Speech: Neilson - Financial Services Council
Peter Neilson, Chief Executive, Financial Services Council
Speech to the Launch of the FSC, the Wellington Club, 88 the Terrace
5.30pm Tuesday 13 March, 2012
First, I would like to thank John Brogden and Sean Hughes for speaking here tonight.
We want to have effective working relationships with both organisations. The FSC in Australia has been very effective in influencing the debate on retirement income security in Australia and the recent cross party support for lifting their superannuation contribution rate from 9 to 12% shows what can be achieved from evidence based advocacy, active engagement with policy makers and an industry that can speak authoritively on issues where there is broad basis for that agreement.
We also look forward to working with Sean Hughes and the team at the FMA. We have a common interest in rebuilding confidence in the financial services sector, keeping the incompetent and dishonest out of the sector and having investors, savers and the insured receive transparent, reliable and easily comparable information on products and performance. We both want regulation that works and to support financial literacy campaigns that are effective.
Tonight we launch not just a new organisation but also a new framework for our organisation.
The FSC membership and the Board have agreed they want to take a strategic rather than reactive role on financial services issues of importance for New Zealanders. That means addressing the issue - what will be best for New Zealand? - before we ask what is good for the industry.
Politicians and their advisers have no shortage of people bringing them problems to solve. People or organisations bringing solutions rather than problems are always more welcome. Any practical and sustainable solution needs an evidence base.
We need a robust process to
define the problem, identify possible solutions and devise
an implementation plan for the best solution.
For the FSC this process is underway.
We have almost completed our investigation into the issues surrounding underinsurance and the very first draft of our report on the Future of Long Term Savings and KiwiSaver will soon be completed. We plan to start a conversation on these issues during the next few months.
Turning first to the question of underinsurance.
The particular interest of the FSC is in the insurance of people, the coverage of life and the provision of cover for accidents, health, total permanent disability, trauma and income protection insurance.
We have long known that New Zealanders are far more likely to insure their home or their car than their life.
The recent tragic events in Christchurch where 185 people lost their lives has resulted in only 101 life claims paid by our members.
Even with a number of those people being foreign nationals who would not be insured here and some of those covered possibly having a claim for their life as well as a separate funeral policy, it looks as though only around 60% of people had life cover. Our research project on underinsurance has addressed the factors behind such numbers.
The industry competes vigorously for the market segment characterised by households with a mortgage, average and above incomes and young dependents.
The research has been used to help understand why the level of underinsurance is much higher for some groups.
It has sought to answer the questions:
• Do the underinsured have positive or negative feelings about insurance?
• Do those views differ with ethnicity?
• Do those potential customers understand the products offered?
• Is it easy or hard to find out what you need?
• Is finding objective advice an issue?
• Are there people who are over-insured?
• Are there gaps in the product offerings compared with current needs?
The findings to date suggest that new business
models will be needed to match the opportunities that now
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For our project on the Future of Long Term Savings and KiwiSaver, we are taking a long term view on these issues starting by asking a few fundamental questions:
• What will the New
Zealanders under 40 want from their retirement.
• How will the level of benefits and cost of providing retirement income in New Zealand compare as the Australian superannuation scheme matures?
• What is a realistic view on what will happen to longevity (how long we will live past 65) looking out to the balance of this century?
• What is the best way to fund retirement incomes going forward?
The objective of the research is to show how we can retain the option to an income equivalent to NZ Superannuation from 65 into the future.
How can we provide more New Zealanders with an income sufficient for them to be comfortable in retirement?
The project is based on no changes for those either already in retirement or close to it and ensuring that pensions continue to be paid at least at the level of NZ Superannuation from 65 without any means or asset test.
We think this work will encourage an informed conversation on the options we have for the future while providing greater security for retirement incomes than currently exists.
The findings from these projects will be made available during the next three months.
They will provide an opportunity to
reinforce the objectives contained in our tag line
“growing and protecting the wealth of New