Covernote March 2016

WHAT HAVE WE LEARNT FROM CHRISTCHURCH?

March 2016 The professionals’ magazine from IBANZ

A NEW FUTURE What does technological disruption mean for broker-intermediated insurance?

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WELCOME

Advertising/Editorial: Robert Johnson, Benefitz Telephone 09 477 4702, Mobile 027 4970 712, Email: robert@benefitz.co.nz Gary Young

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CoverNote is the official publication of IBANZ and is distributed FREE on a quarterly basis (March, June, September, December) to members throughout New Zealand and associated companies.

Additional copies are available at a cost of $7.50 per copy, or 12 month (4 issue) subscriptions at $30.00, inclusive of postage and packaging. The articles or opinions featured within this magazine are not necessarily the opinions of the publishers or IBANZ, and they do not accept responsibility for the content of articles featured within the publication. No part of this publication may be reproduced without the written permission of the publisher. The publishers do not accept responsibility for loss or damage to unsolicited photographs or manuscripts.

IBANZ enquiries should be made to: Gary Young, Chief Executive, IBANZ. Email: gary@ibanz.co.nz IBANZ National Office located at: Level 5, 280 Queen Street, Auckland (P.O. Box 7053, Wellesley Street) Telephone 09-306-1732.

Website: www.ibanz.co.nz

CEO, IBANZ

Time to embrace change Disruption of current business models is something all industries are facing these days. We constantly read about sectors under pressure from new innovation, new technologies. The old way is threatened and the existing players must make a choice to stand and fight the invaders or adapt to a new way of doing business.

Uber is the most quoted example of disruption as it muscles in on the taxi industry using new technology and methods to avoid many of the costs existing drives face.

Meanwhile insurance sits quietly in the background seemingly not yet affected by a major disruptive force.

But is it immune from these changes or are they already here, just under the radar?

I would argue that disruption has started, although it is early days with the true impact yet to become obvious. But the stage is being set and brokers need to be alert to the potential for significant disruption.

In part the future for insurance will be changed by indirect disruption. Driverless cars are not an internal change to the insurance business model however their existence will change the way motor and liability insurance responds to risks. Telematics is another technology impacting on motor insurance.

Disruption within the insurance market can be seen with online offerings, the impact is still small in our market. Innovation in technology could change that. Apps are now available on phones which can detect when you arrive at an airport and ask the question: Do you need insurance?

More significantly and more developed is the disruption by peer-to-peer networks.

These are becoming increasingly common overseas. Groups such as Friendsurance, Guevara, Brolly and World Cover are becoming more influential. They are becoming the way of the future for many consumer groups and their role is only going to increase.

These innovations need not destroy the world of insurance brokers. Rather than adopt a strategy of fighting the disrupters, professional advisers can continue to survive and prosper if they are prepared to adapt.

Our cover story and feature articles in this edition of Covernote provide a fascinating, thought provoking read on disruption. I trust you find these useful in planning for the future.

Gary Young, CEO, IBANZ

Features 11. Drivers want all cars insured 12: A new future: Where to for brokers?

It seems everywhere you look there are warnings of massive disruption on the horizon for the insurance industry. But what does that really mean? And what place do brokers have in it?

16. Businesses ignoring looming costs 20. What keeps you up at night?

26. Ando jumps barriers to entry John Lyon reflects on the process of starting up a new player in this country's insurance industry.

36. Taking lessons from Christchurch The fifth anniversary of the Canterbury earthquakes is a time to remember those who lost their lives, the massive recovery effort since and to look to the future.

29. Are you ready to accept opportunities technology presents?

Regulars

40. Learn from others' mistakes

1. View from the CEO’s chair 3.

News 22.

Out & About 32. Ask an Expert

42. What you need to know about new health and safety laws 43. How you react to complaints matters

44. Professional Development: Professional IQ College 48. IBANZ Contacts WHAT HAV

E WE LEA

RNT FRO

M CHRISTC

HURCH?

March 2016 The professio

nals’ mag azine from

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UTURE

What doe broker-ints technological disr ermediated upt insurance?ion mean for www.ibanz .co.nz

NEWS

Southern acquisition

Litigator appointed

Crombie Lockwood has acquired insurance brokers Reid Manson.

Reid Manson has been a leading insurance brokerage in South and Mid-Canterbury for years.

The addition of the firm’s Timaru and Ashburton offices gives Crombie Lockwood a total of nine South Island locations. Terms of the transaction were not disclosed.

The announcement comes on the heels of Crombie Lockwood confirming its commitment to the Christchurch rebuild by taking a long-term tenancy in the new central city PWC Centre.

“The South Island has always been important to us,” said Carl O’Shea, Crombie Lockwood chief executive. “We have a well-established business base here and the inclusion of David Reid’s team and their operations enhances this position.

“Reid Manson has a justifiably strong reputation in its two key markets, and we are delighted that their team members are remaining with us to maintain the high level of service their clients currently enjoy.”

David Reid said he expected the arrangement to pay off.

“We have always prided ourselves on bringing the best the market has to offer to our regional clients. I am confident that as part of the Crombie Lockwood organisation our capability will be greatly improved, including access to global expertise through the Arthur J. Gallagher parentage.

“It really is a win-win situation; our clients will continue to deal with the same people but with many more resources at their disposal. It is also a significant commercial commitment to our region.”

Insurance litigator Caroline Laband has joined DLA Piper as a partner.

Laband has 15 years’ New Zealand and UK experience.

She is recognised as a leading expert in insurance and reinsurance in Who’s Who Legal 2013 and 2014.

"Caroline's international knowledge and experience are a natural fit with DLA Piper, a firm capable of delivering access to global best practice and expertise across borders, sectors and specialities worldwide," said DLA Piper New Zealand chairman Martin Wiseman.

"This is an exciting time to be joining the insurance practice at DLA Piper New Zealand and the wider firm generally,” Laband said. "Issues arising from the Canterbury earthquakes continue to occupy the industry, and the market is facing new challenges. These include the changes to Fire Service funding, the new EQC Act, bedding in of the Fair Insurance Code and the rise of cyber insurance. As a global firm operating in a local market, we are well placed to understand the impact of these developments on our clients and the industry in general, drawing on our knowledge bank in New Zealand and from similar developments globally."

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3

NEWS

Runacres joins AUB Group Insurance brokerage Runacres and Associates has been acquired by the group that owns Austbrokers and NZBrokers.

AUB Group announced the move in December. Runacres had previously been owned by IAG. “This is further evidence of the targeted expansion strategy AUB Group has for New Zealand,” said Mark Searles, chief executive and managing director of AUB Group, and chairman of AUB Group NZ. Along with the group's existing equity interests, it now directly represents $200 million in gross written premium (GWP) in New Zealand. The group owns NZBrokers, which manages the largest cluster group of brokers in New Zealand. In total, either directly or through its partners, the group now represents $550 million of GWP and is the third-largest broking entity in the New Zealand market.

“Runacres is a high-performing broking business with a strong track record of sustainable growth over the past five years,” Searles said.

Representing almost $50 million GWP, 5300 clients and with 30 staff across Christchurch, Auckland and Greymouth, Runacres is one of the largest brokers in New Zealand. Its portfolio spans

corporate, commercial and personal clients.

AUB Group NZ has agreed to sell down an equity stake to David Crick, the chief executive and managing director of Runacres.

“AUB Group has long signalled its intention to replicate our highly successful ‘owner-driver’ partnership model into New Zealand, and the acquisition of such a high-calibre business reinforces our commitment to this,” Searles said.

The acquisition will retain key leadership within the business.

Crick will continue at the helm. “I’m elated to be further strengthening our relationship with AUB Group NZ,” he said. “I am confident that this partnership will provide my team with an effective platform for continued growth.”

“The announcement is a key step in confirming our position as Australasia’s leading insurance and risk management specialist,” Searles said. “We’re excited by the future and the possibilities it presents.”

Insurers emphasise importance of brokers in resolving Canterbury claims Good brokers have played a very important role in the Christchurch rebuild process, the Insurance Council (ICNZ) says.

Private insurers are on track to settle the vast majority of Canterbury earthquake claims by the end of this year.

Nearly 5400 major repairs and rebuilds were completed in 2015, a 21 per cent rise in the settlement rate compared with 2014.

“Insurers are continuing to make a major contribution to Canterbury and the New Zealand economy and are committed to settling the remaining claims as quickly as possible,” ICNZ chief executive Tim Grafton said. “The rate of progress in 2015 was impressive for one of the biggest events this country has ever known in terms of damage.”

He said insurers had fully settled $16.7 billion, or 75 per cent of over-cap residential Canterbury earthquake claims and 89 per cent of all residential property claims. He said more than 90 per cent of commercial claims had been settled, a figure which would rise when the $635 million Christchurch City Council settlement was included.

Grafton said brokers had been able to take on the responsibility of engaging on behalf of those who were claiming on insurance and had all the experience needed to deal with the process and put the paperwork in place.

4

March 2016

"They understand the process they have to go through, but these are things that can be challenging for the insured. Brokers have played an important role in facilitating the recovery."

At the end of December 2015 there were 25,350 over cap residential claims, with 1425 transferred from the Earthquake Commission (EQC) in the last year.

Based on data jointly collected by ICNZ

and the Ministry of Business, Innovation and Employment (MBIE), 82 per cent (20,726) of all over-cap residential claims are resolved or have been fully settled.

Resolved means the repair/rebuild is under construction, in consenting or a building contract has been signed. A further 13 per cent (3414) of the 25,350 over-cap claims are in resolution, meaning the rebuild/repair is in the pricing and design process or cash settlement is pending.

Grafton said the goal had been to have the vast majority of claims resolved by the end of 2016. “We are well on track to achieve that, even at this stage.”

He said it was hard to tell how close to 100 per cent resolved insurers would get this year, because there were still people who were involved in disputes, or taking matters to court, and it was unclear how long it would take for those to work through the system.

Grafton said the public’s perception of the process was “out of whack” with reality. “For the best part of two years there was ongoing shaking that made it pretty impossible to get under way with any substantial recovery.”

He said there was also added complexity for insurers who were working with the Earthquake Commission, which needed to be resolved.

NEWS

Suncorp reports on half-year Suncorp has reported an after-tax profit of A$530 million ($807 million) for the six months to December 31, 2015.

Suncorp’s New Zealand general insurance business, which consists of Vero New Zealand and AA Insurance, contributed an insurance trading result of $83 million for the half year.

Gross written premium (GWP) grew by 2.7% per cent through direct and intermediated distribution channels.

Paul Smeaton, chief executive of Vero New Zealand, said significant growth in personal insurance, particularly home and motor insurance, has supported a strong result for the New Zealand business.

“New Zealand is building a multi-channel business across both personal and commercial lines, and the result demonstrates our focus on becoming a more resilient and sustainable business.

“Our policyholder customers and valued business partners are a key focus for us, and we continue to look at ways to make it easier for them to engage with us,” Smeaton said.

“We’ve demonstrated this in our new partnership with Warehouse Money, which allows customers to quote and buy online, and our SumExtra benefit, which provides eligible policyholders with extra house cover at no extra cost.”

Vero has now settled $4.7 billion of claims relating to the Christchurch earthquake, representing 89% of expected total claims costs.

“We’re committed to resolving every claim and we hope to be near completion with that programme by the end of 2016,” Smeaton said.

“Vero has also taken an active role in the EQC review and we’re looking forward to the results of that this year – we see this as an opportunity to really embed all the learnings from the earthquakes.”

Tower to reduce offering Tower is to reduce the number of products it sells from 150 to 20, to reduce its operational costs.

Chief executive Richard Harding told shareholders at their annual meeting it was crucial for the company to get the basics right, which included simplifying the number and complexity of Tower’s systems, products and policies.

For the 2015 financial year, the company reported a net loss after tax of $6.6 million.

Harding said staff did well navigating the products on offer but it took time and was not helpful. Fewer products would cut call processing times and boost productivity.

Tower expects to see the decision pay off in the 2017 financial year.

New premises for Vero Vero New Zealand has signed a new tenancy agreement with Ngai Tahu Property to take space in the new King Edward Barracks development in central Christchurch.

“Vero has played an important role in the Christchurch rebuild,” Vero chief executive Paul Smeaton said. “Recommitting to office space in the Christchurch city centre clearly demonstrates our support of the re-establishment of the city, and our confidence in its future.

“The 48 Hereford St building will provide a fantastic new office environment for Vero and Asteron Life employees in Christchurch, and return them to the heart of the city after working from temporary premises in Washington Way since February 2011.”

The new development includes two office blocks in the heart of Christchurch. Close to key landmarks, amenities and transport, the precinct-style development also features a landscaped central park. Vero will occupy half of the fourth level of the building, facing on to Cambridge Terrace and Hereford Street.

The first stage of the King Edward Barracks development is under construction and expected to complete in February 2017. Once it is complete, Vero will continue to operate from two locations in Christchurch, with the EQ team based at premises in Hazeldean.

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5

NEWS

Long serving Vero man moves on The opportunity to take on a different challenge and to become his own boss was too good to turn down for Bryan Noonan, who last year left Vero after 33 years with the company.

He was the insurer’s region manager sales – southern.

As of February 1, he now owns and runs the Nautical Underwriting Agency, one of the country’s biggest insurers of pleasure craft.

Noonan joined Vero as an inspector for Sun Alliance and has held roles as a local manager, Christchurch branch manager and sales manager during his decades with the company.

“Bryan is a passionate and committed businessman who has enjoyed a long and successful career with Vero and its predecessor companies,” said Cris Knell, Vero executive general manager, commercial and distribution.

“It’s been my pleasure working with Bryan. His deep local knowledge of the South Island and Canterbury and his strong local customer relationships have been notable parts of his career success. “ Noonan was appointed branch manager for Vero’s Christchurch office after the September 2010 earthquakes. A few months later the city was decimated in the 22 February earthquake.

“Our whole world virtually turned upside down,” he said.

“We quickly realised we had to find suitable new premises and were fortunate to find an empty site on Washington Way. Within a fortnight we had totally fitted out the new premises and were up and running, albeit with extra Portaloos to cater for the number of staff. The quick transition enabled us to get on and maintain continuity in the 6

March 2016

business during that time.”

Knell said: “One of Bryan’s most prominent recent achievements was his management and coordination of some of the most challenging issues ever faced by Insurers in New Zealand - the Canterbury earthquakes.

“With his team’s support, Bryan handled many significant challenges and ensured that Vero could provide advice and support to local businesses and communities that were heavily impacted. Vero is grateful for Bryan’s contribution and wishes him much future success in his new endeavours.”

Along with working in a variety of different roles, Noonan has remained with Vero through numerous name changes, mergers and restructures.

Over the last five years he has also seen a completely new era in the insurance industry through changes to compliance and legislation and the Christchurch earthquake response.

“My role in the last five years has often been incredibly challenging, but equally it has brought immense satisfaction when I have been able to find and facilitate solutions for our customers,” he said.

“It certainly doesn’t feel like I’ve been with one company for 33 years. There have been so many changes that it feels like I’ve worked for four or five different

companies. What hasn’t changed are the friends I’ve made along the way.

I have found it a total pleasure dealing with our brokers, customer and all the Vero people.”

He said he had not planned to move on from Vero, but the opportunity at Nautical had come up and he thought it would be a nice change. “It was an opportunity to do something different and work for ourselves. It all just fell into place. “ He said there had been a number of changes in the insurance industry over his time with Vero, including the introduction of technology and the rationalization of the industry.

“When I started with Sun Alliance, there were 20 or 30 other companies fighting over the lion’s share of the market.

Sun Alliance had about 5 per cent. We sort of knew it couldn’t carry on like that, because companies needed a critical mass.

Now there are two major players, with smaller companies around, but IAG and Vero control the lion’s share of the market.”

The Christchurch earthquakes had also brought the insurance industry to prominence, he said.

His focus now would be on streamlining some of Nautical’s processes and providing customers with more immediate solutions. He would also work to grow the brand, including possibly expanding further into the North Island.

Nautical has a staff of two, but Noonan said the plan was to hire more people once the quieter winter season had passed.

He said he was positive about the outlook for Nautical and the industry as a whole. “I feel that I’m leaving [Vero] at a good time in the insurance industry. It’s in a good space.”

Combined shuts shop Ace run Combined Insurance has announced it will not write any new business in New Zealand after the end of February.

The change will not affect existing policy-holders, who will continue to receive customer service including claims handling, policy change requests and renewals.

The decision to stop selling new policies followed a review of the company’s growth prospects and business operations.

Kiwi insurance boss gets top gong Mark Wilson, who is at the helm of British insurer Aviva, has been named the UK’s New Zealander of the Year this year.

The award was handed out at the New Zealand Society’s Waitangi Day Charity Ball.

It recognises the outstanding contribution that a New Zealand or British national has made in promoting the interests of New Zealand or New Zealanders in the United Kingdom.

NEWS

Building warranty offers peace of mind A building warranty insurance product is tipped to become more popular with individual builders working outside the big chains.

Stamford Insurance offers a range of building warranty insurance policies that provide 10 years’ protection against major structural defects, including weathertightness problems.

The policies are backed by Lloyd’s of London and have been distributed in New Zealand since 2014.

Projects including individual homes, townhouses, apartments, commercial developments and renovations can be insured. All defects are covered for the first two years, and major structural defects for another eight. The policy can be transferred to a new owner within 10 years.

Duncan Colebrook, of Stamford, said the only other similar product was the Master Build Guarantee, operated by industry group Master Builders.

“That’s not an insurance product, it’s quite different in scope and security. They wouldn’t accept business from brokers. We are the only ones offering this opportunity.”

He said it would suit brokers whose clients were builders working on their own, or property developers working on apartment building-style developments.

“Also body corporates going through a multi-unit project being reclad. It works across the entire spectrum of projects of individual new builds, apartments, renovations and rebuilds.”

He said while Master Builders would tell someone to go back to

the builder and exhaust their rights against the builder first, this product would offer a different approach because it would respond immediately.

“If a client has a problem, they tell us and the builder and we appoint loss adjusters.”

He said it would help builders deal with liability issues. “At the moment they are liable for 10 years, but we can bring that down to two years if they have the warranty.”

For two years after the project is complete, the developer or builder is responsible for rectifying defects in the property. If they do not, the policy will pay another builder to do the works. For the next eight years, the policy covers the cost of rectifying latent structural defects.

The cover costs between 0.5 per cent and 1 per cent of the construction cost, depending on the type of project and the complexity.

Colebrook said Stamford offered fast turnaround on quotes, would consider any value projects, and offered flexible payment options to match the cash flow of the project. He said plans were designed for each project and each would be individually notified and assessed.

Cover includes up to 10 per cent of the contract price, or $100,000 if a deposit is lost before work starts, and up to 10 per cent of the contract price if there are increased costs because the product is not completed by the builder or developer.

LOCAL FOCUS, GLOBAL REACH

INTRODUCING OUR NEW PARTNER Highly experienced insurance litigator Caroline Laband has been appointed partner at DLA Piper.

Caroline strengthens DLA Piper’s market-leading insurance and litigation practices in New Zealand.

Recognised as a leading expert in insurance and reinsurance in Who’s Who Legal 2013 and 2014, Caroline’s international knowledge and capability are a natural fit with DLA Piper.

To find out more about Caroline, visit www.dlapiper.co.nz DLA Piper New Zealand is an independent law firm. It is associated with DLA Piper, a global law firm operating through various separate and distinct legal entities. www.covernote.co.nz

7

NEWS

Donovan appointed QBE chief executive QBE has appointed Bill Donovan to take the role of general manager for New Zealand.

He replaces Ross Chapman, who is retiring in April.

Donovan has been with QBE since 2011, in the role of general manager of distribution.

Before joining QBE, he was chief executive of Willis Australasia for almost three years and managing director of Willis in New Zealand for four years.

Chubb make swathe of appointments Chubb has announced a number of personnel changes after its merger with ACE. The two firms are expected to commence combined operations on April 1.

John French, former ACE country president for Australia and New Zealand will be the country president of the new Chubb.

Perry O’Leary, head of distribution and client management for Australia and New Zealand, will become GBU manager, NSW and strategic distribution adviser Australia and New Zealand. Yiota Zammitt will take the role of alternative distribution manager Australia and New Zealand.

Demetra Day, ACE Asia Pacific chief underwriting officer and financial institutions manager APAC, will be financial lines manager Australia and New Zealand. Alison Perceval becomes FI/D&O/ Crime product head of Australia New Zealand.

Andrew Taylor will take a new role within the financial lines business as management liability and cyber product head for Australia and New Zealand. Joleene Samson becomes financial lines southern region manager.

David Gibbs will head up property for the Australia and New Zealand business as property manager.

ACE construction manager for Australia and New Zealand Stephen Pollard will be construction manager. Stuart Kerr becomes casualty manager for Australia and New Zealand and will work alongside Josh Jenkins as deputy casualty manager.

Cristin Sullivan and Travis Mackintosh will become environmental risk manager and custom products manager respectively. John Leafe and Richard Grant will be inland marine manager and marine manager.

Bob Algie, current ACE consumer product manager for Australia and New Zealand will be MGA and SPL product manager and personal lines strategy manager for the region.

Chubb national property product manager Michelle O’Dowd will be high net worth product manager for Australia and New Zealand and personal lines manager for the Northern region.

Joanne Casha will be personal lines manager for the Southern region.

In personal lines, Chris Newing takes the reins as consumer manager for Australia and New Zealand following his time as ACE travel and consumer manager.

Matt Bouzaid, ACE national A&H distribution manager will be A&H underwriting manager for Australia and New Zealand. Rod Frichot will be A&H Southern region manager.

French said the process of integrating the businesses was going well.

Scott Pickering has been appointed as an independent director to its board of directors in New Zealand.

Pickering is chief executive of ACC and has held executive leadership roles for Willis International and RSA Insurance Group.

He worked for ACE Insurance Ltd in various management roles from 1989 to 2005.

8

March 2016

IAG reports profit drop IAG’s New Zealand says A$150m strengthening of its risk margin for the 2011 Canterbury earthquake contributed to a lower insurance profit in the most recent half.

It reported an insurance profit of A$11 million in the six months to the end of last year, compared to A$193 million in the first half of the year.

IAG said strengthening the earthquake risk margin helped remove ongoing uncertainty around the ultimate cost of claims for the February 2011 event.

Along with new adverse development cover taken out by IAG at a group level, it establishes effective coverage of up to NZ$5 billion for the earthquake.

IAG’s New Zealand business delivered an underlying margin of 18.4 per cent, from 15.9 per cent in the first half.

The company’s New Zealand chief executive, Craig Olsen, said the New Zealand result reflected a number of factors including the increase to IAG’s risk margin for the 2011 earthquake but also increased pressure on the profitability of intermediated commercial lines.

This was offset by lower than anticipated natural peril costs during the period and growth in IAG’s direct insurance business.

“The New Zealand business continues to deliver a solid underlying margin, as it balances customer affordability issues with high regulatory and reinsurance costs in a very competitive market.” Olsen said.

New chair for IAG IAG has appointed Elizabeth Bryan as the chairman of its board.

She takes the role on March 31m succeeding Brian Schwarts.

Bryan has been a director of IAG since 2014 and deputy chairman since last year.

She is chairman of Virgin Australia, a director of Westpac and president of YWCA NSW.

NEWS

Months to file claims

Site promotes cyber cover A new cyber insurance website is promising to fill in the gaps for small businesses who want information about cyber insurance.

Frankie Cyber Insurance, underwritten by Delta Insurance, is being promoted via frankie.co.nz.

The website allows business owners to access information about cyber policies and understand how the risks might affect their business.

The policy can also be bought online.

Rene Swindley, director of Frank Risk Management, said cyber and technology-related losses were a major threat to New Zealand business, whether they were caused by malicious attacks or system failures.

But he said business owners were too relaxed about cyber risk.

“This attitude can result in dire situations such as the business being unable to access its mission critical software or client

data. Having good cyber risk management procedures in place joint with the safety-net provided by cyber insurance cover is a relatively simple task but one mostly ignored by the SME sector.”

Ian Pollard, managing director of Delta Insurance, said: “All New Zealand companies, especially SMEs, should be taking cyber risk and cyber risk management seriously. It’s not just big businesses who are victims of cybercrime, cyberattacks or privacy breaches; more significant to the New Zealand economy is that smaller businesses are often more vulnerable due to their lack of appropriate risk management strategies.”

Cantabrians have until May 16 to make claims for damage sustained in this year’s Valentine’s Day earthquake.

In the 24 hours after the earthquake, almost 500 claims were received by the Earthquake Commission.

Chief executive Ian Simpson said it could take some time to determine the full cost of the damage and the final number of claims.

“We will continue monitoring the situation to understand the resources we will need and to make sure the process meets the needs of our customers,” he said.

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FEATURE

Kiwi drivers want uninsured vehicles off road A

new survey shows strong support for all New Zealand’s drivers to be insured.

A survey by Canstar Blue found 82 per cent of those surveyed who currently have a car insurance policy say that uninsured drivers have no place on Kiwi roads, a slight drop from the previous year.

Close to a quarter of Kiwis (24 per cent) and a third (32 per cent) of Aucklanders have been in a car accident with an uninsured driver.

More than one in five (22 per cent) Gen Ys have let their policy lapse. The majority cited financial reasons.

Many Kiwi policyholders are taking action to manage their insurance costs, whether by reducing their cover to lower premiums (19 per cent) or having a look around the market to compare prices and ensure they are getting the best deal (40 per cent).

Sixty-eight per cent of Kiwis had made a claim on their car insurance due to an accident.

More than half of New Zealanders had third-party cover. Close to a third had flexible insurance policies that considered how and when they were using their cars, and adjusted their fees accordingly.

Many consumers wanted to organise all of their insurance under one supplier.

The survey found 68 per cent of Kiwis had other policies with the same insurance company that looked after their car insurance.

Wellingtonians were the most likely (74 per cent) to have one provider for many insurance plans.

“It is a great idea to have multiple policies

with one provider, as there are many benefits including reductions on premiums or loyalty discounts,” said Canstar general manager Jose George.

The survey asked consumers to rate their car insurance provider across eight variables: value for money, communication, claims process, policy clarity, claims outcome, service quality, claims lodgement and overall satisfaction.

AA Insurance was the overall winner of the Canstar Blue Customer Satisfaction award – Car Insurance for the fourth year in a row. AA Insurance was rated five-stars by its customers in every category across the board, the only insurance provider in the survey to do so.

George said: “The number-one driver of satisfaction for car insurance is the quality of service (83 per cent), closely followed by satisfaction with the outcome of the claim (82 per cent) and how easy the claims lodgement process is (81 per cent), showing that money is not the number-one driver for consumers when it comes to their insurance.”

CAR INSURANCE HABITS BY REGION: Auckland: Aucklanders are the most likely to have been involved in a car accident with an uninsured driver (32 per cent), most likely to have had a valuable personal item stolen from their vehicle (25 per cent), most likely to have reduced their cover/sum insured in order to reduce their premiums (25 per cent), most likely to have a policy that considers how and when they use their car, and adjusts their fees accordingly (37 per cent), most likely to have third-party cover

(56 per cent), most likely to have let their car insurance lapse in the last 12 months (13 per cent), least likely to have other purchases with the same insurance company (61 per cent) and most likely to have compared prices in the last 12 months (49 per cent).

Waikato: Those in the Waikato are least likely to have had valuable personal items stolen from their vehicle (9 per cent) and least likely to have third party cover (41 per cent).

Wellington: Wellingtonians are least likely to have a policy that considers how and when they use their car and adjusts their fees accordingly (24 per cent) and most likely to have other purchases with the same insurance company (74 per cent).

Canterbury: Cantabrians are least likely (equal with Otago) to have been involved in a car accident with an uninsured driver (16 per cent), least likely to have reduced their cover/ sum insured in order to reduce their premiums (11 per cent), least likely to have let their car insurance lapse in the past 12 months (2 per cent) and least likely to have compared prices in the last 12 months (28 per cent).

Otago: Those in Otago are least likely (equal with Canterbury) to have been involved in a car accident with an uninsured driver (16 per cent) and least likely to have other drivers (children/ spouse/partner) named in the policy (55 per cent).

Bay of Plenty: Those in the Bay of Plenty are most likely to have other drivers (spouse/ children/partner) named in their policy (78 per cent). www.covernote.co.nz

11

COVER STORY

A NEW FUTURE

It seems everywhere you look there are warnings of massive disruption on the horizon for the insurance industry. But what does that really mean? And what place do brokers have in it?

D

riverless cars, personal health monitors worn on the wrists of hundreds of thousands of people, online groups of people pooling their money to cover each other’s insurance excess costs. These might have seemed like something out of science fiction 10 years ago, but they are now adopted readily by consumers around the world, and they have the potential to cause major change in the global insurance industry.

The industry now faces a big challenge of how to adapt to and make the most of the rapid change that affects the consumers, industries and properties that it provides cover for.

How can an insurance company that deals in motor insurance deal with a shift to cars without drivers, which remove some of the risks of human drivers but create others? How could a life insurer or health insurer tap into the data that many fitness buffs are willingly collecting, second-by-second through wearable fitness 12

March 2016

trackers and Apple Watches?

While there are challenges ahead for the sector, insurers and brokers who can adapt to growing technology disruption stand to benefit.

In a recent PwC Global CEO Survey, insurance industry leaders said, more than any other commercial sector, that their businesses were facing disruption. PwC Insurance Sector Leader Karl Deutschle said the industry was at a tipping point as it grappled with the impact of new technology, new distribution models, changing customer behaviour and more exacting local and global regulations.

“For some businesses, technology developments are a potential source of disruption, and yet for others, change offers competitive advantage,” he said. “Technology is one of the driving forces behind competitive advantage for new and non-traditional entrants, enabling them to quickly respond to customer demands.

“Customers want insurers to offer them the

same kind of accessibility, understanding of their needs, and products that fit their requirements that they’ve become accustomed to from online retailers and other highly customer-centric sectors. Digital developments offer part of the answer by enabling insurers to deliver anytime, anywhere convenience, to streamline operations and to reach untapped segments.”

Tim Grafton, chief executive of the Insurance Council of New Zealand, said disruption was a growing theme for the sector, but it was not something new to the insurance industry.

Insurance itself had once been a disruptive force of its own, he said. The industry had changed and evolved over hundreds of years and would be able to adapt to its next guise.

“The critical factors that are different are that we have a technological change happening so quickly and at such an exponential pace, it enables disruption to occur more quickly,” Grafton said.

COVER STORY

FOR SOME BUSINESSES, TECHNOLOGY DEVELOPMENTS ARE A POTENTIAL SOURCE OF DISRUPTION, AND YET FOR OTHERS, CHANGE OFFERS COMPETITIVE ADVANTAGE.

Insurance industry consultant David Whyte said disruption was already happening in many ways.

“Travel insurance previously would have been bought from a travel agent, but now it’s marketed so heavily that the vast majority is bought online.

Disruption is already in train, as far as I can see on the general side.”

TELEMATICS If insurers have ever wanted more data on their customers, they are about to get it.

Grafton said there was a growing amount of data that insurers could collect about the people they were offering policies to.

“In terms of the collection of data on behaviours, the risks they present and the analytics available and the tools available to collect that data, it brings about huge potential changes.”

He said some of the biggest changes were happening in vehicle insurance. “Take Uber,

where the cliché is that the biggest taxi company in the world doesn’t own a vehicle. That changes the dynamic around how the insurers respond to provide cover.”

The most high-profile example of technology changing the day-to-day lives of insurance customers is the rise of trackers placed inside vehicles, which feed data back to insurers to use in their premium calculations and responding to claims. Some mobile phone apps are also starting to be used to provide similar data.

Tower was the first insurer to offer telematics in New Zealand, with its SmartDriver app that monitors and assesses driving behavior based on 250km of travel. The insurer then analyses and scores the results and gives premium discounts of up to 20 per cent to those who score well.

Some large businesses use telematics in their fleet to identify problem drivers or ways that vehicles could be used more economically.

In the UK it has been an option for a decade, but it has had relatively low take-up because the savings on offer are not large for mainstream users. It has been more popular with younger drivers, for whom there are bigger carrots on offer.

Whyte said the way data was evaluated could change as more was collected. Some firms are applying tracking devices to their vehicle fleets so a clearer picture of risk can be obtained. “The basis of rating that risk has been radically altered.

We’ve only just scratched the surface.”

There are also increasing amounts of personal data being collected, which could transform the way personal policies are underwritten.

The development of wearable technology such as FitBit, Apple Watch and Garmin is already having an impact. Internationally, health insurers offer discounts and other benefits to consumers whose wearable technology provides data which shows they have a healthy lifestyle.

A survey by Deloitte found a third of health, home and vehicle insurance customers were willing to track their behaviour and share the information with an insurer if it meant they would be given a more accurate premium. Young customers were especially willing. Deloitte said 63 per cent in the 25-to-34 age bracket were happy to share their data with the insurer of their home, compared to 38 per cent of all customers.

Grafton said it was possible that companies that collected a lot of data about their customers, such as Apple and Google, could enter the insurance market if they wanted to.

“Apple devices collect a lot of information about your health on a live basis, just as telematics in your car collects information on a live basis,” he said. “Equally there’s an opportunity for the insurers with the underwriting skills to be able to partner with potential disruptors, purchase technology or the firms with technology that are potentially disruptive and utilise them to gain a market advantage.”

He said insurers would soon know a lot more about individuals and the risks they were covering and price it appropriately. “Equally it means people can manage and reduce their risks.”

People who were known to be low risks in general could be offered “all risks” policies that would cover car, health, house and other insurances bundled into one.

“You’re able to look at these kinds of opportunities, putting different sets of product into the market, it’s a really interesting time with different challenges driven by disruption out of technology.

“I think it’s happening and evolving all the time, and as with any technological change there are early and late adopters. There are always people on the fringe of new change, really at the front line who adopt things and try them. I www.covernote.co.nz

13

COVER STORY

think insurers are out there competing actively, and they understand what consumers want and they are trying to deliver that.”

But Whyte said some big insurers faced problems because they were not nimble enough to respond quickly to new developments.

“If someone came to them two or three years ago with an idea for technology, the scoping documents would have been created, project management reams set up, it would go through to development and then within six months of starting, the technology would be overtaken. But it’s too late then, the capital has been invested and the agenda set, it’s tough to stop the train.

That’s an issue that all insurance organisations face, of capital allocation and technology obsolescence.”

DRIVERLESS CARS Over the next 10 years, it is likely self-driving cars will make the vehicle risk pool more complicated.

Initial tests show self-driving cars tend to be safer than human drivers and have the potential to reduce car accidents. But they would not eliminate risk completely, could introduce new risks and would create a difficult motoring environment to insure if they were on the roads alongside traditional cars.

Deloitte said in the short term self-driving cars could shrink the vehicle insurance market by reducing the rate of accidents and therefore the premiums charged. But in the longer term the introduction of self-drive cars and increasing 14

March 2016

complexity of the risk associated with them was expected to be an opportunity for some insurers.

Capturing data and understanding how the risk evolved would be important, Deloitte said.

KPMG found in a survey of US insurance executives, whose companies accounted for almost US$85 billion in personal and commercial vehicle premiums, that there was skepticism about the potential transformation as a result of driverless cars in the short term.

Few had taken action—not due to doubts about the possible ramifications, but rather because most believed the change would happen far into the future, if at all. Eighty-four per cent of executives did not expect autonomous vehicles to have a significant impact on their business until 2025, while 42 per cent expect a significant impact in six to 10 years. Nearly three-quarters felt they were unprepared for autonomous vehicles today.

More than half said regulators would impede the adoption of autonomous vehicles, which may help to explain why they anticipate a more distant effect on their business.

“The disruption of autonomous vehicles to the entire automotive ecosystem will be profound, and the change will happen faster than most in the insurance industry think,” said Jerry Albright, principal in KPMG’s Actuarial and Insurance Risk practice. “Technology is making cars safer, impacting underwriting practices, claim frequency and severity as well as auto premiums. To remain relevant in the future,

insurers must evaluate their exposure and make necessary adjustments to their business models, corporate strategy and operations.”

The survey found only 29 per cent of executives felt very knowledgeable about autonomous vehicles, and a small percentage (10 per cent) developed a strategic plan to deal with the impact. Most respondents said they were only in the “discussion phase” or had done nothing at all to prepare, despite acknowledging an expected decline in claim frequency and premium per policy.

COMPARISON WEBSITES Comparison websites, which allow consumers to assess a range of the policies on offer, have taken off internationally but are yet to take a foothold in the New Zealand general insurance market. While Life Direct offers a comparison for personal insurance products, New Zealand's big insurance companies have resisted efforts to do the same.

Trade Me Insurance, which launched last year, had wanted to run a comparison model but could not get traction. Former Vero chief executive Roger Bell has been trying unsuccessfully to launch comparison website iCompare.

There are concerns that the sites drive customers to compare policies solely on price and can lead to problems if they do not adequately disclose commissions paid by providers for placing products.

PEER-TO-PEER CO-OPERATION New peer to peer networks enabled by social

COVER STORY

THERE IS AN AWFUL LOT OF POSSIBILITY FOR CHANGE TO HAPPEN IN THE INSURANCE INDUSTRY... RISK IS NEVER GOING TO GO AWAY, BUT WHAT WE ARE GETTING IS A LOT MORE INFORMATION TO INFORM OURSELVES OF THE RISK media encourage consumers to take on some of the risk themselves and self-insurer.

In most cases, members of a network pay a portion of their premium into a pool and the balance to their insurer. The mutual pool then funds claims and the insurer acts like a reinsurer, funding what that the pool cannot meet. Money left in the pool at the end of the year is refunded or carried forwards.

Overseas, examples of disruptive insurance platforms and developments include peer-topeer insurers Friendsurance, Guevara, Brolly and World Cover. Guevara says it saves members up to 80 per cent on its premiums. Friendsurance claims a reduction of a third on average.

There are suggestions that these networks also reduce insurers’ risk of loss. Research has shown that insurers appear to be willing to underwrite the risks introduced to them by P2P platforms for lower premiums on the premise that the ‘moral hazard’ risk is lower because people are less likely to submit fraudulent claims when they are linked to others in a network who would suffer.

Here, Peercover tried to set up a similar model but struggled. Founder Chris Logan said it had been a hard concept to sell.

“There’s a lot of media about disruption, but how much is actually happening is a different story,” he said. “I think, from a consumer perspective, they are quite wary about financial stuff when it comes to anything new. We are seeing disruption in other areas, but most

consumers think if it’s anything financial, the company is trying to rip me off.”

Linked to this is the wider share economy and how insurers deal with consumers who dabble in it. How should they treat a car that is occasionally used for a Uber ride or a house that is only rarely let via Airbnb?

Innovation manager at IAG Colette Campbell has told media it is difficult to insure these new business models.

“This takes the world of personal and commercial insurance, and blends them into one,” she said.

WHERE TO NEXT? Deloitte said insurers who wanted to keep up with a changing world would have to develop new telematics services, work on cyber risk insurance products, prepare now for self-driving cars, exploit the data and analytics available as much as they could, improve the smartphone experience available to consumers and be prepared to work with new types of intermediaries.

Grafton said change was inevitable and would occur quickly and dramatically.

“The world has a lot of capital looking for places to go. We are in a position to see merger and acquisition activity occurring to bring about different companies with different offerings.

“There is an awful lot of possibility for change to happen in the insurance industry. It presents a whole lot of opportunities as well. Risk is never going to go away, but what we are getting is a

lot more information to inform ourselves of the risk.”

Grafton said brokers would continue to have an important role in the commercial insurance arena, despite any new technology.

“It’s very much relationship-based. I think it’s probably going to be more challenging for brokers in the domestic space. If you are looking to buy motor insurance, do you need to work through a broker? It’s very different to commercial building, which is more complicated and you are looking at a range of other things, DNO, other liability. It’s more complex.”

Technological change could also present new opportunities, he said, as people had to adapt to a host of new risks and needed new policies to protect them.

“If we are talking about the drivers of disruption, the exponential expansion of connectivity. The risk attached to that would increase as well, and getting insurance cover is likely to be a really challenging area. Not just in the commercial space, but in the domestic area as well. A lot of people will have their data connected and want that protected.”

Grafton said people who could see change happening and adapt quickly would do well.

“Those who don’t are more at risk.”

Gary Young, chief executive of the Insurance Brokers Association, agreed responsiveness would be important. “The answer is probably to adapt rather than fight.”

www.covernote.co.nz

15

FEATURE

KIWI FIRMS BLIND TO LOOMING COST N

ew Zealand businesses and company directors face major financial consequences if they ignore environmental and pollution issues, Delta Insurance says.

The insurer has issued a new report that says New Zealand is experiencing major environmental degradation, much of it caused by commercial activity.

“Some of this is driven by residential human activity, such as carbon emissions produced by road vehicles, burning wood and coal for home heating, and human waste,” it said.

“However, a significant cause of pollution is commercial and industrial activity such as manufacturing, electricity generation, property development, agricultural activity, transportation, mining and resource extraction. If there isn’t effective environment regulation undertaken in these industries, it is likely that the quality of New Zealand’s environment will continue to erode in the near future.”

Delta Insurance General Manager Craig Kirk said: “The principle of ‘polluter pays’ is wellestablished in New Zealand now, and businesses need to accept that if they pollute they will be held liable for cleaning up the contamination.”

The report said water quality had declined in recent years, and nitrogen levels in waterways were up 30 per cent over the past two decades.

Kirk said the number and cost of prosecutions for pollution and environmental harm had risen dramatically, but “this is just the tip of the iceberg”.

“Many pollution incidents never hit the regulatory radar and businesses are having to pay for decontamination off their balance sheet,” Kirk said.

He cited one case where an employee accidentally turned on a tap on a diesel tank, resulting in diesel spilling into a waterway.

“Clean-up and regeneration of vegetation took many months, costing over $1 million, and yet there was never any formal enforcement by the regulator,” he said.

Delta’s report said courts and regulators were

16

March 2016

FEATURE

seeking to discourage negligent behaviour by imposing more severe penalties on those who caused pollution.

When pollution incidents occur the governing body, usually the local or regional council, may choose either to issue an enforcement order requiring those responsible to remediate the spill, or they can remediate the spill themselves and then recover the costs from the guilty parties involved. In the case of a sudden pollution incident, the net of liability is cast wide and who bears the brunt of the liability depends on the facts of the incident.

Remediation costs can be sought from the owner of the polluted property, the occupier or the polluter, and councils often opt to engage with all three parties.

The directors of the company may even be personally liable for remediation costs or subsequent penalties – s340 of the Resource Management Act holds a separate criminal liability for directors and officers. Following the “polluter pays” approach, the courts hold stricter demands over the involvement of senior management, emphasizing that a more assertive role be adopted by management in such circumstances.

With gradual pollution, who is liable depends on the facts of the case. Both the owner and occupier are vulnerable to liability.

Even the acquisition of historicallycontaminated facilities may pose the threat of liability arising in the future, although the courts have generally been reluctant to remediate historically-polluted sites.

It is important to acknowledge that the burden of determining liability is exacerbated in gradual pollution cases due to the pollution sometimes

being discovered years after the pollution occurs.

Gradual pollution can remain undetected for long periods, and subsequent damage incurred before discovery could place substantial costs of remediation on those involved, including landholders who have unwittingly inherited or purchased the contaminated site. It is possible also that landlords will be responsible for contamination on their land caused by the activities of their tenants.

Since 2001, Resource Management Act prosecution numbers have jumped. Over the past 12 months, the number of appeals filed in the Environment Court has increased by almost a quarter.

Stricter enforcement of the Resource Management Act 1991 and penalties imposed on guilty parties have in some cases amounted to hundreds of thousands of dollars. The costs of containing and remediating contamination may inflict a severe financial toll on the business, due to the often complex processes that are involved with cleaning up and fully remediating a site.

“Businesses are now at a far greater risk of having financial penalties imposed against them by regulators or having to pay legal damages claims and clean-up costs off the company balance sheet,” Kirk said.

“Worse still, company directors are exposed to paying out of their own pockets or indeed, in serious cases, being imprisoned.”

A major collaborator on Delta’s report was 4Sight Consulting, an industry-leading environmental and planning consulting firm.

4Sight Director Michael Lindgreen said: “Ultimately the best way to avoid liability from a pollution incident is to try and prevent one occurring in the first place. There are systems

A SIGNIFICANT CAUSE OF POLLUTION IS COMMECIAL AND INDUSTRIAL ACTIVITY SUCH AS MANUFACTURING, ELECTRICITY GENERATION, PROPERTY DEVELOPMENT, AGRICULTURAL ACTIVITY, TRANSPORTATION, MINING AND RESOURCE EXTRACTION.

www.covernote.co.nz

17

FEATURE

and processes that can be used to help reduce environmental risks, however even with the best controls in place accidents still happen.”

But the report highlights the shortcomings in the coverage response from traditional insurance policies, many of which exclude cover for pollution incidents. Kirk said it showed that environmental and pollution liability cover was important for businesses. Statutory liability policies would, in many cases, respond to statutory prosecutions arising from a pollution incident and cover fines and reparation awarded.

However, they would not cover third party damages claims, emergency response services or the costs of cleaning up the event.

“It’s clear that environmental impairment

policies provide the most complete solution and are designed to not only complement but go well beyond traditional insurance,” Kirk said.

Environmental policy coverage does not draw a distinction between sudden and gradual pollution and extends to the costs of clean-up as well as third party claims and regulatory action.

Delta provides such insurance, as does AIG, ACE and Vero.

“In the case of fixed site policies it can cover business interruption costs as a result of downtime from pollution events, but of particular interest to some clients will be the fact that it also covers unique perils such as asbestos which are not insurable elsewhere,” Kirk said.

A truck transporting industrial paint overturns on a bridge crossing a river.

The contents of the truck subsequently spill over into the river, and there is also notable spillage on the road.The crash also causes the entire road to be cordoned off for nearly the entire day, and the truck is ultimately written off.The spillage of paint into the water resulted in a significant loss of aquatic life, and this has a profound effect on a fish farm which is located in the estuary down-river. The fish farm brings a damages claim of $65,000. The local authorities respond to the situation by cleaning up the damage to the road and bridge, however the truck company is issued with a claim by the local council, who seek to recover the clean-up costs which are $350,000.These include the clean-up of the road, the bridge and the river.

How would insurance respond?

There is often a limited level of pollution cover under the truck’s commercial motor vehicle policy, however this is typically limited to a relatively low value of around $25,000. This may be paid by the motor vehicle insurer, who may also cover the damage to the vehicle.

As it is a vehicle accident, there is no cover under a general liability policy. The prosecution by the local authority should be covered under a statutory liability policy and the investigation costs of $30,000 and fine of $75,000 should fall under that policy.

Under this scenario, an environmental and pollution liability services industries policy could cover: 1 The claim by the council to recover the clean-up costs of $350,000; 2 Access to specialist environmental consultants to help with the emergency response; 3 The claim by the fish farm of $65,000; and 4 Any public relations costs to manage the communication with the media.

A fuel supplier acquires a fuel storage facility which includes existing underground fuel storage tanks. At the time of its acquisition, the purchaser conducts soil sample testing on the facilities and discovers the presence of petroleum hydrocarbons in the soil, due to an existing leak. The vendor is contacted and remediates the premises at the time. Years later, further contamination is detected. There is also groundwater contamination, which poses a significant health risk as it may seep into the water supply of a nearby town.

The fuel supplier is prosecuted by the local council, resulting in a fine of $50,000 and a reparation order of $40,000. The cost of remediating the environmental damage on-site is $250,000. The neighbouring land is also contaminated and the neighbour sues for the cost of decontamination, which is $150,000. The local town incurs costs of $75,000 to put in place

measures to ensure that the water supply is suitable for drinking. The fuel supplier has a fixed site environmental and pollution liability policy, which has the site scheduled for coverage in relation to both existing and new conditions.

How would insurance respond?

A general liability policy may not respond in this case, as the damage is as a result of gradual pollution which is not typically covered under GL policies. The council’s prosecution would likely trigger a statutory liability policy, which could cover investigation costs, defence costs, reparations and any fines imposed. A statutory liability policy would typically not respond to clean-up costs or third party damages claims.

Under this scenario, an environmental and pollution liability fixed site policy could cover: 1 The $250,000 associated with decontaminating the soil onsite; 2 The neighbour’s damages claim of $150,000; 3 The claim by the local water supply authority for $75,000; and 4 Any defence costs associated with the above claims.

18

March 2016

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19

FEATURE

KIWIS REVEAL WHAT KEEPS THEM UP AT NIGHT MORE THAN HALF OF PEOPLE SURVEYED (52 PER CENT) SAID THEY WORRIED ABOUT HAVING A CAR CRASH...

20

March 2016

FEATURE

2015 (motor)

received 2012-

claims IAG has

How many

2015 (home)

50 per cent

received 2012-

52 per cent

A house fire

claims IAG has

Having a car crash

2

Number of

Percentage of

1

people worried

Type of Incident

ew research from IAG has revealed that being involved in a car accident is the number-one disaster feared by New Zealanders this summer, followed by a fire breaking out in their home.

IAG worked with research specialists Nielsen to find out what most concerned people. The insurer then compared the results to the type of home and motor claims it received from customers between 2012 and 2015.

More than half of people surveyed (52 per cent) said they worried about having a car crash, while exactly half (50 per cent) of respondents admitted to fearing a house fire.

While IAG’s data showed six in ten (62 per cent) of all motor claims made in the last three years were for vehicle accidents, only 1.3 per cent of all home claims related to house fires. The figure for house fire claims includes those made for total loss as a result of a blaze.

IAG spokesperson Craig Dowling said: “Just behind of car accidents, fire is a major worry for New Zealanders.

“While fortunately, as our claims data shows, very few of us will experience a house fire, claims of this type are by far the highest value with the average costing $31,000, which goes to show the importance of having insurance to make sure you’re covered for this eventuality.”

Dowling said summer could raise the risk of potential fires breaking out in and around the home, because more barbeques and braziers were being fired up.

Ranking

N

“Taking simple precautions like not wearing loose clothing around the barbecue and making sure you cook well clear of low-hanging trees or long grass will help you to keep safer this summer,” he said. “Make sure you are aware of local restrictions and follow guidelines from your local authorities. People should be aware that they can be held liable for damage caused to other people’s property.”

Next on New Zealanders’ worry list was the fear of being burgled, with 48 per cent admitting it was a concern. Home burglaries accounted for 12 per cent of all home insurance claims paid out by IAG between 2012 and 2015.

The data showed that just over two in ten of IAG’s total home claims (21 per cent) were for damage caused to policyholders’ property, which was a concern of 18 per cent of people who took part in the survey.This includes damage to personal items such as dentures, spectacles and hearing aids, plus malicious damage caused by other people through vandalism or graffiti.

Earthquakes also ranked highly as something people were concerned about, with 42 per cent saying they were worried a shake would hit.This is despite fewer than 1 per cent (0.09 per cent) of all IAG’s home claims over the last three years being earthquake-related. The average cost of claims of this type was $20,175.

Despite lost contents only making up 8 per cent of all IAG’s home claims, 26 per cent worried about losing personal items such as photos, a quarter (25 per cent) fretted about losing their phone and 17 per cent said they feared losing their laptop or tablet.

One in ten people (10 per cent) worried about misplacing their glasses or hearing aid, of which the majority were people aged 55 and over (16 per cent compared to 9 per cent of people aged 15 to 24, 9 per cent of people aged 25 to 39 and 8 per cent of 40 to 54).

Almost a quarter of people asked said they worried about their car or motorcycle being stolen (24 per cent), although IAG’s data showed that just 3 per cent of all motor claims for this period were for theft of a vehicle.

A fifth of people expressed concern over a storm or flood (21 per cent).

Claims of this kind made up 11 per cent of the insurer’s total home claims.

Other natural disasters people feared included a tsunami (13 per cent) and a volcanic eruption (10 per cent).

What are New Zealanders most worried about?

62 per cent 1.3 per cent (includes claims for total loss)

3

Home burglary

48 per cent

12 per cent

4

Earthquake

42 per cent

0.9 per cent

5

Losing personal

26 per cent (25 per

8 per cent

items

cent worry about losing their phones, 10% worry about losing their glasses/ hearing aid)

6

Vehicle stolen

24 per cent

7

Storm or food

21 per cent

3 per cent 11 per cent

8

Damage to property

18 per cent

21 per cent

9

Tsunami

13 per cent

Nil

10

Volcanic eruption

13 per cent

Nil

www.covernote.co.nz

21

OUT AND ABOUT

INSURANCE ADVISERNET OFFICE LAUNCH After nine years in Newmarket, Insurance Advisernet has moved to new offices in Parnell.

David Crawford, the New Zealand director, said: “We had outgrown Newmarket and needed to be closer to the insurance market. We also wanted to provide a separate space for a growing number of new brokers joining Advisernet and we found a new build right on Parnell Rd that was both spacious and modern.

“We decided we would combine an opening function with a Christmas party and invited our brokers, key insurers and suppliers to join us which everyone thoroughly enjoyed. Since we moved in, we have had clients, brokers and insurers all tell us what a great place we have and it certainly is a step up from Newmarket.

We wanted to provide our staff and brokers with a great place to work and we have certainly achieved this if the feedback from visitors is anything to go by.”

Insurance Advisernet is 10 years old and is on a major recruiting drive, looking for advisers who want to start their own broking businesses.

“We’ve got size, credibility and a great playing list already, but we want to keep attracting good brokers into the group because that is the future – being in Parnell certainly helps,” Crawford said.

NZI’S GOLF EVENT OF THE YEAR Sixty brokers and NZI staff attended NZI’s Clearwater golf event last month.

“Although the wind made for some challenging golf, the day was a great success and we were pleased to be able to put on something special for our broker partners”, said NZI’s regional commercial sales manager Glynn Howell.

The last time NZI hosted a golf tournament in Christchurch was in 2011, Howell said it was good to see this much-loved event return five years on from the 2011 earthquake.

Named best golf course in New Zealand and Oceania at the World Golf Awards in Portugal last year, the Clearwater Golf Course is a sought after venue for international professional golf and playing there was a big tick off the bucket list for many of the attendees.

Andrew Dufton – Abbotts Insurance, John Connell - Amicus, Garry Taylor – NZI, David Gibbons – Crombie Lockwood

22

March 2016

OUT AND ABOUT

Dear friends,

Your clients trust you, for all the right reasons In the 30+ years we’ve been in business, we’re really proud of the relationships we’ve built with brokers like you. You’ve recognised the power of our niche insurance products for high-value and classic cars, motorcycles and motorhomes. And how our policies are tailored and relevant solutions for your clients. You’ve also enjoyed our responsive customer support and claims process.

Like you we’re independent. That’s because Vero has delegated authority to us to handle absolutely everything to do with our policies. They trust us because we are knowledgeable, credible, honest and we provide good value. The added benefit is all our policies have an A+ security rating, which is good for you and your clients.

You recognise the power of independence in your business because it enables you to offer the absolute best insurance options to your clients without being tied down to one product line. Being independent also removes bias, which ensures your clients will trust that you’re looking out for their needs. In return, they’ll look after your needs.

Unfortunately one of our brokers received a directive from their parent company abroad, to move all their policies to a single insurer. We’ve enjoyed a great, longstanding relationship with them, so this action surprised us. We’re not ones to tell another company how to run their business, but we were obviously disappointed for their customers who would no longer be given a choice when renewing their policies. And because this goes against everything we know and love about what brokers do.

Yes, we could go direct to the market and seek out those customers, but we serve you too. Which is why we think this is a great opportunity for you to promote your competitive advantage – your independence – and to talk to more people who might not be happy with recent events. Show them that you are a better broker with more options. You’ll win more business because people love being able to choose the best options for their needs. With you they can see the full menu, not just one food group.

Thank you for being loyal to us; we appreciate it. We’re here to help you grow your business by providing you with superior niche insurance policies to offer your clients. If you have any questions, please get in touch with us.

Call us on:

Warm regards,

09 250 6009 Or email:

admin@sual.co.nz Nick Baker MOBILE: DIRECT:

CEO

021 852 687

09 250 6004

John Baker MOBILE: DIRECT:

Founder & Chairman

021 934 665

09 250 6007

www.sual.co.nz

www.covernote.co.nz

23

FEATURE

THE WALLS COME TUMBLING DOWN - BARRIERS TO ENTRY REDUCE John Lyon reflects on the process of starting up a new player in this country's insurance industry.

By John Lyon

A

couple of years ago, the Commerce Commission’s decision to allow IAG’s acquisition of Lumley was met with strong opposition from many corners of the insurance market. Their decision was guided by one overriding consideration – would the acquisition reduce competition to the detriment of consumers? Important factors they looked at included what would happen to market shares after the deal, the role of distributors, the strength of existing competitors and, importantly, the ability of new entrants to bring increased competition to the market.

Since the Commerce Commission decision, we’ve certainly seen strong competition and lowering of prices in some commercial segments, which suggests that consumers have not been negatively impacted. On the other

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March 2016

hand, many brokers have expressed strong concern about the reduction in real choice of markets when competing for new business. Today, opinions no doubt remain divided on the impacts of the merger on competitive tensions.

In one respect, however, there is strong evidence to suggest that the New Zealand insurance market still offers a platform for effective competition: in recent years we’ve seen a number of new competitors enter the New Zealand market in a variety of segments, and using a variety of operating models. While the scale of some is small as yet, it clearly shows that there are no insurmountable barriers to deter new competitors from entering the market to challenge the incumbent players.

When we were evaluating New Zealand market opportunities, before

FEATURE

THERE WAS A TIME WHEN IT WOULD SIMPLY HAVE BEEN TOO DIFFICULT AND TOO EXPENSIVE FOR A NEW INSURER TO LAUNCH IN A MATURE MARKET, BUT TODAY MANY OF THOSE BARRIERS HAVE DIMINISHED. settling on the Ando operating model, it soon became very clear to us that the traditional barriers to entry were changing. There was a time when it would simply have been too difficult and too expensive for a new insurer to launch in a mature market, but today many of those barriers have diminished, particularly in the following areas.

Technology: A few years ago, a start-up insurer would have been hard-pressed to find a cost-effective IT platform. Now there are many options, such as the one we’ve chosen at Ando – SSP’s cloud-based Pure system. Not only are these new solutions more affordable, but they are also significantly more adaptable and effective than legacy systems, with easier connectivity. Instead of being a barrier to entry, a new technology platform can now provide a real competitive advantage.

People: Employee behaviours and expectations have changed over time.

Corporate restructures, mergers and cost-cutting drives mean that people no longer have any expectation that being part of a large organisation will give them long-term job security. Also, the hierarchy, bureaucracy and poor processes that still dog some larger businesses has taken its toll on staff engagement and loyalty. Today more and more employees are seeking opportunities to learn fresh skills and gain the sense of involvement and ownership that smaller businesses can offer. The lack of hierarchy and bureaucracy and the prospect of creating simple, customer-focused processes has been an exciting attractor to Ando staff.

Brand: Consumer behaviours are changing. There was a time when people predominantly bought insurance from well-known insurance brands. Now, in the intermediated market, the brokers’ brand has become more important than the insurers’ brand and a new wave of consumer behaviour is emerging. People are now prepared to buy sometimes unrelated products from strong brands – retailers selling insurance, telcos selling entertainment and electricity companies selling broadband are some recent examples we’ve seen here in New Zealand.

Capital: Post earthquake, we saw some major realignment of risk appetite in the New Zealand market. Some capital left the market, and some new markets arrived. There is now plenty of appetite for New Zealand exposure, with reinsurers looking to deploy capital, sometimes bypassing insurers, in order to grow, or just maintain, market share in the face of competition from alternative capital markets and shrinking markets due to consolidation. The underwriting agency model is highly effective in providing reinsurers and insurers access to new markets, and thus allowing deployment of new capital and products.

Data: There was a time when big companies had an advantage because they had the best data. I remember working for one major insurer that chartered special aircraft to map the topography of Australia to get insight into bushfire and flooding risk. This gave them a considerable advantage in risk selection until Google Earth came along and offered the same insights, free, right there on anyone’s desktop. The point is that new sources of data gleaned from social media, or from businesses such as retailers and telcos, can now often offer much richer insights to customers’ behaviours than the insurers’ own data. When you consider how these insights can be used to build better propositions, it’s easy to see why access to information is changing the landscape for new insurers entering the market.

Size: Economies of scale are important to a business, but it’s the "economies", not the " scale" that give new businesses an edge. By partnering effectively, (for example by outsourcing to specialists) it’s possible to achieve implied scale and this is becoming more and more viable as the range and quality of providers increases. Examples include IT, office facilities management, and our Ando claims partners, Crawfords.

The added bonus is that effective partnering leaves the business free to focus on core activities, and the customer.

So what does all of this mean? While some people would still like to see more immediate competition, the New Zealand insurance market does seem to be working effectively to allow new entrants in. As consolidation occurs and competition/choice declines, market dynamics shift, creating opportunities for new competitors to emerge. Of course, to be sustainable, those new entrants have to deliver real value and quality propositions that attract market interest and support. But that has always been the case.

John Lyon is chief executive of new insurer, Ando. www.covernote.co.nz

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FEATURE

Disruption and Choices

By David Whyte

W

hichever way you look at it, CEOs are faced with an eternal dilemma: their efforts to tackle the issue of technology and its impact on the industry, their businesses and their stakeholders.

Now, I can imagine that you’re shedding crocodile tears for those poor, put-upon CEOs, who are daily faced with decisions to take and choices to make in exchange for the paltry stipend the board allocates!

But when the issue is put under the microscope, the quandary that CEOs (and others) face with disruptive technology is almost impossible to overcome by the application of accepted management practices.

As the name implies, technology that is classed as disruptive is defined as “one that displaces an established technology and shakes up the industry, or a ground-breaking product that creates a completely new industry”.

Professor Clayton M. Christensen first coined the term in his 1997 book “The Innovator’s Dilemma”, and the concept has gained currency as the speed of change in technology seems to be on an ever-increasing and complementary path of innovation and obsolescence.

We can see many examples of technology hardware displaying these characteristics, such as laptop computers, tablets, smartphones, iPads and so on.

But with this hardware, the operating systems and the attendant software have rendered obsolete many "innovations", as they were considered when they arrived on the market for the first time.

The slide-rule has been consigned to the museum, and the earlier generations of 28

March 2016

FEATURE

PERHAPS ON SOME FUTURE ANTIQUES ROADSHOW THERE WILL BE AN EXPERT PLACING SOME EXTRAORDINARY VALUE ON MY OLD NOKIA SLIDEPHONE. WHO KNOWS? cellphones – either huge by comparison, or with tiny screens or strange messaging capability have likewise been discarded.

Perhaps on some future Antiques Roadshow there will be an expert placing some extraordinary value on my old Nokia slidephone. Who knows?

And therein lies the dilemma in the insurance world – who knows what technology will deliver next?

From a product perspective, the evolution of travel insurance distribution has been an early and consistent focus of disruptive technology.

From the days when travel agents caught their clients at point of sale in the shop or office, to the online offerings that abound today, the sale of the product has changed dramatically.

Travel insurance products available via an online employer’s salary programme for staff have been in the market for well over a decade now in Australia, available at approximately a 35 to 40 per cent discount from the normal retail price.

The difference is the commission that used to be paid to the selling intermediary, predominantly the travel agent.

To add to the story, a recently launched online New Zealand company called Volo offers GenYs (90 per cent of whom have a smartphone) an instant reminder and invitation to click and buy travel insurance, if they happen to be at an airport anywhere in New Zealand. The app detects the owner’s location and activates the reminder automatically, providing cover within three or four simple clicks. How’s that for disruptive technology?

Similarly, motor vehicle insurance is

increasingly available online. This innovation is significant, as the old adage about service suffering due to a "cut-price" offer no longer applies.

In the car insurance markets overseas, disruptive technology has created aggregator websites – online portals for accessing multiple quotes with a single entry set of customer and vehicle data. The aggregator takes a small fee of $3 or $4 for every quote accepted and transaction completed, but when those acceptances run to 2-3000 per day due to the ever-increasing capacity and speed of delivery, you can easily see the ability to build a significant business in a short space of time.

The New Zealand insurance industry has resisted such innovation so far, by refusing to provide rates to an innovative website operator, but time will tell whether technology permits continued resistance.

Concerns expressed by the Luddites in the insurance companies that selection by price alone would disadvantage the consumer are an insult to the public and a rubbish excuse for holding back progress. In the life insurance industry there are half a dozen sites offering product comparison on quality and price, and the consumer is far from disadvantaged from the availability of such technology.

Now that the domestic residential insurance market has regained a modicum of sanity by requiring a specific sum to be insured on a property, it is possible to access house insurance online, again with the ability to examine the terms and conditions provided. Offering a nolimit replacement cover on residential property insurance could possibly have been sustained, www.covernote.co.nz

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FEATURE

except for the occurrence of a catastrophic natural disaster. Enough said.

So personal lines insurance has been the easy and natural target for disruptive technology – low-value repetitive transactions are exactly what disruptive technology feeds on by reducing the unit cost of each transaction and increasing the margin for the operator, boosting shareholder value and increasing long-term sustainability.

There appears to be little evidence that claims patterns are impacted either way by disruptive distribution technology – but correct me if I’m wrong with this.

But how does this disruptive technology impact the more complex insurance products in the commercial space? For example, each material damage risk has its own unique aspects and must be carefully assessed and evaluated, I hear you say, and, to an extent, you’d be right.

But when I started my career in insurance in Scotland in the mid-1970s, we boasted a team of fire insurance surveyors, sent out to each proposed location to measure and identify any undue or adverse risks that would require an addition to the then existing fire tariff rate (remember those, anyone?).

Mind you, that was a few years after the four renewal dates (the quarter days) for fire insurance were abandoned because ‘technology’ facilitated a renewal date for the convenience of the client rather than the insurer.

I’m not savvy enough to predict the technology that will disrupt the areas of the insurance market as yet untouched by innovation, but I’d bet the farm that this will happen.

And so we get back to the decision-makers and how they cope in the face of rampant innovation.

Professor Christensen’s analysis presents "sustaining technology" as incremental or gradual improvement to existing technology, while "disruptive technology" often lacks sophistication, has performance issues and may even have limited initial application or appeal.

He cites the example of Alexander Graham Bell’s "electrical speech machine" – the telephone.

In the normal course of events, the average insurance company has an IT department, populated by leading-edge pointy-heads and delivering the very latest in technology innovation to keep their employer sustainably and permanently ahead of the competition.

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I’M NOT SAVVY ENOUGH TO PREDICT THE TECHNOLOGY THAT WILL DISRUPT THE AREAS OF THE INSURANCE MARKET AS YET UNTOUCHED BY INNOVATION, BUT I’D BET THE FARM THAT THIS WILL HAPPEN.

Or so the theory goes, but even the smartest first-class honours graduate in computing science has only proven their expertise in technology that has become obsolete since the day they started the course.

Every 12 to 18 months, computers double their capabilities – see Ray Kurzweil’s historical trends of exponential growth charts that forecast technology in five years’ time being 32 times bigger, faster, and more innovative than at present.

Moving further forward to 10 years ahead, technology will be 1000 times more advanced compared with present day – and the “law of

Accelerating Returns” kicks in big time.

Allocating capital expenditure for IT development projects is fraught, particularly for CEOs and boards of directors, who are ultimately responsible for approving such expenditure.

No sooner has the presentation and analysis been approved by the board (eventually!), than a report from some smart IT dude in Silicon Valley is delivered to the CEO’s inbox, along with the stark realisation that by the time "Project Upgrade" is delivered, the new system will be out of date. Too late – project approved, capital allocated/spent, resources appointed, and stage one is under way.

No right-minded CEO could possibly go back to the board and ask to have the capital already expended written off, seek approval for another "uniquely innovative" project - likely costing even more – and expect to retain the confidence of the directors who may only have a passing appreciation of what’s going on anyway!

Take a look at the boards of some of our leading insurance companies – some, not all – and imagine the conversation around the boardroom table on social media marketing or search engine optimisation!

To keep abreast of technology developments, the board of directors in any insurance company should have the presence of IT expertise available – and not necessarily from the company’s own Executive Management space, as it’s been known for some IT Managers to indulge in self-preservation in the face of unanticipated technology advancement.

The rate of change in disruptive technology impacts every industry. It renders some obsolete (think light bulbs and candle-makers) and forces others to adapt to survive.

But prospects are not completely bleak, as the insurance industry has proved to be remarkably resilient through political, legislative, economic and regulatory upheaval.

Technology is another source of challenge for the industry.

Put simply, insurers that develop adaptive strategies stand a chance of survival; those that stick with the tried and tested ways, and ignore, reject, or resist disruptive technology, will eventually disappear.

David Whyte is an industry consultant, former chief executive of Ginger Group and former director of Southern Response Earthquake Services.

ACE and Chubb are now one.

ACE Limited has acquired The Chubb Corporation, creating a global insurance leader operating in 54 countries under the renowned Chubb name.

On 1 July 2016, ACE Insurance Limited in New Zealand will become Chubb Insurance New Zealand Limited.

The new Chubb brand will be rolled out in phases, replacing existing ACE branding during 2016.

ACE Ad

The new company combines Chubb’s 130 years of underwriting insights and devotion to customer service with ACE’s three decades of technical underwriting excellence, broad risk appetite and global presence. Our goal is to provide the very best insurance coverage and service to individuals and families and businesses of all sizes — from small and medium sized companies to the largest multinational corporations — all across the globe.

As craftsmen of insurance, we are devoted to meticulously conceiving, crafting and delivering extraordinary coverage to meet the needs of the modern world — a world that is epic in scale but by nature both personal and connected.

To find out more, go to new.chubb.com.

Chubb. Insured.

SM

© 2016 Chubb. Coverages underwritten by one or more subsidiary companies. Not all coverages available in all jurisdictions.

SM ACE®, Chubb®, their respective logos, and Chubb. Insured. are registered trademarks.

ASK AN EXPERT

Rented holiday home QUESTION… We have had a client that we have [recorded] as a holiday home owner-occupied. There was a recent claim and it has been discovered that it is a holiday home that is rented out and only occupied by the owner 20 to 50 days of the year. The insurer has accepted the claim but wants to charge an additional premium and, going forward, a higher excess for all claims while tenanted. Renewal was in October and they want to apply the changes with effect from the claim date.

Are they allowed to do that, and on what basis?

REPLY… CROSSLEY GATES, DLA PIPER They are not, unless the policy expressly allows them to vary the policy mid-term on a specified number of days' notice (and that number of days has expired). Otherwise, they have to wait for the next renewal.

REPLY… STEVE WARDLEY It may be that the insurer would expect the insured to declare if the property was to be rented on inception - it is a common question on a house owner’s proposal form, and probably considered material by the insured.

The terms and excess the insurer has suggested may reflect the terms that would have been requested had they known the property was to be rented on inception. It may also depend on the policy wording.

Do you have a question for our experts?

If so, visit iNavigator, www.inavigator.co.nz, or the IBANZ website, www.ibanz.co.nz - and let us know.

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Cleaners cause damage QUESTION… My client’s oven was damaged by third-party cleaners - they have extensively scratched the oven and splashback. Our client’s insurer has declined the claim on the basis that the damage was caused by cleaning/renovations etc. The cleaning company lodged a claim with their insurer, and their insurer has now contacted our client to say that they will only pay indemnity (50 per cent of the RV) on the oven, as they estimate it to be five years old. Can you please advise if this is correct? Surely the cleaners’ insurer is liable to repair or replace the oven. In this instance the oven cannot be repaired, so needs to be replaced. I look forward to your comments.

REPLY… CROSSLEY GATES, DLA PIPER The TP's underwriter is confusing liability insurance with property insurance. Assuming the TP is legally liable, the measure of the indemnity under the TP's policy is the amount of the TP's legal liability. The underwriter is not insuring the peril of damage to the oven (property insurance). The amount of the TP's legal liability is measured by the law of civil damages. Assuming the oven has to be replaced, it is that cost that the TP is legally liable for, and therefore it is that cost that is indemnified under the TP's liability policy.

REPLY… DEAN SEWELL Thanks, Crossley. As a note to this, isn't indemnity the basis of any civil damages claim? If the cleaners have damaged an oven that is five years old, they are liable for the cost of a five-year-old oven, be this the cash value or what have you, not a brand new oven, making the liability insurer correct here? In much the same way as if I wrote off someone's five-yearold Mercedes, they wouldn't be able to recover a brand new one.

REPLY… CROSSLEY GATES, DLA PIPER The calculation of the indemnity value of a used piece of insured property under a property policy and the damages recoverable from a negligent third party for damaging the insured's property are not identical.

In summary, the starting point for damages in tort against the third party is the cost of putting the insured back into the position he or she was in before the negligent act occurred. This usually equals the cost of repairing (if possible) or replacing the property new-for-old. If the negligent third party believes this results in betterment to the insured, the onus is on the negligent third party to prove this. If proven, any deduction for betterment must be reduced by the cost to the insured of the early forced expenditure to replace the property before its usual life expectancy came to an end.

So the approach is similar but not the same. As a general rule, deductions for betterment under the law of damages are often less than the straight line depreciation reduction often used in property insurance.

ASK AN EXPERT

Asbestos discovered QUESTION… A client is preparing a lot for building.

During excavation they have moved some hidden building materials that were buried underground. No one knew they were there and they contained asbestos, which has now been spread over the lot.

The client wants to claim under their annual contract works policy, but not sure about this. Any ideas?

REPLY… STEVE WARDLEY I suspect the contract works policy covers damage to the works (rather than the unprocessed land itself) and excludes pollution or contamination. The client will likely have to bear the costs, unless there is any recourse against the council or previous land owners.

Wording changes

Sand-blasted windows QUESTION…

QUESTION… We have received an email from an insurer with revised MD/BI policy wording attached, confirming the new wording is with effect immediately and to please advise our clients. The revised wording is offering less cover then originally confirmed at inception/renewal of our clients’ policies.

Our thoughts are that under Contract Law the policies currently in place are set for the 12-month period of the contract and no midterm amendments to the wording can be made until that contract comes up for renewal. If this is correct, we would be within our rights to tell the insurer that we will entertain the revised wording at renewal and not before?

REPLY… CROSSLEY GATES, DLA PIPER Unless the existing policy gives the underwriter the right to vary the policy mid-term, it can only take effect from renewal unless your client agrees to vary it mid-term by agreement.

I have had a client that was sandblasting a house and caused damage to the third party’s windows, meaning that they have to get the windows replaced. The TP is considering sending a hold liable to our insured, and the insurer has said that they will only pay indemnity value on the glass and not replacement, as there will be a deduction for betterment. My argument is that the damaged item cannot be economically repaired (it can't be repaired) and needs to be replaced, so the third party should be entitled to replacement costs of the new windows. Can someone please advise? I've spoken to a few people and they have never heard of this.

REPLY… CROSSLEY GATES, DLA PIPER The underwriter is confusing liability insurance with property insurance.

Assuming your client is legally liable, the measure of the indemnity under the policy is the amount of the insured's legal liability to the TP. The underwriter is not insuring the peril of damage to the windows (property insurance). The amount of your client's legal liability is measured by the law of civil damages. Assuming the windows have to be replaced, it is that cost that the TP can hold your client legally liable for, and therefore it is that cost that is indemnified under the liability policy.

www.covernote.co.nz

33

ASK AN EXPERT

Cause of Who is at fault? mechanical damage QUESTION… I have a rural client who put the engine brake and hand brake on a Polaris Ranger. They disengaged the hand brake, but forgot to do the same with the engine brake. They travelled a short distance and smelt smoke and stopped. This has caused approximately $2200 of damage to the Polaris Ranger. The insurer has declined the claim on the basis of a mechanical damage exclusion, however we believe the proximate cause of this damage is the insured's error in not releasing the engine brake. Without this error by the insured, it would not have caused the mechanical damage to have occurred.

REPLY… CROSSLEY GATES, DLA PIPER This is a common area of dispute in motor vehicle policies. Not all accidental damage is covered by the policy. Accidental mechanical damage on its own is generally excluded. It doesn't matter that the cause was some accidental operator error. You will usually find the exclusion refers to the nature of the damage only, not the cause of the damage. If so, the cause of the damage is irrelevant. If the damage is solely mechanical in nature, then the exclusion applies.

Claim declined

QUESTION… I have two clients who have been involved in a motor vehicle accident on a rural gravel road. The vehicle travelling in front stopped suddenly in the middle of the road, as they had missed the farm gate they wanted to enter. The truck and trailer unit had been travelling approximately 200 metres behind, but the road was quite dusty due to the new gravel being put down on this road. The driver saw the vehicle in front stop abruptly and braked heavily to avoid hitting the vehicle, but there was an accident. I realise that the vehicle behind should be travelling far enough behind that they can stop safely, but given that the front vehicle has stopped so abruptly, without warning and in an unsafe place, is there any liability on the front vehicle also?

REPLY… STEVE WARDLEY In my limited experience there is not likely to be any liability on the vehicle in front, as it is difficult to establish what is "abrupt".

QUESTION… When an insurer declines a claim, is there a legal obligation on them to include, in the decline letter, the client’s right of review and an explanation of their rights and the process involved if dissatisfied with a decision? I have a claim where an insurer has declined the claim and the only comeback for client was “please feel free to contact your broker”. I worked at insurer prior to broking and we always included full details of the review process and rights of the client.

REPLY… STEVE WARDLEY Has the declinature letter been sent direct to the client or to your broking office? It is not uncommon for an insurer to direct the declinature letter (often after discussion) to the broking office, so the broker can discuss and explain the reasoning to the client. If the insurer has sent the declinature direct to the client, it would be courteous to have forewarned the broker. The insurer is likely to be reluctant to invite a direct response, as they are only geared to deal with brokers, and brokers often don’t want the insurer to correspond directly with the client.

REPLY… ORIGINAL POSTER The decline was sent direct to the client. We had been told it was going to be declined and were waiting on the letter. Only after waiting weeks and weeks and ringing the client direct did we find out it had been declined and the letter not sent to us. I’m coming from the place that the client has rights, and I feel that the insurer should be responsible for advising the client fully of these in the decline letter. It seems fair to do so; immoral not to. Do you happen to know if there are brochures anywhere or where I can find out about clients’ rights?

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REPLY… STEVE WARDLEY The client has the right to contest a declinature, in this case via the broker, or they can lodge a complaint about the insurer’s actions if the feel it is appropriate. I believe the client must follow the insurer’s internal complaints process first if they wish to progress down that path. Initially as their broker you should take up the battle for them if you feel there is a case.

REPLY… CROSSLEY GATES, DLA PIPER The answer to your question is that there is no legal obligation on insurers to set out their internal dispute resolution process when declining a claim. However, many do as part of being consumer-friendly.

I have just checked the new Fair Insurance Code, and somewhat to my surprise, there does not appear to be anything in the Code about this either.

The insurer will have to belong to an external dispute resolution service, which is free to your client. However, as Steve says, your client will have to go through the insurer's internal dispute resolution service first.

Safe Driving Rewards Programme Our Safe Driving Rewards Programme, powered by EROAD, is designed to reward transport operators who demonstrate safe driving behaviour.

By meeting safe driving benchmarks, transport operators could be eligible for an excess waiver when they make an insurance claim following a driving accident.

There’s no extra cost and the data collected is not used to alter any underwriting terms. Transport operators simply need to have heavy motor insurance with NZI or Lumley and be an EROAD customer.*

* Terms and conditions apply. Please see www.safedrivingrewards.co.nz for full details.

The programme is available for a limited time and will end on 30 August 2016.

LUM6181-2 02/16

For more information and to register for the programme please visit www.safedrivingrewards.co.nz

COVER STORY

Reflecting on Christchurch Five years on, what have we learnt from the experience of the Christchurch earthquakes?

TIM GRAFTON, CHIEF EXECUTIVE, INSURANCE COUNCIL OF NEW ZEALAND The fifth anniversary of the Canterbury earthquakes, is a time to remember those who lost their lives, the massive recovery effort since and to look to the great future Christchurch has ahead.

The insurance industry is proud of its contribution. Our members have settled $17 billion of residential and commercial claims or 90 per cent by number of claims. This has enabled better, modern, safer houses to be built.

This has been achieved in the face of one of the largest, most complex insurance events globally while continuing to maintain insurance cover throughout to support people and the economy. Our country lost the equivalent of 20 per cent of our GDP when the quakes struck, yet Canterbury has not only survived, but thrives.

We understand the frustration experienced by people who have suffered from such a major event. But looking back, our industry has at time been the convenient by-word for delays. In many instances, delays were not of insurers’ making and were beyond their control. These are some of the many reasons: 36

March 2016

•

•

• • • • • • •

Land was unstable with many earthquakes, including major damaging ones, for over a year after February 22, 2011, stalling a major repair and rebuild programme Thousands of properties needed to have geo-tech tests to determine the damage to the land and the unique foundation solutions for those properties Land was zoned and new building codes introduced Long delays occurred in the consenting and council inspection processes Skill and material shortages constantly disrupted the rebuild process Underground service connections were poorly mapped and disconnections and reconnections on sites caused significant delays Contaminated land sites were identified and needed to be cleaned up Mass land movement areas across the Port Hills had to be scientifically identified and assessed Land remediation for liquefied land was researched and developed from scratch

COVER STORY

• •

Ways of compensating people for land damage had to be developed The legal complexities and agreements required to progress multiunit buildings on cross-lease titles where at times people are uninsured.

This is not to say mistakes were not made, but best endeavours have been made to genuinely make progress as quickly as possible. We have learned from what happened, we have made changes and believe more can be done to improve the response to the next event when it happens.

Many insurers have now moved to a sum insured instead of open-ended replacement. This will provide certainty for all parties as to the value of settlement.

We believe for a future natural disaster that the Government should make changes so that all claims are lodged with your insurer who should have responsibility for assessing the claim. This would mean that the worst damaged houses would be identified by insurers early instead of receiving almost 1500 properties from EQC during 2015.

Protestors have misleadingly said claims have not been honoured. This is not true. Where there is disagreement about the scope of repair, insurers must rely on independent experts like engineers to advise them. If there are differences of opinion then insurers have helped fund an independent Residential Advisory Service to provide free legal advice and technical assessments for second opinions. Some insurers have engaged specialists with the soft skills to help claimants through the settlement process.

Five years on from the big one, insurers and the Cantabrians that work for them continue to put every effort in to settle claims for their own community.

DR KELVIN BERRYMAN, GENERAL MANAGER, NATURAL HAZARDS STRATEGIC RELATIONSHIPS, GNS SCIENCE Where are we five years on?

The February 22, 2011, earthquake kicked off an unforeseen chain of events that will be felt for decades in New Zealand. Coming to terms with the loss of life and serious injuries, the long aftershock sequence, the multidimensional range of social, infrastructure, and business impacts, acting on the recommendations of the Royal Commission of Enquiry, earthquake induced liquefaction and rockfall, and the economic impact of the earthquakes, has been challenging, and I don’t have full comprehension of all of the threads and their inter-connections. So I find it an almost impossible task to summarise the last five years. But here are a few thoughts…

The immediate days following 22 February 2011, for me, were a haze of meetings, media inquiries, working with distressed people and trying to communicate to decision makers what we knew, but also coming to terms with how much the science could not tell us. I remember sitting with my small team of passionate and often exhausted scientists in a small corner of the Christchurch Art Gallery, desperately trying to communicate the science and its implications. I am grateful to all their contributions and support during that time. I can see some of our successes and our challenges from that time reflected in what the research community is up to in 2016.

Areas of success In 2015, New Zealand signed the Sendai Framework for Disaster Risk Reduction, the Sustainable Development Goals Accord, and the Paris Agreement on climate change. All of these agreements address, at least partly, natural hazard risks. The leading role that New Zealand has taken in these negotiations is, I believe, a national response to lessons from the Canterbury Earthquake Sequence.

The legacy: Ongoing and evolving In the past five years we have made progress, but there is still much to do. On the science side, better definition of future earthquake, volcano,

OUR COUNTRY LOST THE EQUIVALENT OF 20 PER CENT OF OUR GDP WHEN THE QUAKES STRUCK, YET CANTERBURY HAS NOT ONLY SURVIVED, BUT THRIVES. landslide, flood risk and tsunami activity and modelling future impacts and consequences of expectable events is needed. On the policy side, the review to the EQC Act, the earthquake Prone Buildings legislation and revision of sections six & seven of the Resource Management Act (to place land use planning in a risk-based framework), are all still in process, so not all of the lessons have been enacted yet. More research and policy development is needed to enact the recommendations of the Royal Commission.

We have come far in terms of research. However, research alone does not translate immediately to better risk management, so the research findings need to be communicated in forms that are useful, and used. I am impressed with how quickly and extensively the role of research and science communication has evolved in New Zealand in the past five years.

The Christchurch earthquake really has brought about a sea change in the approach and attitude of researchers and the research user community. Of course, effective communication is two-way, so the audience or potential audience needs to be listening and willing to up-skill to absorb the science and we, the source of information, have to listen to what our audiences need.

I have also observed how agencies, both public and private, and different disciplines are now working more collectively toward common goals. In the past five years researchers and research leaders have sat with a much more diverse range of stakeholders to discuss the evidence needed to instigate policy reform, than before the Canterbury experience.

By continuing to explore these two areas, we continue to honour the memory of painful events of five years ago.

ASSOC, PROF MARK QUIGLEY, ASSOCIATE PROFESSOR OF ACTIVE TECTONICS AND GEOMORPHOLOGY, UNIVERSITY OF MELBOURNE (PREVIOUSLY UNIVERSITY OF CANTERBURY) At 4:35am on Saturday, September 4, 2010, the Darfield earthquake immediately threw NZ earthquake scientists together to be scrutinized under high pressure on the national stage.We learned that cross-institutional science collaborations are important and deliver the best science, but due to the competitive nature of science, can sometimes be hard to manage politically and logistically.

We learned that having a general operational framework in place is important but that good research partnerships can be developed and maintained on the fly. We learned how to turn parts of the tragedy into personal and discipline-wide successes.

We learned just how important it is for scientists to be immediately available to the media, to be honest, open, and transparent with their findings, and that unproven hypotheses can in fact be shared with the public providing they are appropriately framed. I posit that the earthquakes have been one catalyst in increasing scientist engagement with the media nationally, even outside of the earth sciences.

In the long-term as individuals, I’m sure many of us have learned more about finding the balance between trying to amicably collaborate with www.covernote.co.nz

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COVER STORY

fans.That all changed after 4 September 2010 and intensified on 22 February 2011 to a level we were not expecting.

Since then, the positives have been many. What we know about earthquakes since 22 February has taken us to new and unexpected directions that we could not have imagined before the earthquake. We now have GeoNet Rapid, which delivers almost immediate information on earthquakes to our users. We now have the GeoNet APP, along with our website and social media platforms. We sent out 2,150,890 push notifications on the recent Valentine’s Day earthquake. However, it must be cold comfort for the people of Canterbury that the leaps and bounds in the science come from that earthquake that took so much.

However, I am acutely aware that the costs of this growth have been exceedingly high. The loss of life, the damage to the city, the suffering of everyone, versus getting stuck in and focusing on delivering key science people, is almost unimaginable even five years later.

So perhaps the greatest learning for me was how people turned to outcomes at the expense of all-inclusiveness. At the national level we’ve learned that we are able to cope with most of the earthquake science for a GeoNet for support. I learned that science can sometimes comfort as well as inform.With every large earthquake that has come since the 22 February major event nationally, with a bit of help from our friends.

From the broader perspective, numerous large cities throughout the 2011, the first consideration we have now is about the people affected and world are located in settings similar to Christchurch; in many of these how we can communicate with them. We have become people centred, instances, active faults have not been identified and seismic hazard analyses always learning more about how to provide the latest and most useful may not consider the possibility that earthquakes sourced from underlying information to all our audiences.

In this way, we honour the people of Christchurch, who are still teaching proximal blind faults earthquakes may pose a significant shaking hazard.

In the case of the Canterbury earthquakes, more attention could have us lessons about resilience and enduring strength. been pre-emptively focused on the search and investigation of these features. PROF DAVID JOHNSTON, JOINT CENTRE FOR DISASTER Even following the Mw 7.1 Darfield earthquake, the presence of large RESEARCH, GNS SCIENCE/MASSEY UNIVERSITY To reduce earthquake casualties in future events it is important to rockfall deposits at the base of slopes that were only marginally affected by this earthquake provided evidence that stronger shaking from a more understand how people behaved during and immediately after the shaking, proximal fault source was an important scenario to consider publically and and how their behaviour exposed them to risk of death or injury.The 2010for rapid scientific debate. This challenge transcends Earth science alone, 2011 Canterbury earthquake sequences have given us a unique opportunity to better understand this human behaviour. Most previous studies have and is a topic for concerted future efforts.

DR KEN GLEDHILL, HEAD OF DEPARTMENT: GEONET AND relied on an analysis of medical records and/or reflective interviews and questionnaire studies.

GEOHAZARDS MONITORING, GNS SCIENCE In Canterbury we were able to combine a range of methods to explore Our world changed on February 22. 2011. As a scientist and the Director of GeoNet, I’m an expert at numbers not with words. Explaining earthquake shaking behaviours and the causes of injuries. In New Zealand, the Accident Compensation Corporation (a national health payment the impact of this earthquake with words is an almost impossible task.

When I reflect on the last five years, I see the tremendous growth that scheme run by the government) allowed researchers to access injury data has occurred for our GeoNet project. Before the earthquakes, we were a from over 15,000 people from four earthquakes from 2010 to 2011. We little, rarely discussed seismic and volcanic monitoring network, known were able to classify the injury context as direct (immediate shaking of predominately only by scientists, policy makers, hazard analysts and science the primary earthquake or aftershocks causing unavoidable injuries), action

WHAT WE KNOW ABOUT EARTHQUAKEAS SINCE 22 FEBRUARY HAS TAKEN US TO NEW AND UNEXPECTED DIRECTIONS THAT WE COULD NOT HAVE IMAGINED BEFORE THE EARTHQUAKE.

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March 2016

COVER STORY

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(movement of person during the primary earthquake or aftershocks causing potentially avoidable injuries), and secondary (cause of injury after shaking ceased).

The research has found that in general, improved building codes, strengthening buildings and securing fittings will reduce future earthquake deaths and injuries. However, the high rate of injuries incurred from undertaking an inappropriate action (e.g. moving around) during or immediately after an earthquake suggests that further education is needed to promote appropriate actions during and after earthquakes. In New Zealand, as in other countries with earthquake risk, public education efforts, such as the Shakeout exercise are trying to address the behavioural aspects of injury prevention.

ZOE MOUNSEY AND DR SARB JOHAL, JOINT CENTRE FOR DISASTER RESEARCH, GNS SCIENCE/MASSEY UNIVERSITY Research has been undertaken on health care professionals’ experiences of the Canterbury earthquakes and recovery process. This has focused on the impact of "shared trauma" where the health care professionals are experiencing both the direct effects of the disaster and the indirect effects of working with patients who have been affected. Forty-four GPs, nurses and mental health care professionals were interviewed about their experiences between two and four years after the start of the earthquake sequence.While shared trauma can have a positive effect on professional/ patient relationships in terms of increasing understanding and empathy, there were negative impacts around effectively managing boundaries and compassion fatigue.

The research identifies the stresses of the recovery process for health care professionals such as higher workload, reduced resources and changes to working environment.The research has highlighted the negative impact of secondary stressors such as housing repairs and dealing with insurance companies, on both health care professionals and their patients.

The health care professionals identified a number of sources of support with peer support being seen as particularly important for many and while the benefits of self-care were acknowledged, many the health care professionals felt that this was not something they effectively used.

Even though professional counselling was available to the health care professionals, the participants identified barriers to using these services.

The research provides insights for those providing health care services in a post disaster environment.

SOURCE: SCIENCE MEDIA CENTRE

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39

IFSO

FINANCIAL ADVISERS CAN LEARN FROM THE MISTAKES OF OTHERS Complaints are “gold dust” according to Financial Markets Authority Chief Executive Rob Everett, because there is no better way for the industry to learn than from the mistakes of others.

I

nsurance & Financial Services Ombudsman (“IFSO”), Karen Stevens, says the IFSO Scheme’s 20 years’ experience of insurance and financial service complaints can be used to help to prevent future complaints.

“We’re often asked what is the value we add for our 4,000 plus Participants,” says Karen.

“A big part of our role is to help our financial adviser Participants improve business practice and client relationships, with an emphasis on ensuring compliance. Essentially, the training we provide helps our financial adviser Participants avoid future issues and complaints.”

“We’ve partnered with IBANZ and the IFA to provide one hour webinars, which is continuing professional development with CPD points. The feedback is great;

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March 2016

you can access training from your desk wherever you are based, which is time and cost-effective.We encourage all financial advisers to try it.”

Case studies on our website, which are based on complaints to the IFSO Scheme, help to illustrate common issues and what you can do to manage your customers’ expectations – particularly when a claim is made.

Stevens says the case studies on the IFSO Scheme website www. ifso.nz also contain useful lessons for your customers. “Informing your customers about their responsibilities and obligations is another important job for us.

We continually remind them to read documents, provide accurate information, and always ask questions. It’s amazing how many complaints could be avoided this

way.”

Communication between advisers and their customers is a recurring theme in complaints to the IFSO Scheme. Many say they weren’t given critical information, which can lead to a complaint against their adviser. Sometimes they simply haven’t understood the information provided. “Improving communication and demonstrating good processes are two ways to demonstrate the value you can add for your customers, while also ensuring you are protecting yourself against potential claims.” says Stevens.

Here are eight tips: • Have processes in place for good communication with customers • Document your communication in writing • Ask your customers what risks they want to be covered

• Understand any risks, and explain the scope of cover • Explain any limitations on scope of cover and talk about them • Explain exclusions and talk about them • Ask customers to read the exclusions, and confirm that they understand them • Remind customers to read the policy before making a claim, to understand their obligations.

The following summaries from two IFSO Scheme complaints illustrate how clear communication from the beginning helps to avoid misunderstandings and issues.

CASE STUDY 123269 (2013) – COMMUNICATING ABOUT FEES Mr and Mrs White wanted to build a house. They discussed it with a mortgage broker and signed an authorisation form,

IFSO

which incorporated the broker’s disclosure statement.The disclosure statement included the term that “a lender may apply a remuneration clawback from the adviser when the loan is not retained for a minimum period (normally two years)”. The provision also stated that the lender could invoice the client directly if a “commission reimbursement” applied.

When the Whites later purchased a section, they signed a loan agreement for a consolidated loan for the construction of a house.

Eight months later, the Whites repaid the loan in full. Three days after the loan was paid, the Whites were surprised to receive an invoice for $2018.39, for the amount the lender had clawed back from the broker (“the clawback amount”).

The Whites’ complaint was that the disclosure statement “...

failed to disclose if there was a clawback fee to be charged, what the percentage or details relating to the clawback would be”.

The IFSO Scheme case manager believed that the clause in the disclosure statement constituted a contractual term between the broker and the Whites. However, following discussions between the parties, the broker offered to settle the complaint if the Whites paid him $1,000.

They agreed and the complaint was settled.

Lessons learnt – Directly discussing fees with customers when you meet with them, and clearly explaining fees in your documentation, helps to clarify when fees will, or could, apply.

CASE STUDY 124817 (2013) – THE IMPORTANCE OF KEEPING DETAILED CLIENT RECORDS Christine emailed her broker (an RFA) to say she needed insurance cover for her car. The insurance application gave the broker’s address for the insurer to send notices for the policy.

When notices were received, the broker followed a system where the mail was checked and recorded, then forwarded to Christine by mail. A direct debit payment was put in place for the policy premiums but, on many occasions, there were insufficient funds available and premium payments were in default. On some occasions, Christine paid the arrears using manual direct credit payments via internet banking. The insurer notified Christine in writing when policy premiums were in arrears and warned that the policy would be cancelled if the outstanding premium was not paid within 32 days from the notification.

The premium payments continued to default, and the policy was cancelled. Christine made a further payment, but the insurer refunded the premium to her in December 2012. Christine phoned her broker and asked him to arrange

to have the policy reinstated.

“Hold” cover for the vehicle was arranged over the Christmas period. However, on 27 December 2012, the insurer emailed the broker that it was withdrawing the “hold” cover, because Christine had been cancelled for non-payment five times, both on commercial and domestic policies. The insurer explained Christine needed to complete a new proposal and pay the full premium amount.

The broker forwarded the insurer’s email to Christine and followed up with a series of text messages to check if she had completed the application and paid the premium. Christine confirmed by text that she had not, and would consider it in the New Year. The broker confirmed that Christine understood she had no insurance.

Several days later, the car was written off in an accident, and Christine had no cover.

Christine complained that she suffered financial loss as a result of the broker’s negligence. She said he failed to send her policy notices that were sent to him by the insurer, resulting in the policy being cancelled for non-payment.

The main issues for consideration were whether the broker owed Christine a statutory obligation to forward notices from the insurer to her and, if he did, whether he met that obligation.

The case manager believed the notice arrangement constituted a “financial service” to Christine in terms of paragraph 3.1(a) of the IFSO Scheme’s Terms of Reference.

The Financial Advisers Act statutory obligations did not apply to this specific notice arrangement, but the arrangement was a service provided to a consumer under the Consumer Guarantees Act 1993 (CGA), section 28. Accordingly, the broker owed Christine a duty to provide that service with “reasonable care”.

The broker provided evidence that he operated a system to ensure that mail received from the insurer

was recorded and mailed directly to Christine. Although Christine stated she did not receive the notices regarding unpaid premiums, the documentary evidence showed that the mail was sent to Christine’s correct address. On that basis, the evidence supported the conclusion that the broker met the statutory standard required by section 28 of the CGA. Christine also claimed that the broker should have followed-up notices with further action if she did not pay, and the cover was lapsing. However, the statutory obligation under the CGA was for the broker to take “reasonable care” and that did not require him to take steps to ensure Christine made the payments.

Therefore, Christine’s complaint that the policy was cancelled because she did not know it was in arrears, as the broker failed to pass on the insurer’s notices, was not supported by the facts. She was aware in December 2012 that she no longer had cover for the vehicle and her deliberate decision not to put cover in place in January 2013 contributed to the loss she suffered.

The complaint was not upheld.

Lessons learnt – The broker in this case had well documented systems and processes, both for customer correspondence and customer communications. He could demonstrate what had happened with the arrears notices and the information he had forwarded to Christine regarding her lack of cover over the Christmas period. These records were invaluable when responding to Christine’s complaint regarding the broker’s conduct.

IFSO Scheme case studies confirm the value of documenting all communications with customers and having clear processes in place for dealing with customer information. You can access case studies of all complaints considered by the IFSO Scheme at no cost on the website www.ifso.nz. www.covernote.co.nz

41

OPINION

Coming, ready or not

- Health and Safety at Work Act 2015

By Crossley Gates, DLA Piper

B

y the time you read this, the new Health and Safety at Work Act 2015 will be about to come into force. It will affect all insurance brokers' commercial clients.

For those who have left it to the last moment, here is a super-summary of the changes it brings: 1 It commences on April 4, 2016.

2 The application of the Act has widened to any person conducting a business or undertaking (PCBU).

3 A PCBU has the primary duty to ensure, so far as reasonably practicable, the health & safety of: 3.1 Its workers, and 3.2 Any workers whose activities are influenced and/or directed by it, and 3.3 Any other persons affected.

4 The test of 'reasonably practicable' requires the PCBU to take into account: 4.1 The likelihood of a hazard occurring, and 4.2 The degree of harm that might result, 42

March 2016

and 4.3 What is known about the hazard and how to minimise or eliminate it, and 4.4 The cost (but this is only a factor if the cost is grossly disproportionate to the risk of the hazard).

5 If a hazard can't be eliminated, it must be minimised to the extent the PCBU has the ability to control it.

6 A PCBU also has the same duties to contractors as those it owes to its workers.

7 The duties are not transferable. A PCBU cannot contract out. In relation to one worker or contractor, multiple PCBUs may owe duties at the same time to that person. For example, a loss adjuster at a construction site will be owed duties by his or her employer and by the contractors working at the site.

8 The Act separately imposes duties on an officer. An "officer" of a PCBU is a director of a company, a partner of a partnership, any person who holds a position comparable to a director

in a body corporate or an unincorporated body, and any person who exercises significant influence over the management of the business or undertaking (e.g. the Chief Executive). All officers must use due diligence to ensure the PCBU complies with the Act. This requires the officer to understand the nature and risk of the business and ensure the PCBU implements: 8.1 A health & safety system fit for purpose, and 8.2 The appropriate resources and processes, and 8.3 Appropriate reporting back, and 8.4 A regular review programme.

9 WorkSafe has one year to prosecute an alleged breach. It can accept enforceable undertakings instead of prosecuting in appropriate circumstances.

10 For those businesses with 20 or more workers and who are in a high-risk industry, new rules relating to Health & Safety Representatives and Committees.

11 The following penalties are available upon a conviction: 11.1 Fine - maximum of $300,000 for a person, $600,000 for an officer and $3,000,000 for a PCBU. Although insuring of fines is still unlawful, having cover for defence costs will be all the more important given the increases in fines.

11.2 Imprisonment for up to five years for recklessness.

11.3 Reparation.

11.4 Meeting WorkSafe's cost of the prosecution.

11.5 Adverse publicity orders.

11.6 Training orders.

11.7 Injunctions.

11.8 Court-ordered enforceable undertakings.

The Act is an ideal opportunity for insurance brokers to review their clients' liability programme, in particular Statutory Liability Insurance and Directors and Officers Liability Insurance.

FSCL CASE STUDY

How you react to complaints matters

by Susan Taylor, ISO

T

hese two case studies involving complaints about brokers provide a good contrast in terms of dealing with a customer complaint and with us.

The first case offers an example of very good customer service – accepting liability and making a generous settlement offer immediately. In the other case the broker refused to accept he was in the wrong and wanted payment for a policy the customer had no idea about.

For the former (the case where the car was underinsured), the complaint was resolved within a week of it arriving at FSCL, avoiding the need for the broker to spend more time and resources on it and resulting in a happy customer.

Had we conducted a full investigation, we may well have found that the broker was not liable to pay so much in compensation. At the end of the day, the car was now worth only $95,000, not $126,000, although clearly the complainant thought he had insured the car for an agreed value of $126,000. A quick settlement with some compromise by both parties was the most sensible and efficient way of resolving the complaint.

For the latter (the case of the vehicle fleet insurance) the lesson is that it's best to acknowledge a complaint and take action as soon as possible.

Ignoring a complaint will not make it go away, and can often aggravate the situation.

If the broker had not paid Perry the recommended sum, the broker ran the risk of being de-registered from the Financial Service Providers Register, meaning it would no longer have been able to provide financial services in New Zealand.

CASE STUDY: WHEN A CAR’S WORTH LESS THAN BARGAINED FOR Alan bought a new car for $140,000 and insured it through his broker for an agreed value of $140,000. On the policy’s anniversary, Alan checked the policy summary and saw that the car was insured for an agreed value of $126,000. He assumed his broker had decreased the insured amount for depreciation.

About three months later, the car was written off in an accident. The insurer offered the market value for the vehicle: $95,000. Alan was shocked, having expected to receive $126,000, and called his broker.

The broker immediately identified his own error in the policy summary.

While the policy insured the vehicle for market value, he had mistakenly written agreed value on the policy summary. The broker offered Alan $25,000 in compensation for the error.

DISPUTE Alan could not understand why his broker was not prepared to compensate him for the difference between $126,000 and $95,000 – $31,000. Alan believed that if his broker accepted responsibility for the error, he should pay him the full amount of compensation.Alan complained to FSCL. REVIEW We discussed the settlement with the broker. While he agreed he was largely responsible for the error, he noted that Alan could have read the policy document and discovered the error for himself. On this basis, he was not prepared to improve the offer.

We then discussed our approach to Alan and the fact that we base compensation on each party’s relative contribution to the error. While the broker had accepted he was largely responsible, we queried whether Alan could have read the policy document and discovered the error himself.

Alan said he did not recall being given the policy document and based his understanding on the policy summary alone.

We also discussed the merits of accepting an early settlement, including the fact that during the course of an investigation, information could come to light meaning that less, or even no, compensation is appropriate.

RESOLUTION Alan said that if his broker was prepared to split the $6,000 difference between $25,000 and $31,000 and offer a further $3,000 compensation, he would accept the offer.We put the offer to the broker, who agreed to resolve the complaint on this basis.

CASE STUDY: INSURANCE BROKER PLAYS HARD TO GET Perry ran a small specialty shop and had a number of insurance policies for his shop through his broker. In 2015, Perry decided to cancel several policies and sought a refund for the premiums of around $1400.

The broker sent Perry a statement outlining his policies, payments and the refunds due. The statement showed he owed the broker $3,600 for a commercial motor fleet policy he did not know he had taken out. Because of this outstanding amount, the broker advised that Perry would not be refunded any premiums.

Perry did not have a commercial motor fleet for his shop, however he had another business importing motorcycles from overseas. Perry recalled discussing commercial motor fleet insurance with his broker for the motorcycle business, but not for his shop. Perry claimed this was only an informal discussion and he never received any documentation for the commercial motor fleet policy, nor confirmed he wanted to take out a commercial motor fleet policy.

DISPUTE Perry complained to his broker that he was unaware of the commercial motor fleet policy and was unwilling to pay the outstanding premium of $3600. Perry wanted the commercial motor fleet policy cancelled and the premium refund of $1,400 for the other cancelled policies paid to him. His broker did not agree to this and continued to seek the $3600 from Perry.

Perry then complained to FSCL. REVIEW We asked the broker for a report on the complaint, but despite regular prompting, he did not provide one.

As a result, we issued a preliminary view that the complaint should be upheld, given the broker had not provided any evidence that Perry knew about the commercial fleet policy. We were also of the view that the broker should pay Perry an extra $250 for the inconvenience caused by lack of communication.

After some delay, the broker responded to the preliminary view and argued that Perry had arranged the commercial motor fleet policy. We asked for evidence of this, but again received nothing back. Finally, we issued a formal recommendation.

RESOLUTION We found that the broker had not proved that Perry had taken out the commercial motor fleet policy. Without any evidence to rebut Perry’s position, we concluded that the broker had placed the commercial motor fleet policy without Perry’s knowledge or consent.

We ruled that the broker cancel the commercial motor fleet policy and pay Perry his refund of $1400, plus $250 for the inconvenience caused.

Perry accepted our decision, and, after further delay, the broker paid Perry $1650. www.covernotemag.co.nz

43

Professional

College Professional

Professional Development: Professional IQ College Professional Development: Professional IQ College

College

Principal’s Update

W

e are well and truly into the New Year now and much is happening in the adviser space that affects or potentially could affect insurance brokers.

With the Act review and the Code Committee reviewing the Code of Professional Practice we are getting many questions about what to do in terms of professional development. So here’s my responses to some of those questions: WHAT QUALIFICATION SHOULD I DO THIS YEAR? It depends what you are looking for in professional development. The New Zealand Certificate is the “health and safety” or compliance qualification. It teaches you the legislative and regulatory side of the industry you work in. It shows you how to develop fit-for-purpose solutions for your clients that comply with the Act. It keeps you safe.

BUT IT HAS NO INSURANCE PRODUCT KNOWLEDGE IN IT. That’s right, it’s not designed to. The PIQ Insurance Broker certificates are designed to give you product knowledge. This is your professional development qualification.

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March 2016

WHAT IF THE ACT CHANGES, WHAT WILL I HAVE TO DO THEN? We don’t know what these will be but if the review mandates a qualification, it will probably be the New Zealand Certificate in Financial Services Level 5. No matter what the review of the Act finally mandates or not as the case may be, being qualified in what you do can do you no harm. In fact, my view is that it will drive business to you as you will be more confident and more knowledgeable no matter what you do - just get going and do a qualification now.

The College is there to support you and we will help you through your training- just remember to ask. I can talk about the cost and I can talk about the return on investment training and education can bring to your business but none of that matters in the long run. What matters is that each individual broker makes a choice to be a better broker or to be the best they can be at being a broker and one way to do that is to get qualified. Nobody can do that but you.

So what if your manager won’t pay for it, make an investment in yourself and get started - back yourself. The cost should never be an excuse and at the College we have tried to break the

cost down into small chunks so you can afford to start the journey.

I know it sounds like a crusade but I’m passionate about the value education can add to lives and I truly believe you will be a better broker if you get educated. It will give you recognition for your knowledge and skills and that has to be a good thing. I’ve been talking to a number of brokerages lately and many are still putting their learning and development plans together for the year. Remember to use the College as your resource centre to work out a programme that meets your needs within your budget.We have been transferring students from the National Certificate to the New Zealand Certificate lately. This has been an enormous task and got many of you thinking. Some started their National Certificate up to five years ago and never finished often because they didn’t want to do Set B and C. So the good news is you don’t have to if you transfer to the new New Zealand Certificate. Others have been motivated to finish the National Certificate.

Read our article this month on the changes to the qualification and contact us if you want to know more.

DATE

TITLE

PRESENTER

WHERE

TIME

COURSE DESCRIPTION

February Two-day Module 6 Approved Mortgage Advice Course

John Melton

Auckland

8.45-4.30

This module provides the knowledge and skills required to understand residential property lending concepts and the legislative and regulatory environment in which a mortgage adviser operates. You will learn the relationship between residential property lending products and individual needs, and the ability to provide fit for purpose solutions for borrowing

2

Health and Safety at Work Act 2015: An Overview of Final Amendments

Steve Keall

Auckland & webinar

9.30-10.30

The new The Health and Safety at Work Act 2015 takes effect on 4 April 2016. Are you ready?

8

Six Resolutions for 2016 to help you add value for clients

Karen Stevens

Auckland & webinar

11.00-12.0

Based on real examples from complaints to the Insurance & Financial Services Ombudsman Scheme, this webinar will look at the six key factors that could help you assist your clients and improve your business.

9

Build Me an Insurance Programme

Kevin Allen

1.00-4.00

This module provides the knowledge and skills required to understand residential property lending concepts and the legislative and regulatory environment in which a mortgage adviser operates. You will learn the relationship between residential property lending products and individual needs, and the ability to provide fit-for-purpose solutions for borrowing

10

Effective Business Writing: Emails, Letters and Presentations

Ngaire Newland

Auckland

9.30-12.30

Written communication - in our business you can't avoid it, but how good are you at it?

Full of practical tips and help, this workshop focuses on emails, letters and presentations It will put you on right track to confidence and competency in the effective use of written communication.

15

Contract Works for Medium to Large Projects

Russell Gill

Auckland & webinar

9.30-11.00

Contract works is not an off the shelf product. This workshop will increase your confidence in building cover for medium to large complex projects. Presented by an experienced contract works specialist, this is a must for anyone who has clients who manage medium to large construction projects.

16 to 17

Master Class for Advisers on KiwiSaver

Terry Dixon

Auckland

9.00-4.30

With all the chatter about KiwiSaver we thought it was time that financial and risk advisers upskilled their KiwiSaver knowledge. If you are a risk adviser or a wealth manager some of your clients will want to talk to you about KiwiSaver, so this workshop is designed to give you some extra knowledge and skills about the key elements of KiwiSaver.

23

How to have difficult conversations with unhappy clients

Karen Stevens

Auckland & webinar

11.00-12.0

Learn useful strategies and techniques for dealing with unhappy clients and see how you can preserve key clients relationships through successfully managing difficult conversations.

31 to 1st

2-day Module 6 Approved Mortgage Advice Course

John Melton

Auckland

8.45-4.30

This module provides the knowledge and skills required to understand residential property lending concepts and the legislative and regulatory environment in which a mortgage adviser operates. You will learn the relationship between residential property lending products and individual needs, and the ability to provide fit-for-purpose solutions for borrowing

12

Health and Safety at Work Act 2015: An Overview of Final Amendments (repeat)

Steve Keall

Auckland & webinar

9.30-10.30

The new The Health and Safety at Work Act 2015 takes effect on 4 April 2016. Are you ready?

13

BI Claim example – and how well would your client’s cover have performed?

Mark Anderson

Auckland & webinar

9.30-10.30

The workshop will run through a BI claim example and match it to a client’s BI cover, link it into the BI policy wording and highlight issues that can arise.

20

A guide to avoiding common causes of complaints.

Susan Taylor

Auckland & webinar

11.3012.30

Common causes of complaints and how to avoid them. This will include case examples.

29 to 1st March

Auckland

April

Principles of Risk Management

Kevin Allen

Auckland & webinar

1.00-3.00

Clients rely on their insurance coverage to support recovery in the unlikely event of a loss. Losses fall in to many different categories, some of which are difficult to manage, an obvious example is the Christchurch earthquake’s. Clients have an obligation to ensure they manage their potential risks and some simple forms of risk management are practical. This session will explore the principles further and suggest ways in which brokers may assist their clients in this “value add” area.

12

Professional & Effective Broker

Kevin Allen

Auckland & webinar

1.00-3.00

Learn about how to improve your skills as a broker.

16-29

AFA Qualification (4 day)

9.00-4.30

This workshop is designed for new Investment and Wealth Advisers or Graduates who are yet to achieve their AFA status. This four-day course focuses on completing the investment planning process with clients, understanding investment concepts, the legislation and regulations applicable to investment and financial advice.

21

May

Terry Dixon

Auckland

www.covernotemag.co.nz

45

Professional

Professional Development: Professional IQ College

College

The dilemma of qualification change S

o you want to get qualified but there are two qualifications for the same industry sector.

Why was there a new qualification developed? What was wrong with the old qualification? Which one do you choose?

These are the questions Professional IQ College staff get asked all the time.

NZQA qualifications are the health and safety qualifications. They are designed to ensure that as insurance brokers you know how to keep yourself compliant and therefore safe within the scope of services you provide.

The changes don’t mean you lose the National Certificate, it has just been superseded. Once you have a qualification you always have a qualification.

WHY? Every five years NZQA requires qualifications to be reviewed. The industry sector (in this case all of Financial Services) is consulted and the qualification is updated to meet industry needs within the NZQA qualification structure.

WHAT WAS WRONG? Insurance brokers (and all other RFAs) had to complete Set B and C to finish the qualification. These sets, while relevant in terms of legislation, didn’t relate directly the role of the insurance broker therefore many brokers chose not to complete the qualification. It was in the too hard basket. Some legislation and regulation changes needed to be updated.

NZQA also changed how qualifications were to be structured. The new structure ensures that by gaining the qualification it is relevant to what you can do, be and know.

For insurance brokers this means looking at what it is you do; what do you do on a daily basis to provide fit-for-purpose solutions to your client.

46

March 2016

What do you need to know to provide a high level of service to your clients?

By gaining the qualification what can you be i.e. what roles are relevant to this qualification of module of the qualification.

So the new New Zealand Certificate: • Is more relevant to the insurance broker role • Is a shorter pathway to gain the qualification • Has new content is more relevant to your role PATHWAYS TO THE FULL CERTIFICATES

NCFS = National Certificate in Financial Services; NZCFS= New Zealand Certificate in Financial Services

WHICH ONE DO I CHOOSE? Just starting out choose the latest qualification.

The New Zealand Certificate in Financial Services is the latest. This will ensure you meet the latest standards. It is more straightforward and relevant to your role.

Just want to do the module for General Risk Choose the New Zealand Certificate General Risk module. This means if you decide to complete the whole qualification you need only do the Core Knowledge.

Part-way through the old National Certificate Scenario 1 Finished more than half- complete the old National Certificate Complete the old qualification Scenario 2 - only completed set E General Insurance If you want a full qualification transfer to the New Zealand Certificate or update by completing the General Risk module Scenario 3 - Only completed set A If you want a full qualification transfer to the New Zealand Certificate Scenario 4 - Only completed set B or set C If you want a full qualification transfer to the New Zealand Certificate.

HEAR WHAT STUDENTS AND MANAGERS HAVE TO SAY ABOUT THE NEW ZEALAND CERTIFICATE ON THE EVE OF ITS FIRST ANNIVERSARY...

Graduates from the New Zealand Certificate in Financial Services Level 5 are proving to be a valuable asset to their employer, according to a recent survey. Employers are noticing the positive difference the skills and knowledge gained from the programme. Graduates are more confident and knowledgeable which has a knock on effect to the business.

Feedback from students has also assisted the College to make improvements to learning materials and the college website. The assessments have been streamlined and we are working on a full online version that you can fill in your answers as you go.

The College welcomes feedback from students, graduates and employers. Feedback is very important to the College as it helps us to continuously improve our offerings to the sector.

RECENT QUALIFICATION COMPLETIONS Well done to all those brokers and broker support people that spent Christmas and the new year finishing their qualifications. It’s a great achievement!

NEW ZEALAND CERTIFICATE IN FINANCIAL SERVICES LEVEL 4 Charlotte Langridge, Runacres & Associates Ltd Chloe Austin, Amicus Brokers Ltd Matthew Ramsay, Amicus Brokers Ltd NEW ZEALAND CERTIFICATE IN FINANCIAL SERVICES LEVEL 5 Melanie Hamer, OFS Insurance Brokers Ltd NATIONAL CERTIFICATE IN FINANCIAL SERVICES LEVEL 5 Renee Cardno, Money Shop Group Ltd Sarah Lowry, Bridges Insurances Services Ltd

www.covernotemag.co.nz

47

CONTACTS: IBANZ CORPORATE COMPANY LIST

IBANZ BOARD Roger Abel Managing Director Rothbury Group Limited PO Box 1596 Shortland St, Auckland 1140 Mob: 021 852 230 roger.abel@rothbury.co.nz Tony Bridgman (Vice President) Executive Director Marsh Ltd PO Box 2221 Auckland 1140 Tel: 09 928 3015 Mob: 021 873 399 tony.j.bridgman@marsh.com David Crawford Chief Executive Officer Insurance Advisernet NZ Ltd PO Box 74557 Market Road Auckland 1051 Tel: 09 926 2062 Mob: 021 905 537 davidc@insuranceadvisernet. co.nz Angus McCullough Chief Broking Officer / Marketing Manager Aon New Zealand PO Box 1184 Shortland Street Auckland 1140

PIQ BOARD Tel: 09 3629000 angus.mccullough@aon.com Allan Daly Managing Director Avon Insurance Brokers PO Box 3923 Christchurch Mail Centre Christchurch 8140 Tel: 03 3710301 Mob: 0275 358128 allan@avoninsurance.co.nz Duane Duggan (President) Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West Auckland Tel: 09 3574805 Mob: 021 833 286 duane.duggan@crombielock wood.co.nz Craig Buckle Willis New Zealand Ltd PO Box 369 Auckland 1140 Tel: 09 356 9368 Mob: 021 909 148 bucklec@willis.com

PO Box 3086 Christchurch 8011 Tel: 03 366 7536 Mob: 021 358341 stuart@abbott.co.nz Jason Smith Managing Director Property & Commercial Insurance Brokers PO Box 4 Feilding 4740 Tel: 06 323 8820 Mob: 027 293 8724 jase@pcinsurance.co.nz Ruth Steele (Vice President) Brokerage Manager Seneca Group Ltd PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Mob: 021 590 698 ruth@senecagroup.co.nz

(Chair) Branch Director, Crombie Lockwood NZ Ltd

PO Box 34, Invercargill 9840 Tel: 03 218 8994 Fax: 03 218 8996 Mob: 027 258 8433 richard.russell@crombie.co.nz Gary Young CEO IBANZ

Auckland DDI: 09 306 1734 gary@ibanz.co.nz Andrew Gunn Consultant CIFA Training Manager

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

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

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

Stuart Speirs Director Abbott Group

STAFF

WANT YOUR VERY OWN COPY OF

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

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

COVERNOTE? Each issue of CoverNote is packed with vital information, news, commentry and advise for the insurance industry from experts within the industry. To keep abreast with all the issues affecting New Zealand’s insurance broking industry just email robyn@ibanz.co.nz WHAT HAVE

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

TO ADVERTISE...

Contact Robert Johnson on: e-Mail: robert@benefitz.co.nz Phone: 09-477 4702 Mobile: 0274-970-712 CoverNote is published quarterly

by IBANZ, the Insurance Brokers Association of New Zealand.

All correspondence should be addressed to: CoverNote, PO Box 33-1630 Takapuna, North Shore City, Auckland.

Next issue is due out: JUNE 2016

48

Richard Russell

March 2016

WE LEARNT FRO

March 2016 The professionals’

M CHRISTCHUR

magazine from

CH?

IBANZ

A NEW FUTU

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What does tech nological disrupt broker-intermedia ion ted insurance? mean for www.ibanz.co.nz

CONTACTS: IBANZ CORPORATE COMPANY LIST

IBANZ CORPORATE COMPANY LIST Abbott Group Adams Trimmer Insurance 1992 Ltd Addex Ltd Advice First Limited Affiliated Insurance Brokers Ltd AIB Group Insurance Ltd AJIB Insurance Brokers Ltd Albany Insurance Services Ltd Andrew Scragg & Associates AMP Services (NZ) Ltd Aon New Zealand Apex General Ltd API Insurance Ascot Insurance Brokers Ltd Atlas Insurance Brokers Ltd Austinsure Ltd Avon Insurance Brokers Baileys Insurance Brokers Ltd Barley Insurances Limited Bay Insurance Brokers Ltd Benson Insurance Brokers Ltd Bill Boyd & Associates Ltd Boston Marks Group Ltd Brave Day General Ltd Bridges Insurance Services Limited Broker Direct Services Ltd BrokerWeb Risk Services Limited Card Marketing International Ltd Cartwright General Insurance Limited CBA Insurances Limited Certus Insurance Brokers NZ Ltd Commercial & Rural Insurance Brokers Ltd Crombie Lockwood (NZ) Ltd Dawson Ins. Brokers (Whakatane) Ltd Dawson Insurance Brokers (Rotorua) Ltd Edward Ruys & Co Ltd Elders Insurance Limited Emerre & Hathaway Insurances Limited Frank Risk Management FundAGroup Insurance Brokers Limited Future Agency Co. NZ Ltd Glenn Stone Insurance Limited Graeme England Insurance Services Ltd Grayson & Associates Ltd Gregan & Company Ltd Harden & Hart Insurances Ltd Hazlett Insurance Brokers Ltd Hood Insurance Brokers Ltd Hugh Vercoe and Associates Ltd Hurford Parker Insurance Brokers Ltd Hutchison Rodway Ltd I C Frith (NZ) Ltd Ian K Everett Ltd ICIB Limited ILG Insurance Brokers Inbroke Ltd Ingerson Insurances Ltd Insurance Advisernet NZ Ltd Insurance Brokers Alliance Ltd Insurance People (Fire & General) Limited Insurance Plus Limited JLT Holdings (NZ) Limited JRI Ltd Ken McNee Family Trust Lifetime Insurance Brokers Ltd Lloyd East & Associates Insurance Brokers Ltd Lowe Schollum & Jones Ltd Luxor Insurance Brokers Ltd MA Risk Solutions NZ Limited Mainprice King Chartered Brokers Ltd

Christchurch Whangarei North Shore City Wellington Wellington Lower Hutt Lower Hutt Albany Village Manukau Auckland Auckland Auckland Manukau Whangarei Christchurch North Shore City Christchurch Auckland Waitakere Tauranga Christchurch Palmerston North Auckland Auckland Hamilton Christchurch Auckland Wellington Ashburton Tauranga Auckland Alexandra Auckland Whakatane Rotorua Hamilton Auckland Gisborne Cambridge Auckland Auckland Waitakere Auckland Auckland Papakura Auckland Christchurch Auckland Morrinsville Hastings Auckland Auckland Auckland Auckland North Shore City Auckland Wellington Auckland Invercargill Auckland Thames Auckland New Plymouth Christchurch Christchurch Auckland Hamilton Auckland Auckland Auckland

Malcolm Flowers Insurances Ltd Taupo Marsh Ltd Auckland Matt Jensen Insurance Brokers Ltd Taupo McDonald Everest Insurance Brokers Ltd New Plymouth Montage General Insurance Ltd Auckland Multisure Ltd Auckland Nauman Insurance Brokers Ltd Dargaville Nelson Bays Insurance Brokers Ltd (NIB) Nelson Neville Newcomb Insurance Brokers Ltd Auckland Nexus Insurance Brokers Ltd Auckland North Harbour Ins Services (1985) Ltd incl Northsure Group Limited Orewa Northco Insurance Brokers Ltd Masterton Northcrest Insurance Brokers Ltd Auckland Oamaru Insurance Brokers Oamaru O'Connor Warren Insurance Brokers Tauranga OFS Insurance Brokers Ltd Dunedin Omni Fire & General Ltd Auckland One 50 Group Insurance Limited Auckland Paramount Insurance Agencies Ltd Auckland Paterson & Co NZ Ltd Auckland Penberthy Insurance Ltd Auckland Peter C Cranshaw Insurance Broker Ltd Levin PIC Insurance Brokers Ltd Manukau Primesure Brokers Ltd Auckland Property and Commercial Insurance Brokers Feilding Protekt Insurance Brokers 2008 Ltd Auckland Provincial Insurance Brokers Limited Masterton PSC Connect NZ Limited Auckland Pulsar Insurance Agency Auckland River City Insurance Brokers 2000 Ltd Wanganui RMA General Ltd Warkworth Rothbury Group Ltd Auckland Runacres & Asssociates Limited Christchurch Seneca Insurance Brokers Ltd Auckland Sit & Blake Limited Auckland South Pacific Insurance Brokers Ltd Auckland Sweeney Townsend & Associates Ltd Rotorua Thames Valley Insurance Ltd Thames The Advisers 1 Limited New Plymouth The Stoneman Group Wanganui Thorner General Insurances Ltd Upper Hutt Towes Insurance Brokers Ltd Te Aroha Trevor Strong Ins Ltd Auckland Vision Insurance (S.I.) Ltd Ashburton Waikato Insurance Brokers Limited Hamilton Wallace McLean Ltd Auckland Wanganui Insurance Brokers Ltd Wanganui Wholesale Insurance Brokers Ltd Papakura Willis New Zealand Ltd Auckland Yesberg Insurance Services Ltd Christchurch

www.covernote.co.nz

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New Zealand’s leading liability insurer Level 32, ANZ Centre Albert Street, Auckland veroliability.co.nz