Insurance Business 3.03

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CONTENTS / 3.3

FEATURES

34

FEATURES

Bricks, risk and mortar Experts tell you everything you need to know about the state of property insurance cover

NEWS ROUND-UP 6 | Viewpoint Brokers have their say on the market’s biggest news stories 8 | News analysis Roads less travelled: clients, terrorism, and travel insurance

28 | Going coastal NSW broking firm Westlawn on the changing landscape of regional insurance broking 32 | World Cup fever Sportscover’s CEO, David Lamb, explains how insurance makes the World Cup go around 40 | The legal view Wotton + Kearney details the current extent and limits of D&O cover 48 | Trade credit NCI’s Kirk Cheesman on the status of and opportunities in the trade credit market

12

FEATURE

The big interview Ansvar’s new CEO, Warren Hutcheon, on why insurance and community are not poles apart

BROKING INTELLIGENCE

INSURANCE INSIDERS

42 | Mediocre marketing 8 ways to ensure your marketing is either average, or a proven recipe for success 45 | Life in half a second Why you shouldn’t wait to make great things happen in life and in business 50 | Stats Insights from Aon’s 12th Australasian Risk Survey

52 | Social life Austbrokers, the ICA, Zurich and Vero caught on camera 55 | Favourite things Ron Tatarka, Insurance Business Elite Broker of the Year 56 | The last word The need for trust – and a delegated claims settlement authority

N O S R E K O BR

S R E R U S IN COVER FEATURE

BROKERS ON INSURERS 2014 Australia’s top insurers as voted by insurance brokers

16

issue

3.3

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EDITOR’S LETTER / 3.3

WHAT MAKES A GOOD INSURER?

Ben Abbott

Old-fashioned service, is the short answer. But of course, it’s never quite that simple. And as always, beauty is in the eye of the beholder – or, in this case, the broker.

In this issue of Insurance Business, we survey a record number of insurance brokers and ask them this question. The aim? To let brokers speak out on their providers. In doing so, we give brokers the power to change and improve the market’s insurers. And I can assure you – this is one survey that makes insurers sit up and take notice.

In recent years, the insurance industry has been changing before brokers’ eyes. Whether it’s offshoring, restructuring and centralisation, premium volatility, product commoditisation, or the growth of online tools and channels, a host of developments are very real to brokers.

The challenge for insurers will be to harness the advantages of this change – cost reductions and processing efficiencies for example – to produce competitive and sustainable products. But – and this is a big but– they will need to ensure they do not lose sight of what brokers really want. If they do, they risk alienating what will continue to be an important distribution channel for sophisticated and business insurance customers.

For example, one of the key opportunities seems to exist in a ‘back-to-basics’ approach to BDMs. For many brokers, BDM service is where the rubber really hits the road.

Likewise, insurers who are able to provide brokers with skilled and responsible claims officers will succeed in a market where this touch point is still the most critical.

Insurance Business urges insurers to take on board the messages that come through loud and clear in this survey. Brokers will reward you by becoming your advocates.

I would like to thank those brokers who gave their time to take part in the second Brokers on Insurers Survey. I’d also welcome your feedback. As the new editor of Insurance Business, I’d be interested to hear from brokers and other stakeholders who have a story to tell.

So, what does make a good insurer? The verdict is now in. Turn to page 16 and find out which provider took out the Insurer of the Year for 2014.

COPY & FEATURES EDITOR Ben Abbott CHIEF REPORTER Chinwe Akomah CONTRIBUTORS Kevin Eddy, Doren Aldana, Matthew Michalewicz, Darren Trott PRODUCTION EDITORS Roslyn Meredith, Moira Daniels

ART & PRODUCTION DESIGNER Joenel Salvador DESIGN MANAGER Daniel Williams

SALES & MARKETING GENERAL MANAGER Peter Smith COMMERCIAL DEVELOPMENT MANAGER Sophie Knight COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Alex Carr TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Ben Abbott tel: +61 2 8437 4721 ben.abbott@keymedia.com.au Advertising enquiries Commercial Development Manager Sophie Knight tel: +61 2 8437 4733 sophie.knight@keymedia.com.au General Manager Peter Smith tel: +61 2 8437 4740 peter.smith@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Auckland, Manila, Toronto, Denver insurancebusinessonline.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Insurance Business magazine can accept no responsibility for loss

CONNECT

Contact the editor:

ben.abbott@keymedia.com.au

Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

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NEWS / ROUND-UP

BY THE NUMBERS

10%

The amount of the total premium funding market Hollard-backed Attvest Finance is targeting within its first three years

$12.5m

The amount the Federal Budget allocated to address insurance costs in North Queensland over the 2014/15 period, to be provided via the Queensland Government to bodies corporate who will undertake engineering assessments of strata-title properties

$620m The market capitalisation of insurance broker network Austbrokers in April this year

26,052

The number of words in a Lloyd’s of London homeowners’ insurance policy, which has been found to be roughly equivalent to the length of Shakespeare’s Romeo and Juliet

BROKERS UNITE TO DEMAND INSURER FOCUS ON SERVICE Insurance brokers have come together as a group to demand that insurers continue to focus on improving broker service, considered the most critical issue for their businesses.

In the second Insurance Business Brokers on Insurers Survey, a record 413 brokers submitted their feedback on the market’s top insurers, across a range of insurer criteria.

Insurance Business can reveal that, when asked to rank their most important priorities, brokers clearly thought that exemplary service was what set top insurers apart.

Brokers named turnaround times on claims as the area that was most important to them, followed by overall service level and turnaround times on new business. These top three (which were scored out of 5

What brokers want: The top 3 1 TURNAROUND TIMES – CLAIMS 2 OVERALL SERVICE LEVEL 3 TURNAROUND TIMES – NEW BUSINESS Source: Insurance Business Brokers on Insurance Survey

by brokers, at 4.82, 4.65 and 4.64 respectively) were followed in ranking by premium stability and BDM support.

To see how brokers rated insurers across all categories and to see who has been named the Insurance Business Insurer of the Year, turn to our exclusive report on page 16.

FORUM

BROKERS LAMBAST CHEAP ONLINE SME OPTIONS Brokers have responded on the Insurance Business forum to claims that SMEs in Queensland are “falling victim” to online insurance providers, who claim they are providing comprehensive cover for a fraction of the price but do not provide sufficient coverage. Beenleigh-based Parmia Insurance’s Danny Gumm says many businesses with standard cover are approaching brokerages when a claim has been made against them which their policy does not cover. “The policies are worded very carefully, but if you really look at them, you’ll see that there are many shortfalls that are leaving businesses underinsured and exposed to significant financial damage if they were to be sued,” he said.

BARRY CROSS ON 13/05/2014 10:14:31 AM

By all means lobby the insurers and ramp up the fight-back rhetoric through the industry broker associations and cluster groups. Closer to home, though, brokers should invest the energy, time and money on building better relationships and communicating their value as a broker with their customers. Doing that will most likely help reduce loss.

ALEX DAMON ON 13/05/2014 9:48:07 AM

ROD PARSONS ON 13/05/2014 10:36:47 AM

SMEs should not be insuring direct at all, whether online or otherwise, because they have none of the protections consumers have and have to be their own experts. Ultimately, insurers can throw a 100-page policy at them and say, “Caveat emptor”, notwithstanding any possible error in the expert advice the client has received from the 20-year-old at the call centre.

What a circus of an industry insurance is sometimes. Brokers are so accountable and sitting ducks for PI claims, so we have a plethora of safety measures - day books, file notes, letters of advice, reams of compliance attachments with every new business we send out and audits everywhere. Does any of this apply to the direct market?

HAVE YOUR SAY ON INSURANCEUBSINESSONLINE.COM.AU

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INSURANCEBUSINESSONLINE.COM.AU

VIEWPOINT

ARE THE INCREASING NUMBERS OF FINANCIAL LINES INSURERS ONLY FAIR-WEATHER FRIENDS?

No 39%

Yes 50%

Unsure 11% Total votes: 114

“Sustainability is an important factor that brokers need to consider when presenting terms to clients. Some underwriters and underwriting agencies seem to be more susceptible to rate fluctuations or complete appetite changes, and whilst a client will always take a premium reduction it can be very difficult to justify a big rate increase when a client’s risk profile has not changed at all. In a tough economic climate for most businesses a large, unexpected premium increase can also put pressure on cash flow.”

Murray Bruce, Bruce Insurance Brokers

“Not at all. These underwriting agencies are assisting brokers with the placement of risks that conservative insurers just don’t see as profitable or ‘cherry pick’. We have to remember these underwriting agencies are providing targeted products for industries, providing those industries specific wordings.

As brokers it is our job to cover the market, and in utilising these agencies we are doing our job! In a claims scenario the claims are usually handled better than a mainstream insurer as they understand the industry and the risks they face.

It’s a win for the broker and the client!”

Channelle Lewis, Urban Insurance

TWELVE CATEGORIES, TWELVE CHANCES TO SEE IT THROUGH.

Of the twelve categories in the Insurance Business ‘Brokers on Insurers’ survey, we were the only insurer to score top three in all of them. From product range to premium stability, this reflects our commitment to see it through.

CGU Insurance Limited ABN 27 004 478 371 AFSL 238291. When making decisions about an insurance product you should consider your personal circumstances and read the product disclosure statement available at www.cgu.com.au

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NEWS / ANALYSIS

ROADS LESS TRAVELLED Australian businesses are increasingly

travelling overseas for business, but in a time when civil unrest and terrorism are more prevalent, not even SMEs can risk business travel without comprehensive cover. Chinwe Akomah reports The terror attack on Mumbai’s Taj Mahal Hotel in 2008 was a real wake-up call for both businesses and holidaymakers, according to Tim Atkins, Marsh & McLennan Agency director.

“Most people affected by the Mumbai bombings were corporate travellers who happened to be in Mumbai for business, staying at a well-known hotel resort,” he explains.

“When that incident happened, it definitely raised awareness of travel insurance in the corporate circle. To a certain extent, so did the Christchurch earthquake, as some corporate travellers were affected by it too. These events raised awareness among corporates that they were responsible for the insurance for all their employees and contractors.”

Direct insurers may have the upper hand in personal lines travel insurance, but it is ever clearer that there is a crucial role for brokers to play in corporate travel.

Atkins also observes that, in the past few years, clients have started raising questions about adequate coverage.

“They are interested in the level of medical and hospital benefits and c o n d i t i o n s, emergency evacuation

scenarios and immediate responses should a catastrophe or terrorism event occur.”

NO COMPANY TOO GREAT OR SMALL Tim Christian, AIG Australia head of corporate accident and health, says companies of all shapes, sizes and sectors can require a comprehensive travel insurance policy for their staff.

“There is a strong misconception that SMEs don’t require a corporate travel policy because they don’t feel their employees travel enough or travel to destinations that are seen as hostile or dangerous,” he explains.

“The important thing that can be forgotten is that organisations of all sizes have a duty of care to travelling employees, whether domestically or internationally, and need to demonstrate they have taken all practicable steps to meet their employees’ health, safety, security and wellbeing needs.”

Christian also points out that the Australian infrastructure industry in particular does a significant amount of travel to more typically dangerous countries. He says these particular organisations

UNSAFE TRAVELS: TERRORIST ATTACK DATA 2013 Ten countries suffered more terror attacks than any other countries in the world in 2013 and 2012: Total attacks

Total killed

Total wounded

Iraq

2,495

6,378

14,956

Pakistan

1,920

2,315

4,989

Afghanistan

1,144

3,111

3,717

India

622

405

717

Philippines

450

279

413

Thailand

332

131

398

Nigeria

300

1,817

457

Yemen

295

291

583

Syria*

212

1,074

1,773

Somalia

197

408

485

Country

*Given the limitations of media coverage in Syria, the data presented here is a conservative estimate of terrorism in Syria in 2013.

Source: United States Department of State publication, Bureau of Counterterrorism (released April 2014).

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NEWS / ANALYSIS

need to take special care when selecting a policy, as some cover excludes dangerous locations, and the emergency medical assistance offered might not be as far-reaching as they need.

Allianz Global Assistance chief technical officer Matthew Clayton makes a similar point about SMEs. “The IT revolution has had a globalising effect, knocking down many of the barriers to international trade. Now even the smallest of businesses conduct international business, be that through supply chains or target markets. So, increasingly, it is not just large multinationals that find they have a genuine need for corporate travel protection.”

RETAIL POLICIES DON’T CUT THE MUSTARD Traditionally, businesses would organise their own insurance. However, Clayton says the growing spend and risk concern in this area has seen a trend towards utilising the expert advice of a licensed broker.

“Corporate travel insurance is such an important product because it involves the welfare of the employees, and a broker can offer the client advice based on their expertise and experience on which product to select,” he says.

However, Christian warns that most retail, nonbroker-led policies will involve numerous exclusions that can financially cripple an organisation should they need to make a claim. “For example, if the CEO of an organisation fell down a set of stairs whilst travelling on business and needed extensive medical care, emergency flights home, and ongoing surgery, the fees could have a severe financial impact on an SME if they did not have the right coverage.”

He adds that trip numbers and locations may also be limited in a retail policy, whereas more comprehensive policies will usually provide cover for unlimited trip numbers and a broader set of locations. Most of the time, a retail policy will also exclude pre-existing illnesses, whereas a compre­

“There is a strong misconception that SMEs don’t require a corporate travel policy because they don’t feel their employees travel enough or travel to destinations that are seen as hostile or dangerous” Tim Christian, head of corporate accident and health, AIG Australia

hensive corporate travel policy generally won’t, unless the condition is terminal or the individual is travelling against medical advice.

This is all the more reason why brokers have a vital role to play, Christian argues.

“As organisations continue to gain a better understanding of the benefits a non-retail policy can offer them, the need for brokers to step in and guide them to the right cover will increase also. Brokers will have a comprehensive understanding of the business needs, such as the frequency of travellers, the typical destination employees will travel to, whether there is a need for leisure travel for directors and whether anyone has a pre-existing medical condition, and can advise the organisation of which coverage they need, and why a retail policy can fall short when it comes time to make a claim.”

Atkins says it is important to use a broker because of changed market conditions.

“The number of travel insurers has grown, as well as the number of travellers. Ten years ago there were roughly three main players in the corporate travel insurance sector; now there are 10. The broker helps simplify and explain this process so the client can make an educated decision.”

CLIENT TRAVEL INSURANCE PITFALLS The cost of insurance is a constant concern for businesses, and comprehensive insurance is often sacrificed to save money. Clayton says this is a common pitfall that must be avoided.

“While the raw financial cost of an incident may be at the forefront of people’s minds when considering purchase, the peace of mind that an effective assistance service provides really can be key to a better whole experience.”

Every business has different travel insurance needs, he continues, so what may suit one client is unlikely to suit another.

Atkins says a real pitfall for the client is failing to identify their profile or underestimating the importance of their travel insurance program.

“This is where the corporate buyer needs to engage with a broker because the broker can help break down their travel patterns and identify their risk profile, and what is the most appropriate coverage out there.

“If there is a client that is travelling to a politically sensitive country or using bespoke charter flights, a brokerage can source the highest possible coverage and which insurers have appropriate emergency disaster responses and practices.”

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THE BIG INTERVIEW / WARREN HUTCHEON

A COMMUNITY MAN

Ansvar Insurance’s new CEO, Warren Hutcheon, may be the fresh face of the altruistic insurer, but as Insurance Business finds, mixing philanthropy with business is already very much second nature

Insurance Business: First things first. Why did you take the CEO role at Ansvar?

WH: Ansvar has a great vision and a good sense of community responsibility. There is an alignment between my personal values and that of the organisation. There are strategic objectives that resonate with me. It is an organisation that has come through some tough times, but the opportunity to be part of the next stage of the journey is both exciting and challenging. It’s great to be part of a group that has a strong social conscience.

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INSURANCEBUSINESSONLINE.COM.AU

IB: What excites you most about the job?

WH: When you are outside the organisation you get a sense of the capability of the staff, but now I am part of it I have seen the capable, passionate people at the organisation who want to make a difference.

IB: You were formerly CEO of the Victorian Managed Insurance Authority. How will this experience help in the new role?

WH: There is a strong focus on reducing and managing risk as well as providing insurance protection in both organisations, and the community ultimately benefits from this.

IB: Is there anything you personally want to achieve at Ansvar?

WH: I want Ansvar to maximise its potential, to be recognised as an expert and a leader in risk and insurance in its target market, and to generate

sufficient funds to see it make a difference in the community.

One of Ansvar’s core strategic goals is to be a top company donor. The organisation is working with communities on youth education programs. The more successful the company is, the greater the contributions to such programs. The more that we can do with communities, the better.

IB: What is one thing you would change about the insurance industry if you could?

WH: I don’t believe the value our industry provides is fully understood.

Managing risk and providing insurance protection is important for a successful economy. Banks do not lend and finances are rarely available to consumers and businesses that do not manage their risks properly, and purchase insurance cover. The economy would come to a halt without our industry. I don’t know that we have done enough to promote the value of what we provide to a successful economy.

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THE BIG INTERVIEW / WARREN HUTCHEON

IB: Do you envisage any challenges? How will you overcome them?

WH: One challenge is being very clear about our value proposition in our five core sectors [faith, care, education, heritage and community]. We do have a compelling value proposition in some areas but we can improve in others.

If we are going to be the leading insurer in those five core sectors, then we need to understand everything in those sectors. We have already started dialling up our market research into our core segments. We have formed a cross-functional team in Ansvar which will conduct in-depth research into our core sectors – not just understanding insurance and risk, but also what is happening in those sectors, such as regulation. Obviously we do have some knowledge, but this is just a way of ensuring we have complete proficiency. The more we know, the more we can pass on to our brokers.

The economy would come to a halt without our industry Warren Hutcheon, CEO, Ansvar

IB: You say you have a ‘community-focused approach’. Can you explain that?

WH: I have been involved with not-for-profit activities for many years. I’m currently on the board for Bayside Church Inc and its community care arm, Bayside Community Care. We provide services to the disadvantaged and in need locally, across Australia and overseas, such as South Africa, where we will help children with AIDS. I have been involved in a number of different activities with the communities there.

When you have been involved in that sector for a number of years, you can see that if everyone contributes a little bit, it makes a big difference to a lot of people’s lives. Part of my personal set of values is to help wherever I can.

IB: Should the insurance industry more broadly have a community-focused approach?

WH: It is important that if you are taking things out of the community, you should be able to give back.

Many large organisations do that through corporate social responsibility. There is a growing awareness that it is important to have that community responsibility.

All our segments have a community focus, so it is not negotiable not to give back.

There is a difference between Ansvar and some of the general insurance players in Australia: we are all APRA-regulated but our parent company, Ecclesiastical Insurance Group, is owned by a

trust, so it has a different philosophy about giving back to the community.

IB: What can brokers expect from you? Are there developments you are keen to implement?

WH: Brokers are our key distribution channel.

I have an open-door policy that applies to our business partners and clients, as well as staff.

We ran a number of broker forums in May, which I attended.

Brokers are saying that they like what we do and they want us to succeed. There are still areas where we can improve our value proposition, and we are looking at how. We need to be more agile and responsive in some areas and streamline some processes.

We are leveraging off our group’s resources and capabilities, where there are specialist skills. For example, we are bringing out one of the senior surveyors and valuers this month [June] to work with our clients in Australia and to upskill our risk control team. Disaster recovery management is another area we are working on. It is important that when there is a major loss our clients can get back and operating as quickly as possible. We have learnt a number of lessons on this from around the globe, particularly in New Zealand with the Christchurch earthquakes, and we are packaging that up into an educational resource for brokers and clients.

IB: VMIA says one of your key achievements is improving stakeholder engagement. Is this something the insurance industry could be better at?

WH: We can all improve the way we understand and engage with our stakeholders. Our industry is a complex one. We have many different stake­ holders who have different needs. Over the last 30 years I’ve been in the industry I have seen it come a long way, but we need to continue to engage with our stakeholders as our industry is a dynamic one.

IB: What is the one thing you really want the Ansvar stakeholders to know?

WH: There are lots of things I want them to know, but I really want them to know that we are listening to them and acting upon what they share with us, and delivering what they require. We are here for the long run. We have been here for many years and we intend to be here for many more.

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COVER STORY / BROKERS ON INSURERS

N O S R E K O R B

S R E R U S N I AUSTRALIA’S BEST INSURERS Ranked, rated, and revealed

The results of the second annual Insurance Business Brokers on Insurers Survey are in. Scoring Australia’s top insurers across 11 categories that matter to you as insurance brokers, the 2014 survey asks and answers the all-important question: who are Australia’s best insurers?

Loved, loathed, or both?

There often exists a love-hate relationship between brokers and Australia’s top insurers.

More than willing to praise and recognise regular experiences of exceptional practice and service, brokers are also happy to compare and critique their providers – and ask for more from where that came from.

The Insurance Business Brokers on Insurers Survey 2014 provides an opportunity to do both. Asking brokers to rate nine insurers across 11 categories, the survey is a rigorously researched, independent and powerful data set that rewards the best insurers, shines a light on the things brokers really want, and ranks the market to see how insurers truly measure up.

In its second year, the 2014 Survey also presents an opportunity to see if insurers are listening. Have insurers improved on last year’s results? Or are they just treading water?

Insurance Business invites brokers to read on for the answers to these questions, as well as the all-important one: who is the Insurance Business Insurer of the Year for 2014?

Ben Abbott Editor, Insurance Business

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INSURANCEBUSINESSONLINE.COM.AU

WHAT BROKERS WANT

When it comes to the crunch, brokers just want a little respect. Ben Abbott finds brokers open to doing business with insurers who treat them as valued partners

WHAT’S IMPORTANT TO BROKERS? THE TOP FIVE

Claims turnaround times

4.82

Overall service level

4.65

New business turnaround times

4.64

4.46

Premium stability

Like most individuals in day-to-day life, brokers are looking for one thing above all – respect.

And when an insurer goes above and beyond the call of duty, to treat a broker (and their client) as a valued partner and customer, that insurer will excel in the eyes of brokers.

The Insurance Business Brokers on Insurers Survey 2014 virtually mirrors that of 2013, when it comes to the things brokers say are important to them. The top five are claims turnarounds, overall service, new business turnarounds, premium stability and BDM support.

These categories all reflect a desire for respectful treatment. Key among them is efficiency, in both claims and new business turnarounds. Brokers, like most customers, do not like to be kept waiting unnecessarily, especially in the most critical area for clients: claims.

“Allianz sorted out a damage claim in a fortnight,” one broker applauded in a response to the survey.

“Some property claims were sorted within days of receiving claim photographs and quotes. I consider this excellent – a fabulous claim example.”

Another broker said insurers had improved their response and turnaround times. “When a client is requesting changes that need referrals or negotiation, we’re giving them quick results and thorough service.”

Because insurance brokers are people, they expect insurers to act just like people too. They reward those who demonstrate traits like flexibility, creativity, outside-the-box thinking, consideration of the holistic situation of a client or a claim, and even compassion.

“One insurer considered a risk on overall exposure instead of just labelling the client as a claim maker,” one broker said. “Insurers have been able to discount for clients that have been loyal and have quite a large amount of business with us,” said another.

4.29

BDM support

1

2

3

4

5

Note: Categories were individually scored between 1 and 5, where 5 equates to ‘very important’

“Our insurer backdated cover on a claim that happened in 2012 and was not covered under their policy,” a third added. “Premium paid for the two years and the appropriate excess paid. Client happy, and of course the insurer retained the business.”

Brokers also revere those insurers in the market who dedicate time and resources to developing relationships with brokers and their clients to win or retain business.

“A three-way meeting bringing in risk experts, including in cyber security, to analyse risks specifically was arranged,” a broker said. “The client was made to feel like the most important business in the world and well protected.”

Another broker said, “Being from a remote area when visited by a BDM, we have requested they provide on-site training at our office and most have complied, helping us to keep up to date without having to travel great distances.”

It is genuine, long-term business partnerships that brokers are seeking from their insurers.

THE OTHER SIDE Insurers, especially the ones being rated in this survey, are big machines. They have businesses spanning multiple products, distribution channels, and locations. Their approach at any one time can depend on a whole array of factors, including vagaries like the local claims environment, global capacity and even government and public attitudes.

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COVER STORY / BROKERS ON INSURERS

WHAT’S IMPORTANT TO BROKERS? THE NEXT SIX

4.24

Online platforms

Product range

4.17

Product innovation

4.04

Commission structure

3.92

Training & Development

3.75

Insurer brand recognition

3.57

1

2

3

4

5

Note: Categories were individually scored between 1 and 5, where 5 equates to ‘very important’ WHEN A PEN MAKES THE DIFFERENCE

Who said insurance brokers don’t have a sense of humour?

With 413 respondents, there are bound to be a few brokers with a less-thanconventional take on things. This year, when we asked what was the best thing an insurer had done for them during the last 12 months, one broker said, “Ceased trading”; another said, “I can’t remember, so it must not have been memorable”, and another said an insurer had “sent me a pen”. Another broker referred to BDMs in evolutionary terms as a “dwindling species”, while another said that when it came to new business, “when it’s a soft market, everyone drops their pants”.

Ben Abbott is editor of Insurance Business

Within those businesses, of course, there are also a whole host of variables and minutiae, from the creativity and flexibility exhibited (or given) by an individual claims handler – who may be offshore – to the occasional and confusing disconnect between new business and renewals.

While it is hard for any such machine to balance such competing and disparate elements of a business to impress one channel – brokers – at every point, this is what brokers want.

And they often, not unsurprisingly, fail.

“One insurer didn’t respond to requests to endorse a policy until it became an urgent issue, and it was passed from one underwriter to the next halfway through the process,” one broker said. “We are here to manage client expectations; all that is needed is acknowledgement, not laughter from underwriters

because they consider your client to be ‘difficult’.”

Another broker said: “We had a claim turning sour and the client was extremely unsatisfied with the service they were getting. The BDM was inflexible and unwilling to push for a better outcome. In the end, I had to negotiate harder than what I thought would be necessary. Refusal to think or act outside the square where the situation calls for it is not a good look.”

The problem for insurers is that when they fail, even in a small way, brokers remember. And the result is that, with enough encouragement, brokers may direct business elsewhere.

On the whole, brokers are disappointed in large part by the impersonal and inflexible nature of the insurer machine. For example, they cite disappointment with a lack of BDM visits or representation, the lack of power these BDMs have to make real decisions, and the inflexibility of underwriters or claims managers in such a systematised environment to make even small creative decisions based on the whole picture presented. They sometimes find insurer staff to be insufficiently knowledgeable, or that they do not take sufficient responsibility.

“Declined renewals based on postcode,” said one broker when asked about the worst thing an insurer had done. “Delays in turning claims around, especially acknowledgement of the claim,” said another. “Inability to speak to someone who cares,” added a third.

Brokers in many cases attack centralisation, offshoring, and cost-cutting, which appear to have hit some brokers by impacting or changing the service levels they are receiving.

There is also a familiar refrain that insurers have wrongly or inappropriately denied claims. “Denied a stormwater run-off claim by saying they considered it a flood,” said one. “Tried to deny a claim that is partly covered under the policy wording,” said another.

Brokers say they are wary of ‘cowboys’ looking to buy business with lower premiums. Reflecting their desire for genuine long-term partnerships, they would rather keep premiums stable than have disparities between new business and renewal premiums. “For our business and our clients it’s the inconsistencies, the sometimes poor claims service, the attempts to protect renewal premiums but then discount heavily on new business,” one broker said, in attempting to sum up frustrations with insurers in general.

There is one thing for sure. Insurers are being called on to continue to improve their service to insurance brokers, and there are certainly areas in which insurers can capitalise.

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11/06/2014 8:37:15 AM

INSURANCEBUSINESSONLINE.COM.AU

TURNAROUND TIMES (CLAIMS)

A

llianz has taken Gold in what is resoundingly considered by insurance brokers as the most critical area of insurer service for their businesses: claims turnaround times.

Headlined by Chubb in 2013, Allianz climbed from a Bronze medal position in 2013 and leapt ahead of rival Zurich, to be rated by brokers as the best on claims turnarounds. Some brokers surveyed said Allianz had “improved dramatically”, and was “outperforming” its competitors, while one said “Allianz’s treatment of a major bushfire claim was outstanding”.

Chubb, meanwhile, saw a dramatic fall in this category – a raw score reduction of 0.73. This was the biggest fall by an insurer in any category in the 2014 Brokers on Insurers Survey.

CGU was also a big (positive) mover, up from a ranking of sixth last year to the Bronze position in 2014, while Zurich stayed steady, continuing to justify its Silver position.

A majority of brokers (56%) said claims turnaround times had improved across the board over the last 12 months. However, 44% of the market felt they had worsened.

On the positive side, many brokers say that online portal upgrades are improving their experience and turnaround times for some (more straightforward) claims.

However, this is matched by frustration over restructuring, centralisation, staffing and/or offshoring decisions, which brokers say have negatively influenced their experience.

Brokers begged insurers to take a “common sense” approach to claims. They want to deal with claims handlers (preferably one) who are “accountable” and can discuss their claims knowledgeably,

Allianz

3.36

Zurich

3.22

CGU

3.21

Industry average: 3.01

BROKERS SPEAK… ON CLAIMS TURNAROUND TIMES OFFSHORING “As some claim departments are now offshore, it has played a part in the service levels for claims, which are now below acceptable standards.”

SERVICE “Overall, claims have improved, although without our assistance many claims would not be settled correctly or within realistic time limits. When an assessor is appointed it can add up to eight weeks to a claim timeframe.”

ONLINE PORTALS “Most insurers have improved. Higher staffing levels and access to online portals have made claims handling much easier.”

CLAIMS EXPERTISE “Companies sending claims overseas and national claims centres make it hard to deal with one person, meaning every single person who looks at it has to read through the file and decipher it.”

CONSOLIDATION “Insurers have improved turnaround times through consolidating services into large teams; however, quality of response has worsened.”

CLAIMS DECLINES “On balance it still seems to be the case that some insurer claims departments look for ways not to pay claims. This is in many cases because there are very few claims staff with experience around.”

and they are incensed if they think an insurer is being inflexible with policy wordings. Many worst experiences cited by brokers included the denial of claims they saw as legitimate.

Insurers should be in no doubt. This is the area most critical to their broker business. “The insurers that provide good service are first and foremost in my mind at renewal,” one said.

HAVE TURNAROUND TIMES ON CLAIMS IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

44% Worsened Insurer

Ranking 2013

Allianz

3

Zurich

2

CGU

6

Vero

4

Chubb

1

56% Improved Movement

56%

Ranking 2014 1

-

2 3

-

4 5

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COVER STORY / BROKERS ON INSURERS

OVERALL SERVICE LEVEL

Z

urich continues to dominate in terms of overall insurer service proposition in 2014.

First in 2013, Zurich is specifically mentioned by insurance brokers as an example of a provider that “continues to be great to deal with”, “has improved” and provides “good turnaround times”.

On the whole, brokers felt insurers had edged ahead in terms of overall service this year, with 54% agreeing service levels were better than last year.

Brokers commonly say that overall service has “improved slightly”, “only just”, or in many cases has remained “much the same”. However, brokers are adamant it is a “mixed bag”; often, service can “differ vastly” – at least from an individual broker’s perspective – depending on the insurer in question.

It comes down to individual experiences. On the positive side, brokers argue that competition is driving insurers to compete hard for new business and upgrade broker service. However, the largely unenthusiastic response from brokers indicates insurers can do a lot better.

Zurich

3.44

CGU

Vero

3.28

3.27

Industry average: 2.99 Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

CGU

4

2

Vero

2

3

Allianz

5

4

Lumley

7

5

HAVE TURNAROUND TIMES ON CLAIMS IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

46% Worsened

54% Improved

TURNAROUND TIMES (NEW BUSINESS)

W

hat goes for turnaround times on claims also applies to new business. Brokers expect a timely response.

They note that investments in online portals have improved turnaround times for new business.

However, this may not be reflected in more difficult accounts. “Only if risk is done electronically has turnaround time improved,” said one broker. “If a risk does not fit the telephone line or needs to be referred, then just forget it.”

But what really stands out for brokers is the willingness of insurers to take more time to work on client accounts that may be considered difficult.

“One insurer has partnered with us and taken on the good with the bad in terms of non-preferred business to get a look at the ‘good’ risk,” says one broker.

HAVE TURNAROUND TIMES ON CLAIMS IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

41% Worsened

59% Improved

Zurich

3.48

CGU

3.35

Allianz

3.26

Industry average: 3.07 Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

2

1

CGU

6

2

Allianz

3

-

3

Vero

4

-

4

Lumley

7

5

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INSURANCEBUSINESSONLINE.COM.AU

PREMIUM STABILITY

T

here is one certainty when it comes to premiums: brokers will reward stability.

Following a tough period for insurers, driven by higher rates of catastrophes, brokers have welcomed an overall improvement in premium stability over the last 12 months. In fact, 63% of all brokers surveyed thought this year saw more stable premiums in an overall sense.

Many brokers said domestic premiums remained volatile, and that while insurers were somewhat flexible in other areas, domestic was another question.

Brokers from Far North Queensland said domestic premiums there were “a major issue”.

With capacity plentiful, brokers are seeing stabilisation and even premium competition in commercial lines of business. But they are on the lookout for ‘cowboys’, criticising those insurers discounting to win new business, and suspicious of future renewal rises. Some insurers are taking on calculated risks outside strict policy lines to win or hold business.

Many brokers are also wary of premiums signalling conflict with insurers’ direct channels.

BDM SUPPORT

I

nsurers held steady on BDM support. There were no ranking changes at all among the top five, with Zurich achieving Gold just ahead of Vero.

At best, brokers say “BDMs seem to be taking extra effort to cut through and connect with brokers.

Less pushing of the corporate line and more solution focused”. However, not all brokers are happy.

Many note a reduction in BDM visits, with regional banks most affected. “Being situated in regional NSW, we have very little BDM support,” said one.

It appears that brokers want BDMs to have the power to make decisions, and to work with them to get deals across the line. What they don’t want is a “glorified messenger”.

Zurich

3.30

Vero

3.27

CGU

3.26

Industry average: 2.74

Allianz

3.22

Zurich

CGU

3.13

3.07

Industry average: 2.93 Insurer

Ranking 2013

Allianz

3

1

Zurich

1

2

CGU

4

3

Lumley

8

4

QBE

7

Movement

Ranking 2014

5

HAS PREMIUM STABILITY IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

37% Worsened

63% Improved

Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

Vero

2

-

2

CGU

3

-

3

Allianz

4

-

4

QBE

5

-

5

BROKERS SPEAK… ON BDM SERVICE SEEING FEWER BDMS “There are less BDMs around with sound knowledge and the ability to negotiate and really get their teeth into a deal with a broker.”

“Insurers often expect rural brokers to travel to metro areas to attend meetings and product sessions and seem to be anti-travel to country areas to visit brokers.”

“I liked having our local BDM and they were always helpful if I needed assistance. I thought the local BDM made it a bit more personal.”

“I’m not seeing BDMs as often, and phone or email enquiries are often unanswered or there are delays in responding. Not all BDMs I deal with are like this, but unfortunately the majority are.”

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COVER STORY / BROKERS ON INSURERS

ONLINE PLATFORMS

O

nline platforms are both a blessing and a curse for brokers. On the one hand, brokers see significant benefits to efficiency using new online technologies, but on the other, they complain insurers are sometimes losing the personal touch and flexibility they desire.

However, the good outweighs the bad, with online platforms rated highly (sixth) by brokers in terms of overall importance to their businesses. “Access to online portals has made claims handling much easier,” said one broker, while another said “most companies with online platforms or otherwise are very good at responding to new business queries”. A third said of insurer claims handling: “Improvements are all due to electronic platforms.”

Brokers see efficiency and turnaround times as paramount, so insurers that utilise online platforms to improve efficiency and service – rather than just to cut costs – will be the winners in the eyes of brokers. But they should beware the flipside: “If your new business is not within the box of online quoting, good luck getting a quote!” one respondent said.

Zurich

3.55

Vero/Allianz

3.34

CGU

3.24

Industry average: 2.9

Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

Vero, Allianz

3/2

Vero ( ) Allianz

2

CGU

5

QBE

4

Lumley

6

3 -

4 5

PRODUCT RANGE

Q

BE was knocked out of the leading Gold position in the product range category by rival CGU this year, though not much at all separated the top contenders in this category.

In fact, the top five insurers (with Vero and Zurich ranked equal fourth) were separated in raw score terms by only +/-0.12, a reflection of the commoditised nature of products on offer.

Another indicator of commoditisation is that this category presented one of the least amounts of differentiation between top and bottom scores of any category in our survey.

Some insurers traded places, with Vero dipping out of the Bronze position and Lumley rising from sixth to fifth in one of the better improvements in broker scoring across this category.

Our survey shows that brokers seem to have the products they need, and, with capacity high, brokers appreciate insurers being willing to be flexible at times with their risk appetites and policies, looking at a client’s holistic situation to either hold business or write new business.

CGU

3.59

QBE

3.57

Allianz

3.51

Industry average: 3.23 Insurer

Ranking 2013

Movement

CGU

2

1

QBE

1

2

Allianz

4

3

Vero, Zurich

3 (Vero) 5 (Zurich)

Lumley

6

(Vero)

Ranking 2014

4

(Zurich) -

5

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INSURANCEBUSINESSONLINE.COM.AU

PRODUCT INNOVATION COMMISSION rokers appear to be nonplussed by major STRUCTURE

B

insurer product innovation across the board this year, with insurer scores remaining largely the same as they were last year. Zurich and Vero are still considered leaders in this category, while CGU has moved up to Bronze position.

Lumley was the biggest winner overall in the product innovation category, moving up from eighth to fourth, though it’s overall score was almost identical to the score it received last year.

Any product innovation occurring at Chubb did not seem to be communicated to insurance brokers, with the insurer dropping out of the top three Bronze rating last year to seventh.

While products are heavily commoditised in a range of areas, brokers do not seem concerned. In fact, brokers seem to be more impressed when insurers are able to take on risks outside of their accepted criteria, in order to hold on to a larger basket of client business.

T

here was one significant year-on-year mover in insurer commission structure rankings: Vero.

Ranked third (Bronze) last year by brokers in this category, Vero plummeted in brokers’ estimations to last (ninth) overall, with a huge 0.72 shaved off its raw score in this category.

The insurer is suffering some pushback since its move to reduce personal insurance home cover commissions from 22.5% to 15% from 1 February this year.

While commission structure is low on the importance scale (ninth), it is clear that any move downward can cause a rapid backlash in attitudes to a brand.

Zurich

3.45

Allianz

3.41

CGU

3.40

Industry average: 3.10 Zurich

3.32

Vero

3.18

CGU

3.13

Industry average: 2.94

Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

Vero

2

-

2

CGU

4

3

Lumley

8

4

Allianz

6

5

Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

Allianz

4

2

CGU

2

3

Lumley

6

4

QBE

5

-

5

BROKERS SPEAK… ON PREMIUM STABILITY STABILISATION “We are getting to a more stable premium, and understand increases if they are needed. Most insurers are not just putting up premium for the sake of it and are more willing to discuss options and ways of maintaining premiums.”

“It seems to be much better and more

stable in most lines. If anything, I think there is more scope for discounting where required.”

“I think premium stability has improved considering the large losses insurers have suffered, combined with the recent CAT losses. Taking these into account, I find premium stability is consistent to where it should be.”

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COVER STORY / BROKERS ON INSURERS

TRAINING AND DEVELOPMENT

D

espite being second to last on the importance scale for brokers, there is no doubt brokers appreciate the training initiatives on offer, and if they help with CPE points all the better.

Buried in this year’s survey feedback were a number of mentions from brokers of training and conferences, with particular support among brokers for “targeted product training”.

Despite decreases in scores across the entire top five ranked insurers in this area, Zurich held on to a significant lead ahead of competitors to achieve the Gold again this year. In fact, one broker said Zurich had “provided extensive training opportunities”.

The insurer did promise last year to continue to develop its broker development forums and training programs such as Generation Z, and it appears the insurer’s intermediary-only model continues to put it ahead when it comes to supporting brokers with training.

Vero held on to Silver, with further plans following its SME Index to provide tools and information

Zurich

Vero

3.04

2.86

CGU

2.71

Industry average: 2.37 Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

Vero

2

-

2

CGU

3

-

3

QBE

4

-

4

Allianz

5

-

5

that will help brokers develop their businesses throughout the year.

Interestingly, brokers thought insurers should rank exactly the same this year as last year.

BRAND RECOGNITION

A

h, ah, Allianz Insurance.

With a big-spending advertising campaign many would recognise, and avoiding any hits to brand reputation in recent years, Allianz continues to be the most recognised brand by insurance brokers and their clients. However, Allianz should take note. Though obviously important for retail business, brokers consider brand recognition (again) this year to be the least important element for them when it comes to servicing and supporting their clients.

CGU – which recently launched its “See It Through” advertising campaign targeting small business clients – is seeing the benefits, edging up to achieve Silver, while Vero also saw solid gains in this category, with sponsorships of the AFL Brisbane Lions and the Wallabies.

Comparatively, brokers felt QBE’s brand recognition had fallen in 2014, with the insurer’s score dropping, resulting in a fall from Silver last year to Bronze this year.

Allianz

4.17

CGU

4.03

QBE

3.87

Industry average: 3.30 Insurer

Ranking 2013

Movement

Ranking 2014

Allianz

1

-

1

CGU

3

2

QBE

2

3

Zurich

4

-

4

Vero

5

-

5

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11/06/2014 8:38:01 AM

INSURANCEBUSINESSONLINE.COM.AU

INSURER OF THE YEAR

Industry average

2.96 CGU

3.30

“

Zurich

3.36

Allianz

3.26

We value and will continue to work hard with you.”

That was the promise given by Zurich CEO Daniel Fogarty last year, after the insurer was named the inaugural Insurance Business Insurer of the Year for 2013.

Insurance Business is delighted to reveal that Zurich has kept its promise.

After a survey of a record 413 brokers across the market, Zurich has once again performed strongly across all 11 categories to be named Insurer of the Year for 2014.

Zurich took out seven Gold and two Silver in the 11 surveyed categories.

This ensured the insurer claimed its final all-important Gold rating as the Insurer of the Year.

Meanwhile, CGU has achieved the Insurance Business Silver – only just shy of Zurich’s overall score – while Allianz maintains its ranking at third overall, taking out Bronze.

Though praise was forthcoming for many insurers across the market in broker submissions to Insurance Business, Zurich continued to stand out as a leader for intermediaries.

Brokers claimed that “Zurich continues to be great to deal with”, “has improved”, “has good turnaround times”, and “provided extensive training opportunities”. They were also impressed by the insurer making “management accessible to clients”, which brokers said they felt “really reaffirms the threeway partnership”.

Being flexible to secure a deal, as well as making improvements to technology – such as a Motor Rego search facility on electronic business – were also appreciated by brokers.

However, brokers thought that overall there was less separation between the top insurers than was the case last year, with CGU and Allianz both within grasp of the Gold position. This should be motivation for all insurers to continue to strive to improve their broker proposition into 2015.

Insurer

Ranking 2013

Movement

Ranking 2014

Zurich

1

-

1

CGU

3

Allianz

3

Vero

2

QBE

5

2 -

3 4

-

5

METHODOLOGY

H

ow did we come up with the final Brokers on Insurers results?

Using our online newsletter and Twitter, we asked brokers to rate the performance of nine of Australia’s insurers: AIG, Allianz, Calliden, CGU, Chubb, Lumley, QBE, Vero and Zurich.

A record 413 respondents rated these insurers between one (very poor) and five (very good) over 11 categories, which were: claims turnaround times, new business turnaround times, brand recognition, BDM support, training and development, online platforms, commission structure, product innovation, product range, overall service level and premium stability. Broker respondents also rated the importance of each of these categories to them.

An average score was then generated for each insurer in each category, and an overall average was calculated based on each insurer’s performance across the 11 categories.

Brokers were also asked a number of questions about how insurers had performed in the most important areas, and for their best and worst experiences with insurers.

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COVER STORY / BROKERS ON INSURERS

ZURICH TO BROKERS: EVERYTHING WE DO IS ABOUT YOU

Daniel Fogarty, CEO, general insurance, Australia and New Zealand

Zurich has declared that brokers are the ‘heart’ of its business, after being named the Insurance Business Brokers on Insurers 2014 Insurer of the Year.

Daniel Fogarty, CEO of general insurance for Australia and New Zealand, said the insurance broking channel continued to be “fundamentally important” to Zurich’s business.

“Everything we do is about brokers. They support us, challenge us to do better, help guide our actions and are partners in development,” he said.

Fogarty said that, personally, he was once again thrilled and humbled by the win.

“Brokers don’t need insurers who are focused on their own internal matters; they want good market-led policy and meaningful contact” “This is fantastic news. It meant a lot to us to win the inaugural survey, but the bar lifts every year so to win again the second time around feels doubly rewarding.”

According to Fogarty, Zurich has continued to take on board feedback from brokers throughout 2013/14, and has continued to invest for them.

“We’ve continued to develop the products and channels brokers tell us they want – like enhancements to Z.streamXpress that bring efficiency, consistency and ease of doing business with us.

We’ll keep doing those things. We’re proud of the educational and development programs we make available to brokers. Zurich takes building the overall capability of the industry and its reputation very seriously.”

Zurich won Gold in seven of 11 categories this year, and Silver in two. The insurer is pleased that improvements in turnaround times took it from Silver to Gold in that category this year.

“We’ll continue to do what works across 2014/15. We’ve got a good reputation in claims.

We want to continue to build this into a great reputation,” Fogarty said.

“We’ve been consulting widely and we’re putting a key focus on accessibility, consistency, responsiveness and claims specialisation as well as enhanced online servicing capability.

“We also intend to boost the global thought leadership we can bring from our experience in over 200 countries around the world – especially in the areas of emerging risks – like cyber, as well as the benefits of our global international programs.”

Fogarty claims there is more that insurers as a group can do to support brokers in the market.

“It’s really quite simple – just put the needs of the customers and brokers first,” he said.

“Brokers don’t need insurers who are focused on their own internal matters; they want good market-led policy and meaningful contact.

Proactively highlighting the positive aspects of insurance, including the value of the industry as a career choice, are other examples.

“There is no doubt that this is a competitive market. With this recognition, it shows that many brokers trust Zurich and we will continue to work hard to increase our business and continue to be not only relevant but also prudent and sustainable for customers and brokers.”

Fogarty thanked brokers for supporting the insurer. “I greatly appreciate that brokers have taken the time to be involved. This survey is a very useful benchmark for us in terms of what we’re getting right and what we need to improve.”

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11/06/2014 8:38:23 AM

FEATURE / ON THE ROAD

GOING COASTAL

Westlawn has been a familiar name in northern NSW for 50 years. Its general manager of insurance, Chris Dougherty, tells Kevin Eddy how the firm and the region are growing together Go into any major town in northern NSW and you’re likely to see a common sight amidst the Coles supermarkets coffee shops and caravan parks – a branch of local financial services firm Westlawn.

Set up 50 years ago by Bill, Peter and Mike Dougherty to help the residents of Grafton get finance to afford television sets and sewing machines, the firm has expanded to cover 10 locations across the North Coast and Northern Rivers region of NSW. It also provides far more than finance nowadays, counting mortgage broking, financial planning, accountancy and tax advice, and insurance broking amongst the services it provides to local residents and businesses of northern NSW. Insurance general manager Chris Dougherty – son of company founder Mike – sat down with us on a sunny afternoon by the banks of the Clarence River in Grafton to discuss the company’s ethos, community roots and the future of business in northern NSW.

A LOCAL BUSINESS FOR LOCAL PEOPLE Westlawn Insurance is a relatively recent addition to the suite of services provided by the firm – but one that’s been a very successful venture for the company, explains Dougherty.

“Westlawn got into insurance in 1998, when Aon were selling a lot of country branches,” he says. “At the time, the Grafton Aon office was behind our finance offices. The manager walked around the corner, sat in my father’s office and said ‘you should buy the insurance business’. My father said ‘OK – let’s negotiate’, and that’s how the insurance portfolio began.”

While the Aon book formed the core of Westlawn’s portfolio, the business has expanded significantly over the years, with insurance brokers operating out of Westlawn branches in Ballina, Casino, Coffs Harbour, Grafton, Kyogle, Lismore, Murwillumbah and Yamba.

NORTH COAST NSW – STRUGGLING SECTORS AGRICULTURE “It’s been a rough few years – this area comes in and out of drought and flood, so you cop it both ways! Insurance costs have certainly gone up over the last few years and cattle prices are down. From an insurance point of view, farmers are looking closely at cover and cost; they might cut stuff out or shop around.”

TIMBER “This industry has also struggled due to floods - they can’t get their gear in to operate. The larger guys are coping as they renew their contracts regularly, and smaller guys usually have pockets of their own land. It’s the guys in the middle who are being really stretched - several say that if something were to happen disaster-wise, they probably wouldn’t reopen.”

TRANSPORT “A significant proportion of our insurance portfolio is made up of transport-related firms. From an insurance perspective, we’ve seen a higher takeup on management liability from them. There’s more pressure to get risk management right and ensure they’re compliant from regulators and contracting companies.”

The range of other services Westlawn provides means there’s a steady stream of new leads coming into – and exiting from – the insurance business too.

“Different parts of the business lend themselves to different referrals – accountancy is a good insurance referral source, for example, as is our lending arm when they’re providing business finance,” says Dougherty. “On the flip side, we often refer clients to financial planning for life insurance.”

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INSURANCEBUSINESSONLINE.COM.AU

You never know what the scruffy bloke in his thongs and board shorts could own. If you look after him, you could pick up a lot of business

While internal referrals are important, Dougherty stresses that the relationship with the customer is paramount.

“We’re always listening to see where there are opportunities but we don’t want to be like a bank, forcefeeding other products,” he adds. “We prefer to take a soft sell approach. There’s no reason to push a service if a client is happy with who they’re currently with.”

Relationships and top-quality service are essential, he continues – especially in town where everyone knows your name.

“We see our clients every day, whether it’s in the office, on the street or at kids’ sport or wherever. You have to be able to stand in front of them, and assure them that their claim is being dealt with.

“Westlawn has always tried to provide a community service, even from its earliest days of providing loans.

That’s at the core of our business philosophy – we’ve

always tried to support the community both professionally and through efforts like sponsoring local sporting clubs.”

DOMESTIC BLISS? That sense of being embedded in the local communities also flows through to the makeup of Westlawn’s insurance portfolio. A relatively large proportion of its clients – one in five – is a domestic client. Add rural customers to the mix, and they count for more than one-third of the portfolio.

Dougherty admits that retaining those clients in an environment where low price and online delivery are compelling draws for insureds is a challenge. Even so, he views the changing environment as an opportunity to show how brokers add value.

“People still want to talk to someone,” he says. “The challenge is getting in front of the person when they’re

Kevin Eddy is editor-at-large of Insurance Business

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FEATURE / ON THE ROAD

THE LIGHTER SIDE IB: How do you take your coffee?

CD: Flat white or cappuccino with two sugars.

IB: AFL, NRL, soccer or other?

CD: I’m better versed in rugby union, but I follow league as well.

IB: What’s the strangest thing you’ve been asked to insure?

CD: A pair of breeding ostriches!

Sea- and tree-changers either have to buy themselves a job by purchasing an existing business, or they need to bring their job with them confronted with a cheap price on the internet.”

Westlawn has chosen to fight fire with fire, hiring a dedicated social media marketer and introducing a wide-ranging digital strategy.

“We’re trying to educate people about why they should use a broker via social media – our Youtube channel and Facebook page, as well as regular newsletter.

“However, that’s only happened in the last 12 months, so it’s early days in terms of impact. But we are getting the message out there.”

Cutting out domestic insurance lines isn’t an option.

“We’ve considered doing a deal with one insurer and providing a low-touch service, but I don’t like that. We’re an insurance broker and we should be providing options,” says Dougherty. “Domestic clients can be fixated on price, but we don’t want to turn away people who walk in the front door and ask for a quote on their house.

“You never know what the scruffy bloke in his thongs and board shorts could own. If you look after him for his personal insurance, you could pick up a lot of other business.”

A CHANGING LANDSCAPE On the commercial side, the northern NSW region

encompasses a diverse mix of industries.

Dougherty highlights that several of the traditionally strong sectors – agriculture, timber and transport among them – are facing tough times (see boxout). The rise of the sea- and tree-changers is bringing a new wave of clients to Westlawn’s doors, too.

“We’re definitely seeing larger numbers of seachangers and tree-changers moving here to work,” says Dougherty, who himself took the tree-change route by moving back to Grafton in 1998 after a stint in the Sydney police force.

City dwellers decamping to the area basically have two employment choices, he adds.

“They either have to buy themselves a job by purchasing an existing business, or they need to bring their job with them – which is often telecommuting.

In fact, we see quite a few people who are working remotely from a home on the north coast and visit Sydney twice a month. We expect that to proliferate.”

The tidal wave of grey nomads is also seeing a longoverdue boost to the north coast tourism industry, particularly on the coast. Indeed, a stroll down the main streets of tourist favourites like Sawtell (south of Coffs Harbour), Yamba and Byron Bay and you’ll see significantly more artisan bakers and butchers, highend cafes and classy bars than even five years ago.

It’s not just the communities on the coast who are benefitting, though.

“We’re also seeing a drive in inland towns like Grafton and Casino to be RV friendly, opening up showgrounds for overnight campers and so on,” says Dougherty. “Councils are certainly looking at measures to boost tourism seriously.”

Dougherty thinks the future is generally bright, especially given the steady stream of sea- and treechangers coming into the region.

“Admittedly, coastal areas look to have more growth potential,” he comments. “There seems to be a bit of action in places like Coffs Harbour, Ballina and Byron, particularly from people moving businesses north because it’s cheaper to do business. I can see that continuing in the coastal areas.

“For regional areas like Grafton, though, it depends on the proactiveness of local councils in attracting business investment and new industries to replace those that might be slowing down,” he adds. “Overall, I don’t see any downside over the next few years though. The trick is to manage the cycle and adapt to the changing business environment.”

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FEATURE / SPORTS INSURANCE

INSURING FOR SCALE

THE

PENALTY SAVERS

Brazil’s 2014 FIFA World Cup is about as big as sporting events get. But as Sportscover’s David Lamb explains, the insurance industry has all the risky angles covered As sporting events go, it just doesn’t come much bigger than the FIFA Soccer World Cup. The biggest single-event sporting competition in the world and the world’s most widely viewed sporting event, the 32-team contest is a truly galvanising global sporting event. An estimated 715.1 million people in 204 countries watched the 2010 final in South Africa.

However, with the euphoria comes risk, making it just as big for the insurance industry.

David Lamb, CEO of specialist provider of sports insurance, Sportscover, says large-scale international events like the World Cup can present what at times appears like a “logistical nightmare”, with many “moving parts” spread across multiple venues.

While insuring these risks might seem daunting, Lamb says insurers have it covered.

The insurance considerations for largescale sporting events vary widely.

As Lamb explains – and as is the case with the World Cup – it is often a function of the location and venue.

“While Rio might actually be a great place for a party, it does come with a number of social issues, and issues in relation to venue arrangement, so from an insurer’s perspective, in this case the coverage required will have many, many different facets.”

There are the usual covers that one might expect.

Property insurance, for example, will be taken out by organisers for the actual facilities being used, such as the World Cup stadium.

Meanwhile, liability insurance will cover the possibility of third parties being injured or killed, with cover expected for this World Cup to tally in the tens of millions.

“The most significant single risk is a stadium collapse or stadium fire that causes multiple injuries,”

COMFORT FOR CONTINGENCIES When it comes to the World Cup and other sporting events – especially on such a large scale – it doesn’t get much more unique for insurance providers than contingency insurance.

Brokers who deal regularly with sport will know that large events, like the World Cup, often create great opportunities for businesses to capitalise on the fan fervour and hype.

“Lots of retailers or sponsors or commercial partners like to offer a luxury prize or cash sum, and they can cover the chance of someone winning,” explains Sportscover’s David Lamb.

A retailer of electrical goods might, for example, offer to refund the price of a TV if the Australian soccer team scores more than five goals in all their World Cup games. However, they are actually able to cover this possible contingency with insurance – something that the experts in sports statistics, like Sportscover, can provide through brokers.

Lamb says contingency insurance is increasingly popular for large-scale events. “We did lots of that in the Beijing Olympics, we did a lot of that in Sochi, we are doing a lot of that for the Commonwealth Games, and we are writing plenty on the World Cup.” And brokers may be missing out. “To be honest, it’s an area many brokers are currently missing out on, and they could do more and generate new revenue with a bit of proactivity.”

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DAVID LAMB, CEO, SPORTSCOVER Lamb says. “That is the most common and most significant exposure from a liability perspective.”

There are also specialist insurances. Travel insurance, for example, will cover people such as athletes travelling to venues across the globe, from Europe to Asia and South America.

And there is one specialist risk, one that many do not like to think about, especially following the poignant example presented by the 2013 Boston Marathon – terrorism.

“Some countries are safer than others, and some countries have a lot of political unrest,” Lamb says.

“We saw that in the lead-up to Sochi; fortunately, nothing happened, but political and terrorism risks are genuine around the world, and people have to look at that.”

Some large-scale sporting events also face the added and unpredictable risk of being called off.

Insurers and underwriters take care of this with cancellation and abandonment insurance.

“Many events are all-weather events, but some are dependent on a set of weather circumstances,” Lamb says. “If there’s a triathlon, for example, that requires certain weather conditions; if the wind and rain is so bad you can’t hold it, then there is obviously some recovery of organiser costs required.”

David Lamb is CEO for Sportscover Australia, with responsibilities spanning Australia, NZ and Asia. It’s a role he has held for the last two and a half years and comes well qualified for, having previously played, umpired or coached cricket, AFL and basketball. These days he scuba-dives for fun and has a newfound love of triathlon; he is currently on a mission to complete five Olympic-distance triathlons in five different countries over the next two years.

Prior to joining Sportscover, Lamb ran major and multinational accounts at AIG and helped lead AIG successfully through the GFC. Amid all the naysayers, AIG kept over 90% of the accounts, a result that is still the achievement he is most proud of.

Building on 25 years of success and a reputation for unrivalled sports expertise, Lamb has introduced a number of business disciplines and cultural changes at Sportscover, including a collaborative approach to business planning, a rigorous large-claims peer review process and a formal mentoring program to develop emerging staff. Recognising the need for life balance, Lamb also introduced a volunteering program assisting a local intellectually disabled football team, as well as a program (aptly named ‘Supporting You in Sport’), that grants staff either time off to participate in sport, or financial assistance with things like memberships.

Lamb is a director of Vicsport, and is focused on Sportscover continuing to lead the sports and leisure insurance marketplace, and grow their presence in the region.

A GOLDEN BOOT

Lamb says the clubs themselves have to make sure they are protecting their investments. “If one of those players was to suffer a career-ending injury at the World Cup, the employer will say, ‘I can no longer have him on the pitch and I’ve probably got to pay his contract out, so I’ll need some insurance so I can go and buy a player of similar value’.”

For the World Cup, the biggest ticket insurance item – by far – is protecting the athletes.

“Those running around the pitch in the World Cup are incredibly valuable assets to their respective clubs,” says Lamb.

In fact, Lamb estimates the premium spend on personal accident insurance for superstars of the soccer world will be in the tens of millions, and maybe even triple figures.

Typically, individual countries and national associations insure their own athletes to varying degrees. Such domestic cover might contain exten­ sions that name a particular player and say that if that player is playing on international duty they are covered. But these policies will contain a “reasonable limit”, which Lamb says will be nowhere near what is required for some of the bigger names in the game.

“If you look at the highest-paid players from all countries, whether they be from Spain, South America, the UK or Europe, some of these guys are paid incredible amounts of money; so there will be significant insurance policies in place guarding against injury by those players that might prevent them returning to play.”

Insurers and underwriters play key roles in making events like the World Cup a success, with impacts on the lives of both organisers and players at the front and back end.

Before an event even begins, they play a key role in risk management, with Lamb giving the example of Sportscover’s in-house risk management arm, Venue Rating Agency. “What we do is basically go to venues around the country, and in fact outside the country, and assess the quality of the venue and set in place risk management standards.”

At the back end, Lamb says claims handling is critical – as in other insurance lines – because that’s when people get to sample the product. “Otherwise they have just bought a piece of paper.”

Lamb says Sportscover aims to ease the claims process by introducing both clients and brokers to claims relationship managers who may later need to handle their claim. “When a claim does occur, it’s not the first time you are meeting someone, because it’s never a great time to meet your claims manager for the first time when you have got a claim.”

INSURING FOR SUCCESS

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FEATURE / PROPERTY INSURANCE

BRICKS, RISK AND MORTAR

Property insurance has always been a staple business line for brokers.

Insurance Business went on a mission to get inside the heads of the nation’s leading property insurance pundits, to find out what’s in store for products, premiums, competition and customers in 2014 Depending on what part of the market you play in – and where you are based – property insurances may have been a tough game, or an easy one, over the last few years.

And as highlighted by our Brokers on Insurers Survey for 2014, brokers are either full of praise – or highly critical – of the insurers who are delivering products to their customers.

So what are the insurers actually thinking?

Insurance Business asked leaders in the field for their take on four key areas shaping the SME property insurance market – product, price, competition, and the customer.

PRODUCT

changes this year would most likely be cosmetic.

The current focus on price, and improving the accuracy with which we can evaluate risk, means product development has taken somewhat of a backseat. There is the possibility “bare bones” covers may start to emerge, for larger and catastrophe loss exposures. As property cover for small to medium enterprises has mushroomed over the past decade, pricing has also seen some necessary increases. So we think more bare bones-type policies, reducing cover to only include the key fundamentals, will potentially start to be introduced to minimise these growing costs and help support affordability.

6.25%

The proportion of the market that expects property premiums to be flat or show a marginal 0–5% increase on last year Source: Aon’s 2014 Australasian Risk Survey

Andrew Norris, QBE: As property insurance is such a mature product, any

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Michael Badger, ACE Group: The market provides broad coverage on property programs and there is pressure from brokers to expand limits further in response to market competition. It is clear that brokers and clients have high expectations in relation to obtaining tailored coverage for their property portfolios, and this is an area ACE takes pride in delivering on.

Neil Dempsey, Assetinsure: We have not seen any significant changes in product or coverage.

In some cases requests are being made to implement higher sub-limits. Most online platforms have pre-agreed wordings and standardised endorsements to include the most common covers.

Typical of a soft market you may see more machinery breakdown covers being included under the ISR. Jarrod Wilson, CGU: Over the last five years, SME policies have been expanded considerably to include coverage that is similar to ISR product offering. Technology innovation has provided greater flexibility on policy systems and has enabled us to tailor policy coverage to meet the changing needs of both customers and partners.

PRICE Jarrod Wilson: With more sophisticated pricing models, we are able to better understand and rate individual risk and to establish pricing based on that risk. If the risk profile improves, this will be reflected in our pricing. Reinsurance rates are holding up in both our SME and medium-commercial business. Our focus remains on improving our service and strengthening our offering.

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Neil Dempsey: We feel that the SME market is competitive but that pricing is generally more stable than commercial and corporate business.

We have experienced requests for significant rate reductions on commercial accounts and we will review them on a case-by-case basis.

The problem with comparing rates from one year to the next is that it does not always reflect the true level of deterioration if deductibles come down and sub limits go up.

We will see continuing downward pressure on rates due to growth expectations and surplus capacity.

CHANGE IN PROPERTY PREMIUMS AT RENEWAL 10% 8%

7.95%

6%

4.25%

4%

3.98%

3.58% 1.82%

2%

1.05%

0 -2% -4% -6% jul 12-Dec 12

Oct 12-Mar 13

Jan 13-Jun 13

Apr 13-Sep 13

Jul 13-Dec 13

Oct 13-Mar 14 (Forecast)

Source: Aon Commercial Insurance Update, Q1 2014

10/06/2014 1:54:41 PM

FEATURE / PROPERTY INSURANCE

Scott Condren: The SME market is very competitive at the moment, with a growing number of insurers increasing their appetite in this market. Larger corporate customers with a strong culture of risk management are able to achieve premium savings in the current climate.

If they can demonstrate how they are mitigating against risk, they can make a real difference to their premium costs and invest the savings back into their business.

Andrew Norris: Overall we’re expecting the market to stay highly competitive while catastrophe loss experience remains benign, although there are a number of other factors also

Competition is strong amongst property insurers and driven by abundant available capital. Some of this capital is being provided by non-traditional insurance capacity seeking better returns than otherwise available in a low interest rate environment Michael Badger

playing a role in fostering competition. The number of new players entering, and seeking entry into the market, is one which has been having an impact for the last few years. The current change our industry is going through, in terms of mergers, acquisitions and restructuring operations, is also likely to be a key driver, as underwriters and brokers look to position themselves to best take advantage of any potential gains that may come from organisations going through these exercises.

COMPETITION Michael Badger: Competition is strong amongst property insurers and driven by abundant available capital. Some of this capital is being provided by non-traditional insurance capacity seeking better returns than otherwise available in a low interest environment. Insurance buyers will continue to benefit from competition whilst insurers remain profitable. In 2014, as with every year, underwriting discipline will underpin the ACE approach.

Neil Dempsey: There is a surplus of capacity in the Australian market and this will drive a more competitive environment for as long as companies want generic growth. That outcome will not be achieved over the coming year as it will be hard to grow if rate reductions continue to be supported at the pace we have seen over the last 24 months. Other factors driving

THE PROPERTY INSURANCE TRENDS OUR EXPERTS ARE WATCHING Andrew Norris

Scott Condren

Jarrod Wilson

Michael Badger

Neil Dempsey

Premium segmentation

Multi-line products

Technology innovation

Broker-developed trading platforms

Property rates

There is an ongoing focus on improving premium segmentation and, in particular, ensuring each customer can be matched to their actual risk profile, on the most detailed and individual level where possible. We’re actually seeing this across all commercial and personal line classes.

The major trend this year is for insurers to create multi-line product packages. Multi-line packages can minimise any coverage gaps and also maximise savings. For example, insurers can package property cover with liability, commercial motor, workers compensation and marine cover.

Investment in our technology capability has enabled us to increase the sophistication of our pricing models and significantly improve our data capability. As a result, we are able to deliver smarter pricing and continue to write business that delivers sustainable long-term performance;

We are seeing continued growth within broker developed trading platforms where a panel of insurers bid for each account forming part of a portfolio of risks. This is intended to maximise competition amongst property insurers. At the same time insurers are seeking to achieve their budget goals.

Property rates are generally softer, particularly in the commercial and corporate market. Low hazard occupancies started the trend in the second half of 2013 and without any major market losses in the early part of this year the focus has shifted to occupancies that typically have higher rates.

Andrew Norris is acting national product manager at QBE

Scott Condren is Vero’s national manager of property & corporate engineering underwriting

Jarrod Wilson is CGU’s national manager, SME

Michael Badger is property manager, Australia & New Zealand at ACE Group

Neil Dempsey is national manager property at Assetinsure

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competition are reduced costs of reinsurance over the last 12 months and a relatively benign loss environment.

Andrew Norris: Competition is high and we think it will continue to be high in those segments where each insurer is gaining a positive return.

(See responses above as to why.) At the other end of the scale, as price is such a focus at the moment, we expect that in those segments where insurers are finding the return to be less than optimal, the pricing competitiveness will be much lower, reflecting insurers’ risk appetite in these areas.

Scott Condren: The property insurance market is currently very competitive for both SME and corporate customers. There is a good supply of capacity available at the moment and many reinsurers are looking to provide additional capacity as the year progresses.

Jarrod Wilson: More broadly, the SME market is a growth market and competition remains high.

Modernising our core technology has enabled us to remain aligned with emerging customer

expectations and stay well ahead of our competitors. Barriers to entry are largely around scale. It’s difficult for a new market entrant to develop the scale quickly in both SME and midcommercial. Whilst we keep abreast of our competitors, we are not driven by what they do.

CUSTOMERS Scott Condren: Many SME owners don’t understand the value of using a broker and have been looking elsewhere for their insurance needs. However, the advice and expertise that brokers provide can prove invaluable to these customers, so more needs to be done to promote the benefits of using an insurance broker. Vero is committed to highlighting the many benefits of using brokers. Fortunately there are plenty of good stories to tell, because those customers who do use brokers have clearly shown that they understand the value. For example, the 2014 Vero SME Index showed that 92% of broker clients are satisfied with the service they receive.

Vero will continue to champion the cause of

Michael Badger, ACE Group

Gary Dawson, Axis Underwriting

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FEATURE / PROPERTY INSURANCE

Scott Condren, Vero

Jarrod Wilson, CGU

brokers and the importance of quality, expert advice.

Neil Dempsey: A number of business sectors are being affected by a downturn in the economy and it is understandable that the price of insurance protection is under scrutiny. Loss free accounts will more than likely secure better terms and conditions over the next 12 months. Coverage is unlikely to change a great deal with most property policies enjoying relatively broad cover and generous

sub-limits.

Jarrod Wilson: We know our customers are relying more on digital platforms as a touch point for accessing information about our products and services. Digital is about ensuring we find ways to extend our capabilities to our partners and customers in a cost-effective and sustainable way.

Our insureds see their businesses as unique.

They therefore expect that their insurance should be unique to them – so they are looking

ADVICE NOT TRANSACTION IS KEY, BROKERS WARNED SME property insurance experts say insurance brokers will need to be increasingly clear about the value proposition they provide their clients as the insurance market changes.

Citing the increasing impact of technology on property insurance delivery, insurers say brokers can only remain relevant by focusing on their value-add for the client.

“There is a much greater focus than there has been previously on developing online, front-end ‘self-serve’ models for SME clients,” says QBE’s Andrew Norris.

“This segment of the market generally attracts micro businesses balancing price with delivery efficiency. This is why we’re starting to see more aggregator models in this space.”

AssetInsure’s Neil Dempsey says this move to transacting via the web has other benefits luring in brokers, which may not be possible in other insurance lines.

“Some insurers are happy to support the development costs through higher commissions in return for greater access to a broker’s portfolio,” Dempsey explains.

“To put this into context, the standard open market commission used to be 15% but we have seen some insurers paying substantially more.”

However, Norris says online aggregation is in opposition to the ‘traditional’ broker model.

“While these models can help meet customers’ price objectives, they tend to have the effect of distancing the broker from the client and reducing the focus on providing an optimal solution outcome.”

Norris says this leaves a “real opportunity” for brokers with a traditional full-service, advice-focused model to promote the full advice solution to their clients.

CGU’s Jarrod Wilson says brokers should focus on providing value – not the transaction.

“The ‘transaction-driven’ mindset has created a focus on maximising margins and reducing touch

Some insurers are happy to support the development costs through higher commissions in return for greater access to a broker’s portfolio Neil Dempsey, Assetinsure points, while driving commoditisation and standardisation of products and services,” Wilson says.

“Moving from a transaction-driven model to an advice-driven model – offering real value to customers based on deep insights – will help brokers to meet customers’ emerging needs and increasing expectations.”

Vero’s Scott Condren agrees, saying customers are becoming increasingly educated about insurance, meaning that brokers have to better articulate the expertise they offer.

“For example, there is a high incidence of underinsurance in the SME market, which can arise when these businesses arrange their own cover,” he says.

Risk management is one value-add that brokers can offer property insurance clients. “Brokers have a huge role to play in advising customers about the risks they face and encouraging them to take a proactive approach to risk management,” Condren says. “A strong relationship between brokers, insurers and customers will lead to more collaboration and ultimately better service.”

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WHAT’S THE OUTLOOK FOR COMMERCIAL STRATA? Trends “While the strata market has been relatively stable there are rumours of new entrants about to enter the market and we expect to see at least one new entrant in 2014. Whether new entrants concentrate on the much larger residential strata market or also participate in the commercial strata sector is yet to be seen.”

Pricing “Pricing is competitive but the high levels of discounting seen in the broader corporate property market have not been apparent in commercial strata. Strata does have frequency claims, so the scope for rate cutting is limited.

Increasing price competition in the broader property market is likely to have some effect on commercial strata and we expect to see some rate cutting in 2014.”

Axis Underwriting managing director, Gary Dawson

for policies which are aligned to their industry segment and are tailored to suit their individual circumstances.

Customers are also seeking to better understand insurance. For example, they want to understand how to set a sum insured correctly and to ensure they have covered their key assets appropriately and are making informed decisions about their policy coverage. Business interruption insurance is one area of insurance where we know customers are seeking more advice. We work closely with our brokers to help them educate customers on policy coverage so they can make better informed decisions when choosing a policy cover.

Michael Badger: The continuing changing

Brokers “There are a relatively small number of brokers who specialise in the strata market who know the sector extremely well and set the agenda in terms of service standards and support for strata managers who are their clients.”

economic and business climate sponsors different needs and considerations by insurance buying clients.

Product understanding, communication and responsiveness are key determinants in selecting insurance programs and products. Organisations have a wide range of risk measurement and treatment platforms with insurance forming part of risk management strategies. At ACE, we never lose sight of the fact that we are helping businesses safeguard against their unique property risks so they can grow and prosper.

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4/07/2014 8:18:41 PM

FEATURE / D&O

In association with

WHEN DOES COVER

MEAN COVER?

Subtle differences and external factors can significantly affect D&O coverage. Patrick Boardman explains The availability of D&O insurance to cover any claim is predominantly dependent on its terms and conditions, although there are also other relevant factors in play. Those issues are considered in no particular order in this article.

STATUTORY CHARGE

Patrick Boardman is a partner at Wotton + Kearney. He has worked in insurance litigation in the UK and Australia since being admitted in 1990.

He has extensive experience and expertise in the areas of Directors & Officers, Professional Indemnity, Investment Managers and Fidelity.

An issue which has fallen off the radar recently, but could still yet rear its ugly head, is the ability of all cost inclusive liability policies (not merely D&O policies) to be able to provide advance payment of defence costs and/or pay competing claims in circumstances where there is a near full limit loss. This issue is still to be determined with absolute certainty in Australia, following the New Zealand (NZ) Supreme Court decision in Bridgecorp The Australian position is currently that set out by the NSW Court of Appeal in Chubb v Moore which held that the corresponding New South Wales (NSW) legislation did not apply to litigation outside NSW and further, did not create a charge on insurance monies which were payable in respect of defence costs, nor prevented payment of settlement on a first past the post basis.

That decision is subject to an outstanding application for leave to appeal to the High Court, however the hearing of that application is dependent on whether the underlying litigation in the Great Southern matters are settled. Irrespective of whether or not the Great Southern litigation is settled, given the significant importance of the issues in question

Insureds and brokers should review their retention and aggregating policy provisions to ensure that the available cover is as intended 40 | JUNE 2014

and the stated intent of a leading plaintiff law firm and litigation funder to challenge the Chubb v Moore decision, it can only be a matter of time until those issues are raised before the High Court, either in the Great Southern litigation or a similar matter. Until then, there is no guarantee that the High Court (or indeed another Appellant Court outside NSW, in particular ACT and/or Northern Territory) will follow Chubb v Moore and will not otherwise adopt the NZ Supreme Court reasoning. Consequently the issue ought still be a factor in an insured’s risk portfolio.

Notably, the majority of the NZ Supreme Court noted that the insurer and the insured had made “a poor bargain because the policy had not been properly drawn, overlooking the effect of the statutory charge”.

To the extent that an insurer may be entitled to refuse to pay defence costs, by reason of any statutory charge, it could lead to the broker being sued for allowing an insured to enter such “a poor bargain”.

RETENTION Another recent factor in determining the extent of available D&O cover is the applicable retention. Two high profile decisions in the UK showed the potential catastrophic effect of having multiple claims, a large per claim retention and an aggregating provision that was held not to aggregate those claims, so that a separate retention applied to each claim. Given the size of the retention this effectively negated cover for claims totalling many hundreds of millions of pounds.

The issue has recently arisen in Australia in the matter of Brighton Hall Pty Ltd (in liq) where the Court held that a separate retention was applicable to each and every claim in an investor class action regarding advice to invest in Westpoint Companies.

This was on the basis that the required commonality of claims to satisfy the criteria for a class action fell short of the criteria of the aggregating provisions of the policy. Insureds and brokers should review their

INSURANCEBUSINESSONLINE.COM.AU

CYBER RISKS retention and aggregating policy provisions to ensure that the available cover is as intended.

FINES AND PENALTIES Another issue affecting D&O coverage is the ever increasing exposure of directors and officers to statutory fines and penalties. Most D&O policies provide cover for fines and penalties, but that is limited to the extent allowable by law and public policy. As a very general rule, there used to be a distinction between criminal and civil fines and penalties; the effect of the former was to punish the perpetrator and deter others, whereas the latter was considered more compensatory in nature. Accordingly, it is against public policy for the former to be paid by insurers (as to do so would negate their very purpose) whereas the latter could be paid by insurers. However, the distinction between civil and criminal fines and penalties has become blurred with an ever increasing number of statutes imposing ever increasing penalties.

Another general rule was that the larger the fine, the more likely it was to include punitive and/or deterrent aspects, which meant that it was more likely be uninsurable. However, with the ever increasing level of fines and penalties, including certain instances where the courts/tribunals have increased the penalties merely because of available insurance, the extent of available coverage for such fines may not be readily apparent, particularly at the outset of a case.

PROFESSIONAL SERVICES EXCLUSION Another coverage limitation is the exclusion of professional services claims, either by direct exclusion or coverage being limited to activities undertaken in a directorial capacity. Distinguishing what may be a professional or non-directorial service is not always easy to determine. In a recent case, the D&O insurer relied on a Professional Services Exclusion to deny liability for claims arising out of a director’s statutory declaration which was provided to justify progress payment claims by the construction company. The insurer argued that the making of the statutory declaration was in the rendering of a professional service by the company. The Federal Court disagreed and held that the compilation of records to justify progress payment claims was a necessary routine task in the conduct of the company’s business which was not required to be undertaken by a professional person or with any professional assessment.

Risks need to be assessed to ascertain the extent to which any professional indemnity cover may be

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An emerging risk under D&O policies is cyber risks.

While D&O cover currently extends to such risks, as this area of risk expands, we envisage that D&O insurers will seek to carve out such cover, either by way of exclusion or by way of an additional extension.

required and, if it is, it is important that: • the PI and D&O cover be obtained from the same insurer so as to minimise the risk of a dispute about whether an activity was directorial or professional in nature; and • insurers who offer both PI and D&O should be aware that the courts interpret professional services exclusions far more narrowly than PI insuring clauses. In order to avoid the risk of a large claim hitting both the PI and D&O policies, an appropriate non-accumulation clause or exclusion should be incorporated.

SEPARATE SIDE A COVER It is also important that directors and officers have a separate Side A element or at least some form of lifeboat D&O cover that would provide personal cover should the limit of liability be otherwise exhausted.

Until very recently, plaintiff lawyers appeared content to allow ASIC or other regulatory bodies to undertake investigations of potential breaches prior to issuing their claim. This allowed them the benefits of the results of that investigation when bringing any eventual claim. It also meant that directors and officers usually had available cover for the substantial costs of representations at such investigations and/or prosecutions prior to any claim occurring. However, recently a number of class actions have been instigated a matter of days after the relevant event(s) which were the catalyst of the claim were disclosed and/or discovered. This increases the potential for large claims to be determined (and therefore limits to be eroded) prior to any regulatory investigation being undertaken/finalised. Recent matters such as Opes Prime and ABC Learning show the importance of available insurance money in allowing directors to have a full defence to an investigation and subsequent prosecution.

10/06/2014 1:56:26 PM

BUSINESS STRATEGY / MARKETING

MEDIOCRE 8 MARKETING WAYS TO

‘Mediocre’ - that’s not exactly what brokers like to hear, but if you’re doing these ‘don’ts,’ writes coach Doren Aldana, you may be writing that all over your 2014

Little things make a big difference. That’s true in marriage, parenting, and in marketing yourself as an insurance professional. In the little time we have together, I want to remind you of – or, indeed, surprise you with – eight deadly marketing sins that insurance professionals commit and that threaten business growth in any market, especially today’s challenging one.

spend their time doing “urgent but not important” activities when they should be spending their time on “non-urgent but important” activities. Nonurgent but important activities such as planning and marketing generate continued and sustainable longterm growth.

SIN # 1 - WORKING ‘IN’ YOUR BUSINESS INSTEAD OF ‘ON’ YOUR BUSINESS

Last year, I was speaking at a national conference and had about 100 professionals in the room. I asked the crowd to hold up their hands if they had a current marketing plan that they use and refer to on a consistent basis. Only three hands went up!

Studies have shown that small businesses that create and consistently use marketing plans experience an average of 30% higher sales than their competitors. How would you like to increase your sales by 30% or more? Proactive marketing is the key!

Here are a few tips to help you create your marketing plan.

I was working with a consulting client recently who was in a sales slump. I decided to perform a very simple diagnostic. I simply asked him to email me a detailed list with all of his activities for the next three days, and then give me a call back. After reviewing his activities it was clear that he was in the “putting out fires” business because that’s where most of his time was spent. Rather than working “on” his business he was working “in” his business.

This industry professional (and you) should be spending as much time as possible working “on” your business doing things like planning and developing “marketing assets” that work while you’re not working. These are what I call “High Leverage Activities” because they allow you to leverage your time so you can reap a higher longterm payoff.

In his popular book, 7 Habits for Highly Effective People, Stephen Covey hammers this point home using his famous “Time Management Matrix.” Dr Covey emphasises that too many business owners

SIN # 2 - FAILING TO CREATE AND USE A MARKETING PLAN

Tip # 1 Create a plan for mining the gold from your existing database of prospects, clients and referral partners.

If done right, this will allow you to maximise your repeat and referral business. Think of ways to add value and cultivate the relationship with little meaningful touches over time.

Tip # 2 Create a plan to attract more referral partners and

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motivate them to send you more referrals more often. The key to success is to develop a compelling, unique value proposition that positions you as an irreplaceable, indispensable asset on their team.

newsletters, annual policy reviews, birthday campaigns, renewal campaigns, weekly email tips and relevant greeting cards – all of which are designed to stimulate repeat and referral business.

Tip # 3 Create a plan for generating qualified insurance leads independent of your clients or referral partners. I call this “Consumer-Direct Marketing.”

For example, you could launch your own Employee Insurance Benefits Program designed to get companies to endorse you to hundreds, even thousands, of their employees.

SIN # 5 - NOT TESTING AND TRACKING YOUR MARKETING EFFORTS

Tip # 4 Block schedule at least 30 minutes every day to implement your marketing plan in each of the above three areas. Plan your work and then work your plan!

SIN # 3 - FAILING TO IMPLEMENT SYSTEMS A system is a business process that generates predictable, consistent and reliable results day after day. If you want to see a good example of a system, simply visit a fast food franchise like McDonald’s or Wendy’s. Notice how they do the same things, the same way, every single time.

Unfortunately, most insurance professionals never take the time to “systematise” their business, which results in waste, chaos, and ultimately, lost sales. Sin # 1 is partly to blame for not getting around to creating and implementing systems.

SIN # 4 – NOT MARKETING TO YOUR CLIENT DATABASE

John Wanamaker’s famous 1886 quote sums it up very well: “I know that 50% of my advertising is wasted...

I just don’t know which half!”

There’s nothing worse than spending money on a marketing campaign and not knowing whether it worked. It’s even worse when you continue to spend money on a marketing campaign that you think is working, but really isn’t. Most insurance pros use the S.W.A.G. method for tracking their marketing – Scientific Wild Ass Guess!

The only way to invest in your marketing efforts with confidence is to test a campaign, track it and measure your results. That’s why I recommend always offering something of high-perceived value and low risk to motivate prospects to respond. For example, you could offer a special report, seminar or audio CD to get people to respond immediately via the phone or your website so that you can track your response. This strategy also allows you to capture your prospects’ contact information so that you can continue to follow up with them. Remember, the fortune is in the follow-up!

This insurance professional (and you) should be spending as much time as possible working ‘on’ your business doing things like planning and developing ‘marketing assets’

Many insurance professionals believe that once you “close the deal” and the happy client walks out the door, then the deed is done and you need to quickly move on to the next prospect. While that’s true, your next prospect (in the form of repeat or referral business) might have just walked out the door.

Many insurance professionals tend to think, “That deal is closed – they’re not going to buy another insurance policy any time soon so why waste my time on them? Let’s find a new prospect.”

Top producers, on the other hand, implement effective database marketing systems and, as a result, often get 60% to 70% of their business from their past clients through referrals and repeat business. That’s working smart, not hard.

In your marketing plan you should be including customer appreciation events, monthly or quarterly

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BUSINESS STRATEGY / MARKETING

SIN # 6 - NOT FOLLOWING UP WITH YOUR PROSPECTS Studies have shown that 81% of all sales happen on or after the fifth contact. If you’re an insurance professional and you’re only doing one or two follow-ups, imagine all the business you’re losing.

Not following up with your prospects and customers is the same as filling up your bathtub without first putting the stopper in the drain!

Here are four keys to developing a successful follow-up system:

1 2 3 4

Create a lead capture system that is accurate and reliable Develop compelling follow-up marketing campaigns that will drive traffic to your website or generate phone calls (i.e. weekly email tips, monthly client newsletter, etc)

Systematise the process so that it happens day in and day out, the same way every time Automate the system as much as possible using Client Relationship Management (CRM) software and/or an outside mailing house to do your mailings

SIN # 7 - ‘SPRAYING AND PRAYING’

Doren Aldana is considered by many to be Canada’s leading Mortgage Marketing Coach and has won the “Best Industry Service Provider” award two years in a row at the 2012 and 2013 Canadian Mortgage Awards. Visit: www.

SuperstarMortgageBroker.com

Believe it or not, not everyone is a good prospect for your insurance services. If that’s the case, why would you spend your precious marketing dollars trying to reach them? It doesn’t make sense. If everyone is your prospect, no one will be your customer. If you want to maximise your marketing magnetism, you’ve got to shift from being a vague generality to being a meaningful specific.

Unfortunately, too many insurance professionals blast their general marketing message using general marketing media such as radio, bus stop ads, newspaper ads, mass mail-outs, etc. I call this “spraying and praying”. This approach is based on the premise that if you just throw enough yogurt at the fan, something’s bound to stick. The problem is, unless you’re a big dumb company with a multimillion dollar ad budget and no requirement for a positive ROI, you can’t afford to waste a single penny on useless ads.

Instead of spraying and praying, narrow your focus onto a specific niche market that actually has a need for insurance and then market to people just like them. If your ideal prospect is an apartment renter paying $1,500+ per month, then find a policy

that suits their lifestyle and resources. Your response rate will go up and your cost of acquisition per client will go down when you begin to target your market.

Go narrow, deep and rich in your niche!

SIN # 8 - NOT DIFFERENTIATING YOURSELF Did you know that your prospect receives, on the average, over 3,000 marketing impressions a day!

With all that clutter you have to compete with, how do you make your insurance business stand out?

How do you differentiate your business in a way that separates you from the competition? Obviously, it’s not going to happen by following the herd and touting the usual “best rates”, “best service” and “unbiased advice”. It’s like marketing incest out there — everyone else is doing the same thing with ever decreasing results! You need to differentiate your business in a way that makes you stand out from the clutter and get noticed.

A simple way to do that is to keep a close eye on the marketing that really captures your attention and make a note of it. Then borrow and modify those strategies and ideas to create your own unique and compelling message. When in doubt, notice what everyone else is doing, and do the opposite.

The only way to invest in your marketing efforts with confidence is to test a campaign, track it, and measure your results CONCLUSION Let’s face it, most insurance pros are committing one or more of the above marketing sins. If you fall into that category, there is hope — you can repent and improve. My challenge to you is to take just one or two sins that are costing you the most in terms of profits and productivity, and focus on improving them first. Once you have them handled, move on to the next, and so on. Extraordinary business success is often the result of small incremental improvements over time.

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HOW TO ACHIEVE SUCCESS BEFORE IT’S TOO LATE

Still waiting for the right time to make those changes in your broking business or create the life you want? Well, time might be running out, argues Matthew Michalewicz

Planet Earth is four-and-a-half billion years old. The species you and I belong to, Homo sapiens, did not emerge until some 200,000 years ago. The oldest known fossils of modern humans are only 160,000 years old, discovered in Herto, Ethiopia. So out of the four-and-a-half billion years that this planet has been floating through the nothingness of space, we’ve been around some .0044% of that time.

Put another way, if our planet was exactly one year old, then modern humans would have only been around for the last 23 minutes. Measured on the same scale, if our planet was a year old, then your entire life would amount to half a second.

WHAT WOULD YOU DO IF YOU HAD ONE YEAR TO LIVE? We don’t appreciate this as kids. Time seems unlimited and goes by ever so slowly. We’re impatient to grow up, become adults, and enter the real world.

We imagine all the freedom we’ll have, all the things we’ll get to do.

But when adulthood finally arrives, we discover that we’ll be spending the vast majority of our “freedom” at work, paying bills, surviving, often in jobs we don’t like or don’t care about.

Life is not how we imagined it and disillusionment sets in. We spend our half second doing everything except what we really want, dreaming of the future, of some distant, faraway day when life will be different, better, when we can finally do the things we want. But as we grow older, time begins moving faster and faster, and our long-awaited day never seems to come.

The tragedy of life isn’t that we only have half a second. The tragedy is that we waste it. In my travels across continents, countries, and cultures, first as a serial immigrant and later as a businessman, I met people from every walk of life imaginable. I became obsessed by a single question: What would you do if you only had one year to live?

Why? Because I always received the same answer. With only a year to live, most people would quit work, spend time with family, see the world, and do everything they always dreamed of doing before it’s too late.

Their answers would be thick with emotion – not sadness or regret, but enthusiasm, eagerness. I felt they were about to set sail on some journey they often fantasised about but never actually took. With heat and fervour, eyes flashing, gleeing almost, they spoke of the many things they would do before death claimed them. And after the hundredth question and hundredth answer, I finally thought, Good God! Can we only live when we’re dying?

My impression of the world is that we spend life doing what we “have to” rather than what we “want to”. This comes across in many psychology and happiness studies, especially those related to work.

Harvard studies show that worker happiness is at an all-time low, with 74% of employees wanting to find a new line of work.

At heart, we would rather be doing something else.

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BUSINESS STRATEGY / LIFE IN HALF A SECOND

SO WHAT ARE YOU WAITING FOR? If we only had one year to live, our desire to start living – to use what’s left of our half second to the fullest – would become unstoppable and we would finally, finally, take action. But is that what it takes?

Must we be confronted with death to finally do the things we want? Is that what we’re waiting for?

Sadly, it seems so.

Death always seems a long way off, a concept almost, as remote and abstract as the dark side of the moon. We don’t appreciate our mortality or fully comprehend how little time we have, so we defer our desires for another day. It’s not until death becomes more tangible, inevitable, that we realise our time is measured and we spring into action.

We’re relaxed and laid back about the time we have left because we measure our age in “years lived”. We know that 50 is older than 40, and 40 is older than 30, but so what? What does that really tell us? Not much. It’s like knowing how many litres a car has used without knowing how many litres are left. The most important information is missing. So what would happen if we measured our age in “days left” rather than “years lived”? I bet we wouldn’t be as relaxed and laid back. I bet that death would become less abstract. Let’s try it.

The average life expectancy of the global population in 2011 is 70 years, ranging from 80+ years in countries such as Japan, Australia and France, to less than 60 years in South Africa, Laos and Kenya. Let’s assume you live in one of the sixteen countries where life expectancy is more than 80 years, or that you’ll beat the odds and live to be 80.

In either case, subtract your current age from 80 and multiply the result by 365. This is the amount of

“days left” you have – assuming all goes well and you don’t find yourself on the wrong end of “average”.

I’m currently 37 years old, so 80 – 37 = 43, and 43 x 365 = 15,695 days. So that’s it. That’s all I have left: 15,695 days. And there’s something more meaningful about “15,695 days left” than “37 years old”. I feel a sense of urgency, haste. There’s a countdown on my life.

I’m in a hurry to live. The world is right there, outside my window, in the blueness of the sky, over the horizon, begging to be discovered, touched, appreciated. It’s all there waiting for me – so what am I waiting for?

“I’m here to live, man, live!” I remind myself each morning.

I want to lie in the grass, underneath the burning sun and swirling clouds, wind blowing, seasons changing, with the raw earth under my fingernails.

From the largeness of the cosmos to the smallness of my little toe, I love life. And knowing that everything is ephemeral, fleeting, here one moment and gone the next, I’m not saving anything for later.

THERE MIGHT NOT BE A “LATER” Like the great motivators that preach from stadiums and pulpits, I want to live full and die empty. I’ve skydived, explored the great pyramids, sat next to the Moai on Easter Island, bungee jumped, owned Ferraris, driven 300 km/h, rock climbed above Machu Picchu, sailed the Mediterranean, scuba dived on wrecks in the Caribbean, photographed the Nazca Lines from a light plane, touched the giant tortoises on Galapagos Islands, met the Pope, worked with Lech Walesa, and dined with Arnold Schwarzenegger – I’m not waiting for anything.

That’s all I have left: 15,695 days. And there’s something more meaningful about “15,695 days left” than “37 years old”. I feel a sense of urgency, haste. There’s a countdown on my life 46 | JUNE 2014

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BOOK REVIEW | EDITOR’S CHOICE global colossus while he was in restaurants, factories, offices, or background. But I do know one his 50s. classrooms – waiting and deferring. thing: you’ve only got half a second.

Each morning I tell my wife and kids how much I There are thousands of Ilove see it on their faces, in their eyes.

And you might be content to use that them, as if I’ll never see them again – each year similar stories, as evidenced by They believe they’ve got all time in half second waiting and deferring, I’m living like it’s my last, bucket list and all. entrepreneurial statistics. Consider the world, so they wait and defer, waiting and deferring – never quite Do you have a bucket list? No? Then make one that the “over 55” category is putting off the things they “want to” knowing why or what for. do ittime, now, for while you still can, whileresponsible there’s still for starting 28% of all for and another “later”.

But not me. I want to close my life and strength in yourthey veins.

If you only one newhad businesses in the United States And when later comes, often eyes knowing I made the most of to live, dothey’ve it now. Nothing stop you.The truth is that it’s each year. feelyear it’s too lateyou’d – that waited would life – knowing I never waited and I amount of long. commitments, obligations only “tooor late” when you’re dead. andNo deferred for too But why never deferred. If I had more time, responsibilities.

That’s the only time when it’s continue to wait and defer because I would have done more. But because you measure truly lived” “too late”. Any time before you’reBut older today than you weretime in “years with the time I had, I did all I rather than “days left”, future seemsthat, unlimited, the dice are still in play, the yesterday?

What sense doesthe that make? could. That’s why I’m in a hurry; you defer doleft” everythingdealer you “have still has cards to deal, you still Yousowon’t have and any wait. more You “days that’s why I don’t have a moment have tomorrow What’s to lose. There’s a countdown on to” and than very you littledo of today. what you “want to”.

Buttime. what leftare is what’s left, andfor? youWhen must make my life. you waiting you’re old and frail?

No time to lose theWhen most of it.

And guess what – your desire has evaporated? When your loved It’s not over till it’s over.

But you Harlan David Sanders certainly there’s a countdown on that the “over 55” category is responsible for starting ones are gone? don’t have any28% timeoftoall waste, nobody made the most of his “days left”. yours as well. new businesses in the United States each does. If you want from is life After a colourful lifeSTILL that included year.more The truth that it’s only “too late” when you’re WHY ARE YOU WAITING, DEFERRING? than the daily grind of work, farming, piloting steamboats, and only time when it’s truly “too late”.

I see people doing it every day, everywhere I go, in dead. That’s theroutine, Excerpted with permission retirement and death, you’ve only got selling insurance, he founded airports, restaurants, factories, offices, classrooms – Any time before that, the dice are still in play, the from the author Matthew half a second to do it.

Kentucky Fried Chicken at the age dealer still has cards to deal, you still have time. waiting and deferring.

Michalewicz. Life in Half To achieve success and turn your of 65, immortalising his eleven herbs I see it on their faces, in their eyes. They believe a Second is available on all dreams into reality, the only time and spices and becoming a multithey’ve got time inRay the world, waitever andhave NO good bookstore and online. you’ll is TIME now. TO LOSE millionaire in all thethe process.

Kroc so they putting off thehis things they “wantI don’t to” for notyou overare, till where it’s over. But you have any time Visitdon’t www.michalewicz. knowIt’s who diddefer, the same, beginning legendary another time, for “later”. to waste, nobody does.

If you want more from life com.au you live, or anything about your values transformation of McDonald’s into a And when later comes, they often feel it’s too late than the daily grind of work, routine, retirement and Excerpted with permission from the author – that they’ve waited and deferred for too long. But death, you’ve only got half a second to do it.

Matthew Michalewicz. Life in Half a Second why continue to wait and defer because you’re older To achieve success and turn your dreams into is available from all good bookstores and online. Visit www.michalewicz.com.au today than you were yesterday? What sense does reality, the only time you’ll ever have is now. that make? You won’t have any more “days left” I don’t know who you are, where you live, or tomorrow than you do today. What’s left is what’s anything about your values or background. But I do left, and you must make the most of it. know one thing: you’ve only got half a second. And Harlan David Sanders certainly made the most of you might be content to use that half second waiting his “days left”. After a colourful life that included and deferring, waiting and deferring – never quite farming, piloting steamboats and selling insurance, knowing why or what for. he founded Kentucky Fried Chicken at the age of 65, But not me. I want to close my eyes knowing I immortalising his eleven herbs and spices and made the most of life – knowing I never waited and I becoming a multi-millionaire in the process. Ray never deferred. If I had more time, I would have Kroc did the same, beginning his legendary done more. But with the time I had, I did all I could. transformation of McDonald’s into a global colossus That’s why I’m in a hurry; that’s why I don’t have a while he was in his 50s. moment to lose. There’s a countdown on my life.

There are thousands of similar stories, as And guess what – there’s a countdown on yours evidenced by entrepreneurial statistics. Consider as well.

What would you do if you only had one year to live? I always hear the same answer. Most people would quit work, spend time with family, see the world, and do everything they always dreamed of doing before it’s too late!

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FEATURE / TRADE CREDIT

A PERFECT TIME TO BUY

Complexity and hassle is holding trade credit insurance sales back for brokers, but Kirk Cheesman says clients could be the ones losing out

Kirk Cheesman is the managing director of National Credit Insurance (Brokers) Pty Ltd, a leading trade credit insurance broker. He can be contacted at kirk.cheesman@ nci.com.au

How often does a business ask itself, “What would happen to my company if our largest client failed to pay us?”

The awareness of trade credit insurance in the business community is still scarily low. We attend far too many creditors’ meetings at which managing directors and CFOs of businesses owed money are shocked to hear they could have insured against the risk of non-payment by their clients.

Trade credit insurance has always been viewed as a complicated and high-maintenance product for brokers to service. It is why only a handful of specialist trade credit insurance brokers exist.

In Australia, there are four mainstream trade credit insurers, including QBE Trade Credit, Atradius, Euler Hermes and Coface. However, there is further capacity and cover being driven out of Singapore and European markets, and further players are arriving in the political risk and surety markets in Australia.

The NCI Trade Credit Risk Index identifies trade credit risk by analysing credit cover, adverse activity such as credit insurance claims, collection activity and overdue reporting to provide a ‘risk score’ on a quarterly basis. The chart below shows this trend

SCORE Q4 2013 = 11,646 Index drops in line with increased expenditure over Christmas 16,000 14,000 12,000 10,000 8,000 6,000

Q3 /0 Q4 8 /0 Q1 8 /0 Q2 9 /0 Q3 9 /0 Q4 9 /0 Q1 9 /1 Q2 0 /1 Q3 0 /1 Q4 0 /1 Q1 0 /1 Q2 1 /1 Q3 1 /1 Q4 1 /1 Q1 1 /1 Q2 2 /1 Q3 2 /1 Q4 2 /1 Q1 2 /1 Q2 3 /1 Q3 3 /1 Q4 3 /1 3

4,000

and acknowledges that while we are not currently in the ‘red zone’, we are not far away from it.

Recent large insolvencies such as Forge Group and Steve Nolan Constructions have been sizeable events in trade credit insurance. Insolvency levels are on the rise, and traditionally a higher number of insolvencies are incurred during March to June.

Overseas, trade credit insurance continues to be a stable product with a higher level of awareness and traction rate among businesses, especially in Europe. In 2013, Asia was the fastest-growing region for the growth of trade credit insurance.

While there are only a limited number of trade credit insurers in Australia, they are all currently eager to grow this product line. Pricing has softened since the GFC and buyer coverage has pushed through acceptance rates, which are equal to or higher than prior to the GFC. There is a misconception that trade credit insurance is an expensive insurance product; however, when broken down, a premium rate of 0.15% to 0.35% of credit sales (average rates based on level of risk transfer) is a small amount to ensure that, in the event of default, approximately 90% of what is owed is returned to the insured.

What should brokers be doing to make businesses more aware that trade credit insurance is a viable solution to minimise credit risk? They should have their clients ask themselves five simple questions: What would the impact on our business be if our largest client could not pay?

When was the last time we reviewed the credit­ ­worthiness of our top 20 risks?

How do we assess the creditworthiness of a new or potential client?

How do we monitor the credit risk factors of our existing debtors?

What do we do when an account becomes overdue?

Typically, any business that has credit sales greater than $1m per annum can find a trade credit insurance solution.

So asking some simple questions could avoid significant bad debt pain in the future.

1 2 3 4 5

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STATS GLOBAL INDUSTRY

INSURANCE

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THE RISKS OF DOING

BUSINESS

Aon’s 12th Australasian Risk Survey took the pulse of 380 organisations, to gain an insight into what they rate as their biggest risks in 2014, how much these risks are likely to cost them, and how the insurance industry is – or isn’t – protecting them Source for all data: Aon 2014 Australasian Risk Survey

The Top 10 risk concerns

1

2

2

Regulatory and legislative change Local economic conditions

3

8

People risk

4

3

Increasing competition

5

4

Brand and image

6

NEW

Global economic conditions

7

2

Human resources

8

1

Weather and natural disasters

9

3

Failure to innovate

10

6

Business interruption and supply chain risk

55%

Proportion of respondents who said they operated in a highly regulated industry

$7.57

Total cost of insurable risk (per $1,000) for organisations with under $100m in revenue

61%

Proportion of respondents who think stock price volatility decreases as risk management improves

58%

Proportion of combined organisational risks transferred via insurance in 2014

REAL ESTATE

Industry with the highest total cost of insurable risk, at $8.34 per $1,000 of revenue

10/06/2014 1:59:00 PM

STATS

Four key trends we can expect to continue in 2014

HOW ARE COMPANIES EVALUATING BROKER PERFORMANCE?

24%

21% 17% 16% 12%

Price and coverage Broking and technical capability

Service team Claims expertise

10%

Other Value-add services

DO COMPANIES THINK DRIVING DOWN INSURANCE COSTS SHOULD BE A PRIORITY?

48%

28%

3%

Strongly disagree Disagree

16% 5%

Agree Strongly agree

N/A

1

A surplus of capacity across most insurance product lines

2

Strong competition among insurers in key markets

3

A buyer’s market with rate reductions available for well-performing accounts

4

A diverse flow of non-traditional capital entering the Australian market

DO COMPANIES THINK THE INSURANCE INDUSTRY IS DOING ENOUGH TO HELP MANAGE COMPLEX RISK EXPOSURES?

4%

59%

34%

Strongly disagree Disagree

3%

Agree Strongly agree

GENERAL LIABILITY Increase >10%

Flat

PROFESSIONAL INDEMNITY Decrease

>10% 4.5%

5%

7.5%

0% 11%

5%

10%

2%

>10%

1.5%

57.5%

27%

0%

5%

1%

>10%

7%

40%

0-5%

3.5%

N/A

of respondents expect general liability premiums to remain flat or to soften in the next 12 months

N/A

5%

0-5% 40%

Decrease

1.5%

5% 28%

0-5%

Flat

10%

0-5%

N/A

Increase

1%

10%

10%

N/A

7% 2% 0.5% 2% 8%

40%

of respondents expect professional indemnity premiums to remain flat

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SOCIAL LIFE

THE ICA’S ‘AWESOME’ ANNUAL DINNER

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The ICA hosted over 340 guests at its glitzy 2014 annual dinner in Sydney, including the likes of The Hon Bernie Ripoll, Shadow Minister for Financial Services of the House of Representatives, and an industry who’s who including NIBA’s David Wyner and Dallas Booth, and ANZIIF’s Prue Willsford. The ICA’s Rob Whelan opened the dinner, while special guest ABC1 Lateline Program presenter Emma Alberici interviewed ICA President Mark Milliner about some of the key issues facing the industry. Not all business, musical comedy group Axis of Awesome entertained guests with its own comedic view of pop culture, while live band Jazz Nouveau provided music throughout the event.

AUSTBROKERS ‘FAMILY’ GOES 2.0 The Barossa Valley played host to 160 of the close-knit ‘Austbrokers family’ in April, with the group holding its Broker 2.0-themed annual conference. Focused on showing brokers how to shape their shared future and leverage the strength of their combined network, the conference heard from keynote speakers including social

researcher Michael McQueen, on preparing businesses for emerging social and demographic trends, and corporate anthropologist Michael Henderson, on learning lessons from traditional tribal leadership.

Of course, delegates also took time out to enjoy the local sights and tastes at the Barossa, with functions at Chateau Tanunda, Yalumba and Maggie Beer’s Farm.

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SOCIAL LIFE

ZURICH FUTURE PROOFS ‘GEN Z’

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‘However good you are, you don’t remain an expert unless you continue to learn and adapt’. That’s the message that Zurich and industry technical leaders took to the road recently, as part of its Generation Z Forums, held twice per year as part of the Zenith/Broker Plus Program.

Celebrating the 10-year anniversary of the Zenith program, Zurich held forums in 11 locations around Australia, with a total of over 900 attendees. The sessions focused on privacy and change in legislation, SME customers and their overseas exposures, liability in light of changing legislation, transportation, supply chain and marine logistics.

VERO BROKERS TRY TO TAME THE LIONS Vero recently held its annual ‘Train with the Lions’ event at the Gabba, with the Brisbane Lions hosting 30 insurance brokers for a full-on training session. After an initial briefing, the brokers and Vero staff were put through their paces in a series of exercise drills and onfield training action. Participants reportedly threw themselves into the fray, with a lot of enthusiastic kicking, handballing and contested marking. Brokers were left enlightened, a little exhausted and very satisfied, with Suncorp Commercial Insurance CEO Anthony Day saying the company’s sponsorship of the Lions was the product of a natural synergy that meshed with Vero’s ‘challenger attitude’ and its commitment to ‘true teamwork’.

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INSURANCEBUSINESSONLINE.COM.AU

Favourite things...

Ron Tatarka, Scott Winton Insurance Brokers Ron Tatarka has taken out Insurance Business’ Elite Broker of the Year title for two years running, but what makes him tick? We ask Scott Winton Insurance Brokers’ leading light about his life outside of insurance

Music: Classical music Celebrities: John Wayne & Warren Buffet

Book: I don’t get much time to read, but when I do I like to read biographies of people who have made a positive difference in the world

Sport: Aussie Rules. And although I might not make many friends saying this, my team is Collingwood

Food: I love a good spaghetti bolognaise Place to be: Definitely Israel; it’s my spiritual home

Movie: Serpico

Drink: Scotch whisky. Preferably Glenlivet!

Vacation spot: Israel. I go every year. From mid-December to the end of January

Best thing about working in insurance: The people! The staff, clients and underwriters many of whom become life-long friends

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THE LAST WORD

A matter of trust The evolution of a broker delegated claim settlement authority is a ‘no-brainer’, writes Claims Central’s Darren Trott

Darren Trott is executive general manager of Claim Central

Why don’t more insurers trust brokers with a delegated claim settlement authority?

Many insurance companies have a long history of being slow to innovate, especially in the claims space, which continues to be the poor cousin when compared to the underwriting operations.

Over the years I’ve seen the gradual introduction of process and technology improvements, providing brokers with the ability to quote, bind, close and process new business seamlessly.

In the past 15 years most insurers have gradually rationalised and centralised entire underwriting functions, as additional lines of business were added online. Insurers and brokers have both seen the cost benefits associated with the reduction in administrative work.

There is no doubt our industry has taken advantage of the benefits of automating the underwriting process of those risks falling within standard underwriting guidelines. It’s now an accepted industry standard for SME packaged business to be processed from end-to-end through an online platform.

That’s why I find it rather baffling when I look at what’s happened, or to be more accurate, what’s not happened, on the claims side over the same period of time.

QBE took an early lead a few years back when it introduced ‘cchange’, enabling brokers to lodge claims online, granting brokers access to loss adjuster reports and real-time claim status. It also took a bold and positive step to grant selected brokers a delegated claim settlement authority. This authority enables brokers to assess, determine and approve straightforward, low-value claims which fall within the parameters set by QBE.

Most brokers I’ve spoken with take full advantage of this authority, while at the same time, ensuring it is exercised appropriately and with ‘duty of utmost good faith’ principles applied.

This usually results in the insured customer having their claim settled faster and by their “trusted insurance adviser”. The broker is more engaged in the claim progress, demonstrating the value the broker adds when a claim arises. The insurer reaps the benefits of shorter claims duration, reduced administrative process and, ultimately, the retention of customers who have enjoyed a prompt, hassle-free and positive claim experience.

I cannot understand why the ‘delegated settlement authority’ initiative has not been more broadly adopted across all intermediary-based insurers. Isn’t this a no-brainer?

Brokers have been at the front line collecting claim information, liaising with their customers and filtering suspicious claims for years. The vast majority have sufficient skill, expertise and experience to make sound claim decisions. Why not cut down on red tape, at least in low value claims, and make things easier for everyone involved?

There are some brokers who would prefer to distance themselves from claim decisions and leave it up to the insurer, so the status quo can remain for them, but what about the majority who would benefit from a ‘delegated claims authority’?

During catastrophe events a temporary authority is sometimes granted, or a temporary higher settlement authority approved. This helps everyone cope with the volume of claims and to mitigate the risk of negative media reports being published about tardy claim payments.

Surely if this process works during these chaotic events it ought to be possible during ‘business as usual’ too?

Insurers need to recognise the important role played by brokers when a claim arises. In my view, comments I’ve heard – such as “we wouldn’t trust brokers to settle claims” – are not constructive and belong in the past. If the broker can be trusted to provide insurance advice to customers, to recommend insurance products and place business with an insurer, then the trust ought to flow to claim settlement, too.

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