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HARD TIMES IN THE SOFT MARKET
CATASTROPHES: MORE, BUT CHEAPER
INTERVIEWS AND INSIGHTS
THE REVOLUTION IS NOW Everything about insurance is set to change. Disruptive innovation expert Warren Burns says technology is exposing the weak spots and brokers should be worried
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ENHANCEMEN ZU ZURI MO
Issued by Zurich Australian Insurance Limited ABN 13 000 296 640 AFSL 232507. Any advice has been prepared without taking account of your objectives, financial situatio You should obtain and consider the relevant Product Disclosure Statement for the financial product, available at www.zurich.com.au, before making any decision about wheth
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NTS LAUNCHED TO ZURICH FLEET AND RICH COMMERCIAL MOTOR INSURANCE
ZURICH INSURANCE. FOR THOSE WHO TRULY LOVE THEIR BUSINESS.
ancial situation or needs. Therefore, before acting on the advice you should consider its appropriateness having regard to your objectives, financial situation and needs. about whether to acquire, or continue to hold, that product. ZU23024 - V2 02/16 - HBLK-011070-2016
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6 Newsmakers » 10 Gone in seven minutes » Historic Yarloop is little more than ashes, ruins and memories.
62 Waiting for the knockout blow » The industry has been fighting insurance stamp duties for years. Could the end finally be in sight?
66 The power of one »
12 The revolution arrives » Disruptive technology goes mainstream as IAG steps to the cutting edge. It’s all happening very fast, and brokers will have to keep up with it.
A young woman has won a groundbreaking battle against a travel insurer’s mental health exclusion. How will the industry respond?
68 The client stays behind »
16 Innovate, or die not trying » Business technology guru Warren Burns says the insurance industry’s traditional structures are ripe for disruption, and the consequences for carriers and intermediaries could not be more stark.
22 Under the weather » The latest industry health check predicts slight improvements, but commercial insurers still face major headaches.
Employment contracts make it clear to brokers – when they quit, they must leave empty-handed.
70 New year, new danger » Summer always brings the threat of disaster, but now climate change is raising the stakes.
companyNEWS 81 Seizing the opportunity »
30 Soft market, hard times » Whatever this year holds in store, it seems few things would be more surprising than an upturn in general insurance pricing.
34 Suited and rebooted » New boss Tony Barber sees an exciting post-merger future for Willis Towers Watson.
38 Catastrophes: More than the average number, but the cost to insurers was well down » Natural disaster losses in 2015 were concentrated on regions that couldn’t afford insurance.
Brooklyn branches out into accident and health.
81 Growing online » SUA does a deal and adds experienced staff.
81 Saving time » CGU rolls out a simpler rego tool for brokers.
peopleNEWS 83 Two wheels, many countries » Suncorp risk specialist David Madell put his expertise to good use, plotting a bike ride across the world to raise money for cancer research.
40 Grand designs, sharp thinking » Changing a company’s name and logo isn’t an exercise to be undertaken lightly.
44 Perplexed, Dumbfounded, Stupefied… » That probably sums up the experience for millions of Australian consumers who have tried to decipher a product disclosure statement.
52 German precision » A new name is not the only difference at HDI Global this year. Australian boss Stefan Feldmann says the specialist insurer has grand plans for the local market.
56 Eye robot »
84 86 88 91 92 94 95 97
HDI Global says aloha at summer fiesta » Young Professionals bat for the Renegades » Blue Eagles land in Tasmania » MGA keeps ahead of the curve » Surf’s up for AHI staff » EBM celebrates 40 years in style » Fun and games at Sportscover lunches » A right royal thank-you for NTI partners »
98 maglog »
Insurers are embracing drone technology in claims assessment, and encouraging safety among other users.
60 Don’t change that channel » Meet a broker who’s taking the fight over personal lines to the direct insurers.
Cover: Warren Burns, BurnsRed Image: David Russell
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REGULATORY & GOVERNMENT
258 FINANCIAL SERVICES
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More than 21,500 news articles – including 203 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives. Access to news articles and other services provided by insuranceNEWS.com.au is free. 6
IAG gets a new top team and structure New IAG Managing Director and Chief Executive Peter Harmer announced a new organisational structure and leadership team in December. In its Australian market, IAG now has two customerfacing divisions responsible for sales, service, and brand and marketing execution: the Australian Consumer Division, which focuses on individuals and families, and the Australian Business Division which concentrates on businesses of all sizes. Three divisions focused on the customer experience, technology and operations will support the customer-facing divisions. They are: • Customer Labs, which is responsible for the customer experience strategy and driving product innovation across the group. • Digital Labs, which provides digital and design innovation, and harnessing disruptive technology. It will also simplify existing platforms. • Operations, which is responsible for claims and operational functions, including procurement and supply chain management in Australia. It will also drive the simplification of operational processes and systems. IAG’s Asia and New Zealand businesses have moved into a new International division. The new group leadership team comprises: Ben Bessell is the Chief Executive Australian Business Division, which comprises CGU, WFI, Lumley and Swann.
insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 22,000 subscribers. In 2015 we published 2138 articles online. These were made up as follows:
Nick Hawkins remains Chief Financial Officer and also runs the International division as well as the “challenger” consumer segment, which includes SGIO, SGIC and Coles Insurance. Andy Cornish, the former chief executive Personal Insurance, is acting as Chief Operating Officer until former Suncorp Personal Lines chief executive Mark Milliner joins IAG in April to lead the Operations division. Mr Cornish will then leave IAG. Claire Rawlins is the Group Executive, Digital & Technology, leading Digital Labs. Julie Batch, the Chief Customer Officer, heads up Customer Labs. David Harrington is the Group Executive, Office of the Chief Executive, responsible for group-wide strategy and corporate development. Jacki Johnson is Group Executive, People, Performance & Reputation. Anthony Justice is Chief Executive of the Australian Consumer Division (NRMA and RACV). Chris Bertuch is Group General Counsel and Company Secretary, Clayton Whipp is Group Risk Officer, while Duncan Brain is Chief Executive Asia and Craig Olsen is the new Chief Executive New Zealand.
Harmer reveals new IAG structure, leadership, 8 December
These are not acts of charity or corporate social responsibility. They are investments that stand on their own as providing an adequate return.
– International Insurance Society President Michael Morrissey tells a United Nations forum why insurers are adding climate-friendly companies to their $US35 trillion investment pool
NIBA in the doldrums
The National Insurance Brokers Association (NIBA) has reported a deficit of $591,148 for its last financial year. To stem the flow of red ink the NIBA board has decided to close its flagship Insurance & Risk Professional magazine after the February-March issue. In a letter to members, President Graham Stevens says the “economics of magazine publishing have changed dramatically in the past two years”. Although not revealed in the context of the huge loss, in November last year the board voted to close NIBA College and vacate the broker education market. The association had 310 principal (corporate) members at the end of last year, compared with 400 five years ago. The $519,148 deficit comes on top of a $52,755 deficit the previous financial year.
Like most modern industry associations, NIBA is a multipronged business enterprise as well as a membership-driven resource and lobby group. When times are good, revenue streams such as training and education, publishing and events can be very lucrative, and provide member benefits. The association’s challenge is to home in on its reason for being, which inevitably means paring back the business side, such as NIBA College and IRP magazine. “We’ve had to respond to the nature of the business,” Chief Executive Dallas Booth (right) said. “Serious steps have been taken by the NIBA board, and are still being taken, to change the business. “We have spent a lot of time looking at the issues, challenges, causes and opportunities that have to be addressed to manage the financial position presented to us. February/March 2016
One major outcome of that process was the collaboration with ANZIIF; that was a decision taken by the board to limit and ultimately remove exposure to financial consequences in that area. “[This year] an important challenge for us is to look long and hard at our operational activities. “The decision was to concentrate on what brokers want from us, and that’s primarily our industry representation role.” NIBA reports $591,000 loss, 8 February NIBA finances: plotting a course around the black hole, Analysis, 8 February
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Pool saved, at a price A Treasury review has recommended continuation and expansion of the Australian Reinsurance Pool Corporation (ARPC) – but insurers will have to pay more. The pool, set up in 2003 to tackle a global withdrawal of terrorism insurance after the September 11 2001 attacks on the US, is subject to a review every three years. In 2014 the National Commission of Audit established by the incoming Abbott government suggested there was scope for a “gradual Commonwealth exit” from the scheme, as terrorism cover markets were recovering. But the Treasury report finds the opposite, saying while some cover is available in the private market, it falls well short of that offered by the ARPC. It says that is “unlikely to change in the short to medium term”, and the scheme should remain in place, subject to future three-year reviews. It should also be extended to include mixed-use and high-value residential buildings, the report says, while clarification is required to remove doubt over whether losses from chemical or biological attacks are covered. Insurers will be expected to pay a higher price for the cover. Premiums, which currently range from 2-12% of the premium, will rise to 2.616%, earning the ARPC an extra $40 million. Insurers to pay more for extended terrorism pool, 1 February
Suncorp adopts a new model
Combined gets the bullet Combined Insurance will cease writing new business in Australia and New Zealand, its parent company has announced. Combined – a subsidiary of Ace, which merged with Chubb earlier this year – was the focus of an Australian Securities and Investments Commission probe following allegations of agents duping customers to maximise commissions. According to whistleblowers, people were sold policies they did not need and information such as medical histories was deliberately omitted. Agents allegedly engaged in “tombstoning”, where dead or imaginary clients were signed up and initial premiums paid by the agents because the commissions were worth more. Chubb has announced Combined will stop writing new business in New Zealand on February 25 and in Australia on April 22. Current policyholders will not be affected and will continue to receive customer service including claims handling, policy change requests and renewals. Combined to stop writing new business, 15 February
In February Suncorp, like IAG in December, reshuffled its management pack under a new operating model that Group Chief Executive Michael Cameron (above) says will focus on customer needs “and enable them to manage their financial journey seamlessly across their choice of channels and brands”. Under the new model, which comes into effect on March 1, three operational business units have been formed: Insurance Australia, Insurance New Zealand and Banking & Wealth. He says Suncorp will “create engaging and simple propositions by “aligning the business to the delivery of the customer strategy by creating customer-focused functions supported by leaner shared services”. Senior appointments take effect from March 1. They are: Chief executive commercial insurance Anthony Day was named Chief Executive Insurance, with responsibility for product development and pricing, capital and reinsurance, claims management and operational delivery for personal, commercial and life insurance services. Auckland-based Paul Smeaton is now Chief Executive New Zealand, responsible for Suncorp’s New Zealand life business as well as his current responsibility for Vero New Zealand. Suncorp Bank chief executive John Nesbitt is now Chief Executive Banking & Wealth. Chief executive personal insurance Gary Dransfield was appointed Chief Executive Customer Platforms, with responsibility for the development and operations of the intermediated channels, branches, contact centres and digital platforms. Group executive customer, data and marketing Mark Reinke was named Chief Customer Experience Officer, with responsibility for developing customer strategy, propositions and marketing strategies. Steve Johnston remains Group Chief Financial Officer. Day moves to top as Suncorp reorganises, Breaking News, 16 February
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Zurich reports on horror year, as overhaul gathers pace
Zurich Insurance Group says net income last year slumped 53% to $US1.8 billion, as the insurer prepares to shed more jobs than previously announced and deepen organisational cuts. The overhaul has extended to Australia, where the company has announced its departure from the New South Wales compulsory third party market and strata
property insurance markets. Rajbir Nanra (left) was confirmed in early February as the Australian operation’s new Chief Executive. He had been acting in the role since September, following the departure of Daniel Fogarty. Executive General Manager Commercial Adrian Riminton left the company in late January, the latest in a number of recent high-level departures. Mr Nanra says the local transformation program, which involved significant restructuring of the business and staffing levels, is now complete. The group’s global general insurance operating profit last year fell 71% to $US864 million. The business recorded an operating loss of $US120 million in the fourth quarter. The combined operating ratio for the year deteriorated to 103.6%.
Mario Greco, who has headed up Italy’s largest insurer Generali since 2012, will become Zurich’s Group Chief Executive on March 7. He was Chief Executive General Insurance at the company prior joining Generali. Chairman and Interim Chief Executive Tom de Swaan, who has held the latter role since the departure of Martin Senn in December, says Zurich is taking “rigorous actions” to turn its performance around. The shake-up will result in up to 8000 job losses globally by the end of 2018. Zurich exits strata market, completes business overhaul, 8 February Nanra takes reins at Zurich Australia, Riminton goes, 1 February Zurich to quit NSW CTP market, 15 December
New award honours Steve Ball The National Insurance Brokers Association (NIBA) broker of the year award will be renamed the Stephen Ball Memorial Award, in honour of the former association president and JLT chairman who died last year. The annual award will be sponsored by QBE, which has signed a three-year deal. It replaces the NIBA Broker of
the Year Award, which was sponsored by Zurich. Five regional winners will compete for the new national prize, worth about $20,000, with the victor to be announced at this year’s NIBA Convention in Melbourne in September.
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This month marks the final publication of Insurance & Risk Professional, the bimonthly magazine of the National Insurance Brokers Association. It will apparently be replaced by a hybrid online publication. It’s always sad to see a magazine disappear, and especially sad for the directors of this publication, who designed IRP and ran it profitably for nine years until 2009. We left IRP in excellent shape. However, there’s no ignoring the fact that all parts of the publishing business are going through tough times. Newspapers are becoming shadows of their former selves and the trade press is increasingly moving online. Insurance News (the magazine) continues to be available only in print form and only by free subscription. We keep this under constant review, but our research keeps telling us subscribers want it this way. Since 2009 Insurance News has built an international reputation for the quality and relevance of its articles and the “reach” we provide our advertisers. Insurance is a serious and significant industry that deserves the serious attention we give it. So while it may at first glance seem frivolous for our cover story to baldly state that the technological revolution has arrived and will challenge brokers’ supremacy in commercial insurance distribution, we stand by what we report. Everything is changing and no company or individual can afford to ignore the challenges that are fundamentally changing so much about our industry. So in uncertain but nevertheless exciting times we say farewell to IRP and assure you that Insurance News will continue to publish relevant perspectives on our rapidly changing and increasingly dynamic industry. Terry McMullan
QBE takes over for new NIBA broker award, 1 February
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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 PEFC paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.
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ACE and Chubb are now one. On January 14, 2016, ACE Limited acquired The Chubb Corporation, creating a global insurance leader operating in 54 countries under the renowned Chubb name. The new company combines Chubb’s 130 years of underwriting insights and devotion to customer service with ACE’s three decades of technical underwriting excellence, broad risk appetite and global presence. Our goal is to provide the very best insurance coverage and service to individuals and families and businesses of all sizes — from small and mediumsized companies to the largest multinational corporations — all across the globe. As the world’s largest publicly traded property and casualty insurer, the new Chubb has the balance sheet strength and financial security of an AA rating from Standard & Poor’s and an A++ rating from A.M. Best. As craftsmen of insurance, we are devoted to meticulously conceiving, crafting and delivering extraordinary coverage to meet the needs of the modern world — a world that is epic in scale but by nature both personal and connected. To find out more, go to new.chubb.com.
© 2016 Chubb. Coverages underwritten by one or more subsidiary companies. Not all coverages available in all jurisdictions. ACE®, Chubb®, their respective logos, and Chubb. Insured.SM are registered trademarks.
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GONE IN SEVEN MINUTES Historic Yarloop is little more than ashes, ruins and memories THE SMALL WESTERN AUSTRALIAN TOWN OF YARLOOP HAS ExISTED since about 1894, when settlers moved into the area to cut down and mill the surrounding stands of jarrah trees. It thrived in a modest way, with a siding from the Perth-Bunbury railway being built in 1896. The timber company built its houses on one side of the line, with privately owned homes being built on the other. By the 1930s the timber company had 300 employees, the largest private railway in the world with eight railway systems and 25 locomotives, and a timber mill.
In 1984 Yarloop was classified as a conservation area by the National Trust and in 1998 it was placed under the protection of the Heritage Council. In recent years it became home to citrus growers, dairy farmers, vegetable growers and even commuters. It had about 570 residents. On January 7 this year, at 7.34pm, Yarloop residents were warned of a dangerous bushfire heading towards the town. It arrived about 25 minutes later, passing straight through the town centre. In seven minutes it killed two people and destroyed 121 houses, the historic timber mill workshops, factories, old churches, the old hospital, shops, the local hotel, bowling club, fire station and most of the school. The Yarloop catastrophe produced 616 claims, with insured losses above $57 million. It was one of four catastrophes declared since November which have cost insurers more than $500 million. The other events are the Pinery bushfires in South Australia (more than $170 million in insured losses), a tornado in Sydney (more than $202 million) and bushfires on Victoriaâ&#x20AC;&#x2122;s Great Ocean Road (more than $150 million). The Insurance Council of Australia says insurers are paying out more than $1.3 million per working day for repairs, building work, settlements and assistance to policyholders. Today Yarloop doesnâ&#x20AC;&#x2122;t really exist, with most of its homes and service facilities in ashes. However, the Western Australian Government has pledged to rebuild the town. An official inquiry into the bushfire is being held by Euan Ferguson, the former head of the Victorian Country Fire Authority and before that the South Australian Country Fire Service. These pictures, supplied by Nearmap, show the town before and after the disaster. February/March 2016
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The revolution arrives Disruptive technology goes mainstream as IAG steps to the cutting edge. It’s all happening very fast, and brokers will have to keep up with it By Terry McMullan TECHNOLOGY IS SET TO CHANGE THE way the global insurance industry works. Insurers around the world and the international brokers are collectively pouring billions of dollars into finding and developing new ways to serve customers and retain them in the long term. The revolution has been coming for several years, and its impacts are now becoming obvious. It is a major reason why the country’s two largest insurers, IAG and Suncorp, have realigned their business models over the past few months, with the aim of growing closer to their customer base. The two giants’ emphasis is different, however, with IAG going for broke on the digital revolution while Suncorp is working on what many observers see as an updated allfinanz model focused on using technology to help it sell products across its expansive financial services base. The international brokers are following the insurers into the task of building vast information reserves known as Big Data. But it’s the insurers’ focus on finding new ways to deliver insurance products through the use of advanced technologies that is gaining most attention. The term “disruptive innovation” is becoming common parlance in the C-suites of the major insurers – and it’s a term that brokers should be aware of. In December IAG made a dramatic move away from the traditional model to reset its priorities as a customer-led and data-driven organisation embracing disruptive technology. The structure devised by new Managing Director and Chief Executive Peter Harmer put in place customer-facing units, one covering sales, service and brand and marketing execution, and another focused on business relationships. Former chief analytics officer Julie Batch now heads up Customer Labs, where new marketing strategies and “customer propositions” will be developed. It’s also the place for the collection of data and where new business ventures will be tried. The other unit is Digital Labs, headed by former chief information officer Claire Rawlins, now IAG’s Group Executive, Digital and Technology. This is where the innovation and disruption effort will be centred. 12
Changing cultures and helping companies embrace new technologies: IAG Digital Labs’ Claire Rawlins
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This section evolved from the former IAG Labs, which was set up by Mr Harmer last July in the period between running CGU and succeeding Mike Wilkins in the top job. Digital Labs is also accountable for building digital apps and ecosystems, and simplifying existing core platforms, IAG said in December. This will include the consolidation of IAG’s back-office functions under the leadership of incoming Chief Operating Officer Mark Milliner, who carried out much the same program at Suncorp. This consolidation, considered vital following a protracted period of growth through mergers and acquisitions, will result in the claims and product platforms being whittled down to one or two core systems that will be usable throughout IAG’s regional and Asia empire. No decision has been made on where this activity might be based. Ms Rawlins’ history before joining IAG in August last year is instructive. She has held technology leadership roles in highprofile organisations such as Air New Zealand, Woolworths, the NBN company, AAPT, BT and Qwest. She tells Insurance News her career “has always been about going into organisations and helping them change the culture and embrace new technology”. Equally significant was the recruitment in November of Deloitte digital expert Peter Bonney to a newly established “disruptive technology and architecture” role within IAG Labs. Ms Rawlins describes Mr Bonney as “a skilled and forward-thinking digital leader… with significant experience executing large-scale digital transformation strategies. Peter’s role [is] pivotal in introducing new digital architecture and leveraging emerging technologies to ensure we keep ahead of the external environment.” Mr Harmer said in December IAG’s new structure “reflects our focus on future profitability by redefining our core businesses around our customers and establishing three functions to provide the insights, products and services our customer-facing divisions need to deliver a world-leading customer experience”.
“World-leading” might seem a touch ambitious, but Ms Rawlins tells Insurance News she is confident IAG has the team to achieve it. And she is unfazed by the insurance industry’s reputation for being a technological laggard, saying without a hint of cynicism that, in the technology sector at least, “insurance is the new black”. “For many years in terms of technology it was seen as a bit of a backwater,” she says. “But in the past few years it’s become an area that a lot more technologies – and particularly digital technologies – are really interested in joining.
“In the next few years it will be very much about the customer pulling together dynamically what products and services they need for their specific environment. And that will be for the individual.” “Since we’ve gone digital, you have a feel for how exciting the industry’s becoming, and how we’re starting to attract some top people.” She says IAG Labs is “doing lots of experiments and getting products out there much more quickly. Although our core business is still insurance products, our role has changed to open up a whole new set of digital products and possibilities. “We’re not just looking at traditional insuranceNEWS
insurance products, we’re looking at products that we can build on the edge of our insurance companies.” She says her group is looking at possibilities presented by the so-called Internet of Things – the enormous network of devices, vehicles, buildings and other “things” that contain electronics, software, sensors and network connectivity that can collect and exchange data. While not all data collected by such “things” will be relevant to the insurance industry, much of it is. And its influence on practically everything will be enormous – it’s estimated that the Internet of Things will consist of almost 50 billion sources within four years. IAG Labs is also looking at many aspects of the technologically changing world that it can exploit, including the “connected home”. Mr Bonney tells Insurance News the insurer is looking at the possibilities of the connected home – which involves just about everything you can think of – and how IAG’s existing products and services can add value. “When we’re looking at the connected home, that starts to touch on things around home security, and then how we might use some of the emerging technologies to give a high level of independence to the elderly, for example. “That’s just been part of the journey so far, and we’re really becoming excited about some of the experiments that we are running in that space.” Ms Rawlins says IAG’s “customer-led and data-driven” mantra is very much to the fore. “What we want to be able to do is really personalise the experiences for our customers. “In the not too distant future customers will be able to dynamically produce or ‘grab’ services and products they want, and find them in a way that they want. “We’re not quite there yet, but we’re heading on that journey where previously our fixation was given to insights into what customers had a capacity to buy, and how we would target sales to particular customer statements. “In the next few years it will be very much about the customer pulling together dynamically what products and services they 13
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“You just have to keep up with the latest technology, or otherwise you will not be relevant. Brokers’ customers are so much into that already.”
DISRUPTIVE INNOVATION IS A TERM coined by Harvard Business School professor Clayton Christensen to describe innovations that create new markets by discovering new categories of customers. This is achieved by using new technologies to develop new ways of doing business and exploiting old technologies in new ways. The example Christensen used in his 1977 book that introduced the term was the rise and rise of the personal computer. IBM and other large technology corporations were focused on a business client base that needed mainframes, so they kept selling more and better mainframes. This left them vulnerable to a “disruptive innovation” called the personal computer. Disruptive innovations don’t need to force a quantum leap in ability. They just need to appeal to have the ability to constantly improve and grow their customer base. The first personal computers, for example, were underpowered and limited, and IBM and its counterparts failed to see them as a competitive threat. That was the mainframe manufacturers’ mistake. Blindsided by their own success in building and selling mainframes, they ignored the PC companies’ gradual progress in building a massive customer base drawn from the billions of people who didn’t need mainframes but did have a use for cheap and flexible computers. The disruptive innovation drive within the insurance industry is based on the insurers’ belief that technology enables them to sell more products to customers who are welded on to them through mutual regard. The only way to achieve that is to know the customer and their needs, using technology to be responsive and service-focused. And, after all, it’s far cheaper to retain customers than it is to constantly advertise for new ones simply because people tend to switch insurers every few years. Building a long-lasting relationship with customers is at the heart of the insurers’ push into disruptive technology and new business models. Where insurers have traditionally worked on improving existing products and processes, disruptive innovation is a force for rapid – and continuing – change.
need for their specific environment. And that will be for the individual.” In other words, products that meet the needs of the individual, rather than shoehorning them into a product that is closest to what they actually need. Mr Bonney says the emphasis is towards gaining a greater understanding of “the types of products and services that we offer to our customers going forward. Because this notion of having broad products that have great appeal is akin to betting on one horse. “I think we are really focusing on how we can understand our customer base using data and analytics and a whole raft of other approaches, to then starting to structure more meaningful products and services.” The change of emphasis Ms Rawlins and Mr Bonney see looming is a revolutionary step-change from the industry’s traditionally slow and cautious approach, which requires a deep understanding of the risk before developing products to cover it. The answer may well be in what Ms Rawlins calls micro-products – insurance for specific circumstances. Look at it this way: at present, vehicles are insured for a broad range of risks, many of which may never be relevant to the owner. Such risks could be eliminated from the individual’s cover – something most easily achievable if the owner and the insurer have a closer relationship. So if the owner wants to go to the snowfields for a weekend, they would secure extra cover through an easy interaction with the insurer. The risk would be calculated through data that measures not only the general risk, but also the known safety profile of the customer. Another main drive is to get new products and services out much more quickly using “continuous delivery”, a technique pioneered in Silicon Valley. “Companies such as Amazon and Facebook maybe make 150 small changes in a week – small features that you wouldn’t even notice – just to enhance your whole experience,” she tells Insurance News. The group is working on a pilot program with accounting software group Xero to embed insurance in software for SME businesses. It has also introduced new policies for short-stay share houses, one to insuranceNEWS
insure single items, and an alternative product for customers who can’t afford normal home building insurance. And the drive isn’t only internal. Ms Rawlins says the aim is to “expose some of our underpinning services, so companies can innovate on the edge of our company”. Not only on the edge, but also outside. In mid-February Mr Harmer told a briefing on the group’s mid-year profit that IAG will set up an investment fund to buy stakes in “start-ups doing innovative things”. Ms Rawlins says the group is also investing quite heavily “in what we call social coding, which is where developers from different parts of our organisation and potentially outside our organisation can develop products for us”. The drive for change at IAG is impressive, and there’s no doubt that underpinning it all is the need to create new channels and build trust with customers. How will that affect insurance brokers, and how will they keep up with this rapid pace of change? Ms Rawlins says IAG will “help [brokers] stay relevant and current”. That will involve education, honing skills and – uncomfortably for some – “moving with the times”. “You know, you just have to keep up with the latest technology, or otherwise you will not be relevant,” she says. “Brokers’ customers are so much into that already. They will get quotes off the internet. They’ll only go to the broker if they are seeing a value add.” Mr Bonney says brokers are capable of adapting to technological change, which has been going on for four or five years. “Everybody talks about transformation, and the reality is that in the world we’re currently living in, and will be living in going forward, the rate of change means it’s no longer a transformation mindset, it’s just an ongoing way of working. “You have to be open to learning new things and be willing to acknowledge the fact that you can’t know everything. “As technologists we have one of the most challenging jobs. You’ve got to understand where to focus and when to go forward and when to go deep. And this is true for everybody, even our customers. “It’s about being open to the prospect * of change, and learning new things.”
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Innovate, or die not trying Business technology guru Warren Burns says the insurance industry’s traditional structures are ripe for disruption, and the consequences for carriers and intermediaries could not be more stark By Terry McMullan
IN A SPEECH IN NEW YORK LAST JUNE, XL CATLIN CHIEF Executive Mike McGavick challenged the insurance industry to understand and join the technological revolution emerging in businesses around the world. Pinpointing data-driven information and the rising tide of change driven by innovation as a new way forward for insurance, he noted young innovators – the latter-day versions of Steve Jobs – are working in garages across America developing ideas that could lead to the downfall of long-established industries. But for the fact that Warren Burns works from an office in Melbourne, the city of his birth, the XL Catlin chief could have been talking about him. Mr Burns’ office is surprisingly sparse for an operation based around technology. There are giant desktop computer screens linked to cables hanging from the ceiling, as you’d expect, and there are also the ubiquitous young guys with beards poring over screens. But there’s not a single computer server – the very heart of dataprocessing – in sight. That’s because Mr Burns, the founder and Managing Director of innovation company BurnsRed, doesn’t use them. Servers, it turns out, are very yesterday. More on that later, because there’s an interesting lesson attached. But before we go further, we should define what BurnsRed and its founder do. Mr Burns spent a decade working as head of technology at UKbased consumer goods conglomerate Unilever, and also spent time working in the group’s technology, discovery and innovation area – where new ideas were thrown up, tested and sometimes discarded. In innovation, apparently, failure is acceptable because to find what works you sometimes have to first find what doesn’t. He returned to Australia five years ago because he wanted to form his own innovation agency. In his words: “We work with our customers to experiment with new ways of executing business processes that challenge traditional thinking in enterprise technology.” He and his team of specialists create interfaces between technology and users that are intended to be intuitive and engaging to use. Mr Burns is also Chairman of the CSC Leading Edge Forum, a think tank that provides research and executive advisory services to businesses in Asia and the Pacific Rim. He is, in short, an innovation specialist – a bender of traditional business concepts and a prophet for commercial change. He counts 16
among his clients some of Australia’s largest corporations, and he’s also working for companies in Asia and Europe. But Mr Burns is not some new-wave business anarchist, out to destroy industries – although along the way he is likely to shake some up. Very computer-literate, he’s incredibly aware of what’s going on in the technological world, awake to the business possibilities emerging every day. And thanks to his exposure to the higher echelons of Unilever, he’s familiar with how big business works and thinks. Returning to Melbourne in 2011, he set up the BurnsRed consultancy and today is retained by large local and global companies to find new ways of doing old things, and to devise left-field approaches to processes that work well but need tinkering to work better. He counts insurance operations (both life and general) among his client list, and some of what he’s seen and been told makes him wince. Insurance, he tells Insurance News, isn’t keeping up with the demands of an emerging generation of self-reliant people who instinctively trust technology and accept that change is not a phase but a constant. Mr Burns sees the insurance industry as open to invasion from companies that don’t see the business in the way it has always been pursued – what he calls “creative disruptors”. Underpinning the transformation process for industries around the world is the fact that access to technology is getting cheaper – much cheaper. And that’s why BurnsRed doesn’t have servers heating up its offices. It has a direct line to a database centre in Sydney owned by Amazon. The business is therefore based around that mysterious and slightly scary concept known as The Cloud. While the cost of running servers has dropped from as much as $9000 a year to about $110, Mr Burns says his direct link to Amazon’s cloud computing centre costs him four cents an hour. “People now can do massively complex things and build complex and intricate architecture to deliver software that’s just astonishing,” he tells Insurance News. “The barrier to entry into any area of business is now the cost of the technical people and four cents an hour.” And the provider of the storage facility and necessary computing capabilities, Amazon – once just an online department store for the world – is now in the position of being a disruptor. February/March 2016
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Insurance isnâ&#x20AC;&#x2122;t keeping up: technology innovator Warren Burns
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“Under this insurance model you go to the broker for your retail experience. The quality control of that experience is set by the broker, not the insurer.”
It has commoditised the processing field that is – for now – dominated by giant conglomerates such as IBM or CSC. Mr Burns believes such companies are doomed. “Amazon has come into the business-processing function from the side,” he says. “It has opened up the market by commoditising it and now everyone is riding this disruption wave.” He points to the example of online accounting company Xero Software, which has revenue growth of 493% year on year. “It entered the cloud via an Amazon web service to design and build beautiful accounting software. “Where people used to have to go out and buy a huge and expensive accounting package, Xero tells customers to only use what they need and charges something like $20 a month. “It’s normal internet, without servers. So suddenly I don’t have overheads like capex, operating expenses and waste. You only pay for what you use. “And Amazon is at the top end of it because it gets to design the wall sockets we all use. Once everyone is using this sort of service, there’s enormous downward pressure on process. “And the behemoths that thought their market was never going to change and only get bigger get left behind, while we move on and everything grows and we start finding totally new ways of doing things using this facility. “That’s where telephony came from, and the transistor radio. They were developed using existing technology to grow something new and completely different.” The result of the rapid drop in the cost of processing facilities is that every developer with their wits about them is out there with a start-up trying to find new opportunities to disrupt and improve longestablished industries and business processes. “It’s a creative disruption cycle that will eventually become a creative destruction process and eat up existing markets,” Mr Burns says. “We’re at the point already where some operations can poke great big holes in the way you traditionally do something.” The trick, he says, is to start with small and easy bites of any market – “things you know you can do really well. Once you’ve mastered that, you can broaden your appetite. Some of these start-ups will die and some will carve tasty pieces off the corpse of the previous operator and keep going.” Mr Burns says general insurance is an industry under threat from creative disruptors that specialise in those “small and tasty bites”. He believes disruption will also come from within, as insurers 18
increasingly adopt technology in an effort to reach and retain customers for the long term across a wide range of goods and services. The trend across many industries is to attract and then retain customers over the long term. The highest cost comes in the attraction phase, but it’s only comparatively recently that marketers have started looking seriously at keeping customers far longer. And the best way to retain them is to have a solid relationship built around services. That’s a concept that would cut straight across the long-established intermediary system that dominates commercial insurance, but Mr Burns shrugs that off as a consequence of change brought about by other imperatives. He also believes the commission-based nature of the intermediary system has no real future, arguing there is no room for opaque arrangements in an increasingly technology-ruled world. “I’ve been sitting in this office thinking there’s no way financial advisers and general insurance brokers can continue to operate the way they do,” he tells Insurance News. “It’s so opaque; it’s not healthy. “It’s unhealthy to think that a broker should keep picking up a commission every year for a policy he sold several years ago to a client. Surely it would be better to use technology to open new distribution channels that drive that kind of inefficiency out?” Mr Burns says the broker system has become ingrained in the industry to the point that he can’t access any non-commoditised insurance product without using – and paying for – a broker. “I tried to insure BurnsRed online without a broker. You can’t do it. There’s a sell-through culture. I have no relationship with the broker I apparently have to have, and I don’t want one. I want a relationship with my insurer. “Surely the insurers are thinking, ‘Why do I have this sell-through model? Why don’t I have instead a sell-to model?’” He uses the example of consumer goods such as deodorant. “You don’t go to Unilever as the manufacturer of the deodorant; you go to a supermarket. The supermarket dictates your retail experience. “But under this insurance model you go to the broker for your retail experience. The quality control of that experience is set by the broker, not the insurer.” This is where Mr Burns sees a future challenge for brokers. Reminded by Insurance News that brokers provide specialised advice and also promise to simplify the claims process, he responds: “There should be claims specialists you can pay to handle the whole process, anyway. There’s nothing wrong with paying for specialised services.” February/March 2016
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Strip away the complexity through algorithms: Warren Burns says the more information an insurer has, the less need there will be for commoditised policies
He says the Internet of Things holds the key to the advice conundrum. In essence, he sees every policy in future being built on individual risks, rather than generic policies. The data needed is available publicly and through internal processes, and new systems are making it very easy to store and access such systems, and assess risk very finely. “Simplifying general insurance processes through technology isn’t the magic bullet so many people think it is,” Mr Burns says. “The magic bullet will be an algorithm that assesses every part of a person’s life and business – even things that today aren’t very politically correct to consider.” “Algorithms can make massively complex calculations based on the information that’s been fed in. Insurers have probably been the biggest users of them for years, but the character of them will change in the future. “They’ll be used to provide everything it’s possible to know about an individual or company, or ship or cargo – whatever you’re insuring. “You’ll take all the data you can collect to provide a proposal that’s exactly about that thing that’s going to be insured. “It’ll also drive people out of the equation. The Internet of Things is providing a huge amount of information without people being involved.” Like many Gen Xers raised on technology, Mr Burns professes to trust the information he can gain from a variety of sources online more than he does from an intermediary. “I know I’m getting a black and white answer from technology. I know an algorithm is determining the outcome. I know that if I give it the information it needs, I’ll get answers from something that doesn’t have a sales commission structure sitting behind it.” As Mr Burns sees it, the intermediary system is one insurers are comfortable with for now, because while it’s not the cheapest way, it is reliable. But drastically cheaper access to technology and the advent of widespread data collection – so-called Big Data – will inevitably move the customer and the insurer closer together. And with that will come again the issue of who owns the customer – the insurer or the intermediary? Long-term client retention is absolutely the name of the game, and developing systems to make that closeness possible is a commercial imperative insurers are working on. 20
Mr Burns sees continuing operation of the commission-based system as a threat to the major insurers. “They’re setting themselves up to fail in the face of a transparent technology solution,” he tells Insurance News. He also wonders why methods used to force change at the commoditised end of the commercial insurance market – the direct sales end, where simple products and packs compete for sales to small businesses – isn’t being employed through the whole insurance business. “Why don’t [insurers] develop complex insurance products, using algorithms to strip away the complexity? It’s just an algorithm exercise.” He says the more information an insurer has on a client, a business, an industry and all the factors that surround them, the less need there will be for commoditised products. “You should be customising insurance products. Your policy would be irrelevant to any other business because it takes into account the unique characteristics of your business. It’s exactly about you, and it probably also takes into account things you haven’t told them. “Systems can use public information resources to find things like: the client has run a couple of companies into the ground before. It can use vast amounts of publicly available information to check for fraud and to ensure the information he’s given matches up with what’s out there on public sources. “Peripheral data is going to provide the companies that have access to it insights that give them a distinct competitive edge.” Mr Burns says there’s still room in the process for intermediaries, but brokers should detach themselves from opaque processes such as commissions. “If I need a broker’s advice, I’m prepared to pay for it. If he says it’s going to cost me $500 to have him come out to my office and spend an hour learning about me and my business, it’s up to me to decide that’s a worthwhile investment. “But how can I trust his advice if he’s going to be getting a payout from the insurer he advised me to go with?” Mr Burns is adamant significant change in the insurance industry – and any customer-based industry, come to that – is inevitable. “Unless companies become a relevant brand – one that consumers feel they simply have to interact with – they won’t thrive in what’s going to be a very competitive world. “Things are changing quickly, and technology has never been in a better position to determine how that change happens. It’s an irre* sistible process.” February/March 2016
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Under the weather
The latest industry health check predicts slight improvements, but commercial insurers still face major headaches John Deex
THERE’S NO DOUBT ABOUT IT – LAST year was a sickener for the Australian general insurance industry, as damaging rate drops combined with a spate of severe catastrophes. The good news, according to the JP Morgan/Taylor Fry General Insurance Barometer, is this year things will start to get better. The bad news is these improvements are moderate at best, and almost completely reliant on an improved catastrophe experience. For those offering commercial lines, the environment is still very challenging indeed, and there will be no significant turn in the market any time soon. “[Last] year saw a significant deterioration of combined ratios for the insurance industry, primarily due to the catastrophe events,” the report says. Globally catastrophe levels were low, but it was a very different story in Australia, where claims were well above the 10-year average. At the same time excess capacity and strong competition put premium rates under strain, with domestic classes flat overall. Domestic motor was down 2% compared with 2014, with householders up 1%. New South Wales compulsory third party (CTP) was up 2%, as was Queensland CTP. The real damage was done in commercial lines, with rates down 6% on average. Commercial property was down 10%, public and product liability down 7% and commercial motor down 4%. Western Australian workers’ compensa-
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“In terms of return on equity on commercial property, last year was the joint second worst in 40 years. At a headline level, it is very tough.”
The slowdown in domestic and commercial premiums is seeing continuation of prior-year decreases
tion dropped 3%, with Tasmania, Northern Territory and Australian Capital Territory workers’ compensation down 6%. Professional indemnity rates fell 2%, and directors’ and officers’ was down 1%. Claims inflation served only to ramp up the pressure and deliver “concerning” combined operating ratios. Domestic claims inflation tracked at 5%, with householders up to 7%, while commercial steadied at 4%. Overall combined operating ratios deteriorated to 94% last year compared with 87% in 2014. Domestic classes deteriorated to 91% from 86%, with both domestic motor and householders at 97%. Commercial lines blew out to 107% compared with 91%, with commercial property, also known as fire and industrial special risks, deteriorating to a more than worrying 133%. JP Morgan Senior Insurance Analyst Siddharth Parameswaran tells Insurance News commercial property is “as bad as it’s ever been”. “It is particularly tough in commercial at the top end,” he says. “In terms of return on equity on commercial property, last year was the joint second worst in 40 years. At a headline level, it is very tough.” Mr Parameswaran believes a trend of staff leaving brokers and trying to take clients with them has contributed to the situation. “Clients are aware that there is blood being spilt and are asking for rate reducinsuranceNEWS
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“Clients are aware that there is blood being spilt and are asking for rate reductions. The outlook is for more rate reductions.” – JP Morgan’s Siddharth Parameswaran (left)
tions,” he says. “The outlook is for more rate reductions.” But why do insurers allow it? And can they sustain it? “It is very competitive, with insurers increasing their capacity and reinsurers dropping down to grow their corporate business,” he says. “There is no unique price for risk, so when churn rates go up there will be a lot of pressure. This is coming off reasonable rates of profitability, however.” The wider economic situation will do Australian insurance companies no favours, the report says. This year’s outlook for the economy “appears relatively weak, with similar ‘sub-par’ growth trends to those observed [last year]. For Australian insurers this should mean muted growth prospects, and no economy-led pressure valves on premium rates.” However, through the gloom, some specks of light are visible. Increased appetite for mergers and acquisitions “could provide a circuit-breaker to limit price declines” and moderate improvements in rates and combined operating ratios are predicted. Domestic rates are expected to go up 3% this year, with combined operating ratios expected to improve 1% to 90%. Home and motor should each see 3% rate increases. But commercial will still be very hard going. Rates are expected to fall another 3%, with the average combined operating ratio improving 6% to a forecast of 101%. 24
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“There is definitely competition in home and motor, but it is not resulting in declines in rates in the same way as it is in commercial.” – Taylor Fry’s Kevin Gomes (left)
Commercial property rates will drop 5%, as will public and product liability. The barometer’s findings are based on survey responses from major underwriters, reinsurers and brokers, and participants were asked to outline the leading threats facing the industry. Unsurprisingly, 56% of underwriters identify “competition/rates/capacity” as their key concern, with 44% singling out “technology/cyber risk”. About 86% of brokers identify an excessively competitive rates environment as the main issue, while 57% highlight pricing and profitability. Reinsurers have flagged capacity and competition, followed by regulatory considerations and the overall investment environment. Taylor Fry Principal Kevin Gomes tells Insurance News that for those operating purely in personal lines, this year “doesn’t look too bad”. “There is definitely competition in home and motor, but it is not resulting in declines in rates in the same way as it is in commercial,” he says. “They are very important classes, and they struggled last year for rate increases, but it will turn around a bit. “Commercial lines are the ones that are really struggling. There is just so much capacity; it is hard to increase rates. “It desperately needs a turnaround, but given the soft cycle, further reductions are predicted. “There is a different picture for different 26
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“As always, insurers that are agile enough to quickly respond to the changing market with products that meet the needs of their customers are likely to thrive in the new reality of climate change.” – Taylor Fry’s Sharanjit Paddam (left)
client sizes. The larger end is getting the larger premium decreases. There are still reductions in the SME sector but nothing like as big.” So when can we expect a significant turn in the market? Apparently there is no easy answer to that question. “We asked when the cycle will turn and we got a variety of answers,” Mr Gomes says. “The most popular view is that there is no end in sight. It will have to turn, but insurers are saying that with the amount of capacity in the market they can’t pick when. “With a combined operating ratio of 133%, commercial property is certainly a lossmaking product. We haven’t heard any insurers saying they will pull out of the market – but if it carries on they may have to. “The only reason we are predicting moderate improvements this year is because more benign weather is expected. In the absence of that improvement, then there would have been further deterioration.” Mr Parameswaran agrees. “The consensus now is that it won’t turn this year,” he says. “There is definitely pressure on some lines of business, and commercial property is getting very tight. It needs some people to walk away.” The industry desperately needs a shot in the arm to take it back to full fitness. But when that will come, and where it will come from, remain to be seen. The road to recovery looks like being a long, hard * slog. 28
Climate of concern Insurers must adapt to the challenges of climate change to thrive in future, according to Taylor Fry Senior Actuary Sharanjit Paddam. In a paper appended to the JP Morgan/Taylor Fry General Insurance Barometer, Mr Paddam tackles global warming head on, warning there is growing evidence losses from natural catastrophes are rising. He points to September’s groundbreaking speech by Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, and warns Australia is far from immune. “[Mr Carney] stood in front of the historic Lutine Bell at Lloyd’s of London – the spiritual home of the insurance industry – and announced to the gathered senior members of the industry that the risks of climate change to their industry were real.” Mr Paddam says Australia ranks as the developed nation most exposed to natural perils, and it is also heavily reliant on coal. “Where insurers are exposed, directly or indirectly, to the fossil fuel industry, this leaves an exposure to the risk of a sudden reduction in asset values.” And while insurers, which generally underwrite on an annual basis, have the ability to walk away when risks increase, this is “by no means a long-term solution”. Insurers need to grow their businesses, and the more risks that become uninsurable, the smaller the potential market. Also, unaffordable premiums bring adverse publicity and a greater chance of unwanted government intervention. “Insurers need to engage governments and policymakers into adapting for climate change – through better protections from flood, stronger building standards to reduce cyclone losses and better planning controls to reduce development in high-risk areas. “Without these changes, insurers will see a loss of revenue and an increased exposure to losses.” Insurers must also identify their exposure to transition risks through investments in carbon-intensive assets, and to liability risks from historical policies, according to Mr Paddam. The transition to a low-carbon economy offers insurers substantial new business opportunities – if they are sharp enough to take them. “As always, insurers that are agile enough to quickly respond to the changing market with products that meet the needs of their customers are likely to thrive in the new reality of climate change.”
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Soft market, hard times Whatever this year holds in store, it seems few things would be more surprising than an upturn in general insurance pricing By Andy Swales A NEW YEAR IS HERE, AND with it comes the usual flood of predictions for the 12 months ahead, on matters ranging from the global economy and Middle Eastern diplomacy to the latest false apocalypse and the footy season. There are good prognoses and bad – but the latter tend to grab most headlines: Royal Bank of Scotland analysts warning investors of a coming “cataclysm” in the global economy; the Zika virus cutting a swathe through South America; Donald Trump. The insurance industry, too, is no stranger to bold predictions around emerging threats and opportunities. But some things never seem to change, and when it comes to industry pricing, the message for 2016 looks to be: new year, same old story. John Donnelly, Head of Placement Asia-Pacific at global broker Marsh, says it almost feels like the soft market in Australia has lasted forever, but still he sees no end in sight. Not this year, anyway. “It’s good news for customers buying insurance,” he tells Insurance News. “The market is still going to be really competitive and they can expect, in the main, to be making further savings. “If you’re an insurance company or reinsurance company or insurance broker, it’s more of the same.” He says pricing is “a long way from turning upwards”. As for the chance of rates hitting the bottom – from which, hopefully, the only way will be up – Mr Donnelly sees it 30
as no more than a possibility. “We would say not, but there’s a possibility that for certain classes of insurance, it may be approaching the bottom. “But the general market itself is still extremely competitive, and as a result of that competition, we’re expecting further price reductions this year.” He’s not alone in this thinking. “I think it’s far too early to call a bottom of the market – I think we’ve still got a couple of years of price reductions,” Commonwealth Bank insurance analyst Ross Curran says. “If you’re still getting price reductions in reinsurance, you’re probably likely to continue seeing price reductions in commercial lines and personal lines.” Fellow industry analyst Andy Cohen, Principal at actuarial consultant Finity, agrees an abundance of capacity and competition, plus soft reinsurance rates, make for “a pretty tight market – and I’m not seeing it turning very quickly”. “I think personal lines are competitive, but still profitable, as are some of the commercial lines. There’s room to compete, so I don’t necessarily think we’ve bottomed out,” he tells Insurance News. “Many people might hope we have, but I don’t think we have yet.” He says the soft market is putting pressure on margins, noting Suncorp’s December announcement that its underlying insurance trading ratio was expected to be about 10% for the six months to December 31, compared with the target of 12%.
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It is not an entirely gloomy picture, however. Finity’s most recent Pendulum report on the Australian general insurance industry predicted that, taking into account claims inflation, real premium rate drops would slow from -2% last year to -1.6% this year and -1.5% next year. the new JP And Morgan/Taylor Fry General Insurance Barometer, issued in January, suggests an uptick in personal lines this year – largely driven by compulsory third party – albeit offset by further falls in commercial. It forecasts commercial rates could stabilise next year. Russell Toll, National Manager, Placement Services at broker Willis Towers Watson, also strikes a slightly more upbeat note. He notes not all lines are struggling, pointing to exceptions such as cyber, terrorism, political violence, and kidnap and ransom, plus some professional indemnity risks such as financial planners’ and property valuers’ cover. And overall, while it’s difficult to see any upward trend on pricing any time soon, Mr Toll says the heat is coming off. “Some are suggesting that after three consecutive years of price reductions the market may be getting close to its floor, and price reductions, while they will continue, will not be as aggressive as was the case in 2015. “Towards the end of [last year] we did see some carriers resisting reductions beyond certain levels and walking away from the business. Where this happened, there was, however, another carrier prepared to take over and write the risk.” But Insurance House Group director Gary Gribbin sees “no turning at all” on the horizon. “The market will be as lumpy and bumpy this year as it was last,” he tells Insurance News. “I don’t think rate-cutting will be as dramatic, but I think the gap between new and renewal business will be as wide as ever. “Several years ago, when
they said it couldn’t get any worse, I ventured the opinion then that I won’t in my working lifetime see another hard market.” He notes the industry is “awash with capital worldwide. You’ve got reinsurance bearing down into insurance. In personal lines continued challenger brands are popping up – I can’t see that stopping. In commercial [insurance] it’s the least volatile, and in corporate it’s just mad.” So the cuts may be slowing – and optimists may even see a floor after so many years of falling. But what, if anything, might
massive in terms of catastrophe that we’ve not seen in the market before, globally”. Willis Towers Watson’s Mr Toll agrees. “Should the market get hit with unprecedented natural catastrophe losses or there be a significant withdrawal of market capacity, upward pressure may be experienced. “We may start to see more selective underwriting of risks where pricing discounts are being considered, in which case risk management and loss performance of individual risks will gain more focus from carriers when giving consideration to
“There’s consolidation in the [Australian] underwriting market and in the broking market. All that is being driven by the economic environment in which organic growth is really difficult to achieve.” – John Donnelly, Head of Placement Asia-Pacific, Marsh cause the market to harden? Finity’s Mr Cohen suggests it will take “a bit of a shock to the system”. “Some serious losses would push some insurers to pull back or pull out in commercial lines,” he says. “A major event globally that impacts the reinsurance market might change the cost of reinsurance... and push insurance rates up. “A major US loss or Japanese earthquake that took a lot of capacity out of the reinsurance market could have some impact here. Locally, if you had big weather losses, you could perhaps see that things would turn around.” Mr Donnelly says an upturn would require something “very, very significant in the investment markets” to draw capacity away from the insurance industry, “or something just insuranceNEWS
the level of discount being offered.” John Birch, Director of Insurance and International Public Finance at ratings agency Fitch, suggests the problem for Australia is that it’s a magnet for global capital. “There’s a lot of capital around. When you look at some of the returns that insurance markets globally are giving, returns in the Australian market have been pretty good, and they [foreign insurers] are probably willing to accept a lower [return] rate,” he tells Insurance News. “The majors here are all sort of targeting mid-teens return on equity, and it’s hard when you have a competitor that’s happy to have less than that because relative to their home market that’s still pretty good. “That’s just going to drag everyone else down.” February/March 2016
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He says there remains “a lot of capital in the system globally”. “When you look at the major global players, it’s a comment that comes up quite a bit – they’re quite strongly capitalised, and it reaches a point where they start looking for places to deploy. If they see returns in Australia, you can see how that happens. If you’ve still got that global surplus of capital, it’s hard to see how premium rates are going to be pushed higher.” As far as Mr Gribbin is concerned, the soft market is the “new normal”, created by a
for insurers and brokers to grow through “the development of improved and new products to meet the need of businesses to transfer new and emerging risks such as cyber, drones, the Internet of Things, the shared economy, social media and the effects it can have on brand and reputation, nanotechnology and other new or emerging technologies”. Mr Donnelly says Marsh is “trying to focus and develop new propositions for clients in certain industries where we think we’ve got strengths, trying to produce new business”.
“Should the market get hit with unprecedented natural catastrophe losses or there be a significant withdrawal of market capacity, upward pressure may be experienced.” – Russell Toll, National Manager Placement Services, Willis Towers Watson “structural change... in the economy that has simply flowed through to the insurance industry”. But he remains upbeat about the future for intermediaries. “I think there’s been a lot of adjustment. I’ve always had the view that the proprietors of SME broking businesses are very resilient and resourceful people. I think they’ve shown that often. I’m optimistic about brokers’ business... I think people are taking it in their stride now.” For Insurance House, it means “we’ve really got to be on top of our expenses. We’ve got to understand better than we ever have our expense drivers, and the way we can control our expenses. It means we have to be careful moving ahead of the revenue curve.” Mr Toll sees opportunities 32
But brokers must also be more mindful than ever of their expenses. “It’s a difficult environment to manage a business in, but our job is to find the best deal for customers,” Mr Donnelly says. “From the point of view of finding the best deal, it’s easier to find, but from an earnings point of view we’re under pressure all the time because the clients’ premiums are going down. “We have to try to manage the expense in our business to produce the results that our parent company is looking for. “We are addressing it, but it’s an ongoing thing. We’re structurally trying to ensure that we keep our expense base to a minimum, and we do that by centralising more things [such as back-office operations]... trying to improve the technology in a lot of our processes.” February/March 2016
Mr Donnelly expects to see further consolidation in the industry. “Consolidation is rampant at the moment... undoubtedly there is going to be more merger and acquisition activity. “Every week in Australia, major listed brokers and one or two others are announcing acquisition of small brokers, so there’s consolidation in the underwriting market and in the broking market. “All that is being driven by the economic environment in which organic growth... is really difficult to achieve. “It’s symptomatic of the economy, not really of insurance. If I think about our customers that we deal with, they’re all doing the same things we’re doing – focusing on expense. “Economic growth is 2% and below in Australia. In a number of countries it’s even less. Your business isn’t growing through the economy, so if you want to continue producing returns for shareholders, expense management is No.1. If you want to have significant growth... the only real way to effectively do that is through acquisition.” Willis Towers Watson Chairman and Chief Executive Australasia Tony Barber says his group seeks to be a trusted adviser to clients, regardless of the cycle. “What changes in a soft market... is more available capacity, changes in appetites of insurers and new entrants,” he tells Insurance News. “What may not have been a possible outcome previously, with a particular insurer or in the market generally, may now very much be possible. “Similarly, new entrants bring new appetites. It is important to understand all this and therefore what is achievable in the market at any given time. “The soft market just opens up possible alternate solutions or a number of solutions and results that we as brokers must * be across.”
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Suited and rebooted New boss Tony Barber sees an exciting postmerger future for Willis Towers Watson By John Deex TONY BARBER, NEWLY PROMOTED Regional Head of Australasia for Willis Towers Watson, was seemingly destined to work in an office. When he attended a job interview as a golf course greens curator dressed in a suit, his true calling could not have been clearer. “The guy said, ‘I don’t think you’ll find this job very rewarding,’ and he was right,” Mr Barber says. He hadn’t planned on an insurance career, but in 1986 he successfully applied for a position at New Zealand Insurance, now NZI, and the rest is history. He moved to Willis in 1998 and, aside from a three-year stint at Aon, has been there since. He had been lined up to replace the recently retired Roger Wilkinson as Willis Chief Executive for some time, but the Towers Watson merger was an unexpected bonus. 34
Now he finds himself leading a team of almost 700, with opportunities appearing on all sides. The two businesses were such a good fit because there is so little crossover, he tells Insurance News. “It is a positive move for both companies and very much a complementary merger. “What Willis provides in terms of insurance broking is quite different to what Towers Watson was providing. “We were previously just the risk and insurance broking arm – we didn’t have that same skill in talent and rewards, and that broad retirement and broader health and benefits that we potentially do now. We have a broader range of services that we can work with our clients to provide solutions on. “Because it is so complementary, you don’t have the usual thing that happens with mergers, where there is quite a bit of fallout. We will have some synergies obviously within the business, but in general terms it is complementary.” As a result, expectations are high, but Mr Barber is determined to deliver. “It has been made quite clear to us that if one and one equals two, then we haven’t done what we need to do. “I believe the same thing. Just putting the two businesses together is not going to be a success. It’s growing that, winning new insuranceNEWS
work with our current clients and also new clients, being able to provide things we didn’t provide before in a different way.” Globally, Willis Towers Watson sits behind Marsh and Aon as the third-largest insurance broker. But in Australasia, excluding the cluster groups, it’s No.5 behind Arthur J Gallagher and JLT. But that can change, and the merger may be the perfect catalyst. “Our former chairman Joe Plumeri was always aiming to be No.1, but said he didn’t mind being No.3 because there was always room to grow,” Mr Barber says. “We have that same room and the merger is absolutely a big catalyst to push forward. We recently acquired CKA in Western Australia, which is a fantastic business. “That has allowed us to jump a step, but there is still a lot of difference in terms of revenue between one, two, three, four and five. “[The merger] will allow us to do more things for more clients, and look to challenge the No.3 and No.4 companies.” The priorities right now are easy to identify: clients and integration. Looking after clients, on both the Willis and Towers Watson side, has come first since the merger was announced. And integration is clearly a major task.
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“If you are reducing fees and revenue on your existing book to stay competitive, then clearly you have got to pick up new clients to remain in the same place.”
Towers Watson operated in Melbourne and Sydney, and Willis has offices in Melbourne, Sydney, Perth, Adelaide and Brisbane, plus New Zealand. Mr Barber says lease agreements mean there may be two offices in Melbourne and Sydney for a while yet, and it is hard to predict how long the integration will take. “Every time I have an integration discussion around things like systems, it seems to take a little bit longer than I would have expected, but you start to understand it is not just a matter of flicking a switch and everything works on day one. “It does take careful planning to move people into various places. We will have short-term measures to get the people together that we need to be together. “Ultimately, it would be great to have everyone [in Sydney and Melbourne] together.” The focus then will be growth, but considered growth. Willis Towers Watson will stick to the industries in which it has expertise, and not try to be all things to all people. “If we have deep industry expertise, deep industry understanding, we know the client’s risks, we know the challenges they are facing, and we have solutions to help them. “We are strong in education, natural resources, transportation, food and beverage,
financial institutions, and we’re getting a team together to attack the real estate market. “Local government is one where we have some strength – we’re not the market leader, but that doesn’t mean we shouldn’t be offering an alternative.” Further acquisitions are on the table too, following the “great coup” of the CKA purchase. But they must add value, and tie in with strategic goals. “There may be things that Willis and Towers Watson were not able to do, but that Willis Towers Watson can do,” Mr Barber says. “We now have a greater opportunity to make acquisitions where it makes sense, whether it is acquisitions of brokers, financial planners, underwriting agencies, all those sort of things.” However, in the current climate, it will not be plain sailing. Mr Barber admits falling rates have hit hard, and that even more work is required to keep up revenues. “If you are reducing fees and revenue on your existing book to stay competitive, then clearly you have got to pick up new clients to remain in the same place. “There are clients that two or three years ago were paying $1.5 million to their broker and those same clients are paying $500,000 now. insuranceNEWS
“You hazard a guess that the broker is still doing a lot of the same work and getting paid a third. That’s one example, but there are plenty of $100,000 accounts that are now $50,000 accounts, and some are $20,000 accounts. “We are all out there looking for new clients, saying it is a good time to go to the market, a good time to put your broker to the test, so we are all hurting each other and ourselves, but that is the nature of business. “You have got to find different ways of doing things. We have an operational improvement program that we are working through. It’s a global program that we have embraced here because this is an expensive place to do business.” Mr Barber says his company’s approach is to fully understand the client’s individual circumstances before suggesting solutions. “I feel like everyone says this, but we don’t just say it, we do it. We don’t start with a solution. We start with, ‘Tell us about your business, tell us what your challenges are, tell us where you’re going.’ “Then it gets into what could work, how we can add some value, and right at the end of it you have got a solution. “We may have been guilty in the past of saying, ‘Can we quote on your insurance?’ It’s not about that. It’s more about, ‘Is what you’ve got right, is it right for you?’” 35
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“More insurers are providing [cyber] cover and more are prepared to tailor it than previously. There are a number of markets now throughout the world that provide it in different ways, shapes and forms.”
Technology is a huge focus too, with the company keen to continue living up to its reputation as “the analytical broker”. Data is crucial in understanding and analysing a client’s exposures, Mr Barber says. “We don’t have as much data as we need to have and we are working through that. Big Data has a different role to play in different segments. “We want to use it and we want to capture it. We have got some way to go, but we certainly recognise the importance of it and the impact it can have.” However, an overreliance on technology can be dangerous. “It can be a differentiator, but it can’t be the only thing. “You have still got to have the expertise, the knowledge and the understanding about how to apply the technology. Technology is an enabler.” In terms of emerging risks, cyber is clearly the standout. Mr Barber has seen a few attempts at cyber insurance over the years, but he believes cover is finally approaching what clients are looking for. “So much more of what we do is now online and traded electronically. Incidents don’t happen often, but when they do it is a real wake-up. For us, it is just a risk that we 36
need to help clients get their heads around and develop solutions that work for them. “More insurers are providing cover and more are prepared to tailor it than previously. There are a number of markets now throughout the world that provide it in different ways, shapes and forms, and I don’t think there is a board out there that doesn’t ask the question.” Mr Barber believes the challenges are even greater for smaller brokers, with the rise of direct insurers in the SME sector a serious concern. Demonstrating value is more crucial than ever as the insurance product becomes increasingly commoditised. “That’s something the broking industry hasn’t done as well as it perhaps could have.” Consolidation will become common, and brokers will have to adjust to smaller margins, Mr Barber says. “When I started in 1986, Australia had a lot of manufacturing, now there is very little. So four clients have become one client. That puts a lot of pressure on all of the brokers. “That is one of the reasons a lot of those smaller brokers have become part of cluster groups. They can try to compete in different ways through different facilities that they wouldn’t have access to themselves. “The landscape is changing. Brokers will insuranceNEWS
always be relevant, but we need to continually demonstrate our value. “Whether at the top end with the internationals or the agent in local country towns, there is still that element of trust between clients and brokers, and I hope that is never lost.” Mr Barber looks forward to an exciting future, with the merger having opened many doors that were previously bolted shut. Known as an authentic and respectful leader, he has the attributes to make the most of the opportunity. And, with nine siblings, he is well used to working with a large team. “When you get one of us, you get all of us,” he says. “Winning individually is not something I’ve ever been worried about. It is all about winning as a team. “It’s fantastic and it’s contagious – you’re going after the next one. I’m pleased and privileged to be leading this team.” And does he regret not dressing more appropriately for that greens curator job all those years ago? “I don’t think so. Insurance cops a bad rap, but it is undeserved. It is positive and rewarding, and an industry that allows you to do a lot of things. “Plus, every time I go back to the golf * course, my game just gets worse.”
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CATASTROPHES: More than the average number, but the cost to insurers was well down Natural disaster losses in 2015 were concentrated on regions that couldn’t afford insurance By Bernice Han
THE DREADED EL NINO HAS EMERGED AS AN UNLIKELY saviour, sparing the world from what could have been a damaging year in terms of natural catastrophe losses. Overall losses from natural hazards totalled $US90 billion last year, by far the lowest the world has seen since 2009, and down from $US110 billion in 2014, Munich Re says. Last year’s figure was half the 10-year average loss of $US180 billion from 2005 to 2014. All in, there were 1060 recorded loss events. “In terms of financial losses, we were somewhat fortunate last year,” the reinsurer’s Head of Geo Risks Research Peter Hoeppe says. “Strong tropical cyclones frequently only hit sparsely populated areas or did not make landfall at all. “In the North Atlantic, El Nino helped to curtail the development of heavy storms. There were just four hurricane-strength storms in the North Atlantic last year out of 11 tropical cyclones recorded overall. Of the $US90 billion in natural hazard damages last year, about $US27 billion was insured and, predictably, most of the covered losses were in developed economies. The 7.8-magnitude Nepal earthquake – which struck northwest of 38
the capital Kathmandu and affected neighbours China and India – left the biggest damage bill of $US4.8 billion. Typhoon Mujigae in China and the Philippines posted the secondlargest loss of $US3.5 billion, followed by US and Canada winter storms and Typhoon Soudelor in China and Taiwan, at $US2.8 billion each. A series of severe storms in the US completed the list, with insured damage of $US2.5 billion. It comes as no surprise that just $US210 million of losses from the Nepal quake were insured, and industry efforts are under way to rectify the underinsurance problem, which is common in many poorer and developing economies that are prone to natural disasters. “Just like in Nepal, the proportion of insured losses for catastrophes in other developing and emerging countries remains very low,” Munich Re board member Torsten Jeworrek says. “The insurance industry is exploring new avenues to close this gap in cover and thus to help people better cope with material losses after a catastrophe.” About 9000 people died in the Nepal quake and 500,000 were left homeless, with many historically important sites destroyed. A separate report from Swiss Re puts the earthquake’s overall ecoFebruary/March 2016
No open and shut solutions: the Nepal eathquake caused damage worth $US4.8 billion, but only $US210 milliion was insured
nomic losses at more than $US6 billion, of which only $US160 million were insured. It says total losses, including man-made disasters, last year reached $US85 billion, which is lower than the previous year’s $US113 billion and the 10-year loss average of $US192 billion. About $US32 billion of the overall bill was borne by insurers. Swiss Re says natural hazards accounted for the bulk of the damages at $US74 billion, and accidents due to human negligence made up the remaining $US11 billion. The massive chemical storage facility explosion in the Chinese port of Tianjin in August was the year’s costliest man-made insured disaster, Swiss Re says. Initial estimates put claims at $US2 billion, and the figure is likely to climb given the spin-off impact on other commercial lines and coverage. “The insured loss estimate is subject to a high degree of uncertainty due to the many different lines of business and coverage impacted, including potentially contingent business interruption,” Swiss Re says. In what was the world’s warmest year on record, above-average temperatures unleashed havoc in many regions. “Losses were caused by various severe natural catastrophes across insuranceNEWS
different perils [last year], including windstorms, hurricanes, earthquakes, flooding and wildfires,” Swiss Re says. “Exceptionally high temperatures and lack of rainfall caused drought, wildfires and heatwaves in many regions.” Extreme temperatures claimed more than 5000 lives during the summer in Pakistan, India, North Africa and the Middle East. Despite last year’s below-average losses, the year ahead is a potentially challenging one, with the world facing the full onslaught of La Nina, which usually occurs after an El Nino event. “Scientists believe that... the strong El Nino phase might be followed by its twin sister, La Nina,” Munich Re’s Professor Hoeppe says. “Both versions of the climate oscillation ENSO [El Nino-Southern Oscillation] in the Pacific influence weather extremes throughout the world. A La Nina phase would promote the development of hurricanes in the North Atlantic, for example.” La Nina, which means “girl-child” in Spanish, is the opposite of El Nino and refers to the extensive cooling of the central and eastern tropical Pacific Ocean. For Australia, it likely means much wetter conditions, particularly * over the eastern and northern areas. February/March 2016
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Grand designs, sharp thinking Changing a company’s name and logo isn’t an exercise to be undertaken lightly By Kate Hanley
“WELCOME TO ISIS, HOW CAN I HELP you?” Did you dial Syria by mistake? No – the ISIS Group is a 26-year-old Australian fit-out and refurbishment company that – not surprisingly – has become tired of having its brand mixed up with that of a band of Middle East psychopaths. ISIS is now known as Shape, and once again it’s safe from having its role in the world confused. Similarly, employees and members of the World Taekwondo Foundation must have tired of wearing t-shirts emblazoned with their logo, WTF, and decided on a rebrand. While the reasons for ISIS and the WTF changing their identities are obvious, what’s behind the decisions by IAG and AUB (formerly Austbrokers Holdings) to spend millions of dollars and thousands of hours rebranding? AUB is the Australian Securities Exchange code for Austbrokers, and the new identity was introduced at its annual general meeting in November – also the 30th anniversary of Austbrokers’ establishment. Chief Executive and Managing Director Mark Searles says the change highlights the group’s increasing diversification from a solely broker-based company to one where its underwriting agency and risk services areas have gained significance. The Austbrokers and NZbrokers brands will remain, while Sura continues to develop as the generic underwriting agencies brand. “Austbrokers is synonymous with Australian broking – it does exactly what it says – and that name will not change,” Mr Searles tells Insurance News. “But the group is a lot bigger than that now. We needed a name that didn’t suggest one area takes primacy over the others.” Devised by marketing group CMO, the rebrand took 18 months to plan and implement. Controversy is all too common when 40
new logos replace old and familiar images, but the new AUB design and its associated website are crisp and contemporary without attempting to be too “out there”. Wayne Lazarides, the Creative Director and Principal of Sydney-based branding agency Inkredible, says the AUB logo has a nice graphic design and the new website also has “a nice look”. But he doesn’t see anything about the designs that differentiates them from many others. That isn’t a criticism that’s likely to be made about the transformation of IAG’s logo – a lower-case rendition in purple which the design experts say makes the group appear more warm and approachable. In common with many companies it has also dispensed with its title of “Insurance Australia Group” to become just “IAG”. The new logo is certainly a marked contrast with the old design – a traditional uppercase financial services-style logo in a shade of blue known among the design fraternity as “trust-me blue”. Melbourne-based branding agency WhiteRhino Creative Director Andrew Tibb says his initial impression of IAG’s new logo insuranceNEWS
is that it “lacks the sophistication you usually expect from a large financial services company”. That may be deliberate, however, with IAG embarking on a new insurance future in which a great deal of the way it interacts with stakeholders and carries out its business is going to be very different. But Mr Tibb’s comments raise an intriguing point. Was IAG’s choice of purple deliberately aimed at the Chinese market, where purple denotes spiritual awareness and physical and mental healing? The new logo would have been as much as a year in the planning and execution. In October last year, just a month before the logo was launched, the group’s senior managers abruptly switched from an enthusiastic spruiking of major opportunities in China to stating growth would take place everywhere in Asia except China. Strategic shareholders apparently did not share the managers’ previous enthusiasm. Communications company Illuminant says colour is only one of a number of key elements in every brand, but it is a very important element. “Colours are deeply symbolic in China and can make or break your commercial offering in the Chinese marketplace.” Similarly, IAG’s use of circles in the new logo represents totality, wholeness, timelessness and, for the Chinese, heaven. Whether or not the logo was designed with a Chinese mindset, Inkredible’s Mr Lazarides believes the IAG logo “looks quite child-like and lacks a sense of weight and stature. They’ve overcompensated from a staid logo.” He says one reason for an extensive rebrand is to “promote a sense of a coming of age”, and companies like IAG don't go into a rebranding exercise without good reason.
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“A company’s values can be conveyed in so many subtle ways. It’s a cluttered environment and it’s not good enough just to put your name up in lights.”
A matter of colour The Chubb name lives on in a rainbow rebrand WHEN ACE MERGED WITH CHUBB in January the 130-year-old Chubb brand was chosen as the one to go on with. Then came what the combined group’s Chief Executive, Evan Greenberg, describes as an “out of the box” rebrand. The new logo comprises the word Chubb – the old Chubb symbol sometimes referred to as “the toilet seat” has gone. Instead, the Chubb name is set against one of nine bright colours, depending on which business card or brochure you happen to pick up. Mr Greenberg says the colours were chosen to balance the simplicity of the logo. “So we have chosen a new logo that is a simple expression of our name, with no extra symbols or visual distractions. It’s a simple, refined, modern expression of Chubb. “These (nine) colours reflect the diversity and energy of our culture, our thinking, global presence, the many different customers we serve and the many products we offer.” The Ace/Chubb merger required a new “visual identity” to reflect the new Chubb’s vision, he says. Mr Greenberg says the familiar signature line “Chubb. Insured.” will go at the end of every piece of work the new company does. “Craftspeople take personal accountability for their work, often signing their products. At Chubb, we should all be proud to sign our name to whatever work we do.”
He refers to best-selling business author Simon Sinek who says, “People don’t buy what you do, they buy why you do it”. “If businesses think differently they’ve got to show they think differently,” Mr Lazarides tells Insurance News. “IBM, for example, sells computers and Apple sells design and a desire to be different. Apple is an example of not talking about the what and how but the why.” He says IAG’s vision of “making the world a safer place” is excellent, but is disappointed it isn’t reflected in the rebranding. In other words, it’s not connected to the “why”. “A company’s values can be conveyed in so many subtle ways. It’s a cluttered environment and it’s not good enough just to put your name up in lights.” The experts say companies which drop their titles and adopt acronyms risk leaving consumers behind, although to be fair IAG has used its initials extensively since 2002. Mr Lazarides singles out the rebranding of Ernst & Young to E&Y as an example of the “absolutely ridiculous”. “They’ve gone from having a solid and reputable brand to one that means nothing to anyone. How can they use E&Y to communicate their point of difference?” He believes IAG could have gone the whole hog and completely rebranded to “a name that evokes emotion or feeling”. “With their rebrand they are effectively saying ‘We have come of age but we don’t have to mean anything in our name any longer’. Mr Tibb says some companies have successfully turned their acronyms into names that mean something to their clients – like the decision by energy company TXU to become TRUnergy. “They made themselves more acceptable insuranceNEWS
by coming up to a word the market could connect to,” he says. A rebrand of the size of IAG’s probably took a couple of months in the creative and strategy stages and up to a year to roll out. The cost of the rebrand would cost from $20,000 to $250,000 for creative, while the cost of the rollout would depend on the size of the company. Major global companies like PricewaterhouseCoopers with the PwC logo, for example, would have spent hundreds of millions of dollars on transforming their corporate images. And the impact of all this change on the bottom line? The experts agree there are great potential advantages for companies to redefine themselves and why they do it. But it’s an exercise fraught with hazards. In the end it’s a case of enlightenment being in the * mind of the consumer.
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Perplexed, , d e d n u o f b m Du tupefiedâ&#x20AC;Ś S That probably sums up the experience for millions of Australian consumers who have tried to decipher a product disclosure statement By Bernice Han
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HANDS UP IF YOU’VE EVER GIVEN UP TRYING TO understand exactly what a product disclosure statement (PDS) is trying to say. Chances are, you’re not alone. That these statements have not quite delivered the results envisioned by their creators – the Federal Government and the Australian Securities and Investments Commission (ASIC) – is plain to see. So the Insurance Council of Australia (ICA) was on to a winner when it rather belatedly acknowledged the mandatory documents that accompany insurance products have failed the very people they were designed to serve. Where did it all go wrong? After all, the disclosure regime was conceived by some of the best financial brains in the country, united by the noble goal of helping consumers make informed decisions about financial products. Gary Gribbin, director of Insurance House Group, sums it up in two words: information asymmetry. “Essentially, the problem always has been, and always will be, information asymmetry,” he tells Insurance News. “I just think there will always be a massive problem with understanding and engagement between insurance companies and their customers.” Insurers are so concerned with meeting regulatory requirements that they may have overlooked the fact consumers will, in all likelihood, find it difficult to understand the litany of industry jargon and legal speak found in PDSs. “For insurers, the PDS is basically about compliance,” Mr Gribbin says. “It is not about the substance of information to consumers, but about ensuring compliance with regulation. “They don't want a PDS that is going to hang them out to dry.” Consumers buy insurance for peace of mind, and are not usually fixated on the fine print until unfortunate events occur. “Until they have a claim, they have no interest in the policy or PDS,” Mr Gribbin says. “Predominantly, it creates attitudes that are unfair to the insurers, but you have to understand that when people have claims, they are highly emotional. No side is completely right or wrong.” Last December ICA’s eagerly awaited Effective Disclosure Taskforce report was finally made public. Its verdict pretty much summed up what the public and consumer advocates have been saying for quite a long time – the present regime isn't working. However, the report did lay the groundwork for the strongest commitment yet from ICA to improve customers’ knowledge of the cover they buy. As Chief Executive Rob Whelan says: “If consumers don’t understand the policies they’re buying, it can result in major financial losses, angry customers and possible reputational damage for the insurer – everyone loses.
“Clearer, simpler, more effective product disclosure that closes the knowledge gap between insurers and their customers is a vital part of the solution.” The taskforce’s aptly titled “Too Long; Didn’t Read” report makes no bones about the shortcomings of the PDS. “Mandated disclosure documents are not interesting or relevant enough to capture the attention of consumers before a purchase decision is made,” the report says. “As a result, the disclosure regime is not meeting its primary objective of helping consumers buy insurance that meets their needs.”
“For insurers, the PDS is basically about compliance. It is not about the substance of information to consumers, but about ensuring compliance with regulation.” The taskforce, chaired by veteran insurance lawyer Michael Gill, tabled 16 proposals for the industry to improve the situation. Research is a key element in several of the proposals, all of which have been accepted by ICA. Specifically, the industry must study consumer understanding of general insurance products and the correlation between disclosure and decision-making. The taskforce says there is no empirical research to gauge whether consumers are using disclosure documents, and the influence of such information on selecting cover. The industry currently only has research that relies on consumers’ self-reporting their knowledge about and use of disclosure, and there is no evidence on whether the current set-up has helped them. Still, existing research underscores the size of the task at hand. An ANZ adult financial literacy survey last year showed 58% of respondents do not know a claim can be rejected when policyholders have given incorrect information to insurers. A 2010 study commissioned by ICA found 49% of consumers surveyed did not refer to PDSs before taking out policies; 68% used the PDS after buying cover, but only 15% read the document thoroughly.
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About 26% found PDSs for home building and contents insurance “very difficult” or “somewhat difficult” to understand, and 21% felt the same about motor cover. “Although various insurer disclosure regimes have been in place for the best part of 30 years, there is simply no evidence that consumers generally have been assisted in making their purchasing decisions,” Mr Gill tells Insurance News. “It seems that few people read them fully. “The current documents don’t seem to engage those who need most assistance. Why is that? These are policies that are intended to protect significant risks, including the loss of the average consumer’s key assets, and they are an expensive purchase. “Unless we address the key issue of how to successfully engage with consumers and test the results, no amount of documentary content, amendments and additions, regulation or compliance will solve the problem. “Indeed, there is evidence that information that is irrelevant or too voluminous will be a problem in itself.” Insurers have a significant challenge in effectively communicating with customers. Currently the law prohibits provision of personal advice by insurers. “The overriding issue for consumers is to be able to buy the policies they need, so when the claim comes they will have the coverage they expected,” Mr Gill says. “The challenge for all stakeholders, including insurers, is to close the expectation gap.” Despite the flak it has copped, Australia’s mandated disclosure regime, including PDSs, has largely made the grade. “Overwhelmingly, the system works well,” Mr Gill says. “The challenge is to improve the system. Until we have done the research and know what we want to achieve… until there is something better to be put in its place, we haven’t suggested that [PDSs] be abandoned.” Leading consumer advocate Denis Nelthorpe tells Insurance News the report does not break new ground, but he credits ICA with a “genuine” attempt to address the problem. “One of the great values of a report like that is that the really major providers such as IAG and Suncorp will take on board the discussions and commentaries and will move much further than the report,” Mr Nelthorpe says. “I am confident the large insurers with the real market share in the consumer market will actually move beyond what the report recommendations say.” But he believes the taskforce’s report falls short of addressing one issue that has long been a sticking point – provision of general advice to consumers. “I am not sure ASIC would agree with the industry interpretation regarding provision of advice,” Mr Nelthorpe says. “If that is what the industry believes, the report would have 46
said, ‘We will reach an agreement with ASIC.’ “It could just come out and say as a recommendation, ‘We need to sit with ASIC and change the way advice is given.’ That would have effectively been the main recommendation.” ASIC’s inertia is also to blame, he says. “Consumer groups also believe ASIC has been guilty of sitting on its hands on this issue. We believe it’s time both ASIC and the insurance industry sorted out this issue, which has clearly disadvantaged consumers for some time.”
“Although various insurer disclosure regimes have been in place for the best part of 30 years, there is simply no evidence that consumers generally have been assisted in making their purchasing decisions.” Unless there is a significant shift on this, it will be difficult for the industry to achieve substantial progress in advancing consumers’ understanding of insurance products. “If you are buying a home policy, what you need to know first and foremost is to what extent your home is likely to be subject to some form of disaster,” Mr Nelthorpe says. “Is it really personal advice to discuss with someone if they live right beside a river or in the middle of the eastern suburbs? “Reading a PDS will not deal with those sort of issues. This is about making sure what people understand in the policy.” Non-profit organisation Good Shepherd Microfinance, which has worked with IAG and Suncorp on affordable products for low-income people, says a PDS should be written in “plain English” to help consumers. “Currently the document acts as a barrier to consumers taking up insurance and switching providers,” National Program Manager for Insurance Peter Collis tells Insurance News. “Their length and overly complex language makes it
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Fairness, equality drive advocate Denis Nelthorpe (above) has doggedly championed the cause of society’s most disadvantaged communities for 40 years, but the consumer rights advocate from Victoria believes his work is far from over. A long-time critic of the complexity of product disclosure statements and the lack of suitable insurance for low-income earners and the disadvantaged, he says he has “never grown ourt of the notion that things should always be fair”. “Unfortunately, there will always be some people who will feel the only way they can make a living is by taking advantage of people, whether it’s employers or salespeople,” he tells Insurance News. “And there will need to be people like me who try to overcome or overturn the worst aspects of that sort of behaviour.” Mr Nelthorpe says he has always believed everyone, regardless of their social and economic status, should be treated fairly and equally. “I guess I have always believed we need a just, fair community and that should mean all of the community, including lower and middleincome consumers and the disadvantaged.” He says every society has people who lack the means to protect themselves. “Those consumers cannot be expected to survive in a ‘buyer-beware’ economy. For various reasons, they do not have the information to protect themselves in many aspects of everyday life. “So my view is there is a need for legal services and for advocates to help the disadvantaged achieve a fair outcome and be treated fairly.” Mr Nelthorpe is currently Adjunct Professor at the College of Law & Justice at Victoria University and Chief Executive of the Western Community Legal Centre in inner-suburban Melbourne. He has previously worked as the director of the Consumer Law Centre in Victoria, director of the State Insurance Office Consumer Appeals Centre in Melbourne and director of the Consumer Credit Legal Service in Melbourne. His other previous board positions were at the Financial Ombudsman Service, the Insurance Council of Australia’s Code Compliance Committee, Insurance Enquiries and Complaints, and the Victorian Consumer Credit Trust Fund.
hard for consumers to get their head around a product and almost impossible to compare policies. “It might sound counterintuitive, but currently PDSs are so long and complex they actually hinder customers’ understanding of insurance.” He says the industry should follow in the footsteps of superannuation and managed investment scheme providers, which have moved to shorter PDSs, and consider the use of video-based disclosure. “A concise, short-form PDS would encourage take-up of insurance, allow for better decision-making, improve the
“A concise, short-form PDS would encourage take-up of insurance, allow for better decision-making, improve the likelihood that a product is appropriate for the consumer’s need and, ultimately, improve market competition.” likelihood that a product is appropriate for the consumer’s need and, ultimately, improve market competition,” Mr Collis says. “Clear and engaging video content would make a huge difference, especially for people with limited literacy.” Maureen Ball, Managing Director of compliance consultant FinServ, says a PDS should be short and precise. “As for jargon, there shouldn’t be any,” she tells Insurance News. “However, I qualify this by reminding people that an insurance policy is a legal contract and, as such, documents need to contain some specific terminology. “I honestly cannot see a day when retail insurance contracts can be legally modified down much more than they are already. After all, the minimum requirements are stipulated in the Corporations Act and Insurance Contracts Act.” Until that day arrives, consumers will remain perplexed, * dumbfounded and stupefied by their PDS.
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Raising the company’s profile: HDI’s Stefan Feldmann
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German precision A new name is not the only difference at HDI Global this year. Australian boss Stefan Feldmann says the specialist insurer has grand plans for the local market By Michelle Hannen
HDI GLOBAL MAY BE THE BEST-KEPT secret in Australian insurance. The local branch of the German industrial insurer – formerly HDI-Gerling – has been posting strong growth in recent years under Managing Director Stefan Feldmann, who joined the company in November 2010. He has transformed the local operation from “fundamentally a reverse-flow business”, handling the local insurance needs of its large, mainly European-based multinational clients, to a broker-focused organisation that writes lead lines for large Australasian corporations and infrastructure and construction projects. “Until  we did not have a focus on writing domestic industrial business in Australia and New Zealand,” he tells Insurance News. Fast-forward five years, and “quite significant” growth has seen staff numbers expand from eight to 50 and premium volume multiply more than five times, complemented by “solid underwriting returns”. To further its growth trajectory, the company opened a Melbourne office last year, and early this year it expanded into Brisbane. Its burgeoning success in the local market did not go unnoticed by everyone, with Berkshire Hathaway raiding some of the company’s senior underwriting staff when it rode onto the local insurance landscape last year. Mr Feldmann diplomatically describes that time as “interesting”. But far from stopping the HDI juggernaut, he says it strengthened the company. “It allowed us to refocus,” he says, by hiring respected underwriters such as property underwriter Graham Silton and energy underwriter Alex Hind, and snaring HDI’s global head of marine Kai Brueggemann, who moved from Germany to Australia to head up the Asia-Pacific marine business.
“What we’re trying to do in every line is to have lead underwriters, people who are recognised as leaders in their field who are followed by the market, and I think that’s what we have,” Mr Feldmann says. It’s the same approach the company takes in its homeland, Germany – considered the industrial heartland of Europe – and throughout the rest of Europe, where HDI is a leading insurer. “We insure most of the DAX [German stock exchange] top 30 companies,” Mr Feldmann says, by way of illustration. Globally, the company handles more than 3000 international insurance programs and recorded premium volume of about €4 billion in 2014. HDI was established as a mutual insurer for the German iron and steel industries, and HDI Mutual – the liability association of German industry – remains the majority shareholder of its parent company Talanx. Talanx, also the parent of global reinsurance giant Hannover Re, is Germany’s third-largest insurance group. Its closeness to industry comes from HDI’s mutual heritage and is something the company retains – a feature that Mr Feldmann says sets it apart from its competitors. “We are a company that works very closely with clients. We were created by industry, for industry, so we tend to build quite a good dialogue with our valued clients. “A lot of big industrial clients from Australia and New Zealand fly over [to the Hannover head office], and get board-level access. When we talk to big Australian and New Zealand companies, they like our closeness to the industry.” Ten years ago HDI bought the property and casualty business of Cologne-based Gerling [see panel], and traded as HDIGerling until the recent name change. insuranceNEWS
Mr Feldmann jokes the new name is easier to pronounce (previously the local operation’s full title was HDI-Gerling Industrie Versicherung AG), but it has primarily been adopted to highlight the company’s rising global profile. “We have now almost 60% of our premium volume generated in foreign markets,” he says. Locally, the company plans to use the new name “to raise the profile about what we can bring to the market”. “As a big European-based company, I think we are still quite under-represented here,” he says.
Farewell to Gerling The decision to rename HDI-Gerling means the venerable Gerling name has vanished from the Australian market. The one-time global (re)insurance group was badly affected by losses from the September 11 2001 attacks in New York and some significant asbestos risks. Formed in 1904 as a small insurance business, Gerling Konzern, the founder’s son Hans Gerling expanded it into a global operation. On Hans’ death in 1992, his son Rolf sold a 30% stake to Deutsche Bank. The insurer’s premium income halved between 2001 and 2003 to $US5.4 billion, and Deutsche Bank swapped its shareholding for a slice of credit insurer Gerling NCM. Gerling sold most of its Australian commercial insurance business to QBE in December 2002. In 2005 Rolf Gerling accepted that the day of the small global (re)insurer was over, and sold the remaining parts of the insurance company to the Talanx Group.
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“We are a company that works very closely with clients. We were created by industry, for industry, so we tend to build quite a good dialogue with our valued clients.”
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Stefan Feldmann (above) studied insurance business in Cologne, before joining the local office of Allianz as a liability underwriter. He spent two years with the company at its Munich head office, which led to a role establishing Allianz’s liability business in the Asia-Pacific region, based in Singapore from 1997 to 2004. In 2005 he moved to Sydney to establish Allianz Global Corporate Specialty – Pacific, before joining HDI in 2010. “My passion is very much building successful businesses and building strong teams,” he says. “That’s something I’ve been privileged to do twice now in Australia.” He describes HDI as solutionfocused when dealing with clients, family-oriented and non-political, which he attributes to its mutual origins. Mr Feldmann, whose wife is also German, has a 17-year-old son and a 13-year-old daughter. He says they all love the Australian outdoors and sporting lifestyle, and he particularly enjoys the work-life balance. “It’s a very professional, mature market. It’s very sophisticated but operates in a relaxed environment.”
There will be a stronger branch network throughout Australia and sales through more brokers, to allow mid-market clients to access the group’s industrial expertise. “Last year we did Melbourne, this year we’re doing Brisbane”, Mr Feldmann says. “The good thing for us is we’re actually quite an entrepreneurial company. The board gives us a lot of entrepreneurial freedom and flexibility and puts a lot of confidence and trust in us. So far, I think a lot of the proposals we’ve made – obviously backed up by strong business growth – they’re quite happy with.” As for its mid-market push, Mr Feldmann says the company tries not to pigeonhole the market in the same way as other insurers. “The good thing with our business model is the whole market is basically open to us. What a lot of insurers do – which I understand brokers never really like much – is they slice and dice the market into large corporate, mid-market and SME. “We don’t need to do that, we have one team, one approach, and we basically provide all of our services to the brokers. We want to make it very easy for brokers to deal with us.” To produce more local business, HDI plans to “build key partnerships with a number of selected brokers in every state”. Local expansion is not the only thing on Mr Feldmann’s plate. Late last year HDI announced plans to insuranceNEWS
bring its southeast Asian operation, which currently consists of a Singapore office, under his purview. (HDI’s Hong Kong business continues to oversee China, Mongolia and South Korea, while its Japan operations remain separate.) “In most lines we have quite significant capacity in Australia, so basically it allows the [Singapore] office to draw on the technical capability of our office here, and also they will have access to our larger capacity,” Mr Feldmann says. “So our line managers here have technical oversight over the ASEAN office as well.” The Singapore office, which opened in 2012 and employs 20 staff, may be just the tip of the iceberg. Mr Feldmann is clearly excited about the potential in southeast Asia, which has a combined GDP of about $US2.5 trillion and represents about 15% of Australia’s total trade. HDI has a strategic investment in Vietnam with local insurer PVI, and Mr Feldmann flags “quite ambitious plans in the region”, with opportunities in Thailand, Indonesia, Malaysia and the Philippines all on the agenda. With so much activity, it is clear the secret that has been HDI’s local success is out. And the message from Mr Feldmann is clear: watch this space. “The message is, there’s really more to be seen from us in this part of the world.” *
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Here, there, everywhere: a drone films a competition in a European downhill skiing event
Insurers are embracing drone technology in claims assessment, and encouraging safety among other users By John Wilkinson
ALTHOUGH UNMANNED AERIAL vehicles(UAVs) – usually referred somewhat inaccurately as drones – have been around almost 100 years, for most of that time they have been sophisticated pieces of military hardware. However, in the past 10 years they have become affordable vehicles, and so simple to operate even children can use them. As more and more people “take to the skies”, regulatory authorities have grown concerned about the potential safety and privacy risks. How many UAVs are now in operation worldwide is anybody’s guess. The Federal Aviation Administration in the US has decided drones should be registered with it. To date, more than 300,000 have been registered. In Australia there are rules, administered by the Civil Aviation Safety Authority (CASA), about where UAVs can operate. CASA has yet to follow the lead of Dutch police, who have trained eagles to bring down rogue drones. Along with the drone rules in Australia, Sydney-based UAS International has developed a universal standard to ensure the aircraft are operated safely. The standard sets out best practice in all areas of operating UAVs, such as maintenance and airworthiness, incident reporting insuranceNEWS
and technology upgrades. It also covers human factors, including fatigue management and first aid. QBE’s aviation business was a partner in developing this Australian standard. National Manager Aviation Julian Fraser tells Insurance News the insurer took part to “further promote education, professionalism and safety in the industry”. “While UAVs are, at their core, aviation, the technology and associated operational applications attract operators from a variety of backgrounds,” he says. “Introducing UAVs into a traditional aviation environment can jeopardise safety of other airspace users and the public.” He says the industry-based standard lifts competence among all operators, which in turn encourages a culture of safety. “The standard plays an important role in alleviating the concerns of our customers and the community about drone operations,” Mr Fraser says. “It is also providing comfort to organisations engaging UAV services.” And it helps underwriters and brokers to assess risks. “The standard helps us from a risk assessment perspective because operators who meet it demonstrate an understanding of the risks involved and how to operate in a safe environment,” Mr Fraser says. “Asking
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Lofty view: a drone’s-eye perspective, taken from an IAG machine at Victoria’s bushfire-stricken Wye River
if operators are signed up to the standard is certainly a worthwhile question for brokers to ask, and it helps us when underwriting risk.” QBE’s involvement with the standard has led to it being the preferred insurer for organisations that sign up. Mr Fraser confirmed operators who meet the standard will receive preferential rates or a rebate. The growing use of drones has prompted other insurers to form partnerships. Willis Re has joined a strategic partnership with technology company Measure to advance the use of UAVs within the insurance industry. It says drones can easily identify properties and infrastructure damaged in a catastrophe, cutting claims assessment and response times. Aerial data can also shed light on the factors leading to property damage and can inform recommendations on mitigating losses. Willis Re Executive Vice-President Alice Underwood believes drones can transform the general insurance industry. “There is a huge opportunity for the use of UAVs to improve public safety and enhance damage estimates,” she says. “Incorporating UAV usage into the insurance process is the next big step.” insuranceNEWS
IAG used drones to assess damage and fast-track claims assessments after the Wye River and Separation Creek bushfires in Victoria on Christmas Day. It was able to inspect properties before ground access was granted by authorities. The aerial images allowed assessors and customers to review damage at a safe location, removing the risks associated with physical site visits, such as asbestos, fallen power lines and landslips. The insurer had to work with fire authorities to fly UAVs in areas where waterbombing operations were still under way. IAG Chief Operating Officer Andy Cornish claims it is the first time an insurer has used drones in Australia for damage assessment following a bushfire. “Using drone technology as part of our assessment process allowed us to make the experience safer, simpler and faster for our customers,” he says. “We are proud to be the first insurer in Australia to use drones to assess damage following a major bushfire, and have received extremely positive feedback from our customers who benefitted from this technology. “We are already working with our property repair partner to develop how we can use this technology to help more customers * in the future.” AIB 9110
“There is a huge opportunity for the use of UAVs to improve public safety and enhance damage estimates.”
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Don’t change that channel Meet a broker who’s taking the fight over personal lines to the direct insurers By Andy Swales THE ESTABLISHED ORDER IN PERSONAL lines cover is facing its fair share of challenges, not least from the ongoing rise in the number of budget insurers. Their heavily marketed offerings – secured from the sofa with just a few clicks of a keyboard – are chipping away at major underwriters’ market share. While brokers’ involvement in personal lines is relatively small, it’s nevertheless significant. Some brokers see growth opportunities in a market which has become increasingly confusing. Personal lines promotions are focused almost entirely on cost – a standpoint that’s anathema to brokers, who emphasise the suitability of cover above all else. But in a market segment that’s ruled by slick marketing and promises of cheaper cover, how can intermediaries make themselves heard? One old but effective method is being used by Smarter Insurance Brokers in the New South Wales town of Port Macquarie. General Insurance Manager Allan Croft has produced a marketing document that he says has helped clients who have “drunk the Kool-Aid” understand that when it comes to buying personal lines, particularly home insurance, there’s a range of factors to consider. 60
The concise document, which has been presented to clients, advises against taking a “do-it-yourself” approach to shopping for personal lines cover, and spells out the difference between direct insurance policies and the products available through brokers. Mr Croft’s message is simple: “Don’t be fooled – it’s not the same cover.” He says he produced the client guide in response to a surge in advertising by direct budget insurers. “I’ve had so many clients over the years tell me... [budget insurers] will always say, ‘We can do this price for the same cover.’ The words ‘the same cover’ always come out, and it’s not the same.” He tells Insurance News direct budget insurers “tend to focus on price completely and steer [consumers] away from what’s in the policy. “They tend to say, ‘We’ll give you this price for the same cover [as elsewhere],’ but basically it’s the same cover because it’s called ‘home insurance’ – that’s about it.” He says while personal lines is not a major area of business for his brokerage, the Ausure authorised representative often places such cover for commercial clients and customers referred by associated advisory businesses. Smarter’s guide tells clients: “The old saying ‘you get what you pay for’ is never more true than when it comes to domestic insurance, and if a direct insurer’s quote is the cheapest, there will always be a very good reason why... related to limitations within the cover provided. “This will almost certainly be to your detriment and something you will only realise exists when you need to make a claim.” insuranceNEWS
Mr Croft says explaining this has proved tricky in the past, and the guide is a simple tool to aid his discussions with clients. “They will say, ‘I’m saving $100 if I go with [the budget provider].’ What I try to point them towards is, ‘Yeah, for your $100 saving you’re going to miss out – what’s your jewellery limit, what’s this [other limit]... you’ll end up losing thousands if you don’t look into it.’ “We try to steer people away from price and into asking, What am I getting for my money?” He produced the marketing tool towards the end of last year, and it has already made some converts among his clients. “It’s probably down to a combination of [the tool] and what I talk to them about... and also the help of [LMI} PolicyComparison. “When it comes to home insurance, I’ll often do policy comparisons when I feel it’s going to come down to a price versus cover situation, and just get the highlighter pen out and show things such as item limits for jewellery and things that are missing, and the things that, for example, a Steadfast wording would include that absolutely smash the budget insurers.” The guide notes some budget insurer “tricks of the trade”, including higher standard excesses, making some items “options” that require further payments to cover, and “slipping in” exclusions and conditions. It also warns that many direct consumers do not fully read or understand their policies, and only discover barriers to claims when it is too late. Mr Croft’s guide says the “smarter approach” is to engage a broker that can “provide you with expertise, knowledge and
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Waiting for the knockout blow The industry has been fighting insurance stamp duties for years. Could the end finally be in sight? By John Deex
IT’S AN ARGUMENT THAT WAS WON A very long time ago – insurance taxes are unfair and inefficient and should be replaced. But it is one thing winning the argument, another entirely to push through changes, especially when a great deal of money is at stake. The Insurance Council of Australia (ICA) and its supporters have mercilessly hounded, harried and lobbied – and believe the long-awaited victory is just around the corner. New South Wales ditching its emergency 62
services levy in favour of a land-based charge was a perfect pre-Christmas present, perhaps paving the way for a wider win on stamp duty. ICA Chief Executive Rob Whelan tells Insurance News the breakthrough was “excellent news”, but took 10 years of lobbying. “There had been various reviews that had demonstrated the nonsense and counter-productivity of these taxes, and the removal of the Victorian fire services levy created the right atmosphere for NSW to follow suit,” he says. “That is all the mainland states now – Tasmania still has a levy but NSW was our insuranceNEWS
priority. Along with stamp duties and GST, it was punitive, and put almost an extra 50% on top of the risk premium. “Insurers come under a lot of pressure on affordability, which is quite disingenuous when you take those figures into account. “The money will go back into the economy. We don’t know whether people will put it back into insurance, but there is now a fundamental opportunity for the industry to encourage them to buy more cover.” Just a few weeks before the NSW decision was announced, ICA released a report
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“Every state and federal government has agreed with the argument. It is about how they go about the reform, how they substitute the revenue.”
It is not only the industry that believes insurance stamp duties should have been axed years ago. A recent report from the Taxpayers Research Foundation, a subsidiary of Taxpayers Australia, is the latest in a long line to demand removal of the inefficient levies. “Stamp duty rates vary from 6-11% in most jurisdictions and are subject to the GST as well,” it says. “The economic costs of this are well understood, because increasing the price of insurance leads to non-insurance or underinsurance, which is to everyone’s detriment. “This especially applies to lowerincome groups in the community.” But how to replace more than $4 billion of revenue for state and territory governments? The foundation disagrees with ICA’s favoured increase in land rates, because “the revenues would be diverted from the state and territory governments to the local government level”. It instead recommends increasing the GST rate from 10% to 10.75%, with the extra funds withheld from the current allocation formula and state governments fully reimbursed. Kevin Davis, Research Director at the Australian Centre for Financial Studies and a panel member of the recently completed Financial System Inquiry, tells Insurance News removing the stamp duty on insurance adds up, but “governments like to protect their sources of revenue”. He agrees that taxing insurance acts as a disincentive to people taking out proper levels of cover. “It is one of those taxes that changes behaviour in a way that nobody wants,” he says. “It isn’t like taxing beer or wine.” Professor Davis agrees with ICA that the opportunity is there for change. “There are lots of balls up in the air and there is a chance for this to be part of a wider reform. “I’m not sure there is much more the insurance industry can do.”
commissioned from Deloitte Access Economics that outlined the benefits of scrapping insurance-based taxes. The report determined government coffers would receive a $575 million boost over five years if all insurance-based stamp duties, plus the NSW emergency services levy, were replaced by an increase in municipal land rates. NSW would benefit most ($400 million over five years), followed by the Commonwealth ($185 million) and Victoria ($98 million). Household spending would also rise if insurance taxes were replaced, Deloitte says. NSW would record $3.06 billion in extra consumption over five years, followed by Victoria ($1.08 billion), Queensland ($582 million), South Australia ($298 million) and Western Australia ($263 million). Private consumption across Australia would increase by $5.52 billion. The report comes to the same conclusion as so many before it: insurance taxes have a higher distortionary effect than other taxes, and are less efficient than taxes on labour and land. It says an efficient tax system raises revenue without distorting the allocation of resources in the economy. “For example, this would mean individuals make decisions about how many hours to work irrespective of tax considerations and that tax wedges do not stop the flow of goods and services to those who value them most. “Stamp duties on insurance are a particularly inefficient tax… this means raising an extra dollar of revenue through stamp duty is more costly, in welfare terms, than raising it through other taxes such as municipal land rates.” The report appeared to have the desired effect when it came to the NSW emergency services levy. Could it now have a similar impact on insurance stamp duty? Mr Whelan says it can – but he does not expect results before the next federal election. “We believe now is our best opportunity for years,” he tells Insurance News. “The insuranceNEWS
Government is actively talking about tax reform, and stamp duty remains at the forefront. “But there needs to be a mandate. Once a mandate is clear, there is the opportunity for substantial reform. “Every state and federal government has agreed with the argument. It is about how they go about the reform, how they substitute the revenue. “In a sense that is not our problem, but it is a Pyrrhic victory until something is done.” Mr Whelan clearly resents “galling” government pressure on insurers over premium affordability in northern Australia, when there are obvious solutions closer to home. “The Queensland Government has been putting up stamp duty,” he says. “We have said you could reduce the cost of premiums by 20% overnight, with the stroke of a pen, but of course that gets ignored. “We have had many discussions with Treasury to say it is absolutely a priority to get these taxes removed. We will continue the lobbying and discussions with officials.” Mr Whelan says he is encouraged by statements from SA Premier Jay Weatherill and NSW Premier Mike Baird, while the Australian Capital Territory is already well along the track to removing insurance stamp duties by July. “The other states will all fall into line because the arguments against removing these taxes are not substantial,” he says. “The ACT has put itself on a path and that is to be commended. Regrettably, other states such as Tasmania went in the opposite direction, which just shows they have run out of ideas. “If the ACT can do it, why can’t others? Eventually they will.” The point has been well and truly made – but the insurance industry cannot win this fight on points alone. It needs a political leader with the courage to stand up and deliver the * knockout blow.
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The power of one A young woman has won a groundbreaking battle against a travel insurer’s mental health exclusion. How will the industry respond? By John Deex
ABOUT FOUR YEARS AGO Melbourne year 11 student Ella Ingram was all set for a dream school trip to New York, when disaster struck. For the first time in her life she developed a depressive illness, and with her mother she decided she would have to miss the trip for the sake of her health. But at least the costs would be recoverable – a travel insurance policy had been bought from QBE before the symptoms began. The family was in for a shock. QBE denied the claim for $5860, citing a general exclusion that stated there was no cover for mental illness. But Ms Ingram was not about to take this lying down. In the first action of its kind, she took her case to the Victorian Civil and Administrative Tribunal (VCAT), which found in her favour. Ms Ingram successfully argued the exclusion and denial of her claim were in breach of the Equal Opportunity Act 2010, and that she was a victim of direct discrimination due to her disability. QBE contended statutory exceptions applied: the insurer 66
would have been entitled to discriminate if it was based on reasonable actuarial or statistical data, or if not discriminating would have led to “unjustifiable hardship”. It accepted it had no actuarial data to justify the exclusion, but referred to statistics, including that at least 45% of Australians will suffer some mental disorder in their lifetimes. QBE also commissioned a report that said without the mental health exclusion in place, its travel insurance business would make an annual loss of more than $3.2 million. But VCAT member Anna Dea was unconvinced, and said she “cannot safely find” there would be such a reduction in profits. “I have found none of the exclusions relied on by QBE apply, and so the direct discrimination... was unlawful,” she said. Ms Ingram was awarded $4292 to cover economic losses, and a further $15,000 for hurt and humiliation. But could the impact on the insurance industry be far more costly? A recent Choice survey found only CGU and Bupa – both underwritten by IAG – proinsuranceNEWS
vide travel insurance cover for mental health claims. Ms Ingram hopes her victory will lead to widespread change. The tribunal stresses its findings do not automatically apply “beyond the dispute between these two parties”, and it wants “to avoid any impression that it applies to all insurers”. But David Leermakers, Senior Policy Officer for the Consumer Action Law Centre, believes the case will set a practical, if not legal, precedent. “The thing that jumps out at you from this decision is that QBE was given the opportunity to prove it needed this exclusion, but couldn’t,” he tells Insurance News. “I expect all insurers out there using such terms will be thinking about replacing them or making sure they have the evidence to support them. “Insurers are in the business of discriminating, in the original sense of the word. They decide which risks they will cover and which they won’t. “But the question is, was it reasonable to discriminate in such broad terms?” Mr Leermakers says Ms Ingram’s predicament looks like February/March 2016
a classic case of an unfair contract term. “It is an excellent example of why we need unfair contract term laws to apply to insurers,” he says. “Other protections in the Insurance Contracts Act are not sufficient. “How many other people are facing unfair terms but don’t have something like the discrimination laws to fall back on? “We need to move away from disclosure as our primary consumer protection instrument, and move towards insurers making contracts that are safe and fit for purpose. This particular term was unreasonable and the insurer did not need it. “It had not done enough analysis and it thought, ‘We don’t have time to engage with this, let’s just rule it all out.’ “The science around mental health is evolving very rapidly and the community is more accepting of the issues. “The insurance industry has been left scrambling as to how it should respond.” Choice believes the case represents a “partial victory” for consumers, but that general mental health exclusions are
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“Insurers have to manage risk, but they also have to balance that with the impact they are having on the community.”
still rife across a range of insurance products. Director of Campaigns and Communications Matt Levey tells Insurance News the industry “still has a long way to go” in updating its view of the risks and costs of mental illness-related claims. He says blanket exclusions are based on “sketchy evidence – or at least evidence that industry has refused to make public”. “The insurance industry enjoys an exemption to anti-discrimination law, but only if it can produce statistical and actuarial evidence that shows discrimination is reasonable and would be justified by the costs that would be incurred without the discrimination,” he says. “Choice believes QBE’s attempt to meet this obligation in the Ella Ingram case was laughable at best.” QBE says while it accepts the tribunal’s findings, it will not remove the mental illness exclusion in travel insurance. It says the case relates “only to a specific set of circumstances” and the exclusion remains necessary to keep policies affordable. It says the general insurance
industry relies on being able to price products appropriately to reflect risks, and the law recognises insurers are entitled to discriminate on that basis. But it “understands the concerns expressed… and empathises with all Australians who suffer from mental health illnesses. We believe there is a strong need for wider engagement to discuss the growing issue of mental health illnesses in the community, including insurance, and QBE is committed to continuing to work with the insurance body, the Insurance Council of Australia (ICA).” ICA Chief Executive Rob Whelan tells Insurance News there is plenty of goodwill in the industry to “take this on”. But he says the lack of information makes it a complex challenge, likening it to flood cover a decade ago. “The industry needs to come together and find a path forward, but we don’t want prices to go up across the board because insurers are writing for uncertainty. “It comes down to accuracy and clarity, and we are trying to work with mental health groups and making overtures to insuranceNEWS
the Government to get the data we need. “We are actively working on this, but we understand QBE’s position at this point in time.” Mr Whelan denies the case concerns unfair contract terms, and says there is ample protection under current legislation. “This is nothing to do with unfair contract terms – that is a totally unnecessary overreaction.” But consumer groups remain concerned by the response so far. Mr Leermakers says if insurers change nothing, they can expect further challenges – and further negative publicity. “Insurers have to manage risk, but they also have to balance that with the impact they are having on the community,” he says. “Blanket mental health exclusions do not strike the right balance, and could even increase stigma. Insurers need to think a little bit harder about this.” Ms Ingram says she “didn’t ask to be depressed”, and it is hard not to sympathise with her plight. However, take away the emotional sensitivities, and insurers may well have a point. The only trouble is, they don’t have the evidence to prove it. * February/March 2016
Victoria Legal Aid, which ran Ms Ingram’s case, has joined with beyondblue, Mental Health Australia and the Public Interest Advocacy Centre to call on the Government to change discrimination laws. The campaign demands that: • There is stronger protion for consumers; • The data and information insurers rely on when excluding or rejecting claims based on a mental illness are made available to consumers; • Detailed reasons for any denial of cover are provided; • Insurers should report annually on how often and on what basis they discriminate because of a mental illness; • Insurers must comply with updated “insurance industry anti-discrimination guidelines” that would be developed by the Australian Human Rights Commission; • The “other relevant factors” insurers can consider in declining insurance are specified.
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The client stays behind Employment contracts make it clear to brokers – when they quit, they must leave empty-handed
EVERY WEEK SOMEWHERE IN AUSTRALIA an insurance broker empties his or her desk and walks out the office door for the last time. They’re heading for a new job, usually with a competitor. Or sometimes they’re moving into the more challenging but profitable world of self-employment as an insurance broker. Ahead lies a period of uncertainty. No matter whether the new job entails working for someone else or for oneself, the imperative is to build a book of business. That’s easier said than done, and it’s where things can sometimes go wrong. As media reports have shown over the past few years, a significant number of brokers setting up elsewhere eventually find themselves at odds with their previous employer. The reason: clients they handled at the previous employer have moved down the street to the broker’s new place of employment, bringing their insurance business with them. This can lead to a whole raft of complications for brokers who may or may not have been complicit in enticing clients to follow them. Whatever the circumstance, it can find the broker facing court action for breach of their employment contracts, most of which stipulate that the broker must not compete with the previous employer for clients’ business. That can be an expensive exercise. Most of the published reports on these matters are based on media statements issued by the previous employer announcing a successful action against a former employee. The statements will usually contain a brief history of what happened, naming the previous employee and stating that the matter was settled out of court. That’s a sure sign the former employee, faced with legal fees and possibly a hefty claim for damages, has capitulated. The companies’ releases usually finish with a pointed declaration that they will always take strong action to defend their rights in such circumstances. insuranceNEWS
By making their resolve very clear in a public way, companies are making sure their employees know what will happen to them if they do leave and end up with former clients. But such statements are uncommon – a few each year – and are always issued by the major international brokers, for whom such actions take place regularly around the world. So is the problem rare in Australia? It’s impossible to say. Most disputes are settled out of court, although broking sources say some involving smaller brokerages do fester for years. The smaller the brokerage, the less likely they are to become public knowledge. “The problem starts because of the old argument about who ‘owns’ the client,” one broker who has been in this situation says. “If you’re an employee who has been servicing a client for years and you’ve built up a special rapport, it’s often hard to let go when you leave. The relationship sometimes becomes friendship. “It’s just as likely the client will want to follow you, anyway. He trusts you. If that places you in breach of your employment contract, you’d better be sure you can prove they made the decision without you encouraging them. “And even then you might not be in the clear – it could depend on what the employment contract says.” Francessca Lee, a lawyer with employment law specialist McDonald Murholme, says non-solicitation clauses in brokers’ employment contracts are common, and issues revolving around restraint of trade and breach of confidentiality “are common in most industries, but particularly those that involve dealing with a group of clients”. Hays Insurance Business Director Carl Piesse says no-compete clauses in financial services intermediaries’ contracts typically cover a period of 12 months following an employee’s departure. “In most cases they are, by and large, understood and adhered to [by employees],” he tells Insurance News. “However, in some cases [compliance]
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“There is a general perception that businesses will not bother pursuing action over such breaches because they can be hard to enforce. However, an employee must never take for granted their contractual obligations.” comes down to whether an organisation has a culture of enforcing the no-compete clause or not.” He says insurance businesses are increasingly aware of the importance of nocompete clauses. “It is a very competitive market and employers are, understandably, becoming ever more protective of their client bases.” Ms Lee says courts “will only enforce a restraint that is reasonable, and for a restraint to be reasonable in the interests of the parties it must afford no more than adequate protection to the party in whose favour it is imposed. Generally speaking, an employer must indicate the timeframe and geographical location the restraint applies to.” She says other common stipulations in contracts include “non-recruitment clauses and confidentiality clauses alongside a nocompete clause. A non-recruitment clause prevents an employee from enticing other employees of the business to leave and a
confidentiality clause seeks to prevent an employee from divulging the employer’s trade secrets and other confidential information.” Ms Lee says ignorance is an issue regarding no-compete clauses. “Employees are generally unaware of the full extent of how restraint-of-trade clauses apply to them once they have left employment,” she says. “It is always important for employees to seek legal advice on their contracts pre and post-employment, so they are aware of their obligations to their employer. In some circumstances, it may be that the restraint-of-trade clause in a contract may not be considered reasonable, and therefore not applicable.” Complacency is another danger. “There is a general perception that businesses will not bother pursuing action over such breaches because they can be hard to enforce,” she tells Insurance News.
“However, an employee must never take for granted their contractual obligations to their former employer because they are serious and enforceable.” For employers, the key is to cover all bases. “No-compete clauses should be quite specific because employers will need to show they are trying to protect a legitimate interest in seeking to enforce the clause,” Ms Lee says. “There have been instances where courts have found restraint of trade clauses void because they do not seek to protect the legitimate interest of the business.” Mr Piesse says in “some unique circumstances” no-compete clauses can become a negotiating point for potential recruits, but he wouldn’t necessarily advise it. “Generally it is viewed as a standard clause. It also raises questions about someone’s commitment to the job if they are trying to negotiate on this point prior to * commencing.”
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New year, new danger Summer always brings the threat of disaster, but now climate change is raising the stakes By Michelle Hannen FOR MOST AUSTRALIANS, summer signals a long-overdue break from the daily grind. But this is also the time of year that has become associated with natural catastrophes. In a new report on natural disasters in Australia and New Zealand â&#x20AC;&#x201C; titled Expect the
Unexpected â&#x20AC;&#x201C; Munich Re confirms what many have begun to suspect: the magnitude and frequency of hazards in the region are rising. While it may not make for comfortable reading, the report details the impact of climate change and climate variability, plus the latest scientific research into
floods, cyclones, bushfires, droughts, hailstorms, volcanoes and earthquakes in the region. To understand why reinsurers are more concerned about bushfires than flooding this summer, this definitive guide to natural perils in our region is compulsory reading.
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The 5 most significant loss events in 1980â&#x20AC;&#x201C;2015 Australia
3.9 billion Overall losses 2.8 billion Insured losses Hailstorm, 14 April 1999, NSW
28 billion Overall losses 19.5 billion Insured losses Earthquake, 22 February 2011, South Island
3.5 billion 2 billion Floods, flash floods, 10-14 January 2011, Qld
13 billion 10.2 billion Earthquake, 4 September 2010, Canterbury
3.1 billion 1.8 billion Earthquake, 28 December 1989, NSW
3.2 billion 2.4 billion Earthquake, 13 June 2011, South Island
3 billion 1.6 billion Cyclone Yasi, 2-7 February 2011, Qld
1.1 billion 91 million Earthquake, 2 March 1987, North Island
1.9 billion 1.4 billion Floods, 11-18 February 2008, Qld
33.5 million 24 million Flood, 27-29 January 1984, Invercargill
Bushfires Convective storms/ Hailstorms Storm surges/ Floods East Coast Lows
Source: Munich Re NatCatSERVICE
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“While to many this may sound like good news, there is a sting in the tail: the number of very intense storms is predicted to increase.”
WHAT IS NATURAL CLIMATE VARIABILITY? In its simplest terms, natural climate variability describes changes in wind and water cycles that affect weather conditions. The El Nino Southern Oscillation (ENSO) cycle, which encompasses El Nino and La Nina, is an example of such climate variation, as is the Indian Ocean Dipole (IOD). Their impact on natural catastrophes should not be underestimated, Munich Re says. “Australia and New Zealand are exposed to natural climate oscillations that have a strong influence on the activity levels of atmospheric natural hazards.” In addition, these climate phenomena can combine, diminishing or increasing each other’s intensity. While climate variations can be forecast seasonally, forecasters have difficulty predicting their intensity, the report adds.
CYCLONE: While northern Australia has long been aware of the threat from tropical cyclones, it is the risk of a cyclone hitting Brisbane or further south, on the Gold Coast, that causes sleepless nights among reinsurers. Munich Re says that based on current climate models, the number of cyclones in the northeast of Australia could fall 15-35% due to climate change. While to many this may sound like good news, there is a sting in the tail: the number of very intense storms is predicted to increase. A further impact of climate change will be “severe” cyclones moving closer to Brisbane. Munich Re Head of Climate Risks and Natural Hazards Research Eberhard Faust told Insurance News that in both the northern and southern hemispheres, the point of maximum intensity in tropical cyclones is moving towards both the poles. “So that could translate, for instance, in Brisbane being hit by a Category 3 cyclone.” The report adds: “As climate 72
change takes hold, the Queensland region is expected to see an increase in long-lived cyclones, which will increasingly shift southwards. According to current climate research, the number of storm events is likely to decrease, but their severity increase. Based on these indicators, the possibility of a major event in and around Brisbane does indeed exist.” The area around Brisbane experienced several near misses in the 1970s, and Brisbane and the Gold Coast are of concern because of their high concentration of assets and rapid development. Munich Re says the “sums insured, and thus also the loss potentials in this region, have increased greatly in recent decades”. According to the reinsurer’s calculations, the 1000-year insured loss expected in Brisbane in the event of a Category 4 cyclone would be a “lower-two-digit billion” dollar event. The Gold Coast’s geographical features make it “extremely vulnerable to storms and flooding”, the report says.
“The region’s flat surface allows storms to sweep overland at full force. Meanwhile, the lagoon landscape brings an increased chance of flooding that extends far inland.” Aside from climate change, climate variability plays a role in the location and development of cyclones. For a cyclone to develop and be sustained, the ocean’s surface layer must be more than 26 degrees to a depth of at least 50 metres. This is the case in water south of Brisbane during the summer. But cyclones near Brisbane are rare because strong westerly winds break down their vertical structure. However, Munich Re says “local winds at higher altitudes need only be weak… for a severe cyclone to develop and make landfall in the region around Brisbane”. During an El Nino event, cyclones develop further to the east and closer to the equator, with fewer making landfall in Australia. By contrast, La Nina conditions result in cyclones developing much closer to the Australian coast.
Tropical cyclones in Australia
Source: NATHAN Risk Suite
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“Along Australia’s northern coast, storm surges can be higher than almost anywhere else on the planet.” FLOOD: While flood may be the natural hazard the public is most aware of, Munich Re says its potential impact is still underestimated in the community. “Despite regular loss events, the consequences of flooding are still often underestimated – both in Australia and around the world. One reason for this is that almost no one expects the unexpected, even if it happens often, as is the case with this phenomenon. “Floods, in particular the flash floods common in Australia, can happen anywhere, including in extremely dry regions. This element of surprise makes these events even more dangerous than they would otherwise already be.” The report finds part of the reason for complacency is that floods appear “controllable”, with people “less frightened of floods than of other natural hazards”. “Unlike earthquakes, for example, it is assumed that a flood can be controlled by appropriate measures. Most people think that when a flood happens, they will still be able to barricade themselves in or escape safely with their belongings.” With the reinsurer suggesting climate change is likely to result in more flooding in Australia, it is a situation that presents great risks. The causes of flooding in Australia are many and varied, depending on the region. Munich Re says floods resulting in major losses are to be expected in Queensland and along the east, with cyclones affecting Queensland, as well as the northern and western coasts of Australia. “An unfavourable storm constellation could easily put large parts of cities such as Brisbane, Cairns, Darwin or Perth under water, triggering unprecedented losses there,” the reinsurer says. “Large-scale floods and losses in the billions are most likely in the densely populated area of Perth, should a cyclone hit at full force.” East coast lows are cited as the main cause of flooding in New South Wales, and Dr Faust says cur74
rent research suggests their frequency may be reduced due to climate change. “But we do not know exactly whether this might play out in more intensive east coast lows,” he told Insurance News. Most coastal regions in Australia are also at risk of storm surges. “The fact Australian cities have largely escaped storm surge catastrophes to date does not mean that it will stay that way,” the report says. “It is precisely this lack of negative past experience that has led to highly exposed building developments near beaches.” Along Australia’s northern coast, “storm surges can be higher than almost anywhere else on the planet”. River floods also affect Australia, although its geography – with a lack of major river systems aside from the Murray-Darling basin – means “river floods often behave in a similar way to flash floods, providing little or no advance warning”. Munich Re says in the 2011 Brisbane floods the river rose rapidly, in part due to its short route to the sea and lack of tributaries – a situation that is “possible on nearly all Australian rivers”.
HAIL: Of all the natural perils Australia faces, it is severe storms, and particularly hailstorms, that produce the most frequent and highest losses (on an annual aggregate basis) for insurers and reinsurers, Munich Re says. Over the past 35 years, severe storms have caused $14.8 billion in insured losses and $25 billion in direct economic losses (adjusted for inflation). While floods may steal the headlines – indeed flood is the only other natural hazard for which losses reach similar heights in Australia – it is the high frequency with which hailstorms occur and their tendency to strike in cities with high value concentrations that make them the No.1 natural peril in Australia. The report says Brisbane, Sydney, Melbourne and Perth are the areas where severe hail and insuranceNEWS
strong thunderstorms occur most frequently, and although they can happen throughout the year they are most frequent and severe between September and April. Climate variability also plays a role. “In addition to the annual season, other external factors such as the ENSO in the equatorial Pacific have a measurable influence on thunderstorm activity in Australia,” Munich Re says, adding the ENSO influence is greater on the geographic distribution of thunderstorms than on their intensity. “During a strong El Nino event conditions conducive to severe thunderstorms occur much less frequently here than under La Nina or neutral conditions,” the report says. As El Nino causes humidity to drop in southeast Australia, severe thunderstorm activity “decreases considerably” along the coast of NSW and along the Great Dividing Range, while it increases in southeast Queensland and “extensive parts” of Western Australia, including around Perth. During a La Nina phase severe thunderstorm activity in eastern Australia shifts “much further” south and inland, increasing the frequency of severe thunderstorms in southern NSW and northern Victoria,
Hailstorm loss events in Australia
Source: Munich Re NatCatSERVICE
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“Munich Re says risk mitigation and investment in new materials that perform better in severe weather should be a key focus.” including around Melbourne, while severe thunderstorm activity drops in the southeast of Queensland and the northeast of NSW. Most losses caused by severe storms in Australia are attributable to hail damage and flash flooding. Once a roof is damaged, rain can cause substantial harm to a property’s interior and contents. The risk posed by severe storms shows little sign of improving. Aside from the 1999 Sydney hailstorm, the five most expensive storms by insured loss in Australia have occurred in the past five years. Dr Faust says the number of days that develop the right atmospheric conditions for hailstorms “could increase by 30% in Sydney”. Munich Re says risk mitigation and investment in new materials that perform better in severe weather should be a key focus.
DROUGHT AND BUSHFIRE: Climate variability has a large impact on drought conditions, with recent research linking long periods of severe drought in Australia with positive or neutral IOD phases. Add in climate change and the situation may only get worse: using climate models based on the worstcase scenario in which carbon emissions continue at current levels, Munich Re says the frequency of extreme droughts in Australia could increase by 1.5 times by the end of this century. That would “present major challenges to the agricultural sector and water supplies”, the reinsurer says. Under the same worst-case scenario, the average number of days a year Adelaide experiences a top temperature of 35 degrees or more may increase from the current 20 to 47 by the end of this century, while the average number of 35 degree-plus days in Cairns and Perth could increase from three to 48 and 28 to 63 respectively. As temperatures rise and droughts increase, so too do bushfire risks. Munich Re says in the worst-case scenario, the number of extreme bushfire danger days in southern 76
and eastern Australia could almost triple by the end of the century. Dr Faust says New Zealand will face a higher risk of forest fires. Today bushfire is one of the largest causes of natural hazardrelated losses in the southern half of Australia. It is an issue on which “high hazard meets high exposure”, the reinsurer says. Compared with other natural hazards, the amount of damages declared as total losses is highest for bushfire, so the impact of underinsurance is greater. Munich Re says in the 2009 Black Saturday fires in Victoria, it is estimated 80% of people with insurance were underinsured. Climate variability affects the risk of bushfires, with an elevated threat in southeast Australia and particularly in Victoria during both positive IOD phases and El Nino events. “There is a steep rise in the risk of bushfires here when these two climate conditions occur simultaneously,” the report says.
EARTHQUAKE: Earthquake is one of few natural hazards not affected by climate change or climate variability. While the threat in New Zealand has long been known, Australia is also at risk, with even a moderate quake likely to have significant consequences if a major city is hit. “Earthquakes in Australia are infrequent and mostly moderate in size,” the report says. “At first glance, this appears to be a much more comfortable situation than in New Zealand, Japan or the US. “However, on closer examination the picture looks different: earthquakes in Australia could cause insured losses in the same order of magnitude as in the highest-exposed regions worldwide.” The Indo-Australian tectonic plate is being pushed north and is colliding with other plates. The result is that Australia experiences frequent, small, shallow earthquakes. Munich Re says events similar to or greater than the magnitude-5.6 1989 insuranceNEWS
Newcastle earthquake can be expected every two years, while quakes with a magnitude of six or more can be expected every five years. So far, such quakes have happened in unpopulated or sparsely populated corners of the country, but Munich Re believes it is only a matter of time before a major Australian city is affected. “We know an earthquake will hit one of the cities,” the report says. “The only questions that remain are: when and how severe?” Perth, Adelaide, Melbourne and Sydney are at the greatest risk because they are within regions of elevated seismicity, but the probability of an event or its maximum size are hard to predict. “What we do know is that each of the cities has the potential to be hit by earthquakes bigger than a magnitude of six,” the report says. “Earthquakes like those in Christchurch should not come as a surprise and are very realistic scenarios.” The largest earthquake to hit Australia was a magnitude-7.2 event in remote WA in 1941. A magnitude5.7 quake occurred close to Adelaide in 1954; if this occurred today it would result in “multibillion-dollar insured losses”, Munich Re says. “A magnitude-6.6 or greater earthquake in Adelaide would get us into the multi-tens-of-billions range,” Dr Faust says. “All in terms of insured losses, not to speak of the direct overall losses.” At the heart of the loss scenario is the vulnerability and high concentration of Australia’s building stock. Given the relatively low probability associated with earthquakes, buildings in Australia are not constructed to resist very strong ground motions. Munich Re says the Newcastle quake “provided a good illustration of the very poor behaviour of structures such as unreinforced-masonry buildings. Should a severe earthquake occur underneath one of the major cities, the ground motions will significantly exceed the design ground motion in the building codes.
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“The impact of [earthquake] losses would largely fall on the insurance industry, due to the high penetration of earthquake insurance.” “This will inevitably lead to very high loss levels close to the earthquake epicentre.” In Christchurch the design ground motion was exceeded by a factor of more than three, and Munich Re says that would be surpassed in an Australian event. However, soil liquefaction losses are unlikely to echo those in Christchurch. “Fortunately the soil conditions in cities such as Sydney are much better than in Christchurch. Although ground motion amplification is expected in some regions that have soft soils, no widespread liquefaction is expected.” The impact of [earthquake] losses would largely fall on the insurance industry, due to the high penetration of earthquake insurance – which Munich Re puts at above 80% – and because risks are covered on a full-value basis with very small deductibles. “The earthquakes in Christchurch have shown us that even moderate earthquakes can cause huge losses for the insurance industry. Such an earthquake – but with significantly higher losses – is a very realistic scenario for Australia.”
more than 1.3 million people potentially affected. The last eruption near Auckland occurred 600 years ago, but very few places in New Zealand are immune from risk, with 28 volcanoes dotted around the islands. Much of the North Island lies within 100 kilometres of one or more volcanoes, including seven airports and eight ports. While these volcanoes have been inactive for a long time, New Zealand was the site of “the most violent volcanic eruption the world has seen in the past 5000 years”, the report says. The area around Taupo also experienced the world’s most recent “eight” on the Volcanic Explosivity Index scale – 26,500 years ago. The volcanic material deposited was up to two kilometres thick on the central North Island. Losses from volcanic eruptions extend beyond lava, mud and pyroclastic flows to ash clouds – disrupting air traffic and shipping –
and ash deposits, killing crops. Our ability to forecast volcanic eruptions remains highly flawed, due to a lack of geological and historical data on many past eruptions. Munich Re is supporting a research project by the University of Bristol to extend a database for major eruptions from the current 2000 years to 10,000 years. It says this will enable the industry to “get a more dependable idea of the overall occurrence rate of major volcanic eruptions”. The report says while volcanic eruptions are an insurable risk, “the effects of large volcanic eruptions are so severe the occurrence probability needs to be considered not only on a local basis but also globally”. But the infrequency with which eruptions now occur – and especially those in areas of high insurance penetration – mean the technical rate is low, despite volcanic eruption having the potential to “exceed the * limits of insurability”.
Volcanoes in New Zealand
VOLCANO: Volcanoes have the potential to be so devastating, few people dare think about them. “With the exception of extremely rare major meteorite impacts, no other natural events can devastate such large areas with the intensity and suddenness of volcanic eruptions,” Munich Re says. Auckland is the city at greatest risk from volcanic eruption in our region, with its position atop the Auckland Volcanic Field, a 360square-kilometre area with 50 separate volcanic vents. The vents are fed by a single hotspot 100 kilometres deep. Each past eruption created a new vent, making it unlikely a forthcoming event will occur through one of the current vents. “Even a small eruption could have a huge impact,” Munich Re says of the risk Auckland faces, with 78
Much of the North Island of New Zealand lies within 100 kilometres of one or more Holocene volcanoes, this includes seven airports and eight ports
Volcanoes 100 kilometre buffer zone Wellington Source: Munich Re insuranceNEWS
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Seizing the opportunity: Brooklyn branches out into accident and health BROOKLYN UNDERWRITING’S EXPANSION INTO accident and health was a matter of waiting for the right opportunity, according to director David Porteous. “It has been an area we have kept an eye on, waiting for the right partnership,” he told Insurance News. “We do a lot of work with SMEs and sole operators, and they were prime candidates for this type of cover. So expanding into accident and health made a lot of sense.” Mr Porteous says accident and health complements Brooklyn’s other areas of cover. “We are always looking for niches in the market and why they exist. As a result, we saw a niche in personal and group personal accident business that is hard to place. “This includes business where age can be an issue or occupations that have more risk.” He says traditional accident and health insurers tend to frown upon more mature clients and some sporting risks. “We have an ageing population and people will be living longer and working longer. But they are tending to be healthy longer as well.” The new business will be underwritten by Lloyd’s and managed by Ryan Cross, who previously played rugby league with the Sydney Roosters and earned 19 rugby union Test caps with the Wallabies. “He was looking for a new direction after his rugby career and it has taken 12 months to bring it all together to become Manager Accident and Health at Brooklyn,” Mr Porteous says. “With his sports background, it will enable us to look at some unique risks in that area.” He says Brooklyn sees sports cover in accident and health as a growing market. “Sports associations and clubs have players coming up to a level where accident and health cover is now appro* priate for them.”
Growing online: SUA does a deal and adds experienced staff SPECIALIST UNDERWRITING AGENCIES (SUA) IS ON A ROLL. The company was successful in its bid for renewal rights for a portion of Axis Specialty Australia’s portfolio, and has on board a pair of former Axis personnel to spearhead the business in Sydney and Melbourne. The Brisbane-based company now aims to grow its online offering. “While still providing a high level of advice and service, we are looking forward to developing our online presence [this year], which will only improve service standards for documentation delivery,” director John Iles told Insurance News. “At the moment we have two policies that are online policies, and we want to increase the number of products we can facilitate online.” The aim is to increase the proportion of business online to 30-40% within two or three years, up from less than 10% currently. The addition of experienced former Axis staff Quenten Dawson in Sydney and Graeme Jensen in Melbourne is a boost. “Although we do operate Australia-wide, the addition of Quenten and Graeme… will enhance our profile in each of these locations,” Mr Iles said. “Both are knowledgeable and respected underwriters and will be key to SUA’s ongoing market presence and the development of our financial lines portfolio.” Mr Iles is upbeat about the business’ prospects, despite concerns the Australian economy will struggle to overcome the post-mining boom hangover. “The market is almost at the point of turning the corner,” Mr Iles said. “There are enough signs to say we don’t believe the market will get * significant soft growth. I don’t think it will get softer.” insuranceNEWS
Saving time: CGU rolls out a simpler rego tool for brokers CGU HAS INTRODUCED A NEW REGISTRATION look-up tool that lets brokers obtain motor quotes with a just a few clicks of a mouse. All the broker needs is a vehicle’s registration details. “It’s simple and easy to use and is designed to save brokers time,” CGU spokesman Natalie Pennisi tells Insurance News. “It also improves accuracy of quotes. “We are always looking for ways to improve our service offering to brokers.” CGU Connect eliminates the need to manually enter multiple vehicle details when obtaining quotes, thereby reducing the likelihood of errors during the process. It is available throughout Australia and applies to private and business sedans, plus commercial vehicles with goods-carrying capacity of up to two tonnes. “With our new registration look-up, you can know with confidence that the correct vehicle details are entered into our quoting and policy system, so your customer is getting the most accurate premium and has the right vehicle description in case they need to make a claim,” CGU says. When registration numbers are unavailable the tool links to the Glass’s vehicle guide, making it easier for brokers to search for the right model and estimated * value. February/March 2016
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Two wheels, many countries Suncorp risk specialist David Madell put his expertise to good use, plotting a bike ride across the world to raise money for cancer research By John Wilkinson Ready to go: David Madell and bike outside Lloyd’s in London
A PASSION FOR MOTORBIKES AND A dream of hitting the open road led Suncorp Senior Operations Risk Adviser Statutory David Madell to complete the ride of a lifetime. “I grew up with motorbikes, and had this vision of riding to England,” he tells Insurance News. “My wife was my biggest advocate to do it, but negotiating countries such as Iran had been the biggest stumbling block.” Mr Madell took the plunge when a close friend and fellow keen rider was diagnosed with cancer and given just three months to live. “As Ken Bacon’s health deteriorated, I thought about raising money for cancer
research, so other people did not have to suffer,” Mr Madell says. “My parents [in the UK] got onto my case, looking at the security risks for doing such a ride. “Then my former manager at Lumley, Steve Stiles, asked if he could come, but he wanted to do it the other way round, from London to Australia.” So the direction was set – but in the end, due to difficulties with some parts of the route, such as getting a boat from Dili in Timor to Australia, they decided to end the trip at Kuala Lumpur. The planning phase took two years, and help came from a variety of sources. “Here at Suncorp we have a diverse
Across the world for a cause: David Madell and Steve Stiles on a desert highway
workforce, and talking one day to an Iranian colleague I realised I could go through his former homeland,” Mr Madell says. “That [had been] the deal-breaker with our planning.” His contract allowed for a career break, and Mr Madell built up his strength and stamina to undertake the journey. Sadly, he learned during the trip that Mr Bacon had lost his seven-year battle with cancer. The route took the duo through Europe, Turkey, Iran, Pakistan, India, Nepal, Myanmar and Thailand, over more than four months, at an average speed of 72kmh, across 21,650km. It was a smooth journey, with Mr Madell’s BMW running well for the duration. “While the trip enabled me to fulfil a childhood dream, one outcome was the people we met were awesome,” Mr Madell says. “In Turkey people helped us get a new tyre for Steve’s bike on a Sunday. People were always offering us food and inviting us to stay with them.” In Pakistan the pair had armed guards, complete with AK-47 rifles, to escort them through the country. “They formed a motorcade to protect us, and even when we offered to buy them food and drinks they refused,” Mr Madell says. “We found the most welcoming countries were Islamic, and there is something to learn from that.” He says despite the Australian Government’s warnings not to travel in some countries, the risks were calculated. “I had lots of emails from people saying what the risks were, so I knew what we were going into. I manage risk at work, so I factored in calculated risks for the trip. But despite all the risks, it was an amazing way to see the world.” Mr Madell is still working towards a fundraising target of $5000. Donations can be made on the Cancer Council website. *
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peopleNEWS HDI Global says aloha at summer fiesta Hawaii may be more than 8000km away, but that didn’t stop HDI Global from borrowing a whole lot of trademark Hawaiian hospitality at its annual summer fiesta at the Balmain Hotel’s Tiki Huts in Sydney. About 75 brokers from New South Wales broking firms dressed in classic Hawaiian shirts and flower leis as they mingled with Regional Head ASEAN & Australasia Managing Director Stefan Feldmann and his senior management team. This year’s fiesta took on added significance as it also celebrated the German industrial lines insurer’s corporate rebranding from HDI Gerling Industrial Insurance Company to the less complex HDI Global. The rebrand marks a milestone in the company’s history of more than 100 years and signals its global ambitions. Mr Feldman also took the chance to update brokers with plans to expand into Queensland. Entertainment was provided by Harvey and the Hula Girls, as guests enjoyed a varied menu that included “aloha” pizza, deep fried coconut prawns and soft shell crab tacos.
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Young Professionals bat for the Renegades The Young Insurance Professionals (YIPs) Victorian branch joined thousands of fans to cheer on the Melbourne Renegades at Melbourneâ&#x20AC;&#x2122;s Etihad Stadium in January. While the Renegades failed to beat the Adelaide Strikers, about 140 YIPs from Victoria had an enjoyable outing as they watched the two teams slug it out for a place in the Big Bash League finals. They were treated to some first-class cricket action, highlighted by top order batsman Chris Gayle who equalled the record for the fastest ever halfcentury in T20 history. Despite the Renegade not making it to the finals, YIPs did not leave the stadium empty handed. One lucky YIP member won a signed Renegades jersey by Gayle and team mate Dwayne Bravo. The networking event is the first of its kind and there are plans to possibly make it an annual affair, given the popularity of the inaugural outing.
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Blue Eagles land in Tasmania Twenty-five of the leading Allianz Blue Eagle brokers met in Tasmania in December for the seventh annual Blue Eagle event. The meeting began with an introduction to the Amazing Race competition – destination unknown. The first clue in the race for the Blue Eagle Cup directed teams to Cradle Mountain. Once there, it was strictly business, as teams participated in a feedback workshop in which key initiatives for the coming year were discussed. The traditional black-tie dinner on the first night saw IC Frith & Associates (New South Wales) and MGA Insurance Brokers (South Australia) inducted into the Blue Eagle Hall of Fame. Allianz also welcomed Australian Reliance (Western Australia) to the Blue Eagle Legend Club. Day two started with a new clue and the first challenge: the Segway Olympics, in which teams’ skills and dexterity on Segway vehicles were put to the test. At the end of this challenge the SA team was in the lead, with Victoria and WA hot on their heels. Following lunch the teams departed to Ratho Farm on the edge of Bothwell in the state’s central highlands. There, equipped with hickory clubs, they competed on Australia’s oldest golf course. Team Victoria took out the tournament. By day three all teams were still in the running for the coveted cup. Hobart was the final destination, and what better way to find this year’s champion than a sailing race ending at Constitution Dock? Team SA crossed the line first and collected this year’s cup. In celebration of another successful Blue Eagle event – and another strong year for the Blue Eagle program – participants rocked the night away with legendary Australian band The Choirboys.
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Steadfast Agencies App available on the App Store and Google Play.
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MGA keeps ahead of the curve The two-day MGA Brokers Assistants Conference held at the historic Werribee Park Mansion Hotel in Victoria in November was jam-packed with activities, industry involvement and opportunities to acquire new skills. The aim of the event was neatly summed up by its title: “Ahead of the Curve”. Following the opening by MGA Insurance Brokers Managing Director Paul George, who spoke on “the market and MGA moving forward”, it was straight to business with operations workshops and presentations on the impact of technology on business efficiency and customer service, compliance as the driver of excellence and the importance of professional development to “stay ahead of the curve”. The first day also included industry presentations from Sura, Zurich, Millennium and CGU. The day’s highlight was the series of technical sessions ring-mastered by dynamic LMI Group chief Allan Manning. He spoke about liability, from its origins to its application in the 21st century, with case studies that brought the world of liability insurance vividly to life. The delegates were then divided into six groups, each of which was presented with scenarios to which they applied their newly acquired skills and knowledge. By the end of Day 1, delegates had earned their magnificent gala dinner at Werribee Open Range Zoo. The second day of the conference included team-building exercises, presentations from Allianz and QBE and an open forum in which MGA executives and delegates participated in a free exchange of Q&As.
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Surfâ&#x20AC;&#x2122;s up for AHI staff Accident and Health Internationalâ&#x20AC;&#x2122;s (AHI) fun day to promote healthy living among staff and brokers attracted almost 100 industry professionals. After gathering at Manly Surf School in Sydney on a near-perfect day, participants were divided into four teams named after beachside suburbs. A relay surf competition gave participants of all skill levels a chance of winning. AHI-sponsored pro surfer Adam Melling judged the competition, along with fellow surfer Kai Otton, AHI founder David Epper and Chief Executive Peter Banks. The Newport team was declared the convincing winner. The day continued with beach cricket and volleyball before a barbeque and drinks at the Manly Lifesaving Club.
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When you need us most, we’re we’re at our best. Call us on 1800 618 700 or visit acchealth.com.au
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EBM celebrates 40 years in style Perth-based brokerage EBM has celebrated its 40th anniversary with a conference at Noosa in Queensland titled Power of the Past, Force of the Future. A highlight of the event was two workshops by Amanda Stevens, an author of five books and a marketing consultant to such companies as Microsoft, Westpac, Foxtel and Priceline. At the gala dinner Executive Chairman Alan Bishop was presented with a personalised coin to mark his 40-year association with the broker. Managing Director Ward Dedman and Executive Account Manager Owen Connolly were presented with certificates and pins to commemorate 15 years with the business. EBM now employs more than 200 staff in nine offices nationwide.
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peopleNEWS Fun and games at Sportscover lunches Sportscover hosted Christmas parties for brokers and clients in Melbourne and Sydney in December – and as one would expect, there was plenty of sport on offer. The Melbourne event was held at the MCG, where 75 brokers and 25 staff enjoyed lunch in the Olympic Room. For those wanting to catch some elite cricket, a Sheffield Shield match was in play at the time. A highlight of the MCG lunch was Sportscover Australia Chief Executive David Lamb interviewing 17-year-old Australian taekwondo champion and Olympic hopeful Deanna Kyriazopoulos and Commonwealth Games gold-medal swimmer Belinda Hocking. The interviews were filmed by Sportscover’s online broadcaster My Sport Live. The Sydney event was held at Sportscover’s office overlooking Darling Harbour. Forty people attended the lunch, which included a sports quiz.
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A right royal thank-you for NTI partners The National Transport Insurance (NTI) Victoria and Tasmania branch’s fourth Business Partners Function was held at the Royal Melbourne Yacht Squadron, in bayside St Kilda. The December event, hosted by NTI State Manager Renzo Antidormi, was attended by more than 120 guests, who enjoyed an afternoon of drinks, canapes and networking. The entire NTI Victoria and Tasmania team was on hand to mingle with guests. Mr Antidormi says the annual event is held to thank NTI’s business partners – including intermediaries, repairers, salvage operators and legal partners – for their support. He also took the opportunity to thank his team for their “professionalism and commitment” to delivering outstanding sales, underwriting, claims and business services results. NTI Chief Executive Tony Clark also attended the event, and during his address to guests he highlighted NTI’s significant achievements for the year, including absorption of the Lumley heavy motor portfolio, the launch of Yellow Cover, the recruitment of additional expertise in plant and machinery insurance and the success of NTI Truck Assist, the specialist breakdown service for heavy vehicles. Mr Clark also expressed his pride at NTI maintaining its Aon Hewitt “best employer” rating.
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OH DEAR, WE REALLY HAVE UPSET SOME of you, haven’t we! A comfortingly small number of readers have got all hot under the collar over our “incessant leftist diatribe” on climate change, both in this magazine and on the insuranceNEWS.com.au website. “We could well do without it,” rages one. “Fair dinkum, you’re worse than the ABC,” screams another. Some accept that the climate is changing, and just dispute that it’s mankind causing it. Others go further and categorically reject statistics compiled by some of the most respected meteorological organisations in the world – seemingly on the basis that everything looks fine and dandy out of their windows. “Did you and your staff lock yourselves inside for the whole of summer?” asks a particularly incensed rural broker. “The fields are green everywhere.” Let’s just pretend all those droughts and bushfires in other parts of the country aren’t happening, shall we? And never mind that fact that last month globally was the hottest January ever recorded. The science is clear. Global temperatures are rising and – crucially for the insurance industry – extreme weather events are increasing in both frequency and severity. But are they really? YES THEY ARE! NASA’s Global Climate Change unit 98
John Deex Managing Editor Insurance News
summed it up nicely in a recent blog post. It says one of the most commonly asked questions goes something like this: “Hey, NASA, are you really sure people are causing climate change? Have you double-checked?” And NASA’s answer? “Yes, we’ve double, triple, quadruplechecked. It’s science! We check and recheck a gazillion times. We’ve looked into everything you could possibly imagine and more. “Before we commit to what we say, we have a strong desire to make sure it’s actually true.” In September the Governor of the Bank of England, Mark Carney, stood at Lloyd’s, the beating heart of the insurance industry, and spoke of the “growing international consensus” that climate change is unequivocal. He warned that the general insurance industry is most exposed to the impacts, and that “while there is still time to act, the window of opportunity is finite and shrinking”. So we’d better get on to it, hadn’t we? What the journalists at Insurance News think about climate change isn’t relevant. We don’t make the news, we report it. We understand the insurance industry’s issues and we publish information that builds readers’ understanding of those issues. And the biggest issue of them all, according to the recent Global Economic Forum in Davos, is climate change. The vast majority of our coverage focuses insuranceNEWS
on what can and should be done to mitigate the feared increase in natural catastrophes, much of which is brought about by climate change. You would have thought the insurance industry would welcome any push to build cyclone-resilient homes, avoid floodplains, or construct crucial levees. And to be fair, most of the big players do. It’s just a small and very vocal minority who can’t accept that the world’s climate is changing, and because of that the risks to the environment are increasing in number and severity. “There have been cyclones in Queensland since Adam was a boy,” they grumble. True enough, but they’ll be worse in future, and we’ll be more exposed to them. What could possibly be wrong with trying to prepare for that? We could save lives, property and insurers’ profits – not to mention the planet – all at the same time. And even if climate change is one day exposed as the most elaborate hoax in history, what would we have really lost? The world would nevertheless be a safer, cleaner and more beautiful environment for our children and grandchildren to enjoy. So, climate change sceptics, we just think we’re doing our job, and we certainly don’t think we have anything to be ashamed about. * How about you?
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Sam trains six days a week to compete on the world stage. Inspired by her commitment, we support her dream.
Watch part 2 of Samâ&#x20AC;&#x2122;s story here: qbe.com.au/stories
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