CONFLICTED? HOW TO MANAGE YOUR OBLIGATIONS TO CLIENTS
September / October 2014 The professionals’ magazine from IBANZ
POLITICIANS WEIGH IN ON INSURANCE WHICH PARTY'S INSURANCE POLICY GETS YOUR VOTE?
Annual IBANZ Forum, get ahead of the game…
Bad's not going anywhere. Neither are we.
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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: firstname.lastname@example.org IBANZ National Office located at: Level 1, 143 Nelson Street, Auckland. (P.O. Box 7053, Wellesley Street) Telephone 09-306-1732. Website: www.ibanz.co.nz
Gary Young CEO, IBANZ
A principle to live by
he issue of dealing with conflicts of interest is ever-present for intermediaries such as insurance brokers. First and foremost, an adviser owes a duty to put their client’s interests first. This is clearly stated in legislation and in professional codes of practice. The revised Code of Professional Conduct for Authorised Financial Advisers makes putting the client first the paramount standard. IBANZ has adopted this standard in its recently updated Code. Of course, the real challenge for any adviser is to recognise where a conflict exists. They must view the potential for a conflict not just from their own position but most importantly from the viewpoint of their client. “Perception is reality,” as they say. No matter how unlikely it may seem to the adviser, if there is something that could influence the way they deal with a client, then it must be acknowledged and addressed. An adviser is the professional in their particular area of expertise; they are in the best position to understand where a conflict could arise. It follows therefore that their duty is to deal with the potential issue and do so in an open and transparent way. Beyond seeing conflicts from an expert’s point of view, a broker must then place themselves in the position of a client, someone on the outside looking in on the profession. What could they possibly perceive, rightly or wrongly, as influencing the advice they are being given? Particularly important are factors that influence it in a way that benefits the adviser rather than the client. This is not at all easy, looking hard at yourself from another person’s perspective. It is not just about the obvious such as possible differences in remuneration, there are external and internal pressures that could influence the advice, too. A professional will carefully manage conflicts through a transparent process. Eliminating them is ideal but where this is not possible then they need to be managed and fully disclosure to the client. In this issue disclosed of Covernote we take a look at managing conflicts including seeking the view of the Chair of the Code Committee. He notes new obligations under the Fair Trading Act have made it illegal to make an unsubstantiated claim, even if it is true. The bar just keeps getting higher. Professionalism demands this issue is addressed by insurance brokers. IBANZ agrees, which is why we made putting the client’s interest first paramount in our Code. Members of IBANZ sign up to standards that clearly set them apart as advisers in an ever-increasingly complex world. The importance of that commitment is now more significant than ever. Gary Young, CEO, IBANZ
Features 10. New Zealand insurers reject online comparisons
International experience turns Kiwi players off quote websites despite growing move to digital.
14. Politicians Weigh in on Insurance Covernote asked New Zealand's political parties for their policies relating to insurance. Which gets your vote?
18. NZIER backs calls to ditch fire service levy
here's more support for calls to remove the fire T service levy from insurance policies.
24. Five top cyber tips for risk managers
Sophisticated risk managers are well aware of the increasing level of risk posed by cyber crime.
26. Tackling safety in rugby
AIG has launched a new global awards programme, pledging US $50,000 to help improve rugby safety.
42. Forum offers business insights Annual IBANZ event offers brokers chance to get ahead of the game.
Regulars 1. View from the CEO’s chair 3. News 20-23. Out & About 28. Ask an Expert 40. Forum 2014
52. Professional Development: Professional IQ College 56. IBANZ Contacts CONFLIC TED? HOW
September / October 2014 The professio
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POLITICIA WEIGH IN NS INSURAN ON CE WHICH PAR TY'S INS
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New website option A group behind new .nz domain names says brokers should get in early to find out what their options are if they want to change to the new address style. From September 1, .nz will become an option, alongside the more familiar .co.nz and .org.nz. The new .nz domains are managed by the Domain Name Commission, which said it was important that brokers understood what was happening. “These new types of .nz name shorter and simpler, and create an exciting new registration choice. If you don’t already have a .nz domain name and the change has got you curious, this is the perfect opportunity for you to explore representing yourself online with .nz.” Spokesman Campbell Gardiner said some people with existing domain names would be able to reserve the .nz version at no cost for up to two years. “It’s important that IBANZ members who have a website or email address ending in .nz understand what’s happening so they can act on any special options available to them…This is because they could be eligible to register or reserve the shorter version of their name before anyone else, if they wanted to. Some people may find their name is
‘conflicted’, in which case there’s a process in place to make sure their views are heard.” It is not compulsory to register a .nz domain name and .co.nz, org.nz and ac.nz accounts will still operate as normal. Gardiner said: “If you’re not interested in this change, that’s fine. You should know that your .nz name will continue to work as it always has and you’ll always be able to register and use names under existing endings like ‘.co.nz’ and ‘.org.nz’.”
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NZ performing strongly: IAG Brokers and agents contributed 44% of IAG’s gross written premium (GWP) in New Zealand in the past financial year, the group’s financial results show. Direct sales were responsible for another 44%. As a group, IAG announced an insurance profit of A$1.579 billion for the year ended June 30, up 10.6% from the 2013 year. Managing director and chief executive Mike Wilkins said: “This has been a significant year for IAG. We have delivered a strong financial result, maintained the strength of our capital position and completed the acquisition of the Wesfarmers insurance underwriting business.” The performance of the New Zealand business remained strong, It operates in New Zealand under the NZI, State and AMI brands. New Zealand’s local currency GWP grew 3.7%, which IAG said reflected improved volumes from customer and sales initiatives, and rate increases on home insurance to recover higher reinsurance costs. Reported margin rose to 11.5% from 8.9% the year before, despite the impact of a number of heavy rain and storm events. The underlying margin improved to 14.8%. New Zealand chief executive Jacki Johnson said the New Zealand result reflected good momentum in the economy, disciplined underwriting and pricing in a competitive market and a strong focus on delivering positive customer experiences. She said IAG had supported customers through storms in September last year, ex-cyclone Ita in April and storms through June. 4
“Settling claims relating to the Canterbury earthquakes continues as our most pressing priority, while considerable attention is also being given to welcoming Lumley employees and customers into IAG and leveraging the strengths of both businesses.” IAG said most homeowners had chosen to settle their claims but there was still uncertainty around the final cost of the earthquakes because new claims were still coming in as the Earthquake Commission (EQC) determined they were above its $100,000 limit, the rebuild process was becoming increasingly complex and the EQC land settlement approach was being contested. New Zealand reported gross earned premium of A$1.816 billion, underwriting profit of A$206 million, insurance profit of A$180 million and a total divisional result of A$183 million. IAG said it had a continued focus on customer and sales initiatives, which contributed to improved volumes compared to the 2013 financial year. “This includes the development of the online channel which, within the direct channel, has experienced an increase in website traffic of around 23% since FY13 and now accounts for over 25% of State’s private motor new business sales.” The NZI intermediated business, including financial institution partners, represented about 56% of GWP in the year. IAG said: “Rate increases during the year were primarily applied to the domestic homeowners’ book across the respective
distribution channels within NZI, while inflationary rate increases continued to be applied to key commercial lines products. New business and retention levels remain steady across the commercial lines portfolios. Personal lines new business growth is improving while retention levels remain steady.” It cited its IBANZ Most Valued Insurer award as an example of its strong market standing. New Zealand’s reinsurance expense of A$257 million was 8.4% higher than a year earlier. The year’s net claims expense of A$892 million included higher net natural peril costs of A$106 million, lower net reserve strengthening of A$13 million and favourable underlying claims activity predominantly driven by lower frequency. The year to June included a higher incidence of natural peril activity than the 2013 financial year with net related claim costs above allowance in both halves of the year. Total reported expenses of A$461 million resulted in an expense ratio of 29.6%, a deterioration against the previous year’s 28.8%. Reported commission expense increased by 18.3%. IAG said helping customer balance affordability and risk management remained a key focus area as the need to recoup higher reinsurance costs had eased. “Based on the existing input cost environment, only modest rate increases are anticipated in the home owners’ classes in FY15, skewed to the front half of the year. Cost pressures in motor remain negligible.”
New NM national manager
Mercer Marsh Benefits appointment
NM Insurance has appointed Graeme Orchard as New Zealand national manager. He started in the role at the beginning of July. Orchard has been in marine insurance for more than 30 years, most recently as New Zealand marine manager for QBE. He is tasked with growing NM Insurance in New Zealand. “I’m looking forward to building upon the current portfolio that has run successfully for the last three years and widening the product lines, working with our intermediaries and taking the business to the next level. The level of expertise, dynamics and strength of support of our underwriting partners will be refreshing for the market, and the doors are well and truly open for business,” he said. Group chief executive Lyndon Turner said: “Graeme is a fantastic addition to the company. His vast experience in the marine insurance sector is what the market expects, and what we expect from our team.”
Marsh has appointed Alison Bamford as the New Zealand leader for the recently launched Mercer Marsh Benefits. Bamford, who has worked in the medical and health industries for the last nine years, joins Mercer Marsh Benefits from Metlifecare. She was previously the national sales manager with Southern Cross Health Society. Bamford said: “I’m delighted to be heading up the largest benefits brokerage and related advisory business in the New Zealand market. Bringing together Marsh’s strength in the insurance broking market and Mercer’s expertise in employee rewards and benefits will provide employers with considerably more choice in the employee benefits space.” Country head of Marsh Grant Milne added: “We are very fortunate to have someone with Alison’s industry experience to head up what is an exciting new venture for us. “Being able to offer organisations a single source to manage the costs and complexities of employee benefits and health programmes, will help to provide them with a competitive advantage when retaining and recruiting new staff.”
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Quake progress lauded Two-thirds of the residential claims arising from Canterbury’s earthquakes have been settled, as well as 80% of the commercial claims, the Insurance Council of New Zealand says. It says insurers have now paid out more than $12 billion to people affected by the quakes. At the end of June 2014, private insurers had paid out $7.7 billion in commercial claims and $4.4 billion in settling residential claims. “Insurers are currently paying out $11 million a day to get Cantabrians back into their homes and enabling businesses to move forward,” ICNZ chief executive Tim Grafton said. He said there was an increase in the speed of progress over the past quarter, with 1517 over cap claims settled, double the previous quarter. “That’s 17 claims settled daily and insurers handing over 43 repaired or newly-built homes weekly to their customers. The settlement of Canterbury earthquake residential insurance claims has definitely reached a turning point with 50% of all over cap claims now fully settled
and 72% of the out of scope claims completed,” he said. At the end of the June quarter, insurers had 22,739 dwelling claims over the $100,000 plus GST EQC cap, according to the Canterbury Earthquake Recovery Authority (CERA) survey, 284 more than the March quarter. “Private insurers have reached the halfway mark by fully settling 11,392 over cap dwelling claims, including the completion of 2203 rebuilds and major repairs,” Grafton said. Of the 11,347 over cap claims remaining, 8110 insurer-managed rebuilds and repairs are in progress: 1611 (20%) are under construction, 442 (5%) in consenting with a local authority or government agency and 1089 (13%) under contract but not yet started. The balance of insurer-managed major repairs and rebuilds are in pre-design (scoping or collection of technical data), detailed design (with a designer/architect) or pricing (tender or pricing for construction). Of the 11,347 over cap claims still to be
fully settled, 1218 are customers still undecided about their settlement offer and 1169 have yet to be given a settlement option. In the previous quarter there were 2876 in these categories “The 20% drop in the number of customers undecided or with no offers represents the substantial effort by insurers to progress claims that may have previously been stuck,” Grafton said. “The success of the Residential Advisory Service in providing independent advice and the role community groups play in supporting residents, particularly those in vulnerable circumstances, has undoubtedly contributed to moving claims forward.” The CERA survey showed 9189 claims were cash settled with another 850 awaiting their agreed cash settlement to be finalised. “In spite of insurers receiving over 700 newly over cap dwelling claims from EQC this year, insurers are still confident that almost all major repairs and rebuilds will be completed by the end of 2016,” Grafton said.
Pricing drops again
Special counsel appointed
Insurance markets’ pricing declined in the second quarter of 2014 for the fifth consecutive time, the latest Marsh Risk Management Global Insurance Index shows. The decline was driven by strong capacity, particularly for property lines, and an absence of significant losses during the quarter. Nearly all regions around the world reported a general decline in rates. Global property insurance rates dropped by an average 4.6%. Casualty and financial and professional lines fell by 0.6% and 2.3%, respectively. Competition for programmes with favourable loss experience intensified in Asia during the quarter. Capacity was high for Australia’s July 1 reinsurance treaty renewals, while demand was tempered. Marsh said that was a scenario that heightened expectations that soft conditions would continue in the local primary market, most notably for property risks. The report said capacity remained strong in the second quarter of this year, as existing insurers worked to increase their market share and new capacity entered the market. Rates for property insurance fell in most regions of the world. In Australia, as well as a drop in pricing, coverage broadened as insurers offered multi-year agreements and multiline packaged deals. In the US, competition was strong, helped by new entrants to the market and a lighter-than-usual hurricane season predicted.
The quantity and complexity of New Zealand insurance claims is of global significance since the Christchurch and Wellington earthquakes, a newly-arrived insurance law specialist says. Minter Ellison Rudd Watts has appointed insurance and negotiation expert Toby Gee as a special counsel, based in Wellington. He has more than 20 years’ experience as independent counsel specialising in insurance, professional negligence, commercial, engineering and construction, product liability and medico-legal litigation. He has a particular interest in complex cases involving technical or scientific evidence. In Britain, his insurer clients include AIG, Allianz, Aviva, the Medical Protection Society, QBE and Zurich. Gee said the number of insurance claims in this country had grown significantly since the earthquakes. He said he was looking forward to his new role: “I bring a broad range of strategic experience advising and representing clients in hard-fought and challenging disputes, often in novel or abstruse commercial situations.” Minter Ellison Rudd Watts managing partner Mark Weenink said: “Toby is an important addition to our national insurance practice and formidable dispute resolution team. His extensive international litigation experience means he is in an ideal position to help clients with large-scale insurance and commercial disputes, the likes of which New Zealand is only now experiencing.”
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*IUA does not provide financial advice, is not a broker and as such is not registered on the Financial Service Provider’s Register. IUA is not a member of a dispute resolution scheme. IUA acts as an agent for certain insurers and Lloyd’s underwriters. IUA is not an insurer and no name, title, trade mark, style, designation or description on this advertisement or in any documentation should be taken as representing or implying that IUA is acting as a licensed insurer.
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Need for D&O cover increases Good insurance cover for the country’s businesspeople is more necessary than it has ever been, insurance expert Stacey Shortall, of legal firm Minter Ellison Rudd Watts says. Writing in the firm’s magazine, Cover to Cover, she said there was likely to be a dramatic rise in fines as the regulatory landscape changed in this country. “The current global trend towards greater financial regulation is hitting home,” she said. She said the actions of companies’ directors and officers were under heightened scrutiny. “As companies and their people look to the horizon and seek to best prepare for the worst, the role of insurance is critically important. “The challenge to insurers is to be equally well prepared for the changes as they arrive.” She said a number of factors were prompting increasing regulation. 8
In the financial sector, the global financial crisis had resulted in the establishment of the Financial Markets Authority, the introduction of the Financial Advisers Act and the Financial Markets Conduct Act. Natural disasters, such as the Christchurch earthquakes, had prompted changes to a raft of laws, including the Building Act, the Environment Act, the Local Government Act, and the Civil Defence and Emergency Management Act. The new seismic strength requirements put more pressure on people such as engineers, Shortall wrote. She pointed out that workplace deaths such as those at Pike River and in the forestry industry had prompted the establishment of Worksafe New Zealand, overseeing reformed health and safety requirements with tougher penalties. A new Food Act, covering food safety requirements, is coming into force in March 2016.
Shortall said New Zealand was about to adopt legislation that was similar to Australia’s model law, which included the proactive duty of due diligence for directors and officers. She said: “Fines will increase dramatically. In the interim, recent court decisions already reflect higher reparations than previously awarded, which of course, can be insured against. “The number of inspectors on the ground is also growing, which is causing an increase in investigative activity resulting in an increase in defence costs.” New Zealand had never been through such a period of complex and fast change, she wrote. “The emphasis on compliance is driving increased regulator activity. Investigations and prosecutions are growing, as are the number of official inquries. These create the need for legal representation (and consequent spend) particularly when investigations are regularly running on a parallel track.”
Benmosche hastens retirement
Vero appoints head of marketing and corporate affairs Vero welcomed Pamela Bonney into the role of head of corporate affairs and marketing in June this year. Pamela has extensive communications experience working at senior levels in NZ, the UK, and the US, for Baldwin Boyle Group, Hewlett-Packard, and Hill and Knowlton. Working for large multinational companies has allowed her to develop skills in global reputation
management including, corporate communications, public affairs, crisis communications, strategic media relations, influencer relations and executive communications. In addition to her corporate roles, Pamela looks after communications and strategy for the Women in Road Transport Oversight Group. She is also a member of the Board of Shine, New Zealand’s largest organisation dedicated to preventing domestic abuse.
AIG chief executive Robert Benmosche brought forward his retirement after being told he had nine months to a year to live in May. Benmosche was originally slated to leave in early 2015 after being diagnosed with cancer in 2010. But after outliving earlier prognoses and repaying the insurer’s US$182.3 billion bailout, he left last month, saying he wanted to enjoy the time he has left. “I said, ‘You know what, I’m not going to play the odds’. So let’s accelerate my retirement. And the board was happy to do that,” he said in an interview. Benmosche, 70, is handing over to Peter Hancock. Advice from his mother had also prompted his decision. “My mother told me, ‘Don’t wait too long,’ and I’m glad I didn’t wait too long.”
Knell given new role Vero has appointed Cris Knell to the role of EGM commercial and distribution. Knell has been chief executive of AIG Insurance New Zealand Limited since 2010. During that time he has steered the business through losses caused by the financial markets collapse, the Christchurch earthquake recovery and he led the growth of the AIG brand, business and profitability in New Zealand. In addition to his role with AIG, Knell has been active in industry matters. He has served as a vice-president of the Insurance Council of New Zealand and was also a member of a recent New Zealand Government trade delegation with the Prime Minister and other senior ministers. He also had a central role in the sponsorship of New Zealand Rugby’s six national teams, including the All Blacks. Knell has had a number of international insurance roles including senior executive positions with AIG and Chartis in Asia, Europe, Russia and the United Kingdom. www.covernotemag.co.nz
NEW ZEALAND INSURERS REJECT ONLINE COMPARISONS International experience turns Kiwi players off quote websites despite growing move to digital.
nsurance comparison sites have taken hold in markets around the world, as consumers turn to online aggregators to compare quotes and get the best price on their cover. But insurers have quickly found that they are a double-edged sword, encouraging consumers to focus solely on price and offering the potential for reputational damage. The biggest take-up of comparison sites has been in Britain, where 90% of customers have used a comparison site to research and get quotes on non-life insurance policies, according to a new survey. They are also used in the United States and Canada. Google has launched a price comparison site for car insurance in France. Life insurance comparison websites operate in New Zealand but there are no websites offering general insurance comparison. Former Vero chief executive Roger Bell has been trying to launch comparison website iCompare but it has not yet been able to begin operating. A message on the site reads: â&#x20AC;&#x153;The major insurers operating in this country have refused to work with us to allow Kiwis to make convenient and accurate comparisons of insurersâ&#x20AC;&#x2122; terms and conditions; denying Kiwis the benefits enjoyed by consumers in many countries overseas.â&#x20AC;? His business partner, Richard Conway, said the site had interest from overseas insurers and some smaller operators in New Zealand. But he said they did not want to launch until they had enough insurer participation to provide value for consumers.
"We could launch tomorrow if we felt we had a viable product... but if we're putting $1 million of our own money into it, we want to make it work. We're in discussions with other bigger offshore providers who could make it viable. It's impossible to say how long it might take." Insurance Council chief executive Tim Grafton said there was no desire by his organisation’s members to participate in providing information to people who wanted to set up comparison sites. He said while insurers did not object to competition that revolved around price, the sites encouraged people to look at price as a bottom line without considering the cover they were getting. “There’s often a good reason why there’s a very low price in the market. It could be a new entrant pricing low to build their customer base and then on renewal they might increase the price,” he said. “Other reasons might be that the cover is far less extensive or may have certain exclusions or higher excesses. The coverage can be far more limited, which enables the price to be lower. There’s a reluctance to get into the business of encouraging people just to look at price alone.” He said the overseas experience was not likely to change insurers’ minds. Grafton was in Britain recently and talked to
WHILE INSURERS DID NOT OBJECT TO COMPETITION THAT REVOLVED AROUND PRICE, THE SITES ENCOURAGED PEOPLE TO LOOK AT PRICE AS A BOTTOM LINE WITHOUT CONSIDERING THE COVER THEY WERE GETTING. insurers there about their use of comparison sites. “Initially the insurance industry participated in the UK but what they found played out was that people were diving in and identifying an insurer offering a price of X amount of dollars. But then when they inquired about the cover, and the
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insurer asked them what sort of cover they wanted, they would get a different price. Aggregator sites were giving a certain set of conditions that applied generally but with any insurance, it’s priced on the risk of an individual… what insurers experienced was reputational damage coming back to their individual brands.” He said there was less enthusiasm to participate with the comparison sites now because of that. PwC New Zealand partner and insurance sector leader David Lamb said comparison sites were expanding customers’ ability to discover and compare products. He said cover had become increasingly commoditised, and for many consumers, purchase decisions were driven almost entirely by price as they did not understand, or underestimated, the value of insurance products. Insurers in Australia are not supportive of general insurance comparison sites, either. The five biggest insurers, including Suncorp Group and Insurance Australia Group (IAG), control 80% of the market across the Tasman and won’t allow their brands on price aggregator websites. Some comparison sites operate but compare limited numbers of insurers. Canstar compares policies across a wide range of insurers but on a
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high-level basis, without getting into price. Derek Bonnar, of Canstar, said insurance comparison was something that was on the radar for the firm in New Zealand. “We’ll keep our options open. At this stage we’re not doing it, we haven’t looked into it in great detail… but it’s something we’ll consider in future.” Australian Competition and Consumer Commission chairman Rod Sims said comparison sites were an important marketing tool for businesses and helped promote competition. But he said that could be misleading for customers. Chief executive of Australian consumer organisation Choice Alan Kirkland said the main problem was that many only listed and compared companies that paid them.That could be misleading to consumers, he said. Compareinsurance.com.au gives the impression that it compares a wide range of insurers but in reality it only works with five. Australia’s Financial System Inquiry panel recently suggested ways to expand the use of comparison websites to include more information, even if insurers would not play ball. It suggested they use an automated process to obtain quotes, or developed representative categories for customers based on key characteristics. “Insurers could disclose their policy premia for each category and consumers could then, potentially with the assistance of aggregator services, compare premiums from different insurers for the category that best represents their characteristics.” In Britain, the Financial Conduct Authority said the sites did not always ensure that people were given the information they needed to help them make the right decision. It said there was a risk that consumers were buying insurance products without understanding whether they were getting the right level of cover. But despite the problems with the sites, it seems that digital distribution of insurance is a channel that is set to grow. PwC issued a new global report last month, which indicates some insurers may have to rethink their digital strategies if they want to maintain their market share. As part of the report, the views of 9000 consumers around the world were sought. Seventy per cent said they used a digital platform, such as a price comparison website, insurance site or social media, to do their research before they bought a product or service from an insurance company. “Far from just being another channel, the impact of digital is transforming what customers expect which will create fresh opportunities for companies to get closer to their customers, moving insurance from a price to a value consideration for New Zealanders,” Lamb said.
SEVENTY PERCENT OF CONSUMERS AROUND THE WORLD SAID THEY USED A DIGITAL PLATFORM, SUCH AS A PRICE COMPARISON WEBSITE, TO DO RESEARCH BEFORE THEY BOUGHT A PRODUCT OR SERVICE FROM AN INSURANCE COMPANY. The PwC report said that in Britain, comparison sites had driven down margins and taken control of customer relationships. Ninety per cent of the British respondents had used comparison sites for research and quotes for non-life insurance. Car insurance was the most popular type of cover managed online, at 38%. The survey showed that 26% of customers had bought policies online. Almost three-quarters did some digital research before buying. It said by 2017 digital natives, those who have grown up in an internet world, will dominate and drive behaviours. Lamb said there was potential for New Zealand insurers to do more in the digital space. New Zealand customers wanted insurers to offer them the simplicity and accessibility they had become used to in other sectors, he said. They wanted quotes and prices available when they needed them, via any platform they chose. “They will happily change insurer on a regular basis and have little desire to forge a lasting relationship.” WHAT DOES THE MOVE TO DIGITAL GENERALLY, AND THE EXISTENCE OF COMPARISON SITES SPECIFICALLY MEAN FOR ADVISERS? Lamb said a move to digital interactivity by insurance consumers was not all bad news for advisers. The PwC report showed there was still a strong desire to interact with an individual. “Just because it’s digital doesn’t mean the broker is gone,” he said. Even if they were researching products online, customers would often want the ability to seek guidance from an adviser, he said. When asked what would encourage them to purchase online, 35% of respondents cited access to telephone support 35% and 30% said online advice from a professional adviser would be important. In cases where people needed complex cover, the need for brokers to understand their clients and deliver tailored insurance solution would not change, Lamb said. Motor and house and contents insurance might be more suited to being distributed digitally, he said.
But advisers who helped people strategise their insurance: identifying risks and then working to mitigate them, were offering a specialised service that could not be replaced by an online site. Lamb said: “There’s a strong role for brokers in the specialised end of the market. I think there’s a very good place for brokers in New Zealand. A lot of the New Zealand economy, in terms of the commercial side, is small-to-medium businesses. Because of their size, they won’t have the inhouse capacity to accurately assess risks and where insurance will be a benefit to them.” There would be more demand for those services in New Zealand, because of its number of small businesses, than in countries where there were more bigger firms that had the capability to manage insurance in-house. “Good brokers are professionals who can help small businesses with that. Comparison sites are not for sophisticated products, there for the more straightforward run of the mill products – motor, basic life insurance. But it is still early days. These things can move quite quickly.” IBANZ chief executive Gay Young said the comparison sites that were successful overseas were mostly at the retail end of the market and so were not a big threat to advisers. “Brokers should be looking at giving advice not finding the cheapest deal, you should be an adviser not flogging cheap product.”
Industry stalwart farewelled
BANZ is mourning the death of industry stalwart Bill Coughlan. Coughlan was in the insurance industry for 53 years before retiring in 2013. His career started with the State Insurance. He then moved on to Security & General, Hartford Monarch, C T Bowring & Burgess (Marsh) and Stenhouse (Aon) before starting out on his own in 1993. He traded as Coughlan Insurance Services until being bought out by Mike Henry Brokers. But he only had a short time to enjoy his well-earned retirement before he was struck down by illness. Coughlan was an active member of IBANZ and was involved in the old IIBA structure in its early days. He was a keen Crusaders rugby
COUGHLAN WAS AN ACTIVE MEMBER OF IBANZ AND WAS INVOLVED IN THE OLD IIBA STRUCTURE IN ITS EARLY DAYS. supporter, a member of the Wigram Lions club for 33 years and had an interest in classic cars. He is survived by his wife Dianne, three children and five grandchildren.
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POLITICIANS WEIGH IN ON
INSURANCE Covernote asked New Zealandâ&#x20AC;&#x2122;s political parties for their policies relating to insurance. Which gets your vote?
Labour Labour has the clearest insurance policy of all the parties. It wants to expand the Kiwibank family of companies to establish KiwiAssure, a publicly-owned general insurance provider. The policy is subject to a business case but Labour says it hopes that a New Zealand option in an industry dominated by foreign-owned businesses would provide competition in the same way Kiwibank has in the banking sector. “In 2010 the Reserve Bank said that, of the top 20 insurers in New Zealand, 74% of them by business volume were foreignowned. The figure has grown higher since, with the loss of AMI. According to the Insurance Council of New Zealand, the total household insurance market collects $1.17 billion in home and content premiums each year and approximately $1.36 billion in vehicle insurance. The vast proportion of the profits from this flow offshore. That’s not good for our country. New Zealand should strive to own its financial services sector, and not send overseas the profits from this significant portion of the economy,” leader David Cunliffe said. He said the Christchurch earthquakes had brought the issues to the fore. “Thousands of Cantabrians are still struggling to get their claims approved, while others are
THE TOTAL HOUSEHOLD INSURANCE MARKET COLLECTS $1.17 BILLION IN HOME AND CONTENT PREMIUMS EACH YEAR AND APPROXIMATELY $1.36 BILLION IN VEHICLE INSURANCE. THE VAST PROPORTION OF THE PROFITS FROM THIS FLOW OFFSHORE. THAT’S NOT GOOD FOR OUR COUNTRY. NEW ZEALAND SHOULD STRIVE TO OWN ITS FINANCIAL SERVICES SECTOR, AND NOT SEND OVERSEAS THE PROFITS FROM THIS SIGNIFICANT PORTION OF THE ECONOMY - DAVID CUNLIFFE. having trouble getting insurance cover for the future. The pressures have been felt nationwide as well, and there are fears that New Zealand will face higher premiums and more restrictive cover for years to come. Premiums for home and contents policies have increased by around 30% on average over the last two years. A recent survey found 60% of respondents felt they were paying too much for their home and contents insurance, while 17% had reduced their cover because they were finding it too expensive. The new entrant will bring transparency and competition, while emulating the responsiveness to customers
achieved by Kiwibank.” KiwiAssure’s products would be sold through Kiwibank offices and independent brokers. Labour said it would be prepared to support KiwiAssure with a capital injection. “As per standard fiscal procedure, we will set aside money in a contingency for this purpose. The initial capital injection to establish Kiwibank in 2001 was $80 million – we anticipate the initial capital needs for KiwiAssure will be somewhat less than that and that the capital requirements to meet prudential requirements for the new insurer will grow as the business expands.”
MANA MANA has not developed a substantive policy on insurance. A spokeswoman said its focus was on raising the basic standard of living of those who were struggling to afford even the most basic insurance cover. “We have, however, included a policy on insurance in our housing policy to help protect low-mid income whanau who buy a house and are then unable to meet their mortgage payments because of changed circumstances like job loss or ill health.” The party would: • Develop a new low-interest, no deposit Maori Home Ownership Scheme (with low-cost mortgage insurance) for Maori first-home buyers to increase the number of Maori owning their own homes. • Develop a new Kiwibank Home Ownership Scheme that would provide low-interest loans (with low-cost mortgage insurance) to low and middle-income individuals and families with a demonstrated savings record.
NZ First has a very similar policy to Labour. Leader Winston Peters says State Insurance was a casualty of the 1984-1990 Labour Government. He said every New Zealander who paid an insurance premium was paying extra because of the short-sightedness of past asset sales. “We are pleased to see Labour come to its senses and it’s interesting to note their scheme has almost the same name as ours – KiwiAssure as opposed to our KiwiSure,” Peters said. “We will look closely at the plan and see how it fits in with our ideas on giving premium payers a real choice. If the insurance industry and the National Government strongly oppose it, then it obviously has significant merit.” He said state-owned insurance had been done in the past and could be done again. “A New Zealand-owned and run insurance company always did make sense. It is the right move. And just in case you were wondering, New Zealand First has always supported this policy. It was therefore a bit rich listening to Labour gloating over ‘their’ recent state insurance idea. In case we have forgotten Labour sold State Insurance in 1990. If Labour was so keen on a state insurer why did they sell it?”
ACT A NEW ZEALANDOWNED AND RUN INSURANCE COMPANY ALWAYS DID MAKE SENSE. IT IS THE RIGHT MOVE. AND JUST IN CASE YOU WERE WONDERING, NEW ZEALAND FIRST HAS ALWAYS SUPPORTED THIS POLICY.
Act does not have any policies relating to general insurance but wants changes to ACC. It says: “ACT believes that the one-sizefits-all compulsory, government-owned monopoly insurance provider is not only delivering poor results because it is badly managed, but that the failings are endemic to the model.” The party says ACC is prone to political interference and its monopoly status leads to inefficiency. “Pursuing political prerogatives has also led to unclear and unjust coverage definitions. These include an absurdly broad definition of accident, whereas unfortunate people in some categories find themselves without cover they might have bought absent the scheme. Where the legacy of ACC has created a long tail of liabilities that justice requires be delivered upon, ACT believes that the government
should fund these out of general tax revenue and move immediately to a paradigm wherein New Zealanders can purchase insurance of their choice off a competitive market. In so doing, the government should review the removal of the right to sue and litigation rules in general.”
The Green Party does not have a specific insurance policy but touches on the industry in some of its other policies. Its transport policy suggests investigating the merits of a compulsory third-party insurance scheme funded by a levy on liquid fuels. Its mining policy requires bonds and/or minimum insurance requirements for worstcase scenario pollution events to minimise the risk that the taxpayer has to pay cleanup costs when mining operations cause pollution. In its sustainable business policy, it supports mandatory product insurance for all manufactured goods, suggesting that legislation be amended to increase protection for adversely-affected parties in situations where a business entity is liquidated, closed, or unable to finance ongoing responsibility for workmanship or products, for example by using compulsory insurance or bonds.
United Future proposes to: • Collect EQC and fire levies as a component of property owner’s rates instead of their insurance premiums (to prevent “free riding” on the system by the uninsured) • Investigate the feasibility of a national health insurance scheme, as an extension of the existing ACC scheme, for non-trauma based disability such as elective surgery for the elderly • Legislate for compulsory third-party insurance, support the continuation of the “no-fault” regime and mandatory workplace accident insurance, but support competition in the provision of accident compensation services.
No specific insurance policies.
Internet Party No specific insurance policies.
The Conservative Party would make health insurance tax deductible.
THE NATIONAL GOVERNMENT IS COMMITTED TO RESPONSIBLE MANAGEMENT OF OUR FINANCES, AND THIS DOES NOT INCLUDE ENTERING THE INSURANCE MARKET.
National has no specific insurance policies. A spokesman says: “We believe insurance is best left in the hands of the private insurance market, where risk is able to be spread across a wide range of international markets. “Two New Zealand-owned insurance companies could not survive the Christchurch earthquakes because their risks were too reliant on the domestic environment. The National Government is committed to responsible management of our finances, and this does not include entering the insurance market.”
NZIER backs calls to ditch fire service levy T IT’S TIME TO CHANGE THE WAY THE FIRE SERVICE IS FUNDED TO BETTER REFLECT THE WORK IT DOES THE PUBLIC GOOD IT PROVIDES AND ENSURE ITS COSTS ARE FAIRLY MET BY ALL WHO BENEFIT.
here’s more support for calls to remove the fire service levy from insurance policies. The New Zealand Institute of Economic Research (NZIER) says it would be fairer to fund the fire service through a local government levy on property. It says that would better reflect the public good the fire service provides New Zealanders. The levy is currently applied at a rate of 7.6 cents per $100 of premiums on insured property. In reports commissioned by the Insurance Council of New Zealand, the NZIER has recommended moving the funding of the fire service from insurancebased levies to property-value based levies for both non-commercial and commercial property to general taxation. Council chief executive Tim Grafton said: “No one would expect the police force to be funded through their insurance premiums yet the fire service provides a public good that is collected by insurance companies for the benefit for all New Zealanders, including the uninsured or under-insured.” He said funding the service from general taxation would better reflect the diverse role the fire service plays. “It’s time to change the way the fire service is funded to better reflect the work it does, the public good it provides and ensure that its costs are fairly met by all who benefit. While there is still a lack of political urgency for changes to the funding of the fire service, we will be making strong representations to Government after the
election,” he said. The NZIER reports note that Australian states have moved from insurance-based levies to property-based levies to fund their fire and emergency services. NZIER recommends a single rate levy on non-commercial property up to a fixed cap, either of $200,000 of improvements or $500,000 capital value, and a dual-rate abating levy for commercial property, with an initial rate no higher than the current insurance-based levy rate per unit of value, and the abatement point set so as to balance the benefits across mid-range to higher value properties in an equitable manner. The report recommends that the property-based levy be collected by local authorities as a rate on property values, and that this rate be extended to include many of the properties that are exempted from general rates, such as churches and schools, but which are currently contributing to payment of the insurance-based fire service levy. NZIER suggests that the transitional costs should be met by central Government and that the ongoing costs of collection should be recovered from the levy collection, with levy rates adjusted. IBANZ chief executive Gary Young said the system needed to change. He said it encouraged underinsurance by raising the cost of cover. “Our ultimate aim would be to have Fire Service funding removed from insurance altogether. It is an unfair and inefficient tax.”
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Young professionals group marks one year An organisation set up to help young people in the New Zealand insurance sector grow their careers is experiencing rapid growth, its president says. Young Insurance Professionals (YIPS) Australia and New Zealand is a non-profit group that aims to provide a platform for young industry players to develop their business relationships through educational and networking events. Members are mostly in their 20s and 30s. Membership is open to anyone working in the industry.YIPS New Zealand celebrated its first birthday on July 10. About 80 people attended the celebration held at Atticus, on Fort St in Auckland. New Zealand president and Fortune Manning associate Myriam Mitchell said: “A great night was had by all, thanks to event sponsors, Vero Marine and Fortune Manning, with fantastic door prizes being donated by AdviserNet and Marsh. A highlight of the evening was the new CPD – the Cocktail for Prompt Delegates. The first 35 people who arrived received a CPD.” She said that was likely to be a regular feature at future events. “Some great networking was had by all, with brokers, underwriters, claims handlers and service providers mixing and making new contacts.“ Mitchell saidYIPS NZ had grown rapidly in its first year and has held a number of events, including a seminar held in May. “An exciting end-of-year [event] is currently being planned and details will be released shortly.”
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OUT AND ABOUT
‘Shake, rattle and bowl’ with ACE ACE Group’s general insurance operation in New Zealand hosted their annual event for brokers on July 23. With a 1950s bowling theme, this year’s event was called “Shake, rattle and bowl”. More than 100 brokers and ACE’s clients enjoyed a fun night of ten-pin bowling, classic 50s rock music, plenty of good food and mingling with ACE employees. In a friendly competition, Christopher Osborne from Aon proved to be the best bowler of the night, finishing in first place. He was closely followed by Antony Holden of DAC Beachcroft and William Parker from Willis. Many participants were drawn into the spirit of “Shake, rattle and bowl” as they came dressed in retro bowling shirts and vintage outfits. The event proved to be a successful platform for relationship building between ACE and its business partners with festivities extending well into the evening.
Attendees enjoying some friendly competition during the ten-pin bowling
Joining in the revelry were representatives from ACE: From left, John Shanks, Marc Karapanovic, Emily Craig, Duncan Boyd and Mark Downes
Participants from Aon in their retro bowling shirts
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WHO CAN APPLY? • The scholarship is available to employees of an IBANZ member company, both at the time of application and at time of taking up the scholarship. • Applicants with at least 1 year’s experience in a risk adviser (insurance broker) job role are preferred. • Applicants should be able to take up the scholarship within 12 months of announcement of the winner. • Applicants must be citizens or permanent residents of New Zealand.
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FIVE TOP CYBER TIPS FOR RISK MANAGERS Ryan Clark, financial lines manager, AIG Insurance NZ
ophisticated risk managers are well aware of the increasing level of risk posed by cyber crime. Add to this a dynamic background of legislation and regulation, privacy protection and consumer skepticism, and even the most forward-thinking of risk managers may need to pause to catch their breath. These exposures are now too extensive and serious for risk managers to tackle on their own; they require full engagement of senior management and, more critically, the board of directors. Brokers can also play a key role in helping their customers manage their cyber risk if they are aware of the areas that need to be addressed. So where should businesses start mapping and managing cyber exposures? At AIG, we believe that there are some simple steps risk managers should take to manage the exposure and mitigate the potential impact of a cyber-attack. The first step is to understand the company’s exposure. What information does the company hold that is critical in the day-to-day operations? Where is it stored and with what security? If the company uses “cloud” computing, where is the “cloud” physically located? Does the company keep personal information about customers and staff? What about credit card details? Now that we know what the exposures are, we need to lessen the risks where information can be compromised. The second step is to get buy-in from employees. They can be a company’s greatest defence or their Achilles Heel. Employees are still one of the most common sources of a data breach. Educating employees on the responsible and effective management of data and how to recognise cyber threats will be one of the best investments a company can make. The third step is to do the basics. Make sure the company is not the “low-hanging fruit” for opportunistic attackers. Anti-virus software should be deployed and firewalls installed and –more importantly
CYBER THREATS DEMAND VIGILANCE, EXCELLENCE AND IMAGINATION FROM RISK MANAGERS. – kept up to date. All data, particularly mobile data on laptops and smartphones must be encrypted. These steps should be as natural as locking the front door when you leave home. The fourth step is to instigate a business continuity plan. How would the business perform if it could not access its data? What processes would need to occur to get the business back on its feet? Once a business continuity plan is built, it should be tested, then refined based on the results and tested again. Finally, the fifth step for risk managers is to speak to their insurance broker or adviser. The proliferation of cyber liability policies in the market and the broad covers they provide are an excellent safety net in the management of cyber exposures. They will help ensure that any weaknesses in systems are identified, provide the immediate support needed should an attack occur and help get the business back up and running at full capacity as quickly as possible. Cyber threats demand vigilance, excellence and imagination from risk managers. In our experience at AIG, the best approach is to go back to one of the fundamental lessons we learnt at school in the classroom and on the playing field. Get the basics right. Ryan Clark is AIG New Zealand’s Financial Lines Manager. For more information on AIG and its products and services, visit www.aig.co.nz.
Allied into Steadfast fold
teadfast Group has acquired Allied Insurance Group, one of the largest broker groups in the country. Steadfast will become the natural acquirer of Allied businesses if brokers want to sell their equity stakes. Allied chief executive Bruce Oughton said the Allied group would benefit from Steadfast’s scale and strength. “We are delighted to join the Steadfast Group and benefit from their scale and strength in Australia and New Zealand. Steadfast New Zealand will become a natural acquirer of our businesses should our brokers want to sell equity stakes. We also look forward to finding ways to bring the best of both Steadfast and Allied service and product offerings to our clients, via Steadfast New Zealand, and I am happy to continue heading up the new group.” Allied has 31 shareholder members with 40 offices across the country and the group has been running as a co-operative arrangement, with each shareholder having equal ownership.
Allied generated $172 million of gross written premiums in the 2014 financial year. Oughton told Covernote compliance was a growing burden for many advisers as they dealt with the impacts of new regulation. “Our group deals a lot around compliance and best practice.” Having the power of a group helped, he said. “What we can do with insurers is negotiate wider wordings, better wordings and addendums.” Oughton said the number of Allied members had stayed fairly static over recent years. But earlier in the year he said expected there
would be ongoing pressure from the likes of Gallagher, Aon and Steadfast looking to acquire broker businesses. He said at that time that it would be necessary for some of New Zealand’s broker groups to consider a merger or an arrangement with an Australian cluster group, to give them more market power. “To get that size and recognition in the market.” With groups the size they were, he said, they were in danger of falling too far behind the bigger corporates. Robert Kelly, managing director and chief executive of Steadfast, said: “We are very pleased to broaden our presence in New Zealand by welcoming Allied to the Steadfast Network. Allied’s business model is very similar to Steadfast’s pre-IPO, and we will ensure their members enjoy the same level of benefits as ours. Through partnering with Steadfast, Allied will be able to offer existing and new brokers expanded services and product offerings as well as succession planning opportunities.”
Insurance law: we’ve got more coverage We are very pleased to welcome Sophie Lucas to our specialist insurance law team and our Auckland office. Together, Richard Hern, partner, and Sophie Lucas, senior associate, further boost our established understanding of insurance law and enhance our technical expertise and skill set. They also have the advantage of being able to draw upon the resources and experience of the wider firm for all aspects of litigation, commercial and property.
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All Blacks Aaron Smith, Israel Dagg and Cory Jane filming the Rugby Safety Awards promotional video.
Tackling safety in rugby Amy McNicol, global sponsorship manager, AIG Insurance NZ
IG has launched a new global awards programme, pledging US$50,000 to help improve rugby safety. The AIG Rugby Safety Awards will see six clubs from around the world selected to receive funding to help develop the safety procedures at their club. The programme invites all rugby players, from primary schools to premiership level, to submit videos and photographs showcasing how they are improving – or how they would use the prize money to improve – safety at their rugby club. Some examples would include an out-of-season conditioning programme, seasonal first aid training or the installation of slip-resistant tiles in the clubhouse. All entries will be available for viewing on the Rugby Safety Awards website, and will act as a platform for people to share and source safety initiatives to replicate at clubs globally.
AIG, which supports six New Zealand Rugby teams, USA Rugby, the Japanese Rugby Federation, and youth programmes such as Play Rugby USA, aims to highlight the importance of safe practice, to promote safer rugby globally. Six entries – comprising the best contribution from each global region (Europe, North America, Australasia, South America, Asia and Africa) – will be rewarded with a US$5000 grant to help fund improvements to the safety procedures at their club. The six entries will go head-to-head in the public vote to win an additional US$20,000 worth of safety equipment or training for their club. AIG New Zealand’s acting general manager Debbie Wilson said: “By collaborating our expertise in safety with New Zealand’s profile in rugby, we are able to use the power of two global organisations to make a difference. The
link between insurance and safety is evident and we feel AIG can provide a platform to encourage safe participation for everyone involved in the sport.” As part of the sponsorship, AIG is committed to growing the game of rugby around the world by taking the sport to new territories and encouraging young people to participate whenever possible. To help prevent barriers to participation, AIG wants to highlight how players can stay safe on and off the pitch. Interested in entering the Rugby Safety Awards? Complete the online application form and upload your video via www.AIG. com/SafeRugby or #AIGSafeRugby before October 31. A panel of experts including current All Blacks players and legend Sean Fitzpatrick will judge the entries. Regional winners will be announced in November 2014.
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Personal Lines QUESTION… A client’s vehicle has been written off as a result of a non-fault accident. The client’s claim has been settled and as the vehicle was a total loss they have paid for their insurance in full as they have had the benefit of the policy. Lets say for example the client’s insurance premium for the year was $600 and the claim happened the second month into the period of insurance so they still had 11 months to run on their policy. As a result of the non-fault accident the client’s policy has been cut short but they have stilled incurred the full annual premium. In such a case can the client recover the $550 for 11 months cover as an uninsured loss as this is an additional cost they have incurred. If yes and both insurers involved are part of K4K would the client’s insure then have to reimburse the client? Your comments and guidance would be appreciated as whilst I accept the client has had the benefit of the policy they have also incurred additional costs as a result of the accident. Thank you.
REPLY… GRAHAM SANDERS The K4K agreement relates only to insured losses. Uninsured losses must be recovered against the third party or the third party's insurer. Would the lost premium be an uninsured loss - I am not sure. REPLY… CROSSLEY GATES I defer to Graham on the Knock for Knock Agreement (although that is my recollection also when I worked in-house). But I wonder if your client has suffered the “financial loss” you refer to. If the negligent party had not collided with your client, you client would still have had to pay the annual premium. In other words, the balance of the premium was not incurred because of the collision. There is no causation here. REPLY… Thank you Crossley and yes I agree with what you are saying but if the client's vehicle is written off midway through their policy at six months they are still required to pay the balance of the premium for the remaining six months.The client then buys a new car which they then have to insure. This would mean the client has paid in theory for two years' worth of insurance but only receives 18 months' worth of cover. On this basis is there not a loss to our client? REPLY… CROSSLEY GATES I didn’t think of the purchase of insurance for the subsequent car, so yes you are right. The negligent act has accelerated the payment of another annual premium. This is a consequential financial loss, similar to the loss of a no-claims bonus for the next annual premium. I think this is probably sufficiently foreseeable to be recoverable at law from the negligent party. The amounts involved here are usually not sufficiently large to justify civil proceedings, but I do recall seeing a Scottish decision years ago where the court ordered payment of the amount of the no-claims bonus lost because of one collision caused by a negligent party.
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Tenant’s fit-out claim QUESTION… Our insured is a tenant in a building that is badly damaged (although safe for continued occupation) and the building will be demolished by the owners as it is uneconomic to repair following earthquake damage. Our insured owns the “hard” fit-out which will be destroyed when the building is demolished, their insurers are suggesting that as the fit-out itself has sustained only minor damage, they are not liable for the costs of a new fit-out in their new premises under the tenant’s material damage policy. They claim their liability is only for the notional cost of repairing the earthquake damage to the existing fit-out, even though the fit-out cannot be removed and will be totally destroyed when the building is demolished as a result of earthquake damage.
REPLY… CROSSLEY GATES This is a difficult issue. Why can’t the insured remove the “hard” fit-out before the building is demolished? If the answer to this is they never were going to remove it, then all the demolition of the building will do is prematurely terminate the lease and bring forward the “loss” the insured was always going to suffer anyway. This being the case, the insured may have lost something but it hasn’t lost the cost of a replacement fit out. It was always going to walk away from it. .
REPLY… GRAHAM SANDERS Given that removal of the fit-out is impractical, the question is how the tenant’s insurance might respond. The focus in the thread is upon damage, however there is usually the double definition of either loss or damage. I agree that the “damage” that flowed from the earthquake(s) as the
proximate cause is limited to the apparent damage. Now there is going to be another event that will cause the insured to “lose” their property and that is the decision by the property owner to demolish the building. Is this sudden and unforeseen damage (or whatever the particular policy states) and not the subject of an exclusion? Unforeseen generally means when the policy is taken out, or in a situation where the insured can avoid or mitigate the damage, so is unlikely to apply in the case in question. As to sudden – well, occurring at one point in time (not gradual) seems to be adequately appropriate. So unless the policy has an appropriate exclusion applying to the demolition of the building, there might well be two losses involved: - The earthquake damage (or multiple damage), and - The loss that will follow the demolition of the building. If the latter is a total loss, then except for repairs already undertaken, the former may not be an insured loss.
REPLY… CROSSLEY GATES Your concern is valid. I think the exclusion will apply as you say. Strict liability in the civil context usually arises through the terms of a contract.
If a client operates in territories such as USA and Australia, could an exclusion which reads “Liability caused by, or arising out of the breach of any obligation which requires the Insured to be strictly liable for Personal Injury or Property Damage regardless of fault” cause issues under their Public Liability policy? The concern is that, should there be no fault /negligence on behalf of the client, but where they are joined in an action (for example) the insurer may decline a claim in a territory where Strict Liability is common law.
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Property QUESTION… I need an opinion on an engineer’s recommendation before I launch into the insurance company as both the insured and myself feel the engineer’s definition of damage under the policy is incorrect and as such he is being short-changed for repairs to his building. The situation is as follows: The Christchurch building was badly damaged in the February 22 earthquake and the floor has risen and slumped as a result. The results show that the whole floor is up and down with the corners being over 90mm down and the middle being up over 50mm. When the insured purchased the factory which his company also occupies, he spent considerable money levelling the floor so his trolleys could operate easily around the factory. This issue is at the last claims meeting the engineer advised the any area of the floor that has risen or dropped over 25mm over a sixmetre length would be repaired. However any difference in level under 25mm over a six-metre length would not be repaired as this variation in level is acceptable under the building code. He then went to state the any difference in level under 25mm over a six-metre length would not be considered damage. The insured and myself disagreed with his position on the repairs to the building. The policy wording excludes normal settlement, normal wear and tear, slowly developing deformation or distortion, but the cause of loss is earthquake damage. The policy wording s reinstatement definition is “ where property is damaged but not destroyed, the restoration of the damaged portion of the property to a condition substantially the same as, but not better or more extensive than, its condition when new”. “Undamaged” means not damaged physically and directly by an event insured under Part 1 of the policy”. If the building is repaired as per the engineer’s recommendations, who will insure it as it has not been fully repaired? We have asked assessor to put this question to the insurance company. Also if there is another earthquake and the floor levels that have not been re-levelled drop below 25mm, where does this leave the insured? Can you please give me your opinion on this issue. I am hoping that the insurance company agrees to having the whole floor re-levelled, but we need to make a stand if they don’t agree to this!
REPLY… GRAHAM SANDERS Following the Canterbury earthquakes it has been necessary for insurers to consider just what constitutes “damage”. That change is not in itself necessarily “damage” is a common consensus. Thus where a building has, say, uniformly dropped, “damage” is not necessarily acknowledged. Where there is differential settlement the test is more problematic and the use of the building is relevant to the decision on the extent of repairs that may be necessary. Taking that position, the needs of the insured relative to the use of the building will possibly override any levelling formula, such as you mention. If the insured cannot reasonably use the building following the “levelling formula” repairs it would seem that “damage” has not been adequately repaired. The building code is not the test for “damage” under an insurance policy: it is of course the minimum standard for any reinstatement work. REPLY… IAN MARTIN I think this one for Crossley Gates or the legal minds amongst us however in the technical section under resources in respect of insurance of assets there is case information on the case of Technology Holdings Limited v IAG New Zealand under the heading of “What amounts to damage” from DLA Phillips Fox.I have attached same to this message That that may assist your furher in your response to Insurers after consideration of the Policy wording. http://www.inavigator.co.nz/members/threadview. asp?MessageID=2012&ProjID=94&areaName=Property&threadid=10236 REPLY… CROSSLEY GATES This is a thorny issue with many claims arising out of the Christchurch earthquakes. Technology Holdings v IAG is the leading NZ authority on what amounts to damage. It follows a number of earlier cases and they 30
nearly all refer to damage occurring if the “utility or usefulness” of the item is impaired. This might be compared with a purely cosmetic change or a change that is not discernable to the casual observer. I agree with Graham that the test under the policy is not necessarily the same as the test under the building code for the degree of variance allowed in floor levels. But it may be that the building code allowance is set at a figure where the amount it is out of level is not discernable to the casual observer and the utility or usefulness of the floor is not affected in any practical sense at all. If you went round minutely measuring existing buildings you would probably find many of them are not perfect in their dimensions, but are they all damaged? It is a question of degree of course and it may be that we will need a court ruling to put the matter to rest.
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Household Removal QUESTION… A client is having earthquake repairs done to the house. The client is not removing any contents from the home, but is making use of a second storey of the home to store furniture. The items are too heavy for the client so she is having a removal company assist to do this. The insurer is relying on the “removed property” clause in their household contents policy to exclude any potential loss or damage to contents being moved... it reads: Exclusion Loss of or damage to contents: a) permanently removed from the home b) removed to any place of sale, storage or exhibition c) during the course of household removal including loading and unloading The insurer is recommending the client takes a transit policy for this, since the removal firm will not accept potential liability either! We think this is a little pedantic of the insurer. Is the insurer’s definition of household removal legitimate?
REPLY… CROSSLEY GATES This is one of those examples of not being able to foresee every eventuality under the sun when drafting policy wordings. Paying for commercial movers to move furniture within your house is unusual. If the insured moves the furniture himself/herself there could not be any coverage issue, I suggest? Should using commercial movers affect the physical hazard? Some would argue it reduces it - they are pros. Anyway that is all academic. It comes down to the objective interpretation of the words used. The clause addresses three eventualities in (a) to (c). The first is permanent storage, the second temporary and the third over the period of removal for (a) and (b).The second is the one that applies here – “storage”. While (a) and (c) refer to “removed from the home” and “household removal” (which can only mean movement outside the house), (b) does not. On its own it could refer to anywhere. But a court is likely to see the clauses as all addressing a common theme, removal from the house, and so is coloured by (a) and (c). So, (b) won’t apply to damage during transit within the house (not removal) and (b) is unlikely to apply to storage in the house because “storage” is coloured as being storage away from the house by (a) and (c). REPLY… PAULINE BARRATT It is pretty much standard practice for movers of household effects to operate on the basis of “owner’s risk” terms as per the Carriage of Goods Act, and that is the case regardless of where or how far the goods are moving. It is therefore extremely unlikely that your insurer would ever have had rights of recovery, and the situation is no different just because the items are only going upstairs. This assumes, of course, that the movers
do everything necessary under the Act to correctly form an owner’s risk contract (which can’t be taken for granted as some are better at this than others).
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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hen you lose or break a pair of glasses, it’s not just a big inconvenience – it can come with a hefty price tag. Fortunately, the cost of replacing your glasses can often be claimed under your house and contents insurance policy. Most people wear their glasses every day and put them on and take them off multiple times, so it is unsurprising that the two most common reasons for an insurance claim for glasses are loss, or damage – often by grandchildren. Working in a private practice in New Zealand, we have noticed a change in the insurance business. In 2010, insurance claims accounted for 8% of the sales in practice but in 2014 this has dropped to around 5%. Insurers have not said why the number has dropped, but anecdotal evidence points to two main reasons: Insurance excesses have increased, so consumers are choosing not to claim, and, since the global financial crisis, more frugal consumers are claiming less often. More than five years ago, Visique created a new software platform, which allows bulk billing of the month’s insurance claims to go directly to the insurance company. This speeds up the processing at both ends, creating a rigid format as to how claims are done. It also means the insurance company doesn’t have to work one-on-one with a large number of optometry practices. It is also common for people to lose their glasses while travelling. We encourage people to take a back-up set of glasses if they really need them every day. Travel insurance policies often allow claims on lost glasses but only pay out a small percentage as they apply depreciation to them. Travel insurance policies also usually have a much higher excess. There are some policies available that offer a fixed amount for glasses and eye care annually but this is uncommon. Other countries, such as Australia and the United States, have very different insurance programmes for optical goods. In the US, many people have a health insurance policy that covers glasses and eye tests. The private optometry practice then bills the insurer directly. This can be a struggle for independent businesses as the insurer often seeks the minimum price for goods, rather than the best option for the patient. There is also a company in New Zealand offering extended warranties on the purchase of glasses. There is also a company in New Zealand offering extended warranties on the purchase of glasses. This concept is common when buying whiteware or electrical goods, but is uncommon in the optical industry.
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M&G Insurance, Level 12, West Plaza, 1-3 Albert St, Auckland 1010 | Phone: 09 377 4143 | Fax: 09 369 5493
Sydney 02 9966 8820
Newcastle 02 4920 8698
Melbourne 03 8623 2666
Brisbane 07 3210 0666
Townsville 07 4772 0054
Perth 08 9324 1963
Adelaide 08 8232 7645
Darwin 08 8981 7510
Try our online systemNewcastle for quickMelbourne and efficient Find out Sydney Brisbane quotes. Townsville Perthmore www.mgins.co.nz Adelaide Darwin 02 9966 8820
02 4920 8698
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07 3210 0666
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08 9324 1963
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Service Global Transport & Automotive Insurance Solutions Pty Ltd Knowledge ABN 93 069 048 255 AFSL 240714 as agent for the insurerSolutions AllianzPty Ltd Global Transport & Automotive Insurance Protection ABN 93 069 048 as agent for the insurer Allianz Australia Insurance Limited ABN 15 255 000AFSL 122240714 850 AFSL 234708. Australia Insurance Limited ABN 15 000 122 850 AFSL 234708.
do not provide adviceon onany this insurance based on consideration of your objectives, financialor situation orBefore needs. Before making a decision, We do not provide advice on thisWeinsurance based consideration ofany your objectives, financial situation needs. making a decision, Global Transport & Automotive Insurance Solutions Pty Ltd ABNDisclosure 93 069 048 255 (Incorporated inavailable Australia) trading inorNew Zealand as consider the relevant Product Statement or available Policy Wording your broker intermediary. please consider the relevant please Product Disclosure Statement or Policy Wording from your from broker or intermediary. Motor & General Underwriting Agency, acts as the agent of the Insurer, Allianz Australia Insurance Limited ABN 15 000 122 850 (Incorporated in Australia) trading as Allianz New Zealand, Level 1, 152 Fanshawe Street, Auckland 1010.
We do not provide advice on this insurance based on any consideration of your objectives, financial situation or needs. Before making a decision, please consider the relevant Product Disclosure Statement or Policy Wording available from your broker or intermediary.
Kiwis mean international business Kai Dwyer, Zurich’s Head of International Sales and Distribution, Australia and New Zealand
id you know that New Zealand exported milk powder to the value of $4 billion to China in 2013? This is 40% of the overall exports to China, and the highest value of milk powder exported to any country in any year. The impressive figure reflects the fact that New Zealand’s export trade keeps growing, with China claiming the top position for export markets for the first time, a spot held by Australia for the last 24 years. Exports to Australia have been in decline since 2011. In the year ended December 2013, goods and services exports were at $64.2 billion, up 3% from previous year. Our top five export markets were China, Australia, United States, Japan and Korea, accounting, together, for 57% of total exports. While not all international businesses have dealings with China, they will have to look into insurance cover to protect their operations. Countries with the 34
greatest growth potential often pose the most complicated business and insurance challenges. Whether companies have a manufacturing plant, office or storage warehouse overseas, their unique geographic footprint creates unique needs that require more than a local New Zealand insurance solution. Issuing a policy covering offshore business activities seems straightforward, but there are many aspects you need to consider. • Can your clients access a loss adjuster to assess claims that happen overseas?
• Is it legally permitted to pay claims in each country that they operate in? • Are they meeting the insurance tax obligations that they have in each territory? • Do their management and staff have the protection they need in a foreign environment? The consequences of a breach in meeting local regulatory and tax requirements can be very severe, ranging from fines and penalties to even loss of business licenses. It pays to have peace of mind that a business’ interests are fully compliant in the
territories they operate in.After all, it’s their business strategy that is at stake, not just an insurance technicality. In this complex global business environment it is possible to effectively manage risk and resolve claims, but it is essential to work with an insurer that has in-depth knowledge of the insurance and regulatory framework and can service businesses locally in multiple geographies. People spend a lot of time developing their businesses. It pays to select your insurance partner carefully based on their capabilities, especially when there are complex international exposures. Not all insurance solutions are the same. Zurich has been managing International Programs for over 40 years and has over 2,000 professionals on the ground to support customers across over 200 territories, with consistent service and local knowledge of cultures, languages and legislation. Figures: Statistics New Zealand (2013). Global New Zealand – International trade, investment, and travel profile: Year ended December 2013.
YOU GET SUPPORT AROUND THE WORLD, ONE ON ONE.
NEWS When you’re passionate about what you do, you protect your company as best as you can. With Zurich International Programs, one point of contact helps tailor the insurance protection to your needs, and manages for you one of the world’s largest customer service teams in insurance. Contact your local Zurich representative for more information on International Programs.
ZURICH INSURANCE. FOR THOSE WHO TRULY LOVE THEIR BUSINESS. zurich.com/internationalprograms
Thisisisaageneral general description description of andand does notnot represent or alter any insurance policy.policy. Such services are provided to qualified customers by affiliated of the Zurich Insurance Group Ltd, This ofinsurance insuranceservices services does represent or alter any insurance Such services are provided to qualified customers by companies affiliated companies of the Zurich Insurance Group Ltd, in the US, Zurich American Insurance Company, 1400 American Lane, Schaumburg, IL 60196, in Canada, Zurich Insurance Company Ltd, Ave., Toronto, as in the US, Zurich Americanas Insurance Company, 1400 American Lane, Schaumburg, IL 60196, in Canada, Zurich Insurance Company Ltd, 400 University Ave., Toronto, ON M5G 400 University 1S9, and outside the US and ON M5G 1S9, outsideplc, theBallsbridge US and Canada, Zurich Insurance plc, Ballsbridge (andLtd, its EU branches), Zurich Insurance Company Ltd, Mythenquai 2, Canada, Zurichand Insurance Park, Dublin 4, Ireland (and its EU branches),Park, ZurichDublin 4, InsuranceIreland Company Mythenquai 2, 8002 Zurich, Zurich Australian Insurance Limited, 58002 Zurich, Blue St., North Sydney, Zurich Australian Insurance Limited, ABN 13000296640, AFS Licence No232507, 5 Blue St., North Sydney, NSW 2060 and further entities, as required by local jurisdiction. CSPS-008602-2014. NSW 2060 and further entities, as required by local jurisdiction. Zurich Australian Insurance Limited (incorporated in Australia). Trading as Zurich New Zealand ABN 13 000 296 640, AFS Licence No: 232507. ZU22430 - V1 08/14 - CSPS-008602-2014
New NZI and Lumley Business Interruption indemnity period deferment benefit NZI and Lumley introduce a new policy benefit that lets clients choose when the time is right
nnovation is a key goal for both NZI and Lumley, as is ensuring they provide the right protection for their clients and give certainty of cover when the unexpected happens. Since coming together on July 1, the two intermediated brands have spent a lot of time reviewing their business insurance claims from the Canterbury earthquakes and have found they can deliver a better outcome for clients by introducing a more flexible approach. NZI general manager commercial underwriting and risk management Stephen Everett said the teams had listened to feedback from clients and brokers and conducted further research. As a result they had initiated a new approach. “We’re pleased to introduce a new policy benefit that allows NZI and Lumley Business Interruption clients to defer the commencement of their indemnity period to a time that’s right for their business,” he said. 36
“This offers businesses the flexibility to work around challenges that are out of their control, such as a lag in available resources to undertake repairs, as it means the clock won’t start ticking too early in respect of their indemnity period. The key thing for us is to provide certainty in order to ensure a positive outcome in a claims situation. And what’s more, it comes at no additional cost to the client.” he said Paul Munton, general manager broker products at Lumley, said: “It’s not just in an earthquake or catastrophe situation that this increased flexibility could be useful — there are many scenarios where an indemnity period deferment might be required. For example, a retail tenant might be completely in the hands of their landlord in terms of when repairs are scheduled, and they may be required to move out for a period when the repairs get under way. Deferring the indemnity period will mean that cover is available when it’s needed.”
A couple of other examples include: • Following damage to a dairy shed, a farmer might want to delay repairs until the end of the standard milking season to avoid moving the herd or drying off early. A deferred start to the indemnity period is both practical and reduces costs and inconvenience all round. • In an earthquake situation, a factory might be able to keep operating from its damaged premises until the land had been assessed and repairers and resource consent become available. Deferring the indemnity period makes sure cover is available at the appropriate time. Munton said: “The indemnity period deferment benefit is available immediately for new claims — for all clients who have Business Interruption insurance with Lumley or NZI. If a client wants to defer the start of their indemnity period, their broker just needs to let us know.” To find out exactly how the new benefit works talk to your NZI or Lumley account manager.
Inadequate loss of rent insurance cover can put landlords out of pocket Michelle Hill, senior associate, Kensington Swan, Auckland.
ost landlords have loss of rent cover and, in a net lease situation, can recover the premiums from the tenant as an outgoing. The lease will often specify the period of cover the landlord is to take out. The Auckland District Law Society Incorporated deed of lease form, for example, was amended earlier this year to give the parties the opportunity of electing a default 12-month period or agreeing a different cover period. If, as is usual, the tenant is paying the premiums, they may not want the loss of rent and outgoings cover extended beyond the 12-month period as this would ultimately be an additional expense. However, would this leave the tenant exposed if they (or those for whom they are responsible) caused damage resulting in a loss of rent and outgoings to the landlord beyond that 12-month period? This was considered in Galbraith and RPG Trustees (2008) Limited v Alderson Logistics Limited  NZHC 3102.
THE TENANT’S POSITION WAS THAT SECTION 269(1) OF THE ACT EXONERATED THEM FROM HAVING TO INDEMNIFY THE LANDLORD FOR THE UNINSURED LOSS OF RENT.
GALBRAITH AND RPG TRUSTEES (2008) LIMITED V ALDERSON LOGISTICS LIMITED In that case, the tenant’s employee damaged the premises. It took 25 months to repair the damage, during which the premises were untenantable. The landlord had taken out only 12 months’ loss of rent cover. The landlord sued the tenant for lost rent and outgoings over the 13 months balance of that period. The case involved an analysis of the interplay of sections 268, 269, and 271 of the Property Law Act 2007 and the various relevant provisions in the deed of lease. The tenant’s position was that section 269(1) of the Act exonerated them from having to indemnify the landlord for the uninsured loss of rent. In short, that section provides that the lessor must not require the lessee to: a meet the cost of making good damage b indemnify the lessor against the cost of making good damage; or c pay damages in respect of the damage. The landlord argued that section 269(1) does not apply to the consequential uninsured losses of rent and outgoings but, even if the section does apply, the parties had contracted out of it by section 271 of the Act.
CAN THE PARTIES CONTRACT OUT BY SECTION 271 OF THE ACT? The next question was whether the parties could be regarded as having contracted out under section 271 of the Act. That section allows the tenant to expressly acknowledge that the landlord has not insured, or has not fully insured, the premises or land. If the tenant has so acknowledged, the landlord and tenant may expressly agree that the tenant will meet the cost of making good any damage. The judge considered that section 271 only refers to insurance against damage, and not against consequential loss flowing from the damage (such as loss of rent). He accepted this is somewhat of an anomaly, given that section 269 extends to consequential damage.
DID SECTION 269(1) APPLY TO THE LANDLORD’S CLAIM? The judge considered whether, as a matter of interpretation, the compensation sought for the consequential loss of rent and outgoings for the 13-month balance period fell within section 269(1)(c) as “damages in respect of the damage”. The tenant asserted it did—that the concept of damages was broad enough to apply to the consequential loss of rent and recovery of outgoings. The landlord, on the other hand, submitted that the mischief the section was directed at was the insurer’s right of subrogation to claim against the lessee for damage to the building. Therefore, the landlord asserted, the damages referred to in section 269(1)(c) should be read narrowly to refer only to the cost of the damages to the building (and not extend to consequential losses such as loss of rent).
The judge considered that the “damage” referred to in sections 269(1) (a) and (b) is physical damage. By contrast, however, section 269(1)(c) encompasses both physical damage and also damages (being losses that may be sued for at law). Accordingly, as section 269(1)(c) included damages such as lost rent and outgoings, the landlord was prevented from recovering lost rent and outgoings from the tenant.
CONCLUSION The case illustrates that, even if the parties have agreed that the landlord is only to take out loss of rent cover for a limited period (say, 12 months), section 269 of the Act (if it applies) operates to prevent the landlord from recovering any loss of rent and outgoings beyond that period. Unfortunately too for landlords, that the parties cannot expressly agree otherwise as the mechanism in section 271 is not available to require the tenant to meet consequential loss (only direct loss). This would appear to go a step further than the purpose of the insurance provisions in the Act which was that the tenant shouldn’t have to pay twice – firstly for the cost of the insurance and again for the loss . In Galbraith the tenant wasn’t asked to pay twice, as they had only paid for 12-month loss of rent cover. Landlords should turn their minds to a realistic but generous period for rebuilding in the event of damage or destruction and ensure their business interruption policy covers this. All the better if they can pass the cost of this on to the tenant as an outgoing. www.covernotemag.co.nz
NZI rings changes C
hanges at the top level of NZI will only be positive for brokers, the company says. Executive general manager Karl Armstrong is to take up a newly-created role as IAG’s chief risk officer. From September 15, he will be tasked with overseeing reinsurance, risk assurance and compliance. The purpose of the role is to focus on strategic and operational risk, support delivery through strong assurance processes and ensure the business is sustainable and competitive. IAG said Armstrong was one of the most experience and respected leaders in the insurance industry. He has been with NZI for 43 years, since he started as an office junior out of school, and at the helm for the past six. “On day one I was told to get a haircut,” he says. “Now I have no hair.” IAG said the appointment would allow it to benefit from his depth of knowledge and insight into business risk. The NZI executive general manager position will be filled by Travis Atkinson, who has been chief executive of AmGeneral, a joint venture between a large Malaysian banking group and AIG. AmGeneral is one of Malaysia’s largest insurers, providing a range of insurance through a multi-channel, multi-brand approach. In 2013, Atkinson led AmGeneral through the integration of Kurnia insurance, Malaysia’s largest motor insurer. Before his secondment to Malaysia in 2012, Atkinson was IAG’s executive general manager, business partners in New Zealand. Armstrong said it was an opportunity for him to move into a new area of risk, which was becoming more critical as regulatory demands increased. “It’s a great learning opportunity… I’ve been asked ‘what advice have you got’ and I say you’re never too old to learn. After 40-plus years I’m looking forward to developing deeper skills in particular areas.” The best part of his role at NZI had been the people, he said. “Both internally and externally, staff and our broker partners. Not least the fact we’ve had quite a lot of achievement over some quite turbulent times.” The past four years had been the most challenging in his career as the insurance industry reeled after the Christchurch 38
TRAVIS ATKINSON’S FOCUS IS ON BROKERS AND STAFF AND MAKING SURE THE BUSINESS IS A GREAT ONE TO WORK WITH AND WORK FOR. earthquakes, he said. “We’ve come through in a leadership position and I like to think I can take some credit but it’s also down to the great team.” It was a credit to NZI that it had stuck around for customers through the recovery from the earthquakes, he said. “A number [of insurers] upped sticks and moved.We stood firm and created the capital and capacity to continue cover and had backing of our own organisation and reinsurers.” Armstrong said brokers should notice no difference once Atkinson took over. “He’s been away from the broker market for a few years but he’s not a stranger to brokers and he has a great team backing him.” Atkinson said he was excited to be taking over the running of such an important part of IAG as the company worked through the integration of Lumley into the business. New Zealand’s broker market was in a very good position, he said. “The demise of brokers in the digital age is something that’s been predicted for many years but in reality good
brokers will always be good brokers… in New Zealand we already have a healthy balance of customers that deal direct, through the banks and with brokers but the broker market is exceptionally strong. We all need to adapt to changing times but the broker market is as strong as ever.” Changes under his leadership would be for the better, he said. “We are going to be going through a transition with Lumley and want to capitalise on that and be better than we are today. We bought Lumley to enhance our business… we have the desire and resolve to maintain the best of both businesses.” His experience with integrating businesses in Malaysia would help, he said. “I’ve got a different style to Karl but we’re similar in many ways. I’ll be focusing on brokers and staff and making sure the business is a great one to work with and work for.” But he is hoping for better weather in Auckland in time for his return. “Here, it’s 30 degrees every day. I’ve grown a bit accustomed to the warmer weather.”
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CATCH THE NEXT WAVE
This year’s IBANZ Forum is focused on providing insurance professionals the knowledge and understanding they will need to succeed in the future. • Do you understand what skills will be essential in the future? • How well do you understand the insurance big picture? • Can you explain risk management, the role of insurers and reinsurers? • Can you talk sensibly with clients about the future economy and the impact on business? • What are the emerging risks and how is insurance responding? • The NZ insurance sector is changing, what do the key players think our future holds? • How is regulation going the evolve and what will you need to comply? • You can’t grab the next wave unless you utilise the fabulous technology tools which are increasingly taking over all aspects of our world. They are in your hand; at your fingertips, but are you and your staff using them well - if at all? The answers to these questions and many more at the 2014 IBANZ Forum.
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FORUM OFFERS BUSINESS INSIGHTS Annual IBANZ event offers brokers chance to get ahead of the game.
ndustry experts will provide analysis of what the future might hold for insurance advisers at this year’s IBANZ Forum. The Forum, called Catching the Next Wave, will be held on October 2 and 3, at the Viaduct Events Centre in Auckland. A key part of the Forum will be presentations from a variety of invited speakers, who will offer delegates valuable insight into how they can adapt to get the most out of the changes that lie ahead for the industry. Terry Lawrence, QBE Insurance’s chief financial officer, said he would use his presentation to talk about the relationships between brokers and insurers and how things might change over coming years. “What the future might look like is what I’ll be looking at.” He said changes could include the use of technology and the way that altered the customer experience. “I think things may change in the broker/insurer relationship. How brokers and insurers work together, I see changes in that area.” His speech would touch on how doing business could be made easier, he said. Lawrence said the industry had been through a lot of changes since the introduction of the Financial Advisers Act. “Regulation has meant changes, not just from the broker’s perspective but from insurers’.” A Government focus on insurer protection was unlikely to change, he said. “It means more regulation and more compliance cost. That’s a fact of life.You can’t think what we’ve been through is it, you’ve got to expect that from a regulatory point of view, the norm will be continual change.” PwC’s Insurance Sector Leader David Lamb will talk about the megatrends shaping the insurance environment, particularly in relation to the shift to digital. He said a worldwide trend towards more digital
engagement was being reflected in New Zealand’s industry, too. “Customers want policies tailored to their requirements and to only pay for what they need. The opportunities that digital is creating means that in the future, policies can be tailored to a specific person’s set of circumstances and preferences,” he said. That would lead to advantages if there were more natural disasters, he said. Companies would be able to use their digital channels to offer more customer insight and engagement around claims and would be better able to meet their customers’ needs. “The market leaders in New Zealand will be the companies developing longer lasting relationships by using digital capabilities to gain enhanced customer knowledge and harnessing that information to profile customers more effectively, fine-tune underwriting and delivering customised solutions,” he said. Sue Brown, of DLA Phillips Fox, will talk about the regulatory environment. Brown is known to most advisers through her time with the Financial Markets Authority, where she was most recently head of strategy, innovation and engagement. She helped to guide and implement the regulatory response to legislation such as the Financial Markets Conduct Act and the Financial Advisers Act. Her insights from within the regulator, as well as her experience in the financial markets in Australia and Britain, will be valuable in helping delegates understand how to navigate regulation within their own businesses. In her new role as a partner at DLA Phillips Fox, she helps clients to develop pragmatic commercial responses to financial markets reforms. Zurich Australia’s head of international sales and distribution, Kai Dwyer, will speak about emerging
risks and cyber-crime. “We will examine why it is so important to stay on top of emerging risks. In doing so we will outline how the Zurich Insurance Group manages this aspect of its business and some of the tools that we have developed for informing the risk management decisions of our stakeholders, whether they be brokers or buyers of insurance or our own management and shareholders,” he said. “As part of the presentation we will discuss the influence of electronic commerce and the industry’s response to managing security and privacy, or ‘cyber’ risks.” Other speakers include Martin Kreft, of Munich RE, talking about reinsurance capital markets and future implications, Debbie Mayo-Smith on how to use technology better in business, Chris Peace on risk management, Tom Weston QC on legal and regulatory issues, Robert Limb, of RAPP, on customer behaviour and trends and Olympic medallist Rob Waddell, offering delegates a dose of motivation. Forum delegates will also have a chance to network at evening drinks before an evening function on October 2, in which awards will be handed out for 2014 Top Insurer and Top Broking Professional. IBANZ said brokers had completed an annual survey each year for many years to produce their choice of Top Insurer. “It seems appropriate therefore that insurers should now have the opportunity to choose their Top Professional Broker. This they will do through a survey of all insurers.” IBANZ said winners would be selected on the quality of their performance as reported by those in the industry who dealt with them. The survey would rate them against key performance criteria. “By having brokers choose an insurer and insurers choose a broker we are leaving the decision
to those in the best position to decide. This is far more appropriate than a simplistic voting system or using self-promotion to determine the result.”
TOM O'NEIL PRESENTATION - RIDING THE WAVE TO SUCCESS With a strong focus on results and quality takeaways, this presentation locks into the audiences' mind the 1% Challenge - the ability to continually focus on micro-improvement. By applying this principle on an on-going basis, team members quickly learn to regularly focus on ongoing continuous improvement. BIOGRAPHY Tom is the former vice president of the National Speakers Association of New Zealand and is an international specialist in personal and corporate performance. He is qualified in psychology and has 20 years' experience in both the Human Resources and Recruitment industries. A former management consultant in Human Resources and trainer for Deloitte, Tom now uses this background to help businesses develop robust plans for the future, and individuals unleash their potential in every area of their life. Published and featured in The Economist, Harvard Business Review, TVNZ, TV3 and the NZ Herald, Tom inspires, excites and challenges both professional audiences and individuals looking to improve their short, medium and long term personal and business performance. Through his dynamic and fun presentation style, Tom will give you and your team the tools to put in place effective strategies to reach your full potential across your organisation. www.achievementexpert.com
Managing conflicts Stay on the right side of the regulator by prioritising clients’ interests.
dvisers’ regulatory obligations to their clients are growing – and whether they are keeping on top of them is something that is in the regulator’s sights. The Code of Professional Conduct for Authorised Financial Advisers (AFAs) was revised this year to make it clear that putting a client’s interests first is the paramount standard advisers must live by. AFAs are required to identify, and clearly and effectively communicate to the client, all interests of the AFA or a related person that might influence the services the adviser provides to the client. If they cannot put the client’s interests ahead of those, the adviser must not act for them. But registered and QFE advisers don’t escape scrutiny, either. Even advisers who are not authorised are required, under the Financial Advisers Act, to operate with care, diligence and skill and not act in a way that is misleading, deceptive or confusing. They must not be improperly influenced through a conflict of interest and should keep records demonstrating how they have managed any that arose. David Ireland, of Kensington Swan, said conflicts of interest relating to commission and inducements were the most common for risk advisers. If an adviser had two competing products that might suit a client, and placing the business with one of the insurers would be enough to tip them over into the next level of inducements with that provider, that was a classic financial conflict of interest situation, he said. Advisers would have to be certain that they were giving the client the best product for their circumstances, irrespective of what it meant for their own bottom line. David Greenslade, managing director Strategi Ltd and Strategi Institute agreed incentives had to be handled carefully. He said advisers’ conflicts were often related to commission, bonus payments for selling certain products or meeting targets. “In most cases it is the product supplier motivating the adviser to place more business with them so the product supplier has a positive outcome,” he said. “This is not necessarily bad and most industries have some form of supplier incentive so the financial services industry is not unusual. Where the issue arises is where the adviser is motivated to make recommendations which may have been different if the incentive was not in place and the outcome is the client getting a recommendation or product that is inferior to what they otherwise would have obtained.” Advisers should manage their conflicts of interest by keeping an incentive record, he said, and recording every incentive and potential conflict. “Honestly ask yourself if this incentive/conflict altered the advice you provide. Ask if the altered advice was positive or negative for the client.” All potential conflicts of interest should be disclosed in adviser business statements, he said. “Could you potentially go on TV and publically describe how, despite the incentive or conflict, the interests of the client come first? Conflicts of interest are not wrong in themselves, but they should be properly identified and effectively and transparently managed.
ALL POTENTIAL CONFLICTS OF INTEREST SHOULD BE DISCLOSED IN ADVISER BUSINESS STATEMENTS… When a conflict of interest has been ignored, improperly acted on or influenced actions or decision-making then the conduct, not the conflict itself, can be seen as misconduct or an abuse of trust.” Ireland said another conflict of interest could arise if an adviser knew a client had conditions or past history that might lead an insurer not to accept them if that information was fully disclosed. There might be a temptation to push them to keep quiet if the adviser feared not getting the sale. That could then jeopardise the client’s ability to claim. “It would be unusual for advisers to act on that basis, I’m not suggesting they do that, but there is the potential for a conflict if disclosing information about a client might prejudice their application for cover.” Insurance advisers might also strike conflicts when it came to the level of cover a person required, he said. “Giving someone more cover than they technically need. It comes back to financial inducement.” Unlike investment advisers who were limited by the amount of money someone had to invest, risk advisers were often only limited by a person’s cashflow. “You could argue that if the worst happens that person is well covered but they might have liked the spare change to do something else.” There are also new obligations under the Fair Trading Act for advisers making claims about products. Since June 17, it has been illegal for anyone to make an unsubstantiated claim – even if it is true. Ireland said:“In essence, with limited exceptions, if you can’t substantiate something you allege when giving advice, even if it turns out to be true and no deception was involved, you have breached the law.” He said the main exception was when a reasonable person would not expect a claim to be substantiated. “But if, say, an insurance adviser tells a client that one policy was better than another, that exception is unlikely to apply, and won’t save the adviser if he or she didn’t have reasonable grounds to back up the claim at the time. So when comparing products, I think it’s fair to say the law now expressly requires advisers to be able to point to a reasonable level of analysis of the products in question having been conducted, either by themselves or by someone else it was reasonable to rely upon. So it is now more than just slack practice to operate more by good luck than good measure – it’s a statutory offence.” It was something that would likely be targeted by the Financial Markets Authority in its regulatory oversight of the industry, he said.
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Underinsurance a big problem: Report A new report shows most homeowners do not have enough cover to rebuild their homes in the event of disaster.
new survey shows two-thirds of New Zealand homeowners have been left underinsured since the change to sum insured policies took effect. Homeowners now have to specify a rebuild sum for which their property is insured. Consumer asked five companies to do suminsured valuations on houses in Wellington and in Auckland and compared those to the sums generated by insurers’ calculators. It said there were “dismayingly wide” variations in the rebuild costs calculated. Consumer NZ said: “One of the most disturbing aspects of the mystery shop was that the rebuild costs from all five companies were considerably more than the ‘default’ suminsured value provided by each homeowner’s insurance company – in some cases double.” The difference was especially marked in Wellington but even in Auckland, the
difference between the insurance company’s default calculation and the valuation ranged from $115,710 to $524,540. It said because of that, many homeowners risked being seriously underinsured if they accepted the insurance company’s calculations. Construction Cost Consultants (CCC) was one of the companies used by the Consumer report. It said it had been warning about the vulnerability of homeowners as a result of the change for some time. In November 2013, it said that 93% of people were taking the default sum offered by their insurer. It estimated the consequent rate of underinsurance could be a minimum $167 billion of a total housing value of more than $717 billion. CCC said the rate of people opting for their insurer’s default had dropped but the
IN NOVEMBER 2013, IT SAID THAT 93% OF PEOPLE WERE TAKING THE DEFAULT SUM OFFERED BY THEIR INSURER. IT ESTIMATED THE CONSEQUENT RATE OF UNDERINSURANCE COULD BE A MINIMUM $167 BILLION OF A TOTAL HOUSING VALUE OF MORE THAN $717 BILLION. level of risk was still too high. Founder and chief executive Andy Thomson said banks and insurers had acknowledged the problem. He said the major companies he dealt with had made it clear they would increase the base rates on which their default sums were calculated. But Thomson said CCC’s experience was that even when homeowners were warned their cover was too low, they did not increase the sum insured for their property, not trusting the data supplied. Thomson said jargon such as “rebuild estimate”, “gross floor area” and “construction inflation” could also be causing confusion. He said CCC was developing relationships with banks and insurers to help improve sum insured accuracy. The firm was also lobbying for regulation in the quantity surveying sector.
He said there was no regulation to prevent insufficiently skilled, dishonest operators producing rebuild reports that were incomplete and contain inaccurate figures for insurance. Thomson says that as financial services providers changed their calculations to reduce the risk of underinsurance, the “cowboy” operators were the next big risk the industry needed to manage, and a degree of regulation should be introduced comparable to legislation of financial services companies and advisers after the finance company sector collapse. Consumer NZ backed him up. It said there was nothing to stop someone setting up shop as a provider of insurance valuations, and many people had. “As things stand, there’s nothing to stop anyone who wants to set up shop as a provider of insurance valuations. No qualifications needed and no questions asked.”
Time for a change of pace for Vero boss A
fter 37 years in one place, it was time to look for a new opportunity, says Vero’s former executive general manager, commercial and personal. Andrew Aitken left the company two months ago, hoping to build a portfolio of directorships – and “do more of the good things in life”. He said there were already opportunities for board appointments on the horizon and he had become more involved in local sports clubs, of which he had been a member for many years. “It was time to look for new opportunities and a different way of approaching life.” He was also looking forward to spending more time travelling, on his boat and skiing. The insurance industry had changed a lot over his career, he said. “When I started, insurance brokers dealt with the very large and the very special. A lot of business was sold direct to customers by insurance companies using agents. It’s gone from that to the insurer with the balance sheet often being almost invisible to the end consumer.” He said the industry tended to go through cycles. “One of the things I look at with New Zealand versus Australia is that the broking industry in Australia is not as strong in the personal insurance market. In New Zealand, brokers still have a larger share of that market and a number of brokers do quite well with personal insurance. The industry at the moment is in a pretty interesting place and going through a number of cycles. It’s fairly clear that things are going to change in the next few years.” 48
WHEN I STARTED, INSURANCE BROKERS DEALT WITH THE VERY LARGE AND THE VERY SPECIAL. A LOT OF BUSINESS WAS SOLD DIRECT TO CUSTOMERS BY INSURANCE COMPANIES USING AGENCY SYSTEMS. IT’S GONE FROM THAT TO THE INSURER WITH THE BALANCE SHEET BEING ALMOST INVISIBLE TO THE END CONSUMER. The big insurers were still picking up the pieces after the Canterbury earthquakes, he said. “I think New Zealand needs a strong primary insurer market. A lot of that is now consolidated under the IAG banner. IAG and Vero are still working through the Christchurch response. When new players, or those who weren’t exposed to Christchurch, come in with a different set of offers... Brokers have to think: How do we support primary insurers while not exposing ourselves when others come along who can offer different solutions and aren't still paying those costs in the background?” He said, although regulation had become tougher, it was easier for foreign insurance firms to set up in New Zealand now, because of the advances in technology and communications. The Christchurch earthquakes were an insured event like no other in history, he
said, and it would take time to work through the consequences of that. “It is reported that most claims will be finalised by 2015. Will that be achieved? I think the bulk of it will be. But the longer things take, the harder they are, the more they cost. The fall-out will take time.” Aitken said he would miss the people he had worked with at Vero and the process of doing business, making things work. He would not rule out a return to the insurance industry eventually. “Never say never.” He said he would recommend the industry as an option to young people considering their futures. “It has a lot to offer at a lot of levels. There’s been a bit of a gap and that gives an opportunity for young people coming into the business.”
FCSL CASE STUDY
Travel insurance – holiday cancellation A
fire on board an Ethiopian Airlines plane at Heathrow airport on July 13, 2013 caused disruption to travel in and out of the airport. Sally and her friend Martha had prebooked flights from Edinburgh to Heathrow with an onwards flight to Oslo that day. Sally and Martha were due to head off on a tour of Norway departing on July 14. The women then had pre-booked flights for July 21 from Oslo to Heathrow and onward flights from Heathrow to Auckland. The fire caused widespread flight delays and cancellations. Having made it late to Heathrow and without any way to make the start of the Norway tour, Sally and Martha cancelled their trip to Norway. This meant they were in London with no pre-booked travel to New Zealand until July 21. THE FIRST-CLASS TICKET Sally and Martha’s airline provided them one night’s accommodation on July 13 in London. When the women returned to Heathrow on July 14 they could not get any economy flights home and said they were having trouble finding accommodation. This was because of all the other people whose travel had been affected and because of other popular events in and around London being held at the time. Sally contacted her travel insurer. Sally was told by the insurer that she was entitled to $200 for the first six hours of delay and $200 for any full 24-hour period after that (which would have been $1800 for the nine- day period until her pre-booked flights on July 21). Sally said that her travel insurer was not very helpful in assisting her to make alternative arrangements. Sally and Martha were advised at 9pm on July 14that there were two first-class tickets available that night for a flight at 10:05pm. Sally purchased one of the tickets, costing $8800. Sally did not seek her travel insurer’s pre-approval for the purchase of the ticket. THE COMPLAINT Sally claimed the cost of the first-class flight as well as the cost of the cancelled Norway trip, the Oslo/London flights, the pre-booked flights
from London to New Zealand which she did not use, and some additional costs for travel in London after the disruption to her flights. Sally’s travel insurer paid all the costs claimed except the first-class ticket and the additional London travel costs. Sally complained to FSCL that the insurer had incorrectly declined to cover these costs FSCL REVIEW We agreed with the insurer that the cost of the first-class ticket should not be covered. Our key consideration was the section of the insurance policy which said that the insurer would reimburse reasonable additional accommodation and travel expense if a journey was disrupted. Sally’s travel agent gave her information after she returned to New Zealand that the cost of accommodation, food and transport to stay in London until July 21 would have been around $6000.
We considered that a person in Sally’s position may have expected to incur costs of approximately $4200 to stay in London through to July 21, ($6000 less the $1800 the insurer indicated Sally would be entitled to). The amount of $4200 was considerably less than the cost of the first-class ticket. On this basis, we considered that the cost of the firstclass ticket was an unreasonable expense. As Sally had not satisfied the insurance policy terms, there could be no cover for the first-class ticket cost. OUTCOME We recognised that if Sally had stayed in London she would have incurred some costs. We asked the insurer to make an ex-gratia payment of $450, plus pay the claim for the $50 additional travel expenses in London which were reasonably incurred. The parties agreed to settle the complaint by way of a $500 payment from the insurer. www.covernotemag.co.nz
ISO CASE STUDY
House insurance – Canterbury earthquake
r and Mrs Smith’s* home was damaged in the Canterbury earthquakes. It was in the red zone and assessed as a rebuild. The insurer, ABC*, costed the rebuild at $390,311, but the Smith’s quantity surveyor, Bill*, costed it at $638,414. On the basis of Bill’s report the Smiths challenged ABC’s rebuild costings. ABC revised its rebuild costings to $409,319. The ISO Scheme case manager aimed to resolve the complaint through mediation to reach an agreed outcome. The Smiths were under significant financial pressure. Their bank would not agree to assign the mortgage, as required to complete the CERA red zone offer, without the insurance claim being resolved. CERA advised the Smiths they were in default under the agreement to buy their land, and CERA reserved the right to charge penalty interest or issue a settlement notice. The Smiths took out a bridging loan to purchase a new house, as they could not live in the property. Their mortgage lender was threatening to foreclose on that mortgage. The Smiths faced bankruptcy. On September 16, 2013, after attempting to resolve the severe financial
THE SMITHS TOOK OUT A BRIDGING LOAN TO PURCHASE A NEW HOUSE, AS THEY COULD NOT LIVE IN THE PROPERTY. THEIR MORTGAGE LENDER WAS THREATENING TO FORECLOSE ON THAT MORTGAGE. THE SMITHS FACED BANKRUPTCY.
pressure on the Smiths by agreement with ABC, the case manager issued an interim decision requiring ABC to pay a lump sum directly to the Smiths equal to the costs for which it had acknowledged liability. The case manager reviewed Bill’s rebuild estimate and identified items that were out of scope under the policy and ABC’s quantity surveyor identified the items that he thought were out of scope or unreasonable. On September 27, 2013, the case manager facilitated a meeting between ABC, the Smiths and Bill to discuss the differences between ABC’s and Bill’s rebuild estimates. Many of the differences between the two rebuild costings were resolved at the meeting. Discussions between ABC, the Smiths and Bill continued. ABC revised its costings and, on December 20, 2013, ABC provided the Smiths with a final costing. On January 21, 2014, the Smiths agreed to settle the complaint on the basis of the final costing. Complaint settled *not their real names
othbury Insurance Brokers has bought a stake in Wilkinson’s Insurance Brokers. The new partnership began on July 1. Nigel Smith and Conrad and Julie Shanly will continue as shareholders. “We were looking for ways to continue to accelerate our growth and partnering with Rothbury, who are New Zealand’s fourthlargest broker, will provide a platform to focus on growth opportunities,” general manager Conrad Shanly said. He said Wilkinson’s and Rothbury shared a client-focussed approach. Wilkinson’s is based in Wellington with a team of 18. It will remain a standalone operation but will take on
Rothbury branding. As Rothbury’s 15th broking branch, Wilkinson’s will increase its nationwide capacity. It brings the number of Rothbury staff to 220. Rothbury Insurance Brokers managing director Roger Abel said: “Rothbury has been focusing on a number of growth opportunities including expanding our corporate capability. This partnership is great news for our future growth and an exciting time for the business. We are looking forward to working with the Wilkinson’s team, and I firmly believe this partnership will be hugely beneficial to both businesses.”
LEGAL CASE STUDY
Are you on top of the increased liability exposure facing your clients later this year? By Crossley Gates, DLA Phillips Fox
n early December 2014 an amendment to the Sentencing Act 2002 comes into force. Think this hasn’t got anything to do with insurance? Think again. In the 1980s the criminal law added a civil remedy at the end of criminal trials to fasttrack compensation to victims of crime. If an accused was convicted, the court had the power to not only punish the offender, but also order the offender to pay civil compensation to the victim for the emotional harm (not covered by ACC) and/or property damage suffered by the victim arising from the crime. If the offender was convicted of wilful damage (vandalism), he or she would not only be fined or worse, but be ordered to pay the victim the cost of repairing the damage. This order was called a reparation order. It had the status of a civil judgment and could be enforced in the same way as a civil judgment. The court was obliged to take into account the offender’s ability to pay. Therefore, the order was not necessarily for the total cost of the repairs or was sometimes not ordered at all, if the offender had no ability to pay as assessed by the court. This power of the courts led to the slightly strange situation of a criminal court entering a civil judgment against the offender in the course of the criminal process.
Now fast-forward to 2002 when the Sentencing Act 2002 was passed. This Act incorporated the same powers referred to above in an Act that reformed the whole law of sentencing of offenders. What was previously called an order of reparation became a sentence of reparation. The Sentencing Act 2002 also addressed the issue of the interface between sentences of reparation and ACC. You will recall that ACC contains a statute bar against any civil proceedings directly or indirectly connected with personal injury by accident covered by ACC. In other words, if your personal injury is covered by ACC you cannot sue the party responsible for your injury. Unfortunately, the section in the Sentencing Act 2002 addressing this statute bar was ambiguously drafted. It could be read two ways. It either prohibited sentences of reparation in relation to personal injuries covered by ACC to any extent (consistent with the ACC legislation) or it only prohibited them to the extent of the ACC cover. In other words, a sentence of reparation could top up the ACC entitlement to whatever the common-law allowed as damages. After a district court judge clearly topped up a victim’s ACC entitlement in a sentence of reparation, DLA Phillips Fox was instructed by the insurer who insured the offender (arising out of a motor vehicle accident) to appeal the sentence as being contrary to the Sentencing Act 2002 and contrary to the whole scheme of the ACC legislation. After losing in the High Court and the Court of Appeal, we were eventually successful in the Supreme Court. The Supreme Court held that the section was to be interpreted as prohibiting the topping up of ACC. The Sentencing Act 2002 was amended earlier this year. In an example of the supremacy of Parliament, the ambiguous section was amended to make it clear that a sentence of reparation can top up ACC entitlements. In other words, it legislated to overturn the Supreme Court decision. We view this as an unprincipled reform. This amendment will result in a two-tier
compensation system in New Zealand. The victim of a negligent party who has committed no crime cannot sue that party for a top-up of his or her ACC entitlement. However, the victim of a criminal offender can. We struggle to see a good reason for this distinction. In our view, it is the beginning of the end of the ACC system. However, that is another story. What this means is that a person convicted of a crime faces the prospect of a sentence of reparation that tops up the victim’s ACC entitlement. Where the victim suffers serious permanent disabilities the potential difference between the ACC entitlements and commonlaw damages could be significant. Of course, many crimes involve deliberate personal injury or property damage. Therefore the perpetrator’s liability (through a sentence of reparation) for the injury/damage will never be covered under any insurance policy. But there are two areas, in particular, where coverage will potentially be available. The first is a Statutory Liability Policy that covers reparation sentences as well as fines. As most of the offences covered under this policy are strict liability offences, they can be committed accidentally and the injury/damage that results is equally accidental. The large exposure here will be convictions under the Health and Safety in Employment Act. The second is motor vehicle policies. While the traffic offence may be deliberate, the consequences of it usually aren’t. So, victims of motor vehicles accidents will be free to seek sentences of reparation that top up their ACC entitlements for their injuries. As sentences of reparation are, effectively, civil judgments, they are potentially covered under section two of a motor vehicle policy. It is important to remember that this exposure only arises though sentences of reparation made under the Sentencing Act 2002. In other words, unless the author of the injury/damage is convicted of a criminal offence, this exposure to ACC top-ups does not arise. The change in the law comes into force on December 6. www.covernotemag.co.nz
Professional Development: Professional IQ College
Exiting a business is like growing a business
It needs planning: Succession planning Get the free e-book on A Strategic Guide to Exiting Your Business
ou have worked long and hard to build your business so you want to be wellrewarded for all that hard work. You’ve spent many a sleepless night worrying about whether you will be able to make payroll for the week. But you’ve now reached the stage in your life where you are looking at the next phase. It’s about you. Time to do all the things you’ve always wanted to do. It’s now payback time. So what do you do with your business? Putting your business under management or exiting it completely is one of the most important financial and emotional decisions you, as a business owner, will make. Whether you are looking to sell now or sometime in the future, your business needs to be in the best possible shape if you are to get what it is worth. Are you ready to step away from your business? Ask yourself: • Why am I selling? • Is the timing right? • Is my business in order? 52
You want to extract the value you have built in the business so you can do the things you’ve always dreamt about. Maybe that overseas trip, that place at the beach you’ve had your eye on, or just kicking back enjoying the grandkids. But will you get what your business is worth? And more importantly, is your business ready to market and sell? Even if you are looking to sell in the future have you identified the areas you have to work on now to be in the best position to extract the value? Whether you are looking to sell to a consolidator or to another independent, the principles are the same. • Do you have a sound customer base? • Do you have a strong revenue stream? • Do you have sound financial records? • Is the business owner-dependent? Also think about it from the buyer’s perspective. Why would anybody want to buy your business? Have the answer to “Why are you selling?” clearly worked out. That shows the buyer there is an
exciting opportunity for them. What is your point of difference? Remember if the business is dependent on you, this will affect the price a buyer would be willing to pay. As a broker you might not be looking to exit your business, but your client might be looking to get out of theirs. How do you help them make a smooth transition so they refer you to the buyer of their business and keep you if they move to another business? If your client is looking to exit their business, it is an ideal time for you to add value to the relationship. There are many aspects to selling a business or transitioning it to staff. If you want a no-obligation discussion about how we can help make you client’s exit smooth and deliver the value for them, give us a call. We have a specialist team who can help you and your client. If you or your client would like the free e-book A Strategic Guide to Exiting Your Business contact email@example.com
Lesley Southwick, Principal
ast year we introduced the Fast-Track Programme for the National Certificate Level Five. This has been an outstanding success and all the hard work of the 80-odd students who enrolled is now coming to fruition. We have 10 students who have completed the whole qualification so far this year. Well done to you all. It is getting to that time of the year where you all need to be looking at your CPD points and ensuring your training is up-to-date. We are continually developing new short courses and have recently developed the Insurance Process and Policy Construction course.The purpose of this course is to provide an understanding of the basic parts of an insurance policy, and the implications of those parts on the application of cover. Once the purposes of the individual parts of an insurance policy are understood, the policy document can be more readily interpreted. This module assists in giving a broker a toolbox to identify what type of cover, and from which provider, is appropriate for a client’s needs in a particular class of risk.
A Strategic Framework For Business Growth In this overview workshop
IT IS GETTING TO THAT TIME OF THE YEAR WHERE YOU ALL NEED TO BE LOOKING AT YOUR CPD POINTS AND ENSURING YOUR TRAINING IS UP-TO-DATE. In-House CPD Programmes I have had some inquiries for in-house programmes for professional development. We can put together a programme for your staff so they can meet their professional development needs. If there is only one or two of you, team up with other brokers in your region and get a group together so we can come to you. If there are 10 of you in one place, we will bring the workshop to you. We can look at cost-effective pricing so give me a call to discuss and get your people their CPD points. New Workshops We are always trying to develop new and topical workshops. This quarter we are also planning to run more workshops regionally, so make sure you keep track of the upcoming workshops on our site Watch the website for our up-and-coming workshops. http://professionaliq.co.nz/Workshops--Upcoming/6568/ Cybercrime Insurance is a new workshop we are running in September and October. We are also partnering with the Insurance and Saving Ombudsman to deliver a couple of workshops on non-disclosure (a case study) and common complaints and how to avoid them. Personal branding is really important for brokers and any financial adviser. We are developing personal branding and digital marketing workshops that will be very relevant to brokers. Our senior tutor Sophie is running a business writing workshop around the country. Business writing will ensure your customers understand what they are reading. Get a group together to do the business writing courses in your region. Contact Sophie for more information firstname.lastname@example.org
Professional you will learn the key elements to growing a sustainable business. Gain an understanding of the factors that can enable you to make more money and have time for yourself. College You will hear: • Five elements to success • Some key insights to marketing that you may not know • The key elements impacting business today • The fundamentals of strategy • How culture can impact profitability by as much as 189% • and much more. This two-hour workshop on July 3, from 6pm, is designed to help you identify the gaps in your business and give clarity around the actions you need to take to grow your business. You will have the opportunity to meet other likeminded business-owners and learn from them. Gain ideas that can immediately be implemented and have a positive impact on your business.
The success of your business is dependent on the decisions and actions you take today. Sign up for this information packed workshop today. www.professionaliq.co.nz
Professional Development: Professional IQ College
Let’s celebrate success
ith the success of the Fast-Track Programme for the Level Five National Certificate in Financial Services each quarter, we will highlight the students who have completed their qualification. This year we have seen the following students work hard and finished their qualification.Well done and congratulations.Thanks to the managers and business owners who have supported our students to completion. Arjun Sharma from FundA Insurance Brokers Ltd Benjamin Rickard from CBA Insurance Ltd Bernard Kane from Meridian General Insurance Brokers Lisa McLeod from Meridian General Insurance Brokers Mark Hurren from Meridian General Insurance Brokers Poliko Lilo from Money Shop Group Ltd Stephen Wood from Rothbury Rainer Stewart from Youi The Level Four National Certificate in Financial Services has also had four completions this year. With the advent of the new Level Four NZ Certificate in Financial Services we stopped delivering the old qualification and transferred some students to the Level Five or the new qualification. Congratulations to these students who have completed the Level Four qualification. Jo Claydon from Crombie Lockwood Jody Brunt from Instant Finance
Patricia Hickey Edward Ruys & C Ltd Bronwyn Daines from Share NZ In addition to this, we have had 26 students complete Set B and nine complete Set C. These are the compliance sets and probably the most difficult sets in the Level Five.
New qualifications available
hen NZQA mandated the review of all qualifications on the NZ framework nobody really envisaged the magnitude of the changes to come. For financial services and the insurance sector, the first of the changes has just been completed. The change from National Certificate to New Zealand Certificate is primarily a name change. However the qualification itself has significant changes and is now, as we say in education, much more “fit for purpose”. Suitable for new insurance brokers, administrators, bank tellers, bank customer service representatives, bank and claims call centre staff, claims staff and broker support staff, New Zealand Certificate in Financial Services L4 is an introduction to the financial services industry. We have developed the Level Four certificate into five easy-to-follow modules. Three modules are compulsory, with a choice of an insurance or banking elective. The programme covers an overview of the financial services environment and sectors, an introduction to the regulations and the legislation, an overview and application of the 54
advice process in relation to client needs and how to build good client relationships. The insurance elective gives an overview of products and services and what risk is. The banking elective gives an overview of the banking sector products and services, including the lending process and account structures. While the new qualification is significantly longer at 60 credits, it is much more relevant than previously. Module 1 - Financial Services Environment in New Zealand (NZQA 15 Credits) Module 2 - Application of Regulatory Responsibilities (NZQA 15 Credits) Module 3 - Financial Products and Services for Clients (NZQA 20 Credits) Elective: Choose one of the following Module 4 - Banking Industry in New Zealand (NZQA 10 Credits) Module 5 - Insurance Industry in New Zealand (NZQA 10 Credits) Enrol today for the introductory price of $1950inc gst for IBANZ Members Contact Sophie Kowalewski to discuss or enrol online at www.professionaliq.co.nz
SUITABLE FOR NEW INSURANCE BROKERS, ADMINISTRATORS, BANK TELLERS, BANK CUSTOMER SERVICE REPRESENTATIVES, BANK AND CLAIMS CALL CENTRE STAFF, CLAIMS STAFF, BROKER SUPPORT STAFF, NEW ZEALAND CERTIFICATE IN FINANCIAL SERVICES L4 IS AN INTRODUCTION TO THE FINANCIAL SERVICES INDUSTRY.
WORKSHOP SCHEDULE Check the professional IQ College Website for more details and new Workshops www.professionaliq.co.nz SEPTEMBER Date
Contract works- Residential and Small commercial
1.00-3.00pm Kingsgate Whangarei
This course covers both the theory and practice of Contract Works Insurance and provides a broad but detailed overview of the industry and its component parts, players and products. You will gain a good grounding in how to understand and provide Contract Works Insurance related financial adviser services to clients, and how to select the appropriate Contract Works Insurance products based on the needs of a particular contract.
Business Writing- Minutes Reports and Executive Summaries
9.30-12.30 PIQ College Auckland Webinar
Report writing can be made easier than you ever thought it could be - all you need are the skills to develop the ability that you already possess (but maybe don't know about). If you have to write reports, minutes and executive summaries, this workshop will give you hints and tips that inspire the confidence you need.
Contract Works mediumLarge Projects
1.00-3.00pm ATCANZ Training Centre 10 De Havilland Way Christchurch Airport
Contracts 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 experienced contract works specialist this is a must for anyone who has clients who manage medium to large construction projects.
9.30-10.30 PIQ College Auckland Webinar
Essential for all Insurance Professionals dealing with Liability Insurance; this Employment Disputes workshop is part of PIQ's Liability Insurance series. Employment related disputes are a significant and frequent problem for many New Zealand businesses that regularly contribute to insurers loss ratios.
Build me an Insurance Program
1.00-3.00pm Rosebank Lodge 265 Clyde Street Balclutha
What should an insurance programme look like? What types of Cover, whose policies best suit the client situation, how do you know what is best for the client? This interactive workshop starts with a clean sheet of paper and builds an insurance programme from scratch for a given situation. Working in groups you will discuss what cover is appropriate for the situation. So come prepared to discuss and learn whether you are a junior or intermediate broker this workshop will help accelerate your career.
9.30-12.30 Kingsgate Hotel Whangarei 9 Riverside Drive Whangarei Developing Great Commercial Negotiation Skills
9.00-4.30 PIQ College Auckland
Negotiation is a vital skill for insurance and financial professionals. Focusing on the positional bargaining and interest-based models of negotiation, successful completion of this FSCL Negotiation Workshop will enable participants to develop effective negotiation skills to use every day.
Dispute Resolution- Process and Skills
9.30-12.30 PIQ College Auckland
This workshop provides knowledge of in-house and appropriate external dispute resolution services for the financial services industry; This workshop includes: Discussion on the need for in-house and external dispute resolution services; Analysis of potential disputes within the financial services industry; Investigation of legitimate disputes and determining the appropriate action; Implementation of the appropriate action in response to a legitimate dispute within the financial services industry.
CONTACTS: IBANZ CORPORATE COMPANY LIST
COLLEGE BOARD 2013/2014
IBANZ BOARD 2013/ 2014
Richard Russell (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
Tony Butson Rothbury Group Limited PO Box 1120 Queenstown 9348 Mob: 021 332 605 email@example.com
North Shore City 0757 Tel: 09 477 0277 Fax: 09 478 0277 Mob: 021 707 025 firstname.lastname@example.org
Tony Bridgman (Vice President) Executive Director Marsh Ltd PO Box 2221 Auckland 1140 Tel: 09 928 3015 Fax: 09 309 9891 Mob: 021 873 399 email@example.com
Ruth Steele Brokerage Manager Seneca Group Ltd PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Fax: 09 4761679 Mob: 021 590 698 firstname.lastname@example.org Gary Young CEO IBANZ PO Box 7053 Wellesley Street Auckland 1141 DDI: 09 306 1734 Fax: 09 307 0960 Mob: 027 543 0650 email@example.com
David Crawford Chief Executive Officer Insurance Advisernet NZ Ltd PO Box 74557 Market Road Auckland 1051 Tel: 09 926 2062 Fax: 09 524 2226 Mob: 021 905 537 davidc@insuranceadvisernet. co.nz
Duane Duggan (President) Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West Auckland Tel: 09 3574805 Fax: 09 623 9901 Mob: 021 833 286 duane.duggan@crombielock wood.co.nz
Nick Cressey (Immediate Past President) Director Aon New Zealand PO Box 305019 Triton Plaza
Peter Lowe General Manager NZ Willis New Zealand Ltd PO Box 369 Auckland 1140 Tel: 09 356 9368
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 firstname.lastname@example.org CONFLICTED
TO ADVERTISE... Contact Robert Johnson on: e-Mail: email@example.com Phone: 09-477 4702 Mobile: 0274-970-712
Next issue is due out:
? HOW TO MAN
September / October 2014
AGE YOUR OBL
TY'S INSURANCE POLICY GETS YOUR VOTE?
Ruth Steele (Vice President) Brokerage Manager Seneca Group Ltd PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Fax: 09 4761679 Mob: 021 590 698 firstname.lastname@example.org
Gary Young CEO DDI: 09 306 1734 Fax: 09 307 0960 Mob: 027 543 0650 email@example.com
Lesley Southwick Principal Professional IQ College DDI: 09 306 1735 Fax: 09 307 0960 Mob: 027 459 9804 firstname.lastname@example.org
Robyn Gosden Finance & Office Manager DDI: 09 306 1733 Mob: 027 275 2477 email@example.com
Sophie Kowalewski Academic Co-Ordinator DDI: 09 306 1737 Fax: 09 307 0960 firstname.lastname@example.org
Karen Scard Membership & Secretarial Support DDI: 09 306 1738 Fax: 09 307 0960 email@example.com
Steve Wardley Technical Support DDI: 09 306 1736 Fax: 09 307 0960 firstname.lastname@example.org
Annual IBANZ get ahead of theForum, game…
Jason Smith Managing Director Property & Commercial Insurance Brokers PO Box 4 Feilding 4740 Tel: 06 323 8820 Fax: 06 323 8872 Mob: 027 293 8724 email@example.com
POLITICIANS WEIGH IN ON INSURANCE WHICH PAR
Stuart Speirs Director Abbott Group PO Box 3086 Christchurch 8011 Tel: 03 366 7536 Fax: 03 379 5395 Mob: 021 358341
IBANZ STAFF 2013/2014
WANT YOUR VERY OWN COPY OF
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.
Allan Daly Managing Director Avon Insurance Brokers PO Box 3923 Christchurch Mail Centre Christchurch 8140 Tel: 03 3710301 Fax: 03 3666589 Mob: 0275 358128 firstname.lastname@example.org
Fax: 03 358 3343 Mob: 021 909 148 email@example.com
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
CONTACTS: IBANZ CORPORATE COMPANY LIST
IBANZ CORPORATE COMPANY LIST Abbott Group Adams Trimmer Insurance 1992 Ltd Adams Trimmer Nauman Insurance Ltd Addex Ltd Advice First Limited Affiliated Insurance Brokers Ltd AJIB Insurance Brokers Ltd Albany Insurance Services Ltd Allfinanz Risk (T/A CFS RIsk Services Ltd) Andrew Scragg & Associates AMP Services (NZ) Ltd Aon New Zealand Apex General Ltd API Insurance Ascot Insurance Brokers Ltd Atlas Insurance Brokers Ltd Austinsure Ltd Avon Insurance Brokers Baileys Insurance Brokers Ltd Barley Insurances Limited Bay Insurance Brokers Ltd Benson Insurance Brokers Ltd Benton & Power Ltd Bill Boyd & Associates Ltd Boston Marks Group Ltd Bridges Insurance Services Limited Broker Direct Services Ltd BrokerWeb Risk Services (Auckland) Limited BrokerWeb Risk Services (Bay of Plenty) Ltd BrokerWeb Risk Services (Hawkes Bay) Ltd BrokerWeb Risk Services (Manawatu) Ltd BrokerWeb Risk Services (Northland) Ltd BrokerWeb Risk Services (Southern) Ltd Card Marketing International Ltd Cartwright General Insurance Limited CBA Insurances Limited Certus Insurance Brokers NZ Ltd Commercial & Rural Insurance Brokers Ltd Crombie Lockwood (NZ) Ltd Dawson Ins. Brokers (Whakatane) Ltd Dawson Insurance Brokers (Rotorua) Ltd Edward Ruys & Co Ltd Elders Insurance Limited Emerre & Hathaway Insurances Limited Executive Insurance Services Ltd FundAGroup Insurance Brokers Limited Future Agency Co. NZ Ltd Glenn Stone Insurance Limited Graeme England Insurance Services Ltd Grayson & Associates Ltd Gregan & Company Ltd Harden & Hart Insurances Ltd Hawke’s Bay Insurances Ltd Hazlett Rural Insurance Limited Hugh Vercoe and Associates Ltd Hurford Parker Insurance Brokers Ltd Hutchison Rodway Ltd I C Frith (NZ) Ltd i2i Insurance Brokers Ltd Ian K Everett Ltd ICIB Limited ILG Insurance Brokers Inbroke Ltd Ingerson Insurances Ltd Insite Insurance Insurance Advisernet NZ Ltd Insurance Brokers Alliance Ltd Insurance Design Insurance People (Fire & General) Limited Iremonger Insurance Brokers Limited
Christchurch Whangarei Dargaville North Shore City Wellington Wellington Lower Hutt Albany Village Lower Hutt Manukau Auckland Auckland Auckland Manukau Whangarei Christchurch North Shore City Christchurch Auckland Waitakere Tauranga Christchurch Auckland Palmerston North Auckland Hamilton Christchurch Auckland Tauranga Napier Palmerston North Kerikeri Christchurch Wellington Ashburton Tauranga Auckland Alexandra Auckland Whakatane Rotorua Hamilton NULL Gisborne Auckland Auckland Auckland Waitakere Auckland Auckland Papakura Auckland Napier Christchurch Morrinsville Hastings Auckland Auckland Wellington Auckland Auckland North Shore City Auckland Wellington Pukekohe Auckland Invercargill Warkworth Auckland Auckland
Insurance Plus Thames JLT Holdings (NZ) Limited Auckland JRI Ltd New Plymouth Ken McNee Family Trust Christchurch Lifetime Group Ltd t/a/Lifetime Insurance Brokers Ltd Christchurch Lloyd East & Associates Insurance Brokers Ltd Auckland Lowe Schollum & Jones Ltd Hamilton Luxor Insurance Brokers Ltd Auckland MA Risk Solutions NZ Limited Auckland Mainprice King Chartered Brokers Ltd Auckland Malcolm Flowers Insurances Ltd Taupo Marsh Ltd Auckland Matt Jensen Insurance Brokers Ltd Taupo McDonald Everest Insurance Brokers Ltd New Plymouth Mike Henry Insurance Brokers Limited Auckland Montage General Insurance Ltd Auckland Multisure Ltd Auckland Nelson Bays Insurance Brokers Ltd (NIB) Nelson Neville Newcomb Insurance Brokers Ltd Auckland Nexus Insurance Brokers Ltd Auckland North Harbour Ins Services (1985) Ltd incl Northsure Group Limited Orewa Northco Insurance Brokers Ltd Masterton Northcrest Insurance Brokers Ltd Auckland Oamaru Insurance Brokers Oamaru O’Connor Warren Insurance Brokers Tauranga OFS Insurance Brokers Ltd Dunedin Omni Fire & General Ltd Auckland Paramount Insurance Agencies Ltd Auckland Paterson & Co NZ Ltd Auckland Penberthy Insurance Ltd Auckland Peter C Cranshaw Insurance Broker Ltd Levin PIC Insurance Brokers Ltd Manukau Primesure Brokers Ltd Auckland Property and Commercial Insurance Brokers Feilding Protekt Insurance Brokers 2008 Ltd Auckland Provincial Insurance Brokers Limited Masterton PSC Connect NZ Limited Auckland Pulsar Insurance Agency Auckland R.U. Covered Ltd Auckland Reid Manson Ltd Timaru River City Insurance Brokers 2000 Ltd Wanganui RMA General Ltd Warkworth Rosser Underwriting Ltd Waipukurau Rothbury Group Ltd Auckland Runacres & Asssociates Limited Christchurch Seneca Insurance Brokers Ltd Auckland Sit & Blake Limited Auckland Smith Pitman Insurances Ltd Wellington South Pacific Insurance Brokers Ltd Auckland Sweeney Townsend & Associates Ltd Rotorua Thames Valley Insurance Ltd Thames The Insurance Brokers Ltd Auckland The Stoneman Group Wanganui Thorner General Insurances Ltd Upper Hutt Towes Insurance Brokers Ltd Te Aroha Trevor Strong Ins Ltd Auckland Vision Insurance (S.I.) Ltd Ashburton Waikato Insurance Brokers Limited Hamilton Wallace McLean Ltd Auckland Wanganui Insurance Brokers Ltd Wanganui Wholesale Insurance Brokers Ltd Papakura Wilkinson Insurance Brokers Ltd Wellington Willis New Zealand Ltd Auckland Yesberg Insurance Services Ltd Christchurch
OUR POLICYHOLDERS ARE ANYTHING BUT RUN-OF-THE-MILL.
Our customers own unique, classic or prestige cars, motorcycles or travel in homes on wheels. They don’t fit neatly in a box which is why we don’t offer run-of-the-mill policies. Your customers will feel appreciated with customised policies that tick all their boxes. And you’ll appreciate our high performance team who are super-fast and easy to deal with. That’s because we have no apron strings. We’re fully autonomous in our no-fuss dealings with you. We write our own specialised, custom policies and terms, calculate rates, communicate one-on-one with you and pay claims quick-smart; all with a smile.
Call us for a friendly chat about quality, customised insurance you can trust.
Call us on 09 250 6009 or email firstname.lastname@example.org