Number of advisers on FSPR decreases, and more daily news

It has been announced that the Companies Office has deregistered advisers that were registered as financial advisers on the FSPR. Although the number has decreased from the initial number recorded in March 2020, it has increased from the figured reported in March 2021. Currently are there 9236 registered financial advisers. Bolen Ng, MBIE national manager of business registries, has said that 458 FSPs were registered under s18(1)(b) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008. 550 letters were sent out to FSPs who weren’t linked to a FAP. Individuals had 20 working days to update their registration. FAPS now have until 15 March 2023 to apply for their full licences. Click here to read more

“As of July 29, there are 9236 financial service providers (FSPs) registered as financial advisers (FAs) on the Financial Service Providers Register (FSPR).

This number is down 80 from March 15, 2020, but up 58 from March 15, 2121.

FSPs on the FSPR:

- FSPs registered as financial advisers on the FSPR as at 15/03/20: 9316

- FSPs registered as financial advisers on the FSPR as at 15/03/21: 9178

- FSPs registered as financial advisers on the FSPR as at 29/07/21: 9236

Ministry of Business, Innovation & Employment national manager of business registries Bolen Ng says the Companies Office has deregistered 458 FSPs under s18(1)(b) of the Financial Service Providers (Registration and Dispute Resolution) Act 2008.

"These are the FSPs that became financial advisers under the new financial advice regime on March 15, but hadn’t linked to a financial advice provider within three months of that date," Ng says.

In June, the Companies Office sent about 550 letters to FSPs who had not linked themselves to a financial service provider (FAP) warning them of imminent deregistration.

FSPs had a 20 working day objection period within which to update their registration.

FAPs now have less than two years to apply for a full licence by the cut off date of March 15, 2023.”

These reductions are not as great as feared by some through the implementation of the new regime. However, it may be too soon to declare that the necessary balance has been struck between raising standards and sustaining access to advice for the greatest number of clients. As the process of gaining a transitional licence did not require passing much of a threshold many advisers that may leave the industry may have entered the new regime with little or no intention of obtaining a full licence. Insurers report levels of new business production have fallen substantially. That suggests that the industry has sustained a serious blow not fully described by these numbers. 

In other news

Financial Advice: KiwiSaver – Contributions are just as important as fees

RBNZ: Reserve Bank considers tighter mortgage lending standards

From Good returns: Income protection: Why taxable losses are not the right advice


The medical insurers and life insurers included in the FMA's Fire and General Insurers report - UPDATED

The following health insurers were included in the FMA's Insurance Conduct and Culture: Fire and General Insurers Update:

  • Accuro (HSWS)
  • nib
  • Police Health Plan
  • Southern Cross
  • Unimed

The following life insurers were included in the report: 

  • DPL Insurance Limited (which offers both fire and general and life insurance)
  • Booster Assurance Limited

Given the report is on conduct and culture the issues are not fundamentally different whether the cover offered is life, general, or health. However, it is worth pointing out in case you were unaware of the inclusion. 


Legal and regulatory review for the life and health insurance sector

29 July 2021 – Privacy Commissioner release confirming that Covid-19 vaccination status is personal information and so falls under the protections laid out in the Privacy Act 2020. https://privacy.org.nz/blog/the-covid-19-vaccination-and-privacy-rights/

30 July 2021 – RBNZ released an Op-Ed from the Reserve Bank Assistant Governor, Simone Robbers, titled “Sustainable Business: Working together on a path to a climate-resilient future.” https://www.rbnz.govt.nz/news/2021/07/working-together-on-a-path-to-a-climate-resilient-future

28 July 2021 - Minister of Commerce and Consumer Affairs, Hon David Clark, June 2021 diary released with the following potential financial services sector related meetings noted:

  • 10 June 2021 – Financial Markets Authority (Mark Todd, Chair; Rob Everett, CE)
  • 22 June 2021 – Takeovers Panel (Andy Coupe, Chair; Andrew Hudson, Chief Executive)
  • 24 June 2021 – Retirement Commissioner (Jane Wrightson, Retirement Commissioner)
  • 30 June 2021 - Chartered Accountants Australia and New Zealand (Peter Vial, NZ Country Head; Charlotte Evett, Government Relations Lead)

https://www.beehive.govt.nz/sites/default/files/2021-07/Hon%20Dr%20David%20Clark%20Proactive%20Diary%20Release%20June%202021.pdf

29 July 2021 – FMA release advising that AIA admits false and misleading representations to customers in FMA fair-dealing proceedings. https://www.fma.govt.nz/news-and-resources/media-releases/aia-misleading-representations-to-customers

29 July 2021 – FMA released cyber resilience information sheet for financial advice providers. https://www.fma.govt.nz/news-and-resources/media-releases/fma-releases-cyber-resilience-info-sheet-for-financial-advice-providers/

29 July 2021 – RBNZ advised that it will be holding a webinar on the interim Solvency Standard for insurers at 10 a.m. on Thursday, 5 August 2021, via Microsoft Teams. https://www.rbnz.govt.nz/regulation-and-supervision/insurers


AIA self-reported breach details, and more daily news

After AIA reported their shortcomings to the FMA as part of their submission for the FMA/RBNZ conduct and culture review of life insurers, the FMA filed charges in the Auckland High Court claiming that three causes of action under the Fair Dealing provisions (Part 2) of the Financial Markets Conduct Act 2013 (the FMC Act) were breached. The FMA based their case on:

  • purported enhancement of policy benefits
  • charging premiums after the termination of a policy and treating policies as terminated when they should have remained in force, and,
  • incorrect inflation adjustments.

AIA has said that a Notice of Admission will be filed and has agreed to admit to the breaches. A penalty hearing before the High Court will be held where the FMA will ask that AIA should be ordered to pay $700,000 as penalty.

“Life insurer AIA has admitted making false and/or misleading representations to customers in proceedings brought by the Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko.

The case was filed in the Auckland High Court and alleges three causes of action under the Fair Dealing provisions (Part 2) of the Financial Markets Conduct Act 2013 (the FMC Act).

AIA has agreed to admit all causes of action and will file a Notice of Admission of the breaches in the High Court.  The matter will proceed to a penalty hearing before the High Court where the FMA will seek declarations of contravention, and where the parties will submit that AIA should be ordered to pay a pecuniary penalty of $700,000.

The FMA case is based on three core breaches regarding incorrect and misleading communication to customers holding various life insurance and associated policies:

  • purported enhancement of policy benefits
  • charging premiums after the termination of a policy and treating policies as terminated when they should have remained in force, and,
  • incorrect inflation adjustments.
  1. Passback benefits:

AIA wrongly told certain customers they were entitled to passback benefits (cover enhancements to an existing policy), without clarifying that the benefits only applied to post-2003 policies. The information customers received in anniversary letters misrepresented the benefits, and in some cases misled them about their policies.

  1. Termination Dates issues:
  • Premiums beyond termination: AIA continued to charge premiums when customers had no cover. Letters were sent to certain customers with policies approaching the end of their duration, specifying when cover would cease, but the letters contained the incorrect date.
  • Cover Cessation: AIA wrongly ceased cover for certain customers while their policies remained in force, which resulted in some customers, whose claims had been accepted, being underpaid on those claims. Customers were informed by cover cessation letters.
  1. Inflation Adjustments: AIA applied incorrect inflation adjustments to premiums. Many AIA customers choose to have their sum-assured adjusted in line with inflation, with premiums increased accordingly. Policy anniversary letters were sent to customers where the inflation adjustment had been incorrectly applied, and, as a consequence, some customers were charged excess premiums.

AIA self-reported the breaches to the FMA, when asked to provide information as part of the joint FMA/Reserve Bank of New Zealand conduct and culture review of life insurers in 2018. AIA has told the FMA that remediation for affected customers has been completed, and the FMA will be seeking confirmation of this as part of the process.

In deciding to bring this action, the FMA took into account a number of factors, including AIA’s self-reporting, its remediation efforts, the nature of the alleged misconduct, and the number of affected customers.

The FMA considered the seriousness of the breaches, and the length of time it has taken to deal with impacted customers, warranted enforcement action. The FMA is determined to hold such misconduct to account and send a strong message of deterrence to the market. The FMA case only captures breaches that occurred from 1 April 2014 – when the FMC Act came into force – but some breaches occurred prior to this and continued after the Act came into effect.” Click here to read more

AIA have emphasises that they self-reported the issues and completed remediation: 

AIA NZ and the Financial Markets Authority (FMA) have reached an agreement with regards to issues that AIA NZ self-disclosed to the FMA in June 2018 at the commencement of the joint FMA/RBNZ Conduct and Culture Review.

“After conducting an internal review, we found a small number of instances where we may have fallen short of our own standards and commitment to being as transparent as possible with our customers.  Since self-disclosing these issues to the FMA, we have worked relentlessly to remediate these complex issues, whilst engaging and cooperating with the FMA throughout. We have also worked swiftly with the FMA to come to a resolution” says Nick Stanhope, AIA NZ CEO. 

“Our remediation process is complete and, if a customer was impacted by one of the issues, they have already heard from us directly and we have put the issue right.  As part of this remediation, we have also reviewed our systems and processes to ensure this does not happen again. We always strive to do the right thing by our customers and community, and this situation is no different,” concludes Stanhope.

In other news

RBNZ: Review of the Insurance Solvency Standards webinar to be held on 5 August at 10am

FMA: FMA pings adviser for unauthorised advice

From Stuff: Taranaki widow battled for almost a month to get funeral insurance payout after husband's tragic death

From Good returns: CoFI debate back on agenda


Legal and regulatory update for the life and health insurance sector

26 July 2021 – In a webpage post, the FMA released the “Top five tips for becoming a fully licensed Financial Advice Provider.” https://www.fma.govt.nz/news-and-resources/fma-stories/top-five-tips-for-becoming-a-fully-licensed-financial-advice-provider/

26 July 2021 – RBNZ announced that, from today, it will publish new breakdowns for residential mortgage lending by loan-to-valuation (LVR) ratios in the C30 web table. https://www.rbnz.govt.nz/statistics/c30

26 July 2021 – RBNZ & FMA sought feedback on implementing new law, the Financial Market Infrastructure Act enacted in May 2021, to safeguard the ‘plumbing’ of the financial system, with feedback closing on 20 Sept 2021. https://www.rbnz.govt.nz/news/2021/07/reserve-bank-and-fma-consult-on-new-law-to-safeguard-the-plumbing-of-the-financial-system

26 July 2021 – IRD released a set of questions and answers to support the Government’s policy proposals on interest limitation for residential property investors. https://taxpolicy.ird.govt.nz/publications/2021/2021-other-interest-limitation-and-bright-line-rules-q-and-a

27 July 2021 – RBNZ released research looking at the distributional effects of monetary policy and the household cash flow effects of low interest rates in New Zealand. https://www.rbnz.govt.nz/news/2021/07/incomes-rise-for-mortgage-holders-as-interest-rates-fall

27 July 2021 – Financial Services Council released research looking at what New Zealanders think about KiwiSaver, the role it plays in their retirement preparedness, and where it needs to head in the future. https://www.fsc.org.nz/bulletin_display/x_blog_code/2153.html


Legal and regulatory update for the life and health insurance sector

22 July 2021 – FMA released a report on Insurance conduct and culture: Fire and general insurers update. https://www.fma.govt.nz/news-and-resources/reports-and-papers/fire-and-general-insurers-update/

22 July 2021 – The latest FMA update included information on a report released in June titled “Filing of financial statements: review findings and guidance. https://www.fma.govt.nz/assets/Reports/Filing-of-financial-statements-review-findings-and-guidance.pdf

22 July 2021 – The FMA update also included advice that:

  • The FMA will be consulting in the third quarter of 2021 on proposals for exemptions to provide relief for insolvent FMC reporting entities that are in liquidation, receivership or administration from certain financial reporting requirements under the FMC Act to determine whether a class exemption is required.
  • AML/CFT reports for the period 1 July to 2020 to 30 June 2021 are due by 31 August 2021. AML/CFT supervisors have released updated guidance designed to help reporting entities complete their annual AML/CFT report.

https://www.fma.govt.nz/compliance/guidance-library/annual-amlcft-report-user-guide/

  • Updated the AML/CFT content on the FMA website to include information for Financial Advice Providers and Authorised Bodies.

https://www.fma.govt.nz/compliance/amlcft/faqs/#fapaab

  • A reminder of the new AML/CFT regulations that came into effect on 9 July 2021 and the availability of guidance on the new regulations available on the FMA website.

https://www.fma.govt.nz/compliance/guidance-library/amlcft-regulations-update-2021

22 July 2021 – RBNZ announced a consultation on an interim Solvency Standard for insurers, which will determine the minimum amounts of capital that insurers must hold, with submissions closing 1 October 2021. https://www.rbnz.govt.nz/news/2021/07/reserve-bank-consults-on-interim-insurance-solvency-standard

22 July 2021 – APRA released its Private Health Insurance Annual Coverage Survey for 2020. https://www.apra.gov.au/news-and-publications/apra-releases-its-private-health-insurance-annual-coverage-survey-0

22 July 2021 - Retirement Commission released its latest survey into the financial capability of New Zealanders. https://retirement.govt.nz/news/latest-news/latest-financial-capability-study-proves-knowledge-is-power-with-positive-findings-for-maori/

22 July 2021 – In an article titled “England’s NHS data-sharing to third parties”, the Privacy Commission uses this to highlight the privacy issues relating to patient data that may need to be considered with the consolidation of New Zealand’s district health boards into a single agency called Health New Zealand. https://privacy.org.nz/blog/englands-nhs-data-sharing-to-third-parties/

Probably the two most interesting items here are the conduct report on general insurers and the Privacy Commission's interest in medical data sharing. So many of the options for modernising the sector rest on medical data sharing and banking data sharing that these are likely to be areas under continually increasing scrutiny. 


Legal and regulatory update for the life and health insurance sector

13 July 2021 – Parliament’s Finance and Expenditure Committee announced it will be opening an inquiry into the current and future nature, impact, and risks of cryptocurrencies. https://www.facebook.com/FESCNZ/posts/942985546484119

19 July 2021 – FMA released its Annual Corporate Plan 2021-22. https://www.fma.govt.nz/about-us/corporate-publications/annual-corporate-plan/

In the last item there is a relatively brief mention of the insurance sector priorities, which are: 

Our areas of focus in the Banking & Insurance sector are:
Preparation for the CoFI and updated insurance contract law regimes including:
• providing policy input as part of the legislative process
• engaging with industry participants and other stakeholders to build our understanding of the banking and insurance sectors
• developing a licensing approach for CoFI
• developing a monitoring and enforcement approach for when the regimes are in force.

 


Legal and regulatory update for the life and health insurance sector

9 July 2021 – FMA released updated AML/CFT guidance related to the regulation changes coming into force today. https://www.fma.govt.nz/compliance/guidance-library/amlcft-regulations-update-2021

8 July 2021 – RBNZ released the results of its 2021 Relationship Charter performance measurement survey, noting also that this was the first year the insurance sector was included in the survey. https://www.rbnz.govt.nz/regulation-and-supervision/statements-of-approaches/statement-of-relationship-management-approach

7 July 2021 – FMA released survey results showing changing investor preferences and continuing confidence in the markets. https://www.fma.govt.nz/news-and-resources/media-releases/fma-survey-shows-changing-investor-preferences-and-continuing-confidence-in-the-markets/

7 July 2021 – FMA announced cancellation for the first time of a Managed Investment Scheme manager licence, belonging to Fund Managers Otago. https://www.fma.govt.nz/news-and-resources/media-releases/fma-cancels-fund-managers-otago-licence/

7 July 2021 – RBNZ announced that it will be consulting extensively over the remainder of 2021 on issues key to the future of how New Zealanders pay and save, driven by its new stewardship mandate for cash and a broader currency system. https://www.rbnz.govt.nz/news/2021/07/reserve-bank-confirms-consultations-key-to-the-future-of-how-new-zealanders-pay-and-save

7 July 2021 – Department of Internal Affairs released an update to help AML/CFT reporting entities who are involved in real estate transactions understand risks associated with sight unseen property purchases. https://www.dia.govt.nz/AML-CFT-Sight-unseen-property-purchases---ML-FT-Update


Legal and regulatory update for the life and health insurance sector

30 June 2021 – FMA published its NZX obligations annual review. https://www.fma.govt.nz/news-and-resources/media-releases/nzx-obligations-review-2021

1 July 2021 - Department of Internal Affairs published a new AML/CFT guideline for reporting entities supervised by the DIA to assist them assess the money laundering and terrorism financing risks associated with dealing with other countries. https://www.dia.govt.nz/AML-CFT-Assessing-Country-Risk-Guideline-for-reporting-entities-supervised-by-DIA-published

5 July 2021 – NZ Police Financial Intelligence Unit released the May 2021 AML/CFT Suspicious Activity Report. https://www.police.govt.nz/sites/default/files/publications/fiu-monthly-report-may2021.pdf

 


Legal and regulatory updates for the life and health insurance sector

30 June 2021 – Department of Internal Affairs announced the publication of updated AML/CFT Annual Reporting guidance documents – one for Financial Institutions and Casinos (published in conjunction with the FMA and RBNZ), and one for Designated Non-Financial Businesses and Professions. https://www.dia.govt.nz/AML-CFT-Updated-Annual-Reporting-Guidance-Published

30 June 2021 – RBNZ published commentary on the reduction on banking services available to Pacific Island Nations and the related Pacific Remittance Project established in 2019 with the aim of enhancing access to, and reducing the costs of remittances to the Pacific. https://www.rbnz.govt.nz/news/2021/07/tide-going-out-on-pacific-banking-services

1 July 2021 – NZX announced that the NZ RegCo operating and governance model is now fully established and effective from today as a stand-alone, independently-governed agency performing all of NZX’s frontline regulatory functions. https://www.nzx.com/announcements/374894