As a country, we need to be better at planning for the ‘what-ifs’ in life, for building a strong financial future and, of course, a secure retirement. Generally speaking, the financial preparedness of Kiwis needs considerable work.
Last year, the theme for Money Week was Weather the Storm – a national awareness campaign led by the Commission for Financial Capability and Sorted.org to drive home the importance of safeguarding personal financial security – be that through insurance, saving, retirement planning or other tools.
It’s a big challenge for all involved in the finance sector to activate Kiwis to protect themselves from the unknowns and maybes. And it’s challenging for Kiwis who, busy with life, paying bills, making their way in the world, and without the guidance of an expert, tend to - understandably - put figuring out their options in the ‘too-hard’ basket.
So the headline-grabbing, sledge-hammer nature of the recent Fixing the Insurance Market survey by Consumer NZ - an organisation tasked with advocating for better outcomes for New Zealanders – was to put it mildly, a real surprise. In fact, we were so surprised by the survey structure and handling, we contacted Consumer NZ for further background, but at the time of writing this, have not heard back.
No-one is going to argue that there is not room for improvement in the insurance sector. But to state that “the protections so far put in place for consumers aren’t working and we can’t rely on the industry to put its own house in order,” is quite simply inaccurate, and bordering on sensationalist.
This statement ignores the fact that across the sector work is underway – and has been for some time – to address issues and ensure better outcomes for consumers. And let’s take a moment to acknowledge that while there is always room for improvement, and historically the sector has been slow to adapt and change in some instances, the insurance sector plays a vital role in supporting Kiwis through difficult times – $1.33 billion in risk insurance (life, trauma, health etc) claims were paid in the 12 months to June 2018 (Spotlight on Insurance 2018, Financial Services Council)*.
The survey is also at odds with other research, for example, the 2018 New Zealand Consumer Survey conducted by the Consumer Protection department of MBIE, which shows that: “One in 10 consumers who purchased insurance in the past two years experienced a problem, lower than the average across all categories (15%)”**. And is in stark contrast to figures from the Insurance Council of New Zealand on insurance claims, which shows that in 2018, only 0.003% of the 1,186,445 claims received were incorrectly declined by the insurer.
Also, on the subject of changing laws to better protect consumers in the event of accidental non-disclosure, the survey commentary ignores the current regulatory review of Insurance Contract Law. Financial Advice New Zealand made a submission supporting change, and as Insurance Council of NZ CEO, Tim Grafton said when the survey came out: “We are supportive of change here - a fact we have made both Consumer NZ and the government aware of.”
The list goes on.
But what is perhaps most notably imbalanced about this survey and related commentary from Consumer NZ, is the representation of advisers.
Consumer NZ is against commissions and has, in our opinion, clumsily connected the survey to this objective.
It is not ‘inevitable’ that commission risks that the adviser will put their interests ahead of the consumer, as the commentary states. Understandably, quality advisers who spend their working life helping Kiwis secure the right protection for their needs, take issue with this assault on their character. What’s more, it is a long-bow indeed to state that “commission-based selling is leading to less satisfied customers.”
Once again, we have asked for further information from Consumer NZ to better understand the findings and associated statements. We of course agree that remuneration – in either direct or adviser channels – must not be in conflict with good consumer outcomes. But, in our view, Consumer NZ’s position on commissions demonstrates a lack of understanding of the sector and what is needed to ensure Kiwis can continue to access much needed quality advice.
And another key observation is that the survey ignores the fact that ‘buying’ insurance direct is a very different experience from working with an adviser and assessing a wider range of options before making a choice. There is immense value in the advice process: Advisers help clients identify risks they might not have considered, to understand the difference between various types of cover and how they relate to their clients’ needs, and to assess their priorities. This is often a steep learning curve that advisers work through with their clients.
So, coming back to the 2018 Money Week message - Weather the Storm. Helping more Kiwis safeguard their personal financial security is a crucial objective for the sector - providers and advisers - and for regulators.
To get there - yes, providers and advisers must continue to progress existing changes and be continually vigilant about the processes and practises that deliver the best outcomes for Kiwis. To get there, we must also ensure that New Zealanders can continue to access quality advice and advisers. And to get there we must also ensure that that we build public confidence and trust.
We welcome any robust, considered consumer research that will help the advice sector continually improve how we best serve Kiwis and ensure good consumer outcomes. But in this instance, our fear is that all this survey from Consumer NZ achieved was to hinder what we are all striving towards – and that is, helping more New Zealanders to safeguard their personal financial security.
* Spotlight on Insurance | Financial Services Council of New Zealand, 30 June 2018
**New Zealand Consumer Survey, 2018 | Consumer Protection, MBIE