GUEST COLUMNIST
With a well-deserved break on the horizon, the time seems appropriate to collect our thoughts on how 2022 could shape up, says Financial Advice NZ CEO Katrina Shanks.
Throughout this year, we have been keeping a close eye on emerging trends, to ensure our ‘Bring in the Experts’ webinars delivered the latest information on a variety of critical topics. We’ve also heard from many advisers about their needs and goals, and the key themes that are likely to gain traction in the upcoming months.
So, I decided to put down some thoughts about key points that have surfaced, and the implications that they might have for the financial advice sector. As insurance advisers know all too well, we can’t predict the future but we can plan for it – and possibly turn challenges into opportunities.
Elective surgery delays
As in many other countries, Covid-19 and lockdowns has resulted in healthcare reorganisation, and has increased elective surgery waiting times across New Zealand.
Many patients – including those with serious and advanced illness – are facing delays to treatment. And according to experts, the backlog is likely to pose a challenge for already stretched DHBs, many of which lack critical staff and facilities to catch up on all the operations delayed.
As some members told me, and I agree, it’s another valuable reason to discuss the benefit of health insurance with clients. Lockdowns might be on the way out, but with Covid-19 now in the community, it is likely that the system will be under even more pressure going forward. Now perhaps more than ever, health cover could help many New Zealanders get the treatment they need, when they need it.
Rising mortgage rates
It would be a huge understatement to say that the property market has been difficult to predict. Since the first nationwide lockdown, in March 2020, analysts and economists have taken turns trying to anticipate when the bubble would burst – or at least, when price growth would subside.
Hindsight is always 20/20, as the saying goes. But what the market has confirmed, over and over again, is that the factors underpinning it are complex and don’t fit the usual mould.
Prices have continued to show steady growth. Meanwhile, mortgage rates are also rising and getting back to pre-Covid levels (for now), which means that some homeowners will see their rates go up significantly, especially those who have bought their home in the past two or three years.
Combined with the changes in CCCFA around affordability, the impact of the RBNZ changes and some lenders policy changes for debt/income ratios, it will be interesting to see if this slows the market. Just to add to the complexity, we are seeing some lenders ask for vaccine certificates as a considering for affordability.
This is not just relevant for mortgage advisers’ clients, of course. Mortgage rate increases have a ripple effect on Kiwis’ disposable incomes, long-term goals, and even insurance. Some insurance advisers are already encouraging clients to book reviews in the new year, to check that their income protection or mortgage protection insurance is enough to cover the extra costs. It can be a great way to help Kiwis stay one step ahead in their financial lives.
Underwriting
Covid-19 has far-reaching impacts on the insurance sector, and as many experts and commentators have expressed in recent times, underwriting is one of those areas.
Some life and health insurers have started looking at what their global counterparts are doing about Covid-19 and people’s vaccination status. For example, as it turns out, insurers in South Africa and other countries already require people to disclose their vaccination status when taking out life or health cover.
New Zealand-based insurers might follow suit and include this information in their underwriting considerations for new applicants, with a focus on pre-existing conditions that are more likely to result in a claimable event if an unvaccinated client contracts Covid-19 (like heart disease and diabetes).
Of course, this has implications in terms of both affordability and insurability. Insurers may choose to either accept and accommodate the increased risk (by adding a premium loading to unvaccinated clients), apply specific exclusions, or decline cover altogether.
These are all key considerations, which make the coverage provided by existing policies even more valuable. It’s something important to raise with clients who might be considering switching or cancelling their protection to cut down costs.
Returning Kiwis
There has been a lot of commentary around returning Kiwis, a new Covid-related phenomenon in its own right. One of the latest contributions comes from the MBIE, who has recently published a survey of New Zealand arrivals that landed between August 2020 and April 2021. If you haven’t come across it yet, it has some interesting findings about returning Kiwis’ demographics, aspirations, and plans.
For example, the survey found that most New Zealanders were returning from Australia (30 per cent), followed by the UK (17 per cent), Asia (17 per cent), the US (9 per cent), and Europe (5 per cent). As it turned out, 36 per cent of respondents had been living outside of New Zealand for more than five years, and 29 per cent between one and five years. Interestingly, 26 per cent of people surveyed said they had returned sooner than intended, and for nearly half of respondents, Covid-19 was a factor in their decision.
As we know, insurance is an integral part of planning for the future. As returning Kiwis look at calling New Zealand ‘home’ again, insurance advisers can play an important role in getting them set up for a more secure financial life – with quality advice.
At Financial Advice NZ, we are on a mission to support advisers and the ‘value of advice’ message. We believe it’s the key to tackling underinsurance and help New Zealanders face the future with confidence.