New Zealand life insurance sector

New Zealand, 2 September — 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.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Hanoi, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei and Tokyo.

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our network of member firms in more than 150 countries and territories serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 286,000 people make an impact that matters at www.deloitte.com.

Deloitte New Zealand brings together more than 1400 specialist professionals providing audit, tax, technology and systems, strategy and performance improvement, risk management, corporate finance, business recovery, forensic and accounting services. Our people are based in Auckland, Hamilton, Rotorua, Wellington, Christchurch, Queenstown and Dunedin, serving clients that range from New Zealand’s largest companies and public sector organisations to smaller businesses with ambition to grow. For more information about Deloitte in New Zealand, look to our website www.deloitte.co.nz.

© 2020. For information, contact Deloitte Touche Tohmatsu Limited.