Climate change and what it means for health and life insurance

The Geneva Association and Wellcome have released ‘Climate Change: What does the future hold for health and life insurance?’ report. The report digs into the impact of climate on health and life insurance products and how availability, structure and pricing might be affected in future.

Estimates for those that live in climate-vulnerable locations across the world are approximately 3.3 – 3.6 billion people. Estimates for death directly attributable to climate change vary widely, from 250,000 to 3.4 million deaths annually.

While the short-term consequences for life and health insurers have so far been modest, the increasing frequency and severity of climate events may escalate the impact on insurers. Adverse health outcomes from climate change range from immediate to long-term and cover everything from injuries and fatalities resulting from extreme weather events to heat-related illnesses to disruption of ecosystems reducing crop yields and spreading vector-borne diseases to new regions. In addition, social unrest, displacement and economic hardship can all lead to negative health outcomes.

The report classifies climate-related risks into four categories:

• Acute: risks that stem from the impacts of extreme heat, wildfires, floods and severe storms on mortality and morbidity.

• Chronic: risks that emerge from prolonged exposure to adverse climate and environmental patterns.

• Transitional: risks arising from transition to new technologies or climate transition policies.

• Litigious: health-related legal challenges arising from the negative externalities of climate change.

The report calls out the lack of data that can be used to map climate events and patterns against incidences of mortality or morbidity and calls for insurers to resolve the actuarial gaps in understanding.

Those interviewed across 17 global health and life insurance companies agreed that prevention is key to preserving insurability – through things like underwriting that incentivises greener lifestyles and coordination on early warning systems.

“Most respondents do not perceive climate change as exerting any immediate impact on the liabilities associated with H&L insurance, nor do they anticipate short-term consequences for insurability and affordability. Nevertheless, there is consensus that this could change over the long term, although the level of impact may be tempered by multiple factors.”

The report has three key recommendations for insurers: assemble data prospectively to better understand areas of vulnerabilities; invest in innovation; play a bigger role in the policy environment and help strengthen public understanding.

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Legal and regulatory update for the life and health insurance sector

27 Feb 2024 - The Australian Prudential Regulation Authority (APRA) has released its Quarterly Superannuation Performance publication and the Quarterly MySuper Statistics report for the December 2023 quarter.  https://www.apra.gov.au/news-and-publications/apra-releases-superannuation-statistics-for-december-2023

27 Feb 2024 - The Pae Ora (Disestablishment of Māori Health Authority) Amendment Bill was introduced to Parliament under urgency, read a first time, read a second time,went to Committee of Whole House and has received Royal Assent. https://bills.parliament.nz/v/6/79c10303-5472-4eb3-9496-08dc3736cfbc?Tab=history

28 Feb 2024 - The Australian Prudential Regulation Authority (APRA) has released its quarterly private health insurance (PHI) publication for the December 2023 quarter. https://www.apra.gov.au/news-and-publications/apra-releases-quarterly-private-health-insurance-statistics-for-december-2023

28 Feb 2024 - The Monetary Policy Committee agreed to hold the Official Cash Rate (OCR) at 5.50%. https://www.rbnz.govt.nz/hub/news/2024/monetary-policy-remains-restrictive

29 Feb 2024 - The Office of the Privacy Commissioner has released new privacy impact assessment guidance and downloadable templates. https://privacy.org.nz/new-on-the-website

29 Feb 2024 - The Office of the Privacy commissioner has released Privacy News February 2024. https://mailchi.mp/ea0b4c7571b6/privacy-news-biometrics-code-opc-guidance-three-vacancies-ai-governance-training-12758105

29 Feb 2024 - The Office of the Privacy Commissioner is hosting a webinar with Ian Axford Fellow on 6 March. https://us06web.zoom.us/webinar/register/WN_RvnJJixhTOSoT0oVwPth_g#/registration

29 Feb 2024 - This year’s Privacy Week will be held over 13-17 May. The Office of the Privacy Commissioner is seeking people to sign up to host a myth busting webinar as part of Privacy Week 2024. https://www.surveymonkey.com/r/CJPJ7BX

Suncorp Group announce 1H24 financial results

The Suncorp Group has announced their 1H24 financial results.

·         Group net investment returns A$396 million (up significantly from A$167 million in 1H23).

·         Group gross written premium of A$6.9 billion, up 16.3%.

·         Group net profit after tax was A$582 million, up 5.4%.

Suncorp New Zealand’s results

·         Half year profit after tax was NZ $94 million, up 3.3% from the previous comparable period (pcp).

·         Asteron Life Half year profits of NZ$14 million, a decrease of 12.5% from the pcp.

·         Asteron Life had in-force premiums of $330 million, up 7.1%.

·         Asteron Life’ bought in new business of $13 million, up $1 million on the pcp.

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Fidelity Life report digs into the role of financial advice in New Zealand

Fidelity Life’s ‘Advice for good: Rethinking New Zealand’s relationship with financial advice’ report highlights some worrying findings in New Zealander’s feelings towards their financial situation. The report found that:

• 28% of kiwis feel their financial situation is out of their control.

• 47% of kiwis often or always worry about money, and 53% of under-35s saying they always worry about money.

• The majority of New Zealanders don’t feel confident making financial decisions until after age 55 – once this age is reached 63% feel confident in their money decisions.

• Only 28% of women feel confident about their financial outlook, compared to 44% of men.

• While 88% of kiwis agree financial advisers are the most trustworthy source of financial information, only 22% have consulted one – though 36% have sought help from family.

• Many New Zealanders don’t know where to get trusted financial advice, with 41% of those under-35 unable to say where to find good advice.

• There are different emotions towards money depending on ethnicity, with 30% of Māori and 38% of Middle Eastern, Latin American and African (MELAA) respondents said their financial situation made them feel overwhelmed. Meanwhile, 27% of Pacific Islanders were ashamed, and 58% viewed their financial situation negatively overall. 74% of Pacific Islanders, 59% of Asians and 56% of Māori respondents feel unconfident or unsure making financial decisions.

There was some good news about New Zealanders’ finances too.

• 88% of New Zealanders feel like they typically have enough to pay the bills.

• 34% feel financially comfortable, especially older New Zealanders – with 81% of those aged 65+ feeling positive about their financial situation.

• Attitudes towards the future seem to be optimistic, with 41% feeling their financial situation will improve in the next 12 months, compared to 28% expecting things to worsen.

Kiwis are generally focusing on short-term horizons, with 89% of people prioritising day to day spending, 65% focusing on saving and 57% concentrating on paying off debt. Only 13% put growing their wealth and 4% put protecting their finances as their highest priority. 34% of those surveyed didn’t have any form of insurance and only 11% had consulted an insurance adviser.

This short-term focus is highlighted again with only 3% of those under 35 mentioning setting themselves up for a comfortable retirement as an aspiration, with home ownership being the number one goal in this age bracket. While retirement seems a long way away when young, only 23% of those in the 55+ age group mentioned a comfortable retirement as one of their aspirations, despite being less than a decade away from receiving the pension. 79% of those surveyed had KiwiSaver, 30% have stocks and shares and 17% have managed funds.

There seems to be a lack of understanding of the benefits financial advice can bring to people at all ages and stages of life. 31% of respondents said they don’t see the relevance of professional advice, and 10% listed being embarrassed or scared or consider their financial position to be private as a barrier to seeking advice. Only 5% of people stated they don’t know how to/who to talk to as a reason. Part of the lack of understanding on the benefits on advice might be due to a lack of familiarity on the role advisers perform, with only 13% being able to describe it with any confidence. Borrowing money was the most common catalyst for seeking out advice (48%) compared to 36% looking to invest to grow wealth. Just 28% have sought advice on products like income protection insurance or mortgage insurance. For those who consulted a professional financial adviser, 81% said getting financial advice provided peace of mind and 70% said it helped them achieve their goals.

Campbell Mitchell, Chief Executive of Fidelity Life said

“…the evidence shows most New Zealanders aren’t seeking financial help, either through regular financial health checks or at key life stages, until they’re nearing retirement – when it may be too late,”

“As a result of seeking amateur advice, we get stuck in the same old ways of doing things and can’t see a way forward – especially when the people we most often turn to for advice, our parents, have experienced different conditions. Baby Boomers who have achieved financial success via the traditional route of buying a home and an investment property may consider themselves financially savvy without taking into account the fact they’ve lived through one of the greatest property booms in our history, and that as the world changes, a different approach might work better today”.

The report was commissioned to explore attitudes towards financial advice and how to overcome the barriers to seeking professional guidance. The report surveyed more than 1,100 New Zealander’s aged 18 – 69, representative across age, gender, ethnicity and income level and consisted of a mix of quantitative and qualitative interviews.

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nib release 1H24 financial results

nib have released their financial results for 1H24.

• Underlying operating profit of $13.2 million

• Premium revenue was $197 million, up from $179.7 million in 1H23

• Private health insurance experienced policy growth of 3.7%

nib New Zealand Chief Executive, Rob Hennin said,

“We have reported a solid first-half result and are positioned well for the full year. nib NZ has continued to see strong growth in resident private health insurance policyholders, and we have seen positive contributions from our international student, worker and traveller insurance business OrbitProtect and life and living insurance business nib nz insurance limited.”

Hennin pointed to nib’s focus on innovation as key to delivering value and improved services to customers, highlighting OrbitProject, the launch of the redesigned ‘my nib NZ’ app and website, and wellbeing initiatives like Toi Ora and Kickstarter as examples.

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Legal and regulatory update for the life and health insurance sector

22 Feb 2024 - The Commerce Commission has issued an Open Letter to participants of New Zealand’s retail payment system setting its expectations of the industry to deliver a more competitive environment that can give Kiwis new options to pay for goods and services. https://comcom.govt.nz/news-and-media/media-releases/2024/comcom-calls-for-banks-to-pick-up-the-pace-on-payment-options

22 Feb 2024 - Assistant Governor/General Manager Transformation, Innovation, People and Culture Juliet Tainui-Hernandez has resigned. She will be leaving RBNZ at the end of April 2024. https://www.rbnz.govt.nz/hub/news/2024/changes-to-rbnz-executive-leadership-team

26 Feb 2024 - The Commerce Commission has released an updated Cartel Leniency and Immunity Policy and Template Leniency Agreement which removes the option for a person to seek criminal immunity and/or civil leniency for a ‘naked’ cartel attempt. https://www.bellgully.com/insights/commerce-commission-updates-cartel-leniency-and-immunity-policy/

Chubb Life appoint new General Manager – Distribution

Chubb Life have appointed Chris Hand to the role of General Manager – Distribution, replacing David Haak who resigned in December last year. Hand has over 20 years’ experience in a variety of insurance roles, from case and claims management to sales and relationship management. Hand will begin his new role on 1 April.

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Capgemini’s World Life Insurance Report 2023

Capgemini have published their World Life Insurance Report 2023, ‘The aging well opportunity: how trust and engagement can unlock growth for insurers’.

This report looks at how people are living longer and healthier lives and the implications for individuals and organisations who will be impacted including life insurers, retirement advisers, pension providers, brokers and agents.

By 2050 3.2 billion people, 33% of the world’s total population, will be 50 years or older. The dependency ratio – the ratio of the dependent population (aged 65 and above) to the working-age population (aged 15 – 64) – of 15% today is predicted to increase to 26% by 2050. Currently 40% of the top 40 global life insurers’ assets under management are held by those 65 years or older – by 2040 most of these assets will be transferred to their beneficiaries aged 50+.

At a time of declining governmental support and increasing healthcare costs, individuals will need to shoulder more of the financial responsibility for aging well. The World Economic Forum predict the retirement protection gap (the difference between desired retirement income and actual income from pensions, savings and social security) will quadruple by 2050, to a staggering 400 trillion USD in markets with the largest and most established pension systems. In some cases, this will lead to those aged 65 and older having to work longer.

Worryingly, Capgemini’s 2023 Voice of the Customer survey of policyholders across 20 markets found that 60% of those 65 or older have not sought professional financial advice to prepare for retirement or to transfer their wealth. With demand for life insurance, long-term care services and financial advice predicted to skyrocket between now and 2030, there are plenty of opportunities for advisers to make their mark.

Consumers have called out product complexity (39%), limited awareness (39%) and lack of trust (28%) as their biggest obstacles to life insurance product adoption.

Capgemini have identified current gaps between what policyholders want and insurers can deliver, and steps insurers can take to foster deeper partnerships and enhance customer lifetime value. The steps include creating personalised and bundled aging-well propositions; streamlining the purchase experience; accelerating risk assessment; engaging more widely and frequently; and elevating the claims experience.

Capgemini call out the need for more advanced technology and more robust data analytics to help engage more effectively and productively with clients, delivering better recommendations and more personalised plans. They highlight the importance of delivering comprehensive and innovative aging-well value propositions that meet a broader range of customer needs. After all, strengthening relationships with aging policyholders and their beneficiaries is critical to safeguard assets under management.

More action needed to fight online scams

The exact amount lost to scammers is not known, but it must be large: estimates range from around $200m to $2bn a year:

 ·       A Ministry of Business, Innovation and Employment (MBIE) survey, drawing on data from New Zealand’s 11 largest financial institutions, says Kiwis lost $198 million to online scams in the year to September 2023, or at least those directly involving banks.

 ·       Extrapolating a survey of 1000 New Zealand adults by the Global Anti-Scam Alliance, Netsafe estimates that Kiwis lost a total of $2.05 billion to online fraud in the same period.

A common fraud is scammers, often calling or emailing their victims, impersonate organisations that could have a legitimate reason to call and to charge for a service. Once the victim agrees to pay, the money will be directed into an account the scammer can access. These names will generally not match. A key protection for consumers could be to disclose the name of the payee bank account to the payer.

Australia is introducing requirements for banks to help protect consumers from scammers.

Should NZ follow suit? Some basic measures to combat scammers (e.g. name and account number matching Consumer watchdog says NZ banks must from now reimburse all scam victims | interest.co.nz) have still to be implemented here, though work is progressing.

The New Zealand Banking Association announced they would implement name and account number matching, but the latest news we could find says more details will be released in April:

"We are currently looking at technical options and extensive work is underway to ensure compliance with existing privacy laws. This will enable a timeline for the initiatives, including implementation of a confirmation of payee service, which will allow people making an online payment from one bank account to another to check the name of the account they are paying. We expect to provide more detail by the end of April," says Beaumont in this piece: Banks progressing anti-scam initiatives, lobby group NZBA says | interest.co.nz.

So, it’s in the works, just happening very slowly – and we can understand why. Although core banking systems are typically common between the Australian parent and the New Zealand subsidiary there are differences in customer data and mobile applications. Each of these systems has to comply with local legislation and conventions about how we work. Each step that makes it more secure to make a payment also tends to make it a little bit more difficult to make a payment. It is easy for you to see that a payment to “Garry’s Gardening Limited” probably can go to an account named “Garry M Smith Gardening Limited”, but it is harder for systems to tolerate such ‘near-matches’.

Scammers will take advantage of near matches, much as they do with email addresses that sound similar to the organisations they are impersonating. When that happens, the game of cat and mouse will begin all over again. Nevertheless, it is still worth making it as hard as possible for them. It is also, perhaps, a question of prioritisation and will. Innovators like Akahu have been able to deliver a form of confirmation of payee – allowing them to claim that in this respect they are doing a better job of securing systems than much bigger organisations. That is worth saluting. Netsafe teams up with Akahu, Dolla for payee confirmation as banks linger - NZ Herald

Another area, probably for a separate post, is that banking apps should as standard avoid some of the accessibility features inherent in technology such as smartphones, which reduce the security of the accounts.

Legal and regulatory update for the life and health insurance sector

15 Feb 2024 - Income Tax (ACC Payments) Amendment Bill introduced into Parliament. https://bills.parliament.nz/v/6/37fe42b5-8ae1-47f8-408e-08dc2dc25b35?Tab=history

16 Feb 2024 - The RBNZ have published Adrian Orr's speech on the Monetary Policy Remit and 2% inflation delivered at the 2024 Economics Forum at The University of Waikato. https://www.rbnz.govt.nz/hub/news/2024/the-monetary-policy-remit