Science behind high Income Protection premiums, and more daily news

Recently we reported that Income Protection prices are on the rise as a result of the Australian market and COVID-19. New Zealander insurers are now being urged to amend processes and premiums before regulators intervene and introduction mandatory guides. Partners Life begun the conversation when revealing that it has increased IP premiums by 12% and made policy changes. Kris Ballantyne, chief marketing officer, has said that Partners wishes to offer affordable policies that customers can maintain for as long as they need. AIA and Cigna have both noted that they aren’t looking to introduce significant premium increases.  

“It took insurer Partners Life to break the silence last month when it revealed a brave plan to start publishing the content of discussions with the Financial Markets Authority.

 

In doing so, it revealed it lifted its income protection premiums by 12 per cent in the past year, and had made policy changes, including not allowing self-employed people to any longer select an “agreed value” of income to be covered, instead limiting cover to actual loss of earnings.

 

Partner’s Life’s chief marketing officer Kris Ballantyne said the company was a “first mover” on income protection, driven by wanting to provide policies they [consumers] could afford to keep as long as they needed it.

 

It was a big challenge as there were a lot of agreed value policies covering self-employed people, and owners of small businesses.

 

Neither of its two big rivals, AIA nor Cigna, was expecting to make such large premium increases, though AIA had stopped selling new policies in which the income covered automatically increased by 5 per cent a year.

 

AIA chief product officer Len Elikhis said that over time, “the insured’s benefits would creep up and approach the insured’s income”.

Shane Burdack, senior underwriting consultant as Swiss Re Australia highlighted that customers with significant wealth had very little incentive to return to work when on claim, resulting in increased premium prices.

“Swiss Re senior underwriting consultant in Australia, Shane Burdack, said that in New Zealand insurers gave little thought to the net wealth of policyholders.

 

Yet people with significant wealth – sometimes through investments, sometimes because of payouts from other insurance policies – had a low incentive to go back to work, and stayed “on claim” for longer driving up costs.” Click here to read more

  

In other news

nib: nib takes place among top 100 most diverse firms worldwide

Southern Cross: Southern Cross is offering members a $149 voucher when they join Snap Fitness on a minimum 12-month term

Southern Cross: Southern Cross is offering members 10% off the retail price of a monthly LES MILLS On Demand subscription

 

 

 


Core services focus by banks sees them exit insurance

Current economic conditions are accelerating a recent trend in banking - a focus on core services - as evidence, we offer this series of announcements:

Alongside this, traditional branch services are being cut or slimmed down. This shift to digital was given a further shove by lockdowns so the time is right to re-appraise the value of each branch in the network. In addition to that, the value of each service in the branch is being reconsidered as well. With the decision by ANZ to withdraw from offering cash foreign exchange services being announced: https://www.stuff.co.nz/business/123131192/anz-to-stop-offering-foreign-currency-citing-drop-in-demand-due-to-covid19 

Although perhaps this is not just about economic conditions, but also competitive ones. Digital disruption is coming to the world of banking. A slew of online and consumer lenders has been grabbing attention (and high valuations) on the ASX. More challengers are likely to come. This is prompting a strategic rethink by several banks. The regulatory environment is shifting as well, creating more space for the change:


Legal and regulatory update for the life and health insurance sector

21 Oct 2020 – Department of Internal Affairs published a new webinar on the AML/CFT enhanced customer due diligence obligation on its website. https://www.dia.govt.nz/Enhanced-Customer-Due-Diligence-Webinar

22 Oct 2020 - Simone Robbers, RBNZ Assistant Governor & General Manager of Governance, Strategy and Corporate Relations, delivered a speech to the 16th Annual Financial Markets Law Conference titled “Working together to support economic recovery, strengthen resilience, and develop culture”. https://www.rbnz.govt.nz/news/2020/10/working-together-to-support-economic-recovery-strengthen-resilience-and-develop-culture

22 Oct 2020 – FMA released a consultation titled “Recognition of Australian adviser qualifications”, relevant to the upcoming financial advice provider regime, with submissions closing on 20 Nov 2020. https://www.fma.govt.nz/compliance/consultation/consultation-recognition-of-australian-adviser-qualifications/

20 Oct 2020 – MBIE published information on its website an update on COVID-19-related business relief measures, noting that some have been extended, while others are no longer available or are soon to expire. https://www.mbie.govt.nz/about/news/update-on-covid-19-related-business-relief-measures/

21 Oct 2020 - The first statement defining the purpose of New Zealand’s retirement income system was released by the Retirement Commissioner. https://cffc.govt.nz/news-and-media/news/purpose-of-nz-retirement-income-system-defined/


 Aon look to acquire Willis Towers Watson, and more daily news

After announcing its acquisition plans in March 2020,  Aon has submitted an application to the Commerce Commission to acquire Willis Towers Watson. Aon is looking to incorporate the five Willis Towers Watson offices across the country into wholly owned subsidiaries.

“New Zealand’s Commerce Commission has received Aon’s clearance application to acquire the entirety of Willis Towers Watson, as part of a global transaction.

The step was revealed by a statement from the commission, which is New Zealand’s competition, consumer and regulatory agency.

In New Zealand, Aon and Willis Towers Watson both offer a range of insurance brokerage services, including for commercial insurance, reinsurance, group health and welfare benefits, and personal and life insurance. Both firms also provide investment consulting services to institutional investors.

Aon has 58 offices across New Zealand, while Willis Towers Watson has five – Auckland, Wellington, Christchurch, Tauranga, and Dunedin.

Under the proposed transaction, Willis Towers Watson will become a wholly owned subsidiary to Aon. According to the Commerce Commission, it gives clearance to a merger application if it is able to successfully prove that that the deal is unlikely to have the effect of substantially lessening competition in a market.” Click here to read more

In other news

AMP KiwiSaver scheme to go passive, and slash fees

Strategi: The new Privacy Act 2020 2pm webinar

RBNZ: Reserve Bank seeks to preserve benefits of cash


Fluctuations in Income Protection prices, and more daily news

The New Zealand Herald have reported on Income Protection price increases. Financial advisers have credited the changes to IP to the Australian IP market although COVID-19 has played a role in the change in pricing and the underwriting process. During the FSC digital Generations 2020 Conference, Kimberley Robinson from Swiss Re Australia warned that it was important that New Zealand insurers make amendments. Robinson highlighted that in Australia the regulator had to step in after losses totaled A$3 billion in a five-year period. Robinson said that the losses were a result of an increased focus on sales volumes, cross-subsidisation, a competitive market, and in some instances, insurers providing more benefits on claims before claim time.

At an industry conference held online this week by the Financial Service Council insurance underwriter Swiss Re warned that New Zealand insurers also needed to make changes.

Kimberley Robinson, product solutions leader at Swiss Re in Australia, said Australian regulator APRA had intervened after big losses in the sector which added up to around A$3 billion over five years.

"We have suffered losses on individual income protection on an unsustainable level."

Robinson said factors contributing to those losses included an increasing focus on sales volumes over profitability, cross-subsidisation of the product and a fiercely competitive market.

"In some cases we were providing customers with more benefit on claim than they earned before claiming."”

To tackle issues relating to sustainability and customer support, the FSC recently set up a CEO life insurance forum and ran its first meeting. Although Richard Klipin didn’t comment on the pricing of IP, he noted that the sector is not growing and that it is instead expanding sideways. Klipin highlighted that the challenge for the industry to transforming insurance into something that is relevant, affordable and accessible. He continued by saying that insurers need to focus on having the ability to deliver on the promise of cover

In other news

nib: nib is sponsoring the Norwood and Miraka Limited Charity Golf Tournament for a third year

Advisers on Banks survey results revealed


Legal and regulatory update for the life and health insurance sector

19 Oct 2020 – Privacy Commissioner launched NotifyUs, a new online tool enabling businesses and organisations to easily assess whether a privacy breach is notifiable. https://www.privacy.org.nz/news-and-publications/statements-media-releases/office-of-the-privacy-commissioner-launches-privacy-breach-reporting-tool/

20 Oct 2020 – RBNZ released draft guidance on what regulated entities should consider when managing cyber resilience. The consultation on the draft guidance closes on 29 Jan 2021. https://www.rbnz.govt.nz/news/2020/10/reserve-bank-releases-guidance-to-help-build-cyber-resilience


Results of FSC Financial Resilience Index, and more daily news

The FSC has released the latest Financial Resilience Index results. The latest results indicate that New Zealanders are still resilient and confident about financial matters. The index examined views on five indicators: financial confidence, literacy and preparedness, job security and wellbeing. 72% of participants reported that they feel reasonably, very or extremely confident in their financial standing.

“The latest round from the FSC’s Financial Resilience Index shows that despite the last six months being one of the most challenging periods in recent history, New Zealanders have remained remarkably resilient and confident when it comes to financial matters.

The Financial Resilience Index is a major tracking survey of New Zealanders’ views on five key financial resilience indicators: financial confidence, literacy and preparedness, job security and wellbeing.

“The responses in early August show that after initial uncertainty Kiwis remained resilient throughout this unprecedented period, from the introduction of Covid-19, to living in lockdown, right through to the return to alert level one,” says Richard Klipin, FSC chief executive.

“Despite these dramatic changes, New Zealanders continued to have incredible financial confidence, with around 72% of respondents still feeling reasonably, very or extremely confident when it came to their finances.”

The index found that although there is underlying anxiety, New Zealanders remain resilient. The FSC’s findings differs from the key findings of Cigna’s COVID-19 Global Impact Study, which highlighted that the majority of its 20,000 participants have a pessimistic view on their financial position.

In other news

Cigna: Cigna Parenting Survey 2020 found that 36% of parents surveyed had a will but no life insurance

FMA revealed that full licence provisions would be released mid-November  during FSC conference

Financial Advice: New board members announced at Financial Advice NZ


Cigna COVID-19 Global Impact Study insights, and more daily news

Cigna has published its COVID-19 Global Impact Study.  The study examined the financial confidence of New Zealanders before and after the arrival of COVID-19 to New Zealand. Cigna built on data from the Cigna 360 Well-Being Index. The study is primarily based on data collected from May 2020 to August 2020 to understand the change in attitudes. The study that had over 20,000 participants found that New Zealanders are becoming more pessimistic about their financial position.

“Our Cigna COVID-19 Global Impact Study: Resilience and Well-Being through the Pandemic* shows that New Zealanders are becoming increasingly pessimistic about their financial position, which highlights the increasing importance of financial advisers in supporting our customers through this time of economic uncertainty.  

This latest study builds on the data we’ve collated since 2014 through our Cigna 360 Well-Being Index which tracks perceptions about the health and well-being of people across our international markets.

Our 2020 study includes data collected from May to June and July to August to understand people’s changing attitudes to the unfolding COVID-19 crisis.” 

The study found that the views of New Zealanders coincided with views of others around the world. The financial confidence of those surveyed in all markets was generally dim, with 49% of participants expressing that they have the worst possible outlook on the impacts of the economic environment on their financial situation. Cigna has noted that New Zealanders are in need of good advice during this time and said that it will continue to monitor attitudes.

“The impacts of COVID-19 on New Zealanders financial well-being fall broadly into line when compared to other international markets. Across all markets surveyed 49% of respondents continue to have the worst possible outlook on how the economic environment will impact their financial situation and their ability to maintain current standards of living.

Now more than ever New Zealanders need access to good advice. Together we can leverage insights such as these to build confidence, put advice front of mind, and ensure we continue to meet the changing needs of New Zealanders.

 

We’ll continue to monitor how New Zealanders’ attitudes towards our wellness measures change over the coming months and will share any significant changes with you.” Download CIGNA - RESILIENCE & WELL-BEING THROUGH THE PANDEMIC SEP 2020

In other news

FSC: Financial Services Council chairman Rob Flanagan said he was proud to see how the group’s members came together during the Covid-19 pandemic

RBNZ: The Reserve Bank predicts that the economy will not reach levels seen in 2019 until 2022

Fidelity Life: FY20 annual results have been published

(Chatswood will update the industry financial performance index and individual financial performance charts in the quarterly life and health report for the quarter to 15 December which will be issued by 20 December so you can add it to your holiday reading pile). 


Legal and regulatory review for the life and health insurance sector

16 Oct 2020 – Privacy Commissioner website provided details for the next PrivacyLive Forum to be held during Privacy Week on 5 November 2020, with the presentation focused upon the Privacy Act 2020, due to come into effect on 1 Dec 2020. https://www.privacy.org.nz/resources-2/forums-and-seminars/privacy-live-our-speaker-series/

19 Oct 2020 – FIU released the monthly AML/CFT September 2020 Suspicious Activity Report including, for example, a link to the FATF September 2020 report titled “Virtual Assets Red Flag Indicators”. https://www.police.govt.nz/sites/default/files/publications/fiu-monthly-report-sep-2020.pdf


Asteron Life appoints new CEO, and more daily news 

Suncorp New Zealand has permanently appointed Jimmy Higgins as CEO. Since the departure of Paul Smeaton in July Higgins has been the acting CEO. Higgins joined Suncorp Group in 2008 and has had various roles within the company. Suncorp Group CEO Steve Johnston has said that Higgins is highly experienced and has a deep understanding of the industry.

“Suncorp New Zealand has today announced the appointment of Jimmy Higgins to the role of Chief Executive Officer, effective today.

Higgins joined Suncorp Group in 2008 and has held a range of senior and executive positions across its Australian and New Zealand insurance businesses. Prior to being appointed acting chief executive, he held roles in the New Zealand business as CFO and executive general manager, claims.

Before joining Suncorp, he was a Chartered Accountant specialising in audit and forensic accounting.

Suncorp Group chief executive Steve Johnston says Higgins is a highly experienced financial services executive with a deep understanding of the insurance industry and New Zealand insurance market.”

Higgins noted that he is proud to be part of Suncorp New Zealand and that he is excited to lead it towards the future.

“Higgins says: “Our business is uniquely positioned to make a difference in the lives of Kiwis and I’ve always felt very proud to be a part of that.

“Suncorp New Zealand has gone from strength to strength in recent years and I’m excited to lead a team of truly passionate people as we shape our business for the future and continue to deliver more for our customers and intermediary partners.”” Click here to read more

In other news

nib: Putting Health into Life and Work Seminars to be held at North Harbour Stadium on Tuesday 20th October from 9:00am - 11:00am

nib: Putting Health into Life and Work Seminars to be held at Riccarton Park Functions Centre on Thursday 22nd October from 12:00pm - 2:00pm

Regulator on poor processes and bad outcomes

Income protection: Lessons from over the ditch


FSC Session: Professional Advice - Get In Shape: The Next Bite of the Apple, supported by Chatswood Consulting

Day 2 of the conference kicked off with the Professional Advice - Get In Shape: The Next Bite of the Apple session. This session was sponsored by Chatswood and saw Richard Kliplin lead the current and relevant regulatory discussion with Sharon Corbett, John Botica, Angus Dale-Jones, and Derek Grantham. During the session viewers had the opportunity to hear from MBIE, the FMA and the Code Working Group. The insightful session revealed key licencing stats and offered commentary on CoFI and FSLAA. The session allowed viewers the opportunity to ask the regulator questions. It was great to see many viewers utlising the ask a question feature on offer. Questions included:

·       When will the FMA release the requirements for a financial advice provider full licence, and the final standard conditions?

·       Will the FMA do anything to smooth full licence applications across the 2 year period or deal with the rush towards the end of the period?

·       What are the expectations around serving existing clients (pre-FSLAA), and how are these expectations reflected in the duties in the law or the CODE?

·       There are two places in the transitional licence application where the user experience is unintuitive. What are the FMA doing to ensure that the user experience in full licence applications is intuitive, and applicants won’t get stuck unnecessarily?

 

FSC day 2 Oct 14 3FSC day 2 Oct 14 3

 


Financial Advice Trusted Adviser launches, and more daily news

Financial Advice has launched its Trusted Adviser mark although the public launch is scheduled for February 2021 to coincide with the new regime. The Trusted Adviser mark looks to recognise and award advisers that meet the set requirements.

“The Trusted Adviser mark is awarded to those Financial Advice NZ members who show they have committed to qualifications and continuing professional development obligations at a level higher than that required by New Zealand law and code.

The public launch of the mark is scheduled for February 2021 to coincide with the new financial advice regime coming into effect the following month. At that time when the AFA and RFA designations disappear, qualifying Financial Advice NZ members will have this new designation to show the public that their high level of qualification, experience and ethics has been recognised by a professional body.”

Those that meet the amended requirements can now apply to have the accreditation before the new regime.

“Applications are open now so qualifying advisers can have the Trusted Adviser mark ready before the March 15 2021 new regime.

After the feedback received during the consultation phase, some of the criteria has been amended in line with your views. Please review the application details as many members are not required to apply, only register, as we already know they meet the criteria. Click here to apply

In other news


Who uses digital advice?

Perhaps you think it’s the young, but the young may not have the confidence to use a robo adviser, while an older person who has some experience may now feel competent enough to talk with the robot. Confidence counts - a caution not to design for the wrong audience. This example offers some insights along those lines - although it is about robo advice for investing, which also has the complicating factor that few young people have sufficient assets to make it work. 

Link: https://www.financial-planning.com/news/who-actually-uses-robo-advisors-new-data-reveals-surprising-answers


FSC Generations Journalists Panel

Interesting to hear the journalists panel talk at the FSC conference. Lots of commentary on the election campaign, less that is directly relevant to the financial services sector, but some big themes looming in the background: tax cuts and debt.

This contrasted significantly with the interview with James Shaw, Co-leader of the Green Party that had a lot of discussion of the proposed law to require reporting on assets that can be affected by climate change. That is immediately relevant to every fund manager and insurers. As an investor I am interested - it can be difficult to understand possible exposure clearly in many companies, let alone funds that invest widely. It is a valid criticism of investing through index trackers that you are bound to buy a bunch of shares in industries that we know will suffer a lot of disruption over the next couple of decades.

After James Shaw, we had Emma Mellow, candidate for Auckland Central for the National Party. Emma is someone I have worked with through FSC conference committee. Her background, work ethic, and practical focus on what matters are clearly excellent. I live in the Northcote electorate, but if I did live in Auckland Central I know that I would have a great representative in Emma Mellow if she were elected. 

Journalists Panel October 15 FSC Conference


FSC Generations conference begins and more daily news

The FSC Generations 2020 Digital Conference started on Tuesday 13 October at 8am. The three day event has drawn a crowd of over 600 people. Richard Klipin has said that he is thrilled to launch a “digital edition” of the conference. Klipin highlighted that there will be over 150 speakers from many different disciplines. This conference will provide attendees the opportunity to hear from industry experts and other individuals on current issues and themes and the implications.

“The Financial Services Council (FSC) kicked off its 2020 Digital Conference this morning, with over 600 individuals from across the sector registered to attend sessions across three days.

FSC CEO Richard Klipin said he was thrilled to launch a “digital edition” of the annual conference, with this year’s theme being ‘Generations’ – a reflection of the responsibility the financial services sector holds to help different generations make good financial decisions.

The line-up of over 150 speakers includes industry leaders from across the insurance, investment and retirement planning sectors, along with wellbeing gurus, politics commentators and representatives from the Reserve Bank of New Zealand. Klipin said attendees can expect “robust political debate” between party spokespeople and ministers, along with insightful discussions from the likes of Stuff CEO Sinead Boucher and FMA CEO Rob Everett.

“We’re in for some really interesting discussions, especially when so much has changed over the past year,” Klipin commented.

“We’re keen to engage with the industry, find out where the ‘pulse of the nation’ is, and also ask some questions about the issues which are really key to the sector.”

Klipin said COVID-19 had challenged everyone to “be better” at supporting both their teams and their customers, and some of the conference’s key themes are around balancing wellbeing and creating a more sustainable future.” Click here to read more

FSC conference 13 Oct 2020

Financial Advice: An update on the Australian economy and asset markets webinar

Hunters v gathers in the new world


FSC Session: Insurance - Accelerating the Customer Agenda. What Needs to be True?

The FSC Generations conference is well underway. Yesterday I attended numerous sessions but thought I would write up some key highlights from the session 'Insurance - Accelerating the Customer Agenda. What Needs to be True?'

The session was hosted by Mark Banicevich and had a star-studded panel including Gail Costa, Nick Stanhope, Don Allerston, Clare Bolingford, and Russell Hutchinson.

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The reason for the session was to discuss what needs to be done going forward to meet the customers needs when it comes to life insurance. Three areas in particular featured a lot throughout the session: Affordability, Complexity and Trust. Below are some key points discussed:

  • Personal risk insurance exists to support Kiwi families – that is why we are here. But too many New Zealanders have no or not enough insurance. Only 38% of respondents from recent research have life insurance.

  • Customers all have different needs, so they need to work with an adviser to meet those needs as it requires time and knowledge to understand life insurance. They need to understand differences in products across the market. 

  • Trust is also extremely important to customers. Technology has also become more important, due to lockdown. Digital experience is also very important, we need to adapt and evolve as an industry.

  • Advice builds trust and confidence. Customers need predictability, they want assurance insurers will deliver on their promise. They expect flexibility and customisation – that is where we should be moving to.

  • The advisers are not a growing number, we need to bring more advisers into the industry. They tend to operate to their own client base.

  • It would be useful to find out how many Pacific island and Maori advisers there are. Do we currently have enough to influence the market to different ethnicities?

  • As an industry we need to find new customers via platforms that suit them. We need to build more engagement – things customers are involved in they tend to remember well.

  • Clients’ income is dropping but premiums are increasing significantly. How do we address that CPI is increasing at 1.5% but premium percentage increases are now regularly up in the double digits. We need to be conservative with pricing, so we are around long term to be able to pay claims. Automation will help bring costs down. There is an assumption that life insurance is too expensive without people even looking into it, how can we change this? 

  • We need to get in early with educating on life insurance – teach kids at school, what are financial products? Help them raise discussions and make decisions.

  • COVID-19 has already made the industry different – some of the trends we need to take from it are technology, digital, or still face to face meetings. We should let me the consumer decide and we respond to their needs.

  • The FMA asks to just do the basics well. The processes are not always there to achieve customer satisfaction. Embed a culture that is more customer eccentric. There won’t be a dramatic shift from the FMA, what was set in the code and conduct review is it.

  • Conduct risk management needs to be elevated to the same level as financial risk management for the customers sake.

  • We need to demystify the products and get a clearer customer understanding. We should come together and create centralised terms across the industry to help with customer understanding and to build trust.

  • There are numerous giant companies like Amazon who have made a move into the insurance industry – are we saturating it?

  • The pace of change has to be more manageable. We need to be better at data and insights – we currently tend to live off older information. We need to keep pace with changing needs and demographics. It is a continuous journey, it is not a one quick fix.
  • The expectations of customers is increasing, people are more time poor. Convenience is a huge thing, but we also know the value of advice. In the future we may move to a more streamlined online advice.

  • We need to use tools to assess health and wellbeing and assist with advice on how to improve these such as smart watches and apps.

Overall, all the topics discussed throughout the session such as price, simplicity, engagement, wellness and technology were all customer focused so it will be interesting to see what the future holds - it looks hopeful.

 

 

 

 


Legal and regulatory update for the life and health insurance sector

14 Oct 2020 – The Financial Advisers Disciplinary Committee website has again been amended such that the “Next Hearing” has been changed from 2 Nov 2020 to 19 Nov 2020, again with no further information provided other than details of the venue. https://fadc.govt.nz/upcoming-hearings/

14 Oct 2020 – Good Returns reported the launch of the Trusted Adviser mark by Financial Advice NZ, noting that the public launch of the mark is scheduled for February 2021. https://www.goodreturns.co.nz/article/976517649/trusted-adviser-mark-finally-launched.html


Legal and regulatory update for the life and health insurance sector

13 Oct 2020 - Minister of Commerce and Consumer Affairs, the Honorable Kris Faafoi, diary for August 2020 released, with the following potential financial services sector related meetings noted:

  • 4 August 2020 - Meeting with Financial Services Federation (Simon Jensen, Lyn McMorran and Bethany Bray)
  • 10 August 2020 – Meeting with Business NZ (Kirk Hope)
  • 12 August 2020 – Phone call with NZ Bankers Assn (Miles Erwin)
  • 24 August 2020 - Meeting with Mastercard (Cassandra Smith, Ruth Riviere, Chris Siorokos)
  • 31 August 2020 - Meeting with FMA (Rob Everett and Sarah Vrede)

https://www.beehive.govt.nz/sites/default/files/2020-10/Hon%20Kris%20Faafoi%20-%20Proactive%20Diary%20Release%20-%20August%202020.pdf