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Beware the meerkat Why Australia’s biggest insurers aren’t cuddling up to comparison sites
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Zurich Australian Insurance Limited ABN 13 000 296 640, AFS Licence No. 232507. 5 Blue Street North Sydney NSW 2060 www.zurich.com.au
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Contents 6 Newsmakers »
68 Pet cover dogfight »
10 Gallagher stirs the market » Competition will increase as the No.4 global broker sweeps up OAMPS and Crombie Lockwood.
14 Slowing down up north » Premium rises are finally easing in Queensland, but the industry still faces criticism and government tinkering.
Vet bills are rising and owners are spending big on their pets. No wonder insurers are purring.
lawNEWS 70 Exposure to disclosure » Intermediaries’ liabilities continue to grow as courts decide they’re ‘not just a postbox’.
18 Beware the meerkat » Comparators are proving a hit with consumers, but opponents warn of hidden dangers.
26 Valley of the dammed » Raising the Warragamba Dam won’t eliminate the flood threat west of Sydney, with inadequate evacuation routes and a complacent population adding to the danger.
companyNEWS 75 Too many eggs in one basket? » Management liability has its hazards, and stand-alone products can offer a more reliable form of protection.
76 Bad weather, good service » A dedicated team of specialists helps insurers build relationships and prevent claims.
34 Honan truths » The 50-year-old company his father established goes its own way, and Damien Honan is exhilarated by the journey.
76 Putting risky business to the test » A new Lumley app helps SMEs understand their exposures.
38 Life and work in Singapore » Meet some Australian insurance professionals who call the booming Asian financial centre home.
47 Aiming to grow » Two broker cultures, one focus: the IBNA and Austbrokers joint venture is on the lookout for more members.
52 Insurance thoroughbred » When it comes to industry bloodlines, few could compete with Gow-Gates Chief Executive Chris MacKinnon.
57 Adjusting expectations » After a tough decade, the loss adjusting industry faces an uncertain future.
62 Pleasure and pain » The bravery and skill of elite athletes is amazing – and insurance is their essential safety net.
65 Great products... but maybe the message needs work »
peopleNEWS 78 Take a moment to save your life » Breast cancer survivor Tina Wilkinson has a message for others on the importance of screening.
80 82 89 90
Talking about reputation » Celebration and inspiration at AIMS » Zurich forums zero in on trends » Shorter days ahead as AILA YPs toast the equinox » 93 Record turnout gains valuable insights » 96 Cooking up a storm for Dual’s 10th anniversary »
98 maglog »
An industry leader ponders brokers’ slow acceptance of innovative insurance products that meet market needs.
Cover: Aleksandr Orlov Image courtesy of Compare The Market
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insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 21,000 subscribers. In April and May we published 326 articles online. These were made up as follows:
54 Local 64 Corporate 50 Regulatory & Government 41 Financial Services 46 The Professional 64 International 7 Analysis 6 Breaking News Some 16,077 news articles – including 151 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives. Access to articles and other services provided by insuranceNEWS.com.au are free.
PRATTEN goes to jail
The NSW Supreme Court has jailed Rural & General Insurance founder Timothy Charles Pratten (pictured) to three years and six months on charges of obtaining a financial advantage by deception. Pratten has lodged an appeal but was not granted bail and was taken into custody. He had pleaded not guilty to seven counts of obtaining a financial advantage by deception from the Commonwealth over tax returns he had filed. The court ordered he be released after 18 months jail on entering a 24-month good behaviour bond. The sentence also includes 750 hours of community service. Justice Stephen Rothman found Pratten did not declare income of more than $2.77 million and received a financial advantage of more than $1.25 million, being tax that was not paid. He said Pratten has high levels of depression and anxiety, no prior criminal record and is the only available carer for his two daughters.
Charles Pratten jailed, 4 April
Money flows in for reinsurers Reinsurers’ profitability improved last year and their capital holdings reached a record high as pension funds and other investors entered the catastrophe bond market. The Aon Benfield Aggregate report, analysing 31 reinsurers’ results, shows gross property and casualty premiums grew 5% to $US199 billion due to US economic recovery, growth in emerging markets and company acquisitions. Pre-tax profits increased 6% to $US38.1 billion, while global reinsurer capital gained 7% to $US540 billion. The companies’ collective combined operating ratio improved by 2.8 percentage points to 89.6% and catastrophe losses fell 38% to $US7.9 billion. Reinsurers kept their investment income stable despite their combined yield falling 30 basis points to 3.1%.
Reinsurer capital hits record high, 14 April
It’s fair to say [premiums are] only heading in one direction. Supply far exceeds demand in worldwide risk markets… At some point we have to get to a minimum price where insurers can’t make money, but we are not there yet.
– Marsh Australia Executive Director Scott Leney predicting a soft market will prevail “for a long time”
20 14 Budget: a mixed bag The Federal Budget could have been worse for the insurance industry, coming as it does from a government focused on slashing costs and raising revenue. Some of the decisions outlined in the budget are logical and at least one is little more than theft of an asset the Government never owned. The approach to the north Queensland insurance issues are also a mixed bag. The message is that there will be money for mitigation when it can be shown to work. There are few pointless gestures of the type that governments sometimes make to satisfy constituents – except for the plan to develop an insurance comparison website for north Queensland. The National Insurance Affordability Initiative has been dropped, along with plans to establish an affordability council, which was announced in February last year but never appointed. The $72.2 million saving from that will be redirected to addressing insurance costs in north Queensland, including $12.5 million over three years for engineering assessments of strata properties and unquantified funding for Treasury to set up a comparison website. The flood mitigation works for Roma and Ipswich previously announced under the affordability initiative have been retained, but $50 million to raise the height of the Warragamba Dam has quietly been dropped, possibly because the proposal is still under investigation by a NSW Government taskforce. The insurance industry has welcomed funding for the strata assessments but the comparison website decision has put insurers on course for a showdown. Strata is so specialised and the risk so diverse that it’s hard to imagine a body corporate manager wanting to spend half a day filling in a form online only to be told to contact an insurer or a broker. The major insurers, including those writing strata, home and commercial policies in north Queensland, have longstanding objections to so-called comparators. It’s hard to see how the Government can force them to participate in one, and it’s even harder to see what a comparator could do to ease the cost of home and contents cover when insurers and reinsurers have repriced the risk to reflect the realities, and most have withdrawn from the region, anyway. This won’t entice them back. 2014 budget: a mixed bag for insurance, 19 May
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“Austbrokers is a $2 billion broking business and we will continue to evolve...”
Hotter, wetter, windier Severe storms in Europe could quadruple in number and flood risks may triple by 2080, according to new climate change scenarios outlined in a Lloyd’s report. Catastrophe Modelling & Climate Change, produced by Lloyd’s Exposure Management & Reinsurance team, says policymakers and planners need to make use of climate model projections, but also take account of the uncertainty in them. “There are good physical reasons to expect events to become more extreme,” Head of Exposure Management & Reinsurance Trevor Maynard says in the report.
“For example, as the temperature rises the humidity rises, giving the potential for larger floods.” The report says the frequency of heatwaves has increased in Europe, Asia and Australia, but drought is expected to decrease in northwestern Australia and central North America. Lloyd’s says the climate is changing and it is imperative that any trends are considered and incorporated into catastrophe models. The report includes short articles by the major risk modelling companies. Climate change now part of cat models: Lloyd’s, 12 May
Major intermediary group Austbrokers is strengthening its management group to capitalise on the rapid pace of change in the broker market, Chief Executive Mark Searles says. The decision to bring together the group’s broker and intermediary distribution operations will help Austbrokers operate more efficiently and grow more effectively, he says. Bringing together the two divisions saw General Manager Acquisitions and Development Fabian Pasquini (above) named Chief Distribution Officer and General Manager Equity Operations Greg Arms leave the company. Mr Searles says Mr Pasquini will manage all aspects of broker and intermediary distribution,
Austbrokers keeps pace with market changes, 28 April
Rethink needed on flood
IAG’s Lumley NZ deal approved
IAG will be allowed to acquire Wesfarmers Insurance New Zealand assets following a decision by New Zealand’s competition regulator. The Commerce Commission has set no conditions on the acquisition, saying sufficient competition will still exist in the New Zealand market. In a decision this morning, the commission says it’s satisfied the acquisition “will not have, or would not be likely to have, the effect of substantially lessening competition, for personal and commercial insurance products”. The $1.845 billion of Wesfarmers’ underwriting business has proved more contentious in New Zealand than in Australia because of the market dominance IAG will gain with the acquisition of the third-largest insurer, Lumley NZ. IAG already owns NZI, State Insurance and AMI. The Australian Competition and Consumer Commission in March ruled not to oppose the deal but its New Zealand counterpart had to extend the deadline for its decision because of the number of submissions received. New Zealand Commerce Commission approves IAG’s Lumley takeover, 30 April
including acquisitions, partner development and growth initiatives. Mr Pasquini’s new role follows the appointments last year of former OAMPS chief Keith McIvor as Chief Broking Officer and former CGU national operations manager Sunil Vohra as Chief Operating Officer. Austbrokers now has its senior management team in place and no other changes are planned at this point, Mr Searles says. “Austbrokers is a $2 billion broking business and we will continue to evolve as the marketplace changes,” he told insuranceNEWS.com.au.
Zurich has called on governments, communities and insurers to rethink their approach to flood mitigation, particularly in Asia, where only 5% of losses are insured. “Flood is the fastest-growing natural hazard worldwide,” Zurich Regional Chairman of AsiaPacific and Middle East Geoff Riddell told insuranceNEWS.com.au. He says more people now live on flood-prone coastal plains due to population pressure and urbanisation. “The vast majority of money is spent on recovery after the event,” Mr Riddell said. “For every $90 in aid spent after the fact on flood disasters, only $10 is spent on mitigation. We need to be better prepared than we are.” Zurich has completed a study with the International Institute for Applied Systems Analysis and the University of Pennsylvania’s Wharton School, which shows how mass urbanisation and climate change will worsen the impact of floods. Worldwide flood losses nearly doubled in 2000-09 compared with the preceding decade, the report says. Coastal floods are likely to become more even frequent due to climate change. Over the past two decades nearly 87% of aid was spent on emergency responses, reconstruction and rehabilitation, with only 13% for reducing and managing risks. Zurich urges collaboration on flood mitigation, 2 June
Zurich reshuffles management pack Zurich Australia Chief Executive Daniel Fogarty has announced a major revamp of his senior management team. Former Executive General Manager SME Shaun Feely (left) has returned to the company after a two-year overseas stint and will become Chief Operating Officer. Bobby Lehane, who replaced Mr Feely as Executive General Manager SME, has had his role expanded to include the corporate market as Executive General Manager Commercial. It’s understood that Executive General Manager Corporate Nigel Whyatt will leave the company. General Manager Customer and Distribution Management Kai Dwyer will become Head of International Sales and Distribution. All the new appointments will take effect from April 30. Feely returns as Zurich revamps management team, 11 April
Steadfast enters the top 200 Steadfast will be placed on the prestigious S&P/ASX 200 index tomorrow after listing on the Australian Securities Exchange less than 12 months ago. The broker network has a market capitalisation of $787.6 million and has 501.6 million shares on issue, trading at $1.57 at the time of writing. Steadfast’s share price could benefit from inclusion on the S&P/ASX 200 because the stock will attract investors with portfolios weighted to the index. Rival group Austbrokers, which has a market capitalisation of $611 million, may be watching its competitor with some envy from outside the index. However, Austbrokers, which listed in 2005, can point to a more robust share price. It has 60 million shares on issue, trading at $10.05 on Friday – although this is well below its 12-month high of $13. Other insurance industry companies on the index are QBE, IAG, Suncorp and Cover-More. The broker group will be placed on the S&P/ASX 200 after the close of trading tomorrow. Aurora Oil & Gas is being removed after being acquired by Canadabased Baytex Energy Corporation. Steadfast joins S&P/ASX 200 rich list, 26 May
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The big story in claims Lumley, AIG, Chubb and Vero are among insurers to record improvements in the latest ratings on LMI Group’s ClaimsComparison website. Winners of the top five-star rating for handling of motor claims include AIG, Vero, Westpac and Youi. AIG, Chubb, CommInsure, Elders and Vero achieved five stars for residential cover. LMI Managing Director Allan Manning says Lumley recorded a strong improvement, gaining four stars for residential insurance and five for contents cover. The website, launched last year, is being expanded to cover the 17 business classes featured on LMI’s PolicyComparison site. It currently includes private motor, home, contents, small and farm business and travel cover.
hhhhh ClaimsComparison was launched using data from the Financial Ombudsman Service, but Professor Manning plans to add a quarterly survey of brokers, customers, repairers and other service providers. They will be asked about speed of service, accuracy – such as if claims staff are interpreting policies correctly – fairness and proactiveness. Professor Manning says he has had a generally positive response from insurers and brokers, and insurers are keen to gain insights from the data so they can improve their claims service. “We’ve never had a product take off as quickly as this one,” he told insuranceNEWS.com.au.
Rather than lament in perpetuity about the difficulty of recruiting the “right” kind of person for the insurance industry, maybe we should take some time once in a while to celebrate the remarkable people who do find their way through the door. In this issue you’ll meet Damien Honan, who stood in at his injured father’s brokerage for a few days and never left; and Chris Mackinnon, an insurance aristocrat who traces his industry lineage back to the beginnings of the modern industry. Their stories are interesting, and so are their views on life, work, the industry… We also feature some Australian insurance professionals in Singapore, where business is booming and the living is, well, different from back home. The figure on the cover, in case you don’t watch TV, is Aleksandr Orlov, of Compare The Market fame. He’s so cute and funny it’s almost a shame the way the major Australian motor insurers have shunned him. Wendy Pugh’s report on the comparators’ struggle in Australia should give us all pause for thought. What happens when they start selling products aimed at the SME market? Makes you think, doesn’t it? We like that. We also like you to understand the whole story on issues that directly affect insurance. Our aim is always to fill in at least some of the information holes that occur in our fast-paced and issues-packed industry. And it doesn’t hurt if we make you smile sometimes. If you’ve ever wondered how insurance issues get sorted out in Canberra, turn to Maglog down the back of the magazine and let Sam Pentecost demonstrate exactly how it’s done. Enjoy the read.
LMI hails five-star claims peformers, 28 April
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Good at evolution, not so good at revolution: Arthur J Gallagher President, Chairman and Chief Executive Pat Gallagher
Gallagher stirs the market
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Competition will increase as the No.4 global broker sweeps up OAMPS and Crombie Lockwood By Terry McMullan
THE INSURANCE BROKING SECTOR IN AUSTRALIA AND NEW Zealand is set for a shake-up with the emergence of a powerful new competitor in the local market. Arthur J Gallagher, a US-based broker that has grown significantly around the world over the past 30 years on a string of international acquisitions, spent more than it ever has before to buy Wesfarmersowned OAMPS in Australia and the UK, as well as leading New Zealand brokerage Crombie Lockwood. The $1.01 billion deal includes two associated premium funding businesses, Monument and Lumley Finance. Wesfarmers is receiving an additional $150 million to repay funding for its premium funders. Gallagher, the fourth-largest global broker, has operated in Australia for at least 20 years. Based in a suburb of Chicago, it has a unique service culture and has been run by members of the Gallagher family for its 87 years. If that makes it a “family brokerage”, it’s an unusually large one. Arthur J Gallagher has operations in 25 countries and offers client services in more than 140. It earns revenue of nearly $US4 billion and has a market capitalisation of about $US8 billion. Pat Gallagher followed family tradition by working his way up through the ranks, and when he succeeded his uncle Robert E Gallagher in 2006 he took the reins of a company that was already expanding. It entered the UK market in 1974 and hasn’t stopped since. The purchase of the Wesfarmers assets will see Gallagher emerge from a profitable but low-profile position in the local market. It has gradually bought up and built up some impressive diversified business, but this latest move will result in significantly more intense levels of competition in the Australian broker market. The company will leap to fourth place in the local broker stakes with the takeover of OAMPS. Given the Melbourne-based company’s position in the market and Gallagher’s operating model, there is speculation that OAMPS won't retain its name. The switch of emphasis from a “national company with local presence” to one where the availability of international expertise is added to the marketing mix means OAMPS will almost certainly adopt the very strong Gallagher brand. It would be foolish not to. The fate of the Crombie Lockwood brand may be more problematic, considering that company’s widespread recognition in centres across New Zealand. It’s New Zealand’s largest broker, and highly profitable. But it’s likely Gallagher will introduce its brand there as well, in time. Of more importance is whether OAMPS and Crombie Lockwood, united under one brand, have solid synergies that can be exploited by Gallagher. Under Wesfarmers’ control OAMPS and Crombie Lockwood operated as near-separate entities serving different markets. The sale to Gallagher, which is not expected to be ratified by the New Zealand Overseas Investment Office until the end of June, also brings Crombie Lockwood full circle on its ambition to become part of a major global brokerage. In 2007 the Auckland-based broker’s owners were within hours of signing a sales agreement with Willis when Wesfarmers was sounded out with a last-minute speculative phone call to see if the Perth company just might be interested. Wesfarmers gazumped Willis, and Crombie Lockwood’s dreams of being part of a global organisation were put on hold. insuranceNEWS
But not, it seems, entirely forgotten. Sources have told Insurance News that Crombie Lockwood co-founder Steve Lockwood, who is the Executive Chairman of Broking Operations at Wesfarmers Insurance, has been enthusiastic about the deal since meeting the Gallagher team led by President, Chairman and Chief Executive J Patrick (Pat) Gallagher earlier this year. In a note to staff in Australia and New Zealand Mr Lockwood circulated when the acquisition by Gallagher was announced, he urged them not to “waste any energy on whether this is the right thing to do. It is.” Mr Lockwood told Insurance News the sale to Gallagher “will produce an Australasian broking company sharing experience and expertise, rather than two separate companies operating in silos”. The potential of a brokerage that can serve local businesses and still open doors internationally – and that’s what attracted Crombie Lockwood to Willis seven years ago, after all – will probably overcome any fears about identity. Gallagher could also become a more active player in the local broker acquisition circus, with the US company also acquiring major Auckland-based brokers Mike Henry a few days before the Wesfarmers deal was announced. The pace and scale of Gallagher’s acquisitiveness, over the past year in particular, has been impressive. Shortly after paying the asking price for the Wesfarmers assets, the company acquired 87% of Noraxis Corporation, one of Canada’s five biggest brokers. While Pat Gallagher said earlier this month that the global buying spree is now over for a while – and his UK retail chief has actually begged for an intermission while he sorts out the integration of several high-profile companies into his operation – few doubt the mergers and acquisitions will completely halt. Much of the capital for Gallagher’s global acquisitions comes from a unique source: the company’s investment in a highly lucrative clean energy business in the US that reduces carbon emissions from coal power production. The business also receives grants from the US Government, which Gallagher uses to fuel its broker growth. Reliable sources have told Insurance News that Wesfarmers was well advanced with plans to offload the insurance brokerages through a public listing when Mr Gallagher contacted Managing Director Richard Goyder to discuss acquiring them. Having already disposed of the Wesfarmers insurance operations to IAG in December – the acquisitions were approved by the Australian competition regu, more controversially, the New Zealand regulator in May – Mr Goyder was keen to dispose of the broking assets at the top of the market. He succeeded. While the price raised some industry eyebrows, it reflects the high value of brokerages at present as Austbrokers, Steadfast and mid-sized players trawl the market for likely prospects. Wesfarmers expects to book a pre-tax profit of $310-380 million on the sale of the broking and premium funding businesses. Mr Lockwood will become Gallagher’s chief executive of property/casualty brokerage operations in Australasia. It was a logical move; he has deep knowledge of the two brokerages, and a proven background in business development. Other management positions have not been announced by Gallaghers, and are unlikely to be before regulatory approvals are completed. Crombie Lockwood Chief Executive Carl O’Shea is understood to be keen to stay on at the company. In Australia, OAMPS Chief Executive Mike Cutter and Arthur J June/July 2014
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Enthusiastic about the deal: Wesfarmers broking chief Steve Lockwood
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Gallagher Australasia Chief Executive Andrew Godden’s roles may be more clearly defined over the next two months. Gallagher is not only a formidable force in broking. It is also a big player in claims management and an increasingly impressive force in underwriting. Its Gallagher Bassett operation, which is managed separately, is one of Australia’s leading claims management companies, and operates globally. Late last year Australia’s largest Lloyd’s underwriting agency, SRS, was acquired by Gallagher for an undisclosed sum. The former owner of SRS, Paul Lynam is now Chief Executive of Gallagher’s underwriting operations in Australia. SRS has now been brought together with Australis Underwriting, which was acquired by Gallagher in 2005 and became a base for a string of underwriting agency acquisitions. It’s likely the SRS and Australis titles may also disappear in the near future. Gallagher owns some 16 underwriting operation around the world, and there is speculation in the London market that these may be brought under one global brand. The combined Australasian operation owned by Gallagher – including Gallagher Bassett and the underwriting arm – employs about 2500 people. That makes the company a more-than-capable competitor in Australia and New Zealand. And it will be interesting to see the Gallagher model at full stretch alongside international and local broking groups. In his note to staff Mr Lockwood referred to the Gallagher operation as “a very big company, but at heart they are brokers. They obviously ‘get’ the business and what running a successful broking business is all about. “They don’t make a big deal about their size, and Pat [Gallagher] talks more about the single client experience delivered through quality people.” When this writer met Pat Gallagher in 2006, we discussed the role of the broker. “First and foremost we give advice, whether we do it electronically, telephonically or in front of you – and most people are going to want you to be in front of them. A trusted adviser needs to be there. “When you have a claim I am the guy that has a commercial relationship with someone to get that claim paid; I am the one that will coach you through it. “If you’ve ever seen a bad loss what you’ll notice is a good broker will be on the scene. I learned this from my dad at the dining room table.” He also said Arthur J Gallagher is “very good at evolution, but we’re not really good at revolution”. “You’re not going to see us try to come into a country like Australia and make a big acquisition somewhere and then try to put a flag in the ground that says we need to be third-largest in Australia to be here. That’s not our style. “We are very good at building businesses. We do it on an opportunistic basis, and that’s how we’ve built up. “In all of those countries where we need to take care of our * clients, we have relationships.” June/July 2014
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Slowing down up north Premium rises are finally easing in Queensland, but the industry still faces criticism and government tinkering By Jan McCallum
AFTER FOUR YEARS OF dramatic premium increases, rates in north Queensland appear to be slowing. That doesn’t mean they are going down, but after watching premiums double in a year some brokers see signs of hope in rates rising by “only” 10% this year. However, a slowdown is not enough to impress one of the industry’s strongest critics. Federal MP Warren Entsch contends there is insurance market failure in north Queensland. He tells Insurance News reports of increased capacity are “encouraging”, but more action is needed, particularly on strata cover. The insurance industry argues cover is available but the cost must meet the risk of substantial claims in a region regularly hit by cyclones and floods. Townsville-based Aon Regional Manager David Reid says capacity has increased “and there is hope of greater competition”. “We have certainly seen in the first quarter a flattening of 14
rates within the commercial sector, but that does not apply to the private sector, which is where we tend to hear a lot of the noise,” he tells Insurance News. Mr Reid says business owners have experienced premium increases similar to the jump in personal lines since Cyclone Yasi in 2011, and many have had to absorb these cost rises of up to 200%. Optimus1 Insurance Brokers director Barry Koch, based in Cairns, says placing cover depends very much on the class of business. Cafes are easy but country pubs remain difficult: “The premiums are extreme and the excesses are extreme.” He says premium rises have levelled off and “it’s not getting any worse”. The same applies to home and contents cover. “Renewals are either close to last year or there are modest increases of about 10%. For the past four years, every year we have had 30-300% increases,” Mr Koch says. Doug Olsen, whose Far North Insurance Brokers has offices in Cairns and Innisfail, insuranceNEWS
says some direct insurers that entered the market seem to have stopped writing cover, possibly because their treaties are full. Insurance costs are affecting business “and insurance premiums are being blamed for an extremely slow real estate market. It has ripped a lot of disposable income from people.” Mr Olsen accepts premiums have come from a very low base – artificially low based on high levels of competition – “but that does not mean they are correct where they are now”. Nor does he believe some of the risk rating is accurate. The focus on cost and access to cover in north Queensland has increased since the Federal Government changed last year, with the May Federal Budget giving Treasury funding to establish a comparison website and federal funding for the State Government to give grants to body corporates to undertake engineering assessments. The Australian Government Actuary is preparing a study into insurance prices for strata properJune/July 2014
ties over the past eight years, comparing them with Melbourne, Sydney and Adelaide. The scope of that investigation has widened since its last report in 2012, which found on average strata premiums had tripled since 2007, having been underpriced for years. It stated that for every $100 of premium earned between 2007 and 2012, plus investment returns, insurers paid out $130 in claims, commissions and operating expenses. In the 2007 and 2009 financial years there were no significant natural disasters, but base profitability was still poor at less than 10% of premium. The calculations exclude reinsurance costs, which the report estimated had risen 65% since 2007. The cost of cover has become a key issue in Prime Minister Tony Abbott’s plan to develop northern Australia. Mr Entsch, whose electorate of Leichhardt stretches from Cairns to Cape York, says economic development cannot occur unless workers are willing
Cyclone on the way: Cairns property premiums are “not getting any worse”
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to move north, and they won’t do that if housing is too costly or unavailable. He says the market for units has plunged around Cairns due to the cost of insurance for body corporates. Mr Entsch is looking for a verdict of market failure from the actuary, “which broadens options for government intervention”. Despite that comment, he wants to see action from the insurance industry rather than the Government. “Anything they do that returns accessibility and affordability to northern Australia will be infinitely better for them than significant legislative changes that we bring in,” he told Insurance News. The Insurance Council of Australia (ICA) rejects the assertion of market failure, pointing out that strata units were until recently paying about one-third of the premium on stand-alone residences in their neighbourhoods, and losses from cyclones such as Larry in 2006 and Yasi have forced insurers to reprice risk. “Most people have started to understand they have had a premium holiday for a decade and now are paying the same as their next-door neighbour,” one insurer executive told Insurance News. “Strata properties may look all right from the outside after a cyclone yet have suffered $1 million of damage to carpets and substantial damage to the electrical [systems] when the basement is flooded. People are still buying insurance and prices have risen to where they are technically sustainable.” There has also been considerable non-headline-grabbing action on identifying risk, so it can be priced more accurately. Last October the Queensland Government signed a memorandum of understanding with ICA to give insurers free access to all existing and future government flood mapping and elevation data. Access to the Queensland Globe mapping allows insurers to analyse flood lines from the floods of 2011 and last year. 16
ICA Chief Executive Officer Rob Whelan says the council will work with Queensland’s Department of Natural Resources and Mines to identify where hazard mapping can be improved. Townsville-based James Cook University is designing an engineering inspection scheme for strata title properties, which was commissioned by ICA in response to the university’s study last year on strata issues. The study recommended strata owners undertake regular property inspections to identify areas of weakness. The inspection scheme will give them a tool to do this. Owners can use
expects a positive response from body corporates if they see their cost of insurance falling. Lack of competition is identified as one obstacle to increasing affordability in a region where some insurers have withdrawn from providing cover. Cairns-based Joe Vella Insurance Brokers has launched 26North, a new commercial business underwriter, but more competition would be welcomed by the remaining insurers, which have been expected to shoulder a greater percentage of the risk and face holding an unbalanced portfolio.
“We need insurers to come back into the market and they have to know they will make money.” the reports to address mitigation and negotiate with insurers. CGU has begun its own strata inspections via its Strata Unit Underwriters subsidiary, which has led to premium increases of 3% to 15% for four properties in Townsville, which was the pilot for the project. “We are looking at starting in Cairns now and aiming to complete surveys of over 600 properties in north Queensland by the end of this year,” a spokesman told Insurance News. Insureds are asked 80 questions and the surveys are done on site rather than having the strata managers send the information. “The aim of strata surveys is not only to reduce premiums through risk management but to increase capacity,” the spokesman said. But it’s a longterm aim. Mr Olsen says there has been no tangible increase in capacity for strata, while Mr Koch says there has been some flattening of strata rates “but nothing to get excited about”. It’s early days for the engineering inspections, but he insuranceNEWS
“We would like to encourage more insurers into the north Queensland market,” Suncorp Chief Executive Patrick Snowball told a briefing earlier this year. While insurers are often vilified in the north and accused of ripping off consumers, it’s worth noting brokers regard the companies that have remained as heroes. Brokers also understand reinsurer pressure on the insurers. Mr Koch says the insurers remaining in the region should be applauded for sticking around. “They are taking on a lot of the market share and taking on a lot of the claims as well. We need insurers to come back into the market and they have to know they will make money.” Mr Reid says brokers “can make a high- quality submission to the market, but cat rates are cat rates”. “There is little the insurers up here can do to reduce the cost of insurance because we are so heavily influenced by the international reinsurance market and it has put a price on our region.” June/July 2014
Mr Olsen notes that the remaining insurers are Australian companies and wonders whether the local arms of foreign insurers have been ordered to withdraw from the region. Federal Treasury is investigating how to insurers should establish and maintain a comparison website for home and contents and strata cover in north Queensland, a proposal the industry will resist. Insurer executives don’t want to take on the Federal Government but have told Insurance News they will not be ordered to set up a site that commoditises their product by valuing it solely on price. They note the UK Financial Conduct Authority is investigating such websites amid claims of an “expectation gap” when consumers discover they have bought cheap insurance that does not provide the cover they need. QBE, Zurich, Lumley and Suncorp are still major underwriters of commercial cover in the north. Mr Koch says some insurers are very selective, and for many risks there is only one company that is interested. “As long as the insurer keeps extending it you are okay.” Brokers are doing as much as they can to advise clients on risk mitigation and preparing the best-possible cases to present to underwriters. Mr Reid says Aon has brought risk management expertise to the region and worked with clients on ways to quickly recover from losses, so businesses remains trading. “We hope risk management can influence premiums, but in the main it enables us to better advise our clients on what they can do to mitigate loss of assets and allow them to develop a solid and informed continuity plan around risk management,” he says. “The business community in northern Australia, particularly northern Queensland, has come to understand the insurance costs will never be what they * used to be.” Maglog, page 98
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Beware the meerkat Comparators are proving a hit with consumers, but opponents warn of hidden dangers By Wendy Pugh
Cute, but severely constrained: Sergei and Aleksandr won over British consumers, but the leading Australian insurers are holding them at bay
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COMPARETHEMARKET.COM.AU is not surprised comparison websites are attracting more attention and also coming under regulatory scrutiny. As far as it is concerned, it simply reflects a surge in online browsing and buying that is empowering consumers. The financial system inquiry has noted the online comparison trend, and the Federal Government is planning to build its own aggregator site to help resolve insurance problems in cyclone-prone north Queensland. Meanwhile, the Australian Competition and Consumer Commission (ACCC) says examining comparator websites across a range of industries is a key priority this year and the Australian Securities and Investments Commission (ASIC) also has them on its radar. “The demand is moving online for research and comparison and regulators have seen the need to move their attention more online too,” Comparethemarket.com.au Managing Director George Meligonis tells Insurance News. “I don’t think it’s a surprise that the ACCC, ASIC and other regulators are having to shift their focus from the traditional bricks-andmortar space to digital platforms.” More Australians are investigating and buying products and services online, whether it is health insurance, broadband plans, electricity, gas, flights or rental cars. But the sector faces some challenges when it comes to general insurance. The major property and casualty players are not participating, leaving the sites largely as platforms for challenger brands and unable to replicate the UK experience, where comparators are a major force in insuranceNEWS
motor and home cover. Standard & Poor’s estimates new entrants to Australian retail product lines have captured up to 4% of total market, mostly in motor insurance, and the lack of aggregator traction is proving a positive for property and casualty profitability. “In the UK, they generated intense price competition and discounting,” S&P says in a report. “However, in Australia larger insurers have chosen not to participate, somewhat curtailing this channel.” It says customers have also shown quite strong brand loyalty, preferring to remain with established insurers, possibly due to better service perceptions and for peace of mind. iSelect, which listed on the Australian Securities Exchange last June, is the largest insurance comparison site. Others include Choosi, owned by Hollard Financial Services. Comparethemarket.com.au – part of the international Budget Holdings group – was launched as the Australian version of a similarly named UK site in January last year. Advertising campaigns have raised the profile of these websites, but consumer interest groups warn visitors may not recognise shortcomings, such as how little of the total market is being compared and that brands may be part of the comparator’s parent group. “Comparator websites are an important marketing tool for businesses,” ACCC Chairman Rod Sims says. “These websites can improve transparency and promote competition; however, the information displayed on them can on occasion mislead consumers in significant ways.” Suncorp and IAG, the dominant players in the Australian personal lines market, reject the comparator sales channel, and say a focus on 19
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Reasons for using online comparison services Lower price
Better-informed purchasing decision
Simpler comparison Easier to find information
Compare products with different features on pricing, which would make comparison confusing
Simpler to find information
Personalise/tailor the product or service
Expert advice Source: Nielsen Australia March 2013 Research
price can leave consumers more exposed to risks than they realise. IAG’s NRMA and CGU, and Suncorp’s AAMI, Bingle and GIO brands are not offered on iSelect or Comparethemarket.com.au. Brands that do feature include Budget Direct, Australia Post, Real Insurance and Woolworths Insurance. “Insurance is not a commodity, it is a service, and aggregators tend to highlight price over service,” Suncorp Head of Strategy and Corporate Affairs Chris Newlan says. “We believe this is likely to increase the chance of leaving customers underinsured and with products that do not provide the most appropriate cover for their circumstances.” He says research shows 97% of consumers are unaware of the fee and commission structure aggregators employ, and the process lacks transparency. IAG takes a similar stance, according to its spokesman Paul Marriage. “In general, we don’t believe price comparison sites provide customers with all the information they need because they don’t take into account the different benefits and features of individual policies and features,” he says. “They also don’t reflect customers’ experience in having claims settled, which is an essential factor.” The rise in comparator sites follows surging internet use as 20
consumers shop with phones, tablets and home computers, and more products are available online. Submissions to the financial system inquiry, which will release an interim report in July, have highlighted the trend and some of the risks. “Traditional product disclosures are falling behind technological innovation,” inquiry Chairman David Murray told a business lunch in May. “Consumers now regularly compare products online.” The Australian Communications and Media Authority says 10.81 million people went online more than once a day at the end of last financial year, up 7% on the previous year and 72% on June 2008. In terms of transactions, 12.86 million people used the internet for banking or paying bills in the six months to May last year, up 10% on a year earlier, while 10.44 million traded goods and services online. Consulting company Accenture says Australian aggregators are increasing in popularity. Between July 2012 and April last year, site use grew 44% for motor insurance and 50% for home insurance. iSelect began in 2000 with health insurance, moved into life in 2007 and offered auto in 2009 before a broader expansion. The company also owns the InfoChoice site. This year iSelect extended a motor distribution agreement with Auto & General for two years, under insuranceNEWS
a deal that lowers commission rates while expanding the product range. The agreement also introduces Budget Direct home and contents insurance to the website, where it is currently the only product offered in that category. Prospective customers are required to tick a box noting the brand is not compared with policies from other providers.
“Traditional product disclosures are falling behind technological innovation... Consumers now regularly compare products online.” iSelect has undergone a management upheaval and share price slump since its ASX debut, but says car insurance revenue grew 31.6% to $5.1 million in the six months to December 31. Total reported revenue gained 18.3% to $55.8 million. Mr Meligonis says he has seen a slight shift in the attitude of some major insurance suppliers towards aggregator sites.
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“The emergence of comparison websites in insurance – and we should remember they already exist in the banking, travel, real estate and auto industries among others – will allow that segment of the market that most values a low price to find it more easily, and that is a good thing.”
Why insurers won’t let comparison sites share their data • UK comparison sites now account for 40% of the UK personal lines market, and 56% of the UK motor insurance market. • Datamonitor says 30% of UK consumers across all personal lines select the cheapest policy option on the page, with a further 58% selecting a policy within the top five cheapest quotes. • Australian insurers say comparison sites are all about price, without considering factors like policy features and claims experience. • In Australia, IAG and Suncorp hold up to 80% of the personal lines market, and the local motor insurance customer base is slow to move to a new insurer. Comparison sites encourage consumers to shop around each year. • The UK personal lines market was dominated by brokers. The commissions they were paid became the margin that comparators could use to compete in the market. The Australian personal lines market, by contrast, is predominantly direct, robbing comparison sites of their leverage. • The issue of transparency is particularly troubling for the Australian regulators. Compare The Market, for example, is owned by Budget Holdings. The 10 motor insurers it offers details for are all underwritten by one of two insurance companies – Budget’s A&G itself or Hollard. Some of the brands, like Budget Direct, are wholly owned by A&G.
On the health side, Bupa recently joined Comparethemarket.com.au, while the company continues to approach IAG and Suncorp on general insurance. “Comparison is here to stay and the big brands will need to participate if they want to take part in the volume of customers who want to shop through this channel,” he says. “In all other areas, other than the general insurance space, we have successfully managed to attract all the large brands and large providers to our website.” The site has strengthened its insurance product features section in response to feedback, so users can look at differences between policies sold through the comparator and those of non-participating companies. Car and home products on Comparethemarket.com.au are mostly underwritten by Auto & General Insurance, also part of the Budget group. Woolworths Insurance, underwritten by Hollard, recently joined the site. Auto & General also owns the Captain Compare site. iSelect’s general insurance range is also mainly underwritten by Auto & General, including the company’s own Heels n Wheels, Kudos and Silver Fox brands. The site advises in a pop-up window that “at present iSelect does not offer car insurance products from all general insurers”. Choosi’s range of pet insurance products are underwritten by Hollard. “The emergence of comparison websites in insurance – and we should remember they already exist in the banking, travel, real estate and auto industries among others – will allow that segment of the market that most values a low price to find it more easily, and that is a good insuranceNEWS
thing,” Hollard Australia Managing Director Richard Enthoven says. “They will also serve to remind consumers of the value of advice and the benefit of shopping on factors other than advice, and this is also a good thing.” iSelect says Nielsen Australia research shows comparator visitors believe the sites save money, time and effort compared with shopping around independently online or through traditional channels, and people are able to find products better suited to their needs. Other supporters argue the sites bring competitors into the arena and encourage them to offer their best features and prices to win over consumers.
The potential benefits of aggregating information have sparked interest from the Federal Government as it tackles soaring premiums and lack of competition in the north Queensland insurance market. The May Federal Budget allocates funds over the next four years for Treasury to develop a comparison website for strata title and home building and contents cover in the region.
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“Consumers don’t need a website, they need advice from a competent, qualified professional insurance broker who can advise them on their best options and work to get the best deal from the insurers.”
The level of funding is undisclosed “due to commercial sensitivity”. The move follows a Treasury discussion paper that floated the aggregator proposal and requested submissions by early June. “Where they are used to compare on price, aggregators are considered to increase competition and put downward pressure on prices,” the paper says. “They have been particularly successful in the UK and have been cited as a factor in putting downward pressure on premiums in the motor vehicle insurance market.” The percentage share of UK private motor insurance sold online, mostly through aggregators, grew to 51% in 2008 from 2% in 2001, according to Accenture research featured in the Treasury paper. National Insurance Brokers Association Chief Executive Dallas Booth says NIBA has strong reservations about the proposal and will be making its views known in a submission. “ASIC has already issued public warnings about the shortcomings of commercially operated comparison websites and the difficulties of comparing like with like,” he says. “When it comes to difficult insurance-related issues, consumers don’t need a website, they need advice from a competent, qualified professional insurance broker who can advise them on their best options and work to get the best deal from the insurers.” QBE Australia Executive General Manager Corporate Partners Tim Plant says comparison websites can exacerbate the confusion consumers face when looking to buy insurance. “While some products, such as motor insurance, may lend themselves to a comparison site, we believe it is important to have long24
term relationships with our customers that are based on the quality and suitability of cover and the service we can provide, not just the lowest price” Minter Ellison partner Pam Madafiglio, who heads the firm’s insurance practice, says Insurance Contracts Act amendments allowing communication to be sent electronically could lead to more disputes when combined with price-based comparison sites. Buyers are more likely to be caught up in innocent non-disclosure because they have not read electronic forms carefully – an issue courts have had to consider in cases where a person has limited education. At an Insurance Council of Australia regulatory seminar, ASIC Deputy Director Peter Kell surmised there would be “virtually no one in the room” who had not compared products and services online. “ASIC’s role here is in helping to ensure as far as possible that information is presented in a way that is accurate,” he says. “I know there have been some challenges with these sites in other jurisdictions, but I think there is also the opportunity for these sites to facilitate competition and better consumer information.” The more extensive UK general insurance comparison sector has its own problems and faces regulatory scrutiny following its expansion. The UK’s Financial Conduct Authority (FCA) last year began a review of insurance comparators, focusing on 14 sites that represent 90% of the motor, travel and home markets. It follows concerns about an “expectation gap”, in which people save money initially but later find claims are not covered. “We’ve all used a price comparison website so we know how simple insuranceNEWS
they make buying motor, travel or home insurance,” FCA Director of Supervision Clive Adamson says. “We don’t want to lose that convenience, but we do need to ask the question, ‘Does cheapest equal best?’. We want to get to a place where consumers that use these sites buy with confidence, knowing they have all the relevant facts.” The FCA report is likely to be out later in the UK summer, a spokesman told Insurance News. Mr Meligonis says regulators keeping tabs on comparators is in the best interests of the businesses and site visitors, as consumers seek simpler paths to finding the best products rather than doing the legwork themselves.
“We know four out of five Australians believe there is a better insurance deal available for them, but, amazingly, research has shown very few people will look to find that better deal because it is too hard to shop around and compare,” he says. “As a consumer advocate business we firmly believe being reputable, relevant, transparent and user-friendly is what is going to drive * our success going forward.”
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No knowing when it will happen again: “The Floods on the Hawkesbury – The Drowning of the Families of William and Thomas Eather”, from the July 1867 edition of the Illustrated Sydney News, sourced from the National Library of Australia digital archive
Valley of the dammed Raising the Warragamba Dam won’t eliminate the flood threat west of Sydney, with inadequate evacuation routes and a complacent population adding to the danger By Wendy Pugh
THE CONCLUSIONS ARE STARK: FLOOD risks in the Hawkesbury-Nepean Valley, northwest of Sydney, will not end if the Warragamba Dam is raised. Population growth is raising the stakes. A co-ordinated planning approach is lacking. Evacuation is the only action guaranteed to save lives, but roads are inadequate and residents unprepared. The findings feature in the first stage of the Hawkesbury-Nepean Valley Flood Management Review, launched early last year after floods in Brisbane and eastern Australia highlighted the risk on Sydney’s doorstep. “There is no simple solution or single infrastructure option to deal with the complexity of the flood issues in the valley,” the report from the Office of Water says. “The risk of flooding in the valley cannot be eliminated.” insuranceNEWS
Stage one delivers 10 strategies and 20 recommendations, plus some sharp criticisms and clear warnings, as it aims to reduce and manage risk through prevention, preparedness, response and recovery. “At first blush, the report provides a very candid assessment about the flood risks facing western Sydney,” John McAneney, Managing Director of natural hazards research centre Risk Frontiers, tells Insurance News. “The unusual nature of the drainage in the catchment, the speed at which water can rise in very rare floods and the depth of these waters over the flood plain makes the management of the flood plain and the safety of the population complex.” Raising the height of the Warragamba Dam, which is about 65km west of Sydney, is judged the most effective measure and the only infrastructure project that will
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make a significant difference. Beyond that, it is a case of making sure people can evacuate in time and that the issue is better managed in future, to reduce danger to lives and property as regional growth continues. A New South Wales taskforce, led by former Sydney Catchment Authority chairman and board member Mark Bethwaite, is moving on to stage two of the review and will report by mid-next year. Its work will include cost-benefit analysis of raising the dam and consultation on a range of other proposals. In recent weeks the taskforce has met key stakeholders to set priorities. “Feedback from local councils, the Insurance Council of Australia and the Floodplain Management Association will be an important input into stage two,” an Infrastructure NSW spokesman says.
Despite the risks and a long history of flooding, there is currently no major infrastructure dedicated to mitigation in the valley. Construction of the Warragamba Dam began in the 1940s after severe drought and population growth sparked water shortage fears. Meeting Sydney demand remains the focus, with the dam accounting for about 80% of the city’s water supply. The report looks at the impact of raising the dam wall by 15 or 23 metres so it can also be operated for flood mitigation. The extra height would lead to significant reductions in risk, reduce the frequency of large flooding events and provide more time for evacuation, but the geography of the valley means there could still be extreme events. “No dam option eliminates the flood risk,” the report says. insuranceNEWS
A separate summary document says further analysis is needed on the project, which would be costly, could take 10 years to complete and may lead to temporary flooding of upstream national park and World Heritage areas in large events. Mark Babister, Managing Director of hydrology consultancy WMAwater, says developing the Warragamba for flood management is a sensible mitigation measure provided it does not lead to a sense of complacency that weakens land use controls. “If we build a mitigation dam and lower the planning level and allow more development in the flood plain to occur then the reduction in risk is likely to be completely offset by the additional risk we import,” he tells Insurance News. The review also suggests further research into more immediate measures such as cutting the dam’s full supply level 27
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Raising the wall won’t eliminate the flood risk: Sydney’s Warragamba Dam
“The valley could fill like a bathtub in the right conditions, with water levels rising by 50cm an hour for several hours and topping a metre an hour...”
by up to five meters, so there is more space to store floodwater, and changing the operation of the gates. But these actions would have a minor impact that is helpful only in small floods. Dredging and diversion projects are rejected because they would cost as much as raising the dam while providing half the benefit and having large environmental effects. The review finds limited potential for local mitigation using levees because of the extreme depth of flooding in the valley, particularly in the Richmond-Windsor area. Complexity is created by the region’s geology. The Hawkesbury-Nepean Valley is different from other Australian coastal floodplains because large upstream catchments and narrow downstream sandstone gorges can cause water to back up behind natural choke points. The valley could fill like a bathtub in the right conditions, with water levels rising by 50cm an hour for several hours and topping a metre an hour for short periods. A house on the lower areas of the floodplain could be submerged in six hours or less. The river reached 19.7 metres above sea level at Windsor during the worst floods on record in 1867, while sediment analysis shows at least one flood before European settlement was a one-in-1000 year event. The potential for fast-rising water, the size of the population and low-lying escape routes mean that to get everyone out in time, evacuation would have to start based on uncertain rainfall and river forecasts, and before residents can clearly see the danger. Hawkesbury-Nepean roads have areas insuranceNEWS
that are cut off before higher inhabited locations are inundated. It leads to isolated “islands” that could flood in extreme events, endangering the lives of people who delay their escape. “Most people are reluctant to do anything until they see the water coming through the front gate or the fire over the hedge,” Professor McAneney says. If the 1867 flood happened today, about 45,000 people would need to be evacuated, damage costs could reach $4 billion and economic impacts would be far-reaching. In a worst-possible flood around 73,000 people would have to be removed from the danger and more than 20,000 homes would be at risk of failure, the report says. The challenges are rising as Sydney’s hinterland attracts more residents. The area’s population has grown 67% since 1997 and more than 70,000 people are now living in flood-prone areas. The draft Metropolitan Strategy for Sydney says the west sub-region, mostly within the Hawkesbury-Nepean Valley, will have a population of 89,000 by 2031. Despite the risks, the community does not see flooding as particularly life-threatening. Fewer than 10% of people have a flood plan and 20% are unlikely to evacuate if directed to do so, surveys show. Richmond, Windsor, South Windsor, Bligh Park, Pitt Town and McGraths Hill are among towns that could become flood islands during large events, the report says. The paper uses the example of Windsor, where people would need to flee a major flood before the Jim Anderson Bridge is cut. The State Emergency Service says an evacuation could take 25 hours, a
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The bathtub effect: a graphic from the NSW Government report showing northwestern Sydney's growth centres and how natural "choke points" increase the area of inundation in a probable maximum flood
“Failure to deliver education programs will result in a community not primed to respond quickly to warnings, resulting in rescue operations – rather than evacuation.”
67% increase from the 15 hours estimated when the bridge was completed in 2006. Risk Frontiers Senior Research Fellow Katharine Haynes says the community must be involved in the entire discussion on managing and preparing for floods, and it is not enough to just tell people about the risks. “There is no direct correlation between knowledge and taking action,” she says. “There are a range of underlying factors that inhibit people. “If you involve the public much more in the decision-making processes around flood mitigation, and they come on board as partners and help create the solutions, then they are much more involved and more likely to take action and be happy with the risk-reduction measures that are put in place.” The report says failure to deliver education programs will result in a community not primed to respond quickly to warnings, resulting in rescue operations – rather than evacuation – becoming the focus. It also stresses the importance of adequate resources for the State Emergency Service, so it can plan for and manage events. Improving road and transport infrastructure is critical to the proposed flood management measures, with past evacuation plans out of date and traffic congestion risks potentially threatening lives in a severe event. “The long evacuation times and use of uncertain rain forecasts results in complicated and risky evacuation decisions,” the report says. “To overcome this problem across the valley, the capacity of evacuation routes needs to be increased.” insuranceNEWS
A program of cost-effective road improvements to boost evacuation capacity in the short to medium term is required, along with better regional transport infrastructure and development of a comprehensive road evacuation network model, according to the review. More generally, the report proposes a move away from the current “silo approach” to governance on a range of issues. “Continuation of a non-integrated approach to flood management poses risks to life due to capacity of evacuation infrastructure being exceeded by infill and greenfield development,” it says. A dedicated group within an existing agency is recommended to drive a regional approach to land use, infrastructure and evacuation planning and flood modelling. Issues in current land use practices include the default planning level, which focuses on the expected flood depth in a one-in-100 event, plus half a metre. For much of Australia, the difference between a one-in-100 flood depth and the probable maximum flood is less than two metres, but the Hawkesbury bath-tub effect pushes the difference to as much as nine metres. The 1867 flood was estimated to be between a one-in-200 and one-in-500 year event. “It is commendable that the report examines the issue from a catchment-wide perspective rather than by local council areas, and that it considers floods beyond the notional one-in-100 year event,” Professor McAneney says. “The water can keep rising.” Use of such estimates can also create a false sense of security among communities, by suggesting that once such an event hap-
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“It is impossible to determine when the next major flood event in the Hawkesbury-Nepean Valley will occur.”
pens another will be a long time coming. A one-in-100 event indicates that every year there is a 1% chance of such a flood happening; an event could occur several times, or not at all, over a century. “History has shown that flood events such as these can happen numerous times within a single decade,” the report says. Inconsistent and ineffective land use planning in flood-prone areas is a problem under current arrangements, while an inadequate state-wide overview adds to the confusion. A NSW planning policy for natural hazards and a guideline for flood-prone land are proposed, as well as improved planning tools that can be used in the process. The review recommends liaising with the insurance industry and the National Flood Risk Information Project to improve use of flood risk data. The Queensland Government and the Insurance Council of Australia (ICA) last year signed an agreement to exchange information and identify areas lacking solid flood data. “Financial recovery from major flood events is dependent on the uptake of flood insurance,” the Hawkesbury-Nepean report says. “The recent memorandum of understanding between ICA and the Queensland Government to exchange flood modelling and insurance information may provide a model for future co-operation in NSW.” ICA has met the NSW taskforce chairman and has been invited to participate in a stakeholder group on behalf of the insurance industry.
“As a first step in the process, a regional-level flood model covering four separate local government areas is to be completed, and should be made available to ICA for access by its members,” ICA General Manager Policy, Risk and Disaster Planning Karl Sullivan tells Insurance News. “ICA believes the [state] Government’s focus on this issue is important because of the significant risks to communities living in the Hawkesbury-Nepean region.” News reports from the 1867 flood at Windsor and Cornwallis are dramatic and include accounts of 12 members of two families drowning after a rooftop was overcome by rising water. “The wind at times blew furiously, the rain came down in torrents and the waters rolled over the plain with tumultuous impetuosity,” the Illustrated Sydney News wrote. “Women and children were seen walking about half naked, cold and hungry. The town was divided into islands, which were gradually and terribly diminishing.” The region has experienced many floods since then, but memories are short and the issue often takes a back seat to drought concerns. The 2011 disaster in Brisbane turned a spotlight back on the dangers, while the Warragamba Dam spilled in 2012 for the first time in 14 years, also providing a grim reminder. “It is impossible to determine when the next major flood event in the HawkesburyNepean Valley will occur,” the report says. Investigations so far make it clear there is a lot of work to be done before the * region is ready for when it does.
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Honan truths The 50-year-old company his father established goes its own way, and Damien Honan is exhilarated by the journey By John Deex
DAMIEN HONAN HAD JUST FINISHED university when his father Geoff broke his leg skiing. At that stage an insurance career was the last thing on Damien’s mind. He had studied banking and finance at what is now Monash University, and the world of commerce beckoned. But to help out in an emergency, he went in to his father’s company, G Honan and Associates, to make sure the two employees turned up at the Forest Hill office. “They would have turned up anyway,” Mr Honan says. “But I never left. That is how I got into insurance, and I am still here 30 years later. “It wasn’t planned. No one wakes up and says, ‘I’m going to be an insurance broker.’ Well, not many.” Geoff Honan had grown the business he established in 1964 to be one of Australia’s leading life insurance and superannuation consultants for Norwich Union Life Agents. In 1993 Mr Honan bought the business from his father, who retired in 1995, and over the next two decades expanded into corporate and international insurance broking services. “Dad’s 85 this year and in good health. He still comes in here and potters about.” In 2001 two major milestones were passed – starting operations in Sydney and being accepted as an owner of the Worldwide Broker Network (WBN), through which Honan tackles a significant amount of international business. In 2009 Mr Honan was made chairman of WBN. “I was the first from outside North America and Europe, and I was the youngest, something different,” he says. “It helped advance our brand both nationally and internationally.” Offices in New Zealand and Singapore opened in 2009 and 2010 respectively, and the company now employs about 140 people, writing $175 million in premiums. Some of the key principles behind this transformation include a clear strategy, taking calculated risks and investing in the business and its staff. “We haven’t bought a business,” Mr Honan tells Insurance News. “It’s all been strategy and organic growth. But I haven’t 34
“It is extraordinary the number of senior finance people at companies who are in their early to mid 30s who are engaging us for advice as opposed to doing it themselves.” done it all – you have to have good people. “Back then we recruited people out of the bigger broking houses and sold them the dream about what I thought I could do. They could stay at a big broking house and be part of the numbers or come out with me and try to have some fun.” Until the early 2000s it was all about recruiting from institutional brokers, but then the focus shifted. Mr Honan targeted staff who had been formally educated – a sign they had capacity to learn and understand process. “That formal education process does help you along. It doesn’t mean you are going to be a good insurance person, but it’s a good start.” Diversifying the business has been crucial because Honan aims to cover every aspect of risk. “We look at the full holistic risk of a company and that’s where I see this industry going,” Mr Honan says. “I spend a lot of time in the US and the large independent firms there are very focused on this – being able to scope your services to look at the total risk. “Whether it’s supply chain risks or thirdinsuranceNEWS
party risks or internal risks, you’ve really got to have the resources or solid relationships you can outsource to. That’s where it’s going and that’s where we’ve geared our firm to be.” Mr Honan says honest adherence to the concept of service is fundamental to the success of any professional services business. “It’s an easy thing to say and obviously there are different values and definitions of what service is, but leaving your client or your relationship in a satisfied manner – that is really what you have got to do.” There are an increasing number of challenges in the local market, but Mr Honan believes companies with a clear strategy will still thrive. “Those firms that have a strategy in place and understand their business all seem to be growing considerably, as we are. “Those firms that don’t would be struggling. The feedback from carriers is that there are a lot out there who just open the door and hope the phone rings. That’s fine if that’s what you want to do. “But at the end of the third quarter we are 23% up on last year and we are getting 15% plus growth every year. It doesn’t just happen.” The move towards buying insurance direct via digital channels is currently no threat. Mr Honan believes legislation and compliance within the industry results in most businesses, even those led by the younger generation, opting to engage someone as an interpreter. “It is extraordinary the number of senior finance people at companies who are in their early to mid 30s who are engaging us for advice as opposed to doing it themselves. They are seeking out more advice, more opinion, more guidance than people did 20 years ago. “They want to have a better understanding of what risk is and how that can affect their business. We see that daily.” While the domestic market is consistently going online, and the SME market may well follow, “most robust businesses” are seeking advice and guidance, Mr Honan says. He also foresees no immediate impact from the majors moving downmarket to focus on SMEs.
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Growing strategically: Damien Honan is an independent broker with global connections
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Part of the company’s holistic approach to risk involves offering both life and general insurance – something Mr Honan believes more businesses should consider. “When you look at the whole risk of a business, there is the business itself and the people in it. Going in and addressing the business and not the people is a bit ridiculous. “You’ve got business sitting there that you have an opportunity to acquire. “This company started off as a life business so it’s gone full circle. We reinvigorated our life side about seven years ago. It’s going well. We have a dozen people in that area now.” The business has never acquired another company in Australia, but Mr Honan does not rule it out. “The biggest problem with mergers is the integration of people; that’s the toughest thing. I haven’t seen many people along the journey who have been overly happy after a merger or a takeover. There seem to be a lot of disenchanted people. “Acquiring for growth’s sake is a different model to growing for a strategic reason and acquiring people from a strategic point of view.” Some acquisition opportunities have been considered, but agreements on valuation have proven elusive. “If I was a seller, which I’m not, I’d be the same. Everything we sell, we think it’s worth more. Whether it’s a house or a car or whatever. “There hasn’t been a set decision not to [make acquisitions], it just hasn’t happened.” In fact, the company’s first acquisition is taking place in Singapore – part of an international strategy that will be a focus for the foreseeable future. Mr Honan believes a foothold in southeast Asia is a must for all Australian businesses. “We are just going through the shareholding being transferred on our first investment vehicle. “We bought a shareholding in a brokerage up there and we had to get the monetary authority approval, and we’re closing off the share transfer on June 30. “So many companies are basing them36
“The biggest problem with mergers is the integration of people; that’s the toughest thing. I haven’t seen many people along the journey who have been overly happy after a merger or a takeover.” selves in Singapore. The insurance carriers, all the global insurers operating in southeast Asia, have their head offices in Singapore. “There are certainly a significant number of technology companies looking to expand into Asia. We insure a lot of them, and they are all planning how to get growth through Asia. “The carriers themselves are spending a fortune on trying to get their Asian model rolled out.” Mr Honan compares the pace and scope of change in the region to the industrial revolution. “If you take India and China out of Asia there are 600 million-plus people. It’s a lot of people – two times the US. A lot of those people don’t have a fridge yet, or a toaster or a television. “It’s a lot of TVs and fridges, and insurance, to sell. That’s why we see the opportunity there. “Asia is going to be either, ‘I’m glad we got in when we did and invested the money’ or, ‘We should have got in earlier.’ It’s going to be one or the other. “Our plan with Singapore is to seriously insuranceNEWS
be an influence in the southeast Asia market. We do stuff in Vietnam now, Cambodia, Laos, and we do business in Indonesia. “We want to have a footprint in southeast Asia. As that region expands the opportunity for us expands.” Mr Honan admits his father could not have foreseen the business growing as it has. He says he has achieved it by taking risks – but calculated risks. “I have had an advisory board with experienced people on it since 2001. As a group of people to measure the risk of what we are doing, it has been very important. You need someone to test your decision-making process.” And thinking big is the first step. “You start to realise the reality of the difference between big and small is only a zero, or two zeros, that’s all it is. If you have that view nothing becomes daunting. Not being daunted by the size of things is what you have to get your head around. People get scared of big.” The 50-year anniversary is a source of great pride for Mr Honan, and is testament to a dedicated and loyal workforce that has been committed to growing the business. Being in operation for so long brings a solid, professional feel to the company, he says. “To stay in business 50 years you have to have a reasonable reputation. Not many companies with a shitty reputation last 50 years.” His father’s fateful skiing accident has taken Mr Honan on an unexpected ride – but does he ever want to get off? “I’ve had offers to sell but I don’t know what else I’d do. Fifty-one might be a little young to sit on the beach. They say retire early, die early. I really enjoy the business. We have a very young staff relatively. “Being a part of developing and helping influence and grow these young men and women is really good fun. I enjoy that. “Seeing them get business and keep business and get excited about the growth and watching them develop in their knowledge, that is very exciting. It’s great fun. If I didn’t get excited about that I probably would sell up.” Geoff Honan’s broken leg was – in the * end – his son’s big break too.
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Life and work in
Meet some Australian insurance professionals who call the booming Asian financial centre home
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FOR GENERAL INSURERS WORKING IN ASIA, SINGAPORE IS A very attractive place to be. While many wanting to be close to China continue to regard Hong Kong as the prime spot to nest, a growing number are setting up regional head offices or significant branches in Singapore, where the air is fresh and the living is generally more laidback. Not that Singapore has knocked boisterous Hong Kong off its pedestal as the financial powerhouse of Asia. Not yet. Hong Kong, a crowded outpost of 7.1 million, remains the ideal city for access to China. It’s the third most important global financial centre after New York and London, aided by low taxation and free trade (Singapore is the fourth). Hong Kong is also the world’s most vertical city, which makes living on high almost inevitable. And when the winds blow across the border from China’s polluted cities and factories, the air can be thick and stifling. Singapore is gradually challenging Hong Kong’s supremacy – for expatriates, at least – with clean air and a public transport system that will soon be as efficient as Hong Kong’s. It boasts more millionaires – it’s only behind Switzerland and Qatar on that measure. It’s also first in the Ease of Doing Business Index. Hong Kong is second. The city’s official population is 5.4 million, with 38% “foreign workers”. It expects to grow to 6.9 million by 2030, with much of the increase coming from the influx of expatriates. Singapore isn’t a cheap place for expatriates to live, however. The Economist Intelligence Unit says the city has surpassed Tokyo this year as the world’s most expensive place to live. Hong Kong is eighth. (By way of comparison, Sydney comes in at fifth and Melbourne sixth.) While the cost of rental accommodation is “horrendous”, according to some Australians living there, Singapore delivers with its business-friendly policies, increasingly relaxed lifestyle, wellinsuranceNEWS
educated people and personal security. There’s crime, for sure, but the streets are safe at any time. Family comfort and safety – as well as the highly regarded international schools – are major considerations for the many insurance expatriates who use the city-state as a base from which to travel to other countries in Asia. In a region where face-to-face contact makes travel a necessity of doing business, Singapore’s position as the transport hub for southern Asia makes a lot of sense. Some international insurers now split the management of their Asia-Pacific operations between the two centres – QBE is an example – which means Singapore-based expatriates regularly leave the city’s superbly efficient airport for the four-hour flight to Hong Kong. It’s also happening increasingly in reverse. Singapore is also much closer than Hong Kong to the booming economies of India, Thailand, Indonesia and Malaysia. And it’s closer to the developing economies of countries like Cambodia, Vietnam and Myanmar. That’s a big attraction for the increasing number of international insurers and brokers moving into the city. An added plus for Australian expatriates is the fact that Sydney is less than eight hours away, compared with a 10-hour flight from Hong Kong. For Brits, the 12-hour (non-stop) slog to London from Singapore is about 30 minutes longer than Hong KongLondon. Apart from proximity to some of the best business opportunities in the world, the city’s constantly growing and diverse insurance community is taking advantage of a ready supply of highly qualified employees, a thriving Lloyd’s market in the middle of town and a sophisticated and safe environment in which to live. But don’t take our word for it. On the following pages you’ll meet three remarkable Australian insurance professionals who call Singapore home.
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Wherever he works, that’s home Singapore is the centre of the region’s insurance action, says this much-travelled expatriate ASIA IS PHIL ONDAATJE’S NEIGHBOURHOOD. HE’S WORKED IN MANY places, some of them more desirable than others, and came away with positive experiences from them all. And he’s not ready to come home to Australia just yet, thanks. Asia is where the action is. Melbourne-born and raised, these days Phil calls Singapore home. “Home” has also been, at various parts of his broking career, Melbourne, London, Port Moresby, Brisbane, Jakarta and Manila. Now he’s responsible for JLT’s major clients in 12 Asian countries, so like many Singapore-based expatriates his life is a very mobile one. “I’d like to stay in Asia as long as Asia will have me,” he says. “It’s unpredictable and dynamic. Sometimes things happen that you will never understand the logic behind. “The peaks and troughs of transacting business in this part of the world are amazing. In the same day you can win a new account and lose four. “You’ll find that winning or losing, it’s often got nothing to do with what you know but who you’ve known in the piece. In Asia, it’s very much about the relationship.” Insurance wasn’t on the career agenda – nothing was – when Phil finished his VCE exams at the age of 17 and started planning for “a surfing holiday for an indefinite period”. “My father thought differently, and brought me an ad from the newspaper which had four jobs for VCE graduates. I liked one of them, which was from Sedgwicks.” The global broking company – later to become part of Marsh – had a cadetship that focused on school-leavers as well as graduates. It provided a two-year development program that took the cadets through most of the company’s divisions. “It gave you a flavour of the organisation as a whole,” Phil tells Insurance News. “From someone who didn’t really know much about what the industry was about, I found it quite stimulating with all the different types of business we were looking after.” Two years later, at the age of 19, Phil asked for a chance to expand his horizons further, and was given the opportunity to transfer to London and “do some broking with the Sedgwick office there” for six months. Echoing the views of many Australian expatriates interviewed by this magazine, Phil says young professionals have to make their case for an international transfer, rather than expect something to drop into their laps. “I really wanted to do that London stint. So I went to my boss and asked if this was feasible. And he said yes. “At that time a lot of my friends had been doing the backpacking thing. So I did a little bit of an extended European holiday and then spend six months or so in the London office.”
He says the experience gained in London built his broking foundations, and taught him the importance of personal contact with clients. It certainly stood him in good stead. When he returned to Australia he joined AIBA as an account manager. Three years later AIBA merged with Alexander & Alexander and in 1997 it became part of Aon. That led to a job offer to work as a senior account manager for Aon in Papua New Guinea, based in Port Moresby. “I’d always had a desire to travel,” he tells Insurance News. “And if you can make work correspond with travel, it’s great.” He shrugs off the expatriate horror stories of marauding “raskol” gangs and ever-present dangers of Port Moresby. “Papua New Guinea was fascinating.
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Out of all the places I’ve been to, it was the place that presented the most personal danger. But it was just me and my fiancée – later my wife – then, and we had a lot of fun. “It was a great learning curve because I had much more managerial responsibility than I would have ever had in one of the Australian Aon offices. “The security situation meant there was a real sense of community about the people who were there.” Four years later he moved to Brisbane for four years as an account director at Aon. “I assumed a role that had more of a mining focus, so then I got asked if I would come and use some of that mining experience to develop Aon’s mining portfolio in Asia, predominantly in Indonesia. So I moved to Jakarta for four years.” From Indonesia it was on to Manila as chief executive for Aon’s Philippines operation. “When you move to new places in Asia you’ve got to pick up the cultural nuances quickly,” he says. “Every place has its no-no’s.” Phil’s son was just two months old when the family moved to Jakarta (his daughter was born in Manila). “The terrorism was a little bit of a concern during our time in Indonesia. When we arrived in Jakarta they’d just had the Australian Embassy bombing. “You had to see the danger as a wrong placewrong time scenario. You weren’t being personally targeted, and with 21 million people around Jakarta, it’s a pretty tall order to actually be in that wrong place. “You couldn’t compare the dangers of Indonesia and the Philippines against somewhere like Papua New Guinea.” When he turned 40 in 2012 Phil decided the life of a chief executive lacked the client and market involvement he loves, so he and his family upped stakes and moved to Singapore, where he joined JLT as regional director. During the period between old job and new job he returned to Australia to catch up with family and old workmates. “I realised then that Australia certainly wasn’t a magnet that was pulling me back. I think I’m probably at this stage better suited to being in these evolved or developing marketplaces.” Fifteen months after joining JLT he was appointed Managing Director, Strategic Risk Solutions. “In this job I’m pretty much on a plane every week to somewhere around Asia, supporting the
operations in the countries we work in. I’m using what I’ve learned in my career as a broker.” He worries that the rising generation of brokers don’t understand the value of personal relationships with clients and markets and the need for face-to-face contact. “It’s sort of like a lost art, but I think you get better results when you make the effort. The over-use of email these days is a problem. It’s not even a phone call, so it’s even less personal than it used to be. Not just here; that’s pretty much everywhere. “If you don’t at least speak to the client or markets you can’t get across the sincerity of what you’re talking about, and you probably don’t get the same rapport as you would have had if you’d made the effort to go and see someone.” It’s a point that Phil believes all young brokers should take to heart. “Add something to the equation. You tend to see more of this reliance on technology rather than face-to-face in the softer market. You’ve got to go and call in that last favour. “I think it’s just so important that you do more than bang out an email and wait for a response.” He says Singapore is the place to be for an insurance professional working in Asia. Major reinsurers are investing new capacity in the Singapore market, and more insurance business is moving into the city state now that Lloyd’s operates there. “We can place three to four billion dollars into one single direct risk, which has somewhat shifted the traditional reliance on London markets,” Phil says. “I certainly have a lot of our new placement colleagues coming up and spending a lot of time with their clients here for roadshows. They’re here much more regularly than they ever used to be.” And as a place to live, Singapore ticks all the right boxes. “In terms of functionality it probably exceeds most Australian capitals. Everything works. It’s probably the cleanest place I’ve ever lived in. And the airport is spectacular. When you’re travelling a lot, you love the fact that you can get in and out of that place in a heartbeat.” That enthusiasm extends to the quality of education his children are receiving. “Thankfully this time I’ve got them in the Australian international school. They’ve done British and American schools in the other countries, so we’re trying now to give them some patriotism. Otherwise they might not know who they are!” His advice to people starting out in insurance is simple: “There isn’t the level of investment that some of the old British firms used to put into staff development when I started. So for Gen Ys and younger – it’s more of a case of driving the agenda yourself – showing that you’ll go a step above and beyond. “This is an incredibly unknown industry to most people. But it’s dynamic. You can be at a mine site one day and in an operating theatre the next. “You’re not in a desk job if you don’t want to be, and it’s completely international in the portability of the role.”
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Woman with wings Meet an insurance professional who believes in teamwork, trust and the personal touch
VERONICA GRIGG IS A HARD PERSON TO CATCH FOR AN INTERVIEW. SHE TRAVELS between the world’s financial capitals with a regularity that lesser mortals would find impossible to sustain. But at the levels she works in, personal contact is too often the line that separates business success and failure. “People want to meet you and see who they’re doing business with,” she tells Insurance News. “And come right down to it, it’s about personal trust. If I give my word something will happen, it’s up to me to deliver it. People want to see you if you make those sort of commitments.” The life of an international insurance executive is a long way from the cattle property she grew up on near Canberra. One of three girls, she went to school and university in Sydney. While she laments there was no girl for her father to pass the property on to, Veronica says he was well ahead of his time in predicting his daughters would each pick interesting and fulfilling careers. After graduating with an arts degree – “university taught me how to process and manage information, which has been very useful for building business cases” – she joined National Mutual working in agency management development, where she learned the life insurance business. After about eight months she was offered the opportunity to work for National Mutual in London. “And so began my international career.” “I expected I’d be working and living in London, but I was transferred to work from an office in Portsmouth. “For several years I commuted five hours a day between London and Portsmouth, getting up at 5am and arriving home at 10pm.” Later she joined a London bank to learn new skills in trading currency and relationship management. Eventually she joined KPMG Australia. But despite being based in Sydney as a director, most of her initial projects were in Asia – Singapore, Malaysia, Indonesia, Hong Kong… One of the Australian projects she worked on involved the integration of QBE and Mercantile Mutual, a joint venture that combined the two insurers’ commercial operations. She and the QBE/MM management team worked closely, and it was almost inevitable that she would join the company, eventually working for QBE Group. From banker to change management consultant to insurer is several big leaps, but Veronica says it’s all about the people you work with. She’s been fortunate to work with some of the best in the industry at QBE. “Customers, management, members of your team – they help you reinvent yourself, which I believe is the key to being successful.” Her initial role in QBE Australia was focused on “large-scale change management” to get the division working in the right direction. Mission accomplished, she was thrown opportunity – to move across to distribution.
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“It was a logical progression,” she says. “We were focused from the start on being more than a supplier to brokers – we were talking about adding value long before the term was in common use.” From there her progress through QBE has been steeply upwards. In 2011 Veronica was promoted from Regional Manager, Strategic Sales for QBE Australia and Asia Pacific to Head of Global Distribution. The job was initially based in New York, closer to the head offices of the major international brokers. “The portfolios I look after now are the major trading partnerships that really generate significant amounts of income for QBE,” she tells Insurance News. “It’s an area where we absolutely have to be on our game – always. “We have to bring the best of product, service, management and driving the business model in ways that assure mutual growth.” She sees the time she has worked at QBE as multi-facteted. “First I worked on the business, then in the business, and now I represent it and work with our customers in their businesses.” As the need to drive the group’s global strategy developed, so did the need for QBE to sharpen its focus on the increasingly important Asia-Pacific region. “We have a long-standing business model here, so it became a case of me focusing on business development for the group in Asia-Pacific as well as North America. It made sense for me to move from New York, and here I am in Singapore.” Veronica estimates that in the 20 or so years she has been working, she has spent only seven of them full-time in Australia. Travel has always been part of her work. While she sees living in New York as a wonderful experience – “it’s vibrant and always interesting” – there are many practical advantages to being based in Singapore. With a five-year-old son in the care of a fulltime nanny who is very much a part of the family, she’s happier to have her siblings and mother just seven hours away in Australia. And Singapore’s famous efficiency also works for her. “Forty minutes after the plane touches down in Singapore I’m home with my family.” And then there’s the work. “Singapore and Asia Pacific is a place where QBE is growing, and the talent pool I work with is fantastic – they’re really great people, with fantastic leadership,” Veronica says. “The customer base here is great, because so many companies are putting their most talented people into the market. “I’m housed in Asia-Pacific for QBE but I’m working in a global model. So for me it’s interesting work and I’m also shaping something exciting.
“Yes, I travel a huge amount. That’s the way it is these days. I don’t think that is going to change; I’m certainly not the only insurance executive doing this. “Look at our footprint in Asia and you’ll see why travel is so necessary. For me its part and parcel of the job.” As a woman working in Asia and around the world, does she encounter people who don’t want to deal with her? The answer is an emphatic no. “In the US there are lots of senior women in our client base. And in Asia there’s a lot of women in the industry because childcare in the region is manageable and they typically choose not to stay at home. “If you look at the university demographics you’ll find most of the finance graduates are women. I believe it’s the same in Australia. “So women are moving into the senior ranks now, if they choose to. Some prefer to have a balance in their life – some are choosing to have a mid-layer position and not have to be on a plane all the time like I am.” Veronica says the “pub culture” that used to rule in the London insurance industry is no longer so dominant. “These days the long lunches are gone – it’s much more about the business. That works for women and families. QBE has also evolved to be a supportive familyoriented employer, investing in technology which offers flexibility to how and where we deliver. “I do think women are good at multi-tasking as well as promoting empowerment, leadership variety and diversity. But I certainly don’t think I look at anything from a male-female viewpoint. People on teams come in all shapes and sizes, and diversity leads to more interesting outcomes.” As to the industry’s reputation for being a place where people “fall into” jobs, Veronica says she “absolutely” recommends an insurance career. “After 11 years in insurance would I work in another industry? I think not. There’s every opportunity to move within the industry between business channels, service roles and even geographies.” She says new entrants should “take time to understand the whole picture of the business and what insurance is all about”. “There’s not a thing that gets designed, made, built or shipped that doesn’t require an insurance product. Insurance is always changing and there are new risks emerging all the time. “There’s so many places that you can have a career along the way. It’s not all about being more senior – there are so many opportunities to move within the industry. “Whether you’re coming in from a service-based role without tertiary qualifications, or you’re coming in as a graduate or a lateral hire, it’s a genuinely exciting industry.”
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Been there, done that
At the age of 32, Chris Colahan has already achieved more than most of his older peers CHRIS COLAHAN IS RESPONSIBLE FOR LONDON-BASED RSA’S operations in China, Hong Kong and Singapore, as well as its regional specialty business and joint ventures in India and Thailand. He hails from the Gold Coast, and he’s 32 years old. While his responsibilities are huge, Chris carries the load with the relaxed air of many Australian expatriates who love their job and relish the challenges they’ve been presented with. A graduate in law and commerce from Bond University – “it was a few miles from home, so it was handy” – Chris started his career with the intention of becoming a lawyer. But after working in law for six months he decided it wasn’t for him. That led to a spot on Westpac’s graduate program, where he did rotations through marketing, sales and service and ultimately strategy. But the desire for some overseas experience saw him throw it in and head overseas with his girlfriend. “We rocked up in the UK with working visas, little money, no jobs, we knew no one and we had nowhere to live,” he tells Insurance News. “But it’s the kind of thing you do when you’re young and naïve. “After a few months of searching for jobs and when we started running out of money I got a job at RSA Insurance. I’d never planned to work in insurance.” Funny, that – he now knows nobody else did, either. But RSA liked what they saw and put him to work in its group strategy team. That was 10 years ago. Chris worked closely with RSA’s group executive team led by Andy Haste, the then-group chief executive, providing research and strategic advice. “It was a fantastic way of vicariously learning senior leadership by working with them,” he says. “Before long I was running projects in India, Ireland, Argentina and Sweden as the strategy guy working across the group.” After two years RSA gave Chris what he calls “my own strategy gig” working in Dubai, where RSA had its head office for the Asia-Middle East region. He was 25. “I was on the executive team in charge of strategy change and M&A for the region,” he says. “It was an exciting couple of years.” Exciting indeed. It included providing strategic leadership in the company’s operations in India and China, “a huge project I led in China for six months looking at a major acquisition which involved leading a very big team”, buying a company in Oman that made RSA the country’s biggest insurer, and working in the team that publicly listed RSA’s company in the Kingdom of Saudi Arabia.
“It was a wide-ranging set of experiences,” he says. “Ever since I first started at Westpac I’d felt there were limitations in advising others. Owning the strategy is so much better.” The Dubai gig led to an opportunity for Chris to run RSA’s domestic business in Singapore. “The business wasn’t performing very well, but we managed to turn it around and get the growth trajectory going.” The two-year turnaround didn’t go unnoticed back in London. “The group asked me to go and do the same trick in Hong Kong, where there were similar problems. It was the same story – analyse the problems, reset the strategy and the direction and get the team back to growing. It took two years and we made really good money in Hong Kong in 2013.” Two years ago another phone call from London came, and “I got offered the opportunity to run the region”. He’s been in his present position for almost two years, and describes it as his dream job. It’s certainly big. The company operates in six countries with seven operations and about 4000 staff. Its gross written premium for the region is about £500 million. It is, says Chris, “a fairly meaningful presence”. He finds his background in strategy has been helpful in leading the business. “It’s a good discipline. It helps me to understand and analyse problems and work with teams to develop solutions.” He also credits much of his success to “being lucky enough to always have amazing bosses, right from when I first started working at Westpac”. “I saw close-up how Andy Haste led and worked to turn RSA around. And Paul Whittaker, then chief executive of emerging markets, took an active involvement in my career and gave me challenges and experiences that I sometimes felt I wasn’t ready for. “But they always gave me enough rope to get the job done but not enough to kill myself. “I’ve just been blessed to have people who are great mentors and coaches who took the chance with me.” A keen triathlete, Chris finds Singapore “hugely multicultural. It’s easy to move across Asia from here without difficulty. “It’s clear now that Singapore is the centre of insurance for the region – for Asia and possibly also for Asia-Pacific.” The Aussie girl Chris arrived in London with, Claire, is now his wife. They have two girls aged three and a half and one and a half. Not surprisingly after six countries in nine years, they’re hoping to be in Singapore long enough to put some roots down.
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“Whenever you move to a new place it’s always hard for the first three to 12 months,” Chris says. “You don’t know anyone and you don’t have a support structure. With kids that’s very challenging. “Just some of the basic logistics – new bank accounts, phone arrangements, getting the internet connected at home – are often really difficult. “When you get settled, you wake up one day and it feels like home, and that’s the case for us in Singapore now. It’s a great place to be.” The old saying that the world is full of homesick Australians having a great time rings true with Chris. Despite the east coast of Australia being just seven hours away, he doesn’t see expatriate life as a permanent thing. “Australia’s home and the road does eventually lead back to Australia. It’s just a question of when, not if.” In the meantime, he loves his job and the daily challenges that any chief executive has to deal with. And he has some sage advice for people contemplating a career in insurance: “I don’t know anybody that planned to work in insurance,” he says. “We’ve all landed up in insurance accidentally, but we’re all really glad that we did. “Insurance plays a really important role in any community. Bad things happen, and insurance companies are there to help people get their lives back together. I think that’s a very noble thing, and it makes me very proud of what we do. “So for anyone starting out, I’d urge them to stick with it in those early days when it might not seem like the most sexy industry to be in. Because as you get into it and really get to understand what we do, they’ll find it’s a great place to be. “From what I’ve experienced, there’s a great feeling of ‘community’ about the insurance industry. You might compete ferociously with people in the day, but that doesn’t mean you can’t go out and have fun with them after work. “As for career choices, my best advice would be to take some risks. “If you’re ambitious and you want to achieve things personally and professionally, you’re not going to be able to do it all working from an office building in Sydney. “You’re going to have to move around and occasionally take a job you might not feel you’re 100% ready for. “Take the risks; trust your ability. My experience has been that if you do that, things happen.”
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Aiming to grow Two broker cultures, one focus: the IBNA and Austbrokers joint venture is on the lookout for more members By Wendy Pugh
One group, two cultures: IBNA Chairman Gary Gribbin, AIMS General Manager Martin McAvenna and Austbrokers Chief Executive Mark Searles at the AIMS conference in Adelaide last month
A MIX OF BUSINESS CULTURES has proved no problem for broking joint venture AIMS in its first seven years. In fact, the oddcouple pairing of its two shareholder groups is seen as a strength as AIMS seeks to expand in a competitive landscape. “The similarities between groups of brokers are much more evident than the differences in practice,” AIMS General Manager Martin McAvenna tells Insurance News. “These are quality businesses run by serious people, and the level of collegiality between them is strong. “There is a common cause in doing business well.” A&I Member Services (AIMS) began in 2007 to provide services and benefits for members of listed company Austbrokers and the unlisted Insurance Brokers Network Australia (IBNA). Broker businesses seeking access to a larger group’s services have the option of doing so with AIMS through two distinct channels.
The Austbrokers corporate model involves the company taking shareholdings in the individual firms, while IBNA brokers maintain complete ownership of their own businesses and become shareholders of the overall unlisted public company. IBNA Chairman Gary Gribbin says the AIMS arrangement has been “fantastically successful”, allowing brokers in the unlisted group to maintain total independence while reaping the benefits of belonging to a larger organisation. “We don’t order or command,” he says. “IBNA members run their business as they choose to run them and we don’t interfere in any respect.” IBNA celebrates its 20th anniversary as a national association this year, and sees the AIMS relationship and the way the joint venture is structured as key to its plans to attract more independently minded members as it continues its growth. “There is no confusion about which interests are being served,”
he tells Insurance News. “Do we exist for the interests of shareholders or the interests of members? “The answer is, IBNA exists wholly and solely for the purpose of doing well for the member businesses, not ourselves. In that regard we are unconflicted, completely transparent, lily whites.” Mr Gribbin, who is also on the AIMS board and Chairman of Insurance House brokers, joined IBNA as a director when it became a company in 1997. He explored a link with Austbrokers several years before the joint venture was finally agreed. He says he could see the groups complemented each other. “It gave us an opportunity to get together to increase our leverage,” he says. IBNA currently places around $1.3 billion of gross written premium and has 78 members, while Austbrokers had 46 members and base premiums of around $1.7 billion last financial year. 47
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“What we say is you can be fiercely independent and still enjoy the benefits of being an AIMS member by being an IBNA broker.” The joint venture has allowed IBNA to end the expense of having its own costly executive team. It has also enabled it to tap into the governance and management skills of Austbrokers. AIMS itself has a staff of six. It outsources any additional requirements as it provides services to the two distinct groups it exists to serve. Various sub-committees have equal representation. IBNA member numbers are expected to rise above 80 in the next few months, following some recent expressions of interest. Numbers typically fluctuate as new groups join, members sometimes buy other members and some shift from their independent ownership stance and see the advantages of selling into the equity model. Those deciding to sell part of their business are likely to turn to Austbrokers, giving it a key extra incentive to be part of the joint venture. The partially acquired firms then remain part of the AIMS network, but through the other partner. Austbrokers Chief Executive Mark Searles says the scale benefits and wider advantages of participating in AIMS remain just as relevant for all parties involved as when the venture started. “There are a number of brokers out there that are fiercely independent, and we respect that,” he tells Insurance News. “What we say is you can be fiercely independent and still enjoy the benefits of being an AIMS member by being an IBNA broker. “In the future when they start to think about succession or start thinking about engaging in equity discussions, then Austbrokers becomes the partner of choice. It give us an opportunity to pitch our wares as an equity-based group at an appropriate time.” A large cohort of 50-something brokers in Australia is moving into through the age group where issues surrounding 48
the future of their businesses are becoming increasingly important. Potential new group members include non-aligned brokers, of which there may be up to 200 according to some estimates, as well as those switching from market rivals. Overall, competition in the market to build broking businesses is showing no signs of slowing following an active recent history in mergers and acquisitions and the growth in network groups. Growth for AIMS will only come from welcoming new members who have moved into IBNA or been partially acquired by Austbrokers. And both organisations have not been shy in admitting that a prime source of those additional brokerages could well be rival broker group Steadfast. Mr Gribbin notes potential for movement out of Steadfast as member brokers who received shares and made profits as part of the listing last year are free to sell when an escrow period ends on August 31. “I think most good broking businesses regardless of their size, are looking to acquire other broking businesses and it has been that way for the past three, four or five years,” Mr Gribbin says. In some cases businesses seek to become part of larger groups as their increasing size exposes their organisational limitations. At the same time broker groups are boosting their profile and highlighting what they have to offer through various marketing campaigns. “IBNA at the moment is ready, willing and able to welcome new members,” Mr Gribbin says. Mr McAvenna points out that potential AIMS members are often particularly interested in the range of policy wordings provided by the group, and are also seeking the better hearing with insurers that comes with increased market clout. “If you join us you will have easier access,” he says. “You will
be considered part of a group that places a lot of premium with those insurers and therefore you will get the consideration that comes with that.” The group highlights its product segmentation and the high level of financial rebates to members from AIMS-negotiated overriders with insurers. Brokers also have access to technical support and training. Mr McAvenna says the shifting insurance landscape requires new products to be developed and wordings to be regularly revised as market demands change. “It is almost like painting the harbour bridge,” he says. “It is a constant process.” The more complex focus areas have included professional exposures such as management liability, while cyber risk issues are emerging as an increasing concern with rising business exposures to data theft and issues highlighted by new privacy legislation. “Cyber products are where management liability was five or six years ago,” Mr McAvenna says. “It is out there and it is available, and now the competitive and refinement process takes place. It is an evolving product.” More broadly, brokers face challenges as direct marketing moves increasingly into the small to medium-sized enterprise segment, highlighting the importance of improving the level of personal advice and expertise that can be offered to clients. While the joint venture partners of AIMS have their distinctive cultures, the challenges for all members are similar. The benefits of a collective approach and wider support are clear in some areas and there is strength in numbers, according to both broker groups. “AIMS is in a good space at the moment,” Mr McAvenna says. “The membership continues to grow and we are seeking to expand our services. There’s * room for more.”
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Gow-Gates Chief Executive Chris MacKinnon: adding value, not creating more competition in the market
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When it comes to industry bloodlines, few could compete with Gow-Gates Chief Executive Chris MacKinnon By Michelle Hannen
CHRIS MACKINNON’S FAMILY heritage boasts a great-great-uncle who was chairman of Lloyd’s five times, a grandfather who was deputy chairman of Lloyd’s, and a father who was the Lloyd’s syndicate underwriter behind the first Australian managing general agency. As if that isn’t enough, Mr MacKinnon is also married to the daughter of Australia’s “Mr Insurance”, Frank Hoffmann. It’s no surprise then, that in looking for his latest challenge he was attracted by an offer from Gow-Gates, an Australian brokerage with a strong and proud family tradition of more than 50 years. Mr MacKinnon joined Gow-Gates as Chief Executive in April last year, initially splitting his time between Australia and London, where he had previously worked and where his wife and son remain – until next month. He took up the reins full time at Gow-Gates in March this year, in a move that was something of a homecoming. Mr MacKinnon had spent 19 years working in the Australian market before the opportunity arose in 2009 to work with Arthur J Gallagher UK in his country of birth. While enjoying his time back in London – which also afforded him, his wife Tina and children Alex, 18, and Gemma, 16, the chance to travel extensively throughout Europe – Mr MacKinnon says his role as executive director of professional risks, strategy and development was focused internally on the integration of a number of retail and wholesale aquisitions made by Arthur J Gallagher in the UK market. He missed the client interaction. “The changes that had gone on were so dramatic within Gallagher that I was looking for a new challenge, a new opportunity,” he tells Insurance News. “I like things that are growing or building or need change, whereas I’d become a little bit structured in my role and I wanted more diversity.” And Australia was calling. He originally arrived in the country in 1990 on a one-year secondment with Marsh that stretched to five. By the time he returned to the UK to work, he had been in Australia 19 years. “Basically I just felt more at home
here than I’d ever felt in England. Australia was a natural fit for me and the way I see life.” Putting out some feelers that he was looking to return led to a conversation with Gow-Gates Executive Chairman Anthony Gow-Gates. “With my background, family and insurance is pretty important to me. So the idea of working for a familyowned Australian insurance broker, working for Australian clients competing with the big internationals appealed. I think we’ve got something different here.” The rest – as they say – is history. Mr MacKinnon describes the opportunity to work at Gow-Gates as “something exciting, new and a bit fresh”. After an initial, year-long stocktake of where the business was at, plans are now afoot for expansion and development. “The foundation of the business is rock solid. It’s longstanding, with a stable, loyal client base, and the business has been performing very well.
staff to allow for further growth. “We’ve got some fantastic people on board,” he says. “We seem to have a very positive appeal factor in the market, so we’ve been lucky to attract some good quality people.” Another avenue for growth is to separate out the company’s agency and wholesale business and structure it under a new managing general agency, which it has already had licensed and is now launching. Mr MacKinnon says the plan is to start with the company’s existing specialist facilities, such as those in the equine space including bloodstock and equine liability, before it looks to add to and enhance those by bringing on new facilities. “The clear objective in that area, though, is to avoid anything that is readily available in the Australian market. We’re looking for unique product offerings that we think are fresh and are new to market or meet a specific need in the market that’s not being met.”
“The great thing about insurance is that if you have a passion in life you can generally get a career in insurance focused on that particular passion, because nothing works without insurance.” “But we’re taking the opportunity to look for marginal gains, to finetune every little aspect of what we do to seek improvements. My role at the moment is to provide a little bit of fresh perspective in terms of how we might look to grow and develop the business.” Staff numbers have been increased by around 10% as Mr MacKinnon has looked towards strategic recruitment to add complementary skills. Other parts of the business, which were “running at 100% capacity”, have been resourced with additional insuranceNEWS
He says that despite his background in professional lines, Gow-Gates has no plans to launch, for example, a miscellaneous errors and omissions binder. “Definitely not. There are plenty of them out there. There’s plenty of product available in the market from Australian insurers and from international agencies. That’s well serviced so we’ll leave it alone. “We’re trying to add value to the market, not create more competition in the market.” He says supporting the Australian market is also key to the Gow-Gates
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business model. “We’re trying to be an Australian broking firm for Australian business, so we’d be a bit hypocritical if we just moved all our business to London because it was easier and let someone else deal with it.” He says despite its specialist nature, only around 20-30% of the agency’s business ends up in London. The company has “very strong relationships” with all of the key Australian insurers and “looks to support them wherever we can”. Acqusitions – of either teams, books of business or small brokerages – are also on the table. Mr MacKinnon says Gow-Gates, a Steadfast member, remains 100% owned by the Gow-Gates family. “One of the advantages we have of being a privately owned family company is that we can be opportunistic and move quickly and efficiently when we see that there’s a potential return on an investment.” Any such acqusitions, however, must be niche, strategic and “sit alongside and in among what we already do”. The niche nature of the GowGates business stems from its origins in the early 1960s. It was formed by Mr Gow-Gates to assist two sporting associations with whom he had connections – the Australian Jockeys’ Association and the Professional Golfers Association of Australia, which were struggling to find insurance cover. The company still looks after their insurance programs today, as well as those of the Football Federation of Australia and Australian Rugby Union. Its other niche specialities include trade unions, aged care facilities, energy businesses, timber and building materials and medical and healthcare. While the appointment of an outsider as chief executive is a milestone for any family business, Mr MacKinnon says there has been “no issue at all” with him coming in and “being let into the inner sanctum in terms of how the business is run and what we’re looking to achieve”. He says Mr Gow-Gates remains very much involved in the company. “Anthony is the company. I’ve assumed the day-to-day administrative management responsibilities, which has freed him up to continue to develop and work his network of contacts. It’s very much a partnership.” When considering his next career move after Gallaghers, Mr MacKinnon 54
says he tried to zero in on what he had enjoyed the most about his career to date. “The time I just kept coming back to was the very early days of Gallaghers in Australia. Frank Earl had taken me on board to help build the retail broking business and it was a start-up. “We had global backing and a global name, but when I asked where the renewals list was, Frank just smiled and said it was in his head.” He recalls the excitement, hard work and stress of “sitting down with a pad of paper and a Yellow Pages, phoning around some old contacts and starting to try and build the business”. “We had a small group of people who got together and we ran it like it was our own. We ran it like it mattered because every single dollar we brought in was meaningful.” He admits that while the idea of the MacKinnon name on a letterhead has crossed his mind over the years, the timing to establish his own brokerage was never right. “I think I’ll probably always look back and say it would have been good to do it, but I feel such a part of this business, anyway. I feel like I am doing my own thing. I find I’ve got
And while he thinks his sportinclined daughter is less likely to pursue an insurance career, he’s not saying it won’t happen. “The great thing about insurance is that if you have a passion in life you can generally get a career in insurance focused on that particular passion, because nothing works without insurance.” Despite quipping that a “genetic defect” saw him end up in insurance, Mr MacKinnon’s industry lineage is something he feels rightly proud of. But he says that despite being the fifth generation of his family to work in the industry, there was no family pressure to enter insurance. While his family connections landed him his first job, it was the interest and intracacies of the industry that saw him stay. Those same attractions worked their charms on his siblings too – Mr MacKinnon’s brother Andrew is Managing Director of reinsurance broker Guy Carpenter in Zurich, and his sister Rachel worked for a time as a marine broker at Lloyd’s. And Mr MacKinnon is also keen to pay tribute to the influence of his father-in-law Frank Hoffman, whose two sons – incidentally the sixth gen-
Career Timeline 1987-1989 1990-1995
Marine Broker, CT Bowring, London Business Development Executive, Marsh & McLennan, Sydney
Manager, Insolvency Services Division, Principal, Professional Risks and Client Services Manager, Global Professional Risks, Aon Australia, Sydney
General Manager, Professional Risks and Manging Director and Company Director, Arthur J Gallagher Australia, Sydney
Executive Director, Professional Risks and Executive Director, Strategy and Development, Arthur J Gallagher UK, London
Chief Executive, Gow-Gates Insurance Brokers, Sydney
the best of both worlds.” Perhaps that might be something left for the next generation to pursue, should they decide to follow their family’s well-trodden path. Mr MacKinnon says it would not surprise him if his son, who hopes to study law in Australia once he finishes his schooling in the UK, follows in his footsteps. “My son’s grown up seeing me travel around the world. I’ve been involved with some amazing projects. I’ve seen some amazing things, I’ve done some amazing things and I’m not stuck behind a desk.” insuranceNEWS
eration of their family to work in insurance – are underwriters at Vero and QBE in Sydney. “He’s been an Australian father to me, not only as a father-in-law but also as a mentor and a friend, and he’s been a fabulous sounding board all the way through my career. “I quite often refer to him as my duty of disclosure, but he’s been a real leading light in the industry.” With pedigree like that, it’s hard to imagine the industry without a new generation of Hoffmann-MacKinnons keeping the proud heritage of two * families alive.
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Adjusting expectations After a tough decade, the loss adjusting industry faces an uncertain future By John Deex
THE GOLDEN AGE OF LOSS ADJUSTING is gone – and the insurance industry will rue the day. So says LMI Group Managing Director Allan Manning, who has more than 30 years’ experience in adjusting and claims preparation. He has watched the number of loss adjusting businesses whittled down from hundreds to just a handful, and says an undue focus on fees, a lack of understanding of the value of loss adjusting and a dearth of new talent is having a devastating impact. Added to this, accountants, lawyers and builders are increasingly muscling in on loss adjusters’ traditional turf. “There used to be lots of small firms,” Professor Manning told Insurance News. “The claims officer had the power to choose the right person for the job. It was not firms being appointed, but individuals. These people were shown respect – they were people who knew their craft. “But due to an increasing need for compliance, insurers elected to have just two or three firms on their panels. People drifted into the larger firms. “Procurement officers are used to arrange the services of the loss adjuster, and they don’t understand their value.” Professor Manning says there is too much pressure on fees, which results in poor service and, ironically, higher overall claims costs. “This focus is all wrong. The loss adjuster fee could be about 10% of the total claims cost. If you focus on that and try to drive it into the wall, then the average claims cost can go up. I have seen claims paid that shouldn’t be paid, and vice versa. “Some insurers have realised there has been too much screwing on the fees. But they are pretty few and far between.” Professor Manning says claimants are unhappy because less time is spent with them. “A relative of mine experienced this recently, and I happened to know the adjuster so I contacted him. “I said, ‘You’ve shown no compassion,’ and he replied, ‘Allan, how much compassion can I show for 300 bucks?’ He had to fit too many jobs in to make his figures work. “It’s silly that insurers don’t really understand what a loss adjuster does and the true value they bring to the claim.” Professor Manning fears for the future,
saying there is little genuine training given now and a lack of new talent coming into an industry whose morale is at rock bottom. “The very senior guys are getting older and I just don’t see the next generation coming through. And the morale of loss adjusters is nowhere near what it was. “The industry worked so hard during all the natural disasters we had, but every bit of media was negative. You’re damned before you’ve even done anything. It’s souldestroying. “All in all, it hasn’t been a fun time.” Crawford & Company Chief Executive for the Pacific region Andrew Bart told Insurance News too much has been made of the issue of fees. He accepts the lower level of work has seen a reduction in fee income. But he says in other cases, with fewer specialist personnel available, insurers have accepted the value adjusters bring and been willing to structure fee agreements accordingly. He says matching the right skill to particular claims is paramount. “The real issue is that claims need to be triaged appropriately to ensure they are directed to the right party, be it internally handled, desktop-managed or outsourced.” Cunningham Lindsey Australia Chief Executive Damon Bennett says the focus on costs follows significant claims arising from the spate of catastrophes in 2010/11. “Insurance margins were affected, and the resultant focus on cost, or rather the natural client expectation of value for the range of services procured, was not an unreasonable consequence.” The challenge, he says, is to demonstrate the value of the service proposition, regardless of who the buyer is. “Generally, we find the procurement teams direct a process… but the key decisions are held by the business unit owners and executive management, who do understand that our goal is to protect our clients’ reputation, help them keep their customers and help them save money.” Cerno Managing Director Tony Button says an expectation for innovation and efficiency exists in all areas of business, and loss adjusting is no different. The growth of alternative models – such as direct supply and internal teams – has raised questions about how and when to use loss adjusters, he says. This has led to insuranceNEWS
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“Adjusting firms must focus on relevant products for relevant market segments, at relevant price points and supported by relevant empirical evidence...”
external adjusters searching for more efficient ways to handle claims. “The key is for adjusters to segment their service offering and to use the right resources at the right time in conjunction with the right process – all supported by collaborative technology – to arrive at the right outcome,” he told Insurance News. “This is known as mass customisation, and it’s achievable provided clients understand and embrace new processes and adjusting firms have a broader skillset than was required some years ago.” Ongoing pressure on fees is reasonable, he says, particularly in the low-complexity market. The challenge for adjusting businesses is to cut costs without lowering service levels. Mr Button believes loss adjusters need to demonstrate the value they add to the claim process. “We’re getting closer but there is still some way to go,” he says. “It is often said that the inability to prove the value of something results in an emphasis on price. “It’s clear that adjusting firms must focus on relevant products for relevant market segments, at relevant price points and supported by relevant empirical evidence, to move the focus from fees to value.” And how do loss adjusters feel about being “out-specialised” as others move in on their traditional territory? “Loss adjusters cannot claim any turf,” Mr Bart says. “No business has a right to any business. It must be earned.” He says competition is healthy and it is up to loss adjusters to tailor services to deal with non-traditional competitors, “be it builders or other professions”. Mr Button agrees new entrants are “inevitable” and says in certain areas specialists can outperform those with broader skills. “However, a complex claim may have many facets, all of which need to be co-ordinated and balanced,” he says. “Engaging a lawyer to handle a simple liability claim or recovery matter and an accountant to handle the business interruption aspect and an engineer to address the building work and so on would make for a very expensive and cumbersome beast. “Adjusters cannot be all things to all people. Their real specialisation is in the areas of insurance project management, policy interpretation, the determination of the claims strategy and – critically – knowing 58
when to engage more specialised assistance.” And how does the future look with a generation of senior loss adjusters about to step back from the industry? Mr Bart agrees there has been significant generational change, but says there is a tendency to “unreasonably romanticise” the past and underestimate the skills of those joining the business. “Many of the newer breed of adjusters, particularly those managing high-end claims, have professional and other skills that are significantly better than their predecessors. Given time they will provide extremely high levels of service to all those involved in the claims experience.” Mr Button accepts training is a challenge. Previously, adjusters handled smaller claims and this provided the ideal training ground. Learning was a natural result of normal operations. “But we now live in an age of specialisation, where staff may enter with a relatively high level of subject-matter expertise after a career in another area – often unrelated to insurance – such as law, accounting, engineering and so on,” he says. “It’s then a case of imparting the necessary insurance-related knowledge, and in a relatively short space of time.” Australasian Institute of Chartered Loss Adjusters President Michael Cooke says over the past 15 years insurance companies have moved away from using loss adjusters for lowend claims, which are often handled by less qualified assessors. As a result, much of the loss adjusting training ground has been eroded, he told Insurance News. “The only area of loss adjusting not being affected by this ‘supermarket assessing’ is the high-end losses being serviced by well-qualified loss adjusters who can still work on an hourly rate for their expertise,” he says. “This shall always remain. However, we now have to find a way to bring our trainees up to this standard and work out how we can pay them to maintain their interest while getting there.” One possibility in future is to serve the client directly – a set-up Professor Manning believes could evolve as a result of customers’ frustration with the lack of service from loss adjusters. Mr Bart says some adjusters are “working insuranceNEWS
both sides of the street” but that most insurers expect service-providers to declare their hand as either claims preparers or loss adjusters. “We have no objection to acting for claimants, and indeed have been specifically requested to do so by some insurers or captives,” he says. “I consider it unlikely there will be a short-term wholesale shift in the market to the extent that the majority of our work is sourced from claimants rather than underwriters.” Mr Button says there has been a trend over the past 10-15 years of adjusters joining claim-preparation companies. “However, this is generally confined to larger commercial losses, and even in that market the industry is not ready to accept a firm or individual adjuster being both. “There is generally neither the provision nor the need for such services in the domestic and small commercial market segments, which is where the majority of claims occur. “It is therefore unlikely that we’ll see significant growth in this area except for at the higher end of the market.” So can the loss adjusting industry survive into the next decade and beyond? Mr Button says the choice is simple: adapt or die. “The challenge for any industry is to predict the future needs and trends, and to meet the market with a solution clients did not realise they needed themselves only a short time before. “What remains to be seen is how well the adjusting profession can offer flexible alternative claims models to meet the changing needs and expectations of the market. “Literally hundreds of adjusting firms have disappeared over the past 10 years as a result of the consolidation of the insurer and adjuster markets, the rise of procurement and control over every aspect of the claims process, the failure or reluctance to invest in technology, or the unwillingness or inability to adapt to new conditions.” He says there will always be a place for adjusters in the industry, “but unless firms continue to evolve, it is most likely adjusters will be relegated to the specialist and niche * market segments”.
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Surviving change A veteran loss adjuster says the profession needs to adopt alternative approaches By Terry McMullan
Adjusting veteran Alan Cleary: technology has enabled insurers to control costs more efficiently
THE PROFESSION OF LOSS ADJUSTING IS effectively under siege from specialised competition, says leading British adjuster Alan Cleary. He says Australian adjusters should heed what’s happening to loss adjusting in the UK and find ways to ensure they remain relevant in the claims business. Mr Cleary, who has had a long and distinguished career in loss adjusting, says the profession’s place in the industry is also being eroded by insurers’ determination to cut claims costs, as well as the entrance of other professions offering specialised services. “There is a wearing away of the great bulk of claims that used to come our way,” he told Insurance News during the Asian Claims Convention in Singapore in April. “Engineers, networks of repairers, lawyers, chartered accountants and forensic accountants now pose a real challenge to the practice of loss adjusting in the UK.” He sees the impact of competition as having less effect on loss adjusters in Southeast Asia and Australia – so far – but warns it’s only a matter of time. “There’s shrinkage of the volume of work available to UK adjusters and a very considerable move to in-house adjusting,” he says. “It’s a major challenge – I believe a permanent challenge.” Mr Cleary, who began work as a loss adjuster in 1961, says adjusters once had considerable influence on any claims decision because of their knowledge and their reputation for acting impartially and strictly in accordance with high ethical standards. “There were no procurement people, no inhouse lawyers. The loss adjuster was relied on as a thorough professional, an independent person with very special skills.” The situation has changed as technology has enabled insurers to control costs more efficiently and to appoint adjusters through panel systems. This has forced adjusters to compete for work on the basis of cost rather than quality. “When the panels came along people began to fall by the wayside. And then the procurement people came along. There are many, many, many hurdles that a loss adjuster has to jump nowadays that I, in the heyday of chartered loss adjusting in the 1980s, didn’t have to face up to. “Call me a pessimist if you like, but I take the view that in the UK once the decline in the volume of work becomes established, then it is going to be very, very difficult to reverse that trend.” One way in which Mr Cleary believes loss adjusters can continue to be relevant in the insurance claims process is by moving away from an almost total reliance on insurers. “There is a trend in Britain towards chartered loss adjusters acting for policyholders. After all, why should the policyholder be deprived of expert service because insurers seem to see them as merely another level of cost? “Adjusters are driven by technical qualifications and by codes of conduct, and I think the policyholder should be entitled to that kind of service.
“Loss adjusters go along to a burning factory and the senior executives who are brilliant at running the company are like headless chickens. They can’t understand the wordings of the policy, and they’re terrified the loss might not be covered. “The adjuster takes over, and that is a hugely valuable service, in my opinion.” He says this approach makes insurance brokers and loss adjusters “natural partners”. “The relationship between adjusters and brokers is excellent. They appreciate each other, and they depend on each other in a major loss situation. “After all, if there’s no loss adjuster, then the broker has a lot more work to do.” He believes loss adjusters should also have a key role to play in evolving new policy wordings. “Some of the wordings of the traditional policies – property policies and business interruption policies in particular – are antique. I don’t think they’ve been looked at seriously for a generation. “The wordings are not really relevant in terms of technological advances that have been made since they first evolved these wordings. Disputes over wordings are legion. “Loss adjusters play a central role in the interpretation of policies, so I think policy design is a potentially big area for them in the future.” At the age of 78 Mr Cleary could easily be sitting back and contemplating a very successful career that has included stints as president of both the Chartered Insurance Institute and the Chartered Institute of Loss Adjusters. But he’s too busy working, putting in long days on a range of projects that might well exhaust a far younger man. There’s his work as a United Nations commissioner, which saw him involved in an eightyear project dealing with the 2.6 million claims arising from the 1990 Iraqi invasion of Kuwait. He is also a director of a British insurance company. More recently he has been engaged in a similar exercise in the Gaza Strip for the UN, investigating damaged sites while protected by armed bodyguards. The negotiation skills required in such highpressure situations are passed on to industry groups through presentations – a sideline of his international speaking agency, for which he has himself delivered more than 1500 after-dinner speeches. “I want to do the best I can,” he tells Insurance News. “I won’t sleep at night unless I feel that I have put into that day as much effort as I could – whether it’s physical or mental. I want to go to bed tired out and fulfilled. “I get up at 7 o’clock in the morning, and I don’t stop working most days till 10 at night. And I don’t have time for television – that’s the fastest way to brain death.” Mr Cleary regards himself as fortunate to have worked in loss adjusting in its most confident and expansive era. He says the challenges the profession is now experiencing must be identified and analysed so the responses can be measured and effective.
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Pleasure and pain The bravery and skill of elite athletes is amazing – and insurance is their essential safety net By Steve Boucher, Director, International Business Development and Marketing at Sportscover
YOU ONLY HAD TO SPEND A few minutes watching any part of the Winter Olympics to be in total awe of the athletic ability – and bravery – of the competitors. Whether it was the “skeleton”, in which competitors regularly reach speeds in excess of 120kmh with little more than a ski suit and helmet for protection, or the skill and aggression of the padded-up ice hockey players, their athletic abilities are amazing. Sochi received a degree of criticism from some athletes who felt it wasn’t up to standard and was responsible for errors and below-par performances. There certainly seemed to be a high proportion of falls and heavy landings. But at this elite level, there will always be a high level of inherent danger. 62
It’s hard to believe sometimes that elite athletes who fall badly and tumble head over heels at high speed are able to pick themselves up and continue on as if nothing had happened. But the line between the pleasure of winning a medal and the pain of injury is a fine one. The risks to athletes taking part in winter sports was highlighted with the death in February of champion Australian para-snowboarder Matthew Robinson, who suffered neck and spinal injuries in a race accident while competing at the IPC World Cup finals in La Molina, Spain. After spending eight days in hospital in Barcelona, he was being taken by air ambulance to Melbourne when he died of a cardiac arrest during a refuelling stop at Dubai. In all winter sports – from the highest level like the Winter insuranceNEWS
Olympics to amateur participants engaging in recreation – injuries will happen. Watching the TV coverage of winter sports makes us aware of the injuries that can occur to top athletes, but the injuries at amateur level are also widespread. Even skilled amateurs merely engaging in a recreational activity they love are never far from danger. The brain injury suffered by former Formula 1 racing driver Michael Schumacher when he fell while ski-ing is a case in point. Whether it is a dislocated knee from snowboarding, falling getting on or off a ski lift or hitting your head ice-skating, injuries can occur at any time and mean possibly long recovery periods and intensive physiotherapy. Insurance is essential to both elite and amateur sportspeople, as well as to those who provide the facilities. The variety of insurances that are June/July 2014
offered range from accident cover for participants, property cover for ice rink operators, liability cover for lift operators, professional indemnity for coaches, and so on. But when it comes to an event the size of the Sochi Winter Olympics, insurance has to step up several gears. Not only does it have to cover the normal everyday risks that people face in their sporting endeavours, but also the specific threats and dangers associated with larger sporting events that attract global attention. The threat of terrorism is one example. In the lead-up to the Sochi event, terrorism was as much of a talking point as which athletes would win medals. Two recent bombings in Volgograd and reports of suicide bombers in an operation dubbed “Black Widows” even prompted the United States Government to say it viewed the Sochi Winter Games as an “attractive target for terrorists”. The Olympic Games changed forever after the attack on
Israeli athletes during the 1972 Games in Munich, in which 11 athletes were killed. Inevitably, attacks on major global sporting events have continued, like the Centennial Olympic Park bombing during the 1996 Atlanta Olympics which killed one person and injured more than 100 others; or the Spanish bomb attack of 2002, when a bomb was detonated hours before the Real Madrid v Barcelona Champions League semi-final; or the 2013 Boston Marathon bombings. And that’s why all major sporting events – no matter where they are held – have large levels of insurance cover. The coverage for major sporting events can reach incredible levels, but insurers don’t shy away from covering major sporting events. Sportscover Managing Director Chris Nash estimated in 2010 that the insurance coverage for that year’s FIFA World Cup in South Africa was more than $10 billion. “Stadiums and training
venues for the World Cup matches are covered to the tune of £3.2 billion, but other business opportunities linked to the event account for another £3 billion,” he told the BBC. There has been a long history of offering suitable coverage, especially in the Lloyd’s market, for all aspects of sport, from amateur to professional. This includes accident insurance to cover death or disablement, offering compensation and/or rehabilitation for disabling injury, medical expenses, loss of income, contingency and so on. Major sporting events continue to grow in the number of events, participants and spectators. There are an amazing number of risks that have to be covered. That’s why insurance is an essential element for sporting events in stadiums around the world – and for the people * involved in them.
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Just in case… Even as Olympic athletes go faster, higher and stronger, organisers have become more risk-aware, cautious and heavily insured. Until the Athens Summer Olympics of 2004, the International Olympic Committee (IOC) had run its events without overall cancellation cover. That included the 2002 Winter Olympics in Salt Lake City, which took place just five months after the September 11 2001 terrorist attacks. But prior to the Athens Games, it negotiated a contingency policy worth around $US270 million covering full or partial cancellation. That was on top of a security bill that exceeded $US1.3 billion. Cover for this year’s Sochi Winter Olympics in Russia cost around $500 million. Before committing to cover, insurers spent the year prior to the Games checking the security situation – with particular emphasis on terrorist attacks – as well as more mundane aspects like crowd safety measures and contingency plans. The largest buyers of cancellation insurance include not just the event organisers but also the television networks which spend tens of millions of dollars for broadcasting rights. Others include stadium owners, hotels and even souvenir manufacturers. June/July 2014
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AIG Australia’s Noel Condon: reworking basic problems came before innovation
Great products... but maybe the message needs work An industry leader ponders brokers’ slow acceptance of innovative insurance products that meet market needs By Terry McMullan
“BUILD IT AND THEY WILL COME” IS A philosophy that sometimes trips up companies trying to bring new products to market. Remember the Sony Betamax? Vegemite iSnack 2.0? Compass Airlines? All great ideas meeting a need, but sometimes the market lags behind the marketing. AIG Australia Chief Executive Noel Condon says innovation in insurance needs more than just a clever idea. It also needs the brokers who sell its products to be in tune with what the insurer is trying to achieve. And that can be complicated by factors no market researcher is ever likely to uncover. “You can make the most innovative products, but getting them to the end user is not always easy,” he says. “You have to have that in mind every time you come up with a new idea.” insuranceNEWS
Mr Condon has set the local operation of the US-based insurance giant on the hunt for products that do things better. But first there’s “the basic stuff” that has had to be dealt with – building market confidence in the company’s ability to deliver on its promises. “There were some very simple things we at AIG really needed to crack,” he told Insurance News. “Things like getting policies out smartly, having a responsive and effective claims system… getting the basics right so we can have a real conversation with brokers and really follow through and deliver for them.” Reworking below-par processes has come with the territory in the past few years at AIG, Mr Condon says. The near-collapse of the giant insurer in 2008, followed by a painful recovery that saw some jewels in the AIG crown sold off to repay a massive loan 65
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from the US Government, also resulted in some fresh attitudes emerging in a global insurer once regarded as reliable but bureaucratic. “Claims is a case in point,” he says. “We needed a more affirmative claims culture here, and the cultural drive for change was supported at every level within the organisation. The claims climate has become proactive and positive. “These days there’s a much greater degree of interaction between our claims team and our underwriters.” With such “basics” reworked, AIG’s local operation now reflects another cultural change re-emerging across the AIG world – the push for innovative products that resonate with brokers and their clients. And that, Mr Condon says, isn’t as easy as it might sound. “Companies that innovate are often the most successful – they’re the ones giving the market what it wants. But terrific ideas don’t go anywhere if they don’t grab anyone’s attention.” As a significant player in the top and middle of the market and with an increasing focus in the SME space, AIG is finding that sometimes the perceived value of an insurance product relies more on the broker than the customer. Take the company’s Gold Complete product as an example. Launched just over a year ago, Gold Complete is being promoted as the broadest and strongest management liability product that AIG has ever produced. It has a modular design that allows clients the flexibility to select from 12 components of cover, providing a tailored solution that addresses all management liability exposures. It also offers such standard features as no retentions, the ability to offer reinstatements and specific coverage extensions for pre-claim enquiries and mitigation. And much has been made of the “world-first ‘evergreen’ feature”, with cover rolled over each year, eliminating the timeconsuming and often complicated annual renewal process. If the client or AIG elect to undertake a review, the policy will still provide the client with a further 12 months’ cover before any terms and conditions can be changed. All that’s required is an annual declaration form. “It’s a winner,” Mr Condon says. “Companies that once had to fill in 30 pages of information every year are now only required to provide updated figures. “When we came out with the Gold Complete product, we knew there are corporations that would love it. 66
“Companies that innovate are often the most successful. But terrific ideas don’t go anywhere if they don’t grab anyone’s attention.” “But it’s only been truly embraced by a handful of brokers. “We just kind of landed it on brokers. The fact is, they’re not as keen as we believed they would be. “Is it because it’s an evergreen product, and they don’t have to do a formal annual renewal with lots of questions? Does that mean they can’t charge a fee? Do they understand what we’re offering? We've got to work hard to get on the same page as our brokers.” Mr Condon remains convinced that brokers will eventually embrace the evergreen concept, “because it eliminates work”. Another example of broker hesitation is AIG’s CyberEdge product, introduced to the market a few months before Gold Complete. “CyberEdge was developed as a response to market and legislative change, but to be frank I don’t see many brokers embracing it,” he says. “There’s only a few insurers offering cyber cover, and it should be a bigger seller than it is. “What I hear from the big corporations is that it’s in tune with market need. But the coverage they are being offered at present is too narrow and the limits are peanuts – they want more. “Twenty million dollars is chickenfeed for a top-end client in Australia. They’d be more willing to take $10 million for their own account, with a much higher limit to cover the real pain – maybe $50 million. “We could maybe do that using risk finance. They can have the deductibility of a premium being paid and we could give them risk transfer on top of that. “I think there’s real potential for that, because in the cyber world there’s a huge risk for customer confidence to be so damaged that share prices tank and executives get fired. And it can all come from leaving a laptop on a train. “That’s what I mean by making better products as well as clever products.” Mr Condon says the slower-thanexpected acceptance by brokers of Gold Complete and CyberEdge illustrates his point that brokers have to be consulted and insuranceNEWS
informed much earlier in the development of innovative products to ensure they understand and support them when they reach market. “Whether we challenge them or engage more, it needs to happen,” he told Insurance News. “There’s definitely room for brokers and ourselves to work closer together.” He concedes insurers’ ability to be creative is constrained by a range of factors, including their size. Perhaps the proliferation of underwriting agencies in Australia is a response to that. “Insurers can turn on a dime these days compared to the past, but the large insurers are still constrained by their compliance regimes. “So much of the creative stuff is coming from brokers setting up their own innovation hubs, the underwriting agencies. They can get things done quickly.” So can insurers gain more innovative ideas and products by acquiring underwriting agencies? Mr Condon isn’t convinced they can. “The risk for insurers is that if they take over an underwriting agency they can crush it. There are some classic recent examples in this market. “The insurers that succeed keep the agencies they own at arm’s length and let them stay responsive and nimble. It gives brokers what they don’t always get from insurers.” AIG Australia has staff dedicated to working on new ideas, he says. “We’re working at present on an extension to a bog standard product to give it more attraction to a particular type of client. It’s not easy – it’s a constant effort.” He says his company, like most of the farflung AIG empire, took a few years to recover from the company’s near-collapse. “We turned a corner in Australia in late 2011. Our teams are great and we’re back to being the creative organisation we were in the past. “But I’m keen that we resist being purely product-driven. We’ve got to move forward by listening to what brokers and * customers want.”
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Pet cover dogfight Vet bills are rising and owners are spending big on their pets. No wonder insurers are purring By Shelley Dempsey AUSTRALIANS LOVE TO spend money on their pets, forking out more than $8 billion last year. They’re primped and pampered, fed gourmet food and taken on holiday. And just in case, they’re also insured. Pet insurance is now a fastgrowing business, thanks to greater awareness of the heights vet bills can reach. While the Australian pet cover industry is a young pup compared with the UK and the US markets, it has almost doubled in the past five years, with the market hotly contested by two main players. PetSure, underwritten by Hollard, is the industry leader, with policy numbers sold growing by 30% a year, according to Chief Executive Alexandra Thomas. The wholesaler and underwriter commands about 80% of the market through 18 different 68
pet insurance brands. “Our growth has really accelerated in the past four to five years on the basis of us partnering with some iconic brands such as Woolworths, Medibank and the RSPCA,” Ms Thomas says. “Those brands have really raised the awareness of pet insurance, which I think is important. They’ve made a substantial commitment to marketing.” There are 7.1 million cats and dogs in Australia, but it’s estimated only 3-5% are insured, so there is room for huge growth, Ms Thomas says. Last year the pet insurance market was worth about $225 million, according to the Animal Health Alliance, which represents the animal health industry. At the same time, pet owners spent $1.5 billion on vet services. The Australian pet insurance market is still in its infancy compared with the US, which is worth more than $US50 billion. Europeans spend €25 billion a year on pet insurance. “You have the UK sitting at a much higher market penetration, but they also sold their first policy, I think, in 1947,” Ms Thomas says. “So it’s pretty hard to compare, but we’re growing more rapidly here than in the UK and the US.” PetSure may be the biggest player, operating in Australia insuranceNEWS
since 2000, but its policies could not top a recent review of cover by consumer magazine Choice. Policies from rival PetPlan – headed by Victorian broker Doug Ford and underwritten by Allianz – are generally more expensive but offer more inclusions and 100% co-payments. Mr Ford told Insurance News PetPlan is the largest pet insurer in the world and has been operating as a brand for nearly 40 years. “Our excess is about $100 or $125. People know exactly what it is, no matter if the vet operation costs $4000 or $8000.” He says this approach brings better care and fewer claims, preventing pet owners from shopping around for cheaper and less effective treatments. Three PetPlan policies feature in Choice’s top six from 50 accident and illness offerings studied. Four Hollard policies – via the RSPCA, Medibank, Bow Wow Meow and Woolworths – are in the bottom 11. Ms Thomas believes some of the Choice review’s elements were “misleading”, with claims turnaround times not referenced and excess charges and price not part of the rating criteria. “We have the fastest turnaround times in the market,” she says. “We process 390,000 claims a year in about two-and-ahalf days, and for a small June/July 2014
company like ours that’s a pretty extraordinary number.” Claims are most important “because that’s when the rubber really hits the road for the customer”, Ms Thomas says. The average claim size for PetSure customers is about $230, and they tend to claim on average twice a year. On this basis 100% co-payment is often not the best option, she says. “If they have 80% cover with no excess on a $200 bill, versus 100% cover with $150 excess, it’s an easy decision to make.” The Choice report says exclusions based on pre-existing conditions can make it hard to switch policies, especially for older pets. But Ms Thomas says pre-existing conditions can be reviewed. As pet insurance products mature, complaints appear to be falling. Last financial year there were many more complaints about PetSure products than about PetPlan, but now the two are similar. Choice’s report says a “significant increase in disputes” that year was partly due to the rising take-up of cover and a software glitch at PetSure in 2012, which has been resolved. The Financial Ombudsman Service reportedly received 117.8 disputes per 100,000 claims
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WHO? WHAT? WHY? WHEN? WHERE? HOW?
“There are 7.1 million cats and dogs in Australia, but it’s estimated only 3-5% are insured, so there is room for huge growth.”
processed for PetSure in the last financial year, with 19.8 for PetPlan. However, Ms Thomas says PetSure disputes have fallen dramatically after the company overhauled its claims system. She has hit the ground running with the claims shakeup and other projects since taking the helm at PetSure last October, having previously worked as an executive at Optus. She has made an important policy change this year by making sure owners whose pets die do not have to continue paying premiums for the remainder of the policy. Insurers have suffered bad publicity in Australia and the UK over this, and Choice highlighted it as a problem. “I don’t think this was a good thing to do,” Ms Thomas says. The change will take effect from July 1. While firm figures on the industry are unavailable, it appears the size of the market may have doubled in the past five years. Mr Ford estimated in 2009 that about 2% of pets were covered; Hollard’s insurance comparison website Choosi now puts it at 5%. And Mr Ford says vet costs are rising.
“When we started pet insurance in 2004, there was not an MRI scanner specifically for dogs and cats in this country. Now they are a dime a dozen.” Many vets are now required to put animals on drips during surgery, which can add $150 to the cost of an operation. Garry Edgar, chairman of the Australian Veterinary Association’s pet insurance taskforce, says vet costs for consumers are rising about 5% a year, with equipment and technology outlays among the biggest business costs. He says most vets complete the paperwork for insurance claims – which can be timeconsuming because a history is required – but do not charge their clients. The most common complaints from policyholders concern claims, because they don't know what they are covered for and are not aware of exclusions for pre-existing conditions. Some customers have responded well to online pet insurance cover notes. “We find most people will think about pet insurance when they have a new puppy or kitten,” Mr Edgar says. “A cover note gives them time to think * about it.”
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Exposure to disclosure Intermediaries’ liabilities continue to grow as courts decide they’re ‘not just a postbox’ By Jan McCallum
AN INSURED MAY HAVE A DUTY TO disclose all relevant information to their insurer, but the penalty for failing to disclose can rebound onto the broker if a court rules they did not adequately warn the client. Intermediaries have to ensure clients know what must be disclosed, an Australian Insurance Law Association seminar in Melbourne was told last month. University of Southampton Senior Law Lecturer Ozlem Gurses told the Sir Ninian Stephen Insurance Law Masterclass of a UK case where a policy on a boat contained an exclusion if the vessel was used as a houseboat. The broker had asked the client if they used the boat for that purpose and the client had answered in the negative. But the broker did not draw the client’s attention to the exclusion. A subsequent claim on the boat was refused when the insurer discovered the vessel had been used as a houseboat. 70
The client sued the broker, and an English court ruled the broker had not exercised reasonable skill and care by drawing the client’s attention to the exclusion. “The broker is under the duty to know what type of facts may be material, what type of facts may not be material and then warn the assured under the duty of good faith,” Dr Gurses said. “The broker is also under a duty to exercise reasonable skill and care to ensure the assured understood the duty of disclosure.” She says the relationship applies between producing brokers, which have a contractual relationship with policyholders, and placing brokers such as Lloyd’s brokers, which have a contractual relationship with the producing broker. One client successfully sued a broker who appointed a placing broker to renew a policy. The placing broker did not tell the other broker of a new exclusion in the contract, so insuranceNEWS
the client was not informed. When the client’s claim was rejected they sued their broker. The court ruled that if instructions received are not clear or seem inconsistent with past practice, the broker must seek further explanation and act to ensure the cover meets the client’s needs. Brokers were also warned they must do more than just pass on information to the insurer. In a 2007 case involving HIH and JLT Risk Solutions, the court found a broker was in breach of his post-contractual duty of care because he did not warn the reinsurer about coverage issues that meant the client was in breach of a warranty, which would void the indemnity. When a claim was made the insurer paid but the reinsurer did not, and the insurer sued the broker. The court found the broker had information that made it clear the insured would
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breach the warranty. Although the broker had passed that on, “the broker is not just a postbox” and has a duty to ensure the insured understands the coverage issue. There are several cases of brokers failing to prove contributory negligence by arguing the client should have read the policy properly. The courts have ruled clients may not understand exactly what the policy is saying and that they rely on their broker’s professionalism and ability to meet their requirements. Claverhouse Risk & Legal director Mikaela Reynoldson told the seminar that insurance agents, like brokers, owe a duty of care under tort and contract law but the types of agent are changing, with authorised representatives, underwriting agencies and broker clusters on the rise. She says there is a contrast between legal judgements and the legislation applying to agents. Courts have decided agencies owe a duty of care to insurers. She says an agent is “no more than a salesperson; you are there to procure a sale on behalf of the insurer”. But legislators are sending a clear message that “agents are expected to adopt more professional standards and they very clearly owe a duty of care to their insurer clients”. Ms Reynoldson says in determining whether someone is an agent or broker, it is “better to look at how they behave rather than what they are called”. She warns of possible unintended consequences arising from the Future of Financial Advice laws and brokers expanding their businesses by incorporating or partnering with financial planners. The adviser’s duty to act in the client’s best interests appears to dilute the agent’s obligation to the insurer. “If there is a conflict, the law makes it clear the paramount duty is to the retail client, being the insured.” Radford Lawyers Principal Solicitor Mark Radford advised brokers to beware the pitfalls of dealing with third parties to insurance contracts, and to avoid creating a duty of care that may leave them open to being sued by someone who is not the client. A third party might want to be included as a contracting party with the broker’s client. Third parties include policy beneficiaries, loss payees, premium funders, insurers and reinsurers. “It’s crucial to understand what the third party actually wants,” he said. “It is very important to be clear. “If you don’t understand what they are asking, get it in writing so it is clear what is actually being looked for. It is a very big risk for the insurer, too.” Insurance House Group Director Gary Gribbin told the seminar that duties falling * on brokers continue to increase. June/July 2014
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Too many eggs in one basket? Management liability has its hazards, and stand-alone products can offer a more reliable form of protection MANAGEMENT LIABILITY HAS BECOME A POPULAR PRODUCT for brokers and their clients. It’s a product which provides businesses with a broad base of cover over a wide spectrum of exposures. But Specialist Underwriting Agencies (SUA) Director John Iles offers a strong caveat for anyone thinking management liability is the solution to every challenge a business faces. In brief, it isn’t. Designed at the outset to make clients’ and their brokers’ jobs easier, management liability offers brings together a swag of covers that address many management exposures. Common components are directors’ and officers’ liability (D&O), employment practices liability, fidelity, statutory liability, crime protection, entity coverage, cyber and privacy liability and even tax audit costs. There are even more covers that many insurers are happy to add into the mix, providing companies with very wide levels of protection. The packaged product offers minimal paperwork – one proposal compared with one per cover – and a single premium. For an SME business where the job of filling in all the paperwork usually falls on one individual, it was seen as a godsend. Today management liability gathers an estimated $100 million a year in premium. Mr Iles says most insurers have now created a product to fit a market that has expanded exponentially. A recent informal count of the policies on offer in the Australian market topped 40. “But with an overcrowded marketplace, too many insurers have been willing to offer this product to clients who should have purchased individual covers for each section,” he tells Insurance News. “While take-up was slow in the SME space, corporates were enthusiastic buyers. “And the product is often being offered at rates that generally aren’t reflective of the exposures they’re covering. “In some cases, private companies with revenues in excess of $1 billion have been offered management liability covers. That’s simply not wise. “From a broker’s point of view management liability policies are certainly a great way to insure a company’s business practices, but from an insurer’s perspective it can all too easily prove to be an underwriting nightmare.” Mr Iles says it gradually became obvious to brokers that each type of business or occupation has different levels of exposure in each product segment. “Additionally there was cover provided in areas that weren’t intended – or not adequately researched or underwritten. The most outstanding cases are in fidelity, employment practices and statutory liability.” For some insurers and brokers it may also have been a case of overselling the benefits and not understanding the client’s real exposures. Mr Iles says things rapidly turned nasty for some insurers when claims arose and clients’ expectations weren’t always met. “Recently we have seen many insurers reconsider their position on management liability,” he says. “They’ve attempted to reduce their footprint and return the product to its historic status as a solution for small businesses. Covers are becoming more restrictive, is some cases inordinately high deductibles have been applied and there are much stricter controls over preferred occupations.” Ironically, individual products like employment practices liability, fidelity and statutory liability have been readily available, “but the transactional ease and affordability of management liability products insuranceNEWS
meant these individual covers weren’t taken up as readily as they should have been. But this is changing.” He says most brokers are noticing the massive variance in the cover provided by stand-alone offerings, and are switching to these proven covers. “While SUA does have a management liability product that’s aimed at the small business market, even then we’re very careful about who we write it for. “Really, stand-alone covers are far more practical for anything larger.” “SUA was the first company in Australia to offer stand-alone covers for employment practices liability and statutory liability,” Mr Iles says. “These products have remained largely unchanged over the years, and they’re available to all occupation classes and company sizes. “I believe – and I say it proudly – that the SUA products are the orig* inal, and still provide the broadest cover available in the market.”
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Bad weather, good service: A dedicated team of specialists helps insurers build relationships and prevent claims
Putting risky business to the test: A new Lumley app helps SMEs understand their exposures
VIENNA-BASED METEOROLOGY AND severe weather warning specialist Ubimet is offering Australian insurers targeted weather warnings so customers can be alerted when bad weather is on the way. It’s part of a service the company has established with insurers around the world, with alert services tailored to specific postal areas. “These services boost customer trust and satisfaction and help increase customer retention,” says Ubimet Australia General Manager Brenton Kaitler. The company’s weather solutions and high precision forecasts are well tested. They were first developed in 2004 for the Uniqa Group – one of the leading insurance groups in Austria and Central and Eastern Europe. “The personalised severe weather warnings empower customers to take preventative measures to reduce damage,” Mr Kaitler says. Customers can be provided with realtime severe weather forecasts by SMS and email. Already this year, 100,000 Austrians have received postcode-specific alerts warning of storms. “The knowledge of past and future meteorological events is vital, particularly in the insurance sector,” Mr Kaitler says. “After all, rarely does a year pass by without storms, floods, hail and snow-caused damage in that part of the world. “Through real-time reliable warnings to people who will be affected by a weather incident, safety measures can be upgraded. That 76
significantly reduces potential damage. “As a result, the insurer increases positive consumer contact and enhances customer service.” Ubimet was established in Austria in 2004 and opened its Melbourne office in 2011 with a full-scale meteorological operation. It’s 50%-owned by Red Bull, and supports many of Red Bull’s worldrecord attempts, adventure activities and events with on-site weather services and forecasting. The Australian office has links to meteorologists around the world who help Ubimet deliver highly accurate weather predictions. They use proprietary algorithms, inhouse modelling and the knowledge of the meteorological team to ensure the predictions are highest quality weather forecasts and personalised solutions. Ubimet provides one of the largest weather databases in the world, collecting data from several thousand national and private weather stations, as well as the most up-to-date satellite, weather radar, radiosonde and lightning data. This is then stored and processed into local forecasts. It also uses proprietary algorithms, highquality data and purpose-built models for real-time weather forecasting. Its precise “NowCasting” weather services provide short to mid-term forecasting for sporting events and industries such as insurance, infrastructure, mining and energy. Globally, it serves several million pri* vate customers. insuranceNEWS
LUMLEY INSURANCE HAS LAUNCHED A free app to help small business owners calculate their risk profiles and find brokers in their area. The RiskSmart Profiler, which works on all mobile devices and desktop computers, offers suggestions for reducing risk, including relevant insurance products. Users can take a quiz to rate their risk exposure and tolerance on the domainspecific risk-taking (DOSPERT scale), hosted by the Centre for Decision Sciences at Columbia Business School in the US. The quiz takes less than 10 minutes to complete and ranks users on a risk scale in terms of financial decisions, health and safety, and recreational, ethical and social decisions. “SME businesspeople are quite often unaware of the multitude of risks they take on a daily basis,” Lumley Insurance Chief Executive John Nagle says. “Some risks are overt, like investing in new equipment, hiring additional staff or the possibility of your property being destroyed by fire or other perils. “Other risks are less obvious. They include things like forgetting to make follow-up calls and missing out on new business, or not insuring gross profits against business interruption after a fire.” Mr Nagle says a better understanding of risk can have a profound impact on the culture of a business, as well as its operation and bottom line. “Selecting a broker to help manage insurable risks is just as important as finding a good accountant,” he says. App co-developer and organisational psychologist Kirsty Bucknell says taking the quiz can be fun and insightful. “In business, as in life, taking too many risks can be detrimental – but so too is being overly risk-adverse; it’s a delicate * balancing act,” she says.
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Take a moment to save y
Breast cancer survivor Tina Wilkinson has a message for others on the importance of screening By Shelley Dempsey DESPITE WHAT SHE HAS BEEN THROUGH, insurance broker Tina Wilkinson regards herself as a lucky woman. She admits a chance move by her employer may have saved her life – and she’s anxious to warn other women in the insurance industry that they could be risking their own lives by not getting regular health checks. Ms Wilkinson, 41, is Operations Manager for Wymark Sirius Insurance 78
Brokers, having previously worked for JLT in the UK and Australia. Like many mothers and wives who look after a family while working full-time, Ms Wilkinson was so busy she kept putting off screenings for breast cancer. When she finally got around to having a free mammogram in her lunch hour last year, she was showing no symptoms – and the last thing she expected was to return to work that afternoon after a painful biopsy. A week later came the diagnosis of breast cancer. The day she had to deliver the news to her family was far from easy. “My husband has his own electrical business and works with our son, who is an apprentice,” Ms Wilkinson tells Insurance News. “They were both quite upset when I phoned, and I got upset too.” The Queenslander has since adopted a no-nonsense attitude to rid herself of the disease, undergoing a double mastectomy. insuranceNEWS
And she has resolved to encourage as many other women as possible to take advantage of breast screening. “It’s easy to put all these things off, especially with the hours we work in insurance,” she says. “It was only because we moved offices last year in July, to Southport on the Gold Coast, that I got my breast check. “Where we’re based now is literally around the corner from the Queensland BreastScreen clinic, which I drive past every day. “I thought to myself, because I’m over 40 now and just around the corner, there is no excuse. Maybe I should just zip round and get my free mammogram.” The decision may have saved her life. Doctors told her if the cancer had gone undiscovered for a few years and progressed to the stage where she could feel a lump, it could have been invasive and spread through her body.
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e your life “They just said, ‘If you are going through all this, the last thing you need to worry about is pay.’ They were just brilliant...”
Tina Wilkinson with Wymark Sirius colleagues: an office move made it hard to put off a mammogram
The career broker moved with her husband and two children to Australia six years ago, where free breast screening starts at age 40. In her home country, the UK, screening does not begin until age 50. “I’m lucky I was in Australia,” she says. “I can’t even explain what made me go that day, it was just really weird.” She puts her recovery partly down to the unqualified support she has received from her employer. “That’s just been a massive thing for me,” she says. “I have three directors, all of them male, and with all three I can walk into their offices and speak openly.” Wymark Sirius continued to pay her throughout her ordeal, even for a handful of days off she needed when her sick leave and annual leave ran out. “They just said, ‘If you are going through all this, the last thing you need to worry about is pay.’ They were just brilliant and said for me to take whatever time I needed.”
She knows other women are not so lucky. Now an active member of the Gold Coast breast cancer support network Sassy Survivors and Breast Cancer Network Australia (BCNA), Ms Wilkinson has heard stories of harsh treatment for breast cancer sufferers from their employers. “Some just did not receive support, especially those with casual shifts who were struggling to get hours or had their shifts changed. “That seems to be more prevalent with those who have gone on to have chemotherapy and needed quite a bit of time off.” BCNA estimates 15,270 Australian women will be diagnosed with breast cancer this year. After her diagnosis on October 30, Ms Wilkinson endured a double mastectomy on November 22 and returned to work on January 6. In April – following another operation insuranceNEWS
on February 7 – she was still suffering discomfort and swelling. The decision to take the most radical surgery option was made in “about two seconds”, for future peace of mind, she says. “My attitude was, I have had my children, they are just boobs, they serve no purpose, so let’s get rid of them.” After a double mastectomy, the chance of the cancer returning drops to about 5%, doctors say. This compares with up to 20% after a less invasive lumpectomy. “I feel really, really lucky,” Ms Wilkinson says. “I have come back to work and everyone has been so great.” Since returning, she has urged female work colleagues aged over 40 to get screened. “I think they got a bit of a scare seeing what I went through. “We all get caught up in our day-to-day activities, and I was the worst one for it in the past to put things off. I will never do * that again.” 79
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Talking about reputation The increasing risks around reputational damage came under the microscope when Catlin invited 100 brokers to a Melbourne workshop in May. The morning started with a presentation about product contamination, kidnap, extortion and political instability. Brokers also heard about what to be aware of with contractual liability, indemnity agreements, waivers and subrogation. Those with clients in the property business went through the scenario of a property crash and the impact on parties such as valuers, advisers and fund managers. Catlin Singapore Director Steve Lardner chaired a panel discussion about reputational damage, with different perspectives brought by Country Manager Andrew Case, General Liability Underwriting Manager Rory Morison, Product Group Leader for Financial and Professional Risk Timothy Powell and Legal Counsel and Claims Manager Steve Gibbs. Attendees debated the issues over a working lunch.
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Celebration and inspiration at AIMS AIMS conference delegates gathered at the Adelaide Convention Centre to celebrate this year’s theme of “Partnerships”. More than 460 delegates from AIMS joint venture groups Austbrokers and IBNA attended the three-day event, which offered workshops, presentations and the opportunity to enjoy some of South Australia’s fine food and wines. The conference included serious messages, the opportunity to learn from the experience of others and inspiring stories of strength and courage from keynote speakers. AIMS General Manager Martin McAvenna told delegates new technologies are changing the landscape for brokers and presenting new challenges, while a case study looked at how a $26 million claim was successfully settled. Pat Farmer exhausted the audience telling of his experience running from the North Pole to the South Pole and completing the equivalent of two marathons a day with no days off in 10 months. Gill Hicks, originally from Adelaide, recounted her experience in recovering from the 2005 London bombings, when she lost both legs below the knee. A team of doctors, nurses and police worked to save her life and she showed an indomitable spirit to meet the challenge of learning to walk again using prosthetic legs. And sporting writer and historian Peter FitzSimons regaled the conference with tales that pointed to how partnership leads to assured success. Delegates became early visitors to the successful redevelopment of the Adelaide Oval, which has become a game-day cauldron this AFL season. Drinks and a tour of the oval were held before a dinner with a string of sporting legends like netballer Liz Ellis and tennis star Todd Woodbridge. Rounding off the conference was a grand final dinner to remember – a five-course Neil Perry degustation dinner hosted by the chef himself, with wines to match each course. Next year’s AIMS conference will be in Barcelona. Images courtesy of Ray Lawler Studios.
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AND A SCENE
ONLY WE’D TOUCH
aturday morning, 8.15am. What do you do when one of your longest serving customers has a rolled B-double spilling 40 tonnes of liquid tallow into a creek that runs into the Brisbane River? When you’re Rob Wass, Manager of NTI Accident Assist, you go out and buy an inflatable boat. “Having worked at NTI for over 27 years, I’d thought I’d seen everything”, Rob said, “but I was wrong. This was a real disaster. With the driver unharmed the focus was on cleaning up the site, and fast.” “The young woman at NTI Accident Assist who took the call was exceptional”, explained Julie Russell from Russell Transport. “Before we knew it, all the necessary emergency services and environmental protection people were on site, along with NTI themselves.” Rob explains further. “We had disposable oil booms in place to stop the tallow spreading into the Brisbane River, but because the tallow had solidified and was breaking up, we needed to find a way to direct it towards the vacuum sucker trucks.” Ken Russell, Julie’s brother and fellow company director, was keen to get in on the action – he too went out and bought a boat. “They were out on the water with poles pulling the solidified tallow towards the sucker trucks”, says Julie. “I guess I shouldn’t have been surprised about the hands-on role NTI took. They’ve always been great, but it was above and beyond what I expected. They managed everything – the clean up, the police, the media – they even arranged for part of the road to be resurfaced.” It’s certainly an event no one will soon forget. And that’s exactly why R.B. Russell Transport has been with NTI for longer than they can remember. Visit truestories.nti.com.au
Insurance products are provided by National Transport Insurance. NTI Limited (ABN 84 000 746 109) (AFSL 237246) is the Manager for National Transport Insurance, an equal-partner joint venture of CGU Insurance Limited (ABN 27 004 478 371) (AFSL 238291) and AAI Limited trading as Vero Insurance (ABN 48 005 297 807) (AFSL 230859). Each insurer is only responsible for its 50% share of the policy.
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REPUTATIONS AREN’T RENEWED EVERY 12 MONTHS. THEY’RE BUILT OVER 40 YEARS.
With over 40 years in the transport insurance industry, it’s no wonder NTI has achieved a reputation as the specialist you and your clients can rely on. In fact, as Australia’s longest serving transport insurance specialist, we’ve been first with many firsts. We’ve been a proud Foundation Sponsor of the Australian Trucking Association for the past 20 years. We established the National Truck Accident Research Centre to help improve safety on the roads, and since 1998 we’ve published one of the leading industry reports into major accident trends and causes. It’s these kinds of initiatives that have led to breakthrough products like NTI Accident Assist, where our specialist team takes control from the scene of the accident right through to the day the truck’s back on the road. So when it comes to your transport clients, protect your reputation by relying on ours.
Talk to National Transport Insurance – the transport insurance specialists.
National Office (07) 3292 9800 | Adelaide (08) 8271 1166 | Brisbane (07) 3292 9800 | Launceston (03) 6331 6769 | Melbourne (03) 9860 5688 Newcastle (02) 4965 4700 | Perth (08) 9421 1190 | Sydney (02) 9233 3433 NTI Limited (ABN 84 000 746 109) (AFSL 237246) is the Manager for National Transport Insurance, an equal-partner joint venture of CGU Insurance Limited (ABN 27 004 478 371) (AFSL 238291) and AAI Limited trading as Vero Insurance (ABN 48 005 297 807) (AFSL 230859).
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Zurich forums zero in on trends Zurichâ€™s Generation Z forums for brokers have proved to be a powerful avenue for discussing emerging trends in insurance, and there was plenty of debate about the use of drones and the inevitability of telematics at the sessions held during April and May in state capitals and other regional centres. LMI Group Managing Director Allan Manning talked about the value of drones in loss adjusting and some of the audience debated the risks associated with unmanned flying devices and how they can be insured (Is it a plane? Is it a model aircraft?). Privacy issues were also raised. Zurich Head of Customer and Proposition Development Nick Cook sparked more discussion when he said telematics systems being built into new cars could change the industry as customers seek to use information on their driving habits to negotiate their insurance. Every broker has been asked for insurance advice at a party, but solicitor and business management expert Keith Hanslow warned brokers at the forum they could be held liable later. He tells enquirers to call him at the office or to send an email.
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peopleNEWS Shorter days ahead as AILA YPs toast the equinox Nearly 500 young insurance and legal professionals celebrated the autumn equinox in May with an evening devoted to catching up and discussing the latest insurance law issues and developments. The Australian Insurance Law Association (AILA) young professionalsâ€™ event always attracts a wide group from the industry. AILA Young Professionals Network Committee president Siobhan Newton welcomed lawyers, insurer staff, brokers, loss adjusters and forensic accountants for an evening of networking over canapĂŠs and desserts at the Sydney Shangri-la. AILA is now preparing for the annual Luminaries Dinner, attended by senior industry executives who offer their experience and also bring along the rising stars from their organisations.
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Allianz Young Eagle participants: (L-R), Megan Mahony, Trans-West Insurance Brokers; Noel Kelly, Austbrokers AEI Transport; and Carlo Gentili, GSA Insurance Brokers.
Allianz Young Eagle Program: today’s talent, tomorrow’s leaders. As one of Australia’s largest general insurers, Allianz is committed to enhancing the potential of today’s young insurance professionals. Now in its fourth year, the Allianz Young Eagle Program continues to identify and develop our industry’s most promising young individuals. We offer high achievers an exclusive series of educational forums, events and networking opportunities. The Young Eagle Program is a challenging and highly rewarding process where participants undergo advanced development to help them attain both personal and business goals. We will continue in our efforts to provide the educational and networking platform that inspires tomorrow’s industry leaders, today. Contact your local Allianz representative for further information.
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Record turnout gains valuable insights Intermediary group Insight held its most successful conference yet at the end of March at Crown, Melbourne. More than 230 delegates attended the two-day event, with stand-out sessions including a discussion panel with senior managers of the “Big Six” insurers. A cocktail function for principals and strategic partners kicked proceedings off, with dinner at the Melbourne Aquarium the following night. Saturday evening’s gala event at the Crown Palladium saw the CGU Norm Dyer Award of Excellence presented to Marianne Caoile, from Verisure Insurance Brokers in Blacktown, NSW. The award, which recognises leading young Insight professionals, was presented by CGU’s State Development Manager Kent Hannam. Dragan Zivkusic, from Melbourne-based IMC Insurance Brokers, was runner-up. The Vero-sponsored Les McInerney Award of Excellence went to Sharon Pyne, from Parmia Insurance in Beenleigh, Queensland. The award, named after the long-serving former Insight chairman, is for professionals with more than three years’ industry experience. It was presented by Mr McInerney and Zurich Broker Manager Rod Frichot. Christine Palmer, also from Parmia, was runner-up. During the conference $20,000 was donated to Children’s Cancer Institute Australia following a powerful presentation. Next year’s event will be at the Surfers Paradise Marriott Resort & Spa from March 19-21.
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Cooking up a storm for Dual’s 10th anniversary Not that guests were doubting the taste of their hosts, underwriting agency Dual Australia, but some of the brokers being bussed to secret locations for Dual’s 10th anniversary celebrations in Sydney and Melbourne were heard to question the choice of venue as their buses came to a halt. As it turned out, the venues in the gloomy industrial surrounds proved a big hit. More than 100 brokers attended each of the anniversary bashes at the Studio Raw Materials in blue-collar Footscray, in Melbourne’s west, and the Fairground Follies at the Antique Mechanical Music Museum in Sydney’s St Peters. David Howden, the founder of Dual and Chief Executive of parent group Hyperion, flew from London to join the celebrations. He was accompanied by Londonbased Dual International Chief Executive Shane Doyle. Dual Asia-Pacific Chief Executive Damien Coates says the company “wanted to hold special celebrations to thank our brokers for the support they have given us over the past 10 years as we built the business from zero to $100 million”. Anniversary celebrations have also been held in Perth, with events planned for Adelaide and Brisbane later this year.
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maglog » THE FINANCE MINISTER PULLED long and hard on his Montecristo. “I have a security problem, Joe.” The Treasurer, seen only from the red tip of his own cigar, grunted. “That’s hardly your area of responsibility.” “It’s these corridors in the ministerial wing. There are too many alcoves and side corridors where someone can lurk and leap out as you pass. It’s terrifying.” The Treasurer grunted again. He was shivering in the cold Canberra night, but his favourite pastime of puffing on a stogie while discussing affairs of state had become impossible in daylight since that bloody Channel Nine TV crew shot him and Mathias sharing a smoke. “Terrifying? Who could you be worried about in this place?” “Warren Entsch. He lurks in darkness, Joe. Then he leaps out and shouts in my face about the insurance situation in north Queensland. What the hell does he expect me to do?” The Treasurer flicked some ash and frowned. He wondered why cigars tasted so much better in the light. “Well, Warren’s right, in a way. You are acting Assistant Treasurer.” Since Arthur started revolving on the ICAC spit, he thought. “As we used to say in Belgium, the horse must eat the grass where it is tethered. I accept the responsibility. But what can I do about this problem?” A long silence followed as the Treasurer pondered. The secret must be in being able to actually see the smoke. That must be it. “You used to work around the insurance industry when you were Howard’s assistant treasurer,” prompted the Finance Minister. “You must know some of those people, how they think.” The Treasurer grunted again, a dismissive grunt. “That was a while ago.” I must get rid of this grunting habit, he thought. “What’s the situation?” “They have imposed massive insurance premium rises over the past few years on properties in Entsch’s electorate. Every time I talk to the insurers they say the premiums are not only necessary but economically rational. An argument like that is hard for an economic rationalist like me to resist.” 98
Sam Pentecost Contributor
The Treasurer turned his thoughts from the wonders of cigar smoke to the electorate of Leichhardt. A huge hunk of north Queensland, politically conservative, as catastrophe-prone as Kevin Rudd’s management style. Paradise in winter, hell on earth in summer. He sucked on the cigar, the tip flaring like a brake light in the rain. Dammit, it really didn’t taste the same in the dark. “Entsch’s majority at the last election was around 10,000,” he said. “That places Wazza in a bit of a dilemma. The last government did nothing about it because it isn’t like the voters up there are swingers. Not politically, anyway.” I wonder what they do get up to on those long sweaty summer nights when the tourists have fled south, he mused. “Then surely it is up to us to do something.” The Finance Minister puffed and half-choked. “They voted for us.” “That’s Entsch’s dilemma in a nutshell. We could sell them all to Indonesia and they’d still vote for us.” He thought, perhaps if I looked up at the stars and saw the smoke rising; that might help. Nope, just clouds. Bloody Canberra. “What would you do, Mathias?” “Well, we could set up our own insurance company, reinsure it ourselves and offer lower premiums. The insurers would be forced to apply lower premiums to compete.” The Treasurer sighed a long drawn-out sigh. God give me patience. “And what if the insurers all said thanks very much, packed up their bags and headed south, leaving us to part with billions more than we already do every time a cyclone cruises over the coast?” “Ah,” said the Finance Minister. “Good point.” The Treasurer puffed a thoughtful puff, held it in a moment, let it slowly out. Nothing. As satisfying as American beer. “Look, in a situation like this it’s a good idea to let the person on the ground apply the heat. Warren’s all fired up, so use him to maintain the rage. The insurance industry is big business, and Tony’s afraid of only three things: big business, rich people and showing a single grey hair.” insuranceNEWS
“Maintain the rage. A very good phrase. Who said that?” “Never mind. Warren can say things we couldn’t say. He’s very good at it. We can make approving noises from the sidelines, or disown him if he gets too bolshie.” “What will that achieve?” “You really have a lot to learn about politics, Mathias.” “As we used to say in Belgium, experience is the comb that nature gives us when we are bald. You mean… “That’s right. Show we’re doing things. Maybe things will come right. If they don’t, it’s not our fault.” He contemplated the red end of his cigar, the light in the darkness. The Finance Minister spoke. “Some of the people in the Assistant Treasurer’s office have come up with the idea of a comparator,” the Finance Minister said. “Very hi-tech. Every insurance company would put its prices on a website, so people can compare. They say that will force the insurance companies to compete.” Sounds good,” said the Treasurer. Good luck with that one, he thought. “I’ll shove a couple of mill into the Budget to pay for it. Anything else?” “The insurance companies are talking about getting engineers to examine individual buildings so they can show owners how to make them more resilient to winds and rain. Stronger buildings make for lower premiums.” “Brilliant. We’ll shove a few more million into the budget for that, too. It’s not a total solution but it shows willing.” The Finance Minister coughed a discreet cough. “Of course, it appears that as the planet heats up these storms will become more frequent and more fierce.” The silence was a long one, then the Treasurer spoke. “Whatever you do, don’t say that in front of Tony.” “Oh,” said the Finance Minister. “Of course.” “And that old saying about experience and baldness? I wouldn’t say that in front of Tony, either.” The two men fell silent, their cigars two sharp spots in the darkness. Perhaps a nice scotch, a single malt, with ice? Maybe that would help the taste. He’d try that tomorrow night. *
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The local broking scene is in for a shake-up following Arthur J Gallagher’s acquisition of No.5 broker OAMPS. The June/July edition of Insur...
Published on Jun 1, 2014
The local broking scene is in for a shake-up following Arthur J Gallagher’s acquisition of No.5 broker OAMPS. The June/July edition of Insur...