FSC calls for more time on NZ Income Insurance Scheme

The Financial Services Council of New Zealand (FSC) in its submission on the proposed New Zealand Income Insurance Scheme (NZIIS) has called for more time and wider industry engagement to ensure that the scheme is best placed to achieve its objectives. 

“The FSC welcomes the discussion on income insurance which is key for all New Zealanders. Managing risk and insurance needs is important for all Kiwis. The Covid pandemic has recently brought these issues into stark focus, “said FSC CEO Richard Klipin.

“The FSC is focused on helping Kiwis grow their financial confidence and wellbeing, and it is crucial that the proposed NZIIS is well-designed in order for it to play an effective and important role in this.  

“The NZIIS is a far-reaching change for New Zealand. We applaud the vision, however we urge the Government, the CTU and Business New Zealand to consider taking a pause on the development of the scheme to allow a more fulsome and comprehensive engagement process to take place on the NZIIS proposal.”

The FSC has raised the following concerns in its submission:

Rushed policy development process: Good policy development takes time to get right. We are concerned 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: Our 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. Given this specialised knowledge it is concerning 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.

Scope creep: We note the proposal acknowledges that the NZIIS would be a significant reform, perhaps the largest of its kind since the introduction of the Accident Compensation Corporation (ACC) in 1974. What started out as a discussion on redundancy insurance is now proposing to include health and illness as part of the solution. The scope of the NZIIS has continued to grow.

Timing of the consultation process: 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.

The NZIIS represents a significant and complex piece of social policy with major implications, opportunities and risks for New Zealanders. It is essential we get it right and give the proposal the time it deserves.

The FSC’s submission also raises the potential for the NZIIS 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 Klipin.

“This kind of 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. 

“There is an excellent opportunity to bring the best of both worlds together. 

“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,” concluded Klipin.