Honesty really is the best policy, says insurance chief
Bringing sorely needed change to industry starts with rebuilding trust with customers, Fidelity Life CEO tells Tamsyn Parker
Melissa Cantell reckons she fell into the insurance industry by accident. A transformation specialist with a legal background, she had already worked for big names like Fonterra and Coca-Cola Amatil before being enticed to join insurance giant IAG back in 2015.
“[IAG] were looking for someone to come in and help lead their transformation through a customer lens,” she says.
“So I joined for that but I stayed for a really different reason, which is I came across an industry which is [unbelievably] meaningful. You are helping people every day. That was a surprise to me when I came in. So that’s why I’m still here.”
In January 2021 Cantell became chief executive at Fidelity Life, where that transformation focus has continued. This year Fidelity bought Westpac’s life insurance business for $400 million and it now has a 16 per cent share of the New Zealand life insurance market.
Unlike many of the other big players, it is locally owned, with the New Zealand Superannuation Fund holding 49.63 per cent of the business, Nga¯i Tahu 24.94 per cent and the Fidelity Family Trust 14.65 per cent.
Westpac’s sale is part of a major shift in the industry where all the Australian-owned NZ banks have got out of owning life insurers in New Zealand following Australia’s scandalridden Royal Commission into the financial services industry in 2017.
The commission prompted a joint conduct and culture report in New Zealand by the Reserve Bank and the Financial Markets Authority, which also shone a light on an industry that needed to change here.
Their 2019 report found the life insurance sector was not sufficiently focused on meeting customer needs and insurers had been complacent about conduct risk, and had not focused enough on developing a culture that balances the interests of shareholders with those of customers.
Overseas junkets that rewarded financial advisers for selling insurance were canned and high commissions came under the spotlight. Insurers were told to run the rule over all their products and services to check where they had gone wrong and make good with customers.
Last month the FMA reported that life insurers had collectively paid out $43m to wronged customers. And now the insurers (and other financial service providers) are gearing up to be licensed by the FMA for the first time over how they treat customers.
Cantell says the industry is dealing with a lot of regulatory change and has a big challenge in front of it to win back trust.
“If I go right back to the heart of it, it’s because the industry historically hasn’t behaved in a way that was with the customer in mind. That’s a big generalisation. There are lots of wonderful participants in the industry. And sometimes those challenges weren’t even intentional. But it is what it is and it is where we are. As a result, the trust in the industry has been eroded. That’s where regulation comes in.
“I’m a big supporter of customerfocused regulation to help bring that focus back into any industry that needs that help. What it has driven, though, is a whole lot of change. Not only are we each having to work through what the regulation means for us, but it has driven things like industry consolidation as, for example, banks start to focus on their core business by selling off life insurance arms to people like us who can focus on our core business. So it’s resulting in lots of different moving parts and makes it a really interesting business to be in at the moment.”
Cantell says turning around the historic perception of the industry will come down to rebuilding trust.
“Whether it is trust from the regulators or trust from New Zealanders, I think the solution is the same thing. We need to be more transparent in what we do. We need products that are easy to understand. We need advice to be freely and easily available. We need products to be affordable.
“If we can package all of those things up and really look at it through a customer lens, I think we can start tackling that problem. The other thing the industry needs to do is think long term. So really, what is a sustainable life insurance model for New Zealand? And a sustainable solution for New Zealanders. So rather than focusing on short-term profit levers, what’s the longer-term game?”
The other challenge, she says, is addressing the “protection gap”.
“From a life insurance point of view, over half of New Zealand households have a protection gap. So that means if the primary income earner were to pass away unexpectedly, they would find it materially difficult to meet their financial needs. And that’s not good enough. It’s the job of the industry to help close that gap.”
The Government is also making moves to increase Kiwis’ financial security with its planned $3.5 billion income insurance scheme. The scheme is set to be run by the Accident Compensation Corporation and would pay people 80 per cent of their salaries (up to a cap) for seven months after losing their job. The plan would be funded by a levy of 1.39 per cent on employees and businesses.
The move has the insurance industry worried and industry body the Financial Services Council has argued that it would be difficult for ACC to scale up and get the expertise required to assess a potentially large number of complex claims, including those related to mental health for example, by the end of 2023 when the Government wants the scheme to begin operating.
The council wants government to partner with private insurers to provide cover for loss of income due to illness.
Cantell says she’s all for initiatives that will help close New Zealand’s protection gap.
“But as proposed, we don’t think it will achieve what it sets out to do.”
Cantell says the proposal seems to have been rushed and is disappointed there hasn’t been more engagement with the sector on it.
“We’re also concerned that what started out as a proposal for a redundancy insurance scheme has expanded to include health and illness, which are very different propositions, and with no clarity as to what this might mean for New Zealanders who already have private insurance. In its current form, we believe it could cause confusion and lead customers to cancel existing policies with the mistaken belief that the scheme now provides an equivalent level of cover, inadvertently increasing the protection gap. In addition, any decision which reduces New Zealanders’ take-home pay and adds cost for businesses in already challenging economic times warrants thorough consideration of the impact on employees and employers alike.”
Cantell, who grew up on Auckland’s North Shore, isn’t sitting back while all the change is happening. In September Fidelity announced plans to offer a training course for new advisers to address the shortage of advisers coming into the industry and the rise in the number retiring.
“Advice is really critical to New Zealanders to get the protection they need. We want to make sure it stays really buoyant. The other thing is that life insurance and advice is so meaningful and so purpose-led — we get to come to work and do the most amazing work for people every day — I don’t think we have sold ourselves that way as an industry.
“I don’t know if people wake up as teenagers and think, ‘god, I really want to grow up and be in life insurance’. So reframing what we do with that purpose lens and bringing young people in. I have seen some incredible young advisers come into the industry recently and so we want to help support more.”
And she is focused on bedding in the Westpac acquisition, now renamed Fidelity Insurance.
“The immediate horizon is integrating the Westpac Life business. Building a strong stable core business that we can then springboard from.”
Scale is important when it comes to life insurance, she says.
“So that gives us a broader base to build from. From there it’s how do we tackle that protection gap — protect the most vulnerable NZers, what might those products look like?
“We know there are so many people that don’t participate in what we do at the moment and in a lot of cases that is probably the people who need it most. That requires a complete reframing of how we go about doing what we do. That’s the next big focus for us.”
Whether it is trust from the regulators or trust from New Zealanders, I think the solution is the same thing. We need to be more transparent in what we do.
Melissa Cantell