I received my December 2019 update letter, what do I need to do now?
You do not need to do anything now.
The December 2019 update letter and these Frequently Asked Questions are to update you on the progress of the proposed policy restructure which Foundation Life (NZ) Limited (Foundation Life) is considering putting to its participating Whole of Life and Endowment policyholders (Policyholders).
The details of the proposed policy restructure, which would be an arrangement between Foundation Life and its Policyholders under Part 15 of the Companies Act 1993 (Scheme), are still being finalised due, in part, to the need to assess the impact of the significant reduction in long term interest rates over recent months. A detailed Scheme proposal is now expected to be presented to Policyholders to vote on during the first half of 2020.
Why is Foundation Life thinking about changing my participating Whole of Life and/or Endowment Policy?
Foundation Life has been closed to new business since 2000, and solely manages the existing policies that were sold in the past by Government Life and then Tower Life (N.Z.) Limited. As a result, the number of active policies Foundation Life manages decreases each year.
This causes diseconomies of scale that mean Policyholders are likely to face higher policy administration costs in future. In addition, greater conservatism is required in the investment of the statutory fund to cover insurance business risks and interest rates have dropped significantly since the 1990s and even further over the past twelve months. These changes are affecting bonus levels.
Policyholders have also told us that they want more value and choice in relation to their life insurance policies.
As a result, we have been considering whether the benefits provided by your participating Whole of Life or Endowment policy could be delivered to you more effectively in a different way.
Why are my annual bonuses lower than they were in the early 2000s?
The changes discussed above, combined with the requirement for Foundation Life to invest conservatively to meet its obligations to pay guaranteed benefits to Policyholders, have reduced the level of bonuses Foundation Life has been able to declare to Policyholders. This is likely to continue in the future.
Which Policyholders have you met with? Why wasn’t I among them?
We have met with a number of Policyholders, and some financial advisers, to discuss policy options. We have over 35,000 Policyholders so, unfortunately, we have been unable to discuss our thinking with everyone. Following the distribution of our update letters in June 2018, November 2018 and June 2019 we received a range of feedback, with close to 7,000 Policyholder enquiries received. You can provide us with feedback if you would like to do so. Our contact details can be found on the Contact Us page.
What would be the proposed options under the Scheme?
The options expected to be offered to New Zealand resident Policyholders to replace their existing policies if the Scheme is approved are:
- For those who want to continue to have life cover, replacement life cover provided by a replacement insurer with a guaranteed amount of life cover that is ordinarily 5% higher than your current policy’s death benefit (sum insured, reversionary bonuses and additional bonus), and in some cases more, for which no further premiums need to be paid. Many Policyholders will also receive a cash payment of the balance of their policy value from Foundation Life, OR
- A cash payment that is at least the lower of your current policy’s death benefit (sum insured, reversionary bonuses and additional bonus) and 110% of your current policy’s current surrender value, OR
- A combination of replacement life insurance and cash, with the emphasis on replacement life insurance, OR
- A combination of replacement life insurance and cash, with the emphasis on cash.
For those New Zealand resident Policyholders who elect to receive replacement life insurance, Foundation Life will not pay any balance which is less than $250 in cash. Instead, Foundation Life will use the cash amount to buy more life cover from the replacement insurer for them.
I am living overseas, and my address is an overseas address, can I still receive all of the proposed options under the Scheme?
If you are a Policyholder with an overseas postal address on our records, you would receive a cash payment in replacement of your policy if the Scheme is approved. This is because the replacement life insurer is able to offer replacement life insurance only to New Zealand resident Policyholders.
However, all overseas policyholders have options to access replacement life insurance if the Scheme is approved. One of the options is to transfer your policy to a person (or persons) residing in New Zealand. More information on these options and the actions overseas policyholders may take is available by visiting the Overseas Policyholders page or by contacting us.
When will I receive further information about the Scheme?
Further information is now expected to be sent to Policyholders in the first half of 2020. Policyholders will be sent a comprehensive information pack containing an Explanatory Statement, a Voting/Proxy form with instructions on how to vote, and details on the replacement insurer (amongst other things). Policyholders will also receive estimates of what their replacement life cover (if available) and cash options could be if the Scheme is approved by Policyholders and the process is approved by the High Court.
I will be away during the first half of 2020; how can I make sure I don’t miss out on receiving the information pack?
If there is a chance you will be away when the information packs are expected to be sent, please contact us. We will add your details to our “Absent Policyholders” list. We will then send you an email when the information packs are due to be posted. You can arrange for someone to collect your information pack from your mailbox or contact us to arrange an alternative delivery method.
Why has the vote on the Scheme been further delayed?
While we were planning to send the information pack before the end of 2019, we have not yet finalised the proposal, due, in part, to the need to reassess the proposal for the impact of the significant reduction in long term interest rates over recent months. Once this assessment is completed, we will be able to settle the final details of the proposed policy restructure. The Foundation Life Board of Directors believe the recent reduction in long term interest rates will not change the overall viability of the Scheme proposal, and that it will remain in the Policyholders’ best interests.
Are you able to tell me what my estimated values under the Scheme will be now?
It is a complex process to calculate each Policyholder’s estimated values. We will not be able to tell individual Policyholders their estimated values prior to the information pack being sent out. Policyholders will be provided with this information as part of their information pack which is currently expected to be sent during the first half of 2020.
How will the changes be authorised?
No change will occur to your participating Whole of Life or Endowment policy unless the Scheme is approved by the Policyholders and the process approved by the High Court. Details of the required voting thresholds will be provided to you in your information pack.
How will Policyholders be able to vote on the Scheme?
You could attend the Scheme meeting in person to cast your vote. We will advise you of the location of the Scheme meeting in the information pack. If you are unable to attend the Scheme meeting, you would be able to cast your vote by post, online, by proxy (a proxy vote is where you appoint someone else to vote on your behalf) or via a person who holds a power of attorney for you. Your information pack will include all the information you need to vote on the Scheme.
What if I don’t agree with the proposed changes?
If you don’t agree with the proposed changes, you would be able to vote ‘no’ to the Scheme proposal once it is put to Policyholders. If the Scheme is not approved by Policyholders, it will not proceed, and there will be no change to your participating Whole of Life or Endowment policy. The result of the Scheme vote will be binding on all Policyholders.
Do I have to vote?
You do not have to vote on the Scheme. Detailed information about voting will be included in your information pack.
Who is involved in the review?
Many parties have been, and continue to be, involved with the review including, Foundation Life’s Directors and Chief Executive Officer, Foundation Life’s Appointed Actuary (supported by a team of actuaries), an Independent Actuary and various Financial Advisers and Policyholders.
Who is the Replacement Insurer?
We are not in a position to announce who the replacement insurer would be at this stage. We can confirm that the proposed replacement insurer is very credible and has operated in New Zealand for many years. Details of the replacement insurer will be included in the information pack currently expected to be provided to you during the first half of 2020.
My policy is owned by a bank or another organisation, what do I need to do?
You will need to contact the bank or other organisation as soon as possible to arrange for the ownership of the policy to be transferred back to you. We have contacted the major banks, so they are aware of the transfer procedure that needs to be followed and to date we have completed over 1,000 transfers. If you have any difficulties with this, please contact us and we will advise you of the process and the contact details of a person at each bank who can help you. If you have the original policy document and the bank/organisation has already completed their section of the Memorandum of Transfer (on the back of the policy document), you can complete the Transferee section and send it in to us. We will then register the transfer and return the document to you. Please note that confirmation of identity requirements will also need to be satisfied before we can complete any policy transfer – please contact us for more information on this.
Can I still make a claim against my policy?
Yes, it’s business as usual at this time. We have altered our operating procedure to put on hold the ability to convert your policy from a Whole of Life to an Endowment policy and the making of policies ‘paid up’ (reducing the sum insured in exchange for no further premium payments being required) as these actions could change the policy value. Please note that if you are considering surrendering your Whole of Life or Endowment policy over the next few months, you might want to consider delaying this decision until the outcome of the proposed Scheme is known.
Do I still need to pay premiums?
Yes, you still need to pay any premiums due under your policy to Foundation Life. Any unpaid premium debt will affect your policy value.
I have a loan against my policy. Will that affect the value of any replacement insurance or cash that I am offered under the proposed Scheme?
Yes, any outstanding loans, or premium arrears/debt, will be taken into account before your policy value is calculated.
You would not be required to repay any premium debt, policyholder loans or contingent debt to vote on the Scheme, or to receive your Scheme entitlements if the Scheme is approved. However, if you do not repay any amounts owing to Foundation Life, these amounts will be offset against the value of the Scheme option you elect, or default to receive, and reduce the amount you receive. Please contact us for more information on this point.
I have a loan that I agreed to pay back over a certain number of years. How can I change my loan contract to pay it back sooner?
Under the Scheme your existing Whole of Life or Endowment policy would be cancelled. Therefore, all loans would need to be repaid prior to, or at the time when, the new arrangements are implemented should the Scheme be approved by Policyholders and the process approved by the High Court.
Foundation Life will accept repayments of outstanding loans at any time prior to the date to be advised in the information pack to be sent about the proposed policy restructure. As discussed in response to the question above, if your loan is not repaid, it will be taken into account before your policy value is calculated.
Please contact us for more information on this point.
If I make a full lump sum payment towards my loan or premium arrears, will I receive my full policy value?
If you make a lump sum payment to repay the full outstanding amount/s, your policy value will reflect this.
In recent communications you asked for my contact details, don’t you already have them?
For most Policyholders we do hold their correct contact details.
However for some Policyholders we have out of date information. This could be because you have moved house, and forgotten to tell us. We want to check that we have current contact details for our Policyholders.
If your contact details change in the future, please let us know.
If I need/want financial advice who should I contact?
If you have a financial adviser you should contact them in the first instance.
If you do not have a financial adviser, you could go to the Finding an Adviser page on the Financial Markets Authority (FMA) website https://fma.govt.nz/investors/getting-financial-advice/finding-an-adviser/ where you can find searchable lists of financial advisers. Foundation Life is unable to offer you financial advice on the Scheme.