The arguments against following Australia’s lead and holding a commission of inquiry into our banking and insurance industry don’t stack up. We’ve simply got to have one here, writes the head of one KiwiSaver provider
Not long ago, Australian politicians, regulators, insurers and bankers were asked whether a Royal Commission into the banking and insurance industry was needed.
Most of them, from the prime minister down, said no. They were wrong.
The Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has been a huge embarrassment for many.
Stories about industry bad practices have moved from the business section to the front page of the papers. The growing litany of misconduct includes selling products costing more, yet with fewer benefits, incentives that rewarded giving poor advice, and even charging dead people.
It’s a bona fide scandal in Australia, and corporate heads are starting to roll. Even the prime minister, Malcolm Turnbull, has admitted it was a political mistake to initially reject a Royal Commission.
The time has come for a similar examination of our industry here, because some of the companies found wanting in Australia are the owners of local subsidiaries, including four of our major banks and key insurance companies.
Politicians, regulators and the industry are among those in New Zealand who have been vocal in saying that a similar inquiry is not needed. It feels to me like the industry is circling the wagons, and reminds me of that line from Hamlet: The lady doth protest too much. If a commission of inquiry in NZ really isn’t necessary, why make such a noise about it?
I think about these things pretty simply. If there really is nothing to hide, shouldn’t the industry welcome an inquiry? Surely they’d want to be proved as good as they claim to be?
The principal reason offered for the Star Wars-esque line of “nothing to see here, move on” is that we have different regulations in New Zealand. Does the industry really want us to believe that, in spite of everything going on in Australia, nothing needs to be done because our regulations are different? Different is not necessarily better.
The other reason given is that there aren’t enough examples of wrongdoing to merit an enquiry. They all need to look over the ditch, because that was exactly the same reason used in Australia, and it was wrong. We all hope it’s different here, but let’s assume nothing and find out the truth.
The final reason offered is that the management and governance of NZ subsidiaries over here is separate, and somehow immune from the influence of their Aussie parents. Pull the other one.
The products we are sold – in mortgages, KiwiSaver, insurance and savings – impact almost every New Zealander. Collectively we have hundreds of billions of dollars at risk, and we should know if our industry is doing the right thing, once and for all. If that costs the government time and money, so be it. It’s worth it given all the money we trust the industry with.
The misconduct in Australia is now too big to ignore here, especially when many of the same companies operate on both sides of the Tasman.
Fundamentally, if we are to achieve our potential as a nation, we must have a finance industry we can trust. An inquiry could show this to be the case, and we could feel rightfully superior to the Aussies. And if the industry is found wanting, best we correct the misconduct now, so Kiwis get a better deal in the future.
It’s time for some serious sunlight on the finance and insurance industry, so we can all avoid getting burnt in the future.
Sam Stubbs is managing director of Simplicity
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