REGULATION
US life insurers excluded from oversight by new Federal
agency
Go deeper with GlobalData
Following tough opposition from life industry lobbyists, the US
House of Representatives’ Financial Services Committee has excluded
life insurers from the jurisdiction of the Consumer Financial
Protection Agency (CFPA).
On 22 October the committee approved legislation that will lead to
the formation of the CFPA, a Federal body that will have wide
regulatory powers.
Exclusion of life and annuity product providers from the CFPA’s
terms of reference followed Congresswoman Gwen Moore’s adding of
language to the bill that will exclude life insurance and annuities
in the final legislation.
The decision to exclude the life and annuity industry from the
legislation followed strong opposition to their inclusion from a
number of industry bodies including the American Council of Life
Insurers, the Insured Retirement Institute and the National
Association of Insurance Financial Advisors (NAIFA).
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By GlobalDataMERGERS AND ACQUISITIONS
AIG takes big hit on Taiwan life unit sale
As part of its ongoing asset sales programme American International
Group (AIG) has sold its 97.6 percent stake in its Taiwanese unit
Nan Shan Life Insurance to financial services company Primus
Financial Holdings and investment company China Strategic Holdings,
both of which are Hong Kong-based.
The consideration for the sale is $2.15 billion, the largest sum
yet obtained by AIG in its sales programme. AIG anticipates
reporting a $1.4 billion loss on the sale.
Founded in 1963, Nan Shan is Taiwan’s largest life insurer by total
book value and third-largest by total premiums. It serves 4 million
policyholders via 24 branches, 450 agency offices, 4,000 employees
and 34,000 agents.
Nan Shan reported premium income of TWD219 billion ($6.7 billion)
in 2008.
COMPANIES
AIG’s US life boss jumps ship for Allstate
American International Group (AIG) has lost another senior
executive with the decision by the US composite insurer to appoint
Matthew Winter as president and CEO of Allstate Financial, its life
insurance and retirement products unit.
Winter, 52, was previously president and CEO for AIG American
General Domestic Life Companies (American General), a position he
held for three years.
American General is the marketing name for the six insurance
companies and affiliates comprising the domestic life operations of
AIG.
Prior to joining AIG, Winter was executive vice president at
Massachusetts Mutual Life Insurance Company.
In the first six months of 2009, Allstate Financial earned premium
income of $978 million, or 7 percent of Allstate’s total premium
income of $14.1 billion.
COMPANIES
Aviva debuts on New York Stock Exchange
On 20 October 2009 Aviva’s chairman Lord Sharman of Redlynch was
given the honour of ringing the New York Stock Exchange’s opening
bell to mark the UK insurer’s first day of listing in the US. For
the listing Aviva established an American Depositary Receipt (ADR)
programme in conjunction with Citibank with each Aviva ADR
representing two Aviva ordinary shares.
“Listing on the New York Stock Exchange is an important development
for Aviva,” commented Andrew Moss, Aviva’s group chief
executive.
“The US is the largest savings market in the world and represents a
major growth opportunity for us over the long term. Listing now is
a natural step as more than 20 percent of our shareholders are in
the US and we expect that number to increase.”
COMPANIES
Axa sets out to end dual board structure
Axa’s Supervisory Board has approved a recommendation by its
chairman Jacques de Chateauvieux to simplify its governance
structure, currently comprising the Supervisory Board and the
Management Board.
Based on Chateauvieux’s recommendation, which is subject to
shareholder approval at the next annual shareholders’ meeting on 29
April 2010, the dual board structure will cease with the scrapping
of the Management Board.
“While the Supervisory Board and the Management Board proved their
efficiency through the recent financial turmoil, the new
organisation proposed by the Supervisory Board will simplify and
unify our governance” said Henri de Castries, chairman of the
French insurer’s Management Board.
Under the new governance structure Chateauvieux will remain a
member of the new board and Henri de Castries will become chairman
and CEO.
Denis Duverne, currently group chief financial officer and a member
of Axa’s Management Board, will join the board of directors as
deputy CEO and will also continue to oversee the group’s finance
activities.
REGULATION
UK broker pays hefty price for PPI abuses
Despite hefty fines handed down by the UK’s Financial Services
Authority (FSA) for mis-selling of payment protection insurance
(PPI) and a damning report by the Competition Commission on sales
methods used in the sector, abuse continues to come to light.
In the latest revelation of abuse Swinton Group, one of the
country’s largest insurance brokers, has been fined £770,000 ($1.3
million) by the FSA for “serious failings” in single premium PPI
sales.
Swinton will also offer over 350,000 customers a full refund.
In its investigation the FSA found that between December 2006 and
March 2008 Swinton had automatically included PPI in insurance
quotes without first establishing that the customer had any real
demand or need for the PPI cover.
The FSA also noted that Swinton did not make it sufficiently clear
that PPI was optional and did not properly disclose the cost of PPI
at the point of sale.
Specifically, the cost was bundled within the initial insurance
quote and, in addition, Swinton failed to disclose that the policy
only cost £1.21 with the remainder of the £15 to £20 charged being
a fee taken by Swinton.
Swinton, which accrued about £7.8 million from its PPI sales,
exited the PPI market in March 2008 following a request from the
FSA.
REGULATION
Global co-operation initiative makes
progress
The International Association of Insurance Supervisors’ (IAIS)
initiative to strengthen co-operation between regulators continues
to make steady if seemingly slow progress with the Australian
Prudential Regulation Authority, France’s Autorité de Contrôle des
Assurances et des Mutuelles and Holland’s De Nederlandsche Bank
becoming the latest signatories to its Multilateral Memorandum of
Understanding (MMoU).
The regulators join three other regulators in Bermuda, Taiwan and
Germany which in June 2009 became the first signatories of the
MMoU.
According to the IAIS the MMoU will assist insurance supervisors in
improving effectiveness of cross-border supervision of insurance
companies and contribute to the global effort to ensure that
systemically important financial institutions are appropriately
regulated.
“There are applications from almost 20 other IAIS members being
validated to ascertain whether they meet the standards in the
MMoU,” said Richard Walker, chairman of the IAIS MMoU Interim
Signatories Working Group.
He added that further applicants are anticipated and that the MMoU
will eventually be used “as a routine supervisory tool.”
The IAIS represents insurance regulators and supervisors of some
190 jurisdictions in nearly 140 countries.
DISTRIBUTION
Commission-based advice axed in Australia
Commission-based fees for financial planning advice are to
disappear in Australia following approval by the board of the
Financial Planning Association (FPA) to implement a fee-for-service
only model as from 1 July 2012.
The decision follows responses from 250 FPA members to a
consultation paper released in May this year.
Under the FPA’s fee-for-service model the consumer is billed
directly by the financial planner based on an agreement with the
client. The FPA noted that many of its members have already
transitioned to a fee-for-service model.
The FPA emphasised that risk products are not within the ambit of
its fee-for-service model at this stage.
However, it has established a member working group to progress
appropriate remuneration principles for risk products, and a
working group to determine how corporate superannuation will be
implemented. Both will report to the FPA by early 2010.
The FPA is a national body with more than 12,000 members. According
to the FPA its members manage the financial affairs of more than 5
million Australians whose investments are valued at A$630 billion
($580 billion).
FUTURE CARE
Better long-term care deal for Canadians
Responding to the needs of Canada’s ageing population, Canadian
life insurer Manulife Financial has launched Future Care Option, a
product that enables individual disability insurance customers to
exchange all or part of that coverage for long-term care insurance
when income protection is no longer needed.
Manulife stressed that Future Care Option addresses the drawback of
most disability insurance products currently available in Canada
which automatically expired at retirement, typically at about 65
years of age.
An additional attraction of the new product, stressed Manulife, is
that eligible individual customers will not have to undergo the
extensive application and underwriting process usually associated
with long-term care insurance.
According to Manulife there are 4 million Canadians over the age of
65, a total expected to double over the next few decades.
In 2008 the insurer introduced a similar option on its critical
illness insurance product that enables some critical illness
policyholders to switch their coverage to long-term care insurance
in the future.
COMPANIES
Investment results give China Life a boost
Boosted by a recovery in investment markets, China Life recorded a
pre-tax profit CNY7.33 billion ($1.07 billion) in the third quarter
of 2009, an increase of 186 percent compared with a depressed
CNY2.54 billion in the third quarter of 2008. A higher tax rate
reduced the increase in third-quarter 2009 net profit to 155
percent, from CNY2.36 billion to CNY6.02 billion.
Playing the key role in the third-quarter 2009 profit recovery was
a CNY4.5 billion rise in investment income, from CNY11.12 billion
to CNY15.62 billion.
Adding further to China Life’s investment-related recovery,
impairment losses fell by CNY3.04 billion, from CNY3.1 billion to a
mere CNY64 million.
The third quarter’s results left China Life’s net income for the
first nine months of 2009 at CNY20 billion, 51 percent up on the
first nine months of 2008.
From a premium income perspective the insurer did not perform that
well with gross premium income falling 4.9 percent from CNY245.67
billion in the first three quarters of 2008 to CNY233.74 billion in
the first three quarters of 2009. This cut China Life’s market
share to 37.5 percent from 40.3 percent in 2008 as a whole.
DISTRIBUTION
Sun Life puts financial advisers on display
Canadian life insurer Sun Life Financial (SLF) has launched Advisor
Match, an interactive website that enables consumers in 349
communities across the country to select a financial adviser that
they feel best suits their needs.
“Through focus groups, consumers told us that the recent recession
has changed what they’re looking for from companies they deal with
for financial and insurance needs,” explained Lori Bak,
vice-president of marketing for SLF Canada.
“We listened to Canadians and built an online resource based on
what they told us was important to them when it comes to finding an
adviser.”
SLF research indicates that age, gender and language preferences
are significant factors for a successful adviser
relationship.
Based on this and additional criteria, its Advisor Match website
provides up to 12 potential adviser candidates and allows consumers
to decide if they want to contact the adviser of their choice or if
they would like the adviser to contact them.
According to SLF about 80 percent of the advisers within Advisor
Match will meet consumers at their home or office if
required.
Reinforcing its Advisor Match service, SLF’s new television and
online advertising campaign by is designed to highlight advantages
of selecting an appropriate adviser.
DISTRIBUTION
India Post boosts Aviva Life’s customer
reach
In a move that significantly increases its reach in India, Aviva
Life Insurance and India Post have forged an alliance that will
enable the insurer’s customers to make premium payments at any of
the postal service’s 8,294 computerised post offices across the
country at no cost.
Premiums collected by post offices will be transferred to Aviva
through electronic payment system of India Post.
“The industry is increasingly focusing on strengthening the renewal
premium mechanism and this is the key to the profitable growth of
an insurance company,” said Aviva India’s CEO and MD, TR
Ramachandran.
“At Aviva, we have increased our focus on renewal premiums,
resulting in an over 50 percent growth, year-on-year. We hope to
further accentuate this growth with the tie-up with India
Post.”
Aviva Life is a joint venture between UK insurer Aviva, which holds
a 26 percent stake, and Indian traditional health care product
manufacturer Dabur.
