CoverNote - December 2020 issue

December 2020

Cyber attacks and the insurance response New insurance boss navigating change Small brokers bullish about the future

visit www.covernote.co.nz and keep up-to-date with live news and articles from IBANZ, its members and the industry.

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Welcome

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Melanie Gorham CEO, IBANZ

A transformational year

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s another year hurtles by and, with the promise of a well-deserved break close at hand, I welcome you to the final edition of Covernote for 2020.

Much of my last three months and time with IBANZ has been consumed by the new financial advice regime. Tim Williams and I have now finished the 10 regime seminars to members around New Zealand. The slides and a recording of a session are available on our website, as are links to related information which should be useful.

The increasing level of engagement and questions throughout the presentations has been positive. Whether you are a financial advice provider or a financial adviser, we have endeavoured to provide greater clarity about the obligations, duties, requirements and timings on members. We have also stressed the absolute need to obtain a transitional licence now if you wish to operate from March 15, 2021.

There are a number of aspects that seem to be key take outs for attendees which include the duties, stages and ways in which disclosure (which takes in fee, incentive and commission values) must be given and that the new regime is not limited to retail clients. Two examples that apply to retail and wholesale clients are prioritising their interests and exercising the required care, diligence and skill.

From creating new disclosure statements to updating websites, understanding licence conditions to reading the new code of professional conduct and reviewing duties, roles, processes, quality assurance programmes and oversight, a significant commitment is required now from everyone intending to continue to operate as a financial advice provider or financial adviser from March 15, 2021. Let’s not forget that all of this is being undertaken on top of business as usual during a year that has been anything but usual. You are all truly remarkable!

Turning to the pandemic. New Zealand, many Pacific Islands and increasingly Australia are (as I write) all in rather enviable positions, with most of enjoying a near-normal life. By comparison, much of the rest of the world seems to be facing a deterioration with stronger measures being brought in to try to regain control. Largely, the industry here has shown resilience with no widespread fall out from Covid-19 to date.

The insurance market continues to present challenges with increased losses and low returns impacting cost and availability of capacity. It seems unlikely this will improve any time soon as insurers review their offerings, wordings and pricing, all of which impact client’s coverage and add financial pressure. The experience, advice and role of their intermediary remains crucial, particularly against the current economic backdrop.

With the continuation of the Labour Government, whilst we have new ministers, the Contract Law Review and Insurance Prudential Supervision Act remain on the table as we head into a new year. There will also be other challenges to keep across in 2021 as you all navigate the new regime.

Thank you to all IBANZ members for your continued support of our professional association, it is greatly appreciated and we could not represent your interests nor those of your clients or the wider community without it.

I wish all of you the very best for the festive season. Have a wonderful, safe and relaxing time over the break and I look forward to working with you in 2021.

Melanie Gorham, CEO, IBANZ

Features 3. New boss for Suncorp 4. Customers no longer contact EQC for disaster claims 5. Allianz ponders pandemic cover 6. ­­­Cyber attacks hit close to home 9. Vero research reveals small businesses are confident about natural disaster resilience

10. Advisers told to take care with vulnerable clients 11. Northland storm costs insurers $37m 16. Humans of NZI: She came, she saw, and she conquered 20. What you can expect in insurance 18. COVER STORY: in 2021 Cyber attacks and the insurance response 22. ­­­Suncorp assessed remote-working future 23. Insurers investigate car parts questions 26. ­­­Landmark UK business interruption case 28. ­­­Brokerslink launches dedicated international platform to drive its 1. Welcome to 43. Professional network’s business portfolio CoverNote Development: 30. ­­­Insurer remedies for fraudulent claims 38. Ask an Expert Professional IQ 40. Market for D&O insurance hardest in College 44. IBANZ Contacts living memory 41. Delta signs international deal 42. Lloyd’s outlines pathway to clarity

Regulars

Profile 12. New insurance boss navigating change

Opinions 24. Financial Conduct Authority takes action on behalf of policy-holders

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COVERNOTE? December 2020

See page 44 for details on how you can have your very own copy delivered directly to your door...

HOT OFF THE PRESS!

Cyber att and the acks ins response urance New insura nce boss na vigating change Small bro about thekers bullish future

visit ww w.cove and kee rnote.c p news and up-to-date wit o.nz its mem articles fro h live m IBANZ, bers and the indu stry.

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New boss for Suncorp

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uncorp New Zealand has announced the appointment of Jimmy Higgins to the role of chief executive.

Higgins joined Suncorp Group in 2008 and has held a range of senior and executive positions across its Australian and New Zealand insurance businesses. Prior to being appointed acting chief executive of Suncorp New Zealand in July 2020, he held roles in the New Zealand business as chief financial officer and executive general manager, claims.

Before joining Suncorp, he was a chartered accountant specialising in audit and forensic accounting.

Suncorp Group chief executive Steve Johnston said Higgins was a highly experienced financial services executive with a deep understanding of the insurance industry and New Zealand insurance market.

“Jimmy has been a valuable member of Suncorp’s leadership team for many years and has made a strong contribution to the operational and financial strength of our New Zealand business.

“Since joining the group in 2008, he has worked across many aspects

of our insurance businesses and has been instrumental in leading our response for some of the worst natural events in our history, including the devastating Christchurch and Kaikoura earthquakes and 2011 Queensland floods.

“I’m confident Jimmy’s extensive insurance experience and contribution to wider industry position him well to build on the strong momentum in our New Zealand business.”

David Flacks, chair of Suncorp’s New Zealand boards, said the appointment of an internal candidate to the CEO position demonstrated the calibre of talent in Suncorp’s team.

“In what has been a year like no other, Jimmy’s leadership, experience and knowledge of the business have been real assets and will enable Suncorp to continuously improve the experience and outcomes it offers to customers.”

Higgins said he was honoured to lead the New Zealand business during a time of significant disruption, change and opportunity.

“Our business is uniquely positioned to make a difference in the lives of Kiwis and I’ve always felt very proud to be a part of that.

“Suncorp New Zealand has gone from strength to strength in recent years and I’m excited to lead a team of truly passionate people as we shape our business for the future and continue to deliver more for our customers and intermediary partners.”

Suncorp New Zealand includes the Vero and Asteron Life brands, as well as AA Insurance, AA Life and AA Money in partnership with the New Zealand Automobile Association.

See our Profile feature on page 12

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Customers no longer contact EQC for disaster claims

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he Earthquake Commission (EQC) and private insurers say a new partnership will provide an improved, more collaborative approach to supporting New Zealanders through natural disasters in the future.

Under the new partnership, from the second quarter of 2021 anyone with home insurance whose home or land is damaged in a natural disaster will only need to lodge one claim through their private insurer.

“These arrangements will ensure that customers can deal with their insurer who will assess, manage and settle their claim,” said Tim Grafton, chief executive of the Insurance Council of New Zealand. “This will ensure a more effective and efficient response, delivering simplicity and certainty for customers during a very stressful time.

“Customers must always come first and developing these arrangements in partnership with EQC will ensure New Zealand has one of the best natural disaster response platforms in the world,” he said.

Eight private insurance companies - AA Insurance, Chubb, FMG, Ando (Hollard), IAG, MAS, Vero and Tower – have worked with EQC on the partnership model, with a singular focus on improved customer outcomes.

EQC chief executive Sid Miller said the partnership built on the model used following the Kaikõura earthquake, and more recently in responding to the Northland floods in August.

“The response to the Canterbury earthquakes highlighted that New Zealand’s dual insurance system meant customers had to make two claims – one to EQC up to a capped level of the damage and the other to their private insurer for top-up cover losses.This was inefficient and frustrating for our customers.”

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December 2020

Under the new agreements, private insurers will manage the total claim, including the EQC portion up to the statutory capped level of damage and then any claim under their private insurance to cover additional losses up to their sum insured. Under the partnership, insurers will also provide data to EQC about where insured homes are located, so EQC can better model its exposure to natural hazards.

Miller said the new approach built on the findings from the Government’s Public Inquiry into EQC, as well as the lessons learned from the Canterbury and Kaikõura earthquakes, to benefit all New Zealanders for the future.

“We know that EQC cannot respond to a large natural hazard event alone, and this new partnership will streamline the insurance process and ensure we make best use of existing sector capability and expertise to meet the needs of New Zealanders when the next natural disaster occurs. Once set up, it will double our capacity to manage claims from a natural disaster.

“This much improved customer experience, improved data sharing, and increased claims capacity is a milestone for improving our readiness to deal with future natural hazard events.

“If a natural disaster event occurred before the new model commences, we would respond in the same way we currently do and for any large event, the intention would be to use a similar response model to that used for the Kaikoura earthquakes.”

The new model is expected to be in place from the second quarter of 2021 and EQC is now working with individual insurers to satisfy requirements needed for the model.

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Allianz ponders pandemic cover A

llianz Partners New Zealand is developing selected cover for epidemic and pandemic diseases, including Covid-19, as domestic travel plans increase and travellers keep an eye on future border openings for international travel.

The cover offers travellers the provision to claim for cancellation and medical expenses, should they contract an epidemic or pandemic disease such as Covid-19 after purchasing their domestic travel policy.

Chief sales officer David Wallace said all providers in the travel industry were reassessing the role they played in a post Covid-19 world. When it comes to travel insurance, Wallace said it was important to adapt to meet customers’ needs now and in the future.

“Being part of a world leader in insurance and assistance, we need to play our part in providing confidence and security for travellers. Covid-19 has demonstrated just how big an impact infectious diseases can have on travel. We’ll be progressively releasing new policy wordings that have a more considered approach to epidemic and pandemic diseases, starting with selected domestic policies from the end of October 2020,” he said.

While there would still be a general exclusion for epidemics and pandemics, there would be provision to claim for cancellation if travellers contracted an epidemic or pandemic disease such as Covid-19 after purchasing their policy and could no longer travel. Cover for medical claims directly related to an epidemic or pandemic disease such as Covid-19 would only apply after travellers commenced their journey.

“We will soon be able to offer customers more assurance up front, so they can book their trip knowing that there will be provision to claim for cancellation, should they contract Covid-19 and can longer travel. If travellers who have purchased a policy with this new feature contract Covid-19 during their journey, they will have the support of our emergency assistance around the clock, any day of the week,” he said.

As with any travel insurance, disinclination to travel due to fear or change of mind is not covered. It does not cover general travel disruption as a result of epidemic or pandemic diseases such as Covid-19, including government mandated lockdowns, and travelling against the New Zealand government’s advice not to travel.

Allianz Partners New Zealand is looking to progressively roll out the selected cover to partners, insurance brokers and travel agents who issue travel insurance on their behalf starting with selected domestic policies from the end of October 2020. www.covernote.co.nz

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CYBER ATTACKS HIT CLOSE TO HOME NZX hack a reminder that any business can fall victim.

By Angela Cuming

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020 has exposed our vulnerabilities in unexpected and worrying ways.

The ongoing Covid-19 crisis serves as a grim reminder that global pandemics are a real and recurring threat, while the recent cyberattacks on the New Zealand Stock Exchange (NZX) are a stark reminder that even supposedly secure organisations are anything but.

The effects of both will continue to be felt well after 2020 draws to a close, and insurance experts are warning that all businesses, big and small, need to take urgent steps to protect themselves from cyber-attacks.

IT CAN HAPPEN TO US Dan Lowe, cyber specialist and senior underwriter at Vero Liability, says the impact of the cyber-attacks in the NZX will be twofold: a greater awareness of such attacks and a greater scrutiny on Distributed Denial of Service (DDoS) attacks.

“First, a local example increases awareness of attacks occurring here in New Zealand and highlights that if the NZX isn’t immune to a cyberattack then no business is,” says Lowe.

“Secondly, like any major insurable event it will likely see insurers ask more questions on other organisations that may face similar exposure to DDos attacks.

“Standard market cyber insurance proposals won’t ask many questions around DDos mitigations implemented by a business, therefore the NZX attack may see insurers requesting additional underwriting information.”

Insurance Council of New Zealand chief executive Tim Grafton says the widespread coverage of the attacks “hopefully” helped to raise awareness of the threat cyberattacks present to all New Zealanders and businesses.

While there are steps everyone can take to minimise the impact of cyberattacks such as using a password manager and checking privacy settings, says Grafton, there is a concern that an estimated 90 per cent of small and medium businesses have no cyber insurance protection.

“A risk of the NZX attack is that it may reinforce the perception that cyber only affects large organisations when the opposite is actually true,” he says.

“In fact, SMEs are some of the most exposed and given their size often lack the resources and time to consider their risk and insurance needs and put in place good IT security measures.”

The risk is a dangerous one, says Grafton.

“The cost of an attack could be crippling,” he says, “especially if

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December 2020

they are dependent on online channels - that has only increased since Covid-19.”

John Moore, the financial lines manager and senior underwriter at Delta Insurance, says most Kiwi businesses are already aware of cyber risks like social engineering via phishing emails.

“But the NZX DDos attack and targeted ransomware attacks on Fisher & Paykel and Lion has really highlighted in the media that these attacks are a real exposure for New Zealand businesses,” he says.

“These attacks have definitely increased demand for cyber insurance quotes from New Zealand businesses.”

THE EMERGING MARKET Cyber security insurance is an emerging area in the market, both globally and here in New Zealand. But why?

Globally, the Covid-19 lockdowns have accelerated the transformation of the way people communicate and how many businesses operate permanently, says the ICNZ. “Digital platforms have come into their own supporting greater connectivity and more efficient and flexible working arrangements,” says Grafton.

But any change brings its own risks and a cyber risk looms larger than ever, he warns, with incidents rising sharply. He points out that for the first half of 2020 CERT NZ reported a 73 per cent increase in incident reports, with 3100 incidents equating to $7.8 million in financial losses.

But cyber insurance in New Zealand, relative to other parts of the world, is still in its infancy, says Vero Liability.

“It’s a growing portfolio but they the penetration rate remains low,” says Lowe.

“Many organisations still don’t believe they will be victims of an attack or are of the view that as they outsource their IT services to a third-party provider, they therefore don’t have cyber exposure.”

In overseas markets two big drivers of cyber insurance penetration have been regulatory change and contractual requirements, says Lowe.

Specifically, he says, regulatory change in respect to the introduction of data breach notification requirements has driven uptake.

“For instance, the General Data Protection Regulation (GDPR) in the European Union and the Data Breach Notification Scheme in Australia has increased cyber insurance demand,” says Lowe.

“The costs to notify affected parties in the event of a breach can be significant as can the fines for failure to comply with such legislation.

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“Secondly, supply chain contracts are inserting requirements for cyber insurance to be purchased,” Lowe adds.

“Before a supplier or customer is prepared to share data, for which they are ultimately responsible, they want contract certainty that the engaging party has cyber insurance.

“As a result, I think that cyber insurance will see increased market penetration in New Zealand with the introduction of the Privacy Reform and supply contracts inserting cyber insurance requirements as common place.”

ACCESS ALL AREAS So, what types of cyber security coverage can insurers offer?

Key elements to a cyber insurance policy cover business interruption, forensic investigation, data loss recovery, legal costs, and crisis management, with each responding to a unique part of the claim.

“Importantly insurers have cyber response teams that operate 24/7 and are ready to respond immediately in the event of an attack,” says Grafton.

“Once notified, insurers coordinate the appropriate response to the cyber incident, be it phishing, ransomware or data breach.”

An initial response may include forensic investigation of what information was stolen, how the attacker gained access to the system, and the extent of the damage, says Grafton, adding that policies will cover both damage to systems or if access is restricted as well as losses if the business is unable to operate.

One of the lesser-known responses provided by a cyber insurance policy is the provision of a public relations adviser, says Grafton “For some companies, the reputational damage caused by a cyberattack can be more damaging than the financial loss,” he says, “and having access to expert public relations will help address reputational losses.”

The big development to watch will be when privacy reform comes into effect here in New Zealand on December 1, says Vero Liability.

“With it comes mandatory notification in the event of a breach of personal data that has the potential to cause harm,” says Lowe.

“This means in the event of a data breach involving personal information you need to notify both the Office of the Privacy Commissioner and all the affected parties,” he says.

“The costs to notify in the event of a privacy breach and potentially any ID replacement or credit monitoring costs can be covered under a cyber insurance offering, policy wording and optional extensions

dependent.”

Lowe agrees with the ICNZ that one of the most valuable things obtained from cyber insurance is the panel of experts the insurer has in place to assist in investigating and responding to a cyber incident, which include IT forensics, legal and public relations firms.

“In the event of a breach insurers provide a 24/7 hotline which the insured can call to triage the breach and depending on the scale and nature of the breach engage these experts to assist in mitigating the impact,” says Lowe.

“With cyber breaches the ability to respond and recover quickly and effectively could be the difference for business survival.”

THE QUESTION OF COVID So, has Covid-19 heightened the risk of cyber-attacks and impacted the cyber security insurance sector?

Yes, say the experts, with the new normal of working from home a big factor.

“The impact of Covid-19, of course, has been that staff home computers are now part of the firm's IT system, which makes it a lot more vulnerable,” says Dr Michael Naylor, a senior lecturer in finance and insurance with Massey University's School of Economics and Finance.

The answer, says Naylor, is for firms to make sure each staff member’s home computer is included into the firm’s security system.

“Firms may even have to look at ensuring all staff have work laptops and phones and don't use other computers and phones,” he says.

“It seems obvious, but firms often don't,” Naylor adds.

Firms should be buying so-called "black phones"– phones based on the early work Blackberry systems where all data and communication are encrypted –to separate out work from personal communication, but don’t, says Naylor. ‘“Advisers need to be very aware that they hold confidential client info and any release of these could destroy their firm's reputation.”

Lowe agrees that working from home has increased the risk of cyberattacks in a post-pandemic world but says the underlying security gaps exploited through Covid-19 are not new.

“Attackers are still taking advantage of many of the same historical cybersecurity weaknesses,” says Lowe.

"As an example, most successful attacks we see still start from an organisation’s weakest cybersecurity link – their staff.

“This can include an employee clicking on a link in an email which www.covernote.co.nz

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releases malware, inadvertently handing over their login credentials providing network access to the attacker, or acting on a fraudulent instruction received from someone purporting to be their manager.”

Staff, therefore, remain the most exploited vulnerability but user awareness cybersecurity training is not as commonplace as it should be given that all staff form part of an organisation’s cybersecurity resilience, says Lowe.

An ever-increasing attack surface is not a new threat for organisations to deal with either, says Lowe.

“Reliance on technology solutions for organisations has been on the rapid rise for years and with continued digital transformation comes an ever-widening entry into an organisation for attackers,” he says.

“I’d argue Covid-19 hasn’t revealed any new threats, the threats remain the same: Credential harvesting; fraudulent impersonation; phishing scams; denial of service attacks; ransomware,” adds Lowe.

SINCE THE COVID-19 CRISIS TOOK OFF, PHISHING SCAMS HAVE SPIKED BY OVER 60 PER CENT ACCORDING TO THOSE MONITORING THE DARK WEB.

“Instead, the avenues in which attackers can deploy their existing tactics widened and many organisations became more vulnerable because of the pandemic.”

Laura Murray, the head of personal cyber at Delta Insurance, says “opportunistic cyber criminals” have used the pandemic to their advantage.

“Since the Covid-19 crisis took off, phishing scams have spiked by over 60% according to those monitoring the dark web,” says Murray.

This method of cyber-crime has increased for several reasons, she says.

“People are spending more time online in lockdown, they’re hungry for any information on Covid-19 and how to survive it, they are receiving a large volume of contact from banks and other businesses providing updates on their operating hours and Covid-19 responses, and people are away from their more protective work IT environment.

“As a result, individuals are more vulnerable to phishing and phishing attempts, especially those that purport to have valuable information, advice or warnings about the pandemic.”

The statistics paint a stark picture.

In 2019 there were almost 5000 cyber-security incidents in New Zealand, and these are only those that were reported to CERT NZ. The biggest proportion of the reports were phishing and credential-harvesting attacks, with a financial loss of almost $17 million.

For its part, the ICNZ says it has not collected any data that could say it is attributable to Covid-19.

“However, as we said, if businesses operate more from home environments, this may increase cyber risks for some,” says Grafton.

“And while we don’t have specific Covid-19 insights, the number of recent attacks we have seen that impacted Metservice, the Ruapehu ski field car park and a number of other organisations has hopefully reminded people that New Zealand is not immune to cyber-attacks. “ 8

December 2020

PREVENTION IS BETTER THAN A CURE Cyber threats and resilient technologies are continually evolving, requiring constant vigilance and the ability to adapt system controls in a risk-based manner.

On the question of what businesses can do to protect against cyberattacks, the ICNZ says it is not just a matter of transferring risk to insurers, but rather approaching them and answering their questions to highlight vulnerabilities and point to resilient solutions.

“Businesses must talk with their broker or adviser to ensure they fully understand the risks that they face, otherwise there could be a whole host of risks and liabilities that they aren’t covered for,” says Grafton.

Vero Liability recommends implementing basic cyber security hygiene to protect businesses, particularly SMEs, against cyberattacks.

“Attackers will often take the path of least resistance and a large number of the attacks we see still arise from a lack of basic hygiene,” says Lowe.

That meant thing like not installing the latest security updates (patching) made available by the software or systems vendor; no offsite backups or backups that are not regularly tested for assurance and completeness; no multiple factor authentication enabled; not restricting access rights to a need-to-do business basis only; not removing access rights for temporary or terminated staff; and not implementing user awareness training to assist staff in detecting and reporting suspicious emails, links or attachments.

“I also urge businesses to seek independent cybersecurity advice which is specific to their business and cybersecurity needs,” says Lowe.

“The most critical digital business assets or sensitive information is different for every business and no business has an unlimited cybersecurity budget.”

While cyber insurance continues to grow, it is not the answer, says Lowe.

“It should only form part of an overall risk management solution and a cybersecurity specialist can provide value in undertaking a cybersecurity audit, understanding your specific risks, and highlighting cybersecurity gaps,” he says.

“Their findings can then be used by business owners to assist in the decision of where to invest their cybersecurity budget and what risks can be avoided, mitigated, accepted and transferred.”

In the end, cyber insurance is post-loss rather than pre-loss risk management, says Lowe.

“It doesn’t deal with detection and prevention, and only forms a part of your overall response and recovery risk management,” he says.

WHERE TO FROM HERE Naylor says that while cyber insurance is a rapid growth area, insurers and reinsurers are being conservative by still pricing it quite high, as the potential costs are unknown and that in general, insurers are not pushing it for that reason.

“My data suggests that household computer issues are lessening, as modern virus software is becoming very efficient compared to a decade ago,” says Naylor.

“However, organised attacks against businesses seems to be increasing, and becoming very sophisticated,” he says, “and this is worrying insurers a lot.”

Some international insurers and reinsurers are starting to invest heavily in research and upskilling in this area, mainly with the aim of understanding the risk, says Naylor.

“There is, however, a huge market in offering advice, both beforehand on how to reduce risk, and after on how to cope with threats,” he says.

“This is a huge future potential area of revenue, but most New Zealand insurers are can't cope well with their own risks, let alone offer advice.”

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Vero research reveals small businesses are confident about natural disaster resilience

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atural disasters rank well down the list of concerns highlighted

by Kiwi SMEs, according to Vero’s most recent SME Insurance Index.

The index, which surveyed 900 small and medium-sized enterprise owners (SMEs) found that natural disaster ranked 15th on the list of business risks, with respondents more concerned about cost increases (33%), economic downturn (30%), workplace accidents (18%) and political instability (18%) among other risks.

Chris Brophy, executive manager business insurance at Vero, said one reason natural disasters might be less of a concern than other risks was that SMEs were confident they were insured against them.

“Given New Zealand’s experience over the past 10 years, it would be surprising if SMEs believed natural disaster damage wasn’t a possibility for them,” said Brophy. “But only 16% are concerned or very concerned about the potential impact of a disaster on their business.

“Natural disaster is one major risk that SMEs can mitigate with insurance cover and this research shows insurance is really doing its job of delivering peace of mind to SME owners.”

The survey revealed 47% of SMEs were confident their business was covered for natural disaster. SMEs who had insured through a broker and felt satisfied with the support and advice they were getting were even more likely to be confident (67%), compared to 39% of those who bought all of their insurance directly.

“The research suggests SMEs are gaining confidence from working with their broker, which is likely because they’ve had more in-depth conversations about their risk profile and their cover, and may have a better understanding of what their insurance will do for them if they’re affected by a natural disaster.”

Of those who were confident about their natural disaster cover, 84% said their broker had provided a risk assessment and recommended the

most appropriate insurance, and 60% said their broker had recommended other changes they could make to minimise their risk.

The research also showed SMEs in the Wairarapa/Wellington region were the least worried about natural disaster risk, with 12% concerned compared with the survey average of 16%.

Brophy said this finding was surprising given the potentially higher risk of earthquake and other disasters in this region.

“This may be as a result of education and preparedness. Our results show those in Canterbury are most likely to feel confident about their natural disaster cover (68%), with 42% of Wellingtonians surveyed feeling confident.

“Aucklanders are the least confident, with only a third confident they are adequately insured against natural disaster risk. Perhaps the lower risk of certain disasters in that region means they are less likely to have engaged with their insurance cover and are more likely to be unsure of how well they’re covered.”

Similarly, industries that might be hardest hit by a natural disaster were most concerned about it, including accommodation and food services (39%) and agriculture and farming (32%). However, those industries were also the most confident that they were covered (62% and 66% confident respectively).

Vero’s customer data showed 97% of SMEs on its books had natural disaster cover as part of their policy. Brophy said there were a variety of reasons the remaining 3% might not have cover, for example natural disaster not being relevant to what they had insured.

Vero has recently added information on ways SMEs could minimise property damage caused by a natural disaster to its Risk Profiler tool, which provides industry-specific data on risks and how to reduce them. www.covernote.co.nz

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Advisers told to take care with vulnerable clients

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nsurance advisers are being reminded to take care in the way they deal with clients who could be deemed vulnerable.

The Financial Markets Authority has indicated that it expects the number of vulnerable people in New Zealand to increase because of the ageing population and an increase in the number of migrants. It said financial services providers should consider how the design of vulnerability processes and practices could best support their business objectives.

Under the code of conduct for financial advisers, which will apply to all brokers and advisers from March 2021, advice must be given that is suitable, understood by the client and delivered with competence, knowledge and skill.

Training institution Strategi said that meant it was important that insurance brokers identified vulnerable clients and dealt with them appropriately.

Customers could be vulnerable due to health issues, life events such as an income shock or relationship breakdown, a resilience problem such as low income or lack of support, or issues with capability such as poor literacy.

Strategi said insurance advisers might notice that clients were becoming vulnerable if they made a change to their payment habits, such as missing a payment, stopped responding to phone calls or emails, asked the same questions repeatedly or exhibited signs of anxiety.

“Staff can feel uncomfortable asking clients questions that may be perceived as personal, for fear of upsetting them. However, with the right training, staff can learn how to ask these questions in a sensitive manner that helps the client feel able to divulge whether the service needs to be adapted for them.”

Good practice would mean taking a holistic approach, it said. “Every level of your business should understand the role they play in delivering good results to these clients. Vulnerable clients need to be considered throughout the whole client journey and in all interactions.This includes from how you design products, through to how advice is delivered.”

Management would establish processes to support staff to 10

December 2020

act flexibly and establish boundaries for them to operate within, products should be designed in a way that would not affect vulnerable clients adversely and front-line staff and advisers should identify clients who were vulnerable and implement policies with the flexibility to respond to client needs.

“Well-trained staff are often able to help vulnerable clients articulate their needs, by asking about their requirements at key stages during the client journey. This might include letting the client know they need to understand a little more about their circumstances when they are considering switching products. This may highlight if the client has had a change in circumstances which makes them more prone to being vulnerable, such as a bereavement. Staff can also learn a great deal from having the opportunity to share their experiences in dealing with vulnerable clients.”

They should then record the issue, respond in a way that was suitable to their needs and report what had occurred.

“Your professional duties require you to be satisfied clients understand the advice being provided. It is therefore prudent to check the client’s understanding at key points. If you deem the client’s level of understanding to be unsatisfactory, you should not sell the product to them. Consideration should also be given to the communication channels that you offer your services through and whether they might be excluding or disadvantaging particular clients. The broader the range of communication channels you offer, the more likely you are able to meet the needs of vulnerable clients.

“It is important to remember the regulatory framework firmly places the onus on you, as the financial advice provider, to meet client needs and deliver good outcomes for vulnerable clients. Due to the Covid-19 crisis, along with existing demographic changes within New Zealand, it is becoming more likely that vulnerable clients will form part of your client base. By ensuring you have well-trained staff who are able to identify and understand these clients’ needs and that can use that knowledge to adapt services appropriately, will help to ensure the needs of all your clients and your obligations, are met successfully. To be effective, this needs to sit within a robust framework of policies, processes, and controls.”

Feature

Northland storm costs insurers $37m P

reliminary figures released by the Insurance Council of New Zealand reaffirm the extent of damage the July Northland floods left behind.

There has been $37 million paid to date by insurers to support their customers' recovery.

Tim Grafton, chief executive of the Insurance Council of New Zealand, said the flood was another reminder of the damage unforeseen events could cause and the importance of having insurance in place to support your recovery.

“The costs to recover from this event have already exceeded those of the February Southland floods that saw a state of emergency declared for Southland, Fiordland and Clutha.

“With severe weather predicated to become more frequent due to climate change, it is critical that we learn from these events and use them to inform ways to mitigate the risks they present so we can improve the resilience of our communities,” he said.

For the first time private insurers were able to manage some claims for land damage on behalf of EQC. This meant that customers who suffered damage to their residential home, and had silt or debris covering their land, were able to lodge and have their claim managed by their private insurer.

“This helped to ensure the claims process was easy and efficient. Many customers were able to have their claim resolved through their insurer as a single point of contact, enabling them to get back on their feet as quickly as possible,” Grafton said.

EQC’s chief readiness officer Josh Lindsay said the partnership had proven to be successful. “Bringing EQC and private insurers together provided a streamlined customer service experience for the people of Northland. We will continue to work closely to build on this for future events.”

To date, the flood has resulted in more than 2500 house and contents claims, more than 360 commercial or business-related claims and a further 360 claims for damage to motor vehicles. EQC has received 306 land claims to date.

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11

Profile

New insurance boss navigating change Jimmy Higgins is Suncorp’s new chief executive.

Covernote asked how he’s feeling about the sector now, and into the future.

What do you see as the biggest challenges for NZ insurers over the next 12 months?

Financial market fluidity.

2020 has seen immense change and new demands for insurers. Covid-19 has caused a great deal of disruption in the global markets that we rely on for return on capital and reinsurance, and we need to manage the possibility of that volatility leading to increased costs or new restrictions on our products imposed by international reinsurers.

Locally there’s been disruption, including to supply chains and access to international employees which increase the cost and challenges for businesses and I know brokers and advisers are working hard to support their customers with those challenges.

As an industry it’s important that we continue to maintain customer trust, and that we keep looking ahead to what will create value for the industry and our ecosystem in the long term. The recently announced natural disaster response model is a good example of where, despite the adversities of Covid-19, we have managed as an industry to progress a significant milestone that will deliver better outcomes for our customers.

What will be the challenges for Suncorp?

The challenge for us over the coming year will be to 12

December 2020

maintain momentum and agility in the face of uncertainty, and to keep our people engaged in a flexi-working environment.

The global impact of Covid-19 and the local lockdowns have created increased uncertainty and financial pressure for Vero’s customers and the brokers and advisers we work with.

We have a lot of work underway to continue to improve and build on our services and products for the benefit of brokers and customers, and we need to keep making progress on this while maintaining our financial strength and managing any business continuity issues created by Covid-19.

But there are opportunities to take what we have learned from Covid-19’s global impact. We need to be agile and continually look for new or different ways to improve the way we develop products, respond to claims, connect with our customers the way they want, and provide best-in-class customer experiences.

What are your immediate goals in your new role at Suncorp – are there any changes you’d like to see implemented within the next year?

One of my big focus areas as CEO is to continue to make us easier to do business with.

Brokers have experienced a shift in customer behavior, with increasing demand for digital connectivity and responsiveness, so their needs continue to evolve. We are continuously Continued next page

Profile

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13

Profile

improving our digital capability, our efficiency and ensure that we provide a best-in-class experience.

Vero is putting a considerable amount of work into digital connectivity across the full policy life cycle, to find ways to make it easier for brokers to transact business with us.

We’re at a point where we can test some of the increased digitisation we are looking to offer and I’m looking forward to seeing the feedback and impact of this over the next 12 months.

I am also looking forward to seeing the benefits of the increased advocacy work that Suncorp is doing across our industry and the partnerships that we have with community organisations who support those in need.

Has the pandemic experience changed the way New Zealanders interact with their insurers?

When we went into lockdown in March, we implemented a consumer sentiment tracker to help us understand how Covid-19 was impacting our customers, and what their expectations of us might be.

The research showed that consumers are more likely to be experiencing financial vulnerability, and that business owners, in particular, have been struggling to make ends meet.

WE’RE IN A STRONG POSITION TO MEET THE CHALLENGES THAT MIGHT BE COMING, BUT I’M HOPEFUL THAT NEW ZEALAND, OUR INDUSTRY AND OUR PEOPLE, CAN LOOK FORWARD TO A YEAR OF HEALTH, SAFETY AND CERTAINTY – HOPEFULLY UNOBSTRUCTED BY COVID-19 OUTBREAKS AND LOCKDOWNS.

The research showed that customers want us to support those in the community who are most in need – for example to use any savings we’ve made from the lockdowns to support charities or struggling local businesses. But there hasn’t always been an impact on the way our customers personally interacted with us. That might be because they don’t view themselves as needing help, but I think it’s more likely that they don’t always know that there is more than one way we can help them.

The onus is on our industry to change the way we interact with customers and make it easier for them to ask for help. Vero has taken the approach that the best thing we can do is help customers keep key insurance cover in place through financial hardship, so to that end we established a $10 million hardship fund and have been providing discounts and premium holidays for customers.

Brokers play a critical role in identifying which of our customers most need support and are working with us to ensure that customers are accessing our hardship fund if they need it.

What has been interesting is that Covid-19 certainly hasn’t changed 14

December 2020

perceptions of insurance. New Zealand customers might be a bit more likely to shop around for good deals or away from unknown companies back to quality brands that they trust and are familiar with. But during times of hardship they appear to be very aware that insurance is a big part of their financial resilience and cancelling it is an absolute last resort for many.

What lessons has Suncorp learnt, have changes been made to the business as a result?

We already had a clear priority to make our products, sales and service increasingly customer centric in line with changing customer expectations and needs. But Covid-19 has accelerated some of the changes that were already happening in these areas.

One example is our work around customers experiencing vulnerability.We’d done a lot of work on this programme and, in the first quarter of the year, almost all of our people had completed tier 1 training in how to recognise and support when customers might be experiencing vulnerability.That training came at the perfect time to enable us to better support our customers, and as much as possible we need to accelerate the work we are doing on this because we know that vulnerability is likely to become an growing issue. I’m looking forward to seeing some of this work start rolling out to brokers as well.

Another example internally is that for some time we have been promoting and building our flexible work culture, but Covid-19 accelerated our workforce plan and has also generated some insights that we are now using to adapt that plan. We’ve moved forward some of our digitisation work, with the intention to give our intermediaries better and easier access to our products and services, and to make us more efficient. New Zealand has moved rapidly from a really strong economic situation to a much more uncertain one. We need to continuously work to be as efficient as we can, so we can provide competitive pricing in an environment where our input costs are increasing.

How is Suncorp placed to deal with the regulatory change on the horizon for insurers, particularly FSLAA taking effect in March and CoFI? Although FSLAA doesn’t have a big impact on us directly because we don’t provide financial advice, it does have a big impact on our intermediaries and we are doing all we can to support them to meet new regulatory standards.

The new CoFi conduct licensing proposal is something that we are actively working towards once it comes into play. It will create new obligations for Vero to comply with around fair conduct principles and a fair conduct programme.

Vero is in an excellent position to meet those obligations, because they align to our existing code of conduct and values, and with the programme of work we already have in place to deliver improvements in line with expectations from regulators.

What are you most looking forward to over the coming year?

One is spending more time with our people throughout the business.

I’m lucky to lead a team of truly passionate people and I look forward to getting to know more of them as we shape our business for the future and continue to deliver more for our customers and intermediary partners Another is seeing more improvement roll out in the space of our digital connectivity with brokers.

We’re in a strong position to meet the challenges that might be coming, but I’m hopeful that New Zealand, our industry and our people, can look forward to a year of health, safety and certainty – hopefully unobstructed by Covid-19 outbreaks and lockdowns.

Before we put a line under 2020, though, I’m also really looking forward to spending time outdoors and with my family over the summer period – I think we all deserve a bit of a break!

Feature

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15

HUMANS of She came, she saw, and she conquered B

eing awarded Insurance Professional of the Year, in the Women in Insurance New Zealand 2020 awards, has given NZI’s Angela Schwarz, senior underwriter commercial liability, immense pride and time to reflect on what has been an exciting and varied career as a female in the insurance industry.

From a Dutch background and a first-generation New Zealander, Schwarz started her insurance journey 40 years ago when she was a fresh-faced university student, who had just graduated with a Bachelor of Arts from the University of Auckland.

“I was ready to go out and conquer the world, but it wasn’t going to be easy. Unemployment levels were very high in Australasia and it was difficult to get a job.

I landed a three-month temping position at the Royal Insurance mail room. I was 21 years old and that was the start of what ended up being my lifetime career”.

Since then, Schwarz has had several roles in the insurance industry including a stint in London for 10 years. Once back in New Zealand 20 years ago, she worked in a brokerage before she started her underwriting career with NZI in 2007.

Schwarz has always been a strong promoter of insurance as a profession.

“Most people my age, they often say ‘I fell into insurance’, and although that may be true, we need to lift our profile as an industry, because working in insurance is a profession. We should be proud to say we are underwriters as we have a lot of skilled and highly educated people, and I don’t think we get the recognition we deserve.”

A big part of Schwarz’s upbringing was the importance of education and standing up for herself. Her parents arrived from Holland in the 1950s after the war, and she thinks that’s when her passion for the women’s movement started.

“I was expected, as a girl, to go as far as my brother. It was never about having kids or getting married. I learnt that you can lose absolutely everything, but education can’t be taken away from you. By the time I was 17, it was already in my mind that I had to be financially independent, so I’ve always kept pushing myself.

“This might seem a strange thing to say to the younger women of today, but there was still a significant amount of inequality for women in the late 1970s and early 1980s. To achieve that financial independence, I’ve worked very hard at every job I’ve had, putting a lot of effort on education and training.

“I got my first house when I was 26 and I had to work two jobs to get it. And that was back in the day when you had to have a man sign your mortgage application.”

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December 2020

For Schwarz, being awarded the top gong in the Women in Insurance New Zealand awards is especially poignant, after she was riding the first wave of feminism in the 1970s and marched up Queen Street in 1979 for women’s rights.

“The award hits me more as I go along. I’ve been 40 years in this industry, and it hasn’t always been easy. I’m so humbled and honoured to have won this. I’ve seen sexism rife both in and out of the workplace, but today so much has improved. We can freely talk about mental wellbeing; we are encouraged to speak up and express ourselves; and there’s so much more diversity everywhere you go which is liberating.”

For those who are starting in the insurance industry, Schwarz shares her personal philosophy.

“Be driven to do the best job you can, no matter what you do. Get to know as many people as you can, make friends at work, have fun, keep getting educated and aim higher than you think you can manage. I’ve had my knees knocking together with fear with some jobs I’ve taken on, but just get in there and do it. It does work out. And some good oldfashioned work ethic and integrity helps, too.”

Have the

right team behind you

Business is constantly evolving, and recently many Kiwi businesses have been adapting to new ways of working.

Despite the changes, one thing remains true: having the right team behind you matters.

NZI has been insuring Kiwi businesses for over 160 years. Today, nearly 300,000 New Zealanders choose NZI to have their back and protect what matters most to them.

Your success matters to us.

Talk to your broker about insuring with NZI.

Cover Story

CYBER ATTACKS AND THE INSURANCE RESPONSE

by Andrew Horne, Minter Ellison Rudd Watts

N

ew Zealand’s stock exchange, NZX, suffered cyber-attacks on six consecutive working days earlier this year. The attacks left it unable to facilitate trading in shares, in its debt market, the Fonterra shareholders’ market and derivatives market, although participants remained able to conduct direct, negotiated trades. The NZX attack is typical of cyber-attacks against businesses which are becoming increasingly common.

What do these attacks involve?

The attacks were “distributed denial of service attacks” or DDoS. Cyber criminals carry out DDoS attacks by taking over processing capacity on thousands of private computers, usually without their owners’ knowledge, by infecting them with "malware" that causes them to operate as a “botnet” or network of “bots” which carry out the criminals’ instructions. The infected computers are known as “zombie” computers. The criminals instruct the zombie computers to send packets of data to flood targeted companies’ websites, servers and networks with volumes that they are unable to accommodate. The computers do not have to be personal devices; in 2016, around 190,000 internet-connected cameras were infected and used to conduct a large-scale DDoS attack that affected large parts of the internet on the eastern coast of the US. A DDoS attack is challenging to repel because the target does not wish to bar access to legitimate users, but it cannot know until the attack begins whether computers that are sending it data are zombies or legitimate users. The zombies’ IP addresses must be identified and their data blocked at the internet service provider level.

How serious a problem is this?

DDoS attacks are increasingly common. Recently, in New Zealand alone, cyber criminals attacked the websites of Westpac and TSB banks (although it is unclear whether the latter was a DDoS attack), MetService and the Mount Ruapehu skifield car parking website, and they have also attacked the media firms Stuff and Radio NZ. The Government Communications Security Bureau estimates that, since 2016, it has prevented $100 million in loss and damage from cyber-attacks, although this figure will include many forms of attack. It provides assistance to private companies, although it does not release names of those who have suffered attacks because it wishes to encourage them to report them when they occur.

Crown cybersecurity agency Cert NZ recently issued an alert about DDoS attacks or threatened attacks by people identifying as Russian, who were targeting financial businesses in New Zealand. Cert NZ reported that, in 2019, they received 84 incident reports about DDoS attacks, including where criminals had emailed companies to threaten a DDoS attack unless they paid a ransom before a deadline. In some instances, the criminals carried out a demonstration attack against the company’s IP network to prove their capability and intent.

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December 2020

What losses do victims suffer?

Typically, criminals who carry out DDoS attacks request a ransom payment to prevent the attacks in the first place or to cease attacks and not carry out any more. The GCSB Minister, Andrew Little, identified that NZX received a ransom demand before its DDoS attacks, asking for a large payment in bitcoin. It is not known whether any New Zealand victims have paid ransoms, but companies overseas are reported to have done so. Cert NZ recommends against paying ransoms on the basis that this could result in the victim being targeted again, but it must be tempting for a company that is struggling to deal with an attack to pay up.

In most cases, the greater loss is to businesses where a DDoS cyber attack prevents them from providing services to customers, so they lose income due to downtime. Victims may incur liability to customers if their inability to provide services, such as an inability to allow customers access to their data,

Cover Story

causes their customers to suffer loss. Victims also typically incur significant consultants’ costs in closing down the attack and reinstating their systems, and also in bolstering their defences against future attacks. There are also intangible losses such as damage to reputation.

Losses may be very substantial for companies that are highly dependent upon internet business. A DDoS attack in 2017 against Dyn, a service that directs web traffic, impacted Twitter, Airbnb, Netflix, Spotify and a number of other major websites as well as many smaller businesses, and resulted in estimated losses of US$110,000,000. The Reserve Bank of New Zealand has estimated that cyber-attacks against the banking and insurance industries could reduce their profits by about 2% to 3% p.a., which while small as a percentage, is nevertheless a very substantial amount.

Because of this, governments are taking the threat seriously. The Australian Government has promised to spend A$1.66 billion over 10 years to strengthen cyber defences. In the UK, Pool Re, which is a Government and private insurer response to the challenges of insuring for the large potential liabilities resulting from terrorism risk, expanded its cover in 2018 to cover material damage and business interruption from cyber terrorist attacks, reflecting the large potential for loss.

How do insurance policies respond to these losses?

Business interruption policies will not normally cover losses caused by cyber crime, whether from DDoS attacks or otherwise. There are two reasons for this: Many Business interruption policies expressly exclude cover for losses resulting from cyber events; and Business interruption policies normally respond only to loss of revenue that results from damage to property that is insured under a material damage policy, with limited extensions for causes such as acts of public authorities. While it could be argued that DDoS attacks cause damage to networks and other IT equipment, the equipment is often not owned or insured by the business that suffers the loss and it may not be damaged.

Most businesses are therefore turning to specialist Cyber policies to protect them from at least some of the types of loss that

may be expected to result from DDoS attacks. This cover may include the following: • Cover for the consultancy and equipment costs of remedying the

breach, such as the cost of replacing lost data and equipment or

other services • Cover for liabilities incurred to customers and third parties • Cover for legal and consultancy costs • Cover for extortion costs • Cover for PR and communications costs to protect reputation,

which may include liaising with affected customers and third parties • Regulatory fines and penalties Some exclusions may apply: • Some policies are limited to attacks that are directed against an

insured business specifically, whether against its own systems or

ts provider’s. The insured must be targeted rather than being a

random victim. Other policies are broader • Some policies do not cover the insured business’ own lost revenue

or profits although they may offer this as an optional extension.

Where it is offered, it may be worth taking out for a business that is

likely to suffer a loss in revenue from a DDoS attack This is a developing area of insurance and cyber policies are frequently being updated and revised to reflect new issues and new risks.

Some questions to consider when considering cyber insurance are the following: • Will your cyber policy cover business interruption loss?

• Will your cyber policy respond to a denial of service attack that is aimed at a third party’s network or services but nevertheless

interrupts your business?

• Are you covered for fines or penalties?

All businesses should undertake a risk assessment to understand their vulnerabilities in the event of a DDoS attack and what losses they may suffer. This will assist them to consider their cyber insurance with their broker.

www.covernote.co.nz

19

Feature

What you can expect in insurance in 2021

By Craig Furness

Managing director of Gallagher Bassett in New Zealand.

A

crisis like Covid-19 affects all business sectors. For insurance, the demand to deliver tailored solutions across multiple service lines on a local, national and global scale has certainly increased. The cataclysmic shifts of day-to-day life have triggered a game-changing course correction that will redefine “business as usual”.

Insurance is a resilient industry and could be the key to help businesses bounce back from the economic impacts of the pandemic. Recent data from the Swiss Re Institute suggests the sector will bounce back to prepandemic levels before the end of 2021.

Working with some of the world’s largest carriers for almost two decades, we have helped our clients respond to global trends and ‘ride out the storm’ year-on-year. At Gallagher Bassett, we have outlined the insurance industry’s key trends for 2021.

Here’s what we expect is on the horizon next year.

Data, digitalisation and artificial intelligence Data-driven automation, artificial intelligence and machine learning will remain vital for the industry to meet the level of personalisation customers expect from their policies and overall experience. Large carriers and TPAs are already using artificial intelligence to automatically classify and extract data from the claims management process. For example, some insurers are cross-referencing call centre recordings with chatbot data to gain insight into customer sentiment and service quality.

Customer experience Despite digital and automated claims processes driving efficiency to

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December 2020

lower operating costs, a sector focused on experience will continue to emerge to manage policies and claims not fit for machines. The industry is applying data analytics to identify pain points in customer interactions and help make the customer interaction process more fluid and personalised. For example, some may prefer a fast, highly-personalised service whereas others may desire a high-touch and solutions-orientated approach.

Impact on affordability While New Zealand has experienced a soft market for the last five to seven years, the market is now hardening. It is pushed on by low interest rates, growing risks and large claims. A hardening insurance market will put pressure on capacity and therefore, impact the price and affordability of premiums. That said, the current state of the market should not significantly impact customers who have developed a long-term strategy to manage and mitigate risks.

Regulatory changes ramp up Governments and financial regulators relaxed the rules at the height of the pandemic, but the insurance industry should start to see delayed or deferred legislative changes brought into effect from early 2021.

New Zealand’s new code of professional conduct for financial advice services will come into force from March 15 2021 and set standards of competence, conduct and client-care for the whole financial advice industry. The regulatory focus will be extremely important postpandemic as customers become more cautious about their health and financial safety.

COVER STORY Cover Story

“On the other side of a storm is the strength that comes from having navigated through it.

Raise your sail and begin.”

- Gregory S Williams

2020 is not what we expected, but as we reflect on our 50th year in New Zealand, we know that what’s important is more precious than ever.

So we’re starting our next 50 years with an even greater passion for what we do preparing people for what’s next, helping them reduce risk, recover from setbacks, and realise their dreams. From everyone at AIG, we wish you a merry Christmas, a peaceful New Year, and a relaxing summer with friends and family.

Insurance products are issued in New Zealand by AIG Insurance New Zealand Limited. For additional information, please visit our website www.aig.co.nz.

www.covernote.co.nz

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21

Feature

Suncorp assessed remote-working future

A

survey of employees at Suncorp New Zealand, one of the country’s largest insurance companies, has revealed that community and connection (79%) and collaboration and problem solving (66%) are the main drivers for employees wanting to return to the office at least part-time following a period of working at home due to Covid-19.

Catherine Dixon, executive general manager of people and culture at Suncorp New Zealand, said the survey was one piece of data that the company was using to plan how it may work in future.

“We need to be prepared to work within the limitations of Covid-19 for the foreseeable future,” she said.

“But what the pandemic has really highlighted is the importance of continuously checking and adjusting our way of working. The world changes, and what works now might not work six months from now, or may only work for some people.”

Dixon said the technology for employees to maintain connections with their teams worked well but it was not seamless, with 39% of employees citing issues such as wi-fi connection as the main challenge with working from home.

“Technology offers a lot of solutions, but in many instances it’s no replacement for face to face contact – it’s important for our people that we get the balance right.”

Part of the solution would be how businesses used office space in future, Dixon said.

“As a business we will need to adapt the use of our office space to suit a more dispersed style of working. For example, we might need fewer individual workstations, but we might want to repurpose some of that space for larger team areas or hubs.”

The survey was conducted in early August to understand how the shift to home-based working during lockdown had affected employees.

Dixon said the business was surprised to find that half of its employees (53%) were interested in continuing to work at least 80% from home.

48% felt that a more even split (working between two and four days a week in the office) would be most suitable due to technological, physical

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and social considerations.

“What we have found from this experience is that for many of our people, working from home is viable but that it is not delivering the connectivity and collaboration they really need - and for that they want to be physically present in our workspaces.”

Transport, hygiene and work-life balance were some of the main reasons employees gave for wanting to work from home at least some of the time.

She said that going back up alert levels a second time – which happened after the survey was conducted - was a much smoother process for the company, but it created a lot more anxiety and uncertainty for employees which may increase the need for in-person connection over time.

Prior to Covid-19, 87% of Suncorp New Zealand’s workforce had indicated they had the right degree of flexibility to enable them to balance their work and life commitments through a range of options such as working from home or adjusted hours.

“Suncorp’s existing culture of flexible working stood us in good stead this year - when the country went to alert level four in March, 90% of our people were enabled to work from home within 48 hours.

“Now we are reflecting on how the pandemic has affected our productivity, wellbeing and ability to support our customers, and how we can evolve our way of working in future to strike a balance that will meet the needs of our people and our customers.”

She said one of the major enablers of a dispersed or flexible workforce was leader capability.

“There are lots of factors that we need to work on as a business to ensure that we’re supporting remote workers to stay engaged and productive, including technology and even contractual arrangements.

But ensuring our leaders are supported and capable of leading dispersed teams is critical.”

She said workplace flexibility and outcome-based performance were a key part of Suncorp’s culture, and that staying engaged with employees to balance business and employee needs will support the company to be more resilient to future crises.

Feature

INSURERS INVESTIGATE CAR PARTS QUESTIONS T

he Insurance Council of New Zealand and its members have recently been made aware of a car part supplier allegedly misrepresenting car parts as genuine to New Zealand repairers.

“We understand that since late last year a supplier has provided car parts as car manufacture branded when they are not.The matter is naturally of concern to insurers who have established dedicated teams to investigate the situation,” said Insurance Council chief executive Tim Grafton.

As part of their investigation insurers are working to ascertain if any of their customers’ vehicles have been fitted with parts from the identified supplier, and whether any misrepresentation has occurred.

“Affected customers will be proactively contacted by their insurer if there is anything that needs to be addressed.

We understand many customers have been contacted already, and we expect more may be contacted as the investigation continues in the coming weeks.”

The Insurance Council said the sector was working with affected repairers nationwide to rectify the problem for their customers.

“If you are contacted, your insurer will provide you with clear instructions on what you need to do to have your vehicle assessed and if subsequent actions or repairs are needed.

“It’s important to note the use of non-branded parts that meet recognised standards to carry out vehicle repairs is not unusual and wouldn’t in and of itself present any quality concerns.”

www.covernote.co.nz

23

Opinion

Financial Conduct Authority takes action on behalf of policy-holders U

nlike New Zealand, many business interruption policies issued in England extended cover to interruption in consequence of a notifiable infectious disease.

Many of the underwriters of those policies declined their Covid-19 related claims.

The number of declinatures was sufficiently large, and the reasons for them were sufficiently contentious, that the English financial conduct regulator (the Financial Conduct Authority) brought proceedings in the English High Court on behalf of policyholders against eight underwriters to seek declarations about coverage under their policies.

While this didn’t necessarily include all underwriters involved, it covered the majority of different policy wordings applicable.

The court allowed two action groups to appear at the hearing as well: the Hiscox Action Group, representing policyholders underwritten by the Hiscox Syndicate at Lloyd’s and the Hospitality Insurance Group Action, representing a large number of hospitality businesses whose claims had been declined.

The fact that 15 Queen’s Counsel appeared at the hearing, with some parties represented by two Queen’s Counsel, demonstrated the gravitas of the proceeding.

The court released its decision recently. We highlight some of the findings that give guidance to underwriters and claims adjusters alike about the correct approach to policy interpretation.

Principles of construction Given that tens of millions of pounds, and possibly hundreds of millions of pounds were riding on its decision, the court went to some lengths to recount the principles of construction that apply to insurance policies at law.

The court stated that the overriding test is to ascertain what a reasonable person, that is, a person who has all the background knowledge that would reasonably have been available to the parties when the contract was formed, would have understood the contracting parties to have meant by the language used. This means the court must disregard evidence about the subjective intentions of the parties.

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December 2020

The court noted two further principles that apply within that overriding test: ejusdem generis (of the same kind) and noscitur a sociis (known by its associates). A recent example of noscitur a sociis was referred to as follows: In Tektrol v International Insurance Co of Hanover Ltd [2005] EWCA Civ 845, an insurance policy excluded liability for "erasure loss distortion or corruption of information on computer systems". The court held, relying on noscitur a sociis, that in the context "loss" was a reference to loss by electronic means, rather than burglary of the computer.

The court also considered the meaning of "malicious person" within an exclusion for "rioters, strikers, locked out persons taking part in labour disturbances or civil commotion or malicious person". In the context, given the other categories of persons listed, malicious person was held not to be a reference to someone who hacked in remotely to the computer systems.

The court also traversed the contra proferentem rule. Interestingly, the court held that the contra proferentem rule does not require that all exclusion clauses in an insurance policy be interpreted narrowly.

That requirement is confined to exclusion clauses in contracts that limit or exclude liability in negligence or contract. The court approved of the following extract from the judgment of the English High Court in Crowden v QBE Insurance (Europe) Limited [2017] EWHC 2597: 65. In my judgment, applying this approach, the court must adopt an approach to the interpretation of insurance exclusions which is sensitive to their purpose and place in the insurance contract. The court should not adopt principles of construction which are appropriate to exemption clauses - i.e. provisions which are designed to relieve a party otherwise liable for breach of contract or in tort of that liability - to the interpretation of FCA insurance exclusions, because insurance exclusions are designed to define the scope of cover which the insurance

Please feel free to contact us if you require any further information.

Crossley Gates cgates@keegan.co.nz

Frank Rose frose@keegan.co.nz

policy is intended to afford. To this end, the court should not automatically apply a contra proferentem approach to construction.…

Exclusion clauses are necessary to define the cover in the first place.

As such, they are still primary terms of cover and are not aimed at taking away a right that is always there by operation of the law e.g. liability in negligence.

We suggest this approach is consistent with modern insurance policies. In the past, insurance policies often described what was insured by listing defined perils e.g. fire, flood or storm. The modern trend is to have a wide insuring clause simply requiring a fortuitous loss. The policy then narrows the breadth of the insuring clause by listing types or causes of fortuitous loss not covered. In this sense, the combination of the insuring clause and exclusions determines the cover.

Business interruption extensions Many readers of this article will know that the main cover under a business interruption policy is only available if the interruption is in consequence of damage to property, usually the insured’s.

A number of extensions remove this requirement and provide cover in the specific circumstances stated that lead to the interruption. While the court had to consider many extensions, we will concentrate on one contained in a number of the policies before the court that will be familiar to most. One policy called the extension ‘murder, suicide or disease’; the others had variations on this name. The extension read: We will indemnify you in respect of interruption or interference with the business during the indemnity period following: any … iii occurrence of a notifiable disease within a radius of 25 miles of the premises.

The parties accepted that Covid-19 was a notifiable disease. The following issues arose: • When did an "occurrence" of the disease take place, when a person

in the 25-mile radius was infected or when he or she was diagnosed?

• What degree of causal connection is required by the word "following"?

• Where only one or two people suffered from the disease

within the specified radius, was the cover limited to the extent

that only those one or two people having the disease interrupted

the business. Alternatively, did the cover also respond to the

impact of the government’s instructions for all citizens to social

distance, self-isolate, lockdown and restrict travel?

The court found in the same order: • A person in the radius suffering from the disease triggered the

extension. There were no words in the extension that pointed to

a diagnosis by a medical person being required first.

• The peril the extension insured against was an accumulation of

the following circumstances: interruption/interference of the

business following (in this case) the occurrence of the disease

within a 25-mile radius of the premises. The court held that

the word "following" required a causal connection but the

connection did not have to amount to the proximate cause, as

contended by some insurers.

• The court noted the clause did not specifically limit the cover to

the interruption/interference caused by the one or two people

suffering from it in the radius. It found the fortuity insured by

the extension was the disease coming near (within 25 miles)

rather than the specific occurrences within the 25-mile radius.

Once the disease had come near enough, all the impacts of it on

the business (not just the impacts of the two people) were covered.

We understand some of the insurers have elected to appeal the decision. Given its importance and in order to speed up its resolution, the parties have been allowed to appeal direct to the Supreme Court (the highest court in England), leap-frogging the normal process of appealing to the Court of Appeal first.

We await the outcome with interest. www.covernote.co.nz

25

Feature

Landmark UK business interruption case

by Andrew Horne and Nick Frith

I

n our previous edition, we discussed the various jurisdictions in which insurers’ approaches to business interruption cover following Covid-19 were being scrutinised.

In the UK, the Financial Conduct Authority (FCA) initially worked together with insurance companies to aim to provide transparency and clarity in their existing policies for their insureds. It was soon clear that there was a growing problem in the market, largely due to the multiple action groups arising, especially with policies affecting SMEs. The FCA therefore collected 21 sample policy wordings from eight insurers and sought declarations as to how certain extension wording in each of them would respond to Covid-19 interruptions. This case was known as the “test case”, with judgment delivered with significant speed on September 15, 2020.

The case involved the FCA, eight insurers and two class action groups (Hiscox Action Group and the Hospitality Insurance Group Action) as interveners. The judgment was complex and meticulous.

The court largely sided with the FCA on many of the key issues. Example policy 26

December 2020

extensions concerning disease and prevention of access, as well as causation, were all given considerable legal analysis.

The FCA and various of the other parties have received certificates from the High Court allowing them to apply to the Supreme Court for a “leapfrog” appeal. We understand that appeals are likely to be pursued if agreement cannot be reached with the eight insurers and two interveners on how to treat claims going forward.

KEY FINDINGS Disease clauses Most disease clauses examined followed the general structure of: interruption or interference with a business that was “following”, “arising from,” or “as a result of ” any “notifiable disease”, “occurrence of a notifiable disease”, or arising from any human infection or human contagious disease “manifested” by any person. Some policies contained geographic boundaries, mostly being within 25 miles of the “vicinity” of the insured premises.

The insurers’ argument was that cover was provided only for a local occurrence of

a notifiable disease, where they could be distinguished from wider effects. In other words, discrete instances of Covid-19 cases, if necessary within the stated boundary. The FCA argued that the causation requirement was less than “proximate”, and cover should be provided because Covid-19 was an outbreak that had multiple indivisible parts. The outbreak itself was the ‘occurrence’, rather than separate diagnoses in certain areas. “Following” indicated that the proximity required was indirect, and therefore a nation-wide response to the Covid-19 outbreak would fulfil the causal nexus required.

Although cover was dependent on the policy terms in each instance, the court found in favour of the FCA on many of the disease extensions.

Prevention of access clauses In general, the court afforded these clauses a much narrower construction than disease clauses. Cover was limited only to certain circumstances under certain clauses.

In particular, the court held that these clauses required specified events to have occurred within the relevant area at a certain

Feature

time. The policy wordings included phrases such as “emergency in the vicinity”, “injury in the vicinity” and “incident within 1 mile/ the vicinity”, which was intended to provide narrow, localised cover. Therefore, for the prevention of access clause to apply to a business, the relevant action of the authority must have been a response to a localised occurrence of the disease within the relevant distance of the premises – not simply a country-wide response to the pandemic, as in the disease clauses.

An “action” to “prevent” access must have the power of law, such as imposed orders.

Mere government advice or guidelines were not deemed mandatory and would not suffice. Notably, the court did not consider “interruption” to mean a full cessation of business, but to also include disruption, as the word “interference” would suggest.

This analysis shows that prevention of access clauses will turn more closely upon the insured’s specific policy wording, as well as their own position before the interruption. For example, a restaurant that regularly offers takeaway services would be unlikely to be deemed

to have its business impaired enough by a stayat-home order. A restaurant that offered only dine-in however, would likely need to have its premises shut for the purpose of its business operations.

Causation and the Orient Express Causation was found to pertain mostly to the construction of the words before it, focusing on an insured peril, rather than a broad analysis of a causation test overall.

Therefore, the court readily distinguished the causation analysis in Orient Express Hotels Ltd v Assicurazioni Generali SpA [2010] EWHC 1186 (Comm), a case that the eight insurer defendants relied upon. The court also considered the case to have been wrongly decided. Orient Express followed Hurricane Katrina, which damaged the insured’s hotel and also devastated New Orleans. The court in Orient Express held that there was no cover because even if the hotel itself was not damaged, the surrounding area was so damaged that business interruption losses would have been suffered regardless. Therefore, the “but for” test of causation could not be met because the insured peril was not damage

alone. This narrow construction was quickly dismissed by the court in the FCA test case, which highlighted the decision’s absurdity: if the hurricane damaged the hotel alone, and not its surrounding premises, there would have been a full recovery under the policy.

NEXT STEPS This judgment is key reading for insurers with policy wordings similar to those in issue in the case. However, it is almost certain that the decision will be appealed if the parties cannot reach agreement on its application. So, it is a case of “watch this space”.

We are yet to hear anything new directly from the Financial Markets Authority on business interruption policies here in New Zealand. However, the Insurance Council of Australia has brought a similar case to that brought in the UK, which has been elevated to the New South Wales Court of Appeal. It was being heard at the time of production of this article.

Andrew Horne and Nick Frith are partners at Minter Ellison Rudd Watts. www.covernote.co.nz

27

Feature

Brokerslink launches dedicated international platform to drive its network’s business portfolio

G

lobal broking business Brokerslink has launched its dedicated international insurance programme management platform to drive the continued growth and digitalisation of its international portfolio across its broker network.

Called Space B IPA (International Programme Administration), the platform has been developed specifically to meet the needs of Brokerslink’s brokers in more than 118 countries to manage and deliver structured and compliant international and cross-border programmes for multiple policies and insurers from a single bespoke digital platform.

It has been created to facilitate international collaboration across the network, allowing brokers to aggregate and consolidate all types of risk and insurance information including policies, premiums, deductibles and coverages, in addition to risk assessment and management details.

Space B IPA, which can be used with all insurance carriers, has been designed and developed in collaboration with Swiss Re Corporate Solutions. It will enable Brokerslink’s brokers to achieve greater consistency and continuity in the management of international and cross-border business, leveraging optimised processes and automation to increase productivity and performance, improve service delivery and provide clients with greater transparency and reduced volatility in their insurance programmes.

Commenting on the importance of Space B IPA, José Manuel Fonseca, Brokerslink chairman, said: “The launch of Space B IPA is such an important milestone. Investing in technology to enable the network to deliver solutions efficiently and effectively to clients is a strategic priority. The network thrives on its ability to actively collaborate on business opportunities leveraging their local knowledge expertise. Space B IPA not only enables this using truly innovative technology, but it will also play a pivotal role in supporting our partners’ and affiliates’ growth and their ability to deliver a consistent, world-class service.”

Andreas Berger, chief executive, Swiss Re Corporate Solutions, said: "Our collaboration with Brokerslink has been a success and shows our joint desire to use technology to advance corporate insurance together. We are excited that our IPA is now available to their network of partners and affiliates. Through centralised coordination of data and streamlined management and connectivity of programme and policy details the platform eliminates inefficiencies and administrative frictions and above all provides a better customer experience."

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December 2020

CHOOSE YOUR OWN adventure Thinking about starting your own business or concerned about the new requirements for licensing?

We’re here to help. Insurance Advisernet has compliance systems in place to help you manage your own licence, or, choose to operate under ours. Either way, you’ll be able to focus on what you do best – looking after clients and giving professional advice.

For a confidential discussion, contact: DAVID CRAWFORD Director, New Zealand

 +64 9 926 2062

 +64 21 905 537  dcrawford@ianz.co.nz TRAVIS ATKINSON General Manager, Operations

 +64 9 926 2066

 +64 27 505 1912  tatkinson@ianz.co.nz SUE CRAWFORD National Partnerships & Development Manager

 +64 9 524 7600

 +64 027 224 5900  scrawford@ianz.co.nz

Feature

Insurer remedies for fraudulent claims

by Andrew Horne and Nick Frith

I

n its recent decision in Taylor v Asteron Life Ltd, the Court of Appeal discusses the fraudulent claims rule – the first time that this rule has been considered in any detail by an appellate court in New Zealand.

The court held that under this rule, a term is implied into every insurance contract, requiring the insured to act honestly when making a claim. If the insured fails to do so in any material respect, the whole of the fraudulent claim is disallowed – and the insurer may cancel the insurance policy prospectively pursuant to the Contract and Commercial Law Act 2017 (CCLA).

Background This case concerns the conduct of a Mr Taylor, a self-employed insurance broker.

In 1994, Taylor purchased an income protection policy with Asteron.

Taylor subsequently developed a medical condition and in July 2010, he made a claim under his policy on the basis that he was “totally disabled”. “Totally disabled” was defined in his policy to mean where the insured is “unable to work in your usual occupation for more than ten hours per week”.

Asteron accepted Taylor’s claim and made payments under the policy until September 2014, when Taylor failed to provide it with financial information it requested. Taylor issued proceedings, seeking a declaration that he was entitled to continuing benefits under the policy and to recover arrears of payments.

Through the discovery process, information came to light which indicated that Taylor had continued to work extensively at his broking business. Asteron accordingly denied that Taylor was entitled to further payments and counterclaimed for repayment of all sums previously paid under the policy. Its counterclaim was advanced on the 30

December 2020

basis that Taylor owed Asteron a duty of utmost good faith in connection with insurance claims, which had been breached by his false statements as to the hours he worked during the relevant period.Taylor denied this.

In the first instance, the High Court held that Taylor was not “totally disabled”, as defined in the policy. He was not even partially disabled, which was defined in his policy to mean that the insured is working but because of a qualifying illness is earning 75% or less of the insured’s monthly insured income. Taylor’s claims for a declaration and payment of arrears were dismissed.

The High Court further upheld Asteron’s counter-claim, finding that it could recover all sums previously paid under the policy as a result of Taylor’s misrepresentations.

Court of Appeal decision The High Court’s findings in relation to Taylor’s claim were upheld on appeal.The Court of Appeal agreed with the High Court that Taylor was not "totally disabled" from July 23, 2010 onwards, relying on evidence that Taylor regularly worked more than 10 hours per week during the relevant period. The court agreed that even if Taylor was totally disabled, he was not entitled to be paid any benefits because his policy provided for the amount of any monthly total disability benefit to be reduced by monthly earned income.

In relation to Asteron’s counterclaim for a breach of the duty of good faith, the court noted the unusual positions taken by the parties. Asteron argued that to show a breach of this obligation, it needed to show that Taylor deliberately misled Asteron. For his part, Taylor argued that there was no dishonesty requirement; conduct falling short of dishonesty could breach an obligation of good faith. Taylor said that dishonesty had not been put in issue and that it was therefore wrong for the High Court to make a finding that he had been dishonest.

Feature

The Court of Appeal disagreed. It considered that Asteron’s pleading was sufficient to put Taylor’s honesty at issue.

The Court of Appeal further considered the nature and source of an insured’s obligations in relation to claims, to determine their consequences. If an implied term of the policy, then the insurer’s ability to cancel are governed by the CCLA. If, however, they are common law or equitable obligations, then the position is more complex. In exploring this point, the court discussed the UK authorities and the fraudulent claims rule in detail, ultimately finding that the rule should be seen as a term implied by law in all contracts of insurance (subject to the express terms of the contract) to the effect that: a. the insured must act honestly in connection with the making of a claim; and b. if the insured fails to do so, and dishonestly makes a claim that is false in some material respect, the whole of the fraudulent claim will be disallowed.

The consequences of breach are, therefore governed by the CCLA – which entitles insurers to cancel a policy if a term is breached and either that term is essential, or the consequences of the breach are substantial. In this case, an implied term requiring an insured to act honestly is clearly essential to an insurer. Accordingly, if an insured makes a dishonest claim, the insurer is entitled to cancel the contract under section 37 of the CCLA and claim damages. a. The court further clarified that where a fraudulent claim is made and the insurer cancels the policy under the CCLA: b. the policy is terminated with effect from the date of cancellation; c. the insurer is not obliged to pay the fraudulent claim; but the cancellation does not affect other claims made under the

policy before the date of cancellation – meaning that earlier claims properly made and properly paid cannot be unravelled.

Applying these principles to the facts, the Court held that: a. Asteron’s pleading constituted sufficient notice of cancellation of the policy. b. It did not follow from the fact of cancellation that Asteron is ntitled to recover any payments made to Taylor. c. However, Asteron was entitled to advance a claim for damages for the period from 23 July 2010 onwards (when false statements were made). d. In relation to the period from January 2010 to July 23, 2010, Taylor was not entitled to any payment because of his earnings for that year. Asteron could, therefore, have recovered the payments it made during that period in restitution – however, in this case, Asteron had failed to plead that cause of action.

Accordingly, Asteron’s award was reduced by $51,835.64 on the basis that it was not entitled to claw back the sums paid during that period.

Key points This decision is a useful clarification of an insurer’s rights when it discovers that an insured has made a fraudulent claim. While payments made on a fraudulent claim by mistake may be recovered by an insurer, in practice there may be difficulties in recovering these sums. Insurers should, therefore, take care to fully investigate claims before making any payments. It will also be important for insurers to consider their legal claims for repayment carefully and plead the appropriate causes of action.

Andrew Horne and Nick Frith are partners at Minter Ellison Rudd Watts. www.covernote.co.nz

31

Cover Story

SMALL BROKERS BULLISH ABOUT THE FUTURE Mega-mergers have dominated the insurance broking industry in recent years, but what does consolidation mean for NZ’s smaller, independent businesses?

I

n the middle of October, global insurance broking giants Aon and Willis Towers Watson formally sought New Zealand approval for their US$30 billion merger, a deal that will reshape the international insurance advisory industry.

The combination of the two companies accelerates years of consolidation in the insurance broking sector, with the biggest companies across the globe looking to build size and scale in the new broking landscape.

The two international companies have a significant presence in New Zealand; both Aon and WTW operate regional offices across the North and South Islands. It is unclear how the merger will impact New Zealand’s network of smaller, independent brokers, but it is likely to ramp up pressure in the market.

The Aon-Willis deal follows a host of other mergers in the broking space over the past few years. Marsh acquired JLT for US$5.6 billion last year, while NZ broker Crombie Lockwood was acquired by New York-listed Gallagher in 2014, bringing a well-known Kiwi name under the umbrella of a US giant.

There are a dwindling number of large players in the NZ market.

In light of the frenetic deal activity and consolidation, how will smaller businesses cope? Do they face a tough future in the era of the megabroker? And will small companies be able to operate effectively under the new financial advisers’ licensing regime?

Dr Michael Naylor, a senior lecturer in finance and insurance at Massey University, says he “can’t see consolidation having a major impact” on the smaller independent adviser businesses in New Zealand.

Naylor says the market remains “quite competitive”, but believes broader industry changes, such as the emergence of new technologies and artificial intelligence in the insurance market, will have a greater effect on the industry in the years to come.

In the near-term, Naylor says the new licensing regime will be a 32

December 2020

challenge for advisers.

“It will be more demanding, with emphasis on better customer outcomes and customer service. It can impose a cost. It does mean that brokers will have to start working on their internal systems.”

Mel Gorham, chief executive of IBANZ, says smaller broker businesses continue to take consolidation “in their stride”.

“There’s a marketplace for all brokers, and the industry is incredibly dynamic,” she said. Gorham believes smaller operators will continue to thrive, most are part of larger networks, which offer support, size, and scale, to compete.

The likes of NZbrokers, Steadfast, Insurance Advisernet, and PSC Connect provide backing to smaller businesses so they can compete with better-resourced larger brokers.

While consolidation may be the talk of the industry at the moment, the biggest challenge for small and independent brokers is the threat of looming new regulation.

Changes under the Financial Services Legislation Amendment Act, due to come into force next March, will shake-up the industry, with a new licensing regime for advisers and greater regulatory compliance around customer disclosure and quality financial advice.

Gorham says she’s “concerned about the level of administration and requirements under the new regime”: “They are being passed to every Financial Advice Provider [license holder], so if you want to be a FAP under the new regime there will be a considerable impact.”

While some smaller businesses will choose to take on their own FAP license, many small brokers will be able to work underneath the license of their network, shifting some of the compliance and regulatory burden to their larger network partner, allowing them to focus on the customer.

Gorham believes smaller broker businesses have a bright future despite growing consolidation in the sector. She says New Zealanders often prefer a local broker relationship.

Cover Story

NEVER UNDERESTIMATE THE DESIRE TO WORK WITH LOCAL PEOPLE. ONE POSITIVE TAKE OUT OF COVID-19 IS THAT PEOPLE WANT TO BUY NZ AND KEEP LOCAL. A LOT OF CLIENTS WANT SOMEONE THEY KNOW WHETHER THAT PERSON WORKS FOR A LARGE INTERNATIONAL OR A SMALLER OR LOCALLY OWNED BROKERAGE.

"Never underestimate the desire to work with local people. One positive take out of Covid-19 is that people want to buy NZ and keep local. A lot of clients want someone they know whether that person works for a large international or a smaller or locally owned brokerage."

Regulation, rather than consolidation, is likely to be the most pressing issue, she says: “I think there’s a concern around the regime and a lack of clarity about what is required of advisers.”

How do independent brokers feel about the current landscape?

William O’Brien, brokerage manager at Montage, based near Auckland, doesn’t expect the rampant consolidation to have a massive impact on the independent NZ broker market.

“A lot of people prefer smaller firms they can pick up the phone and talk to,” he says. “I’ve managed to bring a few clients in from the larger firms because clients want a relationship.”

O’Brien’s firm is part of the NZ Brokers network, and is weighing up its options under the new regime. The firm may take its own FAP license or merge with another company to build scale, he says.

“A lot of people are deciding to do it [take a FAP] themselves,” he says. “But for many smaller players, there isn’t a lot left after all the bills have been paid, so they may be looking at the cost and time element [from the new regulation].”

Jo Mason, chief executive of NZ Brokers, a 49-member strong adviser network, says smaller businesses would feel “more threatened” if they weren’t part of a larger group or network.

“Joining a network allows us to act as a big boy on their behalf,” She says. “Advisers can maintain independence and get the benefits of a large business.”

Mason believes smaller and independent brokerages will maintain a competitive advantage over larger corporates in NZ, with SMEs more likely to seek a close personal relationship.

“Most businesses don’t want to deal with a branch manager of a large

corporate; they want to speak to a fellow local business owner.”

She says small, independent advisers often have a wider range of insurer options, rather than being “locked into facilities” with one product provider.

Mason also argues that executives at merged companies can often “take their eye off the ball and become internally-focused”, creating business opportunities for smaller rivals.

Jason Smith, of P&C Insurance brokers in Feilding, which has about 2000 rural, domestic, and SME clients, believes regulation is the main focus for smaller businesses right now.

“Consolidation has always been a thing, and it just continues,” he said.

Smith, who is part of the Steadfast network, believes it’s vital for broker businesses to be part of a network for “backup” when the new regulatory regime comes around.

P&C, founded in 1991, will take its own FAP license, but says many businesses will benefit from having the licensing support of their network and working under a network FAP. “Being part of a network will help companies meet their requirements. If you’re not part of one, it will be a struggle.”

He expects NZ’s independent industry “will continue to thrive”, and predicts we may see more brokerages emerge from the embers of mega-mergers.

“You may see someone who worked for a large corporate go out on their own,” he says. “With every change, there’s always an opportunity.”

Smith is bullish about the future, and notes a trend to “buy NZ and buy local” since Covid, with local businesses choosing to support independent brokers rather than place their business through a large corporate.

“It’s quite a movement, and people want to support local businesses,” Smith adds. www.covernote.co.nz

33

FSCL Case Study

No cover in place

A

woman bought a new house in 2018. She asked her insurance broker to arrange home and contents insurance for the property.

When she filled out the application form, she omitted a few details about locks and the alarm system because she needed to be at the property to provide them. She noted on the form she would provide these details once she had moved in. The broker told her everything in the form “looked fine”.

The broker couldn’t progress her contents cover without the missing details, and forwarded her the details of her home insurance policy which was called a “Maxi-cover” policy. She paid the premiums due.

A year later, a valuable bracelet worth about $4000 was stolen from her house. She asked her broker for a claim form. The broker told her she didn’t have contents insurance in place so she couldn’t make a claim.

She thought this was unfair because she had asked her broker to arrange contents insurance cover and didn’t know her application had been unsuccessful. She complained to FSCL.

read the Maxi-cover policy and queried the lack of contents cover with them if she had wanted to progress it.

FSCL reviewed all the correspondence between the client and the broker, along with the Maxi-cover policy.

Insurance brokers have an obligation to act with reasonable care, diligence and skill.

FSCL agreed with the client it was misleading for the broker to advise “everything looked fine” after she provided her application form. It didn’t agree she should have known the missing details on the form were key to getting contents cover. Acting with reasonable skill, care and diligence, the insurance broker should have highlighted to the client that her contents cover application had been unsuccessful and told her the missing details were required to progress it further. FSCL also thought the word "Maxi-cover" could suggest there was more than one type of cover in place.

However, FSCL also thought the client had contributed to her loss.

She assumed the Maxi-cover policy included both home and contents insurance, because the broker didn’t tell her she didn’t have contents insurance. Even though she missed details in the application form, she didn’t realise these were key to getting contents cover. In any case, the broker had assured her “everything looked fine” in the application form.

The broker said they thought the client should have known the missing details were key to getting contents cover and should have followed them up to progress her application. The broker also thought she should have

She could have followed up the missing details once she was able to. FSCL also thought a reasonable person would have looked at their insurance policy to check they had the right cover in place. If she had looked at the Maxi-cover policy, she could have queried the lack of contents cover.

FSCL recommended the insurance broker compensate the client for two-thirds of her claim, taking into account one-third of contributory fault on her part. The parties agreed this was a fair outcome and the complaint was resolved.

Value for money?

T

he insured bought his first car from a motor vehicle dealer for $8500. The dealer, acting as a agent for the lender, arranged the loan and included both mechanical breakdown insurance and guaranteed asset protection insurance without discussing this with him. He assumed both were compulsory and did not query their inclusion with the dealer.

A short time later the car’s lights stopped working and the insured took the car to the dealer’s mechanic. The mechanic fixed the lights but said each light was a separate claim and fell beneath the $200 policy excess. Then there was a problem with car’s exhaust, and the mechanic said the policy excluded any problems relating to the exhaust.

The man started to wonder what the insurance did cover, googled the insurance and came across a Consumer NZ article which confirmed his

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December 2020

view that the insurance was unnecessary and not good value for money.

The man complained that he was: misled about what the policy covered and did not cover, misled about the cost of the insurance, not told that the excess would apply to each individual fault, given the impression the insurance was compulsory and not given a copy of the policy.

The dealer responded that it had given the man all the relevant information and he had signed the loan agreement accepting the insurance. He did not accept this response and complained to FSCL. When FSCL advised the dealer that it had started an investigation, the dealer responded immediately offering to refund all the man’s premiums, a little over $2000.

He accepted the settlement and the complaint was resolved.

FSCL Case Study

Pandemic problems I

n March 2020, a couple were overseas in the United Kingdom when they heard the call from the New Zealand government to return home due to the Covid-19 pandemic. Although they were intending to travel home on April 6, 2020, they were able to bring their departure date forward to March 24, 2020. After checking with their insurer that they had cover, they abandoned their plans to fly home through Singapore, with a side trip to Bali, and purchased new, more expensive tickets, to fly straight home through Canada.

Fortunately, they received their money back from the cancelled tickets, but the new tickets cost $7300.

The pair’s insurer accepted their claim but, from the couple’s perspective, did not pay the full amount of their loss. They complained to FSCL. They calculated that the insurer owed them $4900. They reached this figure by subtracting the original cost of their tickets home ($2400) from the cost of the new tickets flying through Canada ($7300).

The insurer calculated that it owed the couple $3700. The insurer deducted the full cost of the refunded tickets, $3600, which included the cost of the tickets to and from Bali from the new tickets flying through Canada ($7300).

The insurer referred to the policy wording which stated “…we will pay up to the policy’s maximum benefit for reasonable additional travel and accommodation expenses ... The amount claimable will be less any amounts refundable on unused tickets.”

The pair did not accept the insurer’s explanation, saying that no one

would fly via Bali to return to New Zealand. The trip to Bali was a side trip, requiring a return flight to Singapore. They said the insurer should only deduct the cost of the direct flight from the United Kingdom to New Zealand from the cost of the replacement tickets.

Under the policy the insurer agreed that if the couple were unable to complete their journey due to circumstances beyond their control, the insurer would pay the reasonable additional travel and accommodation expenses, less any refunds from unused tickets.The literal interpretation suggested the insurer’scalculation was correct. However, when this clause was read in the context of the section as a whole, it was our view that insurer was only entitled to deduct the cost of refunded tickets for the same or similar services from the additional travel expenses.

When comparing their planned trip home with their actual trip home, it was FSCL’s view that the flight from the United Kingdom to New Zealand, through Singapore, was similar to their actual flight through Canada. As there was no diversion on the Canada trip that could be compared to the diversion to Bali, FSCL found that the insurer could not deduct the refunded tickets to Bali from the amount payable under the claim.

FSCL suggested that the insurer reconsider its position and pay the claim as calculated the insured. The insurer agreed, and paid the couple $1200, being the difference between the amount the insurer had already paid ($3700) and the true cost of the claim ($4900). www.covernote.co.nz

35

IFSO Case Study

Caught out by carpet excess

T

he insured held insurance on her house.

In April 2019, she made a claim to the insurer, because her dog had vomited and had diarrhoea, damaging the carpet at the house over the course of a day.

The insurer accepted the claim.

There were multiple areas of damage in many areas of the house.

The insurer assessed the claim by dividing it into four areas: the lounge/dining area including the stairs and upstairs landing; the hallway; the bathroom/toilet area and the upstairs bedroom. The insurer paid $5874.40, which was the cost to replace the carpet in all areas, except for the bathroom/toilet area as the damage there did not exceed the excess.Three policy excesses were deducted from this amount, a total of $1200.

The woman disputed the insurer’s decision to apply three excesses to the claim. She said the insurer paid her the cost of synthetic carpet, not the cost to replace her wool carpet, and she also wanted the insurer to pay her compensation for stress.

IFSO said the policy allowed the insurer to deduct an excess of $400 from the claim for each incident. The policy defined incident as “something that happens at a particular point in time, at a particular place and in a particular way”.

Where there were a number of individual losses (as in this case, each 36

December 2020

area of damage to the carpet), for them to be regarded as resulting from a single incident, there must be a close connection between the losses, in terms of time, location, cause and motive.

The insured said all the vomiting/diarrhoea occurred over the course of one day. However, it happened at different times during the day and, therefore, the IFSO case manager did not believe all the damage could be regarded as the same incident.

An incident is what happened, as opposed to the underlying cause for what happened.

The dog’s vomiting/diarrhoea was the underlying cause; each time the carpet was damaged was a separate incident. It was reasonable for the insurer to apply three excesses, rather than a single excess.

The insured said she had good wool carpet which cost $239 per metre.

She said the carpet supplier told her that it could only provide a quote for synthetic carpet at $149 per metre. She said that the insurer paid the settlement based on the cost of a synthetic carpet, which she said was “not nice at all”. The carpet supplier said the client had a fleck wool Berber, and the equivalent synthetic carpet was priced at $149 per metre.

The supplier also stated that he had said to her she might want to go to a synthetic carpet as it would wear better and clean up more easily.

IFSO said the insurer paid the cost of replacing the carpet and was not responsible for the fact that the client did not like the carpet.

IFSO Case Study

Stolen watch disappointment A

couple arranged for contents insurance through their bank.

Two years later, a bank employee telephoned the insurer on behalf of the woman, inquiring about specifying a lady’s watch. During this telephone discussion, the employee advised the insurer that the watch was worth $2900. As the policy limit was $3000 for a single item of jewellery or watch, the insurer advised that the watch did not need to be specified on the policy.

A few months later, the bank employee again telephoned the insurer, and inquired about specifying a diamond ring. The insurer advised the bank employee to tell the client that, in order to specify the ring, she would need to provide a valuation. The bank employee told the insurer that he had referred her to a jewellery valuer.

The next year, the bank employee telephoned the insurer regarding the ring. A valuation was faxed to the insurer. The watch was raised in this telephone discussion; however, as it still had an estimated value under the policy sub-limit of $3000, the insurer advised that it did not need to be specified. The insurer said that it could be a good idea to get a valuation for the watch, given its value was close to the $3000 policy limit.

Subsequently, the couple's house was burgled and items of contents were stolen, including the watch.

The woman made a claim under the policy.

A jeweller valued the watch, noting that the particular model was unavailable and that the closest equivalent had a replacement value of $6375.

The insurer accepted the claim, but advised that the policy limit of $3000 would apply to the watch, because it was not a specified item on the policy.

IFSO investigated and found the watch was never specified on the policy schedule. In determining whether the insurer or its agent, the bank, should have listed the watch as a specified item on the policy, the case manager reviewed the recordings of the relevant telephone discussions in

which the watch was mentioned.

From the recordings, the case manager believed the woman had informed the bank employee that the watch was either worth $2900, or that she bought it for $2900. She said she told him she bought it in Singapore and paid SGD $2900 for it. The insurer said it was not necessary to specify items that were valued below $3000. However, it also said that it would be good to get a valuation if she felt it might be worth more than that.

The woman stated that the bank employee did not advise her to obtain a valuation for the watch.

Unlike a court of law, the IFSO Scheme cannot assess oral credibility, but must consider the documentary evidence available.The case manager was unable to make a decision about whether the bank employee advised the woman to get a valuation for the watch; there was no documentary evidence nor recorded conversations about this issue. However, it was clear that the insurer advised the bank employee to tell her to get a valuation for the watch.

Having gone through the process of valuing and specifying the ring, the case manager believed the woman was aware, or ought reasonably to have been aware, that the watch needed to be valued to determine its sum insured, before it could be specified. The insurer was only informed that she bought the watch for $2900.

The case manager believed the insurer correctly advised that, if this indeed was the value of the watch, it did not need to be specified, because it was below the policy limit. Moreover, the insurer suggested she get a valuation for the watch, given it was believed to be valued so close to the policy limit.

She could have obtained a valuation for the watch, just as she had done with the ring, so that it could be specified for a sum insured of more than $3000. However, she did not specify the watch and the insurer was entitled to rely on the policy terms to limit its liability to the policy limit of $3000 for the watch. The complaint was not upheld. www.covernote.co.nz

37

Ask an Expert

Backtracking on settlement QUESTION…

QUESTION…

We have a claim ongoing at the moment where an insurer has backtracked on their settlement offer and refusing to honour what they originally offered.

A client’s TV was damaged and a claim was lodged and accepted, with the purchase order being offered through Noel Leeming. We sent this confirmation through to our client, who replied with additional questions, being: - Has the quote I sent through ($7000) been accepted - What is involved with a purchase order We then forwarded these queries to the claims handler, and this was their exact response (copied from the email) "Yes the claim is been accepted for $6999.00 less excess $400.00. Means Noel Leeming will contact the insured directly and they can replace the TV like for like."

We then sent this offer through to the client, and they have responded with acceptance and requested the purchase order be sent.

When the client has gone to Noel Leeming to pick up their new TV, they have been informed that the TV offered for replacement is a different model, worth $2399, and that they can't get the TV they thought they were approved for. They have also been forced by Noel Leeming to pay their excess before they would deal with the client, and our client is now $400 out of pocket and still doesn't have a TV. We have then gone back to NZI who are stating that this is the correct replacement model, and that the claims handler made a "human error" and they would not be honouring the $6999 TV as replacement. We have taken this up through the claims managers and they are all refusing to provide anything over and above the $2399 TV. I'm just wondering whether there is an consumer law that may apply to this, and where the insurer stands, with the offer and acceptance nature of the claim progression - The insurer offered and confirmed this offer was correct, after it was queried (being a purchase order to Noel Leeming for the quoted figure of $6999) and our client has accepted the settlement via purchase order based on this offer?

We have had several instances recently where insurers have advised that a claim has been accepted, and we have notified our client, and then a little way down the track, they have reversed that decision, having received a loss adjuster's report.

In the most recent case, the claim was for water damage, and, having confirmed acceptance, the insurer themselves engaged a cleaning company to clean and dry the area.

This had already been done when they advised that they were not going to accept the claim after all.

Our client is now being charged those cleaning costs, which, if the claim had been accepted, would have been included as part of the excess (costs were actually less than the excess).

I've been told that legally, if the client hasn't suffered any loss as a result of the initial acceptance, then the insurer does not have to honour the acceptance....could you clarify this for me please.

The issue in this case is that if the client had been told at the outset that this was not a valid claim, she likely would not have incurred the cost of a cleaning company herself, and therefore we believe that the insurer should pay this cost. What are your thoughts?

REPLY… CROSSLEY GATES If there has been a specific offer by the insurer to settle the claim by paying $X, or the equivalent thereof, to the insured (effectively), and the insured has accepted that offer, there may be a binding contract of settlement of the claim that the insurer is bound by.

I add that if the insurer has made a genuine mistake, and $X is clearly wrong, your client may win the battle but lose the war by relying on his or her strict legal rights to force payment. I doubt the insurer will be offering renewal.

38

Insurers changing position

December 2020

REPLY… CROSSLEY GATES I will assume the initial acceptance of the claim was an innocent error based on the limited information available and the subsequent declinature is legally correct - the claim never was covered.

Working backwards, if the claim never was covered the subsequent declinature of it is not a breach of contract. It is in accordance with the contract. Does the initial acceptance of the claim give the insured any legal rights?

The insurer made a representation to the insured that the claim was covered. Ultimately, this representation was incorrect. If the insured changed her position in reliance on this to her detriment, (perhaps made some financial commitment) then the insurer ie: stopped from denying its representation and must recompense the insured. It sounds like this didn't happen here.The insurer went ahead and contracted a company to clean the premises. That contract is probably between the insurer and the contractor. I don't see how the insurer can now “assign” that contract to the insured. The insurer will have to meet it. Unless there was some element of lack of good faith by the insured that led to the initial incorrect position, the insurer is simply stuck with that position. At least it doesn't have to pay the balance of the claim.

Ask an Expert

Dog on driveway QUESTION… Our insured was contracted to perform some plumbing work on a property. An employee of the insured elected to take their dog to work. The dog escaped and ran over a neighbour's property that was under construction. The dog ran across the wet concrete driveway causing $15,000 worth of damage. The insurer of the contract works policy has accepted the claim but is seeking recovery.

A public liability claim was made to the plumbing companies insurer on the basis that the employee who by definition is an insured was vicariously liable for the damage as the owner of the dog.

The insurer has said that the policy will not respond as the “incident has nothing to do with the insured's business activities”.

Is the insurer correct in their response? Are they bound to help our client deny liability if they don't believe they are negligent?

REPLY… CROSSLEY GATES Under section 63 of the Dog Control Act 1996 an owner of a dog is liable for any damage done by the dog. Therefore, the employee is probably liable for the damage to the wet concrete.

It is unlikely that vicarious liability applies to a purely statutory remedy like this. This means the employer may not be liable, but the employee is an insured in his own right and can claim directly as such.

The public liability policy will limit cover to liability in connection with the plumbing business.This requirement is interpreted broadly by the courts.There only needs to be some link between the business and the alleged liability for it to be satisfied. Here the employee was, presumably, working for the business when the dog escaped. I believe that is probably a sufficient link with the business for the policy requirement to be satisfied.

Threshold for an interruption claim QUESTION… A motor vehicle dealership holds a BI policy and insures their full gross profit. The operative clause reads: ".....the insurer agrees to indemnify the insured for loss resulting from interruption to or interference with the insured's business in connection with damage during the period of insurance to any buildings or other property owned, used or leased by the insured, in accordance with the terms of the policy."

Given the business activity, the insured's stock in trade is insured under a CMV policy. It's conceivable that an insurable event gives rise to a claim under the motor policy but not the material damage policy (which insures plant and incidentals kept within the building).

In this scenario, would a claim for property damage to the vehicles only (which prevents the insured from selling them) be sufficient trigger for them to have a BI claim?

REPLY… CROSSLEY GATES There is usually only meant to be cover under the BI Policy if the property damaged is: 1. Insured under the MD policy, or 2. Would be if the insured owned it.

MD policies don't usually insure vehicles, although that policy does cover stock in trade, so are they covered this way? If not, I suggest you need an endorsement to specifically bring the vehicles within the BI Policy insuring clause.

Do you have a question for our experts?

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

www.covernote.co.nz www.covernote.co.nz

39

39

Feature

Market for D&O insurance hardest in living memory D

irectors in New Zealand and Australia are facing the most volatile and restrictive liability insurance market in living memory, according to a report released by the Institute of Directors (IoD) with Marsh and MinterEllisonRuddWatts. And there are no signs of it improving anytime soon.

“Regionally, D&O claims payments have dwarfed the total insurance premium pool as litigation funders become more commonplace and as New Zealand’s regulatory environment, particularly our class action regime, evolves,” said MinterEllisonRuddWatts partner Andrew Horne.

As a result, Marsh chief client officer Steve Walsh said: “insurers are increasingly cautious when considering renewals or applications, often requiring greater access to organisations and their boards.

Premiums and excesses are climbing and some insurers are exiting the market altogether “Directors should be ready to play an active role in securing the appropriate liability coverage for themselves and the organisations they represent. This could include meeting with insurers to provide insights into the company and board structure, as well as their own competency and qualifications.”

As directors and entities come under economic and structural pressure amid a more litigious backdrop, D&O insurance was more crucial than ever, said IoD governance leadership centre and membership general manager Felicity Caird.

“Good governance is integral to successful, sustainable organisations. Strong directors leverage their experience and professional instincts to move an organisation forward; it requires focus and often courage. This is difficult if they’re constantly looking over their shoulder, worrying about personal liability,” Caird said.

“And it’s not just an issue for listed or private companies. Not-for-profits (NFPs) are particularly vulnerable, with many already facing financial challenges as fund-raising opportunities shrink amid Covid-19 restrictions.”

Walsh said New Zealand insurers had so far been relatively sympathetic to the NFP sector when it came to renewals and premiums. “But it’s certainly been tougher in other jurisdictions, so the local industry could well change tack. It’s important that all organisations strike the right balance between the rising costs of insurance and the appropriate level and mix of protection,” he asid.

Horne confirms that liability risks differ across industries and organisational complexity, so entities need to understand exactly what a specific D&O insurance policy offers. “Some key issues directors should be looking for are; whether coverage includes investigation costs, separate defence costs, and adequate cover for individual representation, as well as whether it excludes insolvency-related claims or cover for capital raising or claims by majority shareholders.

“Not all D&O policies are equal.”

40

December 2020

Feature

Delta signs international deal N

ew Zealand-headquartered insurance business Delta Insurance Group has signed an agreement with London-based specialty Lloyd’s-of-London reinsurance brokers Prospect Insurance Brokers to market and distribute Delta’s Personal Cyber Insurance product outside of Asia-Pacific.

Delta Group chairman and managing director Ian Pollard said the agreement meant the company’s personal cyver (PerCy) insurance offering would soon be available in the UK and Europe through Prospect and will possibly be released into the United States in the future.

Pollard said PerCy, which offered protection for individuals against cyber-risks such as ransomware and data loss, was also available in Singapore and the wider Asian market through Delta’s Singapore office, after launching in the New Zealand market earlier this year.

He said the agreement with Prospect marked another step forward in Delta’s alliance with the specialist UK brokerage. “We’ve been working closely with Prospect for some years and a number of our niche insurance products, such as our Unmanned Aerial Vehicles/Drones insurance, have arisen from our association with the company, while Prospect has also played a significant role more recently in helping us develop PerCy.” Founded in 2010, Prospect Insurance Brokers is an independent insurance and reinsurance Lloyd’s of London broker specialising in binding authority, reinsurance and alternative risk transfer business placed into Lloyd’s, European and international company markets. Prospect’s recent work has included innovative developments in the cyber, cryptocurrency, gig economy, drones and parametric structures areas. The company was acquired by private London-based brokerage, Costero Brokers, in August 2020.

Prospect managing director Jamie Webb said the agreement cemented a strong collaborative relationship between the two businesses. “Delta and Prospect have a very similar view of the insurance world and a shared desire to make great products for the times. We look forward to PerCy catching on in our markets so that people can actively reduce their exposure to the recent, dramatic increase in cyber-crime.”

Pollard said the agreement and expansion of the alliance with Prospect was an exciting development for Delta. “This gives us a considerable step up in our global reach with that UK-Europe market opening up, and we are also very hopeful of expansion into North America through Prospect’s parent company Costero.”

Delta’s personal cyber insurance was very much a product for the times and has attracted considerable interest both here and in Asia since its NZ release, says Pollard.“There was already a significant growth in risk to people in their homes from cyber-criminals and that has soared since COVID-19 arrived. According to cyber security company InPhySec, globally, around 64% workers are now remote, a 148% increase with the pandemic, and there’s been an almost 100% increase in the personal use of managed devices.”

He said the research also showed a 161% increase in traffic to highrisk apps and sites and a 600% increase in traffic to porn sites under COVID-19, while cloud-based delivery of malware, rather than webbased delivery, now counted for 63% of incidents.

Pollard said PerCy provided a one-stop solution, accessed through an integrated customer portal provided by NZ-based Insurtech company Sentro, that also enables clients to access a unique personal riskassessment and monitoring tool supported by DynaRisk, and general insurance policy administration. www.covernote.co.nz

41

Feature

Lloyd’s outlines pathway to clarity S

pecialist insurance and reinsurance market Lloyd’s has published a new report, Building simpler insurance products to better protect customers, which sets out a number of ways the global insurance industry could remove complexity and provide enhanced coverage clarity for their customers.

The Covid-19 pandemic has set in motion irreversible societal change around the world, calling for new insurance solutions and greater protection for customers’ short, medium, and long-term needs.

As countries and businesses begin to reopen cautiously and recover from the immediate economic and societal impacts, the insurance industry must take this opportunity to improve the way it protects its customers.

While the global insurance industry’s response and recovery efforts continue to expand through claims payments, charitable donations, and product innovation, there have been distinct complications that have arisen from pandemic insurance coverage uncertainty and resulting court disputes between insurers and their customers.

This report, developed in collaboration with Lloyd’s Global and UK Advisory Committees, has been published to support the global insurance industry’s efforts to better serve its customers through simpler products that promote enhanced understanding of coverages. It provides three important recommendations that the industry should implement to respond to the challenges that Covid-19 has presented: • Leverage and build on the application of existing leading practice,

including a linguistics review of customer documentation - for

both simple and more complex products.

42

December 2020

• Invest in continuous product design and delivery innovations,

including data-led policies and digital contracts, as well as

exploring more radical options like parametric or outcome-based insurance.

• Involve customers directly in product design to build simpler,

more relevant products for their changing needs and post

pandemic risk profiles.

Alongside the global industry recommendations, Lloyd’s is taking its own affirmative action which includes reviewing how products are developed, designed and distributed, as well as reaching out to trading partners, risk managers and customers, so it can proactively implement changes across its global marketplace to enhance customer outcomes and more effectively meet their needs.

The report also looks at the steps the insurance industry and regulators have already taken towards addressing issues around insurance product complexity and clarity of coverage, including regulation, guidance and codes of conduct.

Chief executive John Neal said:“As many businesses around the world evolve to withstand the continued impacts of the Covid-19 pandemic, including radically changing their business models, the insurance industry must urgently reassess how it can better serve and support its customers. While the societal and economic impacts of the pandemic are of a scale that has never before been experienced, it has reinforced the global industry imperative to accelerate its efforts to build simpler insurance products that are more easily understood by its customers.”

Professional

Professional Development: Professional IQ College

College

WINNER: Ivana Vink "Ivana Vink has worked in the insurance industry for over 9 years in commercial and rural insurance. She is currently employed as a broker support with Vercoe Insurance Brokers Ltd in Morrinsville.

In her role Ivana provides sales and admin support, handling potential and existing clients queries for farm, commercial and domestic insurance. She is in regular contact with underwriters and negotiates policy terms both mid-term and at renewal time. Prepares market comparisons, pre-renewal schedules and assists with liability declarations.

Building long lasting relationships with clients is very important to her. Having the right support from her fellow colleagues and knowledge of the current market is also vital.

Ivana believes that obtaining the New Zealand Certificate in Financial Services Level 5 will provide her with a right qualification to further her career and gain necessary knowledge to make her successful in her role."

Ivana Vink pictured with Adrienne Madden, co-owner and Insurance Broker (Snr Assoc ANZIIF, Fellow IBANZ, QPB) of Vercoe Insurance Brokers.

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Contacts: IBANZ Corporate Company List PIQ BOARD

IBANZ BOARD Roger Abel (Vice President) Rothbury Group Limited PO Box 1596 Shortland Street Auckland 1140 Mob: 021 952 230 roger.abel@rothbury.co.nz

BrokerWeb Risk Services Limited PO Box 7264 Sydenham Christchurch 8240 Tel: 03 348 9802 Mob: 027 451 8098 jill.comley-forbes@bwrs.co.nz

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

David Crawford Director NZ Insurance Advisernet NZ Ltd PO Box 37670 Market Road Auckland 1151 Tel: 09 926 2062 Mob: 021 905 537 dcrawford@ianz.co.nz

Craig Buckle National Manager, Corporate Risk Solutions Willis New Zealand Ltd PO Box 369 Auckland 1140 Tel: 09 356 9347 Fax: 03 358 3343 craig.buckle@ willistowerswatson.com Neil Cousins Broker Services Manager Steadfast NZ Ltd PO Box 180 Shortland Street Auckland 1140 Tel: 09 309 7942 Mob: 021 377 942 neilc@steadfastnz.nz Jill Comley-Forbes Chief Broking Officer

Duane Duggan (Immediate Past President) Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West Auckland Tel: 09 3574805 Mob: 021 833 286 duane.duggan@ crombielockwood.co.nz Samuel Kerr Insurance Broker SHARE PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Mob: 021 980 435 sam.kerr@sharenz.com

Ramesh Mavani Manager Insurance People (Fire & General) Ltd PO Box 47218 Ponsonby Auckland 1144 Tel: 09 360 5616 Mob: 021 078 3465 ramesh.mavani@ insurancepeople.co.nz Jo Mason (Vice President) CEO NZ Brokers Management Ltd PO Box 334012 Sunnynook North Shore City Auckland 0743 Tel: 09 869 2785 jom@nzbrokers.co.nzz Angus McCullough General Manager Marketing & Chief Officer Aon New Zealand PO Box 1184 Shortland Street Auckland 1140 Tel: 09 3629059 angus.mccullough@aon.com William O’Brien Manager Montage General Insurance PO Box 8307 Symonds Street Auckland 1150 Tel: 09 373 0700 Mob: 021 737572 william@mont.co.nz

STAFF

David Crawford (Chair) Director NZ Insurance Advisernet NZ Ltd PO Box 37670 Market Road Auckland 1151 Tel: 09 926 2062 Mob: 021 905 537 dcrawford@ianz.co.nz Andrew Gunn Strategic Partnerships Manager Insurance & Financial Services Ombudsman Scheme PO Box 10-845 Wellington 6143 Mob: 021 684 355 andrew@ifso.nz Angi Mann Contract Compliance and Learning and Development Specialist Auckland Mob: 021 293 1724 factnz2012@gmail.com Jason Smith Managing Director Property & Commercial Insurance Brokers PO Box 4 Feilding 4740 Tel: 06 323 8820 Mob: 027 293 8724 jase@pcinsurance.co.nz Gary Young Auckland Mob: 027 543 0650 gary@ibanz.co.nz

IBANZ

Mel Gorham Chief Executive IBANZ DDI: 09 306 1734 Mob: 021 0852 5568 mel@ibanz.co.nz

Sylvia Heywood Academic Manager Professional IQ College DDI: 09 3061737 sylvia@professionaliq.co.nz

Robyn Gosden Finance & Office Manager DDI: 09 306 1733 Mob: 027 275 2477 robyn@ibanz.co.nz

Karen Scard Administration Manager DDI: 09 306 1738 karen@ibanz.co.nz

Lisa Herbison Student Liaison DDI: 09 600 5712 lisa@professionaliq.co.nz

Marianne Taljaard Student Liaison Manager DDI: 09 600 5710 marianne@professionaliq.co.nz

Physical address: Unit 4D, 2B William Pickering Drive, Rosedale, Auckland 0632

June Wang Student Liaison DDI: 09 306 1735 june@professionaliq.co.nz

Mailing address: PO Box 302504, North Harbour, Auckland 0751 Toll free: 0800 306 173 Website: www.ibanz.co.nz

Rod Severn CEO Professional IQ College DDI: 09 306 1736 Mob: 021 749 202 rod@professionaliq.co.nz December 2020

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

CoverNote is published quarterly by IBANZ, the Contact Robert Johnson on: Insurance Brokers Association of New Zealand. e-Mail: robert@benefitz.co.nz All correspondence should be addressed to: Phone: 09-477 4702 CoverNote, Mobile: 0274-970-712 PO Box 33-1630, Takapuna, Auckland.

44

Decembere 2020

Cyber attacks and the insuranc e response New insuranc e boss navigat ing change Small brokers bull about the futu ish re

visit www.cov ernote.co and keep up-t o-date with .nz news and artic live les from IBANZ its members , and the indus try.

Contacts: IBANZ Corporate Company List IBANZ CORPORATE COMPANY LIST Abbott Group

Christchurch

Insurance People (Fire & General) Limited

Auckland

Adams Trimmer Insurance 1992 Ltd

Whangarei

Insure 247 Ltd

Auckland

Advance Insurance Services Ltd

Paeroa

JRI Limited

New Plymouth

Affiliated Insurance Brokers Ltd

Wellington

Luxor Insurance Brokers Ltd

Auckland

AIB Group Insurance Ltd

Lower Hutt

Malcolm Flowers Insurances Ltd

Taupo

AIM Associates Ltd

Auckland

Marsh Ltd

Auckland

Albany Insurance Services Ltd

Albany Village

Matt Jensen Insurance Brokers Ltd

Taupo

Amicus Brokers Ltd

Christchurch

McDonald Everest Insurance Brokers Ltd

New Plymouth

Aon New Zealand

Auckland

Moneybox GI Limited

Wellington

Apex General Ltd

Auckland

Montage General Insurance Ltd

Auckland

Atlas Insurance Brokers Ltd

Christchurch

Multisure Ltd

Auckland

Austinsure Ltd

North Shore City

MW Insurance

Auckland

Avon Insurance Brokers

Christchurch

National Credit Insurance (Brokers) NZ Ltd

Auckland

Baileys Insurance Brokers Ltd

Auckland

Nelson Marlborough Insurance Brokers Ltd (NIB)

Nelson

Bay Insurance Brokers Ltd

Tauranga

Neville Newcomb Insurance Brokers Ltd

Auckland

Bridges Insurance Services Limited

Hamilton

Northco Insurance Brokers Ltd

Masterton

Broker Direct Services Ltd

Christchurch

Northcrest Insurance Brokers Ltd

Auckland

BrokerWeb Risk Services Limited

Auckland

O'Connor Warren Insurance Brokers

Tauranga

Builtin Insurance Brokers Limited

Tauranga

OFS Insurance Brokers Ltd

Dunedin

Builtin New Zealand Ltd

Tauranga

Omni Fire & General Ltd

Auckland

Cambridge Insurance Brokers Ltd

Cambridge

Paramount Insurance Agencies Ltd

Auckland

Capital Risk Solutions Limited

Wellington

Partridge Advisory Limited

Auckland

Card Marketing International Ltd

Wellington

Paterson & Co NZ Ltd

Auckland

Cartwrights Ltd

Ashburton

Penberthy Insurance Ltd

Auckland

Certus Insurance Brokers NZ Ltd

Auckland

PIC Insurance Brokers Ltd

Manukau

Coast Insurance

Whangaparaoa

Primesure Brokers Ltd

Auckland

Coastal Insurance Brokers (TGA) Ltd

Tauranga

Property and Commercial Insurance Brokers

Feilding

Commercial & Rural Insurance Brokers Ltd

Alexandra

Protekt Insurance Brokers 2008 Ltd

Auckland

Crombie Lockwood (NZ) Ltd

Auckland

Provincial Insurance Brokers Limited

Masterton

Dawson Insurance Brokers (Rotorua) Ltd

Rotorua

PSC Connect NZ Limited

Auckland

Edward Ruys & Co Ltd

Hamilton

River City Insurance Brokers 2000 Ltd

Wanganui

Emerre & Hathaway Insurances Limited

Gisborne

RMA General Ltd

Warkworth

Frank Risk Management

Hamilton

Rothbury Group Ltd

Auckland

FundAGroup Insurance Brokers Limited

Auckland

Runacres Insurance Ltd

Christchurch

Grayson & Associates Ltd

Auckland

SHARE

Auckland

Gregan & Company Ltd

Papakura

Sit & Blake Limited

Auckland

GSI Insurance Brokers

Waitakere

South Pacific Insurance Brokers Ltd

Auckland

GYB Insurance Brokers Ltd

Lower Hutt

Sweeney Townsend & Associates Ltd

Rotorua

Hazlett Insurance Brokers Ltd

Christchurch

Thames Valley Insurance Ltd

Thames

Honan Insurance Group (NZ) Ltd

Auckland

The Advisers 1 Limited

New Plymouth

Hood Insurance Brokers NZ Ltd

Auckland

Thorner General Insurances Ltd

Upper Hutt

Hurford Parker Insurance Brokers Ltd

Hastings

Towes Insurance Brokers Ltd

Te Aroha

Hutchison Rodway Ltd

Auckland

Trevor Strong Ins Ltd

Auckland

ICIB Limited

Auckland

Vercoe Insurance Brokers Ltd

Morrinsville

ILG Insurance Brokers

North Shore City

Vision Insurance (S.I.) Ltd

Ashburton

Ingerson Insurances Ltd

Wellington

Wallace McLean Ltd

Auckland

Insurance Advisernet NZ Ltd

Auckland

Wanganui Insurance Brokers Ltd

Wanganui

Insurance Brokers Alliance Ltd

Invercargill

Willis Towers Watson

Auckland

Insurance Design Limited

Warkworth

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45

The world may have changed.

Our appetite hasn’t.

While the world is still working out how to operate in this post Covid-19 environment, our passion for helping NZ business hasn’t changed. And being New Zealand’s only locally based specialist liability insurer means we are Kiwi at our core. We understand how Kiwi’s operate, and we have the ability to make quick decisions in the best interests of New Zealand businesses. You can count on us to be ready to help.

Because for VL, it’s business as usual.

veroliability.co.nz

New Zealand’s leading liability insurer