FMA confirms list of essential financial services - and helps insurers out with a claims

The FMA has confirmed a list of essential financial services, worked out in conjunction with the council of financial regulators in a recent statement:

The Government has confirmed that financial services are essential services that will continue operating when New Zealand moves to level 4 in its COVID-19 response.

The Council of Financial Regulators (CoFR) has consulted with the Government to provide detail on those financial services that should be considered essential services. This includes all financial institutions and suppliers or providers to those entities that are essential to ensure continued operation of our financial system and access to this system for all New Zealanders.

The detailed list includes specific inclusion for suppliers where they support essential operations, including the importance of those involved in claims: 

Access to medical records through doctors’ surgeries
Psychologists, counsellors etc. (mental health claims)
Access to medical laboratories for medical tests
Private hospitals and associated staff/professionals
Access to external medical specialists.

This will be a great relief to insurers and their clients. While we all expect that health resources will go first to saving lives, while there is capacity to provide help with claims, it is important.  Some clients depend on claims payments these for their livelihood. Even for clients that are not on claim, confidence in insurers is an important component of confidence in the financial system.

 


The FMA wants advisers to keep helping their clients

The FMA is encouraging advisers to keep helping their clients: 

The Government has confirmed financial services among its list of essential services that need to continue to operate when New Zealand moves to Level 4 in its COVID-19 response.

Financial advice is not covered by the definition from the Government of workplaces/offices that need to remain open but it clearly remains an important service.

Our expectation is that most advisers should be able to work from home, with no need to staff offices.   This means advisers can continue to provide support to clients without compromising the Government’s social distancing objectives.

We encourage advisers to contact their clients and be available to help with their inquiries during these challenging times.

https://www.fma.govt.nz/news-and-resources/covid-19/fma-covid-19-update-24-march-2020/


Will FSLAA implementation get delayed too?

It would probably be helpful if FSLAA implementation were delayed as well. Not just for insurance advisers, but for our community as a whole. During an event in which there is a heightened consciousness of risk insurance companies and advisers are much in focus, with plenty of calls and activities from clients. There has been a jump of 20% in quotemonster usage over a couple of weeks ago, and insurers are experiencing higher levels of inquiry and application. As a sector we have a lot on our plates with getting people working effectively from home and supporting our customers. https://www.goodreturns.co.nz/article/976516526/regulation-slowing-is-fslaa-next.html 


RBNZ puts changes on hold, will the FMA and the Minister do the same?

RBNZ announcement today puts a whole raft of changes on hold for a period. Are the FMA and Minister considering something similar for the wider financial services sector?

The RBNZ announcement is available at https://www.rbnz.govt.nz/news/2020/03/regulatory-relief-to-provide-headroom-for-customer-focus-and-risk-management


Fees and Levies - wanted: the option not in the paper

Numerous advisers have written to me about MBIE's consultation on the FMA fees and levies. In essence, they have spotted that the paper either calls for an increase based on the current approach, or an increase in the portion recovered from market participants. Succinctly, the view of most advisers, which I share, is that if the regulatory structure is all about building confidence in financial services and, if it is so good for consumers generally, then a much larger proportion should be paid for by government/consumers via normal taxation revenues. 


Council of Financial Regulators Strategy Focus

29 Nov 2019 – RBNZ & FMA announced that the Council of Financial Regulators had set its priorities for the 2020 year, incorporating:

  • Climate change
  • Financial inclusion and consumer engagement
  • Conduct and governance
  • FinTech
  • Residential Property Insurance
  • Credit Unions
  • Review of the Regulatory System Charter

Climate change earns its place at the top of the list mainly due to the risks general insurers and banks face. For general insurers the risks are more obvious: losses due to extreme weather conditions are already a factor considered by most. That they are increasing now means that regulators are seeking those risks to be quantified and stated as a starting point for assessing systemic risk and portfolio issues.

Then exclude the points on residential property insurance and credit unions and you have a good guide to the issues that may inspire thematic reviews, or inform things like the development of license conditions for FAPs.

Consumer engagement is particularly relevant to advice process, but will also turn up as a strong theme in conduct of financial institutions. A more engaged and informed customer is more likely to make better use of their product, complain when things go wrong, and understand disclosures.


FMA fee consultation - a big increase is sought

FMA Funding consultation by MBIE is announced below. In summary, and very broadly, if the enhanced funding model is adopted with all of the increase funded by increased levies, all current levies would, very roughly, approximately double. 

“As the financial markets regulator, the FMA plays a crucial role in ensuring New Zealand’s financial markets are fair, efficient and transparent,” Sharon Corbett, Manager Financial Markets at the Ministry of Business, Innovation and Employment (MBIE), says. The FMA’s funding was last reviewed in 2016. Since then, the FMA’s remit has broadened and now is the right time to look at its funding."

You can find out more at this link: https://www.mbie.govt.nz/about/news/consultation-opens-on-fma-funding-and-levies/ 

 


Transitional Licensing Conditions Submissions Review

Looking at the submissions completed on the consultation on standard transitional licensing conditions, one would be forgiven for questioning whether industry participants have really understood these expectations. Note the following:

  • There were just 30 submissions
  • Even allowing for the fact that adviser businesses were covered by industry body submissions (FANZ, IBNZ, and ICNZ), there were less than 20 submissions directly from entities expecting to be licensed from the body of thousands of expected licence applicants.
  • Perhaps my compliance guru submission comment that the request in the consultation to disclose what written records are currently maintained was a barrier to existing advisory entities completing submission 
  • Perhaps just as likely, there was not good recognition of the expansion of the requirements and their potential impact.
  • In any event, the submission responses provided outlining current written records appeared remarkably silent as to whether the records would demonstrate compliance, while acknowledging that the question did not specifically ask for this.
  • I definitely think that the small number of submissions suggests there is poor recognition that these conditions are likely to be an expression of the FMA expectation on all financial service providers within the enhanced focus on conduct.

 


FMA Release Transitional Licence Standard Conditions

The link below is to the FMA's newly released transitional licence conditions document.

Download FSLAA-transitional-licence-standard-conditions

If you are keen, you may also with to check out the regulatory impact statement (14 pages) and a summary of the submissions from the consultation (116 pages). There were only 30 submissions. To check out those details go to this link and choose the item on standard conditions. 

Returning to the subject of transitional licence conditions. This is obviously especially relevant to insurers, indeed any product providers, that will manage relationships with adviser businesses seeking transitional licences. It is even more important to you if you are about to apply for a transitional licence or a full licence.

Note also that I consider that the provisions around record keeping and internal complaints are such that one could believe that these conditions express an FMA view about what all Financial Services businesses should be meeting, not just those seeking a transitional FAP licence.