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[The Wrap] It's not the death of life insurance companies as we know it

Some people may think life insurance is about to succumb to the very thing it is based on; death. But the opposite is true; the sector is getting a whole new lease of life.

Friday, March 1st 2019, 2:40PM 4 Comments

Life insurance has been getting a bad wrap recently. There's been the FMA's reports into conduct and replacement business, the Royal Commission in Australia a bit of hoopla around soft dollars and offshore trips.

Then there is AMP essentially shutting up shop with regards to life insurance after 160 years in the business.

Despite this background the sector is quite exciting. Partners Life is really looking to shake up the market, firstly with its new advice tool and then there is a second initiative (which we are not allowed to talk about, but around 900 advisers learnt about it this week). 

It is exciting to see some real leadership being shown in the life insurance space and efforts to tackle the under-insurance market.

We can also throw AIA/Sovereign into the mix too. This year will be huge with the rebrand, but more importantly, the launch of its Vitality programme. 

Vitality is AIA’s science-based health and wellness programme, offering customers the knowledge, tools and motivation they need to improve their health, while enjoying lower premiums and other rewards.

“Vitality will be a game changer.  It will change the conversation about life insurance in this country and will focus on what’s important: health, wellness and wellbeing,” AIA New Zealand chief executive Nick Stanhope said.

If that isn't enough we still have Cigna to show its hand in the life market now it has acquired ANZ's former life business, OnePath.

Yes risk advisers feel a bit beaten up as they have worn much of the criticism with has been levelled at the sector. This has been largely unwarranted as it's the life companies which make the decisions around remuneration and commissions.

One of the important news stories this week, possibly the most important, related to this very issue. Recently, FMA chief executive Rob Everett fronted to Parliament's Economic, Development, Science and Innovation Select Committee.

He clarified the FMA's position on commission in the life insurance sector. It should give risk advisers some comfort that the sky is falling down on their heads.

Advisers need to continue what they are doing and helping clients and be proud of what they do.

Tags: Opinion

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Comments from our readers

On 2 March 2019 at 9:14 am dcwhyte said:
Rob Everett's statement is of huge significance. In summary, the remarks confirm that FMA recognise the difference between simple product selling and the provision of more complex financial advice. Despite MBIE rejecting the inclusion of the distinction in FSLAB, it's important that the regulator expresses awareness of the issue
On 2 March 2019 at 9:29 am JPHale said:
Heartening comments that reinforce the commission discussion is coming from the RBNZ and government, not the FMA.

The FMA in my contact with them have expressed awareness of the issue throughout the organisation. Pleasing to see some public comment on this.
On 3 March 2019 at 6:23 am Murray Weatherston said:
I wonder if readers aware of FMA's view on the sales v advice matter as reported by MBIE in a report to Minister on 1 April 2016 (obtained under OIA)

"The FMA does not support package 3 (distinction between salespeople and advice). The FMA notes that financial advisers tend to provide advice that has the least compliance requirements and the least liability attached to it. There is therefore a risk that access to advice will be significantly impacted by this option, where many may choose to sell rather than provide advice. In the FMA's view, this continues the issues created by the disproportionate compliance burdens of the current regime, and does not overcome the advice gaps caused by complexity and an uneven playing field."
On 4 March 2019 at 2:23 pm JPHale said:
Thanks Murray, that reinforces much of the commentary I have heard from the various areas.

Angus with his carefully placed comments about creating a relatively level playing field for all advisers is also the other aspect of this with his discussion around the code too.

It's never going to be level across all disciplines, but removing the distinction between sales and advice lifts the burden on those who are just moving products without application of suitability of need.

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