Simon Papa of Cygnus Law writes on COFI

Simon Papa writes at interest.co.nz a reflection on the principles behind the Financial Markets (Conduct of Institutions) Amendment Act “rejects, without proper validation, decades of orthodoxy on market regulation and basic market concepts”. It is well worth a read, at this link.

Legal and regulatory update for the life and health insurance sector

21 Dec 2023 - FMA warns of increase in fake product disclosure statement scams targeting New Zealanders https://www.fma.govt.nz/news/all-releases/media-releases/fma-warns-of-increase-in-fake-pds-scams/

21 Dec 2023 - The Taxation Principles Reporting Act Repeal Bill has been passed by Parliament. https://bills.parliament.nz/v/6/9faa9e21-c7a9-4433-7e32-08dc003a05e3?Tab=history

15 Jan 2024 - APRA retires prudential practice guides on the risk management framework for life and general insurers. https://www.apra.gov.au/news-and-publications/apra-retires-prudential-practice-guides-on-risk-management-framework-for-life

16 Jan 2024 - The Commerce Commission has received an application from Payments NZ Limited (Payments NZ) seeking authorisation to work with API providers and third parties to develop arrangements that, according to Payments NZ, will facilitate a more well-utilised, secure and innovative open banking framework. https://comcom.govt.nz/news-and-media/media-releases/2024/payments-nz-seeks-authorisation-to-further-develop-its-open-banking-framework

17 Jan 2024 - The Australian Prudential Regulation Authority (APRA) has released for consultation minor and consequential amendments to the superannuation prudential framework.  This consultation is open  until 28 February 2024. https://www.apra.gov.au/news-and-publications/apra-releases-consultation-on-minor-and-consequential-amendments-to

18 Jan 2024 - ASIC urges AFS licensees to register their financial advisers and provides a short extension to facilitate compliance. ASIC’s records show that as at 18 January 2024, 4,036 (26%) financial advisers who provide personal advice to retail clients on relevant products (relevant providers) are still not registered with ASIC.  https://asic.gov.au/about-asic/news-centre/news-items/asic-urges-afs-licensees-to-register-their-financial-advisers-and-provides-a-short-extension-to-facilitate-compliance/

23 Jan 2024 - The European Commission has determined that New Zealand has an adequate level of protection for personal data transferred from the European Union. Essentially ‘adequacy’ says that our legislation isn’t the same as Europe’s, but its outcomes are similar and can be trusted. https://privacy.org.nz/publications/statements-media-releases/new-zealand-is-adequate-and-we-couldnt-be-happier-about-itnew-news-page/

23 Jan 2024 - The Reserve Bank of New Zealand - Te Pūtea Matua has launched a consultation on activating debt to income (DTI) restrictions and loosening loan to value ratios (LVR) for residential lending. Consultation closes 12 March 2024.  They propose initially setting the DTI policy to allow banks to lend:

• 20% of their residential loans to owner-occupiers with a DTI greater than 6; and

• 20% of their residential loans to investors with a DTI greater than 7.

They are proposing easing the LVR settings at the same time as activating DTIs. They propose easing LVRs to allow:

• 20% of owner-occupier lending to borrowers with an LVR greater than 80%; and

• 5% of investor lending to borrowers with an LVR greater than 70%. 

https://www.rbnz.govt.nz/hub/news/2024/consultation-on-dti-and-lvr-settings

24 Jan 2024 - ASIC is implementing the Australian Government’s amendments to the approved principles for the administration of the financial adviser exam that were registered on 18 January 2024.  https://asic.gov.au/about-asic/news-centre/news-items/asic-incorporates-legislative-changes-to-the-financial-adviser-exam/

25 Jan 2024 - The RBNZ have released a bulletin that discusses the drivers of dysfunction in key NZ dollar financial markets in 2020, and their actions to support financial market functioning during this time. https://www.rbnz.govt.nz/hub/news/2024/in-retrospect-rbnzs-support-of-financial-market-functioning-at-the-onset-of-covid-19

29 Jan 2024 - The Australian Prudential Regulation Authority (APRA) has released a response on its proposed changes to the Economic and Financial Statistics (EFS) reporting standards and guidance. https://www.apra.gov.au/news-and-publications/apra-responds-to-consultation-on-updates-to-modernised-economic-and-financial

30 Jan 2024 - The Chief Ombudsman Peter Boshier says New Zealand must be even more open and direct if it is to improve its ranking as one of the least corrupt countries in the world. New Zealand slipped in the 2023 Transparency International Corruption Perception Index to 3rd place on 85 points, after being ranked 2nd equal with Finland on 87 points in 2022. https://www.ombudsman.parliament.nz/news/corruption-perception-results-nz-must-be-more-open-chief-ombudsman

30 Jan 2024 - Reserve Bank Chief Economist Paul Conway delivers speech on the importance of quality research and data. https://www.rbnz.govt.nz/hub/news/2024/the-importance-of-quality-research-and-data

31 Jan 2024 - The Australian Prudential Regulation Authority (APRA) has released the Annual Superannuation Bulletin for the year ended 30 June 2023 and the Quarterly Superannuation Industry publication for the September 2023 quarter. https://www.apra.gov.au/news-and-publications/apra-releases-annual-superannuation-bulletin-for-202223-financial-year-and

31 Jan 2024 - The Australian Prudential Regulation Authority (APRA) has published its supervision and policy priorities for the first six months of 2024. https://www.apra.gov.au/news-and-publications/apra-outlines-2024-supervision-and-policy-priorities

31 Jan 2024 - The Australian Federal Court has declared Westpac Banking Corporation (Westpac) engaged in unconscionable conduct in October 2016 when executing a $12 billion interest rate swap transaction, the largest of its kind in Australian financial market history. Westpac will pay the maximum penalty of $1.8 million in relation to the conduct, together with $8 million for ASIC’s litigation and investigation costs. https://asic.gov.au/about-asic/news-centre/find-a-media-release/2024-releases/24-011mr-court-declares-westpac-engaged-in-unconscionable-conduct-for-interest-rate-swap-maximum-penalty-applied/

31 Jan 2024 - ASIC has published a summary document on Understanding and Responding to Identification Challenges for First Nations Consumers following a November workshop. https://asic.gov.au/about-asic/news-centre/news-items/asic-releases-summary-document-for-indigenous-financial-services-framework-workshop/

31 Jan 2024 - The Government announced plans to reform the Financial Markets (Conduct of Institutions) Amendment Act (CoFI) and the Credit Contracts and Consumer Finance Act (CCCFA). https://www.mbie.govt.nz/about/news/reducing-barriers-for-financial-services/

31 Jan 2024 - ASIC publishes keynote address by ASIC Chair Joe Longo at the at UTS Human Technology Institute Shaping Our Future Symposium on how current regulation around AI may not be sufficient. https://asic.gov.au/about-asic/news-centre/speeches/we-re-not-there-yet-current-regulation-around-ai-may-not-be-sufficient/

31 Jan 2024 - The Government will reform financial services regulations, with Commerce and Consumer Affairs Minister Andrew Bayly saying they will move to a simplified model, with the RBNZ being the prudential regulator, and a single conduct regulator being the FMA. To achieve this, conduct oversight of the Credit Contracts and Consumer Finance Act (CCCFA) currently performed by the Commerce Commission will transfer to the FMA. They will move  to one conduct licence overseen by the FMA, and one prudential licence by the RBNZ. Mr Bayly also announced plans to reform the Financial Markets (Conduct of Institutions) Amendment Act (CoFI) and the CCCFA. https://www.beehive.govt.nz/release/reducing-barriers-financial-services

31 Jan 2024 - Hon Andrew Bayly's speech at Financial Services Council Outlook 2024 is released. https://www.beehive.govt.nz/speech/speech-financial-services-council-outlook-2024

1 Feb 2024 - APRA publishes Deputy Chair Margaret Cole's speech to the Conexus Chair Forum Sorrento including info on cyber risks and operational risks. https://www.apra.gov.au/news-and-publications/apra-deputy-chair-margaret-cole-speech-to-conexus-chair-forum-sorrento

1 Feb 2024 - ASIC publishes address by ASIC Deputy Chair Sarah Court at the Connexus Super Chair Forum on their 2024 enforcement priorities in the superannuation sector. https://asic.gov.au/about-asic/news-centre/speeches/asic-s-2024-enforcement-priorities-in-the-superannuation-sector/

AIA appoints new Southern Regional Manager

AIA is pleased to announce the appointment of Hannah Anderson to the role of Regional Manager Business Development for the Southern Region.

Hannah joined AIA NZ in 2021 as a Business Development Manager in Christchurch. Prior to that she was a BDM for Coca Cola Amatil NZ, and also spent several years honing her customer service and relationship management skills as a cabin crew manager with Air New Zealand.

AIA NZ Chief Partnership Distribution Officer, Sharron Botica says, “Hannah made an immediate impact when she joined AIA. She is skilled in creating a unique sales proposition combined with a high level of service. Operating as we do in a highly regulated and competitive market; Hannah’s innovation mindset shines, as does her passion for excellence and sharing the best of this industry with customers.”

“I’m delighted to promote her into this role and look forward to working closely with her as she continues her career with us,” says Sharron.

Hannah says: “I am passionate about the Southern Region and excited for the future of our industry. I’m really energised by the opportunity for growth and to work alongside our wonderful AIA NZ team to understand and support the needs of advisers, their businesses and customers.”

Hannah started her new role on 22 January 2024. She will remain located in Christchurch and is looking forward to spending more time across the Southern Region, which spans from Invercargill to Hawke’s Bay.

Plastics are contaminating our bodies

Microplastics are everywhere, having been found everywhere from the deepest parts of the ocean to the Arctic and in everything from shellfish to beer. Now research has found that microplastics and nanoplastics are now contaminating fruits and vegetables as they grow. 

Microplastics, tiny pieces of plastic less than 5mm, and nanoplastics, small enough to cross membranes between cells, are increasingly infiltrating our bodies. Whether it’s tiny particles of your plastic water bottle shedding and being drunk or microbeads used in cosmetics such as body exfoliants making their way inside you (thankfully banned in NZ since 2018), or even just breathing them in, odds are you’re contaminated.

Scientists have found microplastics in human blood in almost 80% of people they tested. Microplastics have been found in human tissues, including the lungs.  Microplastics have been found in the faeces of babies and adults, with one study showing babies fed from plastic bottles are swallowing millions of microplastic particles a day and have higher microplastic concentrations in their stool than adults. Research has found microplastics present in both the maternal and foetal sides of the placenta and the particles were small enough to be carried in the bloodstream.

The impact on health is not yet known, but concerning findings from other studies show microplastics can damage human cells. Studies on mice have found that lab exposure to microplastics can disrupt the gut microbiome, lead to inflammation, lower sperm quality and testosterone levels, and negatively affect learning and memory.

Plastics contain a range of dangerous pollutants, including polychlorinated biphenyls (PCB’s) – manmade chemicals that have been shown to cause cancer in animals. Some chemicals in plastics like Bisphenol A (BPA) and phthalates have been found to disrupt the endocrine system and the hormones that regulate human growth and development.  

Toxic Per- and polyfluoroalkyl substances (PFAS), or ‘forever chemicals’ as they’re sometimes dubbed, have been found in many of the world’s plastic containers and bottles, raising concerns they’re leaking into foods, drinks, personal care products, pharmaceuticals, cleaning products and more. Why are they considered ‘forever chemicals’? Because they do not naturally break down, can accumulate in humans and have been linked to cancer, birth defects, liver disease, thyroid disease, falling sperm counts, kidney disease, decreased immunity and other serious health problems.

PFAS levels in water that was left in a fluorinated container for a year measured at a startling 188,000 parts per trillion (ppt). For context, some states allow as little as 5ppt in drinking water, while public health advocates say anything above 1ppt is dangerous.

Some tips for reducing your exposure to microplastics include: wearing clothes made of natural fibres such as cotton and linen; reducing your use of single-use plastics (think things like buying a reusable water bottle, using tea leaves instead of tea bags, choosing products packaged in glass or cardboard over those in plastic); avoid microwaving your food in plastic – even when it says “microwave safe”; regularly dust and vacuum.

Links between financial and mental wellbeing

Beyond Blue have produced a guide for those who work in the finance and mental health sectors to inform them of the relationship between money and mental health. The guide was produced as the ‘Money and Mental Health: Social Research Report’ – a collaboration between Beyond Blue and the Australian Securities and Investments Commission (ASIC) – found people experiencing financial challenges are at least twice as likely to encounter mental health issues than those who aren’t. While the guide has information on what services are available in Australia, we’ve pulled out some insights that are likely to correspond to the New Zealand market.

In 2023, 37% of people living in Australia reported that cost of living pressure was the issue having the greatest negative impact on their mental health. The productivity commission found that poor mental health is currently costing Australia up to A$70 billion a year. Small businesses accounted for over 97% of the 2.6 million Australian businesses in 2021-22 (similarly, 97% of all NZ businesses have fewer than 20 employees). In Australia, 22% of small business owners were diagnosed with a mental health condition.

One of the key takeouts is that financial challenges can cause a decline in mental health, and mental health challenges can cause a decline in financial wellbeing. The guide illustrates how people struggling can get into downward spirals that can progress faster than those experiencing them anticipate, and it can be hard to stop or reverse them.

While anyone can be affected by money and mental health issues, there are several population groups who experience disproportionate risk, including young people, first nations people, women, culturally diverse communities and small business owners. Those who fall into multiple groups are even more susceptible to financial and mental health challenges. The guide covers some of the key reasons why these population groups are at higher risk.

They give examples of ‘turning points’ – interventions or experiences that have led to improvements in people’s financial wellbeing and/or mental health. They showcase a major Australian bank that refocused their collections department on providing solutions that respond to root causes of mental and financial hardship and the turnaround was dramatic. Within 90 days of starting the program, 97% of customers were back on track with financial commitments, employee engagement soared by more than 25% points, and they had an AUD$70 million reduction in costs associated with loan defaults and operational efficiencies.

Beyond Blue have developed a continuum that can help you evaluate a person’s financial and mental wellbeing and suggestions on what you can do support them to move towards a more mentally and financially healthy future. If you or someone you know needs mental health support or is experiencing financial challenges, there are a range of organisations and resources available to help in New Zealand, you can find out more here and here.

Eating for gut health

It seems every time you read the newspaper these days there’s something new about gut health. Our understanding of how our gut microbiome works is still growing, but we know now that it can influence so many factors that impact our health - everything from weight, cholesterol and mental health to sleep and chronic diseases. The gut microbiome’s resume includes making vitamins, hormones, chemical messengers and amino acids, not to mention communicating with other vital organs including your brain, liver and heart. It’s so important that it’s earned the nickname the ‘second brain’. What we eat directly influences the composition of micro-organisms inside our gut. So, what should we be feeding it?

Dr Saliha Mahmood-Ahmed, a gastroenterologist in the UK, gives us tips on how to eat for gut health, including lots of prebiotics (fruits, vegetables, nuts, seeds, wholegrains, legumes and pulses, spices) and probiotics (fermented foods like live yoghurt, kombucha, sauerkraut). As Michael Pollen has said, “Eat food. Not too much. Mostly plants.” Dr Mahmood-Ahmed would like to see fruit and vegetables being ­prescribed to patients, as “long-term, that is going to be cheaper than a lot of the medication we are prescribing people.”

As an example of a gut nourishing diet, Professor Barbara Ryan, a consultant gastroenterologist, has written about what she eats in a typical day to keep her gut healthy.

In New Zealand, researchers have recently published findings that suggest how compounds derived from fruit and vegetables can positively influence gut health.

WHO warns loneliness is a pressing global health threat

The World Health Organisation (WHO) has proclaimed that loneliness is a pressing global health threat. The WHO has launched a three-year commission that will attempt to shape global policy by analysing high-risk areas of social isolation and encouraging government to foster new mental health solutions.

Research shows that social isolation and loneliness can have serious impacts on older people’s physical and mental health, quality of life and longevity. Lonely and socially isolated elderly people are at higher risk of cardiovascular disease, stroke, diabetes, cognitive decline, dementia, depression, anxiety and suicide. Loneliness can have comparable effects on mortality as other risk factors such as smoking, obesity and physical inactivity, with a 2015 meta-analysis found that people with chronic loneliness had a 26% increased risk of mortality. While more often experienced by people of an older age, young people are at risk too, with an estimated 5% to 15% of adolescents experiencing loneliness.

The issues presented by loneliness and social isolation are getting more recognition by those in leadership, with the United Kingdom appointing a ‘loneliness minister’ in 2018 and Japan following suit in 2021.

The WHO suggest a range of individual, community-level and societal-level strategies and interventions that can help reduce social isolation and loneliness. Suggestions range from social skills training and social activity groups at the individual level to improving infrastructure such as transport to creating laws and policies that address social cohesion and socio-economic inequality.

If you’re experiencing loneliness there are a range of organisations that can offer you help.

New medical price comparison database update

We have just uploaded a new version of the Medical Comparison database to all subscribers through your various file-sharing mechanisms. This is version 10_5 of the health or medical insurance price comparison, reflecting the following changes.  

Changes in V105:

• Updated nib rates effective 1/1/24

Updated AIA policy fee effective 1/1/24

Swiss Re write about Health and Wellness engagement impacts

Swiss Re have published a report on how to engage customers with a health and wellness programme. They write how the proliferation of health apps and wearables has led to consumers having more data about their health and lifestyle than ever before. Two thirds of consumers are open to sharing personal data or health results in return for a benefit, whether that’s personalised health advice, discounts or something else.

For insurers there are many benefits, from increasing the frequency of touchpoints, building customer loyalty and maximising lifetime customer value. For consumers the benefits include more relevant products, better price points, meaningful financial incentives and rewards and, best of all, improved health and longevity.

Swiss Re calculated that a successful program with a 25% engagement rate can be ROI positive, after accounting for the costs of launching and running the health and wellness engagement programme including policyholder rewards, premium reductions, initial setup costs and ongoing costs. If engagement rises to 40%, profitability can be up to 9% higher compared to not having a programme in place.

John Hancock in the USA is hiring behavioural scientists and drawing on gamification elements to help encourage policyholders to lead healthier lives. For example, when customers hit an activity threshold they can spin a wheel to win rewards.

Insurance Thought Leadership discuss the success of the Vitality programme. Vitality aims to increase people’s healthspan, the time in a person’s life where they experience optimal health, through a behaviour change incentive programme. Policyholders are nudged towards healthier lifestyle choices that they’re rewarded for in various ways including discounted premiums, discounts at places like gyms and free health checks. They list benefits of the programme to the insurer including reduced frequency and severity of claims, high engagement of policyholders and high levels of retention. Over the last three decades,

“Discovery's three-decade journey provides robust evidence that a significant increase in the level of physical activity reduces by 49% the mortality for individuals aged 45 to 65, and a remarkable 61% reduction for those older.  Positive impacts have further manifested within annual medical expenditures, where the most engaged participants have 15% lower claim costs than the less engaged, risk-adjusted by age and medical conditions. A longitudinal study on the people who showed a low level of physical activity during the initial six-month period showed a subsequent 14% reduction in hospital medical costs for the subgroup that notably elevated their engagement levels over the ensuing four and a half years.”

AIA NZ have recently released statistics on how AIA Vitality has contributed to notable shifts in health metrics. By September 2023 there was a 20% increase in members moving from an unhealthy body mass index (BMI) range to a healthier one. Similarly, there was a 51% improvement in blood pressure levels, 26% in cholesterol levels, and 81% in glucose levels.

Which is more important? Insuring your car or your life?

Pinnacle Life has a cool blog post which compares the cost of insuring a second hand car, with that of buying life cover. At the same time they pack in a few good points about what affects costs, what add-ons are available, and so on. It’s always good to remember that life insurance is a very cost effective way to get financial protection for the worst that can happen in life. Check it out at this link: Pinnacle Life compare the cost of life insurance to car insurance