dermot Martin, who is retiring after 30 years at UniMed. Zacest has held senior roles in different industries and is the current General Manager, Strategy and Partnerships at Healthcare New Zealand. 

“He will be succeeded by Louise Zacest.

 

Zacest joins UniMed from Healthcare New Zealand, the country’s largest home and community service provider, where she has held senior executive positions, including acting Chief Executive.

 

She is currently General Manager, Strategy and Partnerships. Her previous health and insurance experience includes senior roles with Southern Cross, Tower Financial Service Group and Counties Manukau District Health Board.” Click here to read more

 

In other news:

nib: nib’s 2020 virtual Annual General Meeting (AGM) will be held at 1pm (AEDT) on 5 November 2020 - note that we have five companies that have updated financial results in our tracking set for the life and health insurance sector, which will all be updated in the company information section of the Quarterly Life and Health Sector review due on 20 December

'Advisers take note' RIAA welcome sustainable finance roadmap

Long Covid a new problem for insurers to grapple with contrast this with our view: we think it is not too much of a problem provided we keep COVID-19 at bay.