By Gareth Vaughan
Kiwibank CEO Paul Brock says the state owned bank's push into life insurance will see it selling insurance to customers through its banking network that's cheaper than insurance peddled by insurance brokers.
Speaking after Kiwibank unveiled a NZ$57.9 million surge in annual profit to a record NZ$79.1 million yesterday Brock questioned whether a life insurance market driven by sales through brokers delivered the best value for customers.
"We believe we can provide an offering sold through the bank that will be best value by comparison to some of those higher cost packages available elsewhere," Brock said.
"The main thing is that we want to simplify the life insurance product offering and make it very easy to buy so that it's integrated into your discussions with us about your financial needs. Largely it's about a simplified product that's really easy to get and get hold of, and secondly that's really good value."
Kiwibank has been selling the likes of house, contents, motor vehicle and travel cover and health insurance through outsourced providers since 2002. It's now moving to an "in-group manufacturing model" for some insurance products. One of Kiwibank's conditions of registration with the Reserve Bank is that the banking group's insurance business isn't greater than 1% of its total consolidated assets. Kiwi Insurance will therefore be a sister company and subsidiary of Kiwi Group Holdings, a holding company of Kiwibank's parent New Zealand Post.
Brock said the bank had a "good insight" into what customers were currently paying for life insurance, although he wouldn't detail how much cheaper Kiwibank might be than rivals' life insurance charges.
The NZ Post/Kiwibank fledging insurance business, Kiwi Insurance Limited, has thus far launched one product being credit card repayment insurance. Brock said next would be a a term life product later this year.
"We think New Zealanders are under-insured overall," said Brock. "And given that we've got a significant customer base and now that we're 10 years old, many of them are in that younger age group coming into the mortgage age group, coming into the young family age group. We are very fired up to make sure people are well covered overall."
Brock's comments come after he told interest.co.nz in a Double Shot interview in March last year that the group was building a start up life insurance company "like we built a start-up Kiwibank." He said he expected to attract new customers just for the insurance. And in February Brock said Kiwibank was aiming to build up its life insurance business through its retail bank network.
Investment in the life insurance push was "a relatively small investment in the overall scheme of things," said Brock. "It will become quite profitable relatively soon in the journey in our view. Having said that I don't want to give a timeframe because we're still in the stages of setting the thing up and agreeing the levels of growth and business plan and all those sorts of good things."
Asked whether life insurance would be sold by existing staff in Kiwibank/NZ Post stores or new specialists would be brought in, Kiwibank said it wasn't yet in a position to provide details on sales procedures.
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26 Comments
Don't be stupid just for the sake of registering a comment.
How do they (KiwiBank) intend to make a return consistent with the needs of those wishing to secure an annuity/ballon payment etc later in life?
The holding for long term stock market investment model is broken. The S&P 500 is waiting to surpass 1999 levels.
The fixed income market in the Norhern Hemisphere is about to move from ZIRP to NIRP. Hardly a recipe to beat the rising costs of necessities such as petrol, electricity, gas and food.
Don't be sucked in by the "kiwi" aspect of Kiwibank. There are already NZ owned and operated life insurance companies that offer good products.
And bank insurance products rarely stack up against dedicated life insurance companies, e.g. limiting the number of illnesses you can claim for.
It's a shame KiwiBank have decided to move into the snake oil areas like insurance.
"in-group manufacturing model"
Ha Ha. More management BS buzzwords.
I was thinking of moving some deposits to them, because they were a stock standard bank, with no covered bonds, no frills. Obviously no point now.
Hey, but it just gets better and better ...
'credit card repayment insurance'
The NZ Post/Kiwibank fledging insurance business, Kiwi Insurance Limited, has thus far launched one product being credit card repayment insurance.
Also Known As PPI , (Payment Protection Insurance), where banks try to bleed thier customers dry, via a thousand cuts, selling them shit they don't need.
UK banks tried that scam, and finally got caught out.
Very limited Class Action Status available in NZ, so does Mr Brock have enough assets to cover his word?
Or will he disappear into oblivion with your money, via a bonus.
As a 'snake oil' insurance broker I would like to point out that a good personal insurance package is based on more than just who offers the cheapest life insurance premium. There is an advice element that only a good broker (with access to all avaiable products) can provide.
Also recent regulations from the FMA of RFA's and AFA's implies that policies can not be replaced just purely based on price so I'd be careful Kiwibank, I hope your advisers will be well trained and you offer a full range of products, not just a slightly lower life premium. Good luck with that one.
nope. you've lost me. advice is something a friend gives you. when something is sold with advice its called having a vested interest. effectively broker is a salesperson. you give advice with the intent on a sale to meet your sales targets, weekly/ monthly etc. I dont know of a friend who has a sales target when they give advice... get it now?
Most people dont want life insurance until some one tells them they cant get it. Confronting mortality has a way of focussing the mind.
I worry a bit about on line sales and over the counter sales at a bank in that the underwriting is probably going to happen at claim time. Filling in the one page form and forgetting that you saw a doctor three years ago for the flu might give rise to a fight over non disclosure some time. The most complicated thing about life insurance is the medical side and it can get very time consuming for brokers and insureds.
The other trick is getting the ownership correct and that might confuse a few bank tellers.
JackJill: So becuase I am a salesperson with targets it doesn't mean I can give good advice? Um OK still trying to work that out. You would rather rely on a friends advice than a professional who specialises in the industry???
Mist42nz: No I don't sell or advise on investments at all, never have. I agree some of those superannuation plans were terrible in terms of fees and returns - we have all been burn't by those. The policy you were looking for was a landlords policy that covered malicious damage by tenants - pretty common - who did you ask - your bank? Try asking an insurance broker next time.
Waripori: Correct non-disclosure of medical conditions is an issue, although the insurers are not going to decline a claim based on a flu that wasn't mentioned, would need to be a bit more major than that. Funny enough the policies sold by bank tellers are right up there in the non-disclosure cases. You are right if the policy is easy to take out with no broker or application forms then watch out for the fineprint as you likley still have a responsibility to disclose things. At claim time they will obtain your past medical information anyway...might be paying premiums for nothing?
"Um OK still trying to work that out."
Sure - its simple. You are unbalanced in your advice as it is geared to sell. If you can't see that .. an anaolgy might help. Does a 'professional' car salesperson offer better advice than your friend? Yes, their knowledge *might* be better but it is geared/slanted towards the sale.
All salespeoples sell.
*edit*I've worked in both a sales role and a technical role and they a worlds apart in terms of the angle you focus on. Sounds like you never have worked in differenct roles and can't appreciate that a salesperson is vastly different to the non-salesperson.
From what I see "tellers"do not sell Risk products but most banks have specialised Risk trained staff who are AFA.
Maybe some reasons you should look at a bank rather than an insurance agent:
- Insurance agents are mostly commissioned based so not sales pepole (I don't think so)
- Most Bank Risk sales pepole are on salaries (and may also be on a incentive program as well)
- If you get into dispute over a claim would you rather have your bank advocating for you then a one man band insurance agent?
- Your bank is not likely to run off with your premium if it can't pay its mortgage?
- You can use the Risk busness you have with bank to extract out better interest rate or fees on your other banking bsuinesses.
- Your bank is likely to be in same spot in 10 year time and not closed up shop and headed to Australia when times have got tough?
Other advice on insurance: in general if the underwriting to get policy takes time (getting medical records or additional questions) and policy is accepted then you should have less problems at claim time as insurance company knows everything upfront before the policy is written. If getting the policy involves a couple of questions to be accepted be aware as the company will be looking for any form of non disclosure at time of application.
.... as politicians are biased towards producing ever more bureaucracies , new regulations , ..... and increased compliance costs to pay for the whole junket ...
In the immortal words of Bernard Woolley on " Yes Minister " ...... package it up to the electorate as a positive thing , " red tape is fun ! "
"techincal roles working for the man."
oh I've heard that before, mainly from burnt out sales people. Not all technical people do that ya know. some create their own things and collaborate with others But you already know that, you done a 'variety of roles' and you see 'the bigger picture'
Moneyman: Yes brokers are mainly paid by way of commission but so are the risk specialists working for the banks - they get a salary but you should see the weekly targets they have to meet. Forces them to be more 'hard sell' than brokers/advisers...
The ISI have plenty of non-disclosure cases with a lot of references to policies sold through bank tellers. Sorry don't have actual stats. Yes the banks are tending to realise that it is a specialist field and are training people appropriately now...albeit they are only selling one insurers products not a range os options as brokers do...
Your other comments just don't make sense: Your bank is not likely to run off with your premium if it can't pay it's mortgage? Your bank is likely to be in same spot in 10 year time and not closed up shop and headed to Australia when times have got tough?
Kevin:
I known more about this then you may realise:
Do you seroiusly believe a bank employed staff member "hard sells" more than a pure commision based agent or broker.......
At least the bank employer still gets his salary whereas commission based no sale = no income.
I have seen and know of brokers who push the product or company which pays the highest commisions....... Woudl they be doing this to same level if they were also getting salary.......
Tellers do not sell Risk products in banks :Personal Bankers / Sales Consulants etc do.
Never known a "teller" in any bank to sell a Risk insurance policy.
Yes they only sell products from their banks suite of products but that is the same of all products they sell (You don't get a Westpac mortgage at the BNZ or a IAG policy from a AMP agent)
In regards to my comments:
There have been cases where insurance premiums from agents have not been passed onto Insurance company. No one to advocate on your behalf.
How many times have clients gone back to their agent to see the firm has closed and no longer trades. They are either referred to someone to whom the insurance company has "sold"the book to. At least with a Bank you can walk into a branch and endevour to sort it out (unless you have a crap bank as per earlier discussions in this thread.
The whole industry is very much based on commissions so even if a salary is paid there will be targets behind the scenes that must be met. The targets at the banks are pretty high.
Regarding only pushing the highest paid commisions, they all pay roughly the same so it's more about the structure the agent/broker is under and whether they are tied to an insurer/bank. If they are tied they will only offer one option. If they are impartial they will have a variety of insurers to choose from.
If your broker/adviser sells you as a client and dissapears it's not a huge issue, you will be re-assisgned to another one...bank staff change all the time.
Premiums not being passed onto the insurer is more an issue on the fire & general insurance side of the industry - recent case Herberts. It is illegal for life agents to hold or pay premiums.
Casual Observer - www.insurancebydesign.co.nz and email me if you want any thoughts/advice...
Sounds like you've had some great tenants mist42nz! It should be compulsary for all tenants to have contents insurance to protect their goods and the landlords house...! Problem is it's up to the tenant to arrange and pay for it...
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