CoverNote March Issue 2015 by Benefitz

LLOYD'S BOSS PRAISES KIWI MARKET

March 2015 The professionals’ magazine from IBANZ

WHEN WAS THE LAST TIME YOU SAT DOWN TO STUDY? Brokers' CPD options outlined and explained

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CoverNote is the official publication of IBANZ and is distributed FREE on a quarterly basis (March, June, September, December) to members throughout New Zealand and associated companies. Additional copies are available at a cost of $7.50 per copy, or 12 month (4 issue) subscriptions at $30.00, inclusive of postage and packaging. The articles or opinions featured within this magazine are not necessarily the opinions of the publishers or IBANZ, and they do not accept responsibility for the content of articles featured within the publication. No part of this publication may be reproduced without the written permission of the publisher. The publishers do not accept responsibility for loss or damage to unsolicited photographs or manuscripts. IBANZ enquiries should be made to: Gary Young, Chief Executive, IBANZ. Email: gary@ibanz.co.nz IBANZ National Office located at: Level 5, 280 Queen Street, Auckland (P.O. Box 7053, Wellesley Street) Telephone 09-306-1732. Website: www.ibanz.co.nz

Gary Young CEO, IBANZ

More than minor adjustments required With 2015 well under way it is timely to raise a couple of issues for which urgent action is long overdue. These are matters that significantly impact the New Zealand insurance industry. We have been waiting on the government to progress decisions regarding the future of the EQC and Fire Service, for a number of years. Both of these organisations have been frequently identified as having problems. Everyone agrees they require attention and certainly more than just another cursory glance followed by a "sheâ&#x20AC;&#x2122;ll be right response. " Since 2011 the EQC has struggled to cope with demands being made on it. The Government has acknowledged this by requesting Treasury to carry out a full review. Since a call for submissions in 2012, to which IBANZ responded, no obvious progress has been made. Although recent press reports suggest an answer is imminent these reports also suggest we should expect only minor changes. Given the extreme stress the current EQC arrangements have caused for many claimants, we would expect more than fiddling at the edges to be proposed. Insurance is often bought with little expectation that it will be used but when the need does arise, expectations are high. So it is with the EQC, they are only asked to really perform in the event of a major catastrophe. Christchurch is an excellent example and has proved that the existing model fails to meet expectations. Thus more than cosmetic surgery is required to ensure success in future natural disasters. Even more frustrating in terms of a lack of response to chronic need for change is Fire Service funding. The Fire Service is called upon every day to assist with disasters ranging from the minor to catastrophic. We do not question their capability to do so; the issue is not what they do but how they are funded to do it. Those purchasing insurance provide 95% of the $350 million needed by the Fire Service. This funding system is inherently flawed, inefficient and unfair. Review after review by government has confirmed this and yet nothing more than talk has resulted. Our current model originated with the insurance company fire brigades of the 1800s. While the existing legislation is not that old, it is still hopelessly outdated. Fairness is a major issue because those who are not insured receive the same service as those who do insure their assets and as a result provide all the funding. Even the relevance of a fire insurance levy is questionable when the Fire Service readily admits fighting fires has become an increasingly small part of what they do. The Insurance Council has called for urgent action. IBANZ supports this call. Government action is required, no more endless talking and procrastination.

Gary Young, CEO, IBANZ

Features 10. A Strong Team Key to Success 14. Focus on ongoing training

Industry experts say regular training is important to help you provide the best service possible to your clients.

17. Confidence in Underwriting Market 22. Farmers Neglect Risk

24. Canterbury earthquake decisions examined The Canterbury earthquake litigation continues to produce new caselaw. Andrew Horne discusses three recent cases in which the courts have permitted a higher recovery for insureds than some would have predicted.

28. Cyber risks in New Zealand 32. FAA review terms revealed 34. Kiwi market well-positioned, Lloyd's boss says 45. Restrictions on lessor not well understood

20. NZI & Lumley become one

Regulars 1. View from the CEO’s chair 3. News 18-19. Out & About 26. Ask an Expert

47. Professional Development: Professional IQ College 52. IBANZ Contacts LLOYD'S BOSS PRA ISES

KIWI MAR

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NEWS

Call for urgent action on fire service levy The time has come for urgent Government action on funding the Fire Service to better reflect the public good it provides for all New Zealanders, the Insurance Council says. “There's been enough talking and procrastination over this, the time has come to change the way the Fire Service is funded to better reflect the work it does, the public good it provides and ensure that its costs are fairly met by all who benefit," chief executive Tim Grafton said. "With the mounting body of expert opinion that funding the Fire Service through a levy on insurance premiums is unfair, outdated and out-of-step with the rest of the world, it's time for the Government to act.” Internal Affairs Minister Peter Dunne has asked officials to prepare funding options. “No one would expect the police force to be funded

through their insurance premiums. Yet the Fire Service provides a public good that is funded by a levy on insurance premiums and also provides a public good, including for the uninsured or under-insured.” The Insurance Council said funding the service from general taxation would better reflect the diverse role the Fire Service played. It said this often had little to do with putting out fires, for example rescuing victims of serious road accidents or dealing with chemical spills or false alarms. In reports commissioned by the Insurance Council, the NZIER argued the best option was to have the Fire Service funded entirely from general taxation. The next best option was a mixed model including some general taxation and levies on properties’ rateable values.

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NEWS

Brooks appointed ACE president ACE Group has appointed Andrew Brooks to the role of country president for New Zealand. He takes over from Paul Martin, who moves to ACE’s operation in Australia where he will become the state manager for Queensland. Brooks returned to ACE late last year as the accident and health and distribution manager for New Zealand. He was tasked with executing distribution strategies across New Zealand for all lines of business. In stepping up to the role of country president, he will be applying a vast range of knowledge across all product lines, leveraging especially his breadth of expertise in property and casualty. He also brings skills in business development and relationship management for large commercial clients. John French, country president for ACE in Australia and New Zealand said: “We consider it is critical to have a strong leader on-the-ground who understands the local market requirements. After Paul’s sound leadership and contributions during his five and a half year tenure as country president, our business in New Zealand is in good shape and hands. I am confident that Andrew will continue to deliver the quality service standards which ACE takes pride in as he sustains his focus on leadership in distribution, client management and understanding the needs of our partners.”

March 2015

London firms ready to take on NZ risk Solutions to tricky insurance questions may be found by looking to London. London Market Services was established when insurers pulled back from Canterbury after the city’s earthquakes and contractors struggled to obtain insurance required by banks for proposed new builds. Retired loss adjuster Peter MacLeod noticed the problem and decided to see what could be done about it. “The Canterbury earthquake events proved to be the absolute limit for the New Zealand insurers, who made it clear that limited insurance would be available until further notice,” MacLeod said. He contacted Ropner Insurance Services, a wholesale broker to the London market, and asked for help. Within weeks, Ropner was in New Zealand, talking to brokers. MacLeod remembers: “First off the blocks was a New Plymouth broker who had a frustrated insured and contractor who could not progress to start the construction of a new replacement hotel with a $20 million build value. The bank would not support the build without insurance in place. Within a couple of weeks we had

secured full contractors all risks cover from London underwriters and away the build went. The finished hotel is now open and is a valued supplier of quality accommodation for those that need it for the slowly expanding tourist sector and, of course, the Canterbury rebuild.” MacLeod set up London Market Services, which was appointed as Ropner’s introducer representative in New Zealand. It targets retail brokers who are having trouble with insurers not renewing risks, or finding it hard to secure insurance at all levels. Its service has now expanded into other areas of insurance, such as professional indemnity. MacLeod said: “The attraction for London was the good rates being paid for the cover as the city was still shaking on a regular basis. London is an opportunistic market and they love to be involved where good rates are available. They are aware of the risk factors but have more of an appetite for risk than our own insurers. Lloyd’s Insurance have been in business for over 300 years so know all about the global market.” LMS’ office worked as the liaison contact for retail insurance brokers in New Zealand. MacLeod said its

services were paid for by Ropner. “Ropner have two line slip facilities to enable smooth business response involving the sign-off of the lead underwriter and if the retail broker is interested in furthering the placement the number two underwriter is asked for support and if that is successful then all of the following underwriters, that may be about six more, will automatically follow. Upon receipt of a firm order to place the cover from the NZ retail broker the cover is placed and documents follow a week to 10 days later.” EQC and fire service levies are added to the quoted premium. He said no size or type of risk was a problem. Since Christchurch, LMS has been called in on many other occasions when insurers had to put on the brakes. LMS was able to help when Wellington also found itself on shaky ground. MacLeod said: “The phone started ringing about cover for Wellington and we called London. No problem depending on the quality of the risk, London underwriters agreed to support the Wellington area… With the demand for insurance spreading then into Napier, and now with suggestions of assistance

NEWS

Munton appointed to Rothbury leadership team Rothbury Insurance Brokers has appointed Paul Munton to a new role within the executive leadership team, as executive general manager – broking branches. Munton comes to Rothbury from Lumley where he was general manager broker products, responsible for claims and underwriting of the company's five commercial portfolios. He said he had been tasked to help grow, lead and develop the profile of the Rothbury broking branches. “I’m genuinely excited to be joining leadership in a very dynamic time for Rothbury and the insurance market as a whole.” Roger Abel, Rothbury’s managing director, said: “Paul is widely known and highly respected across the insurance industry. He is a director of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and current chairman for the New Zealand Member Advisory Board. He has vast experience and knowledge and has worked extensively across many aspects of the industry from reinsurance to corporate insurance. Paul brings a significant amount of expertise to our executive team with almost 30 years in various management and business development roles in broking and underwriting. I look forward to working with Paul as we focus on positioning the Rothbury business for its next phase of growth.”

Marine appointment announced Mark Roelink has been appointed national marine manager for IAG. Lumley’s centre of expertise marine manager, Andrew Scrivens, has taken redundancy. Danette Hunter has been appointed to IAG’s communication team, from the FMA. She will be involved in communications to brokers.

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NEWS

Flow of overcap claims continues Private insurers have paid out almost $14 billion in settling Canterbury earthquake claims, and more than 80% of all Canterbury earthquake commercial and out-of-scope claims are completely settled. But many claims that are above the EQC’s $100,000 threshold are only now coming to the attention of insurers. The Insurance Council of New Zealand announced that at the end of December 2014, $8.17 billion had been paid to settle commercial claims and $5.69 billion for domestic claims resulting from the Canterbury earthquakes in 2010 and 2011. “This is a significant contribution towards the estimated $40 billion economic loss suffered in Canterbury, which has allowed business and households to recover and rebuild almost four years after the tragic February 2011 earthquake,” said chief executive Tim Grafton. It’s estimated that 83% of all commercial claims are now settled. Based on statistics from a quarterly survey of insurers conducted by the Canterbury Earthquake Recovery Authority (CERA), 84% or 53,698 of all “out-of-scope” claims, such as pathways, driveways and fences, had been settled at the end of 2014. The survey indicates that for residential dwellings, 57% or 13,566 of claims above the EQC cap of $100,000 plus GST, known as overcap claims, have been fully settled. Another 36% or 8594 overcap claims have been agreed between the customer and insurer and are either under construction, in the rebuild-repair queue or about to be cash settled. Of the 13,566 overcap claims settled, 10,676 have been cash settled and 2890 were completed rebuilds and repairs.

“We expected a substantial ramp up in overcap settlements in 2014 and this was evidenced by private insurers settling about 1100 overcap claims each quarter which is a 50% increase on the quarterly rate from the previous year,” Grafton said. But more are coming through. In 2014, private insurers settled 4447 overcap claims but were also transferred a further 1963 overcap claims from the EQC, taking the total number of overcap claims to 23,925, up from 23,181 at the end of September 2014. “We’re very conscious of the substantial number of claims that EQC has had to deal with and these represent a tiny proportion of their total claims, but we also recognise the frustration of customers whose claims have just reached or are yet to get to their private insurer. We have had constructive discussions with EQC and they are working hard to provide us with more clarity and certainty about the claims that will go over cap in 2015,” Grafton said. “While there will be more overcap settlements coming insurers’ way in 2015, even at this quarterly settlement rate we’re confident that the majority of over cap claims will be fully settled by the end of 2016 target. There are still some complications with claims involving multiunit buildings, retaining walls and land issues, but private insurers are working in a concerted effort with EQC, CERA and local authorities to overcome the hurdles,” he said. “Insurers and EQC have also been working constructively on how to improve responsiveness in the event of a major event. And the Insurance Council is also developing proposals on how we believe claims can be managed better for all concerned in future.”

Suncorp Result Good progress on the Cantebury rebuild is being cited as a driver of solid six-month result for Suncorp. The Suncorp Group reported a net profit after tax (NPAT) of AU$631 million for the six months to December 31. Suncorp’s New Zealand general insurance business, which consists of Vero and AA Insurance, contributed an insurance trading result of $100 million for the half year. Gross written premium grew by 2.8% half-onhalf in the direct and intermediated businesses due to moderate rate increases and good unit

March 2015

growth, which was partially offset by softening commercial rates. “Improved underlying profit, good progress on the Canterbury rebuild and a consistently strong balance sheet all support the New Zealand result,” said Gary Dransfield, Vero’s chief executive. “Insurance is vitally important to New Zealand given its high proportion of insurance and property ownership and the risks we face from earthquakes and other natural disasters. Our performance is a reflection of the value we bring as a strong, stable and well-established

insurance company in New Zealand which in turn allows us to offer our customers more benefits and greater security. “ He said Vero had paid out $4 billion, or more than 80% of the company’s total estimated costs, for the Christchurch earthquakes. “In December last year, Vero New Zealand led the settlement on the historic $550 million University of Canterbury claim,” he said. “We continue to invest in our New Zealand business with a focus on technology transformation to deliver improved products and services to our customers.”

NEWS

IAG happy with Christchurch progress Sound progress is being made on settling Christchurch earthquake claims, IAG says. It reported its results for the six months ended December, which managing director and chief executive Mike Wilkins said showed solid performance by the New Zealand arm of the business. It reported a profit of A$195 million for the first half of 2015, up from A$93 million in the same period of 2014. The acquisition of Lumley contributed to the 22% increase in gross written premium. IAG’s New Zealand unit’s insurance margin increased to 19.2% from 12.4% over the year. “The higher reported insurance margin in 1H15 reflects the combination of relatively benign natural peril activity, continued focus on pricing and underwriting discipline, and the realisation of ongoing operational improvements across the business," IAG said. "The New Zealand business continues to deliver a strong underlying margin, as it balances customer affordability with high regulatory and reinsurance costs in a highly competitive market. The business remains focused on providing flexible product and pricing offerings to support customers and ensure they can maintain insurance coverage."

Wilkins said he expected all Christchurch claims to be completed by mid next year. That was six months later than had earlier been forecast but Wilkins said progress was on track. Sixty-nine per cent of IAG’s Christchurch earthquake claims had been settled, he said. IAG has paid out more than $3.9 billion. But the expected cost of Christchurch to IAG had increased by $950 million because of the number of over-cap EQC claims being passed on, and adverse court judgements that would affect the whole industry. “There’s a degree of uncertainty that will remain until all claims are settled,” he said. Wilkins said IAG was hoping the rate of overcap claims coming through would slow. "We remain concerned that we continue to see over-cap claims some four years after the event. However, it is what it is," he said. "Of the $950 million increase recognised, the majority relates to the February 22, 2011, event. Gross claim reserves for this event now stand close to the applicable reinsurance limit of $4 billion. Loss estimates for the other major earthquake events are expected to settle well below respective reinsurance limits."

www.covernotemag.co.nz

NEWS

New insurance broker goes kiwi InsuranceBroker.kiwi (IBK) is a newcomer to the market and one of a very small number of broking firms supporting full disclosure to clients. Headed by Dan Donaldson, a former Crombie Lockwood Christchurch branch director and executive broker, IBK's message is simple: Zero commission. 100% about you. "Although there is no obligation for brokers in New Zealand to fully disclose their remuneration, this does not mean we should not do so,” says Donaldson. “Being totally transparent with what we charge has focused the business on delivering value, as the customer now has something to measure value against. This has been one of the great positives of our approach and one that has been received exceptionally well by clients and businesses in general. We are also free of any perceived conflict of interest given higher premiums mean higher commissions - two factors

that are not naturally aligned in the client’s best interests. We are not saying that this necessarily leads to inappropriate behaviour, it’s just a position we are not comfortable with and prefer to remain independent of it. “Businesses want to know they are in the hands of a professional who is proactive and understands their business. They want to make informed decisions about the insurable risks they face before something happens, so there are no surprises. When something does occur they want support and have things taken care of swiftly. Our clients are not in the business of insurance, that’s our job, and it’s one we take very seriously.”

Having experienced the Christchurch Earthquakes firsthand, Donaldson has seen what it’s like for a business owner when they stand to lose everything. He has also experienced the heartfelt gratitude shown by clients whose livelihoods have been restored. “The scale of loss we saw in Christchurch has given me several lifetimes of real claims experiences. I am convinced that we don’t simply ‘sell insurance’, we protect people’s livelihoods and that is a very honourable thing to do.” says Donaldson. Being part of Insurance Advisernet (IANZ) has also been a factor. “David Crawford and myself have had many conversations over the past

Survey assesses Christchurch building work An independent survey will appraise completed residential earthquake repairs in Canterbury. It is being managed by the Ministry of Business, Innovation and Employment but will be carried out by a team of independent technical experts. It will involve about 100 homes and focus on new building work that has been exempted from requiring a building consent. The review will consider whether the work has been finished to a standard that complies with the Building Code. Canterbury Earthquake Recovery Minister Gerry Brownlee and Building and Housing Minister Nick Smith welcomed the survey. “The Earthquake Commission’s Canterbury Home Repair Programme is nearing an end and good progress is being made by the private insurers. It makes sense for the Government to have an overview of the standard of the repairs that have been carried out, and there is now a sufficient number of completed repairs to allow an appropriate sample of homes to be inspected,” Brownlee said. Smith said: “The Government wants to ensure that homes are safe and durable, and as such, the survey team will concentrate on structural work, rather than reviewing cosmetic repairs such as the quality of the finished paint job. It will give reassurance to Cantabrians that the rebuild is a quality one.” Properties will be randomly selected from information provided by EQC, Housing New Zealand and other insurance companies. The inspections will also include a small sample of homes repaired after opting out of the Canterbury Home Repair Programme. Letters to randomly selected homeowners seeking their participation are being sent this week with inspections due to begin by the end March. Results are expected to be available from July.

March 2015

few months about my personal and business philosophy and approach to developing my new firm’s identity. I am committed to NZ and NZ business and the dot kiwi domain name reflects this.” says Donaldson. “IANZ have been instrumental in helping me get established since leaving Crombie’s last year and I am positive I have made the right move.” David Crawford, Director of IANZ, says: “Dan’s professionalism and approach to business and clients is excellent. This is what the future of independent broking in New Zealand is all about, young brokers stepping up to create opportunities for themselves and their families and taking control of their own future. Keep an eye on InsuranceBroker.kiwi – it is going places.” For more information and to follow Dan’s progress go to InsuranceBroker.kiwi.

ACHIEVEMENT IS ALL ABOUT COMMITMENT It takes years of experience and organisation-wide dedication to build a strong customer-focused network, committed to serving the needs of our clients and brokers, so that they can achieve positive results in New Zealand and around the world. AIG is a valued insurance partner that provides innovative products and services that can respond to all of your commercial insurance needs. Talk to us today, or learn more at www.aig.co.nz

@AIGRugby www.aig.co.nz Insurance and services are provided by AIG Insurance New Zealand Limited, a subsidiary of American International Group, Inc. For additional information, please visit our website www.aig.co.nz

FEATURE

In business and sport, a strong team is key to success Teamwork, unity, passion, and discipline: Inspirational All Blacks Sevens coach Sir Gordon Tietjens shares his advice for creating and maintaining a successful team culture.

small group of Wellington’s top brokers were treated to the wisdom of All Blacks Sevens coach Sir Gordon Tietjens at a breakfast event organised by AIG ahead of the World Rugby (formerly the IRB) Sevens World Series tournament that took place in the city. Sir Gordon has the credentials to prove that he knows what he’s talking about when it comes to building a successful team. He has coached the All Blacks Sevens team for 21 years, winning four Commonwealth Games gold medals and 12 World Rugby Sevens World Series titles in that time. He is renowned for his ability to spot talent and create legends – his rugby sevens team has become a breeding ground for stars for the 15-a-side game, including All Blacks Jonah Lomu, Christian Cullen, Joe Rokocoko, Mils Muliaina, Rico Gear, Cory Jane, Ben Smith, and Liam Messam. He is also a successful businessman, balancing his time as All Blacks Sevens coach

March 2015

with a strategic role at Bay Engineers Supplies, a company he has worked at for more than 30 years. Sir Gordon credits the tightknit culture at the engineering supply company for teaching him everything he needed to know to successfully coach the All Blacks Sevens. It is this culture, he believes, that is vital to the strength and success of his team. For Sir Gordon, there are four key qualities that define the culture of his team. The first of these is teamwork. “Together everyone achieves more,” he said, adding that he never relies on his star players to win a game. “One of my favourite sayings is ‘Whoever plays will do the job’ …. you have to display that confidence in your team.” Second is unity – everyone must work hard for each other.The All Blacks Sevens environment is “tough, uncompromising, and ruthless at times”, so mental toughness and attitude is essential. “[A good] attitude can be trained”, Sir Gordon believes. “There must be total involvement to be

successful. Everyone must buy into it.” The third defining feature of the team is passion – what it means to wear the black jersey, to be part of that team. With passion comes enjoyment, which is essential for the All Blacks Sevens, who he believes to be the hardest working rugby players in the world, despite not sharing the fame and fortune of their All Black or even Super Rugby counterparts. The final element is discipline, both in work ethic and nutrition. The latter, Sir Gordon believes, has played a huge part in the team winning tournaments. He sees it as similarly important in business, and as a result healthy food is heavily subsidised by the company at Bay Engineering Supplies. “Our players…have got to have the right fuel so they work at the intensity they need to, for the duration that they need to, to be the best they can be. In business it’s exactly the same.” Team, unity, passion, and discipline: “these

FEATURE

The most important words in life, according to Sir Gordon Tietjens: PREPOSITIVELY FOUETT SUBCONCAVE UNDOCUMENTED VETTER APOSTROPHIZE HOMOSTYLED MUSSUCK CLEMMIE UNSUNBURNED DOLICHOCEPHALOUS. GEN PHYTOGRAPHER CHICKPEA MELANTHO HIPLENGTH TASSO AGREE MISFOCUSED PRETENSION BUCHENWALD UNBEVELED. ANNOTATE MYOCARDIOGRAPH PRECANCELLING TURCOMAN SUBROTUND LIGHTLY CYME COPRECIPITATED PREDATE CONNOTIVELY DENISE. CARROT MIDWINTRY IMPLAUSIBLY ARRETIUM FRORE KASHA BROWBEATEN RECASTER CHROMO CATACHRESTIC CAF. SYMPHONETTE ORTHICON TREBLY BLYTHE PATRONYMIC DRAMATICS HYPERELEGANT RELAY TRUSTWORTHY TROUVEUR MISBEHAVER. GARNETT RUBRICATOR UNCOLLEGIATE CONVEX OPSONOID LYNBROOK PREALLOTTING MANDUCATORY EPILATOR TUBAL QUADRIVALENTLY. EVANGELIZING UNMULLIONED DOBIE RELIBERATING METACHRONAL PROGRESSIONISM COSMOGONAL SHAHARITH LASHKAR SUPERPRAISE COPULATIVE. MOSSIER LOOSEBOX WILE ENCYCLOPAEDIA NONBULBIFEROUS ILYA MOSKVA PAYSAND SCALY BECOMINGLY UNSANGUINE. PLUMOSE DISSUADER HASLET CHAPPING EVE SURGE TASSY LAE NARD KAUAI TERMINOLOGIST. SHACK CONSPICUOUS SUBDUINGLY BIZ COCLES DULLISH TELEGRAPHONE ZWICKAU OVERABUNDANCE ABACI CHEFOO. RECRUITMENT PRETELEGRAPHIC STEALTH TOOLLESS SURMULLET CHRYSOSTOM HERAKLEAN SALLY HYPERPITUITARISM NABOKOV NONCHARACTERISTIC. UNRUSHING GONFANON APPERTAIN TREASURELESS MACE REGISTERED NONPERSECUTING ACIDEMIA FORGE JITTERBUGGED KEIFER. FIBRO ROBORANT PIELIKE WIMBLE NONIRREVOCABILITY SCORPIO J''OUVERT ERASION AGUEWEED DOLDRUMS HAMMER. ISOCHRONIZING DISCONFORMITY BOHEMIA PRESAGER PENNONCEL REFLORESCENCE FINOCHIO GENITAL CAMPYLITE REENCLOSE GALLICIZER. TUNE COENESTHESIS UXORIALLY GIGASECOND PREELIMINATE NONRUDIMENTARILY MULTIPLE SINKERLESS EXULT DISPERSEDLY PREREALIZATION. SNEESH PREIMPROVE HISTORIAN INVOLVING INHALER KYACK UNBENEFITING DENUDATIVE HIDAGE UNBLIGHTED CARANGOID. MAGAZINIST PREEXCITE PREINTIMATE DEVALUATING GUANAYES EUPATRID ITINERATED HATFIELD NICENE ECHOING FUNDI. BUTYRALDEHYDE VORSPIEL FANTOD INTERLAPPING COLLEGER CHIRP PONTIL DEEPFRYING LIMPOPO PHORONID UNCONSIDERED. ILIOCOSTALIS DEPLUMED CIMICES DUMBBELL BOLO CROSSBIRTH ASTRONAUTICAL EYAS RUMRUNNER MESOMORPHIC MISKNOWLEDGE. BEERSHEBA ARGUER DEMAGNETISING NONTONED NONCOMPULSORILY AIRIEST TWIRP UNRIDERED DACKO LISSOMLY UNLOGICAL INVALIDATOR PROLATE GUST CROSSTIED UNLIFELIKE UNSYMPATHISING PREDISSOLVE SPLORE WASHWOMEN UNSTUDIED SLIPPINESS. NONECLECTIC NONDEGENERATIVE PRISMATICALLY COTTONY UNDERLIE POINSETTIA WHARFLESS HOPLITIC OYER BULLATE DINGILY. SAYABLE HOTSPUR MEASURABILITY RAPHIDES FROLICKLY PREDISPOSEDNESS LESOTHO WOMENFOLKS DYSPNEA PROPITIATED HISSING. ECSTATIC IMPONDERABILIA UNBRIDLED DENOMINATIVELY UNSADDLE LIBELER CERUMEN AHMADOU CONJUGATOR POULTICE CATHEDRALLIKE. PASCO UNMORTGAGE UNPULSATING DIAGRAMMATICAL COENURUS WHEELBARROW AFTERGLOW INORDINATELY ALTO UNRESUSCITATED COMITIA. MANIPLE PHALANGES PAINFUL BILLYE PROMETACENTER CHICHI PREDISCRIMINATING DOXOLOGICAL FLOWERET GEOCHRONOLOGIC POUNDAL. SUPERHUMANIZING BINAL ORIENTALISE SNEAKBOX UNDENOMINATED GOTTLIEB SEMIMONTHLY UNMOLLIFYING SEMIPATRIOTICALLY TABULARIZATION GYNAECEUM. MAUN LARKISHLY FIRMLY FASCIST EXACTER PROSUBSTITUTION AFFRONTIVENESS ZOÏ¿¥Ï¾¡NAL PEASCOD BOWDLERIZING EXTORTIONATE. HEIFETZ JAHVISM MESENCEPHALIC SPLOSH ECHOGRAM CROWFOOT CASEATE ANGULATE OUTRAGEOUSNESS INTERDICTORY TRANSCRIPTIONAL. PRETORIAL INHABITED EXHAUSTINGLY ORTHODONTIC LINOLEUM AMRITA UNWITNESSED HORSEHIDE UNDIPLOMATIC PYROLOGICAL LAPSABLE. DAVID CABBAGELIKE SUPERFINANCING BUMBOAT ABSTRACTIONISM QUINARY LYNCH CROWING FLUORIDATION UNSARCASTICAL ZOWIE. NONHEDONISTICALLY LABIOVELARISING LORETTA LYCAEUS PSEUDOEDITORIAL PSYCHOLINGUISTIC TARATA POLYGYNY EPSILON UNREEL BAKER. HIJINKS UNFRISKY PENNYCRESS CORRECTIBLE INTERESTEDNESS UNDIGESTIBLE PREVERSION PALOMINO GRADUALISM MAGNETOOPTICALLY DIPLOIDIC. THREADIER UNDERHUNG ADAR BANDYING

TEAM, UNITY, PASSION AND DISIPLINE ARE THE FOUR THINGS THAT HAVE CREATED A CULTURE WITHIN OUR TEAM THAT IS SECOND TO NONE... four things have created a culture within our team that has been second to none over the years, and has certainly been successful for us”,

Sir Gordon said. Yet even the strongest team shouldn’t expect success all the time, Sir Gordon told breakfast attendees, but it is how you deal with losses that can define future acheivements. He referenced Roger Federer’s defeat to Rafael Nadal in the 2008 Wimbledon final to demonstrate that, in both business and sport, that losing, while painful, should not be considered failure, when you’ve given it all you have. “That’s exactly what I want from my players,” he said, “you go out, you empty the tank, you come off, and you can be happy with that”. The key, he believes, is to always move forward – never back. It’s when things go wrong, he believes, that the strength of the squad and the characters of the players, comes to the fore. In business and to some extent in rugby, it is character that Sir Gordon looks for when selecting his team, as the right character can be coached to be great, even if they don’t have the

right qualifications to start with. “Character is first and foremost. Someone can come in with the best CV in the world and may not be the right person for your team.” While his players work hard, having fun is important to him in both his roles. “A work place that has lots of fun attracts good people, which creates better morale; it generates higher attendance, mainly due to job satisfaction.” Ultimately, the strong team culture that Sir Gordon has created within the All Blacks Sevens, is important because it leads to the commitment of the players – to each other, and to their goals. “Achievement is all about commitment,” he says. “Make sacrifices, never make excuses.” Sevens Wellington took place on February 6 and 7. The All Blacks Sevens currently sit at second in the table after five rounds in the 2014-2015 season. The top four in this series automatically qualify for the 2016 Olympic Games. www.covernotemag.co.nz

COVER STORY

March 2015

COVER STORY

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COVER STORY

Keep on top of

training requirements

If you’re working as an insurance adviser in New Zealand, industry experts say regular training is important to help you provide the best service possible to your clients.

March 2015

hen was the last time you sat down to study? New regulations have updated the amount of continuing professional development authorised financial advisers in New Zealand have to do, to 30 hours’ structured training every two years. But even advisers who are registered and not authorised are coming under increasing scrutiny. It has been suggested this year's review of the Financial Advisers Act may increase the qualification and ongoing training requirements on financial advisers. Already, members of IBANZ are required to complete 10 hours’ CPD every year if they have Practising Insurance Broker (PIB) status, although 15 hours is recommended. Fifteen hours is required for IBANZ members who have attained Qualified Insurance Broker (QIB) and Chartered Insurance Broker (CIB) status. IBANZ chief executive Gary Young said the law had a clear expectation that all insurance brokers would have adequate skills to meet their clients’ needs, and would maintain them through their CPD programme. “IBANZ acknowledges this expectation by providing all members with courses, workshops and course monitoring required to undertake structured CPD. We purposely set a sound professional standard through our Code of Professional Conduct that ensures members will reach the standards clients, employers and regulators expect,” he said. “An important reason for being a member of IBANZ is to show you are a professional committed to high standards. Our setting of a minimum standard of CPD is

COVER STORY

vital in proving members can be relied upon as quality professional advisers.” But CPD can come in the form of workshops, courses, webinars and online training. With so much available, how can advisers know what will be worthwhile? Young said CPD training was only beneficial when it was done in a planned, structured way and genuinely met an adviser’s identified requirements. That meant advisers would need to draw up a CPD plan each year that would identify areas for improvement in their competence, knowledge and skills. Every time it was revised it was an opportunity to look at the year before and evaluate its plan, identifying any targets that had been left unmet or areas that did not receive as much attention. Young said IBANZ required CPD training to meet the same standards that the Code of Conduct for Authorised Financial Advisers sets out: It must have identifiable aims and outcomes that are relevant to the adviser’s professional development plan, be provided by a qualified educator or subject matter expert and be verifiable by documentation. Young said training would not be recognised as CPD if it did not have enough focus on developing professional skills and did not meet quality standards. Things that would not qualify included business planning meetings, promotional events such as product launches, inhouse business updates and networking events and routine day-to-day work. Lesley Southwick, principal of the Professional IQ College, said a good professional development plan was not only beneficial to an adviser but to their clients. “It helps show competency and professionalism.” She said advisers should start by identifying any gaps in their skills. “That’s what developing a professional plan is about, looking for training that fits that. There’s a number of options and having a training plan allows you to structure it through the year and get what you need in terms

AN IMPORTANT REASON FOR BEING A MEMBER OF IBANZ IS TO SHOW YOU ARE A PROFESSIONAL COMMITTED TO HIGH STANDARDS. OUR SETTING OF A MINIMUM STANDARD OF CPD IS VITAL IN PROVING MEMBERS CAN BE RELIED UPON AS QUALITY PROFESSIONAL ADVISERS. of training.” Advisers could take a personal or an organisational approach depending on their circumstances, she said. “The manager in the office might say your training plan needs to cover X,Y and Z topics, you need more product knowledge training, for example. That could be identified by the manager and the individual could put it into the plan. Or the individual could work out with their manager what their skill gap is and fill out the training plan with goals for the organisation for the year that they need training to implement.” She said while registered financial advisers had fewer legal requirements than authorised financial advisers at the moment, they should not become complacent. “Even if you are an RFA you are expected to have the skills and knowledge to do the job. If you’re audited, you could be expected to show evidence of that, your skill and knowledge around the latest regulation, legislation and code is up to date.” The requirement to act in clients’ best interests and provide advice that was suitable for them meant there was a place for product training as part of advisers’ CPD, Southwick said.“There is a need for product training, when you give advice you have to know it’s the right product for your

client but insurance brokers need to be aware of the bigger picture, there’s more than one product in the market.” Young said a good CPD programme should pay dividends. “In the end if you improve your skills you improve your value for the employer.” The plan could be a living document that was updated throughout the year, he said. “Even if you’ve been in the industry for a long time, you’ve got to stay up-to-date and be constantly learning. It’s more vital when you’re new in the industry and need to develop skills to develop your career but even guys who are getting towards retirement need to stay up-to-date.” David Greenslade, of training provider Strategi Institute, said plans needed to be personalised, not adapted from a generic model, which would force advisers to think about the training they would need to do over the next year. The Financial Advisers Act requires that an adviser exercise care, diligence and skill that a reasonable financial adviser would exercise in the same circumstances. Greenslade said Strategi regarded that as being the very minimum standard for insurance advisers to meet. “A professional financial adviser who is really serious about doing a quality job for their client would voluntarily subscribe to www.covernotemag.co.nz

COVER STORY

the standards deemed to be the minimum for an AFA. In the event of a dispute or litigation in the future, those who are making a determination or ruling about the competency of the financial adviser may use the care, diligence and skill requirements of an AFA as the benchmark of professionalism.” Once a professional development plan was in place, Greenslade said advisers should not “set and forget” but continue to adapt it as the year progressed. If relevant study opportunities arose that they were not aware of when they wrote the plan, advisers would need to go back and alter their plans. That was particularly important when the study was in response to a change in the business environment that could not have been foreseen at the beginning of the year. Keeping up with changing regulatory requirements is an important aspect of CPD.

Even reading FMA guidance notes on new rule changes could count as structured CPD, provided the adviser was able to prove they had done it. Because CPD generally has to be proven, advisers who take an online course may need to look for one that offers a quiz or test at the end. Strategi said CPD should provide for ongoing competence, knowledge and skills, keep the adviser in touch with industry developments including regulation and new techniques and philosophies, should be directly linked to their work as a financial adviser and cover the complete spectrum of knowledge, competence and skills. “Take a robust and conservative approach when assessing the quality of structured training, and select training that can be quantified and has a specific learning outcome, is supplied by a reputable training provider and can be produced for and withstand scrutiny by FMA.” Greenslade recommended advisers should select at least one CPD hour from each of the

six key areas: Ethics/compliance/best practice; product knowledge; behavioural finance; business management; six-step advice process; personal skills and development. Towards the end of the year, it should become clearer whether RFAs' qualification and training requirements will change. But CPD was a better aspect of training to focus but Young said on than entry requirements required to start in the industry. “There’s been some pressure with the review of the Financial Advisers Act to look at entrylevel qualifications. Our position is we don’t believe one requirement for everyone is the best way. We’d rather see 15 hours’ CPD than a qualification that may or may not be relevant. You can adapt CPD but a qualification is what it is.” For more on getting the most from your professional development, see College Page 48.

UPCOMING COURSES The world of insurance March 19, Professional IQ offices Knowing the origins of insurance and how it has evolved over time can be helpful to the insurance professional because it gives context for all we do. The world of insurance workshop goes further, however. It takes the participants to the Christchurch earthquake and examines the huge impact it had on the global insurance market. Brokers’ duty of care April 7, Professional IQ offices With increased regulation and controls on the brokering industry it is important to keep up to speed on your obligations and duties to your customers, and other people. The consequences of failures to comply can be very serious, and the Christchurch earthquakes have shown that some brokers have failed to meet these standards. Principles of risk management April 14, Professional IQ offices The course starts by examining the statement: “The success of a business is built on understanding and managing risk” and continues from there.You will gain an understanding of what constitutes business risk, the relationship of business risk to insurance and your role as a partner to the business.

March 2015

Contract works insurance April 15, Professional IQ offices This course covers both the theory and practice of contract works insurance and provides a broad but detailed overview of the industry and its component parts, players and products. You will gain a good grounding in how to understand and provide contract works insurancerelated financial adviser services to clients, and how to select the appropriate contract works insurance products based on the needs of a particular contract. Ethics April 21, Professional IQ offices Gain a clear understanding of some of the ethical challenges in the insurance/financial advisors industry. Work through practical scenarios using established ethical decision making models and refresh your knowledge of the code of ethics.

FEATURE

IN UNDERWRITING MARKET

ew Zealand’s underwriting agencies have a clear focus on their relationships with brokers, a survey has shown. The Gratex International Underwriting Agencies Australia/New Zealand CEO Survey – Business Priorities and Trends paints a picture of an increasingly competitive industry where key relationships and staff are increasingly important. It was conducted as an anonymous, online survey of underwriting agencies’ senior management in Australia and New Zealand last year. Gratex International said it showed that the confidence in the market opportunity for underwriting agencies was strong. “We see high degrees of optimism about the future of the industry and a clear trend to focus on growth in existing as well as new market segments. Almost all of the respondents see themselves as being the stimulus of industry growth and the facilitator of innovation.” The survey showed creating a superior customer experience to hold on to existing business and attract new customers was at the heart of most business’ strategies. More than 90 per cent agreed or strongly agreed that they delivered high levels of service and that by focusing on specific segments of the market they were able to ensure higher levels of customer experience. Management at underwriting firms ranked their business’ relationship with intermediary channels as being crucial to the success of their organisation. “Increasing channel loyalty and performance is seen as key business drivers for growth in established market segments and products,” Gratex International said.

CREATING A SUPERIOR CUSTOMER EXPERIENCE TO HOLD ON TO EXISTING BUSINESS AND ATTRACT NEW CUSTOMERS WAS AT THE HEART OF MOST BUSINESS' STRATEGIES. The ability to attract and retain skilled staff was consistently ranked as a key factor across all aspects of doing business in Australian and New Zealand. Almost 80% said the most important business factor was improving partner network performance and loyalty. Almost 90% agreed or strongly agreed with the statement:“We feel very optimistic when it comes to the future of the business.” Another 83% agreed or strongly agreed that they saw potential for growth. Despite underwriters’ strong confidence, competition from new market entrants was seen as a key challenge. Almost 70% said it was their biggest challenge, followed by 48.9% who said they were focused on the performance and loyalty of the broker channel as their biggest challenge. Almost half said strong competition was challenging their business. Gratex International said: “The results imply that business leaders need to reconsider their competitive position in the market to take advantage of market growth.”

OUT AND ABOUT

CUNNINGHAM LINDSEY CHRISTMAS PARTY

March 2015

OUT AND ABOUT

LLOYD’S BOSS TALKS TO KIWI BROKERS Insurance professionals attended a breakfast meeting with Lloyd’s chairman John Nelson when he was in New Zealand last month. He spoke to a gathering at Sky City on February 16, offering insight into the state of the insurance market and Lloyd’s relevance in this part of the world. The breakfast was followed by an expo of underwriters, detailing the opportunities they provide. It was a chance for brokers to have indepth discussions with companies’ decision-makers and to talk about how they might find solutions to some of the more out-of-the-box questions they receive. Underwriters at the expo included Catlin, IUA, Rosser and Arch Underwriting.

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FEATURE

NZI & LUMLEY ON TRACK TO BECOME ONE L

umley and NZI should look and feel a lot like one company by the end of this year, says NZI executive general manager Travis Atkinson. Atkinson has been in the job since September. He took over from Karl Armstrong, who has become chief risk officer of IAG. Last year, IAG made headlines when it bought Wesfarmers' Lumley general insurance unit for A$1.8 billion ($1.86 billion), adding the WFI and Lumley Insurance brands to an existing IAG stable which includes NZI, AMI and State. The company had to be granted regulatory approval for the deal, amid concerns about a reduction in competition in the New Zealand market. Atkinson said his focus before Christmas had been meeting key business stakeholders and partners, and catching up with what was happening around the country. Before taking up the NZI role, he had been on secondment in Malaysia as chief executive of AmGeneral, a joint venture between Malaysia’s fifth-largest banking group and IAG. “I’ve been away from the country for three years so it’s important to catch up with what’s been happening. The initial few months have been about that,” he said. NZI made a swathe of management appointments before Christmas as the new top team was cemented including Garry Taylor as general manager claims, Stephen Everett as

March 2015

general manager commercial underwriting, John Chandler as general manager commercial sales, Treena Rowley as head of business performance and governance and Rob Dibley as acting general manager broker personal sales. Atkinson said the appointments had been welcomed and there was a sense that brokers were relieved to know who they would be dealing with. He said the key thing for any successful business integration was the people involved. “A key thing from my perspective is that new leaders have to be part of the process of bringing the company together.” He said some things might start to be done a little differently under his watch this year but the focus would remain on looking after the people involved in the business. “That’s the focus, on bringing teams together, continuing to be very customer-focused.” Staff had come back from the Christmas break focused and practical decisions were now being made, he said: Who would sit where, which offices would be used. The focus for the year would be the company towards operating as one entity. “To my mind getting towards moving towards one company status is a goal for this year.That’s not easy but my immediate priority is to eliminate duplication any customer confusion so we can go to brokers and say ‘are we increasingly looking like one company through 2015?’ That’s the most

important thing for us at the moment, to ensure we are looking at what brokers need from us because that’s really what it’s about.” There could be a place for the Lumley name in certain market segments or particular products, Atkinson said, but NZI would be the dominant brand. “Primarily we will be NZI. We’ve got a lot of loyal Lumley customers in certain segments but the NZI brand is extremely strong. It was easy early on to make the decision that NZI would be the primary brand. Over time I don’t see any disadvantage in the majority of the business being NZI. But being customerled means in certain segments Lumley has some merit. IAG runs multiple brands and I wouldn’t want that to be in any way confusing for brokers. It’s not about trying to overcomplicate things.” Atkinson said the New Zealand market was very competitive and he would not become complacent about NZI’s position in it. “We’re very open in the challenges we have

FEATURE

THE FOCUS IS BRINGING TEAMS TOGETHER, CONTINUING TO BE VERY CUSTOMER-FOCUSED. putting companies together. Without being overconfident, we want to make it work. Increasingly, what we want to do is demonstrate what we’ve said and be judged now by our actions. You’ve got to earn position as leader, regardless of size. There are lots of examples where companies get overconfident and abuse their position as a leader and it’s not sustainable.” It had been pleasing to see that brokers were still operating strongly, he said. “Brokers – no surprise – are still very much strong in their performance, advocating for their customers. There have been some shifts in broker consolidation, some new entrants in the market

but that’s just a reflection of this day and age. That’s in some respects happened quite rapidly but then again if you look back over time there’s been a lot of change over recent years anyway.” Brokers were a key component of the NZI business, he said. “Brokers have been very supportive and the business reflects that. I’ve found high levels of professionalism, all the things I expect from the market that exists here. We do have very strong long-running relationships and I don’t expect them to be turned on their head provided we continue to prioritise brokers and customers at claims time.”

It would take some time to complete the merger, Atkinson said. “It will take 12 months to renew every customer and there are potentially some short-term workarounds in place. [But the goal is] throughout the year everyone is very clear it looks a lot like one company, they know who they are dealing with, know what our underwriting appetite is, the operational performance is very good, and the service standards are exceptional.” Atkinson said the plan was to make a lot of progress to the one-company goal this year although some aspects of the integration that did not affect customers could take longer. www.covernotemag.co.nz

FEATURE

Farmers neglect risk F

armers aren’t paying enough attention to human capital risk planning, says Hastings-based Crowe Horwath risk adviser Tim Ewen. Although the intellectual property underpinning the farm’s wealth was often tied up with the owner, too little focus was placed on the “what-if?” factor, he said. In the event of a farmer becoming either temporarily or totally disabled, or passing away, planning was essential to make sure the farm business could continue to provide for family members. “Farms rely on key people to make the business work,” said Ewen. “Farmers need to take account of the human capital risk and ensure they have appropriate planning in place so the right money goes to the right people at the right time.” Crowe Horwath cited a recent Financial Services Council survey, which found only 20% of New Zealanders have income protection insurance, compared with 95% who have their car and home covered. It also noted a recent Kelloggs Rural Leadership research paper by Michelle Wilson, which found that while 80%of farm widows

March 2015

FARMERS NEED TO TAKE ACCOUNT OF THE HUMAN CAPITAL RISK AND ENSURE THEY HAVE APPROPRIATE PLANNING IN PLACE SO THE RIGHT MONEY GOES TO THE RIGHT PEOPLE AT THE RIGHT TIME. have life insurance, in hindsight only 20% found it was sufficient. Meanwhile, 40% said they should have had enough insurance to provide for a farm manager for 12 months. Insurers typically pay out much less than is claimed. Ewen said farm owners should also be aware there could be advantages in altering their ACC

structure. “ACC will only pay 80% of your predisability income, less tax,” he said. “And farm incomes can fluctuate markedly. In some instances the books may show little if any profit after all expenses are allocated, so it makes sense to lock-in an agreed value cover that will also cover the farmer for sickness as well as accident, regardless of how farm revenue changes.” A related key issue is succession. Even though more than 70% of farmers want to sell to their children, only 10% have a succession plan in place, and access to capital is a major barrier, compounded by the high value of farms today. Ewen recommended farmers develop a comprehensive succession plan, specifying buy-sell agreements, share purchase funding options and shareholder employment contracts. The plan should include funding for off-farm retirement needs and contingencies to cope with a major disability or premature death. “Regular reviews are important because circumstances change,” said Ewen. “They’re not a fun conversation to have, but they certainly give peace-of-mind and clarity to those involved”.

FEATURE

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The situation could have resulted in lost customers and put jobs at risk. QBE Insurance helped negotiate a solution that satisfied both parties, saving the relationship and enabling the commercial reputation of our client to continue to grow.

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FEATURE

Under the microscope: Canterbury earthquake decisions The Canterbury earthquake litigation continues to produce new caselaw. Minter Ellison Rudd Watts' Andrew Horne discusses three recent cases in which the courts have permitted a higher recovery for insureds than some would have predicted. - ‘Full replacement’ obligations Tower Insurance v Skyward Aviation - Notional contingencies Avonside Holdings v Southern Response - EQC’s liability for land damage Earthquake Commission v Insurance Council of New Zealand & Ors. CASE STUDY ONE: AN INSURER’S “FULL REPLACEMENT” OBLIGATIONS Late last year the Supreme Court delivered its judgment in Tower Insurance v Skyward Aviation. Tower had elected to settle the claim with a payment of money rather than rebuilding the insured’s house. Skyward then purported to choose payment of the “full replacement value” of the house. The amount of Tower’s liability was disputed. Tower Insurance v Skyward Aviation The Supreme Court held that: (a) as Tower had elected to pay money and not to rebuild the house itself, its obligations were determined by Skyward’s election as to whether to rebuild the house on its original site, replace it by rebuilding on another site, or buy another house; (b) if Skyward elected to buy another house, the only limit on Tower’s liability was that the cost of the replacement house could not exceed the cost of rebuilding the insured house on its original site; and 24

March 2015

(c) there was no requirement that the replacement house had to be "comparable" to the insured house. So the insured was entitled to buy a replacement house that was more valuable than the insured house, with the notional cost of rebuilding the original house being the sole cap on the insurer’s liability.The value of the original house had no bearing on the insurer’s liability. The Court recognised that this approach could incentivise insureds to make fraudulent claims where the cost of rebuilding exceeds the market value of the insured house, because they could receive more than the value of the damaged property. The Court suggested that this risk may be mitigated by insurers in a number of ways, including (as in this case) by issuing policies that: (a) provide insurers with the option of reinstating the damaged property themselves; and (b) limit the insured’s entitlement to reimbursement of expenditure actually incurred by the insured.

This case demonstrates that insurers should be aware of the scope of their replacement value provisions and should consider how the potential for "moral hazard" may be mitigated by appropriate policy wording. CASE STUDY TWO: NOTIONAL CONTINGENCIES The Court of Appeal recently overturned Justice MacKenzie’s decision in Avonside Holdings v Southern Response, where Justice MacKenzie had disallowed a claim for contingency where a house was not in fact going to be rebuilt. The "What we will pay" clause of the policy said: “We will pay the cost of buying another house, including necessary legal and associated fees.This cost must not be greater than rebuilding your rental house on its present site.” Avonside Holdings v Southern Response In the High Court Justice MacKenzie found that it was not appropriate to include a percentage

FEATURE

THE COURT HELD THAT NATURAL DISASTER DAMAGE REQUIRES A PHYSICAL CHANGE OR LOSS TO THE BODY OF THE LAND AS A DIRECT RESULT OF THE EARTHQUAKES, WHICH AFFECTS THE USE OR AMENITY OF THE LAND. rebuild cost assessment, the industry standard figure of 10% was appropriate. As no evidence was led about the amount of contingency that would in fact be likely to be used to meet unexpected costs if the house was rebuilt, the Court of Appeal appears to have simply taken the best evidence available and settled on 10%. However, industry sources indicate that only part of the contingency allowance is normally actually expended in a rebuild or repair. Evidence as to the amount of the contingency which is generally spent could have led to a lower figure than 10%. The Court of Appeal’s judgment is being appealed to the Supreme Court with a date yet to be allocated. We await the Supreme Court’s decision, which will have important ramifications for insurers making cash settlements. amount for contingency in calculating the cost of a notional rebuild, because the house was not in fact going to be rebuilt. The Judge accepted that contingencies are typically included in building cost estimates to deal with unexpected expenditure during building. However, he said, in a notional rebuild the house will not in fact be rebuilt, so no unexpected costs will be incurred. The Court of Appeal reversed that decision, holding that the cost of rebuilding the house on the same site involved both: (a) the full replacement cost and (b) additional costs, encompassing contingencies and professional fees. If the policy had been intended to limit "the full replacement cost" in the "What we will pay" provision, it would have said so. It was therefore irrelevant that rebuilding would not take place. What was required was an assessment of the costs that would be incurred if rebuilding actually occurred, which the Court held would include contingencies. The Court of Appeal also found that, where contingency was to be included in a notional

CASE STUDY THREE: EQC’S LIABILITY FOR LAND DAMAGE A full bench comprising three Judges of the High Court recently issued a decision in Earthquake Commission v Insurance Council of New Zealand & Ors. The EQC had applied for declarations approving its policy regarding increased flood vulnerability (IFV). IFV results from changes to land levels caused by natural disaster which leave the land more prone to flooding. Many properties in Christchurch are now subject to IFV as a result of the earthquakes, as well as to increased liquefaction vulnerability (ILV) where land has a thinner crust between the ground surface and the water table. The decision deals principally with the EQC’s obligations. But the Court’s comments as to the classification of IFV and ILV as natural disaster damage may be relevant to private insurers, as this may affect their obligations relating to rebuilding and repairing damaged residential buildings on land subject to IFV and/or ILV, particularly if the

IFV or ILV results in the claim exceeding the EQC cap. Earthquake Commission v Insurance Council of New Zealand & Ors The Court considered whether IFV constituted "natural disaster damage" under the EQC Act and, if so, how EQC was required to settle relevant land claims. "Natural disaster damage" is defined in the EQC Act as any “physical loss or damage to the property occurring as the direct result of a natural disaster.” The Court held that natural disaster damage requires a physical change or loss to the body of the land as a direct result of the earthquakes, which affects the use or amenity of the land. This means that where there has been: (a) a disturbance to the physical integrity of the land as a direct result of the earthquakes; (b) which reduces its volume and leaves the body of the land in an altered physical state; (c) resulting in the land being more vulnerable to flooding and thereby adversely affecting its use and amenity (i.e. the primary use of residential land is as a platform for building); then this will satisfy the criteria for physical loss or damage for the purposes of "natural disaster damage". A similar conclusion was reached in regard to ILV. The Court also found that while IFV may constitute physical loss or damage to land covered by the EQC Act, IFV will not automatically be considered natural disaster damage to residential buildings. This means that where there has been physical damage to residential land but no change to the physical state or integrity of the body of the superstructure, this will be considered to be damage to the land and not the building. The Court also made declarations entitling the EQC to develop and publish guidelines for assessing the validity of a claim for natural disaster damage based on IFV or ILV. Lastly, the Court refused to make a declaration that an insured’s recourse against the EQC in relation to unresolved claims was limited to judicial review. The Court held that insureds could potentially institute ordinary proceedings, judicial review proceedings, or both, depending on the circumstances. Author: Andrew Horne Andrew specialises in commercial litigation and dispute resolution. He has particular expertise in insurance disputes and has acted for insurers for more than 20 years. With substantial experience in all aspects of contentious insurance law, Andrew leads Minter Ellison Rudd Watt’s insurance practice. www.covernotemag.co.nz

ASK AN EXPERT

Spilt milk QUESTION…

REPLY… CHRIS SMITH, ROTHBURY GROUP Had the exact same case and it was also declined. They simply class this as deterioration and apply that extension, therefore the loss must be due to the only listed perils. Simply forgetting to turn the vat back on is not sufficient.

My client’s employee failed to follow correct instructions and the refrigeration plant was not switched on following milking. Prior to the next milking the farmer discovered the milk had not been cooled and was no longer acceptable to Fonterra. He dumped the milk so he could milk again without contaminating the next lot of milk in the vat. NZI have declined the claim under the Milk Benefits extension citing the milk plant would need to actually suffer a breakdown although the wording states "breakdown or failure....". NZI have declined the claim under the MD section of the policy based on the exclusions for rot, gradual deterioration and losses immediately preceded by change in artificially-controlled temperature. Does anyone have experience of a loss of this nature being paid? Is the intent to cover this type of loss? What is the intent of the word "failure" in the milk benefits wording?

How much should directors know? QUESTION… A company has several directors and several employees. A director who arranges the insurances on behalf of the business states that he cannot reasonably complete an insurance proposal form as it asks questions about motor convictions, prosecutions, insolvencies etc. The director claims it would be impossible for him to know the history of his colleagues. My question is who should complete the proposal form and how do you overcome the situation above?

REPLY… STEVE WARDLEY, OF IBANZ I’m not sure that there are legislative requirements that set out any special rules around this.There is of course the usual duty of disclosure and utmost good faith by the person who fills out the proposal form.They must answer fully and to the best of his or her knowledge. Can the director pass around to all his staff a short internal form asking them to advise of any convictions, prosecution or insolvencies? Most proposals ask "after inquiry" and this is probably the best any one could reasonably be expected to do. REPLY… CROSSLEY GATES, DLA PHILLIPS FOX A company is a legal fiction created by the Companies Act. It is a separate legal entity from the directors charged with running the company and the shareholders who own the company. A company can't have motor convictions, but it can become insolvent and it can be prosecuted. 26

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A legal representative of the company should complete and sign the proposal on the company's behalf. Usually this will be a director. The answers the director gives will bind the company. The questions in the proposal may relate to the company itself (e.g. has the company ever traded while insolvent) or about the directors and/ or employees (e.g. has any director or manager of the company been bankrupt). To the extent they are about the company itself, the director ought to be able to answer on behalf of the company.To the extent they are about directors/employees, it is incumbent on the person signing to make inquiries of the relevant people in the company. A director can't just put his or her head in the sand. At the PI renewal for our firm each partner is asked if they know of any claim or any circumstance that could result in a claim in order to ensure the duty of disclosure is complied with.

ASK AN EXPERT

Separate dwellings QUESTION… Can you please advise if EQC and FSL levies are payable on a part of the home which is separated off as a separate dwelling unit. Is it rated as two dwelling units when one is obviously a commercial undertaking?

REPLY… CROSSLEY GATES, DLA PHILLIPS FOX I am confused. Is one part of the “home” separated off, not a home in fact but used as a commercial undertaking? Original poster: Separated off in terms of a separate entrance but still part of the same building. The client supplies B&B services to paying customers. Gates responds: See definitions of residential building and dwelling below taken from EQC Act. Residential building means— (a) Any building, or part of a building, or other structure (whether or not fixed to land or to another building, part, or structure) in New Zealand which comprises or includes one or more dwellings, if the area of the dwelling or dwellings constitutes 50% or more of the total area of the building, part, or structure: Dwelling means, subject to any regulations made under this Act, any selfcontained premises which are the home or holiday home, or are capable of being and are intended by the owner of the premises to be the home or holiday home, of one or more persons: Sounds from what you say that there is only one dwelling in the building. If that dwelling is 50% or more of the building, the building is a residential building and EQL and FSL are payable based on one dwelling. REPLY… RICHARD HERN, WYNN WILLIAMS Cros has beaten me to the punch - I agree with his view it may well be a residential building within the EQCA. REPLY… LEE PATTON, OF THE EARTHQUAKE COMMISSION See page 18 of the Insurer's Guide to EQCover on the EQC website eqc.govt.nz “What we do” section. It discusses Bed and Breakfasts.

Broking ambitions

QUESTION… I am in the farming industry, and am joining up with a rural broker to collect insurance-related information from my contacts so they can provide insurance quotes. We will share commission. Am I required to be registered with FMA, and are there any education requirements?

REPLY… ALLAN CAMERON, VERO Stick to farming!!!

Do you have a question for our experts? If so, visit iNavigator, www.inavigator.co.nz, or the IBANZ website, www.ibanz.co.nz - and let us know.

www.covernotemag.co.nz

FEATURE

CYBER-RISKS IN NEW ZEALAND by Toby Gee, Minter Ellison Rudd Watts, New Zealand

NEW ZEALAND’S INCIDENCE AND RISK OF CYBER-CRIME yber-crime and data breaches are one of the key risks facing businesses. New Zealand has traditionally been regarded as a low-crime environment. So, unsurprisingly, its IT encryption and security processes appear to have lagged behind those of other developed countries. The global nature of cyber-crime means New Zealand is a soft target for cybercriminals, and it needs to catch up in terms of understanding and precautions. There are some signs that it is doing so, but this is an ongoing process. It is estimated that more than half of online New Zealanders are the victims of some form of cyber-crime every year. The estimated cost of cyber-crime per capita in New Zealand is comparable with that in Australia (New Zealand: US$157m total, Australia US$1b total; Norton 2013). New Zealand is also not immune from the global rise in cyber-crime. This, combined with often less stringent security procedures, suggests that New Zealand is at risk of a faster rise than in some other countries, depending on

March 2015

the speed with which New Zealand companies and individuals can bring their IT security precautions up to international best-practice levels. EDUCATION IS REQUIRED Cyber-insurance is a relatively recent product in New Zealand. New Zealand insurance brokers say that they find companies often underestimate, or do not understand, the nature of the e-risks they face.There is a perception that the most serious effect of e-risks is reputational rather than direct loss. Companies need to build crisis management plans and capability. There is an ongoing need to educate company executives. Brokers and insurers recognise this. Several initiatives exist to improve knowledge and appropriate precautions. A range of stakeholders across government and industry supports Netsafe and Security Central (http:// www.securitycentral.org.nz/). A major broker has produced an online cyber-risk selfassessment tool. Some brokers and insurers are working together to educate companies as to risk assessment and reduction, by giving seminars in major cities. The Insurance Council of New

Zealand is also playing its part by broadcasting the message that e-risks matter. One difficulty in getting the message across is the profile of New Zealand’s companies. Over 97% of New Zealand businesses employ fewer than 20 people, and only 1% of New Zealand businesses employ more than 50 people. This makes it more difficult to disseminate the message that companies need to do more to assess, reduce and protect against their exposure to e-risks. However, encouragingly, 67% of New Zealand businesses plan to spend more on IT security in 2015 than 2014. PRIVACY LAWS ARE CHANGING In New Zealand, as elsewhere in the world, privacy is an increasingly troublesome area. Unlike in Australia, New Zealand’s courts have been willing to recognise a common law cause of action for breach of privacy. Its scope is not fixed, but it is relatively narrow. Any expansion of that scope is likely to be cautious, having regard to the balancing act that needs to be performed between protecting privacy and protecting freedom of speech. In May 2014 the government announced

FEATURE

SUMMARY • New Zealand appears to be a relatively high-risk environment for cybercrime. • More education of New Zealand companies is required to reduce and protect against e-risks. • Privacy laws are beginning to acquire more teeth. • Derivative actions against companies and related professionals following data breaches are likely in the future.

proposals to overhaul the Privacy Act. As the general election returned the same party to power, it appears likely that this will proceed, albeit the timetable is as yet unclear and no bill has yet been introduced into parliament. The proposals for reform include, as a “critical” matter, a two-tier reporting obligation. Organisations will be obliged to self-report data breaches to the privacy commissioner. Tier 1 (all) breaches will need to be reported to the commissioner but not to the persons affected.Tier 2 (serious) breaches will need to be reported not only to the commissioner but also to the persons affected. Penalties for breach of the reporting obligation will be up to $10,000. Penalties for privacy breaches themselves will also increase from $2,000 to $10,000. This sounds like a big increase. But penalties at that level remain puny compared with other jurisdictions. For example, in the UK the maximum penalty is £500,000, approximately 100 times higher than the proposed new maximum in New Zealand, and the EU looks set to increase maximum fines to 100 million euros ($160m) or 5% of an offending company’s annual worldwide turnover if higher.

IT IS ESTIMATED MORE THAN HALF OF ON-LINE NEW ZEALANDERS ARE VICTIMS OF SOME KIND OF CYBER-CRIME EVERY YEAR. So it remains to be seen for how long the New Zealand government will continue to consider the proposed maximum penalty of $10,000 to be adequate. The commissioner will also have increased powers to investigate, and an increased budget to do so. This is likely to be an area of significant exposure for insurers covering the costs of dealing with such investigations, which may rapidly outstrip the maximum fines. Likelihood of derivative claims arising from privacy breaches and cyber-crime In the USA banks have launched class actions

against Target for recovery of losses caused by Target’s loss of customers’ credit card details due to hacking. New Zealand is already seeing derivative actions in other areas such as failed property developments and failed investment companies, where plaintiffs attempt to claw back money from related professionals such as auditors or lawyers. It is probably only a matter of time before similar actions occur against companies or related professional advisors in relation to losses caused by privacy breaches (whether or not involving cyber-crime), particularly where those losses are alleged to be due to inadequate security or inadequate responses to previous security breaches. Toby Gee, Special Counsel, Minter Ellison Rudd Watts, New Zealand toby.gee@minterellison.co.nz Toby Gee practised as a barrister in London for 20 years, specialising in insurance, professional risks, product liability, property damage and medico-legal claims, before moving to New Zealand in 2013 and joining Minter Ellison Rudd Watts as a Special Counsel. He has also been accredited as a mediator in the UK and New Zealand. www.covernotemag.co.nz

FEATURE

ew Zealanders think uninsured drivers should not be allowed on the road, a new survey shows. The Canstar Blue survey found 86% of Kiwis surveyed supported the view that those who could not afford to insure their vehicles should not be on the road, said Derek Bonnar, general manager, Canstar New Zealand. “Gen Ys, were least likely to agree (65%) compared to Gen Xs and baby boomers. Perhaps that’s because Gen Ys are more likely to be cash-strapped compared to older New Zealanders.” Being involved in an accident with an uninsured driver can be costly; 11% in the survey said they had taken an uninsured driver to court, with Aucklanders (26%) Gen Ys (22%) and Gen Xs (24%) more likely than those from other regions and age groups to do so. While nearly all (91%) say their car insurance provider is easy to deal with, switching seemed to be on the rise. “This is the third year of our survey, and while most have remained with their current provider, 15% have moved their business, up from 10% the year before. Aucklanders were nearly four times as likely to switch compared to those from other regions.Value for money (35%) is the biggest driver of satisfaction, followed by quality of service (23%) and clarity of policy (23%),” Bonnar said. He said the car insurance market was competitive, particularly in Auckland. “Consumers should always compare prices and policies on a regular basis, just to make sure they have a policy that best meets their needs. In addition, a quarter of respondents reduced their cover in order to manage premiums, with Aucklanders (38%) leading the charge towards lower cost cover.”

March 2015

86% OF KIWIS SURVEYED SUPPORTED THE VIEW THAT THOSE WHO COULD NOT AFFORD TO INSURE THEIR VEHICLES SHOULD NOT BE ON THE ROAD Crime statistics show that car theft and theft from cars has been trending downwards over the past 20 years. Nearly a quarter of respondents said they regularly leave valuable items in their car, with Aucklanders (38%), Gen Xs (41%) and Gen Ys (42%) most likely to do so. Baby boomers were least likely to, at 13%. Consequently, 20% had valuable personal items stolen from their vehicle at some point in their lives. Theft from cars seemed to be a particular problem in Auckland, with respondents from the City of Sails more than twice as likely as respondents from any other region to fall victim to thieves. Analysis of claims shows the majority were for accidents (66%) and a large minority for windows/windscreens, says Bonnar. “The most unusual claims shared in the survey were for flood damage, damage caused by animals (hit a dog, lamb ran into car) and a hit and run at the cemetery.” AA Insurance took the award for overall customer satisfaction.

FEATURE

Smith&Smith® is proud to announce the first winner of our $10,000 travel prize draw. Congratulations to Phil Haines of Masterton. Phil Haines visited our Masterton Authorised Dealer (Ewen Glass) to have a chip repaired on his windscreen. Phil is insured with AMI Insurance and was entered into the monthly prize draw to win $10,000 worth of travel vouchers. When we called Phil to tell him his name had been drawn, he and his wife, Karen, were out on a bike ride. Karen told us she was so excited by the news she almost fell off her bike. Phil and

Karen, who married three years ago, will use some of the prize to have a belated honeymoon. Phil and Karen said: “We are over the moon, about winning such an awesome prize, and feel extremely grateful.” The couple have already visited their local travel agency and are enjoying the process of researching the different exotic destinations open to them. Phil and Karen are the first of three grand

prize winners with two additional draws still to take place during the months of March and April. All qualifying customers using Smith&Smith® services at our branches and Authorised Dealers during the qualifying period will be entered into the upcoming draws. *For details and terms and conditions of the Smith&Smith® travel promotion please see our website www.smithandsmith.co.nz

Keep your client’s claims stress-free Broken vehicle glass is common. But stressful claims shouldn’t be! At Smith&Smith® our aim is to ﬁx your client’s vehicle glass needs as quickly and as conveniently as possible. We achieve this by having over 60 locations across New Zealand and a team of highly skilled technicians who can carry out repairs at a convenient location for your client. Plus we provide an emergency service 24 hours a day, 7 days a week.

smithandsmith.co.nz

0800 80 90 80

With our nationwide lifetime warranty on workmanship you can be sure that your clients are in safe hands.

www.covernotemag.co.nz

FEATURE

FAA REVIEW TERMS REVEALED T

erms of reference for the Financial Advisers Act review have been released. It signals the start of an 18-month review process. It has been suggested that the role of RFAs and the qualifications required to enter the market may be brought into consideration in the review. The terms of reference say the objective of the review is to analyse the role of financial advice and financial service provider registration and dispute resolution in improving financial outcomes for New Zealanders and to assess and update the objectives of, and rationale for, regulatory intervention. The Financial Service Providers Act will also be reviewed. The results of this review will provide recommendations on how these two pieces of legislation could be improved. The legislation, which first came into force in 2011, has been criticised for being complex to implement and resulting in unintended consequences, such as making consumer access to advice more difficult. The Commerce Minister, Paul Goldsmith, has asked for the views of the finance industry, consumers and stakeholders to ensure the review includes feedback from the widest possible range of voices. Goldsmith said in a statement: â&#x20AC;&#x153;It is important that we have the best regulatory system in place, one that facilitates quality financial advice and promotes confident and informed participation of businesses, investors, and consumers.â&#x20AC;? In a release from MBIE, the ministry says regulation was put in place with the intention of promoting sound an deficient delivery of financial adviser services and to encourage public confidence in the professionalism and integrity of advisers. MBIE said: "An effective and well-functioning system of regulation for financial advice is important because a healthy financial advice sector requires a level of public

March 2015

FEATURE

OUR ANALYSIS WILL INCLUDE CONSIDERATION OF CHANGES TO THE REGULATORY ENVIRONMENT, TO CONSUMER NEEDS AND EXPECTATIONS AND TO GOVERNMENT PRIORITIES. trust. This trust was undermined by real and perceived issues with financial advice prior to the implementation of the FA Act. Clients expect a level of care, skill and diligence from financial advisers. Where advisers do not meet these expectations, or where they do not act in the client’s best interests, this can lead to significant financial detriment to those clients. The costs imposed by regulation can make advice more costly and less attractive to consumers, reducing the number of people receiving advice about financial matters." It said since the FAA was introduced, there had been a number of changes in the market such as the introduction of the Financial Markets Conduct Act, the creation of the FMA and the commencement of AML regulation. MBIE said it planned to run the review in an open, transparent way and seek input from stakeholders throughout the process. "We plan to provide a number of different types of opportunities for input into the process, beyond formal consultation processes. We expect that this will include targeted focus groups and workshops, open forums and active engagement through online channels." The initial focus of the review will be to updated MBIE’s understanding of the role of financial advice and financial service provider registration and dispute resolution in improving financial outcomes for New Zealanders. “Our analysis will include consideration of changes to the regulatory environment, to consumer needs and expectations and to government priorities. This understanding will help us to test and update the objectives of, and rationale for, government intervention in this area. Current regulatory settings will then be considered in light of this intervention logic in order to identify key issues for consideration. Our analysis of these issues will focus on areas where the FA Act and FSP Act may not be meeting the needs of consumers and where the benefits of their requirements may not be justifying their costs.This analysis will be informed by the government’s best

practice regulation guidelines.” The Ministry's analysis of objectives, intervention logic and issues will be consulted on in an issues paper due for release in early May. It said this would be an opportunity for interest parties to comment on, correct and challenge the analysis. "We will look to actively participate in a range of discussions on these issues during this time." In August, a report will be given to Goldsmith providing detail on the options identification process. An options paper is expected before the end of the year. "The full operation of both Acts will be considered during the review, with consideration given to the impact of other related legislation. We will seek to understand the impact of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 on the adviser sector and will work with the Ministry of Justice and FMA to ensure that any feedback is fed into any future changes to this Act. If there are areas where this legislation is imposing undue compliance costs on the adviser sector, we may recommend that amendments or exemptions be considered." Strategies to promote financial literacy will not be considered and the review will not propose substantive changes to other financial markets legislation. Liam Mason, FMA’s General Counsel, said the review of the financial advice laws provides an opportunity to find out what is working well in practice and identify areas that could work better for consumers and advisers. “This is a chance to examine whether the current regulation is delivering the right outcomes for New Zealanders. We want to find ways of ensuring that regulation in this area can adapt to the changing ways that consumers and investors access information and advice to help them make decisions about financial products,” said Mason. Law firm Chapman Tripp said the review should look at the boundary between personalised, class and no advice.

www.covernotemag.co.nz

COVER STORY

KIWI MARKET WELL POSITIONED, Lloyd's boss says N

ew Zealand is a good market to do business in despite the upheavals caused by the Christchurch earthquakes, the chairman of global insurance giant Lloyd’s says. John Nelson was in Auckland last month to speak to an IBANZ breakfast meeting. Lloyd’s is now made up of 94 syndicates around the world, managed by 57 managing agents, with more than 200 brokers bringing in business from more than 200 countries and territories. About 60% of the business is direct insurance and 37% is reinsurance. Nelson said New Zealand was an important market for Lloyd’s. Lloyd's reinsures New Zealand giant IAG, which sells under the NZI, Lumley, State and AMI (New Zealand) brands. “We have a long and proud history of writing reinsurance and insurance business from New Zealand and providing specialist coverage for the large and complex risks you face here. We provide cover for some of New Zealand’s greatest assets - your national airline, your education system, your earthquake commission, your thoroughbreds, your Tall Blacks and many of your All Blacks. As chairman of Lloyd’s, I want to reiterate – in

March 2015

person, our total commitment to support the physical recovery of Christchurch following the two earthquakes and also restate to our promise to support, in whatever way we can, the wider impacts the earthquake has had on the New Zealand economy,” he said. Nelson said New Zealand’s insurance market was well-developed and sophisticated. “The New Zealand economy is relatively small but if you look at the degree of insurance around the place, you look at what cover is being provided, you’d say it is a good example to many other countries. One of the great things about the New Zealand market is that it’s well regulated,” he said. In other parts of the world with similar catastrophe risk to New Zealand’s, governments had not paid enough attention to insurance, Nelson said. “This is not the case in New Zealand. Our experience of the New Zealand government is that it has a serious approach to insuring the assets adequately. One of the reasons for this is because the government here sees the value in international reinsurers supporting the industry here and diversifying risk. This is an intelligent approach. It protects the New Zealand economy.” Nelson said the benefits of that approach

could be seen in terms of risk mitigation and diversifying risk outside the country in the aftermath of Christchurch. “The benefits of that are shown through. If you look at the benefits of diversifying risk outside the country and increasing insurance penetration, it does drive economic growth, makes it more sustainable, reduces the loss and the burden on the taxpayer and community and gets recovery back that much more quickly. Over half of New Zealand's $40 billion of economic losses in 2011 following the earthquakes in Christchurch - were picked up by international insurers.” For Lloyd's, 2011 was one of its worst years because of the Japanese tsunami, floods in Thailand and Queensland and the Canterbury earthquakes, Nelson said. Lloyd’s had paid a combined $4.2 billion in reinsurance and insurance claims relating to the Christchurch earthquakes. He expected that figure could eventually reach $5.8 billion. “Of course, we are a prominent reinsurer of the EQC.” Although Nelson said he was aware of local frustrations about the time it had taken to resolve claims in Christchurch, he said progress there was good compared to other parts of the world where there had been similarly catastrophic natural disasters. “It’s

COVER STORY

THE NEW ZEALAND ECONOMY IS RELATIVELY SMALL BUT IF YOU LOOK AT THE DEGREE OF INSURANCE AROUND THE PLACE, YOU'D SAY IT IS A GOOD EXAMPLE TO MANY OTHER COUNTRIES. an example a lot of people are holding up globally as a good way to do it. That may come as a surprise to you.” Things are becoming more competitive in the global insurance market, and this country is no different. Nelson said the insurance market was changing as low interest rates drove inflows of capital. “Because of the returns over recent history you’ve seen in the global insurance market, particularly the reinsurance space, that naturally attracts capital so it’s arbitraging the returns out. That’s what you would expect. We’re seeing this weight of capital in all markets. The competition is high.” But he said there was a lot of growth still to happen in the insurance market worldwide. Lloyd’s expects its addressable market to increase from US$600 billion per annum at present in gross written premiums to US$2

trillion by 2025. “The reason for that being the growth in the emerging growth countries and the level of underinsurance they have.” He said there were two ways to look at the dearth of insurance in emerging markets. “It reminds me of a favourite story: two shoe salesmen go to a desert island. As well as warm sandy beaches, and an aquamarine sea they discover that the entire population goes barefoot. One thinks ‘No market for me here!’ and the other thinks ‘what an opportunity!’ Well I am definitely in the latter camp. The emergence of new markets in the seriously underinsured economies, such as South East Asia, South America, China, Brazil and India, is changing the landscape. But what an opportunity that presents.” As that underinsurance gap closed, the insurance market should grow at a greater pace than GDP in those countries, Nelson

said. “You may say the capital has arrived a bit early,” Nelson said. “But there is plenty of business to be done over the next 10 years.” He said the biggest challenge for the New Zealand insurance market was trying to anticipate and listen to what the market wanted. That might mean different types of cover for new risks, such as cyber and supply chain risks. “That will be a real challenge. It will need people to think out of the box. They’ll need to gain, hopefully from Lloyd’s in particular, the expertise to underwrite some of those risks.” Client feedback had indicated that some of Lloyd’s newest products were becoming its most valuable, Nelson said. “Over the last few years for example, the size of the global market in cyber has leapt from US$850 million gross written premium in 2012 – to an estimated US$2.5 billion last year. Lloyd’s underwriters are reporting a huge increase in cyber submissions and enquiries over the recent years, with some reporting as much as a ten-fold increase. Just as the insurance industry adapted to the industrial revolution, and subsequent technological advances, so, today we have to adjust to the requirements of the newer higher growth economies, the digital revolution, and environmental changes, not least climate change.” A study by Boston Consulting Group commissioned by London Market Group, which includes Lloyd’s, looked at the future the global insurance industry. Nelson said: “The report pitched Australasia in terms of market growth at 10% between 2010-13 – second only to Asia’s growth of 11%. But what this report identified was the key challenges we face as an industry; challenges, which should resonate with those of us not just in Lime St, but also here in Auckland. Two in particular stood out: A preference by customers to buy insurance in their local market; and inevitably the prolonged soft market cycle. I know that competition is fierce here in the New Zealand market - as it is elsewhere. And my advice to deal with this is innovate to compete. Of course it is important to have a connection between capital and understanding of risk; and build up long-term working relationships. But if we are not one step ahead in terms of risks and solutions to those risks then we will lose vital ground.” Nelson said brokers would continue to have an important place in the industry, particularly in dealing with specialist products. www.covernotemag.co.nz

FEATURE

TIME TO OVERHAUL EQC: Dransfield

ew Zealand should use the EQC Act review as a chance to completely rethink the way natural disaster insurance is funded and managed in New Zealand, the boss of one of the country’s major insurers says. The EQC review, led by Treasury, was launched in September 2012 to gauge the Government's disaster contingency fund's future. Its resources were overwhelmed by the Canterbury earthquakes, which caused billions of dollars of damage and killed 185 people. The review was meant to lead to a Cabinet decision in mid-2013 but has been delayed. Vero chief executive Gary Dransfield said his company questioned whether it was sensible for the Government to continue to

March 2015

operate a fully-resourced and funded public insurance agency with the sole mandate of managing claims after a major natural disaster. “The Canterbury earthquakes exposed weaknesses in the current EQC and private insurer hybrid insurance approach,” he said. “The model is systemically flawed when placed under the stress of a massive volume of claims and no consistency in the terms and conditions of policies being managed by both the EQC and private insurers.” He said it added an extra level of complexity to navigate. “Having a government insurer and private insurers responsible for claims from the same customer has made the Canterbury recovery extraordinarily complex and has reduced claims management speed and efficiency. Another major deficiency of the current approach is that it

increases costs and wastes capital for both the Government and private insurers. Those additional costs are ultimately met by taxpayers and customers.” Dransfield suggested there were a number of alternative approaches that could be better for New Zealanders. “I believe there are a number of different models that should be considered for private insurer and government involvement in earthquake insurance. Some could result in a substantially reduced level of Crown involvement in the provision and administration of general insurance, including no involvement in claims management. Others could have a changed level of Crown and private insurer funding. For example, private insurers could write earthquake insurance

FEATURE

up to a set maximum amount and the Crown could act as a virtual reinsurer and meet the costs of claims above a set cap.” Dransfield said the EQC review should be the start of an ongoing reform process to deliver a resilient general insurance sector that would underpin New Zealand’s economic competitiveness. “For Government, it should be an opportunity to consider the best way to reduce the fiscal risk to the Crown for natural disasters, while providing an acceptable level of protection for public and private property.” A Deloitte report, Four Years On: Insurance and the Canterbury Earthquakes, used data made available by Vero relating to the earthquake response. Vero received 31,050 claims as a result of the 2010 and 2011 Canterbury earthquakes, valued at just under $4.8 billion. Dransfield said the report was a timely, independent assessment of Vero’s response to the Canterbury earthquakes. “The Canterbury earthquakes were devastating for so many people in Christchurch, the Canterbury region and New Zealand. The earthquakes had a profound social and economic impact on New Zealand, including death, serious injury, personal financial impact, business disruption, ongoing trauma and displacement. In the context of one of the world’s most complex insurance events in recent times, we have looked hard at what we

THE CANTERBURY EARTHQUAKES EXPOSED WEAKNESSES IN THE CURRENT EQC AND PRIVATE INSURER HYBRID INSURANCE APPROACH. did and what lessons we can learn.” He said customer feedback indicated that a simpler, more efficient process was needed. “In their moment of truth, customers need their insurer to help them get their lives back to normal as quickly as possible.This needs to be the defining principle of New Zealand’s insurance framework. Insurance is vitally important to New Zealand given its high proportion of insurance and property ownership and the risks we face from earthquakes and other natural disasters. We support a dual insurance model but it is important to ensure that the primary aim is to get the best outcomes for New Zealanders.” Vero executive general manager of claims, Jimmy Higgins, said the inefficiency of a dual claims management model had a significant impact on timely resolution of claims for

customers, and it was crucial to get this right for the future. “In a natural disaster, there is no shortage of good intentions by all players involved in disaster recovery - but we need to make sure the system is efficient and works for customers. The question is whether having both an insurance company and EQC managing claims is the right approach. Many insurers, including Vero, have worked hard to compensate for inefficiencies in the operation of New Zealand’s natural disaster insurance model. The current set-up does not always have customers at the centre and there are lessons that have been learned which can be applied to getting better outcomes for New Zealanders.” The report found the more rapidly a claim was paid by insurers, the more rapid was the return to normal economic activity. It also concluded that Vero’s decision in early 2013 to proactively take over the management of claims where the damages were believed to exceed the EQC cap contributed to a reduction in processing times. In the last 18 months the share of finalised residential claims have more than doubled in percentage terms. Dransfield said it was easy to look back and think what might have been

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FEATURE

done better. “I don’t want to come out with the wisdom of hindsight.” But he said it was possible to see now that the dual insurance model needed to be configured differently around claims handling. “I don’t have any answers. I think I know what the questions are around the need to break down the whole claims process to its components and figure out who might do what bits of it in a future scenario and get a more streamlined outcome for customers.” Dransfield said if there had been a different system for claims handling, it might have delivered certainty more quickly for homeowners about what their outcomes would be. “The key customer insight is that people want their lives to get back to as normal as possible as quickly as possible. We need that in an economicallysustainable way for the country.” He said, compared to other seismicallyactive regions around the world, New Zealand had more depth of insurance coverage between the public scheme and the private insurance coverage. “It’s great protection but we need to be able to collectively deliver certainty quicker for homeowners. “ EQC chief executive Ian Simpson welcomes the call for discussion about the issues. “Any opportunity to review how the insurance industry responded in Canterbury and what we could do to improve customers’ experience is well worth it,” he said. “Under the current arrangement, EQC is managing 85% of the domestic property claims arising from the Canterbury earthquakes, while private insurers handle just 15% of them. Were private insurers to lead on all claims, they would have had to complete six times more assessments than they are doing at the moment.” He said EQC regularly talked to insurers about how the load might be shared and

March 2015

WE LEARNED A LOT ABOUT HOW INSURANCE COVER WAS DESIGNED IN THE EARTHQUAKE THAT WE HAD TO IMPROVE FOR THE INDUSTRY AND OUR REINSURERS AS WELL AS FOR CERTAINTY FOR POLICY HOLDERS. how to boost customer certainty and service. “WIn the meantime, EQC has been providing good information – such as geotechnical data or the details of claims expected to go over cap – to insurers to allow them to manage claims as early and seamlessly as possible. We have also been looking at our own lessons learned and are implementing recommendations made by an independent review we sought on how we interact with our customers. Other lessons being considered include changes to EQC’s stable ‘business as usual’ structure to improve readiness for a future event.” Simpson said the review of the Act was a good time for everyone to input their views on what worked and what didn’t. Dransfield said the industry had learnt lessons that would be applied in the event of another disaster. “Even without changes to EQC, were it to happen again we would be better placed in terms of knowing how to streamline processes. Nevertheless, the EQC commissioner and manager are still sitting there with legislation that defines how they should operate, what they should do. The system would still be constrained by the current constructs even with those learnings.” As the industry became more competitive over the past 18 months, some parts seemed to have forgotten some of the lessons learned, he said. “In lots of ways [the lessons] are perhaps less enduring that I

would like, the ways coverage was designed. We learned a lot about how insurance cover was designed in the earthquake that we had to improve for the industry and our reinsurers as well as for certainty for policy holders.” Over time, all parts of the industry, including brokers, had come to terms with what needed to happen, he said. “Early on I think the whole industry, distribution and underwriting, was probably overwhelmed by the compounding scale of the September, February and then June major quakes, so I think it’s fair to say we were all overwhelmed early on, including brokers. Over time we’ve all managed our processes in a way to make it all hang together better for customers. Insurance companies and brokers are much alike in this respect - we don’t run a sizeable organisation anticipating a one-in-1000 or one-in-2500year earthquake such as the September and February ones were. If we did have that many people sitting around waiting for that event, insurance would cost a great deal more in the intervening years between those events than consumers want to pay.” He said the challenge for brokers and underwriters was how to gear up quickly should something like the earthquakes happen again. “We should be heavily criticised if we haven’t learnt from what we’re going through now. We should be able to gear up quicker and better.”

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FEATURE

Increasing cyber-risk increases cyberliability insurance needs in New Zealand

yber-risk will soon cost New Zealand businesses up to half a billion dollars a year and cyber-crime is New Zealand’s thirdmost prevalent crime, according to a new white paper, Safeguarding Business From Cyber Threats, released by Delta Insurance in conjunction with The University of Auckland. Collating a number of independent surveys, the white paper reports that up to 133,000 New Zea-landers fall victim to identity theft each year, and that more than 42% of people have had their em-ployee records compromised. A staggering 86% of New Zealand executives for public amenities organisations (such as water and power) have said that their firms suffered at least one security breach which compromised confidential information over the last year. It also revealed that there was little in the way

March 2015

of evidence around insurance being widely purchased for companies who had cyber-risks or who have suffered a privacy breach. Ian Pollard, managing director of Delta Insurance said: “Most New Zealand companies wrongly assume they are covered under other insurances such as professional indemnity and general liability; however the most relevant threats, especially to SMEs, being data loss and corruption caused by viruses, are not covered under any standard insurance policy.” He said: “Our report also alarmingly found that the most vulnerable companies are often SMEs who don’t believe they are big enough to be targeted. But more often than not, cyber-risks are not just international espionage but include malware, botnets, viruses and even simple human error that can leave them exposed and facing

a massive data restoration bill and huge loss of revenues as a result of a business interruption. As such they aren’t taking adequate steps to ward off the risks before they occur.” The Safeguarding Business From Cyber Threats white paper also examines the gaps in the legal system to protect consumers, particularly where an offshore cloud service provider is compromised and looks at the strategies available to manage those risks. It also considers key risk management tactics that can help SMEs, the dominant segment in the New Zealand economy. “The primary issue with the current legislation is the lack of jurisdiction and resources to deal with offshore cyber and privacy events affecting New Zealand businesses. The law has also not been updated to take into account advances in

FEATURE

THE MOST VULNERABLE COMPANIES ARE OFTEN SMES WHO DON'T BELIEVE THEY ARE BIG ENOUGH TO BE TARGETED.

technology, leaving businesses vulnerable,” said Pollard. Delta Insurance, which offers a cyberinsurance solution, said while the take-up of such insurance was sharply on the rise, many SMEs were still not taking adequate steps to implement cyber-risk management strategies before it’s too late. Pollard said: “We are expecting a doubling in companies seeking cyber-insurance over the next 12 months, but our report also uncovered that only 22% of companies conduct incident response planning, leaving themselves more vulnerable to cyber-attacks.” Delta Insurance believes all companies, especially SMEs, should be asking themselves: • What are the possible points of intrusion from unwanted sources?

• Are my existing security measures enough to address the cyber-risks facing my business? • Have I provided my employees sufficient training to minimise cyber-threats? • If my business is affected by a cyber incident, will it be able to cope with the increased costs and loss of business? “Many companies don’t stop to consider something as simple as malware that can often be dis-guised as anti-virus software, or even that an accidentally dropped USB stick can create untold havoc. It’s not just big businesses who are victims of cyber-crime or privacy breaches. More signif-icant to the New Zealand economy is that smaller businesses are often more vulnerable due to their lack of appropriate risk management strategies,” Pollard said. www.covernotemag.co.nz

FEATURE

FSCL CHANGES SUGGESTED D

DISPUTE SCHEMES EXAMINED A

public consultation process will consider a proposal to make insurance dispute resolution schemes more accessible for homeowners in dispute over insurance claims. Commerce and Consumer Affairs Minister Paul Goldsmith said:“We are considering making dispute resolution schemes more accessible by increasing the compensation cap from $200,000 to $350,000 for property insurance disputes. Under this proposal, dispute resolution schemes will be able to consider cases where the insurer and the customer are seeking to resolve a claim discrepancy of up to $350,000. Currently disputes over $200,000 must be referred to the High Court, which many people may not be able to afford.” He said the dispute resolution schemes were an independent, less formal and cheaper alternative than going through the court system. “This proposed change would enable more effective and faster resolution of issues, and in particular should help move forward some of the unresolved disputes in Canterbury.” Members of the public have until April 9 to make submissions on the proposal. Any resulting increase in the compensation cap would be made in the middle of the year. Anyone with a dispute dating back to August 2010 would be able to take advantage of the change. “The upcoming review of the Financial Advisers Act and Financial Service Providers Act will provide the opportunity to consider the role of the dispute resolution schemes and their jurisdiction more broadly,” Goldsmith said.

DISPUTE RESOLUTION SCHEMES WERE AN INDEPENDENT, LESS FORMAL AND CHEAPER ALTERNATIVE THAN GOING THROUGH THE COURT SYSTEM.

March 2015

isputes resolution scheme FSCL has received a glowing report from an independent review. The Financial Services Providers Act requires approved EDR schemes to have an external review every five years. FSCL has just had its first. It was conducted by Australia-based Foundation for Effective Markets and Governance. FSCL chairman Kenneth Johnston said the board and management were thrilled with the outcome of the review. “The review was extremely thorough and professional, calling on input from our participants, complainants and government and community stakeholders, as well as a range of other sources. To hear independent feedback that our service is ‘a real life-saver’ and ‘we like telling customers we are a member of FSCL and are proud to be one’ is extremely pleasing.” He said the review confirmed FSCL met the relevant legislative requirements and adhered to principles and practices that met international benchmarks. The review has prompted FSCL to make some changes to its processes, though. The reviewers made 15 recommendations, five of which relate to potential changes to FSCL’s terms of reference. The other recommendations relate to initiatives to improve accessibility, enhancing transparency, and operational and governance matters. FSCL will amend its terms of reference to increase compensation for inconvenience from $500 to $2000, after it consults with its financial service provider participants and stakeholders. It will push to pool resources with other EDRs to develop a single tollfree consumer complaint telephone referral facility for all the schemes and talk to the others about joint promotion. It will also seek agreement on standardisation of exit survey questionnaires at the quarterly meeting of EDR schemes and raise the issue of Disputes Tribunals dealing with financial services complaints. FSCL also agreed with a recommendation to give the CEO discretionary power to investigate an issue however that is brought to her attention. But FSCL said it did not agree with the review recommendation that the names of the financial services providers be published alongside the statistics about complaints. There were privacy concerns and because determinations are binding on participants, not consumers, the quid pro quo for the participant was that complaints were investigated in confidence and without publication of the parties’ names. “The Board will review its view on name publication at a later date.” Johnston said he valued getting an independent view that FSCL adhered to natural justice principles with no evidence of bias in investigations or decision making. “I am also heartened by FEMAG’s view that much of the explanation for our significant growth since we started operating in 2010 is due to confidence amongst financial service providers in the quality and cost efficiency of our service.” Among other aspects of the scheme the reviewers were asked to look at were whether FSCL was disadvantaged by not using the name “ombudsman” and to assess FSCL’s performance against the requirement to resolve complaints in a co-operative, efficient, timely manner. Johnston said it was pleasing that the report found it to be an effective scheme, that was well-governed and delivering high-quality services efficiently.

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Insurance for businesses, families and individuals | www.acegroup.com/nz

What does it mean to be ACE insured?

Insurance for businesses, families and individuals | acegroup.com

We work with local experts who are also part of a global network. We count on the team What does it mean to be ACE insured? at ACE to go the extra mile, from designing a compliant multinational programme to taking good care of ourWepeople when theexperts unexpected Weofcan get on with growing our business, work with local who arestrikes. also part a global network. We count protectedon bythe ACEteam Group, onetoofgothe and from strongest general insurersmultinational in the world. at ACE thelargest extra mile, designing a compliant programme to taking good care of our people when the unexpected strikes. We can get on with growing our business, protected by one of the largest and strongest insurers in the world. ©2015 ACE Group. Coverages underwritten by one or more companies of the ACE Group. Not all coverages available in all jurisdictions. ACE®, ACE logo®, and ACE insured are trademarks of ACE Limited. © 2013 ACE Group. Coverages underwritten by one or more of the ACE Group of Companies. Not all coverages available in all jurisdictions. ACE®, ACE logo®, and ACE insured are trademarks of ACE Limited.

CASE STUDY

Address change causes problems Jo’s insurance company sent warning letters to an incorrect address. Her financial adviser was not obligated to inform her of the possible impending cancellation of the policy. A copy was sent to ABC. XYZ also sent ABC a series of reports, showing that Jo’s premiums were in arrears. In June 2009, XYZ wrote to Jo at the incorrect address, stating that it had cancelled the policy, because the premium had not been paid. XYZ also advised ABC of the cancellation. In early 2012, Jo discovered the policy had been cancelled. She subsequently underwent two knee replacement surgeries. XYZ refused to reinstate the policy and provide cover for the surgeries. Jo made a complaint against ABC, stating that it failed in its duty of care to her, which resulted in her incurring the cost of the surgeries. BACKGROUND In 2006, Jo arranged health insurance with XYZ, with the help of a financial adviser, ABC. Jo paid her monthly premiums by credit card. Two years later, Jo notified XYZ of her change of address to 3 Smith Street. XYZ incorrectly recorded the address as 30 Smith Street. In February 2009, XYZ wrote to Jo at the incorrect address, noting that her credit card was due to expire and asking for new credit card details. XYZ also provided ABC with a copy. Soon after, XYZ wrote to Jo at the incorrect address, advising that the premium was overdue.

March 2015

ASSESSMENT Jo believed ABC owed her a duty, to take all reasonable steps to inform her that the policy might be cancelled due to her credit card expiring. Jo also believed ABC should have contacted her, when it was notified that the premiums were overdue and also when the policy was cancelled. Having carefully considered the law in this area, we did not believe ABC’s duty of care to Jo extended to this degree. Even if it did, for the following reasons, we believed ABC’s actions were reasonable in the circumstances:

• Jo chose to pay the premiums by credit card and it is the insured’s responsibility to make sure the premiums are paid on time. • ABC was not under a duty to warn Jo about the potential problems caused when a credit card expires. • The policy clearly stated that cover would end if Jo failed to pay the premium within 90 days of the due date. • Jo was aware of the need to provide XYZ with up-to-date credit card details, because XYZ had advised her of this and she had acted on this advice in the past, when another credit card expired. • There was no evidence that Jo had provided ABC with her new address. There was no evidence that ABC knew XYZ was sending the notices to an incorrect address. It was unfortunate that XYZ sent the notices to the incorrect address; however, ABC was not responsible for XYZ’s mistake. ABC was not liable to reimburse Jo for the cost of the surgeries. Complaint not upheld.

CASE STUDY

Holiday interrupted THE FLOOD Claude and Clementine went on a Danube river cruise. Heavy rain on the sixth day of the cruise caused the river water level to rise rapidly. The boat on which Claude and Clementine were travelling could not sail further up the river. Claude and Clementine were stranded. For five days Claude and Clementine stayed on the boat. The tour company operating the river cruise offered alternative tours to those originally booked on Claude and Clementine’s itinerary. Claude and Clementine went on two of the seven tours offered. Unfortunately the tour company did not offer Claude and Clementine a refund under the tour’s standard terms. THE INSURANCE CLAIM Claude and Clementine returned to New Zealand and claimed $9255 : the full cost of the number of days they were stranded. Claude and Clementine’s claim was declined by their insurance company because their loss was a loss of enjoyment, which was not covered by the policy. Claude and Clementine argued that their loss was a loss of value:They were delivered a service of a wholly different nature to the one they paid for. The parties could not agree on a resolution and the complaint was referred to FSCL. FSCL’S REVIEW Unfortunately FSCL was unable to resolve the complaint by agreement.

The parties asked FSCL’s CEO to give her recommendation on the complaint. The insurance policy wording covered lost deposits for travel paid in advance by Claude and Clementine if their journey was cancelled or shortened as a result of unexpected circumstances. The insurance company argued that the bad weather and subsequent flooding was not “unexpected”, because Claude and Clementine could have anticipated bad weather. FSCL’s CEO did not accept this argument. Who would pay $18,000 to go on a cruise which they expected would be significantly disrupted? FSCL’s CEO accepted that Claude and Clementine suffered a loss. The alternative tours offered were of a lesser quality to the original itinerary. However, there was no evidence of the difference in cost between the original tours and the amended tours. Without this evidence, FSCL’s CEO could not conclude that Claude and Clementine had suffered a financial loss or a “loss of deposits” that was required for cover under the policy wording. Claude and Clementine had undoubtedly suffered a loss of enjoyment. However, loss of enjoyment was specifically excluded from cover under the policy wording. RESULT Unfortunately for Claude and Clementine, FSCL could not uphold the complaint.

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CASE STUDY

Restrictions on lessor recovering from the lessee still not well understood By Crossley Gates, DLA Phillips Fox

t has now been more than seven years since the Property Law Act 2007 came into force. Sections 268 to 272 of that Act applied new restrictions on the ability of a lessor (or a lessor’s subrogated insurer) to recover from a lessee when the lessee causes damage to the lessor’s premises. However, it seems from the continued number of queries I receive about the application of sections 268 to 272 from brokers and insurers that the law change is still not well understood. Soon after the law change came into effect, I set out in this column a summary of how the law change affected lessors and lessees (and as a consequence, insurers of lessor’s property and insurers of lessee’s liability). I have decided to set out a further practical guide, emphasising some of the misunderstandings that still exist. The underlying principle behind the reforms is to make the lessor’s insurance available for the benefit of the lessee, as though the lessee is an insured under that policy. Once this is understood, the reforms become easier to

follow. One of the effects of the reforms is to render worthless what the lease says about the lessor being able to recover from the lessee for damage caused to the lessor's premises. The Act expressly overrides anything in the lease to the contrary (section 272). This means the Act had retrospective effect to existing leases. It appears many lessors still do not appreciate this. WHEN DO SECTIONS 268 TO 272 APPLY? They apply if the leased premises are damaged or destroyed by: a) Fire, flood, explosion, lightning, storm, earthquake or volcanic activity, or b) Any other peril covered under the landlord's policy over the premises. Note, this means that a) applies whether the lessor has arranged cover for these perils or not. This would mean that in the unlikely event that a lessor did not insure against these perils, not only does the lessor have no insurance cover, but also, the lessor cannot recover from the lessee if the lessee negligently caused the damage by way of a fire. WHO DO THE SECTIONS APPLY TO? They apply to not only the lessee, but also any person for whose acts or omissions the lessee is responsible (e.g. an employee of the lessee). This was confirmed by the Court of Appeal decision of Sheehan v Watson [2011] NZLR 314. WHAT IS THE EFFECT OF THE SECTIONS WHEN THEY APPLY? The lessee cannot be liable for the cost of making good damage to or destruction of the premises, even although this was caused by or contributed to by the negligence of the lessee. ANY EXCEPTIONS? Yes, this does not apply if the lessee intentionally caused the damage or destruction

March 2015

or it resulted from an act or omission of the lessee which constitutes an imprisonable offence. WHAT IF THE LESSOR'S INSURANCE TERMS ARE AFFECTED BY THE DAMAGE OR DESTRUCTION CAUSED BY A NEGLIGENT LESSEE? Although the lessor cannot recover from the lessee, if the damage or destruction results in prejudice to the lessor in retaining insurance cover on reasonable terms, the lessor can terminate the lease on reasonable notice. Alternatively, if the damage or destruction results in the premium increasing or the deductible increasing, these extra costs can be recovered from the lessee. CAN THE LESSOR AND LESSEE CONTRACT OUT OF THE SECTIONS? Yes, but only if the lessor has not insured the premises at all or has not fully insured the premises, and the parties acknowledge this in the lease and agree the lessee is to be liable to this extent. It is still unclear whether the reference to the premises not being “fully insured” is referring only to underinsurance or to a voluntary deductible as well. I believe it is likely to be referring to underinsurance only. If I am correct, this means the lessor can never recover a deductible from the lessee (voluntary or otherwise) when the sections apply. ANYTHING ELSE? It was thought, until recently, that the Property Law Act 2007 regime did not apply to residential tenancies governed by the Residential Tenancies Act 1986. However, in a recent High Court decision (Hollier v Osaki) the Court held it did. I believe this decision is being appealed to the Court of Appeal and I await the appeal with interest.

Professional

Professional Development: Professional IQ College

College

Principal’s Update Have you become a wind-up toy in your career?

o you wake up each day go to work do what you need to do, come home and wait for the next day? Are you stuck in that monotonous routine, to the point of feeling brain dead or just going through the motions? With renewal time coming up for many of you, do you just go through the motions there too? Or do you really look at your clients' programme and work with them to ensure they really do have the best insurance programme they can for the best value? Going through the motions is easy but in doing this your brain has transformed itself into dead matter that no longer strives for success or higher goals or vision. For your clients you may not be seen as value for money. So challenge yourself to be better than the next guy and better than the online options by providing quality customer centric service that your clients will value. One of the challenges for the College today is to provide you with the best value professional development programme that doesn’t leave you brain dead and challenges you to learn something new while not stinging your pocket too much! So as a College we are always trying to be innovative and try new things. This challenges us to think outside the square and to anticipate what your needs maybe. Our new

programmes coming shortly and those already here hopefully do that. So my challenge to you is to get out of the wind-up toy mode and challenge yourself to do it differently. Develop a training plan for you or your people. Enrol yourself or your team on one of our specialist broker certificates or challenge yourself to the new level 5 NZ Certificate. All new enrolments in the full qualification specialising in the General Risk Insurance strand will receive a free copy of an executives Guide to Insurance and Risk Management by Graeme Berwick. Terms and conditions apply. Challenge yourself to be more ethical and more professional through enrolling in one of our programmes. I also challenge you to call me and discuss what we can do for you. We are after all your College and are there for you, so support your College and support yourselves, to be the best that you can be through the College programmes.

hese people have completed their qualifications in the last three months. Congratulations and well done. We have also had record 2079 credits achieved from Dec – March so well done to all of you who have been working towards your full qualifications. Will this be your year to finish your qualification?

NATIONAL CERTIFICATE LEVEL 5 COMPLETIONS: CraigSeton Daniel Lee DavidWing John Campbell Ranjeeta Nand Rouen van Eck Susan Lyall

Mortgage Link Manawatu Allfinanz Risk (T/A CFS RIsk Services Ltd) Rothbury Group Ltd Cii Group Ltd Crombie Lockwood (NZ) Ltd Cii Group Ltd

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Professional

Professional Development: Professional IQ College

College

What is a training plan? Do I need a training plan? A

s a professional adviser in any part of the financial services sector you need to be continuously improving your level of knowledge and service to your clients. Some associations and the regulator, may require you to do so many hours of professional development a year. This is not only beneficial to you but also to your clients. It helps show competency and professionalism to your clients. Here at Professional IQ College we believe everyone should plan their training for the year either at an individual level or at an organisational level. One way of doing this is to add to your professional status by (for IBANZ members) completing the requirements for PIB, QIB or CIB. Having a training plan allows you to schedule and plan your professional development throughout the year. This applies whether you are an RFA or an AFA. AFAs are obligated to complete 30 hours of professional development over two years. It probably won’t be long until the RFAs have this imposed on them too. As a professional adviser or broker you should welcome the increase in professionalism, and see the competitive advantage in having your knowledge and skills recognised. To help insurance brokers and broker support staff, we have developed two certificates that do just that. Both the broker support and the insurance broking certificate add to your professionalism by giving you independent knowledge in the products and services you advise on every day. The first step in developing a training plan is to analyse what gaps you have in your knowledge- is it regulatory, is it product knowledge, what soft skills or business skills do I need? Do I need an NZQA qualification or a professional development certificate? This is called a gap analysis. Decide how you want to train - do you want a face-to-face workshop, will webinars work for you, are you disciplined enough to complete a selfpaced online programme?

The next step is to look at the courses or programmes available. Some may be provided by your employer, some may be provided through your membership organisation or you can look at external providers like Professional IQ College. No matter what professional development or training you require, it helps to have a professional put together your training plan. At Professional IQ College we have, among us, many years of experience in putting together training plans, across a range of professions. So email lesley@profesionaliq.co.nz or sylvia@professionaliq. co.nz to learn how simple it is.

Professional IQ College announces enrolment for NZ Certificate of Financial Services Level 5

inally the reviewed NZ Certificate in Financial Services Level 5 is ready to be rolled out to the financial services industries. The new qualification is much more straightforward in its structure than the National Certificate was. Students now complete the Core Knowledge module and then their specialised module. The learning outcomes are more focused on the sector you work in rather than trying to fit everyone into the same box, which didn’t work for insurance brokers especially or any RFA. For those wanting AFA status it is likely that the Code Committee will require you to complete the Core Knowledge module, the Financial Advice module and the Investment module. This reflects the current Code 16 48

March 2015 September/October 2014

requirements for AFA’s who aren’t restricted on the financial advice they can give. Insurance brokers no longer have to set B and C. So for RFAs the new qualification is much simpler For Insurance Brokers: Core knowledge + Insurance General Module For Life and Health Risk Advisers: Core knowledge + Personal risk (Life and Health) Module For Mortgage Brokers; Core Knowledge + Residential Property Lending Module For Financial Planners and Investment Advisers: Core Knowledge + Financial Advice Module + Investment Module. (AFA Status) Professional IQ College will have a range of transition options available for those who are part way through the current National

Certificate Level 5, including the completion of the previous qualification, or transitioning to the new New Zealand Certificate. Professional IQ College delivers all programmes online with the option of specialised support workshops on request and numbers dependent (at a small extra fee). The course study guides are easy to read, use real case studies and have knowledge quizzes throughout to check your learning. Our student liaison manager Sylvia Heywood will be there to support you through each programme. Please call Lesley Southwick on 09 3061735 or Sylvia Heywood on 09 3061737 or email info@professionaliq.co.nz

Sales of insurance, home loans and KiwiSaver under the FMA spotlight By Russell Hutchinson, Chatswoof Consulting

Brokers take qualifications seriously

or many insurance brokers, the National Certificate in Financial Services – Level 5, doesn’t mean very much. Most brokers still rely on the old ANZIIF qualifications which unfortunately have no corresponding relevance with the new qualifications for financial services administered by NZQA. This year the government is undertaking a review of the Financial Advisers Act 2008 and one of the areas they will be looking at is education and competency standards for individuals in the financial services industry, including insurance brokers. Insurance Advisernet (IANZ) has been encouraging its members for some time to get qualified before the government forces them to be and resources become scarce. With several AFAs qualified early on, a number of IANZs RFAs followed suit and last year the entire office of Meridian General Brokers in Wellington achieved their Level 5 qualification. Bernie Kane, principal of MGB, says: “Continuing professional development is an important part of our service offering. With this qualification we continue to demonstrate to our clients that we are committed to providing the very best in advice-based service.” More recently, Cii Group in Dunedin have also successfully completed Level 5, as profiled in PIQ’s newsletter. John Campbell, principal of Cii, says: “Completing the certificate adds to the professionalism I can show clients and this helps to build their trust and confidence in me as their broker.” David Crawford, Director of IANZ, says: “We have quite a number of brokers part-way through Level 5 and also Level 4 which is more suited to support staff. Professionalism is a key focus of our group as we move towards an advice model to further differentiate our brokers from the price takers. We are committed to ensuring all of our clientfacing RFA’s are qualified ahead of the government enforcing it – we are leaders, not followers.”

rokers and advisers need to be particularly careful with compliance around insurance, home loans, and KiwiSaver, for two reasons: In the recently-released Statement of Intent, the FMA highlighted replacement business as a focus for the coming year. In speeches, FMA officials, have highlighted the issue of different types of advisers – especially RFA and QFE advisers – causing confusion among potential clients and they have called for simplification to be considered in the review of the Financial Advisers Act review which is being conducted this year. The replacement business issue was triggered by consumer and industry complaints about insurance and KiwiSaver sales processes when a new product is taken out and an existing one cancelled (or a transfer is made from it). There is a concern that the guidance on comparison, in the case of insurance replacements, is not being applied. That guidance requires that either a comparison is being made, or that no comparison is made and the consumer is warned of the risks of replacement where no comparison is being made. Listening to some of the frequent complaints in this area there are clearly some advisers – some working in otherwise well-supervised networks – that are trying to have it both ways: they are happy to compare their price for new cover with the price of the existing insurance but they do not want to do a full comparison. They claim that they are not advising on replacement or disposal of the existing product but are not giving the warning about the risks of replacement without a comparison. Re-reading the guidance note it appears clear that either a comparison is done, or a warning is given. It’s a choice between those two. Given the FMA’s intention to focus on this area you would be wise to revisit your processes and ensure you are either making a comparison or providing a warning. The second issue of confusion between adviser types arises when, for example, an RFA completes the advice process on insurance and proceeds to offer a no-advice sales process for KiwiSaver. Without a clear distinction between the services this change of process is not obvious to the client. They are talking with a financial adviser and due to the context are apt to think that they are still receiving “advice” when in fact the adviser may believe that they are only giving “information”. The law is clear about “misleading” or “confusing” behaviour. Complaints about sales in such a context would be more likely to succeed. You should probably consider this when looking at the process for ‘add-on’ sales. That’s why insurance and home loans in particular are likely to get more regulatory focus in 2015 than they have seen before. Russell Hutchinson Director, Chatswood Consulting Limited, www.chatswood.co.nz

www.covernotemag.co.nz

Professional

Professional Development: Professional IQ College

College

DATE

TITLE

PRESENTER

WHERE

TIME

COURSE DESCRIPTION

Under insurance and sum insured issues

Virginia Douglas

Auckland & webinar

9.30 10.30

Recently, the ISO Scheme has investigated a number of complaints where clients have been under-insured. As the industry moves towards sum-insured cover, under-insurance could become a more common complaint. Many clients do not fully understand how this change impacts on their insurance cover and the factors they should consider when determining their sum insured

Liability to pay reparation under the Sentencing Act 2014: the "ACC top up"

Steve Keale

Auckland & webinar

9.30-10.30

The Sentencing Amendment Act 2014 provides for the Court to impose a reparation order on a convicted defendant where the victim experiences a shortfall in ACC cover for bodily injury. This will increase the scope of situations where insurers indemnify policyholders in respect of reparation payments at the time of sentencing. This is a significant development in the law which many people in the insurance industry are following closely.

World of Insurance

Kevin Allen

Auckland & webinar

1.00-2.30

Knowing the origins of insurance and how its evolved over time can be helpful to the insurance professional because it gives context for all we do. The World of Insurance workshop goes futher, however. It takes the participants to the Christchurch earthquake and examines the huge impact it had on the global insurance market

Brokers Duty of Care - Updated for 2015!

Andrew Hooker

Auckland & webinar

9.30-10.30

With increased regulation and controls on the brokering industry it is important to keep up to speed on your obligations and duties to your customers, and other people. The consequences of failures to comply can be very serious, and the Christchurch earthquakes have shown that some brokers have failed to meet these standards.

Dealing with Difficult People

Virginia Douglas

Auckland & webinar

9.30 10.30

This webinar looks at how to deal with the very small group of “difficult customers”. Share the ISO Scheme’s expertise acquired over 20 years (handling over 42,000 complaint enquiries and investigating nearly 5,000 complaints) in dealing with disappointed and frustrated consumers.

Setting up for LinkedIn

Tony Vidler

Christchurch

9.30-12.00

Be competent, confident and get cracking with the No 1 Business Networking tool today. “You need to learn Linkedin because there are 1,106,518 NZ LinkedIn users. What are the chances your prospects are on there…and checking YOU out on Linkedin? In this Masterclass you will bring your laptop and work on your own profile

Build me an Insurance Programme in the Rural Sector

Kevin Allen

Whangarei

9.30am 11.30am

Come along and in a team environment construct a suitable insurance programme for your rural sector client

Setting up for LinkedIn

Tony Vidler

Palmerston North

9.30-12.00

Principals of Risk Management

Tony Rowe

Auckland & webinar

9.30-11.00

The course starts by examining the statement: ‘The success of a business is built on understanding and managing risk’ and continues from there. You will gain an understanding of what constitutes business risk, the relationship of business risk to insurance and your role as a partner to the business

Contract Works - Residential & Small Commercial

Tony Rowe

Auckland & webinar

1.00-2.30

This course covers both the theory and practice of Contract Works Insurance and provides a broad but detailed overview of the industry and its component parts, players and products.

Setting up for LinkedIn

Tony Vidler

New Plymouth

9.30-12.00

Ethics

Ngaire Newland

Auckland & webinar

9.30-11.00

Gain a clear understanding of some of the ethical challenges in the insurance/financial advisors industry. Work through practical scenarios using established ethical decision making models and refresh your knowledge of the code of ethic

Setting up for LinkedIn

Tony Vidler

Auckland

9.30-12.00

Build me an Insurance Programme in the Transport Sector

Kevin Allen

Hamilton

1.00-4.00

Learn through practical experience in this interactive workshop and build an insurance programme for a very diverse freighting, general cartage, and logistics business.

Setting up for LinkedIn

Tony Vidler

Wellington

9.30-12.00

Psychology of Selling

Tony Vidler

Auckland & webinar

9.30 10.30

We de-construct the sales process and re-build using knowledge of psychology and learning styles to have a more effective sales process

Behaving Ethically - How, Why and When

David Weston

Auckland & webinar

Strategic Risk Management Planning for Clients

Tony Vidler

Balclutha

MARCH

APRIL

Privacy, Ethics & Disclosure. What do they have in common?

MAY 7

March 2015

9.30-12.00

Learn how to behave ethically within the regulatory framework.

Strategic Risk Management Planning for Clients

Tony Vidler

Christchurch

9.30-12.00

Uncover more client needs and business opportunities with a Risk Management strategy model. It will lead to higher engagement with other professionals as Centres of Influence too.

Build me an Insurance Programme in the Transport Sector

Kevin Allen

Balclutha

10.00-1.00

Learn through practical experience in this interactive workshop and build an insurance programme for a very diverse freighting, general cartage, and logistics business.

Strategic Risk Management Planning for Clients

Tony Vidler

Palmerston North

9.30-12.00

Uncover more client needs and business opportunities with a Risk Management strategy model. It will lead to higher engagement with other professionals as Centres of Influence too.

Personal Productivity

Ngaire Newland

Auckland & webinar

9.30-11.00

Working independently can bring up additional challenges to productivity. Learn how to self motivate, separate work from home, overcome procrastination and perfectionism.

Build me an Insurance Programme in the Transport Sector

Kevin Allen

Christchurch

9.30-12.30

Learn through practical experience in this interactive workshop and build an insurance programme for a very diverse freighting, general cartage, and logistics business.

Business Interruption

Andrew Holdcroft

Auckland & webinar

9.30 10.30

Content yet to be confirmed.

When clients donâ&#x20AC;&#x2122;t tell the truth â&#x20AC;&#x201C; fraud, misstatement and false statement in insurance claims

Virginia Douglas

Auckland & webinar

9.30 10.30

The consequences of clients not telling the truth to their insurer when they make a claim are serious, but many clients do not appreciate this. The ISO Scheme has investigated a number of complaints where consumers have jeopardised their claim by not telling the truth. Find out how you can help clients avoid these issues. The webinar will look at fraud, misstatement and false statement.

Build Me an Insurance Programme

Kevin Allen

Auckland

9.30-12.30

What should an insurance programme look like? What types of Cover, whose policies best suit the client situation, how do you know what is best for the client? This interactive workshop starts with a clean sheet of paper and builds an insurance programme from scratch for a given situation. Working in groups you will learn what cover is appropriate for the situation. So come prepared to discuss and learn whether you are a junior or intermediate broker this workshop will help accelerate your career

Strategic Risk Management Planning for Clients

Tony Vidler

Hamilton

9.30-12.00

Uncover more client needs and business opportunities with a Risk Management strategy model. It will lead to higher engagement with other professionals as Centres of Influence too.

How to best settle your client's claim and not be second best

Leon Briggs

Wellington

9.30 11.00

This session will look at the claim process, including material damage and business interruption, from a Loss Adjuster's perspective

Strategic Risk Management Planning for Clients

Tony Vidler

Auckland

9.30-12.00

Uncover more client needs and business opportunities with a Risk Management strategy model. It will lead to higher engagement with other professionals as Centres of Influence too.

Psychology of Selling

Tony Vidler

Auckland & webinar

9.30 10.30

We de-construct the sales process and re-build using knowledge of psychology and learning styles to have a more effective sales process

Behaving Ethically - How, Why and When

David Weston

Auckland & webinar

What does 'replacement' mean?

Virginia Douglas

Auckland & webinar

9.30 10.30

For clients facing a significant loss there is often no way of putting them back into the position they were preclaim. However, many times issues emerge about what a replacement or replacement value mean when the claim is being settled. Looking at complaints considered by the ISO Scheme, this webinar will look at a range of Fire & General claims where the issue of replacement was central to finalise the claim.

How to best settle your client's claim and not be second best

Leon Briggs

Wellington

9.30 11.00

This session will look at the commercial claim process, including material damage and business interruption, from a Loss Adjuster's perspective. It will explore, in an interactive format.

Business Writing

Ngaire Newland

Auckland & webinar

9.30-12.30

Report writing can be made easier than you ever thought it could be - all you need are the skills to develop the ability that you already possess (but maybe don't know about). If you have to write reports, minutes and executive summaries, this workshop will give you hints and tips that inspire the confidence you need

How to best settle your client's claim and not be second best

Leon Briggs

Christchurch

9.30 11.00

This session will look at the commercial claim process, including material damage and business interruption, from a Loss Adjuster's perspective. It will explore, in an interactive format.

How to best settle your client's claim and not be second best

Leon Briggs

Dunedin

9.30 11.00

This session will look at the commercial claim process, including material damage and business interruption, from a Loss Adjuster's perspective. It will explore, in an interactive format.

Privacy, Ethics & Disclosure. What do they have in common?

JUNE

www.covernotemag.co.nz

CONTACTS: IBANZ CORPORATE COMPANY LIST

PIQ BOARD

IBANZ BOARD

Richard Russell

Roger Abel Managing Director Rothbury Group Limited PO Box 1596 Shortland St, Auckland 1140 Mob: 021 852 230 roger.abel@rothbury.co.nz

(Chair) Branch Director, Crombie Lockwood NZ Ltd

PO Box 34, Invercargill 9840 Tel: 03 218 8994 Fax: 03 218 8996 Mob: 027 258 8433 richard.russell@crombie.co.nz Ruth Steele Brokerage Manager, Seneca Group Ltd

PO Box 305415, Triton Plaza Auckland 0757 Tel: 09 476 1670 Fax: 09 4761679 Mob: 021 590 698 ruth@senecagroup.co.nz Gary Young CEO IBANZ

PO Box 7053, Wellesley Street Auckland 1141 DDI: 09 306 1734 Fax: 09 307 0960 Mob: 027 543 0650 gary@ibanz.co.nz Andrew Gunn Consultant CIFA Training Manager

Wellington Ph: 04 815 8007 andrew@ifa.org.nz Bruce Howat CEO World Skills NZ

Auckland Ph: 021 671 566 bruce@thethinkingcompany.co.nz Rod Severn

Tony Bridgman (Vice President) Executive Director Marsh Ltd PO Box 2221 Auckland 1140 Tel: 09 928 3015 Fax: 09 309 9891 Mob: 021 873 399 tony.j.bridgman@marsh.com

Fax: 03 358 3343 Mob: 021 909 148 bucklec@willis.com

Triton Plaza North Shore City 0757 Tel: 09 477 0277 Fax: 09 478 0277 Mob: 021 707 025 nick.cressey@ibi.co.nz

Stuart Speirs Director Abbott Group PO Box 3086 Christchurch 8011 Tel: 03 366 7536 Fax: 03 379 5395 Mob: 021 358341

Allan Daly Managing Director Avon Insurance Brokers PO Box 3923 Christchurch Mail Centre Christchurch 8140 Tel: 03 3710301 Fax: 03 3666589 Mob: 0275 358128 allan@avoninsurance.co.nz

David Crawford Chief Executive Officer Insurance Advisernet NZ Ltd PO Box 74557 Market Road Auckland 1051 Tel: 09 926 2062 Fax: 09 524 2226 Mob: 021 905 537 davidc@insuranceadvisernet. co.nz

Duane Duggan (President) Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West Auckland Tel: 09 3574805 Fax: 09 623 9901 Mob: 021 833 286 duane.duggan@crombielock wood.co.nz

Nick Cressey (Immediate Past President) Director Aon New Zealand PO Box 305019

Craig Buckle Willis New Zealand Ltd PO Box 369 Auckland 1140 Tel: 09 356 9368

Jason Smith Managing Director Property & Commercial Insurance Brokers PO Box 4 Feilding 4740 Tel: 06 323 8820 Fax: 06 323 8872 Mob: 027 293 8724 jase@pcinsurance.co.nz Ruth Steele (Vice President) Brokerage Manager Seneca Group Ltd PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Fax: 09 4761679 Mob: 021 590 698 ruth@senecagroup.co.nz

PAA CEO

Auckland Ph: 09 600 5171 rod.severn@paa.co.nz

WANT YOUR VERY OWN COPY OF

COVERNOTE?

STAFF Gary Young CEO DDI: 09 306 1734 Mob: 027 543 0650 gary@ibanz.co.nz Robyn Gosden Finance & Office Manager DDI: 09 306 1733 Mob: 027 275 2477 robyn@ibanz.co.nz Karen Scard Membership & Secretarial Support DDI: 09 306 1738 karen@ibanz.co.nz Steve Wardley Technical Support DDI: 09 306 1736 steve@ibanz.co.nz Lesley Southwick Principal Professional IQ College DDI: 09 306 1735 Mob: 027 459 9804 lesley@professionaliq.co.nz 52

March 2015

Sylvia Hegwood Student Liaison & Compliance Manager DDI: 09 306 1737 Mob: 021 152 7174 sylvia@professionaliq.co.nz

IBANZ Physical address: Level Five, 280 Queen Street, Auckland 1010 Mailing address: PO Box 7053, Wellesley Street, Auckland 1141 Toll free: 0800 306 173 Website: www.ibanz.co.nz

Each issue of CoverNote is packed with vital information, news, commentry and advise for the insurance industry from experts within the industry. To keep abreast with all the issues affecting New Zealand’s insurance broking industry just email robyn@ibanz.co.nz TO ADVERTISE... Contact Robert Johnson on: e-Mail: robert@benefitz.co.nz Phone: 09-477 4702 Mobile: 0274-970-712 CoverNote is published quarterly by IBANZ, the Insurance Brokers Association of New Zealand. All correspondence should be addressed to: CoverNote, PO Box 33-1630 Takapuna, North Shore City, Auckland.

Next issue is due out: MARCH 2015

LLOYD'S BOS S PRAISES KIW

I MARKET

March 2015 The professionals’

magazine from

IBANZ

WHEN WAS TH E LAST TIME YO U SAT DOWN TO STUD Y? Brokers' CPD opt and explained ions outlined www.ibanz.co.nz

CONTACTS: IBANZ CORPORATE COMPANY LIST

IBANZ CORPORATE COMPANY LIST Abbott Group Adams Trimmer Insurance 1992 Ltd Adams Trimmer Nauman Insurance Ltd Addex Ltd Advice First Limited Affiliated Insurance Brokers Ltd AJIB Insurance Brokers Ltd Albany Insurance Services Ltd Allfinanz Risk (T/A CFS RIsk Services Ltd) Andrew Scragg & Associates AMP Services (NZ) Ltd Aon New Zealand Apex General Ltd API Insurance Ascot Insurance Brokers Ltd Atlas Insurance Brokers Ltd Austinsure Ltd Avon Insurance Brokers Baileys Insurance Brokers Ltd Barley Insurances Limited Bay Insurance Brokers Ltd Benson Insurance Brokers Ltd Benton & Power Ltd Bill Boyd & Associates Ltd Boston Marks Group Ltd Bridges Insurance Services Limited Broker Direct Services Ltd BrokerWeb Risk Services (Auckland) Limited BrokerWeb Risk Services (Bay of Plenty) Ltd BrokerWeb Risk Services (Hawkes Bay) Ltd BrokerWeb Risk Services (Manawatu) Ltd BrokerWeb Risk Services (Northland) Ltd BrokerWeb Risk Services (Southern) Ltd Card Marketing International Ltd Cartwright General Insurance Limited CBA Insurances Limited Certus Insurance Brokers NZ Ltd Commercial & Rural Insurance Brokers Ltd Crombie Lockwood (NZ) Ltd Dawson Ins. Brokers (Whakatane) Ltd Dawson Insurance Brokers (Rotorua) Ltd Edward Ruys & Co Ltd Elders Insurance Limited Emerre & Hathaway Insurances Limited Executive Insurance Services Ltd FundAGroup Insurance Brokers Limited Future Agency Co. NZ Ltd Gary Jamieson Insurance Brokers Ltd Glenn Stone Insurance Limited Graeme England Insurance Services Ltd Grayson & Associates Ltd Gregan & Company Ltd Harden & Hart Insurances Ltd Hawke’s Bay Insurances Ltd Hazlett Rural Insurance Limited Hugh Vercoe and Associates Ltd Hurford Parker Insurance Brokers Ltd Hutchison Rodway Ltd I C Frith (NZ) Ltd i2i Insurance Brokers Ltd Ian K Everett Ltd ICIB Limited ILG Insurance Brokers Inbroke Ltd Ingerson Insurances Ltd Insite Insurance Insurance Advisernet NZ Ltd Insurance Brokers Alliance Ltd Insurance Design Insurance People (Fire & General) Limited

Christchurch Whangarei Dargaville North Shore City Wellington Wellington Lower Hutt Albany Village Lower Hutt Manukau Auckland Auckland Auckland Manukau Whangarei Christchurch North Shore City Christchurch Auckland Waitakere Tauranga Christchurch Auckland Palmerston North Auckland Hamilton Christchurch Auckland Tauranga Napier Palmerston North Kerikeri Christchurch Wellington Ashburton Tauranga Auckland Alexandra Auckland Whakatane Rotorua Hamilton NULL Gisborne Auckland Auckland Auckland Thames Waitakere Auckland Auckland Papakura Auckland Napier Christchurch Morrinsville Hastings Auckland Auckland Wellington Auckland Auckland North Shore City Auckland Wellington Pukekohe Auckland Invercargill Warkworth Auckland

JLT Holdings (NZ) Limited Auckland JRI Ltd New Plymouth Ken McNee Family Trust Christchurch Lifetime Group Ltd t/a/Lifetime Insurance Brokers Ltd Christchurch Lloyd East & Associates Insurance Brokers Ltd Auckland Lowe Schollum & Jones Ltd Hamilton Luxor Insurance Brokers Ltd Auckland MA Risk Solutions NZ Limited Auckland Mainprice King Chartered Brokers Ltd Auckland Malcolm Flowers Insurances Ltd Taupo Marsh Ltd Auckland Matt Jensen Insurance Brokers Ltd Taupo McDonald Everest Insurance Brokers Ltd New Plymouth Mike Henry Insurance Brokers Limited Auckland Montage General Insurance Ltd Auckland Multisure Ltd Auckland Nelson Bays Insurance Brokers Ltd (NIB) Nelson Neville Newcomb Insurance Brokers Ltd Auckland Nexus Insurance Brokers Ltd Auckland North Harbour Ins Services (1985) Ltd incl Northsure Group Limited Orewa Northco Insurance Brokers Ltd Masterton Northcrest Insurance Brokers Ltd Auckland Oamaru Insurance Brokers Oamaru O’Connor Warren Insurance Brokers Tauranga OFS Insurance Brokers Ltd Dunedin Omni Fire & General Ltd Auckland Paramount Insurance Agencies Ltd Auckland Paterson & Co NZ Ltd Auckland Penberthy Insurance Ltd Auckland Peter C Cranshaw Insurance Broker Ltd Levin PIC Insurance Brokers Ltd Manukau Primesure Brokers Ltd Auckland Property and Commercial Insurance Brokers Feilding Protekt Insurance Brokers 2008 Ltd Auckland Provincial Insurance Brokers Limited Masterton PSC Connect NZ Limited Auckland Pulsar Insurance Agency Auckland R.U. Covered Ltd Auckland Reid Manson Ltd Timaru River City Insurance Brokers 2000 Ltd Wanganui RMA General Ltd Warkworth Rosser Underwriting Ltd Waipukurau Rothbury Group Ltd Auckland Runacres & Asssociates Limited Christchurch Seneca Insurance Brokers Ltd Auckland Sit & Blake Limited Auckland Smith Pitman Insurances Ltd Wellington South Pacific Insurance Brokers Ltd Auckland Sweeney Townsend & Associates Ltd Rotorua Thames Valley Insurance Ltd Thames The Advisors for Insurance New Plymouth The Insurance Brokers Ltd Auckland The Stoneman Group Wanganui Thorner General Insurances Ltd Upper Hutt Towes Insurance Brokers Ltd Te Aroha Trevor Strong Ins Ltd Auckland Vision Insurance (S.I.) Ltd Ashburton Waikato Insurance Brokers Limited Hamilton Wallace McLean Ltd Auckland Wanganui Insurance Brokers Ltd Wanganui Wholesale Insurance Brokers Ltd Papakura Willis New Zealand Ltd Auckland Yesberg Insurance Services Ltd Christchurch

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