New Zealand's major life and health insurers are dragging their heels over pressure to can freebie trips for financial advisers despite a repeated warnings from the regulator warning over the potential for conflicts of interest for consumers.

The Financial Markets Authority last week met with insurance industry bodies to demand change after it released a report on the "soft" incentives insurers give to advisers including $18m spent on both domestic and overseas travel during the two years to March, 2017.

It has been highlighting its concerns about the trips since 2016. Last week Liam Mason, the FMA's director of regulation, told the Herald he expected to see action from insurers soon.

But asked whether they would be cutting trips in response to the report none of the insurers currently offering trips responded with an affirmative.


The report covered AIA, Asteron Life, AMP, Fidelity Life, nib nz, OnePath, Partners Life, Southern Cross and Sovereign.

OnePath, which is owned by ANZ bank, stopped offering trips in 2016. It saw sales fall by a third as a result but a spokeswoman said it maintained it was the right thing to do.

"Even though this has cost us financially, we maintain this was the right thing to do to ensure we continue to put customers' interests first."

Last month AMP said it would stop offering them from next year as it no longer believed they were appropriate.

But AIA, Asteron Life, Fidelity Life, nib nz, Partners Life and Sovereign are yet to make a call on dropping the controversial trips which have included visits to London, Argentina, Tahiti, Singapore and the United States in the past.

Southern Cross, does not take adviser on overseas trips, but said it was planning a domestic trip in October for a yet to be decided destination.

A spokeswoman for Sovereign - the country's largest life insurer, said it would carefully consider the findings of the report to "to ensure the design of our recognition programmes continue to deliver good customer outcomes."

"We believe that customers benefit from a competitive market and we are always reviewing our incentives very closely to ensure good customer outcomes. For example, low lapse rates are an important criteria for recognition trips."

But she wouldn't comment further on whether it would stop its overseas trips.

A spokesman for Partners Life said it understood the concerns raised by the FMA and agreed that using soft dollar incentives as a tool to promote new insurance business could represent a conflict.

But he said the report showed soft dollar incentives did not appear to have been an influence on poor outcomes to consumers.

"The FMA has not identified specific poor outcomes for clients, and there has been no apparent increase in the sale of poorly rated products."

Partners Life, which is almost exclusively reliant on financial advisers to sell its products, said its overseas trips included a strong focus on education.

"Partners Life notes that the success of any incentive offered is dependent on whether the IFA [independent financial adviser] believes the customer value proposition of that insurer is strong enough to justify their support; if not, they would be exposing themselves to significant regulatory liability if they choose to support a provider for any other reason."

The spokesman said it would be polling advisers on their views on soft dollar incentives at its July conference.

Nadine Tereora, chief executive of Fidelty Life said it would consult with advisers on soft commissions. Photo/Doug Sherring.
Nadine Tereora, chief executive of Fidelty Life said it would consult with advisers on soft commissions. Photo/Doug Sherring.

Nadine Tereora, chief executive of Fidelity LIfe said it too would consult advisers on whether to stop offering trips.

"We'll consult with our adviser partners regarding the report and then consider what changes need to be made so that good consumer outcomes are always first and foremost."

Tereora said it took the FMA report extremely seriously and supported a model where consumers' interests came first.

"New Zealanders are under-insured, and independent financial advice has significant benefits for their financial health and well-being."

But she also put the responsibility back in the adviser's court.

"Fidelity Life expects the independent advisers who advise on our products to always put their customers' interests first and manage conflicts of interest.

"We also expect advisers to disclose remuneration and incentives in accordance with legislation and in a way that is clear and easy for customers to understand."

The FMA has said it is concerned that insurers are designing and offering incentives that potentially set advisers up to fail in complying with their obligations.

""Insurers themselves must acknowledge the need to promote good customer outcomes and take responsibility for conflicted conduct that results from these incentives."

NIB Insurance chief executive, Rob Hennin. Photo/Nick Reed.
NIB Insurance chief executive, Rob Hennin. Photo/Nick Reed.

Nib New Zealand chief executive Rob Hennin, said it had revised its practices to put the customer at the heart of what it did over recent years, while also remaining committed to supporting the adviser profession.

"We will continue to make improvements to the way we do things to reflect the evolving environment with the key focus being on the customer."

But it did not respond to questions on future trips.

A spokesman for Asteron Life, said it had begun an in-depth review of its sales incentive programme for life insurance advisers which including looking at trips.

But no decisions had been made yet on the outcome of the review.

"This review supports our strategy to elevate the customer and follows recent reports by the Financial Markets Authority (FMA) which raise questions as to whether incentive programmes are appropriate and support good customer outcomes."

Nick Astwick, Southern Cross chief executive, said it was planning to offer a domestic trip to advisers in October which it anticipated would cost around $40k - a similar price to previous years.

"We support the FMA in looking at soft commissions and welcome vigilance from governing bodies in overseeing the practices of their members.

"We will follow the guidance of the FMA and other governing bodies on this issue."

Astwick said it only spent a very small amount on soft commissions.

"We estimate that around 0.01 per cent of our total premium income is spent on soft commissions."

The FMA report found soft commisions soaked up 9 per cent of sales revenue across the nine insurers.

AIA did not respond in time for deadline after two days of requests for comment.