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INSIGHT: Steadfast launches its own broking system FACE TO FACE: QBE’S Tim Plant BHSI’s Peter Eastwood HIGH AND UNSAFE: Hidden hazards in city buildings
THE LESSONS OF WINLEY: Shaun Standfield explains why the Perth company’s collapse won’t affect the growth of authorised representative groups
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Contents 6 Newsmakers » 10 Model for the future » Insurance Advisernet chief Shaun Standfield says the Winley collapse does not mean the AR model is flawed – but strong infrastructure is vital.
16 Northern exposure » Does Canberra have a role to play in the cyclone insurance market? With mitigation looking the most viable option, the answer is maybe yes, probably no.
22 Building on good fortune » One year on, BHSI has become a force in the local insurance market. Meet its global chief, whose growth plans are amazingly simple.
28 Gaining Insight, keeping focus » Steadfast says the development of its own broking system is the key to autonomy. Others wonder why they’re bothering.
34 Digging in » Others may be talking about the turn of the cycle but QBE’s Tim Plant is more focused on the ‘new normal’ in a world where customer and cost are key.
38 Back in business » Vero’s latest report says SMEs are inching back to brokers, but a successful future is far from guaranteed.
44 Hidden dangers » Our cities’ skylines may look spectacular, but a spate of revelations has left Australians asking just how safe they really are.
52 The uberwriting agency » CHU chief Bobby Lehane is determined to be a strata market disruptor, and his journey has only just begun.
56 From workshops to bunny hops » With his health fading, motor insurance pioneer Wayne Patterson reflects on his legacy in business, and a new creative project that will live long into the future.
58 Mutually assured protection » When it comes to customer service, one of the oldest insurance models around remains ahead of the curve.
62 Ill prepared? » There’s nothing new about the pandemic threat, but as populations grow and diseases evolve, so too must the global response.
lawNEWS 70 Insurers on the hook » A High Court ruling changes an established precedent in the way insurers handle third parties when their client is insolvent.
companyNEWS 72 Doctor on the spot » AHI’s app provides an online hospital in an emergency.
72 Higher limits, more flexibility » QBE farm cover packs plenty into one wording.
73 Keeping lifestock safe » Allianz guide shows the way to foil thieves and rustlers.
73 Getting an edge » Vero launches its new online platform for brokers.
73 Cyber cover, but not as we know it » Nova Underwriting claims some ‘firsts’.
74 Wiping confusion » Vero’s new iTech policy does just that.
74 A story behind every claim » Talbot launches commercial property claims database.
peopleNEWS 76 Golf, entertainment and insights as AIMS talks leadership » 80 All Blacks afternoon of fun and games with AIG » 82 The CQIB long lunch lives up to its name » 84 CGU ARs go troppo at Cairns conference » 86 Expo inspires and informs brokers » 88 QBE celebrates Swans partnership » 90 UAC’s giant Sydney expo draws a crowd » 93 Blame it on the bogey: Allianz Blue Eagle’s golf gets competitive » 94 Celebrations mark LMI’s 17th birthday » 96 Vero launches 2016 SME index » 98 maglog »
68 Finding the spark » How tracts of land covered in blackened trees and ash-laden ruins give up their secrets to fire investigation experts.
Cover: Shaun Standfield, Managing Director, Insurance Advisernet. Image: Kym Thomson
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53 REGULATORY & GOVERNMENT
76 FINANCIAL SERVICES
72 THE PROFESSIONAL
5 BREAKING NEWS More than 21,000 news articles – including 208 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
Perth-based authorised representative (AR) group Winley Insurance Group is being wound up amid allegations of financial irregularities. The company, which has previously engaged in heavy levels of advertising to recruit ARs, is to be wound up by Managing Director Jeff Bailey after its major investors left the country, sources have told insuranceNEWS.com.au. One insurance company source told insuranceNEWS.com.au some underwriters have not been paid by Winley for several months and “we suspect premiums may have followed directors overseas”. It is understood insurers are owed millions of dollars, and that the investors, US citizens Steve
Where’s the money? Winley sinks and Chandanie Godwin, had access to the broker trust fund. Other sources allege Winley has not submitted its annual return to the regulator for the past two years. Winley Managing Director Jeff Bailey did not respond to insuranceNEWS.com.au requests to be interviewed. It is understood he will wind up Winley by June 1. A number of Winley’s largest ARs have already moved to other groups. These include Mr Bailey’s own company, Sunset Coast Insurance Services, which he is moving to former rival Apollo Risk Services in Perth. The company had about 70 ARs.
IRN W A INSU
insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 22,000 subscribers. In February/March we published 450 articles online. These were made up as follows:
AR group collapses as insurers go unpaid, 4 April
This situation is a dog’s breakfast, with homeowners being unprotected and a government seemingly impotent or unwilling to act on this issue.
– Victorian Senator John Madigan, on builders’ warranty insurance which requires a builder to be broke, disappeared or dead before a homeowner can make a claim
New focus on climate change Climate change is a hot topic in the insurance industry, with Insurance Council of Australia (ICA) President Andy Cornish raising the issue in his opening address at the council’s annual forum in Sydney in March. “I think we can use the words climate change now,” he said. Insurers have responded admirably to this summer’s catastrophes, he says, but there is “more to this than just responding in the short term”. He referred to Bank of England Governor Mark Carney’s groundbreaking speech on the issue last year, and warned Australia is far more exposed to the impacts than the UK. Yet the Australian insurance industry “has not been very vocal”. “The risks are not easing,” Mr Cornish said. Governments, business and the community must work together and invest in appropriate mitigation, rather than spending “small fortunes” on disaster recovery. QBE Group Chief Executive John Neal has added his weight to the issue, saying global warming is real and
insurers have a responsibility to help slow it. In an article posted on LinkedIn, he says climate change is arguably one of “the greatest challenges in the long-term wellbeing of the global economy”. Mr Neal says it is estimated climate change could displace 250 million people around the world by 2050, and insurers are seeing risks increase globally at an “alarming rate”. Mr Neal says insurers can help influence policy on climate change. “Through initiatives such as the United Nations… Principles for Sustainable Insurance we can work together as a global community of insurers, regulators and other bodies to drive awareness, encourage wider debate and influence policymaking. “We also have the opportunity to assist with the transition to a low-carbon economy by working with the renewable energy sector.” Industry opens debate on climate change, 7 March QBE chief sounds rallying cry on climate change, 14 March
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Upside and downside Driverless cars may dramatically reduce premiums and profits, but innovative insurers have three decades to adapt, according to a Moody’s report. The ratings agency says accident frequency will “fall sharply over time”, leading to significantly lower premiums and profits. Most cars could be self-driving by 2045, with the technology universal by 2055. With motor insurance responsible for nearly 40% of insurance industry revenue, the impact “could be significant”. However, Moody’s says motor insurers may increase profits thanks to the technology over the next decade. Tools such as automatic braking and adaptive cruise control will roll out in new fleets over the next few years, cutting down on crashes. Many insurers will not reduce premiums until they know accident rate declines are lasting, which could lift profitability over the next 5-10 years. “That said, reduced accident frequency would be partially offset by higher costs of replacement parts with embedded technology.” Moody’s says innovative insurers have time to adapt, and suggests some car manufacturers may self-insure for claims and buy reinsurance for software problems. Hi-tech cars promise short-term gain, long-term pain, 4 April
Insurance policies in Australia will be sold entirely via digital channels in three years, according to most insurers polled by consulting group Accenture. About 70% of the 30 local insurers surveyed expect their sales channels to be fully digitised by then, while 33% have social media strategies in place to monitor and interact with clients. And 43% say the use of connected devices to create personalised insurance is crucial to
growing revenue in the next three years. “This is really a response to customer needs and expectations,” Insurance Strategy Lead for Asia-Pacific Ravi Malhotra told insuranceNEWS.com.au. The Australian respondents were among 414 insurers surveyed worldwide last year to determine the impact of technology on industry distribution channels. About 52% globally are moving towards digital channels or plan to do so in the next three years. Clients will still have access to insurance staff, but not necessarily face to face. Australian insurers plan switch to digital, 7 March
Black swan? More likely bad management The “black swan” theory on natural catastrophes and other crises that cannot be predicted no longer holds sway, according to Munich Re Chairman Nikolaus von Bomhard. “The term is all too often misused to distract from bad risk management, and thus also from an incorrect assessment of probabilities,” Dr von Bomhard said. “The more unlikely an event is supposed to be, the greater the hoped-for understanding for the lack of precautions. “My argument is that the supposed unpredictability of events all too often serves as an excuse for the lack of risk management. In this way, human error becomes force majeure, recklessness becomes bad luck and irresponsibility becomes fate.” Events deemed unthinkable or “100-year” calamities have happened all too regularly, and such scenarios should be included in risk analysis, he says. Such events include the global financial crisis, the eurozone debt crisis, the 2011 Fukushima nuclear plant accident and global warming. “What’s needed is an honest and realistic assessment of probability and the impact of possible but also quite rare events,” Dr von Bomhard said. “In particular, events with potentially major impacts should not be ignored in the risk analysis simply because their probability of occurrence is essentially difficult to determine, or is relatively low. “Difficulties with estimating the probability of occurrence, the impact of events and options for action should not be an excuse for not dealing with a risk.” Black swan label an ‘excuse for poor risk management’, 4 April
Sura gets a new MD Angie Zissis has been appointed as the new Managing Director of AUB-owned underwriting agency group Sura. Mr Zissis is a former finance director at Marsh and chief operations officer at Aon Australia. He was most recently New South Wales State Manager of ATC Insurance Solutions. He told insuranceNEWS.com.au Sura will add up to 15 additional staff over the next year. “We need to have [extra] people in the finance, IT and marketing space. We’ll also be looking to add a couple of people in the claims area. “This is a dynamic organisation with real entrepreneurial spirit and commercial acumen.” Former managing director Craig Patterson has become Executive Chairman of Sura. Zissis joins Sura as MD, 14 March
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French tops merged firm
From the From the
Brokers’ business stays stable
Ace and Chubb have Manager for Chubb. Ace’s Paul McNamee, unveiled their Australian who retains his Deputy leadership team as Regional President Asiamerger preparations The of acountry’s companytwo is always In the past couple ofcollapse months the biggesta Pacific title, will continue continue. messy their affair,chief particularly whenwhile thereone are insurers have replaced executives, to oversee Australia and John French (left), undertones of dishonesty. And in the highly regarded senior executive has jumped from onecase to New Zealand. currently Ace’s Country of authorised representative (AR)swiftly groups, the other, necessitating a reshuffle of managers to Chubb and Ace President of Australia and where success depends as much on the fill the gap. continue to operate as New Zealand, will retain trust Wilkins and commitment of in theseven insurer as IAG, which Mike transformed years competing companies in this role in the merged the abilities of the AR, collapse of from a confusedon and lost organisation to athe powerful leader the local market until their company, which will Winleywas Insurance Group in Perth in the insurance the industry, smoothly handed on toinPeter the UK accounted for 77% Premiums invoiced by intermediated general merger is and completed. The operate under the Chubb Singapore contains some the lessons shouldn’t Harmer, who hasApril since restructured entirethat operation. sum placed with UFIs, and the highinsurance businesses totalled $9.66 billion for the of thecompanies say planning brand. The changes he be hasignored. made reflect an organisation adapting value-insured exemption was used to place six months to December 31, Australian Prudential for integration of the It appears insurers were to the emerging realities of the the technological age.among the Reporting to Mr 78% of UFI business. Regulation Authority (APRA) data shows. Australian businesses is tothe be mantra told of the collapse – if society they were Change has last been shouted across for French will be Senior December 31, 1625 intermediaries werenow, and The sum was down just 0.03% on theand Chief At“progressing well”. told atpace all. Many found is out from reading 20 years the of change accelerating. There Vice-President licensed to conduct general insuranceis no “new normal” corresponding period in 2014. insurance NEWS .com.au.there Yet Winley, like most any more because is no “normal”. Operating Officer Matthew Ace, Chubb reveal More than $8 billion was placedwho withis currentlybusiness. groups, was holding millions Instead, we’re insuch a permanent stateallegedly of transition. Doquile, Australian leaders, Of these, 830 placed business direct with APRA-authorised general insurers of dollars of – the insurers’ It’s not just insurance, of premium course – money it’s every aspect of 30 November Australia(down Country underwriters during the six months, while 32 and ourmoney 0.5%), while $908 million was placed with – in trust. is changing the way we our lives work. Technology placed all business through other Australian Lloyd’s underwriters (down 0.1%). The whole tale has concerned approach what we do and how tawdry we exist. Our privacy is now intermediaries and 763 placed no general The amount placed with unauthorised the managers leading groups,the who not much more than a concept.ofBig Data AR is making insurance business. foreign insurers (UFIs) grew 5.2% to $746 say the accurate AR “brand” damaged. calculation of risk more andcould also be more personal. million, with the increase mainly due to fire Intermediated premium holds the That line will inevitably Insurance Advisernet Managingshort Director lead, over a disconcertingly time, Shaun Standfield one who feels that with and industrial special risks placements. 7 March to new ways to buy insurance. Theistraditional distribution bit in more due diligence and caution by channels are notaset stone – they will exist only as long insurers and others, Winley might never as they’re effective and useful. been able to are happen in the first place. Challengers have already emerging the data-rich Our cover story looks a companies with bottomless pockets and – at ashow XL Catlin’s reputable, secure and efficient AR group Mike McGavick put it so eloquently earlier this year – “the Australia’s general insurance industry is impact on M&A of underlying drivers of in garages working should be It’s important toof kids to managed. destroy whole categories changing customer behaviour, value-chain poised for a major shake-up, with mergers understand the them issue,to because economic activity and reducing apps”. the AR has economics between distributors and manuand acquisitions (M&A) expected to pick become a standard partIt’s of making the insurance Technology is changing everything. our The National Insurance Brokers Association (NIBA) has handed over its facturers and regulatory change. up in the next few years, according to landscape. world more efficient and safer but also more complex and broker training role to the Australian and New Zealand Institute of Insurance opportunities for insurers emerge and “These could all be converging to less predictable. TheAs demand for insurance will change, Deloitte. and Finance (ANZIIF) under a deal signed in Sydney this afternoon. the development new technologies, if the channels aren’t up to of supplying the need, create a very active M&A environment in traditional with Limited organic growth opportunities, The change will see the two major broker training bodies in BigMr Data and increasing levels of of years competition someone else will. Harmer noted a couple ago the next few years.” increased rivalry between intermediaries Australia move immediately into a new relationship under which for the hearts as well as the wallets of that brokers, for example, must “adapt or die”. Intermediary M&A activity will remain and pressure to expand top-line revenues ANZIIF becomes NIBA’s preferred education supplier. customers, ARs are likely to become a But this is December and a long, hot summer stretches solid after a year in which five deals worth either domestically or in College Asia willwill drive up to take From today NIBA cease new enrolments for its major in treadmill the distribution game.catch ahead. It’s time to steppawn off the for a while, $700 million were inked, Deloitte says. M&A activity. broker qualifications, traineeships or continuing professional developour collective breathWhether and rest.they are independent, skilled do not anticipate a slowdown in IAG instead to“We The huge dealPeople last year and trustworthy the intermediary The 19th Century banker andmembers scientistof John Lubbock ment courses. willbetween be referred ANZIIF. M&A activity [this year]. Given the presand USThe giant Berkshire Hathaway, plus for current or no more than a throwback to once noted that community “to lie sometimes on the grass on a college will provide education students until sure on commissions – correlated tosummer day listening New Zealand-based of the days of the tied agent will or depend to a to the murmur of water, watching September 1 nextCBL’s year, acquisition when the remaining students will transition to general insurance premiums – and limited Assetinsure, have set the wheels in motion, large extent on is thehardly management the AR the clouds float across the sky, a waste of time”. ANZIIF’s education programs. growth opportunities, intermedi-As we hurtle groups solid, forwardbeing into aas new year,respectable the team atand Deloitte says.Chief Executive Dallas Booth saysorganic NIBA NIBA will now focus on aries will continue to look for growthInsurance News wish reliable members. youasalltheir the joys of the festive season, “It has been manyservices, years since any of standards lobbying, member professional and representation There’s a lot you of variety in this with the hope that you and those hold dear willedition. indeed through M&A. theofindustry segments saw numerous sizeits corporate and individual members, and in providing networking I hope you it. and simply do nothing. have an opportunity to lie onenjoy the grass able transactions in a short period of time. poised for more M&A, Deloitte opportunities and events for the intermediatedIndustry insurance community. Terry McMullan Terry McMullan However, we are beginning to see the says, 14 March NIBA hands broker education role to ANZIIF, 18 November
More M&A action on the way NIBA College drops out
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Model for the future Insurance Advisernet chief Shaun Standfield says the Winley collapse does not mean the AR model is flawed – but strong infrastructure is vital By John Deex and Michelle Hannen
REPERCUSSIONS FROM THE COLLAPSE of Perth-based authorised representative (AR) group Winley Insurance will be felt for some time. Insurers were left millions of dollars out of pocket when two investors allegedly raided the company’s broker trust fund and left the country. But according to Insurance Advisernet Managing Director Shaun Standfield, the AR model is strong enough not only to withstand any associated damage, but to thrive and grow. “It would be naive to think that there are no flow-on effects [from Winley],” he tells Insurance News. “But it needs to be kept in perspective. “Such losses affect about 0.01% of premiums. “And while there are structural issues within some AR companies, it is not systemic. “It is all about the way that they are set up. “For example, the Winley website had no reference to the managers or the board. Overseas directors apparently had access to the trust account, and that is not necessarily a smart thing. “We have much more stringent measures in place. “Winley was well known for saying ‘we will give you $10,000 to join us’. As the old adage goes, if it seems too good to be true then it probably is. “These models are about hard work over a sustained period of time. The rewards don’t come straight away. “I don’t know how they were able to operate that way – setting up the proper infrastructure is expensive and perhaps costs were cut.” Allianz Australia has announced that it plans to more thoroughly scrutinise the records of Winley ARs who have moved on to other groups. It says it “will not be automatically endorsing” requests to appoint former Winley ARs to other AR groups.
Mr Standfield welcomes this stance, and says the Australian Securities and Investments Commission (ASIC) should push for greater transparency. “You can’t afford to cut corners,” he says. “It is detrimental to the clients, advisers and insurers. “And ultimately it affects the AR’s personal brand. “If you attach yourself to a brand that is not reputable and it goes down, then there will be some impact on you. “Insurers need to decide who they are happy to work with, and I applaud Allianz for the action it has taken. “Otherwise the whole thing gets forgotten too quickly; it becomes yesterday’s
Mr Standfield believes the AR model is crucial to the future of insurance advice. The industry is urgently seeking to attract the next generation, as older brokers approach retirement age, and the fact that a licence is not required for an AR to set up their business makes it easier for younger people. The model also focuses heavily on personal relationships, which Mr Standfield says is absolutely key in the SME market. “The AR model will not replace brokers but complements them,” he says. “There is a lot of talk about disruptors taking out the advice element, but most SME owners want to deal with people, not technology. They want advice.” He says that personal service aspect is why AR models work so well. “ARs have a deep understanding of clients’ businesses, and people are not treated as numbers but individuals. “Technology enhances the relationship but does not replace it and disruptors give us an opportunity to get our message across. “I wouldn’t go head to head with them on home and motor, but in the business environment we have the edge and we need to make that clear.” Mr Standfield says the age of the average AR “is a lot less than that of a broker principal”. “They are both complementary, I wouldn’t put one over the other. But ARs have the edge over the larger brokers in terms of personal relationships.” The value of advice is not the only issue that Mr Standfield believes the industry should be more vocal about. Underinsurance remains a major problem. A recent Insurance Advisernet survey found up to 60% of businesses were underinsured. And building community resilience to increasingly frequent natural disasters is crucial, he says.
“While there are structural issues within some AR companies, it is not systemic. It is all about the way that they are set up.” news and everybody moves on. “Having an Australian financial services licence (AFSL) has to be cherished, and not taken for granted. “Secure insurance companies are a must, but so is the security of advisers and the compliance systems behind them. “I’d welcome the requirement for all AFSLs to show their most recent confirmations, that relevant forms have been returned to ASIC, such as confirmation of external audit reports, confirmation of professional indemnity programs and licence variations and breach-reporting obligations. “These could be added to websites on a regular basis as forms are lodged.” insuranceNEWS
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“We don’t accept everybody who wants to become an AR with us. The culture across the group, while everybody’s running their own business, is important. We cannot afford to have people who destabilise the culture.”
THROUGHOUT HIS CAREER SHAUN Standfield has been required to speak in front of hundreds of people, so it comes as a surprise when he describes himself as previously being “quite shy and introverted”. He credits the turnaround to his first manager when working in human resources at Melbourne Water – a job he took because “I didn’t have a [driver’s] licence, but I could walk to the station and get off the train underneath the building” – who told him communication would be crucial to his future success. “He told me, ‘It doesn’t matter how many qualifications you have, if you can’t deliver the message that’s not going to help you,’” Mr Standfield says. “So he enrolled me in the local Toastmasters, where I went to pick up the tips and the traps of public speaking and build my confidence. I’ve mentored a number of people over the years and to many of them I’ve said, ‘Your first stop is Toastmasters.’” With that experience under his belt, Mr Standfield used his human resourcesbased knowledge of workers’ compensation to move to the Accident Compensation Commission in Victoria. Overseeing a tender involving FAI Insurance led to a role there, culminating in a move to Sydney as national claims manager in 1995. A stint at Ace followed before Mr Standfield joined QBE Mercantile Mutual in 2002. He remained at QBE in various senior roles, most recently Asia-Pacific chief underwriting officer. But Mr Standfield clearly enjoys the freedom, flexibility and ability to be innovative in his new role at Insurance Advisernet. He says the move was prompted by wanting to spend more time at home in Sydney with his wife and two daughters, and his lack of enthusiasm at the prospect of “getting further and further away from the customers” if he stayed at QBE. “I get immense pleasure out of watching people grow their own business,” he says. “To be honest, it has been even better than I thought it would be.”
“We should be using technology, smart tools and social media to get the message about underinsurance across. “Consider how many people work in the insurance industry. If all of us were using social media to push the implications of underinsurance it would have a major impact. “Insurance isn’t sexy, and most people don’t really think about it until they have a claim. But the National Insurance Brokers Association and the Insurance Council of Australia could be doing more [to build awareness of underinsurance]. “As for resilience, we spend much more in restoration than we would need to spend on mitigation. “As an industry we should be working with government to push this forward. “You can believe or not believe in climate change, but you can’t deny there has been an increase in the severity and frequency of events. “It is about how we respond.” The focus on advice dovetails with Insurance Advisernet’s new brand and logo, launched to coincide with the 20th anniversary of the group, founded by Chairman Ian Carr in 1996. The rebrand includes the tagline “advice you can trust”, plus a new logo and website, with an integrated social media marketing plan to leverage search engine optimisation. “We see ourselves as dynamic and we like to believe we’re the market-leading AR model in Australia,” Mr Standfield says. “Our role is to continue to be the market-leading general insurance broking dealer group. We deliver superior systems, products and services.” It’s a hard point to argue against. The business boasts 180 network partners in Australia and New Zealand, gross written premium of almost $500 million, with more than 100,000 policies, more than 61,000 clients and 460 employees. Another of Mr Standfield’s priorities is further leveraging that size. “We haven’t joined up to use the true power of a network of 180 businesses. insuranceNEWS
“Their personal relationships are very strong, but we’re not joined up as a collegiate group perhaps as much as we should be to use that to actually grow our businesses. “We have a lot of people that’ll win an account in Sydney, and the client will have an office in South Australia, so they’ll ring one of our other ARs in the full knowledge the client stays a Sydney one but the other firm will help service it, and they’ll work that out between them. “They know they’re not going to poach that client because we all exist to look after each other. The time will come when someone in South Australia needs some help in Sydney. The camaraderie between our ARs is exceptional and we want to make sure we maintain and build on that.” Much of the growth in AR numbers follows referrals from current members, but attracting entrepreneurial young brokers is another plank in Insurance Advisernet’s growth strategy. Mr Standfield says the network is developing programs to “encourage young people to come here and build their own businesses with us as their business partner”. It is also casting its net wider in other ways. “I think we need to be more cognisant as an industry about demographic changes, so diversity includes things such as gender and ethnicity.” But nothing will be done that could risk the group’s strong culture. “We don’t accept everybody who wants to become an AR with us. The culture across the group, while everybody’s running their own business, is important. We cannot afford to have people who destabilise the culture that’s been created within Insurance Advisernet.” The difference between this and the Winley approach is clear, suggesting Winley’s fall was most likely down to its own failings. With the likes of Insurance Advisernet leading the way, the AR model looks set for a bright future at the heart of insurance industry innovation.
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Putting the IT into AR Technology is firmly at the centre of Insurance Advisernet’s growth strategy
Insurance Advisernet in Numbers Number of ARs: 180 Number of policies: 100,000-plus Number of clients: 61,000-plus Number of staff: 460 GWP: almost $500 million
PEG – OR PROTECT, ENHANCE AND GROW – is something of a mantra at the offices of Insurance Advisernet. The words are a yardstick against which every initiative is measured – specifically, whether an idea will protect the businesses in its network of authorised representatives (ARs) across Australia and New Zealand, enhance them or grow them. The mantra may have been introduced just six months ago, but Managing Director Shaun Standfield says it has clearly struck a chord. “Most of our ARs will repeat that back to me, asking, ‘Is this protecting my business?’ It’s short, sharp, and keeps everybody here very focused. If anything we do doesn’t protect, enhance or grow their business, we shouldn’t be doing it.” Mr Standfield, who joined Insurance Advisernet as Managing Director last October, also has the task of growing the network. It currently stands at 145 ARs in Australia and 35 brokers in New Zealand. But the tasks are complementary, with the success of the parts translating into success for the whole, he says. “Our role is to make [our ARs] more successful. The more successful they are gives Insurance Advisernet longevity and generates the finance for us to invest in technology, to make them look better in front of their clients and give them an edge.” It is no coincidence Mr Standfield mentions technology in the same breath as success. He sees technology as firmly at the centre of the group’s growth. The question of how best to use technology was answered by members in a recent survey, which revealed their top priority is access to more services to help them with advice. To that end, Insurance Advisernet recently rolled out a new smartphone app that generates for clients a benchmark report, with ratings out of five across various areas of property risk. The app leads ARs through a 20-minute conversation with clients, examining both insurance-related and, importantly, nontransferrable risks each business faces. “If they’re running a cafe, we can talk to them about the risk management strategies or preventative maintenance strategies they have around, for example, keeping their flues and ducts clean,” Mr Standfield says. The report will provide information and contacts for other service providers than can help clients achieve compliance, minimise risks or improve safety. The app also helps combat underinsurance. By combining Google maps, information gleaned from site visits and a building cost calculator, building values are quickly determined, with an option to seek a second opinion from a property valuation company. Mr Standfield says since launching the
app two months ago more than 60% of clients whose risks have gone through the system have increased their sums insured. “That’s great for the industry. Most of the problems come when you have a claim, so our goal is to build that relationship with a good footing right from the start.” The app is exclusive to Insurance Advisernet. Mr Standfield says while it is delivering great results to ARs, it is a relatively low-cost way of “using technology to enhance the way we deliver advice”. “When they’ve developed something in this space, [technology] companies are very, very happy to partner with us. We’ve got 180 opportunities to distribute that product, so we bring distribution, which is very powerful.” The feedback from ARs has been overwhelmingly positive, Mr Standfield says, quoting the words of one AR on the network’s internal communication portal. “He wrote, ‘If you’re not using this system you’re an idiot. I’ve won four pieces of business this week and I’m not talking about price.’” He tells the story of another AR who won business that had been with a rival broker for 25 years. “He made the appointment on the pretext of going to talk to them about their property’s five-star risk rating. It was underinsured to the tune of a couple of million dollars, and he won the account on the spot.” These examples highlight the app’s potential as a business-generation tool, Mr Standfield tells Insurance News. “I have a goal that we shouldn’t go out and talk about price – we should actually talk about risk first and use some smart tools to bring that home to people, and technology’s allowing us to do that now.” The app is now being expanded beyond property to cover other types of risks, he says. Claims advocacy is another area Insurance Advisernet has identified to harness technology and provide ARs with low-cost tools to improve their advice to clients. Mr Standfield says claims advocacy is increasing in profile due to the cost pressures on insurers to streamline claims through overseas call centres and centralised procurement. “That might be delivering the right financial outcome, but is it delivering the right customer experience?” He says the network is considering initiatives that will show clients what to do in the event of a personal motor vehicle accident or workers’ compensation claim, with plans to leverage the relationship with AUB Group subsidiary Austbrokers, which owns 50% of Insurance Advisernet. “We’re saying, ‘If you have a car accident, here’s some things you might like to think about. If you have a workers’ compensation claim, here’s some information and here’s a partner that can take your calls 24/7, which will be part of the broader AUB Group.’”
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Northern exposure Does Canberra have a role to play in the cyclone insurance market? With mitigation looking the most viable option, the answer is maybe yes, probably no By Leo D’Angelo Fisher
THE LONG-AWAITED RELEASE OF THE NORTHERN Australia Insurance Premiums Taskforce final report was something of an anticlimax, but one welcomed by most of the insurance industry. The report, released by Assistant Treasurer Kelly O’Dwyer in March, arguably took the path of least resistance when it concluded that mitigation is the only sustainable way of lowering premiums in the cyclone-prone region, and recommended against government intervention in the insurance market. IAG Chief Executive Australian Consumer Division Anthony Justice agrees mitigation is the answer. He has called for a co-ordinated national resilience program to protect northern residents and 16
help reduce premiums. “If there is government intervention in northern Australia, it should be focused on reducing vulnerability through land-use planning, building codes and better funding for mitigation and retro-fitting,” Mr Justice says. Suncorp Insurance Chief Executive Anthony Day has also welcomed the taskforce’s final report and its focus on mitigation. “It’s now time for governments to invest in mitigation. We have spent too much on rebuilding communities rather than investing in their protection,” he says. Ms O’Dwyer’s predecessor as assistant treasurer, Josh Frydenberg, announced the formation of the insuranceNEWS
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taskforce in March last year. Its brief was to explore options for reducing home, contents and strata premiums in the north, where insurance costs can be five times greater than in Melbourne or Sydney. The taskforce was specifically charged with examining whether the Government should provide support to a reinsurance pool or a mutual insurer providing cyclone-specific cover. Mr Frydenberg made the taskforce one of his defining initiatives, but Ms O’Dwyer has been more low-key in considering the challenge of reducing premiums in the north. She was handed the report in November by taskforce chairman Mike Callaghan, a former Treasury official, but it languished on the shelf for more than three months before she released it at the Insurance Council of Australia’s Annual Forum on March 4. Ms O’Dwyer says the Government will consider options contained in the report and intends to provide a detailed response by June 30. With the next federal election widely expected to be on July 2, that’s a deadline likely to be observed in the breach. The Minister acknowledges high premiums in northern Australia are “a complex area”. The options of a mutual insurer or reinsurance pool are favoured by senior Coalition backbencher and MP for Leichhardt Warren Entsch, whose lobbying led to the appointment of the taskforce.
Mitigation is the workable option: the taskforce found much to support in the industry’s contention that stronger buildings reduce cyclone damage
“Both options could possibly reduce premiums, but involved significant fiscal risk and any effect on premiums could not be considered sustainable.” But neither the taskforce nor Ms O’Dwyer appear convinced government intervention is the answer. “[The taskforce] found both options could possibly reduce premiums, but involved significant fiscal risk and any effect on premiums could not be considered sustainable,” Ms O’Dwyer says. “The probability of cyclone damage was modelled to assess the likely cost to the Government and found that, for a scheme set to reduce premiums by 10-15% on average, there is a 10-20% chance it would cost more than $2 billion over 10 years and a 5-10% chance the cost would be more than $5 billion.” In a political and economic environment of budget restraint, that sounds like a “no”. Ultimately, the taskforce believes responsibility insuranceNEWS
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“For a scheme set to reduce premiums by 10-15% on average, there is a 10-20% chance it would cost more than $2 billion over 10 years and a 5-10% chance the cost would be more than $5 billion.” – Assistant Treasurer Kelly O'Dwyer
for reducing premiums falls to householders as much as insurers. “The reduction in premiums that could be achieved from mitigation will depend on individual circumstances and the mitigation action taken,” the report says. “However, such reductions can only be achieved by household action.” Governments, for their part, can take “a range of relatively low-cost… measures to promote mitigation”. “Low cost” will be just what the Government wants to hear. These measures include additional funding for research on mitigation options, public works spending, subsidising mitigation work for low-income households and education campaigns “to encourage and support property owners to undertake mitigation”. The report acknowledges some insurers’ product innovation has helped reduce premiums, but the taskforce urges the industry to go further. “The… industry should develop insurance pricing systems that provide greater recognition of mitigation action and be more proactive in offering a range of policy options that provide increased scope for policyholders to assume more responsibility for risk of cyclone damage in return for lower premiums.” The mutual and reinsurance pool options do not appeal to the taskforce, although the latter “represents a more feasible approach”. The taskforce dismisses a mutual outright. “In contrast to the mutual, the reinsurance pool could promote competition through new entrants to the northern Australia market,” the report says. “A reinsurance pool that charged premiums to cover the estimated long-run cost of claims from cyclones and was supported by a government guarantee might offer a premium reduction for consumers of 10-15%.”
The taskforce says that compared with a mutual, there is greater potential for the Government to withdraw support for a reinsurance pool – but it would come at a cost. “If the Government did exit the market, any premium reductions would be reversed unless households had undertaken mitigation during this time.” Mr Entsch, whose electorate covers the northern tip of Queensland, insists he “hasn’t ruled out the possibility of a catastrophe reinsurance pool or a mutual to address the north’s insurance challenges… despite the final report”. “I’m glad the report has now been released. We’ve been waiting for it to be made public so we can start talking about the findings,” Mr Entsch says. “The report is very comprehensive and includes a lot of useful information… but in my personal view there’s too much focus on mitigation, which is the easy way out for the insurance companies. “I still believe some model of catastrophe reinsurance is probably the better way to go.” Despite Ms O’Dwyer’s clear signal she does not favour government intervention, and the at-best mixed signals from the taskforce about the mutual insurer and reinsurance pool options, Mr Entsch is right in principle: until the Government brings down its decision, the mutual and reinsurance pool options remain “on the table”. The report does provide pros and cons for the mutual and reinsurance pool options that would give comfort to either detractors or proponents. To determine the potential to reduce premiums and the cost to the Government of creating a mutual insurer or reinsurance pool, the taskforce had to estimate potential losses due to cyclone damage in northern Australia and the value of the current premium pool paid to insurers for cyclone cover. The taskforce calculated that insurance losses
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“I do suspect [the Insurance Council] has used some rubbery figures in its submission.” – Leichhardt MP Warren Entsch
due to cyclones in the vast region of northern Australia over the past 20 years totalled $2.4 billion, or $115 million each year on average. Modelling undertaken for the taskforce forecasts long-term future losses from cyclones to be about $285 million per year. The taskforce tested two models. The first was a mutual designed to offer a cyclone policy that private insurers could sell to residents with their non-cyclone policies. The mutual would charge a premium that reflects the individual property risk, but at a subsidised level underpinned by government guarantee. The second, a reinsurance pool, was designed to operate through a government-owned statutory corporation such as the Australian Reinsurance Pool Corporation, which was originally set up to provide appropriate cover in the event of a terrorist attack. The taskforce commissioned Finity Consulting to analyse potential premium reductions and cost to government under scenarios involving different levels of government support. Finity’s conclusions were: • If either option were to run along commercial lines there would be no reductions in premiums. • For a cyclone insurer or reinsurer to provide a reduction in premiums the Government would have to provide a subsidy. • The larger the reduction in premiums, the larger the likely cost to the Government from taking on increased risks. • Detailed “scenario analysis” finds the risk faced by the Government rises as the premium reduction increases. • A relationship that strikes a balance between a reduction in consumer premiums and cost to the Government – a “partially funded scheme” – could cut premiums by 10-15%. However, if that perfectly balanced, partially funded scheme was set up for 10 years, there would 20
be a 50-60% chance the government guarantee would be called on at least once, a 30-40% chance the scheme would cost the Government money when wound up, and a 10-20% chance it would, over 10 years, cost the Government more than $2 billion. When testing the impact of a mutual, the taskforce made these findings: • Removal of cyclone risk may encourage new insurance players into the market, but a subsidised mutual insurer would be likely to crowd out private sector cyclone cover. • A mutual could be effective in encouraging mitigation. However, it is unlikely it could raise the required capital to ensure financial viability in the event that the Government removed support. The impacts of a cyclone reinsurance pool include the following: • It could encourage new entrants into the local market by reducing insurers’ exposure to cyclone risk. • Because the scheme would have no adverse impact on insurance markets, the Government could gradually withdraw support, although overseas experience demonstrates withdrawal from any subsidy scheme is difficult. “Of the two insurance options the taskforce was asked to assess, a reinsurance pool represents a more feasible approach than a mutual,” the report says. Mr Entsch, with a federal election in the offing, must decide whether he continues pressing for the radical solution of government intervention in the insurance market, or simply awaits the umpire’s decision – even if he believes it could turn out to have been premised on dodgy assumptions. He believes his old nemesis the Insurance Council of Australia, which supports the mitigation option, may have gilded the lily in its contribution to the taskforce’s deliberations. “I do suspect [it] has used some rubbery figures in its submission,” he says. *
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Building on good fortune
Building one of the worldâ€™s leading property/casualty companies: BHSI President and Chief Executive Peter Eastwood
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One year on, BHSI has become a force in the local insurance market. Meet its global chief, whose growth plans are amazingly simple By Terry McMullan
ANY OF PETER EASTWOOD’S peers would have to envy him. He’s the President and Chief Executive of Berkshire Hathaway Specialty Insurance (BHSI), an expansive global insurer with the financial wherewithal to hire the best professionals and buy the best systems, with a goal to become globally as big as it can realistically be. All that and a shareholder in Warren Buffett who famously leaves his chief executives alone to get on with their jobs. While he has a dream job in building a business from scratch, Mr Eastwood has brought a pleasant balance to his role. He’s wasting no time in making Mr Buffett’s dream of a global property and casualty insurer a reality. In Berkshire Hathaway’s annual report for last year, Mr Buffett notes BHSI was formed less than three years before and “our first decision was to put Peter Eastwood in charge. That move was a home run: BHSI has already developed $1 billion of annual premium volume and, under Peter’s direction, is destined to become one of the world’s leading property/casualty insurers.” Plenty of advantages flow Boston-based Mr Eastwood’s way through the Berkshire Hathaway brand. It opens doors in the boardrooms of the world and attracts employees who are excited by the prospect of working at BHSI. Mr Eastwood, in turn, is making each employee in his international team feel tightly bound to the organisation.
His experiences at AIG – which he joined in 1991 as an underwriter and where he served in increasingly senior roles until Berkshire Hathaway came calling in 2013 – have apparently shaped much of his thinking about the kind of employee he wants for BHSI. He told a recent conference in the United States that when choosing employees, employers need to look at individuals’ character as much as their capabilities, which are easier to assess. Character, he says, is what represents the company’s brand, so companies should value character and encourage employees by creating appealing work environments. That has been the case in Australia, where BHSI staff in the new George Street headquarters in Sydney have twice the room they need – as do their counterparts in Melbourne. Just 12 months after gaining its licence in Australia, BHSI has more than 50 staff, and Regional President Australasia Chris Colahan says he has ambitions to see the empty office expanse he has leased filled over time. During a visit to Australia in April, Mr Eastwood told Insurance News BHSI’s global expansion is being assisted by the quality of staff, and the enthusiasm of so many insurance professionals to join up. “One of the nice things we’ve experienced over the past three years is that there are many market participants – underwriters and underwriting
BHSI Regional President Australasia Chris Colahan: the brand is a big differentiator
“One of the nice things we’ve experienced over the past three years is that there are many market participants who frequently express interest in being part of what we’re building.”
managers – who frequently express interest in being part of what we’re building, and joining us on the journey. “Some key reference points in terms of whether we’re getting well received are, what’s the level of attractiveness and what’s the ease with which we can bring people onto the team. April/May 2016
“We’ve found ourselves to be pretty attractive, and I think increasingly so. There’s a lot of volatility in the marketplace, there’s a lot of change going on, so part of what we’ve worked very hard to achieve is to create a level of certainty for prospective team members, and really everybody that we deal with externally as well.” 23
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“Everyone who comes here wants to be dynamic, innovative, nimble and focused on the customer. It’s what makes this place so different.”
Susan Donaldson Head of Claims An early recruit to BHSI Australasia – she joined in its third week, before it even had an operating licence – Susan Donaldson says it has “absolutely been worth being here from the beginning”. The former head of claims at Zurich Australia says BHSI has operated as it promised. “It’s a really inspiring place to work. You don’t get to build something from the ground up in a company every day, especially in a company like Berkshire Hathaway. “Everyone who comes here wants to be dynamic, innovative, nimble and focused on the customer. It’s what makes this place so different.” Ms Donaldson says she was told in her recruiting interview that BHSI believes in a claims process based on “pay promptly and get the client back on their feet quickly”. With four claims specialists answering to her, she says her team is already “having a greater effect than our size would suggest”. As an example, she says a recent fire at a business insured by BHSI saw the loss adjuster on the premises within hours and a building team of 15 starting the clean-up within two days. “The focus is on simplicity. The outcome for the client is always key to what we do.” She says her job makes her very happy. “I’m working for a great insurance company that does great things for its customers.”
Another point of envy is raised when Insurance News notes BHSI’s steady progress into new markets (UK/Southern Europe and Northern Europe divisions were added recently) and asks: What is your five-year plan? Where do you expect to be in five years? Mr Eastwood hesitates for a moment. “Yeah. Listen, I don’t really have a five-year plan.” He indicates Mr Colahan sitting beside him. “And he doesn’t have a five-year plan.” BHSI, it turns out after some discussion, does have a plan, of sorts, but if you’re looking for trend reports and market comparisons and lots of graphs and projections, you’ll probably be out of luck. The insurer doesn’t have a five-year plan because it doesn’t need one. With the financial heft of Berkshire Hathaway behind him and his team, Mr Eastwood’s strategy for the future is impressively straightforward: be profitable from the start, keep growing and stay flexible to respond to opportunities. It is, Mr Eastwood tells Insurance News, “a general roadmap as to what we want to build. But we’re always going to be deviating from that. “Our objective, from the moment we started the business, was to put BHSI in a place where it was self-susinsuranceNEWS
taining, producing an underwriting profit for Berkshire Hathaway. And then, once we were on that path, [we would] really never look back. “After 14 months our business was profitable and it’s going to stay that way.” Mr Eastwood can point to eight quarters of sustained growth in BHSI’s combined operating ratio as proof you can still grow in an environment as challenging as the global insurance industry. “We’ve been able to build something we think is a sustainable business for us,” he tells Insurance News. “It has put us in a place where we can respond to whatever the market opportunities are. We don’t feel the need to have a rigid blueprint over a five-year period. We want to have the flexibility so that when market opportunities arise – for whatever reason, however they emerge – we’ve got the ability to respond to them. “And, you know, we’re very fortunate that we are part of an organisation that has significant amounts of capital we can deploy. We don’t have those kind of limitations where we have to make decisions around, ‘Do we do A or do we do B?’ We can likely do A and B.” But while Mr Eastwood enjoys running an organisation with a high degree of flexibility built in, he has no April/May 2016
particular vision on what size BHSI will eventually be. “We’re always going to go where we think we can add value, and if we’re adding value, then it’s likely the returns are going to be acceptable to us as an organisation. “So what this looks like over the real long term, I don’t know. To some extent the external environment, the marketplace, will dictate that.” The AIG veteran is equally relaxed about the prospect of BHSI becoming a global giant. “I do believe that you can build a multinational property and casualty insurance organisation and be hugely successful at it,” he tells Insurance News. “I don’t believe that size is a natural impediment to achieving an acceptable financial return. “Nor do I believe that size is an impediment to creating an environment where people want to work and where customers and brokers want to do business. We’re intensely focused on those things. “As a result, I look at size as an outcome, not as an objective.” So while BHSI is growing organically rather than through mergers and acquisitions – why buy other people’s problems if you don’t have to? – does Mr Eastwood discount the possibility of one day bolting on an established
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“Warren Buffett insists that we do business ‘the right way’... to deal honestly and sincerely with people both internally and externally.”
Craig Taylor Head of Property The world is changing very quickly, according to Craig Taylor, the eighth person through the door at BHSI Australasia and Global Employee Number 237. “Risk has changed too. We’re a very traditional industry and we can see all this change happening, but it’s still basically about selling a hunk of capacity at a cheaper price than the next guy. Some day there has to be a paradigm shift, and this is the company to be in when that happens.” Mr Taylor has a team of six underwriters in Sydney and three in Melbourne, and is recruiting for the new Brisbane office. He says Berkshire Hathaway’s capacity gives BHSI the ability to look at things differently. “That makes it very compelling for a person like me. We’re still on the journey. I’ve learned a huge amount by being in a start-up organisation where you can try some new approaches.” He says the “leadership aspect” of BHSI attracted him to the company. “Chris [Colahan] went about recruiting his team in a very particular way. No matter who I spoke to, the story was the same – everyone who joined up was so sure of the leadership team and the chance to learn from them and grow with the company. “The Berkshire Hathaway brand has definitely helped us with potential clients. There are those who will be very familiar with the brand and what it stands for, who will say, ‘As far as I’m concerned I want you on my program.’ “Even potential clients who don’t know how we’ll do things such as handle claims or what our intentions are say to me, ‘Come back in the future when we know more about you.’ “A year later we have a story to tell them, with real-life experiences and something new to offer. It’s a patience game.”
insurer? He says it could happen, but the chemistry would need to be right. “We see stuff, naturally. Being part of Berkshire Hathaway, which is an acquisitive organisation with a lot of capital, we’re naturally going to see things in the marketplace. “But the team and I didn’t come here three years ago with an objective to build a new business through acquisition. “We came with an objective of building a business organically, using the great characteristics of Berkshire Hathaway, and then attracting talented people to the team. “We think that’s the best way. We’re focused on building a business that has differentiated characteristics from other market participants. And going out and buying other assets doesn’t necessarily get you to that place of differentiated characteristics.” He agrees that if he concentrates solely on organic growth “it will naturally likely take us longer to gain real critical assets and size. But again, we’ve got the luxury of time, and the luxury of being patient and long term-focused. “But having said that, you never say never, right? Things change and things emerge, but I’m not actively spending time scouring the landscape, and I’ve asked my colleagues to not spend their time doing that either. “I’ve asked them to spend their time in the marketplace with the focus on customers.” He smiles. “But again, never say never.” Mr Colahan says BHSI Australasia has had a fantastic first year, gaining top-end cusinsuranceNEWS
tomers that would normally ignore an insurance newcomer. “In one case they actually called us,” he says. “That’s the advantage of the Berkshire Hathaway brand – and it goes well beyond just awareness to issues around trust and integrity. “I’ve certainly never observed a leader that is as thoughtful and as tenacious around getting the fundamentals of the culture as right as Peter has been about BHSI. “That is already a massive differentiator for us as a business in the region. And the longer we’re at this, the more challenging the market conditions get externally, the more it will be a clearly accentuated, competitive differentiator.” Mr Eastwood says the word he always picks to describe the Berkshire Hathaway brand is “integrity”. “Warren [Buffett] insists that we do business ‘the right way’, whether it’s our business or any of the other businesses that exist within the Berkshire Hathaway Group. “I think that’s part of the characteristic, to deal honestly and sincerely with people both internally and externally. Having integrity in everything you do. “The second characteristic outside of the balance sheet and the brand is the operating philosophy of the company. I describe it as empowerment and accountability. Chris and I and our colleagues have been afforded this opportunity to build a company with an elite organisation that has a great capital base. “We have a philosophy that allows us to operate in a very simplistic, non-complex environment, undistracted by things above us, and just go April/May 2016
into the marketplace and build a great organisation.” Mr Eastwood says BHSI focuses on “capabilities and character”. “We’re going to make sure we hire people who are not only good at what they do, they really do think it’s the right way. We’re uncompromising in achieving that.” All simple and impressive precepts, but then Mr Eastwood surprises by mentioning that he places great weight on “the concept of being wanted”. “I’ve recognised from the moment we started the business that nobody needs another insurer,” he says. “This market here is highly competitive, and that’s the same as the marketplace that exists globally. If you just look at us from a capacity standpoint, there is more capacity in the business today than there is demand for it. So nobody needed us when we showed up, right? “I think that’s a great way to think about the business, because it requires you to show up every single day to create an organisation that’s wanted. “And that concept of being wanted is a by-product of who we are as a company, right? We recognise that every day we’ve got to create reasons for people to want to get up in the morning and come and work with us. “We absolutely believe that, in this marketplace, if you are a true underwriter and great selector of risk, and you’re not in a rush, you can still go into the marketplace and create a tremendous amount of value for customers and brokers. “And as a result, you know, that results in great value for * your organisation.”
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STEADFAST’S LATEST CHALLENGE:
Gaining Insight, keeping focus
Steadfast says the development of its own broking system is the key to autonomy. Others wonder why they’re bothering By Bernice Han BY NOW, THE DETAILS SURROUNDING Steadfast Group’s not-so-secret project known as the Insight Broking Platform will have been unveiled at its annual convention in April. Much is at stake for the giant broker cluster, which has invested considerable time and resources to breathe new life into a broking management system that has been around since the mid-1990s. It’s not too farfetched to assume the industry will be watching with bated breath to see if Insight, now bankrolled by Steadfast, will finally gain traction in the market. For the few broker groups that have attempted similar costly adventures, the returns would have been graded as somewhat below-par if you’re an investor. So the odds are certainly stacked against Steadfast. Just don’t tell that to Managing Director and Chief Executive Robert Kelly, who is confident his company has cracked the code for a successful broking system. 28
“We don’t fail in execution,” Mr Kelly tells Insurance News. “We expect strong support for our technology initiative. The desire for this system comes from the [Steadfast] network.” The revamped Insight is the culmination of a two-year program that started almost immediately after Steadfast bought the system from NAQ Technology in 2014 at a “very decent price” that was hard to resist, Mr Kelly says. Numerous alterations were made during the process as network members who were brought into the project to provide user input gave valuable feedback before the official rollout. Mr Kelly says Insight, known in its development stages as eClipse, is essentially a system that the brokers have been demanding for the past five years, and his only regret is the length of time it has taken to make it happen. “It’s my fault it took so long to build, but it’s not good, it’s great. “It’s exactly what the network wanted,” he says, adding “there will be a stampede to get into it” when they see what Insight brings to the table. The major transformations made include the way the system communicates with users. It now boasts an intuitive user interface, meaning little or no training will be required to learn how to operate it. “It’s the Google of insurance broking systems,” Mr Kelly says. “Insight is a cloud-based system. There are others out there at the moment, but this is a first for the industry in insuranceNEWS
that it is completely intuitive. Training is now a non-event for the users.” The system is capable of backing up automatically and users are spared the burden of having to worry about having reliable disaster recovery programs in place. “Insight breaks new ground for the Australasian market. Nothing comes close to it.” Mr Kelly says brokers can expect annual running cost savings of 30-40% in their IT budgets by using the new platform. “I think it’s important for the growth of any business that you can contain cost and revolutionise the process. It’s very important for Steadfast because it is a bespoke system only for [the use of] Steadfast network brokers,” he says. While he won’t explicitly say so, it’s apparent that Mr Kelly views Insight as a key part of his strategy to further expand the Steadfast family. Under his watch, the ASX-listed company has grown to become one of the country’s biggest broker cluster groups, offering a plethora of general insurance products. It is now the largest group of its type with more than 300 fully owned, partly owned or aligned but independent brokers and 22 underwriting agencies. Steadfast network brokers and the underwriting agencies generated billings of more than $6 billion in 2014/15. Its net profit grew 68% to $42.1 million and gross written premium (GWP) placed by the network increased 8% to $4.4 billion.
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Mr Kelly expects Insight to provide an extra incentive for brokers to join the network. “Along with other services that we provide, it will be conducive to those wanting to change and become a Steadfast broker, with all the efficiencies that Steadfast means to its broker network,” he says. “It’s central to the core of how we go about doing business and it’s very, very important to us to see back-office efficiencies and reduced prices, while improving client-broker compliance and instruction execution.” Corporate history is littered with a list of big-name titans that have flopped spectacularly when they tried venturing beyond their main realm of expertise. As Ebix Australia Managing Director Leon d’Apice commented wryly in October 2010 when cluster group IBNA announced it was developing its own (ultimately unsuccessful) broker system: “What we have seen over the years is the IT road in this industry is littered with corpses.” Nearly six years after getting into IT development, IBNA isn’t shedding any tears over the 2014 sale of 90% of its broker management system to UK-based insurance services company Xchanging. The system had a troubled development after IBNA formed a joint venture with BrokerCentral developer InsuranceConnect in October 2010. The project to acquire and develop BrokerCentral was controversial among many IBNA members, who from the start
questioned the need for it. Steadfast had previously looked at BrokerCentral but a few months before IBNA signed up backed away from negotiations to purchase it. Over the next few years IBNA reputedly spent millions of dollars developing BrokerCentral. It ended the joint venture in November 2011, then six months later renamed the system BrokersIT and outsourced its development. The system was sold to Xchanging in November 2014 for an undisclosed price. IBNA President Gary Gribbin’s explanation for the sale tends to support the belief that in IT at least, sticking to your main game is infinitely safer. “IBNA is a broking cluster group, not an IT or technology company,” he tells Insurance News. “We just didn’t have either the operating capacity or financial resources to carry it to market, so what we needed was someone who had all the technological skills and the resources and structure to do that.” Xchanging has already invested in improvements to the system that leave Mr Gribbin in no doubt the decision to sell BrokersIT was the right one. “There has been a huge amount of work done on the system,” he says. “A lot of coding work has now been completed.” Mr Gribbin says there remains a “distinct possibility” that IBNA may increase its 10% holding in X-alt in the future. Insurance News understands the sale agreement with Xchanging includes proviinsuranceNEWS
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“The reality is the incumbent systems do a very good job, but we don’t want to have a third party controlling our destiny.” – Steadfast Managing Director Robert Kelly
sions regarding the future use of the X-alt system by IBNA members. Xchanging says it has attracted new customers since launching the system in April last year, but will not give Insurance News any figures. “We are engaging with brokers, insurers and premium funders across Australia,” Head of Insurance Diego Ascani says. “The reception has been excellent and our momentum continues to grow.” However, informed sources have told Insurance News the number of brokers to move across to X-alt so far is “very, very few”. Despite the IBNA example and numerous other sagas of companies failing to build in-house IT systems, Mr Kelly has no time for industry critics who say Steadfast would be better off using the systems that already exist in the market and concentrating instead on its main insurance activities. “They are idiots, and probably part of the IT legacy that holds back the whole development world. It’s not a distraction. It is core to our activities.” Steadfast is no doubt taking a gamble getting into the broker system business, but Mr Kelly believes this is the only way to go if the company is to secure its future. “The reality is the incumbent systems do a very good job, but we don’t want to have a third party controlling our destiny,” Mr Kelly tells Insurance News. “We want to be in charge of our own destiny. “The execution of data is the most crucial part of our business processes. You can’t operate without it. Data is king, and transaction and usage is paramount to cost containment.” 30
While Mr Kelly did not name who that third party is, there are no prizes for guessing he was referring to Ebix Australia. Relations between the two companies can be described as cordial at best, or rocky if you prefer, after a highly publicised spat over an interface between Ebix’s broking systems and the Steadfast Virtual Underwriter (SVU) transaction platform. Ebix Australia is a wholly owned subsidiary of US-listed Ebix, and dominates more than 80% of the Australian market, thanks to its three insurance broking systems – WinBEAT, eGlobal and CBS. More than 10,000 insurance intermediaries log into an Ebix broking system each day – an 18% increase in the past five years. And most are using Ebix’s Sunrise Exchange and iClose transaction platforms. Sunrise Exchange is the industry’s leading platform. There are about 967 active connections to the platform, which sees an average of 8000 policies transacted daily. It has the support of eight major insurers – AIG, Allianz, Calibre Commercial Insurance, CGU, National Transport Insurance, QBE, Vero and Zurich. Overall gross written premium processed via Sunrise Exchange last year exceeded $2.9 billion, and when combined with iClose, the figure was over $3 billion. But Steadfast wants to run its own complete system independent of the dominant Ebix offerings – a situation that has led to a protracted conflict between the two. Top of the list is the long-running skirmish over Ebix’s commercial terms to build and maintain an interface between its broking systems and the SVU. For the fourth consecutive year the cominsuranceNEWS
pany was not invited to the Steadfast Convention in April. Ebix had been a regular exhibitor prior to 2013. Mr Kelly says the invitation is not extended as Ebix Australia is “not a strategic partner”. However, he insists that doesn’t mean relations between the two companies are at a standstill. “A really good relationship exists between Ebix and Steadfast Technologies. [Mr d’Apice] is a very professional guy and reliable with the products that he puts into the market. Ebix serves the industry well with the products they have developed.” Mr d’Apice tells Insurance News he also sees the relationship as “healthy”, despite the breakdown in talks over the SVU interface. “We differ on a number of matters but we still have a healthy respect for Steadfast and we do engage with them on other projects,” he says. “We still, to this day, work for Steadfast in terms of information-gathering. The relationship with them is professional, with open lines of communication.” Mr d’Apice says the insurance technology specialist is always ready to meet any new challenges and competition. “We always watch what is happening in the market and try to act appropriately,” Mr d’Apice tells Insurance News. “There has always been competition, which encourages us to develop and offer new and enhanced solutions to the market. “Competition is healthy. We are not daunted by it. We recognise that competition is a good thing in the market.” For the moment, Mr d’Apice prefers to let the market be the judge of whether Insight is a better alternative to what his
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“It’s an expensive exercise to develop a broking system but equally important is the high cost to maintain a broking system. Many underestimate the complexity.” – Ebix Managing Director Leon d’Apice company offers, and he is quietly confident that history is on his side. “A lot of new software products have been launched but failed miserably,” he says. “In terms of where we are sitting with a product like Insight, the jury is still out on whether it will be successful.” Steadfast’s move to run its own broker system does not come as a surprise to Mr d’Apice, but he maintains this end of the business is better left to the specialists like Ebix to manage. “It’s an expensive exercise to develop a broking system but equally important is the high cost to maintain a broking system,” he says. “Many underestimate the complexity of the ongoing system support requirements. “Historically, local and international brokers have developed broking systems but they have largely stopped doing that because of the challenges involved.” The cost of maintaining the software running a system over its reasonable life can easily run up to five to 10 times the initial investment, he says. Besides, mixing technology and insurance together is not always a surefire recipe for success, as Google’s recent closure of its insurance comparison website in the US and UK demonstrates. “Technology companies don’t do well in insurance and typically, insurance companies don’t do well in technology. Google is a good illustration of the first point,” Mr d’Apice says. “Software development is an expensive exercise and a business you need to concentrate on. Many corporates have shown they are not necessarily good in the software development arena.” 32
He says Ebix has done extremely well in Australia, and also in the US, because the company understands what clients need. “The major international brokers including Aon, Marsh, Willis all have internal software development capabilities, yet they use our broking systems both in Australia and internationally,” Mr d’Apice says. “They don’t do that just because they like us. Their decisions were made because we have got good solutions that address their requirements. They also know that building and maintaining systems is an expensive exercise. It can be a minefield.” He says the company does not for one second take its success for granted and is already working on a fourth broking system called Ebix Evolution. A test version of Evolution has already been released for a few of its larger clients to review. “Their feedback has been very positive,” Mr d’Apice says. “We have been working on Evolution for the past 18 months. “It’s designed as a global project and backed by a mult-million dollar investment. We have to constantly reinvent our software products to remain relevant and that is what Ebix Evolution is all about.” The Australian market remains an attractive proposition despite the drop in the number of brokers in the past 10-15 years. A broking system is a must-have for every insurance broker in Australia and the latest Vero SME Insurance Index finding that the proportion of business owners using brokers has increased is good news for Ebix. “There are businesses in the Asia-Pacific region who can survive without a broking insuranceNEWS
system, but you can’t operate without one in Australia,” he says. “Broking systems provide the backbone for any business managing clients, transaction processing, assisting with compliance… I don’t think you will ever see broking systems made redundant.” The way Mr d’Apice sees it, broking systems will take on greater importance as the industry evolves and brokers seek greater levels of efficiency. “Over the years, broking systems have become more sophisticated in what they offer a broker, and for the future these levels of sophistication will increase in order to provide even more facilities for brokers,” he says. “The future will see greater interconnectivity to third parties and external systems. Customer self-service and mobility solutions will also play an increasingly important role.” The figures explain why Ebix guards its stranglehold of the market zealously and devotes more than 40% of Australian revenues on research and development. The company says the size of its R&D budget is confidential. “We invest heavily in R&D to ensure that our broking systems remain market-leading solutions. This situation hasn’t changed since we commenced developing software for this market over 25 years ago,” Mr d’Apice says. Australia accounts for around 2% of GWP globally but it plays an outsized role as a revenue source for Ebix and is the company’s biggest market outside of North America. Of the $US265.5 million earned last year, Australia’s contribution “is far more than
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Digging in Others may be talking about the turn of the cycle but QBE’s Tim Plant is more focused on the ‘new normal’ in a world where customer and cost are key By Michelle Hannen
INSURANCE COMPANIES ARE WELL known for talking the market up. With the noise around rates growing louder and “bottom of the cycle” and “upturn” beginning to creep back into the industry vernacular, one would expect an insurance company chief executive to be upbeat about the outlook. But new QBE Australia and New Zealand Chief Executive Tim Plant is more circumspect when discussing rates. Not only is he not talking the market up, he’s reluctant to accept that the market may have bottomed out. “It’s just too early to call a bottom to the softening of the market,” Mr Plant told Insurance News. “It will become more evident as we look through to the May and June renewals where we have a greater proportion of our overall renewals occurring. “I think as we get to July and August that will give us a much better feel as to whether we’re seeing signs of the market turning, or more particularly, whether the market actually has bottomed.” Not that it matters much, anyway. A turnaround in rates is unlikely to be the panacea for insurers that it once was. Amid “the toughest trading conditions that most of us have ever seen”, Mr Plant says that even if a major global catastrophe strikes, triggering a hardening of rates, the abundance of capital and hence competition in the industry will remain. “We’ve really had to adjust our business models, our business structures and our expense bases to be more reflective of the new normal, rather than expecting things to magically turn around,” he says. “Investment returns are likely to remain low – we think for the next five years plus – so we’ve got to make sure that our underwriting returns are responding to that accordingly and make sure that we have the right expense structure to support it. 34
“It’s important that we’re an efficient business. For us it is really about saying, Let’s invest in the things that really add value to our customers [and] our intermediary relationships. “Let’s continue to invest heavily into systems and relationships where it adds value to our customers, but really push hard to take out costs that are either not adding value to our customers or to our risk environment as an insurer.” So, it seems, in the “new normal” insurance success revolves around the “two Cs” – customers and costs. “An important area of focus for us is making sure that we’ve got a really strong focus on the customer,” Mr Plant tells Insurance News. “I’m really pleased we’re not only continuing to focus on good quality underwriting disciplines and expense management, but a lot of our focus has been on measuring our customer experience.” This renewed emphasis on customers led Mr Plant to introduce a new marketing position to the QBE Australia and New Zealand team, with the appointment in November of Bettina Pidcock to the role of Executive General Manager, Marketing. “We wanted to ensure that marketing and brand was at our executive table,” Mr Plant explains. “Across the organisation, we are seeking to increase our capability to deliver great customer experiences – when, where and how they want them – to strengthen our brand and improve our reputation.” A Head of Digital, Marcus Marchant, has also joined the team, to develop online capabilities and oversee IT investment. “The customer work we’re doing will provide an increased level of digital and social capability, providing greater choice for our customers. “This will ensure we’re making the right investments so we create improved customer insuranceNEWS
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A son of the soil with his heart in insurance
Being efficient and adding value: QBE’s Tim Plant
In another life, Tim Plant could have been an agronomist. In fact, before he entered the heady world of insurance he was headed for a life of soil analysis and maximising crop yields. After growing up in country Victoria, he studied agricultural science and agricultural economics at university, before driving harvesters. He then landed a job lecturing in agronomy at an agricultural college. The switch to insurance came when he picked up a job with insurer Australian Eagle, which was looking for a crop and rural product manager. After that his career took off, with QBE acquiring Australian Eagle in 1992. He moved to Sydney to take on a national product role before being sent to London for a stint in QBE’s London business, working in reinsurance. He returned to Australia with the QBEowned (now defunct) Sydney Re, before jumping ship to Swiss Re for a stint as a client manager. Agriculture came back into the mix in 2002 when he became general manager of Adelaide-based Elders Insurance before taking on a broader role as managing director of Elders Financial Services Group – a role that encompassed wealth management as well as general insurance. He came back into the QBE fold in 2009 after it acquired Elders Insurance, first working in the dual roles of managing director of Elders Insurance and executive general manager, technical for QBE Australia. “At that stage I was responsible, in addition to the Elders role, for looking after our actuarial, product and reinsurance functions for the Australian business,” Mr Plant says. In 2011 he was appointed executive general manager of QBE’s crucial corporate partners and direct wing, before moving into the top job last August following Colin Fagen’s appointment as the QBE Group’s chief strategy officer. (Mr Fagen was subsequently appointed Group Chief Operations Officer in February.) Mr Plant is hopeful that what began as a chance appointment may result in a family dynasty, with two of his three children now studying business-oriented degrees at university. “I keep encouraging them to think about [insurance] because there’s so many opportunities in the insurance sector,” he tells Insurance News. “It’s important to give them exposure to the fun that I’ve had in my career.” In his downtime, Mr Plant says he enjoys spending time with his family, as well as surfing, “playing golf badly and trying to keep fit”. He also like travelling and entertaining. That’s just as well, considering the amount of time he needs to spend in his new role doing both.
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“We’re making sure that we’re efficient in all parts of our business and making sure we do understand what our customers’ changing needs are.”
experiences right across the business,” Mr Plant says. “We think digital is not just something that’s going to add a lot of value to our online capability for direct customers, but just as importantly across our affinity channels, corporate partners, our agency businesses and our broader intermediary relationships.” He says brokers are just as keen to use available information to ensure they are meeting the evolving needs of customers, both in terms of the delivery of insurance solutions and the evolution of insurance products. “We’re working jointly together to look at how we can bring insights to them and how we can utilise some of the insights they’ve created for us to provide a better set of solutions to their customers.” Analytics plays a big role in sifting through the vast amounts of data that insurance companies possess, and Mr Plant says that as a global insurance company dealing across multiple channels, QBE has “a huge amount of data on risk”. “There are some real opportunities to create insights out of that data, to also bring secondary and other data sets in there to complement our insights and really importantly have a very strong shift to driving customer analytics and understanding our customers better.” He says another advantage of being part of a larger insurance group is that much of the investment into analytics is being made at group level “to try and get the scalability and efficiency of a $14 billion company rather than four individual divisions”. As a global insurance company, QBE’s turnaround story is well under way and the local division continues to perform well. While gross written premium (GWP) in the Australia and New Zealand business may have fallen 14% in 2015 – from $US4.4 billion in 2014 to $US3.8 billion – the weak36
ened Australian dollar against the US dollar accounted for much of the drop, with GWP up 3% on a constant currency basis. Premium rates were down 2% in Australia and 7% in New Zealand, where Mr Plant says capacity in that market continues to recover following the Christchurch earthquakes, resulting in increased competition and pressure on rates. Its commercial portfolio grew by 5% for the year, which Mr Plant attributes to the strength of its broker relationships and an increased focus on customer retention. “We’ve got such strong relationships right across the board in our intermediary segment and those deep relationships have meant that we’ve continued to get a good showing of business,” he told Insurance News. “We’ve focused very heavily on the customer experience and the quality of the value that we’re adding to our intermediary partners and to their customers and I think we’ve seen an improvement in retention in most areas as a consequence of that as well.” For 2016, QBE Australia and New Zealand is forecasting another fall in premiums, to $US3.5 billion, which Mr Plant says is “reflective largely of expected GDP growth in the market”. “We’ve seen some sectors of the economy pulling back, so we’re being realistic as to what genuine new business growth is in the marketplace”. But he does not subscribe to the suggestion that the insurance industry is ripe for disruption. “I’d rather not be cynical on this,” he says. “I’ve been in the industry a while now and I’ve seen so much change. “The role that we play in society is incredibly important, and I actually see us responding really well to societal changes. “It’s easy to say that the world’s changing and that new customer preferinsuranceNEWS
ences and experiences are changing, and that there’s a potential for disruptive forces coming through. “But I think the industry in the main is responding pretty well to those.” He cites the industry’s willingness to underwrite cyber insurance as an example. “As an industry I think it’s fair to say that none of us really truly understands where cyber exposures will evolve over the next five to seven years. “We can’t absolutely call our individual exposures, but as an industry I think we’ve responded well to be able to provide products. “A lot of this relates to the concept of taking intelligent risks. What are we prepared as individual insurers to underwrite, not only on an individual risk basis but to understand the accumulations of those sort of exposures and come up with products that try and meet the needs of what is an emerging risk profile for our customers as well?” He says that rather than worry about what competition might be emerging, either in the form of traditional competitors or “firms nibbling away at different parts of the value chain”, insurers should instead make sure they have their own houses in order. “We’re making sure that we’re efficient in all parts of our business and making sure we do understand what our customers’ changing needs are so we can… ensure we continue to provide really strong solutions.” He may not be upbeat about rates but Mr Plant is upbeat about the opportunity he has been given to guide QBE’s local operation. “I’m absolutely loving it. The privilege of running such a diverse operation, in excess of $5 billion worth of GWP across a range of distribution channels, the complexity that comes with that, is quite * exciting.”
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Back in business Veroâ€™s latest report says SMEs are inching back to brokers, but a successful future is far from guaranteed By John Deex
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“The fact the three greatest concerns are essentially uninsurable puts the role of insurance in perspective and means brokers must widen their focus substantially.”
FOR THE PAST TWO YEARS VERO’S highly regarded SME Insurance Index has contained some concerning statistics, reporting that business owners moved away from using brokers towards buying direct. Thankfully for brokers, this year’s report tells a different story. It says last year 36% of SMEs exclusively used brokers to purchase insurance, up from 34% in 2014, when the figure had dropped dramatically from 40% in 2013. The growth in “going direct” slowed, with 57% of business owners buying insurance through this channel only – a slight rise from 56% in 2014 and 50% in 2013. However, the report makes it crystal clear that brokers cannot afford to take it easy – there is a huge amount of work required to stay on top. For the first time the 1500 SME respondents were asked about business risks that concern them most, and this forms the basis for much of the report’s analysis and conclusions. The top three fears are increasing costs (47% “very concerned”), an economic downturn (42%) and an increase in competition (34%). Other concerns raised by SMEs include being unable to trade (32%), equipment failure (31%), cyber attacks (25%) and being sued (25%). Vero says the fact the three greatest concerns are essentially uninsurable puts the role of insurance “in perspective” and means brokers must widen their focus substantially. “The issues that most worry this audience are things no level of insurance coverage can ever resolve,” the report says. “Brokers have a role to play as trusted advisers to their clients – they are not just an insurance sales channel.” Fortunately, brokers are well placed to take on this challenge. Respondents were asked who they would turn to when seeking advice about general business risks. Accountants and bookkeepers are the most popular source, but 39% of broker clients would consult their broker and 29% of direct buyers would seek the views of their insurer. When asked what type of information they would want from their broker, 38% say general business risks, while 43% are interested in risk analysis. insuranceNEWS
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“Simply knowing brokers can handle claims increases satisfaction, regardless of whether a claim is made, and brokers should be making clients aware of the assistance they can offer in this area.”
“Brokers, as risk experts, have a right to be part of a business’ advisory team, and being there when you are needed most can lead to long-term, loyal relationships and referrals,” the report says. Clearly some of the concerns raised are insurable, but SME clients often don’t have the coverage in place to mitigate these fears. For example, 80% of those who rank being unable to trade among their top concerns do not have business interruption cover. A similar picture emerges for machinery/equipment breakdown, with 80% of those concerned reporting they don’t believe they are covered. And 91% of those concerned about cyber attack do not have cyber insurance. Even those who have experienced an attack in the past year are unlikely to be covered. Vero says all this, while worrying, presents a great opportunity for brokers to help educate clients and sell more underutilised covers. Broker satisfaction remains high, with 68% of clients giving their broker a score of eight out of 10 or higher. This figure has been consistent for the past three years. Only 12% score their brokers at five out of 10 or lower. The report says clients are more likely to be satisfied with brokers who go the extra mile. “In general, brokers of highly satisfied clients do more than just the basics and are far more likely to provide in-depth analysis and information that reinforces their expertise.” The report says more than a quarter of SME clients don’t realise brokers can look after claims for them. “This misconception can be found across all ages, genders and business sizes. The only group more likely to say their broker handles claims for them are those who have used a broker for more than five years.” Simply knowing brokers can handle claims increases satisfaction, regardless of whether a claim is made, and brokers should be making clients aware of the assistance they can offer in this area. Despite the recent growth in SME owners buying insurance direct, there remains a strong opportunity to reverse this trend, with more than a third of direct buyers open to the idea of using a broker. “The challenge for the broking industry is to work out how to harness this potential and ensure these high consideration levels are converted to actual buying behaviour,” the report says. Key to this is online presence – with 64% of those considering a broker planning to go online to find one. But what should a broker’s internet offering include? Online search is crucial, because 35% of SMEs looking for a broker say they would “Google it”. A range of search terms are used, with “insurance broker” the most popular, plus many others including specifics such as location or industry. “It is important for brokerages to understand these commonly 40
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“The most successful businesses have websites that are carefully designed to best reflect their brand and make it as easy as possible for potential customers to engage with them.”
used search terms to ensure their websites are optimised with the right language, so as to appear on the all-important first page of search engine results.” When SMEs describe how they would find a broker, 20% say they would use a comparison website and 14% mention product review websites. While it is impractical for brokers to build a presence on such sites, it gives an insight into what SMEs are looking for. “Brokerages can reflect elements of [comparison websites] by highlighting the number of policies they offer and using comparisonstyle language when explaining what they will deliver to their clients,” the report says. It adds the appeal of product review websites reinforces the importance insurance customers place on recommendations. “Asking satisfied customers for referrals, publishing testimonials on their website and including options for reviews are all tactics brokerages can consider to meet this customer need.” Brokers need to understand how SMEs engage with social media, and design their own strategies. While Facebook dominates overall usage, LinkedIn is the platform most commonly used for business purposes. Twitter and Instagram are used by “a minority” of SMEs, and mainly for personal use, “giving them little relevance for brokerages”. However, Google+ is used by a surprisingly large number of small businesses and has “considerable advantages” in boosting search results. “In an era dominated by digital, merely having a website is no longer enough,” the report says. “The most successful businesses have websites that are carefully designed to best reflect their brand and make it as easy as possible for potential customers to engage with them.” A third of business owners say they research products and services on smartphones or tablets, meaning a mobile-enabled website is vital. However, digital must not eclipse the personal relationships side of broking. Instead, the two need to work hand in hand. “While online is the first place many SMEs would go when looking for a broker, the importance of personal referrals cannot be overemphasised,” the report says. “In the end, the brokerages that are able to most effectively engage with SMEs, whether online, through personal experience or via trusted referrals, will be the... most successful in attracting those direct clients who are open to the idea of using a broker.” The statistics on broker usage certainly offer encouragement. The model is far from obsolete and looks to have turned around a worrying slide towards direct. But Vero’s report is clear: brokers have their work cut out on all * sides if they are to stay ahead of the game. 42
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Hidden dangers Our cities’ skylines may look spectacular, but a spate of revelations has left Australians asking just how safe they really are By John Deex
THE SENATE INQUIRY INTO non-conforming building products is still a work in progress, with the reporting date already missed three times. But evidence and submissions presented so far have revealed a worrying number of potentially life-threatening defects lurking within the nation’s building stock.
Combustible cladding This is the issue making all the headlines – primarily because of a major fire at the Lacrosse apartments in Melbourne’s Docklands in November 2014. A cigarette on an eighth floor balcony sparked a blaze which raced up to the top of the building, fuelled by a flammable aluminium composite panel that had been imported from China and not tested to Australian standards. The ferocity and speed of the fire was unprecedented, with the Metropolitan Fire Brigade warning that it may be forced to keep crews back from similar incidents in future. A number of factors (lack of wind, sprinklers performing beyond expectation) meant no lives were lost that night but it could so easily have been different. 44
Across the globe, the fires keep on coming, with Dubai tower blocks going up like candles on a frighteningly regular basis. But how big a problem is it in Australia? A Victorian Building Authority (VBA) audit examined 170 Melbourne CBD buildings and found 51% featured non-compliant cladding. This is concerning to many. But at least Victoria is looking, which is more than can be said for most other states. New South Wales has yet to complete any such audit, but reports indicate that as many as 2500 buildings could be affected. A limited audit in Perth found no issues of concern, but the questions remain unanswered in South Australia and Queensland. The Northern Territory, the ACT and Tasmania have not commented at all on the issue. “Nobody really knows how much of a problem there is,” Fire Protection Association Australia Chief Executive Scott Williams tells Insurance News. “Only Victoria has been proactive on the issue. There could be thousands of buildings affected across Australia. The lower limit is probably a couple insuranceNEWS
of thousand. It’s pretty significant. “There has been neglect for such a long time and we don’t know where the bottom is.” The VBA says non-compliant cladding does not necessarily make a building dangerous to occupy. Emergency orders were only issued for two buildings. But the level of risk deemed acceptable is a highly subjective matter, and not everyone agrees. “Our construction and fire safety standards are high, and we have some of the lowest fatality rates in the world,” Mr Williams tells Insurance News. “But the moment you compromise any of that, there will be more lives lost. “Are we just accepting that there is a greater risk, that it’s okay because we are still going to have low rates of loss? “Everybody knows we dodged a bullet with Lacrosse. It could have been a severe catastrophic event. “Fire does not occur very often but all we are talking about is time.” Some action has been taken – the Building Ministers Forum announced the National April/May 2016
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An international phenomenon: combustible cladding on high-rise buildings is causing serious fires in many cities around the world. This is the 63-storey Address Hotel in Dubai, which caught fire on New Yearâ€™s Eve. Fourteen people were injured and the fire took several days to extinguish
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Construction Code is to be reviewed and consideration will be given to enhancing regulators’ powers. But Mr Williams believes too much is being expected of the states and territories. “You have got to question their ability to deal with this,” he said. “There is no federal response. “As Australian manufacturing dries up more products are being imported. “The Government has to step up its surveillance and auditing to make sure the safety of Australia is not eroded.”
Faulty cabling Many people will have heard about the potentially deadly Infinity electrical cable installed in thousands of homes, thanks to a concerted Australian Competition and Consumer Commission (ACCC) awareness campaign. The product, imported from China, was recalled in 2014 after tests showed its poorquality plastic insulation breaks down over time, leading to electric shocks or fires. About 2300km of the cable remains unremediated, and progress is extremely slow. 46
Melbourne firemen in action: known and unknown risks add to the danger
However, according to the Australian Cablemakers Association (ACA), there is another sinister threat that is much more likely to impact public and city buildings – the Ecables product. Infinity cables were sold through major national hardware chains and electrical wholesalers, and are most likely to have been used in small jobs in private homes. Ecables products, however, were specifically targeted at major developments such as apartment buildings and commercial sites. “They were predominantly sold in Victoria, but it is difficult to pinpoint the buildings at risk because the regulators have to date refused to release information on where these products were installed,” ACA Chairman Frederick Persson tells Insurance News. “The ACA believes residents and other people who may be accessing affected buildings have the right to this information, and again we call on Energy Safe Victoria to make it public.” Ecables products were recalled because they were found to melt when under moderate load – far below supposed insuranceNEWS
tolerances. This could result in fatal fires, says the ACA. “The common factor among all these recalls is that they were imported products allowed on to the Australian market without adequate testing to ensure they met our high electrical safety standards,” says Mr Persson. “The faults were only uncovered through testing conducted on behalf of the ACA and its members, under the Approved Cables Initiative. “It is deeply concerning that faulty imported products can find their way so easily on to the shelves in Australian stores. “The other common factor has been that once the products have been found to be unsafe, the importing company has folded, leaving no way to fund the removal and replacement of faulty cable.” The ACA is urging state and territory electrical safety regulators to strengthen standards for electrical cable. “We believe there should be independent testing ahead of sale in Australia, to ensure that products meet the standards, as well as follow-up spot checks to ensure ongoing compliance,” said Mr Persson. “This will require a major April/May 2016
effort from regulators and governments, but we believe it is necessary to prevent faulty products being easily sold and potentially putting Australian lives and property in danger.”
Glass Glass installed in many Australian buildings could be extremely dangerous, according to submissions to the Senate inquiry. Nathan Munz, a specialist glass manufacturer, believes “manifestly inadequate” toughened safety glass is being fitted in thousands of homes and public buildings every week. He claims the problem is with the Australian Standard, which he says needs to be more stringent. “The current standard allows the certification of glass that forms long, dangerous pieces, which, if they pierce a person’s body, can be fatal,” he told a public hearing of the inquiry. “Toughened safety glass, by definition, is required to break into small, relatively harmless cuboid particles.” Leon Jacob, of consulting engineer Jacob & Associates, believes “dangerously thin” glass is being installed in buildings.
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“Tradesmen would not wear protection and if they cut into the material, releasing asbestos fibres, they could be the next wave of asbestos disease sufferers, and we could be creating a new legacy issue.”
“We are putting in glass which is fundamentally too weak,” he said. Dr Munz tells Insurance News the glass strength situation is serious, and the current standard inadequate. “If you have a windy day there is a propensity for it to break. In commercial buildings there are very large pieces of glass and this is a major concern. “As for the toughened safety glass, it is supposed to break into small, safe particles, not 250-300mm long blade-like pieces. Anything over 7mm can kill. “Unfortunately there is a lack of data surrounding injuries, but 90% of double glazing going in is very simple 4mm toughened glass. “People would be up in arms if they knew their kids were running around that stuff. It could be lethal.” However, Australian Glass and Glazing Association Chief Executive Warren Overton tells Insurance News there is no significant problem with the glass or standards. He says where installed correctly and to the Australian Standard, glass is “not inherently dangerous”. 48
When breakages occur it is more likely down to incorrect installation, he says. “Unfortunately for our industry, a significant amount of glass is installed by untrained or unskilled workers and that is where the problems typically arise. “We do believe that the current Australian Standards have served us well, stipulating both manufacturing as well as design/installation requirements. “The problems that we are seeing are due to an inadequate level of policing against these standards. “As glazing is not a nationally licensed trade we have introduced a voluntary accreditation program to the market so that those who are qualified and adhere to the standards can differentiate themselves. “Our hope is that such an industry-driven approach may eventually lead to a governmentendorsed national licensing approach.”
Asbestos If you thought asbestos was a problem consigned to the past, you’d be wrong. Australia ought to have a handle on the legacy issue – insuranceNEWS
every building built prior to 2003 must have an asbestos register, and a regularly updated management plan alongside it. Tradesmen can access the register to make sure the necessary precautions are taken if work is carried out. However, Asbestos Safety and Eradication Agency Chief Executive Peter Tighe tells Insurance News that compliance levels “leave a bit to be desired”. “We hear of WorkCover inspectors going in and people pulling out the register and having to blow the dust off it,” he said. “They are not being maintained as they should be, and so the risk factor increases. “I would like to see centralised electronic registers, which would allow for better compliance and transparency.” There is an even greater concern – the import of materials from Asia that contain asbestos, despite a blanket ban. “Australian manufacturing is winding down and we are importing more products from India and China, but we cannot rely on the quality or testing,” said Mr Tighe. “We have more and more anecdotal evidence of asbestos materials coming in and we fear April/May 2016
that this might be just the tip of the iceberg.” Products include high-density boards and sandwich panels, and the danger is that once installed nobody would know asbestos was present. “Because the building was post-2003 anyone working on it would assume there was no asbestos,” said Mr Tighe. “Tradesmen would not wear protection and if they cut into the material, releasing asbestos fibres, they could be the next wave of asbestos disease sufferers, and we could be creating a new legacy issue. “Education is the key. We need to raise awareness that the cost of building products is not the only thing to look at. “All we can do is make sure the awareness is there with the importers and the builders.” Earlier this year the Australian Border Force announced a review of its asbestos controls, to determine whether any strengthening is required. Australia has the second highest mesothelioma death rate in the world, behind only the UK, with more than 10,000 dying since the 1980s. A further 25,000 people are expected to die from the disease * over the next 40 years.
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The uberwriting agency CHU chief Bobby Lehane is determined to be a strata market disruptor, and his journey has only just begun By Leo D’Angelo Fisher
ON APRIL 1 FORMER ZURICH AUSTRALIA SENIOR EXECUTIVE Bobby Lehane celebrated his first anniversary as Chief Executive of strata insurance specialist CHU Underwriting Agencies. So when he says he looks to the taxi industry to guide his transformation agenda, it may be tempting to assume it’s just a joke. But the joke is on anyone who doesn’t believe he is deadly serious. Mr Lehane is – in the parlance of current management mantras – a disruptor, and he has spent the past 12 months turning a staid strata insurance company into a thoroughly modern innovator. And the taxi industry? Think ride-sharing service Uber. “It’s plain to see the taxi industry was ripe for disruption, and disruption has had fairly devastating consequences for the business and investors, but arguably very positive impacts for the customers,” Mr Lehane says. He sees parallels in strata insurance, but unlike the hidebound taxi industry, he is determined CHU won’t be caught by surprise. “Strata is an extremely challenging sector. We need to assess: are we meeting the needs of our customers? Is there an opportunity for strata to do things better?” The answers are clear to Mr Lehane, and when he was appointed chief executive last year he had his chance to “Uberise” his new charge. CHU was acquired by listed broker group Steadfast from QBE in February last year, along with Underwriting Agencies of Australia (UAA) and Body Corporate Brokers for a combined $290 million. QBE remains the underwriter of both agencies. Mr Lehane, a former senior executive at Zurich’s Asia Pacific and Australia businesses, was the star recruit charged with running CHU and given free rein to innovate and disrupt. “When Steadfast purchased the business it was well recognised [by the board] that CHU needed a bit of remediation work to be done,” he tells Insurance News. “That was the reason I was chosen. “Morale was down, there had been a significant number of staff departures and there was a sense that there was an inability to respond to the new competitive environment. My role was to re-engage staff, reengage the market and create a renewed vision for CHU.” CHU is no stranger to innovation. Founded in Sydney in 1978, Corporate Home Underwriting created the first strata insurance plan in Australia, and has since then underwritten more than 100,000 schemes nationally. But competition took its toll as new entrants and an aggressive price war saw strata cover premiums fall 20-30% last year. “A proliferation of new entrants, all trying to get market share as quickly as possible, created a market dynamic that was irrational and
difficult to compete with,” Mr Lehane says. He believes the switch of ownership from QBE to Steadfast has made it easier for CHU to respond to the challenges ahead. “There’s more flexibility with Steadfast. As a small part of a very large organisation, CHU was bound by QBE’s processes and procedures, which you can understand, but it can also be limiting,” Mr Lehane tells Insurance News. “Steadfast has a federated model that enables businesses to run with a degree of autonomy.” Under its new ownership and leadership, CHU’s focus is more customer-centric. “QBE is an underwriter. That’s why the purchase by Steadfast has worked so well; Steadfast isn’t an underwriting company. “Our focus now is on being a sales and distribution company. We need to be mindful of underwriting profit, but now the focus is on the right product for the customer in the context of a particular risk and a particular market, being price-competitive and providing the service levels our customers expect. It creates a very different mindset.” Monolithic corporates such as QBE can unintentionally stifle staff creativity and engagement, but Steadfast, although an ASX 200 company, has a decentralised business model that has made CHU’s renewed customer focus easier to achieve. “Previously CHU was completely intertwined with QBE, but now we are operating as a completely separate organisation with our own distinctive culture,” Mr Lehane says. “Staff were often afraid to make decisions, but now they are empowered.” Another priority for CHU is rebuilding bridges with brokers. “One of the things I’m particularly proud of is re-establishing our relationship with brokers,” Mr Lehane says. “The perception in the market was that we favoured authorised representatives over brokers. “I’ve told our broker partners that whatever the historical perspective might have been, I was drawing a line in the sand on the issue of channel conflict. “I made it clear that’s not the way we operate now and in the past 12 months we have well and truly stamped out that perception. “We are a multi-channel business and we are not going to express preference for one channel over another.” Mr Lehane’s boss, Steadfast Managing Director and Chief Executive Robert Kelly, is clearly happy with changes at CHU, telling shareholders at the company’s annual general meeting last October: “Bobby Lehane has revitalised the business by making the CHU offering more competitive, winning back lost business, selling more
“The focus is on the right product in the context of a particular risk and a particular market, being pricecompetitive and providing the service levels our customers expect.”
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CHU Chief Executive Bobby Lehane: digital transformation is the key
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products through the broker channel and focusing on new products and geographies.” But the biggest change under way at CHU is the digital transformation of business processes and customer service. Mr Lehane wants to be the disruptor, like Uber, rather than the disrupted, like the taxi industry. “Over the next 12 months CHU will be releasing a number of new initiatives to follow in Uber’s footprints and revolutionise the way we think about service in the strata sector,” he says. “We will enhance our ability to interact digitally and simplify many of the cumbersome processes inherent to insurance. “No longer will clients need to wait for office hours to submit a claim or get a quote for insurance. We believe clients should be served when, where and how they want by multiple channels.” CHU has already launched the CHUniverse phone app, allowing people to submit a claim and receive updates on progress without the need to fill out lengthy forms. Staff will also benefit from digital systems and processes. “At the moment one of the biggest concerns with staff is the laborious nature of what we do. There’s a huge amount of manual work in quoting insurance. “Now, a significant proportion of this work will be easier and quicker to do, which will free up time to focus on more complex risks and growing the business.” The digital era suits Mr Lehane, whose professional background is in information technology leadership. He served as chief information officer at Zurich Australia and before that was chief information officer at construction giant Multiplex – now Brookfield Multiplex. He was also head of financial markets technology at Commonwealth Bank. More telling perhaps is the career trajectory Mr Lehane has chosen, parlaying his technology leadership roles into general management positions, providing the ideal combination of executive smarts for the age of digital disruption. “So many different businesses are going to be utterly transformed by technology,” he says. “Even before I was CIO at Zurich, I realised [general management] is what I wanted to do. I was never your stereotypical CIO. “I was always people-oriented and commercial, and I understood the impact technology was going to have on future business models. “I realised that was going to be the key to becoming a chief executive or getting into general management roles. I think we’ll see a lot more chief executives coming from IT backgrounds.” Mr Lehane joined Zurich Australia as chief information officer in 2007. When he left seven years later he was executive general manager
of the commercial insurance and SME/general insurance segments, having earlier been chief operating officer general insurance for the Asia-Pacific region. As part of its digital transformation, CHU has tapped into the market by appointing an advisory group. Known as Sage, it comprises eight authorised representatives, brokers and strata managers and meets quarterly with Mr Lehane and other senior executives. “The strata market has changed and strata insurance has changed,” Mr Lehane says. “As CHU goes down the path of change, we haven’t been alone. When we started to look at where we could take the business from a digital perspective, we brought the Sage group together and they have provided invaluable advice to us on our digital strategy. The path we’ve taken is as a result of advice from this group.” Sage has also provided market feedback on changes at CHU, and its composition underscores CHU’s commitment to adopt a multi-channel model. Matthew Dawson, director of Brisbane-based Direct Insurance Brokers, is a member of the Sage group. He describes his role as “providing a broker’s perspective on the strata market”. The biggest contribution Sage can make, he says, is honest feedback. “The open discussions we have provide a total picture of the strata market in Australia,” he tells Insurance News. “It allows CHU to look at all angles and hopefully assists it in providing enhanced products and servicing for our clientele.” Mr Dawson says being a member has also been personally beneficial. “[Sage] has given me a unique opportunity to interact with other strata industry professionals on the issues facing the changing insurance environment,” he says. CHU Solutions Architect Mark Borner, who previously held the same role at Zurich, was recruited by Mr Lehane to help shape “a vision for digitally enabling the company”. “What we’re doing is customising digital enablement for the strata segment,” Mr Borner tells Insurance News. “It’s about making our customers’ lives easier, but it’s going to be an ongoing evolution as we build capabilities, and we are being guided by Sage along the way.” Mr Lehane can look back on the past year with pride. But he knows what his digital guru means by “ongoing evolution”. He is not ready to rest on his laurels just yet. “The business is in a very strong position now,” he says. “We’re a business that is growing, we’ve exceeded our profitability targets, staff retention is high and staff engagement is strong. * “But we’re not even close to being the best we can be.”
“We will enhance our ability to interact digitally and simplify many of the cumbersome processes inherent to insurance.”
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A legacy for the grandchildren: Wayne Patterson with Fat Rabbit
From workshops to bunny hops With his health fading, motor insurance pioneer Wayne Patterson reflects on his legacy in business, and a new creative project that will live long into the future By Kate Hanley AS A YOUNG EXECUTIVE WAYNE Patterson watched as AAMI emerged from dark days to revolutionise the way Australian motor insurers operate – namely putting the customer first. It was a formative lesson he would later draw on to turn around a sinking National Transport Insurance (NTI). 56
Mr Patterson’s first job was in insurance. He hated it. As head of pay-by-month auto cover for AGC (yes, customers could pay by the month even in 1974), his job involved the monotonous task of pulling small cards containing policy and payment details from a file each day, to send out letters. “Thank god we didn’t have a fire,” he jokes. “We didn’t have back-up in those days. I hated it and vowed to never go back. My father, a mechanic, said, ‘Quit, and come work with me.’” So the 21-year-old started an apprenticeship in his father’s workshop. “Then, suddenly, I realised insurance wasn’t so bad after all, as I lay under cars with oil dripping in my face, and the dirt; I couldn’t get my hands clean,” Mr Patterson tells Insurance News from Yamba in New South Wales, where he is holidaying with his wife Lisa. He returned to insurance, but this time he was full of ambition, and he set himself insuranceNEWS
the goal of becoming a manager. Aged 24 he started his first degree – in accounting – by correspondence and joined RACQ Insurance as an assistant manager. He looked after central Queensland, then Far North Queensland before managing the Gold Coast operation. Then Mr Patterson left RACQ Insurance for AAMI. It was a time that would shape his future and that of the auto insurance company. AAMI had become the target of a rogue group of smash repairers, and the issue was the subject of a probe by the ABC program The Investigators. “AAMI came out very badly,” Mr Patterson says. “It was very cathartic. It became a much better company as a result. It was the best thing that could have happened.” The insurer adopted progressive and innovative practices that would deeply influence the motor segment – and him. It set up a customer charter – promises
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to consumers, backed by penalties for noncompliance. For example, it promised to respond to a customer enquiry within 24 hours or pay the client $50. “Every year it refined the process,” Mr Patterson says. “It was a wonderful experience being part of that.” AAMI also introduced a lifetime repair guarantee, which Mr Patterson says “everyone is doing” now. It was a time when, if you had a car accident, the insurer made you obtain three quotes and find your own way home after dropping off the car. Meanwhile, repairers would “game” the system by ringing around their mates to share jobs but keep prices high. “The insurer was always on the back foot because they’d never get the best price. The repairers were colluding.” AAMI set up its own repair centres, meaning repairers had to come to it. This brought down prices, and repairs were of better quality because AAMI would inspect the vehicles before they were released to the customer. It also set up a “repair valet” system, under which taxis would take customers to work or home and pick them up when their repairs were done. AAMI also introduced progressive human resources policies for staff, while setting core values for the company nationally. “I learned so much at AAMI,” says Mr Patterson, who was Queensland state manager. “I was very, very lucky.” In 2000 he left AAMI to take the helm at NTI. “NTI was in a very bad way when I arrived. It had lost a lot of money and the chief executive had left under a cloud and the people had lost confidence in themselves.” Mr Patterson put lessons learned at AAMI into practice at the heavy vehicle insurer. “We introduced core values to the business. “We’d look for personal traits and values in employees – honesty and integrity, respect for others and a sense of urgency. We set out to find the gold in the pile of junk. We knew there was gold in there, but there was a lot of junk.” With support from the board, Mr Patterson had the business back in profit within a year.
“We changed the way trucks were repaired in Australia,” he says. “First we fixed the underwriting and then we worked on the claims and made a lot of improvements.” Corruption was a major problem. Big trucks had big accidents, and this attracted a lot of the wrong kind of people. Repairers put 100 chase cars on the road across Australia to get to truck accidents first and sign up the owners. “Some repairers were offering truck owners overseas holidays while their truck was being repaired. They’d offer to fix things that didn’t need fixing.” To change this, Mr Patterson and his team created a call centre manned by trained nurses. “Truck accidents could be very traumatic, so we needed people with soft skills, and the nurses, after talking to the truck drivers, would transfer them to our tow operator, and they would pick up the truck and take it to an approved repairer.” NTI also offered a lifetime repair guarantee – an approach learned from AAMI – that encouraged truck owners to call the insurer rather than their “mates”. It also provided incentives for repairers to work faster, giving them fixed quotes so trucks that would normally be repaired in 10 days were fixed in half the time. This resulted in a 16% reduction in the average time to fix a truck – a significant saving for the owner and the wider economy, because the truck would soon be back earning money. Mr Patterson left NTI in 2007 after transforming it into an innovative insurer with a shelf-full of claims service awards and a progressive online database. “If I’d give any advice to people in the business, I’d say look at values, and if you’re not talking about them every day then something’s wrong,” he says. “Everyone loves turning up to work knowing they are making a difference every day.” Mr Patterson moved from NTI to water technology disruptor Multitrode, where he bought a 10% stake. After slowing during the global financial crisis, business there picked up, and in 2013 the company was sold for $26 million, more than double the original enterprise value. Mr Patterson then set up PointBreak Consulting, but last February he received insuranceNEWS
news that shook him and his close family to the core. Aged 58, he was diagnosed with motor neurone disease (MND) and given between two and five years to live. MND is incurable. It attacks the limbs and the ability to breathe and swallow, but leaves the mind intact. Two Australians are diagnosed with it every day, and each day two sufferers die. The hardest thing for Mr Patterson was telling his adult children James, Alexandra and Sarah, and realising he would probably never meet his grandchildren. “I can still swallow independently and dress myself and walk around, but the first thing to go will be my speech,” he says. “My family make a big joke of [losing my voice]. They say you can always point a finger and get things done.” After periods of anger and denial, Mr Patterson now accepts his fate, and last year he took his family to Tuscany for a few weeks, sailed his boat in the Whitsundays and saw his middle child Alexandra married. He has also created a legacy for his future grandchildren – a series of children’s books starring Fat Rabbit of Carrot Top Island. Fat Rabbit is a character Mr Patterson first drew as a 15-year-old on the inside of his wardrobe door. Proceeds from the books will go towards MND research. “My idea is that when I’m gone my wife and daughter can carry it on,” he says. “To give them an income and job while also supporting MND research.” The second and third books are already in the pipeline, plus a series of plush toys and T-shirts. And judging by children’s reactions, Mr Patterson may be onto a winner. But most importantly, Fat Rabbit will be his voice well into the future – something his grandchildren can enjoy while knowing their grandfather was more than a successful businessman; he was also a family man who loved to bring joy to those around him. “My voice is already deteriorating and will shortly go forever,” he says. “Hence Fat Rabbit moves from oral history to written. Through him my voice will go on forever.” Fat Rabbit is available online at * carrottopisland.com.au. 57
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Mutually assured protection When it comes to customer service, one of the oldest insurance models around remains ahead of the curve By Andy Swales
IN A DYNAMIC AND INCREASINGLY complex global risk environment, it’s hardly surprising that many commercial clients are seeking more tailor-made alternatives to “offthe-rack” insurance. The growing need for cyber cover is just one example where one size doesn’t fit all. Cyber-related issues take many forms that are constantly evolving and can cause colossal financial and reputational damage. But a recent report from researcher IDC Financial Insights warns that existing cyber policies typically provide inadequate coverage while imposing high premiums, excessive exclusions and restrictions. Many of the associated risks are simply uninsurable. And ratings agency AM Best last year warned old policies covering cyber risks are often unfit for purpose, urging insurers to begin developing and selling specifically targeted cyber coverage. In a highly competitive market, with client satisfaction more important than ever, many insurers are striving to gain greater understanding of their end customers’ specific needs. One group blazing a trail in this area is Unimutual, the discretionary mutual scheme for Australian higher education and research institutions. Formed in 1989 to provide complex 58
cover at affordable prices – which the traditional market could not facilitate – the program currently provides cover of up to $2.65 billion per location for $65 billion of assets and associated liabilities. It’s managed by Regis Mutual Management, a London-based company that provides what it calls a completely outsourced management service for a growing portfolio of international partners. Unimutual pools members’ everyday risk exposures and works with the traditional insurance and reinsurance markets to cover high-level and accumulation risks. It provides a highly targeted service, based around tailored risk management, protection and claims management. Unimutual Chief Executive Gerald Ewing says the discretionary mutual model lends itself perfectly to tailored solutions. “You’ve got a group of universities that have similar risks [and] that understand each other. So pooling their risks and tailoring the cover to their needs is very important, as is understanding it and servicing it,” he tells Insurance News. He says Unimutual provides a dedicated team that “understand the university sector, so when we’re dealing with the universities, we know exactly what we’re talking about. We understand the problems they face on campus insuranceNEWS
Minimising risks at higher education facilities: Unimutual keeps members aware of everything from hackers to students stealing lab equipment so they can live the Breaking Bad dream
and we have empathy with those issues. “We also make an effort to spend a lot of time on campus – there’s a lot of face-to-face engagement with the membership. Claims support is particularly important. Our ethos is, ‘How can we help the member, how can we pay the claim?’” He says the mutual’s “discretionary” aspect comes into play “around the edges, the grey areas, things that are either not explicitly covered or excluded, or risk that just hasn’t been thought about”. Such claims are considered by the Unimutual board, largely comprising fellow scheme members. Mr Ewing, who was also named Chief Executive of Regis in early April, says the equine flu outbreak of 2007 offers a good example. A number of Unimutual members were affected by restrictions on the movement of horses. “There was no physical loss as such. Normally for a business interruption claim you need a trigger under the property cover, or you need quarantine arising from human infectious disease. “Equine flu had neither of the above, so there was a gap. Members came to us and said, ‘We’ve all lost money – will the mutual consider the claims?’ “So the board considered them and
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accepted the claims, and I think probably we were the only provider of cover in Australia that paid any claims in that outbreak for business interruption losses.” He says when the board is “exercising discretion like that, it has always got to have one eye to the member and the membership – what’s good for the members and what’s good for the membership as a whole... then it’s just a simple question of, ‘Have we got the money to back us up?’” The mutual model also allows for a major focus on risk management, driven by members with similar profiles and often drawing on individual institutions’ own research. Unimutual independent director Terry Ibbotson says since he joined the group last year, the “thing that has impressed me most is the degree of expertise it has in the risk management area, and the low cost to the clients of resolving some very difficult issues they face”. The former senior QBE executive says risk management services benefit brokers – with whom Unimutual maintains a close relationship – as well as end users. “I’ve been around for a long time, and I’ve not seen anything anywhere as effective in terms of reducing risk,” he tells Insurance News. “The competitiveness that can be put into the premium structure is a direct consequence of risk reduction.”
Northern issue not perfect for a mutual Last year Gerald Ewing represented Regis on the Northern Australia Insurance Premiums Taskforce, as the primary advocate for establishing a cyclone mutual to bring down high prices in the region. Regis recommended a hybrid model, involving the traditional market, a mutual and a reinsurance pool. “One of the concerns from the Government was if it spent money on [cyclone] mitigation, how would it guarantee that insurers would give premium relief?” he tells Insurance News. “Our model suggested if you take the primary layer of that risk in a mutual – and that’s where the majority of claims arise – you can be sure you’re getting that relief. “The model was designed so insurers still played a part. They sat above the mutual at a level where they would be comfortable. “We had also sought to engage the Australian Reinsurance Pool Corporation (ARPC), because we thought that was a model that would work, with the mutual managing the lower end of the risk, the insurance market in the middle and the ARPC standing behind them with the reinsurance for catastrophe losses.” He believes a standalone cyclone mutual would “have been impossible, for the simple reason you have a very high concentration of risk in a relatively small population. That’s really the nub of the problem up there.” The taskforce report was released in March. It concludes mitigation is the only sustainable way of lowering premiums in the north, and rejects intervention – including mutuals or pools – in the insurance market. Despite this, Mr Ewing is upbeat on the outcome. “I think it’s good that the Government took it on board, investigated it and came up with a sensible solution, which is, ‘Let’s have a look at mitigation and see how we can reduce the severity of the impact,’ because ultimately that will drive insurance pricing,” he says.
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“The chief executive of a traditional insurer is always trying to find that balance between the right decision for the shareholder and the right decision for the insured client. It’s much easier in this mutual model.” – Unimutual director Terry Ibbotson
“I think we have a back to basics model – Insurance 101. It’s how it was done originally. It was around working together, working collaboratively.” – Unimutual Chief Executive Gerald Ewing
In recent years Unimutual’s risk management drives have included work on the safe storage of research materials, cyber risks – including students hacking grade databases – the threat from pandemics and even the “lone gunman on campus” scenario. “That was really triggered by what happened in the Lindt cafe [terror attack of 2014],” Mr Ewing says. “These things happen with alarming regularity in the US. “They don’t happen here, and people tend to become a little bit complacent about them, so it’s something we certainly remind members about. It’s something that’s high on the risk registers at most universities.” Unimutual regularly issues notices on emerging risks, alerting members to threats as diverse as sexual assault on campus and students stealing equipment to run Breaking Bad-style meth labs. Mr Ewing says risk management is about getting more “efficiency from the model”. “We’ve got a dedicated risk management team that spends a lot of time on site, really looking at the core issues for universities, to help them manage their risk. “The reasons for that are twofold: if you help individual members manage their risk, that’s better for them; and it’s improving the risk profile of the mutual as a whole.” So could traditional mainstream insurers 60
learn a thing or two from the mutual model about customer engagement and tailored policies? Possibly, but answering to shareholders in a profit-driven organisation is a far cry from answering to members in a nonprofit model. “I think we can learn lessons from each other,” Mr Ewing tells Insurance News. “I think we have a back to basics model – Insurance 101. [It’s] how it was done originally. It was around working together, working collaboratively. “So I think there are lessons insurers can learn in terms of service and engagement with members, and a lot of them are trying to do that. “I think the difficulties they face are ones of scale, particularly for the general insurers with very large customer bases and a very large set of risks. You’re never going to be able to manage those as effectively as a mutual that focuses on one area of risk.” The “schism” between the needs of shareholders and customers is another barrier. “Those schisms don’t exist in a mutual,” Mr Ewing says. “Shareholders want returns and prices are constantly being driven down by consumer pressure. “When that happens there are only three things you can do: cut the risks you’re covinsuranceNEWS
ering, cut the service, or stop paying claims. And nobody wants to do that. “So it inevitably means, where’s the soft point? They’ve got to compete on claims, they’ve got to compete on cover, they can only reduce the service. So I think they’re in a hard place.” Mr Ibbotson agrees. “The chief executive of a traditional insurer is always trying to find that balance between the right decision for the shareholder and the right decision for the insured client,” he tells Insurance News. “It’s much easier in this [mutual] model.” Mr Ewing says the trend towards commoditisation of insurance “and the move by consumers to price rather than value” presents a major challenge to the industry as a whole, playing into the hands of potential market entrants that may rely more on algorithms than human engagement. “When it becomes a cost-only equation, the likes of Google and Amazon will win, but at the end of the day, is that what consumers really want? “I think we’re starting to see a bit of a push back on some of that. “Whether a mutual or an insurer, you’re buying a promise, so you need to have a high level of trust in the promise you’re buying and you need to understand the product.”*
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There’s nothing new about the pandemic threat, but as populations grow and diseases evolve, so too must the global response By Andy Swales
AS THE MOSQUITO-BORNE ZIKA VIRUS spreads from Brazil through Latin America and beyond, the word “pandemic” is once again on risk managers’ lips. While there may be some debate over exactly when the term should be applied, its most basic definition is a disease that spreads worldwide or over a wide area, usually affecting a large number of people. Zika was labelled a “pandemic in progress” by US experts Anthony Fauci and David Morens in the New England Journal of Medicine in February. The virus – which, it is thought, can also be transmitted sexually – is often symptomless and causes relatively mild illness, according to the Australian Department of Health. But it also has been associated with insuranceNEWS
severe congenital conditions such as microcephaly – abnormal smallness of the head – in babies born to infected mothers, and the onset of the autoimmune disease GuillainBarre syndrome. At the end of March the Zika outbreak had spread to Caribbean and Pacific nations, with isolated cases identified in countries including Australia and the US. The World Bank’s initial estimate in February for Zika’s economic impact this year in Latin America and the Caribbean is a “modest” $US3.5 billion, or 0.06% of GDP. It follows the horrific Ebola outbreak in west Africa in 2014-16 – with more than 28,000 cases and 11,000 deaths, according to the World Health Organisation (WHO) – and several flu scares since 2005. No
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Keeping pathogens at bay: German tropical medicine specialists clean up at a quarantine station in Berlin
wonder insurers have flagged pandemics as a key threat to the industry. Swiss Re’s latest SONAR report on emerging risks rates “rising pandemic risk” as a medium-impact threat over the next few years. But as Regis General Manager Risk Management Services Harry Rosenthal notes, it is “drawing a long bow” to describe pandemic as an “emerging” issue. He points out the Black Death plague outbreak struck more than 600 years ago, killing hundreds of millions in Europe and Asia. And last century alone there were three major flu pandemics, starting with the 1918 Spanish flu outbreak that killed more than 50 million people worldwide. “We have always been fighting microbes,
and only since the development of antibiotics have we had the – false – belief that we’ve won over the world of pathogens,” Mr Rosenthal tells Insurance News. “This thought is very incorrect, because our opponents are crafty, and are continuously working around our defences.” It is not a question of if more events will follow this century, but when. “To call pandemic emerging risk is technically wrong because we know it is going to happen,” Mr Rosenthal says. “We don’t know what is the vector, what is the disease? The trick is responding at the right moment.” It’s a trick that was missed when Ebola recently hit Guinea, Liberia and Sierra Leone. Mr Rosenthal, who oversees risk maninsuranceNEWS
agement in the Australian university sector through mutual scheme Unimutual, says global bodies such as the WHO “really waited too late [to respond], and as a result it was the worst outbreak in history”. “With other viruses, if you respond early and contain it early, you do quite well. It’s clear the response to the Ebola outbreak was quite late – they weren’t able to contain it. Ebola comes around every 13 or 14 years, but this one just got away from them.” Swiss Re says the Ebola epidemic “fortunately did not develop into a global pandemic due to the poor international connections of the West African region”. Mr Rosenthal believes the response to Zika has been more impressive, despite some major challenges. “They really got on that quite early. It 63
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Tiny but deadly: larvae of the Aedes Aegypti mosquito are being used in research on the Zika virus outbreak in Brazil. This mosquito is a carrier of a range of diseases
“Most of our antibiotics are becoming rapidly ineffective due to the way we abuse them in the commercial production of cattle and poultry, rendering them less effective on the human population.” was more difficult, because instead of person-to-person transmission [like Ebola] it’s a mosquito-borne vector. You’ve got to control mosquitoes, rather than human contact. “Give me human contact any day – I can build a wall around a city, I can’t keep mosquitoes out.” The World Bank says it is estimated an “airborne, Spanish flu-like outbreak today would kill more than 33 million people in 250 days”. And estimates of the cost of a severe outbreak could be as much as 5% of global GDP – or $US4 trillion. And Swiss Re warns the means of transmission is growing. “The number of hosts for virus reproduction is increasing: human population worldwide went from about 3.5 billion in 1967 to about 7 billion in 2010,” the SONAR report says. “Animal stocks have also increased massively. This represents a big reservoir for new severe pathogens that could lead to a global pandemic if an urban region with good intercontinental connections is affected.” Mr Rosenthal says the emergence of a “slightly more virulent” flu virus is a major concern, given how quickly and easily the disease spreads. 64
“A... flu virus, say, with a 2% mortality rate, would kill tens of millions in today’s population numbers,” he says. “This is a concern, because we are dealing with an adversary that knows how to travel on airlines effectively.” He also notes the threat from antibiotic-resistant pathogens. “This scenario is quite possible, because most of our antibiotics are becoming rapidly ineffective due to the way we abuse them in the commercial production of cattle and poultry, rendering them less effective on the human population. “Secondly, antibiotics are not good money-spinners for pharmaceuticals, under our current model of drug protection.” He warns this “is creating a perfect storm for some opportunistic pathogen”. The SONAR report focuses on the fairly obvious pandemic impacts for life and health insurers, but general insurers too could take a hit. A recent report from Lloyd’s says a repeat of the Spanish flu outbreak could prompt a global recession, and lead to impacts on insurance lines including general liability, workers’ compensation, medical malpractice, marine, business interruption and travel. It could also lead to a major slump in insurers’ investment income.
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Historic worst: the so-called Black Death that swept Europe from 1346 to 1353 killed as many as 200 million people – about 60% of Europe’s population
Banking on an outbreak The recent Ebola outbreak in West Africa has prompted the World Bank to establish the Pandemic Emergency Facility (PEF), to “enable a faster and more effective global response to a potential pandemic” and “be an essential piece of a broader pandemic risk management framework that extends from preparedness and early identification of outbreaks to epidemic response and recovery”. The facility, developed with the WHO and other partners, aims to allocate funding early, to nip potential outbreaks in the bud rather than responding to them later. The bank says the PEF – scheduled to be launched this year – features two financing pillars: an insurance mechanism that draws on insurance and the bond markets, paying out upon pre-agreed triggers; and cash or longterm pledges from development partners, “against which the World Bank Group could front-load funds”. It says the latter component “will give the PEF flexibility to respond even more quickly in fast-moving situations before the insurance mechanism is triggered”. The bank says the insurance aspect will “for the first time put a price tag on pandemic risk. It would purchase insurance coverage from the private sector on behalf of developing countries to cover the costs of containing disease outbreaks.” It says the PEF will “help advance country investments towards universal health coverage” and, in time, is “expected to create a new market for pandemic insurance that will bring greater discipline and rigour to pandemic preparedness and incentivise pandemicresponse planning”. “The PEF will encourage countries and development partners to build better core public health capabilities for disease surveillance and health systems strengthening towards universal health coverage.” Swiss Re Head of Digital Analytics Innovation Daniel Ryan says his group and fellow reinsurer Munich Re “have been closely involved in the conceptualisation and development of the Pandemic Emergency Facility... Both are working with the World Bank and an independent modelling agency on how the facility might be structured in terms of triggers and the multiplicity of diseases that would be covered in different regions and locations around the world.”
“It’s like saying we are good at fire suppression... I think it’s better to be good at fire prevention.”
Mr Rosenthal says the Australian higher education sector faces risk because many students and researchers work with overseas governments and NGOs, or carry out volunteer work, often as part of the response to disease outbreaks. Many others travel to learn or for pleasure. “We tend to keep a very close watch on pandemics, because often it does put our people at risk,” he says. Unimutual advises universities on potential risks, often drawing on the research of its members. “When the avian flu was very active, we sent out three or four [risk notices] because members would update us and we would share that with the sector. “That’s why we’re very attuned to this, because we try to leverage off the knowledge of the entire sector. “It’s my job to identify these [threats] as early as possible. Sometimes it’s significant, sometimes it’s not, but I’d rather have 10 false alarms than miss the real fire.” He says Australians are “are first-class world travellers” with good awareness of perils and precautions, while Australia itself “has extremely good, robust policies, procedures and protocols [for disease threats]. It’s actually mind-blowing. We’re damn good at it.” insuranceNEWS
However, there are gaps in the detection and surveillance of outbreaks around the world that must be addressed. Rapid response is fine, but “it’s like saying we are good at fire suppression... I think it’s better to be good at fire prevention”. And after recent scares that amounted to little – in this part of the world, at least – another risk is complacency, according to Mr Rosenthal. “The issue is, because we haven’t really had a pandemic strike since the early 1900s, there’s been a view that, ‘Ah, spending a lot of money... why are we doing this?’ You can have that syndrome. “That’s probably our biggest challenge as risk professionals looking at an emerging risk – that at some point, people are going to say, ‘You’re crying wolf.’” A similar – but more baffling – kind of “first-world” attitude is flagged in the SONAR report. “More people in some Western countries have started to refuse vaccination [for their children] against known and controllable pathogens, thus increasing the risk for an epidemic or even pandemic,” Swiss Re says. “The measles outbreaks in the US just before Christmas 2014 or in Germany early [last year] have shown how unvaccinated children can increase the * epidemiological risk.”
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Finding the spark How tracts of land covered in blackened trees and ash-laden ruins give up their secrets to fire investigation experts By Richard Woods AFSM
ACCURATE IDENTIFICATION of the cause of a bushfire plays a critical behind-the-scenes role when it comes to liability and cost recovery. But how do you find the cause in a blackened landscape that may cover thousands of hectares? The investigation of the cause of bushfires is a specialist task that is quite different to structured fire investigation. As the smoke clears the hard work begins, and like any investigation, it requires specialist skills to accurately interpret what occurred out of the ash and blackened bush that remains. This work has taken on more significance in recent years as homeowners, business owners, other victims and even 68
insurance companies turn to civil and class actions to seek compensation for their losses. Some of the most recent devastating fires that have been the subject of civil court class actions include the 2013 Blue Mountains/Springwood bushfire in New South Wales and the 2009 Victorian Kilmore East/ Kinglake bushfire. The Springwood class action was still ongoing (at the time of publication) and survivors of the Kilmore East/Kinglake blaze, (known also as part of the “Black Saturday” bushfires), were awarded a record class action settlement of $494 million. As with all civil court proceedings, the final decision hinges on many factors, among the most important being the insuranceNEWS
accuracy of the evidence on how the fire started. It’s a specialised and very challenging skill that requires a significant level of experience and training. So, how do you accurately determine the cause of a bushfire? By adhering to internationally accepted methodology, the investigation can accurately determine if the cause of the fire was a campfire, lightning, powerlines, motor vehicles, or an arsonist. What about cigarettes? The propensity of a cigarette to successfully ignite vegetation is limited to a specific range of circumstances and isn’t a common cause of bushfire, as once thought. The investigation process involves: April/May 2016
• obtaining background information of the initial reports of the fire; • interviewing attending fire crews and members of the public; • identifying where the fire was first observed; and • conducting an examination of the fire scene. The onsite examination can be the most challenging task, but also the most crucial. This is where an extensive level of investigation experience and understanding of bushfire behaviour pays off. And like any investigation, the greater level of experience and training, the more accurate the findings are likely to be. The examination of the fire scene uses interpretation of “fire pattern indicators” to
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You never stop learning: Richard Woods (left) training a fire investigator in the Netherlands
“The onsite examination can be the most challenging task. This is where an extensive level of investigation experience and understanding of bushfire behaviour pays off.”
allow a reconstruction of the fire’s movement, tracing it back to its origin/ignition area. These indicators are the result of physical objects displaying changes from exposure to heat, flame, and combustion byproducts. The accurate determination of the “specific origin area” then becomes the area for the finding of the cause of the bushfire. Tiny remnants of exhaust carbon, catalytic converter, molten metal scraps from an arced powerline and even a match can be located here, as the investigator sifts through the ash. This painstaking process can be very time-consuming, and if not thoroughly applied
the entire investigation runs the risk of being compromised. Crucial pieces of evidence can be overlooked and with it, the conclusive evidence behind the cause of the fire investigators will be missed or incorrectly identified, with the possibility of repercussions occurring beyond the courtroom. However, when the process is applied and evidence located, the case can be presented to all concerned. Finally, in my experience the role of a bushfire investigator requires a mix of extensive experience in bushfire suppression along with an understanding of law enforcement processes – and you never stop learning, because every fire scene is different. During my recent work in insuranceNEWS
training investigators in Europe, I found it common to hear that actually finding the cause of bushfires was impossible, as the ignition is often in a remote area, is rarely witnessed by anyone and the resulting fire consumes all traces of evidence. Thankfully, my training has started to turn this thinking around. And at a 2015 meeting with a bushfire official from Russia, I informed him that grassfires he was constantly attending along railway easements were not likely to be caused by train passengers’ cigarettes as he suspected, but were likely a failure of the trains’ equipment. I suspect my next investigation training course may have to * be delivered in Russia! April/May 2016
About the author: Richard Woods has been working in bushfire management, investigation and law enforcement in New South Wales and the ACT since 1976. He established and managed the NSW Rural Fire Service’s Fire Investigation Unit for nine years and has delivered bushfire investigation training in Australia, the US, the Netherlands and South-east Asia. He has also worked with the Commonwealth AttorneyGeneral’s Department developing national bushfire arson prevention programs and is the Australian representative on several North American-based bushfire investigation committees.
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Insurers on the hook A High Court ruling changes an established precedent in the way insurers handle third parties when their client is insolvent LAWYERS HAVE WARNED THE insurance industry to take note of a landmark High Court ruling that allows third-party claimants to join an insolvent defendant’s insurer to proceedings. Law firm Allens says the ruling goes against the established belief that only in limited circumstances could an insurance contract be enforced by a party to, or thirdparty beneficiary of, that contract. Therefore a third-party claimant with a successful claim against an insured defendant could not recover compensation directly from the defendant’s insurer. “This will usually be inconsequential because a solvent defendant will be motivated and able to procure the release of the insurance proceeds to pay the claimant,” Allens says in a note to clients. “However, where a defendant is insolvent or potentially insolvent, the third-party claimant is vulnerable to any contentious denial of indemnity or reservation of rights by the defendant’s insurer, because the insured is unlikely to be motivated or able to challenge the insurer’s decision. “The prospect of a hollow judgement for the third-party claimant is significant.” Claimants have sought “with varying degrees of success” to join insolvent defendants’ insurers to proceedings, but the issue has now been heard and determined by the High Court for the first time. Liquidators of Akron Roads began an insolvent trading claim against Trevor Crewe, an Akron director, and company Crewe Sharp, a de-facto director of Akron. The defendants’ insurer, CGU, denied indemnity for a claim under Crewe Sharp’s professional indemnity policy. The company went into liquidation, and Mr Crewe had insufficient assets to satisfy any judgement against him. Akron’s liquidators obtained leave from the Victorian Supreme Court to join CGU to the proceeding and to seek a declaration that CGU was liable to indemnify Crewe Sharp and Mr Crewe. CGU unsuccessfully appealed to the Victorian Court of Appeal and then to the High Court. Law firm Hall & Wilcox says the decision is likely to encourage liquidators and 70
other claimants to join insurers to proceedings where insured defendants are insolvent, or likely to become insolvent, if the insurer has denied liability. “Further, the decision gives insurers an incentive to actively engage in the process of deciding whether to indemnify from an early stage, given the increased likelihood of [being joined] to proceedings,” it says. “The decision may also increase the regularity of claimants seeking disclosure of insurance contracts at an early stage of proceedings.” Allens agrees that the decision has “important ramifications” for the Australian insurance industry. “[The decision] confirms that thirdinsuranceNEWS
party claimants can directly involve the insurers of insolvent and potentially insolvent insured defendants in the resolution of their disputes. “Following this decision, applications to access insolvent or potentially insolvent defendants’ insurance policies and [to join] insurers to proceedings against those defendants are likely to increase. “Third-party claimants should now be better able to assess their recovery prospects in these proceedings and, thereby, reduce the risks of hollow judgements.” Allens says the ruling may lead to a decrease in the overall time and cost of litigation, with insurance coverage issues becoming * “front and centre from an early stage”.
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THE LEGAL VIEW
Buyer bewar beware: e: No duty of car care? e? Wotton + Kearney partner Andrew Moore Moore and senior associate Anita Smith discuss who bears the risk for latent defects and how this may affect affect insurers
As multi-unit apartment and townhouse construction continues its unprecedented unprecedented rise in Australia, the spotlight is on who pays for defects appearing long after the builder has been paid and the from om apartment has changed hands fr the developer to new owners. The High Court of Australia has held that a contractor under a design and construct (D&C) contract for an apartment complex did not owe a duty of care to the subsequent purchasers/ body corporate of the complex to avoid pure economic loss caused by latent defects.1 Since the High Court’s decision, two more NSW Supreme Court decisions have followed suit in finding that no duty of care was owed by an engineer2 and a sub-contractor3 to subsequent purchasers in respect of works undertaken on residential buildings. Insurers who provide cover for building contractors and others also involved in the building industry such as architects, engineers, construction managers, developers and owners should be aware of the recently narrowed scope of liability in negligence for latent defects in both commercial and residential building works. As a result, there is increased importance in negotiating adequate contract terms to allocate who bears the risk of such defects.
1. Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 & Anor  HCA 36. 2. Chan v Acres  NSWSC 1885. 3. The Owners SP 74602 v Brookfield Australia Investments Limited  NSWSC 1916. 4. Wyong Shire Council v Shirt (1980) 146 CLR 40. 5. For example, in NSW a claim under s18D of the Home Building Act 1989.
The duty of care care for latent defects It is well established that the existence of a duty of care is a necessary prerequisite for an action in negligence. Generally speaking, a duty of care is found where there is a “sufficient level of proximity” between the parties, such that “a reasonable man in the defendant’ss position would foresee that defendant’ carelessness on his part may be likely to cause damage to the plaintiff”.4 In cases where negligence is alleged against a builder by a subsequent purchaser of property for pure economic loss suffered as a result of latent defects in the property, case law in Australia has sought to limit the duty of care to “special” cases only. In such cases, a duty is required where a plaintiff plaintiff has limited capacity to take steps to protect themselves from pure economic loss (i.e. the plaintiff plaintiff was particularly “vulnerable” to a builder’s actions). Therefore, where purchasers demonstrate an ability to protect themselves from a builder’s negligent actions, it is unlikely that a court will determine a duty of care exists. For example, a sale contract which includes both warranties provided by the developer as to the quality of work, and the right for the purchaser to have defects in the common property remedied within a defects liability period, is likely to demonstrate that the purchaser was able to protect their own interests. Purchasers who are unhappy with the terms of the warranties under a sale contract are of course free to negotiate differ different terms or invest their money elsewhere.
Moore e Andrew Moor Partner | Wotton + Kearney
Looking ahead With some Australian states set to build more multi-unit dwellings than detached houses this year, building professionals and their insurers can take comfort from the recent case law narrowing the circumstances in which a building professional is exposed to a claim in negligence by subsequent (third party) purchasers. While the specific circumstances of each case will be central in determining whether or not a duty of care exists, the trend in the recent case law appears to be that: 1. commercial purchasers will ordinarily be regarded as having a degree of sophistication that will make it very difficult to find them “vulnerable” to a builder’s conduct; and 2. likewise, residential purchasers will not necessarily be presumed to be “vulnerable” where the circumstances of the case demonstrate that the purchaser had means available to protect their interests (i.e. they willingly accepted the limited warranties provided under the terms of the sale agreement and/or can recover from the builder under a claim for breach of statutory warranties5). In light of these recent trends, it is possible that insurers may start to see a rise in collateral warranties being provided by contractors in respect of a subsequent purchaser. To To ensure cover, brokers may request that insurers provide a write back of cover for collateral warranties in respect of “assumed liability” exclusions. For more more legal updates relevant relevant to the insurance industry, industry, visit: www.wottonkearney.com.au www.wottonkearney ney.com.au .com.au
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Doctor on the spot: AHI’s app provides an online hospital in an emergency
A NEW APP LINKING ACCIDENT AND Health International (AHI) clients to an online hospital will be aimed at the corporate market, says General Manager Kevin Kinsella. The AHI TeleHealth app will be powered by Docto, Australia’s first “online hospital”.
“We will be promoting the human risk for travellers and expats through all the big risk brokers working in the corporate area,” Mr Kinsella tells Insurance News. “If something occurs overseas, our clients can use the app to contact a doctor from the comfort of their home or hotel room.”
Higher limits, more flexibility: QBE farm cover packs plenty into one wording QBE SAYS ITS NEW FARM PACK PRODUCT COMPRISES “one policy wording” that makes it easy for rural clients to take up insurance. “The new QBE farm pack can be fully tailored to policyholders’ specific situations,” Executive General Manager Intermediary Distribution Jason Clarke tells Insurance News. “[It] consists of one policy wording, which provides a wide range of domestic and commercial risk protection in the one policy. “The farm pack is designed to insure farms of all sizes, types and with a wide variety of occupations.” The farm pack, which replaces the land pack product, will be available for new business from May 2. Features include higher cover limits, additional and optional benefits and the flexibility for policyholders to choose higher excesses for a number of covers. “Our intermediary partners and policyholders can now select the cover options and benefits that suit their local conditions and circumstances, which means they pay only for the cover they actually need,” Mr Clarke says. Land pack policies will be converted to the new policy * wording when they fall due for renewal from August 8. 72
Mr Kinsella says he expects demand for the app will grow as more people use it. “This app will bypass call centre operations to allow people to talk directly to a doctor,” he said. “Corporate travel cover is not a grudge purchase. People know they need the cover and with the app we can deliver the best outcome for the patient and the insurer.” Docto co-founder Jon Field says online service adds to the assistance company model provided by insurers. “There is no need for the patient to be sent off to a hospital or clinic to get a medical report,” he tells Insurance News. “Being a video call, it adds a whole new dimension to telemedicine. “There is so much more you can do with a video call than a phone call.” Dr Field says a doctor using a video link can see clinical signs such as rashes, cuts, bruises or skin discolouration to help with the diagnosis and treatment plan. “Most importantly, we get to interact visually and build a rapport with the patient so there is better scope for diagnosis,” he said. “If the patient had a skin condition and required a referral to a dermatologist, the emergency physician will send the referral. “An appointment will be made at a convenient time for both the patient and specialist and that consultation will also be carried out through a video call.” If the insured does need a medical evacuation, Docto works with AHI’s assistance provider, Dynamiq, to transport the patient to obtain the required medical treatment. *
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Keeping lifestock safe: Allianz guide shows the way to foil thieves and rustlers ALLIANZ AUSTRALIA HAS PRODUCED A FREE guide for farmers on various steps they can take to safeguard their livestock and premises from thieves amid a rise in crime statistics in rural areas. The “Help Prevent Rural Crime” flyer also includes the factors to consider when buying farm insurance. “As part of our ongoing commitment to rural and regional communities, Allianz has produced a flyer with tips on ways to keep livestock, stockyards and property safe,” the insurer says. Preventative actions that farmers and rural dwellers can undertake to lower the risk of being burgled include clear marking of all equipment and machinery, tagging of livestock for identification purposes and regular stocktaking of inventory. On insurance, the guide advises against opting for the cheapest policy and to pay attention to details regarding the level of coverage and exclusions. “Having the correct insurance will ensure that your risks are covered and that you are free to focus on running your farm,” the guide says. “The cheapest quote is not always the best. “Farm insurance can be complex, so check to make sure that the insurance plan will actually * cover your requirements.”
Getting an edge: Vero launches its new online platform for brokers VERO HAS ROLLED OUT A NEW ONLINE business platform for the broker community. VeroEdge, which was developed with input from brokers, promises to streamline and improve brokers’ workflow and business processes in workers’ compensation. “We are really excited to be adding this new platform,” National Manager Commercial Intermediaries Anthony Pagano says. “It’s the future of how we will connect with brokers online. “Thanks to great input from our broker panel, we know VeroEdge is going to hit the spot and position us well for success moving forward.” The platform facilitates easy access to policy documents and provides an overview of brokers’ workers’ compensation porfolio. There are plans to add more products to the platform, including Vero’s business packages and motor fleet. Brokers who were involved with the platform’s development are pleased with the finished product. Western Australian broker Candice Pratt says Vero acted on all her suggestions. “It’s not every day that you’re asked to help design an insurer’s operating platform,” says Ms Pratt, of Perth-based Centrewest Insurance Brokers. “There were things that could have worked a little better, so I suggested them and they made * the changes.”
Cyber cover, but not as we know it: Nova Underwriting claims some ‘firsts’ AROUND-THE-CLOCK BREACH RESPONSE TEAMS AND BUSINESS interruption cover sets Nova Underwriting’s new cyber policy apart from the others, according to its designer. Since joining the Lloyd’s coverholder in January, Rob Collyer has launched Nova’s innovative cyber policy and updated its IT liability policy. The cyber cover provides comprehensive protection for businesses in the event of a cyber attack, with a $20 million capacity backed up by a global breach response team available 24/7. For Nova Managing Director Malcolm Fletcher, Mr Collyer’s addition to the underwriting team came at exactly the right time. Cyber crime was becoming recognised as a significant new business risk and Mr Collyer had the required expertise to work in the area. “We were watching this space closely over the past couple of years and it’s been a case of waiting for the right time and right person to come along to enter this market,” Mr Fletcher says. Mr Collyer tells Insurance News that having a dedicated response team made up of IT forensic specialists, PR consultants and expert firms to help victims of breaches is essential to ensure affected businesses recover quickly. He says the cyber policy is also about educating brokers and their clients. “What we’re trying to do is utilise these specialist response teams to educate the brokers and clients,” Mr Collyer says. “These teams are dealing with these breaches every day.” Cover for IT professionals was also front of mind when Mr Collyer joined the team. “This is an industry that is always changing, so it’s essential we keep our finger on the pulse to ensure the product meets the needs of the market.” Nova’s new IT liability product provides cover for IT professionals, combining professional indemnity with public/product liability and features cover for contractual liability, product recall and breach of privacy. Mr Collyer says the cyber/tech space is “an exciting, emerging area” at a time when brokers are looking at ways to grow in an extremely competitive market. “Cyber is certainly the buzzword at the moment, but the challenge is to turn the talk into action and to arm our brokers with the knowledge and tools they need to advise their clients of the need for such cover.” He says businesses need to ask themselves; “Will the business suffer if we lose access to our system or critical data is lost or damaged? Do you know who to turn to when a breach occurs?” Cyber products are expected to become more popular, given new legislation requiring businesses with a turnover of $3 million or more to report * significant privacy breaches.
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Wiping confusion: Vero’s new iTech policy does just that VERO HAS LAUNCHED A NEW COVER THAT COMBINES professional indemnity and liability to serve the needs of the IT sector. iTech is distinguished by its “clear, user-friendly wording” and is designed to cover the common risk exposures faced by the sector. These exposures include loss of data, privacy and confidentiality breaches, system failures, intellectual property infringement claims, and injury or damage to third parties caused by faulty design. “It can be confusing to determine the full scope of cover with some other products on the market,” Vero National Manager Professional and Financial Risks Steven Lau tells Insurance News. “For example, it is not always clear when extensions and exclusions only apply to the liability section and not the professional indemnity section, or vice versa. The cover is triggered instantly when the insured is requested to attend or produce documents for an investigation, Mr Lau says. This is not often the case with other such products.
“This means iTech effectively supports the insured in co-operating with an investigation,” he said. Vero says the policy is suitable for a range of IT businesses including product developers, data service providers, consultants and project managers, as well as manufacturers and suppliers. Key features include a provision of up to $500,000 to cover the costs from being involved in an investigation or inquiry, and advance payment of defence costs as they are incurred – even if the insured is accused of dishonest conduct. Mr Lau says client reception of the new policy since it was launched in March has been positive. “Vero’s expertise and experience in professional indemnity is well established and this new product has been seen as a great complement to our existing products. “Businesses of all types and sizes now rely on the services and advice provided by the IT sector. As such, IT businesses have to protect * themselves from honest mistakes and unforeseen circumstances.”
A story behind every claim: Talbot launches commercial property claims database TALBOT UNDERWRITING AUSTRALIA has compiled a national database of more than $800 million worth of losses to commercial property in 2015. The database will be officially launched in June as a publicly available resource with its own website. Managing Director Adam Matteson says the database has three primary aims: to promote discussion on themes and trends in commercial property losses; to unlock the intellectual capital that is provided by the claims; and to improve risk resilience against losses caused by natural catastrophes and major fires. “The database will use visualisation techniques to highlight the geographic extent to which weather activity has impacted the country, and will have location-specific fire losses catalogued,” Mr Matteson tells Insurance News. Around 90 “collaborative partners” from the underwriting and claims industries, government and academia have contributed to the database, which is 80% complete. Additional data is being sourced in the lead-up to the June launch. Mr Matteson believes the initiative is consistent with Prime Minister Malcolm Turnbull’s innovation agenda and expects a 74
positive reaction to the database. “This is an exciting innovation that will provide great benefits to decision-makers ranging from risk managers to fire services planners but in many respects unlocking this data will have benefits that we can’t even see yet,” he says. “We believe there is a lot of value in unlocking the vast amount of information around claims but once we make the data publicly available we will keep an open mind about how that value will be realised by the various stakeholders. “One very important benefit of this database is that it will make people think and talk about risk and resilience. Once you provide data of this kind it creates informed conversation around solid science.” Mr Matteson believes strongly in the importance of story-telling as a vital key to understanding risk and increasing awareness of the issues around risk. This extends to working with the journalism schools at Queensland University of Technology in Brisbane and Bond University on the Gold Coast. “I’ve got a very strong view that the journalism profession has a lot of parallels with the work underwriters do in terms of the insuranceNEWS
skill sets used, especially the written language, to tell stories around risk and catastrophes,” Mr Matteson says. “Understanding the writing and analytical skills of journalists will benefit the industry while the claims database will also provide a valuable resource for journalists in telling their stories and improving the understanding of risk in industry and the wider community.” Mr Matteson hopes that another useful outcome of the collaboration with the journalism schools will be to improve the insurance industry’s use of social media as a communications platform. “The database will provide scores of stories and themes around the major fires that occurred last year and these will provide benefits that are industry-specific but also, we believe, for the greater good,” he says. Talbot Underwriting is a wholly owned subsidiary of Talbot Holdings, which was acquired by Bermuda-based Validus Holdings in July 2007. It received regulatory approval to operate in Australia in April last year. Mr Matteson, who established Arch Insurance in Australia, was recruited from Arch in 2014 to establish Talbot * Underwriting Australia.
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Golf, entertainment and insights as AIMS talks leadership Golf might have been expected to be at the forefront at the AIMS Conference on the Gold Coast in April. And while a few hard-fought tournaments were indeed held on the lush greens of the RACV Royal Pines Resort, the real action was indoors, where 430 delegates enjoyed several days of business insights and dazzling entertainment. The Sunday welcome dinner featured short speeches by IBNA Chairman Gary Gribbin and AUB Group Managing Director Mark Searles, followed by a smorgasbord dinner with mountains of seafood. This was followed by four cover bands, each more amazing than the one before. The opening session at the newly refurbished resort the next morning saw AIMS General Manager Glenn Schultz highlight the “Leading for Success” theme of the conference by telling delegates the industry needs to develop “great leaders” to help it adapt to change. He was followed by the Australian of the Year, Retired lieutenantgeneral David Morrison, the former army chief who gained international praise for his order to soldiers to “get out” if they couldn’t accept female soldiers as their equals. He spoke about the experiences that led to his belief the armed forces must become more culturally, ethnically and sexually diverse, and how he set about implementing a program to make it happen. The next morning former prime minister John Howard kicked off proceedings with a stirring, humorous and insightful speech on leadership. Other speakers at the conference included social researcher and trends expert Mark McCrindle, motivational speaker Michael Crossland, a panel of five senior industry executives questioned by Insurance News Publisher Terry McMullan, innovator Chris Maxwell, people empowerment guru Margie Warrell, businesswoman and Shark Tank TV show star Naomi Simson, and financial services giant Mark Bouris. Meal and coffee breaks were held in the “pod area” outside the convention hall, where a record 35 participating sponsors were able to mingle freely with delegates. Evening entertainment was always sparkling, with one surprise “offsite” coach trip taking delegates to the underground car park of the resort, which was set up for an innovative dinner featuring music and food from some of the foreign venues the AIMS conference has been held at in recent years. And next year? Delegates will pack their bags for Shanghai, China.
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peopleNEWS All Blacks afternoon of fun and games with AIG All Black players Gillies Kaka, Dylan Collier and Lewis Ormond and coach Ross Everiss demonstrated they are not just handy with a rugby ball during an afternoon of games with AIG staff and 16 business partners in Sydney in February. The global insurer is the primary sponsor of the allconquering New Zealand rugby team, members of whom were in Sydney to play in the HSBC World Series sevens tournament. Games played by the players and AIG staff included Pictionary, Olympic trivia and cupcake decorating – including drawing AIG Chief Executive Noel Condon’s face on a cupcake. The herculean Kiwis also showed their deft and nimble skills in an egg and spoon relay. A Q&A session revealed coach Everiss’ strict player diet and exercise regime as well as the players’ secret cravings on “cheat days”. Some AIG staff were also lucky enough to watch the last training session before the HSBC World Series tournament in Sydney. The Kiwis won the next day in front of 74,000 people with an after-the-siren try. The AIG staff and guests also attended a pre-match lunch donned in Hawaiian shirts in line with the Summer Party theme.
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The CQIB long lunch lives up to its name Council of Queensland Insurance Brokers (CQIB) members know how to do a long lunch, establishing their credentials as champion long-lunchers on February 26 when they descended on Brisbane’s Stanford Hotel and didn’t leave until late into the night. After the two-course lunch ended, the majority of the 150 guests went downstairs to the bar to continue their networking. And they had good reason to. Many had travelled from as far away as Rockhampton, Dalby, Townsville and the Gold Coast, so this wasn’t any ordinary occasion. The twice-yearly event attracted a capacity crowd. A highlight of the evening that followed included the rib-tickling words of comedian Fiona McGary, who acted as master of ceremonies and made fun of every person in the room, according to CQIB General Manager David Duncalfe. He says the formula of throwing people together in a room with no reserved seating, good food and great entertainment has once again proved to be the perfect recipe for successful networking.
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Two N New ew Wordings and a Cyb Cyber er Extension ate products tto o be market Be rkley IInsurance nsurance Au stralia has ccontinued ontinued to update update and cre Berkley Australia create Product called called le ading in tthe he SME SME space. The most re cent update update is to to the IT Liability Product leading recent rage. ground bre aking policy offers broad based Civil Liability PI and PL cove ITOPS. The ground breaking coverage. ractice Product which has been named named Berkley has also rele ased its new Medical Medical Malp Berkley released Malpractice Practice Protection (HCP P). Health Care Practice (HCPP). In addition Cyber Liability is now available under ou ourr Manag Management ement Liability policies. 716'5+557'&9+6*+0FH*1745 716'5+557'&9+6*+0FH*1745 1.+%;+557'&+056#06.; 1.+%;+557'&+056#06.; '12.'9*170&'456#0&241&7%65#0&6*'+/2146#0%'1(5'48+%' '12.'9*170&'456#0&241&7%65#0&6*'+/2146#0%'1(5'48+%'
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CGU ARs go troppo at Cairns conference More than 100 CGU authorised representatives converged on the Shangri-La Cairns last month for the companyâ€™s annual AR conference. The conference theme was Back to Business, which focused on staff capability, digital technology, succession planning and business development. Work aside, there was plenty of time for ARs from all over the country to get to know one another. The Hawaiian-themed dinner proved an icebreaker on the Wednesday night, while Australian comedian and actor Shane Jacobson delivered a hilarious keynote address. Jacobson was also master of ceremonies at the black tie awards dinner, where CGU announced South Australiaâ€™s Kerrie Woodards Insurance had won the Authorised Representative Business of the Year. The Young Professional of the Year award went to Jeremy Boyle from PMA Insurance in Toowoomba, Queensland.
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Expo inspires and informs brokers Brokers were treated to new thinking from inspirational speakers and given lots of knowledge about innovative approaches and products from Vero when they attended the insurer’s Expo at the Sydney Hilton in February. The speakers included former foreign minister and New South Wales premier Bob Carr, who delivered the keynote address about the characteristics of great leaders and the lessons that can be drawn from their actions. Motivational speaker Josie Thomson talked about the “possibility mindset” and how to create ideal conditions for innovative thinking, while Happiness Institute founder Tim Sharp spoke about the importance of happiness to workplace engagement and productivity. Carl Longmire tackled the subject of reinsurance while Suncorp Manager, Learning and Development Beverley Bradley spoke about understanding the attitudes and motivations of SMEs. “Web celeb” Kylie Bartlett gave brokers guidance about using social media to connect with customers, and researcher Adam Fraser talked about delivering better customer experiences. Brokers were also given information about the latest offerings from Vero, including its new liability wording for drones, the iTech product for the IT sector and developments to VeroCentral. The expo additionally featured information about workers’ compensation and risk management, as well as banking and personal insurance.
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QBE celebrates milestone Swans partnership QBE’s 30-year-old partnership with the Sydney Swans AFL team was celebrated with much fanfare in March in the presence of VIPs, guests and players. QBE Australia and New Zealand Chief Executive Tim Plant and the Swans Chief Executive Andrew Ireland led the celebrations, which were held on the hallowed turf of the Sydney Cricket Ground. The Australian insurer has been a principal sponsor of the club since 1986, with its logo prominent on the Swans’ guernsey. It is a partnership that continues to grow strongly, Mr Plant says. “The entire team at QBE Australia and New Zealand is extremely proud that 2016 marks such an important milestone for one of the most enduring sporting partnerships in the country. This is a monumental year for the Swans and QBE Australia.” The celebrations were held in conjunction with the official launch of the Swans’ 2016 season, which kicked off at Easter with the Swans administering an 80-point (133-53) walloping of Collingwood.
Talk to insurance Celebrating as part of your planning. a company We can help you make the most of it. milestone? Holding an event?
Email email@example.com to find out more 88
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The information contained in this document is not intended to be financial product advice. This document is intended for intermediaries only. Great Lakes Reinsurance (UK) SE trading as Great Lakes Australia (ARBN 127 740 532, ABN 18 964 580 576, AFSL 318603) (‘Great Lakes Australia’) is the insurer of the motor insurance products available from Dawes Underwriting Australia Pty Ltd trading as Dawes Motor Insurance (ABN 18 050 289 506, AR No. 342982) (‘Dawes’). A Product Disclosure Statement (‘PDS’) for each of these products can be obtained by contacting Dawes or visiting www.dawes.com.au. We recommend that your client consider the PDS in deciding whether to acquire, or to continue to hold, the product.
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peopleNEWS UAC’s giant Sydney expo draws a crowd There was plenty to celebrate during the Sydney Underwriting Expo in March hosted annually by the Underwriting Agencies Council (UAC) in conjunction with the National Insurance Brokers Association. Not only was it the largest expo yet with a record number of 82 exhibitors, but the 17th event was also noted for the announcement that a reciprocal membership agreement has been signed between UAC and the American Association of Managing General Agents. UAC President Lyndon Turner says the agreement will facilitate closer ties with the US body, which has 3500 members. Mr Turner and NIBA Chief Executive Dallas Booth hailed the strong working relationship between the two groups on issues and challenges facing the industry. Mr Booth says brokers get the opportunity to “learn what’s available” at the expo. Former Foreign Minister Bob Carr was the headline speaker at a lunch following the expo. He touched on a range of topics, including how court actions by “ambulancechasing lawyers and Santa Claus judges” were pushing up premiums. The event ended on a sweet note for lucky Sydney broker, Villy Kounlavongsa, who won the travel prize draw of $5000.
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We’re always thinking about brokers. Specialist Underwriting Agencies Pty Ltd is an independent, Australian owned and operated underwriting solutions provider. Since 1992 our thinking has been about our broker customers, and providing you with a diverse range of quality products. SUA is one of the few truly independent underwriting agencies in Australia. We don’t engage in retail broking. We don’t deal with unlicensed intermediaries nor unauthorised Insurers. Product development and claims management are our strengths, meaning we are Always Thinking of ways to achieve the best possible solution for your clients. We are aware of the ever-changing demands of the Australian insurance market, so better able to offer a range of products that will satisfy your clients’ needs.
Contact C on t ac t P P:: 0 07 73 3624 624 9400 940 0 F: 0 07 73 3624 624 9433 9433 2 255 55 S Sandgate andgate R Road oad A Albion lbion QLD QLD 4010 4010 P PO OB Box ox 3 324 24 C Clayfield lay field QLD 4011 QLD 4 011
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DIRECTORS & OFFICERS LIABILITY
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Blame it on the bogey: Allianz Blue Eagle’s golf gets competitive Much fun was had at the Allianz Blue Eagle Golf Tournament, which was held in mid-February in Western Australia and Victoria and early March in New South Wales. In the West, 44 players teed-off in warm and windy conditions at the Joondalup golf course. EBM Insurance’s Matt Terry and Damian Adams beat IC Frith’s Rick and Justin Purslowe by a single point in a nail-biting finish, with third place going to Cowden Insurance Brokers’ Matt Allen and Russell Hateley. Gallaghers’ Kim Edwards and Unity Insurance Brokers’ Craig Winzer won nearest the pin while Strathearn’s Daniel Waters and Cambridge Insurance Brokers Scott Carlisle were awarded the longest drive prize. In Victoria participants faced the challenging greens of Huntingdale with the course in immaculate condition following the PGA tournament the week before. It was another narrowly contested affair, with Ferguson Insurance Brokers’ Noel Boyd and Chris O’Connor beating McLardy McShane’s Don McLardy and Mike McShane by one point. The third place-getters, Austbrokers’ Tim Considine and Marc Wilson, were just pipped for second after a countback. Noel Boyd and Austbrokers’ Troy Mansell won nearest the pin and the longest drive (male) was claimed by Insurance House Group’s Jay Fereday. Allianz’s Kate Stebbings won the longest drive (female). The NSW Blue Eagle golf tournament teed off on a glorious day at Manly Golf Club with 52 in attendance. GSA’s Paul Hines and James Telford won by two points over Garaty Murnane’s Troy Garaty and Chris Murnane. Nearest the pin winners were Austbrokers’ Greg Bridge and Finn Foster’s Sheik Rahiman, while Austbrokers’ Russell Chegwyn and Brookvale Insurance’s Graham Turner won longest drive. The national final will be played in May in Sydney.
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Celebrations mark LMI’s 17th birthday More than 90 guests, mostly brokers and loss adjusters, flew in from across the country and from as far as the United States to celebrate LMI Group’s 17th cocktail birthday bash at its Melbourne office in April. The celebration was the first time that LMI has celebrated its birthday, and its success means it won’t be the last. There are now plans for another celebration next year, possibly in Sydney. Managing Director Allan Manning used the occasion to thank clients and brokers for their support, which he says has been crucial to the success achieved by LMI Group. Special awards were given out to individuals who stood out for their excellent work. Melbourne-based client Peter Unger Catering was among the clients who received an award from Professor Manning in recognition of the caterer’s successful work in rebuilding after a fire destroyed its premises last year.
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Disillusioned with your licensee or AR network?
MAYBE YOU SHOULD CHECK OUT WHY SO MANY BROKERS ARE MOVING ACROSS TO UIG We’ve been working with ARs since 2003 – in fact, UIG was established by ARs for ARs. It is a group designed specifically to support independent broking experts. Call Trevor on 03 8676 0344 or 0431 705 660 or you can email firstname.lastname@example.org to discuss why we’re growing so quickly.
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Vero launches 2016 SME index Over the five years of its existence Vero’s SME Insurance Index has become an important means for the intermediary sector and insurers to track issues and attitudes in the important small and medium-sized business sector. So no surprises when a VIP list of brokers and other guests turned up at the launch of the latest edition at the luxurious function venue L’Aqua at Sydney's Cockle Bay Wharf on March 10. Guests were able to hear the latest insights into broker attitudes to insurance and intermediaries, and the concerns that keep them awake at night. Vero’s National Manager Commercial Intermediaries Anthony Pagano and Director of Brand at strategy company BrandMatters, Kylie McNamara, presented the findings. Special guests included Suncorp Customer Platforms Chief Executive Gary Dransfield and National Insurance Brokers Association Chief Executive Dallas Booth. Details of the 2016 SME Insurance Index report are on page 38 of this issue.
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Leo D’Angelo Fisher
SELLING INSURANCE IS QUITE POSSIBLY the second oldest occupation. Like the oldest, the purveyor of insurance is someone who has been around forever. A little bit frowned upon, a person in an occupation nobody would put at the top of their careers list, a calling not spoken of in polite company, a habit of attracting notoriety. You can decide which of the two I’m writing about. Insurance is one of those industries that attracts stereotypes like pins to a magnet. The pushy, fast-talking insurance salesman was a mainstay of the old black and white movies of the 1930s and ’40s. The slick door-to-door salesman flogging life insurance policies, foot in the door, delivering a well-rehearsed pitch along with salesmen selling vacuum cleaners, encyclopaedias and cooking utensils. The Three Stooges, Abbott & Costello and Laurel & Hardy knocking on hundreds of doors selling life insurance. Or vacuum cleaners, or encyclopaedias or cooking utensils. Insurance professionals who have been around the traps for a while have heard all the insurance salesman gags – they probably tell a few themselves – but they know something else: that they wouldn’t be doing anything else. And they also know that whatever cracks people make about crossing the street when they see an insurance salesman approaching, the relationships they have with their clients are stronger than almost any other customer relationship. But now the insurance salesmen – if they can still be equated as a seller of products rather than a counsellor and adviser who supplies insurance – face a threat far greater than disrespectful stereotypes, ribald jokes or disparaging comments. The threat that the insurance salesman now faces is the same that every occupation, business and industry faces: disruption. It’s the management buzz phrase that won’t go away, and it’s unlikely to for some time as business models are transformed to accommodate new digital technologies, changing consumer behaviours and market fragmentation.
When all is said and done, most people know that insurance, whether it’s for their life, health, car or home, is an essentiual of life. So the issue is not whether people will keep buying insurance; it’s how they will buy it in future. Modern consumers increasingly look past personal relationships to fulfil their product and service needs. They can now buy their insurance – along with almost anything else – through diverse mobile and online technology platforms. And Big Data analysis and algorithmic wizardry will ensure that their device can deliver as much, if not more, “personal” service than any human being – faster, at any time of the day and with a breathtaking array of options and permutations. Part of the disruption that the insurance marketing model faces is that consumers will “go direct”. Direct sales channels are already making an impact on the market, and digital disruption is going to heighten that trend many times over. Tailored insurance that is easier to buy might even prove an advantage in chipping away at Australia’s chronic underinsurance problem. So, is this the end of the insurance salesman? No. But it is very likely the transformation of the insurance salesman. Some will not adapt, but many will, and a new generation of insurance professionals will be much more at home with 21st century markets and technologies. But it is in the insurance industry’s interest to ensure that the personal touch remains a cornerstone of the industry. That’s a lesson well understood by the oldest profession.
Leo D’Angelo Fisher has been writing for Insurance News for nearly two years. A journalist, editor, writer and commentator for more than 30 years, he has covered business, management, leadership, the economy and politics. He has been an associate editor at Business Review Weekly, a columnist for the Australian Financial Review and was a senior writer at The Bulletin. Leo is also the author of a book on Edward de Bono. April/May 2016
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