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