Robo-advice on general insurance
23 Jun 2017
General insurance is one of the products for which the FMA is proposing an exemption to allow entities to provide personalised advice generated by a computer programme or algorithm (robo-advice).
The current law, passed in 2008, did not contemplate digital advice, meaning that personalised advice, or advice that takes into account an individual's financial situation or goals, can only be given by “a natural person". Proposed changes to financial adviser laws are designed to address this issue, but will not come into effect until 2019.
The FMA is proposing to use its exemption powers to facilitate robo-advice prior to the legislative changes. The exemtion will apply to a limited list of eligible products considered easy to exit. These include general insurance, Kiwisaver,listed equity securities, government bonds, listed debt, savings products and credit contracts (excluding mortgages). Personal insurance may be included with special provisions as this is harder to exit
Liam Mason, FMA Director of Regulation, said: “we’ve been looking at ways to enable innovation to help tackle the advice gap in New Zealand, but also to mitigate the risk of poor consumer outcomes. We are seeking to ensure we maintain the standards of consumer protection provided by the legislation while encouraging innovation that can help more people get help with investment decisions. Robo-advice offers a way to address the low numbers of consumers currently receiving personalised financial advice[i].”
Robo-advice has been increasingly adopted around the world and New Zealand companies have approached the FMA to discuss introducing digital financial advice tools here. The FMA’s proposals would allow personalised robo-advice, subject to limitations and conditions to safeguard consumers. Class robo-advice, or generic recommendations based on characteristics such as age and risk profile, can already be provided.