Legal and regulatory update for the life and health insurance sector

9 Sept 2020 – IRD issued guidance on the taxation of cryptoassets. https://www.ird.govt.nz/cryptoassets

10 Sept 2020 - Financial Advice New Zealand have created a Virtual Conference/ Regional Roadshow, with the conference hosted over four regions in a different region each day over 21-24 Sept, with the Auckland event being online. https://financialadvice.nz/conference-2020-home/

14 Sept 2020 - The Reserve Bank announced that it will be relaunching the review of the Insurance (Prudential Supervision) Act (IPSA) in October 2020. A policy paper outlining the resumption of the IPSA Review, and objectives and topics to be covered, will be published in early October. It will provide an updated overview explaining objectives, topics to be covered and an indicative timetable. At the same time, the RBNZ will release a consultation paper on principles to guide the review of Solvency Standards. https://www.rbnz.govt.nz/news/2020/09/work-on-insurance-act-review-resumes


Advisers warned against cyber-attacks, and more daily news

After the NZX cyber-attacks, financial service businesses are being warned by the National Cyber Security Centre (NCSC). The high cyber security advisory that was issued addresses the current threat and details how attacks could happen. The NCSC has said that businesses should review current plans and systems in place.

“A high cyber security advisory has been issued by the National Cyber Security Centre (NCSC), warning financial services businesses about the current threat and outlining how the attacks could occur.

Affected entities have received ransom emails demanding payment in Bitcoin, along with a threat of a significant distributed denial of service (DDoS) attack against internet-exposed infrastructure if the ransom is not paid.

The NCSC said financial services firms should review their plans for responding to a DDoS attack to ensure they were up to date, and review their systems architecture to identify any potential points of failure. ”

Katrina Shanks has said that advisers need to avoid being complacent and instead need to know the strength of their current cyber security processes. She continued by saying that cyber-attacks affect consumer confidence and that there are many options for those looking to improve their cyber security.

“Financial Advice NZ chief executive Katrina Shanks said advisers would need to understand how up to date their cyber security processes were and what protections they had in place. And should avoid “being complacent”.

She said there were a lot of options available to businesses that wanted to improve their cyber security. “You do get what you pay for.”

She said there was a risk to consumer confidence when high-profile financial services firms such as the NZX, were repeatedly felled by the attacks.” Click here to read more

In other news

Level five isn't the big issue for advisers; It's something else

FMA: FMA releases new investor guide to bonds

Deloitte: Tricky to compare NZ insurance to other markets - report prepared for Partners Life


Financial Advice conference recipient of Government funding, and more daily news

It was announced that MBIE’s $10 million Domestic Events Fund was set up to support events. Financial Advice NZ has been named as one of the 200 recipients.  The funding was granted to Financial Advice NZ for their 2020 Bounce conference.

“The $10 million Government fund was set up to support the events industry despite the disruption of Covid-19.

Financial Advice NZ received funding for its conference this year, which is set up as a series of roadshow events across the country. The events can be attended online or in-person. The association will decide this weekend whether to go ahead with an in-person Auckland event.”

Katrina Shanks has said that the funding is fantastic and would allow them to have certainty.

“Financial Advice NZ chief executive Katrina Shanks said the funding would allow the association to have some certainty as it worked with the events company delivering its conference this year.

“It’s fantastic for them. It’s yet another industry that’s had a huge hit from Covid.” Click here to read more

In other news:

AMP: AMP announced that it is considering selling all, or some, of its assets, various stories, but this one in the AFR is recent

Partners Life: Expressions of interest is now open for the September 2020 New Adviser Training Course

RBNZ: Same objectives, different challenges


Industry reacts to disclosure regulation draft, and more daily news

The submissions on disclosure regulations have been released by MBIE. Although the response was largely positive, some concerns were raised about the disclosure requirements set to come into place on 15 March 2021.
 
AMP highlighted the risk of repetition without addressing issues currently being undervalued by consumers. To ensure value is added AMP suggested that disclosures need to be simple and brief, something AMP doesn’t believe has been achieved by the current draft.

“AMP said there was a risk that the disclosure would end up being repetitive and not address the issue of long, impenetrable disclosures not currently being valued by consumers.

 

“For benefits to be delivered to New Zealand consumers it is essential for disclosures to be simple, meaningful, very brief and unobtrusive. We do not consider that these aims would be met with the regulations as drafted.”

 

Under the new rules, advisers are required to disclose any commissions or incentives they receive that a reasonable client might think might materially influence their advice.”

While Financial Advice said that a reasonable person wouldn’t have a good grasp of identifying conflicts of interest within the industry and that the regulation could be strengthened by having higher standards in place. Financial Advice highlighted that there are many references to ‘incentives’ so including a definition and reference to ‘disincentives’ would be valuable. 

“But Financial Advice NZ said a reasonable client would not expect to have a good grasp of identifying conflicts of interest in the sector.

 

“The regulation could be strengthened by having a higher standard, such as – ‘any interest of A, P, or any other person connected with the giving of the advice that has the potential to influence the advice given by A’.

 

“There are various references to ‘incentives’. We recommend including in the regulation a definition and reference to ‘disincentives’ as well. For example, a reduction of commission rates for low volumes could escape the disclosure regime. Disincentives is an area that is often overlooked and should be drawn attention to, so FAPs and advisers cannot avoid their disclosure obligations by saying ‘this disincentive is not technically an incentive’.”” 

AIA stated that there should be further clarification on was is “practicable” for advisers to include and highlighted that this would cause significant issues for financial advice providers. Although AIA doesn’t see this as an issue as they are prepared to invest in the appropriate systems to aid advisers. 

“AIA said there should be more detail on when it was considered “practicable” for advisers to include in their disclosure the amount of fees payable by a client connected to the advice recommendation.

 

“This is a significant issue for financial advice providers. For AIA NZ, significant system investments will be required to provide estimates. While AIA NZ anticipates making this investment, we are concerned that other providers may choose not to do so, and instead elect not to provide estimates on the basis that it is not practicable to do so. This is an undesirable outcome for consumers which we consider could be avoided by better articulating the circumstances when providers may elect not to provide estimates.” Click here to read more

In other news

FSC: Generations Conference will no longer take place

Kepa: Kepa Compliance Officer’s Course was held in partnership with Rosewill Consulting  

Fidelity Life: Fidelity Life were announced as finalists in Best ICT Team Culture category in the 2020 CIO Awards

Fidelity Life: new applications are encouraged to be done through e-App

Fidelity Life: options for alteration requests are:

·       emailing signed alteration requests to admin.services@fidelitylife.co.nz

·       email from the individual policy owner’s email address

·       Mailing to Customer Care, Fidelity Life, PO Box 37-275, Parnell, Auckland 1151


COVID-19 crisis lessons for risk planning, and more daily news

After the Alert Level was eased to Level 1, New Zealanders returned to life as normal but after months of normalcy we were all shocked to discover that there was a COVID-19 resurgence and Aucklanders found themselves in lockdown once again. Adviser Peter Leitch recently spoke of the importance of having insurance. Peter said the recent developments has worked to remind people of the very real chances of unexpected events occurring and the consequences the will follow if people don’t have protection in place. 

 

When discussing the recent events Peter highlighted that people are often aware of the best course of action after the fact. During Financial Advice’s Money Week, Peter highlighted the importance of consulting a professional adviser and encouraged the public to seek out information relating to different insurance types and the cover they offer as well as understanding the claims process. 

“Money Week 2020 wrapped up earlier this month, and at the same time, New Zealand experienced its second outbreak of COVID-19 in the community - something financial adviser and insurance expert Peter Leitch says has once again demonstrated the importance of having protection, and of making good financial decisions.

 

With Auckland back in Alert Level 3, Leitch says this fresh outbreak has reminded everyone that unexpected events can happen overnight, and have potentially significant consequences. Partnering with Financial Advice New Zealand for Money Week, he urged consumers to inform themselves about different types of insurance, what they protect against and the claims process, and he also emphasised the value of having an adviser guiding them along the way.

 

“Recent events have shown us that things can happen unexpectedly, and we’re hoping for the best with the developing situation here in New Zealand,” Leitch commented. “We’re always cleverer in hindsight, and we always wish we may have done something prior to an event occurring.”” Click here to read more

In other news:

Pinnacle Life: Pinnacle Life offering 30 second quotes to find the right cover

Financial Advice NZ: Dr Angus Hervey and Tane Hunter from Future Crunch have been announced as speakers at the Bounce Conference  

Buying insurance can be a reassuringly normal thing to achieve

 

 

 

 


nib financial growths amid COVID-19, and more daily news

nib New Zealand announced that the 12 months to June 30 2020 has been an overall successful year for the insurer. nib experienced a 10.2% growth in revenue to NZ$253.1 million while also prioritising their efforts to support members and the community through COVID-19 related relief and other initiatives. The underwriting results also increased 11.2% to a total of NZ$25.9 million.

“nib New Zealand today announced an improved operating performance for the 12 months to 30 June 2020 (FY20) lifting membership, revenue and earnings.

nib New Zealand premium revenue grew 10.2% to NZ$253.1 million while underwriting result was NZ$25.9 million, up 11.2%. The FY20 underwriting result includes a NZ$9.0 million COVID-19 deferred claims provision for an expected claims catch-up in healthcare treatment deferred during the peak of the COVID-19 that is expected to occur in FY21.

nib New Zealand Chief Executive Officer, Rob Hennin, said nib performed well in FY20, reporting good financial results alongside its strong focus on supporting members and the community throughout COVID-19.

“Helping our Kiwi members stay safe and healthy throughout the COVID-19 pandemic has been a priority, which is why we moved quickly to implement an extensive support package,” Mr Hennin said.”

As part of their member support initiative nib has provided COVID-19 financial hardship support to over 2,000 members, premium relief and suspension options to over 5,000 members, extended cover for COVID-19 related treatments, expanded GP and specialist consultations through telehealth, and extended treatment pre-approvals.

““To date, we’ve provided more than 2,000 Kiwis members with access to financial hardship support, including premium relief and suspension options, postponed premium increases for over 50,000 members and extended coverage for COVID-19 related treatment across all levels of hospital cover, at no extra cost.

In addition, we expanded cover for consultations with GPs and specialists through telehealth, ensuring members could continue to see their medical practitioner during severe lockdown restrictions. We also extended treatment pre-approval from three to six months, meaning over 1,000 members did not have to reapply for surgery approval if they experienced delays in accessing hospital treatment."

In partnership with nib foundation, nib has donated $1 million to Lifeline Aotearoa and Clearhead as part of their community support initiatives.

"Further, we made a $1 million donation, together with nib foundation, to Lifeline Aotearoa and Clearhead, helping support our communities and the ongoing mental health needs of New Zealanders,” he said." Click here to read more

In other news:

Nib: Episode 4 of nib’s webinar series is set to stream September 2 2020 at 11:30am 

AMP: AMP makes top-level changes amid allegations

Asteron Life: Asteron Life profit drops

RBNZ: RBNZ to lead Asia-Pacific Central Banks working group

Financial Advice: Economic update by Economist Tony Alexander


Insurer wins argument over chronic pain claim, and more daily news

The Court of Appeal revealed its verdict on the case between Asteron Life and financial adviser Peter Taylor. According to the story: Peter Taylor made an Income Protection claim in 2010 saying that as a result of his bone cancer he was suffering from chronic pain. Peter was able to get payments after supplying the required information on his medical condition and ability to work, but in 2014 Asteron Life suspended the payments stating Peter’s earnings made him ineligible for payments.

"The Court of Appeal released its judgment on Wednesday.

Taylor first took an Asteron Life income protection policy in 1994 and made a claim in 2010, saying he had bone cancer and suffered chronic pain.

Taylor was required to provide progress reports to Asteron describing the current state of his medical condition, whether he had been able to work, what income he had earned from working, and certain other matters.

He received payments until September 2014, when Asteron suspended them. It was concerned that he was earning at a level that would make him ineligible.”

Unhappy, Peter went to court arguing that he was still entitled to payments.  Asteron Life stated that he was no longer entitled to payments and counterclaimed for repayment of the amount paid out to Peter. The court noted that Peter used the payments for holiday homes, cars and overseas trips and ruled in favour of Asteron Life. The insurer was awarded $371,286.70.

“Taylor went to court seeking a declaration that he was entitled to continuing benefits under the policy, and wanting arrears of payments.

Asteron denied he was entitled to any further payments and counterclaimed for repayment of all sums previously paid.

It said he had made false statements about the extent to which he worked while on claim.

The High Court sided with Asteron and it was awarded $371,286.70. That court noted that he had used his insurance payouts to fund a holiday home, cars and overseas trips.”

Peter then took the case to Court of Appeal. The judge again ruled in favour of Asteron Life saying that Asteron Life was entitled to a reduced counterclaim payment of $51,835.64.

”The Court of Appeal said Asteron was entitled to succeed in its counterclaim but could only recover payments made in respect of the periods about which Taylor was found to have dishonestly provided false information.

“The judge declined to find that the initial claim made in July 2010 involved false statements that breached Taylor’s obligations in relation to making claims. So Asteron’s claim as pleaded, which was founded solely on the allegation of breach of utmost good faith, could not succeed in respect of the initial period from January 2010 to July 22, 2010.

“There may well have been another basis on which the payments made in respect of that period could have been recovered. But they were not pleaded by Asteron, and Asteron did not give notice that it intended to support the High Court judgment on grounds other than those accepted by the judge.”

That reduced the amount owed to Asteron by $51,835.64. Taylor has since sold his insurance broking business. Click here to read more

In other news:

Financial Advice webinar: Economic Update by Economist Tony Alexander

Financial Advice: 2020 Conference registration

AIA: COVID-19 UPDATE


Importance of focusing on replacement business, and more daily news

Engagement in replacement business has been a focal point of regulators in previous years and the introduction of the new regime will mean that advice on policy replacement will be closely monitored. During an FSC Get in Shape webinar Steven Burgess from Compliance Refinery highlighted that the FMA has identified replacement business as an area that has the highest risk associated with it.

“Advisers engaging in replacement business have been under intense scrutiny from regulators over the past several years, and the new financial advice regime will ensure that close attention is paid to the details when replacing a customer’s existing policy.

As part of the FSC’s ‘Get in Shape’ programme for advisers, Steven Burgess, of Compliance Refinery, says the FMA has determined replacement business as an area ridden with potential risk. He says advisers will have to be extremely thorough in explaining the benefits, and, most importantly, the potential negative impacts of replacing a policy, and it will no longer do to simply quote a cheaper price.

“Replacement business is an area the FMA has determined as an area of ‘highest risk,’ and rightly so,” Burgess said.”

Steve suggests that advisers focus on providing comprehensive advice to clients. This means first understanding the different product offerings to ensure clients make informed decisions.

““That’s an area that advisers should be focusing on a lot more. It is much higher risk to potential customers, and it’s an area where you really need to be providing comprehensive advice to clients. You can’t limit the scope of that advice.”

“You need to make strong comparisons between what the old product was, and what the new product would be,” he explained.

“It’s really important that you get right down into the actual product details, so you can outline it and say “this is what you used to have, and these are the differences between that and what I’m recommending.” The more detailed the better, because these are the areas where the client can come back and tell you that they don’t have some sort of benefit or cover that they used to have, because they didn’t understand those differences.”

Burgess says that at the heart of it, advisers need to be extremely sophisticated in their understanding of various insurance products. He says risk is an area in which customers are usually the least knowledgeable, and it’s the adviser’s job to clearly lay out the risks specific to them.” Click here to read more

In other news:

Financial Advice: the Money Week event at the Base in Hamilton has been cancelled as a result of lockdown

Fidelity Life: Fidelity Life adds to board

AMP: Shake-up at AMP


Money Week is nearing

Financial Advice New Zealand will be holding Money Week next week. Money Week will be dedicated to educating the public on money matters. Money Week will be filled with resources that will are intended to raise awareness and address questions and concerns that the public may have. The daily webinars will be focused on different financial topics and will tap into the knowledge base of different financial experts.  The topics will include financial planning, mortgage, insurance, retirement planning, and investment. The webinars will be led by:

  • Monday 10th: Financial Planning – Hannah McQueen
  • Tuesday 11th: Mortgage Discussion – John Bolton
  • Wednesday 12th: Insurance Discussion – Peter Leitch
  • Thursday 13th: Retirement Planning – Liz Koh
  • Friday 14th: Investment Discussion – Paul Sewell

“Financial Advice NZ goes into overdrive next week to educate the public on the need to get financial advice, particularly in these uncertain times.

Every weekday we are hosting a free public webinar to discuss aspects of financial well-being. These will be hosted by five financial advisers who work every day advising clients. The public will be able to use the chatroom during each webinar to ask questions.”

The FMA have partnered with Financial Advice to run a joint event at The Base in Hamilton. Advisers will be present to chat with attendees, although they will not be providing financial advice. Joining Money Week will provide the public with the opportunity to think about their financial wellbeing and seek professional assistance from advisers.

"This year we are excited to have partnered with the Financial Markets Authority to visit The Base to raise the awareness of the importance of your financial health, wealth and wellbeing. Financial advisers will be on site to provide information to you regarding your general financial wellbeing (note this will not be personalised advice)." Click here to read more


Partners Life reverse waiting period for self-employed clients, and more daily news

After making changes to underwriting guidelines for self-employed customers earlier this year Partners Life received feedback that they used to further improve processes. Adviser feedback focused on the 4 week waiting period for Income Cover, Mortgage Repayment Cover, and Household Expenses Cover.

“One of the changes we made was to restrict the waiting period options to only 4 weeks for self-employed clients across these products. This change was designed to facilitate early engagement with claims case managers when a self-employed customer had become disabled. We determined that longer waiting periods would make early intervention and return to work management much less effective.

While we still believe this to be the case, we also understand that forcing a shorter waiting period onto customers can impact on affordability and can also cause issues for advisers when trying to combine business cover such as Loss of Revenue with personal income protection products. In addition, we appreciate that shorter waiting periods do expose us to more claims because we get all the shorter ones and we pay more for the longer-term claims (because we start paying sooner).


We know from your feedback that this restriction of waiting period choice has been a significant issue”.

Based on the feedback received, Partners Life are implementing the previous waiting period effective July 23, 2020.

“In response to your concerns, and because we believe our other changes will provide enough of the protection we are seeking, we are reversing the restriction on waiting period options for self-employed clients with effect from Thursday 23 July 2020.”

In other news:

The Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill was read a first time in Parliament and referred to the Governance and Administration Committee.

Department of Internal Affairs: Department of Internal Affairs released a summary of its AML/CFT findings in relation to the legal sector.

Financial Advice: Financial Advice New Zealand Free Webinar Series