Zombie fee focus by regulators and more daily news

Investment News NZ highlights the issue of 'zombie fees' in its recent piece on ASIC's legal action against five AMP entities in Australia. "Zombie fees" are fees which carry on being charged even if no service is being given, sometimes even if the client has died. Of course, if an investment management service is continuing then some level of fee should continue but it is hard to argue advice is being given if the client is dead. In a sector which usually knows the age of its clients and offers products explicitly focused on end-of-life issues we are being challenged to be more active in identifying when a client dies, which is a matter of public record, rather than simply continuing to take the money. 

In a release, the Australian Securities and Investments Commission (ASIC) says the legal action alleges five AMP entities “were involved in charging life insurance premiums and advice fees to more than 2,000 customers despite being notified of their death”.

Last year AMP paid out about A$9 million in a remediation program established to redress fees charged to close to 20,000 dead insurance and superannuation fund clients.

But the latest ASIC action comes in “respect of 2,069 deceased members affected by the retention of premiums, and 27 members affected by the retention of advice fees”.

Does this affect New Zealand? Not directly, in the Investment News NZ column it is clear that NZ entities are not part of the recent news. However, it is clearly unacceptable to continue to charge premiums and or advice fees long after a person is dead in either jurisdiction. We can expect that when conduct law passes here, a conduct program will need to envisage how to identify if a person has died and how to treat products while and end-of-life process is followed. Advisers, largely exempt from the conduct programs, will inevitably be caught by either their obligations under the Financial Advice Provider license, Code, or commitments to product providers. 

You can read more at this link: https://investmentnews.co.nz/investment-news/zombie-fee-charges-rattle-amp/ 

Other daily news: 

Kōura is calling for advisers that want to offer a 'facilitated' digital advice process. This underlines the trend towards convergence of digital and human in contrast to the binary view of development in the past. 

Pinnacle Life shares details of how a change in income may affect the need for life insurance. 

Adviser business values - those that are low and those that are high - are the subject of my recent piece at goodreturns. 

Seth Godin shares with us how not to miss a deadline - and how to - in two interesting and challenging posts: https://seths.blog/2021/05/how-not-to-miss-a-deadline/

 


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"


Pinnacle Life offers self-servicing life insurance tool, and more daily news

Pinnacle Life has announced the introduction of a tool that allows people to understand how much life insurance cover they really needed. The tool is designed to identify important people in a user’s life and the user’s worry as well as the household income of the user. Once all details are provided, Pinnacle Life provides figures on the amount people with similar incomes spend in a month on insurance cover. Based on the user’s worry, Pinnacle Life also provides information on the types of cover and amount. Although the information is not personalised advice, there are "get more advice" and "get covered now" features available.

“Up until now, if you knew you needed life insurance, you could use some simple calculators that considered your financial needs, or you could talk to an insurance adviser. Pinnacle Life has always offered life insurance directly, but we couldn’t help you work out how much you needed in a thorough and sophisticated, and regulated, way. Now we can.

The tool starts by asking you to think about who’s important to you, and who relies on you for financial support. It then takes you through a step-by-step process of working out what your drivers are for getting insurance, what you worry about and your financial circumstances. We give you some things to think about along the way, but the more you tell us about you, the more we can tailor the advice to your situation. This includes telling us about your family, your health, your finances and any life cover you have already.

The cool thing is it doesn’t take very long to go through the whole process, and you can do it as many times as you like. To make it even easier (and quicker) get any details about your finances ready before you start – things like how much you earn and the amount of assets or debt you might have. You can do it on the couch in front of the tv and wearing your pajamas if you like, at 3 in the morning when you can’t sleep, on your own or with your partner, it’s up to you.” Click here to read more

In other news

nib: nib Adviser Oversight Framework launched

Compliance Refinery: 2021 Predictions survey to celebrate Compliance Refinery turning three


Themes for 2021 in life and health insurance

What will be the big themes for 2021 for life and health insurance? 

  • Helping people keep their cover through disruption will continue to be a theme - although economic performance has been better than expected there remain quite a few people out there struggling with adjustment to the COVID economy. Several advisers tell me of long conversations that are essentially about conservation. They take time and they generate little revenue - this largely unsung work is of a piece with claims help and is part of the value of the commission model: the adviser isn't expecting to charge a fee for these discussions, they just want to help the client stay covered. 
  • The shift towards digital - within advice businesses, at insurers, and for consumers. Digital is an enabler of faster transactions, more efficient administration, better accuracy, and more meaningful engagement. More adviser businesses will develop better digital capability and be looking for ways to automate certain processes. That includes digital advice offerings. It also means better underwriting processes built around access to 
  • Direct - it has shown solid growth - and not merely as a proportion of the market which has shrunk, but in absolute terms. It has benefitted from a big drop in bancassurance and a big push through online social media platforms. I really want to see the quality of the offers improved in 2021, but that will probably require more work in the area above to achieve. 
  • Regtech - this is the year we begin to see regtech applied to insurer and adviser conduct programmes - analysis of all clients by a range of factors will be a vital complement to human-managed compliance processes.
  • Transition - to the new advice regime means that a lot of advisers will be spending a bit more time than usual working on systems, new processes, and disclosure requirements. That will hit productivity for a few weeks. Combined with holidays, will the nadir be the first quarter production figures with a recovery from there, or will the second quarter be the low point? I am expecting recovery and more confidence to recruit and focus on marketing to be able to get traction in at least the third quarter. 
  • Consolidation - adviser business size is definitely rising. The greater integration and co-ordination required to successfully meet new compliance requirements is reflected in the high number of authorised body structures being disclosed by FMA licensing statistics. 
  • Consumer knowledge and understanding will continue to rise as more advisers share relevant content in easily digestible digital media. Gradually the focus on what is most relevant and readily explainable will begin to percolate through consumer finance forums changing the general perception of 'good' this will further current consumer trends towards more living products and more packages of benefits. 

 

 


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


Southern Cross mental health programme, and more daily news

Southern Cross has reported that there is an increase in demand for a mental health programme targeted at school aged children. The Pause Breathe Smile programme became available for free in September to all New Zealand primary and intermediate schools. There has been increased demand for the programme since.  Southern Cross partnered with Pause Breathe Smile Trust and the Mental Health Foundation to fund the programme. Southern Cross spokesperson Joanne Mahon has said that Southern Cross is happy with the increased demand for the programme from schools and parents and is equally happy to be making a difference in the lives of children.

“Demand for a programme aimed at equipping school children with tools to navigate life’s ups and downs has more than doubled in the past three months.

Interest in Pause Breathe Smile with Southern Cross has increased significantly since September, when the programme was made available without cost for the first time to any primary or intermediate school in New Zealand.

First launched in 2013, the Pause Breathe Smile programme had already reached 65,000 kids before teaming up with Southern Cross.

New Zealand’s leading independent health and wellness provider, Southern Cross has joined forces with the Pause Breathe Smile Trust and the Mental Health Foundation to fund the programme.

Spokesperson Joanne Mahon said Southern Cross was delighted by the level of interest from teachers, schools and parents in New Zealand’s own locally designed and internationally recognised schools’ mindfulness programme.

“This increase in demand since the costs associated with participating in the programme were removed shows us there is huge appetite for a structured programme like this for schools.

“We wanted to support a programme that directly benefited our children and the fantastic uptake means we can start to make a real impact on the mind health of our kids.

 “We’re thrilled to be able to make a tangible difference for Kiwi kids as part of our commitment to helping to build a healthier future for all New Zealanders.”

Grant Rix, Director of Mindfulness Training and Development, has said Pause Breathe Smile is scaling up the team and the programme because of the anticipated and actual surge in demand.

“The Director of Mindfulness Training and Development for Pause Breathe Smile, Grant Rix, said that with financial barriers to schools participating in the programme now a thing of the past, the programme had been scaled up to meet demand.

“The last three months have been a game changer for us. If all the schools that have contacted us since September go ahead with bookings, we will double the number of schools we have reached in the past two and a half years before we teamed up with Southern Cross.

“We knew demand was likely to be high but it’s always difficult to gauge. Now we are building the team to scale up to meet this increased demand, which is a wonderful position to be in.”

In other news

From Insurance Business Mag: Insurance players should embrace a ‘hybrid’ digital model - expert


Who uses digital advice?

Perhaps you think it’s the young, but the young may not have the confidence to use a robo adviser, while an older person who has some experience may now feel competent enough to talk with the robot. Confidence counts - a caution not to design for the wrong audience. This example offers some insights along those lines - although it is about robo advice for investing, which also has the complicating factor that few young people have sufficient assets to make it work. 

Link: https://www.financial-planning.com/news/who-actually-uses-robo-advisors-new-data-reveals-surprising-answers


US: methods to ensure adviser business feasibility

Zoe Garcia-Amaya has stated in her white paper that digitisation and automation will present advisers with new growth opportunities and will drive industry change. Garcia-Amaya elaborates that advisers will need to offer personalised services, digitise their value chain as well as ensuring that clients clearly understand the adviser’s value proposition to ensure continuous success. Click here to read more

The emphasis added is mine. Advisers often think of insurers offering these services, and assume competition with their core offer. But why shouldn't you offer a digital advice service? 


Does robo-advice worsen bias and can AI fix that?

There is a concern among regulators that robo advisers do not make their selection process clear to customers - so algorithmic advice may be biased, especially in those cases where there is a choice of product providers. There are several ways such sites can lead clients to believe that their choice is perhaps wider and the process fairer than it might be. One is simply the way the starting set of companies is selected - if you have a mid-market product and you want to favour that one then it is easy to only select products that are in some obvious way 'worse' - say more expensive or offering less cover. The manner in which you apply selection criteria can affect outcomes too. If you apply selection criteria in a series of 'rounds' where you eliminate products you can imagine that if you knock out, say, all the products that are more expensive first, then in the second round you may find it easy to win on a coverage criteria. Even considering criteria in a balanced scorecard can be  gamed in some ways - such as the weighting applied to each factor. That is why the Financial Conduct Authority in the UK is interested in how robo-advice works, and in particular how they meet requirements to check suitability, but also other advice safety issues.

It is not just bias in sales that concerns us - it also happens in underwriting and probably in claims. Humans are prone to bias in favour of groups to which they belong, and by implication against the others. That can reinforce existing societal prejudices and make life harder - more expensive policies and more declined claims - for minorities. Is there hope? This article from Daniel Schreiber, CEO & Co-founder at Lemonade explains how he thinks an AI we may never understand can eliminate discrimination and bias in insurance. Of course, I note that he isn't talking about bias in insurer selection - Lemonade is a single insurer offer, not a marketplace. 


Kōura looking to improve its digital advice platform - the struggle is conversion

Rupert Carlyon, Kōura founder has said since going live, they have given advice to 3,000 people through the company’s digital advice platform. They are looking to roll out new messaging to improve user experience and understanding of their products. Click here to read more

The internet is a great platform for data-rich financial services. Since its earliest days financial services (led by sharetrading) have been a leader in e-commerce. But there is a catch. It has always been difficult to convert a lot of interest into action. We can easily deliver data, calculators, and content - and still struggle to achieve connection, engagement, and action. This is the overarching problem with digital. It is worth working on, but it is hard.