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TURNING ZURICH: With the tough decisions made, Raj Nanra is steering the company to a brighter future

MANSFIELD MANIA: Why insurers want that trophy HARD TO PREDICT? The insurance cycle after June 30 CHANGE OF MIND: Travel insurers and mental illness THE INSIDERS: Interviews, Insights and Innovation

August/September 2017


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Issued by Zurich Australian Insurance Limited ABN 13 000 296 640 AFSL 232507. Any advice has been pr prepared epared without taking account of your objectives, financial situation or needs. Ther Therefore, efore, before before acting on the advice you should consider its appropriateness appropriateness having regard regard to your objectives, financial situation and needs. You Yo ou should obtain and consider the rrelevant elevant Product Product Disclosure Disclosure Statement for the financial product, product, available at www.zurich.com.au, www.zurich.com.au, befor beforee making any decision about whether to acquire, acquire, or continue to hold, that product. product.


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COVER COVER A AS S DIVERSE DIVERSE AS AS YOUR YOUR C CARGO ARGO

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CERTAINTY At United Insurance Group, we believe authorised reps should know who they’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 trevor@uig.net.au to discuss why we’re growing so quickly.

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www.uig.net.au ww w.u i g .n et.au | Co Contact n ta c t Ge General n er a l Ma Manager n ager TTrevor revor How Howard a rd | 03 8676 867 6 0344 0 34 4 | trevor@uig.net.au trevor@ u i g .ne t . a u


au

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Contents 6 Newsmakers » 10 Welcoming harder times » Price gains at the June 30 mid-year renewals have increased confidence that the market has turned the corner.

14 Zurich, empowered » The hard yards are behind him. Now Chief Executive Raj Nanra is taking the fifth-placed Australian insurer on the journey to a more profitable future.

20 Living in perilous times » Catastrophe models are helping insurers and communities prepare for natural disasters, AIR Worldwide President Bill Churney says.

26 Declaration of independence » Catastrophe modeller Risk Frontiers will write the next chapter of its history alone. Key to its success is its close relationships with local insurers..

28 Disrupting the disrupters » Insure Pitch is inviting brokers to spruik their brightest ideas to a high-powered panel of experts.

30 The birth of the Mansfields » How (and why) a plan was hatched to help raise the profile of claims in insurance by celebrating excellence.

34 Covering all bases » AUB chief Mark Searles says the group’s strategy is helping brokers become trusted advisers.

40 This year’s big blips » Swiss Re’s latest Sonar update reveals another broad array of emerging threats.

46 The insurtech revolution will not be televised » It’s time for brokers to embrace technological change.

52 Back in the games » Former national swimming and athletics chief Simon Allatson is now going for gold with Sportscover.

56 Time to act » A devastating blaze the other side of the globe has finally shaken Australia into action over flammable cladding on high-rise buildings.

70 Rising value » Valuers’ professional indemnity is a challenging, yet improving risk.

76 Equipped for the future » QBE’s broker education scheme is celebrating a decade of sharing skills, but the journey is far from over.

78 Road to restoration » NTI has returned an historic truck to its 1940s glory in a project to raise funds to fight motor neurone disease.

companyNEWS 74 Excess waiver » CHU shakes up the strata-sphere.

74 Filling a gap » Swiss Re Corporate Solutions expands its offering.

75 Mould breaker » Steamatic eliminates fungi using global industry standards.

75 To be Sura, to be Sura » Specialty specialist joins the club.

peopleNEWS 80 Axa celebrates its French roots on Bastille Day » 82 HDI Global warms up winter with mulled wine and bratwurst » 85 High stakes at AILA event » 86 Allianz tournament delivers thrilling finish » 89 CQIB celebrates annual awards » 90 YIPs says cheers to financial years » 92 Broncos coach shares philosophy at UAC expo » 94 Winners are grinners at the Mansfields » 97 QBE cheers diversity at AFL Pride Game » 98 maglog »

62 A lifetime of caring » In an increasingly price-driven industry, broker Ron Tatarka thrives by treating his clients like family.

66 A new mindset » More than a year after a landmark legal decision, two major travel insurers have removed blanket exclusions for mental illness.

August/September 2017

Cover: Zurich’s Chief Executive Raj Nanra Image: Kym Thomson


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newsmakers at

insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 23,000 subscribers. In June/July we published 475 articles online. These were made up as follows:

72 78 LOCAL

Musical chairs for bosses Marsh has appointed John Doyle as chief executive of its global operations following the departure of Peter Zaffino, who will join AIG as Global Chief Operations Officer under new leader Brian Duperreault. The move sees the two giant companies playing a form of highlevel musical chairs. Before joining Marsh last year Mr Doyle was chief executive of AIG’s commercial insurance businesses worldwide. Mr Zaffino begins his new role at AIG next month, having served as Marsh chief executive since 2011. He will oversee all country operations for AIG, including US commercial field operations, the multinational organisation and global business services. Ex-AIG man to lead Marsh after AIG recruits Marsh CEO, 10 July

Lyons steps up at Gallagher

CORPORATE

REGULATORY & GOVERNMENT

82 LIFE INSURANCE

74 THE PROFESSIONAL

77 INTERNATIONAL

9 ANALYSIS

10 BREAKING NEWS Almost 25,000 news articles – including 256 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives. Access to news articles and other services provided by insuranceNEWS.com.au is free. 6

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Arthur J Gallagher Australasia has announced the appointment of Sarah Lyons (above) as its new chief executive, following the departure of Andrew Godden. Ms Lyons, previously managing director of commercial broking, will take up the new position immediately following “an extensive recruitment campaign”. Managing Director Australia/New Zealand Steve Lockwood says Ms Lyons has played an “impressive role” in turning around the Commercial Broking division over the past 18 months.

Gallagher announces new CEO, Breaking News, 10 July

There are legacy issues in ratings structures that are being corrected, and some high-risk businesses are being treated to some steep increases.

– Insurance House Group Managing Director and IBNA Chairman Gary Gribbin sums up what he sees as a “spotty” renewals season

SME women take their own path

Women who run SMEs are less likely than their male counterparts to use brokers to buy insurance, and are more likely to go online to examine the possibilities, according to Vero research. About 68% of women in small business use the internet to investigate their insurance options, including price, compared with 56% of men, according to the latest tranche of data from the Vero SME Insurance Index.

insuranceNEWS

About 29% of female respondents use a broker, versus 33% for men, while a further 9% of women use a mix of brokers and direct channels, against 7% for men. “There are several important nuances between female and male SME decision-makers,” Vero Head of Commercial Intermediaries Anthony Pagano said. “Brokers need to understand female owners want to have greater control in the insurance process and brokers need to adapt their relationship accordingly.” Government data shows women represented 34.1% of all SME decision-makers in Australia in 2015, up 46% over the previous decade. The Vero report follows a nationwide online survey of 1541 business owners and insurance decision-makers, with women representing 45% of respondents. Female SME owners present ‘nuanced’ challenge for brokers, 31 July

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1 new division + 2 licences = faster moves IAG’s decision to unite its Australian businesses into one division will accelerate decisionmaking processes in the company, Managing Director and Chief Executive Peter Harmer says. As reported by insuranceNEWS.com.au in a Breaking News bulletin, the newly formed Australia Division brings together the Australian Consumer, Australian Business, Operations and Satellite divisions under chief operating officer Mark Milliner (right), who becomes Chief Executive Australia Division. Mr Harmer says in a message to staff that the new division will

help the company transform from a “product-centric organisation to one that is more focused on the customer”. The new management structure sees Australian Business Division chief executive Ben Bessell become Executive General Manager Business Distribution. He will report to Mr Milliner, but will remain a member of IAG’s Group Leadership Team. Chief Financial Officer Nick Hawkins retains responsibility for the group’s New Zealand and Asia divisions. IAG has also consolidated its nine Australian general insurance

licences into two after receiving approval from the Federal Court. From August 1 it will have two licensed Australian entities: Insurance Australia Limited (IAL) and Insurance Manufacturers of Australia Pty Limited. IAL will become the insurer of policies issued by CGU, Swann Insurance, WFI, IAG Re, Mutual Community General Insurance, CGU-VACC Insurance and HBF Insurance. IAG says the consolidation will help make it a simpler, more efficient and agile business. IAG focuses on speed with united Australia unit, 24 July

A rosy future for insurance Things are looking up for global insurance markets, according to a detailed new report from insurance heavyweight Allianz. The paper examines the current status and outlook to 2027, and concludes that insurance markets are about to shift up a gear. After the meagre years of the financial crisis, insurers can finally look ahead with more confidence. From 2008 to last year, worldwide insurance premium grew by 3.1% annually, but Allianz says growth should accelerate to 5.9% per year over the next decade, with the recovery mirroring the global economy’s return to normal growth.

As a result, the global insurance market should be worth $10.05 trillion by 2027, compared with $5.32 trillion last year. The turnaround is most pronounced in mature markets such as western Europe, which is emerging from “nine years of stagnation”. By 2027 China will be the second-largest insurance market in the world at $2.28 trillion, within striking distance of the US and bigger than all of Europe. Allianz says new technology offers huge opportunities by generating more demand for insurance. Global outlook: emerging from the ‘lost decade’, 17 July

Trading barbs over pricey premiums Northern Australia is at the centre of an escalating political row as the Turnbull Government and the Labor Opposition trade barbs over the long-standing problem of rising insurance premiums. Labor has today attacked Revenue and Financial Services Minister Kelly O’Dwyer’s (below) failure to respond to the Northern Australia Insurance Premiums Taskforce final report. “The response has never been provided despite the serious impact escalating premiums are having on households and businesses in cycloneprone northern Australia,” Shadow Minister for Small Business and Financial Services Katy Gallagher and Shadow Minister for Resources and Northern Australia Jason Clare said. Ms O’Dwyer had promised a detailed response by June 30 last year. The taskforce report was presented to Treasury in November 2015. But she now says a new pricing inquiry by the Australian Competition and Consumer Commission will give the Government new insight, including the premium impact of Cyclone Debbie in March and April. She has also called on the Queensland Government to help reduce premiums by reforming strata regulations and inefficient state taxes, including taxes on insurance. Labor hits out over northern Australia response, 10 July

Cyber storm clouds A major cyber attack on a cloud service provider could trigger up to $67.7 billion in global economic losses and pose significant risks for Australian businesses, according to Lloyd’s. A report by Lloyd’s and analytical group Cyence also warns mass attacks on vulnerable business operating systems could cause losses of $36.6 billion. Lloyd’s General Representative in Australia Chris Mackinnon says the interconnected

nature of digital technology and services increases the potential economic impact of attacks and the likely level of insurer costs from multiple claims. “This report gives us a real sense of the extent of damage a single extreme cyber attack could cause,” he said. “An attack of that magnitude could create losses bigger than of some of Australia’s worst natural disasters combined.” Cloud attack could cause $67 billion loss: Lloyd’s, 17 July

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newsmakers at

Personal lines Finalists: Allianz Australia, Ansvar, Chubb, Defence Service Homes

WINNER: ALLIANZ AUSTRALIA SME property and casualty Finalists: Ansvar, Capricorn Mutual, Chubb Insurance, IAG

WINNER: CHUBB INSURANCE Corporate property and casualty: Finalists: Berkshire Hathaway Specialty Insurance, FM Global, TIO/Allianz, Vero

WINNER: BERKSHIRE HATHAWAY SPECIALTY INSURANCE Specialty Finalists: GT Insurance, NTI, Terri Sheer

WINNER: NTI The Gold Mansfield Award for overall excellence in claims Finalists: Chubb Insurance, IAG, Vero

WINNER: CHUBB INSURANCE

Conceived and organised by

Publisher/editor: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: publisher@insurancenews.com.au Advertising: NAOMI CONWAY & MADISON SEYMOUR McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: advertising@insurancenews.com.au Address: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road, Ivanhoe VIC 3079

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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 Art director: KRISZTINA STRZEBONSKI purple ink creations Email: kris@purpleinkcreations.com.au www.insurancenews.com.au/magazine

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August/september 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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Welcoming harder times Price gains at the June 30 mid-year renewals have increased confidence that the market has turned the corner By Wendy Pugh

IT’S BEEN A LENGTHY WAIT, BUT premium price turnaround signs strengthened during the closely watched mid-year insurance renewal season, increasing confidence about an anticipated market hardening. Gains are not universal, and come after an extended period in the doldrums, but there is evidence that a recovery is finally in train. “We are seeing definitely a different mood in the market compared to six months to 12 months ago and rates in a number of areas are going up,” Finity Principal Andy Cohen tells Insurance News. Some loss-affected policies have seen sharp percentage jumps, while more broadly gains have been modest. Arthur J Gallagher has reported premiums firming “across multiple classes” after a transition from a soft market began early this year. Australia and New Zealand were highlighted for special comment in the global group’s second-quarter earnings presentation, with Chairman and Chief Executive Patrick Gallagher saying both countries were “doing very well” after pricing turned higher by about 4-5%. The June renewals period was always going to spark plenty of interest, given years of sliding rates and earlier indications that the market was showing signs of stabilising over the past year. Suncorp Chief Financial Officer Steve Johnston told the August full-year results briefing that the company had seen strong pricing improvements in all commercial lines in recent months. “The June renewals period, when 17% of our policies renew, has exceeded our 10

expectations, with rate increases of greater than 10% in the top end commercial property market,” he said. Broker and analyst feedback from the mid-year renewals suggest the change in momentum is well underway, damping some speculation that a tentative recovery may fizzle out before it gathers steam. “Insurers are looking to restore profitability on lines that have been affected by high loss ratios,” Arthur J Gallagher Chief Executive Australia Sarah Lyons says. “It’s a mixed story, however, reflecting variations in capacity and price-driven competition in some spaces.” One senior broker told Insurance News that underwriters have been “far less inclined to negotiate” over some clients’ risks, and even profitable classes have seen rises in premiums. “Anyone who didn’t settle early in the period has been hit pretty hard,” he said. “Some brokers who wouldn’t accept increases have come back once they’ve tested the market and accepted [rises].” Analysts say insurers have suffered from a chase for market share in some segments, and needed to put through gains after an extended period of weak and falling premiums in order to rebuild margins. “Rates fell a lot and were just too low, in property in particular,” JP Morgan analyst Siddharth Parameswaran says. “Commercial property returns have been woeful for the past couple of years, both on an underlying basis and a reported basis.” Arthur J Gallagher has said major insurers sought rises of about 5-7.5% in property during the renewals, while busiinsuranceNEWS

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ness pack policies were rising by at least 5%, and up to 8% in some cases. In other lines, brokers have said industrial special risks premiums have risen as much as 25%, while management liability rates have climbed 20-25%. Rises in other liability classes have been moderate. Insurance House Group Managing Director and Insurance Brokers Network Australia Chairman Gary Gribbin points out the rises haven’t been across the board and it would be too soon to say “spotty” increases so far represent a hard market. “There are legacy issues in ratings structures that are being corrected, and some high-risk businesses are being treated to some steep increases,” he says. Insurers have looked for 6-7% increases on a “whole-of-account basis” he said. S&P Global Ratings analyst Craig Bennett says plentiful capacity and competition from offshore rivals continues to limit premium moves in the top end of the commercial market, with more signs of a turnaround in the small-to-medium segment. “From conversations we’ve had with insurers, they are becoming a lot more comfortable around putting some rate increases through and being able to maintain retention,” he tells Insurance News. Claims inflation has impacted the market in some lines, such as motor cover, while in liability increased claims activity in certain areas has contributed to rising awareness of the potential risks. “I think the market has turned,” Mr Bennett says. “We are not expecting big increases across the board, but we do expect rate to hold and further rate rises to come through at a general level.” 12

“We are expecting to see continued uncertainty and a more measured attitude towards risk in a number of sectors.”

Some segments are still “a bit underpriced”, with further material gains likely, while other segments are starting to reach return objectives, he says. The shift in gears has proved a challenge for younger brokers who have not experienced a time when prices are pointing in the wrong direction for clients and the market is more risk-averse, according to the observation of some veterans. “Based on what we have seen in the first part of the year, we are expecting to see continued uncertainty and a more measured attitude towards risk in a number of sectors,” Arthur J Gallagher Head of Corporate Broking Mark Oatway says in a report on the local situation. “The market continues to harden, which re-emphasises the critical role of a broker, especially for specialist or harder to place risk.” Regional issues are also coming into play to some extent after Cyclone Debbie powered across the Queensland coast at the end of March and moved south as a major rain-bearing depression, becoming one of Australia’s costliest natural catastrophes. insuranceNEWS

August/september 2017

“Anything above the 25th parallel south is being scrutinised from an insurance perspective and renewal terms are not being offered for some clients,” Arthur J Gallagher says. “For those where cover can be provided, premium increases across the board are expected.” General liability premiums are on the move, according to the report, although not to the same degree as the property market and with only marginal increases for well-managed, low-claim activity accounts. Despite the gains, the plentiful capacity that has weighed over premiums has not disappeared, and the environment remains competitive. It is yet to be seen if the pricing will further strengthen as market conditions change and insurers try to improve their financial performance. Typically, a turning from the soft to hard parts of the cycle would mean consecutive periods of market hardening, Mr Cohen says, while warning this is not always the case. “I would like to think that we would see this sustained and that we would not go backwards at the next renewals,” he says. *


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Zurich, empowered The hard yards are behind him. Now Chief Executive Raj Nanra is taking the fifth-placed Australian insurer on the journey to a more profitable future By Terry McMullan

THE TIRED CLICHÉ THAT “EVERYTHING IN insurance is changing” is forcing companies everywhere to examine their market strategies, question the reason for keeping loss-making business and develop new ways to distribute policies. Just keeping up is a task engaging companies around the world, not least Zurich Australia and its global parent. The Swiss-based group underwent an unusually thorough management turnover last year that saw former Generali chief executive Mario Greco return to restore the giant company’s faltering fortunes. By that time Zurich Australia had been treading the transformation path for several years, being an early adopter of the belief that resistance to change is futile. Chief Executive Rajbir (Raj) Nanra is happy with the progress being made on what he calls “a journey” for Zurich in Australia and New Zealand. Since Mr Nanra took over the Australian and New Zealand operations in late 2015, replacing Daniel Fogarty, he has been busy stabilising the business, then setting a new strategy and reengaging the market. To achieve that, he set out to benchmark Zurich’s place in the market before deciding where it should be and how to get there. “I think, for me, it was gaining clarity around where our strengths were in the market, and what fitted our strategy,” he tells Insurance News. “That’s why we took some pretty hard decisions in the fourth quarter of 2015.” These “hard decisions” included significant

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job losses – a reputed 65 positions were lost in the period, mainly from the underwriting, claims and shared services areas – placing Zurich’s travel insurance for debit and credit cards into run-off and withdrawing from the New South Wales compulsory third party market. “We felt those lines of business that we exited allowed us to redeploy that capital to areas where the markets really knew us and our strengths,” Mr Nanra says. “So it was about realigning what Zurich meant to this market and working to our strengths.” As any chief executive who has had to make hard calls over the past few years will attest, communicating the strategy and ensuring it’s understood and supported internally is essential. Mr Nanra says he focused on being transparent about his actions and intentions. “I think it was engaging the staff and making them understand why we made the decisions we did in 2015, being very transparent with them and explaining that we had to make some hard decisions, and dealing with our expense challenges at the same time. “It wasn’t easy. But it was important to be upfront with them as to why, and making it very clear that this was the way forward and explaining what the vision was so they could have total clarity around the decision-making process. “There was a simple process we set up: engage, listen. But we were also very decisive in our decision-making process, so once we had decided on an action they saw some activity and

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“I’m very happy about where we are up to in terms of our journey. It’s been one of embedding the change, which we have done over the past 12-18 months.”

they saw an outcome. So moving very fast through the fourth quarter of 2015 gained us a level of insight that the team and the staff could understand the process that was happening.” Zurich Australia has suffered in recent years from a rapid turnover in chief executives – a phenomenon often blamed on the Swiss parent’s overly intrusive management culture, which saw local decisions routinely altered or over-ruled by Zurich-based mandarins. But Mr Nanra says the Greco-led management is focused solely on getting the job done. “I think what we are seeing in Zurich is empowerment, and accountability comes out of empowerment,” he says. “What we are seeing in Australia is we have the ability to get on with executing our business plan. “That’s obviously coming from the change in how the group is being managed, so it’s been a positive for us. We have the empowerment within the business unit to go out and execute our plans.” Some 18 months after he started his change program, Mr Nanra can look back on what has been achieved with some satisfaction. “Our strategy was around building that commercial level of corporate business and where best to deploy our capital that we thought was in the wrong lines of business. We didn’t have scale in some of those areas, so what we did was the right thing. “I’m very happy about where we are up to in terms of our journey. It’s been one of embedding the change, which we have done over the past 12-18 months. 16

“But it’s also been about re-engaging our stakeholders. Our staff are our key stakeholders. But we’ve also been re-engaging with the broking community and the customers. “We believe in being very much on the front foot to go out and understand what they need from us. That whole engagement process, I think, that has really been key for us moving forward.” That market engagement also saw Zurich Australia decide to retire its venerable Zenith program, which had supported brokers for 12 years. “It served us well in the past, but as we move forward and we want to evolve as a business once again, a new approach is needed,” Mr Nanra tells Insurance News. “We went out to our brokers and spoke to them and said, ‘What do you want to get out of Zurich, what do you need from Zurich?’ How do we align strategically closer to where they’re moving? “What became clear was the market’s moved on and it was time to try a different approach. We’ve done a bit of a soft launch around some new ideas about a new program moving forward. “We’ve done a tour around the country speaking about what we want to do moving forward, and the response to date has been quite positive. “But I think the key message is around strategic intent and how we want to work with our brokers around what they’re doing and what we’re doing, and ensuring the program we do roll out has alignment.” Zurich is one of the last insurers to adhere to a broker-only model, and Mr Nanra emphasises insuranceNEWS

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“So innovation and technology is critical to make things more efficient and happen a lot more smoothly, but we are still ultimately in a relationship business, and we can’t forget that interaction.”

the company remains “very committed” to its broking relationships – for now, at least. But it isn’t a commitment written in stone, and changing market forces may see the company placing products into the direct market in future. “We do have the opportunity to look at a diversification of our distribution potential, but that doesn’t mean we won’t be staying true to our broker distribution,” he tells Insurance News. “But I think the key thing is that our commitment to the broking community is still there.” New market realities mean any move into the direct market would not be as confrontational to brokers as in the past. Technology and innovation have seen to that, forcing brokers and insurers alike to adapt to all sorts of new realities as they struggle to keep up with the accelerating pace of change. In any move involving insurtech, Mr Nanra has the advantage of belonging to a strong and innovative global company. What he’d like to see is “how we make it easier for our customers and our brokers to interact with us, to make the process of quoting a policy, to issuing a cover note, to paying a claim, a lot more seamless and a lot easier to transact”. “But none of that should replace the relationship aspect of our business,” he says. “So innovation and technology is critical to make things more efficient and happen a lot more smoothly, but we are still ultimately in a relationship business, and we can’t forget that interaction.” Whatever happens, Zurich Australia has 18

returned to being master of its own destiny, rather than being a mid-market player helplessly buffeted about by changing market forces. “We view ourselves as driving our own destiny now,” Mr Nanra says. “Part of the changes we have made was to enable us make the right decisions around how we operated and how we underwrite. “As an organisation with a focus on technical excellence, we want to drive our approach to how we want to see the market move. “Our broking partners are on this journey with us. They understand our [risk] appetite, and we back that up with increased servicing around claims, and around technology. “So we are trying to be very clear and consistent and delivering what we promise. “By doing that – even with a challenging market like this one – it is allowing us to grow, because we can back up what we’ve said we are going to do.” Asked how he sees Zurich Australia operating five years from now, Mr Nanra doesn’t hesitate. “We will be very much customer-focused. That’s the journey we have started on already – understanding the customer, listening to the customer and meeting the needs of the customer. “That will allow us to have a broader sort of impact in the market. “For us, it’s not about the size of our presence, but our ability to serve our customer. Doing that well will allow us to attract more customers. “Our new strategy here is to be that insurer of choice, and you do that by serving the customer * and listening to them.”

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Living in perilous times Catastrophe models are helping insurers and communities prepare for natural disasters, AIR Worldwide President Bill Churney says By Wendy Pugh DESPITE THE BUSHFIRES, CYCLONES and hailstorms to hit Australia in recent years, the country may in fact have had a lucky run when it comes to natural disasters. “There is a 20% chance in any given year in Australia of having a $10 billion loss or higher,” Bill Churney, the President of international catastrophe modelling company AIR Worldwide, says. “Australia has been fortunate not to have a very significant natural disaster, but if one were to occur today, given the level of exposure it could make prior historical events look quite small by comparison,” he tells Insurance News. Cyclone Debbie, which hit Queensland in late March before also causing storms and floods in New South Wales, has been the costliest recent event, with losses reaching $1.4 billion by late July, according to the Insurance Council of Australia. Events that could cause higher losses include large-scale hail or wind catastrophes in a metropolitan area such as Sydney, a tropical cyclone striking densely populated regions or an earthquake hitting vulnerable built-up environments. US-based AIR Worldwide, which produces models for more than 100 countries, 20

has examined various Australian scenarios and is expanding the range of risks it studies. The group has added an Australian severe thunderstorm model to its suite of local products. Updates to bushfire, tropical cyclone and earthquake models were also outlined last month at a seminar in Sydney, presented with parent company Verisk Analytics. Next year releases for Europe will be a major focus, while New Zealand’s earthquake model is undergoing an update, with data from this decade’s catastrophes to be incorporated into a new version scheduled for 2019. The group globally is putting out up to 10 updates and new offerings each year. Other areas of focus in the Asia-Pacific region include Japan, where it is this year releasing an inland flood model. “One of the things we need to do is every few years or so do updates and expansions to those models to ensure they are consistent with data from recent events, or new scientific knowledge, or to try and expand their scope and breadth,” Mr Churney says. The models incorporate local knowledge and data, along with input from global events, while post-disaster information is collected as part of the validation in an evolutionary process. Globally significant events such as the Christchurch earthquakes yield claims information and observational data that then influence modelling in other countries such as Australia and the US. Improved satellite images and greater access to more specific on-the-ground data are among inputs that are enhancing results. “This concept of big data is something that is not new in the catastrophe modelling field, but as we gather more information – and it is easier to gather information – the insuranceNEWS

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models can become more realistic and better representations of what actually happens,” Mr Churney says. The concept of probabilistic modelling has gained traction with insurers as computing power and data quality has improved, and the sector has established a track record for helping the industry to understand its risks. AIR started in 1987 but didn’t really find its feet until Hurricane Andrew barrelled into the Florida coastline in 1992. The catastrophe was the costliest natural disaster in US history, at that time, in terms of insurance payouts. The extent of the hefty losses caught many insurers by surprise, pushed a number into insolvency and highlighted the need for a better understanding of ramifications from low probability, high severity events. Modelling became part of the new paradigm, aiming to give a realistic view of potential hazards and impacts on exposed properties so risks could be better managed. AIR, headquartered in Boston, expanded its US offering in the wake of Andrew, spread its wings overseas and launched an earthquake model in Australia in the late 1990s. Mr Churney, 46, an economist by background, joined AIR in 2002 and later became chief operating officer, with responsibilities including global business development, consulting and client service activities. He took on his current role at the start of last year. The benefits of modelling for the insurance industry and for building disaster resilience in the community in general have been clearly demonstrated over the years, he says. “One of the things with natural disaster risk, is that a lot of it in the world is still uninsured, and insurance has proven time and


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One eye on disaster: AIR Worldwide President Bill Churney

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Costly catastrophe: damage following Sydney’s 1999 hailstorm

again to be the best way for individuals, businesses and countries to respond to natural disasters,” he says. “One of our ambitions is hopefully to use the work that we do to improve that education so people recognise the need for insurance, embrace it and it helps them get back on their feet after something tragic happens.” According to Munich Re, overall losses from worldwide natural catastrophes in 2016 totalled $US176 billion dollars, while insured losses were $US50 billion. The most perilous year in recent times was 2011, when a series of major catastrophes included the devastating earthquake and tsunami in Japan, the Christchurch earthquakes and flooding in Thailand. Data published by the New York-based Insurance Information Institute estimated insurance losses from those three events alone totalled $US72 billion. Despite the impact, the insurance industry was better prepared to financially manage the risks from the catastrophes compared with the Hurricane Andrew period, when modelling was in its infancy and losses wiped out a number of companies. “Only one insurance company globally went insolvent, so to me that is testament to both the development of the models but also how the insurance companies have used them,” Mr Churney says. Natural hazards modelling by AIR includes both rare events that are often overlooked or discounted as well as those that are an acknowledged risk that comes with living in some regions.

In Australia, earthquakes are an example of a low probability, high-risk event where modelling provides a stark warning of the possible implications. Modelling data includes regional information on construction types, with many Australian suburbs filled with masonry veneer and double-brick homes that are more vulnerable than wooden buildings to seismic events.

Australia could easily trigger losses of $20$30 billion. “You are not going to see earthquake risk in Australia with the frequency that you see tropical cyclones, hailstorms, bushfires,” he says. “But even relatively low magnitude events, if they occur in areas like Perth, Adelaide, Melbourne, Sydney could cause extensive amounts of damage.” By contrast, AIR’s new severe thunderstorm model looks at risks from Australia’s most frequent atmospheric peril, and one which has accounted for a third of the costliest natural catastrophes in the country during the past 50 years. Sydney’s 1999 hailstorm remains Australia’s most expensive natural disaster when it comes to insurance losses. AIR warns the loss potential is increasing as property replacement values rise in the densely populated capital cities, while the number of insurable exposures is growing as development expands into previously unpopulated areas. The model includes data from the Bureau of Meteorology’s severe storms archive, sourced from reports from trained weather spotters. To compensate for bias from eyewitness reporting, AIR says it employs a hybrid physical-statistical method to simulate hail, straight-line wind and tornadoes in physically realistic locations, including areas that may have escaped damage during the brief historical record. In general, the models provide a reality check against people’s natural tendencies to become overly optimistic or pessimistic about the chance of events happening based on their own experience and short memories.

“Insurance has proven time and again to be the best way for individuals, businesses and countries to respond to natural disasters.”

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The insurance risk is also potentially significant as earthquake is one of the multiple perils normally included in household policies, even though most people would not give the risk a second thought. In the US, a more tectonically active country where the earthquake threat has a higher profile, there is low uptake of separate cover to insure against the danger. Although not front and centre in most residents’ minds, there have been reminders in Australia that the threat is a real one. Newcastle’s earthquake in 1989 ranks among the country’s worst disasters, and would cost more than $7.6 billion if it happened today, according to AIR Worldwide estimates. Mr Churney says a seismic event in insuranceNEWS

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Rising risks often result from complacent development in bushfire prone areas or on flood plains after a long disaster-free period. “That is certainly one of the values of the models – to serve as a reminder that major losses can occur. Just because you haven’t seen it in the past 10 or 20 years doesn’t mean that it might not happen tomorrow,” Mr Churney says. “We are very much anchored by what has happened in the recent past and the models provide a more objective way to counter some of those perceptions.” Globally, the last decade has been relatively benign for natural catastrophes, with the exception of 2011, contributing to a decline in reinsurance pricing and encouraging more insurers to look at expansion into new geographies and emerging liability risk areas to kick-start earnings. AIR Worldwide diversified into terrorism modelling after the US September 11 attacks and has extended its interests to include crop perils and potential impacts from global pandemics. In the past 18 months it has increased its focus on cyber risk and other casualty line events, responding to client demand for improved information. The group this year acquired UK-based Arium, which helps companies model liability losses for a variety of potential risks, such as those that emerged when dangers from asbestos and tobacco exposure became clear. “The reality is that if you look back over the last 20 years, there have been more insolvencies from losses in casualty or liability

Work is also underway on applying artificial intelligence and machine learning to improve processes. Climate change is expected to become an increasing focus, with AIR this year releasing a report on the latest research and potential impacts on extreme weather. “The insurance industry has not been overly focus.ed on the impact of climate change,” he says. “Most policies are one year in nature, so I think there is a view that the industry can adapt over time. “But I would say [that] over the past couple of years we have had more and more companies come to us and say, we are trying to think out five or 10 years into the future and we would like to bring in an understanding of how climate change will make a difference in how we run our business over that timeframe.” Mr Churney’s address to the Verisk seminar coincided with a calm and sunny Sydney winter’s day, where natural disasters would be far from the mind of most people going about their business. But the risks are there, have always been there, and their implications are often increasing. Mr Churney says the models are a reminder that a range of catastrophes can happen. They give insurers greater clarity as they account for potential events in their pricing, reinsurance protection and capital allocations. “One thing that catastrophe modelling teaches you is don’t just look to the recent past to have a sense of what might be coming in future,” he tells Insurance News. “What we do in developing models is fundamentally helping the world to better * prepare for extreme events.”

“One thing that catastrophe modelling teaches you is don’t just look to the recent past to have a sense of what might be coming in future.”

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portfolios than there have been from a natural disaster point of view,” Mr Churney says. “This framework they are developing is getting embraced quite well in the Lloyd’s market and the US market, and we are starting to talk about it a bit further here in Australia.” Compared to the geographic perspective of natural catastrophes, “liability storm tracks” reflect the economic links between sectors and along supply chain. Mr Churney says AIR will continue to put most of its focus on natural catastrophe risks, while expanding the analytical capability it offers clients and becoming a broader “extreme event” modelling company that includes the cyber, casualty and life and health areas. insuranceNEWS

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Wake-up call: Hurricane Andrew hit South Florida in 1992

AFP

Declaration of independence Catastrophe modeller Risk Frontiers will write the next chapter of its history alone. Key to its success is its close relationships with local insurers By Bernice Han

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JULY 1 MARKED NOT ONLY A NEW financial year but also a new era for Risk Frontiers, as the natural hazards research centre parted ways with Macquarie University to become a privately run commercial operation. The centre is excited about the journey ahead, and believes its independent status paves the way for new opportunities, including the chance to tap external funding and monetise parts of the business to fund research in new areas such as coastal erosion and cyber security. “Whereas Risk Frontiers has in the past been run as a non-profit organisation, the new board is focused on growing the company,” Chief Executive John McAneney tells Insurance News. “Being a private company in which the staff own the intellectual property, we can now access external capital to fund this growth. “In spinning the company out of the university, Risk Frontiers can be more commercial in some aspects of its business operations, while continuing to provide the rigorous science-based advice that clients have come to expect.” insuranceNEWS

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Risk Frontiers is still finalising its “strategic plans”, but the one thing that will not change is its DNA: the commitment to improving the management of natural hazard risks. This is, after all, what spawned the group 23 years ago, when the insurance industry realised the country was in dire need of a natural hazards research agency. The wake-up call came courtesy of Hurricane Andrew in 1992, when AIR Worldwide founder Karen Clark, who developed the industry’s first probabilistic catastrophe model, correctly predicted insured losses from the Category 5 Atlantic storm would be about $US13 billion. Leading risk experts, including Lloyd’s of London, were expecting no more than $US6 billion and panned what they felt were overblown calculations from the then relatively unknown risk modeller from Boston. The final loss was about $US15.5 billion, and Ms Clark cemented her place in risk management history. Insurers everywhere, including in Australia, have not looked back. Using scientific data to gauge a catastrophe’s strike


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Looking ahead: John McAneney

path and the losses it may inflict is now normal practice. “Missing from the traditional risk assessment approach had been the geospatial understanding of likely hurricane paths in relation to where assets were located and knowledge of structural weaknesses of different kinds of buildings,” Professor McAneney says. “Today, catastrophe loss models attempt to encompass all these attributes, and we have gone from a situation where few companies used models to a point where many use more than one model. “Some argue that models are being used wrongly, with too much credence given to the exact numbers produced for, say, the one-in-200-year event loss, and there needs to be a much better appreciation of why models differ and the perils that each cover. “However, this is a much better situation than existed 25 years ago, when several insurers went bust after Andrew.” The societal impact of Risk Frontiers’ work cannot be overestimated. Its research has been used by insurers to assess natural hazards and determine the premiums Australians pay to insure their homes and other assets.

“As we look further ahead, you don’t have to be clairvoyant to see the increasing insurance and economic risk profile in southeast Asia.” Moreover, as the importance of resilience has become central to thinking, Risk Frontiers has strengthened its services to government to assist in building more resilient communities, including a commitment to risk communication. Funded by the insurance sector when it was launched in 1994, Risk Frontiers has played a leading role in supporting the country’s natural disaster mitigation efforts. One of its crowning achievements is its contribution, together with Willis Re, to the creation of the National Flood Information and Flood Exclusion Zone Databases for the Insurance Council of Australia and its members. The two databases provide flood information for almost 92% of Australia’s addresses, to help insurers determine the risk. “When we started, almost no company offered flood insurance,” Professor McAneney says. “There was little research on likely losses. “Very often, the work was heavily focused on the hazard. In trying to take it to the next step and say, these are the risks and how to price them – that was truly pioneering.” insuranceNEWS

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Risk Frontiers does not expect its ties with the insurance sector to weaken now it is more commercially driven. “The insurance and reinsurance sectors will continue to be key to our future business success and the key collegial relationships developed with the major companies in Australia and abroad, which have so generously supported our development, will be fostered,” Professor McAneney says. “We wouldn’t be where we are today without that support.” Risk Frontiers also wants to use its Australian success as a springboard to the wider Asia-Pacific region, which is often rocked by earthquakes, typhoons, landslides and other calamities. “As we look further ahead, you don’t have to be clairvoyant to see the increasing insurance and economic risk profile in southeast Asia, where many of the world’s largest cities are located in hazard-prone areas,” Professor McAneney says. “It makes sense that we engage more fully with an exciting part of the world. We want to play our part in helping make these * communities more resilient.” 27


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Disrupting the disrupters

Insure Pitch is inviting brokers to spruik their brightest ideas to a high-powered panel of experts By Wendy Pugh BRILLIANT IDEAS THAT MAY NEVER otherwise see the light of day will have the opportunity to flourish in a new insurance innovation program that borrows from the television Shark Tank concept. The TV series has brought together emerging entrepreneurs and investors to accelerate a range of enterprises, including a granola business, coffee capsule company and pole exercise rooms. Insure Pitch, led by Premium Funding Director Ross Hayward, has set its sights on uncovering ideas from brokers that can generate new business, drive revenue and lead to a better operation. Potentially proposals will “disrupt the disrupters” when it comes to insurtech rivals. “I am sure out of the thousands of brokers that are in the industry there are people with great ideas, but they just don’t have the ability or opportunity to pull the trigger and get them commercialised,” Mr Hayward tells Insurance News. “I think we will uncover some really brilliant ideas and people.” 28

Potential ideas could involve automation on the marketing side and improvements to claims-handling or payment technologies. They may involve smartphone apps or any range of innovations to improve the experiences of brokers, their staff and clients. People with proposals are invited to apply at www.insurepitch.com.au by October 31. From there the ideas will be distributed to a panel of potential investors. If they trigger interest, proponents will be invited to provide more information. Mr Hayward says assistance to develop projects could be financial, although it might also involve marketing help, technological expertise or other guidance. Insure Pitch potentially offers exposure to thousands of brokers and hundreds of millions of gross written premium. The panellists who will assess ideas with Mr Hayward are Ebix Managing Director Leon d’Apice, PSC Insurance Group Managing Director Paul Dwyer, Ausure Managing Director Troy Brown, Insurance House Group Managing Director Jay Fereday, Resilium Insurance Brokers Managing Director Greg Arms and Hollard Group Director Richard Heilig. “They are all competitors, so to get them all in the same room and on the same page has been unusual,” Mr Hayward says. “It is lovely that they have all decided for the betterment of the industry to work together and sit down and hear some of these ideas and try and assist people to get them off the ground.” insuranceNEWS

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The concept comes as the insurance industry faces pressure to shake-up its traditional ways of doing business amid a technological upheaval that is opening the door to new competitors. McKinsey & Company says lowering of regulatory barriers in countries such as Australia, Singapore and the UK is increasing the potential for insurtech disruption globally. Insurtechs have not yet made deep inroads but they are growing fast and could capture “a meaningful share of value pools” within a few years, a new McKinsey report says. “How quickly incumbents adapt to these inexorable market changes will determine the size of their share in the next generation of the insurance industry. “With few if any layers separating staff from top management, insurtechs can more easily make adjustments and act on the latest experiences.” Mr Hayward says Insure Pitch is a proactive response to the changes and challenges swirling around the industry and he looks forward to working with his fellow panellists and meeting some lateral thinkers from the industry. “I don’t know how many applications we will get or how many people we will be able to assist, but it is worth giving it a go,” he says. “If we just sit around waiting to be disrupted by the insurtechs of the world, and not as an industry combine to try and do something about it, we might look back and * be frustrated that was the case.”


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The birth of the Mansfields How (and why) a plan was hatched to help raise the profile of claims in insurance by celebrating excellence By Terry McMullan Publisher, Insurance News

LIKE SO MANy GOOD THINGS, THE CONCEPT OF AN AWARD AIMED specifically at claims professionals came about through frustration. Claims is what insurance is all about, yet it often seems to be the industry’s forgotten child. When I joined the Insurance Council in 1991 consumer activism was in its earliest stages, and claims was the central issue. But like giant oil tankers, insurers were finding it hard to change course. Insurance contracts at the time were full of meaningless legalities. They meant nothing to the customer, for whom court action was the only course of redress. There were many interesting debates with executives who insisted it was all about the contract, full stop. How things have changed! Today claims departments are not only captive to the often-extravagant promises of their marketing departments and the varying expertise of their underwriters, they also have to deal with the trending attitudes of the Insurance Ombudsman, the pressures of a highly competitive market and the expectations of their customers (and brokers). Plain-language policies contain less wriggle room, but the need for fairness and balance is more important than ever. The excellence of a company’s claims department is central to the success of everything from brand management to market penetration. So you might think we’d all be focused on claims, but we’re not. Claims professionals are the industry’s unsung heroes. The largest insurance industry awards event has 17 awards covering everything from small brokers to employers, but nothing specifically for claims professionals. Late last year I was discussing this omission with Allan Manning, the Managing Director of LMI Group, a claims expert and a fervent blogger on industry-related issues. LMI produces, among many other things, the free Claims Comparison service, which grades the claims performance of insurers. We jointly reached the conclusion that the best way forward would be to mount our own awards event for claims professionals. LMI had

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the tools to develop an accurate and credible measure for insurers’ claims performance, and Insurance News had the industry audience to promote it to as well as event management experience. Using our companies’ names for the awards was never going to happen, and Allan suggested instead naming them after Lord Mansfield, the originator of the concept of utmost good faith in insurance (see Insurance News December 2016/January 2017, Page 60). And so was born “the Mansfields”. We also agreed immediately the awards should be run on a not-forprofit basis. I have an aversion to awards events – or for that matter awards – which have more to do with public relations than celebrating excellence. Allan felt the same way, so we agreed that we would budget tightly, with any money left over going to an orphanage he had visited in Bengkulu, Indonesia, a city with a strong link to the story of Lord Mansfield and the concept of utmost good faith. Steadfast and icare came aboard as sponsors as soon as they became aware of our plans, and it was their financial support that made it all possible. The much-admired trophies carrying the stylised outline of a bewigged Lord Mansfield were designed by Insurance News Marketing and Development Manager Madison Seymour. She also managed the event at Sydney’s Establishment Ballroom, working with LMI’s Ashleigh White and Andrew Pitts. Among the 200 guests at the inaugural event were the chief executives of the Insurance Council, the National Insurance Brokers Association and many insurance companies, as well as claims managers and their teams. Master of ceremonies Martin McAvenna kept the night ticking over on time. It was a very impressive turnout and a great way to celebrate claims excellence. Congratulations to the winners – especially Gold Mansfield winner Chubb – and the finalists. August/September 2017


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Vivek Bhatia, Chief Executive and Managing Director, Insurance & Care NSW (icare) The reason we are gathered here today is to make sure that we recognise the lifeblood of the insurance industry, which is the claim. That is the moment of truth where our industry stands in front of the millions of people and businesses who buy the insurance product in the hope of never using it, but should it come to that we are always there to support them. We are there to stand by them and help them navigate through what can be a very difficult process in an emotionally trying time. It is a great honour and privilege to be a sponsor for the inaugural Mansfield Awards. Terry [McMullan] and Allan [Manning] have done an absolutely tremendous job in terms of really highlighting and elevating the function of claims in the industry. As an organisation we are all about claims, which is why the insurance industry exists at all. So as an insurer we always make sure that we are true in the time when people are really tested, which is in the time of the claim.

Janelle Greene, General Manager Strategic Delivery & Operations, NTI (Mansfield Award for Specialty Insurance) I am absolutely thrilled to accept this award on behalf of NTI and [Chief Executive] Tony Clark, who couldn’t be here today but would have absolutely loved to be. Thank you also to icare and Steadfast and to LMI and Insurance News for what I think is a wonderful new event in our insurance industry calendar. A number of my claims team are here today, and this award really is in recognition of all the efforts you put in day in and day out to deliver exceptional claims services to our customers. So thank you very much – this is for you.

Samantha Hollman, Chief Operating Officer, Steadfast Group Steadfast is proud to be one of the major sponsors for the Mansfield Awards. We actually put our hand up to be a sponsor within days of hearing about this. We believe in the purpose of the Mansfield Awards of recognising claims excellence and we also really hope that they help to raise the industry’s claims management standard. Claims handling affects our brokers’ customers’ outcomes, and customers need to have that confidence that when there is a claim if something goes wrong, that they will be paid efficiently and smoothly. Therefore awards like this, which recognise excellence in claims handling, is really what’s needed in this industry – it’s crucial. That’s why Steadfast is proud to support the Mansfield Awards in its inaugural year, and congratulations to Terry and Allan on such a fantastic initiative. We are really behind it.

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Susan Donaldson, Head of Claims, Berkshire Hathaway Specialty Insurance (Mansfield Award for Corporate Property and Casualty) I was just saying to a colleague exactly how much I wanted one of these [trophies] for my desk, having only seen it for the first time tonight. I’m proud – incredibly proud – to be here tonight. We are just two years in as Berkshire Hathaway Specialty Insurance and we have set ourselves a fairly high standard in terms of insurance excellence, and certainly in terms of claims excellence. To see that recognised tonight, so very early on in our journey, is an honour we didn’t dream of winning. Thank you very much to Terry and to Allan and to the very fine industry members who are here tonight. I say thank you also to [President Australasia] Chris Colahan for his excellent leadership in terms of our business overall and certainly in terms of our claims team. And I say thank you to the wonderful team of people who work with me.

Sean Jungwirth, National Manager Claims Services, Allianz Australia (Mansfield Award for Personal Lines) I am really pleased to accept this award on behalf of Allianz, and in particular all of the people who contributed to the service excellence that is provided through our claims units nationally. Congratulations to the other finalists and the other winners tonight. I know that everybody in this room understands the importance of the premise of this award – utmost good faith – and we are really pleased to be recognised for the service and in particular the fairness that represents. We are really pleased that an event like this recognises excellence and fairness in the industry, and thank you to Insurance News and LMI. We look forward to seeing this event grow in the future and the prominence of this award recognised further.

James Flaskett, Head of Claims, Chubb (Mansfield Award for SME Property and Casualty) Our Chief Executive, John French, can’t be here today as he’s travelling, so as the Head of Claims at Chubb I’m who you get tonight, which is probably quite fitting, really. It’s great to see so many chief executives around the room showing their support of claims and what claims means for their business. I’m happy to accept this award on behalf of the 100 people who work tirelessly day in and day out at Chubb to deliver claims service to our customers.

(The Gold Mansfield for overall excellence in claims) What an honour! It’s been 18 months pretty much to the day since Ace and Chubb came together, and in that time it’s been an incredible journey and taken a huge amount of effort to bring two large insurance companies together. There’s been a lot of hard work, tears, sweat, blood, and to receive an award like this – recognition for service excellence – through that period of time is incredibly humbling and a true recognition of the effort that each one of my team has put in during the past 18 months. I wish my team could all be here, but I don’t think my budget could extend that far. So on behalf of them, thank you very much for a wonderful * evening and for this recognition. 32

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Covering all bases AUB chief Mark Searles says the group’s strategy is helping brokers become trusted advisers By Wendy Pugh

AFTER A FOUR-YEAR transformation program, AUB Group Chief Executive Mark Searles has the company set for a future that offers new opportunities, while keeping risk advisers centre stage. He has reduced AUB’s reliance on Australian broking by adding other sectors to the mix, creating a more diversified company that still builds on its historical strengths. “We have enabled growth coming from new areas, while at the same time looking to protect the core area of Australian broking, working with our partners,” Mr Searles tells Insurance News. “Importantly, the magic is when you connect all that together. The collaboration is really starting to come through, and that is very pleasing to see.” The changes aim to strengthen AUB throughout the market cycle and ensure it offers more value to clients amid challenges facing all traditional sales and advice industries in the age of technological disruption. The company adopted the broad AUB Group name in November 2015 to reflect the new direction, with the previous Austbrokers moniker repurposed for the Australian broking division. This followed a strategic review driven by Mr Searles, who joined the group in January 2013 from local insurer 34

CGU. He previously held senior roles in the UK at companies including Zurich, Sage Group and Lloyds TSB. His appointment to the Sydney-based broking company came as storm clouds were gathering. Commercial premiums were poised for a multi-year slide and interest rates were slipping consistently to fresh historical lows. Nevertheless, other drivers for the company such as policy count, premium funding penetration and cost controls were still heading in the right direction, and the business had continued its pace of expansion, with local broking acquisitions and expansion in niche underwriting agencies. Mr Searle’s diversification leap came with Austbrokers’ entry into New Zealand in 2014, and the creation of the Risk Services division the same year through the purchase of a 50% stake in workers’ compensation business Procare. Further acquisitions in the new areas followed, and last year AUB said it would work with Suncorp to introduce a direct life insurance offering. This broader focus has seen Australian broking’s share of profit fall to about 65% in firsthalf results released in February, down from more than 90% six years earlier. Underwriting agencies, rebranded last year under the insuranceNEWS

Sura label, contributed 15% to earnings, New Zealand broking 8% and Risk Services 12% in the six months to December 31. AUB’s overall revenue grew 15% to $121.8 million in the first half, while group adjusted net profit after tax increased 12.7% to $14.5 million. The company says its new “ecosystem” is now in place. “The connection point is still the risk adviser, so while diversification across the group has taken it away from purely an Australian broking focus to being a whole host of different things, the key contact will always be the broker or the risk adviser,” Mr Searles says. “I don’t see the percentages changing much going forward. I see all areas growing equally.” AUB remains committed to the “owner-driver” model that has served it well since before its Australian sharemarket listing in 2005. The shared equity approach has typically seen the company take a 50% stake in a brokerage, although the percentages can vary, particularly in the underwriting agencies side of the business. “The core point is that it is more about having skin in the game,” Mr Searles says. “It is about working with a partner where you have mutuality of interest.” AUB also enhances its overall clout through the August/September 2017


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Diverse approach: AUB Group Chief Executive Mark Searles

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Austbrokers & IBNA Member Services (AIMS) joint venture between Austbrokers and the IBNA network of independent brokers. The group’s corporate diversification has taken place as brokers across the industry are encouraged to lift their game to protect their turf. The internet is offering convenient online alternatives for customers, particularly at the smaller end of the market. The annual Vero SME Insurance Index shows 31% of Australian respondents used a broker to buy cover last year, down from 40% in 2013, while online purchases increased to 27% from 20%. Mr Searles says at the micro, commoditised end of the market, business owners may go online, but as enterprises become more complex the diversified AUB Group is well placed to assume a “trusted adviser” role. “The income from the SME, from the owner’s perspective, pays the mortgage and feeds the kids, so why wouldn’t you use a risk expert to help protect your income?” Mr Searles asks. “If the client says, ‘I really need specialist proper advice and I am prepared to pay for that,’ that is basically our sweet spot. “That is where we are setting this group up for the long term.” 36

“The income from the SME, from the owner’s perspective, pays the mortgage and feeds the kids, so why wouldn’t you use a risk expert to help protect your income?” AUB categorises risks affecting customers as physical, people or financial. Under its approach, adviser partners should have the tools to complete a risk discovery assessment and offer assistance across all three areas, even where the issues are not part of the traditional broking domain. “In themselves, they may not have the skills in those other areas, but they will know someone within the group, or that we can procure the services of, given our scale and size, to enable that adviser to give really good advice,” Mr Searles says. “By doing that you change the nature of the client relationship from an annual renewal to one that is an enduring relationship as a true trusted adviser.” Physical risks include cover for factories, trucks and other assets, while financial risk is less about the banking side and more about insuring the contriinsuranceNEWS

bution of key personnel, who may be the owners and backbone of the business, and who keep it thriving. The people domain includes workers’ compensation and the prevention and management of employee workplace injuries – an area of expertise introduced through creation of the Risk Services division. After several years transforming the company amid difficult market conditions, Mr Searles may now also catch a wave of momentum from a hardening premium cycle. AUB’s half-year report says rates are stabilising, while insurers are increasingly expected to raise premiums as they face pressure to combat claims inflation and rebuild shrinking margins. “This has been talked about for a year or so and, in my experience, it takes about 12 months or so for the edicts to August/September 2017


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come out, and then the effect to hit the marketplace, so we will start to see that happening now,” Mr Searles says. Signs of a firming market were reported by brokers at the mid-year renewals, presenting a more positive premium backdrop for the financial year starting July 1. The outlook is less positive around interest rates. The Reserve Bank has kept the cash rate mired at 1.5% for the past year after cutting steadily from 3% in early 2013, having an adverse effect on brokerages. The central bank forecasts the economy, which has been relatively subdued, will strengthen gradually, while many analysts expect rates to remain low for some time. “From our point of view, the SME sector has done it tough for a number of years,” Mr Searles says. “If we start to see renewed confidence in the economy, then… the SME market will pick up accordingly.” The weak market has contributed to fewer acquisition opportunities in Australian broking in recent years, with AUB instead active in New Zealand and the risk services area. Mr Searles says more opportunities are likely to emerge as the market leaves the bottom of the cycle, but the company’s growth focus is less acquisitiondriven than six or seven years 38

“It is almost as if disruption is a new word. Disruption has been around for donkey’s years. It just takes different forms at different times, so we just need to ensure we are fleet of foot with regards to the way we execute strategy.” ago. “Today, organic growth is our core driver and acquisition needs to be seen as icing on the cake.” The company has tweaked its portfolio with some small divestments, exiting the NewSurety business last year and last month selling its 100% holding in commercial business pack product Sura360. Mr Searles says the underwriting agencies division aims for leading positions in niche markets, and the mainstream 360 product didn’t fit the criteria. AUB is also ensuring it is part of the conversation on insurtech, particularly when it comes to technologies that could deliver a better experience for advisers and clients. Technological transformation is frequently flagged as an emerging threat to entrenched insurance companies, but Mr Searles says despite the recent insuranceNEWS

focus, challenges from market change and competition have long been part of the business environment. “It is almost as if disruption is a new word,” he says. “Disruption has been around for donkey’s years. It just takes different forms at different times, so we just need to ensure we are fleet of foot with regards to the way we execute strategy and the way we actually engage and attract the clients as well.” AUB Group is continuing to seek opportunities while adapting to the ever-shifting landscape and aiming to capitalise on any upswing in the market. The foundations for the future may be in place, but there’s no time for standing still. “You have got to ensure you are constantly contemporary to the market, that you are constantly staying abreast of * changes,” Mr Searles says. August/September 2017


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This year’s big blips Swiss Re’s latest Sonar update reveals another broad array of emerging threats By Andy Swales 40

insuranceNEWS

FROM GENETIC ENGINEERING AND “ELECTRONIC PERSONS” to monetary policy, Swiss Re’s annual Sonar report on emerging threats frequently runs the gamut from the outlandish to the mundane. And, in the short term at least, it’s most likely the latter that keeps (re)insurance executives awake at night. This year is typical: three of the report’s four leading industry dangers stem from global economic and regulatory trends. Swiss Re ranks the return of inflation, reduced market access and regulatory fragmentation as threats with the potential to cause “high impacts” over the next few years. The former is a function of recovering oil prices and some central banks’ willingness to let inflation surpass short-term targets, according to the report. It warns of added “pressure on insurers’ profitability, already under stress from competition and regulatory requirements”. August/September 2017


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Growing risk: nationalist movements such as Donald Trump’s “America first” threaten global trade

Reuters

“In a world where nationalistic tendencies are strengthening, market access will become more difficult for all industries, including (re)insurance.”

“While insurers can protect themselves through a number of measures… (diversifying assets into commodities or real estate, premium increases to manage claims costs, contract clauses), circumstances warrant careful management and may not always be permissive to such measures,” Swiss Re says. The other two are closely tied, with the global trend towards nationalism and protectionism – as demonstrated by “America first” and the rise of anti-EU sentiment in Europe – throwing up barriers to global trade and co-operation. “In a world where nationalistic tendencies are strengthening, market access will become more difficult for all industries, including (re)insurance,” Swiss Re says. “Consequently, there will be a negative impact on global trade and economic growth. Capital controls not only diminish the [movement] of capital, but may also undermine contract certainty and even the ability to offer products in certain countries. insuranceNEWS

How Sonar works The Sonar report, published annually since 2013, aims to “inform the debate about emerging risks and facilitate the finding of solutions”. Swiss Re says it “identifies emerging risks, first and foremost, through its proprietary Sonar tool, an internal crowdsourcing platform that allows for collecting input and feedback from underwriters, client managers, risk experts and others across the company”. It says the report’s risk themes “are based on early signals collected throughout the year. They neither reflect the entire emerging risk landscape of the insurance industry nor that of Swiss Re.”

August/September 2017

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“Should an event bring down or severely impair a super cloud, whether through a technical failure, a cyber attack or a power blackout – possibly caused by a natural disaster – and last a couple of days, the financial loss could be immense.”

The parched world Despite a (hopefully brief) resurgence in scepticism of late, most people now accept the science on global warming and humans’ role in it. Swiss Re has been among the insurance industry’s loudest voices on the dangers ahead. This year the reinsurer flags water stress – or the “big drying” – as a high-impact threat over the medium-long term. It already affects much of central and western US, and regions from the Mediterranean to Africa, parts of Asia and Latin America. “The World Resources Institute ranked future water stress (ratio of withdrawals to supply) in 167 countries and found 33 will likely face extremely high water stress by 2040, with 14 countries in the Middle East alone,” the report says. “Climate change is expected to play an increasing role as well. Detectable trends towards more frequent drought conditions before the end of the 21st century can be observed in particular in the Mediterranean, South Africa, and parts of the Americas.” The potential impacts are manifold – from agricultural losses and property damage due to soil subsidence and wildfires, through to famine, war and mass migration crises. “Water scarcity, drought and wildfires already lead to significant economic losses. As population and economic values continues to grow in affected areas loss potentials will increase.” However, as the Sonar report notes, risks generally bring opportunities. In this case, “losses in agricultural, energy and forestry sectors due to drought conditions will likely increase. At the same time, this is a chance to enhance water-efficient practices and to provide parametric insurance solutions.” Parametric cover uses a pre-defined model – rainfall levels over a set period, for example – to trigger and calculate payouts, rather than responding to actual damage. This allows for quicker payment without the need for loss assessments.

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“In the long run, diminished diversification effects will make insurance products more expensive, which will dampen insurance growth and hinder… efforts at bridging the protection gap.” On the regulatory front, Swiss Re flags the emergence of “island solutions”. “Rising popular discontent with the current economic and political order in the world’s developed economies, which supply not only most of the insurance sector premium income but also most of the financial assets, could lead governments to withdraw from [post-financial crisis] international regulatory standard-setting efforts, and more generally adopt key tenets of economic nationalism,” the report says. “Since it may impede insurers’ ability to engage in cross-border capital management, regulatory fragmentation is a particular concern for international insurers that seek to support the benefits of diversification by pooling capital centrally.” The fourth and final high-impact/short-term threat in Swiss Re’s report is dubbed “the perfect storm – cloud risk accumulation”. It says business and organisations increasingly use “clouds of clouds – integrated distributed cloud services – or super clouds” to store vast amounts of data. These offer “cloud services regardless of where you are and where the data you want to process is hosted. In theory, interconnected services such as these can be set up as closed systems. Cloud service providers such as Google, Microsoft or Amazon Web Services operate data centres through the internet, thus encompassing vast networks of data flow and management.” However, as the data stacks up, so the associated business interruption and liability risks blow out, according to the report. “Should an event bring down or severely impair a super cloud, whether through a technical failure, a cyber attack or a power blackout – possibly caused by a natural disaster – and last a couple of days, the financial loss could be immense.” Some of the other threats flagged in this year’s Sonar will already be familiar to regular readers of Insurance News – cyber threats in an August/September 2017


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Emerging risk themes by potential impact and timeframe 0 – 3 years The return of inflation – the effect on insurance business

Man-made epidemic – opioid medication and popular health

Pros and cons of work in the gig economy – another kind of digital risk

Reduced market access – protecting your own backyard

The human factor – stress and fatigue in safety-relevant jobs

Hijacked money – political risk of forced investment

The perfect storm – cloud risk accumulation

Sensors as weapons – Internet of Things invites cyber attacks

Island solutions – regulatory fragmentation

Eroding rationality – the information challenge

Most affected business areas Property Casualty Life & Health Financial markets Operations (incl. legal and regulatory)

> 3 years Potential impact Bugs on the march – underestimated infectious disease

Danger in unexpected places – carcinogens in artificial turf

Dangerous games – risks of e-sports

The big drying – growing water stress

Blame your robot – emerging artificial intelligence legislation

Cash repression – the paper money squeeze

Too much of a good thing – antimicrobial overuse in animal farming

Good things in your gut – advances in precision medicine

High Medium Low

Cancer treatment revolution? – liquid biopsy and immunotherapy Shifting land use – uncertainties for real estate values in the new economy

increasingly connected world, spread of infectious diseases, antimicrobial resistance and carcinogens in artificial turf are among emerging risks to receive in-depth coverage in our pages over recent years. But the report raises some interesting new topics, among them “eroding rationality”, or as Donald Trump’s Twitter feed might have it: FAKE NEWS! “The foundation of the (re)insurance business model is based on the one hand on rationality – a common and mutually intelligible understanding and assessment of risks – and on the other hand on trust – the trust of the customer that the insurers will pay in future in case of a legitimate claim,” Swiss Re says. As digitisation and social media have “multiplied and democratised the supply of information”, many sources of “news” and opinion have lower (or zero) quality standards, while people increasingly exist in information bubbles that merely serve to repeatedly reinforce their biases. This has “provided a platform for conspiracy theories and the spread of fake news, alternative facts and blatant lies”. In an online environment populated by crackpots and chatbots, where the President of the world’s leading democracy lies as easily as he breathes, it can be difficult for truth to be heard. “A client is not going to take out cover for the increased likelihood and severity of storms caused by climate change if he or she doesn’t believe in climate change as a phenomenon or, even worse, deems it to be another example of a global conspiracy. The troubling part of such conspiracy theories is not that they exist, but that ever more people believe them to be true.” Swiss Re warns distrust in political institutions is spreading to corporate players, with a potentially major impact for the insurance industry. “If customers do not trust insurance to behave fairly, and assuming customers do not only rely on facts and rationality, the insurance industry could very well lose business. 44

insuranceNEWS

“At the same time, it becomes increasingly difficult for (re)insurers to know which data sources they can tap into that are reliable… new information asymmetries are emerging that could influence the relationship between insurers and insureds.” From fake news to fake people, the report also features an entry called “Blame your robot”. The issue of liability in an automated world has been much discussed in the industry, mostly around developments such as selfdriving cars: will blame shift from drivers to the manufacturers of in-vehicle sensors and navigational tools? Swiss Re takes this line of thinking a step further. “If [intelligent machines] can assume increasing numbers of human tasks, if they can learn and adapt, and ultimately make decisions for human beings, should they still be treated as inanimate objects?” Such questions have inspired sci-fi writers from Philip K Dick to Isaac Asimov, but they may soon warrant attention in the real world, according to Swiss Re. “Is it reasonable to establish a new legal personality for autonomous systems like ‘electronic persons’ with specific rights and obligations, and make them liable for harm caused to third parties? Should, in such a case, the manufacturers of these intelligent machines be freed of their responsibilities for injuries and damages caused by the machine’s autonomous decision?” The report says the debate has gained momentum in the European Union – a “champion in the development and production of such intelligent systems”. The EU’s current product liability framework puts the onus on manufacturers and importers for bodily injury and property damage caused by product defects. But “the ongoing review of product liability might bring major shifts to the very concept of liability, and gaps in consumer protection”. Swiss Re warns that “shifts from the current liability regimes * could leave consumers with more vulnerability”. August/September 2017


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After 25 years of independence, we still think about brokers. In 2017 we’re proud to be celebrating 25 years as an independent, Australian owned and operated underwriting solutions provider. Since 1992 our thinking has been about our broker customers, and providing you with a diverse range of quality products. SUA is one of the few truly independent underwriting agencies in Australia. We don’t engage in retail broking. We don’t deal with unlicensed intermediaries nor unauthorised Insurers. Product development and claims management are our strengths, meaning we are Always Thinking of ways to achieve the best possible solution for your clients. We are aware of the ever-changing demands of the Australian insurance market, so better able to offer a range of products that will satisfy your clients’ needs.

Contact P: 07 3624 9400 F: 07 3624 9433 255 Sandgate Road Albion QLD 4010 PO Box 324 Clayfield QLD 4011 www.sua.com.au


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The insurtech revolution will not be televised It’s time for brokers to embrace technological change By Eoghan Trehy

THIS WILL BE REMEMBERED AS THE year the fourth industrial revolution truly took hold. A time when artificial intelligence (AI), machine learning and automation became more entrenched in our everyday lives, and data was collected, analysed and interpreted, with insights fed back to decision-makers and customers in nano-seconds. It’s time for the insurance sector, in particular brokers, to realise the opportunity this presents for a better customer experience, from frictionless onboarding and tailored-to-me policy value to paperless renewals and seamless claims management. In an industry where products are increasingly commoditised and pricedriven, this will be a key determinant in creating a sustainable point of difference. This is not a case of brokers being replaced by robots. Technology has the potential to automate elements of the process, but it won’t remove people from the entire experience. We need good brokers at the core of what matters to the customer, including complex risk assessment and claims support. That goes to the heart of insurance’s value. By embedding insurtech into your business, you can reimagine processes and overturn legacy systems. 46

You don’t need to invent it all yourself. You just need to understand what the insurance process is like for your clients, and what other options they already have, in Australia, and around the world.

The changing competitive landscape According to our latest benchmarking findings, just 8% of insurance brokers feel they are “leading the way in innovation” and 6% believe they are falling behind competitors. That leaves a massive middle ground that are either just keeping pace, or feel they could do more. What’s more, just one in 10 companies offer a full quote, bind and pay capability online. Most are focusing their tech efforts on improving productivity and staff flexibility. This leaves brokers vulnerable to the growing risk of direct-to-business client models, which is where new and established providers are already making their presence felt. And while about half of insurance broking businesses see direct sales by insurers as a key threat in the year ahead, only 15% say the same about insurtech start-ups. In reality, both are part of the same challenge. Globally, insurers are already investing in insurtechs and using these platforms to rapidly improve their direct-toconsumer experience. insuranceNEWS

August/September 2017

Business Insider Intelligence’s Insurtech Report for last year highlighted that most insurtech products target retail customers (including small businesses and consumers), and brokers are most at risk of disruption because it is the next logical area to look at replicating these processes. Last year 173 insurtech deals raised $US1.7 billion in funding globally, including the $US45 million investment in Trov by a group of insurers including Suncorp. More than half the deals were for USbased start-ups, but other activity was spread from Germany and the UK to Australia and China. We’ll start to see more technology applications in complex commercial risk in the near future, and this will have a significant impact on brokers, insurers and end customers. To make sense of some of these emerging technologies, let’s map them against four key customer touchpoints: client onboarding, underwriting, renewals and claims management.

Client acquisition and risk assessment Finaeo is an AI-enabled digital assistant and sales coach for insurance advisers, launched in February in Canada by former insurance advisers.


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It is working towards a “hybrid bionic adviser”, bringing together robo-advice, AI capabilities and human relationship management, and is designed for advisers servicing small and medium businesses. Using client data to suggest upsell or cross-sell opportunities, it can also provide real-time insights for clients, not only streamlining the experience but improving the outcome for client and broker. Other insurtechs such as Trov target the digital needs of Millennial customers. Its product insurance is available via mobile phone only, and uses client data to improve pricing. In the US, Lemonade has already shaken up the homeowner insurance industry with a new model for the digital generation. With a fast, intuitive mobile-friendly experience, it also flips traditional thinking by donating a share of unused income from under-claiming customers to a charity of their choice. A chatbot replaces a broker for its growing Millennial market – and traditional insurers are taking this seriously. In March, just six months after Lemonade’s launch, Allianz made a strategic investment in the start-up. Platforms like this will eventually handle more complex risk, once they have

increased levels of data, combined with AI and machine learning technology. Companies such as Embroker in the US are already breaking new ground in this arena.

Paperwork and underwriting Lemonade has also replaced underwriters with algorithms. And if you think that sounds far-fetched, consider this: Goldman Sachs has just found a way to automate half the complex (but repetitive) steps in an initial public offering (IPO) – saving thousands of human hours. Automated online onboarding, prepopulated form-filling and machine learning for contract management are all part of the standard experience in the legal and financial sectors. There is an enormous opportunity to streamline the part of the insurance process with the most friction: the paperwork. Plus, by gathering insights from the data you already have on your clients – risks, claim behaviour and behaviour or business patterns – you may improve the policy value and coverage you provide. Insurers are already looking into ways they can use this for underwriting, such as telematics predicting driver behaviour. Embroker is also doing this as a virtual broker. It uses client data to offer improved insuranceNEWS

August/September 2017

policy options, plus renewals without the paperwork. Online insurance conversions are still very low – globally, only 1-2%. So a home-grown insurtech company, Flamingo, is taking on that specific challenge, by combining web-chat, online forms and machine learning to guide customers through the complex decisions needed to buy insurance online. It is currently targeting the US market with capital raised through an Australian Securities Exchange IPO last October. US insurer Nationwide Mutual is using the platform and in Australia AMP is trialling it for a superannuation product. Meanwhile, RiskMatch focuses on turning data into insights to support better broker-client relationships. This includes understanding underwriter appetite for specific risks and matching the right product to their needs. US insurance advisers use RiskMatch to help clients manage complex and emerging risks.

Renewal, retention and loyalty Globally, insurers lose about 20% of their customers every year. There is an enormous opportunity to use data algorithms and analytics to automate or streamline the renewal process, 47


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The greatest risk is to do nothing. It is inactivity regarding the latest technological revolution that will stifle the continued success of insurance broking businesses.

recognise and reward loyalty, upsell and cross-sell to ensure complete protection, and cut out unnecessary data duplication. By automating some of the claims history assessment, discounts can be applied or risks re-assessed without friction for the client. There are many tech platforms ready to help with elements of this process. For example, Aureus Analytics addresses the loyalty challenge with customer experience and risk analytics to provide real-time intelligence on lifetime value, cross-sell opportunities and fraud. UK-based Adsensa provides document intelligence for more than 100 insurance companies, improving the accuracy of datachecking and capture. And Wellthie is tailored to the US health insurance market, providing simple online quotes, contribution modelling and customised proposals.

Claims management This is where brokers can add tangible value. With less time devoted to chasing forms or payments, brokers will have more time for client support when it’s needed most. But even here, technology will play an increasing role. In Australia, Claim Central’s outsourced 48

claims management platform makes the process more efficient and transparent. It combines a digital claims management platform, ClaimLogik, with a live videostreaming application, and also provides services to help policyholders get their lives back on track, from property repair to cyber-breach resolution. Meanwhile, Lemonade got its claims processing and payment time down to just three seconds last year. The claims bot reviewed the claim, cross-checked it with the policy, ran 18 anti-fraud algorithms, approved it, sent payment instructions to the bank and informed the customer. In three seconds. Just think what that means for that customer, and for the efficiency of that business. Lemonade expects to fully automate 90% of its claims, although humans still handle more complex issues.

So what can you do? The fourth industrial revolution will have just as much disruptive impact on our lives (and our businesses) as its predecessors, from the steam engine to internet technology. However, what’s different today is the sheer velocity of these changes. No one business has all the answers, and no one can do it all on their own within such a rapid timeframe. That’s why insuranceNEWS

August/September 2017

traditional players (including Macquarie Bank) are investigating new ways to partner, merge or joint-venture with the right types of start-ups, and teaming up with experts by providing capital or other forms of support, where appropriate. Smaller businesses can also build partnerships: team up with a tech provider, work together to combine expertise and client bases. You can create your own innovative ecosystem, and focus on the problems your clients are dealing with. You just need to be aware of what’s happening, and be ready to take an opportunity when it arises. The US and Europe, with their large and mature insurance industries, are where we should be watching. They are the ideal first target for insurtech operators, and once those start-ups get capital, we can expect them to expand their global footprint. The greatest risk is to do nothing. It is inactivity regarding the latest technological revolution that will stifle the continued success of insurance broking businesses. So I encourage you to be part of the inevitable change ahead, and understand what you can do in your own business * today. Eoghan Trehy is National Head of Insurance Broking at Macquarie Business Bank


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BUILDING BETTER BROKER RELATIONSHIPS 1. Partnerships Allianz knows that the foundation of any high performing broker channel is to build strong partnerships. p artnerships. No No matter matter w what hat technological technological changes changes occur, o ccur, h human uman rrelationships elationships will will always always b be ea att the the fforefront, orefront, a and nd llearning earning tto o manage manage them them iiss vital. vital. ““We We w work ork closely closely w with ith our o ur b brokers rokers tto o deliver d e l i ve r a ccompetitive ompetitive offering of fering while while b being e in g e easy asy to to deal d e al w with i th a and nd a addressing ddressing ttheir heir ccustomer ustomer d demands,” emands,” ssays ays David D a v id H Hosking, o s k in g , C Chief h i ef G General eneral Manager Manager Broker Broker and and Agency Agenc y at at A Allianz llianz A Australia. ustralia. “We “ We ccollaborate ollaborate w with ith our o ur b brokers rokers tto o strengthen strengthen relationships relationships a and nd drive drive business b u sin e s s g growth row th for for both b ot h

parties. It’s this customer service e philosophy philosophy that th a t helps align our business interests t s while while d differentiating if ferentiating A Allianz llianz ffrom rom tthe he competition.” competition.” A Along long w with ith a strong strong ccustomer ustomer sservice er vice ffocus, o cus , A Allianz llianz iiss iinvesting nvesting iin n ttheir heir cclaims laims p processes rocesses to to add add vvalue alue tto ob broker roker p partnerships. ar tnerships. ““The The vvalue alue of of an an iinsurance nsurance policy polic y iiss on only ly rrealised ealised when when it’s it ’s ttime ime tto o m make ake a cclaim. laim. O Our ur go goal al is is to to e ensure nsure tthis his process process iiss a ass ssmooth mooth and and stress-free stress-free a ass p possible, ossible, not not jjust ust for for our o ur end-customers, end- customers, b but ut for for our o ur b broker roker p partners ar tners as as well,” well,” says says David. David.


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Back in the games Former national swimming and athletics chief Simon Allatson is now going for gold with Sportscover By Andy Swales

WHEN IT COMES TO HIS new position at Sportscover Australia, Simon Allatson has the sports side of things well and truly covered. He became the specialist underwriting agency’s chief executive in May, following an illustrious career heading some of the nation’s leading sporting bodies. And while this rugby fanatic may be on unfamiliar turf in the insurance industry, he tells Insurance News his goal remains essentially unchanged. “Some of the most invigorating or rewarding experiences I’ve had the privilege of enjoying involve athletes realising their ambitions through their sport,” he says. “That’s not all about coming first.” It could be as simple as “a kid running a personal best because he or she has moved their performance up”. Sportscover, the Melbourneheadquartered international company, he notes, offers much the same opportunity. “The ultimate ambition we have is to make sure people can play their sport or enjoy their leisure and recreation activities, so it’s not just about writing a policy and banking the money, ticking that box. “It’s working with the clients to make sure they minimise and manage their risk as best they can, which then provides a better environment for people to take part in their preferred activity.” 52

But the installation of a noninsurance person into what is a complex industry has nevertheless raised eyebrows in the market. He’s not concerned with that, noting that there are plenty of people around him at Sportscover to deal with any unique complexities. “My approach has always been to involve the whole organisation in the direction and strategy,” he tells Insurance News. “While there has to be a coach and in a lot of situations there is also a captain, in actual fact the successful organisations and sporting teams have many leaders, not just one.” While the expertise he brings to Sportscover is focused on sport, it’s also wide-ranging. Malawi-born and Canberraraised, Mr Allatson had his first tastes of sports administration in the late 1980s, with Australia’s national ice sports authority and New Zealand’s tennis body. But it was with Australian Swimming (now Swimming Australia) that he hit the big time, joining as chief executive in 1991. “The [national swim] team had been progressively improving its performance under [coach] Don Talbot’s leadership. During my time at Australian Swimming, Sydney was fortunate enough to win the rights to host the 2000 Olympics,” he says. “I told Don, ‘You write down your ambition for Sydney, and I’ll write down what I think we insuranceNEWS

ought to achieve and we’ll compare notes.’ “We both had one line – that we wanted to be the No.1 nation in the world at the 2000 Games, and so we mapped out a strategy to achieve that.” In the Sydney medal count, an Australian team featuring champions Ian Thorpe, Grant Hackett and Susie O’Neill finished second only to the mighty Americans. The medal tally included gold in two key grudge matches: the men’s 4x100m and 4x200m relays. However, by that time Mr Allatson had moved on. He met his wife Susie while she was working in marketing for the Australian Olympic Committee and, following spells with the Australian Rugby Union and Commonwealth Bank, became chief executive of Athletics Australia in 1999. “It was, frankly, a great time to be involved in Olympic sport,” he says. “There is no better time to be involved than when your own country is hosting an Olympic Games.” There is, of course, great pressure in running some of the country’s most prized sports, with a requirement to achieve results on and off the field of play, plus a media spotlight that extends beyond the business pages. Mr Allatson appears to have taken that in his stride. “That’s the nature of working for a national sporting organisaAugust/September 2017

Safe hands: Sportscover Chief Executive Simon Allatson


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tion in a country that attaches so much importance to sports and games. “Chief executives always have to be accountable, but it’s interesting that when you are attending board meetings and annual general meetings you are held to account on both sides – not just team performance, but all the other aspects, from coaching to junior development, all the policy positions that are so important these days. “And then the balance sheet. I think one of the real attractions about working in the sports industry is that you have to get involved in all parts of the business.” After leaving Athletics Australia in 2004, he was alerted to an opportunity with basketball franchise the Sydney Kings, then owned by a consortium led by Macquarie Bank. He took over as chief executive in 2005 – his first position at a club level. “I learnt an awful lot, but also had the privilege of working alongside perhaps this country’s most successful professional in any sport, Brian Goorjian. While he’s widely recognised as being the most successful basketball coach in Australia, pound for pound he’s probably the greatest coach of any sport this country has produced.” Mr Allatson left a couple of years later, as Macquarie sold the franchise. insuranceNEWS

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“I wouldn’t dream of trying to tell Brian Goorjian how to coach or Don Talbot how to teach swimming; it’s the same thing here. These guys know insurance.”

He has since watched bemused as the National Basketball League has fallen on hard times – a predicament he attributes to two “General Custer-style” miscalculations. Blunder one, he says, was moving the season from winter to summer, ostensibly to avoid clashing with the all-powerful football codes. “Before that, the hottest sporting ticket in Sydney was a Kings game, because it didn’t matter what the weather was doing. It could have been minus 20 and snowing, and people would still go to the game, because it was two hours of great entertainment, a lot of razzmatazz, it was indoor and warm. “They moved to summer to compete against cricket and tennis, but most importantly, from a Sydney and Queensland perspective, you’re competing against beaches and barbecues and summer activities.” He says a change in broadcaster from channels Ten to Seven proved equally destructive, bringing in more cash but sacrificing prime-time slots that reached target audiences. In a fiercely competitive market, the battle for bums on seats and eyeballs on screens leaves little room for error. “No other country in the world has four professional football codes, and now a professional women’s code in netball, plus the usual tennis, 54

and we’ve got cricket too, all for a country with 24 million people. Something has to drop off, and basketball was the first one to blink.” For six years from 2007 Mr Allatson held executive roles at the Heart Foundation, and in 2008 he set up Sports Super, which aggregates superannuation products and health cover for the sports industry. With that business established and running smoothly, he took the role with sports and leisure insurance specialist Sportscover. He is undaunted at entering a new – and particularly complex – industry. “It’s consistent with every other role I’ve had,” he tells Insurance News. “I could never stand upright on an ice rink. My forehand is crap… track and field, hopeless. And I don’t have a medical background, so the Heart Foundation didn’t get someone who could perform surgery. My superannuation experience was purely as an employer, and it’s the same with insurance. “Actual technical expertise is not what I bring to these organisations, because they have an abundance. The experience Sportscover has is really impressive. “I wouldn’t dream of trying to tell Brian Goorjian how to coach or Don Talbot how to teach swimming; it’s the same insuranceNEWS

thing here. These guys know insurance. “What they’re looking for is someone who can bring all that together in a business way and provide the right structure and framework to get a business outcome.” What he also brings is a wealth of experience from the buyer’s side of Sportscover’s market. “There’s no doubt that was one of the attractions from Sportscover’s point of view. “It was looking for someone with solid industry knowledge and solid industry experience, and I’m fortunate that I have that.” When announcing his appointment, Sportscover noted it “has been expanding the number of countries in the region in which it does business, and Simon will have a major role in continuing this work and strengthening Sportscover’s brand within these markets”. Mr Allatson tells Insurance News: “Europe is a prime focus, and we’re also involved in New Zealand, the South Pacific and Asia.” But he also flags there’s “a lot to be done” still in the home market. “We don’t cover the whole market yet, so there’s still some good business to go after in Australia.” There are about 80 sports played in Australia, and while Sportscover deals with “a very good percentage of them, there August/September 2017

are sports out there that we don’t currently look after. So, as in any sector, you look where the opportunities are and see whether you can secure them.” He tells Insurance News the dynamics of sports insurance have changed a lot in the past 10-20 years. “There’s a far greater awareness around the importance of managing risk within a sport and leisure sense. We’re not just talking about child protection strategies, but also the liability side of things.” He sees risk management as “one of the points of difference we provide to the market – we don’t just write the policy, but we actively work with them to manage the whole process”. He sees good times ahead for the business. If only he could say the same for his beloved Wallabies rugby union team, which recently suffered the ignominy of a home defeat against Scotland. Mr Allatson says the state of rugby union in Australia is “bordering on the depressing”, as the national side struggles, Super Rugby undergoes a painful overhaul and cashed-up rival football codes such as the AFL encroach on its grassroots. “I’ve always prayed at the church of the Wallabies. Now, it’s more and more about rugby supporters spending time in the confessional box, seeking abso* lution for our sins.”


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Grim scene: the blackened shell of London's Grenfell Tower

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Time to act A devastating blaze the other side of the globe has finally shaken Australia into action over flammable cladding on high-rise buildings By John Deex

IN THE EARLY HOURS OF JUNE 14, IN A BLOCK OF public housing flats in London’s North Kensington, a refrigerator in a fourth-floor apartment caught fire. The response should have been straightforward, with the blaze contained within the single flat. But 60 hours later, when the fire was finally extinguished, most of Grenfell Tower’s 24 storeys were reduced to a blackened shell and at least 80 people were dead. The final death toll will not be confirmed until next year, and many fear it will eventually hit triple figures. Many victims had followed previous advice to remain in their homes, and could be seen waving to would-be rescuers from the upper levels. But their fate was already sealed. A wide-ranging public inquiry is still to be carried out, but experts believe the building’s flammable cladding, added as part of a refurbishment completed last year, enabled the fire to spread rapidly up the exterior. Cladding, such as Grenfell’s aluminium composite panels, has its benefits. It tends to be a fantastic insulator, with strong green credentials and a cheap and easy way to restore the appearance of older, uglier buildings. The panels feature two aluminium sheets, or skins, with an insulating core sandwiched between. And it's the composition of this core that is critical. Because in some cheaper products, the core is highly flammable. Despite this, it appears to have been routinely used on the exterior of high-rise buildings – not just in the UK, but also in Australia and across the world. The Grenfell tragedy has led to an unprecedented outcry over the use of such products, but to many it came as no surprise. In November 2014 a fire started by a dropped cigarette raced up the exterior of the Lacrosse apartments in Melbourne’s Docklands, fuelled by flammable cladding. Nobody died that day, mainly because Lacrosse had sprinklers. Grenfell did not. But the Metropolitan Fire Brigade (MFB) was clear. Had the Lacrosse sprinkler system failed or weather

conditions been different, many residents could have perished. Experts lined up to warn that a mass-fatality was a very real possibility unless the cladding issue was tackled. Thousands of buildings across Australia were thought to contain similar materials, but the response from authorities was weak. An audit of high-rise buildings in Melbourne’s CBD was carried out, with smaller investigations in Perth, but the rest of the nation was silent. Even in Melbourne action has been criticised as ineffective and far too slow. Almost three years after the Lacrosse apartments fire, the same flammable cladding remains on the building as debates rage over who should pay for its removal. But where Lacrosse failed to inspire action, Grenfell has succeeded. Suddenly politicians are interested, now that this issue has made countless headlines across the world. Prime Minister Malcolm Turnbull has written to premiers and chief ministers asking them to conduct audits, and all jurisdictions have responded. New South Wales – heavily criticised for its lack of action following Lacrosse – has announced a 10-point plan that it says is the most comprehensive in Australia. Victoria has set up a taskforce to investigate the issue, jointly chaired by former Liberal Party premier and architect Ted Baillieu and former Labor Party deputy premier and planning minister John Thwaites. The Senate inquiry into non-comforming building products has widened its remit, requesting additional submissions on the cladding issue and holding public hearings in Melbourne and Sydney. And the insurance industry – relatively coy after the Lacrosse incident – has upped the rhetoric as well. The Insurance Council of Australia (ICA) submission to the Senate inquiry warns that flammable cladding could force premiums up, or even result in cover being refused.

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“I would think that any delay is only going to end up, potentially – or in the worst case – in some kind of a disaster.” – Karl Sullivan, Insurance Council of Australia

It recommends a national approach to enforcement and an audit of buildings to quantify the current level of exposure. ICA General Manager Risk Karl Sullivan told the inquiry’s public hearing in Sydney that the audit should go beyond the cladding issue. It would be “senseless” to do an audit only looking at one issue, he says, pointing out that other concerns such as dangerous electric wiring should also be considered in a “complete or comprehensive” compliance audit. “We are talking about a massive exercise nationally, aren’t we?” Senator Nick Xenophon asked. “Enormous,” replied Mr Sullivan. “I would think that any delay is only going to end up, potentially – or in the worst case – in some kind of a disaster.” Mr Sullivan tells Insurance News the heart of the problem is product substitution, and that developers and builders are unwittingly including non-compliant products. “Builders don’t knowingly set about constructing flammable buildings,” he says. “But there does seem to have been some products brought into Australia that purport to be something they are not. “The question is, how do we shut this loophole?” He says Australia has moved away from independent inspections, with self-regulation taking precedence. “There are compliance checks but they are not done frequently,” he says. “We do see major building defects that could be picked up and dealt with if there was a better compliance regime. “There’s a lot of evidence to suggest upping the compliance regime to catch some of these issues.” Mr Sullivan says many building owners, and their insurers, may be unaware that non-compliant cladding is present. “There could be a reasonable proportion of buildings that have this issue without anyone knowing about it – and that is why we need the audit.” Mr Sullivan says insurers would assess individual situations on their merits, based on the severity of the problem and plans in place to tackle it. 58

“Only in the most extreme cases would you see an insurer decline to insure,” he tells Insurance News. “But certainly there could be an increased risk, and the premiums may reflect that.” He says that if policyholders deliberately withhold information, there could be a problem come claim time. “If they were aware and failed to declare to the insurer then they will have failed in their obligations under the policy, and that could complicate the claims process.” He says the chances of a mass casualty incident in Australia are “very, very low” because of the fire protection regime in place. “But that doesn’t mean there is not an enhanced risk that needs to be dealt with.” In a submission to the inquiry in July, IAG admits its current underwriting assessments would not necessarily identify the presence of cladding. “However, even if we did ask for this information builders, contractors and owner/residents are often not aware that this material is being used in their building or that it is being used in a way that does not comply with Australian standards,” the insurer says. IAG says a number of issues have led to the current situation, including insufficient or misleading testing that is often conducted offshore; changing construction standards; misuse of product; and a lack of enforcement. It agrees with ICA that cladding is not the only problem. “We are noticing similar issues for other materials, including braided hosing, electrical wiring and inferior PVC piping.” The Senate inquiry hearings and submissions and the audits that have already taken place make it clear that there is a huge problem in Australia. There are in all likelihood many thousands of highrise buildings featuring non-compliant, flammable cladding. For example, NSW Better Regulation Minister Matt Kean says an audit has revealed more than 1000 buildings in the state could contain flammable cladding. While many point out that we are unlikely to have a Grenfell-style mass fatality here – our regulations are

insuranceNEWS

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IPCA CODE OF PRACTICE 4.3 2017

E G A N MA K RIS T I F O R T E R

AVOID RISK

ACCEPT RISK

COMPLIANCE

REDUCE

R E F S N TRA RISK

RISK

SMART INSURERS AND ISP USERS INSIST ON CODE COMPLIANCE. In days gone by, incorrect perceptions about the comparative performance of ISP (Insulated Sandwich Panel) have been prevalent. How is an insurer today to minimise risk? By insisting on compliance with the Insulated Panel Council's Code of Practice. The Code is intended to deliver a better performing Panel System in a fire. It was developed

to address fire fighter concerns, in consultation with NSW Fire Brigades, and the NSW Department of Emergency Services and supported by AFAC. To be compliant, panels must be manufactured in accordance with relevant Australian and ISO Standards. There must also be an identification process for the awareness of fire fighters, identifying all panel types. The Certification Body also keeps

relevant Fire Brigades aware of Certified Buildings, to enable Pre-Incident Planning and site inspections. The Code establishes the minimum standards and principles for the design, manufacture, installation, maintenance and Risk Management of structures constructed from Insulated Panels. Measures have been validated by comprehensive research and repeated testing by independent laboratories.

Phone: +61 7 3188 9120 / Email: info@insulatedpanelcouncil.org Suite 5 Level 1, The Exchange 88 Brandl Street, Eight Mile Plains, QLD 4113 Get smart. Review the CODE at www.insulatedpanelcouncil.org or call us now. IPCA Ltd is a third-party certification body for the insulated panel industry. It certifies the goods and services of manufacturers, installers and distributors.


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Still there: flammable cladding remains on Melbourne's Lacrosse building

Flammable building cladding has been responsible for dozens of destructive fires worldwide. Some examples:

Jing’an, Shanghai, 2010 • An exterior façade fire occurred in a 28-storey residential building in Shanghai’s Jing’an district on November 15, 2010. • It killed 58 people, and injured more than 70 people. • The fire was believed to be caused by welding resulting in fire spread on polyurethane insulation to external walls.

Mermoz Tower, Roubaix, 2012 • The 18-storey apartment building in Roubaix, France, was refurbished in 2003, including the installation of cladding with a polyethylene core in the façade. • On May 14, 2012, a domestic fire occurred on a 2nd-storey balcony. Flames spread to the top of the building within a few minutes resulting in one fatality and six injuries.

Lacrosse building, Melbourne, 2014 • The fire, on November 25, 2014, started on the balcony of a lower-level apartment and quickly climbed to the 21st floor due to combustible cladding. • It caused about $5 million property damage and at least 160 apartments were unoccupied for months while restoration works were completed. • Undamaged cladding remains on the building pending legal determination on who is responsible to replace it.

Grenfell Tower, London, 2017 • The fire on June 14 is suspected to have started on the fourth floor of the 24-storey building with an electrical fault in one of the apartments. • At least 80 people have been confirmed dead. However, the total number has not been confirmed. • Experts who watched footage of the fire indicated the external cladding accelerated the spread of the fire. • The building was built in the 1970s, with the new cladding installed as part of a refurbishment in May last year. • The building has been left in ruins, with almost all the 1000 homes extensively damaged.

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stronger and sprinklers are required in buildings higher than 25-metres – others warn that sprinkler systems often fail, and that buildings below 25 metres are exposed. One key question is whether the Building Code of Australia is “fit for purpose”. General Manager of the Australian Building Codes Board (ABCB) Neil Savery says it is. “The thing is, the code is the code,” he told the Senate inquiry. “The code has not changed. The code does not allow this type of cladding – combustible wall elements on buildings. “So the only thing that is available to the ABCB – because we do not have powers to audit, to seek compliance, or to enforce – is, is there any way we can better socialise what the requirements of the code are?” All sides of the debate agree audits must be carried out, and at-risk cladding identified. But what happens next is unclear. The non-compliant material should be removed – but who will pay for it? The total cost could amount to billions of dollars. NSW’s new 10-point plan seems to acknowledge that fact, focusing on prevention, tougher regulations and fire safety education for the occupants of affected buildings. It does not mention stripping non-compliant cladding from buildings that already exist. Mr Sullivan’s point about enforcement, and upping the compliance regime, may be crucial in solving the problem in future. The impetus for action must remain strong, even as the horror of Grenfell fades. International fire safety expert Jonathan Barnett, who played a central role in investigating damaged and destroyed buildings after the 9/11 disaster in New York, told the inquiry that while the Lacrosse fire should have “woken everyone up”, it didn’t. “I have given 79 talks on façades now, including in Boston just last month,” he said. “Grenfell has finally woken people up. Do we need a Grenfell in this country? I hope not. Let’s do something * before that happens.”

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A lifetime of caring In an increasingly price-driven industry, broker Ron Tatarka thrives by treating his clients like family By Kate Hanley

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“I say it the way it is. Maybe it gets me in trouble and the clients don’t like to hear it. They get upset if you tell them they don’t have a claim.”

AS YOU WALK INTO SCOTT WINTON Insurance Brokers in Melbourne’s St Kilda, the large open-plan office is buzzing, with staff talking on telephones and moving between desks. It’s a far cry from 25 years ago, when Ron Tatarka and his wife started the business working from their dining room with a typewriter. Scott Winton Insurance Brokers now has 35 staff and offices in Melbourne and Sydney. It has a reputation for strong relationships and caring service. And that’s due to the attitude of its founder, a friendly and humble man with a big heart and a dedication to the people around him. The softly spoken member of Melbourne’s Orthodox Chabad Jewish community always has his office door open, and during an hourlong interview with Insurance News he is interrupted several times by questions from staff members enquiring about clients. Each time he has the answer. He makes it his business to know everything that’s going on. On his office wall hangs a framed photo of Rabbi Menachem Schneerson, one of the most influential Jewish leaders of the 20th century. And propped against a wall, perhaps symbolic of the team’s 2017 woes, is a framed guernsey of the AFL’s Collingwood football club signed by the team. His affection for Collingwood has been maintained since the age of six, when two of the club’s legends, Len Thompson and Peter McKenna, came to Mr Tatarka’s school to run a one-week football clinic. These days the father of six goes to Collingwood games when they don’t fall on the Sabbath, which means Saturday night or Sunday events are the only ones he can attend. But this restriction has been something he hasn’t particularly minded this season, he says with a wry smile. Mr Tatarka is renowned for his straight talking, which he attributes to his upbringing in the Jewish faith and culture. “I say it the way it is. Maybe it gets me in insuranceNEWS

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trouble and the clients don’t like to hear it. They get upset if you tell them they don't have a claim. “But you didn’t clean your pump, it’s full of rubbish and you’ve never bothered to clean it and it’s been like that for years. I say no wonder the pump exploded – it couldn’t breathe,” he says. “You don’t have a claim.” However, his straight-talking manner can come in handy for putting a client’s claim to insurers. Because when it comes to his clients’ interests, Ron Tatarka pulls out all the stops. So much so that he has been known occasionally to assist clients’ claims when insurers have refused to do so – especially when it’s a grey area. “In particular, I don’t like to see elderly clients aggravated, so I will go the extra mile to help them with their claim,” he tells Insurance News. “Just so they feel more at ease. “Some elderly clients don’t quite understand how the policy reacts to a possible claim. Something breaks, they say insurance should pay.” While these days he’s a successful businessman, Mr Tatarka says his teachers at Yeshiva College thought he would not achieve his goals, although he was pretty good at numbers. After gaining his HSC he went to Melbourne’s Rusden College to study teaching, but quit after six months. “It wasn’t my cup of tea,” he says. Finding his “cup of tea” proved a lifetime project. He studied in the United States to qualify as a rabbi, but has never worked as one. Instead, his work experience has included running youth programs at Yeshiva College and working in sales in the plastics industry. In the ’80s he and two associates were successful property developers, until the market collapsed in 1987. The partners spent the next three years in courts trying to 63


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“You’re like a psychologist in the afternoon when people call up and say ‘my son’s done this, he doesn’t listen to me’. So you’re on the phone listening to the family member.”

recover money from builders who had signed contracts with them, but “we didn’t make any money in the end”. Then a year-long job turned out badly and plunged Mr Tatarka into depression as he found himself with a large family to support and no income. A close relative suggested he try selling life insurance and sent him to the man who owned Scott Winton Financial Services. He became a life writer with Norwich Union, but increasing regulatory demands and a crackdown on commissions saw him turning his attention to general insurance instead. He bought the rights to the name Scott Winton for $12,000, but getting a foot in the general insurance door wasn’t all that easy. “Nobody would give me an agency,” he tells Insurance News. “It was really tough.” It was a friend at NZI who gave him his first break, but the going was still tough, with few clients and the insurer’s managers constantly questioning why he was on their books at all. But two years of door-knocking, letterwriting and cold-calling in Melbourne’s southern suburbs finally paid off, with Mr Tatarka going from an empty book to writing $3 to $4 million in premium. Such dogged determination and hard work has become a hallmark of Mr Tatarka’s 25 years in general insurance. The self-confessed workaholic rises early each morning, checks his emails and then goes to the local synagogue to pray. He’s back home in time for breakfast before starting work at the office at 6.45am. He works each day until 7pm. To relax he reads history and every year he and his wife go away on a holiday to America and Israel – or, to be more precise – he, his wife and his laptop go on holiday. He says his wife is not happy about the laptop but at least when they are in Israel the time difference means Mr Tatarka does not 64

start working until 10pm, when Australia wakes up. He spends his weekends in St Kilda doing community work, visiting Jewish families who may be going through difficult times. While he has never practised as a rabbi, that doesn’t stop his workday being interrupted by clients and members of his community wanting to discuss their personal concerns with him. “You’re like a psychologist in the afternoon when people call up and say ‘my son’s done this, he doesn’t listen to me’. So you’re on the phone listening to the family member.” Mr Tatarka and his wife have set up a charitable foundation and support good causes locally and overseas. In the early 2000s Mr Tatarka bought a business venture with a friend, but it drained all his financial reserves. “It took about eight years of my life,” he says. “It was a disaster.” But despite being owed a fortune, his bank kept him solvent for the three to four years it took the business to recover. Mr Tatarka says the success of his business is not down to him alone – far from it. “It’s due to the dedicated team that works here. Without them, I wouldn't have the business I have today.” While he still enjoys dealing with clients and getting involved in the details of the business, he confesses that he enjoys it less than he used to, because the emphasis these days is more about price than quality service. “That’s why people are saying we’re as bad as car salesmen,” he says referring to a recent Roy Morgan poll. Mr Tatarka says knowledge and expertise are overlooked in today’s price-driven market. “The younger people are not being taught to analyse the risk – it’s all figures. The older generation could analyse risk. insuranceNEWS

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“Look, the industry is a very, very tough industry. Clients are very tough. On price they’ll move. But I believe our clients have a level of loyalty as we do try to provide them with quality service and advice.” He has plenty of stories of working hard to convince clients to take out cover for risks they didn’t want to deal with, only to have them praise him when those risks became claims. They are obviously the moments that make it all worthwhile, he says. “It is what you do not get online.” Loyalty is something he values highly. “I try and remain with the same underwriter for at least five to 10 years. If I can do a deal, if the premium is $20,000 and the cheapest one is $18,000 I’ll go back to my underwriter and say, don’t do it at 20, do it at 19.” Loyalty and trust are also something he gets through having his three sons in the business. His eldest son Avi joined the business 10 years ago and is the Sales and Marketing Manager. Younger son Shmuli works in claims and another, Eli, works as an account manager. Mr Tatarka says the next generation has “very different ideas and values” on how to run a business. While he’s “a paper man” Avi insisted they take the company paperless. Mr Tatarka hopes that one day his sons will carry on his legacy. “When you’ve built up something for 25 to 30 years you hope someone will take it over,” he says. And while he has been burned in business and has had to pick himself off the floor several times during his long career, it has ultimately brought him a strong business with a reputation for service and care – and that’s something worth more than gold to Ron Tatarka. “Life’s too short,” he says. “You want to be always fair and honest, and that’s what I try to do. And that’s also what I think about * the insurance industry.”


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A new mindset More than a year after a landmark legal decision, two major travel insurers have removed blanket exclusions for mental illness By Andy Swales

WHEN ELLA INGRAM TOOK HER TRAVEL insurer to the Victorian Civil and Administrative Tribunal (VCAT) in 2015, she cast light on an issue with which the industry is still grappling today. In February last year the tribunal ruled QBE breached the Equal Opportunity Act when it rejected Ms Ingram’s claim for a school trip to New York that she cancelled due to depression. Ms Ingram did not have the condition when she bought her travel insurance policy, but her claim fell foul of a blanket exclusion on mental health conditions. The tribunal decided QBE had failed to show the exclusion was based on reasonable data, or that it would have suffered unjustifiable hardship without it. Ms Ingram was awarded $4292 to cover economic losses and a further $15,000 for hurt and humiliation. Soon after, an industry roundtable on the matter concluded more data was needed for insurers to adequately underwrite travel policies that cover mental illness, although CGU and Bupa – both underwritten by IAG – already offered cover for such conditions. In March this year the industry received another nudge, this time through a Financial Ombudsman Service determination that an unnamed “financial service provider” should pay a traveller’s claim after he suffered a manic episode in Canada in March 2015, incurring cancellation costs. The traveller received his first diagnosis for a bipolar disorder while on the trip. The service determined the insurer’s “general exclusion for all claims arising from mental illness” was contrary to the Disability Discrimination Act, and the insurer had not “established an unjustifiable hardship” under the Act, nor “established that the discrimination is lawful under the exemptions within” the Act. The insurer was ordered to pay more than $10,000. 66

Now, two major travel insurers, including QBE, have acted. In early July both Ms Ingram’s former insurer and Zurich-owned Cover-More announced the removal of blanket mental health exclusions from travel policies, allowing claims for first diagnoses delivered after a policy is bought. “We have listened to our customers and are making changes that will get us closer to where the community expects us to be,” a QBE spokesman told Insurance News at the time, while Cover-More Chief Executive Mike Emmett hailed it as a “significant first step for Cover-More and Zurich”, noting it is “something the travel insurance industry, including us, has neglected for too long”. The Insurance Council of Australia (ICA) has welcomed the move and expects “further improvements in coverage” as more data becomes available about mental illness-related claims. Stephen Carbone, Research and Evaluation Leader with mental health advocate Beyondblue, calls it a “step in the right direction”. “It’s great that the insurance companies and industry have taken on board what consumers and advocacy groups like ourselves have been saying: that those products were unfair and discriminatory. The Ella Ingram-QBE case demonstrated that in a legal sense, so it’s good they’ve got on board and made those changes,” he told Insurance News soon after the announcement. However, he flagged “room for improvement” on the matter of pre-existing conditions – mental health issues diagnosed before a policy is bought. “I guess it’s understandable to some degree that pre-existing conditions might not be covered, but they should be dealt with as would any other preexisting condition: if you’re willing to pay an insuranceNEWS

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Surf Life Saving provides free-of-charge surf education to disadvantaged children attending Stewart House on Sydney’s Northern Beaches. Just one of the terrific Not for Profit organisations that we have been able to assist with funds from our annual Small Grants Program.


News Ltd

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Trailblazer: Ella Ingram

additional premium, that should be an opportunity… to have it covered, like with quite a large number of physical health conditions. I know not all travel insurers cover all pre-existing [physical] conditions, but a lot do, and that just seems to be a sensible position to take.” Perhaps someone was listening in: just days after Dr Carbone’s conversation with Insurance News, Cover-More announced it will go a step further, establishing a pilot in its Australian direct sales channel for pre-existing conditions. “A traveller with an existing mental illness condition, including schizophrenia, bipolar disorder and post-traumatic stress disorder, can apply to CoverMore for cover, just like someone with a physical medical condition,” the insurer says. “The assessment process is straightforward and there will be one of two outcomes depending on the nature and severity of their condition: cover offered with the payment of an additional premium and, in some more serious cases, no cover will be able to be provided.” Susan Quinn, Senior Policy Officer at the Consumer Action Law Centre, welcomes the pilot. “It’s good to see Cover-More starting to treat mental health conditions like any other health condition,” she tells Insurance News. “Of course insurers should be removing this hurdle for people who need travel insurance. It’s clearly the right move. “We hope Cover-More’s trial proves fairer insurance is possible, and that this is a permanent change. And hopefully it encourages others to follow suit.” On Cover-More and QBE’s initial decision to remove blanket exclusions, Ms Quinn says it is “a step in the right direction, and it’s good to see them join insurers such as CGU”. Ms Quinn suggests this “has been done at the 68

“Having a blanket exclusion for mental health is decades behind where the rest of society is in terms of attitudes to mental illness.”

prompting of the ombudsman and VCAT, and advocates in the public arena. Having a blanket exclusion for mental health is decades behind where the rest of society is in terms of attitudes to mental illness.” She says it is “starting to look like a no-brainer” for other travel insurers to follow suit, and reiterates the Consumer Action Law Centre’s call for broader action on the insurance industry’s exemption from the unfair contract terms regime under consumer laws – a proposal ICA has consistently resisted. “While the ombudsman has found these blanket exclusions on mental health are not valid under current laws, if there was an unfair contracts term regime for insurance, the remedies for that kind of situation would be much better,” Ms Quinn tells Insurance News. “A term would be declared void and there would be a broader impact for people with that kind of policy, and you would see a much better response. “The Australian Consumer Law review earlier this year recommended that should be considered by the * Government… it is a live issue now.”

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News Ltd

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Leighton Hawkes Principal

Product Safety Reform – Productivity Commission Research Report into Consumer Law Enforcement The Consumer Law Enforcement and Administration Research Report published by the Productivity Commission earlier this year evaluated the effectiveness of Australia’s current consumer protection framework. It specifically examined the effectiveness of the multiple-regulator model in administering and enforcing the Australian Consumer Law (ACL). The current ACL framework is complex. It requires the interaction of multiple regulatory bodies including two Commonwealth regulators (the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission), eight state and territory regulators and numerous specialist safety regulatory regimes. The commission found that while the current multipleregulator model operated reasonably effectively, across jurisdictions there were some inconsistencies and deficiencies. It canvassed a number of findings and recommendations aimed at enhancing co-ordination and co-operation between regulators. Following are some of the key recommendations that are relevant to insurers who provide cover to manufacturers and suppliers of goods. Increasing issuance of infringement notices and the maximum financial penalties: The commission’s report noted a number of differences in the regulators’ powers to respond to breaches of the ACL. In particular, state and territory ACL regulators are not empowered to issue infringement notices. The commission recommended that state and territory regulators’ powers to issue infringement notices should be expanded to enable regulators to deal with a range of minor offences in a cost-effective manner. It said the Government should increase the maximum financial penalties for breaches of the ACL, which are currently capped at $1.1 million per contravention for companies and $220,000 for individuals. They commission believes the current financial penalties are likely to be insufficient to deter breaches in cases where they are outweighed by the benefits of contravening the ACL. The report also canvassed the use of ‘penalty units’ which would allow the value of each unit to be increased annually in line with inflation, and suggested financial penalties should be scalable to the size of the company and the benefit derived from the breach. The latter model is already used in relation to competition laws under the Competition and Consumer Act 2010, where companies can receive a maximum penalty that is the greater of $10 million, three times the value of the benefit received from the breach, or (where the benefit received cannot be calculated) 10% of annual turnover. For insurers the imposition of higher, scalable penalties for manufacturers ought to sound significant alarm bells. To avoid being caught by these increased penalties (if implemented) insurers may need to review their underwriting approach including reviewing existing ‘fines and penalties’ exclusions and/ or sub-limits. Information sharing through a national database: The commission proposed the development of a national database to improve intelligence gathering and sharing by ACL regulators. It also proposed the development of a publicly accessible register of information recording consumer complaints and

product safety incidents. Such a register is designed to assist consumer decision making and influence business behaviour. From an insurance perspective, the proposed register would provide a ready source of ‘tendency evidence’, by which claimants could seek to demonstrate a pattern of negligence or previous supply of defective products by an insured company. Balancing that, the register would also provide insurers with readily accessible underwriting information. Nationally consistent laws on electrical goods safety: The commission noted that inconsistencies between state electrical safety regulations had resulted in circumstances where certain electrical products are legally sold in some jurisdictions while being banned in others. It recommended that state and territory governments should move to agree on nationally consistent laws on electrical goods safety. The proposed changes would further tighten controls over electrical goods manufacturers which have been under increased scrutiny for some time. Review consumer alternative dispute resolution mechanism: The report recommended the establishment of an independent review of ACL alternative dispute resolution (ADR) mechanisms including giving regulators the power to compel businesses to participate in ADR. Currently, ADR services are underutilised because regulators can only encourage businesses to participate. This is likely to result in parties being compelled to attend ADR at an early stage leading to a more ‘front-loaded’ system of claims assessment.

Summary Recommendations in the report are aimed at strengthening the enforcement powers and capabilities of ACL regulators while delivering a greater national consistency. This has largely arisen from consumer concern over recent product failures, including the well-publicised issues with the ‘Hoverboard’ and Samsung Galaxy Note 7 mobile phone. Some of the proposals of note for the insurance industry include: i A substantial increase in fines – insurers will need to consider @1/6?>5./?:?6@65F›==?)›-165-*>.65F?/96/:65F/;63@65Fc65/3 and Penalties’ exclusions and/or sub-limits. i A publicly accessible register of information recording consumer complaints and product safety incidents – providing underwriters with useful information, but tendency evidence for claimant’s solicitors. i Strengthening electrical goods safety regulations – hopefully leading to a decline in claims involving these products. i Compulsory ADR for product liability complaints, leading to a more ‘front-loaded’ system of claims assessment. The outcomes and recommendations of the report will be considered by the Consumer Affairs Minister later this year. We will provide a further update on this when it becomes available.

˜)?7)?/650)9636@ mccabes.com.au


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Rising value Valuers’ professional indemnity is a challenging, yet improving risk By Nick Beswick, Product Leader Professional Indemnity for XL Catlin

FOR PROFESSIONAL INDEMNITY (PI) underwriters, few occupations are as fraught as valuers. Valuers – or appraisers, as they’re called in some countries – are responsible for estimating the fair market value of different classes of goods, including land and buildings. Most specialise in a particular area. In real estate, for example, some valuers specialise in agricultural properties, while others focus on residential housing. Valuers have historically been a challenging risk. In fact, poor claims performance led to the occupation being almost uninsurable in Australia before 2004. However, to its credit, the industry in Australia has done a lot of work since then to improve the risk profile of valuers and to make this industry segment more attractive to PI insurers. Although capacity continues to be constrained, some Australian insurers and Lloyd’s markets are active in this space, albeit selectively.

Risk mitigation As a general rule, PI insurance serves as catastrophe cover to protect the business in the event its best efforts to avoid losses are 70

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unsuccessful; it shouldn’t be viewed as a means of transferring high-frequency losses to another party. This means appropriate measures to mitigate identified risks are crucial if insurance markets are to have a favourable view of a valuer’s risk profile. Some practical steps valuers can take to minimise and mitigate risks include: • Avoidance – “know your customer” is the most important step valuers can take to mitigate risk. Conducting due diligence on new clients to assess their business practices and potential litigiousness is critical. Valuers should avoid accepting engagements from non-regulated lenders as well as those identified as having poor lending practices or who have shown a propensity for litigation. • Reduction – valuers should also consider measures that reduce their risk profile. One option is to diversify the business mix by reducing the business’ reliance on income derived from “high-risk” valuation activities. Further diversification could be achieved by increasing the focus on nonvaluation activities in related fields, such as property research and consultancy services. • Risk transfer – seek appropriate advice around risk transfer. External legal advice regarding contractual indemnities and appropriate use of disclaimers and


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Real problem: valuers can test professional indemnity underwriters

other qualifications in valuation reports is useful. Engage an insurance broker with experience in valuers’ PI to advise on available markets and scope cover. Given the limited nature of the PI market for valuers, an insurer with long experience in this area is more likely to offer consistent coverages and pricing, plus, perhaps most importantly, claims handlers who are knowledgeable about this class of business. • Retention – carry an acceptable level of risk or excess. This will vary depending on the nature of the activities, but as a general rule it should be pitched at a level that is meaningful in the context of the size of the business. Setting retentions at an acceptable level will improve claims history and improve the ongoing availability of PI insurance. It also provides an incentive for implementing practical and effective risk management practices. For all of these, it’s important that the principals of the business monitor adherence to these practices by practitioners, especially if it has multiple offices.

What do PI insurers want to see? Most PI insurers in this sector assume that potential insureds have formal risk management procedures in place. Those that do not may have difficulty finding adequate PI

insurance or, at worst, be considered uninsurable. An important aspect that should be reinforced by such procedures is a robust culture of peer review throughout the sbusiness. PI insurers are especially interested in due diligence processes: how does the valuer assess new clients to determine if their corporate values and practices are aligned? Not all clients are good clients and factors such as litigation history, lending practices, borrower selection and thirdparty reliance should be considered carefully before accepting new engagements. Clear terms of engagement are paramount and should specify the basis of valuation required; the identity of those who will rely on the valuation; and the purpose for which the valuation is required. The nature of ongoing commercial relationships between a lender and its clients should be understood; for example, lenders and property developers. These relationships can be significant because there may be an intention or willingness to transact regardless of the valuation report. For example, the valuation may have been sought to protect the lender by establishing a means of recourse in the event the deal goes “south”. Clearly, such relationships can give rise to potential conflicts of interest, insuranceNEWS

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and it is important that the business understands how these conflicts are managed, or avoid the engagement entirely. Individual engagements should be matched to individual valuers having the appropriate expertise in the relevant property type or marketplace. For example, where a business is engaged to undertake a valuation for a purposed development, it is obviously important for the valuer to be experienced in this kind of engagement, and to appreciate the significance of “as is” or “as if” as the basis of a development valuation. An “as is” valuation will provide the lender with some kind of “baseline” valuation on which to formulate their decision to advance funds for a project. One of the misconceptions held by many clients is that PI insurers don’t want to see notifications and they will be penalised on renewal for notifying. On the contrary, PI insurers prefer to see businesses demonstrate that they have robust procedures for the identification and notification of potential claims in place, because this provides a level of confidence that the business is on top of its exposures. Early notification increases the likelihood that such matters can be dealt with before significant costs are incurred by either party. This will also provide insureds 71


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“Although the valuation profession has done a lot of work to improve its risk profile over the past decade, it remains a volatile class when it comes to PI insurance.”

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with early access to the insurer’s claims team. These procedures also enable the business to apply the lessons of the past when reviewing procedures to avoid the reoccurrence of similar matters. Although the valuation profession has done a lot of work to improve its risk profile over the past decade, it remains a volatile class when it comes to PI insurance. Few insurers are prepared to enter this space, and the experience of many insurers that have has been negative. To secure consistent PI outcomes, valuers need to demonstrate that they have, or are prepared to implement, sound business practices and work with their PI insurer to establish a long-term relationship. They should also be willing to provide insurers with a significant level of detail regarding the business operations and risk management procedures that have been implemented – good-quality valuers need to set themselves apart from inferiorquality risks. In that way, both parties can work towards establishing a collaborative environment in which the client and the insurer enjoy a long-term relationship and work in partnership to best manage the transfer of acceptable risks while providing consistency * around the scope of cover and pricing. August/September 2017


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Excess waiver: CHU shakes up the strata-sphere CHU UNDERWRITING AGENCIES HAS AGAIN RAISED THE ante in the rapidly growing strata market, launching two new products that may reshape the way excess is applied in insurance policies in future. Landlords insurance and contents insurance for strata policies have provisions for waiving excess if certain conditions are met. The products underscore the underwriting agency’s intentions to keep introducing innovative products to cater to the growing number of Australians who will be living or working in strata properties. Research has indicated at least 40% of the population will live in strata complexes by 2040, and nearly half of Sydney’s housing stock will be multi-unit dwellings. “To our knowledge, this treatment of excess on the CHU Contents or CHU Landlords policies is a first in the strata insurance market,” Chief Executive Bobby Lehane tells Insurance News. “We think this will be a game-changer in the strata insurance market.” The products have been a hit since their launch in July and CHU’s team of business development managers has been out in the field visiting intermediaries to brief them on the new products and work out the strategies to maximise the business opportunities. “We appear to have identified a very real gap within strata and our simple innovative solution designed specifically for strata has captured people’s attention,” Mr Lehane says. “Response from the market has been very positive, both from intermediaries and indeed from end consumers.” The final concepts of the two products are the results of a meeting held early in the year by CHU’s customer representative group, Strata Advisory Group of Experts. It took about five months to conceptualise and launch the products commercially. “This clearly demonstrates our desire to innovate and be responsive to market requirements,”Mr Lehane says. “We are keenly focused on ensuring we remain responsive to the demands of our customers, and we realise that we need to be more nimble than traditional insurance companies, who can * often take years to translate an idea into a product.” 74

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Filling a gap: Swiss Re Corporate Solutions expands its offering SWISS RE CORPORATE SOLUTIONS HAS ANNOUNCED IT is expanding into the primary Australian market for financial lines and casualty insurance. The reinsurer sees a gap in the market after “rationalising” from established providers, and launch events held in Sydney and Melbourne were attended by more than 130 strategic broking partners. Swiss Re says a new suite of policies will give Australian corporations a wider range of coverages including professional indemnity, directors’ and officers’, crime, and general liability. “Australian corporations are facing an increasing array of liability risks in Australia and overseas markets,” Head Casualty & FinPro for Australia and New Zealand Jeremy Scott-Mackenzie said. “As a result, many corporates are seeking local, sophisticated commercial insurance solutions. “At the same time there is volatility and uncertainty in the market, with a number of established providers rationalising their approach in the commercial insurance market. “Against this backdrop we are coming to the market with a fresh suite of new policies, a team of industry-recognised experts, quality capacity and the ability to work with brokers and corporations to write financial lines and casualty business in Australia. “We are offering solutions the market wants, structured around our market expertise.” Mr Scott-Mackenzie tells Insurance News the launch of the new products is a milestone in Swiss Re Corporate Solutions’ development. Previously the company had provided capacity, but now it is shifting to become a primary provider. A team of underwriters and claims experts has been recruited and they will be supported by the company’s local and international infrastructure. Australia has often been labelled the second most litigious country in the world behind the US, and Mr Scott-Mackenzie says the rise in class actions and increasing awareness of consumer rights means businesses need the best possible cover. “There is huge demand for these products and it continues * to grow.” August/September 2017


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Mould breaker: Steamatic eliminates fungi using global industry standards

To be Sura, to be Sura: Specialty specialist joins the club

ADHERING TO INDUSTRY-ACCEPTED STANDARDS IS ONE OF the most effective ways to deal with mould, the unwanted guest that lurks in properties throughout the country, according to professional cleaning company Steamatic. Industry standards such as the ones set by the Institute of Inspection Cleaning and Restoration Certification (IICRC) are based on scientific principles including “source removal”, which is key in the fight to eliminate mould. “So, if we start to think of mould like the cancer of building materials, we would start removing the source, like we remove cancer from a human body,” National Training and Education Manager Jason Twigg says. “This means that if you have active mould growth on a porous or semi-porous material, it needs to be removed and replaced. “By doing so, we can remove the contamination without having to replace the original structural component. “The result is a healthy building remediated at a typically lower overall cost than replacement.” The IICRC S520 Mould Remediation procedural standard for damaged strucures and contents has been established in the United States, but that does not in any way diminish its relevance in Australia. The standards governing mould removal are the result of collaboration among microbiologists and other scientists, remediation contractors and other stakeholders in the mould remediation industry. “Moulds are found all over the world, so there is no such thing as Australian aspergillus fumigatus,” Mr Twigg says. “It is ubiquitous.” Melbourne-based Steamatic provides restoration, cleaning and disaster management services using environmentally friendly methods to permanently neutralise all mould, mildew, allergens, infectious disease agents and carcinogens. It works closely with the insurance sector, providing professional cleaning services for insurers, loss adjusters, assessors, underwriting agencies and brokers. Steamatic has been operating for more than 20 years, and says its investment in technology makes it a market leader in all areas of commercial, industrial and domestic cleaning and restoration services * and solutions.

SURA IS CONTINUING ITS REBRANDING SPREE WITH the relaunch of Lawsons Underwriting Australasia as Sura Specialty. The new name embraces Sura’s policy of grouping its underwriting agencies under its central brand, without affecting the things that make the specialists shine. Sura Specialty, for example, comprises rail, engineering, construction, mining, nightclubs, medical, chemical manufacturers, importers and distributors, property owners, excess liability layers and umbrella layers with liability coverage up to $250 million. Sura Managing Director Angie Zissis says his group has become home to a growing number of agencies and products that have been chosen for their “exceptionalism” in core industry niches. “Having Lawsons join our family of Sura-branded agencies as Sura Specialty means we can now talk more effectively to customers about the liability risks we can insure in a range of different sectors,” he says. Sura’s stable of specialist underwriting agencies now covers hospitality, professional risks, labour hire, engineering, construction, film and entertainment, marine, plant and equipment and now specialty. Sura Specialty Managing Director Kevin Corkery says brokers can expect the same focused approach to complex liability risks, paired with additional service depth and new business opportunities. “We meet hard-to-place liability risks in diverse sectors like rail, mining, chemical manufacturers, importers and distributors, and property owners with quality, purposebuilt cover,” Mr Corkery says. Mr Zissis says Sura’s reputation for purpose-built policies mean brokers can expect the same intelligent approach to specialist industry risk from Mr Corkery’s team. “We are able to deliver insurance with both insight and passion because we know the risks our industries face better than anyone else,” he says. “We’re glad that now * includes the Sura Specialty team.”

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Equipped for the future Believes in brokers: QBE's Jason Clarke

QBE’s broker education scheme is celebrating a decade of sharing skills, but the journey is far from over By John Deex QBE’S EQUIP BROKER TRAINING program has helped progress the skills of about 500 brokers – with many going on to extremely successful careers. The respected scheme celebrates its 10th anniversary this year, but the appetite to assist mainly younger brokers remains strong. Equally strong is the desire from brokers to take part. QBE’s Executive General Manager Intermediary Distribution Jason Clarke tells Insurance News the scheme spun out of discussions between the insurer and the National Insurance Brokers Association (NIBA). “About 11 years ago we sat down with NIBA and started talking about how we could attract younger brokers to NIBA, and whether we could sponsor brokers to join,” he says. “Then we started to think about whether we could actually help educate these younger brokers. “Some of the skills we require at QBE could be useful for the brokers too, and assist their professional development.” About 50 brokers complete the yearlong course annually. The program comprises three parts: leadership skills, business acumen, and sales and relationship management. Traditionally, participants had to be nominated by a manager, and then a selec76

tion process from the roughly 140 nominations would take place. “This year there has been more of an understanding of who we deal with and who we can help develop,” Mr Clarke says. “There has been more emphasis on selection.” Initially, the scheme was targeted at non-international brokers, but that has changed and some are included now. It also had an age limit of 35, but again this has been widened. “People much older than that have gone through it and benefitted a lot.” Mr Clarke believes that while other insurers offer broker training, it tends to be more technical and aimed at senior people. “I don’t think there is another program like this,” he says. To mark the anniversary, QBE carried out a survey of alumni to track career progression and understand the benefits of the scheme. Almost all (98%) say they would recommend it to colleagues, with 90% saying it increased their confidence and 72% saying attending the course led to more opportunities. About 88% say the program has helped their career development. The results also show alumni are in more senior positions and earn more money. Most participants had a salary in the $60,000-$80,000 bracket when they took part in the course, but the most common salary now is $140,000-plus. Midland Insurance Brokers Managing Director Terry Lane says his company is indebted to QBE for providing the program. “Equip has improved the confidence of our staff with the clear thinking and presentation skills provided throughout the course,” he says. insuranceNEWS

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“It also provided valuable information on how insurance companies operate and their methodology in establishing rates for risks to be insured.” Keith Roderick of Roderick Insurance Brokers says staff from his business found the program very rewarding. “Giving young people the opportunity to be involved at this level is a fantastic initiative from QBE.” Mr Clarke says the course demonstrates QBE’s commitment to educating and increasing the professionalism of up and coming industry participants. “We believe in the value brokers add to the insurance industry and are committed to helping them grow their skills and further their careers,” he says. “[The program] helps them develop, and hopefully helps them stay in the industry. “A lot of brokers who went through the course in the early stages are principals or senior managers now. “It gives our own people a closer relationship with people who will become senior brokers, and it helps the brokers understand the drivers from an insurance company perspective. “It gives them an understanding of why we ask the questions we do.” He believes Equip has many successful years ahead. “The insurance market is changing now and there is potential for further change in the future. “As we move forward, what we deliver, and how we deliver it, will change and programs such as this, where we are connecting with brokers, help. The content will need to be refreshed, but we are absolutely committed to the intent behind it.” Those wishing to participate in future intakes of Equip should speak with their * QBE business relationship managers.


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“We believe in the value brokers add to the insurance industry and are committed to helping them grow their skills and further their careers.”

Setting a course for success Equip alumni have only good things to say about the program and how it helped them advance their careers. “The program made me more confident in my knowledge, ability and skill set, which meant the quality of my work increased,” one graduate says. “I believe that with the assistance of the program I was able prove that I was ready for

the next challenge, which was a promotion to a business relationship manager. “The role requires someone who has the ability to understand all facets of business from technical and business requirements through to rapport building and relationship engagement, which is what the Equip program tools you with.”

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Another says: “Hearing from inspiring leaders and building networks with other future leaders gave me the inspiration and belief that the insurance industry was a great career choice. To have access to senior QBE executives and to obtain the knowledge passed down has been an invaluable component to my own success.”

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Road to restoration NTI has returned an historic truck to its 1940s glory in a project to raise funds to fight motor neurone disease By Wendy Pugh

NTI HAS RESTORED AN HISTORIC TRUCK LEFT undisturbed in a shed for decades in a fund-raising project of special significance for the heavy vehicle insurer. Keys to the 1946 International Model K5 truck will be handed to a raffle winner in September in the culmination of the project, which aims to raise $100,000 for the MND and Me Foundation to fight motor neurone disease. The cause has personal resonance for NTI, with former chief executive Wayne Patterson battling the illness after his diagnosis two years ago. Chief Executive Tony Clark said Mr Patterson had rebuilt the company when it was struggling as an organisation and instilled values that continue to serve it well. “We really pride ourselves on our service delivery and what we do with customers and he led that change,” Mr Clark said. “Wayne was originally a mechanic and then he got into insurance many years ago, so he would just love to be on the tools helping work on the truck.” NTI found the vehicle for restoration in a parts yard in the Queensland town of Dalby and tracked down the nephew of the original owner, from the name Hamilton printed on the side of the truck, as they sought to uncover its story. 78

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The owner was an accountant in the small town of Miles who bought the International vehicle, the trucking equivalent of the popular Holden back then, as it was one of the few available at the time. NTI’s Don Geer, who has helped drive the project, said the mechanics were probably imported from the US in kit form, with a motor body from manufacturer Richards added locally when it was put together after arrival. The extensive restoration has involved stripping the vehicle back, restoring parts and making some changes so it is more functional for current times. A second dilapidated truck was purchased to provide some replacement parts in an often challenging process. It’s been a race against time to have the truck in perfect condition for next month’s presentation to the winner of the raffle. “It will look just like a brand new vehicle back in 1946, but it will have some modern things done to it to make it more user friendly,” Mr Geer said. That includes replacing the original hand crank starting operation and installing modern ignition, as well as making some refinements to the interior. The whole process has been tracked in a video series called A Green Diamond in the Rough, with the title taking its name from the International engine used in the vehicle.

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Team effort: NTI's Don Geer (left) and Peeter Liiv with the truck

“The restored, operational truck will be a culmination of time, energy, skill and resources generously contributed by NTI’s people, suppliers, partners and industry affiliates,” Mr Clark said. “This initiative will generate better awareness of the impact that motor neurone disease has on the community, and raise vital funds.” Three finalists in the raffle with be notified on September 1 and will be brought to Brisbane, courtesy of NTI, to then discover which has the winning key. The vehicle comes with 12 months registration and a certificate of roadworthiness. Runners-up will also receive prizes. NTI hopes funds raised will help find a cure for MND, which gradually takes away the ability of the body to function as nerve cells in the brain and spinal cord are progressively affected. Two Australians die of the disease each day and two more are diagnosed. Mr Patterson says in the videos following the project that he was diagnosed by a neurologist after noticing his voice had become fatigued. “When NTI contacted me and told me their plans to document the restoration of an old truck and raise money for MND at the same time, I thought it was a marvellous idea,” he says. To purchase raffle tickets to win the truck, go to * www.rafflelink.com.au/mndandme by August 31.

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peopleNEWS Axa celebrates its French roots on Bastille Day Mini French flags and balloons in the colours of the flag adorned the Café del Mar in Sydney’s Darling Harbour precinct last month when Axa Corporate Solutions Australia hosted its inaugural Bastille Day broker function. Chief Executive Hubert Jumel led the celebrations to mark the French national day with staff, brokers and other service providers who were treated, as expected, to some of the best wine and cuisine associated with the country. Mingling over French bubbly, guests enjoyed Gougeres cheese puffs, croque monsieur, ratatouille, macarons, eclairs and the best of French cheese. A few lucky guests managed to take home bottles of highly prized wine from Axa’s very own wine estates in France, courtesy of a door prize draw. Axa intends to make the event an annual affair. Until then, vive la France!

Talk to insurance Celebrating as part of your planning. a company We can help you make the most of it. milestone? Holding an event?

NEWS

Email admin@insurancenews.com.au to find out more 80

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HDI Global warms up winter with mulled wine and bratwurst More than 100 guests enjoyed a traditional German outdoor winter gathering when they attended HDI Global’s Winter Festival in July. Managing Director Stefan Feldmann hosted the event, which was held on the balcony of the industrial lines insurer’s office in Sydney. Company executives and guests mingled over warm mulled wine, German beer, pretzels, freshly grilled bratwurst and other German sausages. Mr Feldmann used the occasion to give a brief update on the company’s performance and thanked brokers for their support. The Australasian region was a star performer for HDI Global last year, with gross written premium rising by more than 15%.

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Delivering Solutions, Saving Property . . . Restoring Lives WATER DAMAGE & DEHUMIDIFICATION We know that water damage from household taps, floods, cyclones and storms can be a major inconvenience at any time. Improper drying of property, structures or valuables can have disastrous results. We provide technology proven drying and water extraction services using dryers as well as Refrigerant and Desiccant Units for major losses

MOULD TREATMENT Our certified technicians stabilise the area, clean and remove mould and mildew to minimise disruption and sanitize the premises to allow safe occupancy. This service entails: • Environmentally friendly chemicals • Remediating microbial growth • Decontamination • Surface and property cleaning • Report to Hygienists if required

CONTENTS CLEANING & DISASTER RECOVERY Following fire or water damage, some contents may continue to be affected by smoke residue, moisture, mould or other contaminants. We provide cleaning, restoration and secure storage of these items. Crime scenes such as accident sites or drug labs need professional attention. Our technicians are certified and expertly trained to handle these and other hazardous clean-ups

In the event of smoke damage, water intrusion or mould identified, we treat property and contents by: • Extracting airborne and surface mould, bacteria and viruses • Decontaminating to restore air quality and habitation • Removing mildew and mould • Disinfecting in accordance with legal requirements • Treating ‘sick building syndrome’

1300 STEAMATIC 1300 783 262 steamatic.com.au


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peopleNEWS

High stakes at AILA event Imagined fortunes were won and lost at the Australian Insurance Law Association young Professionals Casino Royale event in Sydney last month. About 300 people from across the insurance industry attended the casino-themed evening, with many delving into wardrobes for tuxedos and high-roller fashion, bringing plenty of glitter and glamour to the occasion. “Gamblers� were given $2000 of pretend playing money and were able to test their nerves and skill as they set out to double down and amass some winnings before the night was over. Tables for blackjack, craps, roulette and poker helped transform the Establishment Ballroom, with the most successful player receiving a $250 Merivale voucher. Prizes were also awarded for the best-dressed male and female.

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peopleNEWS Allianz tournament delivers thrilling finish The Allianz Blue Eagle golf tournament had one of its most thrilling finishes in years as rival teams battled each other at the Australian Golf Club in Sydney. With a trip to the US Masters next year at stake, teams fought tooth and nail all the way to the 18th hole. In the end, just two points separated the winning team and runner-up. Michael Fennessy and David Welsh from Victoria’s Honan Insurance Brokers held their nerve to claim the national title over Aviso WA father and son pairing, Rick and Justin Purslowe. David Creaser and Brad Entwistle from Safeguard Insurance Brokers in South Australia finished third, three points behind the champion team. Allianz Managing Director Niran Peiris launched the tournament with his ceremonial tee off.

J oi nt hec onv er s at i on

www. l i nk edi n. c om/ c ompany / i ns ur anc enews

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@I ns ur anc enews _1


All your clients are different

At GT Insurance, we’ve got them all covered GT Insurance work with you providing:

ƒ0 Flexible programs to suit your clients’ business; ƒ0 Knowledgeable people who provide you with carefully designed options for your clients’ business;

To find out more and get quick and easy quotes online, visit gtins.com.au or contact your local GT Insurance Relationship and Development Manager.

ƒ0 Claims reporting to support risk management; ƒ0 Professional assessors and efficient claims recovery team;

ƒ0 Access to GT Accident Assist - immediate and effective response to accidents

Insurance products are issued by Global Transport & Automotive Insurance Solutions Pty Ltd ABN 93 069 048 255 AFS Licence No 240714, trading as GT Insurance, as agent for the insurer Allianz Australia Insurance Limited ABN 15 000 122 850 AFS Licence 234708. Neither we nor the insurer provide any advice on this insurance based on any consideration of your objectives, financial situation or needs. Before making a decision about it please refer to the relevant Product Disclosure Statement or policy wording which can be obtained from www.gtins.com.au


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peopleNEWS

CQIB celebrates annual awards Brokers and business partners travelled from Cairns, Townsville, Mackay, Rockhampton and the Darling Downs for the annual Council of Queensland Insurance Brokers (CQIB) awards night. CQIB welcomed 360 members and guests for the Queensland Day event, held at the Brisbane Convention & Exhibition Centre. The celebration included the presentation of six achievement awards, while life memberships were bestowed on Glen Butler and Alan Schafer, both former committee members and leaders of CQIB. Mr Butler served as president from 2007 to 2009, while Mr Schafer took the helm from 2009 to 2012. The Peter McCarthy young Professional of the year Award went to Amy Porta, from Bill Owen Insurance Brokers in Cairns, recognising outstanding commitment and service over the past 12 months to the brokerage, clients and the insurance industry. Ms Porta received $1000, CQIB convention registration and a perpetual and personal trophy. The all-rounder insurer award was accepted by State Manager Queensland Ian Garbutt on behalf of CGU, while Allianz Australia was named runner-up. CGU also took out the claims service award and domestic insurer awards. UAA won the underwriting agency award for the ninth year in a row, with Regional Manager North Greg Thompson accepting the accolade on behalf of the group. This year’s Mick Lambert Barker Award, presented to a CQIB business partner’s staff member for “service above and beyond”, went to Luke Wennerbom from Vero Insurance. Mr Wennerbom received a trophy from Piranha Insurance Brokers in Rockhampton and a $500 cheque presented by CQIB President Sean Bemrose.

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peopleNEWS

YIPs says cheers to financial years young Insurance Professionals (yIPs) have farewelled the past financial year and welcomed in the next at events around Australia. The celebrations are one of the major networking events of the year for yIPs, which has expanded around the country and across the Tasman since it was founded in Melbourne in 2011. The End of Financial year functions gave young professionals the opportunity to meet and enjoy drinks and canapÊs with colleagues from across the insurance industry. In Sydney more than 250 people attended the event at the Ivy Hotel’s Sunroom. The Highlander Bar was the destination in Melbourne and the new financial year was welcomed in style at the Cellar Bar in Brisbane. Events were also scheduled in the Northern Territory, Western Australia and Tasmania, while in New Zealand a function was held in Auckland.

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peopleNEWS

Broncos coach shares philosophy at UAC expo The Underwriting Agencies Council/National Insurance Brokers Association Brisbane expo brought hundreds of brokers together at the event’s new location at the Royal International Convention Centre in the showgrounds. Brokers visited 77 exhibitors’ stands and gained plenty of information on latest product offerings before gathering for a lunch addressed by Brisbane Broncos rugby league coach Wayne Bennett. Mr Bennett shared his philosophy about achieving happiness in life, whether in sport, business or relationships, urging guests to do their best and be honest with themselves. “No one tells us more lies than ourselves,” he told the lunch. “Be honest with yourself. We have to live with ourselves all our lives.” After his presentation, three framed, signed rugby league jerseys were auctioned to raise money for the family of two-year-old Cooper Brown, who died from a childhood cancer. The funds will help pay for the funeral and medical bills. ICPS Australia’s Brad Nicholls, Andrew Hinz from Insurance Aid General Brokers, and Steadfast NSG’s Shaun Luck dug deep to make the highest bids, raising $11,700.

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peopleNEWS Winners are grinners at the Mansfields

The big winners: from left, Stephanie Morison, Scott Simpson, James Flaskett, Michael Babington, Samantha Kent and Belinda Thatcher

All smiles at Allianz: from left, Nicholas Scofield, Natalie Zulian, Kerryn McKinlay, Sean Jungwirth and Gerhard De Kock

The Berkshire Hathaway Specialty Insurance team wtih their award: from left, Joseph Hershewe, David Cook, Susan Donaldson and Chis Colahan

Specialists with a prize: National Transport Insurance’s Mairead McKendry, Chris Mitchell, Leonie De Villiers, Janelle Greene, Kathleen Richards and Megan King

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Industry leaders and claims professionals turned out in force to gather in Sydney’s Establishment Ballroom last month for the inaugural Mansfield Awards, recognising claims excellence. The event, which was conceived by Insurance News Publisher Terry McMullan and LMI Group Managing Director Allan Manning, saw claims staff from a wide range of companies chatting with their peers from other insurers, fulfilling the organisers’ wish that the event should promote networking. Winning teams and managers posed proudly with their trophies, which featured the stylised profile of British Lord Chief Justice Lord Mansfield. The big winner of the evening was Chubb Insurance, which won the SME property and casualty award, and the Gold Mansfield for best overall performance. The awards evening was sponsored by icare and Steadfast, with money left over from running the event going to support an orphanage in Bengkulu, Sumatra that looks after disabled children.


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QBE cheers diversity at AFL Pride Game QBE displayed its support for the rainbow flag at the AFL Pride Game in Sydney. Australia and New Zealand Chief Executive Pat Regan led the cheers at the Sydney Cricket Ground in July as the Sydney Swans, sponsored by the insurer, scored a 42-point victory over the St Kilda Saints. But it wasn’t just the coveted four points that mattered on that day. Mr Regan says the two clubs and the AFL should be congratulated for championing the initiative and QBE intends to push for greater diversity and inclusion internally and in the broader community. Guests who joined in the QBE celebration included Sydney Swans player Jordan Dawson and former Olympic swimmer Daniel Kowalski.

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maglog »

Sam Pentecost Contributor

A COUPLE OF LITTLE NEWS ITEMS CAME OUT IN the past few weeks that highlight just how cack-handed our politicians and their bureaucrats can be. The first was the admission late in July by the New South Wales Government that it blew more than $25 million on preparations for switching the fire and emergency services levy reform from insurance policies to ratepayers. You’ll recall Premier Gladys Berejiklian and her team took fright at the last minute, transforming “the most significant reform of a generation” into what the opposition is calling “the most significant waste of taxpayer funds”. That $25 million doesn’t, of course, include the tens of millions insurers say they spent amending their IT systems to comply with the changes. Now they’ve had to spend millions more changing everything back to where it was, with “Insurance Monitor” Allan Fels (cost so far $3.9 million) charged with overseeing the switchback to ensure they act honestly. Great gig if you can get it, but how he does that job without occasional outbursts of hysterical laughter is beyond me. Meanwhile, in Canberra, that hotbed of revolutionary thought, the ACT Government has come up with the concept of a “citizens’ jury” to discuss topics that are “interesting and meaningful to the community”. The idea is that as many as 10,000 citizens, spread evenly across the city, could be consulted by the territory’s government. Chief Minister Andrew Barr’s choice of the first topic for discussion was compulsory third-party insurance. That led Greens MP Caroline Le Couteur to warn that few people are interested in insurance and he risked “boring the people of Canberra”. Which is probably a good illustration of the way so many MPs around the country don’t understand the vital importance of insurance but still like to talk about it. And then there’s the inability of bureaucrats to ever admit they’ve made a mistake. You won’t find a better example than that drawn from the skirmish in the shaky isles to our east when Vero New Zealand tried to acquire third-ranked personal lines insurer Tower. 98

Vero was knocked back by the New Zealand Commerce Commission on the grounds that the deal would create a Suncorp-IAG duopoly. Fair enough, but then why did the commission allow IAG to buy the previous third-placeholder, Lumley, in 2014? IAG was already dominant in New Zealand, and now it holds around 65-70% of the personal lines market. Michael Naylor, who is Senior Lecturer in Finance and Insurance at Massey University, told our online counterpart insuranceNEWS.com.au the Lumley takeover “is regarded by the industry as a mistake. It is what ruined competition in the market.” Being a government department, the commission could never come right out and say: “Well, he’s right – we totally botched up the IAG-Lumley deal, but that was three years ago and we’re not going to make the same mistake this time.” No, no. The commission’s detailed reasoning for its decision to block the Vero acquisition is a masterwork. It describes the IAG-Lumley situation as “materially different” and says comparisons with the present knockback are “not valid”. “The proposed merger would involve the removal of Tower as a significant third competitor, resulting in a reduction of significant competitors… from three to two. “In contrast, post-merger in IAG-Lumley, three significant competitors remained.” Yeah, right. Lumley was a big player. Tower, by contrast, holds a New Zealand market share of around 5% at best. It hasn’t competed “significantly” with the big Australians since the claims shocks of the Christchurch earthquakes. The Big Two could squeeze it like a pip if they wanted. The fact that Tower is third in the rankings is merely stark evidence that the commission got it wrong three years ago. Fairfax might come back and make an offer for Tower, but you’d have to bet that it won’t be offering a premium on what it was offering before Vero was nobbled. And a real third player with deep pockets would indeed be good for the market. But it won’t undo the commission’s original mistake in allowing the IAG-Lumley merger, which did lessen competition. But like bureaucrats and MPs everywhere, the lan* guage doesn’t exist that allows them to say so.

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STRATEGIC ALLIANCE OF INDEPENDENT LOSS ADJUSTERS

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WE CAN TAILOR THAT COVERAGE FOR YOU. Property | Casualty | Executiv Executive e & Professional Lines | Marine, Transport Transport & Logistics Liability Healthcare Lines | Cyber | A Accident ccident & Health | Construction | Pow Power, er, Energy & Mining

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