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DIVING INTO CHANGE: Diversity – still a long way to go THREE AND EASIER: Our top insurers turn the corner D&O STRUGGLES: Premiums up as lawsuits hit profits
CLOSER. BRAVER. FASTER. Mark Milliner is leading IAG’s Australian Division into a challenging new world
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Issued by Zurich Australian Insurance Limited ABN 13 000 296 640 AFSL 232507. Any advice has been prepared without taking account of your objectives, financial situation or needs. Therefore, before acting on the advice you should consider its appropriateness having regard to your objectives, financial situation and needs. You should obtain and consider relevant Product Disclosure Statement for the financial product, available at www.zurich.com.au, before making any decision about whether to acquire, or continue to hold, that product.
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Contents 6 Newsmakers » 10 Closer. Braver. Faster. » Mark Milliner reveals the thinking behind IAG’s dramatic restructure and the emergence of a new Australian division moving in bold directions.
56 Here to stay » Axa Corporate Solutions sees Australia as a key growth opportunity.
63 Class struggles » D&O premiums are surging as shareholder lawsuits hit profitability.
18 Three and easier » Australia’s leading insurers have come through some tough times and now appear energised by a hardening market.
22 Time to Dive In » A survey finds the insurance industry can do a lot more when it comes to promoting diversity and inclusion in the workplace.
companyNEWS 68 A new approach » An industry veteran is attracting rising interest with his cluster model for underwriting agencies.
69 Driving ahead »
24 Fighting fires from space » A scientist uses satellite data and a complex set of figures to calculate Australia’s bushfire risks.
26 Ready for lift off » APRA stats point upwards as rate rises kick in.
Bus and coach specialist gets on board with Sura.
peopleNEWS 70 Diverse future » Greater gender diversity will create a stronger insurance industry – but what does that really mean?
30 Evolutionary road » Tech advances will take time to deliver major impacts, according to Swiss Re economist Kurt Karl.
34 A call to Canberra » The Senate inquiry’s recommendation for increased public spending on disaster mitigation again highlights the Government’s foot-dragging.
38 Crime and punishment » Insurers’ caution around providing cover for exoffenders may be understandable, but are they too quick to turn people away?
44 Stronger together » PSC Reliance Franchise Partners aims to more than double in size with a unique AR structure.
48 Storm clouds on the way » Tropical windstorms will increase in severity thanks to climate change, but the total impact may not be felt for decades.
72 74 77 78 80 83 84 86 88 90 92 94 96
AILA entertains Italian-style » Quill Club supports soldiers’ charity » APIG conference draws a crowd » UAC Adelaide expo continues to grow » All Blacks score at AIG function » McLardy McShane hosts island retreat » CGU launches women’s leadership lunch » Resilium’s big bash at Adelaide Oval » A celebration to remember » CQIB ‘toolkit’ convention draws a crowd » Elvis connects with PSC » Art of celebration » Festival of inclusion »
98 maglog »
50 Gathering momentum » AIG considers its next blockchain steps after the success of a global pilot project.
52 It’s certainly not boring » Melbourne-based Insurance Advisernet authorised representative Samantha Green talks with Kate Hanley about ambition, opportunity, communicating and listening and building a broking business from scratch.
Cover: Mark Milliner, Chief Executive, IAG Australian Division Cover image: Kym Thomson
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insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 24,000 subscribers. In August/September we published 375 articles online. These were made up as follows:
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8 BREAKING NEWS More than 25,000 news articles – including 264 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
Puerto Rico flattened
Boats in a marina in Marathon, Florida, lie shattered after Hurricane Irma smashed into the state in September. Irma followed close behind Hurricane Harvey, which severely damaged several island groups and caused intense floods in Texas. Hurricane Maria was the most recent of four destructive Atlantic hurricanes in about six weeks, hitting Puerto Rico on September 18 – two weeks after Irma destroyed most of the territory’s infrastructure.
Hurricane Maria will cost insurers up to $US85 billion, with Puerto Rico bearing the bulk of the losses, according to catastrophe modellers. The US territory will account for more than 85% of the bill, AIR Worldwide says. It predicts overall insured losses of $US40 billion to $US85 billion. Discussions with insurers indicate the most devastating damage is in areas with very low insurance coverage, thereby limiting the loss impact on the industry. Maria severely damaged Puerto Rico’s infrastructure, with the island still struggling to restore water supply, electricity and other necessities. Puerto Rico bears brunt of losses from Maria 2 October
This is a pretty big beast now.
– Steadfast Managing Director and Chief Executive Robert Kelly talks about his baby following the company’s results announcement
AIG plans to create a separate general insurance division as part of a reorganisation of the global company into three business units in an overhaul announced by new Chief Executive Brian Duperreault. General insurance, led by Peter Zaffino, will include commercial and personal insurance and US and international field operations. “We believe this structure will maximise our global platform by empowering our local geographies and provide our businesses with the greatest competitive advantage and ability to serve our clients,” Mr Duperreault said. AIG creates general insurance unit in overhaul, 2 October
Winley cost $8 million More than $8 million went missing from the accounts of failed Perth authorised representative company Winley Insurance Group, according to the liquidator’s report to creditors. As previously revealed by insuranceNEWS.com.au, Winley collapsed last year following an alleged theft of funds from the company’s trust account. The RSM Australia Partners report says preliminary investigations indicate about $8.69 million “appears to have been misappropriated” between December 2013 and January last year. The company’s known liabilities total $3.31 million, but this is expected to rise. The liquidator says Chandanie Godwin and Michael Kapilovsky may have been de facto Winley directors, and Steven Godwin a shadow director. There are no details at this stage on Mr Kapilovsky’s precise role or background. Winley report reveals true scale of missing funds, 11 September
Low losses from Mexico quake Insured losses from last week’s 7.1-magnitude earthquake in Mexico could range from less than $1 billion to $2.6 billion, according to various estimates by catastrophe modellers. RMS says low insurance coverage in Mexico City and surrounding areas means the bill will not exceed $US1.2 billion, but economic losses will be higher. Rescuers are still searching for survivors, while the death toll from the deadliest quake in 32 years has climbed to more than 300 people. Mexico quake claims may hit $2.6 billion, 25 September
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Satisfaction equals loyalty Nearly 78% of Australians stayed with the same general insurer when their policies were last due for renewal, up slightly from 79.9% in 2013, according to a Roy Morgan Research survey. About 4.6% opted for a change, compared with 5.8% four years ago. The researcher says it indicates customers are satisfied with their present insurers. “It is worth noting that satisfaction with general insurance is closely associated with higher levels of loyalty, as shown by the fact the top performers for loyalty also have well above average satisfaction levels,” Industry Communications Director Norman Morris said. “Retaining customers is therefore likely to be affected by more than price, but also by the many other factors that drive improvements in satisfaction.” RACQ Insurance has the most loyal clients, with 85.2% renewing without checking out other insurers, followed by RACV (84.1%) and RAC WA (83.8%). Suncorp Insurance is fourth with 82.9%, followed by sister brand Apia (80.3%), IAG-owned NRMA Insurance (79.1%), Suncorp’s AAMI (74.8%), Allianz (74%), Youi (70.6%) and QBE (70.4%). Budget Direct is last of the 12 insurers surveyed on 63.3%, with GIO one place above it at 67.2%. Customer loyalty growing, survey shows, 11 September
QBE’s John Neal calls it a day QBE Group Chief Executive John Neal (above left) will step down at the end of December after five years in the top role. The company says Pat Regan (above right), currently Australian and New Zealand Chief Executive, will take over from Mr Neal on January 1 after a four-month leadership transition. Mr Neal began with the company in QBE’s European Operations in 2003 and moved to Sydney in 2011 as chief executive global underwriting operations. “John has led the business through a significant transformation and a challenging period in the insurance industry globally and has been working closely with the board to ensure a smooth transition for his succession,” Chairman Marty Becker said. Mr Regan joined QBE in 2014 and was group chief financial officer before heading the Australian and New Zealand business. “In the last 12 months Pat has led a strong turnaround in the Australian & New Zealand operations highlighting his operational skills and business acumen, and in his previous role had been pivotal in stabilising the balance sheet and enhancing the group’s capital management,” Mr Becker said. QBE’s John Neal to step down, Breaking News, 12 September
Bad bushfire summer ahead Most of the east coast of Australia faces above-normal bushfire risk this summer, according to the Bushfire and Natural Hazards Co-operative Research Centre southern outlook. Below-average winter rainfall has added to long-term drying trends, leading to a marked increase in fire weather severity. “The combination of short and long-term rainfall deficits serves to increase the fire risk in the coming spring and summer seasons,” the report says. Large areas experienced the hottest June-August daytime temperatures on record, which exacerbated the drying of vegetation. The report says New South Wales has above-normal fire potential for eastern forested areas, while grassland areas have normal potential due to reduced fuel loads. Southeast Queensland could suffer due to high winter temperatures, while Victoria and Tasmania could see an early start to the fire season. ACT bushfire potential is above normal due to dry vegetation, with large parts of South Australia similarly affected. The centre’s outlook for northern Australia, released in July, showed increased risk in some parts of Queensland due to damage caused by Cyclone Debbie. In northern Western Australia, above-normal fire potential is reported in parts of the Ord Victoria Plain and Dampierland regions of the Kimberley. The southern half of the Pilbara and central parts of the Gascoyne region also face above-normal fire potential. Experts fear severe bushfire season, 11 September
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Looking for better business Reinsurers are continuing to diversify their portfolios as they look to improve underwriting performances, according to a half-year market report from Willis Re. “Due to ongoing pricing pressure, reinsurers continue to moderate their exposure to catastrophe-exposed business, including for their US business,” the report says. Diversification has targeted structured property and casualty, life, health and specialty lines such as cyber and mortgage business. Premium growth for some companies is also supported by the further allocation of capital to primary insurance business.
Net written premium for companies in the Willis Reinsurance Index increased 2% to $US129.8 billion in the half. Shareholder funds totalled $US348.2 billion at the half-year, a 1.2% increase from the end of last year, while alternative capital increased to $US75 billion from $US70 billion at the previous half-year. Insured natural catastrophe losses fell to $US20 billion compared with $US30 billion in the corresponding half last year, and significantly below the 10-year average of $US29 billion. Reinsurers looking for diversity, Willis Re says, 18 September
The high cost of crashing Deaths, injuries and other consequences of road accidents cost the economy almost $30 billion a year, according to the Australian Automobile Association (AAA). The public purse also pays a heavy price, losing $3.7 billion a year through missed tax revenue, income support, and health and emergency services costs, a study commissioned by the association shows. Road trauma deaths, and health and wellbeing payments cost the economy almost $9.3 billion in 2015, by far the biggest cost. Vehicle damage was second at $4.8 billion, followed by disability care ($2 billion). Insurance administration placed sixth at $1.12 billion. Road crashes take $30 billion toll on economy, 18 September
Publisher/editOr: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: email@example.com AdvertisiNg: NAOMI CONWAY & MADISON SEYMOUR McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: firstname.lastname@example.org Address: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road, Ivanhoe VIC 3079
The online and print versions of Insurance News have been covering for several years the threats and opportunities thrown up by the insurtech revolution. We’ve moved from warning that technology had reached a point where it could change the way people buy insurance, to reporting developments from the so-called disruptors and the industry’s moves to embrace the emerging opportunities. The overarching message throughout this period has been the call for the industry to adapt to continuous change or risk being sidelined by more innovative competitors. The larger insurers in particular have climbed aboard the technology bandwagon and are rapidly learning what they need to do to gain leverage from their databases. They are also investing in new projects and products. Agility is not a common trait of large insurers, but as our cover story in this edition illustrates, IAG is going to give becoming nimble, speedy and innovative a red-hot go. Mark Milliner has been appointed to give the group’s vast Australian businesses a thorough makeover and everything is up for change. The new Australian Division – itself a radical departure from IAG’s previous vertically integrated business structures – has set out to find new ways of doing pretty much everything. As Mr Milliner notes in our interview, the initial internal disruptions that have to happen to open up the organisation to change will happen very quickly as he creates an insurance operation that’s based solely around the wants and needs of the customer. The next year will therefore be a challenging one for IAG and its people. Change can be exciting in its innovation and originality but the journey will not be without its upheavals. What will emerge in time will hopefully be a model that just might turn on its head the way we think about and buy insurance. IAG will be closely watched as it boldly goes where no leading insurer has gone before. Terry McMullan
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Closer. Braver. Faster. Mark Milliner reveals the thinking behind IAG’s dramatic restructure and the emergence of a united Australian division moving in bold directions By Terry McMullan
IT’S FOUR YEARS SINCE IAG MANAGING Director Peter Harmer first delivered to insurance brokers the stark message that they must “adapt or die”. He was warning of the increasing influence of technology and the new opportunities reshaping everything from underwriting to distribution and claims. That call to adapt has become something of an industry battle cry, with IAG most prominent in building new customerfocused business units and developing an understanding of exactly what insurance does and is capable of. Much of the pre-Harmer IAG structure survived until July this year, when chief operating officer Mark Milliner was handed a new Australian division encompassing most of IAG’s operating units. No one could have been surprised that Mr Milliner was chosen to reshape IAG’s largest and most diverse businesses into one focused unit. After moving up George Street from arch rival Suncorp in April last year – he had been a strong pick for the group managing director role that went instead to Michael Cameron – Mr Milliner spent 18 months as chief operating officer, gaining a thorough understanding of IAG’s strengths, weaknesses and opportunities. Now, with a clear vision for enhancing the effectiveness of the group’s Australian assets, he makes it clear that moving slowly is not an option he’s willing to consider. The result will be some dramatic changes at IAG over the next 6-12 months, all enacted under a philosophy emphasising simplicity and speed. 10
The insurance industry doesn’t adapt to change all that easily. While the former practice of running IAG’s various businesses in distinct silos was suitable for a company that had grown rapidly by acquiring large insurance operations, the brave new world of business has little patience with untidy corporate cultures. They may promote stability, but they’re also a brake on decision-making, and the word that came up most often in an Insurance News interview with Mr Milliner a few weeks ago is “change”. There’s already a lot of that happening within IAG. As he sees it, all the influences playing on insurance at present – technology and disruption, new forms of competition, new distribution methods, the role of brokers, regulatory oversight and changing consumer attitudes, to name just a few – can be lumped together under simple questions such as: what does the customer want, and what’s the best way for IAG to deliver it? Followed by another question: why are we waiting? “I think this whole mantra of ‘closer, braver, faster’ is really important, and it will continue to drive us to deliver on our purpose,” Mr Milliner says. “It’s time to let go and change – we’ve got to do some stuff.” Along the way has evolved a new business theory – the IAG ecosystem. Australia’s leading insurer by premium income wants to be Australia’s leading insurer “in terms of being really focused on the customer and the right products, the right distribution channels and the right margin”. insuranceNEWS
Ecosystem? It’s a way of explaining how everyone around the insurance process is involved in a common purpose, using all available specialties and skills to achieve the best result for the customer. That includes combining products and methods from inside and outside insurance with the aim of producing not just new products but new opportunities. “We have to understand the ‘adjacencies’ that fit around insurance products, and then work out how to bring it all together to make a difference for anybody who is buying insurance,” Mr Milliner says. “It means we can choose to be the core of the business model and bring things together, or we can play into other ecosystems that want to have general insurance as a product.” He includes brokers as a distinct ecosystem, with IAG as a manufacturer supplying a product to them. And he notes that the SME market is one area where CGU has its own ecosystem. In that example “we own all the bits of the value chain – manufacturing, distribution and claims – and we will use partners to bring together services and products customers want. “We will leverage things differently, because that is where our customers want us to go. How do we make it simpler and easier for them? “It’s something I talk about every day, and I think it’s already starting to make a big difference in the way we understand how we do business as a group.” The words “closer, braver, faster” feature throughout the interview with Insurance News. He’s confident that IAG can change
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Moving quickly: IAGâ&#x20AC;&#x2122;s Chief Executive Australian Division, Mark Milliner
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fast enough and establish enough market advantages to be clearly different from its competitors. “There are always opportunities that come out of change, especially if you understand what is happening and why,” he says. Part of his challenge is to bring about change while maintaining the fundamental trust he believes customers have in their insurers. “At the moment, the Australian community has probably lost trust to some degree in governments and big companies, but I think insurance is well placed in terms of how it’s dealt with customers over the years. “We help people out when they need it most, and we do a great job of getting them back on their feet. I think we can enhance that trust by adopting some key ways to improve it and to differentiate ourselves, both as an industry and also, more specifically, as IAG. “We are an organisation that has always been and is still very much focused on the customer and communities. I think that comes out of our roots as a mutual. We’re very attached and linked into our customers. “Our role is to understand what they want and what they need, and we have to deliver – whether it’s a day-to-day normal claim or whether it’s peace of mind in terms of having a policy that covers people when something does go wrong, or in terms of large events.” Achieving IAG’s ambition is indeed going to take a great deal of change, and Mr Milliner says that process is already under way. And it’s taking place under that “closer, braver, faster” tag. 12
The first step was the July restructure of the senior management group into three geographic divisions – New Zealand and Asia under Chief Financial Officer Nick Hawkins and the new Australian Division under Mr Milliner, bringing together the Australian Consumer, Australian Business, Operations and – importantly – the Satellite Division, which houses such “challenger” brands as Coles Insurance, SGIO, SGIC and Berkshire Hathaway Personal Lines. In real terms, Mr Milliner’s division is the largest general insurance operation in the country, with the inclusion of the operations and satellite divisions indicating his influence across the organisation remains considerable. In his statement announcing the changes, Mr Harmer explained the decision to unite the Australian businesses into one division as a way of accelerating decisionmaking processes in the company and speeding its transformation from a “product-centric organisation to one more focused on the customer”. The change saw Australian Business Division chief executive Ben Bessell, whose responsibilities included CGU, become Executive General Manager Business Distribution, reporting to Mr Milliner. (However, Mr Bessell will remain a member of the group’s senior management group.) Consumer Division chief executive Anthony Justice’s reporting relationship also changed, and he decided to leave after six years at IAG. In mid-July changes at the executive general manager level of the division were insuranceNEWS
“There are always opportunities that come out of change, especially if you understand what is happening and why.” announced, and the range and severity of the changes were enough to indicate IAG isn’t playing with words; this is serious. Among those to leave the company in the restructure are executive general managers of Broker Business Donna Walker and Customer Delivery Fiona Phillips. The EGM level has been severely whittled down in the search for a simpler structure. Sources within the company have told Insurance News the cadre of about 50 executives at this level, which included the division’s executive general managers and state managers, will now number about 10. The nine executive general managers so far reported who will report to Mr Milliner are: Customer Development, Cheryl Chantry; Consumer Distribution, Amanda Whiting; Business Distribution, Mr Bessell; Australian Operations, Chris Newlan; Customer Promise (Short-Tail Claims),
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Prevention, not just protection IAG WILL DEVELOP NEW APPROACHES that will see it more involved in the prevention of events and accidents that lead to claims. Mr Milliner says there are many facets to providing protection and security to customers, and prevention is increasingly important. “The reality is, we are very much a purpose-led organisation,” he says. “We see our purpose as making the world a safer place for our customers and communities, and that takes insurance past the emphasis on merely paying claims. “Historically, insurance has been very much about protection, and that should be what leads us as an organisation and as an industry. “There is already lots of talk around here about going into homes to stop fires before they start and dealing with leaking taps and breaking pipes and those sorts of things,” he says. “It will expand outwards from there. “What you are seeing is IAG and the wider insurance industry starting to think more and more about how to move into prevention. When something goes wrong today we fix it, but there are also options for the industry to stop things going wrong.” He says emerging strategies related to prevention products present “huge opportunities” for IAG. “Prevention is better than cure. I think that’s probably one of the biggest things we are seeing in the shift in community attitudes.” He says the situation in cyclone-prone north Queensland, where politicians have mounted a series of inquiries and reports into the relatively high cost of insurance, is an example of both the value of government mitigation strategies and the value of insurance. “People in north Queensland are continuing to buy insurance,” he tells Insurance News. “Retention rates broadly have held strong, even though we are pricing correctly for the inherent risk. “Compare that with the situation in the United States, where they have used insurance to distort risk and all that will happen is that all people in the US, as a community, will be put at a disadvantage from a financial perspective. “The reality is, insurance globally works really well if risk is priced properly to leverage the global insurance market. “My argument has always been that if we price correctly for risk, we ultimately end up not building in risky areas and finally getting building standards that are fit for purpose. “In other words, we’re going to make the world a safer place for people.”
Steven Fitzpatrick; Customer Promise (Long-Tail Claims), Steve Marshall; Operational Partnering, Suzanne Young; EGM leading IAG’s Core Simplification Program, Kylie Burtenshaw; and Chief Technology Officer Neil Morgan. An eight-person team of executive managers to work in Mr Bessell’s Business Distribution unit was also named in mid-September. It’s understood a large number of other personnel at lower levels will leave the company by the end of the year, although IAG is wary about going into details on numbers, saying the restructure is a strategy in motion. Nevertheless, sources have told Insurance News the workforce cuts are expected to be significant. Mr Milliner says his focus is on “designing what customers want and how we service that, and then having both claims and distribution teams equally focused on servicing customers’ needs for such things as selling them the policy, or working with brokers as a distribution partner, and ensuring that when somebody has a claim that experience is world-class”. “What we are doing at the moment is building the foundation for Australia’s leading insurance business. That comes down to things such as putting one transaction system across the business and simplifying the structures. So yes, it will be a much simpler organisation.” Simpler perhaps, but also an organisation that thinks deeper than we might be used to from our leading insurers. The phenomena of swift management change and new approaches are already insuranceNEWS
being felt in many service industries seeking to change their direction and embrace the benefits technology can bring – not just for their business and its profits, but also for their customers. Because there’s little doubt that, for companies such as IAG, growth in the future is going to come from their ability to act decisively in the interests of the customer – that “closer, braver, faster” thing. Responsiveness has been the name of the game for a while, but now it has added urgency. Mr Milliner says during his time at IAG he and the senior management group have been talking about ways to simplify the way the company works to make it more responsive. This has included IAG moving closer to a leadership position in its stated purpose of “making your world a safer place”. That involves a number of moves, including supporting research into extreme weather, speaking out on the need for mitigation to minimise damage from such events, and even getting involved with other industries in national and global forums around climate change. It has also involved IAG taking a significant role in United Nations initiatives around climate change. In an industry such as insurance, where the talk has always been about contracts and risks and who owns the customer, there’s a somewhat ethereal feeling being involved in a conversation about professional interdependencies and simplicity, and preventing claims before they happen. But this is one of the first tangible signs of the emerging new world of insurance, where everything is possible and the customer really is king.
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The personal touch still matters THE TERM “DIGITAL WORLD” IS a cold one, at odds with insurance brokers’ emphasis on the value of personal relationships, but Mr Milliner says it relates more to the growing trend for people to access IAG through technologies such as mobile phones and tablets. And no matter what changes happen in the many ways IAG will distribute its products, he agrees there will always be a need for intermediaries. “When we sell policies, there are times when people want to talk to people. “It certainly plays out with brokers, where quite often there is complexity that sits in there. The broker model shouldn’t be underestimated for its importance. “Even in claims, people talk about everything being transacted electronically or digitally. But I just think some people will want to talk to another person, and it’s important to show empathy for those people. It’s the same with a business and brokers. “People need advice, and I think brokers will continue to be a critical part of the insurance value chain. “So in short, I don’t think everything that develops will be around new technology.”
“What we’ve done is step back and understand strategically what we want to do, so this whole sense of moving to an ecosystem model is really important to the group,” Mr Milliner tells Insurance News. “We believe that will allow us to deliver on our purpose to make the world a safer place. “So, with a clear high-level strategy in place, we’ve stepped back and looked at what needs to be done. Once we understood the operating model, we could then put the structure in place. “It made a lot of sense for us to have one chief executive for all the Australian businesses, which allows Peter [Harmer] to focus on the longer-term issues of the organisation.” Mr Milliner says the “original intent” of insurance – to restore assets that have been lost or compensate for loss – hasn’t changed but, thanks to technological advances, the way all that is achieved can be very different. And also much simpler, thanks to emerging opportunities driven by technology, a smaller workforce and new ways of looking at the traditional role of insurance. At the end of the equation is the need to strengthen revenue streams. “We do want to make the world a safer place for the community and customers, but part of my role is to make sure the world is a safer place for our shareholders as well,” he says. “One of the fundamental issues we have to keep in mind is that many insurers just haven’t been making the right sort of returns on a consistent basis.” insuranceNEWS
As previously noted, the elephant in the room is the impact such dramatic change will have on workforce numbers – a subject IAG isn’t keen to discuss until it has the details straight. The adoption of a flexible horizontal structure will inevitably affect many people who have been working within the trusted but people-heavy vertical “silo” structure that sustained IAG as it grew through acquisition. This is also the group’s second shot at the headcount in its business insurance services area. The inevitable trimming of staff numbers following the acquisition of Wesfarmers Insurance in 2014 was based around selecting the best available people to fill existing roles. This time it’s different: it’s about deciding what the roles should be, and then selecting the best people to fill them. Mr Milliner makes it clear he’s communicating with the staff in his division and intends to have the headcount reduction exercise over and done with before the end of the year. “We’re going through this in a structured way, understanding the work that needs to be done and then creating job descriptions and roles to do that work,” he says. “We’re looking at the best people we have in the organisation. “Along the way, we’ve been able to simplify the structure and make it more clear and accountable in terms of the peoples’ roles, and that obviously means there are some people who will miss out. “The the new leadership structure will be in place by early December, and so far we’ve hit all our milestones.
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“We have to make sure people understand the role they are doing, that they’ve got clear accountabilities and know in terms of performance what they need to deliver. That will take us a year or so.” Mr Milliner explains that IAG’s official mantra of making the world a safer place will see the group developing new approaches to risk. For example, it will focus not just on putting things back together again through its claims functions, but will also take a more proactive approach to preventing events that trigger claims. [See panel on page 14] He says consumer attitudes to insurance and the way consumers buy it are continuing to develop as society changes. “There are going to be more people working for themselves, owning small businesses, and their requirements around insurance will be slightly different to what has occurred historically. “So you would argue there needs to be a balance between a good technology solution, coupled with a clear understanding of that segment and how it will work and how they want to buy insurance. “Some of those SMEs will want to buy online, direct from an insurer, and some will want to go through a broker. You are going to see a shift in distribution channels, but I’d argue there will continue to be a balance, and I believe it will come through the complexity of what someone is trying to insure. “What I think we have to do is understand what the customer wants to do. People within the industry can have good
conversations about who should do what part of the insurance daisy chain, but at the end of the day, unless we respond to what the customer wants, it’s a moot argument. “Different segments of Australian businesses, and primarily SMEs, will want to handle insurance transactions differently, and it’s up to us to understand that customer journey and how we can help them.” IAG executives have in recent times been publicly blunt about the role of brokers, cautioning them not to price themselves out of the market through high commissions, fees and incentive payments. Mr Milliner’s view is a little more sophisticated. Putting aside debates over the need for brokers to provide value for money to the client and the insurer, he says simply that the customer will decide whether or not to use a broker. And if they decide to go along the intermediated route, IAG must be there to facilitate it. “In the SME market in particular, the insurer should decide on the price it wants and leave it up the customer how to move forward and the broker how much cost and value it adds to the equation. “We get all caught up in commissions and how much it should be,” he tells Insurance News. “If somebody wants to put a price on broking in the distribution channel, then they can do that themselves. If [the broker] can sell that as an added value to the customer, then fair enough, that’s their business model. If it’s successful they will grow and if it’s not successful they won’t. insuranceNEWS
“We have to make sure people understand the role they are doing, that they’ve got clear accountabilities.”
“The point is, at the end of the day, it’s the customer who is going to make the decision as to where they buy from – not me and not the broker. “Brokers will continue to play a valuable part in the transaction of insurance in Australia. “They fulfil a need. The real issue as we simplify the business is to be really clear on what an insurance manufacturer should do. “We want to be very clear on how we handle distribution. That will, partly at least, involve the brokers and how much they receive to make that insurance experience really good for people, and from a claims perspective how we make it work. “We just want to keep it really simple and easy about who does what, without having the complexity of all of us trying to * do everybody else’s job.” 17
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Three and easier Australia’s leading insurers have come through some tough times and now appear energised by a hardening market By Bernice Han THE BIG THREE AUSTRALIAN INSURERS have proved their resilience once more. IAG, Suncorp and QBE reported higher earnings despite testing conditions that have depressed the industry in the past few years. Suncorp’s domestic general insurance arm, a key engine for the Queensland-based financial services group, made $689 million in after-tax net profit for the year to June 30, up 40.6%. IAG reported a 48.6% rise in full-year net profit to $929 million, while QBE’s net profit for the six months to June 30 improved by 30% to $US345 million compared with the corresponding period last year. Adding to the good news, the consensus is that the dark clouds appear to be clearing, albeit slowly. Rates are on the rise in some lines – a sign the market may have turned a corner. “I think throughout the 12 months, we’ve made a conscious decision to drive 18
some price increases through,” Suncorp Chief Executive Insurance Anthony Day told an analyst briefing. “I was really encouraged with June where, in areas such as property, we saw midteen… increases coming through. Certainly in motor – commercial motor – as well as into the liabilities, we were seeing 9%, 10% increases coming through, and retentions were improving, which is showing the market has moved. “That’s created momentum going into this year, and really gives me encouragement that we’ll see some further improvement and growth.” The prognosis is similar from IAG: the domestic commercial business is “seeing rate increases flowing through pretty consistently”, and in New Zealand the market since the Kaikoura earthquake is “more favourable than 12 months ago”, Chief Financial Officer Nick Hawkins says. Rate rises in short-tail motor partly contributed to a 5.5% increase in gross written premium to $6.12 billion in the commercial division. “I like the IAG results,” Morningstar analyst David Ellis tells Insurance News. “It’s good. Its Australian and New Zealand businesses are performing well. The ROE [return on equity] of 15.2% was strong. “Despite the poor performance of the Asian business, the group still generated return on equity of more than 15%.” Increased competitive pressure in the insuranceNEWS
Thai and Malaysian motor markets affected IAG’s business in Asia, as did rising claims costs in Thailand. Asia’s overall earnings contribution fell to $10 million from $26 million the previous year. “Its Asian business should be disposed of as quickly as possible,” Mr Ellis says. QBE suffered a setback in Asia and Latin America, with the emerging markets division combined operating ratio blowing out to 110.8% from 99.5%. But this was not enough to drag down the rest of the business. Its Australian and New Zealand operations achieved a combined operating ratio of 92.2%, improving from 93.9% due to premium rate rises, tightened policy terms and conditions, and better underwriting discipline and claims management. The crucial North American business also played its part, delivering further improvements in underwriting operations. “I’ve got a relatively positive outlook… the underlying business performance is actually very good,” Mr Ellis says. “I think there was too much focus on the shorter-term negative impact of the emerging markets division. “There is major action being undertaken to ensure it doesn’t have a repeat of that loss for the division. There will be more finetuning in the Asian and South American businesses.” The challenge for incoming chief executive Pat Regan, who will take over from John Neal in January, will be to chart a path for sustained long-term profitability.
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“It will be interesting to see how he is going to grow the top-line premium,” Mr Ellis says. “To grow profitability long-term, the new CEO needs to implement strategies to grow premiums profitably, and luck plays a big part of any business. “The new CEO might be lucky with global interest rates moving up in the next few years, and the pricing cycle is moving up in Australia for commercial insurance premiums. “These hurricanes [Harvey and Irma] in the US will probably see premiums increase globally, which will benefit QBE as well.” Ratings agency S&P Global agrees the soft market has bottomed out, with most insurers able to pass on price rises and maintain retention since the first quarter of last year. It says industry gross written premium should grow at an of average 3% this calendar year and next, lifted by rate hardening in some lines. “The sector’s operating performance has benefitted from sound underwriting practices involving significant rate increases for select lines, and comprehensive property catastrophe cover,” S&P says. “We believe the operating performance of Australian [general] insurers will continue to be strong in the medium term, while cost and claims inflation remains moderate and pricing remains rational on the whole. “We also see emerging opportunities for insurers in further privatisation activity, in respect of state-based underwriting or claims management of non-catastrophic injuries.” Market researcher Ibisworld expects the general insurance industry to grow revenue by 2.5% on an annualised basis over the next five years, to $68.9 billion in 2021/22. “Industry performance is projected to strengthen over the next five years as both the local and global economies are forecast to record stronger growth,” it says in a report. “Interest rates are projected to rise over the period, boosting investment income * for insurers.” 20
“Industry performance is projected to strengthen over the next five years as both the local and global economies are forecast to record stronger growth.”
Different paths, same destination Fierce rivals Steadfast and AUB Group are putting on quite a show. The twin giants of Australian insurance broking have produced another set of stellar results. For Steadfast, pre-tax profit grew 9.8% to a record $66 million in the year to June 30, and network brokers’ gross written premium increased 9.8% to exceed $5 billion for the first time. AUB achieved adjusted net profit of $40.4 million in the year, up 7.5%. The Australian broking business, by far its largest division, improved pre-tax profit by 2.5% to $49.17 million. There is little margin for error and no room for complacency in such a brutally competitive business. Chief executives Robert Kelly and Mark Searles, running Steadfast and AUB respectively, know that. What the results show, more than anything, is the pair have their strategies right, even if they have taken somewhat contrasting paths. Mr Kelly has leaned towards acquisition, while his AUB counterpart prefers mostly organic growth. “Despite a flat market, organic growth was the key driver of business performance, which further highlights our strategic execution,” Mr Searles says. “Importantly, growth was not a result of premium increases. Nevertheless, evidence of rate increases in the last quarter leads us to believe the return to a more stable premium rate environment will further support the group’s financial performance.” Premium rates grew an average of 2-3% in the final two months of the financial year. Mr Searles is not anti-acquisition; he will spend provided the company in question offers compelling value, as with Lea Insurance Brokers when AUB took a 50% stake in May. “We will do it where it makes sense, but it is not the reason for being,” he says. At Steadfast, the broker network continues to grow at a frenetic pace. It acquired a stake in unisonBrokers, a global network with more than 200 members in 130 countries and $US17 billion in gross written premium. Overall, Steadfast took new equity stakes in nine brokers and increased its holdings in another 12 in the financial year. “This is a strategic partnership and, over the medium term, new revenue streams will be created by using our experience to grow the products and services available on the unisonSteadfast [formerly unisonBrokers] network,” Steadfast says in its annual report. “Steadfast Group will also consider, in concert with unisonSteadfast, acquiring equity holdings in suitable brokers in the unisonSteadfast network.” Both Steadfast and AUB are confident they have momentum and will consolidate their positions. Considering how well they have performed in a tough market, it would take a brave punter to bet against them this year.
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Time to Dive In A survey finds the insurance industry can do a lot more when it comes to promoting diversity and inclusion in the workplace By Wendy Pugh
A DIVERSITY SNAPSHOT OF INSURANCE EMPLOYEES has laid foundations for the industry to better reflect the wider community and improve inclusiveness in areas such as gender and sexual orientation. Results from an inaugural benchmark survey were released during last month’s Lloyd’s Dive In diversity festival, presenting the current state of play in the Australian industry and highlighting areas for attention. “Insurers need to be more focused on employing people from a wide talent pool,” Lloyd’s General Representative in Australia Chris Mackinnon says. “Failure to do so not only puts them at risk for winning the best and brightest employees, it also jeopardises their potential future customer base.” Almost 2500 insurance industry employees responded to the survey, carried out by Macquarie Bank. It asked 21 questions in a mini industry census. The results in some cases were compared with similar broader population data from the Australian Bureau of Statistics. Not every finding was a surprise – like further evidence of the continuing gender imbalance in insurance. Females accounted for nearly half the total participants in the survey, but only 31% were in one of the roles from team leader upwards. Questions on sexual orientation show that 10% of employees identify as lesbian, gay, bisexual, transgender or intersex (LGBTI), with 83% of those respondents completely open at work, 2% open to only a few close friends and 6% not at all. A further 9% preferred not to respond despite the survey’s guarantee of anonymity. Mr Mackinnon says the percentage of participants who identify as LGBTI but have not disclosed that fact at work suggests more needs to be done to ensure all industry employees feel comfortable and included. “That is very important for us. We don’t want anybody to feel that they can’t be themselves in a working environment in the insurance industry,” he told Insurance News. And there’s an economic and efficiency reason for companies to focus more on inclusion. “It is fairly well documented that people who are not bringing all of them22
selves to work are going to be less effective because they are not going to be fully comfortable in their environment.” Challenges in communicating a positive message regarding diversity across the workplace are highlighted in the survey. One in four people didn’t know whether their company executives “showed commitment” to diversity and inclusion, while almost one in five weren’t sure whether they were equipped to manage diversity and inclusion in the workplace. Only 15% of respondents spoke a language other than English at home, compared to 28% in the official census statistics. When it comes to country of birth, 11% were born in the UK compared to 4% in the overall population, likely
“We don’t want anybody to feel that they can’t be themselves in a working environment in the insurance industry.” reflecting the industry’s enduring London links, while 6% come from New Zealand. The “other country” category, which accounted for 11% of respondents, included 63 countries. Macquarie Business Banking’s National Head of Insurance Broking Eoghan Trehy says 48% of participants identified as Christian and 41% followed no religion. Buddism and Hinduism each represented 2%, Islam and Judaism 1% each, while 3% preferred not to respond. Health and personal responsibilities were covered amid increasing community focus on delivering opportunities for people with varying requirements. About 13% of respondents said they had a medical condition, with 4% experiencing a psychological condition such as depression or bipolar disorder, while 49% had caring responsibilities.
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In a positive finding for work-life balance, 80% of respondents said they were happy with the level of flexibility offered in their current position. Lloyd’s says the participants were from 21 insurance organisations, with a strong representation from small broking firms. Respondents were also from insurers, reinsurers, underwriting agencies and other providers. “We got a fantastic response, which I think probably exceeded our expectations,” Mr Mackinnon told Insurance News. “Next year we are planning to broaden it to more “attitudinal” questions around what they are seeing in their working environment, rather than just their own background.”
There is also the possibility of working more closely in future with major insurers IAG, Suncorp, QBE and Allianz, which have their own surveys, in gathering information, he said. The survey results highlighted the “Diversity Dividend” theme of this year’s Dive In festival, held across 32 cities in 17 countries. In Australia events were hosted in Sydney, Melbourne and Perth. “Holding up the mirror as in industry will help us draw a line in the sand from which we can track and measure * future progress,” Mr Mackinnon said. See Diverse Future, page 70.
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Fighting fires from space A scientist uses satellite data and a complex set of figures to calculate Australia’s bushfire risks By Bernice Han
A PILOT LAUNCH OF THE SPACE-BASED Australian Flammability Monitoring System (AFMS) can’t come soon enough as the country braces for what could be an early start to a very fiery summer. Funded by the Bushfire and Natural Hazards Co-operative Research Centre, the AFMS started trials on October 1, providing fire crews and other emergency services with another set of eyes to track down potential hotspots before the blazes spread out of control. The system measures the fuel moisture content (FMC) of live bushfire fuel based on images collected by two NASA satellites that were designed to specifically observe Earth’s changing climates. 24
It crunches the FMC numbers using an algorithm developed by Australian National University scientist Marta Yebra in collaboration with her peers. Dr Yebra, a Spaniard, developed the original formula using data from Mediterranean grasslands and shrublands when she was undertaking her PhD studies in her homeland. She wants to further improve the AFMS predictions and will soon be embarking on experiments at the National Arboretum Canberra, collecting moisture content data from the city’s botanical garden for FMC computations. The research will be funded by the prizemoney she collected when she won the inaugural Max Day Environmental Science Fellowship Award earlier this year, which is an initiative of the Australian Academy of Science. “Right now, the AFMS uses the algorithms that we calibrated in Europe with some modification I made to apply it to Australia,” Dr Yebra tells Insurance News. “Although the results of the validation of the algorithm in Australia using FMC values measured on the ground shows satisfactory insuranceNEWS
results, I believe that I can highly improve the accuracy of the estimations by better adapting the algorithm to Australia temperate sclerophyll forest. “The work proposed at the arboretum involves collecting field measurements in the ANU research forest to better understand the mechanisms that link FMC and leaf reflectance in eucalyptus species and develop a suite of radiative transfer models suited to Australian forest.” Dr Yebra provided a glimpse of how the AFMS functions during her presentation at the Australasian Fire and Emergency Service Authorities Council conference in Sydney last month. She says in the presentation the monitoring system is the first continent-scale prototype web explorer providing spatial information on current live fuel moisture content and landscape-scale fuel flammability derived from satellite observations. “The overarching objective is to contribute to the development of operational tools that can assist in better resources allocation in fire protection and response and improved awareness of fire hazards to * people and property.”
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“The dry state of vegetation means that warm, windy conditions are likely to see more elevated fire risk than is normal for the time of year.”
Bushfire potential 2017 Above normal Normal
In the field: Marta yebra studying grass fires
A fiery summer looms AN UNUSUALLy WARM WINTER, COMBINED WITH below-average rainfall, has hastened an earlierthan-usual start to Australia’s bushfire season. Blazes broke out in parts of New South Wales and Queensland in September as temperatures soared to near-record levels, and it could get worse even before summer arrives. The prognosis from the Bushfire and Natural Hazards Co-operative Research Centre is grim. Its widely followed Southern Australia Seasonal Bushfire Outlook report, released last month, indicates elevated fire risks. “The below average rainfall has seen poor vegetation growth for most of southern Australia,” the report says. “Further north, the dry conditions now mean that vegetation is already dry with very low greenness evident in satellite data. The dry state of vegetation means that warm, windy conditions are likely to see more elevated fire risk than is normal for the time of year.” Although parts of southwestern Western Australia, South Australia and Victoria did receive better rainfall in August, it wasn’t enough to make up for the dry conditions seen in the previous months. Also, NSW and some areas in
Queensland stayed exceptionally dry. “Below average rainfall in 2017 adds to much longer-term drying trends that are affecting parts of southern Australia during the cool season,” the report says. “The combination of short and long-term rainfall deficits serves to increase the fire risk in the coming spring and summer seasons.” NSW has higher than normal fire potential for eastern forested areas, while grassland areas have normal fire potential due to reduced fuel loads. Victoria and Tasmania may have an early start to the fire season, while southeast Queensland could pay the price for high winter temperatures. Dry vegetation in the ACT means abovenormal bushfire potential and large parts of SA are similarly affected. In an earlier report on northern Australia the Bushfire and Natural Hazards Co-operative Research Centre said damaged vegetation caused by Cyclone Debbie and Marcia in 2015 has exposed parts of Queensland to higher fire risk. Parts of the Ord Victoria Plain and Dampierland regions of the Kimberley in northern WA also face an above-normal fire risk.
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Ready for lift off APRA stats point upwards as rate rises kick in By Bernice Han
THE NEXT FEW YEARS ARE LOOKING decidedly rosier for the general insurance industry, which has endured a prolonged cycle of soft pricing, among other threats. An analysis of the sector’s performance over the past decade, based on figures submitted to the Australian Prudential Regulation Authority (APRA), gives cause for optimism. APRA-licensed insurers (not including reinsurers) earned a combined $3.14 billion in after-tax net profit for the year to June 30, higher than the previous year’s $2.71 billion, and $2.7 billion in 2014/15. Gross written premium (GWP) increased 5.1% to about $43 billion in the year to June 30. Crucially, insurance profit grew to $4.85 billion from $3.89 billion in 2015/16 and $3.44 billion in 2014/15.
“Underlying margin momentum is turning,” analysts from Swiss banking giant UBS write in a report. “Our top-down analysis paints a relatively healthier picture for Australian general insurance over the next three years. “In short, we are more convinced now that 2016/17 will prove to be a low point for insurance margins: industry anecdotes, company behaviour, shareholder pressure and evidence of early stability in reinsurance markets support this view.” UBS’ analysts conducted a “deep-dive” assessment of the APRA statistics for their report, and the results point to one conclusion: momentum is kicking in. Rate rises in commercial short-tail lines and motor powered the 5.1% surge in GWP. They say GWP should achieve 4-5% growth as hardening rates in short-tail lines cushion
Intermediated general insurance business for the six-month period ($ million) 10,000 9000 8000 7000 6000 5000
Total premium invoiced
Business placed with APRA-authorised general insurers
Business placed with Lloyd’s underwriters
Business placed with unauthorised foreign insurers
0 June 2015
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The same figures in graph form 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5000 0 2004
Gross written premium
Gross incurred claims
Total underwriting expenses
price reductions in compulsory third party covers. “In motor, we believe significant margin pressure will continue to lead insurers to push at least mid-single rates through,” the UBS report says. “At the same time, efforts to contain claims inflation should start bearing fruit. On this front, we’re relatively more optimistic on insurers improving pathing of non-driveable repairs to owned repair networks and stifling activities of car-hire claims administrators.” UBS projects domestic motor GWP will reach $10.52 billion in 2019/20, rising from $10.09 billion in 2018/19 and $9.58 billion this financial year. Commercial short-tail GWP is estimated to rise to $8.43 billion three years from now, up from $7.01 billion this year and $7.69 billion the following year. 28
The underlying loss ratio will steadily improve, declining from 68.6% last year to 68.3% this year, 67.9% the following year and 67.3% in 2019/20. Like all businesses, the industry is not immune to external shocks that may throw off the upward swing. Morningstar analyst David Ellis also sees an industry on the rise, but singles out catastrophes as a danger. “Catastrophes may derail the more positive view of things,” he tells Insurance News. “It seems to me the cycle has bottomed out. “Commercial pricing is improving, consumer pricing is robust, unit volumes are growing roughly in line with GDP growth… so there are a couple of good signs there. “Profitability should be more consistent in the * next few years.”
Net profit after tax
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Evolutionary road Tech advances will take time to deliver major impacts, according to Swiss Re economist Kurt Karl By Wendy Pugh
Farewell tour: Swiss Reâ&#x20AC;&#x2122;s Kurt Karl
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THE TECHNOLOGICAL WAVE DESCRIBED AS THE fourth industrial revolution is more of an evolution at this stage, even as it sparks innovation opportunities, Swiss Re Chief Economist Kurt Karl says. Disruption is everywhere and companies are looking for better ways to do business, but technological transformation is yet to translate into rising general economic productivity, while in the insurance industry game-changing impacts are still to take hold. “Everyone is working with someone on something, and I think the big players are quite adept at getting involved in technology, but we are not seeing a huge payoff yet,” Dr Karl tells Insurance News. “We could in the next 10 years, but I think initially it is going to be incremental.” The scenario harks back to the 1980s US productivity paradox, when the shift from mainframe to faster personal computers and leaps in tech spending and capacity took time to translate into economic activity. Nobel prize-winning economist Robert Solow brought attention to the conundrum during that period, when he said: “You can see the computer age everywhere but in the productivity statistics.” “Solow said this in the ’80s and it was 10 years later in the ’90s that we got the productivity boost and we did get quite a bit stronger growth,” Dr Karl says during a trip to Australia, which also marks his last annual visit here for Swiss Re before retirement at the end of this year. The insurance sector is examining how new technologies can be harnessed to drive the greatest benefits, particularly as global premium growth stays subdued and interest rates remain near historical lows. Much of the investment is in distribution and better accessing customers and increasing engagement after sales. Artificial intelligence offers the potential to reduce call centre staff numbers and allow better targeting of customers who offer a high probability of sales. For reinsurance, cost-cutting benefits may come from improved underwriting efficiencies and the harnessing of Big Data and predictive modelling. Dr Karl says technology has allowed development of innovative products, such as those incorporating parametric triggers, and offers the potential to transform contract processing and claims handling, and generally automate more back-office operations. The flip side, for insurers saddled with legacy systems, may be the emergence of new rivals. Tech giants Google, Amazon and Facebook often head lists of possible big-ticket entrants, while a raft of insurtech start-ups are increasingly getting involved.
Dr Karl says insurance is a trust product: clients must be confident claims will be paid, and brand reputation is important. The risk side of the industry may also deter large, well-known tech companies that are expanding their reach into new areas. “Google hates regulatory frameworks, so getting into insurance would be a nightmare to them,” he says. “They could do it, and they could be very successful because they are a good brand, but they have other opportunities.” Swiss Re noted at its half-year results that insurance risks and distribution will be affected by the latest advances, and staying ahead of industry developments is a key priority. That’s particularly the case as the sector seeks opportunities in emerging markets while targeting gains in advanced economies where policy penetration is higher. “Utilised more fully and intelligently, the latest technology presents an opportunity to the insurance industry to reinforce its relevance to its clients,” a Swiss Re Institute report overseen by Dr Karl says. “While sheltered somewhat by regulation, insurers must nevertheless continue to embrace both incremental and sometimes more radical innovations.” Even without new entrants in the sector, there are battles for market territory, and the search for growth has seen insurers and reinsurers encroaching on each other’s turf. Insurers struggling to lift gross written premium (GWP) have looked for ways to improve the net premium line through adjusting reinsurance spending. “The problem we have seen in the market is that insurers have been pulling back from reinsuring, so we are struggling to grow, just like they are struggling to grow,” Dr Karl says. “Everyone complains about both sides. When I joined Swiss Re 17 years ago, they were saying it is not a relationship business so much any more. They are still saying that, 17 years later. Maybe sometimes it’s a little bit of a love-hate relationship.” Swiss Re offers primary commercial insurance through its Corporate Solutions arm, which reported GWP of $US1.75 billion in the first half of this year, compared with $US1.81 billion in the corresponding period last year. The reinsurance property and casualty division’s GWP slipped to $US9.4 billion from $US11.12 billion, reflecting a capacity reduction where prices did not meet profitability expectations. Dr Karl says the tough premium environment has generated demand for tailored reinsurance, targeted more precisely for clients compared with a broader program. “This has been a big part of our success recently with respect to premium volume.
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“It has been more structured transactions on the reinsurance side that have been giving us growth, and we can do that as a very large, sophisticated player.” Joining Swiss Re marked Dr Karl’s entry to the world of reinsurance after working in macroeconomics. Originally from the US state of Oregon, he studied at the London School of Economics and completed at PhD at Princeton. At forecasting company The WEFA Group he focused on the dynamics of the US economy and the global outlook. Dr Karl became Swiss Re’s chief US economist in 2000 before moving into the group’s top economics role. He has provided internal consulting expertise on products and risks, overseen the group’s Sigma publication and examined trends and forecasts amid tumultuous times, including the global financial crisis. Generally, the wider economic backdrop for the industry is looking more positive a decade after the crisis, even though low interest rates continue to curb insurer investment returns and abundant capacity remains in the market amid lacklustre investment alternatives and a benign period for natural catastrophes. Global political uncertainty, including tensions with North Korea after missile and nuclear weapons testing, has not so far had a significant effect on economic activity and financial markets. “Impacts are not extreme and often do not seem to last long,” Dr Karl says. “I think it will take an actual political action to disrupt things and, obviously, we hope this does not happen.” The presence of alternative reinsurance capital shows little sign of retreating, but it may have reached a threshold level because it remains a relatively niche segment for investors. The increase in alternative capital stopped “dead in its tracks” at about $US75 billion after rising relatively quickly from $US50 billion, Dr Karl says. Most of the funds are in US catastrophe risk. The total is a drop in the ocean compared with total fixed-income markets, with investors cautious on products about which they have limited knowledge, even though the diversification holds appeal. “Higher interest rates would suck out some of the alternative capital, because the alternative capital is looking for yield,” he says. However, economists expect interest rates to remain relatively weak, as central bankers express caution about the outlook and the potential to tighten monetary policy. The US Federal Reserve has started gradually raising rates, but is expected to take its time winding back balance sheet levels swollen by financial asset purchases that were aimed at spurring economic growth after the financial crisis. 32
“The kind of catastrophe that would bolster the market would be something that has unexpected characteristics.” “It will be slow and gradual, and I agree with the Fed when they say it will be like watching paint dry it will be so boring,” Dr Karl says. The relatively calm period for global natural catastrophes, which has contributed to abundant capacity and weak pricing, is still weighing on the industry. “The kind of catastrophe that would bolster the market would be something that has unexpected characteristics,” Dr Karl says. “But there is so much alternative capital in the market, ready to come in if the prices move up a bit, it is hard for anything to be lasting.” Hurricane Harvey caused extensive flooding and damage in Texas after landing in late August as a Category 4 storm, although the impact on insurance markets may take some time to emerge and the effect also depends on the wider catastrophe environment. “It is clearly a large event and will change pricing regionally, but it is unclear if it can reduce global capacity sufficiently to cause a general price rise,” Dr Karl says. An event with characteristics not previously accounted for in catastrophe models has greater potential to change pricing levels. “For example, the liquefaction of land in the New Zealand earthquake was new and not modelled, thus the price of earthquake insurance went up, not just in New Zealand but other places where this is also a risk.” While the impact of future catastrophes remains unknown, global growth is improving a little. Swiss Re forecasts premium growth will also be moderate, particularly in advanced economies such as Australia. Dr Karl says he plans to “chill out” after retirement, but as an interested observer he will still monitor innovations and developments in insurance and reinsurance. “What I have loved about it is, it’s a very diverse set of products, diverse issues and I am always still learning,” he says. “I have enjoyed my 17 years, * for sure.”
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A call to Canberra The Senate inquiry’s recommendation for increased public spending on disaster mitigation again highlights the Government’s foot-dragging By Bernice Han
NO INQUIRY INTO THE INSURANCE INDUSTRY IS COMPLETE without tackling the topic of disaster mitigation. The message from the latest review, by the Senate Economics References Committee, was clear: the Government can and should invest more in measures to reduce the impact of natural hazards. “In the aftermath of the recent devastation caused by Cyclone Debbie, the committee acknowledges that some disasters are unforeseen and their impacts unavoidable,” the inquiry’s final report says. “However, in many cases the consequences of natural disasters can be mitigated. “Accordingly, the committee believes there is an urgent need for governments at the Council of Australian Governments to address investment in targeted disaster mitigation. “As well as the obvious benefits mitigation provides with regard to protecting life and property, the committee agrees with industry stakeholders that increased investment in well-designed mitigation by all governments should help reduce home and strata insurance premiums over the long term.” Insurance affordability has worsened nationally. Consumers, particularly in northern Australia, are paying more for home 34
insurance, due partly to the higher number of major natural catastrophes in the past decade, according to various inquiry submissions. QBE’s submission estimates insurers absorbed about $16.1 billion in losses caused by natural disasters between 2000 and 2012. The committee has urged the Government to reconsider the Productivity Commission’s recommendation to commit $200 million a year to disaster resilience and mitigation. It has also called on the Government to respond to the Northern Australia Insurance Premiums Taskforce’s (NAIPT) final report. The Australian Business Roundtable for Disaster Resilience & Safer Communities backs the call for a bigger budget. “If we truly want safer and more resilient communities, we need to spend more on mitigation,” IAG Chief Executive Peter Harmer says on behalf of the roundtable. However, Canberra is willing to provide only $26.1 million for disaster resilience this financial year, to be matched “dollar for dollar” by states and territories. Another $7.9 million was allocated for a new northern Australia pricing probe, a bewildering move considering the Government has October/November 2017
Time to act: Prime Minister Malcolm Turnbull looks down on damage caused by Cyclone Debbie
yet to respond to the NAIPT’s final report, presented to Treasury in November 2015. Revenue and Financial Services Minister Kelly O’Dwyer previously said a detailed response would be made by June 30 last year. The Government “continues to carefully consider the findings of the [NAIPT] final report and all options available in detail and will respond in due course”, a spokesman for the minister tells Insurance News. “Affordability of insurance in areas of high natural disaster risk is a complex issue and requires co-operation at all levels of government, the insurance industry and residents, and business owners. “The Government believes mitigation is the key to sustainably managing the affordability of insurance and reducing the devastating impacts of natural disasters on the community. “The Government will consider the findings made in the Senate inquiry’s report into Australia’s general insurance industry.” All up, the Senate inquiry made 15 recommendations to improve the $28 billion home, strata and car insurance industries. “Sapping consumers of the will to compare” is how the committee describes the insurance industry after a nine-month inquiry insuranceNEWS
that was certainly ambitious in scope, covering a range of thorny issues including comparators, product disclosure statements, key facts sheets, exemption from unfair contract terms laws and disclosure of the previous year’s premiums on renewal notices. The committee has recognised the “efforts being made by the general insurance industry… to improve product disclosure practices and encourages the continuation of this work”. But it is “of the view more needs to be done to support and protect consumers in purchasing general insurance products appropriate to their needs. “To that end, the committee is deeply concerned by the apparent lack of transparency in the general insurance industry with regards to product disclosure, and the detrimental effect this has on consumers’ ability to effectively compare similar insurance policies. “The committee shares stakeholder concerns that some aspects of the current product disclosure regime for general insurance are ineffective in enabling consumers to make informed decisions.” Consumer advocate Denis Nelthorpe says the industry’s use of “19th-century” terminologies is hampering efforts to reduce confusion about what is and is not insured. October/November 2017
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Fifteen ways to improve insurance THE SENATE COMMITTEE RECOMMENDS: 1. That the Government release its response to the final report of the Northern Australia Insurance Premiums Taskforce. 2. That the Government conduct a review into competition in the strata insurance market in north Queensland, to establish a fact base and explore avenues to improve insurer participation in this region. 3. That the Government strengthen the transparency of general insurance pricing by amending the product disclosure regime in the Corporations Act 2001 to require insurers to: disclose the previous year’s premium on insurance renewal notices; and explain premium increases when a request is received from a policyholder. 4. That the Government initiate a review of component pricing to establish a framework for amending the Corporations Act 2001 to provide component pricing of premiums to policyholders upon them taking out or renewing an insurance policy, as well as an assessment of risks to making such a change. 5. That the Government initiate an independent review of the current standard cover regime, with particular regard to the efficacy of current disclosure requirements. 6. That the Government work closely with industry and consumer groups to develop and implement standardised definitions of key terms for general insurance. 7. That the Government undertake a review of the utility of key facts sheets as a means of product disclosure, with particular regard to the effectiveness of key facts sheets in improving consumer understanding of home building and contents policies; and merit of extending use of key facts sheets to other forms of general insurance. 8. That the Government complete a detailed proposal for a comparison tool for home and car insurance, consistent with the proposal made in the Financial System Inquiry interim report and similar to the structure of the Irish model. The proposal should include a detailed evaluation of the international evidence base of the costs and benefits of comparison services on consumer outcomes, as well as the likely benefits in the Australian context. 9. That the Australian Securities and Investments Commission undertake a comprehensive review of the efficacy of the north Queensland home insurance website. 10. That the Government consider introducing legislation to mandate compliance with the Australian Competition and Consumer Commission’s good practice guidance for comparison website operators and suppliers. 11. That the Government introduce the legislative changes required to remove the exemption for general insurers to unfair contract terms laws. 12. That the Government strongly consider introducing legislation to require all insurance intermediaries to disclose component pricing, including commissions payable to strata managers, on strata insurance quotations. 13. That state and territory governments strengthen disclosure requirements in relation to the payment of commissions to strata managers. 14. That the Government reconsider its response to the Productivity Commission’s inquiry into national disaster funding arrangements. 15. That, as a matter of urgency, the Australian Government work with states and territories through the Council of Australian Governments to reform national disaster funding arrangements.
“The real problem is the industry is trying to convince modern consumers to engage with a 19th-century product and process.”
“There is no point discussing transparency if the industry is determined to hold on to historical terms that are outdated,” Professor Nelthorpe tells Insurance News. “Why on earth would you continue to use the word ‘premium’ when it is a ‘price’? “The real problem is the industry is trying to convince modern consumers to engage with a 19th-century product and process. “If you really want to engage with consumers, you need to move to the 21st century.” The committee also recommends that the Government prepare a “detailed proposal” for a government-run comparison tool for home and car cover, similar to a model used in Ireland. Several inquiry participants were critical of the information given to consumers on commercial comparison websites. Some websites are owned by the same parent companies as insurers. The committee agrees a comparison site “could lead to consumers focusing on product price rather than value”, but it sees merits in the Irish model. The Insurance Council of Australia (ICA) is not convinced comparison sites will lead to better consumer outcomes, because buyers’ final decisions are still decided by price. “General insurance policies can differ greatly,” ICA says in its submission. “While on first glance, features and exclusions may appear the same, the difference often lies in the detail such as exclusions and limits. “It is not practical to summarise all the matters that may be relevant for a particular consumer on one page for side-by-side comparison, and to assume that the consumer can interpret the information appropriately.” The Melbourne-based Consumer Action Law Centre believes a comparator service that focuses on product quality, rather than price, will address the non-standardised nature of general insurance products. “We are in favour of making it easier to compare insurance policies and the comparator website will be a good step,” Senior Policy Officer Susan Quinn tells Insurance News. “Price alone doesn’t tell you a lot of things you need to know. “What this report shows is that there are underlying issues that would make it hard for a comparator site to work effectively. “The recommendations about things such as standard cover and standard definitions acknowledge that there also need to be changes that make the policies themselves easier to understand * and compare.” October/November 2017
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Crime and punishment Insurers’ caution around providing cover for ex-offenders may be understandable, but are they too quick to turn people away? By Andy Swales
THE CONSEQUENCES OF OBTAINING A criminal conviction can be many and varied, from problems securing employment to family breakdown and social stigma. And it can serve as a black mark when it comes to obtaining vital financial services and products, including insurance. It’s not surprising that insurers would exercise caution around ex-offenders when making risk judgements, but is the industry too quick to reject clients with criminal pasts? Some people think so. Lawyer Denis Nelthorpe, Chief Executive of Melbournebased legal advice service WestJustice and a longtime observer of the insurance industry, says it is at times “applying 1950s thinking to 2017”. His concern is with “blanket rules on criminal convictions” that reject exoffenders’ applications out of hand and do not consider the circumstances or nature of their offences. Broker Georgina Brown, from Peter Brown & Associates in Wagga Wagga, New South Wales, has first-hand experience of the barriers in place. She hit a series of dead ends when trying to secure cover for two clients with recent criminal convictions – one for a drugs offence and the other for causing death by dangerous driving. In both cases she was seeking public liability insurance so the men could work as self-employed contractors, and 38
the latter client also needed motor insurance – a tall order given his past. “My own investigation has been incredibly difficult, but when these people have come to me… they’ve already tried the direct market,” she tells Insurance News. “They’re not getting past the first person they’ve spoken to on the phone. They were already desperate by the time they came to us.”
At time of writing she has secured public liability insurance without loadings for the first client, but drawn a blank on similar cover for the second, while – perhaps surprisingly – placing motor cover for him, albeit without the discounts she usually secures. If nothing else, Ms Brown’s hard work and expertise are a fine example of the value brokers can offer, but she feels some
“They’re not getting past the first person they’ve spoken to on the phone. They were already desperate by the time they came to us.” Ms Brown’s enquiries on their behalf on automated placement platforms were rejected at every turn after she was prompted to disclose the criminal convictions, usually within a “past five years” timeframe. So she took to the phone, and was still “told no more often than not”. insuranceNEWS
insurers are too quick to dismiss exoffenders’ business. “A lot of the insurers are saying, ‘We can’t do it because it poses a moral risk.’ They keep saying that phrase, but I’m not really sure what they mean by that,” she says. “I’m not sure if it’s their way of saying, ‘This person poses a higher risk to us in
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Difficult journey: ex-offenders can find it hard to access insurance
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“The problem is applying the sort of acrossthe-board rules that say, ‘If someone’s got criminal convictions, we’re not going to provide them with insurance’.” – Professor Denis Nelthorpe
terms of claims.’ If that’s the case, they need to explain why, particularly in the case of this man who has got the dangerous driving [conviction]. He wants to be a contractor, which has nothing to do with motor insurance, nothing to do with driving history. They’re not telling me how it’s relevant.” Professor Nelthorpe agrees context is key. “The industry is probably getting better at this, but I think the problem is applying the sort of across-the-board rules that say, ‘If someone’s got criminal convictions, we’re not going to provide them with insurance.’ In a lot of ways, it doesn’t make sense.” He tells Insurance News some restrictions are understandable – a convicted arsonist struggling to secure home insurance, for example. But other offences may have little bearing on the kind of cover people are trying to buy. And a criminal conviction does not always mean a person is inherently dishonest or risky: people make one-off mistakes, or circumstances can conspire against them. “A lot of people’s convictions are for relatively minor things. I haven’t worked in criminal law for ages, but about 10 years ago at West Heidelberg [in Melbourne], police were charging people with not just possession, but with dealing and trafficking in circumstances where someone has bought a relatively small amount of drugs and shared it among five friends.” 40
Professor Nelthorpe also flags a disparity in the way offences are handled across different regions and even races. “There is a need to recognise that sometimes there is a very marginal difference between ending up with a record and not ending up with a record,” he says. “There are people being charged and convicted for things in Aboriginal communities that arise exclusively because they’re in those communities. If the same [offence] happened in Melbourne, there would be no charge, no court case, and we wouldn’t dream of dealing with it in the same way. “I would say with Aboriginal people, we have got to have more sympathetic responses. The idea that we may say… ‘Because you’ve got some sort of record, we’re not going to insure you,’ it’s horrifically counterproductive.” Professor Nelthorpe contributed to Victorian indigenous support group WoorDungin’s Criminal Record Discrimination Project, which aims to help Aboriginal people overcome barriers to rehabilitation by securing introduction of a spent convictions scheme in Victoria, and an amendment to the state’s Equal Opportunity Act 2010 to prohibit discrimination against people with an “irrelevant criminal record”. The project has produced fact sheets for ex-offenders, including one on buying insurance, which warns they may find cover harder to secure and urges them to seek expert advice. insuranceNEWS
RMIT University professor Bronwyn Naylor also contributed to the Woor-Dungin project. “It’s really important that we recognise people with a criminal history have ‘paid’ for their offending with their penalty; they should not be treated as if they have to be punished indefinitely,” she tells Insurance News. “They need the chance to show they have rehabilitated, and that they can contribute to the community, as so many want to do. “This is particularly important for Aboriginal communities, where more people may have some sort of criminal record, for all the well-known reasons to do with colonisation and disadvantage. “Most obviously, people should be given the opportunity to take on fulfilling employment and take on community roles; they should also be supported to volunteer, to rent or buy accommodation and so on. And this, of course, includes being able to take out the necessary insurance.” Sam White, from UK-based motor insurer Pukka Insure, says the use of blanket bans and prohibitive loadings for exoffenders is quite common – both in her home market and in Australia, where she recently visited to promote her innovative approach to claims management. Pukka specialises in covering commercial van drivers with claims histories or convictions, who may have been refused cover elsewhere.
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“Insurance was always supposed to be about protecting the less fortunate and vulnerable among us and we definitely shouldn’t lose sight of that.” – Sam White
Ms White tells Insurance News there are always risky people, “particularly known fraudsters”, that should be avoided. “Although we believe everyone deserves a second chance, as a business you equally shouldn’t allow yourself to be taken advantage of.” However, she believes a more open approach can be to all parties’ benefit. She says while certain convictions often align with a higher overall frequency of claims, “other factors must be taken into consideration to make an accurate value judgement. For instance, we find people who are prepared to undertake driver safety courses are often better risks.” She says the insurance industry needs to “see people more as individuals and accept that there’s a significant difference between someone who perhaps has a criminal conviction for shoplifting when they were 19 and an individual who is a serial drunk-driving offender”. “We often find that a rehabilitated serious offender is a safer risk from a vehicle insurance perspective than a continual speeding offender, for instance,” Ms White says. Professor Nelthorpe calls for more “sophisticated” underwriting, taking account of an individual’s circumstances and the way their offence affects – or does not affect – their risk. Broker Ms Brown wants insurers to “ask more questions… rather than just asking a 42
blanket question that will rule everything out, maybe drill down a bit deeper and look at the circumstances of each conviction, and look at everything on a case-by-case basis”. She says the insurance industry should not act as a barrier to rehabilitation. “Is their [criminal] sentence not the punishment? If they’ve completed that, then why does this thing hang over their head? “I know there are different circumstances. There is a huge degree of different crimes, and they can be horrible, but people can find themselves in situations [such as drug crimes] quite easily and it haunts them with every decision they try to make.” Pukka Insure’s Ms White says insurers have a societal obligation – one they must not lose sight of in the rush to more automated processes and data-driven decision-making. “With the very rigid underwriting principles often applied in large insurers and the Big Data and enrichment processes, we are in danger of polarising people into the haves and have-nots, the insured and uninsurable. Sometimes this may be a result of a mistake a long time ago or by virtue of the unfortunate geographical location [people] find themselves in. “Insurance was always supposed to be about protecting the less fortunate and vulnerable among us and we definitely shouldn’t lose sight of that.” Consumer Action Law Centre Senior Policy Officer Susan Quinn tells Insurance insuranceNEWS
News it is important to consider the “broader social obligation not to stand in the way of rehabilitation of people with criminal convictions”. “We know rehabilitation is in everyone’s interests, and having work is a big part of rehabilitation. But, for example, denying someone car insurance because of convictions that are irrelevant to their driving may mean they can’t take up job opportunities. “Denying someone [liability] insurance on the basis of irrelevant convictions will have a very harsh effect on people – and to what end for insurers?” The Insurance Council of Australia says the best bet for ex-criminals and other former offenders is to engage a broker, some of whom specialise in insurance products for people with prior convictions. A spokesman says the degree to which an individual’s ability to buy cover is affected “depends largely on the insurer’s appetite for this type of risk, the type of conviction and the product sought”. “Insurers each make their own commercial decisions when pricing to risk. In some cases, a prior conviction will have no effect on someone’s ability to purchase insurance. “In other cases, some insurers will have an exclusion period before offering a product to someone with a prior criminal conviction. “And in other cases, the offence com* mitted can lead to a denial of cover.”
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Stronger together PSC Reliance Franchise Partners aims to more than double in size with a unique AR structure By John Deex
RELIANCE PARTNERS IS AN AUTHORISED REPRESENTATIVE (AR) network and much more. According to Chief Executive David Wyner, it’s the only AR network in the country that overlays a formal franchise structure, giving ARs (or franchisees) a distinct level of protection and support. Reliance Partners also takes a 50% stake in the franchisee’s business, forging the strongest of partnerships. “With other AR networks, the client portfolio is generally owned 100% by the AR, and the licensee just provides some services – rents their licence and provides an operating system, some compliance functions, and that’s about it,” Mr Wyner tells Insurance News. “With a franchise model we do a whole lot more, because as the franchisor we have certain obligations to provide services to our franchisee.” The network assists with product development and marketing, and negotiating with bulk buying power. “We provide all the services the franchisees require, to take away a lot of the backroom work that is non-income-generating in the direct sense. “We want to give them as much opportunity as possible to spend their time on servicing clients, retaining clients and finding new clients. “The bottom line is that you have got a huge amount of protection being a franchisee as opposed to an AR, and a huge amount of security as well. “It is a much more robust way of doing business, and as a franchisor we are absolutely committed to doing the right thing and making sure our franchisees get what they sign up for.” In February last year Reliance Partners was acquired by PSC Insurance Group, and after a period of consolidation Mr Wyner says the aim is to “aggressively grow” the network. There are currently 33 franchisees, and the goal is to more than double that to 80 within five years. Most of the growth will be targeted on the eastern seaboard. “We have built a really strong network in very short space of time,” Mr Wyner says. “Our turnover is about $70 million. “With PSC acquiring the business, it has given us a lot more impetus in the market. “We are linked in with a really credible brand that has helped us do deals we couldn’t have done prior to the acquisition. “PSC has a wonderful culture that permeates every business that they run. They are very client-focused and that fits in really nicely with the approach our franchisees have. 44
Linked with a really credible brand: Reliance Partners Chief Executive David Wyner October/November 2017
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“It’s not so much about whether they have the money to come into the business – we can help with that aspect – it’s about their attitude and their focus and their drive.”
“What we are doing is bringing the idea of face-to-face dealings with your insurance broker back to the community.” Mr Wyner says having a shareholding in the franchisee’s business means successful growth is in everyone’s interests. “We have all got skin in the game,” he says. “We’ve all got that focus to make sure the business is successful. It grows and creates a valuable asset we both enjoy owning.” This also means the business is incredibly selective about its partners. The partnership is always a 50-50 ownership split over a five-year term. “When you are talking about a joint venture and having a partner in business, you have got to be very, very careful when it comes to the type of partners you invite into the network. “We have to work with them for a five-year period and we are a lot more selective than a generic AR network. “We’re looking for people with existing businesses who want to maybe sell down 50% but not change their lifestyle or the way they do things. “We can give better opportunities to build that business, so the dollar value of their shareholding increases over the five-year period. “We’re also looking at picking really good individuals out of other businesses – people who have not had the opportunity to do something on their own but really want to and have the ability. It’s not so much about whether they have the money to come into the business – we can help with that aspect – it’s about their attitude and their focus and their drive.” Mr Wyner says franchisees are allocated exclusive territories, allowing them to concentrate their efforts and avoid internal competition. And instead of micro-managing, full management rights remain with the franchisee. “They can focus their efforts on a small geographic area, which means the service to clients in that area is going to be much better. “They are going to be much more attentive and responsive. The good thing about our model is that because everybody has allocated areas, there is no chance of internal competition in our business. So the collegiate culture within the business is really good. “We are essentially really good SME brokers, but some of our people have some particularly good skills in certain disciplines and those people assist others in the network. 46
“So when a franchisee has a particular risk placed in front of them and they don’t have a lot of experience, there is always somebody else in the network that they can ring to get some help from. The guy that helps someone today might need help tomorrow.” Mr Wyner believes PSC’s traditional AR network, PSC Connect, is also a vital cog in the wheel. “PSC Connect is an extremely good model,” he says. “Part of the overall PSC strategy is to have distribution through various channels, so the client can choose which channel suits them best.” He believes the AR model could be particularly attractive to ambitious Millennials. “Young people are being told it’s not good enough to earn a salary and put some money into super – you’ve got to have equity in something. “That’s what they are looking for now. So a lot of younger people are saying, ‘The AR model would be great. I can work hard, I can still deal with clients, I can still deal with all the insurers I have relationships with, but instead of working to create wealth for somebody else, I’m working to create wealth for myself.’” And he feels Reliance Partners’ unique approach is an even greater pull. “We are the only ones that are a franchise network,” he says. “There is no other broker that is a franchise. All the bits that are going to stress you out, you don’t have to do. “From the financial point of view, because we are your business partner, we are there to assist and support. “I think we are going to see more and more people branch out to be ARs and build equity and assets that they own, whether under a franchise model or an AR model or something completely new.” Mr Wyner believes the advice model is alive and well, and that most SME owners still want to talk through their insurance requirements with a human, despite increasing online opportunities. “People desperately need to get advice,” he says. “There have been too many instances where well-meaning Australians have thought they could save a dollar by buying something online, only to find out the product is wrong, it doesn’t cover them and they have a bad experience. “That is not good for our industry at all. Brokers do a really good job. Clients appreciate that and will pay to get the right * advice and the right product. That’s not going to change.” October/November 2017
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Storm clouds on the way Tropical windstorms will increase in severity thanks to climate change, but the total impact may not be felt for decades By John Deex
DEPENDING ON WHAT PART OF THE WORLD YOU LIVE IN, they can be called cyclones, hurricanes or typhoons. But one thing is consistent across the globe – tropical windstorms cause devastating losses of human life and property. The worst on record for insured losses, Hurricane Katrina, struck the US in 2005, moving up the country’s east coast and causing a staggering $US125 billion in economic damage and $US62 billion of insured losses. Recent hurricanes Harvey, Irma and Maria could come close to matching Katrina, and the depressing news is that scientists are pretty certain climate change is increasing the severity of tropical storms. On the positive side – if there is such a thing – they could also become less frequent. “Most numerical modelling studies show the intensity of storms will increase,” Kevin Walsh, Professor of Meteorology at the University of Melbourne’s School of Earth Sciences, tells Insurance News. “There is less confidence in the decrease in frequency, but it would be more pronounced in the Southern Hemisphere.” Professor Walsh says the increase in intensity would be between 5% and 10%, but that is still decades away. “Some of these effects should only become more apparent after the middle of the century,” he says. “The exception to that is sea level rise, which will lead to the increasing size of storm surges in cyclones.” With this in mind, the impact of climate change in the recent 48
string of devastating hurricanes to have slammed into the Caribbean and US is probably limited. The damage is still being assessed, but the Harvey, Irma and Maria triple whammy looks set to have caused more than $US100 billion in insured losses. Professor Walsh says the key issue with Hurricane Harvey was the flooding caused by it stalling in the same position for a long period of time. Harvey dumped 125 trillion litres of water on Texas – about four times the amount of rainfall Katrina dumped on the eastern seaboard. “There is no evidence for that having been caused by climate change,” he says. In a report on Harvey, the World Meteorological Organisation (WMO) confirms climate change is not making the occurrence of “slowly moving land-falling hurricanes” more or less likely. However, there are other aspects of Harvey that could be pinned on global warming, the WMO says. “For example, the rainfall rates associated with Harvey were likely made more intense by anthropogenic climate change. “This is a consequence of the tropical atmosphere generally holding more water vapour due to climate warming (about 7% more water vapour per degree Celsius sea surface temperature increase). “This higher water vapour content leads to higher rainfall rates in hurricanes that have been simulated using climate models.” Writing on The Conversation website, University of Melbourne Climate Extremes Research Fellow Andrew King argues that October/November 2017
Flood rescue: people and pets are evacuated after Hurricane Harvey hit Houston
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Hurricane Harvey Harvey was the first major hurricane to make landfall in the US since Wilma in 2005. It achieved Category 4 intensity on August 25, making landfall the following day at Rockport, Texas, with wind speeds hitting 215km per hour. Many areas received more than 100cm of rain as the system stalled over eastern Texas, causing catastrophic flooding. Hundreds of thousands of homes were inundated and 30,000 people displaced. Harvey is the wettest tropical hurricane on record in the US, and caused more than 80 deaths.
Hurricane Irma Irma developed into a Category 5 hurricane on September 5, with wind speeds of up to 295km per hour. It caused catastrophic damage in Barbuda, Saint Barthélemy, Saint Martin, Anguilla, and the Virgin Islands, before making landfall at Cudjoe Key in Florida as a Category 4 on September 10. Major damage was caused to buildings, trailer parks, boats, and roads in the Keys. Irma caused 101 deaths, including 57 in the US.
Maria was the tenth most intense Atlantic hurricane on record, the worst natural disaster in Dominica, and the strongest to make landfall in Puerto Rico since 1928. Maria developed into a tropical storm on September 16, east of the Lesser Antilles, and steadily strengthened reaching Category 5 two days later. It had peak wind speeds of 280 km per hour, caused catastrophic damage and the deaths of at least 68 people.
Hurricane Irma’s main impacts were due to strong winds, storm surge and heavy rains. “Climate change has likely worsened the effects of Irma,” he says. “We know that climate change is intensifying extreme rain events. We also know that climate change is worsening storm surges by raising the background sea level on which these events occur. “Sea levels are projected to rise further over the coming century, by 50-100cm under a high greenhouse gas emissions scenario, and 20-50cm if we greatly reduce our emissions. “So while it’s likely that climate change is contributing to more extreme hurricanes, we have even more confidence that climate change is worsening the impacts of these storms, and will continue to do so over the coming decades.” The experts seem united in the belief that later this century we will see worsening tropical storms, and increasing levels of damage. But less certain is the impact of climate change on current events. There is some good news, however, thanks to scientists’ improving ability to track and forecast the behaviour of major systems. “Better forecasting of hurricanes allows for earlier planning for their impacts and should improve evacuation processes,” Dr King says. “In theory, with the right plans in place, better hurricane forecasting should reduce death tolls from events like Irma. “But it doesn’t necessarily reduce the economic costs of these * storms.”
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NM Insurance Pty Ltd (ABN 34 100 633 0380) (AFSL 227186) has been given a binder authority by the insurer AIG Australia Ltd (ABN 93 004 727 753) (AFSL 381686). NM Insurance enters into policies, handles and settles claims as it were the insurer within the terms of the binder authority.
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Gathering momentum AIG considers its next blockchain steps after the success of a global pilot project By Wendy Pugh
AIG IS PREPARING TO TAKE THE next step in progressing blockchain technology after a successful pilot with client Standard Chartered Bank and technology partner IBM added to industry enthusiasm about the potential benefits. The pilot targeted multinational commercial business, which typically involves placing and managing policies in various countries with differing legal and regulatory rules in a complex process with a large number of participants. Commercial Strategy and Innovation Managing Director Rob Bauer says the pilot highlighted blockchain’s strengths in supporting the trust and transparency pillars that have underpinned insurance since its London beginnings in the shipping market.
AIG, which described the multinational smart contract pilot as the first of its type, is now weighing up the potential for further development amid increasing interest from clients. “We are going to be carefully considered in terms of where to go next and how to scale up,” Mr Bauer told Insurance News. The company has substantial commercial portfolios in the US and the UK that offer opportunities, and AIG Australia Chief Executive Noel Condon sees potential for blockchain in the local market, particularly where strong tripartite relationships exist between insurer, broker and client. In the pilot, a master policy written in the UK, where Standard Chartered is based, and local policies in the US, Singapore and
Kenya were converted into a “smart contract”, allowing parties to simultaneously follow what actions had occurred, what had not yet happened and what needed to be addressed. As a large and complex market, the US was an obvious choice, while Singapore is a growth destination for Standard Chartered and Kenya has a specific regulatory requirement where cover must be paid for before it is valid. Existing “pain points” in policy and payment processes, such as notifications when events have taken place, were the focus of the trial, according to a presentation at the Risk and Insurance Management Society forum in Sydney in August. “What we did in that pilot was essentially digitalise the policy and
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the process, so the global risk manager could see every piece and the local risk managers could see different pieces of the transaction at different times,” Mr Bauer says. AIG says the project demonstrated blockchain has a powerful role to play in the future of insurance. The company is not alone in its thinking, with various insurance industry collaborations advancing programs to test the distributed ledger technology. Swiss Re’s Sonar report says blockchain has the potential to revolutionise industries like insurance where heavy documentation is needed, and “could challenge the traditional underwriting value chain thanks to its potential for efficiency”. The efficiencies include removing duplication and the
chance for misunderstanding in processes involving clients, brokers, insurers and reinsurers, with blockchain providing a shared, real-time verification trail that can’t be tampered with. The B3i group of 15 insurers and reinsurers, formed in 2016 to explore the technology, is working on an industry platform focusing on reinsurance contracts. The group reported at the Reinsurance Rendezvous in Monte Carlo last month that it is set to launch a “beta-testing” program for a prototype before a planned wider introduction to the market. “The deployment architecture is already close to a productionready environment and the team is preparing for feature enhancements of the prototype and a first deployment into production in 2018,” Swiss Re Director of Finance
Global Business Solutions Paul Meeusen says. Swiss Re, Munich Re, Aegon, Allianz and Zurich are among companies that make up the B3i consortium. A marine insurance blockchain platform has also completed a 20-week proof of concept. That venture involves EY, technology company Guardtime, AP Moller-Maersk, ACORD, Microsoft, MS Amlin, Willis Towers Watson and XL Catlin. AIG’s Mr Nolan says blockchain offers transparency and streamlined procedures that are beneficial for all parties involved in the insurance process. “Blockchain has really captured my imagination as a mechanism for the elimination of wasteful, time-consuming exercises that could be captured in that * ledger environment,” he says.
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It’s certainly not boring Melbourne-based Insurance Advisernet authorised representative Samantha Green talks with Kate Hanley about ambition, opportunity, communicating and listening and building a broking business from scratch
How did you get started in insurance? I took a job as a receptionist with a local broker in Rockhampton. I knew nothing about insurance, but the owner saw something in me and before a year was up I was promoted to an assistant account executive. That developed over the next five years to an account manager role. What did you enjoy about it? I liked the variety. I’m a bit of a numbers person, and I liked the numbers that were involved as well as dealing with clients. One day you could be dealing with an earthmoving company, the next a trucking company and then a café. What are the most important skills of a broker, from your perspective? I think communication and listening, because your main role is to communicate between the client and the insurer. You really need to be clear on what you’re asking and what you’re delivering. Listening is important because a lot of people like to talk a lot, and as a broker we have to cross off all the compliance requirements and make sure we’ve told them about all the important things they need to know. When did you make the leap to being an AR? What was the attraction? Two years ago I left my job at [national broker] Honan’s after two and a half years in different roles and different sections. A really good friend of mine – who is also my mentor – suggested I should look at becoming an AR. I’d been in the industry for eight years and I didn’t even know anything about them. My friend explained it all to me, what they did and pushed the equity side of owning a business and what you can 52
do with that equity. It really interested me because I’d never thought about owning my own business. I was also attracted to the fact I’d be doing the same thing I had been doing working for someone else. What are the main differences – from your perspective – between working as a broker or an AR? It’s not just working in the business and coming home. You tend to have more passion and care for what you do because you’re solely responsible at the end of the day for how things go. I like that – it’s woken up all that internal drive and passion. I was always committed to my job and would always do that bit extra, but it’s so rewarding when you do it for yourself and it works and you back yourself. It keeps you going on those tough days – because there are tough days where you don’t want to get out of bed and you don’t want to answer the phone or check your emails because a client was unhappy with you yesterday over something. You’re like, I don’t want to deal with this today but if I don’t deal with it who is going to? So you just have to get up and get back into it, and then something great will happen and you’ll be thinking, I love my job, I love my business. It’s definitely not boring. Was the transition difficult? Not really. When I get an idea I just run with it. I thought to myself, worst-case scenario if it doesn’t work out I’ll sell whatever book I’ve built and go back to working for someone else. So I just went full steam ahead. It was challenging thinking about marketing and budgeting but initially it is just doing your job and being a good broker. insuranceNEWS
What skills have you had to develop being an AR? The biggest challenge is working on the business rather than in the business. I’d been working in the business for eight years as an employee, but working on the business is all about making sure things grow and reaching overall business targets. I never studied marketing and didn’t know anything about SWOT analysis or anything like that. Insurance Advisernet has a lot of internal procedures and training and support, which was one of the things that attracted me to its model. How have you built your customer base? Insurance Advisernet has a referral funnel that you do get some leads from, but basically it’s just getting out and meeting people and finding out what they do and introducing yourself. I’ve found Facebook business groups are really successful. I’ve got about a 95% conversion rate from any leads I’ve got from Facebook. I’ve found the best conversion rates come from that, so I’m really targeting Facebook marketing business groups. What opportunities has working as an AR opened up? Working as an AR has given me the opportunity to use the equity I have built up to invest in other ventures and take holidays whenever I want, although they are few and far between! I decided to start up a designer handbag hire business. I found that having set up the insurance business and the structure and getting things right with companies and trusts and business plans, I could apply most of that experience to the handbag hire business. I’ve also learned a
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Model AR: Samantha Green
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“There’s a shortage of new ARs coming through, so the next three to five years is the perfect time if you want to make the leap.”
lot about digital marketing from the hire business that I can apply to the insurance business – they kind of tie in together in a weird way. Do you think the AR model suits young brokers? Is it the way of the future? I really do. One of my passions and goals is to nip people out of uni when they finish and give them an opportunity to work for me, show them how it works and give them the opportunity to buy equity in the business further down the track, or if it’s something they want to do on their own fully support them. Flexibility is the new age thing and also the opportunity to do what you want. How do you think the AR model will develop over the next decade? Technology is really going to influence that. The insurance industry as a whole is definitely extremely behind on the technology front, but I think that will change. There will be more automated processing that gives more flexibility for ARs and staff to be more customer-facing. Technology will improve to give more of a personalised service, which is what the AR model is all about. What are the things about your business that keep you awake at night? New ideas. My brain is buzzing at night just writing new ideas down one after the other. I’ve had to learn to curb that a little bit. New ideas like coming up with a scheme for a group of businesses, or changing something on a client’s proposal, or starting up a luxury linen business! It’s new ideas that keep me up at night. 54
What will your business be like in five years? How will it have developed? I’m hoping to double in size in the next five years. Driving my Range Rover to work (laughs) with an established solid book of business and a few staff and a plan to continue to grow the business in the next five years to be in the top 10 income-earning ARs within Insurance Advisernet. Really, there’s no limit, so why not number 1!
with a like-minded AR within your network to have a buddy system, so when either of you needs some downtime you can have a backup person for a few days, or even a week if you’re lucky, who can handle any urgent matters on your behalf. You can also look at this as another incentive to grow your business to the next level where you can hire staff to work for you to manage your time better.
How did you find your mentor? When I first moved down to Melbourne we met through work and we just clicked. We shared the same personal qualities and work ethic. We catch up every two to three months to discuss industry movements, and he’s the one who gave me the kick up the bum by saying, why aren’t you an AR?
Are there a lot of opportunities for new and upcoming ARs? I really think so. There’s a lot of mature people in the industry, especially ARs, who started their business 20 or 30 years ago and are now starting to wind things up. There’s a shortage of new ARs coming through, so the next three to five years is the perfect time if you want to make the leap. Do it now!
Where does your business name RCL Insurance Services come from? I get asked this a lot! I came up with this when I was catching up with my mentor, and he asked me, what are you passionate about, what do you love? I came up with R for Range Rovers (Vogue Autobiography LWB to be specific). C is for cats – I love cats, and L is for Louis Vuitton, which I also love. How do you balance work/life now that you work for yourself? Initially the lines are very blurred. To start with you are working when the work needs to be done, so if you are out all day meeting with clients no one does the processing for you when you get home, so you have to open the laptop and get to it. Based on this I can’t stress enough how important it is to give yourself some time out. Partner up insuranceNEWS
So you don’t think brokers will be superceded by robots? I have friends in the industry who think robots are going to take over our jobs but I say, don’t be ridiculous. People are still so fond of having relationships. Even from a broker’s perspective dealing with insurers, we’re not happy just dealing with an online system – we still want that relationship. You do business with people you like. So if it comes down to a computer spitting out a price or someone you like to talk to, who you can ask about how their kids went at footy on the weekend and build a relationship with, hands down they are going to choose that every time. I think that’s why in 50 years it doesn't matter how tech-savvy we have become, people will always choose * relationships over computers.
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Here to stay Axa Corporate Solutions sees Australia as a key growth opportunity By John Deex
Key players: Etienne Champion (left) and Hubert Jumel
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FRENCH INSURER AXA IS A GLOBAL giant with one of the strongest brands in the industry, which has helped its Corporate Solutions team gain a strong foothold here in Australia. Axa Corporate Solutions provides risk management and insurance solutions to large-cap corporate groups, and it first opened an Australian branch in 2009. Australia Chief Executive Hubert Jumel tells Insurance News this unit was initially to service the policies of international programs written elsewhere. But in 2015 a major strategic review identified Australia as a market ripe for growth, and from the beginning of last year the company started to underwrite Australian risk. The expansion has been well received, with brokers here indicating the Axa brand remains highly respected. So it should be: Axa has been named by Interbrand as the top global insurance brand for the past eight years. Not only that, but the company previously had a large life insurance presence in Australia, until it was acquired by AMP in 2011. “Axa is a very well-known brand here and it is natural to see us taking up the risk of the Australian corporates,” Asia-Pacific Chief Executive Etienne Champion says. “Axa Group is incorporated in France but, especially in Axa Corporate Solutions, we are very global.” The Australian operation has a team of 15 across underwriting, claims management, policy handling and risk engineering.
“Our wish is not to be only a capacity provider, but to be a partner for our clients and brokers in terms of claims handling and risk prevention services.”
“As the business is steadily growing, we will actively pursue recruitment in all areas with the view to continue to deliver best-inclass services,” Mr Jumel says. “We have managed to reach our targets [last year] and are in a pretty good position for this year as well. Feedback from the broking community to our offer is very positive.” Mr Champion says annual turnover is close to $40 million, and the aim is to double that by 2020. “We have a clear goal of steady and cautious growth over five years.” On January 1 Axa Corporate Solutions entered the energy and chemicals sector across the entire Asia-Pacific region, including Australia. In the middle of next year it will start providing international programs for Australian multinationals. “We think there is an opportunity in Australia to bring some added value,” Mr Champion says. “Ten years ago the market insuranceNEWS
was extremely crowded. There was not enough space for differentiation for a player such as Axa Corporate Solutions. “We feel this is the right moment to bring this differentiation now, because there are some movements in the market opening some opportunities in that space of specialty lines, quality servicing and international programs.” Mr Champion says Axa’s strong culture at group level influences operations in Australia. For the past year, the group has focused on its “payer to partner” transformation project. “Our wish is not to be only a capacity provider, but to be a partner for our clients and brokers in terms of claims handling and risk prevention services,” Mr Champion says. As part of the international programs initiative, Axa Corporate Solutions will offer access to an online portal where clients and brokers “can follow every local policy of their program”. 57
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“We are starting to see a lot of interest [in parametric insurance] in different areas such as power generation and renewable energy, as well as agriculture.” – Hubert Jumel
“Has the policy been issued? When was the premium invoiced and paid? This is a tool for brokers and clients to really monitor their programs,” Mr Champion says. About four years ago Axa introduced a parametric insurance offering to complement its suite of traditional policies. Unlike traditional products, which cover a policyholder’s actual losses, parametric insurance pays out in response to predefined triggers, simplifying the claims process. “It is particularly interesting for clients active in renewable energy, where they can have a tailor-made solution to cope with the impacts of the weather on electricity output,” Mr Champion says. “Those kinds of products can actually propose a certain buffer. “We also provide through that line of business some crop yield products based on weather parameters. “It is another way to address some of the financial risks of our clients, and claims handling is much easier. It is a formula. Either it is triggered or it is not triggered. When it is triggered, the formula is applied and you know exactly the money that you give to your client. “It is quick, it is easy, it is automatic. That part of the product is very attractive.” Mr Jumel says interest in parametric products is growing in Australia, where Axa Corporate Solutions is one of the few insurers to offer it. “We are starting to see a lot of interest in different areas such as power generation and renewable energy, as well as agriculture,” he says. 58
“It is too early to say there is a lot of business here, but we are starting to see some interest and clients are starting to ask questions.” Mr Champion says many insurers in the large and corporate space are facing adverse claims experience, either in number of claims or severity. “That’s actually a clear reaction in the market, which was not foreseen, and it’s affecting the whole industry,” he says. Alongside this, clients want to buy more cover, to be better protected, which is in turn driving the evolution of risk management. “With the demand for capacity comes demand for risk management,” Mr Champion says. “For an insurer to feel confident putting up big amounts of capacity, the request from the other side is that there is a proper disclosure of information and proper management of the risks the client is facing. “The risk management element is changing. Natural catastrophes, high demand for capacity and sophisticated covers – it must go with a risk management element. “We are seeing much better investment in that area.” Mr Champion says Axa is happy to pay claims – but is happier if proper risk management processes have been followed. “Axa Corporate Solutions is a company with a €2.3 billion turnover across the globe, so… of course we pay claims. We can’t blame a client having performed all the right risk management levels for a claim they are facing. The mitigating measures will cer-
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“Autonomous cars are a reality, and lately there have been conversations about the first autonomous ships. What does that mean as a risk?” – Etienne Champion
French connections ETIENNE CHAMPION, CHIEF ExECUTIVE of Axa Corporate Solutions Asia-Pacific, has been with the company for 17 years. He is a civil engineer, and started his career in 1995 as a field engineer in the chemical industry in Canada, the US and France, before joining Axa Corporate Solutions in 2000 as liability international underwriter. He held positions in Germany and Belgium before returning to France in 2008 as commercial manager for France. In 2011 he took the role of casualty chief underwriting officer (liability, environmental impairment liability, directors’ and officers’, crime) for all Axa Corporate Solutions operations. He joined the Asia-Pacific region in February last year, based in Singapore. On top of his regional role, Mr Champion is Chief Executive of Axa Corporate Solutions Singapore and Senior Officer Outside of Australia for the Axa Corporate Solutions Sydney branch. Hubert Jumel, Chief Executive of Axa Corporate Solutions Australia, has a finance and actuarial background and started his professional career in 1992 within the Axa Group. He held various positions in France before moving to Melbourne in 1999 to join the international department of Axa AsiaPacific as business manager. Mr Jumel returned to France in 2003 to take responsibility for the finance and actuarial department of Axa Corporate Solutions. He was appointed Chief Executive of the Australian branch in 2013 to develop and implement the group’s strategy here.
tainly encourage us to have the right reaction and continue the story with that client. “There is a difference between those claims that happen despite the risk management you have put in place and those claims that happen when there is no risk management. One is normal and unavoidable and the other has some in-depth causes. “But Axa is here for the long term. Accompanying a client in the good and bad times is very important.” Mr Jumel says in terms of rates, a previously soft market is beginning to harden, but it is too early to assess where it will end up. “The market seems to be in transition at the moment,” he says. “We are starting to see some changes, but it is a bit early to say which direction it is going to go. We still see a lot of capacity in this market, which could limit the potential for rate increases.” While the corporate space is less vulnerable to disruption than SME or personal lines, Mr Champion says the digital revolution is still leaving its mark. Increasing amounts of data could bring broad benefits for both clients and insurers. “Gas turbines, for example, have hundreds of sensors already in them giving a lot of data on vibration, speed, temperature. Interpretation of that data is very important and could be enhanced. “In the marine space, sensors are being tested to bring 24/7 data on cargo that may be in the middle of the Pacific Ocean. Is it at the right temperature? Has the cargo suffered any shocks? “Insurance will have its role to play to insuranceNEWS
support that technology or use the data for mutual benefit. It will fail as a business model if it’s one-sided. “Autonomous cars are a reality, and lately there have been conversations about the first autonomous ships. They are being tested live in Nordic countries. What does that mean as a risk? This transformation is happening and we have to analyse it. “How will cyber risks affect autonomous ships, can somebody take control of them? Those are the new questions being asked right now.” Mr Champion highlights the level of risk management information that can be delivered to commercial fleet clients. “For those businesses, based on having a fleet of buses, trucks or cars, telematics solutions on top of the usual insurance can dramatically improve their knowledge, control and prevention of the risks, and the price that they transfer the risk to insurers. “We should see [digital disruption] as an opportunity. “It will happen, it is not a question of if. It will certainly bring a lot of positives for the client, who will know more about their risk, usually 24/7. “You won’t get the information about your risks six months down the line, you will get it now as it is happening.” In changing and sometimes turbulent times, Axa Corporate Solutions has shown faith in the Australian market. And with the strong backing of its European parent, along with a commitment to innovative development and quality service, it looks set to stay * for the long term.
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Andrew Sharpe, Principal Direct Line: +61 2 9265 3261 Email: email@example.com
Hit the deck! Who’s liable for unsafe rental premises? Libra Collaroy Pty Ltd v Bhide  NSWCA 196 Mr and Mrs Bhide, the landlords, retained a real estate agent, Elders Collaroy (the agent), to manage their residential property in Collaroy by way of a management agreement executed in 2005. The property was leased to Ms Gillies (the tenant). Issues arose concerning the state of repair of the property’s upper balcony, including the condition of the decking surface and structural adequacy. The agent periodically obtained quotes for repairs, which indicated that repairs short of replacing the balcony would be temporary measures, and passed on those quotes to the landlord. Repairs were carried out in 2005, including some repairs to (but not replacement of) structural elements. A carpenter replaced decking boards in 2008, but the structural elements were not inspected. In 2010, and again in February 2012, Ms Gillies raised further concerns with the agent over the structural adequacy of the supporting elements of the balcony. Further quotes were obtained but no works were completed. On 15 June 2012, the balcony collapsed, injuring four people, including the tenant’s daughter (the plaintiffs), who were on the balcony. The plaintiffs commenced proceedings against the agent and the landlords. The tenant also brought an action against the agent and the landlords alleging that she suffered psychological injury as a result of the incident. The landlords and the agent issued cross-claims against each other and the tenant.
Decision at First Instance The primary judge held the agent 100% liable for the plaintiffs’ injuries on the basis that the agent: i had accepted the delegation and authority to arrange repairs and maintenance and failed to exercise reasonable care in maintaining the premises. i was not entitled to a contractual indemnity against the landlords under the management agreement, because such indemnity was only available in respect of liability arising out of the proper performance of the agent’s duties. The landlords were held to have discharged their duty to the plaintiffs by engaging a competent contractor to fulfil that duty. They were not liable to make contribution to the agent. The landlords were liable to the tenant for breach of their contractual obligation under the lease to maintain the premises in a reasonable state of repair. However, they were entitled to a full contractual indemnity from the agent. The tenant was held to have discharged her duty of care to the plaintiffs, as occupier, by complaining about the condition of the balcony and seeking that the agent intervene. She was not liable to make contribution to the agent.
Court of Appeal On appeal, the agent did not challenge the findings that it was negligent. However, it argued that the primary judge should have held that the landlords and the tenant were also liable to the plaintiffs and that the landlords should not have been granted a contractual indemnity in respect of their liability. The Court of Appeal held: In relation to the landlords: The landlords were liable to the plaintiffs. While the landlords initially delegated their duty of care to the agent, they ought to have formed the view, at least by 2010, that the agent was not discharging its delegated duties competently. A reasonable person in their position should have
instructed the agent to engage an expert to investigate the structural integrity of the balcony and, if necessary, taken steps to replace it; and to take steps to prevent access to the balcony pending remedial work. The landlords were entitled to a contractual indemnity from the agent in respect of their liability to the plaintiffs, because the agent breached its implied duty to take reasonable care in carrying out its duties under the management agreement. That entitlement arose notwithstanding the landlords’ own breach of duty. Where a principal and an agent have both been found liable in negligence, the law provides (unless otherwise agreed) that the principal is entitled to a contractual indemnity for the whole of the principal’s loss. Because the landlords’ entitlement to indemnity arose from the agent’s breach of contractual duty of care, the amount of the contractual indemnity was reduced to reflect the contributory negligence of the landlords. Their contributory negligence was assessed at 30%. The agent’s claim for contribution against the landlords failed because an action for contribution under section 5 of the the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) does not operate in circumstances where the person against whom indemnity is sought is entitled to a contractual indemnity from the person seeking contribution in respect of that liability. In relation to the tenant: The tenant breached her duty of care to the plaintiffs because a reasonable person in her position, having expressed concerns about the precarious nature of the balcony, ought to have refused access to the balcony until its structural integrity had been properly investigated. The tenant’s liability to make contribution to the agent was assessed at 20%.
Implications Ordinarily, a landlord may discharge its duty of care in respect of property maintenance by engaging a competent managing agent to fulfil that duty. However, where a landlord is (or ought to be) aware of a risk of harm, and that the agent is not discharging its delegated duties competently, the landlord has a duty to take reasonable steps to ensure that the agent addresses the risk. Similarly, a tenant will not be considered to have discharged their duty of care to visitors simply by voicing concerns to the managing agent about a potentially harmful situation at the rental premises. The fact that the agent was held not to be entitled to contribution from the landlords, but the landlords’ cross-claim for indemnity against the agent was subject to reduction for contributory negligence, creates an anomaly, because the relative liability of the agent will be greater if the plaintiffs seek to enforce their judgments directly against the agent (rather than the landlords). That is an unsatisfactory outcome for the agent. To avoid this, agents should seek to include in their management agreements an express contractual indemnity in favour of the landlord (in the case of breach by the agent) which is limited so it does not apply to the extent that the landlord’s loss is caused, or contributed to, by the landlord’s own negligence. In the absence of such a clause, the agent will be liable to fully indemnify the landlord for the whole of its loss, which will prevent it from obtaining contribution from the landlord.
)? 7)?/ 650) 9636@ mccabes.com.au
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D&O premiums are surging as shareholder lawsuits hit profitability By Wendy Pugh THE LIST OF COMPANIES TARGETED BY CLASS actions reads like a warning sign for corporates on the stock exchange, and their insurers. NAB, Myer, Slater & Gordon, Treasury Wine Estates, Billabong, Leighton, Centro, QBE and Nufarm are among the big names to have faced claims in a legal area that is attracting increased attention. Shareholder class actions are the main driver of claims in the directors’ and officers’ (D&O) insurance market, and the level of activity is causing concern given the lack of profitability in this area. “If the claims we are seeing on the class action side that have been around for the past two or three years continue, it is going to get very ugly in that space,” Marsh Managing Director and Head of Placement Asia-Pacific John Donnelly told a Risk and Insurance Management Society (RIMS) forum in Sydney in late August. In particular, companies face sharp rate increases for D&O side-C cover, which insures the corporate entity against claims related to wrongful acts around the trading of its securities. D&O insurance also offers side-A cover for individual company directors and officers, and side B, which relates to reimbursement of directors’ costs. XL Catlin says after more than a decade of soft market conditions, D&O ABC rate increases have ranged from
about 15% to more than 100%. Many insurers are reducing side-C capacity and some are not renewing policies that do not meet new underwriting criteria. “Our analysis suggests that, based on the premium pool and projected claims experience for [last year], average D&O premium rates will need to triple to restore the market to an acceptable level of profitability,” Product Leader for Management Liability Australia Ewen McKay tells Insurance News. XL Catlin, which has partnered with lawyers Wotton + Kearney to release a white paper series on the issue, considers 2011 a tipping point, with the average annual frequency of actions tripling to six in 2011-16, compared with levels previously. Total costs to insurers, including estimated defence expenses, grew to $1.32 billion in the period, against ABC gross written premium of $1.2 billion. “The D&O class is unprofitable on side-C claims alone, before other claims are considered,” Mr McKay says. Class actions are a relatively recent addition to the legal landscape, introduced to the Federal Court in 1992 after recommendations from the Australian Law Reform Commission. The first securities class action settlement was the landmark GIO case in 2003. Victoria’s regime followed in 2000, followed by New South Wales, while Queensland’s new class action laws took effect in March this year. The legal procedure aims to improve access to justice for individuals who otherwise face a power and resources imbalance against deep-pocketed corporates. Access has been further improved by the growth of litigation funders, which pay legal fees and costs in return for a
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Continuous disclosure rules that require companies to report key information as it becomes known provide fertile ground for claims.
settlement percentage, reducing shareholder risks in pursuing a claim. Funders can additionally instigate actions by identifying and contacting potential plaintiffs who might be unlikely to organise themselves. Stock exchange continuous disclosure rules that require companies to report key information as it becomes known provide fertile ground for claims. Share price plunges triggered by shock announcements can energise investors who feel they bought stock on false pretences. The larger and legally active US market clearly tops the rankings for cases, but Australia has developed into arguably the most liberal class action regime in the world, according to XL Catlin and Wotton + Kearney in their paper titled How Did We Get Here? The History and Development of Securities Class Actions in Australia. “The number of law firms looking to commence class actions is… contributing at least as much as the growth of litigation funders to the increasing frequency of class action filings,” they say. Current cases include an action filed by Maurice Blackburn Lawyers against QBE after its shares dropped on a profit warning in December 2013, a few months after a positive half-year report. A trial is set for August next year. Treasury Wine Estates this year reached a preliminary settlement after its shares slumped on a warning that surplus US inventories would hit earnings. The $49 million settlement, including interest and costs, was fully insured, the winemaker says. There are concerns it is too easy to pursue actions and that the area has become a honey pot for law firms and litigation funders, which often receive 25-40% of the settlement and in some cases have sought up to 75%. 64
Funders choose cases carefully as a business proposition that will deliver returns, making securities class actions a favoured area, particularly when insurance is in the picture. “Unless the defendant has the capacity to meet any likely settlement or judgement, including the benefit of any indemnity under an insurance policy, funding is unlikely to be provided,” a Victorian Law Reform Commission consultation paper released this year says. The commission is reviewing litigation funding, with its terms of reference focused on ensuring those pursuing action are not exposed to unfair risks or disproportionate cost burdens. The final report is due by March 30 next year. Finity Principal Susie Amos says the surge in D&O sideC rates partly reflects a wider hardening in commercial lines, plus the impact of an increase in class action activity and the need to improve profitability in the area after an extended period of losses. Increases only emerged in the latest mid-year renewals period, with rises from 20-300% in side C, despite profitability pressures since the global financial crisis. “It is an issue that has been around for a number of years now, and the market has got to a point where the rates have started to respond,” Ms Amos says. “I would say the reason why they haven’t been responding previously may have been… a lot of capacity and competition in the market.” Ms Amos says broader class actions, other than shareholderled claims, have also affected the market, although securities class actions have caused the most significant dollar pain. Discussions at the RIMS forum in Sydney questioned a range of issues affecting the market and class action activity, including whether gathering as few as seven shareholders should be sufficient to launch an action.
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“The D&O market will continue to harden, with increasing premiums and reduced capacity for the foreseeable future. These developments may cause companies to change their D&O insurance buying behaviour...”
“This has enabled an enormous number of claims to be raised, and settled, causing significant losses in the Australian D&O market,” RIMS Australasia President Kevin Bates tells Insurance News. “The quantum of losses has exceeded the total premium pool by more than 600%, which is clearly not sustainable.” So far, no securities class action has gone to final judgement in a court, with all cases either settled or discontinued. “Having to respond to these class actions cannot be in the best interests of the shareholders, given the financial and reputational impact on the company,” Mr Bates says. “RIMS will be working with the insurance carriers and law firms representing those insurers to facilitate some clear thinking as to what can be done to eliminate those securities class actions that are clearly not in the best interests of the shareholders.” Potential areas of investigation include judicial intervention to eliminate vexatious litigation and unconscionable conduct. A legal case could also be pursued, rather than settled, to air arguments and allow a precedent to be set. Treasury Wine Estates pursued a typical path with its settlement, saying it was a commercial decision, in the best interests of shareholders, which allowed the group to stay focused on its strategy without the distraction and expense of the legal proceeding. XL Catlin’s Mr McKay says the average settlement for class actions has been about $50 million. He says some insurers have stopped offering side-C cover on a primary, or lower-excess-layer basis, such as less than the average settlement level, but otherwise there has been little change to the cover. 66
“At this point, there is no indication that availability of side-C cover will completely disappear, but it will be considerably more expensive and some companies may not obtain the limits they prefer. “The D&O market will continue to harden, with increasing premiums and reduced capacity for the foreseeable future. “These developments may cause companies to change their D&O insurance buying behaviour, such as adopting significant retentions for side-C claims or not buying side-C coverage at all.” Maurice Blackburn spokesman Cameron Scott says a very small percentage of Australian Securities Exchangelisted companies become involved in class actions – about 0.2% in any given year, based on the past five years. He says class actions are a contributor to improved governance. “The insurance industry plays an important role in the class actions space,” he says. “Insurers benefit greatly from their regular participation in a range of cases they make recoveries from, and they also have an impact in demanding that corporate clients adhere to higher governance standards of conduct and disclosure, which benefits everyone.” Nevertheless, insurance executives including Allianz Global Corporate & Specialty Pacific Chief Executive Willem van Wyk say problems relating to D&O side-C cover are a significant issue. “There are more law firms coming in, there are more funders coming in, and the trend is definitely still on the up,” Mr van Wyk told the RIMS forum. “I do think the whole space will change. “Larger companies that buy side C will take much larger deductibles and so on. Otherwise the cover may just not be * available in the future.”
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A new approach: An industry veteran is attracting rising interest with his cluster model for underwriting agencies TECHNOLOGICAL DISRUPTION AND industry changes are driving interest in new insurance products and niches, and Underwriting Australia Pty Ltd (UAPL) says it’s well placed to assist professionals aiming to carve out a place in the market by setting up their own underwriting operation. Managing Director Kerry Henry says the group, which offers an underwriting agency version of the broker cluster concept, is seeing increased interest in the services it offers. UAPL has operated as an underwriting agency since 2007 and a couple of years ago widened its scope to include corporate authorised representatives working from Sydney and Brisbane. More participants are expected to join the group after a jump in the number of recent enquiries sparked by changes in the wider insurance industry environment. Proposals and talks are at various stages. “Over the past four months, people have been approaching us,” he tells Insurance News. “They have obviously looked around and viewed other potential models, but have found we are more flexible in terms of the way we will allow them to operate under our umbrella.”
Sydney-based UAPL sees its future as being mainly in areas where insurance products can meet specialist niche demand, as well as in supporting innovative products that offer new or smarter approaches within mainstream areas. Interest has come from insurance professionals looking to take charge of their own career prospects and futures amid various corporate upheavals and shifts, while in the insurtech space innovators are exploring pathways to develop and market products. “We have both a wholesale and retail Australian financial services licence and that has sparked the interest of a few disruptors out there,” Mr Henry says. “Having the retail licence offers marketing flexibility.” He says if an idea is brought to UAPL it can assist in structuring the product, finding an insurer, marketing and accessing brokers. More generally, the group saves underwriters worrying about licences, annual audits, operating systems, compliance, professional indemnity insurance and general administration, among other services. The underwriting agencies are left to run their own business independently, with UAPL taking a varying clip of the ticket
according to the level of support provided. There is an exit strategy where UAPL can buy out a product facility if the underwriter wishes to exit or fund another participant to take over the area. The company’s own speciality lines include audit insurance and insurance bond products, such as deposit bonds used as an alternative to cash or bank guarantees in property purchases. It is an authorised representative for deposit bonds issued on behalf of QBE Insurance. Mr Henry, who has more than 30 years’ insurance experience, split by 10 years in merchant banking, says the cluster group concept reduces the high level of costs involved in starting up an underwriting agency. It also allows business managers to focus on their core underwriting mission, rather than administration, and frees up time to allow more opportunity for developing improved offerings. Demand for support as new products are launched is only likely to grow, he says. “There is quite an incredible amount of thought and planning going into reviewing the existing models,” Mr Henry says. “I think the next five years are going to see * quite a bit of disruption.”
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Driving ahead: Bus and coach specialist gets on board with Sura SURA AUSTRALIAN BUS AND COACH HAS BECOME the latest underwriting agency to rebrand under the Sura banner as it targets growth in the specialist transport sector. The company, previously known as ABC Underwriting, has been part of the bus and coach industry landscape since the late 1970s, offering specialist cover for owners and operators. “We’ve been in this business for a very long time, and our bus and coach clients and their brokers have always expected us to improve our proposition,” Sura Australian Bus and Coach National Manager Matt Etheredge says. “For brokers our new name is a symbol of our willingness to innovate, embrace change and push boundaries of underwriting best practice, so we can give them an edge in a competitive market.” Clients range from individual and small bus operations to large corporate and government fleets around Australia, with insurance offered for vehicles, depots and businesses. The company says its motor vehicle policy is specifically written for the sector, while depot and liability insurance also addresses a broad range of industry-specific considerations. That includes cover for tour cancellation and abandonment, passenger baggage and trauma counselling as well as more general risks such as fire, business interruption, machinery breakdown, theft and glass. The Sura umbrella organisation, part of AUB Group, has expanded in the past few years to include specialist underwriters in hospitality, labour hire, marine, film and entertainment, construction and other areas. Sura Managing Director Angie Zissis says the rebranding of the bus and coach underwriting business is a welcome * addition that complements the existing suite.
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Diverse future Greater gender diversity will create a stronger insurance industry – but what does that really mean? By Ahranee Vijayaseelan
Calling for change: Ahranee Vijayaseelan
SUPERFICIALLY, THE INSURANCE INDUSTRY IS ALREADY gender diverse. In fact, figures from the Workplace Gender Equality Agency (WGEA) released in April last year suggest female participation in financial services and insurance at 55%, and male participation at 45% nationwide. So, can we say the job is done on gender diversity? If we look a little closer, most would have to concede no. Probably we have not even come close. WGEA figures show finance and insurance has the largest industry pay gap – the gap is 33.5%, while for base pay the gap is 26%. This reflects fewer women in senior management positions, which attract higher salaries and bonuses. While women may outnumber men in the financial services and insurance sector, it’s also worth noting nearly 15% of women are employed part-time, compared with male part-timers who account for less than 4%. Approximately 60,000 people work in the Australian insurance industry, according to the Insurance Council of Australia. It’s a highly influential industry, which means the industry has a huge opportunity to bring more women into senior management and c-suite roles. What are the benefits of greater gender diversity? The Diversity Council of Australia claims that increased gender diversity benefits the bottom line through “improved financial performance, market share, retention, innovation, safety, group performance, access to talent, and productivity, as well as reduced turnover, meeting regulatory reporting requirements and minimising legal risks”. A more diverse industry will be a better insurance industry – something we are striving for in the Association for Women in Insurance, with which I am proud to be involved. One area of concern is gender diversity at executive levels within the insurance industry. While there aren’t comprehensive statistics available, a recent report by Credit Suisse suggests women occupy just 12% of top management positions in the industry – a mere 1% of insurance firms have a female chief executive. This reflects trends in Australia generally – for example, just 5% of ASX 200 companies have a female chief executive. 70
But more positive news stories are emerging. A recent report from Europe shows all segments within financial services, including insurance, have increasing female representation on company boards. The study stated women currently account for 26% of boards, and 18% of executive ranks. Lloyd’s of London is currently an outlier in this area, with women accounting for 44% of executive positions including its chief executive, Inga Beale. They are showing the way forward. Critically, the report states that targets and quotas have been a major contributor to a more balanced gender diversity. As a nation, Australia has been reluctant to employ targets and quotas. Perhaps it’s time for a change of heart, perhaps the industry will be pleasantly surprised that there is genuine talent that is unearthed through this approach. It will certainly assist candidates to be more confident in putting themselves forward. In Australia, it’s encouraging to see initiatives such as the 2017 Insurance Industry Diversity Survey, which will provide industry-wide benchmarks and statistics on diversity and inclusion across the Australian general insurance sector. We’re hopeful the survey will reveal more on the gender make-up within the industry, and we hope it’s the first of many such surveys that eventually show more women participating at the top levels. In the meantime, it’s important to keep the discussion going and to look for making positive changes in small ways. For example, Hall & Wilcox has been involved with a Victorian Government pilot program, which aims to stamp out “unconscious bias” in recruiting. This is a big issue for both gender and cultural diversity. Studies show these unconscious biases are strong, yet may be overcome if they are acknowledged and understood. There is no one easy solution to gender diversity, but organisations such as the Association for Women in Insurance embrace the challenge and we hope to see more Australian insurance organisa* tions take Lloyd’s lead on the issue. Ahranee Vijayaseelan is a special counsel at Hall & Wilcox, and President of the Women in Insurance Committee NSW. October/November 2017
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peopleNEWS AILA entertains Italian-style The Australian Insurance Law Association (AILA) luminaries dinner last month hit the high notes with an Italian theme. More than 110 guests enjoyed fine Italian cuisine at The Star Sydneyâ&#x20AC;&#x2122;s Balla restaurant as the Three TenOz performed O Sole Mio, Nessun Dorma, O Mio Babbino Caro and other opera classics. AILA President Angus Kench thanked the luminaries for their contributions to the industry.
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Quill Club supports soldiers’ charity The Quill Club’s annual charity lunch in Melbourne was attended by almost 500 people and raised $40,000 for the Commando Welfare Trust. The event included auctions, raffles and guest speakers who highlighted the work of the trust in supporting Special Operations Command soldiers and their families. Adventurer and former soldier Brian Freeman was guest speaker, while the trust was represented by Executive Officer Selena Clancy and a serving senior commando. The sum raised included a $10,000 donation from the Steadfast Foundation, while a ceremonial handcrafted commando dagger became one of only three to belong to a civilian when it was auctioned for $3000. The Quill Club, an insurance industry networking group, celebrates its 40th anniversary in October. In recent years the charity luncheon, its major annual event, has supported causes relating to spinal muscular atrophy, Parkinson’s disease and spinal injury research. The lunch this year was held at Docklands venue Peninsula A.
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APIG conference draws a crowd Almost 300 delegates from across the financial lines market gathered for the annual Australian Professional Indemnity Group (APIG) national conference and gala dinner. Speakers at the conference included Insurance Council of Australia President and Suncorp Insurance Chief Executive Anthony Day, who spoke on changes and challenges in the professional indemnity market. Other topics covered by experts at the event included blockchain technology, climate change and cyber insurance risks and opportunities. A masterclass, new to the conference this year, delved into the complexities of directors’ and officers’ cover and securities class actions. AIG Complex Claims Examiner Mitchell Spurr was awarded the Wotton + Kearney APIG Scholarship for his essay on the exposure for directors to potential claims relating to climate change. The Gala Dinner that followed was attended by more than 500 people, with TV and radio presenter James O’Loghlin hosting proceedings. The APIG conference, now in its eleventh year, was held at The Westin in Sydney in September.
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peopleNEWS UAC Adelaide expo continues to grow A record 68 exhibitors and 200 brokers attended the Underwriting Agencies Councilâ&#x20AC;&#x2122;s (UAC) Adelaide expo at the Hilton Hotel in August. MGA Insurance Brokers Assistant Broker Vanessa Grandison and Murdoch Insurance Brokers Personal Lines Manager Daniel Robinson left the event with more than just new business contacts â&#x20AC;&#x201C; they each won $1000 of travel vouchers, courtesy of UAC and Corporate Traveller. UAC did its bit to keep the Royal Flying Doctor Service flying by donating $2000, and fundraising manager Anthea Rice was at the expo to receive the cheque.
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All Blacks score at AIG function The All Blacks proved a massive hit with brokers and AIG staff at a function hosted by the insurer on the eve of the Bledisloe Cup match in August. Mental skills coach Gilbert Enoka shared tips about how the concept of teamwork, belonging and trust has helped the All Blacks on the field. Players Beauden Barrett, Ben Smith and Ofa Tu’ungafasi thrilled young fans from children’s counselling charity Kidsxpress with drumming, balloon exercises and paint throwing at a special event hosted by AIG. On match day, AIG staff and broker guests embarked on the luxurious Pontoon vessel for the game at ANZ Stadium, soaking up scenic views of Sydney Harbour over canapés and wine. AIG has been a sponsor of New Zealand rugby since 2012.
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McLardy McShane hosts island retreat Winter was forgotten when McLardy McShane conference delegates descended on sunny Hamilton Island in August for the annual event, which also doubled as a birthday bash to celebrate the company’s 10th anniversary. A Hawaiian-themed barbecue was held on pre-conference night to welcome guests before they got down to serious business the following day. A Buggy Rally adventure game testing delegates’ time management and teamwork was added to the program to inject an extra dose of fun. About 150 staff, authorised representatives, partners and industry colleagues attended the event to celebrate the “past, present and future” at the island’s Reef Hotel. Various awards were handed out during the two-day event. LMI Group’s Allan Manning and McLardy McShane’s former receptionist Maureen Anderson were inducted into the company’s “hall of fame” and Scott O’Neill of CP Insurance Services collected the branch of the year award. AR of the year was Edge Insurance Services’ Garth King, while Jamie Mercieca and Sharron Healy were recognised for 10 years’ service with the brokerage, and Vishal Kapoor for five years. Assistant Accountant Fatma Kulafi was named employee of the year, Marketing Manager Rachel Sozzi received the “McCulture” award and Amanda Taylor of the Albury branch was crowned “rising star”.
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CGU launches womenâ&#x20AC;&#x2122;s leadership lunch More than 180 people attended CGUâ&#x20AC;&#x2122;s inaugural lunch in support of women in leadership, diversity and inclusion. The event was held in September at The Glasshouse in Melbourne, with guest speakers sharing inspirational stories. The audience heard from philanthropist Susan Alberti, Collingwood player Moana Hope and business leader Kathy Cocovski.
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Resilium’s big bash at Adelaide Oval About 400 principals, staff and business partners of authorised representative network Resilium gathered under the sail roof at the Adelaide Oval for its annual conference. In Donald Bradman’s famous stamping ground the Resilium team was treated to some inspirational speakers including founder of Carman’s Fine Foods Carolyn Creswell, war veteran Damien Thomlinson, motivational speaker and charity founder Peter Baines and yellow Brick Road founder and television celebrity Mark Bouris. Attendees also enjoyed a dinner date with comedian Vince Sorrenti and the whole affair was topped off with a 1970s-themed night at the Adelaide Wine Centre as the team celebrated the past year’s strong growth. The annual awards dinner honoured Hayes Insurance Services with the RIB (Resilium Insurance Broking) Practice of the year and Parkway Insurance Services took out the coveted Resilium Fire Helmet Award.
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A celebration to remember About 170 guests joined senior Steadfast Re executives at the Shelbourne Hotel in Sydney to celebrate its third anniversary on September 21. They danced the night away at the Altitude Rooftop Bar as local band Michael McGlynn Trio revved up the mood with its brand of highoctane live act. Steadfast Re says the biennial event is also an opportunity to thank local clients for their support. The party was well supported with overseas representatives from the likes of Arch Re, Hamilton Re, Hannover Re, Allied World and Validus Re in attendance on that night. Locally based staff from Swiss Re, Berkley Re, Scor Re, Berkshire Hathaway Re, Talbot, Newline, xL Catlin and other insurance providers were also at the party. Steadfast Re was created three years ago when Steadfast bought a 50% stake in a reinsurance brokerage owned by Beach & Associates.
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CQIB ‘toolkit’ convention draws a crowd The Council of Queensland Insurance Brokers’ (CQIB) 25th annual convention drew a record crowd this year, with the agenda covering a wide range of topics and offering a variety of networking highlights. Comedian Kat Davidson was master of ceremonies at the event, held at the Intercontinental, Sanctuary Cove and attended by about 160 brokers and more than 300 other industry participants. The conference theme was The Broker’s Toolkit and program streams for principals and staff covered topics such as online marketing, flood and storm damage, insurance contracts and claims training. Keynote speakers included Simon Ezard, a senior security consultant with Verizon’s Risk team, and Vero’s National Manager Commercial Intermediaries Anthony Pagano, who spoke about using the company’s SME Index insights to help drive business success. On the social side, the conference began with a CGU “welcome to country” dinner. Entertainment included a band comprising lead singers from the Hoodoo Gurus and Boom Crash Opera. The QBE Whiteout party took place on the Friday night and Vero hosted a Seven Deadly Sins-themed dinner to finish off the weekend.
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Elvis connects with PSC A record-breaking 240 delegates attended this year’s PSC Connect conference at Melbourne’s Sofitel hotel in August. Guests were treated to a rare appearance of Elvis at the welcome dinner held at the Encore venue in St Kilda, while PSC Connect’s very own authorised representative Mike Cole marked the company’s 40th birthday by performing original songs. Interstate delegates were treated to a Tramcar luncheon and a tour of the MCG and Collingwood footy club, and almost everyone joined a three-hour leisurely cruise around Docklands, Williamstown and St Kilda. There was a morning session from wellness coach John Toomey on how to stay healthy and happy while a Kombucha health drink promotion proved a challenge the morning after the Gala Dinner. At the dinner Jason Toy, Principal at JT Insurance in Victoria, was named authorised representative of the year. Jo Kiro from Kiro Management New Zealand won the global marketing award, and Sam Hornery from Central West Insurance Group in NSW was crowned rising star. Vanessa Muir, Compliance Manager at PSC Connect in Victoria, received the high achiever award, and Peter Snedden from Peter Q Snedden Insurances in Auckland was New Zealand member broker of the year. The conference raised more than $12,000 for the Love Me Love you charity, a youth focused, non-profit organisation that aims to improve the mental health and wellbeing of young Australians.
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Art of celebration Delegates to the 11th Claims Convention celebrated the success of the event with dinner, drinks and live entertainment at the Sofitel Sydney Wentworth. Participants included insurance company managers, brokers, reinsurers, loss adjusters, professional consultants, lawyers, suppliers and service providers. The convention theme this year was “the art of claims – maintaining customer focus” and session topics ranged across big data and analytics, emerging technologies, the impact of social media, techniques for dealing with difficult claimants and the role of customers. Speakers included Berkshire Hathaway Specialty Insurance President Australasia Chris Colahan, Zurich Chief Claims Officer General Insurance ANZ Hilary Bates and Cunningham Lindsey National Manager Loss Adjusting Anita Wilson. The event was hosted by the Australasian Institute of Chartered Loss Adjusters and the Australian and New Zealand Institute of Insurance and Finance.
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Festival of inclusion The Dive In diversity and inclusion festival expanded to 10 Australian events this year as part of a growing international program. The Dive In festival, initiated by Lloyd’s, started in London in 2015 and has expanded to 32 cities in 17 countries. More than 1300 people registered for the Australian events, held from September 26-28. This year’s theme, “Diversity Dividend”, highlighted the benefits to organisations of a diverse workforce and an inclusive culture. The Australian festival kicked off with a breakfast launch at Lloyd’s Sydney office and continued with three days of talks, workshops and other events across the city. Race Discrimination Commissioner Tim Soutphommasane moderated a debate on cultural diversity targets, with Macquarie University Associate Dean Professor Lucy Taksa on the affirmative side and iCare Chief Executive Vivek Bhatia among speakers on the opposing team. Elsewhere, Megan Dalla-Camina, the author of books “Getting Real About Having it All” and “Lead Like a Woman” was among some 30 speakers who presented at the various events. In Melbourne, participants focused on tackling unconscious bias with a discussion led by expert in the field Jennifer Whelan, AFL Manager of Female Football Development Jan Cooper and journalist and diversity advocate Tracey Spicer. In Perth, Commonwealth Bank executive Francine Ryan shared experiences and strategies on creating positive change.
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sam Pentecost Contributors
Sunshine is delicious, rain is refreshing, wind braces us up, snow is exhilarating; there is really no such thing as bad weather, only different kinds of good weather.
– John Ruskin
IF YOU LIVE IN THE SOUTH OF AUSTRALIA, AS I DO, YOU’LL find yourself discussing weather quite a lot. It’s a conversation-starter with strangers, for sure, but also a topic of deep discussion with friends. There’s simply so much weather happening, and it rules your life. The further north you live, the less interesting the weather seems to get. There’s a sameness about each northern Australia day that allows you to organise a barbecue for a month hence without a thought about “bad” weather driving you indoors to huddle around the heater. In such places it’s only when things get extreme – think bushfire, flood, drought, cyclone or even hailstorm – that the weather moves to the top of the northerners’ conversation charts. But everything’s changing. In recent years routine discussions about the weather have taken on a darker hue as the shadow of climate change looms over us all. What will it bring? Self-confessed “weather tragic” Lawrie Zion – who lives in Melbourne, of course – has written a book about weather, its causes, effects and extremes. For any insurance professional looking for a Christmas gift that intrigues and informs, The Weather Obsession would be a good choice. Zion moves easily from the backyard weather stations that dot the Australian landscape and still play an important role in understanding weather behaviour to the satellites and radar providing constant information for the supercomputers grinding data to bring us regular and amazingly accurate forecasts – usually. He demonstrates how technology has transformed weather forecasting in much the same way it has transformed everything else, and makes the argument that everyone, no matter where they live, is now obsessed with weather data. And he introduces us to the many characters who have shaped weather forecasting in Australia. Perhaps the most colourful was Clement Wragge, who served as Queensland’s chief weather forecaster from 1887 to 1902. He not only infuriated his interstate counterparts by introducing a national weather forecast, but was also the first weatherman to systematically name major storms, which sometimes bore the names of politicians he didn’t like. 98
Today the Federal Government’s Bureau of Meteorology leads the way on Australia’s weather and climate, and it’s a very sophisticated operation in all ways. It’s the go-to authority, with a website that attracts 1.5 billion unique page views each year. Zion not only details how the bureau works, but also demonstrates how it has had to take on the responsibility of warning the public in advance of the consequences of extreme weather events. That wasn’t always the case. A lot was learned from the way in which Cyclone Tracy hit an unprepared Darwin on Christmas Eve 1974. Today the bureau tells it like it is, using messages on mobile phones and news media to give the public the best possible chance of preparing for whatever nature’s about to hurl at them. For example, The Age newspaper’s website – fed by the bureau – was blunt in its assessment of how people in and around Melbourne should deal with the weather on February 7, 2009: “Don’t go on the roads. If you don’t need to use the public transport system, don’t use it. If you can stay at home, stay at home.” That followed warnings from Victoria’s Premier John Brumby the previous evening that “the worst day in the history of the state” was looming. The next day was Black Saturday, when more than 400 bushfires killed 173 people. The book is full of stories that entertain and inform. That’s not surprising, considering the author is Professor of Journalism at Melbourne’s La Trobe University, and has finely tuned interviewing skills to discuss the weather and forecasting. And his quest for accuracy means he hasn’t hesitated in taking on the critics of the science behind climate change, using overwhelming research that undermines the conspiracy theorists’ arguments. But the politics of climate change are another matter, with conservative politicians attacking the need for society to change its dirtier habits and adapt to a more dangerous world where nature is fighting back, using weather as her weapons. What’s happening with our weather is something we need to understand, and this book has done the groundwork. The Weather Obsession, by Lawrie Zion. Melbourne University * Press. Published 2017. Available on iBooks. October/November 2017
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