The insurance industry in New Zealand is currently in the midst of a transformation that was born from the challenges it has recently faced. The 2008 financial crisis sent shockwaves through the country’s largely unregulated financial markets and associated industries. The impact for both the financial and insurance sectors has led to a more stable and transparent system, but there is still more work to be done. Financial education for the public, making services more accessible and instilling greater public confidence are vital steps that need addressing.
Facing the challenge head-on is life insurer Asteron Life. Here is a business that is attempting to go above and beyond to create fairer and far-reaching insurance solutions that can help the entire breadth of New Zealand’s various communities. World Finance had the opportunity to speak with CEO Nadine Tereora about the changes currently happening in New Zealand, and what role Asteron Life has to play.
If the [insurance] industry is to make real in-roads, we’ll need to successfully lobby parliament
What was the overall impact of the 2014 ASIC report on New Zealand’s own retail life insurance market?
The Australian Securities and Investments Commission’s (ASIC) report reignited the debate that has enveloped the intermediated advice channel; it has helped to bring the conversation into a more public arena and crystallise various arguments. The industry here is now keen to participate in the discussion and explore various issues in the New Zealand context.
This is helped because a number of insurers in New Zealand are either fully or partly owned by Australian parents – Asteron Life included. Of course we must remain vigilant of the differences between our two jurisdictions and the prevailing regulatory frameworks. That means considering whether the recommendations resulting from ASIC’s review achieve the best outcomes for all of those impacted by it here. However, I am comforted by the enormous effort being invested in the associated due diligence.
The release of ASIC’s report also coincided with the review of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. These key pieces of legislation are designed to increase the professional standards of financial advisers, ensuring that financial services markets function well and help consumers make informed decisions. We anticipate that the impact of this work won’t be felt until policymakers have undertaken their reviews and New Zealand’s specific data has been captured and scrutinised.
What concerns still persist in the industry?
Ongoing concerns include underinsurance, which is a significant issue facing New Zealand if the data is to be believed. Price, affordability and value perceptions are also factors, together with financial literacy. Customer engagement and product design must be improved and simplified, which involves keeping up with technological innovations inside and outside of the industry. The cost of compliance and disclosure obligations, industry trust and business replacement drivers are other current challenges that need to be addressed.
How are these issues being dealt with?
It’s difficult for me to respond on behalf of the broader industry. However, speaking for Asteron Life, we are 100 percent focused on making a lasting difference as far as the sustainability debate is concerned. That includes everything from sensible adviser remuneration structures, through to the way we communicate with our customers, innovative product development, enhancing our service culture and the evolution of a diverse, culturally rich workforce that is capable of taking us forward.
Why is regulated and quality financial impact such an important pillar for New Zealand’s economy?
It’s about instilling greater confidence and trust to promote an environment that facilitates the development of fair, efficient and transparent financial markets. It’s a crucial component for stability in a country where a significant proportion of households contend with modest discretionary income. Regulation has since improved both the accessibility to financial advice and the levels of professionalism and rigour therein.
How can customer engagement be improved?
Through trust, authenticity and education. We also need to work a lot more on simplification without diluting the message – it’s a tough challenge. Financial education will deliver the most material change of all. There’s an opportunity for the industry to continue bridge-building with the incumbent government to tackle financial literacy among New Zealand’s diverse communities – the Commission for Financial Capability and the Retirement Commissioner, Diane Maxwell, are doing some great work in this area. The State and ACC (Accident Compensation Corporation) aren’t going to come to the rescue – the typical ‘she’ll be right’ philosophy of heartland New Zealand needs to shift somewhat.
How is underinsurance being dealt with?
A review commissioned by the Financial Services Council in 2011 found that the country’s level of underinsurance was the third lowest in terms of penetration among 31 OECD countries – with only Greece and Mexico faring worse. I believe we’re still wrestling with this message; it’s an issue we’re not alone in dealing with – larger markets elsewhere in the world are experiencing similar difficulties.
The public’s perceptions around simplicity and affordability must play a part in the underinsurance debate. If we’re to take the industry forward, we need to tackle this challenge head on. That’s why I continue to press our agenda to evolve customer offerings across the entire breadth of our business.
I also believe that we need to resonate more with the hearts and minds of the communities we serve. Perhaps the financial services industry needs to do more than most to atone for misdemeanours of the past – the global financial crisis has left a legacy for us all to reconcile.
If the [insurance] industry is to make real in-roads, we’ll need to successfully lobby parliament; perhaps significant change won’t happen until insurance is made compulsory or tax incentivised. After all, we’re talking about a country that doesn’t mandate car insurance. And then there’s the savings and retirement gap. Underinsurance might need to take its place in the queue but that doesn’t stop us from trying.
How is Asteron Life equipped to handle an ongoing transformation in the industry?
We’ve championed a more holistic, sustainable advice model for some years now; one that attempts to negotiate the sometimes competing arenas of sales growth and longer term persistency. Undoubtedly, this policy has cost us new business revenue.
But I prefer to point to the overwhelming support we’ve received from the vast majority of our adviser partnerships who have encouraged us to hold our course. This focus on value over volume will deliver longer-term shareholder return and customer trust.
Where possible, our approach is focused on level premium business, equitable commission structures, sustainable product development and customer insight. For the majority of New Zealand households, disposable income levels are modest. This is useful context in helping to explain why a significant number of customers choose to lapse their cover for reasons of affordability.
As a customer-oriented business, we have to be sympathetic to customer feedback. It’s an important consideration for Asteron Life as we distribute our product via a non-aligned network of advisers throughout New Zealand’s North and South Islands.
What are the areas of focus for Asteron Life at present?
Our focus can be summarised across three pillars of activity. The first is founded on a principle of placing the customer at the forefront of everything we do. This is a unifying sentiment across the organisational value chain that includes everything from the speed with which we place our customers on risk, to the care we demonstrate at claim time – and everything in between. We’re doing well but there remains much scope to improve.
The second is all about building strong partnerships with progressive, customer centric adviser businesses and dealer groups – those that are looking to build sustainable revenue streams as a result of better persistency, balanced income portfolios and a genuine desire to elevate the role intermediated advice plays. If we get these first two pillars right, we’ll deliver sustainable shareholder value: a ‘win three’ model where everyone benefits.
The third is built around our people as they afford us a competitive advantage. They live and breathe a leadership mind-set, regardless of where they might appear in the organisation’s hierarchy. This is the difference between organisations that can and those that can’t. It’s no coincidence that over the last three years our financial performance has accelerated exponentially, while at the same time staff sentiment has outperformed high achieving global norms in engagement and enablement.
How do you see the industry evolving in the coming years?
We’re facing some difficult choices. The Ministry of Business, Innovation and Employment’s review of the Financial Adviser and Financial Service Providers Acts may dominate the industry headlines in the coming months, and no doubt the conversations around the water-coolers too, but change feels far broader to me than that and I’m sure other leaders share this view as well. For example, my sense is that at some point, the cost of reinsurance will accelerate the product simplification conversation.
I’m also mindful of the ageing adviser workforce with many individuals either at or approaching traditional retirement age. Metaphorically speaking, that’s a lot of intellectual property that’s about to walk out of the door. Then there is the very real challenge of sustainable growth. For a country with a modest population of roughly 4.5 million dispersed across a geography greater than the UK, the spectre of industry consolidation and the proliferation of alternative methods of channel distribution cannot be ruled out. Intermediated distribution is the life-blood of our business, but we must remain vigilant in the face of acquisition and maintenance cost pressures.
I think it is worth underlining that material success within the industry will be born of a collective focus toward changing customer needs and their perceptions of value, service and trust. I see these things as a ‘must’ if industry stability is to be maintained during these changing times.
