A Deloitte issues paper on the New Zealand life insurance sector was released today, expanding on the observations made in an RBNZ Bulletin published earlier in 2020 by the Reserve
Bank. Following the release of the RBNZ Bulletin Vol. 83, No.1 in January, Deloitte was commissioned by Partners Life to further explore the drivers of the observations made in the
bulletin, with a focus on sector efficiency, profitability and capital adequacy relative to other countries.
The paper was put together by a cross-functional team including actuarial, insurance and economics specialists across
the New Zealand and Australia Deloitte firms. “Our intention is that the paper will encourage further discussion amongst
the life insurance community, particularly in light of the upcoming review of the Solvency Standard,” says Lee-Ann du
Toit, Deloitte New Zealand Actuarial and Insurance Services Partner.
Du Toit expands: “The New Zealand life insurance industry is unique for a variety of reasons when compared to its
overseas counterparts. For instance, existing alongside ACC, KiwiSaver and NZ Super, our life insurance offerings have
been shaped by the needs of a local population that is already confident in an existing level of support from
government.”
“It is, therefore, difficult to use high-level metrics as a means of comparison, as these may be distorted by the
different characteristics between jurisdictions. For example, commission ratios, where we see a relatively high
commission ratio in New Zealand compared with Australia. However, this is driven by a significant portion of life
insurance in Australia being distributed through mandated default insurance under group schemes attached to
Superannuation, while in New Zealand, adviser distribution is more dominant.”
The paper also notes that a focus on customers (policyholders) is key to future profitability and reputational success.
“To achieve a sustainable life insurance industry which has the end consumer’s interests as its primary concern,
insurers and regulators need to consider all factors from a solvency, sustainability and appropriateness of coverage
perspective,” says du Toit.
As the RBNZ looks to review the Solvency Standard in the near future, it will be important to strike a balance between
providing stability and confidence in the sector without imposing a strain on the industry through unnecessarily high
capital requirements, discouraging investment in growth and innovation.
The full paper can be downloaded here.