Contracts of Insurance Bill

Commerce and Consumer Affairs Minister Andrew Bayly has said that insurance law reforms are “long overdue”, with some laws over 100 years old. Bayly has said his three focus points for the new Contracts of Insurance Bill are to make it easier for consumers to get insurance, for consumers to better understand what they’ve signed up for and for consumers to get paid out more quickly. Bayly has said the government intend to pass the Bill before the end of 2024.

The Insurance & Financial Services Ombudsman, Karen Stevens, has said she looks forward to insurance contracts becoming fairer and easier to understand for consumers.

“… Many consumers don’t understand what information they are supposed to tell their insurer, and the consequences if they don’t disclose this information.

Forgetting to tell the insurer something regarded as being material to the risk of providing a consumer with insurance (i.e. whether the insurer would have provided cover or not, and on what terms) can be fatal.

I’m pleased that this law change will require insurers to ask clear and relevant questions, making it easier for consumers to know what information they have to provide.”

Submissions on the Bill are open until 3 June 2024. The Financial Services Council (FSC) is urging members to feedback and has circulated an industry submission process document.

We think that all the questions adviser-focused insurers ask are clear and relevant and that in a full underwriting environment it is clear to customers what they should be disclosing. But this is not the full scope of the changes that the law will bring in. Bell Gully’s comment covers this well:

“Most submitters welcomed the overall approach taken in the exposure draft, which proposed to consolidate, modernise and clarify a number of outdated statutes into one primary statute governing insurance policies generally, as well as the specific relationship between insurers and their customers.  The Bill also proposed to bring about significant changes in the law of insurance in New Zealand – particularly relating to the duty of disclosure owed by insureds, the duty of utmost good faith, the remedies available to a party who has a claim against an insolvent insured, and the application of the unfair contract terms regime to insurance policies. The details of some of these substantive changes were met with resistance, including in our submission, primarily due to concerns that the reforms may create significant uncertainty for both insureds and insurers.”

For more details on the content of the Bill, we suggest that you check out their summary here. Steve Wright also outlines seven potential changes facing advisers and insurers here.

Legal and regulatory update for the life and health insurance sector

29 Apr 2024 - The FMA is holding a series of forums to dicuss the report on their monitoring of Class 1 and 2 Financial Advice Providers (FAP). Sessions will be held on 11 June in Auckland; 13 June on the North Shore, 19 June in Wellington; 20 June in Palmerston North, 25 June in Hamilton and 27 June in Christchurch. Invitations to register for these sessions will be sent to the relevant FAPs in May.

29 Apr 2024 - The Commerce Commission will hold a consultation conference on the banking competition draft report in Auckland on May 13. https://www.goodreturns.co.nz/article/976523089/having-a-say-on-draft-banking-report.html

29 Apr 2024 - The Department of Internal Affairs, the Financial Markets Authority and the Reserve Bank of New Zealand have produced new and updated guidelines related to customer due diligence ahead of the new regulations due to come into effect from 1 June 2024. https://www.dia.govt.nz/AML-CFT-Updated-guidelines-related-to-customer-due-diligence

29 Apr 2024 - The Contracts of Insurance Bill introduced to Parliament. https://bills.parliament.nz/v/6/019dad64-3f9e-46b8-5cd9-08dc67f794e8

Fidelity Life bring back customer engagement initiative

Fidelity Life’s Customer Engagement Initiative to recognise advisers who achieve great customer outcomes is back. To qualify, advisers must register to participate in the initiative prior to 10 May. From 1 April – 31 July 2024, Fidelity Life will review participants Adviser Net Promoter Score (a measure of customer satisfaction).

Twenty five qualifying advisers (and their partners) with the top NPS scores will be hosted at a 3-day customer engagement forum at Kauri Cliffs in the Bay of Islands.

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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.

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.

Asteron Life and AIA awarded at the ANZIIF NZ Insurance Industry Awards

The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) held the 11th New Zealand Insurance Industry Awards on 22 November.

Asteron Life were awarded the Life Insurance Company of the Year award. It is the fourth time they have won this award, having also won it in 2013, 2014 and 2021. Judges were impressed by Asteron Life’s Voice of Customer program, which provides insights into the customer experience; their high customer satisfaction scores overall; their policy wordings being accredited with the WriteMark standard; and attention to helping customers with affordable levels of cover. In particular the judging panel praised the variety of customer and people initiatives Asteron Life have implemented, ranging from Connected Care to Kids Cover to a Professional Supervision Programme.

AIA were recognised as winners of the Excellence in Workplace Diversity and Inclusion (D&I) and for Excellence in Environmental, Social and Governance Change. At AIA all leaders are expected to take responsibility for DE&I measures in recruitment, development, remuneration and the overall workplace environment. AIA recently achieved the Accessibility Tick and implemented a Menopause Tookit initiative. AIA has a five-pillar ESG strategy that incorporates sustainable operations, investment, health and wellbeing, people and culture and effective governance. They have committed to being net zero by 2050 and have already put in place many actions to work towards that goal, including new buildings aligning with green standards. They are committed to ethical investment and have a co-created employee wellbeing strategy in place.

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Southern Cross announce winners of the 2023 Southern Cross Health Insurance Wayfinder Awards

ASB launch two new Aggressive Funds

Pinnacle Life voted Most Trusted Online Life Insurance Company

Graeme Edwards takes on role of Lifetime Group director and chairman

FSC circulate submission template for feedback on FMA's approach to outcomes focused regulation

Bell Gully highlight areas of interest in the FMA’s proposal to adopt an outcomes-focused approach to regulating

Data is plural - international cancer data

The excellent blog, data is plural, publish links to open-source data which may be of interest. One that caught our eye is a link to International cancer statistics.

The World Health Organization’s Global Cancer Observatory provides interfaces to a range of studies and statistics. Its Cancer Today portal features tables, charts, and maps of “incidence, mortality and prevalence for year 2020 in 185 countries or territories for 36 cancer types by sex and age group.” Those figures come from the latest GLOBOCAN estimates, calculated by the WHO’s International Agency for Research on Cancer based on data from national and regional registries. Note: “Caution must be exercised when interpreting these estimates, given the limited quality and coverage of cancer data worldwide at present, particularly in low- and middle-income countries,” the researchers warn. Previously: Statistics from the American Cancer Society (DIP 2016.01.27).

This may be especially useful if you want to make comparisons between markets, especially those that you may consider peers, or markets to which we might aspire to be peers with, in terms of cancer treatment and survival rates.

Partners Life premium reductions and announcement of upcoming product changes to improve flexibility

Partners Life has made a series of changes to their products resulting in premium reductions or otherwise lower prices for customers:

• increased their high sum insured discount, which results in a cheaper premium

• decreased the new annual policy fee from $132 to $100 for the Partners Protection Plan

• adjusted premium rates for larger sums assured across life, life income, terminal illness and accidental death cover

• reduced accelerated trauma on their yearly renewable premium by 10% after allowing for cross-subsidisation between life cover and accelerated trauma

Chief and appointed actuary Kate Dron said

“Given the cost-of-living crisis that’s going on at the moment, we looked at were there any opportunities for us to do anything to actually help our customers out.

….that’s looking at the way that we do things and the way that we run our business and making sure that we’re doing it as efficiently as possible. And where we’re able to do that, we’re seeing that it’s fair for us to allow the customer to share in some of those cost savings, which is why we’ve implemented these changes.”

Partners Life have announced some upcoming changes to make their products more flexible.

• Ability to opt out of specific injury option and critical illness option on their disability income

• Ability to opt out of total permanent disability on trauma

Consultation on Customer and Product Data Bill opens

The Ministry of Business, Innovation and Employment (MBIE) has opened consultation on the Customer and Product Data Bill (sometimes referred to as the Consumer Data Right (CDR)), with consultation running until 24 July 2023.

The Financial Services Council (FSC) is collating member feedback to form an industry view on the on the exposure draft of the bill. FinTech NZ is hosting a roundtable discussion on July 17 to provide MBIE with direct feedback from our sector.

The purpose of the bill is to allow customers to safely access and exchange data held about them. The bill will impact all New Zealand businesses who collect and hold customer data. The bill will require businesses who wish to access data to be accredited and will only permit data exchanges when the customer has given consent.

The intention of the bill is to unlock the value of customer data and benefit consumers through reduced prices, improved product offerings, greater productivity and making it easier to compare products and services.

MinterEllisonRuddWatts has an article that explains some of the obligations the bill will create for organisations.

MBIE intend to roll out legislation on a sector-by-sector basis, with banking the first sector to be designated. CDR has begun to be implemented to an extent on a voluntary basis in the financial sector with Open Banking.

MBIE is running webinars for different audiences that will give people the opportunity to learn more about the draft law.

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The FSC has released details of the Conference 2023 panels and sessions

The Financial Services Council (FSC) has released details of some of the key events of interest to those in the life insurance and health insurance sectors at the Building Consumer Confidence Conference 2023.

Of interest to the Health Insurance sector:

• 15 August – Member only session - The great Genetics Debate – creating a win-win for customers

• 16 August - Breakout session - The future of the Health System in NZ: Public and Private innovating together?

• 16 August - Breakout session - Equity and Fairness in the Health System

Of interest to the Life Insurance sector:

• 15 August – Member only session - The great Genetics Debate – creating a win-win for customers

• 16 August - Breakout session - Be Confident, Be Courageous: what insurance do customers really need?

• 16 August - Breakout session - Is there a Golden Egg? Balancing of technology, legislation and innovation

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New ruling from IRD regarding GST and Directors' and board members' fees

AIA NZ has been awarded the Accessibility Tick

The Co-operative Bank announce full-year profit before tax of $18.8m for the period ending March 31

Tomorrow, Today, Event Series: The AI Revolution – Sustainability event on Jun 27

Stats NZ confirms NZ dipped into recession

Data for Australia shows overall life insurance inflows saw a modest increase of 2.5%

Government to increase the number of funded medical students from 2024

Good Returns has six marketing tips for mortgage advisers

Government announces a five-year focus on tackling rheumatic fever and rheumatic heart disease