Letter to life insurers by the FMA and Reserve Bank
Letter sent to life insurers by the FMA and Reserve
Bank of New Zealand
The
FMA and the RBNZ have sent the letter below to the chief
executives of New Zealand’s licensed life
insurers
Response to the Australian Royal Commission into misconduct in Banking, superannuation and other financial services (Royal Commission)
As you will be aware we met recently with the Board of the Financial Services Council. We discussed the issues raised at the Royal Commission that pertain to life insurance providers. At the meeting we reiterated our views that the nature and extent of the issues within financial services in Australia and the obvious cross-over in terms of entities, people and practices into New Zealand demands a strong response from the industry here, and from the regulators. We acknowledge the strong support and engagement we received from the FSC Board.
We would like to set out the expectations of the FMA and the Reserve Bank as to next steps and to clarify the information and actions required from your organisation. Our objective in this exercise is to understand what work you have undertaken to review your operations to promptly identify and address any conduct and culture issues. We expect you to show us what you have done in order to be comfortable that there are no material conduct issues within your business. We anticipate that you will be familiar with our Conduct Guide (published in February 2017) and may be extending or enhancing your work in response to the guide as it intersects with issues raised at the Royal Commission. There may also be issues you are looking at more broadly as a result of that inquiry.
We consider that the window for you to demonstrate to consumers, regulators and other stakeholders that they can have full confidence in the financial services industry in New Zealand is narrow, and you will have seen we have encouraged proactive leadership from the retail Banking sector. Given the breadth of your business activities here in New Zealand we would like to ask you for the same information that we have requested from the Banking sector.
Aspects of financial services conduct and culture fall within the regulatory remit of both the Reserve Bank and the Commerce Commission. This letter has been shared with and has the support of the Commerce Commission. In addition, we advise that the responses we seek from you will be shared with both of these agencies.
Information
requested
The purpose of this exercise is for us
to understand how you have obtained assurance that
misconduct of the type highlighted in Australia is not
taking place here. To clarify, we request a written response
from your organisation outlining:
• The actions you,
your Board and your senior teams have taken to identify and
address conduct risk arising directly or indirectly from
your firm’s actions, including product design and
distribution, incentives setting, and claims performance.
This should include any “gap analysis” work against the
expectations set out in the FMA’s Conduct Guide
• Any
specific plans and actions you have taken (or have underway)
to respond to the issues and themes arising from the Royal
Commission
• Any other work you have underway or that
is planned to proactively identify and address potential
conduct and culture risk
• Any work underway to
remediate any identified issues where conduct by your firm
has resulted in detrimental outcomes for customers.
We
envisage receiving from you a summary document that provides
an overview of your programme of work including:
•
the key objectives of your work
• structure,
approach and level of resourcing of your work
•
level of Board and senior management oversight and
reporting
• key personnel involved
•
summary of any early findings/insights to date
•
details of any remediation programmes underway
•
any other summary information that will help to provide us
with a view on level and depth and focus areas of your
current inquiries.
Time frames
Please
provide this overview to the FMA no later than Friday 22
June 2018. We will then assess this summary information and
schedule a follow up meeting with your core team to discuss
your response, agree next steps, timetable, further
information requests and ongoing reporting. We will also
work with you to schedule a meeting with your Board of
Directors to discuss this work as appropriate.
We intend to be fully open and transparent in our inquiries and interactions with you and we expect the same approach from you. We encourage early discussion of any areas where you anticipate that some remediation may be appropriate or where you are considering changes to product offerings, sales practices or business structures.
We will also continue to
focus on areas we have previously signalled as priorities,
including:
• the FMA’s thematic review on soft
commission in life insurance
• the Financial Adviser
Act reforms
• the FMA’s thematic work on incentives
in vertically integrated institutions
• QFE Insurance
provider replacement business
• Our stakeholder
relationship management programme – we anticipate
deepening our priority focus this year on governance and
culture within financial services firms.
Please also
share this letter with your Boards of Directors. We will
publish this letter on our website in the interests of
transparency.
Yours sincerely
Rob Everett
Chief Executive
Financial Markets
Authority Adrian Orr
Governor
Reserve Bank of New
Zealand
cc: Dr Mark Berry, Commerce
Commission