nib Putting Health into Life seminar, and more daily news

nib will be holding seminar series, Putting Health into Life and Work from July 28 to August 14. The seminars will include different speakers that will touch on different healthy living points. As part of the series group insurance as well as the benefits in the current climate will be discussed.

"Our speakers will explain the powerful reasons you can share with your clients around why health comes first and where it fits in the advice process. 

Our Group Sales team will also join our speaker panel to explain why group health is even more relevant as an employee benefit and equip you to access this market with confidence in a post COVID-19 lockdown world."

Different topics relating to health in life and work will be explored in the seminars. Topics include:

"Putting Health into Life

  • Health insurance and the public health services
  • How health insurance meets client’s needs and expectation at various life stages, while complementing other living insurances
  • Understanding life circumstances and expectations
  • Assessing value through premiums and claims

Putting Health into Work

  • Why health insurance is important to employers and their employees
  • How group health can accelerate your business growth
  • nib’s group health value proposition: putting the wellbeing of employees first
  • Supporting you to access this market with confidence"

Click here to register

In other news:

Expert says financial advice is key to emerging from a downturn

FMA:CONSULTATION: Review of 16 class exemption notices expiring in 2021

What I'm seeing at the moment - Philip Macalister's Blog

 

 


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.


Making a living will

Insurance is, of course, about planning for a future event before it happens. For life insurance, it is often described as a fundamentally altruistic purchase: you buy it to benefit someone else. Of course, the holder does enjoy a benefit, which is peace of mind. The planning helps us to relax a bit about the future, a future we know is coming for us: one day our life will end. Making a living will is also a kind of plan. A way to say some of the more difficult things, or put in focus some of the things you would most like to be remembered for. At this link you will find a beautiful article about a living will and what it meant to the family. https://www.huffpost.com/entry/ethical-will-legacy-letter-why-you-want-one_n_5eeb7a09c5b6c8594c7f2d03 About a ten minute read and well worth it. 


Financial Advice weigh in on disclosure regulations, and more daily news

Financial Advice New Zealand have voiced their approval of the new disclosure regulations that were announced by MBIE on 25 June 2020. Katrina Shanks has said that new regulations mirror what Financial Advice outlined in their CoFI submission.

“Financial Advice NZ chief executive Katrina Shanks said the new rules had picked up many of the points made in the association's submission.

“The focus of the sector during this process was to ensure the right balance between good consumer outcomes and a financial advice sector which isn’t encumbered by unreasonable red tape and adverse outcomes.

“We support regulations around disclosure made to clients – including on conflicts of interest, commissions and other incentives and disciplinary issues.”

The need for disclosure being limited to adviser fees, the products they offer advice on, their conflicts of interest, commission they receive, and how clients can contact dispute resolution services is something Financial Advice is please about.

““However, we are pleased to see a change from the draft disclosure requirements that now only requires disclosure of these matters when they would likely materially influence a client’s decision. This is something we strongly recommended in our submission to ensure disclosures were meaningful and not overwhelming for consumers.

“We were concerned the draft regulations required disclosure of product fees charged by unrelated third parties (e.g. insurance premiums) so the removal of the requirement to disclose fees for ‘acting on the advice’ was a sensible move."” Click here to read more

In other news:

FSC: FSC 2020 Awards - Nominations Open

FMA: FMA takes CLSAP NZ to court over alleged anti-laundering breaches

Westpac: Westpac to launch carbon footprint tracker

BNZ: BNZ launches banking support for domestic, economic abuse survivors


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


Market movements: what changes the size of the market for insurance?

The market for insurance is affected by three main factors: 

  • The size of the eligible population 
  • Their need for insurance
  • Their ability to pay for it

Rob Dowler, our preferred compliance consultant for large projects, suggested that I expand on the role that immigration plays in the growth in our market and whether that places constraints on whether people can buy insurance. 

Some additional information about how the size of the eligible population changes can help to put this into the right context. Showing data from 2018 to illustrate how a more 'normal' year works, accepting that 2020 is far from normal and there has been a sharp rise in both long-term departures and long-term arrivals, and a sharp decline in short-term departures and arrivals.

New working age residents added about 44,000 people, plus there were about 62,000 children who reached working age. This addition of just over 100,000 was somewhat off-set by 44,000 people who reached retirement age and about 8,000 people who died during working life. These movements exclude those people on student or short-term working visas. Although a number of students eventually become permanent residents, they are only counted when they achieve that status. 

We have tended to assume that demand for insurance is constant on a per person basis. Of course, it isn't. Usually debt increases the demand for cover, but not all debt is equal. Household debt is usually insured, consumer credit debt often isn't - so as home ownership rates have dropped due to the high cost of housing, there has been some hit to demand. But this is a very small reduction in demand compared to the size of the underinsurance gap - which we estimate to be about a million people who are in-work. 

The ability to pay for cover receives only modest attention, usually as we consider the cost of cover relative to age. It will receive additional attention as the economic crisis associated with the COVID-19 pandemic plays out in New Zealand. Unemployment is forecast to rise from a little over 4% to about 10% under even the best case scenario. We can expect to see a reduction in average household income for the current quarter and very slow real wage increases in the next couple of years. Limiting the ability of New Zealander's to pay for cover will cause an increase in lapse rates. The interaction of the high cost of housing and lower wage growth will constrain a proportion of budgets. 

 


AMP sale gets the green light, and more daily news

After spending the past 18 months reviewing the sale proposal, the Reserve Bank announced that they have approved the sale of AMP Life to Resolution Life. Customers with existing policies with AMP Life will be unaffected by the transaction.

“The Reserve Bank has approved the proposed sale of AMP Life to Resolution Life, in a revised arrangement that is subject to a number of conditions imposed to protect policyholders.

The Reserve Bank has been reviewing the proposed transaction and consulting with the parties involved over the past 18 months to ensure the deal met our requirements, Deputy Governor and General Manager for Financial Stability Geoff Bascand says.”

For the sale to go ahead a Trust was established. This is to ensure objectives are met, industry dynamics are positive and that there is insolvency protection. Additionally, the Trust is set to ensure localisation. Capital and assets will be held in New Zealand and Resolution Life New Zealand (RLNZ) will be established.

“A bespoke trust model has been established that ensures supervisory objectives are better met, future industry dynamics are generally more positive, and there is additional protection in the event of insolvency - one of the key risk considerations that we have been seeking to mitigate,” Mr Bascand says.

The Trust is required to hold capital and assets in New Zealand that help provide long-term security for policyholder benefits or investments, where relevant. The Trust will be under the management and scrutiny of relevant officers in New Zealand, who have appropriate influence and authority in respect of the New Zealand operations, for the purpose of securing equity across all policyholders.

In addition, the model will see the establishment of a new, locally incorporated insurer Resolution Life New Zealand (RLNZ). The RLNZ board will have a majority of New Zealand resident, independent directors. RLNZ will act as Trustee to the Trust and will effectively manage the assets held in the Trust.”

In other news:

Kepa: Four Adviser Resource Centre Services were available to Kepa Members for free July – September

FSC Connect webinar - Customers, complaints and claims - what have we learnt from COVID-19?

FSC webinar: Compliance with Financial Advisers Act between now and March 31 2020

FSC webinar: Preparing contracts with authorised bodies, advisers, contractors and other staff or suppliers


Cancer diagnosis concerns

About a five minute read, this article covering concerns about catching up on delayed cancer diagnosis caused by the lock-down is well worth the read. I expect that we will not know the full impact (or which of the views in the article is more correct) for some time - possibly years. It is worth considering that the options were grim - without a strong response to COVID-19 then many people with cancer, who are immune compromised, would have died from COVID-19. The choice made may well have been the best possible choice, which still doesn't make it any easier for people concerned about the impact on their cancer prognosis of a delayed diagnosis. 


Lack of market maturity insulates insurers in the COVID-19 crisis

The the market for insurance has grown significantly in recent years. Chatswood defines the market as people with both the money, need, and health sufficient to buy insurance coverage. A rough proxy for this is the number of people in work between the ages of 16 and 65. Analysing the 2018 to 2019 year we found that when allowing for people entering and leaving the market the number of eligible people had grown by over 50,000 (up 1.4%) and GDP per capita had grown by 1.3%. This reflects the situation applicable for most of the last five years – a net increase in eligible people of around 50,000 per year. Giving us a number of about 2.6m people employed in June last year. That will take a big hit this year, but we also estimate that there are about a million people who have no cover, and probably about another million (based on Massey University research and other industry sources) who have less cover than they need. That presents us with a big cushion: as the size of the unmet opportunity is large compared to the size of the expected unemployment and income hit to come in the year. In effect, underinsurance, an industry weakness, dilutes the effect of the economic impact on the sector, provided we are prepared to see it as an opportunity, not as a fixed and immovable problem. 


Age and population standardised mortality data for 2020 compared to 2019

Following the article by Farah Hancock we had our new data specialist Ed Foster take a look at mortality data. They standardised the mortality rate per capita and also for age and gender demographics. By those calculations New Zealand experienced 116 fewer deaths than would be expected. Within the context of a year in which we would normally see about 30,000 deaths, this is a very small number. But what it show is a continuing absence of excess mortality seen in other markets.

Cause of death is not officially released until 6 months after the event, but we do know for sure that there have been fewer road and work related deaths - this may go some way in explaining the gap. Also, we know that rates of 'flu and 'flu-like illnesses have dropped due to the recent lock-down - and these cause some deaths too, and that number will be much lower. There is still plenty of bad news to wash through the economic system, and hit people's lives: as headlines about redundancies show. There are also the consequences of deferred treatment to examine. We shall be reporting on this in more detail in each of the next two or three quarterly life and health sector reports, as there is still more to be learned. 

We are happy to share data tables if you would like to take a look.