Legal and regulatory update for the life and health insurance sector

25 Sept 2020 – Good Returns reports that the Australian government is set to axe responsible lending laws. https://www.goodreturns.co.nz/article/976517550/australia-to-scrap-responsible-lending-laws.html

23 Sept 2020 – IRD advised that the Public Guidance Work Programme 2020-21 has now been finalised. https://www.taxtechnical.ird.govt.nz/-/media/project/ir/tt/pdfs/consultations/work-programmes/public-rulings-work-programme-2020-2021.pdf

24 Sept 2020 – FMA released a report on its supervision activities over the past 18 months. https://www.fma.govt.nz/news-and-resources/media-releases/fma-issues-supervision-report-2020/

Commentary: 

The development in Australia where responsible lending rules are being axed is of considerable interest. In specific terms I do not know enough about the details of the Australian lending legal and regulatory framework to comment. In general terms there are some good questions to be asked about what rules are fit for purpose in an environment with very low interest rates for borrowing and with other consumer protections and processes available. I shall take a look at that development with some interest. Given the involvement of our current Minister of Commerce and his work on predatory lending practices I doubt this is going to appear on his agenda. 


FMA looking to obtain power over mergers and acquisitions, and more daily news

After a policyholder raised concerns over the sale of AMP Life the FMA has stated that it would like to obtain the power to oversee mergers and acquisitions relating to banking, insurance and non-bank lenders. The proposed expansion of regulatory power would give the FMA power to require a conduct assessment be completed before purchase.

"The Financial Markets Authority (FMA) wants to be given the power to block mergers and acquisitions that affect banking, insurance and non-bank deposit takers’ products.

The regulator wants to be able to require a prospective new owner of a financial institution, or a particular loan or insurance book for example, to undergo a conduct assessment first.

It says it would exercise this power as the overseer of a conduct regime to be introduced once the Financial Markets (Conduct of Institutions) Amendment Bill is passed."

The FMA has presented their idea to MBIE and has suggested that additional clauses be added to CoFI to permit the FMA to oversee future mergers and acquisitions.

"The FMA argues that in the same way the Reserve Bank (RBNZ) needs to ensure a financial institution meets its prudential requirements before it becomes licenced, so has to give its approval for a merger/acquisition to proceed, the FMA should be given similar powers when it comes to conduct.

It has discussed the matter with the Ministry of Business Innovation and Employment, and suggests clauses be added to the Financial Markets (Conduct of Institutions) Amendment Bill, which is currently before the Finance and Expenditure Committee." Click here to read more

In other news:

Department of Internal Affairs: Department of Internal Affairs advised that it is calling a list of businesses who operate in the sectors that it supervises for AML/CFT that have not registered with the Department or confirmed that they do not provide products or services that would require them to comply with the AML/CFT Act, to obtain clarity about their status.

FANZ: Trusted Adviser mark criteria revealed

'Make real money': Client sues over 'sophisticated' investor tag

This last story is well worth a look too. Here is a quick snippet. It is worth considering that compliance structures are now complex. If clients do not understand the consequences of their choices within the establishment of the nature of the relationship, then it is likely that advisers, advice providers, and even product providers will be blamed: they have experience and information on their side. This may be hard to distinguish from a client who knew exactly what they were doing and simply reach for any and all means to recover losses that they should take responsibility for. It is always complicated 

'A woman who says she lost hundreds of thousands of dollars on funds of fallen investment manager Blue Sky claims she was wrongly steered into classing herself as a “sophisticated” investor."


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

 

 


Lifetime wealth and insurance

So many New Zealander's feel that they may never have enough lifetime wealth (see this article by Rob Stock at stuff.co.nz). To focus on the positive: at least they are thinking about a good question. How much money is required to life out the rest of one's days is the number that underpins most strategic financial planning. It's the node which links planning for life and disability insurance to planning for retirement.

Most people in the financial services industry have several ideas about this number: a kind of rough rule of thumb, some assumptions about what should or should not be included, and then a much more detailed number they have worked out in their own case - and therefore a clear idea on how to do so. Most other people, unless they are working with a good financial adviser, haven't got that far. Just trying to work out the number generates the right kind of context to work on all sorts of financial planning questions, which is one of the reasons this question is such a good one to address.

For those of us with a strong interest in life and health insurance, it is interesting because that figure for lifetime wealth is essentially the amount of money required in order to never need to earn an income again. That's a circumstance broadly equivalent to total and permanent disablement. It is also a guide to the level of wealth at which insurance may no longer be required - although it may still be desired, in order to protect that wealth.

Of course, it is slightly more complicated in many risk planning situations. Costs can be higher in the case of disablement compared to retirement, but the time horizon may be shorter - as those with chronic health conditions affecting their ability to work have lower life expectancy. In the case of the death of a family member future financial requirements are affected by both the loss of income and the loss of expenditure by the deceased. Variations abound. When financial planners talk about their approach to calculating this number I like to hear the details of how they calculate the amount, and intrigued to hear if they consider age-adjusted life expectancy in the process. If you are interested in further discussion on this do let me know, I have a number of resources available to share. 


Why many women arrive at retirement financially worse off than men

Women arrive at retirement 18% financially worse off than men, on average, they also tend to live longer. Research commissioned by CFFC states that there are more than twice as many women as men living in poverty post age 65 - 14% females compared to 6.6% men. This is a long-run legacy of two features - the interruption to earning from having children, and the gender pay gap. In some Scandinavian countries, both parents take time off for the birth of a child (not necessarily at the same time) and men are more likely to become an at-home carer if that is the option parents go for. Hopefully, other changes can be made - although a gender pay gap persists, it is narrower in New Zealand than many countries. Click here to read more. 


'Threat multipliers' that turn personal crises into financial disasters

This article by Rob Stock for stuff.co.nz tells the story of one mans unfortunate run of bad luck which financially ruined him. Stock discusses "threat multipliers" and gives his golden rules for reducing them. This scenario underlines the need for an integrated view to be taken of financial planning: these situations show how debt, savings, health, work, and insurance all connect to make a situation either fragile or more resilient. 

Click here to read more. 


Money Week

This week is Money Week and this years theme is 'Now we're talking'. The aim of the campaign is to get people to open up and start talking about money with partners, children, friends and of course, advisers. 

Here is a link to the official Money Week website set up by Sorted which discusses why people should be talking about money and some of the negative impacts keeping money issues to yourself can cause. 

Financial Advice NZ have created this video stating that good things can happen once people starting opening up and discussing money, encouraging Kiwis to talk to a financial adviser. 


28 product and pricing changes this year - the market does not stand still

It has been a very busy year and below is a summary of the pricing and product changes so far in 2019. We keep a running record of all the changes - in our pricing and product comparison databases, and report in detail on the most significant changes in the quarterly life and health reports. You simply cannot assume that you are familiar with the product and price competitiveness of the market. You need to keep checking, because it keeps changing.

Changes 2019


Congratulations to Pinnacle Life on being granted a digital advice exemption

The FMA has granted Pinnacle Life a digital advice exemption. Congratulations to Gillian Vaughan and her team, in particular Amy Cavanaugh who has been driving this project forward. From the media release:

General Manager Operations Amy Cavanaugh says the provision of digital advice will extend Pinnacle Life’s existing online service to customers, offering a flexible approach to personalised advice.

“We know our customers are busy people, so we thought about how we could provide advice in a flexible, personalised, easy-to-access way. The new digital advice platform we are developing will enable customers to make informed decisions about insurance through tailored, real-time digital advice, whenever and wherever they want it.

The Chatswood team has been privileged to be a part of this project. Our prior contributions to online processes have tended to be data services. This project is a further step forward as it has been for a personalised digital advice process. I would like to recognise Shaun Dowler, who provides data science consulting as part of our team has been particularly valuable in pushing ahead this work for Chatswood. 

The announcement says that the service will be launched later this year.