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STEADFAST MOVES CLOSER TO LISTING
FOFA WAR: THE TRUCE
INSURANCE IN 2030: BIG CHALLENGES
How the 2011 floods exposed the General Insurance Code of Practice
April/May 2012
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Zurich Australian Insurance Limited ABN 13 000 296 640, AFS Licence No. 232507. 5 Blue Street North Sydney NSW 2060 www.zurich.com.au
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”One brand, a whole world of options.“ Insurance solutions to suit all your customer‘s needs. Zurich provides risk management solutions for all your customers‘ needs. Backed by our global strength, security, integrity and service, our insurance solutions are available exclusively through you, the insurance broker. To learn more, contact your local Zurich Business Manager or visit zurich.com.au
AWHN-006069-2012. ZU21007 IN
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Contents 8 Newsmakers » 12 Code Red » The General Insurance Code of Practice is facing unprecedented political pressure for radical change.
18 Here comes Steadfast Inc »
Brokers give an overwhelming vote in favour of moving to a public listing.
20 Lloyd’s settles in for the Asian Century » The focus for Australian risks may switch over time from London to Singapore, says the market’s AsiaPacific chief.
24 What a key facts sheet could look like » Treasury drafts a consumers’ insurance checklist – but it won’t replace the PDS.
26 UAC: All systems go »
Last year was a good one for underwriting agencies. In a hardening market the outlook is even better.
30 The FOFA war is almost over »
Lobbying by financial planners helped them achieve a limited victory.
32 Insurance in 2030 »
Can the industry keep up with shrinking asset ownership, technological innovation and increased regulation over the next 18 years?
36 Bigger, faster… safer? »
Ocean trade routes are getting crowded, and marine insurers should heed the emerging risks.
38 Good sports, good business »
Why insurers dominate Australia’s billion-dollar sport sponsorship market.
companyNEWS
50 Lower the risk, save your premium » Insurers are getting tougher over truck safety, says Lumley.
52 Vero can D&O »
New policy meets emerging business challenges.
52 Avoiding technology traps »
Axis Specialty expands its lT liability risks cover.
54 Brokers’ expertise enhanced by the web » CGU unlocks greater flexibility with an online quote and bind tool.
54 Cyber risk a growing business threat » Dual upgrades policies to cover technology, older workers and riskier sports.
peopleNEWS
56 Gold Coast convention delivers for Steadfast » 64 An office fit for a king » 66 Lumley serves up cocktail surprise » 68 Zurich takes dining to the Zenith » 69 Underwriters get Gruen Transfer » 70 Allianz musters the troops » 72 Kids, don’t try this at home… » 73 Vero Expo a slam-dunk » 74 maglog »
42 Making a killing »
Somalis have created an insurance market far larger than the piracy business.
44 Claims breakthrough? »
Greg Johnson’s radical new approach could be the innovation loss adjusters have been searching for.
49 No time to hang around waiting »
Australian insurers are searching for their own solutions to the flood mapping dilemma.
April/May 2012
Cover design: Hannah Ngaei
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newsmakers at
Where the premium dollars went
More droughts, more rain The climatic extremes experienced recently in Australia are expected to continue, a new study of long-term climate trends by the CSIRO and the Bureau of Meteorology has warned. The State of the Climate 2012 report predicts an increase in the number of droughts in southern Australia, coupled with an increase in intense rainfall events in many areas. The report identifies a trend towards increased spring and summer monsoonal rainfall across Australia’s north, higher than normal rainfall across Central Australia and a decline in late autumn and winter rainfall across southern Australia. But no significant trends for the total number of tropical cyclones or for the occurrence of the most intense tropical cyclones have been found in the Australian region. The data shows that since the 1950s each decade has been warmer than the previous decade, with Australia’s annual average daily maximum temperature increasing by 0.75 °C since 1910, and the annual average overnight minimum temperature increasing by more than 1.1 °C in the same period. In line with this trend, Australian average temperatures are projected to rise by 1-5 °C by 2070.
Insurers wrote $30.6 billion in gross earned premium for the year to June 30 2011 and incurred claims of $23.8 billion. The Australian Prudential Regulation Authority’s new annual publication, General Insurance Supplementary Statistical Tables, shows that 58% of claims were for home and contents, domestic motor vehicle and fire and industrial special risks (ISR). The report says these classes were affected by catastrophes in the period. Claims from hailstorms in Melbourne and Perth in March 2010 contributed to a gross loss ratio for
home and contents and domestic motor vehicle of more than 90%. The Queensland and Victorian floods in summer 2011 led to high loss ratios, including 153% in Queensland for fire and ISR. Public sector insurers, which are not covered by the Insurance Act, earned $10.2 billion in premiums for the period and incurred net claims of $11.9 billion. However, investment income helped them to a net profit of $500,000, up from $300,000 the previous year. Hail and floods led to high loss ratios, says APRA – March 26 2012
“None of these people are rocket scientists” – Christchurch fraud squad chief John Rae, on householders caught trying to double-dip on claims – March 12 2012
Allianz makes a splash
Australia to see more droughts and flooding rain – March 19 2012
QBE continues to expand
A dam good move
QBE has snared the Argentinian and Hong Kong insurance businesses of global bank HSBC as part of a $US914 million offloading of non-core assets. Just a week after raising $US600 million to offset a $US500 million convertible debt note, QBE announced it has purchased the insurance arms of HSBC Argentina and Hong Kong subsidiary Hang Seng Bank for $US420 million in cash. The deal also includes 10-year distribution agreements. Both businesses will be earnings per share accretive in their first full year and are expected to deliver combined net profit after tax of more than $US40 million before synergies.
The Insurance Council of Australia (ICA) has welcomed the mitigation measures proposed by the Queensland Floods Commission of Inquiry and called on governments to “get moving” on flood mapping. The inquiry recommends the Queensland Government act before the next wet season to ensure a statewide natural hazard risk assessment is completed. Many of the inquiry’s recommendations relating to disaster planning and emergency management concern how information can be disseminated to communities so they can prepare for disaster. ICA Chief Executive Rob Whelan says the 2011 floods have served as a wake-up call to governments and the insurance industry.
QBE expands South American, Asian reach – March 12 2012
ICA welcomes Queensland flood mitigation recommendations – March 19 2012
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Checking insurers’ risk diet The Australian Prudential Regulation Authority (APRA) is increasing its focus on how insurers set their risk appetite after reviews raised questions over the analysis behind risksetting and boards’ involvement with the task. APRA Supervisory Support Division Executive General Manager Helen Rowell told the Insurance Council of Australia Regulatory Update conference in Sydney that discussions with directors and chief execuives had found some boards had “a questionable level of engagement” in setting risk appetite. When APRA reviewed risk appetite statements it found the quality varied from “poor to quite good”. The reviews picked up a lack of analysis using stress testing that supported how an insurer set its risk appetite as well as a disconnect between the statement and its translation into operation. In response, APRA will increase its work on risk appetite and issue guidance to insurers. Insurers’ risk appetite statements lacking, says APRA – February 27 2012
insuranceNEWS
April/May 2012
Allianz Australia has launched a new specialist marine underwriting agency called Allianz Marine & Transit (AM&T). The new division will manage the underwriting, claims and business development for non-pleasurecraft marine in both Australia and New Zealand. The insurer says AM&T will complement Allianz’s pleasurecraftfocused business Club Marine and will use the existing Allianz marine staff in Sydney. Former Associated Marine Insurers Managing Director Stephen Ford (below) will run the new Allianz division. Ford left the Zurich-owned business last year. Allianz launches new marine business – March 5 2012
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London-based insurer Catlin Group is sponsoring a major scientific expedition to study the composition and health of sections of the Great Barrier Reef. The Catlin Seaview Survey will use leading authorities on oceanography and climate change to strengthen the understanding of how climate change and other environmental changes are likely to affect ocean ecosystems. It will be led by the Director of the Global Change Institute at the University of Queensland, Ove Hoegh-Guldberg. Catlin recently completed its three-year sponsorship of an Arctic survey. The new Catlin Seaview Survey of the Great Barrier Reef will begin in September. About 50,000 360degree panoramas from the survey will eventually be accessible on Google Earth and Google Maps. The project will also have a dedicated YouTube channel.
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FIGURE THIS
From the Arctic to the Reef
Statistics on the Christchurch earthquake in the Insurance Council of New Zealand’s annual report, issued in March:
185 Number of people killed in the quakes
100,000+ Approximate number of Christchurch homes damaged – about half the city’s housing stock
7000 Number of homes totally destroyed and red-zoned Tourism Queensland
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Catlin turns focus on Great Barrier Reef – February 27 2012
CGU rebuilds, cuts 600 jobs
For sale: one loss adjuster
Intermediated insurer CGU has begun speaking with staff over plans to cut 600 roles over the next three years under a $75 million realignment of its business. CGU will shave staff numbers by 16% between now and 2015, with 450 roles to be removed by the end of the 2013 financial year. Chief Executive Peter Harmer says while the number of roles within the company will fall from 3700 to 3100, the actual number will be less as employees move within the business. Downsizing is expected to take place across all parts of CGU’s business. The bulk of the company’s 3700-strong workforce is based in Melbourne. Harmer says while most roles would be lost through natural attrition, CGU has budgeted for some redundancy payments.
Financial Services Minister Bill Shorten has told insurers they need to “get with the times” and offer income protection and workers’ compensation insurance to older workers. He told a conference in Sydney that the Federal Government sees insurance as a key factor in helping older Australians stay in the workforce. “At present it is very difficult to purchase income protection and workers’ compensation above certain arbitrary ages,” he told the Insurance Council of Australia-hosted conference. Shorten said the Government understands premiums will be higher for older workers, but that as people live longer and healthier lives some of the age limits on cover need to be raised. With the retirement age moving up to 67, “insurance companies should keep up with the times” and offer insurance to that level or beyond.
Major global loss adjuster Cunningham Lindsey is likely to be sold this year after its two leading private equity owners decided to realise profits. The company’s Australian Director of Business Development Damon Bennett told insuranceNEWS.com.au it’s “business as usual” for clients as the global company is sold. The Canadian-based loss adjuster acquired GAB Robins Australia just over three years ago as part of a buy-up of GAB Robins’ businesses outside the US. European and US investment firms have registered interest in the firm, and an announcement is expected within six months. Bennett says Cunningham Lindsey has grown strongly in the past couple of years.
Shorten tells insurers to get with the times on older workers – February 27 2012
Cunningham Lindsey for sale – March 26 2012
CGU shakeup to cut 600 roles – March 12 2012
Fair deal for older workers
insuranceNEWS
April/May 2012
3000+ Number of the 5000 CBD businesses displaced
1400+ Approximate number of CBD buildings demolished
124 Kilometres of water mains damaged
300 Kilometres of sewer pipes damaged
50% Approximate percentage of residential roads needing replacement or repair
12 Number of schools, or parts of schools, relocated 9
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newsmakers at
News Ltd
Frank on the farewell lap
Top of a grim list Truck-related incidents account for a third of all workplace deaths, and older workers are over-represented in the number of fatalities on agricultural properties. Analyses by the Federal agency Safe Work Australia also estimate that workrelated injury, illness and disease cost more than $60 billion a year. Employment and Workplace Relations Minister Bill Shorten says the Government will make the transport, construction and agriculture industries priority areas for action under the new work health and safety strategy for the next decade, which is due for release later this year. The House of Representatives is currently debating the Road Safety Remuneration Bill, and Shorten says safe rates for truck drivers will improve road safety. Reports by Safe Work Australia –
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The Cost of Work-related Injury and Illness for Australian Employers, Workers and the Community: 2008-09 and Work-related Traumatic Injury Fatalities, Australia 2009/10 – show Australia recorded its lowest number of work-related deaths since 2003/04. In the seven years of reporting, 567 workers have died in truck-related incidents, including truck drivers as well as car drivers and pedestrians who have been hit by trucks. Accidents on agriculture properties accounted for 310 deaths. Nearly a third of the agriculture workers who died were aged over 65. Of the 216 people killed in 2009/10, 204 were men. The fatality rate of male workers is 3.4 deaths per 100,000, compared with the female rate of 0.2 deaths per 100,000. Trucks, agriculture dominate workplace deaths list – March 19 2012
O’Halloran era coming to an end – March 5 2012
SUBSCRIPTION ENQUIRIES: www.insurancenews.com.au/subscribe Email: admin@insurancenews.com.au CONTRIBUTIONS: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538. PRINTING: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia www.insurancenews.com.au/magazine
A McMullan Conway production
ISSN 1837-4972
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QBE Chief Executive Frank O’Halloran has delivered his 14th and final annual report as his heir apparent and current Global Underwriting Chief Executive John Neal prepares to take the reins of the global insurer. Neal will be only the third man to lead QBE when O’Halloran steps aside in August, and faces a tough road to rebuild the company’s share price and reputation. O’Halloran will take six months of “gardening leave” before returning as a non-executive director on the QBE board, following the path of his predecessor John Cloney. Unlike Cloney, O’Halloran has said he has “no desire” to become chairman of the company. Since taking over as chief executive in January 1998, O’Halloran has overseen around 140 acquisitions, growing premiums from $US1.5 billion to $US18 billion and building QBE into a global behemoth with a market capitalisation of $13 billion. He joined QBE in 1976 as Group Financial Controller when QBE was a small player in the underwriting scene, with a market value of $7.5 million and gross written premium of $93 million. His achievements in turning a provincial insurer into an international brand have been recognised by the Harvard Business Review, which in 2010 ranked him among the world’s top 100 chief executives. In the same year, O’Halloran received the highest international recognition for an insurance executive with induction into the Insurance Hall of Fame. Neal, who joined QBE in 2006 and was appointed Chief Executive of Global Underwriting Operations in 2010, has promised “evolution and not revolution” under his watch. “It might be a different pair of shoes, but it’s the same QBE suit,” he said.
insuranceNEWS
April/May 2012
Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on FSC®paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.
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The General Insurance Code of Practice is facing unprecedented political pressure for radical change By Michelle Hannen
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insuranceNEWS
EVER SINCE LAST YEAR’S CATASTROPHIC WEATHER events, the Federal Government has been gunning for the insurance industry, and the General Insurance Code of Practice is the latest – some would say most vulnerable – target in its crosshairs. The Insurance Council of Australia (ICA) recently accepted the need to “fix it first” in the face of escalating criticism of the code, announcing updates to strengthen it against much of the Government’s bombardment (see panel, page 14). But some key areas of combat remain. These are likely to form the basis for the next battle, when the three-yearly independent review of the code – which has been brought forward by ICA from next year – commences in June. The recent changes to the code include new timeframes for determining claims that require further investigation and for claims lodged during declared disaster events, and timeframes for the completion of external reports. They come on the back of claimants’ complaints following the 2011 catastrophes over delays in decisions and a lack of communication from insurers. Consumer groups were involved in the recent updates, and while they commend the progress made by ICA in its pre-emptive swoop on the code, they will be pushing for further changes at the independent review. Leading consumer lawyer Denis Nelthorpe, who has served as an independent consumer representative on the code compliance committee, says a fundamental flaw in the code which remains unaddressed is that claimants currently have no legal right to a response when making an insurance claim. While the code lays out timeframes for claims decision notification, adherence to the code is a voluntary – rather than legal – obligation. Mr Nelthorpe says he knows of cases where claims have been April/May 2012
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lodged for close to a year without acknowledgment or response, let alone a decision. “Those people would be better off with a denial which they can then escalate to dispute resolution,” he says. “It’s strange that there has never been a legislative right to a response to a claim.” This point is not lost on the Government, with a well-placed source telling Insurance News that Financial Services Minister Bill Shorten was “outraged” when he was made aware of this situation recently. “The Government may act ahead of the mid-year review,” the source says. A spokesman for Mr Shorten says that while the recent changes to the code are a step forward, “there is more to be done”. She says when it comes to examining changes Mr Shorten would like to see made to the code, the minister will consider the reports of the House of Representatives Standing Committee on Social Policy and Legal Affairs into the operation of the insurance industry during disaster events, the Queensland Floods Commission of Inquiry and ICA’s response to the changes to the code proposed by the Natural Disaster Insurance Review. Graham Perrett, who chaired the House of Representatives standing committee, has come out of the evidence-gathering experience with the code firmly in his sights. In an unusually curt assessment of its usefulness, he wrote in the committee’s report: “Given the operation of the general insurance industry during recent disaster events, the committee has little faith in the code as it currently stands as an effective self-regulatory tool. “Unfortunately there are no regulations that compel insurance companies to do the right thing by their clients and resolve claims in a timely and satisfactory fashion.” The 13 recommendations made in his report include updates to insuranceNEWS
The General Insurance Code of Practice was first launched in 1994, but was extensively revised in 2005, with the changes coming into effect in July 2006. insuranceNEWS.com.au said in July 2005 that the revised code was being promoted “as something that will improve claims management standards, cover all types of general insurance including personal and commercial lines and also provide a better response to natural disasters”. The original code had been harshly criticised after the 2003 Canberra bushfires, and the Insurance Council of Australia (ICA) said the revised version “recognises that when natural disasters strike the insurance industry needs to be flexible and understanding in helping affected communities”. Then-ICA President Michael Hawker said it “represents a real bonus for consumers”. “They want to know what they can expect when a claim happens, when they will hear from their insurer and that their claim will be dealt with fairly, honestly and efficiently. This is all set out in the code.” The code process did attract criticism, however, with the Australian Securities and Investments Commission (ASIC) complaining during the drafting stage about its “consumer-unfriendly approach”. The council did not seek ASIC’s ratification before implementing it. The code is administered by the Financial Ombudsman Service, with a compliance committee made up of industry and consumer interests producing annual reports that remain confidential between members. It is also independently reviewed every three years, with the reviewer’s findings made public.
April/May 2012
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Under pressure: how inquiries called for code changes As the benchmark for the industry’s claims performance, the General Insurance Code of Practice has come under intense scrutiny in public inquiries set up as a result of the 2011 Queensland floods. The following is a summary of the various findings, and the Insurance Council of Australia’s response so far: Queensland Floods Commission of Inquiry: This was established by the Queensland Government on January 17 last year to examine the causes of the floods, the response and the aftermath. Its first report, issued in August last year, contains 176 recommendations for issues that needed immediate attention, such as dams, disaster frameworks and planning, forecasts and warnings, emergency responses, essential services, and matters related to flash flooding. Its second report, which came to 658 pages, was issued last month. It contained a chapter on insurance and recommended changes to the General Insurance Code of Practice to require insurers to inform policyholders of their right to request a review when the insurer refuses to provide access to information used to reject a claim. “Letters notifying policyholders that their claims have been denied should, at a minimum, state the information upon which the insurer has relied in making the decision.” It also recommended insurers review their systems and processes to ensure accurate and complete records are made of conversations with policyholders. The commission said insurers should use policyholders’ “preferred method of communication” to keep them informed about the progress of a claim, although important decisions should always be confirmed in writing. Eight insurers supplied data on claims, which revealed 27% of claims were declined. The time taken to reach decisions and internal dispute resolution processes were also examined. While the commission praised the industry for its cooperation, its report singled out CGU for allegedly being “less meticulous in its responses to the commission’s requirements” and supplying incomplete responses. It also criticised CGU Chief Executive Peter Harmer over a conversation he had with a claimant. Natural Disaster Insurance Review: Chaired by insurance luminary John Trowbridge, this three-person review was commissioned by the Federal Government in March last year. It reported in December, making a wide range of recommendations that were due to be officially responded to by the Federal Government as this edition of Insurance News went to print. Several of its 47 recommendations addressed issues related to the General Insurance Code of Practice. They included: Every licensed insurer should be a signatory
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the code, some of which have already been implemented by the Insurance Council. The standing committee made two recommendations to address some of the serious shortcomings of self-regulation. One calls on the Government to enact legislation to make the code compulsory by law for all general insurers. At present the code is entirely voluntary, although all ICA members must abide by it. But there are several insurers authorised by the Australian Prudential Regulation Authority to operate in Australia which are not code signatories. The standing committee also called for the Government to give the Australian Securities and Investments Commission greater powers to regulate insurers in the areas of claims-handling, settlements and disputes, with authority to impose sanctions on insurers and “name and shame” those who breach the code. Gerard Brody, the Director of Policy and Campaigns at the Consumer Action Law Centre, says more work needs to be done regarding monitoring of compliance with the code and enforcement. He says ICA’s recent “hard-fought” concession to make public the annual report of the code compliance committee is a “good first step”, but he believes ASIC has a role to play in approving the code and ensuring it adheres to best-practice principles. “We would encourage the insurance industry to go down that track,” Mr Brody says. Mr Nelthorpe agrees. “I think the industry needs to accept that regulation could be a good thing. However good a code is, it’s not a substitute for actual legal rights.” The recently released annual overview of the code by the Financial Ombudsman Service (FOS) shows that while code compliance did not deteriorate during 2010/11 – a period in which the industry dealt with a record number of catastrophe claims – nor did it improve. Some 2118 breaches of the code were identified in 2010/11, compared to 2193 in 2009/10. Eight companies were found to have been in breach of the code at least five times during the year, and of the 57 general insurers that are signatories to the code, 15 were found to be non-compliant in some way. However, the FOS report does Inquiry chief Graham Perrett: little more than record the facts little faith in the code without naming names. Most of the breaches it recorded relate to insurance claims and complaintshandling. Despite the criticisms of politicians and consumer advocates, ICA is adamant the industry’s current dispute resolution processes are adequate to deal with consumer complaints. Chief Executive Rob Whelan says they have proved to be “robust and effective”, and further government and regulator intervention is therefore “not necessary”. An ICA spokesman says that while the recent updates provide “greater certainty” for policyholders, the code is only intended to set a minimum standard for service. “ICA member companies and brands have considerable scope for those wanting to differentiate on customer service.” He adds that the council will put “several issues” raised in the Natural Disaster Insurance Review to the impending independent review, such as the recommendation that a policyholder should be able to request a review of a claim finalised within one month of a catastrophe. ICA won’t be making further changes to the code until the independent review is completed. As the process currently stands, even those changes recommended by the independent review must be agreed to by the ICA board, which has final say on whether or not the code is changed. “The next round of code changes, if approved by the board, are likely to be introduced late next year,” the spokesman says. Of the ICA’s recent amendments to the code, Mr Brody says the commissioning of external reports remains a sticking point, and he will be advocating at the upcoming review for a timeframe to be in-
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to the code (at present a number are not); The provision that the code does not apply during natural disasters should be removed; The time for natural disaster claimants to make further claims or lodge further reviews after the finalisation of an initial claim should be extended to seven months; Internal dispute resolution (IDR) measures should be independent of the claims handlers, and IDR officers should have the power to overturn denials; IDR complaints should be finalised within 45 days, and if it’s not achieved the claimant should be advised of the right to access the Financial Ombudsman Service; Time limits on IDR complaints should start from when the claimant complains; A general fairness test for claims and claims handling; and Standardisation of appointments to the code compliance committee. House of Representatives Social Policy and Legal Affairs Committee report into the insurance industry’s response to natural disasters: This report was released in late February and made 12 recommendations. Those impacting on the code are: A call for amendments removing the clauses setting aside code standards in times of disasters; Insurers to stop advising policyholders against making a claim and incorporate a “right to claim”; Explain the claims-handling process and complaints procedure to claimants; Provide written details of the claims handler and the expected claim timeframe; Make external experts’ reports available to claimants within 10 days; In exceptional circumstances such as declared disasters, minimum standards would be applied, including: A timeframe for informing claimants on the progress of a claim, and details of any external expert’s qualifications and role. The external experts’ reports must be available within 12 weeks; Timeframes for accepting or denying a claim, responding to requests for information on claims and complaints; and An undertaking to communicate in writing about claims decisions. The response so far: The Insurance Council of Australia board agreed in early February to made some amendments to the code to bring it into line with many of the recommendations, and has also brought forward the date of an independent review of the code to this year. The changes include: Removal of the provision allowing the code to be suspended during a catastrophe; A time limit of four months for a claim to be settled. If the limit is breached the claimant must be invited to access the IDR process; This will not apply in “exceptional circumstances” such as a fraud investigation, failure to supply documents or where an “extraordinary catastrophe or disaster” is declared. ICA plans to consult widely on the criteria for this declaration; Consumers will have a “right to claim”, and if a claim is denied the insurer will supply formal information about the review process; External reports to be available within 12 weeks of a claim, and claimants must supply copies of their own expert reports within 10 days of being requested to do so; Code and claims training will be stepped up.
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troduced specifying how long after a claim is lodged such reports must be commissioned. “Many of the issues in the recent disasters involved the time it took for external reports to begin,” he says. He and Mr Nelthorpe also harbour reservations over the “right to claim” amendment. While the new clause compelling call centre staff to ask customers if they want to lodge a claim when calling with a coverage enquiry is a step forward, they note that staff are still allowed to express an opinion as to whether or not the claim is likely to be successful. The consumer advocates believe such opinions effectively dissuade customers from lodging claims – a point of disagreement with ICA. “We’ve still got concerns around that,” Mr Brody says. “There needs to be a wording which spells out that call centre staff are not qualified claims assessors.” Mr Nelthorpe says insurers trumpet the high percentage of claims that are paid, but those figures do not take into account potential claims which are discouraged and are therefore never lodged. “If you added those, there’s an awful lot of claims that are effectively refused,” he says. One of the architects of the original code was former ICA deputy chief executive Philip Maguire, who oversaw the code’s introduction in 1994 and the updates which expanded its remit to cover commercial lines products in 2006. Mr Maguire, who is now a principal at consulting firm Professional Financial Solutions, believes the code has been “very successful”, and does not see a need for it to be enshrined in legislation. “I think self-regulation can certainly work, and the code is a good example of that.” He says the recent amendments and the bringing forward of the independent review are a positive sign rather than an admission that the current standards are inadequate. “It shows an industry that is willing to deal with the issues.” He recalls that the members of the industry team drafting the original code were “very aware of the need for it to have teeth” and “sanctions that matter” in case of a serious breach. And he says that over the life of the code “there ICA’s Rob Whelan: resolution have been some quite serious processes are robust and effective sanctions applied”. But Mr Nelthorpe says that during his long history with the code, including his period on the code compliance committee, he can only recall one insurer – Rural & General Insurance – being publicly censured in the 1990s. He says the approach of both FOS and the code compliance committee to breaches of the code is to work with the insurer to fix the breach rather than punish them. “So long as an insurer agreed to some form of rectification there wouldn’t be publication [of their name],” he adds. Mr Maguire admits that balancing all of the disparate interests to create a workable set of standards was a difficult task. “Managing the process and herding all the cats was not the easiest thing I’ve ever done,” he reflects. “We were very keen to come up with a code that was genuinely very meaningful.” Ultimately, “a reasonable balance between practicality and aspiration” was struck, which he says satisfies the sometimes competing interests of the industry, government and consumers. He says further improvements may be possible, “but there’s no point making it impossible to comply with”. While the industry has already demonstrated that it’s prepared to make concessions in the face of political scrutiny, the case for swinging away from self-regulation towards legislation is a compelling one for a reformist government. Insurers risk being caught between managing an acceptable pace of change and popular arguments for regulatory control. The space between a rock and a hard place would probably be more comfortable.
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Here comes
Steadfast Inc Brokers give an overwhelming vote in favour of moving to a public listing By Terry McMullan
THE SHAREHOLDERS OF MAJOR broker group Steadfast will meet in May to take the final steps needed to proceed with a listing of the company on the Australian Securities Exchange. The decision to move ahead with the plan was made at the group’s annual preconvention meeting on the Gold Coast in March. While the shareholders’ vote was overwhelmingly approved by the members, Executive Chairman Robert Kelly made it plain to Insurance News that the listing project will proceed with caution. “We’ve asked each step along the way what the shareholders wanted, and we’ve always talked it through at these meetings,” he said. “We’re very close [to a final decision] now, but we’re also conscious of the need to make sure people understand what this is about and what it means for each of them.” Some 82% of Steadfast’s broker shareholders were at the meeting in the Gold Coast Convention and Exhibition Centre on March 17, and 93% of them voted yes to the question: “Do you want the board to proceed with the changes that we need to move to a viable ASX-listed entity?”` Mr Kelly says the next step will involve distribution of an information memorandum, an extraordinary general meeting of shareholders in May and – pending approval – the appointment of advisers to manage the listing exercise. To reach this point has required intensive work by Steadfast managers and directors over several years. Last year shareholders were asked if they wanted to list the company (80% attending said yes) and whether they would permit the board to “take Steadfast to the market”. In that case, 93% approved. Mr Kelly says he has engaged in face-toface meetings with many of the organisation’s 273 shareholders to discuss their particular situations. Steadfast has evolved to this point as a “one size fits all” type of organisation, with each shareholder enjoying equal voting status despite the extraordinary diversity in size of the brokerages within it. Over 16 years the group has attracted brokerages ranging in size from large national operations to small shopfront businesses. 18
It’s been a five-year saga for Mr Kelly and his team as they sought ways to unlock Steadfast’s value for the benefit of all shareholders while ensuring one has no more advantage than another. Mr Kelly says the Steadfast board “went back to first principles” in the past year when discussing the various options. “What we want is a situation where it’s business as usual under a different operating entity,” he says. “We decided the most important thing was to protect the shareholders of Steadfast at all costs. That will remain our over-riding consideration.” The listing plan will need the approval of 75% of the shareholders at the extraordinary general meeting, and discussions by Insurance News with many members at the Gold Coast convention turned up no one vehemently opposed to it. Reactions ranged from a minority who cautiously accept it to others who are very enthusiastic. All expressed confidence in the ability of the Steadfast board to find the best possible way forward and to protect their individual interests. Some of the options researched by Steadfast’s listing project team and consid-
Robert Kelly wants to be the managing director and chief executive of Steadfast the public company. That would be a decision for the board, which would include an independent director. At present Steadfast’s board is made up of 12 trusted and experienced brokers drawn from the membership. Under the public float plan, the listed company board would comprise just six directors, with only three appointed from inside Steadfast. Mr Kelly wants to be one of the three, “but what happens to me is a decision for the board”, he told Insurance News. “But I do intend to put myself forward as the managing director and chief executive.”
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ered by the board included talking over or merging with a listed entity, forming a shell company and listing it, and even whether to list on a foreign stock exchange. The plan unveiled by Mr Kelly at the Gold Coast meeting is designed to ensure minimal disruption to shareholders’ businesses. He emphasises that the proposition rolled out to members is tentative at this point, and the scenario used to illustrate how it might work is hypothetical. “Everyone can participate but no one has to sell any part of their business if they don’t want to,” he says. “Nothing will really change but the percentage of Steadfast that individual shareholders own.” As it happens, research over the past year shows that many shareholders are willing to sell some or all of their businesses into a listed entity. A limited due diligence done over the past year on 80 shareholders’ businesses revealed that 55 would be prepared to sell 25-49% of their brokerages to Steadfast. The remaining 25 said they are willing to sell 100%. The proposal is to convert the value of those businesses and the value of Steadfast itself into shares in the listed entity. Mr Kelly points out that the organisation has built a large variety of member services, joint ventures and such facilities as the Steadfast Virtual Underwriter (SVU), usage of which is now growing rapidly as major insurers move their products on to the platform. “The SVU has grown spectacularly over the past year,” he says. “I’m confident it’s going to be a major part of our success.” A key joint venture – and an integral feature of the listing scenario – is Macquarie Premium Funding, which Mr Kelly says has proved a lucrative source of income for Steadfast over the past three years. He says some shareholders have supported the joint venture more strongly than others, and their commitment would be rewarded with extra shares based on the level of their support over the past three years. Taking Steadfast’s assets and income from its businesses and adding the total to the value of the shareholders who want to sell, it’s estimated the company’s
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market capitalisation would be well over $300 million. Mr Kelly provided Insurance News with a hypothetical “best case” scenario involving strong users of the premium funding facility. Shareholders at present receive an annual marketing and administration rebate of about $20,000 from Steadfast. They have already agreed to forego one-third of that. So as an example, if a member receives an annual rebate of $20,000 from Steadfast and placed $1 million in premium funding with Macquarie Premium Funding, they may receive around 170,000 shares at $1 each in a Steadfast listing. “This will allow around $170,000 worth of $1 shares to be passed over to the shareholder,” Mr Kelly says. “In order to allow some latitude and also leave plenty of shares for the market, the board has decided it would allocate – at par value – an equivalent amount of shares to be purchased at par value by the shareholder. “So again in a purely hypothetical situation, if you received 170,000 shares you could swap your equity in Steadfast and then buy another 170,000 shares for cash, which would give you a parcel of 340,000 shares.” He says the shareholder wouldn’t need to hold on to the additional shares; they could be allocated to staff or even key clients. Steadfast has set a benchmark figure for participation in the scheme at 25% of earnings before interest and taxes. Mr Kelly agrees some small members could find that hurdle challenging. “We would work with them to normalise their accounts and fix whatever has caused their expenses to be out of kilter.” Other alternatives are consolidation with other brokerages or even a plan to create “hubs” with similar brokerages, sharing support facilities owned by Steadfast. Macquarie Premium Funding Chief Executive Gary Seymour says the success of all the brokers who have supported the joint venture “has been a major driver in our own success”. “It’s tremendous to see Steadfast delivering on its potential and creating an opportunity to drive greater value in the
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“ The most important thing was to protect the shareholders of Steadfast at all costs.”
Kevin Chamberlain
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– Executive Chairman Robert Kelly (above)
group and for individual shareholders.” Mr Kelly told shareholders at last month’s meeting that a float could eventuate as soon as November or early next year. “It will depend on the number of due diligence assignments we have to do on brokerages,” he told Insurance News. The impact on the local insurance scene of a listed Steadfast is difficult to assess. Steadfast would gradually accumulate shareholdings in member and non-member companies as opportunities arose, and the insuranceNEWS
April/May 2012
need to provide shareholders in the public company with competitive dividends would change the dynamics of the organisation. Questions left to be answered include the likely impact on the value of brokerages in the wider market. Would a stronger and more acquisitive Steadfast raise the value of brokerages? What are the implications for rival broker network IBNA, which remains resolutely an association? Steadfast Inc is getting closer, and the possibilities are endless. Steadfast Convention pictures, page 56 19
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Lloyd’s settles in for the Asian Century The focus for Australian risks may switch over time from London to Singapore, says the market’s Asia-Pacific chief By Terry McMullan
Lloyd’s Asia Pacific Managing Director Kent Chaplin: Australia remains Lloyd’s fourth-largest customer country
ASIA HAS NEVER BEEN A PARTICULARLY easy place for the Lloyd’s market to gain a secure foothold, but perseverance is paying off. Australia is the fourth-largest market for London-based Lloyd’s, but the entire AsiaPacific region provides only 10% of the market’s global income. That will change. Australian insurers and underwriting agencies provided around $1.9 billion in premium last year, but the real growth opportunities lie in Asia. Lloyd’s has made some strong progress in the past few years, with a rapidly growing Singapore market platform and a breakthrough in China topping the market’s list of regional achievements. Kent Chaplin has been Lloyd’s Managing Director for the Asia-Pacific region since January last year, plucked from leading Lloyd’s claims division in London to managing the most diverse and in many ways difficult market in the Lloyd’s empire from a base in Singapore. 20
The only countries he’s not in charge of in the Asia-Pacific region are Japan and China, two economic and industrial giants that need their own management groups. As a New Zealander who’s well aware of the distance from here to London, Mr Chaplin smiles at the suggestion that the days where planeloads of Australian brokers and underwriting agents have to make a regular slog to London may be coming to an end. There’s no doubt an increasing amount of Australian risk business is being dealt with through Lloyd’s Asia, the Singapore market set up 11 years ago that now handles around $US330 million in gross written premium each year. Today it has 21 syndicates operating. Singapore is “very much a regional hub”, Mr Chaplin told Insurance News. “About 85% of the business we write in Singapore is regional. The rest is Singaporean. “But of that 85%, Australia’s our biggest insuranceNEWS
April/May 2012
market for income – almost 10%.” Indonesia is the next-biggest user, followed by Korea, Thailand and China. So will the Singapore market eventually replace the London market for brokers, or is it merely a siphon for business back to 1 Lime Street? Mr Chaplin admits that’s a “quite a strategic question”, but offers a different perspective. “I think when Singapore was set up there was a real desire to grow it, but no one anticipated it would actually grow so phenomenally,” he tells Insurance News. “It was really set up to try and capture business that wasn’t making its way to London. “Initially a lot of risks did go to London anyway, because when Singapore started a lot of the underwriters on the ground didn’t have very big authority levels and they didn’t have a very wide product mix. “So it was a bit more mono-line. It very much started off as a maritime operation. “But over time that’s totally changed. We’ve now got 260 people there, all Lloyd’s
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people, trading almost every class of business that we do in London. “Property is our biggest class, but we’re also doing marine, aviation, political risk, war, terrorism…” Mr Chaplin says the Singapore syndicates now have the expertise and reputation that allows them similar authority lines to their London counterparts. But the Singapore operation still has a long way to go before its volume of business approaches that of its London parent. Most Asian and Singaporean business still gets written in the London market. That may have a great deal to do with the London market’s ability to handle complex and unique risks, and the evidence seems to suggest that – as originally planned – it’s mainly new business that’s being done through Singapore. “Because of the growth in the Asian economies and the increase in insurance penetration across the regions, Singapore is picking up lots of business that’s new,” Mr Chaplin says. “It’s also getting existing insurance business that’s coming to us from elsewhere that wouldn’t otherwise have made it to London.” He says Asian insurance professionals don’t have the same tendency to want to go to London as they may have in the past, and part of that may be because every cent of premium transacted through the local market stays in Singapore, held in trust funds. Asian insurance-buyers are more inclined to keep the business in Asia when they can, “while the Australian market, the New Zealand market, the North American market… they want to deal with it in Europe”. Singapore is already a major global financial hub, and most of the European, North American, Bermudian and Australian insurers and reinsurers have extensive operations in the city state. So Australian and New Zealand intermediaries have increasingly valid reasons to get off the plane in Singapore. “Australian brokers want to get the best terms for their clients, and you’ve got so much capacity in Singapore, writing the same sort of lines as London, and expertise is growing,” Mr Chaplin says. “There isn’t sufficient capacity in Australia, but there is in Singapore. Increasingly Australian brokers are going to stop in Singapore to do business. “If they’re just calling through on their way to London, it’ll only be because the risks they’re handling are really complex and specialist lines. “There’s some business we just don’t have the capacity or the expertise to deal with in Singapore – no one does – so that will still go to London.” He says the Singapore strategy worried a lot of people at Lloyd’s when it was first mooted. Would it compete with London, or dilute the strength and the uniqueness of London? “Well, it hasn’t at all,” he says. “In fact, it complements it. 22
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“Increasingly Australian brokers are going to stop in Singapore to do business.”
“Our Australian business is growing at the same time as the Singapore platform grows, but the amount of business we write through London in Asia isn’t decreasing either.” Mr Chaplin says there’s no denying the enormous economic, social and geographic diversity of Asia. “It’s complicated, but we’re not in Singapore expecting to just concentrate on India or China, although they are big markets for us. “Many Asian nations have had low insurance penetration, but that’s changing really quickly. Indonesia is an example of a rapidly changing country that we’re focusing on. “Countries like Malaysia, Vietnam, Korea, the Philippines, Thailand – they’re growing at a phenomenal pace. “While they still have a relatively low insuranceNEWS
April/May 2012
insurance penetration, the growth in their GDP means there’s huge infrastructure development going on. These big growth areas are ideal for Lloyd’s Singapore platform.” He says a lot still needs to be done in Asia to increase awareness of Lloyd's in the region and promote understanding of its purpose. That’s not a problem for the market in Australia or New Zealand, where Lloyd’s has been writing risks since the 1860s. “We are the fifth-largest non-life insurer here.” Lloyd’s also has a $2.8 billion fund of last resort in Australia. “The reality of our security is that it would take a $16 billion claim in Australia net of reinsurance to wipe out Lloyd‘s security here.” The local market supports more than 100 Australian-owned underwriting agencies, and as premiums harden over the next couple of years that number will probably grow as new entrants seek to cash in. Mr Chaplin says the “local” nature of the underwriting agencies is a key point when considering the Australian business. “We work with a huge variety of local businesses with local knowledge, local people and local brands, and that helps us to understand the Australian market.” But he’s keen to dispel the notion that Lloyd’s isn’t interested in the SME market, where most Australian brokers work. “Over 50% of our general insurance premiums come via brokers from outside of the large three global brokerages, and 45% of our Australian book is written via local agencies.” Mr Chaplin sees the need to encourage more international capital and underwriting expertise as a major challenge for him over the next year. He also wants to concentrate on developing stronger relationships with Asian investors, insurance-buyers and brokers. As for the Australian market, he says claims are the biggest priority for him at present. “My successor, David Lang, took over the Head of Claims job in London in January last year, and since then he has been very fond of telling me that I left at the right time. “But one of the features of 2011 was that the tragic catastrophes in Japan, the earthquakes in New Zealand, and of course the floods in Australia and in Thailand – all happened in the Asia-Pacific region.” But while he agrees his experience in claims has proved very useful in his first year in the job, he says his over-riding responsibility is to build and grow Lloyd’s business in the Asia Pacific. “Of course, the cycle is not in the right state for much business growth at the moment, but that will turn, and Lloyd’s long-term strategy is clear – we want to do more business in this region. “Global economic growth is happening here, and we want to see that reflected in the size of the premium that we write here.” AIB 5301
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U T P
What a key facts sheet could look like Treasury drafts a consumers’ insurance checklist – but it won’t replace the PDS By Jan McCallum
THE IMAGE AT LEFT IS A draft key facts sheet prepared by Treasury as a model for the key facts sheets that will eventually be issued to people buying home building and/or contents insurance. The industry was invited to comment on the draft last month, with Treasury seeking input on matters such as what will be included. So this image will not necessarily be the template the Government adopts. Treasury plans to undertake consumer testing of the sheets before regulations are made to bring them into effect. The Australian Securities and Investments Commission will then be responsible for monitoring them as part of its oversight of the Insurance Contracts Act. Financial Services Minister Bill Shorten says key facts sheets will make insurance easier to understand and help consumers buy the cover that is best for them. The one-page document is designed to help consumers check the basic terms of an insurance policy quickly and easily, including the nature of cover and any key exclusions. The proposal for domestic policies to include a key facts sheet came out of last year’s disaster inquiries. But it is not new for many in the industry, who remember working on a simple explanatory
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document only a few years ago. That document would have explained briefly and clearly the main points of the policy, what it covered and, importantly, what it did not cover. It might have saved some consumers the anguish they suffered last year when they learned they were not covered for flood. “The project went well until the lawyers got to it,” an executive told Insurance News. “Then they said we had to cover basically everything in the policy because otherwise we could be held liable if the consumer relied on the fact sheet and there was something it didn’t have.” Instead the regulators decided to go with product disclosure statements, which explain the cover in its entirety and in such detail and language that last year’s disaster inquiries heard that most consumers did not read them. A discussion document issued at the end of February says key facts sheets should contain a short statement outlining how the sheet is to be used; that is, not in isolation or as an alternative to the product disclosure statement. The key facts sheet will not have the same legal effect as current disclosure documents, but insurers will have to prove the consumer received one. They will apply only for home building and contents policies.
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UAC: All systems go Last year was a good one for underwriting agencies. In a hardening market the outlook is even better By Ben Oliver
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JOHN ILES, THE NEW CHAIRman of the Underwriting Agencies Council (UAC), could be forgiven for taking a pause to collect his breath. The past year has been a very busy one for the council and its members. “Last year was a massive year for us,” Mr Iles told Insurance News. “It just happened to be the year when a lot of the things we have been working on came to a head.” Criticised in the past as oldfashioned and lacking influence, UAC has emerged over the past couple of years as a bolder and far more active body. Membership is at an all-time high of 80 agencies, representing two-thirds of the underwriting agency sector, A series of structural and strategic announcements culminated in December with Mr Iles’ appointment as chairman. He replaced the mercurial Damien Coates, who has moved to London after a busy period where 14-year-old UAC grew from a loosely organised group of likeminded professionals into a fully fledged representative body. “Regulation has been at the forefront of our members’
April/May 2012
minds for a long time,” Mr Iles says. “But once that had all gone, UAC had to sit back and ask, ‘what can we do outside of broker expos?’ “We had to do more for our members, and the whole idea was to reinvigorate the council and show our members and the wider industry that we’re the voice of underwriting agencies.” Just over a year ago William Legge was appointed UAC’s first general manager, providing members for the first time with a fast and accessible point of contact. The council further bolstered its stocks in May by unveiling a new corporate image – “the resource” – and signing Vero as a corporate sponsor, joining key partner Lloyd’s, which had announced its alliance with UAC in May 2010. Hollard became the council’s third and final sponsor three months after Vero. A new training program for Lloyd’s coverholders offered by the College of Professional Education was announced in August, with Mr Iles’ promotion to the top post from deputy chairman completing a packed list of achievements.
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“As this market hardens further – and it looks very likely it will – it gives us an opportunity to build our businesses.” – John Iles, UAC Chairman (left)
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While last year was probably the most eventful in UAC’s relatively short life, 2012 could be the start of something even bigger for agencies themselves. As reinsurers pass on costs after the worst year for catastrophes on record, the underwriting agency sector is primed to step up its competition with the mainstream insurers trying to claw back their capital and risk exposures. “We haven’t had a truly hard market since the September 11 attacks, and the agency network shone during that time as capacity dried up,” Mr Iles says. “As this market hardens further – and it looks very likely it will – it gives us an opportunity to build our businesses. “Over the next two or three years there will be a massive swing among insurers to have a more conservative risk outlook.” While underwriting agencies will no doubt increase their place in their chosen niches, Mr Iles believes new opportunities won’t necessarily entice new players into the local market. He also doesn’t see a trend towards “super-niche” agencies as a way to insulate against
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future market movements. “Whether there will be an increase in the number of underwriting agencies we don’t know,” he says. “Being niche does cushion the impact of changes in the market, but if you look at the products we have available through underwriting agencies, there is a massive range. “Each agency has a forte in a certain area. Some will compete hard with insurers and some will dominate the smaller niches. It depends on the type of market segment each of them is in. “It’s all about moving quickly to recognise emerging trends. Underwriting agencies are run by people who have the knowledge and the confidence to take up opportunities quickly.”
“The big things for us this year are the trade shows and expos, the professional development and training, and regulation and compliance. “And we really want to make sure we are a voice that can be heard.” With UAC’s new strategic partners providing a welcome source of funding, Mr Iles says the council has been able to expand its activities and member services. The Sydney expo in March attracted nearly 350 brokers and 54 exhibitors – the highest on record – with events in Melbourne, Brisbane, Adelaide and Perth soon to follow. Of particular interest has been the appointment of UAC’s first international member, New Zealand agency, International Underwriting Agencies (IUA) in Auckland.
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As the underwriting agencies build greater market share over the next few years, some are likely to prove irresistible to insurers wanting a slice of their action. QBE – which has already signalled its desire for smaller “bolt-on” acquisitions under incoming group chief executive John Neal – is an example of an insurer that knows how to build market strength through niche operators. “There is a home for all sorts in this business,” Mr Iles says. “From our experience, 99% of the time insurers will leave an agency they own to run its own race.” Mr Iles, the Brisbane-based director of Specialist Underwriting Agencies, says his tenure as chairman will be focused on consolidating the council’s activities and programs – at least in the short term. “The great thing is that I was deputy chairman for 18 months, and I was lucky enough to have worked with the board, so the transition has been much easier for me. April/May 2012
As underwriting agencies aren’t yet common in the New Zealand market, there is no representative body. Lloyd’s likewise has a very low profile across the Tasman, and Mr Iles says the relationship with IUA is more about informationsharing and support at present. “We want to help them to the point of developing a council like this for themselves,” he says. “With the changes to regulation in New Zealand taking place, there will be a lot more demand for international placements through organisations like Lloyd’s, and there will be an increasing need for representation.” Mr Iles is coy about further international expansion for UAC, saying it hasn’t been discussed at board level. Locally, however, he’s bullish about the sector’s growth potential. “It all comes down to risk appetite and what is available in the market and what our members are able to underwrite,” he says. “I think we have a tremen dous future.”
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The FOFA war: almost over Lobbying by financial planners helped them achieve a limited victory By John Wilkinson
THE FINANCIAL SERVICES industry has won a few skirmishes on the Future of Financial Advice (FOFA) reforms, but looks to have lost the battle. Financial Services Minister Bill Shorten announced last month that FOFA will be implemented on July 1 next year. The aim is for the legislation to become law from July 1 this year, but insurers and brokers have a year to comply. The financial services industry has fought hard for this change, telling the Federal Government there is too little time to change systems. According to the Financial Services Council (FSC), the FOFA changes will cost an estimated $700 million to implement and $375 million in annual ongoing costs. FSC Chief Executive John Brogden says a one-year transition to FOFA recognises the significant investment and training needed to implement the extensive reforms. “A 12-month transition period will allow businesses to make the necessary changes to their IT systems, compliance processes, training and disclosure requirements,” he says. “The reforms will be accompanied by extensive regulations and regulatory guidance, which will only be made available once the legislation has been passed. “Therefore a July 2012 commencement with no transition period was simply unworkable.” Mr Shorten admits the implementation date change is due to industry lobbying and a realisation that there would be only a couple of months for the transition once the legislation is passed – an impossible situation. 30
He says the Government “has listened to concerns from the business and advice community that they need more time to prepare for these changes”. “This timetable also balances consumer needs, as it gives early industry movers the opportunity to provide commission-free products from July 1 this year.” Mr Shorten says the Government will continue to work with all stakeholders “to ensure these reforms are implemented in the most cost-
Securities and Investments Commission (ASIC) Summer School in February that those seeking a delay are “buying time to keep the commissions’ gravy train going”. She also dismisses claims that the FOFA reforms will cost the industry hundreds of millions of dollars, arguing that a Rice Warner report commissioned by the ISN found implementation costs would be about $11 a client. Then, when the House of Representatives debated the FOFA bills last month, the
“The Government has listened to concerns from the business and advice community that they need more time to prepare.” effective way possible in the best interests of consumers”. But not everybody is so keen on the delay. Consumer groups and the Industry Super Network (ISN), which represents union-dominated super funds, don’t want the date put back. They have argued at parliamentary hearings that there is no logical reason to change the date. ISN Chief Executive David Whiteley now agrees that some flexibility is acceptable, but he doesn’t want a “wholesale delay”. Jenni Mack, Chairman of consumer group Choice, told a session at the Australian insuranceNEWS
opt-in proposal was watered down after financial services industry lobbying. Under the deal, the opt-in requirement – under which clients must be asked every two years if they want to renew the arrangement with their financial planner – will be exempted for advisers belonging to a professional association which has a code of conduct. ASIC must approve such codes before an opt-in exemption is agreed. This will be just one of several regulations that ASIC will set during the next year before FOFA is implemented legally. The House of Represen-
tatives passed the FOFA bills by five votes. The bills will now return to the Senate, which is not due to sit until early May. While some in the general insurance industry see the FOFA debate as relevant only to financial planners selling investment advice, brokers are gradually being sucked in to some of the new laws. A Senate Economics Committee report on FOFA last month calls for authorised deposit-taking institutions’ (ADI) employees selling non-banking products, such as general insurance, to move away from commissions. “The committee sees that qualified ADI representatives can continue to provide a high level of service and advice on non-basic products in combination with basic banking products where representatives are paid their ongoing set salary,” the report says. “The committee encourages ADIs to consider the use of non-financial measures to determine incentive eligibility for employees, including customer satisfaction and quality, self-development and strategic process.” Consumer credit insurance also comes under scrutiny, with the Senate report recommending that Treasury “provide guidance on the application of the conflicted remuneration bans” on these products. The FOFA war is almost over, but uncertainty remains as to what advisers, brokers and insurers will have to do to be compliant. ASIC will decide the final details after consultation, so there will still be some skir mishes ahead.
April/May 2012
2989 SR
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“OUR 16 YEAR ASSOCIATION WITH LLOYD’S PROVIDES SRS WITH A TWO-FOLD BENEFIT. It gives brokers confidence in our brand and its longevity, plus it gives confidence to our supporters at Lloyd’s that we are a reliable representative in the Australian market who is here for the long haul. These key benefits, combined with highly experienced SRS staff in Australia and a highly skilled stable of claims managers, allow our underwriters to accommodate an extensive list of risks and occupation classes when Public or Products Liability cover is required.” Paul Lynam CEO, SRS Underwriting Agency Ability. Reliability. Consistency. SRS Delivers.
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INSURANCE IN
2030
Can the industry keep up with shrinking asset ownership, technological innovation and increased regulation over the next 18 years? By Mark Milliner, Chief Executive, Personal Insurance, Suncorp This is an edited version of a presentation to the General Insurance Exchange conference in Sydney last month
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OUR SUCCESS IN THE INSURANCE BUSINESS ultimately depends on how well we adjust to the currents and tides of change. There are three broad areas that keep me awake at night when considering the future of insurance. They are the “invisible forces” of change: changing technology, personal likes and lifestyles, and the very evolution of human society. These are the fundamental forces that are reshaping the insurance industry of the future. The same forces are at work reshaping our world. We need to understand them. I’m not looking at the next five years, but much further – say 15 or more years – where kids in their teens are already getting university degrees and computers have similar capability and capacity to humans. Change is happening faster and we will be operating in a world that is very different from today. If we are to have a successful insurance role in that world then, starting today, our job is to prepare the insurance business to satisfy what will be very different insurance needs. An effective response to such a dramatic evolution will be organisational change, not just some inspired or insightful thoughts or tinkering around the edges of our industry. Dealing with this dramatic change will require strong yet flexible and innovative leadership. It will require leaders to build organisations that support long-term thinking to have a quick understanding of and adaptation to the changing behavioural patterns occurring, to enable the industry to be prepared for a new insurance world. Failure to lead change and adapt will mean extinction. This new “insurance world” will be more competitive than we would have thought possible. Consumers, as we define them today, will be the unchallenged kings and may never even take out insurance. If this seems extraordinary or unlikely, let me explain what I think are the three invisible forces that are silently reshaping the insurance industry: real assets, the speed and impact of technology and the regulatory environment.
Real assets are shrinking Today we insure homes, their contents, cars and other assets. Generally these are getting better and costing less. There is mounting social and economic pressure for future homes to be smaller. We have smaller families requiring less space and governments facing infrastructure demands forcing urban consolidation. Homes will continue to be a major investment, but with more value in the uninsured land component and less in the insured home, and smaller homes will have fewer contents to insure. Homes will also be more secure, the contents more traceable and burglary less attractive. People might also have many more things that they don’t insure. Technology is driving us towards not owning possessions but having “experiences”. As we move online, more of our purchases are becoming “rights”, not tangible items. Music is no longer on a large black disc, or a small silver disc, or a tape or even anything real that requires insurance protection. It is a computer file that can be replaced at no cost or, more likely in the future, kept in the cloud somewhere where it can’t be stolen or damaged or insured. The music and books of the future will be an accessible experience, not an insurable possession. I’m sure
most of you own an iPhone or iPad or both. Whatever you download – a book, movie or a digital notepad – can be accessed from the cloud even if you lose your device. Looking into the garage, we might find the total value of our cars falling. Due to urban consolidation, public transport or the possibility that we will spend more time working from home, we may even dispose of our need to have a car. We might have only one car, not two or three, or we might pay as we go to use a car, through a service such as GoGet car share. In 2030, a more attractive option may be to rent a car by the day or hour rather than own it outright. Car use will represent a smaller share of our annual pay package. Cars may have fewer accidents, they may be thief-proof and completely trackable – they might even fight back by locking themselves, and capturing the thieves. In future we may not buy a car but a mobility service, which can be integrated between public transport and cars. You will hit a button on your smartphone and a car will arrive, chauffeur-driven by a computer. The insurance and the car may well be arranged and provided as part of the package by the car distributor, not the user. People will not own a car, they will purchase the experience of a car, and the insurance with it. If this all sounds like nirvana for consumers, remember, you work in the insurance industry, so think about the impact of having assets decreasing. Assets will represent a smaller value, and a smaller risk-value because they are being replaced by purchased experiences that consumers won’t insure, even if the experience providers do so. The insurance needed in this environment is very different and the insurance provided will be different. It may have different timeframes such as minutes, hours or days rather than a yearly term. Instead of insuring homes we might be insuring lifestyles, the elements that contribute to someone’s quality of life. We already insure against the cost of ill health. People can insure against loss of income. We insure against lost experiences – such as travel insurance. In the future we may insure against bad restaurants, or blogs. Insurance providers may indemnify travel companies against the risk of failed experiences so they can offer money-back guarantees for special experiences – whale-watching with no whales or the long-awaited African safari where the lions fail to appear. Society and technology are moving us to purchasing an experience because it will be a better experience, probably cheaper and more efficient. The successful insurance providers will be the ones that adapt to the new environment, because they were prepared to think differently about what insurance is and the timeframes for that insurance.
Information flattening The second “invisible” force is information flattening. Our industry is all about risk assessment – the ability to accurately assess a customer’s risk exposure, to value it and to offer coverage with a working margin. Insurers have an advantage over consumers because we have enormous amounts of data and the capability to understand that data. The insurer’s ability to categorise and qualify consumers into smaller and better-defined risk classes is improving rapidly with changing technology. In the future information may allow providers and users to evaluate – not by postcode or some broad age category of a driver – but precisely based on variables insuranceNEWS
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such as health measures, eyesight and actual lifestyle characteristics; not just what they claimed in the past. As our risk assessment gets better so will customers’ ability to measure risk, probably provided to them by a third party. Insurance buyers will not only be better informed, but also more mobile. They will be able to compare insurers’ performance – who pays out most, fastest or the slowest, which company gets the biggest number and most colourful complaints, on some “new Twitter”, and who has the least number of complaints, or even praise. We may well live by the “Like” or “Unlike” button. We hear the term “Big Data” more often. We have to be able to use more data faster and create interactive algorithms to interpret and act. In the information-flattened world, reputation will be more critical and more vulnerable. Information will be freely accessible to all, but not always accurate or true. There will be no hiding from your record. Consumers will have more market knowledge about performance and will influence your brands. They might also have a greater capacity to fight any disputed claim. What about from the consumer perspective, announcing on Facebook that they are away from home for three weeks? Is that an advertisement to thieves? Does it impact the insurance provided, or is it an opportunity for the insurance company? There are so many potential opportunities and issues.
product inclusions and exclusions and wider “no fault” insurance regulations. In addition, the courts are great regulators. They continually redefine risk, and generally in one direction – shifting the responsibility and risk away from the individual. All these changes are raising the bar on insurance providers and this will continue. At the same time, the industry is being squeezed by changes in global regulation. The industry will be effectively re-regulated on an international basis. Insurance providers already need to meet global regulatory performance standards of liquidity, transparency and accountability. Social rights and public expectations reflect global expectations reset by an instant global media.
Regulatory squeeze Public pressure for consumer protection rights will increase and in a political democracy, governments rightly respond to public expectations. We should expect governments to use the greater availability of insurance information to raise regulated performance standards and consumer protections. Service performance, insurance options and regulation oversight will all increase. Regulatory levers may be used to prevent us from developing sharper risk profiling and a tighter risk assessment, for fear that it will limit insurance coverage to groups or individuals, and encourage “cherry-picking” by insurers. After the 2011 floods, and with better information technology, insurers can better assess flood insurance risk on an individual house-by-house basis. Medical and scientific information will enable us to identify accurately who is at high risk and low risk of many serious diseases, who will inevitably require glasses or hearing aids or even who has an elevated risk of accidents. You can already get your biological make-up. Imagine how useful it may be in buying life insurance. But as the industry becomes more capable of exercising its technical ability to improve risk assessment, there will eventually be regulated limits on how we can assess these risks. Will insurers be allowed to use an individual’s DNA to rate risk, determine a price or exclude insurance? It may be politically unacceptable to rate on risk for certain categories. These may become regulated so that you cannot seek or access certain information for the purpose of insurance. Risk may need to be assessed in categories wide enough to be politically acceptable and this will be arbitrary and politically determined. In future, information technology will enable us to be more capable of developing a much more precise risk assessment. However, regulators will likely prevent us acquiring this information, or using it selectively. There will be pressures on regulations for insurance 34
It’s the very latest in anti-theft devices. It locks the thief inside and then plays Justin Bieber’s Greatest Hits non-stop
The industry will be squeezed by globalised regulatory requirements and locally regulated performance demands in an information-rich environment where everybody knows everything. So, don’t think of our new insurance world as suffering from a future of shrinking assets, information flattening and regulatory squeezing. Think of it more as the opportunities and possibilities these changes bring for an innovative organisation. There will always be insurance and many more things to insure as people inevitably become wealthier and insure more things that protect their standard of living. But what we insure will be different and how we insure will be different. And it will be a much tougher market. insuranceNEWS
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CONTACT US Kevin Corkery 0403 019 277
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David Boothroyd 0419 019 441
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Natalie Lings 08 9420 8010
Megan Sheehan 0409 914 899
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Ocean trade routes are getting crowded, and marine insurers should heed the emerging risks
Pressure points: shipping “highways” and the number of total losses in congested areas between 2001 and 2011 THIS IS THE ALLURE OF THE SEAS, THE largest passenger liner in the world. It’s 360 metres long and has a gross tonnage of 225,300 tonnes. It dwarfs the liner RMS Titanic, which when it sank 100 years ago last month was the world’s largest ship. The Titanic was 269 metres long and its gross weight was 47,000 tonnes. Packed with technology and safety systems of many kinds, Allure of the Seas illustrates just how far marine engineering has come in 100 years. Today much larger commercial ships working tight schedules move quickly from port to port. The ships are getting bigger and bigger, too. Danish shipping giant Maersk has ordered 20 ships that will carry 2500 more containers than today’s largest ship, the Emma Maersk.
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These “Triple-E” class ships are 400 metres long, 59 metres wide and carry 18,000 twenty-foot-equivalent unit (TEU) containers. To move all those containers by rail would require a train 110 km long. Giant ships of all types are travelling along virtual ocean “highways” that are becoming more crowded all the time. In the past 100 years the world’s commercial shipping fleet has trebled to more than 100,000 vessels. Even those highways on the sea are changing, too, as melting polar ice offers a new trade route between Asia and the ports of Europe and the US west coast. According to a new report by Allianz Global Corporate and Specialty (AGCS), the continued growth of worldwide shipping poses several challenges for the marine insurance industry.
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Reuters
Bigger, faster… safer? While safety at sea has greatly improved since the Titanic charged blissfully and blindly at full speed into an iceberg in 1912, ships still sink, and lessons are still being learned from the mishaps. The results are seen in falling loss rates. Overall shipping losses have declined from one per 100 per year in 1912 to one per 670 per year three years ago. But all cargo ships now rely more on technology than manpower, and the number of crew aboard cargo ships has dropped dramatically. The AGCS report says small crews can lead to a greater propensity for human error. Then there are the hazards of Arctic navigation and the continued threat of piracy off the coast of Somalia. Sven Gerhard, Global Product Leader for hull and marine liabilities at AGCS, says the marine insurance industry needs to address these new risks seriously. “For example, ultra-large ships pose challenges for insurers due to their sheer size and value, while others raise concerns on structural integrity and failure.” While he says scale alone doesn’t make big ships more of a risk, mega-ships introduce specific new risks. “This is where the industry should focus most closely, so that best practice risk management and a culture of safety become second nature across the world fleet.” Technologies such as radar and GPS have improved safety, but major accidents have in fact been the catalysts for key changes. For example, the 1914 Solas convention, which set standards for ice navigation and life-saving equipment – was triggered by the loss of the Titanic. Dr Gerhard believes the case of the Costa Concordia, which sank on the coast of Italy in January with the loss of more than 30 lives, “is certain to be no different – whatever the result of the official investigation”.
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nccee an urra Heavy Motor Fleet Inlessu Options Aggregate Deductib
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quick quic k fac facts ts Some benefits include: t Basic excess of $5,000 per unit or combined unit (any one loss), with no age or inexperience excess applicable t Australia wide coverage t No driver declarations t Automatic additions/deletions of vehicles to the fleet (limited to $400,000 per unit) restrictions on age or inexperienced drivers t No restrictions restrictions on goods carried t Minimal restrictions
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t Market value at time of loss, or sum insured insured as per schedule, whichever is the lesser replacement for t New vehicle replacement (refer vehicles up to 12 months old (refer wording for more more details) to policy wording
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t Up to $1,500 for repatriation repatriation of driver residual payout on t 20% residual encumbered vehicles encumbered
4&$5*0/ o 5)*3% 1"35: -*"#*-*5: 4&$5*0/ o 5)*3% 1"35: -*"#*-*5: t Up to $30,000,000 limit available t $10,000,000 supplementary bodily injury included
Hazardous goods cover available t Hazardous request, up to $10,000,000 on request, limit
10-*$: .*/*.6.4 10-*$: .*/*.6.4 t Minimum aggr aggregate egate deductible $100,000. This means the client must selfinsure insure at least the first $100,000 of losses in any one period of insurance t The aggregate aggregate deductible is protected protected by a stop loss cover t Minimum premium premium $50,000
/P ESJWFS EFDMBSBUJPOT ESJWFS EFDMBSBUJPOT t /P /P SFTUSJDUJPOT PO BHF PS SFTUSJDUJPOT PO BHF PS t /P JOFYQFSJFODFE JOFYQFSJFODFE ESJWFST ESJWFST t -POH -POH IBVM IBVM NVMUJ DPNCJOBUJPO NVMUJ DPNCJOBUJPO VOJUT VOJUT
t #FO #FO +PIOTUPO #SBEGPSE +PIOTUPO #SBEGPSE Ph: 07 3624 9406 Mob: 0404 519 692 Fax: 07 3624 9433 benj@sua.com.au +PIO *MFT *MFT t +PIO Ph: 07 3624 9408 Mob: 0413 449 951 Fax: 07 3624 9433 johni@sua.com.au
&9$-64*0/4 10-*$: &9$-64*0/4 10-*$: t Sedans and commer commercial cial vehicles under 2 tonne carrying capacity ar are e not covered covered under this policy t Packaged hazardous hazardous goods classes: 1; 6.2 and 7 t Bulk hazardous hazardous goods classes: 1; 2.1; 2.3; 3; 6.2 and 7 t Cartage of dioxins or polychlorinated biphenyls
#&/&'*54 t Significant savings in Gover Government nment charges t All claims within and upon exhaustion of the aggr aggregate egate are are handled by Assetinsure Assetinsure t All costs, including assessors and investigation costs, ar are e covered covered by Assetinsure Assetinsure within the aggregate aggregate This is an overview of the coverage pr provided. ovided. We We recommend recommend reading reading the policy wording wording prior to considering cover. cover. Contact us to obtain the policy wor wording. ding.
6DQGJDWH 5G $OELRQ 4OG รท 32 %R[ &OD\รฐHOG 4OG 3K รท )D[ รท LQIR#VXD FRP DX
Specialist Underwriting Agencies Pty Ltd ABN 18 010 862 745 AFSL 231104
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Good sports, go The ultimate big deal: Manchester United is halfway through a four-year £80 million sponsorship deal with Aon, which took over the red jersey from AIG. Pictured is Fulham’s Mahamamadou Diarra attempting to find a way past United superstar Wayne Rooney, who scored the only goal in their English Premier League match on March 26
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good business Why insurers dominate Australia’s billion-dollar sport sponsorship market
Reuters
By Ben Oliver
ALLIANZ ARENA, ON THE NORTHERN OUTSKIRTS OF Munich in southern Germany, is quite possibly the world’s most stunning football stadium. Resembling a giant ribbed bracelet, the arena’s wow factor is immediately obvious. Encasing it in a billowy embrace are nearly 3000 diamond-shaped “cushions”, which form the world’s biggest membrane cladding, covering 66,500 square metres. These glow at night, with a hue to support whichever home team is in play: red for Bayern Munich, blue for 1860 Munich and white for the German national team. “It cost a lot, but it does look amazing,” a resident told Insurance News. Under the terms of a new 10-year, multi-million dollar naming rights deal – only the German insurer’s second for a sporting ground – Allianz is promising something similar for the Sydney Football Stadium, which was renamed Allianz Stadium in March. While eliciting groans from those fighting a rearguard action on the purity of sport, the deal also underlines a rarely noted phenomenon: insurers are among the world’s biggest – if not the biggest – spenders on sports naming rights. From global broker Aon, whose logo adorns English Premier League powerhouse Manchester United, to QBE’s sponsorship of not one but three sporting teams (AFL club Sydney Swans, A-League soccer team Perth Glory and netballers the NSW Swifts), there’s a marketing trend in play. If it kicks, marks, jumps, throws, rides or hits, odds are an insurance company is somewhere in the mix. The sports sponsorship market in Australia is a highly competitive, billion-dollar business in which insurers have secured an impressive beachhead. By last count, insurance companies have renamed four stadiums – Allianz Stadium in Sydney, Brisbane’s Suncorp Stadium, AAMI Park in Melbourne and the home of AFL in Adelaide, AAMI Stadium. They also sponsor five AFL clubs, at least three Group 1 horse races, three rugby teams including the Wallabies national team, a soccer team, a netball team, a tennis event, a golf tournament and an entire football league. Even NRL umpires carry an insurer’s name around the field. Andrew Robertson, Client Service Manager with sponsorship management specialist Subnine, says insurers see sport as a lightning rod for reaching potential customers. “Insurance is not a very exciting proposition,” he says. “People are passionate about sport, but not about insurance. “Insurers want to build on the existing emotional connection people have by becoming sponsors of a club.” Tapping into that passion doesn’t come cheap. For a
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company’s logo to be emblazoned on a football team’s shorts costs between $300,000 to $600,000 a year, depending on the club’s code and status. Naming rights for a guernsey fall between $800,000 and $2.4 million, while naming rights for a stadium costs tens of millions of dollars. While the terms of the Allianz announcement have not been made public, ANZ’s deal for Sydney’s Homebush stadium reportedly costs the bank $31.4 million a year. But is this money well spent? Suncorp, with a marketing budget alleged to be in the hundreds of millions per year, has the broadest sponsorship footprint of any insurer in Australia. Direct insurer AAMI alone sponsors the AAMI Classic, a traditional curtain-raiser for the Australian Open, Group 1 races the Victoria Derby, the Golden Slipper and Stradbroke, and the Western Australian Football League, to name just a few. Suncorp’s Executive Manager Sponsorships John Bennetts says sponsorship has risen from 5% of Suncorp’s annual marketing budget 10 years ago to nearly 17% today. “When you look at the insurance product, it’s obviously a product that lacks the engagement of other more retailfocused products,� he told Insurance News. “So by associating your brand you are engaging with customers in a way that is quite unique. “Each sponsorship relates to a particular market audience. We have the more general personal insurance brands like AAMI, or Shannons, which is more niche. “It’s the ability to allow us to communicate to a particular market, which we can measure.� Suncorp and other insurers use brand analysis companies, such as Repucon, to measure the effectiveness of their sponsorship spending. Using sophisticated programs, Repucon can monitor an AFL game and count how many times a logo appears and how much that translates to in advertising dollars. Other analyses include surveys to track brand awareness and measuring “click throughs� to monitor advertising hits on club websites. “Its all about increasing unprompted awareness,� Mr Robertson says. There are other strategic reasons at play. An AFL club sponsor could, for example, gain access to the members database and use that information to sell directly to potential customers who already see a link between their team and the insurer. “The fanatics bleed for their club and appreciate the sup-
On the ball: Sydney Swans player Jarred Moore’s team has been sponsored for more than 25 years by QBE, while Mark Nicoski’s West Coast Eagles side is sponsored by SGIO. IAG stablemate CGU also sponsors AFL team Collingwood under a seven-year deal signed in late 2010
News Ltd
“ By associating your brand you are engaging with customers in a way that is quite unique.�
port they need and will be more aligned to that insurer,� Mr Robertson says. “It’s all about tapping into that passion to create a relationship.� Of course, part of the allure of sponsorships comes down to perks, of which there are plenty. “At an executive level, sporting sponsorships create many opportunities to network and promote your business capabilities in a relaxed environment through access to corporate hospitality as well as seeing it as a great chance to entertain high-end clients,� Mr Robertson says. The days of “Chairman’s Choice� – the somewhat derogatory industry term for sponsorships that reflected the passions of the top managers rather than marketing recognition – are gone, Mr Bennetts says. “It’s 100% strategic these days. There is just no way that a chief executive’s or chairman’s team would get any advantage. “It would be impossible for a decision to be made on the love of a sport alone. “First and foremost, any sponsorship would have to show what the benefit would be and how it allows us to engage with the market.�
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Increasing unprompted awareness: AAMI Park in Melbourne, the city’s 30,000-seat venue for soccer and rugby matches, is one of three major stadiums sponsored by Suncorp brands
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Making a killing Somalis have created an insurance market far larger than the piracy business By Ben Oliver
®
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TWELVE MONTHS AGO PIRATES boarded a loaded oil tanker in the Indian Ocean and sailed it back to the coast of Somalia to hold for ransom. For the ship’s crew led by Captain Miro Alibasic, it was the beginning of a long and terrifying ordeal. The pirates subjected the tanker’s crew to a 90-minute attack with machine guns and grenades. And once they had sailed the ship to Somalia, they held the officers and 28 crewmembers for 75 days while the ransom was negotiated. They nearly hanged the ship’s second officer to speed things along. Piracy is all too common for the insurers of ships that sail in such areas as the Gulf of Aden, the Arabian Sea and the northwestern Indian Ocean. Despite the protection offered by a force drawn from the navies of many countries, including Australia, the potential rewards of piracy far outweigh the risks for Somali men facing a short life that promises only poverty. The multi-million dollar ransom is all they are after, and reports say the crews the pirates capture are increasingly being used as pawns to speed the negotiation process. Some ransomed crewmen have told of acts of torture that include the 16th century punishment of “keelhauling”, where the victim is tied to a rope looped beneath the vessel, then thrown overboard and dragged across the keel. Jack Sparrow these pirates are not. For nearly seven years piracy on the high seas has been the biggest problem faced by the international shipping community and the insurers who cover them. There are small signs of progress. The International Maritime Bureau recorded 439 attacks last year – the first time in five years the number has fallen. insuranceNEWS
April/May 2012
More than half of last year’s piracy incidents took place in the seas around Somalia or in the Gulf of Guinea in West Africa. The problems piracy causes in some of the busiest trade routes in the world has become so bad that British Prime Minister David Cameron hosted a summit on piracy in February. But while Somalis are now taking on piracy as a career, earning 30 times their average lifetime wage in just five years, their impact on international trade – and marine insurance – is equally impressive. A giant economic ecosystem has blossomed around Somali piracy, with international insurers right in the middle. According to the Oceans Beyond Piracy report released in February, the entire Somali pirate economy is worth nearly $US7 billion, mainly made up of the expense of military action to curtail their activities. Of this figure, just $US125 million – or 1.75% – comprises actual ransom money. A far larger figure is the profits insurers have made from providing piracy-linked cover. Since the first attacks by Somalis were recorded in 2005, the market for kidnap and ransom (K&R) and war risks cover boomed. The cost of war risks coverage shot up more than 1900% between January and June 2009 alone. By 2010, owners who were previously paying $US500 per ship per voyage, were paying $US150,000. International law firm Sheppard Mullin estimates sales of marine K&R rose from nothing in 2008 when the cover was introduced to about $US125 million a year now. Global insurer Catlin’s 2011 annual report shows the bulk of its underwriting contribution last year came from war and
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political risk cover at $US180 million – with a loss ratio of just 32%. Willis Group Chairman and Chief Executive Joe Plumeri describes piracy as one of the fastest-growing areas of his business – a situation he says is “crazy”. The situation has raised some novel ideas on ways to reduce the risk of piracy. JLT and Lloyd’s have come up with a deterrent plan involving a private fleet of armed patrol boats in the Gulf of Aden. The Convoy Escort Program could, with appropriate funding, be running by the middle of this year. JLT partner Sean Woollerson told The Times the program needs $US27.5 million to pay for 18 second-hand vessels. “It has taken an extraordinary amount of hard work and effort over the past two years, but we hope we’re about 70% of the way there,” he said in February. The market’s healthy appetite for piracy-linked risks recently prompted respected maritime journal Tradewinds to describe the piracy insurance market as a “licence to print money”. But all this money has raised questions about whether marine insurers are profiting from a problem that is essentially sociological, not economic, in nature. The marine insurers argue they are charging a fair price for premiums, and the evidence appears to confirm that. Ships that routinely traverse pirate territory – especially crude oil tankers – are now taking on armed specialists, installing “citadels” – armoured rooms where crews can shelter until help arrives – and barbed wire and other deterrents along ships’ sides to thwart mid-ocean boarders. Insurers are also offering discounts on war risks premiums of up to 50% if the ship carries a four-man armed security team or is separately covered for K&R.
He says if we give him a million dollars he won’t hold us to ransom and our piracy premium won’t go up The price of piracy covers has also undergone some competitive attrition. London reports indicate premiums have nosedived as the piracy insurance space becomes increasingly crowded. According to Willis, competitive forces halved the cost of K&R cover between 2008 and 2010, despite the number of piracy attacks rising in the same period. And Lloyd’s Market Association Maritime Committee Chairman Andrew Voke told a British Foreign Affairs Committee hearing in London last year that piracy claims have now overtaken the value of premiums. “There has been a lot of discussion in some syndicates about whether to continue offering coverage in this class,” Mr Voke said. “It is important to stress that this was not a case of syndicates writing business to profiteer.” Lloyd’s Syndicate 33 run by LondoninsuranceNEWS
April/May 2012
listed Hiscox Group has already stopped selling K&R cover due to the collapse in rates. UK mutual marine insurers are also following suit in reducing premiums by up to 10%. But much like the Australian commercial market, sweeping statements on premium movements are difficult to prove. “You can never say one way or another whether it is safer,” Neil Roberts, a London-based marine insurance underwriting specialist for Lloyd’s, told the New York Times. “There’s always some areas that are going up in the attacks they face, while others are going down.” Until Somalia’s myriad social and economic problems are solved, the pirates will continue to attack ships. And just as surely, marine insurers will continue to offer cover. 43
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Claims breakthrough?
Greg Johnson’s radical new approach could be the innovation loss adjusters have been searching for By Ben Oliver
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EVERY GREAT IDEA HAS A SIMPLE premise, and a new confederation of loss adjusters and builders is based on simplification. At worst, Claim360 is a novel idea that will interest and intrigue. But the potential of the new joint venture between Cerno, Australia’s largest loss adjuster, and insurance and claims management specialist Claim Central Holdings goes far beyond mere interest. It could completely revamp how loss adjusters do business. “We think [Claim 360] is going to be a very big business and a major player in the market,” Mr Johnson told Insurance News. “I wouldn’t call it the standard, but I think it could become a benchmark.” Mr Johnson has big plans for Claim360, a business that was planned, conceived and born just six weeks after meeting his opposite number at Claim Central Holdings, Chief Executive Brian Siemsen. Launched in December last year, Claim360 already has its first clients and aims to have 100 people on the payroll by the middle of this year. The rollout of Claim360 capped a busy year for Cerno, which besides bedding down a name change from MYI Freemans in May also acquired building consultancy firm Censeo in August. While Claim360’s execution was swift, it is far from a rushed idea. Before meeting with Claim Central Holdings (formerly Siemsen Group), Mr Johnson spent eight months in the top job at Cerno musing on how to turn around a business, or even an industry sector, that was in danger of stagnating. “I’m sure I asked a lot of dumb questions,” he says. “I was learning on an hourly basis.” Coming from an insurance broking background, Mr Johnson knew the importance of claims handling, yet found it strange that loss adjusters were not receiving due credit for their part. “It became apparent to me what little understanding those outside the industry really have about loss adjusting. insuranceNEWS
April/May 2012
“Loss adjusters are a critical component to our industry, yet we are being continually challenged to demonstrate value.” Loss adjusters have been fighting a war on two fronts for years. At the pricing end, insurers have been steadily paying less and less, while on the service side less qualified building assessors have found a niche by muscling in on their turf. Add to this pincer movement the difficult act of balancing staff against an unforeseeable calendar of natural disasters. Mr Johnson says it was obvious the sector needed to do something or risk becoming obsolete. He admits the speed of change within the industry caught loss adjusters “off guard”. “While what I would call the ‘traditional’ loss adjusting business wasn’t struggling, it wasn’t being allocated the volume of work that was being allocated in the past,” Mr Johnson says. “In asking questions why this was the case, it was obvious we had a gap in the solutions we were providing. Claim360 is our endeavour to fill that gap.” Claim360 brings loss adjusters and builders under one roof to offer tailored packages that respond to clients’ needs. Essentially, it tears down the vertical, top-down claims cycle and replaces it with a system where one company monitors and controls all moving parts of a claim. This hybrid model means more efficiency for insurers and intermediaries and a more consistent and cohesive approach for policyholders. The company expects claim cycles to be reduced by up to 37%. The model is flexible enough for insurers to pick and choose which parts of the model they wish to use. Clients can even use their preferred supplier or choose from Claim360’s panel of builders. Claim360 controls the procurement, retention and “score-carding” of trades to monitor cost control, quality and service. Additionally, their software allows the company to manage the supply chain from start to
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Trying to find a balance: last month’s Townsville tornadoes illustrated the difficulty of adequate staffing for unforeseeable events
finish, including contents, supplies and trades. “We have worked through the general claims transaction on almost a process by process basis and removed anything from the process that we believed had no value,” Mr Johnson says. “We can communicate on the process of a policy claim in real time with the clients, and we have the technology to ensure the tradespeople and builders are delivering to the scopes and schedules they have set. “This is neither traditional loss adjusting nor a builders’ model. We simply took the best parts of both to create a hybrid solution not seen in the industry before.” Indeed, the Claim360 model appears even to be a world first, which could be replicated overseas. “We are not thinking about that right now,” Mr Johnson says. “Having worked in London, I think there would be some relevance for it, but that is a fair way into the future.” More relevant is how the model changes the equation in favour of loss adjusters. In one sense, Claim360 can be viewed as an attempt to take back pricing power from insurers while simultaneously claiming skills superiority over its competitors. Because Claim360 offers not one but several services, all of which can be combined in unique and tailormade solutions, Claim360 sets the 46
price rather than the insurer. “The business is offering the best of both worlds in terms of pricing,” Mr Johnson says. “The client decides to manage each claim or transaction, and this business can provide a variety of pricing models depending on who does what.” The model also contrasts loss adjusters’ obvious skills against ever-encroaching yet less-qualified competition. “It was evident to us that our clients were looking for alternatives,” Mr Johnson says. “We seemed to be less relevant than we used to be. “We wanted to build a solution that gave our clients the opportunity where if they wanted to use an adjusters’ model they could, but in using the builders’ model they were also given the opportunity to have a solution that was independent.” The model has implications for the industry’s maligned natural disaster response – the evergreen complaint directed at insurers after every catastrophe. Claim Central Holdings’ Brian Siemsen said the service is flexible enough to rapidly respond to a natural disaster. “One person can attend the site and repairs can commence within 48 hours.” Mr Johnson is slightly more circumspect, but agrees the new business insuranceNEWS
April/May 2012
will have an impact. But he’s uncertain if anything could have improved a disaster on the scale of last year’s Queensland floods. “With the kind of intensity, volume, severity and number of people required [in Queensland], I’m not certain this or anything could have massively improved the circumstances. “What I am certain of is this combination of adjusters and estimators working together will work well in times of great stress.” Initial feedback from Claim360’s small but increasing stable of clients has so far been “very positive”, Mr Johnson says. And despite the somewhat radical departure from “traditional” loss adjusting, there has been little if any pushback from an industry some accuse of being wedded to the past. “If anything we have been congratulated by people who are interested in what we are trying to do,” he says. “There have been lots of questions, and as with anything new, people are sitting down and looking at this. “Most individuals we have spoken to say it’s the right idea. “Loss adjusters are a critical component of our industry, but we have to enhance what they do by providing real and relevant solutions to our clients.”
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No time to hang around waiting Australian insurers are searching for their own solutions to the flood-mapping dilemma By Jan McCallum
THE INSURANCE INDUSTRY has called for governments to step up on flood mapping, but insurers aren’t waiting. Companies are looking to develop their own models, not only for risk management but also to pull more information out of their data systems for analysis to improve business operations. Executives from Californiabased geographic information system developer Esri have been invited to Australia to show insurers how their technology can work. Global Director of Commercial Solutions Simon Thompson says that although the floods have focused attention on mapping, insurers are also using it to gain business insights. The mapping enables users to layer details such as policyholders’ addresses over geographic data, along with information such as weather events or electricity blackouts, creating what Mr Thompson describes as a “map sandwich”. Data from meteorology bureaus, state emergency services and country fire authorities can be incorporated on to maps, and the explosion of social media is also having an impact. “Volunteered geographic information” – such as hailstone photos loaded from mobile phones to Facebook or Flickr – can be siphoned out of the websites to create another tier of information on where the worst damage has occurred. In an event such as a hailstorm, insurers can combine storm reports with addresses to find the policies likely to be most affected, along with those on the fringe of the disaster. “You can start to triage claims because you know who in that area is subject to potential loss, how many loss adjusters you need, even if you need to get the chief executive out of a meeting to alert them,” Mr Thompson told Insurance News. “If you know there were insuranceNEWS
storms last night, you can map the path of the storm and wind intensity with the sort of impact that might occur – branches coming down, tiles lifted off, damage to air-conditioning units. You can get a sense of what the claims will be.” Companies can also prepare for potential fraudulent claims when they isolate areas less likely to be affected. Mr Thompson says insurers need to move on from pricing on postcodes now that they can match policies to geography as well as location. Areas within postcodes can differ greatly, yet postcode definition makes no distinction between the householder living on the riverbank or the one on top of a hill. “Postcodes are not a good model of the physical environment,” Mr Thompson says. Apart from claims management, Esri Australia Principal Consultant Financial Services Gary Johnson says insurers are using spatial technology for risk management by pinpointing homes and then overlaying the type of risk that might occur. As the companies drill down into their data, they gain capacity to deliver better products and services, he says. Companies are also using geospatial mapping to warn policyholders of events. In Denmark insurers have called in contractors to board-up holiday homes before storms hit. In the United States companies were able to warn marine customers to get their boats out of the water when the Deepwater Horizon oil rig exploded. “If the shrimp and oyster boats had been covered in oil, the owners would have had to clean the hulls, and the boats would not have been allowed back in the water until that was done,” Mr Thompson says. “The more you can get ahead of this, the more you can reduce these costs.” April/May 2012
Australian insurers and groups such as Willis have introduced Esri technology from their overseas operations. With higher claims and low investment returns squeezing insurers, companies are looking at technology that gives an edge in risk management and pricing to risk. “It is not just the technology itself, but the business insights it can provide, which will run across many departments,” Mr Thompson says. He believes the cover improvement benefits customers and insurers by reducing uncertainty and increasing competition, and will ultimately drive transparency in providing homeowners with the information they need on their risks. As part of the drive to get spatial technology more widely used, Mr Thompson is pushing for a global flood model that would provide an international platform for flood risk assessment and modelling. During the Thai floods, Esri worked with officials to capture information to help emergency services find the best routes to deliver help. Mr Thompson says that as a result there has been considerable interest in mapping from Australian and Asian businesses and insurers that felt the impact when Thai factories stopped production. He says the Australian floods have shown how the community has united to address flood issues and there is an opportunity to harness the public and private sector, engineers, academics and the public to develop measures to adapt and mitigate flood risk. “We feel if we can encourage everyone, from the man on the street to national governments, to understand the flood risk in their own area, they will be more inclined to reduce its impacts and long-term costs to society,” he says. 49
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Austra
Lower the risk, save your premium Insurers are getting tougher over truck safety, says Lumley
TRUCK CRASHES ARE never out of the headlines, and a Work Safe Australia report released last month says truck-related incidents account for a third of workplace deaths. This statistic backs up Lumley Insurance’s concern that the causes of those headline-grabbing accidents have to be addressed urgently. Lumley, a major player in the truck insurance market, says the past six months have seen an increasing frequency of heavy truck crashes and associated claims – and a 60% increase in their severity. In the past seven years 567 workers have died in truckrelated incidents, including truck drivers, car drivers and pedestrians hit by trucks. The Federal Government is moving legislation through Parliament to address many of the safety issues of truck management. But Lumley National Heavy Motor Manager John Bottomley says the day of cheap premiums in the heavy truck market may be ending. He says the increasing incidence of accidents “has to have an impact on the overly competitive insurance market conditions the Australian transport industry has enjoyed for quite some time”. Lumley research suggests the frequency and severity of losses are partially caused by the tougher underlying economic conditions affecting the transport industry. Mr Bottomley says in a tightening insurance market, transport operators experiencing excessive incidents 50
insuranceNEWS
April/May 2012
and claims may find it difficult to buy sustainably priced insurance. “In the past six months we have noticed a definitive change in probability of loss,” he says. “Previously risks which have been residing in a category of low probability of loss have enjoyed low premiums. “But not any more. It appears risk has changed its dynamics, and the change has been extreme.” Lumley says transport operators can help themselves by imposing tighter risk management disciplines on their companies and they way they operate. While risk reduction isn’t simple, Mr Bottomley says operators should be able to demonstrate that all key risks identified are either acceptable, “or being addressed via a succinct risk treatment process”. “Done properly and articulated to an insurer, that can considerably improve a transport industry client’s insurability and premiums.” He accepts that the transport industry “is fraught with risk and is a difficult industry segment to predict”. “But with changing industr y dynamics now beginning to place significant pressure on both transport and insurance industry profits, any efforts invested in covering all the risk bases will be beneficial,” he says. “You also need to be able to actively demonstrate and articulate these actions to your financiers and insurer, or the financial benefits could be lost.”
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companyNEWS
Vero’s Alex Green: Enhanced protection for directors and officers
Avoiding technology traps: Axis Specialty expands its lT liability risks cover
Vero can D&O: New policy meets emerging business challenges THE AUSTRALIAN SECURITIES AND INVESTMENTS Commission’s reinvigorated focus on continuous disclosure in listed companies makes Vero’s new directors’ and officers’ (D&O) product a timely offering to Australian companies. “Directors are vulnerable in this volatile economic climate,” Vero Head of Casualty Alex Green says. “Senior executives and directors are being watched more closely than ever by their stakeholders, and even the directors of wellmanaged, successful businesses aren’t immune from the threat of litigation or civil penalties.” Mr Green says Vero’s D&O product incorporates many new features intended to bring the cover into line with emerging business challenges. These features include broadly defined key terms like loss, claim and investigation. There are also wide severability and non-avoidance provisions, and only four standard exclusions – bodily injury and property damage, intentional misconduct, prior claims and circumstances, and US jurisdiction. The new D&O product also offers pre-approved use of Vero’s legal panel at pre-agreed rates, avoiding delays and potential gaps in cover with respect to handling of legal bills by the insurer. Directors and officers insured under the Vero policy also won’t have to wait for their company’s decision on indemnity or pay a deductible in order to have access to the policy. “We believe we have a very competitive local product in this important area that has traditionally been dominated by international insurers,” Mr Green says. 52
insuranceNEWS
April/May 2012
THE SPEED AND EVER-INCREASING reach of electronic communication have expanded the risks associated with information technology. With so much sensitive information now held in cloud networks and the ability to transmit to the world at the touch of the “send” button, issues around privacy, patents and reputation are emerging hazards. Axis Specialty has responded by expanding its information technology liability product to include privacy and defamation, reputation protection expenses cover and fidelity cover. Senior Underwriter of IT and Multimedia Liability Klaus Lejon says new risks are continually emerging as the use of technology increases. He says the immediacy of the internet and social media such as Facebook and Twitter mean defamatory comments can be distributed very quickly, and businesses that handle sensitive data such as credit card details or medical records are vulnerable if there is a privacy breach. The policy includes defence costs in addition to the liability limit, patent and trade secrets cover, no exclusions for return of fees, costs of contract and other amounts paid that form part of a claims settlement, and duty to defend cover. It also responds by providing extended continuous cover if an insured changes insurer. Mr Lejon says this gives comfort to both client and broker. Clients know they have continuous cover and brokers who recommend a switch to Axis need not worry about their professional liability if the client moves and then receives a claim that precedes the new contract. Axis is offering capacity of $20 million for professional indemnity and $20 million for public and product liability and there are no restrictions on the size or profession of IT and communications providers the company will underwrite.
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companyNEWS
Brokers’ expertise enhanced by the web: CGU unlocks greater flexibility with an online quote and bind tool
Cyber risk a growing business threat: Dual upgrades policies to cover technology, older workers and riskier sports
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THE INTERNET IS OFTEN SEEN AS A threat to intermediated insurance by giving consumers access to as much information as they want, but online tools are also making it easier for brokers to demonstrate their expertise to clients. CGU has taken this approach in relaunching its Padlock commercial investment property product for intermediary partners and including an online quote and bind tool. General Manager Retail Mark Searles says the facility will make it easier for brokers to quote and bind on a range of commercial property-owner risks at a time that suits both them and their clients. He says the Padlock online tool has clearly stated exclusions up front to save time on referrals and is available aroundthe-clock to all intermediaries through the CGU web portal. The tool includes intuitive “knock-out” questions that allow a user to quickly identify if a risk needs to be referred to a CGU underwriter. Mr Searles says CGU’s suite of e-busi-
ness solutions for intermediaries continues to grow and evolve. The re-launch of Padlock builds on the success of the UBuild online quote and bind tool for construction risk launched last year, as well as increases in the cover provided by Padlock to commercial property owners earlier this year. These include an increase in claims preparation costs from $25,000 to $50,000, and reinstatement has been increased from $250,000 to $350,000. If the sum insured for removal of debris is exceeded, an additional benefit of $100,000 over the sum insured is available. Accountants’ fees have been increased from $5000 to $25,000, theft in the open air has been increased from $5000 to $10,000, and further amendments have been made to the period of rent default and cover provided. Mr Searles says the enhancements to Padlock demonstrate how technology can be used for advances in product development that assist intermediaries when they are working with clients to discuss insur ance needs.
VERY FEW MAINSTREAM INSURERS offer cover against cyber risks, despite such risks being one of the emerging threats most feared by business. There is very good reason to be concerned. A breach of a firm’s electronic communications can damage or even cripple the business in the space of a few minutes. Sometimes the damage can’t be repaired, and if clients’ personal information is stolen it can cause loss of customer trust. A report last year by internet security firm McAfee told how five global oil and energy companies’ IT systems were simultaneously overwhelmed by a concerted attack by unknown hackers who stole confidential exploration and commercial information. The variety and complexity of cyber threats on companies of all sizes is continuing to grow, according to Dual Australia Managing Director Peter Bailey. He says continual innovation is needed to address clients’ emerging concerns about the safety of their information, so Dual has expanded its management liability product with a cyber risks extension. “Recognising the reliance of Australian businesses on using the internet and email, this optional extension provides cover for a range of first and third-party exposures arising from damage to client networks or websites caused by hackers through to breach of privacy and infringement of copyright,” he says.
The extension is one of four new products from Dual. The company has also released a stand-alone statutory liability product in response to increasing legislative responsibilities placed on businesses and directors. “A recent report found more than 5000 different legislative provisions relating to civil penalties, making a statutory liability policy an essential insurance purchase for companies to help navigate the legislative landscape,” Mr Bailey says. Assistant Treasurer and Federal Employment and Workplace Relations Minister Bill Shorten has told the insurance industry to “get with the times” by providing income protection and workers’ compensation insurance to older workers, and Dual has expanded its accident and health product suite with an “Over 65s” individual personal accident and sickness insurance product. Most income protection policies cease cover at age 65, although the average retirement age is now 67 and rising and the Federal Government wants to encourage older people to stay in the workforce. Mr Bailey says Dual has also launched a new sports group personal accident insurance product. He says the company can assist with most sports, including high-risk activities such as motor sports, football, rugby and equestrian, for both amateur and professional players.
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Gold Coast convention delivers for Steadfast EVENTS AS LARGE AS THE STEADFAST Convention are limited in the number of venues that can accommodate them. The Gold Coast, a favourite with insurance professionals because of its excellent convention, accommodation and entertainment facilities, once again hosted Steadfast’s annual event in March, and once again it was a noisy, colourful, educational and business success. This year’s Steadfast Convention attracted a total of 1750 delegates, with an additional 575 registrations sold for day passes and events. Mixing plenty of business with top-class entertainment and a program that kept people fully engaged, Steadfast 2012 lived up to the standard set by previous events, with a huge exhibition hall crammed with the stands of insurance companies and service-providers of all types.
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The speakers were remarkable. Who could ever forget young adventurers James Castrission and Justin Jones, fresh from their unassisted trek to the South Pole and back – a feat they had only finished a couple of months before their convention appearance – discussing such concepts as resolve, despair, planning, risk management, survival and the best way to lance giant blisters. Then there was rugby union great John Eales, motivational expert Steve Simpson, Earth Hour co-founder Nigel Marsh and marketing guru Dan Gregory to add inspiration, while speakers like IAG Group Chief Executive Mike Wilkins, Lloyd’s Managing Director Kent Chaplin, business commentator Michael Pascoe and a panel session of industry managers provided plenty of inside knowledge.
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The centre of everything was the Marketplace, where breakfasts and lunches were served, ensuring plenty of interaction between brokers and insurers and suppliers, and brokers and brokers. It was also the venue for the opening-night celebrations. Entertainment included a great night out at the Movie World complex and the final night dinner, where pop diva Jessica Mauboy sang and danced with the crowd during a night that was all about maximum enjoyment. Fund-raising activities at the dinner resulted in a $150,000 donation to the Motor Neurone Disease Association of Queensland. Since 2003 the traditional final night fundraiser has raised a total of $620,000. Next year’s convention will be held in Sydney from April 6 to 9. Images courtesy of Kevin Chamberlain
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e My one piec of advice: resh. Review. Ref . Reinvigorate ur Maintain yo edge. competitive
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At Newline Australia we underwrite the following classes of insurance: Public & Products Liability; Professional Indemnity; Financial Institutions; Directors' & Officers' Liability and Crime
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Flood Excess Buydown Are you worried about a high flood fl ood e excess? xcess? Our flood Our flood excess excess b buydown uydown facility facilit y underwritten u nder written b byy certain cert ain underwriters under writers aatt L Lloydâ&#x20AC;&#x2122;s loydâ&#x20AC;&#x2122;s o off L London, ondon, ccan an rreduce educe yyour our cclients lients flood flood property propert y excess excess d down own ffrom rom $750,000 $750,0 0 0 aatt aany ny o one ne llocation. ocation. H igher limits limits aare re also also aavailable. vailable. Higher For more For more information, information, o orr a q quotation uot ation ccall all Roger Roger S Smith mith on on 0 02 2 9034 9034 5 5555 555 orr visit o visit www.indemnitycorp.com.au www.indemnit ycorp.com.au
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An office fit for a king QBEâ&#x20AC;&#x2122;s new Adelaide office has whatâ&#x20AC;&#x2122;s known these days as a collaborative work environment. It also features spectacular 360-degree views of the city. After months of planning, the 150 staff based in the city of churches moved into their new home on King William Street in mid-December, with QBE hosting the official opening in February. South Australia Regional Manager Barry Drinkwater guided 100 guests, including QBE Executive General Manager Distribution Tony MacRae and General Manager Australian Intermediaries Shaun Standfield, through the new space. The openplan design enables all employees to be located on one floor.
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Lumley serves up cocktail surprise They may not quite be ready to reprise Tom Cruise’s character as a New York bartender in the movie Cocktail, but some lucky brokers have at the very least learned a few new cocktail recipes. As part of Lumley’s my.club program, winners of the insurer’s latest competition were invited to a cocktail creation challenge in events held in Melbourne, Adelaide, Brisbane and Perth. Besides being awarded prizes for the best team and cocktail creations, brokers were given the opportunity to network with industry peers and their local Lumley team. Lumley Insurance’s my.club program offers users of my.place@Lumley the chance to win a ticket to exclusive my.club events held every six months in their region.
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4857 Su
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We promised, we delivered. Our report card is an open book — all claims were accepted, not even one was disputed.
The summer floods of 2010/11 brought terrible times to many Australians and put the insurance industry in the spotlight and to the test. It was a test that rallied our industry with prompt action being the response of many companies in the sector. For our part, as soon as the waters receded SRS Underwriting and Summit moved into top gear with our worst affected clients seen by senior managers within hours. When you couple the strength of the world’s strongest underwriter in Lloyd’s with the most experienced prestige property claims team you can expect an excellent result to be the outcome. So be prepared for extreme weather this summer...or next... and place your client’s cover with Summit. You’ll have one of the broadest covers available, the security of Lloyd’s and the personal attention at claim time from a team that has a reputation of making things happen. When it rains... Summit shines. Visit our website to make an online
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Zurich takes dining to the Zenith Zurich Australian Insurance traded the high seas for haute cuisine for the launch of its 2012 Zenith program. While 2011 saw brokers take to an afternoon of sailing or kayaking, a sumptuous degustation course was the highlight for delegates invited to this yearâ&#x20AC;&#x2122;s launch. Events were held in Perth, Melbourne, Sydney, Brisbane and Adelaide in February, giving brokers a chance to meet with the companyâ&#x20AC;&#x2122;s general insurance leadership team. During the business session of the launch, brokers were given an overview of Zurichâ&#x20AC;&#x2122;s 2012 initiatives in the SME and corporate space and its claims strategies. More than 300 brokers, accompanied by their respective better halves, attended the launches.
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Underwriters get Gruen Transfer Brokers and underwriting agency staff attending the Underwriting Agencies Council’s (UAC) recent Sydney Expo were given plenty to think about when the morning’s business concluded with the traditional expo lunch. Some 54 exhibitors – a new record – joined more than 300 brokers at the expo, held at the Novotel in Brighton-Le-Sands in Sydney’s south last month. It was the first expo for new UAC Chairman John Iles, and by all accounts the most successful one to date. Following Insurance News Publisher Terry McMullan’s annual summary of the industry’s previous year, Leo Burnett Australia Chief Executive Todd Samson was on hand to give the audience a master class on creativity in business. Mr Samson, who appears on ABC-TV’s The Gruen Transfer, also spoke about his personal exploits, including a solo ascent of Mt Everest.
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Allianz musters the troops
Photo courtesy of d’Albora Marinas Akuna Bay
When it comes to boats, cruising has it all over amateur boatbuilding. That’s a fact brokers discovered during Allianz’s South Australian getaway. Every year Allianz invites its 25 top rural and regional brokers to its Allianz Muster event, held this year on the Murray River. Brokers took part in a variety of water sports including water skiing, tubing, kneeboarding and wakeboarding as the flotilla made its way from Barossa to Bowhill and finally Mannum. The craft constructed by the brokers as part of a team building exercise proved less than successful during their maiden launches. The three-day event concluded with dinner at Mannum and an awards ceremony.
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Club Marine Business and Marina Operators Package
Photo courtesy of dâ&#x20AC;&#x2122;Albora Marinas Akuna Bay
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Kids, don’t try this at home… As part of the 10th anniversary celebrations marking the founding of National Transport Insurance’s (NTI) Accident Assist service, the insurer is rolling over six trucks in demonstrations around the country. While truck-rolling is unlikely to make it into the Olympics any time soon, it’s a great way for the insurer to demonstrate how it goes about things and how truck design is evolving. Invited brokers are given a first-hand demonstration of NTI’s clean-up skills as well as an insight into the complexities of load recovery. An inclusion for all NTI policies, Accident Assist provides vehicle recovery and clean-up operations services, automatic claims lodgement, medical assistance and post-trauma counselling. NTI Chief Executive Tony Clark says there was nothing linking insurers, repairers and recovery operations until Accident Assist was devised in 2002.
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Vero Expo a slam-dunk Known for his long-range shots and shock blonde hair, former Boomer and NBA basketball player Shane Heal was the guest of honour during Vero’s Brisbane Expo. The point guard and NBL commentator was the keynote speaker at the insurer’s February event – the fifth expo to be held by Vero over the past 18 months. Picking up on Shane’s speech about building a strong team culture, Vero personnel and brokers then held a debate over whether leaders are “born or created”. The Brisbane Expo attracted 290 brokers from across Queensland.
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maglog »
Look out, Sydney! From left, Mike Olofinsky, Greg Stewart, Joe Vella and Chris Baker
The mardi gras crew spread the news about next year’s venue
AFL stars? Yeah, right… From left, Mike Olofinsky, Joe Vella, Chris Baker and Graham “Bear” Stevens
Heading for Perth, it’s the Village People resurrected: from left, Graham “Bear” Stevens hides behind his moustache, cowboy Joe Vella has lost his trousers (again), Greg Stewart is always “the chief”, Rick Wolozny wears his Eagles scarf with pride, Mike (hullo sailor) Olofinsky and Chris (make my day) Baker
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YOU JUST HAVE TO HOPE THAT AFTER Steadfast becomes a public listed entity ruled by the demands of the stockmarket, they don’t lose their sense of humour. After all, humour is the reason why the Steadfast Convention is the only event in the whole world that gets a decent audience in for the last session of the last day. Here’s why. Convention Chairman Greg Stewart gets up on the stage each year with a bunch of his mates to announce where the next year’s convention is to be held. And they try to set the theme for next year. If you don’t pitch up to witness the spectacle for yourself, you’ll get tired of people trying to explain it all and finally saying, “You had to be there”. It’s one of those things like the calving of an iceberg off a glacier, your first dolphin experience or the birth of your first child; you can’t describe it without an upwelling of emotion, any more than you can describe Joe Vella dancing across the stage in a tutu. The ironic thing is that Steadfast has developed into a broking behemoth under the guidance and painstaking care of people like this bunch who appear on the stage every year. Each and every one of them is a director of Steadfast. They’re not pretty, and their costumes often leave something to be desired – like good taste, for a start – but they do epitomise much of the spirit that binds the Steadfast organisation: no matter how serious things get, no matter how hard you’re working, someone is going to make you see the brighter side of life. The pictures on this page – taken by brokerturned master lensman Kevin Chamberlain over several years – illustrate how Greg and the crew tell delegates where they are going next. There was the year the big news was Perth. So we got the Village People, singing “Go West”, although the sight of Big Greg in the feathered headgear did cause one excited delegate to exclaim, “We’re going to India!” Then two years ago the big news was that the 2011 convention would be in Melbourne, so down the aisles came the boys bouncing AFL footballs and demonstrating that their ball skills were terrible, but better than their ability to dance. No one can remember what they did last year to announce a return to the Gold Coast. Perhaps they dressed up as Meter Maids. Perhaps no one wants to remember. Next year’s venue will be Sydney. These guys were never going to dress up as the harbour bridge. Nope, the Gay and Lesbian Mardi Gras was more their speed, and they did it proud. Above left is a tiny selection of the pictures from that memorable occasion in March. Our graphic designer had to go through all Kevin’s pictures to make these choices, and we hope she returns from rehab soon. Distinguished American journalist Hugh Sidey once summed up this whole thing very nicely: “Joy in one’s heart and laughter on one’s lips is a sign that the person down deep has a pretty good grasp of life.” Amen to that.
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