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Jon-Paul Hale

Pros and cons with life policy structures

Jon-Paul Hale
Saturday 2nd of January 2021

So you know your policy wordings right?

Hmm ... I wonder? I talked the last time about passback and hardening and retracting markets for life insurance. Also, the impact of cover structures with policy documents.

These are clear issues with how we give advice and will come into the picture more in the future with the scrutiny from both regulators, and more so compliance auditors. I expect we are going to have a lot of education to do with the compliance people on how we do things. As many have an outside-looking-in background, which usually doesn’t understand the nuances particularly well.

When we focus on policy construction and how the policy wordings work, there are a few things that are both an advantage and a disadvantage with the Cigna and Partners Life policy structures.

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FMA outlines its latest expectations for advisers
Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.
3 days ago Steve Wright
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Just a tip, if you use more than six, six letter words in a sentence you lose most Kiwi's. So avoid client/adviser confusion when writing your post or article if you would like it read and understood. Ironically, my last sentence was not likely read.
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FMA outlines its latest expectations for advisers
All things said are great aspirational goals for a great financial advice industry, it mirrors what both the legislation and the code requires. However, like most things discussed it talks about what's expected not how it's done. The hardest aspect of financial advice today isn't what it is, it is how it is done. The how only comes from those that have done it, the how is only provided with examples. Guidance documents that spell out what's required along side how it it done. We’re still dealing with the same issues we started with in 2021, figuring out the how. And figuring out the how in every advice business is consuming resources that could easily be shortcut by the FMA demonstrating what they are expecting. It's not about “do it this way” its about this is the sorts of things we’re looking for. In the absence of standards and expectations, guesswork prevails. That represents significant risk to FAPs and the result is onerous overcooked advice processes for multiple advice operations and undercooked she’ll be right for single operators focused on getting the work done. Both approaches have potential for harm and as its been said earlier, leaves advisers open to explain they haven't been speeding with the authorities have pulled them over. The advice industry needs guidance on the how we know the what already.
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To correct errors in my previous post: "policies, templates, and controls" should read "policies, processes, systems and controls", and "is more conductive" should read "is more conducive".
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