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DRIVING LLOYDâ&#x20AC;&#x2122;S: :PTXHY58XMLVTDXY>UJW 9XWOXYNTSMLSSXSYVPX UXXNYHRQYNTDXQSTVGCYVPX TUNLSVQG@SYMPWOOXUJXS WUNYVPXYKWQAXV@S HLVLQXYNTQXMVTRUY
December 2016/January 2017
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ONE COVER FOR BIG AND SMALL.
Zurich’s commercial motor insurance offers cover for all types of vehicles, from cars to trucks, excavators to forklifts under one policy. Delivered through our easy to use platform, Z.stream. Talk to us today. Call 1800 426 021 or your Zurich representative.
ZURICH INSURANCE. FOR THOSE WHO TRULY LOVE THEIR BUSINESS.
This information is general only and does not take into account your objectives, ﬁnancial situations or needs. You should consider these factors, the appropriateness of the information and the relevant Product Disclosure Statement (PDS) available from zurich.com.au before making a decision. Motor insurance products are issued by Zurich Australian Insurance Limited (ZAIL), ABN 13 000 296 640, AFS Licence Number 232507 of 5 Blue Street, North Sydney NSW 2060. MDOS-011938-2016
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Allianz Alive New Interface New System New Efficiency
The One Allianz team thanks you for your support and partnership throughout 20166. At Allianz, we believe teamwork, relationship building, education and reward are the prime factors for success. In 2017, we pledge to continue providing you with better services, solutions and specialist information, to build strong and successful business partnerships. We are particularly excited about the launch of Allianz Alive, our new enhanced SME user interface, that will provide an improved customer experience and make Allianz easier to place business with. We thank you for your continued support and ongoing commitment. Together, we know we can raise the bar again for 2017.
Allianz: our team is our difference.
Allianz Australia Insurance Limited ABN 15 000 122 850
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Contents 6 Newsmakers » 10 Diversity and inclusion: It’s all about growth and survival » Chief Executive Inga Beale explains the thinking behind Lloyd’s market-changing cultural shift.
18 Playing catch-up on technology » Macquarie’s latest broker survey shows too many businesses risk being swept away in the digital revolution.
22 The top 20 influencers in general insurance » Our annual round-up of those who change people’s minds, affect the industry and make things happen.
30 All roads lead to Munich » Company loyalty has taken Ralph Ronnenberg a long way – all the way to Australia, in fact.
34 Failing the customer » The UK regulator has issued a damning indictment of the authorised representative model, identifying ‘serious and widespread’ issues.
40 Broker education – lots of questions » Everyone wants high professional standards, but how that fits with the regulator’s rules and a complicated training sector is no simple matter.
44 Turning up the heat » Resilium’s Adrian Kitchin has big plans for the Suncorp AR network.
52 Bracing for seismic shifts » Earthquake responses, trust and regulation are key issues for the industry, according to Insurance Council of New Zealand chief Tim Grafton.
56 The war on bugs » Antimicrobial-resistant diseases pose a danger to health and stability worldwide, but the fightback is under way.
66 Dawn of the robots » The age of automated insurance advice is closer than brokers may think. In fact, it’s already here.
68 Broking commercial motor in a hard market »
lawNEWS 60 Utmost good faith » The story behind a 250-year-old court case that forms the basis of modern insurance practice.
companyNEWS 74 Investing with care » The icare Foundation has begun a $100 million funding drive to help NSW workplace and road injury research.
76 Heavy overhaul » NTI enhances its product suite.
76 Tools of the trade » Brokers well-placed thanks to Vero’s series of SME insights.
peopleNEWS 78 We have ignition. Westcourt enjoys the Sunshine Coast » 80 Elegance rules at CGU’s Winning Post venue » 82 icare celebrates award-winning practitioners » 84 ‘Mobsters’ have fun at AILA party » 85 Allianz pulls a crowd with training sessions » 86 Vero celebrates risk management achievements » 88 Learning, inspiration and giving – IA ticks the boxes » 92 CQIB packs a long lunch for a charitable cause » 95 Industry leaders welcome Lloyd’s boss to Australia » 96 Off to the races with Suncorp » 98 maglog »
Things are getting tougher, and brokers need to know some alternatives to protect their clients.
December 2016/January 2017
Cover: Inga Beale, Chief Executive, Lloyd’s Cover image: Kym Thomson
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insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 22,000 subscribers. In October/November we published 464 articles online. These were made up as follows:
A â&#x20AC;&#x2DC;confrontingâ&#x20AC;&#x2122; soft cycle /XUXQWOYTUSLQWUMXYFTOOYQXKWTUYTUYWYSRHVYIQTMTUJYMGMOXYRDXQ VPXYUX8VYMRLIOXYRHYGXWQSCYWMMRQNTUJYVRY=WGORQY)QGYNTQXMVRQ "XDTUY/RKXSB 2XVYORSSYQWVTRSYWQXYHWOOTUJYWUNYKRNXOOTUJYSPRFSYVPTSYTS OTAXOGYVRYMRUVTULXCYSRYWMVLWQTWOYMRUSLOVWUVY=WGORQY)QG IQXNTMVSYWY YQWVXYNQRIYHRQYUX8VYGXWQCYPXYVRONYVPX ?MVLWQTXSY>USVTVLVXY/XUXQWOY>USLQWUMXY<XKTUWQYTU 7XOERLQUXYOWSVYFXXABY>UY1;4 YQWVXSYFTOOYEXYHOWVB -.TJPYMRSVYQWVTRSYWUNYORFYGTXONSYRUYTUDXSVKXUVSYPWDX SXXUYVPXYORFXSVYQXVLQUSYRUYX&LTVGYTUYVPXYIWSVY ;6 ;
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69 REGULATORY & GOVERNMENT
64 THE PROFESSIONAL
2 BREAKING NEWS More than 23,000 news articles â&#x20AC;&#x201C; including 220 breaking news bulletins â&#x20AC;&#x201C; 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
... and itâ&#x20AC;&#x2122;s not going to improve soon ?LSVQWOTWUYJXUXQWOYTUSLQXQSYFTOOYWMPTXDXYMRKETUXN RIXQWVTUJYQWVTRSYRHYWERLVY ! YUX8VYGXWQCYXDXUYWSYIQXKTLK JQRFVPYQXKWTUSYHOWVCYWMMRQNTUJYVRY< +Y/OREWOY3WVTUJSB ?UNYVPXYTUNLSVQGYTSYSVTOOYVQXWNTUJYMWQXHLOOGYFTVPYTVS TUDXSVKXUVYIRQVHROTRSCYNXSITVXYVPXYORF6GTXONYXUDTQRUKXUVC VPXYQWVTUJSYWJXUMGYSWGSB -'XYMRUVTULXYVRYPWDXYWYSVWEOXYRLVORRAYHRQYVPX ?LSVQWOTWUYURU6OTHXYSXMVRQC%Y<XUTRQY(TQXMVRQYWUNY:QXNTV ?UWOGSVY7WQAY0XJJXYVRONYTUSLQWUMX25'<BMRKBWLB ->USLQXQSYWQXYIQRNLMTUJYQXWSRUWEOGYJRRN IXQHRQKWUMXYJTDXUYVPXYXUDTQRUKXUVBY'XYMRUVTULXYVRYSXX WYIQLNXUVYWIIQRWMPYVRYTUDXSVKXUVS Y=PXGYWQXYEXTUJ
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We will be launching and rolling out in the US first, but our plan is to reach all consumers interested in having an insurance experience that is instantaneous, unconflicted and downright delightful. â&#x20AC;&#x201C;
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Case moves to Talbot Talbot Underwriting Australia has announced Andrew Case (left) as its new managing director. Mr Case set up Catlinâ&#x20AC;&#x2122;s business in Australia in 2004 and was its head of Australian operations prior to last yearâ&#x20AC;&#x2122;s merger with XL Group. He has more than 30 yearsâ&#x20AC;&#x2122; experience in the industry. A former Willis insuranceNEWS
executive director based in Perth, he was recruited by Catlin as its country head. Following the merger last year he became the new groupâ&#x20AC;&#x2122;s regional distribution director, based in Sydney, and left the company â&#x20AC;&#x153;by mutual agreementâ&#x20AC;? in February. )RQKXQY:WVOTUY?LSVQWOTWYMPTXHYVRYQLU =WOERVCY44Y2RDXKEXQ
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New RACQ chief
Shaken, not stirred
Allianz executive John Myler (left) has been unveiled as the new Chief Executive of RACQ Insurance. He replaces Bradley Heath, who announced his resignation in July and stepped down at the end of September. Mr Myler has been with Allianz for a decade, most recently as Chief Market Manager. RACQ says it carried out an international search and selected Mr Myler â&#x20AC;&#x153;because of his extensive and diverse insurance experienceâ&#x20AC;?.
New Zealand was hit by a powerful 7.8-magnitude earthquake just after midnight local time this morning, causing the death of at least two people and damaging homes and roads. The quake struck near the small town of Hanmer Springs, about 100km from Christchurch, which was devastated by earthquakes in 2010 and 2011. The shaking was felt strongly in Wellington at the bottom of the North Island. Earthquake Commission Chief Executive Ian Simpson says senior managers have met today and will monitor the situation as it unfolds.
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Industry achieves $3.1 billion profit
... but damage aplenty Non-compliant restraints for air-conditioning, telecommunications and other fittings likely caused damage to commercial buildings in Wellington during this monthâ&#x20AC;&#x2122;s Kaikoura earthquake, according to the Insurance Council of New Zealand (ICNZ). â&#x20AC;&#x153;We believe many buildings have had these systems installed and [they] do not comply with New Zealand standard guidelines set for their installation,â&#x20AC;? Chief Executive Tim Grafton said. â&#x20AC;&#x153;Appropriately, there is a strong focus on engineering sign-off of structural elements in buildings, but there is little or no monitoring or thorough inspection of the non-structural elements.â&#x20AC;? Non-structural seismic restraints hold air-conditioning, fire prevention, telecommunications, electricity and lighting equipment in ceiling cavities and other parts of a building. They can collapse and pose risks to life and property, ICNZ says. Modeller AIR Worldwide estimates insured losses from the magnitude-7.8 quake on November 14 could range from $NZ1.15-$NZ5.3 billion. )TVVTUJYHWTOLQXSYWNNYVRY'XOOTUJVRUY&LWAXYNWKWJXCYY 1 Y2RDXKEXQ
Australian insurers and reinsurers recorded a combined net profit of $3.1 billion for the year to September 30, up from $2.4 billion the previous year. The latest statistics from the Australian Prudential Regulation Authority (APRA) show net earned premium dropped 3.4% to $30.6 billion. Of this, insurers wrote $28.8 billion and reinsurers $1.8 billion. Gross incurred claims dropped 7.1% to $31.1 billion, reflecting decreases in short-tail property class claims. The net loss ratio for the industry was 66%, down from 70%, and investment income dropped $500 million to $2.9 billion. The industry underwriting result was a profit of $2.6 billion, compared with $1.1 billion the previous year. â&#x20AC;&#x153;The higher underwriting result was mainly related to the decrease in net incurred claims,â&#x20AC;? APRA says. >UNLSVQG@SYWUULWOYIQRHTVYQTSXSYVRY B4YETOOTRUCY14Y2RDXKEXQ
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Hail claims exceed $190m The insurance bill for the hailstorm that hit northwest Victoria, northeast South Australia and southern New South Wales on November 11 has reached $192.6 million from 28,146 claims. SA was the most severely affected state, with 20,080 claims totalling $130 million. NSW has recorded 4529 claims for $37.5 million and Victoria 3537 claims totalling $25.2 million. The Insurance Council of Australia (ICA) says more than half of all claims are for motor vehicles, costing $80 million, with three-quarters of these in SA. ICA declared the hailstorm a catastrophe on November 15. November hailstorm bill nears $200 million, 5 December
The cost of Brexit
From the As years go, 2016 is one the insurance industry will prefer to forget. The past year has offered little in the way of positives. Competition in the local market is at a high level, which is always sure to put pressure on premiums. But the earnings from investments that normally cushion the impact of low premiums are also woefully low. This isn’t how the classic insurance cycle is meant to work, thanks to such factors as the low interest rate environment and the volatility of capital markets. It’s nice that the insurance industry can turn a profit in these difficult economic times, but the range of influences on industry earnings is such that it’s also difficult to rely any more on the traditional concept of the insurance cycle as a measure of where the market is at. Today, according to economists, there’s a range of insurance cycles for different classes of business. The word from the experts over the past couple of months is that overall the industry will continue to struggle through the economic doldrums in 2017 before things begin to lift in 2018. So batten down the hatches – the rough ride will continue for a while yet. Our annual list of the industry’s Top 20 influencers is featured in this issue. Begun in 2009 as a one-off informal introduction to the industry powerbrokers, the feature has taken on a life of its own. Finding the greatest influencer, and explaining why, has become the centre of ongoing debate at Insurance News each November. This year’s top influencer is quite different, and we hope you’ll agree we’re on the money – even if you disagree with the choice.
Britain’s European Union exit could affect £7.3 billion of premium written in the London company market, the International Underwriting Association (IUA) estimates. The IUA – which represents non-Lloyd’s international and wholesale insurance businesses operating in the London market – includes the estimate in its annual statistics report. The figure comprises European premium received by companies headquartered in London and business written by companies based outside the EU with offices in the UK capital. Overall London company market premium was £21.6 billion last year, down from £22.4 billion in 2014, according to the IUA report. The figures include premium written in London and business in other locations that was overseen by London operations. Australasia accounted for £663 million last year, down from £785 million in 2014.
This issue also features a wide-ranging interview with Lloyd’s Chief Executive Inga Beale, who has very clear-cut comments to make on how Lloyd’s must develop a new culture and an enhanced global vision over the next nine years. It’s the second consecutive edition of Insurance News to feature a woman on the cover. It doesn’t mean women are suddenly a common sight in the industry’s top ranks, but it is an indication nonetheless that old stereotypes are on the slide. Like our October cover subject, XL Catlin’s Kelly Lyles, Ms Beale is a convincing advocate for inclusion and diversity in Lloyd’s and the wider industry. Her reasoning is simple: in a fast-changing world, diversity builds more effective businesses.
Underwriters foresee huge premium lost from Brexit, 24 October
It’s summer, and blue skies and sparkling beaches beckon. About time, too. The team at Insurance News join me in wishing all our readers a joyous and fulfilling festive season. Stay safe. Be happy. Terry McMullan
Publisher/editor: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: email@example.com Advertising: NAOMI CONWAY McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: firstname.lastname@example.org Address: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road Ivanhoe VIC 3079
subscriPtion enquiries: www.insurancenews.com.au/subscribe Email: email@example.com contributions: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538. Printing: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia www.insurancenews.com.au/magazine
A McMullan Conway production
december 2016/January 2017
Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on FSC paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.
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Diversity and inclusion: It’s all about growth and survival :PTXHY58XMLVTDXY>UJWY9XWOXYX8IOWTUSYVPXYVPTUATUJ EXPTUNY0ORGN@SYKWQAXV6MPWUJTUJYMLOVLQWOYSPTHV By Terry McMullan
JUST BECAUSE SOMETHING IS traditional doesn’t mean you should keep doing it. It’s a truism that Lloyd’s has taken to heart over the past 10 years or so as the 328-year-old insurance market struggled to keep up with a rapidly changing world. Tradition made Lloyd’s a late player in the use of technology, and tradition stalled its physical expansion beyond London. But all that started to change in 2002 with the appointment of a new chairman in Peter Levene, a political and business heavyweight with international connections. Lloyd’s had suffered some serious setbacks in the 1990s as the asbestos claims scandal wiped out many of its private investors – the so-called Names – and the market was in need of a makeover. It couldn't survive by continuing to rely on masses of paperwork, glacially slow processes and the investments of rich individuals. Change came in the form of technocrat Richard Ward – another non-insurance man – who joined in 2006 as Lord Levene’s deputy and chief executive. While the chairman set about expanding Lloyd’s influence in key foreign markets and attracting corporate investment, Mr Ward ran the war on paper and forced a reluctant army of brokers and underwriters into the 21st century. The reporting of results, for example, improved from three years to 12 months. When leading businessman John Nelson succeeded Lord Levene in 2011, the campaign stepped up a gear. The new chairman continued the strategy that would 10
see Lloyd’s become a thoroughly modern organisation with a physical footprint across the globe, but Mr Nelson also wanted to change its culture. As he told Insurance News in 2013: “The brokers are pretty international, but the underwriters are not that diversified. They will need to be…” With a global expansion outlined in the Vision 2025 strategy on course, and new technology-based placement systems finding ready acceptance in the market, Mr Ward’s work was apparently for the most part complete when Mr Nelson started looking for someone who could keep the impetus of Vision 2025 moving along while also influencing cultural change. It wasn’t a job you could drop an “outsider” into, as the market had done with Mr Ward. With 2025 looming, Lloyd’s needed to find someone who understood the language and scope of the global insurance industry, who had the industry’s respect, who could engage with people at any level and could navigate a way through. The recruitment list would have been a very short one. Cultural change is about persuasion and leadership; you can’t force people to accept new ways of thinking and doing. The eventual choice met with remarkable market-wide approval. Lloyd’s picked a person with “experience as a chief executive, underwriting background, international experience and operational skills”, together with “deep knowledge of the Lloyd’s market”. Inga Beale, said the Chairman, “is the ideal chief executive”. insuranceNEWS
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SITTING IN A CONFERENCE ROOM in Lloydâ&#x20AC;&#x2122;s new Sydney offices, Lloydâ&#x20AC;&#x2122;s first female chief executive ticks off the progress towards completing the marketâ&#x20AC;&#x2122;s Vision 2025 strategy â&#x20AC;&#x201C; and its drive to become more diverse and inclusive. Does she dare to believe that by 2025 weâ&#x20AC;&#x2122;ll see the venerable institution transformed into an organisation that embraces employees from every walk of life? Will the besuited white men in white shirts who crowd the underwritersâ&#x20AC;&#x2122; booths at 1 Lime Street have been joined by people of every nationality, race, religion, gender and sexual orientation just nine years from now? Ms Beale doesnâ&#x20AC;&#x2122;t even blink. â&#x20AC;&#x153;I think itâ&#x20AC;&#x2122;s going to be quicker than that. The momentum we have now tells me we could deliver ahead of that,â&#x20AC;? she tells Insurance News. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s a feeling of a culture thatâ&#x20AC;&#x2122;s a lot more modern and a lot more diverse. People going out of their way to make sure theyâ&#x20AC;&#x2122;re hiring different people.â&#x20AC;? Ms Beale says statistics collected by Lloydâ&#x20AC;&#x2122;s have illustrated the urgent need to change culture, because Lloydâ&#x20AC;&#x2122;s is expanding into places where the insurance stereotype isnâ&#x20AC;&#x2122;t recognised. â&#x20AC;&#x153;Lloydâ&#x20AC;&#x2122;s is so global, and some of the analysis we did showed that much of the growth in the commercial insurance brokerage area, which is obviously Lloydâ&#x20AC;&#x2122;s sweet spot, is going to be coming from markets weâ&#x20AC;&#x2122;ve traditionally not been strong in,â&#x20AC;? she tells Insurance News. â&#x20AC;&#x153;The latest McKinsey research says 67% of commercial insurance growth in the next few years is likely to come from emerging markets. If we donâ&#x20AC;&#x2122;t have people who speak Chinese, who speak Korean, who understand the culture, who can have longstanding relationships and respect in the country they work in, we are not going to be part of the future.â&#x20AC;? insuranceNEWS
What sheâ&#x20AC;&#x2122;s saying is that Lloydâ&#x20AC;&#x2122;s diversity and inclusion strategy has its basis in a commercial necessity: it isnâ&#x20AC;&#x2122;t a social fad, itâ&#x20AC;&#x2122;s a survival and growth strategy. Lloydâ&#x20AC;&#x2122;s is leading the way because it has to, but the rest of the industry should get used to hearing a lot more about diversity and inclusion â&#x20AC;&#x201C; which in the way of all things insurance has already been abbreviated to D&I. In years to come the genesis of D&I in the Australian insurance industry will be traced to the Lloydâ&#x20AC;&#x2122;s-organised DiveIn in September. â&#x20AC;&#x153;DiveIn was a huge success in London when we started it last year,â&#x20AC;? Ms Beale says. â&#x20AC;&#x153;We didnâ&#x20AC;&#x2122;t necessarily have a specific goal in mind, we just knew we had to do something. â&#x20AC;&#x153;In the London market we have got people to sign up to a charter committing to at least start reporting on some D&I metrics, so we can get a baseline, and then we can start seeing a change in the demographics of the working population. â&#x20AC;&#x153;But itâ&#x20AC;&#x2122;s also a commitment from them to use certain tools, to get some training run about unconscious buyers [a theory that 90% of buying decisions are made subconsciously] and things like that. â&#x20AC;&#x153;But the most important indicator for me right now is that the biggest increase in demand from the consultants at the moment is advice on D&I for businesses. â&#x20AC;&#x153;That to me is a real demonstration that people are taking this seriously. They understood why itâ&#x20AC;&#x2122;s important to get this new type of talent in. And they mean business; otherwise they wouldnâ&#x20AC;&#x2122;t be spending money on it. â&#x20AC;&#x153;It really feels as though people have understood the business rationale behind D&I now, so weâ&#x20AC;&#x2122;ve kind of moved on from that. The challenge now is how we can actually make it happen. â&#x20AC;&#x153;How can we start appealing to the new
INMAG DEC 16_page layouts 1/12/2016 6:06 pm Page 13
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generation, or the generation of future leaders? How can we make sure that the insurance sector is attractive enough for them? â&#x20AC;&#x153;I think the success of the DiveIn Festival, which went global this year in 16 different cities on four continents, is pretty amazing. â&#x20AC;&#x153;The amount of support from all the businesses in the various cities shows that people are taking it seriously.â&#x20AC;? Ms Beale says such a profound change in the make-up of the workforce at all levels of the industry wonâ&#x20AC;&#x2122;t happen overnight, and it will need constant reinforcement. Preferring job candidates who are most like you is instinctive, and â&#x20AC;&#x153;we all have to force ourselves to understand thatâ&#x20AC;?. â&#x20AC;&#x153;I remember when I was an underwriter in the â&#x20AC;&#x2122;90s in London, and one day I looked around at my team of underwriters and realised I had five women working with me,â&#x20AC;? she says. â&#x20AC;&#x153;How did I end up with five women? I insuranceNEWS
didnâ&#x20AC;&#x2122;t consciously seek them out, but obviously there was an unconscious element that made me hire people who I knew I would get on with. â&#x20AC;&#x153;So all of us have a duty to call ourselves out and make sure weâ&#x20AC;&#x2122;re seeking out the diverse range of people who are out there. Because if you all think the same, youâ&#x20AC;&#x2122;re going to be less successful in business.â&#x20AC;? The lesson is a vital one for Lloydâ&#x20AC;&#x2122;s, she says, because the marketâ&#x20AC;&#x2122;s access around the world is rapidly increasing. â&#x20AC;&#x153;We are focused on a few particular markets. Weâ&#x20AC;&#x2122;ve seen great success in China, for example. â&#x20AC;&#x153;Last year we got another insurance licence in China, so that was a huge positive signal that we are doing the right thing there. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve got a licence application going through Malaysia right now. Weâ&#x20AC;&#x2122;re opening up in India next year. We opened up in Dubai last year.â&#x20AC;? Dubai will be Lloydâ&#x20AC;&#x2122;s regional hub, --Ms Beale says.
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â&#x20AC;&#x153;People are writing offshore business from there, covering the Middle East, and some people are going to start writing African business from Dubai. Weâ&#x20AC;&#x2122;ve made a lot of progress. We are turning our focus now a little bit from Asia over to Latin America. â&#x20AC;&#x153;We have opened up a representative office in Colombia and Mexico, weâ&#x20AC;&#x2122;ve got a new regional rep whoâ&#x20AC;&#x2122;s moved to Mexico, and heâ&#x20AC;&#x2122;ll be looking at the entire Latin America region. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ll be looking at getting insurance licences in some of those countries. So thereâ&#x20AC;&#x2122;s lots going on.â&#x20AC;? Singapore is the largest Lloydâ&#x20AC;&#x2122;s location outside London, with 200 underwriters based there. â&#x20AC;&#x153;When we started it 15, 16 years ago, we only had two syndicates,â&#x20AC;? Ms Beale says. â&#x20AC;&#x153;Now weâ&#x20AC;&#x2122;ve got more than 20. And thereâ&#x20AC;&#x2122;s more than 30 in China.â&#x20AC;? She says the Monetary Authority of Singapore is making â&#x20AC;&#x153;a concerted effortâ&#x20AC;? to have the city state develop as a major hub for insurance. Despite all that emphasis on modernisation, expansion and cultural change, Ms Beale also has much to contend with in a world where investment capital is cheap and easily available. But the increasing investment in the industry from a variety of new sources means Lloydâ&#x20AC;&#x2122;s is not only experiencing people diversity, but also a greater diversity of capital sources. Lloydâ&#x20AC;&#x2122;s split of reinsurance business versus primary insurance is changing. It used to be about 40% reinsurance/60% insurance, but itâ&#x20AC;&#x2122;s now closer to 30/70. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s partly driven by pricing and partly driven by this new capital thatâ&#x20AC;&#x2122;s coming in,â&#x20AC;? Ms Beale says. â&#x20AC;&#x153;Their expected rates of return are way lower than the reginsuranceNEWS
ular insurance capital. Theyâ&#x20AC;&#x2122;re happy with 2-3%, whereas weâ&#x20AC;&#x2122;re used to double digits.â&#x20AC;? Japanese insurers are now providing nearly 17% of Lloydâ&#x20AC;&#x2122;s capital as a result of their recent acquisitions. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s great news for Lloydâ&#x20AC;&#x2122;s, because itâ&#x20AC;&#x2122;s a very loyal, long-term capital-provider base. And theyâ&#x20AC;&#x2122;re really tapping into the expertise of the specialist underwriter. The capital base now in Lloydâ&#x20AC;&#x2122;s is quite different from what it was. So part of our vision is also diversity of capital. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve got Koreans in there, weâ&#x20AC;&#x2122;ve got Chinese â&#x20AC;&#x201C; our first Chinese syndicate opened last year. Weâ&#x20AC;&#x2122;ve got capital from the Middle East, and from Latin America. So itâ&#x20AC;&#x2122;s... very much more diverse.â&#x20AC;? Having spent most of the past 10 years keeping a wary eye on the growth of the Bermuda (re)insurance market, Ms Beale says Lloydâ&#x20AC;&#x2122;s is enjoying â&#x20AC;&#x153;a bit more equilibrium nowâ&#x20AC;?. â&#x20AC;&#x153;Even some of the Bermudians are realising you canâ&#x20AC;&#x2122;t write everything from Bermuda. If you want to be successful in Asia-Pacific, youâ&#x20AC;&#x2122;ve got to be in the AsiaPacific. â&#x20AC;&#x153;The world is globalising, but itâ&#x20AC;&#x2122;s also localising. So youâ&#x20AC;&#x2122;ve got to be somehow local, but match it with your global expertise.â&#x20AC;? The few-thousand private investors remaining in the market â&#x20AC;&#x201C; the Names â&#x20AC;&#x201C; provide just over 10% of Lloydâ&#x20AC;&#x2122;s capital. â&#x20AC;&#x153;It seems to be reasonably stable at the moment, and there is a lot of interest. â&#x20AC;&#x153;But if youâ&#x20AC;&#x2122;re a big trade owner, or big insurance group, do you also want to have Namesâ&#x20AC;&#x2122; capital on your syndicate? Itâ&#x20AC;&#x2122;s just a bit more cumbersome.â&#x20AC;? All that said, Ms Beale says Lloydâ&#x20AC;&#x2122;s is open to having Names behind syndicates. â&#x20AC;&#x153;We want to retain an entrepreneurial spirit.â&#x20AC;?
INMAG DEC 16_page layouts 1/12/2016 6:07 pm Page 17
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Playing catch-up on technology
7WM&LWQTX@SYOWVXSV EQRAXQYSLQDXGYSPRFSYVRR KWUGYELSTUXSSXSYQTSA EXTUJYSFXIVYWFWGYTUYVPX NTJTVWOYQXDROLVTRU By Bernice Han INSURANCE BROKERS APPEAR woefully ill prepared for the digital revolution that is already gripping the industry, according to Macquarie Business Banking’s latest Insurance Broking Benchmarking survey. About 45% of the 200 broking businesses surveyed have made changes, but admit they could have made more effort to use technology to build sales, while 41% say they are keeping up with industry innovations. Only 8% describe themselves as leading the way on innovation, according to the report, released in November. Just 11% offer full quote, bind and pay capabilities online, despite 75% relying on their websites for brand promotion and lead generation. In another disturbing finding, just 15% see insurtech start-ups as a competitive threat “despite signs of increasing activity”, which could portend a rude awakening down the road. About 49% view direct online sales from insurance companies as more of a challenge. The insurtech threat is real and here to 18
Current use of website Brand promotion/lead generation
Engaging directly with clients
Quote requests (processed offline)
Full quote, bind and pay capabilities
Instant quotes None of the above
Current use of technology Operate online platform, staff can work from anywhere
Have mobile friendly website Active on social media, eg Twitter/ Facebook/ LinkedIn
Use SEO on website
Offer publicly available information and documents online
Collaborate with clients using online software
None of the above
INMAG DEC 16_page layouts 1/12/2016 6:07 pm Page 19
stay, and the sooner brokers get their digital acts together, the better their chances of staying relevant. “For today’s high-performing brokers, that makes it essential to develop a strategy to future-proof your business and remain resilient in a rapidly changing market,” Macquarie says. “In an industry where simpler product lines are increasingly commoditised, technology can help you streamline and automate lower-value transactions and client on-boarding, liberating staff to focus on real value-added activities and create truly personalised client interactions.” Otherwise, brokers may suffer the same fate as counterparts in the news, music and photography industries that have been overwhelmed by tech revolutions. “Insurance brokers generally excel in the fundamentals of building strong client relationships and delivering high-quality service,” Macquarie says. “Yet our research suggests many are less confident in making effective use of emerging technologies to reach new clients and service them more efficiently. That potentially makes brokers vulnerable to emerging competitive threats, including the potential for disintermediated business models from new and established providers selling direct to business clients.” Macquarie says brokers can use digital technology to create a high-quality and consistent client experience, and provide an efficient avenue to serve a growing customer base. Social media allows them to interact quickly and directly with clients, and offers
possibly the most convenient way to promote a business’ expertise and insights at minimal cost. Just 41% of survey respondents are active on social media sites such as Twitter, LinkedIn and Facebook, and 32% provide publicly available information and documents online. “Use your social media presence to grow your share of wallet and promote a wider range of services to your existing clientele, supported by case studies and testimonials to demonstrate value,” the report says. “Build an expert network online by connecting with like-minded people and businesses and sharing content with their clients. “Social media provides a unique opportunity to reach out directly to clients with targeted content that speaks directly to their needs.”
The survey results – which follow similar studies in 2011 and 2013 – are not all doom and gloom. Most broking businesses are optimistic about their prospects, with 87% expecting higher revenues and three-quarters anticipating increased profits this financial year. Nine out of 10 made a profit last financial year, despite the brutal market conditions, with about 33% increasing margins by more than 30%. Profit growth is undoubtedly harder to achieve in current conditions, but a relentless focus on efficiency gains has been the key. “In a challenging market, insurance brokers across Australia have proven both resilient and adept at creating efficiencies to maintain margins and drive profits higher,” Macquarie Business Banking Division Director Eoghan Trehy said. “Firms are eliminating the discretionary
Change in profit compared to last financial year
30% 30% 32% 24% 13%
31% 20% 20%
Increased 20% 19
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spending accumulated during the buoyant markets of recent years, and high performers in particular are putting considerable emphasis on driving strong outcomes from the quality staff they invest in.â&#x20AC;? Fewer businesses plan to expand their workforces this financial year, with more than one-quarter freezing recruitment. It appears brokers prefer to channel their resources into acquisitions: more than half are willing buyers of other businesses, up from 44% five years ago. â&#x20AC;&#x153;Even after the substantial industry consolidation of the past few years, the appetite for further acquisitions has only grown strongerâ&#x20AC;Ś The result is very much a sellerâ&#x20AC;&#x2122;s market, with only one in five principals willing to even consider selling,â&#x20AC;? the survey says. Brokers in Queensland and Western Australia are experiencing a tougher patch than those in states less reliant on the resources sector, which has slowed sharply. About 44% of West Australian brokers reported no revenue growth or declining earnings last financial year, while 39% in Queensland say profits have declined because of softening premiums and client hardship. Victorian brokers led the country on earnings, reflecting the stateâ&#x20AC;&#x2122;s resurgence and diversified economy. They had average gross written premium (GWP) of $18.7 million and revenue of $3.98 million. New South Wales brokers recorded $13 million average GWP and $2.7 million of average revenue. 20
2016 Broker support staff
Client servicing broker
3% General management 6% Finance/accounts 8% staff 5%
Business development staff
Authorised 10% Reps 18% Administration
2% 2% 3%
13% Claims staff
None of the above
4% n/a 27% 2011
Willingness to buy or sell
48% 51% 33% 22% 10%
A willing buyer
A willing buyer or seller
*New option added in 2016 Insurance Broking Benchmarking survey
n/a n/a 11% Looking to sell a portion of your business in the next two years*
A willing seller
7% None of these
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20 INFLUENCERS IN GENERAL INSURANCE
Our annual round-up of those who change peopleâ&#x20AC;&#x2122;s minds, affect the industry and make things happen 22
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IN THE EIGHTH YEAR OF OUR annual Top 20 list, you would think the field would look much the same as it did last year. But an examination of the list over the past few years reveals considerable change. This doesnâ&#x20AC;&#x2122;t suggest the industryâ&#x20AC;&#x2122;s leaders are constantly being recycled or moved on â&#x20AC;&#x201C; although thereâ&#x20AC;&#x2122;s some of that â&#x20AC;&#x201C; but the old lists do show that change is constant. Not only do people at the top change, but thereâ&#x20AC;&#x2122;s also a constant shuffling of â&#x20AC;&#x153;influencersâ&#x20AC;? as the issues that dominate the industry change. Two years ago we had heard little about the imminent arrival of technically driven assaults on the industryâ&#x20AC;&#x2122;s basic sales and customer service patterns. Come to that, Aon Australia Chief Executive Lambros Lambrou was talking about Big Data and what it would do to the industry before anyone else knew what it meant, and we picked him as an influencer as a result. But itâ&#x20AC;&#x2122;s only in the past year that the true impact of technology has begun to be felt. Will the continued entrenchment of the technological revolution in the future change the people named in this annual Top 20 list? Probably. This list has been compiled after a lot of discussion and occasional argument with people inside Insurance News and with trusted sources in the industry. The methods used are completely unscientific, although much of the discussion was very useful. In reality, the numbering systemâ&#x20AC;&#x2122;s efficacy falls away after about No 10, and there isnâ&#x20AC;&#x2122;t widespread agreement on who should be where from that point. We think each of these people is influential through their achievements or persuasive abilities. But please donâ&#x20AC;&#x2122;t think No 20 just sneaked in â&#x20AC;&#x201C; he could just have easily been placed at, say, 16. And to those aggrieved personal assistants and PR people who spruiked their boss or client during the year, please be assured they came in at No 21. We donâ&#x20AC;&#x2122;t expect everyone â&#x20AC;&#x201C; or possibly anyone â&#x20AC;&#x201C; might necessarily agree with this list. Some readers might feel weâ&#x20AC;&#x2122;re miles off. But we hope it does lead to discussion and even debate about the issues that result in sometimes unexpected people coming to the fore.
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INMAG DEC 16_page layouts 1/12/2016 6:07 pm Page 25
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All roads lead to Munich :RKIWUGYORGWOVGYPWSYVWAXUY3WOIPY3RUUXUEXQJ WYORUJYFWGY#YWOOYVPXYFWGYVRY?LSVQWOTWCYTUYHWMV By John Deex
RALPH RONNENBERG IS that very rare thing in modern business – a genuine one-company man. He has spent time during his career with client businesses, but admits he’s “never been on the payroll of any other insurance company”. However, with a company the size and scope of Munich Re, it’s not surprising to discover he has a huge breadth of experience. “I started off on the client management side for Asia and Australasia in Munich, then moved into casualty underwriting, first in Munich then later in Hong Kong,” he tells Insurance News. “Then I moved back to Munich in a specialist underwriting role, before about 10 years ago I moved to the corporate side of things at the time that enterprise risk management was built up in the industry. But that was also within Munich Re. “I joined the first integrated risk management team in Munich and later moved across to be part of the management team for central loss reserving in non-life. 30
“Three years ago I moved into financial controlling.” In May it was announced that the latest leg of his Munich Re marathon would see Mr Ronnenberg take over from Heinrich Eder, who retired on June 30 as Australasia managing director. He has settled in relatively easily, he says, having spent significant time here in previous roles. “I’ve never lived here, but spent more than half a year of my working life here, in various locations over the course of 10, 15 years. I have been a fairly frequent visitor to Australia.” On the business side, he’s still learning, and absorbing, but is already clear about the three key pillars to his strategy. First, to continue as a leading provider of natural catastrophe security in the region, and second, to seize opportunities in the capital management side. “Munich Re has a very long tradition here in this market, and we’ve always been a very strong player,” he tells Insurance News. “This region has high nat insuranceNEWS
cat potential and nat cat threat, which we have unfortunately been reminded of very recently. “That is one of our core pillars, and that has been unchanged for many years. The second thing is, this market is a very competitive one, and a very sophisticated one with a very sophisticated regulatory environment. “Client companies are not only faced with pressure to reduce administration costs, but they also need to look into efficiency on the capital management side. “That is another pillar where we are a leader. Munich Re is able to react flexibly and we are prepared to deploy our know-how together with substantial capacity to optimise capital efficiency of our clients.” The third pillar, which is rapidly gaining importance, is innovation and the change it will bring to the industry. “We are very determined to become a leading player in that field too, and have strong initiatives all around the world to foster it, from ‘inno scouts’, to innovation labs in Beijing, Silicon Valley and Berlin, our unit Digital Partners, which is
investing in start-ups, and Design Thinking workshops all around the world. “The challenge for the next year will be to continue our strong position in the first two areas and then build up the third one.” In the current environment, with competition increasing, it won’t be easy. “We have always been operating in a competitive environment,” Mr Ronnenberg says. “But what we see is that capital is available in abundance, and that pushes prices as the supply side is increasing globally. “Clearly, competitive pressures have increased. We are used to that, because there have always been cycles. What I do not see now is completely irrational competition, people doing things blindfolded, not really knowing what they do. “That is probably the sharpest contrast to what we have seen in the late ’90s, where people just moved in and did cashflow underwriting based on very superficial analysis. “Competition is high, it has
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been increasing, but we have not seen irrational competition.â&#x20AC;? Despite the influx of alternative capital to the industry, Australasian insurers are keeping faith in traditional reinsurance. â&#x20AC;&#x153;Insurers here have very high nat cat capacity demands,â&#x20AC;? Mr Ronnenberg says. â&#x20AC;&#x153;Clearly they are looking at what is available at good security and with a reasonable predictability and stability. â&#x20AC;&#x153;They are using predominantly traditional reinsurance, but also alternative forms, as you would expect in a market as sophisticated as here. â&#x20AC;&#x153;People are experimenting and trying different things and seeing what is the most efficient way to support their capital base. Munich Re can support all forms of reinsurance, as well as alternative and innovative solutions.â&#x20AC;? Mr Ronnenberg accepts the hard market is unlikely to turn dramatically soon. He says people often look to swings seen in the early 2000s and early 1990s, but he believes
these were fundamentally different to the present situation. â&#x20AC;&#x153;We should remind ourselves that most of these massive swings were very much driven by fear in the industry. â&#x20AC;&#x153;Fear because the industry didnâ&#x20AC;&#x2122;t understand some of the exposure it was writing. In the early â&#x20AC;&#x2122;90s it was very much fear of not having the nat cat and extreme event accumulations under control, and in the early 2000s it was fear that the overall pricing and subsequent reserving was way too low, loss costs terribly underestimated. â&#x20AC;&#x153;They are very different subjects, but the same amount of fear. The response to that was to drastically reduce the risk appetite and the capacity that was put out, and the reaction was a massive hardening of rates. â&#x20AC;&#x153;If I see that coming again, I canâ&#x20AC;&#x2122;t really imagine where that should come from. I see competition is hard but not irrational, so I donâ&#x20AC;&#x2122;t see anything that would produce the same amount of fear in the industry that we have seen before. â&#x20AC;&#x153;I think expecting a similar insuranceNEWS
turnaround like the last two times is probably a very optimistic view. Do I see that there is a gradual bottoming out and slight upward tick? Yes I do see that. â&#x20AC;&#x153;Again, I see this as proof that people are not irrational. â&#x20AC;&#x153;They are realising that combined ratios of well above 100% are not sustainable over a longer period of time, and even if that comes at a sacrifice of market share, people are now prepared to take that decision and walk away from business that is not adding to the bottom line. â&#x20AC;&#x153;It is not a rapid change and it would be naive to expect that, but I see people realising that the current rating level is unsustainable.â&#x20AC;? Munich Re went through some fairly dramatic changes this year â&#x20AC;&#x201C; not least the announced sale of primary insurance operation Great Lakes Australia following a strategic review. Although the decision was made before Mr Ronnenberg took up his position, it came as no surprise, because he had been involved in the analysis in previous roles.
Discussions with potential buyers are ongoing, but Mr Ronnenberg says the sale does not have wider implications. â&#x20AC;&#x153;Does it change anything in Munich Reâ&#x20AC;&#x2122;s strategy in primary insurance? It does not. â&#x20AC;&#x153;It does not mean that on a global scale we see this of lesser importance, or that this is the beginning of a withdrawal for Munich Re in primary insurance. â&#x20AC;&#x153;Is it the beginning of Munich Re withdrawing from Australia, or placing less importance on Australia? I say no even more emphatically. That is not the case. â&#x20AC;&#x153;Australia has been and will remain an important market for Munich Re, which will now have a clear focus on reinsurance. â&#x20AC;&#x153;The company will continue to be a strong partner in property and casualty, as well as in life reinsurance business. â&#x20AC;&#x153;The change allows Munich Re in Australia and New Zealand to focus on where it can provide the best value to the market and its reinsurance clients. 31
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“It is very much a combination of timing, size of the market and the space that we are operating in, and not the reflection of a larger change in strategy.” In September a restructure of Munich Re’s Asia-Pacific operations was announced, with the Melbourne office to close by the end of the year. Again, Mr Ronnenberg warns against reading too much into this.
“What we have seen, as in other parts of the world, is that the market generally is consolidating, that our clients are becoming larger and even more sophisticated and tend to centralise their reinsurance purchasing, which is a quite natural thing to do. “We felt it is time to respond to that, and have an infrastructure where we have fewer but larger operations that allow us
Changing climate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
to have a critical size in each of them, with the necessary depth of expertise that our clients demand. “It is a consolidation on our side. In the whole Asia-Pacific region we have three main centres now – Sydney, Singapore and Beijing. For Australia the implications are that we will consolidate our business focus and operations in Sydney.” Mr Ronnenberg is adamant Munich Re will not stand still – that it will invest and explore opportunities in innovation. He breaks innovation down into three main areas. “One is the type of innovation that enables us to run our business more efficiently and effectively. It is often a combination of our clients and us – the joint venture attitude gives the interesting opportunities. “I’m very much thinking around data analytics, automation. Another block is the innovation that changes the exposure we are covering. It could mean a reduction in exposure. “The most prominent example would be automated driving, where automation very much takes the human factor out of that risk, therefore certainly decreasing the exposure going forward. That means a shrinking of our business pool. “A more positive example would be cyber, where new development means there is new exposure we can offer solutions for. So that is the growth potential. It goes both ways. “The third aspect is the disruption side, where the whole business model is being challenged by new entrants to the market. “And that is the wild – but exciting – card in our business. We are looking at it very closely.
We are very much convinced that it makes sense that we explore all innovation topics, in a collaborative effort with our clients. “Things are developing rapidly. While reinsurance is not the prime target of potential disruptors, will reinsurance be conducted completely differently in 10 years? “I don’t know, but we need to be prepared for changes.” Mr Ronnenberg does not believe the Australasian market presents any unique challenges – but some global challenges are “more pronounced” here. The issues he highlights are market concentration, regulation and volatility coming from natural catastrophe exposures. “From that perspective it’s a very exciting environment to operate in.” He believes Australia has often been at the forefront of developments. “I’ve been involved with Australia for more than 20 years now, in one way or another. For whatever reason, whenever we have seen changes in the industry – it was around nat cat management in the early ’90s, it was around governance controls and regulations in the early 2000s – Australia has always been at the forefront of these developments and has been very much leading the charge. “People tend to forget that a lot of international companies and markets have looked to Australia as a little bit of a role model in many fields. It is a very exciting time to be here now. We have to expect a major change to the industry coming from innovation. “I see no reason why Australia shouldn’t be at the forefront again.”
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BRITAINâ&#x20AC;&#x2122;S GENERAL INSURANCE APPOINTED REPRESENTATIVES (ARs) â&#x20AC;&#x201C; broadly equivalent to Australiaâ&#x20AC;&#x2122;s authorised representatives â&#x20AC;&#x201C; have taken off in a big way. There are more than 20,000 of them. The model clearly works for the industry â&#x20AC;&#x201C; ARs are exempt from the usual regulatory requirements and as a result enjoy faster and easier access to the market. But the UK regulator isnâ&#x20AC;&#x2122;t convinced the AR concept works for the consumer. A report from the Financial Conduct Authority (FCA) raises serious doubts about the approach of the ARs and the â&#x20AC;&#x153;principal firmsâ&#x20AC;? â&#x20AC;&#x201C; the companies that hold the operating licence and have regulatory responsibility for the ARs. Itâ&#x20AC;&#x2122;s important to remember the issues raised are specific to the UK, and donâ&#x20AC;&#x2122;t necessarily have any bearing on Australia. The FCA survey focused on the conduct of principal firms, with its final report noting that â&#x20AC;&#x153;anything the AR has done, or omitted to do, is treated as having been done, or omitted to be done, by the principal itselfâ&#x20AC;?. â&#x20AC;&#x153;This means the principal is responsible for any regulatory breaches committed by their ARs in respect of the business for which the principal has accepted responsibility.â&#x20AC;? Initially an online survey of 190 principals â&#x20AC;&#x201C; all authorised general insurers or intermediaries â&#x20AC;&#x201C; was carried out. The group is responsible for 6000 ARs, selling more than 10 million policies and generating annual revenues of ÂŁ500 million. Further information was sought from a sample of 15 principals, and finally visits and interviews were carried out with 14 principals and 25 ARs. The outcome of all that information is not pretty. Almost half the principals in the sample could not demonstrate they had considered and understood the scale and complexity of risks arising from their ARsâ&#x20AC;&#x2122; activities. â&#x20AC;&#x153;This resulted in some ARs conducting activities outside their principalâ&#x20AC;&#x2122;s core areas of expertise, where the principal lacked the ability or resources to oversee them effectively,â&#x20AC;? the report says. Many principals couldnâ&#x20AC;&#x2122;t demonstrate meeting obligations to consider the solvency and suitability of the AR on appointment. Nor had they considered the impact on their own compliance, or the adequacy of their own controls and monitoring resources. Some had not set up an appropriate operational framework for ARs. â&#x20AC;&#x153;We saw examples of contracts that were not fully compliant with the relevant requirements,â&#x20AC;? the report says. â&#x20AC;&#x153;In relation to ongoing oversight, we found that over half of the principal firms in the sample were not able to demonstrate consistently that they had adequate controls over the ARsâ&#x20AC;&#x2122; regulated activities or adequate resources to monitor and enforce compliance by their ARs with the relevant requirements.â&#x20AC;? The regulatory framework aims to ensure that customers buying insurance products from an AR are afforded the same level of protection as if they were purchasing products from the principal firm itself. However, the report notes that in relation to many of the principals in the sample â&#x20AC;&#x153;the shortcomings that were apparent in risk management, control and oversight gave rise to risks to customer outcomesâ&#x20AC;?. insuranceNEWS
â&#x20AC;&#x153;In a third of the principal firms, we saw examples of potential mis-selling and customer detriment as a result of ARsâ&#x20AC;&#x2122; actions, with most of these issues not previously identified by the principal. â&#x20AC;&#x153;This included customers buying products that they may not need, under which they may be ineligible to make a claim, or without being provided with enough information â&#x20AC;&#x201C; including key exclusions â&#x20AC;&#x201C; to make an informed choice.â&#x20AC;? At one principal firm the FCA found â&#x20AC;&#x153;significant evidenceâ&#x20AC;? of misselling by ARs leading to customer detriment, with some customers buying warranty insurance under which they were clearly ineligible to claim. The regulator concedes that some firms do get things right, but notes that such firms are relatively unusual. â&#x20AC;&#x153;A minority of principal firms within the sample had a good understanding of their ARs and were able to demonstrate how they effectively managed, monitored and mitigated the risks arising from their activities,â&#x20AC;? the report says.
23"0(+#31*/130 2-3*/)"30"31*2 %-,+',%/)3",-&.3,+31*23./&%)2 !2-23+013/ )23103#2&0+.1-/12 '0+.,.12+1) 31*/131*2 3*/# /#2 (/123'0+1-0).30 2-31*23 . 3-2$()/12#3/'1, ,1,2. But it is scant consolation â&#x20AC;&#x201C; AR practices were â&#x20AC;&#x153;predominantly poorâ&#x20AC;?. The FCA has taken early intervention action at five of the 15 principals in the sample. This includes: â&#x20AC;˘ Commissioning reviews to assess whether customers have suffered from mis-selling; â&#x20AC;˘ Ordering two firms to cease sales activities; â&#x20AC;˘ Stopping five firms from taking on new ARs; and â&#x20AC;˘ Considering the need for customer redress and whether further regulatory action is required. The FCA has also written to the chief executives of every principal firm in the general insurance sector â&#x20AC;&#x153;to remind them of its expectationsâ&#x20AC;?. Itâ&#x20AC;&#x2122;s a massive wake-up call for the industry, and thereâ&#x20AC;&#x2122;s a lot of work to be done now to restore faith in the British AR model. It looks like, in the UK at least, itâ&#x20AC;&#x2122;s been treated as an easy option and not given the attention it deserves. But the FCAâ&#x20AC;&#x2122;s message could not be clearer: do things properly or we wonâ&#x20AC;&#x2122;t let you do it at all.
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The Australian AR experience .WUNS6RUYWUNYHRMLSXNYRUYXHHXMVTDXUXSS THE OBVIOUS QUESTION IS, DO THE PROBLEMS IN THE British AR sector exist in Australia too? In October the Australian Securities and Investments Commission (ASIC) amended its record-keeping obligations to ensure advice licensees can adequately monitor and supervise authorised representatives. The changes require ARs to keep records, provide access to records and to hand them over to licensees on request for compliance purposes. ASIC Deputy Chairman Peter Kell says the changes clarify that the â&#x20AC;&#x153;ultimate responsibilityâ&#x20AC;? for advice rests with licensees. The ASIC action, combined with the untimely demise of Perthbased AR network Winley, might indicate that all is not well here, either. But that would be drawing too simplistic a conclusion, according to industry representatives. Resilium Managing Director Adrian Kitchin believes regulation in this country is â&#x20AC;&#x153;far from light touchâ&#x20AC;?. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s quite prescriptive, and I think rightly so, for how a general insurance licence-holder needs to operate,â&#x20AC;? he says. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s pretty clear, and the majority of licence-holders in this country are doing things the right way. â&#x20AC;&#x153;No matter what business you are in, there will always be people who seek to do the wrong thing, either actively or through incompetence. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m not close enough to say what actually happened, but Iâ&#x20AC;&#x2122;m sure there would have been warning signs apparent to those doing business with Winley. â&#x20AC;&#x153;Perhaps the lesson learned is that those doing business, whether thatâ&#x20AC;&#x2122;s insurers or brokers or ARs, need to talk up early, speak to the regulator early, if they see some evidence of potential wrongdoing or if something just doesnâ&#x20AC;&#x2122;t add up.â&#x20AC;? He believes the approach to ARs has evolved significantly over the years â&#x20AC;&#x201C; and for the better. â&#x20AC;&#x153;Maybe when ARs first came out, some brokers saw them as a cheap labour source. But now people understand that an authorised representative is exactly that, a representative of you and your licence and youâ&#x20AC;&#x2122;d better make sure they are doing the right thing. â&#x20AC;&#x153;Anyone who is running ARs as a full-time model, like Resilium, like Insurance Advisernet, like some others out there, are doing the right things. â&#x20AC;&#x153;If people are engaging in part-timeism, then that is where there are potentially some issues if they donâ&#x20AC;&#x2122;t have a very strong focus on regulation and governance.â&#x20AC;? Tony Walker, Managing Director at PSC Connect, says the Australian general insurance AR compliance model is strong and rigid, and monitored closely by ASIC and the Financial Ombudsman Service. â&#x20AC;&#x153;PSC Connect conforms to that, and has built a very strong compliance regime for all our ARs, both here in Australia as well as New Zealand,â&#x20AC;? he tells Insurance News. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s our No.1 priority. I am positive all the mainstream networks also run a stringent model, and we have to, because if thereâ&#x20AC;&#x2122;s a breach it reflects on us all. â&#x20AC;&#x153;There are a few brokers out there trying to run ARs on the side, and that might be an issue going forward. â&#x20AC;&#x153;We can monitor our ARs remotely, all the financial transactions 36
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T L E I T H U E T B K R E R O S A F O M P R E R E R V U I P CO R H U O B LA SURA LABOUR HIRE IS THE PURPOSE OSE BUIL BUILT LT SPECIALISTT AGENCY FOR LABOUR HIRE AND SPECIALIS TRALIA. RECRUITMENT INDUS INDUSTRY TRY RISKS IN AUS AUSTRALIA. We We have have a unique unique perspective. perspective. W We ec combine ombine this this with with industry industr y speciﬁc speciﬁc know-how know-how a and nd rresponsive esponsive sservice er vice tto o gi give ve o our ur b brokers rokers an an e edge dge in in a competitive competitive market. market.
K KEVIN E V I N CO CORKERY RK ER Y MANA MANAGING G IN G D DIRECTOR IR E C T O R S SURA UR A LABOUR L A B OU R HIRE HI R E
MEGAN M E G AN SHEEHAN SH E E HAN SENIOR S EN I O R UNDERWRITER UN D ER W RI T ER S SURA UR A LABOUR L A B OU R HIRE HIRE
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TTELEPHONE. E L E P H O N E . 0033 66231 2 3 1 7700 7 700 EEMAIL. MAI L . M MEGAN.SHEEHAN@SURA.COM.AU E G AN . S H E E HAN @ S U R A .C O M . A U
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Recruitment Recruitment ﬁ ﬁrms, rms, b both oth blue b lue collar collar an and dw white hite c collar. ollar. Labour L abour hire, hire, both both blue blue collar collar a nd w ollar iincluding, ncluding, and white hite c collar b ut not not limited limited tto: o: M but Mining; ining; C onstruction; Factory Factor y workers; Construction; workers; F arms; H ospitality; Engineering; Farms; Hospitality; Engineering; D rivers a nd Welding. Welding. Drivers and
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Product Product and co coverage verage descriptions in this document are intended only as a guide to co coverage verage terms and conditions and beneﬁts. Policy Policy co coverage verage is subject to the speciﬁc terms and conditions as outlined in each policy policy w wording. ording. For more information information about our products, products, please discuss with your your SURA Labour Hire representative. representative. SURA Labour Hire Pty Ltd ABN 67 604 373 088. representative LTD TD ABN 36 A corporate authorised representativ e of SURA PTY L T 3 115 672 350, AFSL 294 313.
INMAG DEC 16_page layouts 1/12/2016 6:07 pm Page 38
and premium payments are controlled centrally, and the fact we have a compliance manager in-house sets the standard we require from our brokers. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re also very careful about recruitment and only identify brokers who are 100% committed, are well qualified and professional in their business. â&#x20AC;&#x153;We provide a lot of training, not only about insurance but how to manage a successful broking business. â&#x20AC;&#x153;With Winley, it wasnâ&#x20AC;&#x2122;t down to the brokers, it was the licensee and directors. You canâ&#x20AC;&#x2122;t blame the ARs for what happened there.â&#x20AC;? United Insurance Group General Manager Trevor Howard tells Insurance News the concerns are different Down Under, compared with those in the UK. â&#x20AC;&#x153;Our issues are more on what we are not selling, rather than misselling the wrong products. â&#x20AC;&#x153;The greater challenge is getting the clients to accept the additional covers required or alternatively documenting their preference not to. â&#x20AC;&#x153;As an industry, our training has a strong emphasis on the structure of general products and how they can be applied to clientsâ&#x20AC;&#x2122; needs, rather than selling for the dollar. â&#x20AC;&#x153;In addition, the way the current products are packaged assists in ARsâ&#x20AC;&#x2122; understanding and delivery.â&#x20AC;? He says the Winley problem was primarily due to financial management, rather than the standard of advice. â&#x20AC;&#x153;It is difficult to know what factors the regulator was aware of leading up to the Winley collapse, but if matters such as lack of financial returns had been detected, then certainly they should have been acted upon sooner,â&#x20AC;? he said. Managing Director of Insurance Advisernet Shaun Standfield told Insurance News â&#x20AC;&#x153;we treasure and protect our licenceâ&#x20AC;?. Systems and processes support a risk-based approach to clientsâ&#x20AC;&#x2122; insurance needs, he says. â&#x20AC;&#x153;Our bespoke iaAnyware system and exclusive 5Star Risk Survey system support the adviser through the risk analysis process ensuring compliance with obligations and best practice in regards to standards of advice and service delivered to the client.â&#x20AC;? ARs and their staff have access to a high level of training and support, and practice reviews maintain compliance, he says. â&#x20AC;&#x153;We make no compromises when it come to our licensee obligations. Our ARs fully understand the standard of advice, service and compliant business practices required of them. â&#x20AC;&#x153;Our compliance framework is robust and is supported by great people, culture, systems and procedures. â&#x20AC;&#x153;Regular measurement and review allows us to identify our compliance systems efficiencies and allows improvements to be made as required. â&#x20AC;&#x153;As licensee we partner with our ARs â&#x20AC;&#x201C; this approach is hands-on and we work together to protect, enhance and grow their business and ours.â&#x20AC;? Mr Standfield says Winley represents the exception rather than the rule. â&#x20AC;&#x153;From our perspective in the AR space the regulatory framework is relevant and appropriate and we are respectful of this and proactive in our approach to consumer protection.â&#x20AC;? 38
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Broker education – lots of questions 5DXQGRUXYFWUVSYPTJP IQRHXSSTRUWOYSVWUNWQNSC ELVYPRFYVPWVYHTVSYFTVPYVPX QXJLOWVRQ@SYQLOXSYWUNYW MRKIOTMWVXNYVQWTUTUJ SXMVRQYTSYURYSTKIOXYKWVVXQ By Wendy Pugh
GENERAL INSURANCE BROKERS CAN sleep easy over new rules to raise financial adviser standards that recently came before Federal Parliament. Those standards, which – among other changes – require financial advisers to hold degrees, have excluded general insurance, allaying early fears that education costs for brokers could unnecessarily skyrocket. But the qualifications brokers should have and how that is regulated and provided are issues still bubbling away, touching on uncertainties around vocational education provided through registered training organisations (RTO), and changing ways of studying and working. It’s a key concern for Australian financial services (AFS) licensees who must ensure their staff meet compliance rules. “Not all training courses are created equal,” Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Chief Executive Prue Willsford tells Insurance News. “Part of the skill of an RTO is ensuring that the training is at the level and rigour required to be suitable.” Debates over degrees versus certificates, time taken to complete qualifications, what technical skills are included and whether qualifications are doing the industry justice can prove emotive. To LMI Group’s Allan Manning, who has taken up a shareholding in an RTO, training is the most vital cog in the development of insurance industry professionalism. “Insurance is just so important to our customers,” he tells Insurance News. “If we get it wrong, they can lose their business, their income, their superannuation, the mortgage over their home and their place in society.” While prospects of a compulsory degree insuranceNEWS
for insurance brokers have been put aside, the focus is still on Australian Securities and Investments Commission (ASIC) requirements for general insurance – how they should be met and what’s next on the horizon. Skills and knowledge for advisers, including general insurance brokers, are spelled out in Regulatory Guide 146, which ASIC has been reviewing, separately to the parliamentary inquiry that focused on financial planners. Tier 1 competency under ASIC RG146 is broadly equivalent to a diploma level subject, while most general insurance products fall within the Tier 2 category, which is more in line with Certificate III level. Alongside that, insurance certificates and diplomas are part of a burgeoning vocational training sector. More than 4500 RTOs cover areas such as aged care, hospitality, carpentry, dog training, fashion styling, engineering technology and hairdressing. Industry reference committees develop training packages that contain the qualifications, and RTO-delivered courses are ticked off by the Australian Skills Quality Authority (ASQA). Despite the regulation, there’s still wide variation over how courses and units are delivered. For insurance, ASIC doesn’t see itself as a regulator of training courses, but the ASIC and ASQA realms are nevertheless linked. “To a limited extent, we liaise with the industry reference committees/skills service organisations in relation to the Financial Services Training Package,” an ASIC spokesman tells Insurance News. “We do not endorse the courses. This is for ASQA to regulate.”
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She says the regulator understands there is close mapping between RG146 requirements and ASQA units, “but it is not an area where ASIC has oversight”. The ASQA-approved Diploma of Insurance Broking, amended last year, includes the subject “Provide advice in insurance broking” as an ASIC Tier 1 compliance elective. It lists three prerequisite units, including “Deliver professional insurance broking services”. Tier 1 compliance can also be gained outside a diploma qualification, or as a step along the way, as long as standards in RG146 are met. “They sit side-by-side and they touch, but they are not tightly coupled,” Ms Willsford says. “Ultimately the responsibility sits with the (AFS) licensee in terms of ensuring that the training is appropriate.” ANZIIF has this year launched a new model of education, based on time-efficient, bite-sized skills units that can be combined for various job needs and qualifications. “We have had exceptional feedback from industry around our new skills units in terms of what they teach, how they teach and how they assess and really embed knowledge,” Ms Willsford says. The ANZIIF offering includes a Tier 1 insurance broking compliance qualification that involves six weeks of learning and one week of assessment. It includes an exam and two interactive scenarios. On the ASQA side, it simply lists the unit “Deliver professional insurance broking services” as a competency. Students doing the compliance subject insuranceNEWS
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should have some experience in the industry, and a separate base-level subject may also be recommended. Other study areas available from ANZIIF include a range of foundation subjects as well as qualifications such as diplomas. According to the training.gov.au website, 40 RTOs are approved to deliver the â&#x20AC;&#x153;Provide advice in insurance brokingâ&#x20AC;? unit, but many are not focused on general insurance, leaving doubts over the wider depth of knowledge. The main providers of general insurance broker education are ANZIIF, major training company Kaplan Professional and insurance industry training specialists Gold Seal and The Financial Services School. Financial Services School Chief Executive Val Phinn says that given various discrepancies, more guidance is required on what is needed from ASQA, training course developers or ASIC. â&#x20AC;&#x153;It is confusing at the moment what the requirements for Tier 1 are, and that is reflected across the industry,â&#x20AC;? she says. â&#x20AC;&#x153;All things aside, this needs to be addressed.â&#x20AC;? Under the current situation, a student with a life insurance or banking focus could hold a statement of attainment without having solid underpinning general insurance knowledge, she says. That can cause difficulties for other RTOs and potential employers and licensees. The ASIC RG146 document outlines required knowledge such as types and classes of insurance products, policy wordings and claims. Skills include analysing client needs, and developing and implementing agreed actions. Across financial services, RG146 has been criticised for not giving enough guidance on just how much depth and 42
complexity in training is needed to meet the standards. ASIC also used to publish a register of approved RG146 training organisations, but has abandoned maintaining the list, as it didnâ&#x20AC;&#x2122;t audit the providers and feared it could be giving a false impression of quality assurance. General insurance has taken something of a back seat when it comes to further training scrutiny amid planning scandals that have forced the major banks to pay millions of dollars in compensation to people who received rogue or incompetent advice. But the insurance industry canâ&#x20AC;&#x2122;t afford to be complacent about its standing, particularly with more generic products sold direct to customers and intermediaries needing to find ways to add value. Ms Phinn says there is a lack of technical general insurance expertise in the present training package courses, with outlines specifying a generalised product knowledge rather than drilling down more deeply. Whether improved standards means going up the qualifications ladder remains a controversial question, with each rung adding costs for perhaps limited practical benefit, even as the industry would welcome higher status. â&#x20AC;&#x153;An insurance broker is as important to a business as accountant or a lawyer, because youâ&#x20AC;&#x2122;re a protecting that personâ&#x20AC;&#x2122;s lifeâ&#x20AC;&#x2122;s work,â&#x20AC;? Professor Manning says. Under the Australian Qualifications Framework (AQF), there are 10 levels from Certificate 1 all the way through to a doctoral degree. A Certificate III in Insurance Broking sits on the third rung, a vocational training level that wouldnâ&#x20AC;&#x2122;t be out of place in some senior secondary school courses. insuranceNEWS
The National Insurance Brokers Association (NIBA) backs holding a Diploma of Insurance Broking, which sits at level 5 on the AQF scale. But it argues against imposing compulsory degrees on brokers. NIBA College, which ran its own courses before it negotiated a deal last year making ANZIIF its preferred education supplier, highlighted the constantly changing demands in a submission to the Government earlier last year. â&#x20AC;&#x153;Courses and qualifications are constantly and regularly reviewed to ensure they remain relevant, up to date, and accurate, in keeping with changes in the industry, the development of new products and processes, and any changes in the law that might affect insurance policies and the rights and obligations of clients and policyholders,â&#x20AC;? NIBA said in its submission. Ms Willsford says people come to insurance with a range of life skills and educational backgrounds that can prove valuable, while many of the skills needed to be a great broker can then be taught at the vocational level. â&#x20AC;&#x153;Where I do think there is increasingly the ability for brokers to have education at higher levels is in risk management,â&#x20AC;? she says. â&#x20AC;&#x153;Great brokers now are actually great risk advisers.â&#x20AC;? The regulatory and education environment is likely to keep changing while training standards may not easily align with a one-size-fits-all mould. Ms Willsford says that like all things, â&#x20AC;&#x153;it depends on your client setâ&#x20AC;?. â&#x20AC;&#x153;It depends on the products that you are selling and it depends on the industries that you are selling into, because that will help to define the level of skill and experi ence that you need.â&#x20AC;?
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CERTAINTY At United Insurance Group, we believe authorised reps should know who theyâ&#x20AC;&#x2122;re dealing with. We want them to be part of a true partnership. UIG is committed to maintaining that partnership and ensuring a clear future for your business. Call Trevor on 03 8676 0344 or 0431 705 660 or you can email firstname.lastname@example.org to discuss why weâ&#x20AC;&#x2122;re growing so quickly.
At UIG your future is certain
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A competitive fee structure with no extra charges for PI or additional fees collected directly from clients
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Access to the wider range of underwriting and support services through the Steadfast Group.
www.uig.net.au ww w.u i g .n et.au | Contact Co n ta c t General Ge n er a l Manager Ma n ager Trevor Trevor Howard How a rd | 03 8676 867 6 00344 34 4 | trevor@ email@example.com u i g .ne t . a u
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Turning up the heat
3XSTOTLK@SY?NQTWUY"TVMPTU PWSYETJYIOWUSYHRQYVPX <LUMRQIY?3YUXVFRQA By John Deex ADRIAN KITCHIN KNOWS THE INS AND outs of authorised representative (AR) networks better than most. Following a decade with trailblazer Insurance Advisernet, he has now spent more than a year as Managing Director of Suncorpâ&#x20AC;&#x2122;s Resilium. And after a period of bedding in, he says heâ&#x20AC;&#x2122;s ready to turn up the heat on the competition. â&#x20AC;&#x153;I spent 12 months analysing the business, formulating strategy and then starting to roll it out,â&#x20AC;? he tells Insurance News. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s done; 2017 is the year to hit the afterburners and absolutely go after it, so weâ&#x20AC;&#x2122;ll be a lot more visible in the marketplace. â&#x20AC;&#x153;Youâ&#x20AC;&#x2122;ll be hearing a whole lot more from Resilium as we bring some well-known professional recruits in. Weâ&#x20AC;&#x2122;re happy to take the business from anyone, brokers or ARs.â&#x20AC;? Itâ&#x20AC;&#x2122;s easy to talk the talk, but can Resilium back up these strong words with action? Absolutely, Mr Kitchin says. He is very complimentary about his former employer, but says Resilium â&#x20AC;&#x201C; thanks to the scale of support from Suncorp â&#x20AC;&#x201C; has vastly greater potential. Previously known as AMP General Insurance Distribution, Resilium was acquired by Suncorp from the financial services giant four years ago â&#x20AC;&#x201C; although a strong relationship had been in place for years, with Suncorp providing product for AMP to distribute. â&#x20AC;&#x153;The decision was made, rightfully, to acquire the business, and it was renamed and Resilium was formed,â&#x20AC;? Mr Kitchin says. â&#x20AC;&#x153;But it has been a company since 1958. Itâ&#x20AC;&#x2122;s got a long, proud history and many of the ARs have been here for many years. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s a very well established business with a very strong customer connection, and I saw the opportunity to come in and take it to a new level. â&#x20AC;&#x153;Insurance Advisernet was a great place to work. Iâ&#x20AC;&#x2122;m very pleased with the company I left behind and Iâ&#x20AC;&#x2122;m confident it will continue to be a success. â&#x20AC;&#x153;But the benefit Suncorp offers in terms of its sheer scale â&#x20AC;&#x201C; marketing teams, underinsuranceNEWS
writing teams, claims teams and all of those things that arenâ&#x20AC;&#x2122;t necessarily available in a smaller organisation â&#x20AC;&#x201C; that was a large part of the attraction for me to come and work with Resilium. â&#x20AC;&#x153;It is part of one of the largest companies in Australia, let alone insurers.â&#x20AC;? A strategic plan is now being put into action, and a key focus area is growth. Continuing to invest in the professionalism of staff is also crucial, â&#x20AC;&#x153;putting back into the networkâ&#x20AC;?. And the new group-wide strategy introduced by Suncorp Chief Executive Michael Cameron ties in perfectly with Resiliumâ&#x20AC;&#x2122;s ambitions. â&#x20AC;&#x153;Michael has launched a new way of thinking for Suncorp,â&#x20AC;? Mr Kitchin says. â&#x20AC;&#x153;Core to what he is trying to do is elevate the customer, to make sure we as a business are delivering more customer needs. â&#x20AC;&#x153;Resilium is certainly going to play its part in that.â&#x20AC;? He says the changes introduced across the group have brought â&#x20AC;&#x153;huge opportunitiesâ&#x20AC;? that might not otherwise have been as easily won. â&#x20AC;&#x153;For example, the banking business previously ran quite separately to the insurance business and the wealth business. â&#x20AC;&#x153;Under the new model the organisation is effectively being turned on its side.
Innovation 'X@QXYWMVTDXOGYKRUTVRQTUJYFPWVYTSYJRTUJ RUBY'X@QXYJRTUJYVRYXUSLQXYFXYWQXYFXOO WUNYVQLOGYWPXWNYRHYVPXYMLQDXBY'TOO XDXQGVPTUJYKRDXYVRYWUYRUOTUXYQRER6 WNDTMXYKRNXO Y>YNRU@VYVPTUAYSRBY >YSVTOOYVPTUAYVPXYTUVXQWMVTRUYVPWVYW ELSTUXSSYRFUXQYPWSYFTVPYWYIQRHXSSTRUWO WNDTSXQYTSYWOFWGSYJRTUJYVRYPWDXYWYIWQVYVR IOWGBY?SYTUURDWVTRUYNQTDXSYNTSQLIVTRUYTU VPRSXYXWSTOGYMRKKRNTVTSXNYSIWMXSC GRL@DXYJRVYVRYHTUNYGRLQYIOWMXYTUYVPX KWQAXVBY ?SYWUYTUVXQKXNTWQGCYTHYGRLYWQXYVQGTUJ VRYEXWVYVPXYKWMPTUXCYGRLYWQXYIQREWEOG JRTUJYVRYORSXYRDXQYVPXYORUJYVXQKBY>V@SYOTAX IOWGTUJYMPXSSYWJWTUSVY(XXIY9OLXBY 'PXQXYMWUYGRLYKWAXYVPXYNTHHXQXUMX HQRKYWYMLSVRKXQ@SYIXQSIXMVTDX Y=PWV@S VPXYIOWMXYGRLYSPRLONYJRYVRYTHYGRL@QXYURV WOQXWNGYVPXQXB
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“All aspects of the business that deal with customers are now operating together, so we are working very closely with the Suncorp business bankers in terms of providing solutions for customers of the group, which is also of great benefit to our ARs in terms of increased opportunities to write business.” That link with other strands of Suncorp is what enables Mr Kitchin to talk about growth with such confidence. “In any distribution business, if you are able to tap into a bank and to have that access, it would be considered gold, and simply by being part of Suncorp our ARs get that,” he says. A steady stream of referrals also comes from the AAMI and GIO business contact centres. And the creation of broking arm Resilium Insurance Broking (RIB) two years ago has added another invaluable string to the network’s bow. In the past, ARs didn’t necessarily have access to the broader insurance marketplace, but RIB has changed that. “If a customer comes through one of the agri-bankers and they are looking for a farm or crop solution, under the previous model we might not have been able to do that. But in the new model we can,” Mr Kitchin tells Insurance News. “We can find who the specialist insurer might be and it doesn’t need to be a Suncorp insurer. “That is what RIB is doing. It has been going for two years now and it’s growing phenomenally.” Resilium ARs have access to Suncorp products, but most also have a cross-endorsement into RIB, meaning that if the customer’s needs aren’t met under the Resilium side, they have insuranceNEWS
access to the wider marketplace. Essentially, it means there is almost nothing Resilium can’t deal with. “They have the Suncorp product – which is our own product and it’s not available to the general marketplace. But when they need to, and agriculture is a great example of that, they can go into the marketplace to find a solution for the customer with one of the other players. “We deal with more than 100 insurers through RIB.” Resilium’s focus is the SME market, although it also serves a number of larger, corporate clients. It has almost 160,000 clients, across all sectors of the economy. “Within the AR group we have some ARs that specialise. Some might be professional indemnity specialists and others might be construction specialists, and that’s where they choose to focus,” Mr Kitchin says. “That’s what Resilium is doing differently today than, say, 15 months ago. We are engaging very much in tactical marketing with those ARs. We are bringing marketing expertise to the table to help them actually grow in that particular space.” And what about the general insurance marketplace? When is pricing going to turn? Mr Kitchin is prepared for a highly competitive environment for a good while yet. “We can all talk about pricing and product, the Australian economy and the general economy,” he says. “Boil it down and it’s highly competitive. “I think it’s going to continue to be highly competitive for quite some time. “There may be some hardening, and some players are talking about it, but the reality is that it’s going to be a very competitive place to operate.”
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Running alongside this is heightened scrutiny of the financial services sector by regulators and legislators. Mr Kitchin believes now is the time for those in the intermediary space to make some big decisions. “I think the days of small, independent brokers are probably numbered,” he says. “They need to be part of something bigger. “Whether they are acquired by a larger broker or they choose to become an AR of a group such as Resilium, it’s a choice they are going to have to make, because increasingly there needs to be more investment in that compliance and regulation and all that comes with it. “The barrier to entry if you are intending to start a brokerage these days is almost impossible with compliance, trust accounts, getting a licence in place, and so on. “Before you’ve even written a dollar you are half a million dollars spent. “That barrier to entry is incredibly difficult. I see the AR groups providing that ability to get into the market. It’s not easy but it’s easier. “I do see the market splitting. The smaller brokers probably need to seriously scale up or sell, and then we will see that the SME space will be pretty much dominated by the AR models while the corporate space will continue to be run by the larger brokers.” SME owners are intelligent people who demand value in their dealings with intermediaries, he says. They are generally well researched, but time-poor. “They are looking for value and value is one of two things – it’s either price or it’s advice. “I think ARs and brokers need to make a 48
choice about what type of intermediary they are. Are they in the advice game, or the price game? “Unfortunately, if they are in the price game I think they will probably not last the distance. “We have chosen to be in the advice game, which is why we are very much focusing on product, on technology and professional education, on assisting our ARs to be the best they can be.” He believes there is still an appetite for advice – and a willingness to pay more for it. “If you are able to explain why you are charging your client for advice, then the client will happily pay it. Frankly, if a client’s sole focus is on price, then they probably should be dealing direct. “In some of the direct channels you will get some advice, but it may not necessarily be tailored. And that, I think, is the difference that a good intermediary should provide.” There is debate over whether younger SME owners will turn to direct online offerings in future, but Mr Kitchin is not convinced this will happen beyond the smallest micro-businesses. “If you’ve spent 20-30 years building up your family’s wealth and it’s wrapped up in a business, the question a client should ask themselves is, ‘Am I willing to roll the dice on this or am I wanting to have the protection I know I will get by dealing with a professional adviser?’ “They may do some research online so that when they come to have a conversation with an intermediary they come at it from a more educated point of view. That means the intermediaries really need to be on their game. “They need to demonstrate that they are insuranceNEWS
experts in their field, because Google has all the information sitting there. You can read something, but the understanding is a higher order of thinking, and that’s where we are going in our particular business. “The only space we have in our business is for true professional advisers. That’s part of the evolution of Resilium.” He says the company has put on 10 new ARs in the past 12 months, all of whom were formerly employed in other companies. “We have portfolios that we can sell them to get them going, ready-made marketing plans and they’re off and running. That is one of the unique things Resilium can do that pretty much no other AR or broking network can do.” Mr Kitchin believes there is one other crucial attribute Resilium has over its major competitors – momentum. “Most of the others have reached a position where they are relatively full, working with what they’ve got,” he says. “With our marketing, our bank and our sponsorship, plus the overflow from the business contact centres, we can’t help but continue to grow.”
Cost of intermediaries =WATUJYMRSVYRLVYRHYIWGTUJYVPXYTUVXQKXNTWQG TSU@VYVPXYQTJPVYFWGYVRYORRAYWVYVPTUJSB >UVXQKXNTWQTXSYNRYWY*REYWUNYVPXGYUXXNYVR EXYQXKLUXQWVXNYHRQYTVBY=PXQXYWQXYWYORVYRH MRSVSYTUYVPXYTUSLQWUMXYELSTUXSSYVPWVYMWU EXYWVVWMAXNYORUJYEXHRQXYGRLYJXVYVRYVPWV IWQVTMLOWQYMWSXY#YMXQVWTUOGYVPWV@SYFPWV FX@DXYEXXUYNRTUJYTUY<LUMRQIB
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Bracing for seismic shifts 5WQVP&LWAXYQXSIRUSXSCYVQLSVYWUNYQXJLOWVTRUYWQXYAXGYTSSLXSYHRQYVPXYTUNLSVQGC WMMRQNTUJYVRY>USLQWUMXY:RLUMTOYRHY2XFY XWOWUNYMPTXHY=TKY/QWHVRU By Wendy Pugh
THE EARTHQUAKE THAT HIT CENTRAL New Zealand in November was a powerful reminder that the country ranks third in the world behind Chile and Bangladesh when it comes to potential economic losses from natural disasters. It’s a reality that is front and centre for Insurance Council of New Zealand (ICNZ) Chief Executive Tim Grafton as the industry focuses on how best to respond to quakes and other natural and man-made risks. The November shock came as the country continued to deal with repercussions from the quakes more than five years ago that devastated Christchurch. Treasury is now reviewing the Earthquake Commission Act that covers the role of insurers, amid calls for a speedier and better process. “We would like to see some progress in that area, and hopefully get the improvements needed to improve the responsiveness of our public and private sector insurance industry to another major catastrophe, which will happen one day, there is no doubt about that,” Mr Grafton tells Insurance News. Few New Zealand industries have such a central role as insurance across the range of potential crises, from day-to-day personal issues to cataclysmic threats. It’s a breadth Mr Grafton has come to appreciate since taking up his position at ICNZ four years ago. 52
“It’s an industry that really is absolutely fundamental to what we do, more so than any other industry I can think of,” he says. “The nature of taking risk for people covers so much, and philosophically it takes on the future and uncertainty of human existence to manage that.” That uncertainty was never clearer than after the 2010/11 earthquakes in the Canterbury region, where the risk was thought to be lower than other parts of the seismically active country. The 6.3-magnitude Christchurch quake in February 2011 was more damaging than an initial major temblor six months earlier, and was followed by thousands of aftershocks. Reconstruction costs are estimated at more than $NZ40 billion and the rebuild is likely to extend beyond 2020, according to the Reserve Bank of New Zealand (RBNZ). Private insurers had paid out almost $NZ19 billion in claims at the end of September, but some cases are unresolved more than five years after the event. The industry has come under fire for the delays, while discussions to improve the system are being thrashed out. Treasury has delayed introduction of its Earthquake Commission Act reform bill until next year “due to the complexity of the issues and engagement with insurance industry stakeholders”. insuranceNEWS
ICNZ says the system whereby the first $NZ100,000 is covered by the state-run Earthquake Commission (EQC), with “overcap” amounts later passed to private insurers, has slowed the process. The EQC is still handing properties over to insurers, with transfers for the year to September numbering 1443. Mr Grafton says insurers should handle claims from the start, rather than splitting the assessment process with the EQC. This would speed the process for the worst hit, least safe properties. Insurers have larger claims teams ready to respond, and taking the lead on assessments would help remove double-handling and disconnects between private companies and the EQC, ICNZ argues. “In a catastrophe you want to have the most efficient response possible, and there is a critical way of doing that,” Mr Grafton says. “You would have the identification of the most damaged properties much earlier in the process. “Last quarter we had 290 over-cap properties identified for the first time. That is an intolerable situation for a householder.” ICNZ also wants separate land and building cover – counter to Treasury proposals – amid concerns that a coverage limit could quickly be reached in a high-risk, hilly city such as Wellington. “You face the risks of underinsurance
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occurring with a sum-insured cap because you could have up to $NZ200,000 worth of land remediation required, leaving you with a dollâ&#x20AC;&#x2122;s house on top of the piece of land,â&#x20AC;? Mr Grafton says. The Christchurch quake response was well under way when Mr Grafton took the chief executiveâ&#x20AC;&#x2122;s job at the Wellingtonbased offices of ICNZ in 2012. Like his predecessor in the role, Chris Ryan, Mr Graftonâ&#x20AC;&#x2122;s career pathway has led from journalism and through positions in the political sphere. He has been an adviser to former prime minister Jenny Shipley, as well as Deputy Prime Minister Bill English and former finance minister Bill Birch. He also has experience in the corporate sector through his work as the executive director of a market research company. His experience in dealing with issues around reputation has provided valuable experience for his current role. The insurance industry regularly takes a reputational beating over cover and claims handling. â&#x20AC;&#x153;The essence of insurance is trust, because it is the delivery of the promise â&#x20AC;&#x201C; if the worst happens to somebody, we are there to provide support,â&#x20AC;? Mr Grafton says. â&#x20AC;&#x153;In that respect we have to have vigilant efforts to constantly look to promote trust in the industry and guard the industryâ&#x20AC;&#x2122;s reputation.
â&#x20AC;&#x153;And there are ways we need to do that more effectively.â&#x20AC;? ICNZ is looking at using data to better demonstrate delivery of the claims promise to customers, following the lead of the Association of British Insurers. It has also developed a revised Fair Insurance Code for members. The code was given teeth, with a maximum fine of $NZ100,000, when it took effect last January. â&#x20AC;&#x153;It is very important for the industry organisation to act clearly and decisively where it believes reputational matters have been affected adversely,â&#x20AC;? Mr Grafton says. â&#x20AC;&#x153;Regardless of who the member is, that has to happen if we are serious about looking after the reputation of the industry.â&#x20AC;? South African-owned Youi, charged by the Commerce Commission for misleading sales tactics, felt the force of the ICNZ code in October, when it was fined the maximum amount set by the council and warned it risked expulsion if it again failed to meet best-practice standards. More stringent self-regulation comes as the New Zealand insurance sector faces tighter rules compared with the more freewheeling environment of a decade ago. Reviews by the International Monetary Fund (IMF) and the RBNZ are set to drive further changes. The Insurance (Prudential Supervision) insuranceNEWS
Act (IPSA), introduced in 2010 and overseen by the RBNZ, changed the landscape, and the regulator is embarking on the first five-year review of the rules. Mr Grafton says RBNZ decision-making should be more transparent, while the review could also look at recovery mechanisms, such as those in Australia if an insurer fails. New Zealand has already set the bar high, with solvency standards that include cover for a one-in-1000 year event â&#x20AC;&#x201C; an elevated level compared with other countries. With the IMF conducting its first Financial Sector Assessment Program for New Zealand since 2003/04, there is no shortage of scrutiny at present. It is likely to release some of its findings in the first half of next year, feeding into the IPSA timetable. The regulatory review process then runs into the election cycle, with New Zealanders due to go to the polls by next November. Whatever the recommendations, Mr Grafton says it is important there isnâ&#x20AC;&#x2122;t a swing to a heavy-handed approach or to â&#x20AC;&#x153;tick-a-boxâ&#x20AC;? compliance that can have its own dangers. â&#x20AC;&#x153;We support good regulation, but I think it is important to have regulation that is appropriate for your country, not necessarily one that is slavishly adopting the models of other countries,â&#x20AC;? he says. â&#x20AC;&#x153;It is 53
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healthy for New Zealand to have a regulator that puts a lot of emphasis on saying, â&#x20AC;&#x2DC;Have you got the right risk culture?â&#x20AC;&#x2122;â&#x20AC;? The central bankâ&#x20AC;&#x2122;s IPSA review has generated controversy even before getting off the ground, with suggestions the RBNZ shouldnâ&#x20AC;&#x2122;t be conducting the assessment. If the protests fall on deaf ears, any change to the process may have to wait for next time around. â&#x20AC;&#x153;Really it is unusual and inappropriate for a regulator to review its own Act,â&#x20AC;? Mr Grafton says. â&#x20AC;&#x153;I think some element of independent review is required to give confidence in the thoroughness of the process. â&#x20AC;&#x153;We have written to the Minister of Finance saying it would be better to have a different process. If it doesnâ&#x20AC;&#x2122;t happen, at least the signal is out there.â&#x20AC;? Regulators and insurers worldwide are under pressure to keep up with evolving political, economic and business environments, and new risks from disruptive technologies. â&#x20AC;&#x153;The industry globally is on the cusp of significant changes, and you would want to ensure you have the appropriate regulatory framework that is supportive of competition, that is fair to all parties and also looks after New Zealand well so you have confidence in the industry.â&#x20AC;? In the emerging risk sphere, cyber crime poses dangers for organisations 54
ranging from government departments to small businesses, while the advent of driverless vehicles threatens upheaval in motor cover over the next decade. Most businesses in New Zealand employ only a handful of people, without IT departments, and cyber-risk insurance demand there is yet to take off, despite publicity around potential problems, he says. â&#x20AC;&#x153;The product is there [and] the need is there. The uptake is the challenge at the moment. There is a challenge there for the broking community to bridge the gap.â&#x20AC;? The New Zealand Government this year allocated $NZ22.2 million for a Computer Emergency Response Team, due to swing into action early next year. It will provide support for businesses hit by cyber attacks, while also helping authorities better understand the problem. Compared with catastrophe events, there is a lack of information on cyber crime. Internationally there are moves to step up mandatory reporting, with many companies reluctant to reveal incidents for fear of hurting their reputations. The Association of British Insurers has proposed a national anonymous database that could be made accessible to insurers so they can provide the right cover and properly price risk. â&#x20AC;&#x153;There is a growing consciousness of the vulnerability of businesses to cyber insuranceNEWS
attack,â&#x20AC;? Mr Grafton tells Insurance News. â&#x20AC;&#x153;You canâ&#x20AC;&#x2122;t continue with virtually every transaction going to be online... and not have some kind of ability to identify the scale and impact of those sorts of attacks.â&#x20AC;? Cyber crime is one of many areas in which the New Zealand industry expects fresh challenges. Even the nationâ&#x20AC;&#x2122;s vulnerability to the forces of nature is changing in the face of global warming. A report from the Parliamentary Commissioner for the Environment on sea level rises identifies $NZ20 billion of assets in New Zealand lying within 150cm of the average high-tide level. ICNZ says this underestimates the risks, because it doesnâ&#x20AC;&#x2122;t take into account ageing infrastructure and extreme weather events. More widely, climate change has highlighted the role of insurers in the transition to a low-carbon economy. Mr Grafton says the Canterbury earthquakes unequivocally demonstrated the value of insurance, and the industry has a key role in contributing towards the social, economic and environmental sustainability of New Zealand. At the same time, the industry has to spread its message and polish its reputation. â&#x20AC;&#x153;In terms of the risks we face, as humans, that the planet faces, insurance is absolutely there,â&#x20AC;? he says. â&#x20AC;&#x153;Is there anything more important?â&#x20AC;?
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The war on bugs ?UVTKTMQRETWO6QXSTSVWUVYNTSXWSXSYIRSXYW NWUJXQYVRYPXWOVPYWUNYSVWETOTVGYFRQONFTNXC ELVYVPXYHTJPVEWMAYTSYLUNXQYFWG By Andy Swales
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WHEN CONSIDERING THE GREATEST THREATS facing the world today, many people’s minds turn to global warming, economic and political instability, war and terrorism. Antimicrobial resistance (AMR) may not trip off the tongue quite so easily, but according to United Nations Secretary-General Ban Ki-moon, it poses “a fundamental, long-term threat to human health, sustainable food production and development”. The implications of more bacteria, viruses, parasites and fungi developing resistance to medicines such as antibiotics are stark. Research published this year by the UK’s Institute and Faculty of Actuaries forecasts AMR could reduce global GDP by 3.5% – about $100 trillion – and kill 10 million people a year by 2050, up from about 700,000 presently. That would make it more deadly than cancer is now. Assistant Director-General of the UN World Health Organisation (WHO) and Special Representative for Antimicrobial Resistance Keiji Fukuda says the financial costs would be “enough to send countries backward, particularly those that are in precarious economic conditions”. Speaking before a UN meeting on AMR in September – when world leaders pledged an “unprecedented level of attention to curb the spread of [resistant] infections” – he also warned of the danger to sustainable food supplies, which depend heavily on antibiotics to treat ill animals and prevent the spread of diseases. The UN says AMR has occurred due to infectioncausing micro-organisms changing as they are exposed to antimicrobial drugs such as antibiotics, antifungals, antivirals, antimalarials and anthelmintics. This creates “superbugs”. In the Institute and Faculty of Actuaries report, Sally Davies, Chief Medical Officer for England, says the “golden age of antibiotics, which the world has taken for granted for well over 50 years, has ended”. She says AMR has “increased alarmingly, accelerated by the overuse of antibiotics in many countries for medicinal and also agricultural purposes”. Meanwhile, “research into new antibiotics has not matched the evolution of the bacteria themselves; no new major class of proven antibiotics has been brought into clinical use since 1987”. Professor Davies warns we are “already seeing the consequences of AMR, with estimates of about 50,000 deaths per year recently in Europe and the US due to insuranceNEWS
antibiotic-resistant infections, and far greater numbers worldwide”. “The projected figures are much more worrying,” she says. “It is quite possible – and perhaps even likely – that the recent era of material mortality improvements will give way to many years of material mortality worsening.” Mr Ban agrees the situation is already “sobering”. “More than 200,000 newborn children are estimated to die each year from infections that do not respond to available antibiotics,” he told the UN meeting in September. “An epidemic of multidrug-resistant typhoid is now sweeping across parts of Africa, being spread through water. Resistance to HIV/AIDS drugs is also on the rise. “Extensively drug-resistant tuberculosis has been identified in 105 countries. And resistance to antimalarial medicines is an urgent public health concern in the Greater Mekong sub-region [of southeast Asia].” A recent report on AMR from Munich Re cites the case of the antibiotic colistin. It says the drug was “rarely used on humans because of its harmful effects on the kidneys, although it has been used extensively in veterinary medicine”. In recent years, as other drugs became less effective, it was used as “a last-resort treatment for some patients with specific hard-to-treat bacterial infections”. In November 2015 scientists announced the emergence of E.coli bacteria in China carrying the MCR-1 gene, which makes bacteria resistant to colistin. An infection with E.coli bacteria can cause gastroenteritis and even kidney failure. A study in The Lancet medical journal describes this as the “breach of the last group of antibiotics”. Munich Re says researchers have succeeded in transferring colistin resistance to other bacteria, and “are now more concerned than ever before that panresistant bacteria could develop”. The implications for life and health insurers are clear. Munich Re says a slow but significant increase in AMR-driven illness and deaths “may affect overall pricing of life insurance products at some point. Underwriting and claims will need to assess diseases and risks that have been unknown to life insurance since the pre-antibiotic era.”
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Healthcare costs will rise as simple treatments such as penicillin need replacing with new, more expensive drugs. As for general insurance, a recent Lloyd’s report on potential pandemic illness outbreaks flags spikes in liability claims against the medical profession, major employers and anyone else to whom blame may be attached, plus impacts on lines such as business interruption, travel cover and credit insurance, and even secondary property impacts linked to social unrest. So what can be done? At the UN meeting in September Mr Ban noted the need for “deep engagement, co-operation and co-ordination of several sectors, and sustained financing” to tackle the overuse of antimicrobial treatments. Heads of states committed for the first time to a co-ordinated approach to address the root causes of AMR across multiple sectors, “especially human health, animal health and agriculture”. In a joint statement, the WHO, the Food and Agriculture Organisation of the UN and the World Organisation for Animal Health said: “Leaders recognised the need for stronger systems to monitor drug-resistant infections and the volume of antimicrobials used in humans, animals and crops, as well as increased international co-operation and funding. “They pledged to strengthen regulation of antimicrobials, improve knowledge and awareness, and promote best practices – as well as to foster innovative approaches using alternatives to antimicrobials and new technologies for diagnosis and vaccines.” Farming in particular has been told to raise its game. “Agriculture must shoulder its share of responsibility, both by using antimicrobials more responsibly and by cutting down on the need to use them, through good farm hygiene,” Food and Agriculture Organisation Director-General Jose Graziano da Silva warns. In November, as part of world Antibiotic Awareness Week, Health Minister Sussan Ley outlined the Federal Government’s response. It recently introduced a National AMR Strategy implementation plan, featuring resources to support health professionals and raise awareness among the community, species-specific antibiotic guidelines for vets and a national antibiotic usage surveillance 58
3-2'2+13 )0 # .3-2%0-130+3%012+1,/) %/+#2&,'3,))+2..30(1 -2/ .3")/$.3.%, 2. ,+3),/ ,),1 3')/,&.3/$/,+.131*23&2#,'/) %-0"2..,0+ 3&/ 0-32&%)0 2-.3/+#3/+ 0+2 2).23103!*0&3 )/&23&/ 3 23/11/'*2# system for integration with animal health and agricultural surveillance. She says compared with other OECD countries, Australians have a high use of antibiotics for human health, and she encourages people “to consider their use of antibiotics. Antibiotics must only be used when they are really needed.” But cutting down on antimicrobial drug use is just one side of the equation. As Munich Re says, the effects of AMR can be “mitigated or even prevented altogether if new antibiotics are developed and other methods for fighting infectious diseases, such as genetic engineering, become a reality”. In the Institute and Faculty of Actuaries report, Professor Davies notes “there are great hopes for last year’s development of teixobactin”. Teixobactin is a newly discovered antibiotic – isolated from micro-organisms in soil by US researchers – that has been hailed as a potential game-changer in the fight against AMR. This year scientists at the UK’s University of Lincoln produced two synthetic derivatives of what they call “the world’s first known antibiotic capable of destroying drug-resistant bacteria”. This breakthrough paves the way for its development as a clinical treatment. Lead researcher Ishwar Singh warns bringing new antibiotics into clinical use can take 10-15 years, but his team’s work is a “very important stepping stone towards an in-depth study of teixobactin and the quest for synthesising similar molecules that could prove vital in our fight against drug-resistant bacteria”. “Breakthroughs such as this via organic chemistry have to be made to keep the drug resistance problem in check.”
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Utmost good faith =PXYSVRQGYEXPTUNYWY 1!;6GXWQ6RONYMRLQVY MWSXYVPWVYHRQKSYVPX EWSTSYRHYKRNXQU TUSLQWUMXYIQWMVTMX By Terry McMullan
A CONFERENCE IN OCTOBER IN, OF all places, Sumatra in Indonesia commemorated the 250th anniversary of a principle that today underlies the hundreds of millions of insurance policies contracted around the world each year. The event in the coastal city of Bengkulu celebrated the intriguing story behind the legal precedent of uberrima fides – literally “most abundant faith”, but better known to the insurance industry as the principle of utmost good faith. The two-day conference was a joint initiative from LMI Group Managing Director Allan Manning and Perth barrister Greg 60
Pynt, supported by the University of Western Australia. Delegates from four countries, representing all sides of the insurance profession, travelled to Bengkulu – Professor Manning calls it a pilgrimage – to celebrate a legal decision delivered in 1766 by Lord Mansfield in the Guildhall in London. The story behind the formation of uberrima fides in insurance is rich in history. It begins with the powerful British East India Company, an English trading group formed in 1600 by aristocrats and wealthy merchants to build trade in Asia. Over the next 250 years the company insuranceNEWS
grew to account for half of the world’s trade – everything from cotton and tea to opium. Under edicts signed by King Charles II in 1670, it had the power to acquire territory and make laws, mint money, form alliances and even make war. It acquired – by various means – large slices of India and other territories in Asia and enforced its rule with private armies and a powerful navy. The 17th century was a period when the European powers competed for colonial territory, and the British East India Company’s activities in Asia occasionally led to conflict. In 1685 the company founded Bencoolen – now Bengkulu – on the west
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coast of Sumatra as a trading centre to enforce its foothold in the region’s lucrative spice trade. The move brought the company into conflict with the dominant European trading power in the area, the Dutch East India Company. In 1713 the British began building a defensive fort at Bengkulu, to be known as Fort York. But before Fort York was completed the British East India Company set out to build another, stronger fort, some 3km distant, which was named Fort Marlborough. This building was probably quite suitable for a slightly sleepy trading backwater
that sat in a strategic position at the head of the port. Convict and local labour was used to build Fort Marlborough, but progress was slow. The most notable interruption was a local uprising that saw the East Indiamen flee to the company’s regional headquarters in Madras, India. They didn’t return until a peace agreement was signed in 1724. The next time Fort Marlborough faced conflict was in late 1759, when Britain was deeply embroiled in the Seven Years War – which actually lasted nine years, from 1754-63. The war involved all the great powers of Europe, with the British fighting France insuranceNEWS
and Spain over a series of colonial and maritime disagreements, while Frederick the Great of Prussia took on Austria, France and Sweden. Familial ties between various royal rulers escalated the war to include other, smaller European countries. It was complicated. In April 1760 a squadron of French privateers – privately owned ships acting with the blessing of the French Government – arrived off Bengkulu. The privateers had been attacking company ships across the region and even its fort in Madras, and from all accounts they had little difficulty in occupying Fort Marlborough, which they 61
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proceeded to destroy with explosives. The fortâ&#x20AC;&#x2122;s commander, a deputy governor named Roger Carter, surrendered along with many of his officials. They were sent back to Madras once a ransom was paid. The following year Carter and his officials returned to Bengkulu after the privateers left the area, flush with yet another ransom paid for the return of what remained of Fort Marlborough. Carter set to work building a stronger fort, and all might have been well for him were it not for the denial of an insurance claim on an unusual contract he had taken out in London with a private underwriter named Charles Boehm. Carter lodged a claim for the loss of the fort, which had not been insured by the East India Company. This claim gave rise to a court case, the resolution of which still resonates in the global insurance industry. Carterâ&#x20AC;&#x2122;s position in Bengkulu had apparently brought him considerable wealth. It was not gained illegally, but it was nevertheless earned through side-dealings and activities that might today be regarded as corporate kickbacks. His later court depositions stated he owned ÂŁ20,000 of goods at Fort Marlborough when the French attacked in 1760. The court case that followed revealed that in August of the previous year Carter had been warned by letter of a possible French attack on Fort Marlborough. In the following month, September 1759, he sent a letter to his brother Robert in London asking him to arrange insurance in his name against the loss of Fort Marlborough due to action by a foreign enemy. The letter arrived in March 1760 â&#x20AC;&#x201C; just a month before the French attacked â&#x20AC;&#x201C; and a policy underwritten by Boehm was in place by May 9. As Professor Manning notes in a highly detailed account of the case that will be published in a book commemorating the 250th anniversary, the insurance contract had an â&#x20AC;&#x153;interest or no interestâ&#x20AC;? clause. This meant Carter did not need to have insurable interest in the property at the time of its loss. But he did have an insurable interest. The contract was for a maximum loss of ÂŁ10,000 â&#x20AC;&#x201C; half the value of his stated private assets stored at the fort. Boehm rejected Carterâ&#x20AC;&#x2122;s claim on the grounds he had concealed circumstances that should have been disclosed. These were specifically that the fort had been designed solely for defence against an attack by the local population. Boehm also stated Carter had advance knowledge of a plan by the French to attack it â&#x20AC;&#x201C; a fact 62
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What happened to Fort Marlborough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
borne out by the contents of his letter to his brother. Carter insisted he did not conceal his knowledge of the plan with intention to defraud. He argued all the circumstances were â&#x20AC;&#x153;universally knownâ&#x20AC;? and that he was obliged only to disclose the facts relevant to the contract, rather than â&#x20AC;&#x153;ideas or speculationsâ&#x20AC;?. The case was handled by an extraordinary judge named Lord Mansfield (see following article), who ultimately found for Carter. Mansfield decided an underwriter cannot insist a policy is void because the insuranceNEWS
insured did not tell it what he knew. â&#x20AC;&#x153;The insured need not mention what the underwriter ought to know; what he takes upon himself the knowledge of; or what he waives being informed of. â&#x20AC;&#x153;The underwriter needs not be told what lessens the [risk] agreed and understood to be run by the express terms of the policy. He needs not to be told general topics of speculation.â&#x20AC;? Accepting Carterâ&#x20AC;&#x2122;s side of the argument and rejecting Boehmâ&#x20AC;&#x2122;s, Mansfield said Boehm knew or ought to have known that the risk of the fort being attacked by a foreign force existed, because the political
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situation was public knowledge and the state of the fort was â&#x20AC;&#x153;well known by most persons conversant or acquainted with Indian affairsâ&#x20AC;Ś and could not be kept secret or concealed from persons who should endeavour by proper inquiry to inform themselvesâ&#x20AC;?. Further, he said: â&#x20AC;&#x153;The underwriter knew the insurance was for the governor. He knew the governor must be acquainted with the state of the place. He knew the governor could not disclose it, consistent with his duty. He knew the governor, by insuring, apprehended at least the possibility of an attack. With this knowledge, without asking a question, he underwrote.â&#x20AC;? By rejecting the claim, Boehm had not acted with utmost good faith. Regarded even today with awe by legal historians, Mansfield had argued for some years before this case that all business contracts should be based on the principle of uberrima fides, which should be binding on both parties to any transaction. In the case of Carter v Boehm, he explained the duty of disclosure â&#x20AC;&#x153;is to prevent fraud and encourage good faith. If [Boehmâ&#x20AC;&#x2122;s] objections were to prevail, the rule would be turned into an instrument of fraud.â&#x20AC;? He argued that in most cases only utmost good faith can ensure the insured does not have an advantage over the insurer. Insurance is â&#x20AC;&#x153;a contract upon speculationâ&#x20AC;?, he said, and the special facts upon which the risk is to be calculated â&#x20AC;&#x153;lie most commonly in the knowledge of the insured only. The underwriter trusts to his representation and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist. â&#x20AC;&#x153;Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.â&#x20AC;? Lord Mansfield was less successful in having the principle of utmost good faith become a standard part of the law pertaining to non-insurance contracts. Boehm paid the claim and â&#x20AC;&#x201C; apart from a couple of other disputed claims ending up in court â&#x20AC;&#x201C; vanished into obscurity. Much the same can be said of Carter, who presumably retired to England with the considerable assets gained in a career of service to the East India Company. The principle of uberrima fides is very much alive. It remains an overriding principle of modern insurance practice in most developed countries. In Australia it is enshrined in Section 13 of the Insurance Contracts Act. 64
The father of utmost good faith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Dawn of the robots =PXYWJXYRHYWLVRKWVXNYTUSLQWUMX WNDTMXYTSYMORSXQYVPWUYEQRAXQSYKWG VPTUABY>UYHWMVCYTV@SYWOQXWNGYPXQX By John Wilkinson THE FINANCIAL SERVICES SECTOR LOVES TECHNOLOGY, AND is always looking for the next way to transform the way it does business. And robo-advice will change everything. How quickly the automated provision of sometimes-complex advice comes to compete with human insurance brokers really isn’t clear. But it is coming, and some major financial services companies are already introducing it to sell insurance. The most active provider of robo-advice to date is Yellow Brick Road, which includes general and life insurance in its robotic financial modelling. The technology, called Guru, calculates clients’ financial needs and the actions required to meet them. NAB has announced plans to provide robo-advice on insurance to 40,000 customers, and Zurich says it will use automated advice to help sell life cover. So what is robo-advice? An accurate description features in a discussion paper on the topic from the Australian Securities and Investments Commission (ASIC). It describes robo-advice as “the provision of automated financial product advice using algorithms and technology and without the direct involvement of a human adviser”. “It can comprise general or personal advice and range from advice that is narrow in scope to comprehensive financial product advice.” Actuarial consultant Rice Warner has three definitions of what is robo-advice in a report on the topic. It says that based on global experience, robo-advice can be fully automated with no human interaction. Hybrid advice can be provided with various levels of sophistication, including the option of consulting a human. There is also a full-service advice model that uses technology to leverage off a consumer’s online discussions with the provider. Rice Warner says the full-service option will be aimed at wealthier clients with more complex issues. “Technology developments allow the delivery of scalable online advice tools to a large audience in a cost-efficient manner,” the report says.
“Properly utilised, robo-advice will allow providers of advice to extend their value proposition, and this will likely include many younger consumers.” ASIC backs robo-advice as a way of delivering advice to a wider audience, in a more cost-effective manner. “We think robo-advice has the potential to offer an attractive, convenient and low-cost advice service to clients who may not otherwise seek financial advice,” the regulator says. But not everyone is convinced it is the right time for regulation of robo-advice to be introduced. The Actuaries Institute says it’s still too early. “We believe this area is too complicated and fluid at this point to benefit from detailed regulations,” it says in a submission to the ASIC consultation paper on automated advice. “We suggest the area will develop best if providers of robo-advice are required to obtain appropriate professional advice.” The Association of Financial Advisers (AFA) also has concerns about regulation. It wants robo-advice providers to comply with the same rules as traditional advice providers. The AFA’s submission to ASIC’s paper says the way advice is delivered shouldn’t make any difference to compliance rules. “The obligations upon digital advice providers must be consistent with the obligations upon human advice providers regardless of the method. “The financial advice profession has been through significant regulatory change to raise trust and confidence of consumers.” But the AFA isn’t opposed to robo-advice, and admits it could enable more consumers to receive financial advice. “If technology-based offerings can fill the gap, this could be a helpful stepping-stone to drive the uptake of full, personally delivered financial advice,” its submission says. “But as more Australians start to seek advice, human advisers are best placed to deliver on clients’ more complex advice needs with empathy and holistic oversight of financial and lifestyle goals for clients.” The concept of robo-advice first emerged among United States investment fund managers who were seeking a way to challenge the financial adviser fee-based model. Start-up fund managers, rather than the well-known institutional names, drove its development. Many have become very successful. Warren Burns, founder of Melbourne-based innovation agency BurnsRED, says that success is due to the attention the developers pay to their algorithms.
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“They are solving complex problems with simple interfaces,” he tells Insurance News. “It is a financial advice tool that has hundreds of pieces of information about the client. Robo-advice can swallow up all that information and then spit it out again with tailored solutions. That was a shock to the financial advisers.” The US funds management model initially targeted areas of the market that were not well serviced, but today these direct businesses are aggressively targeting $1 million portfolios. “By keeping the advice simple, the US robo-advisers found new markets such as the Millennials, who weren’t being approached,” Mr Burns says. “They’d been too expensive to target using traditional advice models, but robo-advice made it possible. “Robo-advice has commoditised complexity, and created new markets.” In Australia the general insurance industry has yet to embrace robo-advice. “I don’t think the major general insurers have looked at roboadvice yet, but the start-ups certainly are looking,” Mr Burns says. “This will create new markets for the start-ups, but robo-advice will not replace the best brokers who have a good relationship with their clients.” Although there is a belief robo-advice will start in personal lines, a computer’s ability to obtain and sort masses of information means specialist lines will not be overlooked in the future. “First will be the mass market, but robo-advice will quickly address new users and service those demands,” Mr Burns says. “If I was an insurer, I would turn my business upside-down and look at losing a lot of overheads out of my proposition.” Such cuts may include brokers’ commissions. Developments in the life insurance industry at present perhaps give an indication of the future for brokers. A push by some life insurers to cut overheads has prompted legislation to limit commissions. “If I was an insurer, I would want to remove that large barrier between me and the client and not rely on a broker to give me that information,” Mr Burns says. Others believe the use of robo-advice might bypass the brokers and focus on areas such as claims management. According to research by Ernst & Young, claims management accounts for 14% of an insurer’s costs and 37% of an organisation’s headcount. In the world of simple claims, such as motor or homes, it is an area ripe for automation, says Ernst & Young Director Advisory Steven Girvan.
He predicts personal lines insurers may reduce their employee bases by up to 50%, with less severe cuts in commercial. “A lot of claims come from low-cost events and this is what will be automated,” he said. “Claims will work in a virtual team environment.” Mr Girvan says automated, rules-based processes for less complex tasks will reduce corporate risk and provide more real-time data for insurers. For the consumer it will bring faster, more standard responses. Remaining claims personnel will be more skilled, because many of the simple and time-consuming tasks they perform will be eliminated. Insurers will retain claims staff longer in more sophisticated jobs, and there will be more demand for staff with analytical skills as data volumes grow. While larger insurers will increase automation, it will be a challenge for the smaller ones due to technology costs, Mr Girvan says. “The smaller insurers will need to be selective when timing their investment in technology. The decision will be when to move towards a more mature system, but some of this technology is not expensive – the challenge is embedding it.” Everybody now accepts robo-advice is here to stay but there are still questions over who is legally responsible for delivering the automated service? Hence ASIC’s interest. The consensus is that the provider must be licensed by ASIC and meet all advice requirements under the Corporations Act and the Future of Financial Advice legislation. ASIC has flagged releasing regulatory guidelines on robo-advice. It does not want to impede its development, but does see a need for regulation. There is no doubt general insurers will embrace robo-advice, as cost savings make it very attractive. But will robo-advice bring benefits to brokers who have already lost the mum and dad market to automation? It also remains to be seen how quickly the insurers can embrace new technology with out-dated so-called legacy computer systems. They have been slow to embrace other technologies and even slower to rid themselves of legacy systems that contain important client data but can’t interface with newer systems. As Mr Burns says, it is the start-ups that will drive the change, and looking at Yellow Brick Road’s offering that links mortgages to gen eral insurance, tomorrow is already here.
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2RVYWURVPXQYRUX YWU RDXQFPXOKXNYLUNXQFQTVXQ TSU@VYJRTUJYVRYFXOMRKXYWU 4 6IWJXY+()YSMPXNLOXC FPTOXYWYSOTIYFTVPYLSWEOXYNWVW TUYWUY58MXOYWVVWMPKXUVYFTOO JXVYVRYVPXYVRIYRHYVPXYITOX
Broking commercial motor in a hard market =PTUJSYWQXYJXVVTUJYVRLJPXQCYWUNYEQRAXQSYUXXNYVRYAURFY SRKXYWOVXQUWVTDXSYVRYIQRVXMVYVPXTQYMOTXUVS By Steven Hamilton, Business Development Manager at Fleetsure
PREMIUMS IN THE COMMERCIAL motor market are taking a sharp turn upward, and brokers are being faced with an entirely different set of propositions for their clients. These premium increases are now a reality across most accounts – not just for clients under distress in short-tail classes – and provide brokers with both challenges and opportunities. Pricing on commercial motor has recently been greatly impacted by the prudential regulator raising concerns about insurers’ underwriting losses. The message of “fix the book or allocate more capital” is very clear. There have also been significant changes in and to market participants. The repricing of a couple of insurers’ big motor portfolios that were acquired a 68
few years ago and the exit of a player adds to the brokers’ current challenges of offering palatable pricing terms to their clients. It’s a much more difficult conversation to now have to explain a premium increase when for a number of years brokers have been able to offer year-on-year rollover or reductions in pricing – even when clients had less than ideal loss histories. In the soft market a change of insurers may have been required from time to time, but the same levels of premiums were able to be maintained. As insurers take action to correct unsatisfactory loss ratios, badly performing accounts are being exposed to increases, restrictions in cover or even, in some cases, declinature of renewal terms. At the same time, well-performing busiinsuranceNEWS
ness is being aggressively fought over as insurers try to maintain market share all while jettisoning what they regard as poorer business. A lot of premium increases are simply corrections back to sustainable pricing that for various reasons was ignored in the past few years. The reasons for increases may be due to any of the following: • Previously underpriced • Insurers exiting segments • Blowout in claims costs • Blowout in claims frequency • Increases in fleet size • Moving from no-claims bonus rating to fleet rating. Depending on the underlying cause/s of the premium increase, the broker’s
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strategy to meet the clientâ&#x20AC;&#x2122;s expectations will need to be determined. When a client faced with a 20-40% premium increase asks, â&#x20AC;&#x153;what else can we do?â&#x20AC;?, the broker should have a few options available. Clients usually expect their brokers to undertake marketing exercises to obtain alternative quotes when significant premium increases are tabled. But marketing business to insurers is also now happening in a different environment. As insurers become inundated with quote requests, the preparation and format of the quotation slip will determine how much attention an account is going to get from a busy underwriter. A slip with a cumbersome 18-page PDF schedule, for example, will receive a less favourable approach than a slip with usable data provided in an Excel attachment would. Slips with past underwriters, claims history, fleet size history and details on vehicle usage are more likely to go to the top of the underwriterâ&#x20AC;&#x2122;s pile. Utilising fleet questionnaires for distressed accounts will also become more important. In previous years very competitive terms were often available on very scant and often outdated underwriting information. Today accurate and current exposure profiling is key to gaining the attention of prospective insurers. Other premium containment options that will help demonstrate a brokerâ&#x20AC;&#x2122;s ability to think outside the box include: â&#x20AC;˘ Reduce sums insured â&#x20AC;&#x201C; but be careful of average clauses in some of the antiquated policies that still have this trap. â&#x20AC;˘ Reduce to third party only â&#x20AC;&#x201C; be careful of financed vehicles. â&#x20AC;˘ Increase excess â&#x20AC;&#x201C; be careful of claim-handling of â&#x20AC;&#x153;just above excessâ&#x20AC;? losses. The brokerâ&#x20AC;&#x2122;s ability to offer and explain different policy structures is vital. Burning cost and aggregate excess policies [see panel] which have not needed to be considered when very competitive full risk transfer flat premiums were available will now become more common. In the vast majority of cases a traditional flat policy structure, often with the holding insurer although at increased premium rates, is the likely renewal option that clients will take. If a holder broker doesnâ&#x20AC;&#x2122;t consider these options, they should be aware that attacking brokers will certainly discuss them with the client. 70
*23%-2%/-/1,0+3/+#3"0-&/130"31*2 (01/1,0+3.),%3!,))3#212-&,+23*0!3&('* /112+1,0+3/+3/''0(+13,.3$0,+$3103$21 "-0&3/3 (. 3(+#2-!-,12- Burning cost policies =PXYMOTXUVYFTOOYIWGYWYNXIRSTVYIQXKTLKYVPWVYTSYVPXUYWN*LSVXNYFTVPYWYKTUTKLKYWUNYKW8TKLK EWUNYLSTUJYWUYWJQXXNYHRQKLOWCYNQTDXUYEGYVPXYRDXQWOOYMOWTKSYMRSVYRHYVPXYIROTMGB For example: =PXYNXIRSTVYIQXKTLKYTSYSXVYWVY 1;;C;;;CYFTVPYWYKW8TKLKYIQXKTLKYRHY 1!;C;;;CYWUNYW KTUTKLKYIQXKTLKYRHY 4!;C;;;Y WN*LSVWEOXYWVCYSWGY4;; ; BY=PTSYOXDXOYFTOOYDWQGYEXVFXXU TUSLQXQSYEWSXNYRUYMRKKTSSTRUSCYMRSVSYQX&LTQXNYQXVLQUSYWUNYVPXYOTAXB =PXQXHRQXCYFPWVXDXQYVPXYMOWTKSYWKRLUVYVRCYVPXYIQXKTLKYFTOOYURVYEXYPTJPXQYVPWU 1!;C;;;YRQYEXORFY 4!;C;;;B ?YJRRNYFWGYVPXYEQRAXQYMWUYX8IOWTUYVPTSYWQQWUJXKXUVYVRYVPXYMOTXUVYFRLONYEXYVRYIRTUVYRLV VPWVYHRQYXDXQGY ;YTUYMOWTKSYVPXYMOTXUVYFRLONYIWGY 4;;CYELVYURYKRQXYVPWUY 1!;C;;;YRQYOXSS VPWUY 4!;C;;;YTUYVRVWOBY +LVVTUJYTVYWURVPXQYFWGCYNLXYVRYTVSYDWQTWEOXYUWVLQXCYVPXYMOTXUVYMWUYPWDXYSRKXYWNNXN RFUXQSPTIYRDXQYVPTSY ELQUTUJYMRSV YIQXKTLKYWUNYSPWQXYTUYVPXYRDXQWOOYMRSVYWSYMRKIWQXNYVRYW SVWUNWQNYHOWVYIQXKTLKYNXIXUNTUJYRUYFPWVYVPXTQYMOWTKSYWQXYOTAXBY Key burning cost buying decisions to consider: .RFYPTJPYTSYVPXYKW8TKLKYIQXKTLKYMRKIWQXNYVRYWYHOWVYIQXKTLK Y<RYFPWVYTSYVPXYFRQSV6 MWSXYSMXUWQTR .RFYORFYTSYVPXYKTUTKLKYIQXKTLKYMRKIWQXNYVRYWYHOWVYIQXKTLKY#YTUYRVPXQYFRQNSCYVPX EXSV6MWSXYSMXUWQTR >V@SYJRRNYHRQYMOTXUVSYFPRYPWDXYPWNYWUYLULSLWOOGYEWNYQXMXUVYORSSYPTSVRQGB Advantage: =PXYIQXKTLKYMRLONYIRSSTEOGYEXYORFXQBY =PXQXYTSYWYMOXWQYTUMXUVTDXYVRYKTUTKTSXYMOWTKSYMRSVB Disadvantage: =PXYIQXKTLKYMRLONYEXYPTJPXQCYWUNYWSYTVYFTOOYEXYJXUXQWOOGYMROOXMVXNYWVYVPXYXUNYRHYVPX IROTMGYGXWQYTVYMRLONYWHHXMVYMWSPHORFB 2RVYRUOGYVPWVCYELVYTVYKWGYEXYPWQNXQYVRYWQQWUJXYIQXKTLKYHLUNTUJB
Aggregate excess policies =PTSYTSYWYJRRNYRIVTRUYHRQYMOTXUVSYFPRYPWDXYVPXYWETOTVGYVRYPWUNOXYORSSXSYVPXKSXODXSYWUNYPWDX WYHWTQOGYMRUSTSVXUVYORSSYPTSVRQGB =PXYMOTXUVYIWGSYWYORFXQYIQXKTLKYELVYIWGSYVPXYHTQSVYWJQXXNYWKRLUVYRHYORSSXSYTUMLQQXNYTU VPXYIROTMGYGXWQBY=PTSYWKRLUVYTSYTUYWNNTVTRUYVRYVPXYSVWUNWQNYX8MXSSYVPWVYWIIOTXSYVRYXWMP TUNTDTNLWOYORSSBY For example: =PXYIQXKTLKYTSY 41;C;;;CYVPXYWJJQXJWVXYX8MXSSYTSY 4;;C;;;YIXQYIROTMGYIXQTRNCYVPX TUUXQYNXNLMVTEOXY SVWUNWQNYX8MXSS YTSY 4;;;YIXQYTUMTNXUVB =PXYMOTXUVYIWGSYVPXY 41;C;;;YIQXKTLKYWUNYVPXUYFTOOYPWDXYMOWTKSYIWTNYWHVXQYPXYPWSYIWTN 4;;C;;;YRHYPTSYRFUYORSSXSY X8MOLNTUJYVPXYX8MXSSYIXQYTUMTNXUV B Advantages:
INMAG DEC 16_page layouts 1/12/2016 6:09 pm Page 71
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.
Did Did you you know know that that SUA SUA has has ppurchased urchased A Axis xis Spe Specialty cialty A Australia’s ustralia’s R Renewal enewal rrights? ights? From From nnext ext rrenewal, enewal, yyou ou w will ill rreceive eceive ccorrespondence orrespondence from from SUA SUA inviting inviting renewal renewal for for your your Axis A xis Specialty Specialty Australia Australia PI, PI, D&O, D&O, Multimedia Multimedia and and IT IT Liability Liability policy. policy.
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LET’S TALK ABOUT VALUE FOR MONEY… Some insurance industry magazines charge less for advertising than insuranceNEWS. That’s fair enough if you believe, as we do, that cost should be based on value. Take a look at these two graphs from a recent insuranceNEWS reader survey:* What print publications do you receive to obtain information about insurance issues?
Which one do you value more in terms of the content of each of these print publications?
Other Other Mainstream newspapers Mainstream newspapers
insuranceNEWS (the magazine)
Insurance Business NIBA’s Insurance Adviser
insuranceNEWS (the magazine)
Insurance Business NIBA’s Insurance Adviser
INMAG DEC 16_page layouts 1/12/2016 6:09 pm Page 73
Not only do far more insurance professionals read insuranceNEWS than any other industry publication – they also place far greater value on its content. If people are reading a magazine’s articles rather than idly ﬂipping through the pages, your advertisement stands a much greater chance of being seen and acted on. So next time a magazine offers your company an amazingly low ad rate, ask yourself why. You’ll ﬁnd it’s because they offer little value to the readers you’re trying to reach. And then consider this: insuranceNEWS is the most cost-effective print publication for advertisers to reach the largest possible industry audience. Nothing else comes close.
Insight. Trust. Value.
*The above information was drawn from a reader survey conducted by insuranceNEWS in October and November 2016, with 2534 respondents. insuranceNEWS (the magazine) has a bimonthly print run of nearly 9000, and is circulated free across the industry in Australia. It is seen by more general insurance intermediaries in Australia than any other insurance news publication.
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Investing with care =PXYTMWQXY)RLUNWVTRUYPWSYEXJLUYWY 4;;YKTOOTRUYHLUNTUJYNQTDX VRYPXOIY2<'YFRQAIOWMXYWUNYQRWNYTU*LQGYQXSXWQMP
THE NEW ICARE FOUNDATION HAS wasted no time allocating funds for research into injured workers and motorists. The Insurance & Care NSW (icare) program will invest $100 million over five years, with an emphasis on research, family support programs and establishing stronger partnerships with businesses and community organisations. The first projects funded cover fields such as mental health and care for seriously injured people. A partnership has been formed with the Mental Health Commission to raise awareness and support small businesses without employee assistance programs. This adds to icare’s collaboration with mental health groups such as Beyondblue and the Black Dog Institute. The aim is to develop a comprehensive mental health strategy for workers, including addressing post-traumatic stress disorder in police and emergency services staff. Another project to win backing is Spinal Cord Injuries Australia’s NeuroMoves program in Lismore, New South Wales. Chief Executive Peter Perry says the project could expand to other regions such as Tamworth, the Southern Highlands and Wagga Wagga. “Our partnership with the foundation will bring potentially life-changing programs to areas where they are not currently available,” he said. “Our NeuroMoves program has a proven track record and now more people with spinal cord injuries will experience the benefits it can deliver.” The foundation is also supporting the Ufirst initiative, in partnership with the University of Technology Sydney. It brings together participants from the health system and the community to design better solutions for workplace health and rehabilitation. Another program, in partnership with Carers NSW, will deliver individual support programs for families and carers of people with serious injuries. The final project in the foundation’s first round of funding aims to expand the Australian Paralympic Committee’s speakers program, providing more businesses with workplace safety and injury prevention training from Paralympians. The program will expand from 175 speakers to 250. NSW Minister for Finance, Services and 74
Property Dominic Perrottet says the projects reflect icare’s mission to provide the best care to some of society’s most vulnerable people. “Without the right care, recovery can be a long, dark road for the seriously injured,” he said. “The foundation will work to ensure the care we provide helps to overcome those challenges. This initiative will mean better care and support for injured people in NSW.” The foundation Chief Executive is Vivek Bhatia, who also heads icare and was previously chief executive of Safety Return to Work and Support. Mr Bhatia tells Insurance News the foundation’s goal is to work with a diverse range of support organisations and the people who need them. “A key aim of the foundation is to broaden and deepen the value icare provides to the greater community. It will provide a vehicle to attract third-party partnerships, enabling co-creation and the ability to build scale to maximise social investments and activity.
“The foundation provides a more focused platform to consolidate all grants, sponsorships, research and innovation seed funding from across the icare organisation.” Mr Bhatia says the foundation will look to work with the insurance industry as a way of “broadening our contribution to society”. “Our focus on ‘whole-of-person’ wellbeing suggests we will be looking comprehensively at innovative ways of preventing injury in the workplace and on our roads,” he says. “We know we can’t do this alone, so it will be vital for us to collaborate with the expert organisations that are already helping people.” The NSW Government has appointed Elizabeth Carr as Chairman of the icare foundation committee. She is a non-executive director of icare and Chairman of the NSW Department of Family and Community Services’ audit and risk committee. She has previously held senior management roles at Macquarie Bank and IBM. The foundation’s committee also includes icare non-executive director David Plumb, who is also a non-executive director of BT Financial Group, and icare non-executive director Mark Lennon, who is also a director of State Super. Mr Bhatia says this independent committee will perform checks and balances on research projects to ensure they deliver the maximum impact and social value. “We also conduct rigorous due diligence in scoping our projects with our key industry partners, such as government and the community,” he says. “This gives us a real-world view when developing a research brief and will deliver holistic outcomes.” The foundation will also undertake public awareness campaigns. “We recognise there is a need to engage with employers and the wider community about the important issue of mental health and wellbeing in the workplace,” Mr Bhatia says. “We will focus on the need to help employers communicate better with their employees and drive a bigger awareness campaign to tackle this issue on multiple levels. We will also raise awareness and support small businesses in injury prevention and risk management.” See icare celebrates award-winning practitioners, page 76.
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WHILE WE’RE TALKING ABOUT VALUE… Our recent reader survey* asked respondents which news websites they access for information about the insurance industry, and how much value they place on those sources. The results are in the two graphs below:
What online publications do you read regularly to obtain information about insurance issues?
Which online publications do you value more in terms of the content? Mainstream media Broker Buzz Insurance Business
insuranceNEWS.com.au Insurance Business
98% of the respondents say they read insuranceNEWS.com.au for industry information. And 84% place the most value on the news and information that insuranceNEWS.com.au produces through its weekly and Breaking News bulletins. Compare our 84% value rating with NIBA’s Broker Buzz, which 1.83% of respondents found most valuable, and Insurance Business, which scored 4.21%. Value equals readership. And that equals advertising exposure.
Insight. Trust. Value. *The above information was drawn from a reader survey conducted by insuranceNEWS.com.au in October and November 2016, with 2534 respondents. insuranceNEWS.com.au has nearly 23,000 active subscribers and circulates every Monday in Australia, New Zealand and industry centres around the world. It is accessed by more general insurance intermediaries in Australia than any other online insurance publication.
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Heavy overhaul: 2=>YXUPWUMXSYTVSY IQRNLMVYSLTVXY
Tools of the trade: 9QRAXQSYFXOO6IOWMXNYVPWUASYVRY XQR@SYSXQTXSYRHY<75YTUSTJPVSYY
HEAVY MOTOR SPECIALIST NATIONAL Transport Insurance (NTI) has launched a range of enhancements to its transport, mobile plant and equipment product suite, as well as a new carrier’s cargo product. Carriers Protect, designed specifically to meet the unique needs of Australian transport operators, is available either as a standalone product or as part of NTI’s Transport Package. The broader enhancements across all products are based on broker feedback, and policy wordings have been simplified too. General Manager of Sales and Distribution Mike Edmonds says response to the Carriers Protect product has been “hugely positive”, with more than 350 brokers participating in the launch webinar. He says the company carries out surveys twice a year to get product feedback, “because NTI’s goal is to keep our products at market or better”. “We keep things as simple as we can,” he tells Insurance News. “We tend to go back and say we can do this, or we can’t do that. “It’s about making sure your product is top of market, and listening to brokers and responding to their needs. “You miss things unless you listen to your customer base.” The business interruption product has been expanded to cover trailers, and business interruption has also been included within specialist plant and equipment product Yellow Cover for trucks and trailers. “We’re continually looking for new ways to improve our products and services for our intermediary partners and policyholders,” Mr Edmonds says. “NTI are the experts in commercial motor. It’s what we’ve done for more than 40 years and now we’re building on our proven expertise and experience. “There are enhancements across the entire product suite, including our Yellow Cover product, and we have streamlined our wordings to make them clearer and easier to understand.”
VERO HAS LAUNCHED THE LATEST IN A SERIES OF TOOLS AIMED AT equipping brokers to understand SME clients. The online video, which brokers can share with existing and potential customers, highlights the value of having an insurance expert in your corner during a claim. Vero’s latest SME Insurance Index reveals that more than a quarter of SME broker customers don’t know that brokers manage insurance claims. The report also finds that 74% of SMEs who do know that their broker manages the claims process are satisfied with their broker. The video is available via YouTube and the VeroCentral website, and is the most recent in a series of tools unveiled this year. In September the insurer announced the Risk Gap Calculator (now called the Insurance Selector), a free interactive risk analysis tool designed to help broker customers identify business concerns and gaps in insurance coverage. The SME Index shows that 32% of SME owners are very concerned about being unable to trade, and that 31% fear the consequences of their equipment and machinery breaking down. However, 80% also do not believe they have business interruption or machinery/equipment breakdown cover. The Insurance Selector, available through the VeroCentral website, asks customers about their business concerns and existing insurance cover, then identifies any potential gaps. In July the insurer launched a free online tutorial to help brokers educate their staff on the behaviours and needs of SME clients. The tool takes many of the findings from the SME Index and translates them into workable actions. The tutorial is also available through the VeroCentral website. Head of Commercial Intermediaries Anthony Pagano tells Insurance News the needs of SMEs are “increasingly complex”. “The economic environment is extremely competitive and brokers need to stay relevant and continuously demonstrate the value they can create,” he says. “The Vero SME tools help brokers stay informed and connected to their existing and potentially new clients. “The research shows better connected brokers have more satisfied clients. The creation of several unbranded tools by Vero allows brokers to use several techniques as a point of differentiation to their competitors. “The SME Index continually aims to reinforce and arm brokers with insights, trends and emerging issues that provide essential discussion points between the broker and their client,” Mr Pagano says. “By enabling access to the Vero SME Tools, brokers can be better informed on the business coverage and issues keeping clients awake at night.”
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A fresh approach to Property and Liability risks. At Miramar, we work with underwriters from around the world to $ $ # to an ever-changing market. ! $ #
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Contact Miramar to discuss how we can help you service your clients. Visit miramaruw.com.au or call 02 9307 6600 This brochure is intended for insurance intermediaries only. Miramar Underwriting Agency Pty Ltd (ABN 97 111 534 797, AFSL 314176) arranges the contract of insurance as agent for and on behalf of certain underwriters at LloydÂ&#x2019;s.
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THE LEGAL VIEW
Advances in medical technology Â&#x2013; an insurerÂ&#x2019;s insurerÂ&#x2019;s best friend? With technological advances in the medical industry outpacing those in the insurance industry, Wotton + Kearney Partner, Karen Jones, and Special Counsel, Dominic Flannery, advise insurrers e to be alert to the opportunities created ated thrro ough the use of these advancements in the defence of proceedings
The pace of medical advancements in the last decade has revolutionised healthcare and biomedical research and these changes are just the beginning. Â&#x201C;WearablesÂ&#x201D; such as FitBit and AppleWatch already track heart rate, distance and movement type, and are ushering in a new era of professional health tracking. Nano therapy, the mapping and increased understanding of the human genome, the use of real-time empowerment through the availability of these dynamic resources and medical records are changing how medical conditions are being examined and treated at an unprecedented rate. As computer science, engineering and medical science merge, opportunities arise for the insurance industry to apply these developments in better responding to medical issues raised in claims. A huge resource of health data is growing and its analysis by algorithms will result in more accurate recognition of symptoms, a better understanding of trends, and ultimately quickerr, easier and che cheaper diagnosis and treatment. Privacy and patient consent issues concerning the sharing of personal data
Assistance from from the Court Knowing that a new medical technique and insurers and their lawyers, but maintaining awareness of current trends is only half the battle. Assuming that an insurer is aware of the usefulness of genome mapping in determining a causation dispute, using it practically in the defence of a claim will require the power of the Court. No matter its nature, every medical examination generally needs a patientÂ&#x2019;s consent before proceeding otherwise it may constitute battery in the eyes of the law. Insurers can, 1. Rule 23.4 of the Uniform Civil Procedure Rules 2005 2. Rule 23.7 of the Uniform Civil Procedure Rules 2005 3. Teys e Australia Meat Grroup o Pty P Ltd v Flett  QDC 177 a  4. Sharif Zraika by his tutor Halima Zraika v Walsh NSWSC 1774; Plowman v Sisters of St John of God Hospitall  NSWSC 33 333
Karen Jones Partner Wotton + Kearney
however, use the power given to the Court in certain circumstances to enforce medical examinations. For example, in New South Wales if the Court makes an order for a things reasonably requested by the medical expert and answer all questions reasonably asked.1 The Court also has the power to direction of a medical practitioner.2 These orders provide insurers with an avenue to use medical examinations to build evidence to assist in the defence of a litigated matter. Similar provisions exist in other jurisdictions around Australia, such as VictoriaÂ&#x2019;s Rule 33.04 of the Supreme Court (General Civil Procedure) Rules 2015. While it is abundantly clear the courts recognise the usefulness of medical examinations and testing in legal disputes, insurers and their solicitors have traditionally utilised this power in a conventional manner, ignoring burgeoning medical technology such as robotic surgery. For instance, with robotics increasing the accuracy and control in surgery, examinations that were once considered impossible or highly invasive may soon be completed with minimal discomfort. As these technologies improve and become commonplace, insurers should give consideration to how far they can use the CourtÂ&#x2019;s power to enforce these new medical examinations. Although each request will turn on its own facts, the Court needs to be convinced that the examination is relevant and reasonable in respect to the personÂ&#x2019;s physical and/or mental condition in issue in the proceedings, striking a balance between the need for a
3 As medical testing becomes increasingly non-intrusive in certain areas, the line between a procedure and an examination blurs. If an insurer can show the Court that using an emerging medical technique on a determining a real issue in dispute in litigated proceedings, what constitutes a medical examination will be expanded. There are already instances of this occurring such as where the Court ordered that a party provide blood for the purpose of genetic testing to determine whether an injury was
Dominic Flannery Special Counsel Wotton + Kearney
a result of an incident the subject of a claim, or a consequence of a genetic disorder or another contributing factor.4 The short-term cost of these new procedures will likely outweigh the long-term claims costs if they can improve or better diagnose a claimantÂ&#x2019;s condition.
Where e to from from her here? e? genome mapping Technologies e such as ge providing insight into the cause of certain diseases and conditions, robotic surgery making complex procedures commonplace and multi-functional radiology that can detect multiple biomarkers and symptoms at once, are just the beginning. Clearly there is scope for the medical profession to assist further in determining complex disputes that are commonplace in medical negligence and personal injury insurance claims. Initially at least, the greater challenge is for insurers and their lawyers to be aware of these emerging techniques and specialised examinations. The next step is for insurers to leverage these technologies at a claim level. Jurisdictions around Australia already provide to be examined by a medical expert so long as it is relevant and reasonable. However, it is up to the insurer and its lawyers to convince the Court that the results of a medical examination or test based on an emerging medical breakthrough will illuminate an issue of substance or be in the claimantÂ&#x2019;s best interests for the treatment of the injury and Utilising these existing legal powers will hopefully be the catalyst needed for industrywide change creating a cheaper, more the use of new medical technology. However, in our view such an industry-wide shift will only be possible if patient consent and privacy are adequately addressed and insurers will need to lobby governments in the social concerns.
For more legal updates relevant dustry y, visit: to the insurance industry www.wottonkearney.com.au www.wottonkearney ey y..com.au
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Vero celebrates risk management achievements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Learning, inspiration and giving â&#x20AC;&#x201C; IA ticks the boxes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ÂŠ2016 Fleetsure Fleetsure All All rrights ights rreserved. eserved. FFleetsure leetsure P Pty ty Ltd Ltd ABN: 78 078 661 220 AFSL: 238151 Allll policies ar A are e under underwritten written b byy APR APRA A licensed licensed insurers insurers
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CQIB packs a long lunch for a charitable cause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ACCIDENT & SICKNESS
Vehicles we insure:
Liabilities we insure:
Accident & Sickness we insure:
• Vintage • Classic • Prestige • American Imports
• Budget Accommodation • Scaffolders • Shopping Centres • Cleaners • Supermarkets • Events & Markets • Transport & Logistics • General • Vacant Land • Property Owners • Welders & Boilermakers • Restaurants
• Group Personal Accident & Sickness • Individual Personal Accident & Sickness • Sports Group Personal Accident • Voluntary Workers Personal Accident
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peopleNEWS Industry leaders welcome Lloydâ&#x20AC;&#x2122;s boss to Australia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
INMAG DEC 16_page layouts 1/12/2016 6:41 pm Page 96
peopleNEWS Off to the races with Suncorp ),( .!)(#&'),*+( .#%) ) '-.)'" -,,&' .( & (. -+-.,%-.*+"-+.*!.,%-.") !*+.)+*$'". . $-(,(.&' &,-".,* $'#*+ (. )+ $--.),. - &' ,*'
)#-#*$+(-.!*+.,%-. ,%.+$''&' .*!.,% - *$+'-. $
)&'.%- ".*!!.!*+. *(,.*!.,%-.") )%-)".*!.,%-. & .+)#- . &,%. $# $',-+(.#%--+&' . )'"&'.)(.&, ) * -".&',*.%&(,*+ .,*.#+*((.,% &''&' . &'-.)%-)".*!. -)+, +-) . &, $(,* -+(.!+* .)#+*((. $'#*+ ( )+&*$(. +)'"(. -+-.%*(,-".),.,% )+ $--.&'.,%-. +-(,& &*$(. &+"#) -.)+-) &,%. .*'-.*!.,%-. ) *+.( *'(*+(%& )+,'-+(.!*+.,%-.#$ .#)+'& ) , -. )(.,%-.!*#$(.*'. ) (. ) %-+-. $'#*+ . '($+)'#-. %&-! -#$,& -. ',%*' . ) .%*(,-". +* -+( )'".*,%-+. $-(,(
INMAG DEC 16_page layouts 1/12/2016 6:11 pm Page 97
your clients All your are different are
At GT Insurance, Insurance, weÂ&#x2019;ve weÂ&#x2019;ve got them all ccovered overed GT Insurance work with you providing:
Flexible programs to suit your clientsÂ&#x2019; business; Knowledgeable people who provide you with carefully designed options for your clientsÂ&#x2019; business;
T To o find out more more and get quick and easy quot quotes es online, visit gtins.com.au or ccontact ontact yyour our llocal ocal GT Insurance Relationship Relationship and and De Development velopment Manager. Manager.
Claims reporting to support risk management; Professional assessors and efficient claims recovery team;
Access to GT Accident Assist - immediate and effective response to accidents
Insurance products products are are issued issued by Global Global Transport Transport & Automotive Automotive Insurance Insurance Solutions Pty Ltd ABN 93 069 048 255 AFS AFS Licence Licence No 240714, trading trading as Insurance GT Insur ance, as agent ffor or the insurer insurer Allianz Australia Australia Insurance Insurance Limited Limited ABN 15 000 122 850 AFS AFS Licence Licence 234708. GT Insurance,
please refer refer tto o the relevant relevant Product Product Disclosure Disclosure Statement Statement or policy w ording which ccan an be obt ained fr om www.gtins.com.au www.gtins.com.au making a decision about it please wording obtained from
INMAG DEC 16_page layouts 5/12/2016 11:24 am Page 98
sam Pentecost Contributor
Welcome to the annual Insurance News summer Holiday Quiz, which sorts out the insurance nerds from the others. Try these out on your workmates or around the dinner table with your family (no, don’t do that – just joking). All questions are based on news items published in insuranceNEWS.com.au during 2016. If you get five or less answers correct, we sentence you to insuranceNEWS.com.au every week for an entire year; 6-15 you’re doing okay but should apply yourself more; 16 to 20 you’re executive material or possibly already there; 21-30 you’re either cheating or you know far more about the industry than is altogether good for you. Take a holiday. The answers will be published on the insuranceNEWS.com.au website from December 12 on www.insurancenews.com.au/quiz-answers. Good luck.
13. Which major national sports team is sponsored by AIG? 14. In November consumer group Choice warned consumers not to buy travel insurance from which source? 15. Who will succeed Graham Stevens next year as the President of the National Insurance Brokers Association? 16. Name the new Managing Director of Munich Re Australasia and his predecessor. 17. In June householders were warned to have their homes checked by electricians for potentially dangerous electrical cables sourced from China. What is the cable’s brand name? 18. Who joined Zurich in February as the global Chief Executive?
1. Who said: “I look forward to questioning, under oath and before a Senate committee, every major insurance executive in Australia about the way they conduct their business.”
19. Which international insurer rebranded earlier this year and made its logo available in nine colours?
2. Which electronics company gets its major source of profit from selling insurance?
20. Who is the federal minister responsible for the insurance industry?
3. Which German peer-to-peer insurer set up in Australia this year?
21. What was the name of the West Australian town destroyed by a bushfire on January 7 this year?
4. Another peer-to-peer insurer in the US has a fizzy kind of name. What is it?
22. Who is the Chief Executive Australia and Pacific at Marsh?
5. Which former IAG chief executive recently joined the QBE board? 6. What magnitude was the earthquake that struck New Zealand in November?
23. Which insurance company won a court case this year against former Essendon AFL coach James Hird? 24. Specialist underwriter Assetinsure was acquired in September last year by which New Zealand-based global company?
7. And what magnitude was the earthquake that struck Christchurch in February 2011?
25. Suncorp invested in a US start-up that provides flexible ondemand insurance for personal property via an app. Name the start-up.
8. Which of these risks – chemical, biological, nuclear, radiological – does the Australian terrorism pool cover?
26. What is the name of the Australian general insurance underwriting operation being sold by Munich Re?
9. Where is Pudding Lane and why is it famous?
27. A US car manufacturer found itself having to defend its self-driving technology in July after a fatal crash. Name the manufacturer.
10. Willis Towers Watson Chairman and Chief Executive Tony Barber left for another global broker in September. Which company did he join?
28. Two American directors emptied the trust fund of which Perth-based authorised representative organisation during the year?
11. Who is the ESL Insurance Monitor in New South Wales, responsible for overseeing the industry’s behaviour during the transition from an insurance-based emergency services levy? Hint: he had the same gig in Victoria.
29. And can you name the audacious fund-raising stunt they were planning in in the US?
12. Lloyd’s recently held a series of events promoting diversity and inclusion in insurance. What was it called?
30. The founder of Rural & General Insurance Brokers was jailed for five years in April for tax evasion. Who is he?
december 2016/January 2017
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A STRONG TEAM, BACKED BY A STRONG BALANCE SHEET. Berkshire Hathaway Specialty Insurance is pleased to bring underwriting flexibility, claims handling excellence,and financial strength to Australia and New Zealand. Our experienced teams in Sydney, Melbourne, Brisbane and Auckland are committed to providing precisely the coverage you need. AUSTRALIA
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