by Susan Edmunds
Allan Rickerby, of Super Advice Services, has offices in Australia and New Zealand. It specialises in KiwiSaver for workplaces, employee group insurances and group private health.
He said Kiwi consumers were missing out because they were not able to hold insurance inside their KiwiSaver accounts and access the cheaper advice group cover structures would provide.
Commission levels being paid to insurance advisers were obscene, he said.
New Zealand regulators and lawmakers had looked to Australia’s experience in crafting aspects of KiwiSaver and they should do the same when it came to insurance.
“It may be time to copy some of the things that have happened there to provide consumers potentially lower premiums for their life cover,” he said.
If people were able to hold life cover within their KiwiSaver accounts, they could cut their insurance costs down to a quarter of what they paid currently, he said.
His firm would make 10% to 20% brokerage per customer set up with a group cover scheme in Australia, compared to the up to 230 per cent upfront commissions paid to insurance advisers in New Zealand. “In Australia you can have $500,000 of cover for a 40-year-old for $250 a year, compared to about $1000 on an individual basis.”
Grosvenor offers small amounts of cover via KiwiSaver but Rickerby said it should be regulated on a larger scale.
“It’s a Government issue. They haven’t opened it but it is something worth looking into. We’re an advocate for change.”
Rickerby said Australia also had a higher standard of licensing for advisers that New Zealand would do well to emulate. “The level is extremely low here, you just have to register.”
He called for New Zealand to step up to the standard of Australia’s rules requiring disclosure of commissions and soft dollar incentives, too.
While authorised financial advisers in New Zealand are bound by rules relating to conflicts of interest and disclosure of fees, registered financial advisers are not. “230% is obscene. If you put that in front of a client and fully disclosed it, and told them you’re making $5000, they’re going to ask whether there’s a better way.”
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What I do find obscene is the scare mongering antics of some commentator's, such as is the case here.
"New Zelanders could slash their life insurance premiums by up to 75%" This makes for good headlines but let's look at the facts.
Firstly, if the figures Allan quotes for $500,000 cover for a 40 yr old in Australia are correct, Australian insurance companies are making a killing. In New Zealand, the same cover through an adviser costs less than $500.
Secondly, if the client was paying a premium of $1,000, the 230% commission payable would be $2,300, not $5,000.
Let's say for argument sake it was $2,300 and compare this to the commission a widow would pay if, instead of receiving a $500,000 insurance payout, she had to sell a property to release capital to live on.
Even selling through a company charging at the lower end of the commission scale (2.95% 1st $300,000 and 2% on the balance) the widow would pay $12,850 + GST in commission. On top of that would be advertising costs.
We are a nation with a high level of under insurance. The inclusion of life cover in KiwiSaver accounts would go some way to solving this but we shouldn't start the discussion with inflated and emotive comments.