|        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Thursday, July 18th, 9:54AM


Latest Headlines

What’s all this about a public income insurance scheme?

Russell Hutchinson looks at the government's proposed income insurance scheme and what it means for advisers.

Tuesday, February 8th 2022, 9:18AM 2 Comments

by Russell Hutchinson

The logic for an income insurance scheme was brought into policy debate again (this isn’t the first time) by the pandemic.

As several tens of thousands of workers were let go from travel and hospitality sectors a temporary safety net was provided at a level above that for normal unemployment benefits.

That brought both praise and criticism from both the left and the right. Perhaps the best argument in favor of such schemes is simply that events such as pandemics are hard to insure – social goods that are hard to provide for in another way are usually the proper realm of government. Having said that, these proposals include income cover not just for mass redundancy, but the more specific types, and, for loss of income due to sickness. 

Strong arguments exist that some contingencies should be covered by savings.

Savings are marvelously flexible – if you don’t use them for one thing, you can use them for another.

Generous safety nets can create hazards which depress private savings further causing other problems. 

Another is that by squeezing out the private sector, you can reduce the size of the productive economy.

Competition between insurers often yields efficiency and innovation.

Arguments back will cover the ideas that single, state-run insurers, such as the entity we usually call ACC, are very efficient. There are schemes overseas with which comparison can be made. 

One particular concern for income insurers is that the government proposes to take the best bit of the income protection risk and leave the worst bit: long term income claims.  

Do take the opportunity to read the proposals and give feedback, if a whole submission is daunting, then co-operating with your industry body is a great way to participate. If nothing else, some clients may bring up the potential scheme and you should know about it.

Tags: Russell Hutchinson

« Mass media praise the value of adviceThere has been a revolution in cancer treatment, its ongoing, and its great news. »

Special Offers

Comments from our readers

On 10 February 2022 at 11:56 am JPHale said:
I agree there is some good social support and safety net from this that is beneficial, and when it comes to businesses pivoting and changing direction, that's a good thing.

Russell's point on short term claims is spot on, as usual, 7-8 months of support as proposed falls well short of the industry average claims of 14-18 months.

Even the "normal" short claims are going to find they don't have enough support just as they start back to work. And then what about those that bounce around a lot.

Particularly mental health claims where the stressors come back from time to time. I have one client going through his third such claim in about 10 years because things are not as straightforward and as simple as the modellers like.

There is going to remain a need for good disability coverage with this, the challenge we are going to have is justifying why in the same way we have had to with ACC and accident claims, now it's harder.

In some ways the job loss piece is excellent, the medical disability component is setting people up for significant failure and hardship. It would be better to have this component at 90 days/13 weeks, which slots nicely into the disability insurance sweet spot for premiums.

6 months wait is too long if there isn't coverage provided, and not enough of a saving to justify pushing it out either.

We also need to see more detail on what is proposed, as anyone who has worked disability claims knows, there are significant fishhooks to consider.
On 11 February 2022 at 9:57 am Tash said:
The abuse will be epic. Every person wanting a break from work will get a 6 month paid holiday. the costs will soon balloon to much more than is affordable by anyone, employer or employee.

Sign In to add your comment



Printable version  


Email to a friend
Insurance Briefs

Why nothing else?
We wanted to dedicate this email solely to Graeme Lindsay; That's why there are no other stories.  A full newsletter will follow.

PIC Insurance Brokers partners with RE/MAX New Zealand
PIC Insurance Brokers has entered into a new strategic partnership with real estate company RE/MAX New Zealand as the exclusive insurance broker.

New customers get 3-months' premium-free on Fidelity Life
Fidelity Life has announced a special offer to cover new customers’ premiums for the first 3-months of their policies.

Premium relief for customers in drought areas
Fidelity Life offers premium relief to drought-affected customers

News Bites
Latest Comments
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous News
Most Commented On
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
Site by Web Developer and