Message from FSC about COVID-19

The FSC has issued a message to all policyholders who are worried about the effects of Covid-19 on their current policies, Richard Klipin has suggested that they should contact their financial advisers or insurers. Furthermore, people looking to take out new policies are advised to honestly answer all questions, including their recent travel history.

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Thank you to all the advisers we saw in the recent Getting in Shape seminars

I really appreciate seeing so many advisers at the recent Getting in Shape seminars run by the FSC. It was great for us to see you. For those we had a chance to talk with - it was especially good to have conversations about advice process, valuations, transitional licensing, and all those good things. There is no one-size fits all approach to compliance, as I think the panel discussions showed. 

Special thanks to the advisers that gave up their time and shared generously their experience of preparing their businesses for the new regime: Peter Rickards, Tim Fairbrother, Peter Leitch, Camilla Gribble, Anand Srinivasan, John Bolton, Brendon Neal, Peter Cave, Kieran Sutherland, Paula Jones, Fiona Keenan, Mike Tonks, and Richard Thomas. 

I also very much appreciate the work of the FSC and Financial Advice New Zealand in setting up the roadshow and providing great content. Richard Klipin, David Bishop, Naomi Simpson, Katrina Shanks, Andrew Gunn, and all the folks back in the offices that didn't come on tour but helped to make it a success too. 

Mark Banicevich, thanks for stepping up on the Wednesday and being the master of ceremonies. 

The photo below is from the Dunedin event on Wednesday. 

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FSC Message 17

Here you can find the seventeenth message from the FSC about future changes coming to financial advice regulation. This message contains an invitation to attend the Get in Shape Summit in February 2020, along with a reminder about transitional licence applications and links to the two latest MBIE fact sheets. 


FSC Launches new insurance research

The Financial Services Council has launched new insurance research highlighting the gap between typical and ideal cover levels and some significant challenges facing the industry in lifting consumer engagement.

In the media release the CEO of the FSC, Richard Klipin, highlighted the purpose and key findings: 

The study looked at the three main types of life insurance available in New Zealand; life insurance, income protection/mortgage repayment insurance and critical illness insurance. “While 54% of those surveyed agree that it is important to have the right amount of insurance to cover risks including illness, death and job loss; estimates of underinsurance are much higher,” continued Klipin. Critical illness showed the highest level of underinsurance with only an estimated 9% of Kiwi’s being sufficiently insured, followed by 11% who had adequate income protection/mortgage repayment insurance and 29% with adequate life insurance.

Consumer views are included in this introductory video: 

 

Gambling on life 2020-01-22 164052

The research can be viewed here


Outlook 2020 with Rob Everett

FSC will be holding a breakfast event, Outlook 2020 on 4 February 2020 at Chapman Tripp, Level 35, 23-29 Albert Street, Auckland 1010. Attendees can expect to hear from Rob Everett, the Chief Executive of the Financial Markets Authority. Entry for members is $60 and $100 for non-members.

The agenda is as follows:

7.45am: Breakfast
8.15am: Welcome
8.30am: Outlook 2020 with Rob Everett, Chief Executive, Financial Markets Authority followed by Q&A
9.15am: Networking
9.30am:  Close

Click here to register


End of Life Choice Bill coverage focuses on insurers... it probably shouldn't

Katrina Williams, writing for stuff.co.nz has a piece on how life insurance companies may have to decide how to cope with the new End of Life Choice Bill if it becomes law.

The first thing to be clear about is that life insurers are bound by their current contracts in the marketplace. I don't think that the article is as straightforward about this as it should be - it therefore raises doubts about claims payment under current contracts that are not really there. As one insurer in the article relates, most insurance policies cover suicide provided that the policy has been in force for at least 13 months and there was no evident intention to defraud the insurer. 

Another point to note is that end of life choice typically happens in old age. Although the debate about euthanasia tends to highlight extreme cases - like cases of severe illness in younger people because of the tragedy of them - these are rare. When you examine these cases more closely they are often (although not always) as a result of long-pre-existing disorders, sometimes congenital. Few such people own life insurance, and few people hold life insurance into very old age where most end of life choices are likely to be made. The actual number of policies affected is likely to be small, and in most cases, these claims are being met already under payments for terminal illness, and eventual death, whatever the exact cause.

Insurers are conscious, also, of the risks of commenting on a subject where views vary considerably and feelings are strong. The business of an insurer is insurance, not political advocacy. Whatever the views of individual executives might be, their shared project is the business, and they are conscious of that particular, defined duty to their clients. That is evident in Richard Klipin's response, as CEO of the Financial Services Council: 

"The life insurance industry and individual companies will work in a careful, considered way to review policies to ensure that they remain fit for purpose, in line with international best practice, and continue to provide the support and coverage that New Zealanders expect," 

There are wider implications if the Bill becomes law. Product design must consider moral hazard, which may be slightly elevated in the case that a decision to end one's life is more acceptable and legal. These challenges, however, are usually successfully navigated in this market, as they have been in other markets. The existing moral hazard of the incentives to fraud and murder are very well managed by New Zealand insurers through the underwriting process and through the law. There are many issues to consider in the End of Life Choice Bill debate, but how insurance may operate is not the most important. 

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