Advisers were very interested this week in the criticism levelled by the FSC around the rushed nature and lack of industry consultation by the Government over its proposed New Zealand Income Insurance Scheme…
The Financial Service Council has strongly criticised the rushed nature, timing and lack of prior industry consultation associated with the Government’s proposed New Zealand Income Insurance Scheme.
Initially released for consultation in February (see: Government Launches Consultation…), the basis of the Government’s proposal is to offer temporary financial support for New Zealanders who are made redundant, are laid off, or who stop working due to a health condition or disability. It proposes a levy of 1.39% on the wages and salaries of both workers and employers to fund 80% of salary for up to seven months.
Rushed policy development process
While welcoming discussion on the nature of the proposition, the FSC is critical of the short duration of the consultation process, which closed on 26 April. In its own submission, the council referred to a rushed policy development process. In stating good policy development takes time to get right, the FSC documented its concern that the policy development for the NZIIS proposal “…has been unduly rushed for a scheme of this complexity and that this will likely lead to poor drafting, and ultimately poor public policy outcomes.”
Lack of sector engagement
The council’s submission also noted the financial services sector has been managing life and health insurance for New Zealanders for generations and has the skills, capability, depth, and understanding on how a scheme like this could operate.
…the sector was not consulted in the build and development of the proposal
Given its specialised knowledge, the FSC expressed its concern that the sector was not consulted in the build and development of the proposal and was only engaged once the proposal was released to the wider public for feedback.
Timing
In observing the perceived ‘scope creep’ associated with what started out as a discussion by the Accident Compensation Corporation on redundancy insurance, the FSC also weighed-in on the timing of the consultation process, in which it stated:
“The significant scope of the proposal relative to the lack of prior industry engagement and a consultation period coming in the midst of the Omicron outbreak and at a time when our sector faces an almost unprecedented volume of regulatory or proposed regulatory change (much of it deferred from 2020/2021 due to Covid-19) is of significant concern.”
Public/private proposition
In terms of the nature of the NZIIS proposition itself, the FSC’s submission reflected on the potential for the scheme to be delivered through a public/private partnership approach.
“We think a public/private approach similar to that taken with KiwiSaver needs to be investigated and considered,” said FSC chief, Richard Klipin, who added that this model would allow the life and health insurance sectors to bring their capability and expertise to help solve a national problem, under a framework fostered by Government:
“New Zealanders deserve the best possible scheme and this will take time, commitment and capability to develop. We look forward to being part of the solution and the future of the NZIIS,” he concluded.