New Zealand’s life insurers have bowed to the pressure of the regulator and will stop sending high-selling financial advisers on overseas trips by 2020 – but not before one last round of freebies.
The Financial Markets Authority called for insurers to act in May after a report on soft incentives in the sector found nine firms spent $18 million in two years taking advisers to destinations including Tahiti, Argentina and the United States.
The FMA was concerned the incentives were setting advisers up to provide poor advice to the public. A 2016 inquiry raised concerns some advisers were likely to be acting in their own best interests by replacing insurance policies to boost commissions or get free overseas trips.
Herald inquiries have found all of the major life insurers will stop offering trips by 2020 but next year advisers will still have the chance to be taken to Japan for the Rugby World Cup, Cambodia and Vietnam, Switzerland or Hong Kong.
Sovereign, New Zealand’s biggest life insurer, which was bought out by global player AIA this year, said it would cease overseas recognition trips for advisers beyond 2019.
Chief executive Nick Stanhope said the decision formed part of a wider review by AIA/ Sovereign.
“Our aim is to ensure our relationship and responsibilities with advisers remain closely aligned to supporting best practice and promoting good outcomes for customers.”
Stanhope said AIA had briefed staff and advisers and the reaction had been “very encouraging”. “As the largest life insurer in New Zealand we take the responsibility of earning and maintaining the trust and confidence of our customers very seriously.”
But it will still take advisers to the Rugby World Cup in Japan in October next year as part of honouring an “existing contractual obligation”.
Partners Life, which hit the headlines in 2014 when it offered insurance advisers a luxury trip to Los Angeles, which included a dinner party at the Playboy Mansion, said an adviser conference scheduled for next July in Cambodia and Vietnam would be its last offshore conference.
Naomi Ballantyne, managing director of Partners Life, said: “We fully support the focus of regulators on ensuring that consumers have trust in the conduct of New Zealand financial services companies and distribution channels, and we are intent on doing our part to preserve trust.”
The firm believed “offshore conferences lead directly to good customer outcomes because of the emphasis on adviser training, upskilling and business management”, but it was ready to adapt “to meet a wider market view”.
Ballantyne said it would now survey advisers on their views on how the company could support them in the future with plans to launch new offerings in the New Year.
Fidelity Life, whose shareholders include the NZ Superannuation Fund, said it had no plans for its partnership programme beyond 2019.
Chief executive Nadine Tereora said it was committed to ensuring Kiwis had access to independent financial advice they could trust and innovative insurance solutions. “The insurance industry’s undergoing fundamental change and we’re mindful of evolving public expectations.”
A spokesman said Fidelity’s last trip would be to Switzerland, partnering with its reinsurer Swiss Re.
Cris Knell, the executive general manager intermediated distribution at Suncorp NZ, which owns Asteron Life, said it reviewed its sales incentive programme in May.
“As a result of this review, Asteron Life made a number of key changes to the qualifying criteria for the 2019 overseas programme to ensure we are creating value for advisers while delivering good customer outcomes.”
Knell said the 2019 programme, in Hong Kong, includes a two-day executive education programme focused on managing potential conflicts of interest, elevating the customer, and building trust and confidence in the life insurance industry.
AMP pulled its trip programme this year, with its last overseas event held in Hawaii, while OnePath stopped offering overseas trips in 2016.
Health insurer nib NZ uses Fidelity Life’s partnership programme, which will stop after next year, while Southern Cross said it would stop offering domestic trips from January.
Southern Cross chief sales officer Kerry Boielle said in the past it had offered one domestic trip a year to up to 10 advisers and their partners.
“We chose these advisers based on various criteria including customer service and feedback from members.”
It will instead strengthen its existing investment in training, development and feedback for advisers.
The FMA and the Reserve Bank are due to release a report on the insurance industry’s conduct and culture in late January.