It has been an interesting week for the insurance industry with the release of the Life Insurer Conduct and Culture report by the Financial Markets Authority New Zealand and the Reserve Bank of New Zealand.
The report feeds back to the market both positive and negative findings. We welcome this report and are glad that it brings greater transparency to the industry. While we recognise that the insurance sector isn’t perfect and there is progress yet to be made, we believe the media coverage of this report has been largely (and unfortunately typically) one-sided. The media coverage about the report paints an unbalanced picture of the industry we are passionate about and proud of.
At Plus4 we absolutely believe that poor conduct in the industry should be called out, and that there is a small minority of bad players that tarnish the good work of our advisors and the majority of our peers. New Zealand already has an under-insurance problem and uncertainty from consumers about why obtaining the correct insurance is important, and we have concerns about the damage that irresponsible media reporting on this report could do.
We would like to take this opportunity to answer some of the coverage of the report, reassure our clients that they are in safe hands with Plus4, and outline some ways in which all consumers can make good decisions when buying insurance.
The report was tasked with looking at the conduct and culture of the insurance industry, in particular that of life insurance providers.
It is important to understand that while advisers work closely with a range of different providers and sell their products, we are not insurance providers. There is an important distinction between the two.
Insurance providers sell to consumers in three different ways:
The report reviewed 16 life insurance providers in New Zealand, including some that sell directly to consumers, others that sell through advisers, and those that do both.
Insurance advisers, like Plus4, work with many different providers to find the best product for you and our other clients. At Plus4, we even use independent research to make sure the providers and products we work with are the best available. Providers (including banks) that sell directly to consumers are able to avoid this level of scrutiny.
One of the points of concern raised in the report and amplified by the media was around commissions (paid to advisers when they sell a provider’s product), incentives and rewards. Insurance is a sales-based industry and as such has historically been incentivised.
In particular, the report was concerned about advisers being financially motivated to choose a product for a client based on the commission or incentive they could receive, not on the merits of the product, and whether these commissions were disclosed to clients.
It’s important to note that:
We believe all New Zealanders should be able to seek high quality advice on insurance – it is an important purchase and getting it wrong can cost you when you need it most.
We also believe that insurance advisers deserve to make a living, like anyone else. Individual advisers take on significant financial risk with the advice they give, and are on call for their clients – we promise to be there and be available for our clients when they need us.
The law around disclosure can be loose, however there are industry best-practice standards that most of the industry follows. At Plus4 we have committed to a standard that is much higher than that required by law.
Our partners are held to that standard and any adviser that breaches our standards would be asked to leave the group.
It is only natural that when a report like this comes out, or the insurance industry get bad press, that people wonder how to protect themselves. Insurance can be a significant expense, and isn’t something anyone enjoys buying. Here are some ideas on making sure you get the most out of it.
If your adviser follows these steps you can rest assured, you have a good adviser.
If you want to talk to any of our Plus4 team, want to make sure your insurance is up to date, or have concerns about your current insurance, please call us.
Here are a few reviews from some of our existing clients around New Zealand