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INSURTECH AND THE GENDER DILEMMA Artificial intelligence leader Catriona Wallace says the dominance of male coders risks gender bias becoming embedded in new insurance products PLUS: Trends and innovations in the insurtech revolution

April/May 2019


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Contents 6 Newsmakers »

specialFEATURE

10 Coming up for air »

50 The best of both worlds »

QBE has risen from the depths, thanks to a ‘stronger and simpler’ approach to its global business

14 Keeping score »

It’s hard to compare Steadfast and AUB, but fun to try

16 Facing the challenge »

Declining trust levels and direct buying trends are putting the heat on brokers, an annual survey shows

20 Hard talk »

General insurance lead ombudsman John Price sees the Hayne reform agenda as a vital opportunity

24 Straight from the heart »

Tim Wedlock is a passionate advocate for insurance broking – even if so many brokers don’t support their association

28 Clear as mud »

Insureds should be well aware what flood cover is and why they need it, but apparently they’re (still) not

30 Question time »

We’ve asked the major political parties their views on general insurance issues

34 Trust me! »

In the wake of the Hayne royal commission, how can the insurance industry regain customers’ confidence? You won’t find the answer in a PowerPoint presentation

38 All about the client »

AUB’s Australian broking chief Nigel Thomas says the network is building for a future full of opportunities

42 A ‘pervasive’ threat »

A series of class actions have put the spotlight on toxic chemicals found in a host of everyday items

46 Double trouble »

Two cyclones at once, and a new tendency to go slow – is climate change altering cyclones?

For tech start-ups, disruption or collaboration is far from a binary choice

54 Looking for a fair share »

With males dominating insurtech, gender inequality has become an issue with serious consequences

58 It’s a cinch »

The algorithm rules. An innovator develops his own insurance platform that can serve brokers as easily as it aids consumers

62 Analyse this »

Tech innovators are finding novel ways for the industry to utilise its vast data resources

companyNEWS 67 Ready for take-off » HDI builds aviation team

67 Two become one »

Marsh/JLT deal goes through

68 IAG settles in »

From city centre to harbourside, these new offices are all about connection and agility

peopleNEWS 70 ANZIIF leads way on insurtech » 73 Positive verdict for Lloyd’s ‘mock trial’ » 74 Adroit conference shifts focus » 76 Cruising and celebrating with BHSI » 78 Hollard launches new brand » 81 UAC expo draws record numbers » 82 HDI throws sizzling summer fiesta » 84 Women to the fore at Insurance Advisernet workshop » 86 Steadfast sparkles on Gold Coast » 90 maglog »

April/May 2019

insuranceNEWS

April/May 2019

5


In February/March we published 507 articles online. These were made up as follows:

70

Steadfast buys control In Mid-March Steadfast ended its long-running 50/50 premium funding joint venture with Macquarie Bank by buying the whole thing. Macquarie Pacific Funding was immediately rebranded with the unforgettable if confusing title IQumulate.

Local

Former Zurich chief Raj Nanra, who joined in October, is continuing to run the one-owner operation as Chief Executive. After the deal is complete, Steadfast says it will sell equity to Mr Nanra and his senior managers.

90

Corporate

58

Regulatory & Government

Asked whether Steadfast brokers would be pushed into using IQumulate, Managing Director and Chief Executive Robert Kelly was emphatic this wouldn’t happen. “Competition is in the DNA of this business.” Macquarie Pacific Funding was formed in 2003

57

and offers more than $1.5 billion in premium funding loans each year to more than 60,000 clients. So why did Macquarie sell a profitable business? Sources have suggested funding might have been more complicated than it was worth in the post-Hayne royal commission world, but Mr Kelly says it was simply a case of needing “one set of hands controlling it to get to the next step”. “Eventually you get to a situation where you wonder who is best to take it forward, the bank or the distributor,” he told insuranceNEWS.com.au. “This deal frees us up to look at the future.” Steadfast acquires premium funding operation, Breaking News, 18 March; Steadfast brokers ‘not obliged to use acquired 0 funder’, 18 March

“We rarely hear from the 99% of claimants who have had their lives rebuilt because they had the wisdom to insure themselves.”

Life Insurance

56

The Professional

Insurance Council General Manager Risk Karl Sullivan highlights the valuable work being done by industry professionals after a torrid summer by mentioning a bitter truth – dissatisfied customers tell everyone, satisfied customers say very little.

58

International

Resilium breaks out

9

Analysis

The large broker groups were left disappointed after Suncorp sold its authorised representative (AR) network, Resilium, in March via a management buyout.

105

Resilium Managing Director Adrian Kitchin leads the new owners, and will continue to run the business after the sale, which is expected to be completed by the end of June.

Daily

The sale brought to an end considerable speculation about who the successful buyer would be, after IAG sold its Community Broker AR network in October to Steadfast.

4

Breaking News More than 28,500 news articles – including 318 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives. 0

By giving Mr Kitchin’s team the nod, Suncorp will continue working with a valuable sales channel that would probably have been diluted had Resilium been sold to any of the large broker groups. As Suncorp Chief Executive Customer Marketplace Pip Marlow put it: “We have formed a long-term strategic alliance which allows Resilium to distribute Suncorp’s GIO and Vero-branded products, alongside those from other insurers.” Resilium was formed after AMP sold its 700-person general insurance agency to Suncorp in 2011. With the much-admired Mr Kitchin in control, the new company is expected to have more freedom to invest in itself while maintaining that lucrative Suncorp channel. Resilium reported revenue of $69.2 million last financial year and a profit of $159,000. The sale is estimated to have reaped Suncorp $40 million. Suncorp confirms Resilium sale, Breaking News, 25 March 0

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New owner: Adrian Kitchin


Terror aftermath: ‘Doing the right thing’ The realities of terrorism came to New Zealand in March in a horrifying attack on two Christchurch mosques that left 50 Muslim worshippers dead. The focus after was on the causes and effects of the one-person attack, and the country’s united effort to recover through shared sorrow and tighter gun laws.

AAP Devastation: dozens of homes were lost to summer bushfires

An expensive summer As Australia slid into autumn, the insurance industry counted the cost involved in dealing with a catastropheridden summer. The Insurance Council of Australia declared three catastrophes during summer: The Sydney hailstorm in December, Townsville floods in February and the Victorian bushfires in March. The estimated cost in claims received by early April: $2.2 billion. Townsville losses stand at $1.04 billion from 25,770 claims, while hailstorm losses have reached $1.19 billion from 130,000

Dead broke New Zealandbased insurer CBL Corporation has yet to pay any of its creditors who are owed at least $NZ173 million, the voluntary administrators say in a new report. Offshore assets that have so far been disposed of include Sydney-based Assetinsure, which was sold in November to Lombard Australia, a holding company made up of an alliance of surety providers. But so far only $198,295 from the sale of offshore assets has been received. Legal costs have run up to $2 million in the year since CBL Corporation went into administration – an arrangement being funded by its lenders. According to the administrators’ report, unsecured creditors are owed nearly $165 million and priority creditors $542,946. Dead broke: CBL has no money to pay 0 creditors, 29 March

claims. Insurance losses from the fires have reached $20 million from 365 claims. And then there are the other, smallerscale disasters, like bushfires in several states and cyclones Trevor and Veronica that caused losses in Queensland, the Northern Territory and the northwest of Western Australia. While the cost of all these losses is usually the way insurers register the impact, there are also thousands of insurance professionals – many of them at the scene – working to put damaged communities back together again. Karl Sullivan, General Manager Risk at the Insurance Council, says the industry’s good work after a catastrophe strikes is often overlooked. “It often seems that anyone can tell you about a disappointing experience they, or someone they know, has had,” he writes on LinkedIn. “We rarely hear from the 99% of claimants who have had their lives rebuilt because they had the wisdom to insure themselves.” Summer catastrophe bill passes $2.2 0 billion, 1 April

Insurers, faced with a swath of claims related to the attacks – mostly for cars and businesses trapped within the no-go zones around the targeted mosques – could have imposed the terrorism clauses in their policies to avoid claims. Instead they waived the exclusions in a show of support for the community. IAG NZ chief Craig Olsen said the action was “the right thing to do in these circumstances. We’re here to support our customers and community.” Mr Olsen says the company’s thoughts “are with the Muslim community and wider Christchurch community” after the “unfathomable” terrorist attack. Suncorp’s joint venture personal lines insurer AA Insurance and Tower Insurance also announced they wouldn’t be enforcing their terrorism exclusions. The attack – the first terrorism incident in New Zealand – raised awareness of the country’s apparent lack of preparation for the potentially devastating effects of a fullscale terrorist attack, and whether terrorism reinsurance pools like those operating in Australia and the UK are needed. As Insurance Council of New Zealand Chief Executive Tim Grafton put it in a discussion with insuranceNEWS.com.au: “What has happened now turns the mind to the very real risks that are out there and how they would be responded to given the standard exclusion that exists around acts of war and terrorism.” Terror exclusions waived for Christchurch, 0 20 March

Brokers’ tech headache Broking businesses are prospering, but they are increasingly worried about technology and preparing for the future, according to a new study. A Macquarie Bank report says highperforming brokers are still feeling their way with technology but are “ahead of the curve in harnessing innovation to increase productivity”. Strategies include partnering with tech companies and launching pilot projects to automate and streamline operations.

Macquarie Business Banking National Head of Insurance Eoghan Trehy says the report also finds the 194 brokers surveyed are worried about possible regulatory intervention, increased price sensitivity among clients and heightened competition. The research confirms most broking businesses are prospering amid recent premium hardening, with average revenues and average profit margins up. Technology trend ‘increasingly urgent’ 0 for brokers, 18 March

insuranceNEWS

April/May 2019

7


From the

PUBLISHER

Moving uptown If a town is being constantly wrecked by floods because it’s situated in the middle of a floodplain or on the banks of a river, why not simply move it to higher ground? Managed relocations of towns that are too exposed to flood should be considered as climate change increases the frequency and severity of extreme weather events, says Suncorp. The insurer says there are dozens of examples of such moves in the US, and after the 2011 Queensland floods the township of Grantham was relocated from a floodplain to higher ground via a council land-swap scheme. While it may seem extreme, Suncorp Acting Executive Manager Government, Industry and Public Policy Josh Cooney says all mitigation options should be considered. “Suncorp is a vocal supporter of flood mitigation, and what we are keen to do is initiate much more rigorous discussion about what the mitigation options are,” he told insuranceNEWS.com.au.

“Exploring the viability of managed relocations in towns that are more prevalent to risk is a worthwhile thing to do.” Suncorp recently hosted a forum to discuss the issue with US flood retreat expert Professor Nicholas Pinter. Professor Pinter outlined more than 30 examples of relocations in the US, and Mr Cooney says they featured common themes. “They were all pretty small communities,” he said. “Clearly there is a population tipping point where the business case for retreat becomes unviable. “In all the cases there was strong community leadership, and a viable and more attractive site nearby.” Mr Cooney says in each case the relocation was sparked by a tragedy, and in some cases loss of life. He says insurers could help relocations get off the ground by offering cash settlements after losses, and putting a “price signal” on risk. Relocation, relocation: Suncorp’s answer to flood0 prone towns, 19 March

Terry McMullan

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This issue of Insurance News focuses on insurtech, a phenomenon that’s becoming more interesting each day. As Insurance News has noted before, insurtech has the potential to change the way our industry works. In reality, it probably already has. Fresh from the third ANZIIF-organised national conference on the issue – at which Insurance News was pleased to be the media sponsor – we’ve brought together a fascinating collection of articles that look at some of the issues we’ll all be dealing with in the nottoo-distant future. But before we get carried away with the wonders we will be able to perform and make clients happy, we must first deal with the startling gender imbalance that exists within insurtech. As Miranda Maxwell reports in her interview with insurtech leader Catriona Wallace, nine out of every 10 of the coders building the industry’s platforms and systems are men. As the chief executive of a successful technology company, Ms Wallace is herself a rarity – there are very few women working in the tech development field at all. In an industry that’s working with considerable success to deal with gender imbalances in its ranks, this fact alone should make insurance practitioners uncomfortable. The fact that the products under development may feature conscious or unconscious bias in their assumptions and settings should ring some very loud alarm bells. If you are one of the few non-technical individuals who has succeeded in understanding exactly how algorithms work, you will know that insurance is a happy place for them. Because, as Warren Burns points out in an article in this issue on his latest insurance technology venture, algorithms thrive on data and “the insurance industry is awash with the stuff”. Mr Burns featured in the Insurance News cover story of February 2016. At that time he expressed some controversial thoughts on the future of brokers in a digital insurance industry. It’s pleasing that this time around, thanks to several years spent working closely with brokers and insurers, his views on the value of human intermediaries has mellowed. Technology, he says, is there to help the broker by doing such repetitive and detail-heavy tasks as collecting relevant risk data and putting it into a form that can be used by underwriters. That will give the broker more time to explain to the client the risk aspects and transfer choices that are best sorted out over a cup of coffee. Computers don’t drink coffee and are terrible conversationalists.

insuranceNEWS

April/May 2019

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CONTRIBUTIONS: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538.

Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on FSC® certified paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification. ISSN 1837-4972


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Coming up for air QBE has risen from the depths, thanks to a ‘stronger and simpler’ approach to its global business By Bernice Han

W

hat a difference a year makes. The latest earnings season has again served to remind us how quickly fortunes can change. This time last year QBE dominated the headlines for all the wrong reasons: the insurer was in a huge mess, hamstrung by a $US1.2 billion loss incurred in 2017 and copping a barrage of criticism over the way its business was run. Main rivals IAG and Suncorp were not exactly problem-free, either, but the sheer scale of the troubles facing QBE dwarfed everything else. Twelve months on, and QBE is again the main story – for the right reasons this time. It finished last year with a $US390 million net profit, a solid rebound built on an average 5% rise in premium rates and a catastrophe claims bill that fell by more than half to $US523 million. Chief Executive Pat Regan, who took over as Group Chief Executive in January last year just before the disastrous 2017 result was announced, has rid the business of underperforming units, streamlined the structure and revamped the underwriting strategy under a “stronger and simpler” prescription that has paid off handsomely. “We successfully exited the countries and portfolios where we lacked scale or were not able to deliver an acceptable return to shareholders,” Mr Regan says. “Businesses exited generated underwriting losses in 2017 of about $US200 million. “The actions we have taken to simplify the group, upgrade core capabilities in pricing, underwriting and claims management, and implement a rigorous performance management framework delivered meaningful improvement in the underlying quality of our business On track: Pat Regan has led an impressive turnaround

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For IAG and Suncorp, the outlook is somewhat less rosy, after the pair produced subdued first-half earnings. and our financial performance [last year].” Analysts like the new-look QBE and the direction set by Mr Regan, who wasted little time clearing the QBE house of unwanted furniture. He was familiar with the business, having joined as chief financial officer in 2014 before becoming chief executive of Australia and New Zealand two years later. When he took the hot seat in January last year, he had a clear idea of what the business needed, and a strategy to deliver it. “The track record has been pretty good if you look at when he stepped down from the chief financial officer role in October 2017 to take up the chief executive role for Australia and New Zealand,” Moody’s Investors Service analyst Frank Mirenzi told Insurance News. “The Australian and New Zealand business when [Mr Regan] took over was still a strong business but had some difficulties, and he put that on a much stronger footing. “Clearly the process he has embedded there has worked and he has rolled that out across the group, and if you look at the lower attritional claims ratio it has [for last year], and the rate rises it has been able to get across the book, the indicators are there that the process it has implemented has benefitted it.” The group-wide adjusted attritional claims ratio dropped to 52.3% from 54.5%, mirroring similar improvements in other key indicators of a company’s financial health. Overall gross written premium grew 2% to $US13.7 billion and underwriting erased the 2017 $US507 million loss, recording a $US480 million profit. The crucial North American business, its biggest by gross written premium, returned to the black with a

$US221 million insurance profit before tax. “The turnaround story has been a long time in the making in terms of their North American business,” Mr Mirenzi says. “They have also managed to sell off the Latin American business, which has been poorly performing for some time.” Macquarie Group’s Insurance Analyst Andrew Buncombe agrees QBE is on the right track. “There is a path for it to get even better and a number of the headwinds and challenges the business was facing have been clarified and articulated with the market,” he told Insurance News. “So as we sit here right now, a lot of those issues are past us and for the first time in many, many years QBE has clear air. “What could impact it would be investment markets and, of course, catastrophes – but that’s what an insurance business is. You can never control all of those things, but in terms of what is in its control, the trajectory is certainly pointing the right way and investors are getting more and more confident that the management team will deliver on that.” Macquarie has an “outperform” call on QBE, describing the stock as its preferred Australian insurance exposure due to the results. For IAG and Suncorp, the outlook is somewhat less rosy, after the pair produced subdued first-half earnings. IAG’s net profit fell 9.3% to $500 million and Suncorp’s general insurance arm in Australia suffered a 43.2% slide in after-tax profit to $133 million, dragging group-wide earnings down 44.7% to $250 million. Last December’s Sydney hailstorm damaged mostly motor vehicles and properties, and was a major

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Insurers’ net profit/loss $bn

1.5

1.0

0.5

0

2013

2014

2015

2016

2017

2018

-0.5 QBE reports on a calendar year basis, while Suncorp and IAG operate to the Australian financial year. QBE reports in US dollars. Figures have been converted to local currency according to the exchange rate at the time of reporting.

-1.0

-1.5

earnings drag for the two insurers. They control these personal lines by gross written premium: in the home and contents market, they have a combined 62% share. Suncorp says natural hazards cost the business $580 million, exceeding the $360 million it allocated for the period. The Sydney storm alone produced $370 million in gross losses. The Queensland-based group has moved to shore up its defences, raising the natural hazard allowance from $720 million to $820 million for the next financial year. It also plans to buy an extra $200 million in natural perils reinsurance cover. Macquarie has both IAG and Suncorp stock in the “underperform” category. “With ongoing pressures on revenue growth and attritional margins, we continue to believe IAG looks overvalued at current levels,” Mr Buncombe says in a post-earnings report. On Suncorp, Macquarie lists “volume losses in general insurance” as a challenge for the business.

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Catastrophe losses from the once-in-a-century floods in Townsville and, to a lesser extent, the Victorian bushfires could complicate matters for insurers in the second half. The Insurance Council of Australia says the Townsville disaster has run up to more than $1 billion of insured losses and the bill will continue to rise as more claims come through. How things pan out will depend, to a large extent, on the reinsurance arrangements and hazards allowances in place. “Following the Townsville flood, Suncorp’s remaining $97 million deductible under its aggregate program has been fully eroded,” Bell Potter analyst TS Lim says. “This means claims from this event will be capped at $97 million and Suncorp appears to be well protected against further natural hazard events in [the second half].” Bell Potter has kept its “hold” call on Suncorp 0 shares.


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Keeping score It’s hard to compare Steadfast and AUB, but fun to try Still running the show: Robert Kelly at the Steadfast Convention on the Gold Coast last month

I

t has been a game of ups and downs so far for the broking giants While they are two very different companies in their strategic approaches, there’s a certain sporting fascination in comparing the performances of the two major local players in the broking sector, Steadfast and AUB Group. While they were once directly comparable, Steadfast has grown to become a large, diverse and rapidly growing insurance group with its major focus on broking and technical support, while AUB has spent the past five years consolidating its position as a full-service broking and risk management provider. So with the caution that comparisons can be misleading (but nevertheless interesting), the half-time earnings score is in, and Steadfast appears to have the measure of AUB this time around. Steadfast enjoyed a 19.8% rise in firsthalf net profit to $40.5 million as gross written premium (GWP) from the Steadfast Network and equity brokers gained 12% to $2.9 billion. A 24% increase in underwriting agencies GWP to $558 million also lifted the result in the six months to December 31. Rising rates and increased volumes produced a 21% jump in overall revenue to $263 million. For AUB, the December half brought a stumble, with after-tax profit down 16.5% to $19.8 million despite a 12% rise in revenue to $145.4 million.

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But adjusted net profit increased 1.8% to $17.014 million, excluding items such as adjustments to the carrying value of assets. Pre-tax profit from the Australian broking arm increased 11% to $22.6 million, lifted by contributions from new acquisitions, organic growth and a hardening rate cycle. Underwriting agency pre-tax profit recorded a similar rise to $5.1 million, with strong organic revenue growth of 14%, and the New Zealand broking business climbed 15% to $3.2 million. But the risk services arm had a blip, as pre-tax profit dipped to $1.8 million from $4.3 million in the corresponding period of 2017, with revenue affected by changes in the New South Wales workers’ compensation market. The two broking giants believe the price cycle will continue heading north as the industry pushes through rises following recent huge catastrophes like the Townsville floods and Sydney hailstorm. AUB expects average rate rises of about 5% this financial year and next year. Steadfast Chief Executive Robert Kelly says the hardening market has “at least a couple of years” to run. An insurance market “clock” created by Steadfast to monitor the pricing environment indicates rates are nowhere near the 12 o’clock mark – the tipping point from a hardening to a softening cycle, Mr Kelly says. Former Cover-More Chief Executive Mike Emmett has taken over the reins at AUB from Mark Searles, who had been running

the group since 2012 and was responsible for its strategic diversification. Meanwhile, Mr Kelly has changed his mind about stepping down at the end of next year. He will now remain in charge of Steadfast until the end of 2022, with the looming challenges stemming from the Hayne royal commission – particularly its comments on the industry’s commission structure – expected to require his persuasive powers. A Treasury review of the commission-based remuneration model, one of 76 recommendations from the royal commission, is expected to be completed in 2022. “Of the issues that were raised during the royal commission, none of them related to insurance broking,” Mr Kelly told Insurance News. “Our job is to point out the history of insurance broking, the ramifications that losing commissions may have for the consumer and the rationale for maintaining the current commission structure, and to prove that to Treasury.” It will also keep Mr Kelly in the hot seat for a couple more years when the broking sector tackles such additional challenges as technological disruption and insurers’ increasing inroads into the commercial insurance market. AUB and Steadfast are intelligent companies taking markedly different strategic paths, so the next year or two will 0 be very interesting.


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Facing the challenge Declining trust levels and direct buying trends are putting the heat on brokers, an annual survey shows By Wendy Pugh

S

ome confronting messages for brokers have emerged in the latest Vero SME Insurance Index, which shows falling trust levels and more firms buying part of their cover in the direct market. Claims experience satisfaction, a service area that is a source of pride for many brokers, also fell compared to last year, while a worryingly high level of respondents believe evaluating the insurance needs of their business is easy. Vero Head of Commercial Intermediaries Anthony Pagano says the findings show it is more important than ever for brokers to explain their role and promote the value that they offer, particularly following the Hayne royal commission, and in an environment where their work is often undervalued. “Insurance is far from easy and it is important for brokers to be open and transparent with clients, and anything we can do to help SMEs understand what we do, how we do it, and why, will go a long way toward maintaining trust in our industry,” he tells Insurance News. The index, now in its eighth year, surveys more than 1500 business owners and decision makers on their insurance purchasing behaviours and analyses their perceptions of brokers. The survey this time was conducted in late September and early October, right after the Hayne insurance hearings and following numerous tales of misconduct in other areas of financial services. The critical backdrop was reflected in the figures, with 47% of respondents agreeing that recent events have made them more wary of the insurance industry, up from 36% who agreed with the proposition last year. Drilling down further and looking over a longer period, 33% agree that “at the end of the day you can’t trust insurance brokers”, which compares with 16% in 2013, while for insurance companies the response jumps to 43% from 35%. The results suggest the royal commission’s spotlight shone so strongly on misconduct that there is now a need to more clearly highlight professional services delivery. Mr Pagano says the Hayne royal commission has focused the attention of brokers on many of the issues raised, although their role was barely mentioned

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Last insurance purchase by channel 80% 70% 60%

62%

62%

38%

38%

2015

2016

66%

63%

64%

37%

36%

2018

2019

56%

Direct buyers

50% 40%

44%

30% 20%

34%

Broker users

10% 0% 2014

2017

Source: Vero SME Insurance Index

47%

43%

41%extensive hearings. during the inquiry’s 38% 36% 35% “They are starting to challenge themselves, they are starting to challenge us, about what it is that we do to deliver better customer outcomes and make sure we think through the community expectations,” he says. 2013 might be 2014more cautious 2015 2016 insurance 2017 in“SMEs of the dustry but for me this is a golden opportunity for brokers to take steps to rebuild client trust.” Brokers are doubly under pressure to demonstrate their value amid a trend for SMEs to purchase at least some cover through the direct market. Some 60% of SMEs buy 1-89% of their insurance 43% through a broker, compared 35% with 42% a year earlier, 33% while for those aged under 40 the level jumps to 78%. SMEs that believe brokers are not up to 16% date with current ways of working are more likely to use both channels, while availabilityAtwas a key reason for buythe end of the At the end of the day, can’t trust day, you can’t trust ing more simple cover such asyoumotor directly. insurance companies insurance brokers More complex policies such as indemnity or indus2013 2019 trial special risks are more likely to be sourced through brokers. The survey finds 75% of respondents believe evaluating insurance needs is easy, while 63% say the same for sourcing the right insurance. Managing claims is considered simple for 56% while only 39% agree that applies for policy wordings. Those who say evaluating insurance needs is easy are more likely to buy direct, but less likely to have

36%

2018

2019


40%

50% 40%

44%

30% 44%

30%

38%

38%

20% 38%

20%

10%

38%

34%

34%

37%

36%

37% Broker users

0%

10% 0% 2014

2014

2015

2016

2017

2016

2017

2018

2019

2015

Agreement that recent events have made me more wary of the insurance industry 43% 41% 36% 35% 43% 41% 38% 36% 36% 35%

2013 2013

2014

2015

2014 2016

2015 2017

2016 2018

2018

38% 47%

36%

2017

2018

2019

Source: Vero SME Insurance Index

conducted a formal risk assessment of their business, while the perception impacts the view of broking as a Agreement with trust statements profession. Mr Pagano says the figures highlight the risk of SMEs being underinsured or having inappropriate cover, particularly as direct transactions may leave buyers 43% unaware of details in often-unscrutinised lengthy sup35% 33% porting documents. 43% “It is a complex product, no matter what people 35% 33% 16% think, particularly for commercial insurance. There are so many different variables and there are so many different ways of people trying to minimise their costs,” 16% he says. At the end of the At the end of the Despite the hybrid-purchasing trend, 36% of reday, you can’t trust day, you can’t trust spondents used a broker for their last purchase, little insurance companies insurance brokers At the endhas of the changed from 37% last year. The level stabilised At the end of the can’t trust within a 34% to 38% range for day, five you years after droppingday, you can’t trust 2013 2019 insurance companies insurance brokers from 44% in 2014. Source: Vero SME Insurance Index “It is important to note the top line broker usage has 2013 2019 remained stable, which is a huge positive in this market. With this, brokers have challenges and opportuni“Broker clients tend to be slightly more satisfied but ties to build on and strengthen these relationships,” Mr the gap between direct buyers and broker users needs Pagano says. to be more significant if brokers are able to legitimately Providing in-depth information and analysis and use claims as part of their benefit to clients,” the report advising on a firm’s risk profile are highly correlated says. with increased trust. Checking up on changes to a busiBy far the biggest cause of claims dissatisfaction is a ness and recommending changes based on a risk profile lack of clarity about the process, while processing time are also welcome. and the amount paid are among other concerns. SMEs splitting buying between channels presents The level of broker involvement in SME claims vara problem as brokers don’t get to manage the whole ies widely, but taking a more active role means insureds of their clients’ needs, affecting their ability to act in a are less likely to feel the process is complex and are broader risk adviser capacity. more likely to be satisfied. Mr Pagano says brokers should talk with their cliA total of 41% of all SMEs and 60% of medium-sized ents about why they might be choosing to purchase SMEs feel the experience would have been much hardsome products direct and to find out more about the er if their broker hadn’t been involved. services they appreciate receiving. Mr Pagano says the research findings overall highThe survey also highlights the need for transparenlight ways brokers can grow relationships with current cy and keeping clients informed during the claims proand future SME clients, rebuilding confidence in the cess, with results indicating that just under half of those profession and adding even more value. who have made a claim are satisfied. “Across the board, it’s evident that, with the right unIn the case of broker users, the satisfaction rating derstanding, insights and tools, brokers have the power declined to 51% from 62% last year, while for direct to create client connections that are both resilient and 0 buyers it fell to 47% from 57%. mutually beneficial,” he says.

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Hard talk General insurance lead ombudsman John Price sees the Hayne reform agenda as a vital opportunity By Bernice Han

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he insurance industry is feeling the pressure. Rarely have the nuts and bolts of the business model come under such a multipronged attack, but that is what happened following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Australian Financial Complaints Authority (AFCA), the new Federal Government-run external dispute resolution body for financial services, believes the host of reforms put up by Commissioner Kenneth Hayne is just the tonic for the sector. John Price, the authority’s Lead Ombudsman General Insurance, says the royal commission’s final report highlighted “an erosion of trust in financial firms, including the insurance industry”. “I see the general insurance industry as a vital part of the Australian community and Australian economy,” he tells Insurance News. “In a country that is subject to such extremes of weather as we are, it’s most important that we have a strong and viable insurance industry that consumers and small businesses can trust. “I do see now as a time when the industry can really show some leadership in responding to the recommendations from the royal commission. “It’s well placed to do that, and I hope to see a very strong positive approach from the industry in dealing with the royal commission’s proposals.” Accounts of poor behaviour and practices heard during the independent judicial probe intensified long-standing calls from consumer advocates for greater regulatory oversight of the entire financial services sector, including general insurance. Treasury has started the ball rolling, opening consultations on removing the exemption of general insurance claims handling from the financial service definition and making industry codes enforceable by law – a controversial recommendation that has been criticised

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Positive approach: John Price believes the insurance industry can come back stronger

by legal commentators in the industry. The commissioner also wants the Insurance Contracts Act amended to replace the consumer’s duty of disclosure with a “duty to take reasonable care not to make a misrepresentation”. Having the industry comply with unfair contract terms provisions and mandating a deferred sales model for add-ons, while not new ideas, are also on the Hayne hit list. And he wants hawking of products banned as well. Reforms to the disclosure regime could go a long way towards helping consumers understand insurance and, most importantly, what policies cover. Independent studies tell the same story: most policyholders do not fully know what they are and are not insured for. Mr Price says the fact that about 11% of the 4 million-plus claims lodged each year are denied or withdrawn points to a clarity problem. “And then there are a whole raft of claims that are only partially accepted,” he says. “I think that’s a strong indication that consumers and small businesses don’t fully understand the nature of cover and the limitations of cover that’s being offered to them. “The discussion around pre-contractual misrepresentations, removing the non-disclosure provisions and replacing them with a duty to take reasonable care not to make a misrepresentation makes an awful lot of sense.” Using plain English will also improve the disclosure regime. “Policies need to be written in plain English, that’s obvious,” Mr Price says. “I don’t think they are clear. There are technical terms, and policies differ considerably. “For instance, a person who takes out a home policy will not understand the difference between an accidental damage policy and an insured events policy. “He or she would not understand the difference in relation to certain aspects of cover, so I think that is an


area that needs to be improved.” While there is a drive to accelerate the pace of reform by the industry itself, to get ahead of any legislative or regulatory changes, Mr Price warns against going too fast. “I think it needs to treat it with a degree of urgency, but you should not move at such a pace that you get it wrong. It’s important to get it right. “With things like the claims handling, I think it’s most important that it be brought within the Corporations Act. Consumers are entitled to expect that claims are handled efficiently, honestly and fairly. In the main part, that is what occurs.” He says add-on cover is one area where the industry could have acted faster. “Add-on insurance has been an issue for some years, and it is a problem that has been known to the industry. The industry is being very slow to respond.”

But he’s enthusiastic about the industry’s preparations for the next version of the General Insurance Code of Practice. “It’s very pleasing to see such a proactive review,” he tells Insurance News. “Obviously, there are recommendations from the royal commission to extend codes, including enforceable codes, and to extend the codes’ sanctions powers. “Again, I have long said that to be truly effective, the codes need to have strong sanction powers, and those powers need to have a bit of bite in them.” General insurance disputes accounted for 22% of the 23,681 complaints AFCA received in the four months since it launched last November, the second-highest proportion behind credit-related cases. Claims handling delay was the biggest source of disputes, with 910 complaints, followed by claim amounts (832), denial of claim linked to exclusion or condition

Focused on fair play Act fairly. This has been a constant theme throughout the career of John Price, Lead Ombudsman for General Insurance with the Australian Financial Complaints Authority (AFCA). He was a solicitor with social justice law firm Maurice Blackburn in 1978 before becoming a partner six years later in 1984, and headed the industrial personal injuries practice until his departure in 2004. Mr Price later joined the Insurance Ombudsman Service as referee/adjudicator and panel chair, and in October 2009 he was appointed ombudsman. He took on the Lead Ombudsman General Insurance role when the Financial Ombudsman Service, the predecessor of AFCA, started in January 2010.

“I think the guiding philosophy is we should all strive to do what is fair in the circumstances and make sure that we are all operating on a level playing field,” he tells Insurance News. For five years until 2011 Mr Price was a director with State Trustees in Victoria, serving on a number of its committees and chairing the organisation’s Australian Charitable Fund. In 2017 he chaired a stakeholder review into common law benefits for the Victorian WorkCover Authority. Mr Price is a continuing Integrity Commissioner with Cricket Australia and Cricket Victoria. In the winter he’s a dedicated supporter of AFL club Collingwood.

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(815), denial of claim (695) and service quality (258). Mr Price says there has been a spike in general insurance disputes compared with the previous year. But it is not all bad news for the industry. “Pleasingly, the general insurance industry is resolving about 40% of disputes at our first stage, at what we call our registration stage, and so the volume of disputes coming through to our case management area in the general insurance space has remained relatively stable. “We are alarmed in the sense the dispute numbers are up, but we are pleased that the industry is resolving matters. “We will have to continue to monitor that and be in constant discussion with the industry about those complaint levels.” AFCA expects the Townsville floods will give rise to disputes, but details concerning the number of complaints or significant issues causing distress are not yet available.

And the impact of increased compensation caps under AFCA’s jurisdiction could become more clear when complaints from the north Queensland city begin to filter through. Under AFCA, compensation caps have generally risen from limits applying to the Financial Ombudsman Service it replaces. For example, the cap on claims against brokers has risen from $250,000 to $1 million. “It’s too early to say how [the compensation caps] are being used,” Mr Price says. “Obviously, they are available. It will improve access for people in particular with large loss claims. “It will certainly improve access for small business. It will enable a broader range of small business disputes to come here, including business interruption. “We may well see the benefit of the higher caps when we start looking at the disputes that arise from the Townsville floods. There are obviously going to be 0 some significant disputes there.”

AFCA in action These two case studies are examples of AFCA’s recent general insurance determinations. Issue: A customer’s home and contents insurance policy increased 39% from the previous year. The insurer explained this increase was based on additional flood data that had become available, in addition to the normal modelling and calculation practices it generally applied. AFCA’s jurisdiction: The insurer submitted that the complaint concerned the level of a fee, premium or charge and as such was outside AFCA’s jurisdiction. The insurer stated that they had sent the customer an offer of renewal and it was their choice to accept or reject it. AFCA can, however, consider complaints that concern the incorrect application of a premium. As this complaint concerned the method by which the insurer set the premium and not the process of renewal, we accepted it as being within jurisdiction. Findings: The customer’s renewal notice included a comparison of last term to this term’s premiums; however, it did not explain how this was calculated. When we asked the insurer about this, they explained that each house was individually assessed for flood risk by using local or state government studies, where available. The customer provided us with a recent government report, which indicated that the house and land had an extremely low flood risk. In response, the insurer advised that the study was not available to the industry. They did not explain, however, why it was not sourced, given local and government studies are considered by the insurer to provide the most reliable flood hazard maps.

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The insurer did not provide us with enough information to determine whether the new modelling used was fair, and whether it justified the premium increase. As a result, we found in favour of the complainant and determined the insurer had not exercised its discretion fairly when setting the premium. We reduced the flood premium increase by 50%. Applications: Assessing and setting premiums is largely at the discretion of the insurer, but they are required to act fairly and consistently with good industry practice and their own established procedures. Issue: An insurer requested that customers contribute to the cost of repairs for claims on motor vehicle insurance policies based on ‘wear and tear’ – an incorrect reliance when the cause of damage was by accident. The exclusion for wear and tear is applicable only when damage arises during ordinary use of the vehicle, not as the result of an accident. Unlike similar policies from other insurers, there was no provision in the policy that allowed the financial firm to seek a contribution for betterment. Outcome: The financial firm ceased receiving contributions, implemented procedural changes for referrals from repair managers and provided training to claims staff to reinforce best practice. A remediation program was created to compensate affected customers. Application: When a provision is interpreted and applied incorrectly by staff, it has the potential to quickly affect many customers. It is essential that staff are adequately trained to process claims within the scope of the policy.


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Standing up and standing tall for brokers: Tim Wedlock

Straight from the heart Tim Wedlock is a passionate advocate for insurance broking – even if so many brokers don’t support their association By Wendy Pugh

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hether speaking before a parliamentary inquiry, careers class or insurance industry gathering, Tim Wedlock always displays the same convictions: a passionate belief in the value of broking and a determination to see professional standards keep rising. Mr Wedlock, Austbrokers AEI Managing Director and a three-decade industry veteran, has just completed a two-year term as President of the National Insurance Brokers Association (NIBA) that coincided with one of the industry’s most scrutinised periods, including the Hayne royal commission and various official inquiries. As a result, he regularly had the responsibility of appearing before Senate and state-level parliamentary committees, educating politicians on the role of brokers and at times setting the record straight. It wasn’t an experience that would have deterred him. “When it comes from the heart you don’t mind standing up and standing tall, and I’ve enjoyed being put in that position,” he tells Insurance News. “The insurance profession always gets put down in the event of a major catastrophe, when it should be the opposite. We do so much good for affected communities and families. [Official committees and inquiries] are a great opportunity to get up and speak out.” Mr Wedlock was forthright in defending the sector during a Senate inquiry in 2016 into general insurance pushed for by then-Senator Jacqui Lambie, who had accused insurers of letting down Tasmanians following the worst floods in 60 years. Mr Wedlock told the committee that he “gets very disturbed” when insurance professionals “get kicked in the guts”. He argued that the industry’s people “do a wonderful job for the community”. “I am very proud to be an insurance broker,” he told the senators. “I am very proud my kids know what I do. I go to schools and I look to promote the very [important] role that insurance has.” Mr Wedlock has been at the forefront of efforts to highlight the value of insurance, and the opportunities


“If we want to compete with the lawyers and accountants … we also need to make sure our standards are up there with lawyers and accountants.” it offers, at school and university careers days as the industry seeks to attract top young talent to its ranks. Teachers and students often focus on accounting and law without realising insurance is global, diverse, well paid and plays a critical role in society, he says. “When I say ‘why not insurance?’ and explain all the value that the insurance profession has to offer in broking, underwriting, reinsurance, you name it, they all sit back and say ‘wow no-one has ever explained it like that before’,” he says. “It is very under-rated and misunderstood.” NIBA, in conjunction with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), has recently released a Careers in Insurance promotional kit that can be purchased for $100 and used to promote the industry. Mr Wedlock says people at the career-entry level are increasingly realising that insurance has a lot to offer, but more work needs to be done to raise its profile and to ensure the right pathways are there to promote higher standards. “If we want to compete with the lawyers and accountants, because that is how we see ourselves as a profession, we also need to make sure our standards are up there with lawyers and accountants,” he says. NIBA has been working with the Australian Securities and Investments Commission (ASIC) about raising the minimum training qualification to a Diploma of Insurance Broking. The Warren Tickle Memorial Award, presented by NIBA each year to a young insurance broker below the age of 35, has highlighted the motivation of applicants across the states to pursue higher levels of training and education. “Most of them have either done or are doing a university degree outside of their insurance qualifications because that is the drive they have to be seen as professional,” Mr Wedlock says. University programs currently don’t include insurance as a specialty, with courses provided through

training organisations such as ANZIIF. Mr Wedlock is typical of those who initially overlooked insurance but ultimately discovered it was a rewarding career. He was considering opportunities in science before his uncle, a founding director at broking company AEI, pointed out the insurance alternative. Initially he landed a position with GRE Insurance and gained insights into reinsurance and underwriting before joining AEI. During the early years he also transferred to the company’s Moree office in northern New South Wales and became familiar with the concerns of rural and regional customers. “I found that I really enjoyed the client interaction,” he says. “The more I continued with my journey, the more I enjoyed the broking role.” Mr Wedlock now specialises in the heavy transport sector at Sydney-based AEI, looking after clients up and down the eastern seaboard. He was presented with the Australian Trucking Association’s Don Watson Memorial Award for his outstanding contribution to the industry in 2014. Mr Wedlock joined the NIBA NSW divisional committee 15 years ago as he sought to take a more active role in supporting the industry, and later joined the national board. He will continue as a director now that his term at the top has concluded with the handover to new President Eric Harris, and is set to remain a strong voice for brokers as they deal with issues arising from recent inquiries and future challenges. Mr Wedlock says it’s not surprising that broking wasn’t a focus of the royal commission, with the industry’s proactive approach reflected in declining complaints to the Financial Ombudsman Service (FOS), now replaced by the Australian Financial Complaints Authority. NIBA has worked hard to “get rid of the rogues” and there was no evidence of any systemic financial misconduct by the broking fraternity leading into the royal commission. Brokers were also looking to strengthen

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He remains frustrated that some brokers remain outside the association despite all the group does on their behalf. the code of practice before the Hayne inquiry began, he says. “Our Code Compliance Committee had already spoken to ASIC about involving them with the review of our code this year, and talking about where the lines and level of enforcement should sit,” he says. The royal commission had plenty to say about codes of practice, including making parts enforceable by law. While it made recommendations for the Insurance Council of Australia’s code, it made no mention of the broking code. Mr Wedlock says it’s too early to comment on how the royal commission’s recommendations might affect the next broking code. “A lot of that needs to be worked through in conjunction with everyone involved to see what is best for the consumer at the end of the day.” Commissioner Hayne also put commission payments in the spotlight, calling for a review in 2022 of the general insurance exemption from the conflicted remuneration ban. Mr Wedlock says the schedule gives NIBA plenty of time to make its case against a ban. “We don’t agree with conflicted remuneration, and we have strong reasons as to why we believe what we do doesn’t involve conflicted remuneration,” he tells Insurance News. “At the end of the day the customer is still getting the benefit through our advice and support, not only at the time of placement but also when it comes to claims.” The amount of work that will be involved in dealing with these challenges raises one niggling point with Mr Wedlock – the number of brokers who aren’t members of NIBA and who therefore are getting what amounts to a free ride. He says he remains frustrated that some brokers remain outside the association despite all the group does on their behalf. NIBA’s successes in ensuring the profession isn’t unfairly caught up in measures sparked by problems elsewhere in financial services should be financially supported by individual brokers. Some of the things that NIBA does for members and non-members alike are sometimes not even recognised. For example, NIBA recently went in to bat for a fairer deal under a new ASIC funding model to recover costs from those it regulates. The group made a strong case that brokers are not a problem and are not taking up extensive time and resources for the regulator. As a result of this representation, NIBA achieved a sharp drop in levy amounts. “When they allocated the funding of ASIC back to financial services the insurance broking segment got more leniency than some of the other areas where the energy was going to be focused on,” Mr Wedlock says. “That saving alone would more than cover the cost of a small firm being a member of NIBA, so why wouldn’t you get on board in helping us? And that is

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just one example.” He says insurtech and fintech developments will increasingly provide opportunities to enhance systems and streamline processes, although broking remains fundamentally a people business. Speaking about the future, that spark of enthusiasm becomes obvious once again. “I’m certainly excited about the future. I don’t believe we are an area that will be taken over by artificial intelligence, especially at the larger end of town,” he says. “We have the opportunity to meet and greet our clients and if there is a claim we go and talk about it together. If there is a negotiation that needs to happen over a policy, we also do that together.” Mr Wedlock says personal skills in dealing with clients always come to the fore in a changing market where premiums are increasing, and has become more important than ever to promote the professionalism of brokers as trusted advisers who make a difference for their clients. That value is also particularly demonstrated after major events that spark claims, despite the inevitable political finger-pointing that often emerges in the wake of natural disasters. NIBA pointed out in a submission to the royal commission that the number of broker disputes accepted by FOS fell 16% last year, and the figure has remained consistently low across the years as a percentage of total issues dealt with by the service. Such statistics are powerful weapons in their own right. “It’s something to be proud of, but we can’t rest on our laurels,” Mr Wedlock says. “We need to make sure we maintain that position as the trusted adviser, and that comes back to education and training and making sure we do the best by the customer at all times.” 0


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Clear as mud Insureds should be well aware what flood cover is and why they need it, but apparently they’re (still) not By John Deex

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he Brisbane floods of 2011 were a wake-up call on flood cover for insurers and claimants alike. Those left high and dry because they didn’t take out the crucial cover were held up as victims by the mainstream media, which led to a change of approach by the industry and the introduction in 2012 of a standard definition for flood. While many in the insurance industry believe you need to have been living under a rock not to realise the importance of considering flood cover, the recent Townsville floods prove that there is work still to do. Significant numbers of businesses in the north Queensland city went without flood cover, and Mayor Jenny Hill says many “don’t understand” the difference between storm and flood damage. Domestic and commercial insurance tackle the issue differently, and it’s been further complicated by some insurers – stand up NRMA Insurance and its Insurance Manufacturers of Australia stablemate RACV Insurance – adopting an atypical approach. With the help of industry and consumer experts, Insurance News has compiled answers to some key questions.

What is flood insurance? This one’s easy – there has been a standard definition of flood for the purposes of insurance for seven years. Flood is defined as “the covering of normally dry land by water that has escaped or been released from the normal confines of any lake, river, creek or other natural watercourse, whether or not altered or modified, or any reservoir, canal, or dam”. Flood damage is therefore distinct from damage caused by rainwater, either from above or as “rainwater run-off” from below.

Is flood cover automatically included in home and contents policies? Usually, but not always. Since 2011 the most common approach is to include flood cover and allow customers to opt out. But some insurers do it the other way around, and some don’t offer flood cover at all. Risk rating for flood

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is increasingly carried out at the property level, based on government flood maps, so insurers will price the risk accordingly. While there is no obligation on insurers to provide cover, if flood is not included this must be made clear to the policyholder.

What about motor? Motor policies generally include flood cover, although some insurers have introduced exclusions around driving into floodwater.

Do commercial policies include flood? The most common approach is opposite to personal lines – flood is usually not included, but there is likely to be an option to opt in. Brokers will always discuss flood cover with clients, because if they don’t they could end up on the wrong end of a professional indemnity claim.

Who should opt out? There are no easy answers on this one. Insurers say if consumers are not at risk of flood, they won’t be paying any more for flood cover, so they might as well keep it in place. But it’s not an exact science – out of date and inaccurate flood mapping does exist – and it’s not easy for customers to figure out whether they are paying additional premium for flood. Those most likely to opt out are customers facing a large and potentially unaffordable premium for flood cover, but this is a high-risk strategy.

What are NRMA Insurance and RACV Insurance doing? These insurers have linked flood cover with two other perils – rainwater run-off and storm surge. As a result, you cannot opt out of flood without also opting out of the other two. Consumer groups have criticised the move for confusing the issue and leaving those who choose to opt out of flood at even greater risk. NRMA Insurance and RACV Insurance say those without flood risk would not be paying additional


AAP Flooding nightmare: the clean-up begins in Townsville

premium for the cover, so would leave all three covers in place. But this may not be widely known, and consumers could still opt out thinking it would save them money. And those high-risk customers who opt out because they cannot afford flood cover would also have rainwater run-off removed. The insurers say this new approach reduces confusion by lumping all ground-level inundation together – so there should be no more disputes over whether damage was caused by flood or stormwater. But it’s hard to see how it benefits anyone – except the insurer, which avoids the costly process of sending in hydrologists.

What happens if customers are inundated by flood and stormwater? Hydrologists are sometimes used to try to establish whether damage has been caused by flood or stormwater. If an insured does not have flood cover but is

covered for storm, then sometimes the claim is part paid. For example, if there is flood inundation and also damage from stormwater entering the roof, any damage above the level of the floodwater would be paid. However, if both floodwater and rainwater run-off enters the property at ground level, the claim would not be paid. This is due to an accepted principle in insurance that specifies where damage is caused both by an insured and excluded peril, the excluded peril prevails and the insurer is entitled to deny the claim.

Will insurers pay out just to avoid a fuss? No. Or at least very rarely. While it might sometimes seem worth paying the claim to avoid damaging headlines, there is a very good reason why insurers can’t do this – and that’s reinsurance. If insurers were paying out on policies that don’t respond, that would leave their reinsurers fuming and jeopardise future support. It’s a risk insurers can’t 0 afford to take.

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Important industry: Stuart Robert says insurers play a critical role

Question time We’ve asked the major political parties their views on general insurance issues

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n case you haven’t heard, there’s a Federal election coming. Insurance News puts some key questions to the Coalition’s Assistant Treasurer Stuart Robert, and Labor’s Shadow Minister for Financial Services Clare O’Neil. Broadly speaking, what is your view of the general insurance industry in Australia; what are your key concerns and main priorities for improvement? Clare O’Neil: I believe that there is a genuine commitment in the industry to do what it takes to improve practices, policies and procedures to ensure that the expectations of the public, and the expectations that insurers have of themselves to deliver a high-quality customer experience, are being met. I have confidence from my engagement with insurers that there has been some introspection and reflection in the wake of the royal commission. My commitment to the industry is that Labor will work with you to implement the recommendations of the royal commission, and to continue the conversation about how practices, cultures and laws can be improved to deliver better outcomes for the community.

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Stuart Robert: The Government considers insurance an important part of the economy. However, the royal commission identified a number of instances where the industry failed to meet community expectations. Consumers deserve to have peace of mind, to know that when they purchase an insurance policy they are covered for the risks. How different will general insurance industry regulation look by the end of the next term of government? What changes do you expect to have introduced? Stuart Robert: The Morrison Government has committed to taking action on all the recommendations of the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Clare O’Neil: Insurance plays an extremely important role in Australian society, allowing Australians to avoid significant hardship and risk when misfortune strikes. Australians look to insurers to assist when things go wrong, often when they are at their most vulnerable. The general insurance industry has a

history of delivering outcomes for consumers and for the community that befit this important role, and of supporting Australians through difficult periods in their lives. However, it has become clear that there are some areas in which the industry as a whole, and in some cases particular parts of the industry, need to make improvements to meet the community’s expectations. There have been some welcome commitments made to improve processes and practices and begin proactively implementing the recommendations of the commission. Labor has committed to implementing the full suite of recommendations that Commissioner Hayne has made regarding insurance. By implementing these recommendations in full, Labor will deliver substantial reform to general insurance regulation aimed at improving consumer protections, removing incentives that can lead to customer harm, and making sure that insurers are best able to fulfil their important role in the community and the economy. Will the cost burden on the insurance industry be considered when implementing reform? Costs will inevitably be passed on to consumers and ICA has pointed out that “world’s best practice


Keeping faith: Clare O’Neil believes the industry can improve

“If the rules are fair, the trust of the public can be regained, and the problems that the financial services industry faced from the revelations at the royal commission can be dealt with and consigned to the past.”

regulation will be of no avail if customers can’t afford to buy the products”. Clare O’Neil: Commissioner Hayne’s recommendations are aimed at improving standards in some key areas, clarifying obligations of insurers and customers, and preventing customer harm. Reforms will be made to ensure more consistent, improved claims handling, protection from unfair contracts and the banning of predatory unsolicited sales, among other important changes. In many cases in the current regulatory environment, when a customer acts in good faith, pays their premiums and then makes a claim when something goes wrong, their insurer is there to support them. However, the royal commission showed that in some cases, the system has let customers down. These reforms will ensure that customers and insurers have additional certainty about the level of customer service and fairness expected at all stages of the insurance process, from product design to marketing to policy selection to claims handling. Labor will work with [the] industry to make sure that the new regulatory environment gives them the best opportunity to do so.

Stuart Robert: The Government is conscious of the need to ensure that reforms are implemented carefully and without unintended consequence. That is why we are consulting before we implement material changes to financial services regulation, so that we do not rush to failure. Will the general insurance industry be properly consulted about proposed legislation? ICA has flagged a return to Regulatory Impact Statements as a crucial step. Do you agree? Stuart Robert: The Government is committed to consulting on legislation. It is currently preparing to consult on exposure draft legislation to extend the prohibition on unfair contract terms to insurance contracts. The Government has also issued a consultation paper on including claims handling as a financial service, because it recognises that unless this is done right this could have unintended consequences for general insurers and their customers. Clare O’Neil: Labor will continue to consult carefully with industry and other stakeholders about implementation of Commissioner Hayne’s recommendations. Nobody understands the nature of the

insurance industry as viscerally as insurers themselves, and Labor will ensure that insurers’ experience and input is valued and considered throughout the implementation process. Labor will utilise the experience and knowledge of industry to ensure that the recommendations are implemented in such a manner that the long-term health of the industry is enhanced. If the rules are fair, the trust of the public can be regained, and the problems that the financial services industry faced from the revelations at the royal commission can be dealt with and consigned to the past. Climate change is increasing the severity and frequency of extreme weather events but the Federal Government has repeatedly ignored calls from the insurance industry and others to increase disaster mitigation spending. This despite research proving that every dollar spent prior, saves $3 after an event. Will you back calls to increase mitigation spending to at least $200 million a year, as recommended by the Productivity Commission? Clare O’Neil: Labor has a comprehensive plan for action to mitigate the effects of dangerous climate change. Our 50%

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“I encourage the insurers and the Insurance Council to continue to step forward and to help Australians during their times of need and assist them to get back on their feet quickly.” renewable energy target, 45% emissions reduction target and commitment to stable, affordable, sustainable power will bring Australia back into the fight against climate change after five years of inaction under the Liberals. Stuart Robert: The Government accepts that mitigation activities to reduce the risk of damage from natural disasters are the only way to reduce premiums on a sustainable basis. Can and should the Federal Government be doing more to encourage the removal of state-based insurance taxes? Stuart Robert: The Government continues to encourage the Queensland Government to abolish inefficient stamp duties, strata commissions and other levies on general insurance premiums. These taxes increase the cost of insurance for policyholders and can lead to under or non-insurance. Clare O’Neil: That is a matter for state governments and the [Council of Australian Governments] process. The ACCC has called for general insurance broker commissions to be banned immediately, while the Hayne final report recommends the issue be included in a separate review. How will you approach this issue, and do you consider such commissions to be problematic? Clare O’Neil: Labor has outlined the action we will take on each recommendation in our response to Commissioner Hayne’s final report. Labor will fully implement recommen-

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dation 2.6 and include consideration of a ban on general insurance and consumer credit insurance commissions in a review to occur in three years’ time, to be completed by December 31 2022. Stuart Robert: The Government has accepted the royal commission’s recommendation to review commissions for general insurance brokers. This will occur in three years’ time as part of the Government’s commitment to review the effectiveness of measures to improve the quality of advice. A number of insurance catastrophes have taken place this summer. What do you think of the insurance industry’s response to natural disasters? Stuart Robert: The Government acknowledges that insurers and the Insurance Council have done a lot of work to help Australians that experienced these catastrophes. I encourage the insurers and the Insurance Council to continue to step forward and to help Australians during their times of need and assist them to get back on their feet quickly. Clare O’Neil: Labor understands the massive amount of work that the general insurance industry puts into responding to significant natural disasters. These are difficult physical circumstances to operate in, but more than that, insurers deal with people who have often had some of the most traumatic moments in their lives that have shaken their sense of safety and may have damaged their homes and most precious possessions. In terms of this summer in particular, we know that the response of the general

insurance industry to natural disasters takes some time to play out. As we saw from the evidence in the royal commission about the Wye River bushfires and other significant disasters, the role of insurers can last for months or years as people rebuild and repair their homes. Labor anticipates that insurers will act in good faith, work with customers, take a flexible approach to interpreting contracts and exclusions, and recognise the serious hardship that affected families are going through. The General Insurance Code of Practice is under review. What improvements do you hope and expect the revised code to include? Clare O’Neil: Labor will continue that conversation with the general insurance industry and the code governance committee as part of implementation of the recommendations of the royal commission. We will continue to discuss what other steps could be taken by the industry to strengthen the code. Stuart Robert: The Morrison Government continues to support and encourage industry to develop voluntary codes that go beyond the minimum requirements set out in law. The Insurance Council is in the process of undertaking a comprehensive review of its Code of Practice to ensure that it continues working effectively. The Government encourages ICA to continue to progress this work, including updating the code as recommended by the royal commission (recommendation 4.10). The Government also expects ICA to work co-operatively with ASIC and the Treasury to give effect to royal commission


from the pride at Lion recommendations to have certain terms in the general insurance code designated as “enforceable code provisions”. “Financial and insurance services” remains the worst-performing sector in terms of reducing the gender pay gap. What can be done about the lack of female leadership within the industry? Stuart Robert: The current gender pay gap for full-time adult employees [across all industries] is at a record low of 14.2%, down from a high of 18.7% in November 2014. The Government is committed to reducing the gender pay gap by supporting increased workforce participation by women, increasing women’s access to jobs of the future and improving women’s representation in senior leadership roles. Clare O’Neil: Increasing [the number of] women in leadership requires commitment and clear, decisive action. It requires visibility of women leaders within the industry. It requires changes to culture from the boardroom to the staff common room to ensure that discriminatory and exclusive language and behaviour is stamped out. It requires commitment to mentoring and promotion of women, and a genuine commitment to recognising the talents and capabilities of women from the recruitment process for junior positions to consideration for promotions throughout the organisation. Among a range of policies to improve outcomes for women in the workplace, Labor will ensure that companies with more than 1000 employees will have to publicly reveal how much they pay women compared to men, to shine a bright light on 0 the gender pay gap.

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Trust me! In the wake of the Hayne royal commission, how can the insurance industry regain customers’ confidence? You won’t find the answer in a PowerPoint presentation By Dominic McMullan*

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ould you tell a colleague they were putting a used coffee cup in the wrong bin? Most coffee cups can’t be recycled, so you’d be doing the right thing, sure, but chances are that you’d hesitate, because you wouldn’t want to be accused of moralising. Even if you felt really strongly about recycling, you’d likely avoid the possibility of confrontation and the potential for lasting grief between you and your workmate. You might even find yourself rethinking your own attitude; after all, “everyone knows” that most recycling these days is just put into landfill anyway… Such an everyday scenario illustrates the uphill battle we’re facing to restore trust in insurance. Because what I hear around the traps is that many of us in the industry are caught in this morale-sapping loop where we know what should be done but don’t do anything about it, either because it’s likely to cause aggravation or because the problem feels too big for us to deal with on our own. This is the situation in too many offices, and it’s a problem replicated in the boardrooms where strategic decisions that affect thousands are made: it’s just so much easier not to rock the boat. It’s a depressing picture, isn’t it? And isn’t this exactly how the Australian public sees us? Insurance companies, a bunch of greedy corporate suits, snouts in the trough, just looking for a way to avoid paying out a claim… In my experience working within the industry – and yes, I’ve worked in claims – this image is very far from the truth. The mystery at the heart of the public’s lack of faith in insurance is this: we have a really good story to tell, so why is the image so far from the reality? I’m going to suggest that part of the answer to this mystery is that we haven’t spent enough time as an industry asking ourselves why we should be considered trustworthy – that we’ve forgotten how to even have the conversation with ourselves. What we talk about now is finance. It’s almost like new financial technologies have overwhelmed us to the point where it’s the only thing we think we need to talk about. We’ve become really good at talking about prices and returns to shareholders, and all the while our stock with our customers has been in freefall. (There’s probably a graph for that, too.) But things haven’t stood still for the public, either.

Modern technology allows anyone with a computer or smartphone – and is there anyone left without one or both? – access to reams of knowledge undreamt of by previous generations. This isn’t just ruining trivia nights, it’s also changing the way that people relate to the services and products we provide. Where it might have once seemed tolerable for financiers to say “trust me” to their clients, people now expect more from their interactions. More detail, more charts, more consideration, more everything. And there’s the rub: the public also no longer knows how to have the old conversation about trustworthiness. Just because people have better access to information and technology, it doesn’t mean that they’ve also become more sophisticated. Which is why 70-year old retirees with iPhones and self-managed super funds fall prey to foreign scammers with dial-up internet and bad command of English. Whether it’s admitted with gratitude or with a grudge, the fact is that the modern world is no place for individuals, and the best outcome is still going to be found from seeking and receiving good advice. In other words, we need each other, but we’ve lost our common ground. That common ground used to be a presumption of mutual interest – you scratch my back, I’ll scratch yours. But we don’t talk that way now. Instead we’re all speaking to each other in the language of finance, where the bottom line dominates and everyone is presumed to be out for themselves. Once you start talking like that, it’s almost impossible to build mutual trust because you’re not looking for a fair deal, you’re trying to come out on top. If you’ve come with me this far, you might be wondering what I’m proposing we do about it. I do have some ideas, but first I want to examine what we’ve already tried to do and why it has made things worse. At the same time as our customers have been becoming more sceptical and demanding, we’ve become more and more entranced by numbers and data, so our intuitive response has been to respond with measurables. In other words, we’ve responded to a crisis of faith by pointing to numbers and charts. It’s like we’re telling people that everything will be okay this time, but don’t believe us, believe this report card we prepared earlier. Let’s call this “the technocratic response” – the

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tendency to look to the measurables for salvation, because that’s what we’re good at. In this data-obsessed age, it’s only natural that we’d try to respond technocratically, and in many ways it’s a good move. (Everyone benefits when we know that insurance companies are solvent – does anyone really want to see another HIH?) But that drive to surround ourselves with data is how we’ve ended up obsessed with the C-word: Compliance. Compliance is an ugly word, reminiscent of a robotic policeman shouting “Don’t go in there!” So if the only thing a business can point to as proof of their good faith is a well-run compliance program, you might as well admit that you’re doing the barest minimum. (In plenty of cases this would at least have the advantage of honesty!) Compliance has little to do with improving standards – it has everything to do with ticking boxes so that you don’t get into trouble. Compliance is not about being good, it’s about being creative and maintaining lists that show everyone has looked at the PowerPoint presentation. What does this have to do with trust? Well, the thing is we can’t restore trust if we’re not actually trustworthy, and trustworthiness is a much tougher goal to have than merely being compliant. In a nutshell, the technocratic response hasn’t worked because the public doesn’t see webinar attendance as a stand-in for common decency and moral courage, and it’s just these qualities that are seen as being in short supply in the financial services sector. So where do we start? I think we need to begin by ending talk of “recovering trust”. Like blind faith in the clergy and asbestos roofing, if it returns it won’t be like it was before. The trust that we once had was founded on a vague belief that financial services could be relied on to do the right thing, and we can safely say that the recent royal

commission drove a stake through that notion. But this doesn’t mean we must resign ourselves to being loathed as untrustworthy – it means we should build a new reputation as something different. So let’s divorce ourselves from the rest of financial services, especially the banks – beyond playing with money we’ve never really been involved in the same pursuit, anyway. The banks used our contacts to build their client portfolios and then walked away laughing. All we gained from the banks was an appreciation for products that do more for shareholders than for customers. We should signal this break by training insurance people to be ethical operators rather than box-tickers, to act with consideration for our customers as well as having the confidence to criticise those that act without consideration. There’s a world of difference between acting within the bounds of compliance and acting in the best interests of the client, so what does it look like? It’s a broker telling a client that they can’t expect their family business to survive if they don’t take out business interruption insurance. Or an insurance executive saying no to a new product that promises a 20% return in claims. It’s large insurance companies teaming up to pursue Winley-type fraudsters, because it’s everybody’s responsibility to seek justice, and justice doesn’t come free. This sort of behaviour requires moral courage, and there are always going to be knockers. But part of building a strong moral character is learning to do the right thing even when it isn’t rewarded, even when no one else is looking, and crucially even when it annoys someone else. As an industry we can strive to have the moral courage to be better people together, and then 0 maybe we’ll deserve to be trusted.

*Dominic McMullan has a Masters in Professional and Applied Ethics from Melbourne University, where he taught philosophy, and is a business development manager with a major insurer. He is also an Associate at professional ethics consultancy Ethilogical Consulting. In the interests of full disclosure, he is also the son of the Publisher of Insurance News. The views expressed here do not necessarily reflect the views of Insurance News or his employer.

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All about the client AUB’s Australian broking chief Nigel Thomas says the network is building for a future full of opportunities By John Deex

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hange is afoot at AUB Group. The hugely influential Mark Searles has left the building, replaced as Chief Executive and Managing Director by Mike Emmett. Not long before that Chief Distribution Officer Fabian Pasquini had shifted across to become Managing Director of newly acquired Adroit Insurance & Risk. That move gave Nigel Thomas, AUB’s Divisional Chief Executive Austbrokers Network, an expanded role and greater authority – something he relishes as the business moves into a new era under Mr Emmett. Mr Thomas is a stalwart of the insurance industry, having started as a broker with Reed Stenhouse (now part of Aon). He later spent 20 years in underwriting before progressing to premium funding with Allianzowned Hunter. It was here that he developed a strong relationship with Austbrokers, eventually joining the broker cluster group in 2013. He says he was attracted by the network’s “unique model”. “I got a good handle on what Austbrokers represented, and I didn’t really see that anywhere else in the marketplace. “I thought if I’m going to make a career move at this stage in my life, it needs to be the right one, and the one I am committed to through to retirement. “Here I am, five and a half years later, loving it, really enjoying what we are doing and being able to take the business to the next level with a lot of the change that is going on.” Mr Pasquini was previously responsible for acquisitions, but his move to Adroit has given Mr Thomas greater control over that side of the business. “We’re putting ownership and responsibility for acquisitions back into each one of the divisions,” he says. “That has been an exciting change and it certainly gives me more say and more control over what we are doing here at Austbrokers. “Fabian and I worked extremely well together but it’s always more challenging when you have two of you that are engaged in directing the future.

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“Now I’m in the fortunate position to be able to make those calls myself, in conjunction with the great team that we have here. I’m looking forward to working with Mike Emmett. It’s an exciting time.” Mr Searles’ focus in recent years was around the diversification of the business beyond just Australian broking – reflected in the name change from Austbrokers to AUB towards the end of 2015. The group’s rapidly expanding New Zealand presence, and creation of the risk services division, meant less reliance on revenue from one sector. “Our eggs were all in one basket and, with the recent soft market, had we stayed doing just that I don’t think I would be talking to you now,” Mr Searles said last year. But despite this diversification, Mr Thomas says Australian insurance brokers remain at the heart of the group’s customer solutions. He believes AUB’s “owner-driver” model, in which the group takes an equity position but leaves it to the owner to run the business, has been critical to its success and growth, and that’s not about to change. “We started out with the owner-driver position and we were unique in that and created that many years ago,” Mr Thomas says. “Previous management did a great job of building a market and a profile around that. It’s really held us in good stead. “Without having to have hundreds of partners we have a number of high quality businesses that we partner with, and we are very clear about bringing value. “We focus on ensuring that we are not all things to all people. “We have got to be able to pick the areas where we can actually add value and if we are not adding value we need to reconsider that. “We are very clear on who we are and what we are and what we want to do, and ensuring that we are very focused on the fact that it is all about the client. “So whenever we think about what we do and how we are doing it, we are ensuring that we are creating value in providing a better proposition to the client.”


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“I think there is an opportunity now to ensure that we are the owners of our own destiny.” The owner-driver model has been built around a 50/50 “skin in the game”, but this has shifted slightly. “As businesses grow, they grow in terms of their value. Future leaders of the businesses may be at a stage in their lives where they have potentially got mortgages on their homes and kids in school and it can be quite challenging to buy in at a 50% level. “So we have probably seen a little bit of movement where we’re happy to own a little bit more than that so long as we maintain that connection to the skin in the game.” And the network continues to expand, with 51 broking businesses across Australia. Partners range from “sizeable and complex” businesses like MGA and Insurance Advisernet, to more traditional broking operations. While Mr Searles repeatedly emphasised the importance of organic growth, acquisitions are still very much on the radar. More often than not these take the form of “bolt-on” acquisitions made within partner businesses. “We did a capital-raising so we are very much in the market,” Mr Thomas says. “Where things make strategic sense we will pursue acquisitions. “We do a lot of growth and a lot of acquisitions from within the partner businesses. We’re not always acquiring as a standalone business.” While Australian broking is still a cornerstone of AUB, Mr Thomas is well aware that the industry needs to evolve to keep up with changing times. He says education is a critical factor. “It is something that is near and dear to my heart. We are soon heading off to the University of San Francisco with about 80 of our partners for an education day there, and we are going to be focusing on succession and leadership. “It’s about ongoing education and making sure that we are contemporary and relevant with our advice, and expanding our knowledge base and understanding new risks that are coming forward. “The world is moving so quickly. We talk about cyber as this new and exciting risk that insurers themselves are still grappling with, and the market seems to change every day. “You have got to be on top of all these things to be able to provide the level of advice that clients expect. We are excited by that proposition. “We’ll continue to work with our partners to maximise education to ensure our partners are best positioned

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to be able to provide the best advice to their clients and get the right outcomes.” Technology is going to be hugely important to the future of the industry, Mr Thomas says. And he doesn’t see insurtech as a threat; it’s more an opportunity. “[Technology] will really drive the efficiencies of the business as we continue to move forwards,” he says. “Clients’ expectations have clearly changed and will continue to change and we need to make sure we are at the forefront of engaging with them how they want to, when they want to and be able to provide the best outcome. “Technology will be a big focus for us.” Mr Thomas sits on the Insurtech Australia advisory group, and AUB was a founding partner of the organisation. “We want to continue to work with the insurtechs and bring value to our partners and to the end client,” he says. “Personally I am not concerned about technology as a negative or as a threat. “I think we need to embrace it because it is going to enable us to be far more efficient and provide a much better outcome to clients. I am quite excited about what technology could do.” Broker remuneration has been a major discussion point since the Hayne royal commission, but Mr Thomas believes broker commissions don’t present a major problem. “In the general insurance space you are active with your customer, you know your client well, it’s an annually renewable policy, you are doing endorsements, you are doing claims management, there is a lot of activity bringing advice and information on a regular basis to your client. “That would put you in a place where being paid a commission to provide that to a client is not conflicted remuneration.” He says insurers outsource a fair amount of work to brokers, in terms of submitting information to systems, and pay a commission accordingly. “I am absolutely confident going around our partners talking to them and sitting in the businesses and really understanding the operations, that we are not going to place business with an insurer just because of revenue. “We place it there because it is the best outcome for an end client. “If there is more activity and more work involved


in a particular client’s business quite often there is a fee associated with that. “We are fully transparent in disclosing that to our clients.” While Mr Thomas is “confident and comfortable” with commissions, he’s not complacent. He sees an opportunity to get ahead of the game in the next few years to avoid change being dictated by government or regulators. “I am very keen to ensure that we are doing a lot of work in the background to support our partners in what the future might look like. I think there is an opportunity now to ensure that we are the owners of our own destiny. “We don’t want to be in a position where others could turn around and say, you know what, we are going to change things because you haven’t positioned yourselves, as they would see it, appropriately. We are going to be very active in that space. “The key to any placement, first and foremost, has to be what’s best for the client. That approach is what drives everything.” Mr Thomas believes these are exciting times for broking as the industry continues to evolve. And he is convinced AUB is up to the task, with new leadership in place, a unique business model, and single-minded focus on the client. “Mark [Searles] really created an environment to ensure that all aspects of the group worked well and collaboratively to drive the best outcome for an end client,” he says. “Shifting the group from what was probably 95% insurance broking and 5% underwriting agency, he diversified that revenue and ensured that there was a really clear platform to enable all parts of the group to work collaboratively. “Mike [Emmett] is exploring things in some detail and clearly will have his own ideas on what else we need to do and what’s next. That is the exciting part for us. “When you get a change at the top there is a real opportunity, rather than to have that incremental continued growth, to look at a step-change. “I think that is probably what Mike will be looking to do. “The future is very bright for us. We’re looking forward to continuing to grow and bringing lots of benefit and value to our clients. “There are lots of exciting things taking place and 0 lots more to come.”

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A ‘pervasive’ threat A series of class actions have put the spotlight on toxic chemicals found in a host of everyday items By Bernice Han

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he past three years have been a living nightmare for Anthony and Kirsty Bartlett, who were happily raising their three children in the Northern Territory until a phone call from the Department of Defence in April 2016. Defence asked the Bartletts’ permission to test the water supply on their property, which sits within 5.5 kilometres of the RAAF Tindal base near Katherine, for per- and poly-fluoroalkyl substances (PFAS). A few months later the results came back, and the couple’s worst fears were confirmed: the presence of PFAS in the water supply, which relies on a single bore connected to the Tindal aquifer, was above the acceptable levels for drinking. More bad news soon followed. Blood tests showed the couple had high levels of PFAS in their bloodstreams. Mrs Bartlett now suffers from a thyroid condition and her husband has high cholesterol. They believe their medical conditions have something to do with years of drinking PFAS-tainted water. The Bartletts now face an uncertain future. The 15-hectare block they bought in 2003 is virtually worthless, because soil tests indicate the ground is also contaminated. “Looking back, it was quite a shock,” Mrs Bartlett tells Insurance News. “There was lots of confusion and a lot of questions about what these chemicals were and what the implications of the contamination meant. “We thought we had invested in a good property. It was an asset and now that is completely uncertain. Living with that uncertainty is quite stressful and it’s really changed decisions about what we can do into the future. That has been really difficult.” Most people have not heard of PFAS, but they have almost certainly crossed paths with it. Used widely since the 1940s, it is a group of man-made chemicals found in many everyday consumer items. Non-stick cookware, food paper wrappings, water-resistant apparel, stain-resistant upholstery and carpets are just some of them. There are at least 4730 different types of PFAS, with perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS) the most extensively produced and used. Broker Gallagher recently called PFAS the “next big environmental threat”, and that’s no exaggeration. It is feared that these synthetic substances, over a long time, could damage the environment and impact human health. “Both [PFOA and PFOS] chemicals are very persistent in the environment and in the human body – meaning they don’t break down and they can accumulate over time,” the US Environmental Protection Agency says. “Most people have been exposed to PFAS. Certain PFAS can accumulate and stay in the human body for

long periods of time. There is evidence that exposure to PFAS can lead to adverse human health effects.” According to the US agency, the most consistent finding among exposed populations is increased cholesterol levels, with more limited findings related to low infant birth weights and effects on the immune system. In the case of exposure to PFOS, thyroid hormone disruption could result. There are implications for the insurance industry as the chemicals come under scrutiny. “PFAS has become so pervasive in society because of its widespread use in products, as the chemicals exhibit resistance to heat, water and oil,” Cameron Douglass, US-based Account Executive with Gallagher’s environmental practice, says. “Still, the environmental insurance marketplace has yet to fully understand how to address concerns with their insureds that have PFAS exposures, which would include paper mills, food packaging plants, airports, landfills and manufacturers, among others. “Property owners/operators can use pollution insurance as a risk management tool to mitigate exposures associated with contamination on, at, under, migrating from or through their owned (or leased) locations. Claims and losses, which include legal expenses and defence costs for investigation, can arise from a variety of sources.” In February last year 3M settled a lawsuit filed by the state of Minnesota for $US850 million over charges PFAS chemicals it produced were dumped into the state’s groundwater, causing environmental damage, including drinking supplies. The 3M lawsuit is one of many legal actions in the US against PFAS manufacturers or commercial users of the chemicals. Municipalities and landfill owners have been prosecuted for PFAS contamination arising from products degrading in landfills, which were found to have run off and entered surrounding soil, groundwater and surface water. “The magnitude of liability costs from PFAS responsibility will largely depend on legally enforceable standards and clean-up levels,” Mr Douglass says. “While [US] states are increasingly beginning to set maximum contaminant levels (MCLs), which are legally enforceable standards for chemicals, most state and federal regulatory bodies have failed to enact MCLs. Until then, third-party lawsuits and toxic tort claims will likely drive the rise in associated liability costs.” Legal cases are brewing in Australia too. Class actions have been filed on behalf of residents in three towns – Katherine, Oakey in Queensland and Williamtown in NSW – against Defence over its historical use of firefighting foam containing PFAS. The actions allege residents near RAAF facilities have been exposed after the foam leached into the

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Health warning: firefighting foam can contain dangerous contaminants

groundwater and soil. Defence says it stopped buying foam with PFAS contaminants from 2004 and phased out its use, moving to an alternative fluorinated product. The department’s handling of the matter and subsequent communications with affected residents recently drew criticism from the Joint Standing Committee on Foreign Affairs, Defence and Foreign Trade’s PFAS subcommittee. “This issue has driven many otherwise ordinary citizens to organise, conduct research and develop significant expertise in an effort to be heard,” subcommittee chairman Andrew Laming says. “It should not take years of campaigning at this level of effort to adequately address the legitimate concerns of communities of people. “These communities are hurt and angered by the effects PFAS contamination – and the delays and inadequacies in the response to its discovery – have had on their lives, their families and their communities.” More than $130 million has been spent managing the impacts of PFAS contamination on Defence sites and surrounding properties, making it “possibly the largest program of environmental investigations ever conducted” in the country, according to the Government. In December the subcommittee tabled its report on the management of PFAS contamination in an around Defence bases. It says the risk is not confined to Defence facilities. “The scale of the issue of PFAS contamination in Australia should not be underestimated… the issue is clearly a national problem that is not limited to a single portfolio, and crosses a range of industries and jurisdictional boundaries,” it says. Other locations, including many airports and fire training facilities, are under investigation or being

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managed for PFAS contamination. “Effective co-ordination of effort will be crucial for the success of these investigations.” The subcommittee has made recommendations to improve Canberra’s handling of the issue. Appointing a co-ordinator-general to oversee the national response and compensation is among them. “The compensation scheme should be flexible enough to accommodate a variety of individual circumstances,” it says, adding the Government “needs to act swiftly to offer hope to property owners caught up by the PFAS crisis”. Evidence submitted by affected communities leaves the committee in no doubt they “have suffered demonstrated and quantifiable losses as a result of Defence’s use of PFAS-based firefighting foams on its bases”. The Federal Government says it will consider the suggestions. “Defence is committed to being open and transparent about its environmental investigations, management and remediation efforts at PFAS-affected Defence bases and in communities,” First Assistant Secretary for Infrastructure Chris Birrer tells Insurance News. “Defence acknowledges there is community concern around PFAS and is committed to provide support and assistance to those affected.” The Bartlett family – lead plaintiffs in the Katherine class action – say Defence has left them no option but to seek recourse through the courts. “Through our own interactions with them, there has been no real show or any action taken to indicate there would be any compensation,” Mrs Bartlett tells Insurance News. “I see the class action as our only hope of rectifying our financial situation and being able to move on 0 with our lives.”


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The Hayne Manifesto By Andrew Sharpe

My initial impression, on reading the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, was surprise at the extent to which it transcended the usual list of recommendations and became Commissioner Hayne’s manifesto. The Royal Commission heard several case studies which revealed pervasive misconduct in various guises throughout the financial services industry – from ‘fee for no service’ to the use of inappropriate medical definitions, telephone sales of insurance products to people with disabilities, and the sale of add-on insurance to consumers through motor dealers.

Manifesto (n) a published declaration of the intentions, motives, or views of the issuer which promotes a new idea with prescriptive notions for carrying out changes the author believes should be made.

General observations Commissioner Hayne drew a series of observations about the conditions which drove or enabled the behaviours observed in those case studies: 1. Misconduct was driven by the pursuit of profit at the entity level and by poor remuneration structures by which rewards were paid without regard to the standard of conduct of the individuals. 2. Misconduct was able to flourish due to the asymmetry of power and information

between consumers and financial services entities. Consumers lacked financial knowledge to enable them to understand the transaction and had no effective ability to negotiate terms. 3. Intermediaries failed to protect consumers, often due to conflicts between duty (to client) and (self) interest. Too often the best interests of the client was sublimated to the interests of the intermediary. 4. Financial services entities which broke the law were not properly held to account. Where misconduct was detected, the favoured modes of enforcement paid too little attention to the need for public denouncement and deterrence of such conduct. Four Pillars From those observations, Commissioner Hayne identified four ‘pillars’ to provide the foundation of a ‘comprehensive policy response’ being: Pillar 1: Simplify the law so that its intent is met, rather than merely its terms. Pillar 2: Change the approach to managing conflicts from managing them to removing them. Pillar 3: Improve compliance with the law (and industry codes) including through more effective enforcement built on deterrence and proportional consequences. Pillar 4: Promote effective leadership, good governance and appropriate culture. Six norms of conduct Each of the four pillars is designed to provide a foundation for a cultural shift within the financial services sector where conduct is guided by six identified norms of conduct which drive behaviours within the sector. Those norms are: • obey the law; • do not mislead or deceive;

• • • •

act fairly; provide services which are fit for purpose; deliver services with reasonable care and skill; and when acting for another, act in their best interests.

Vision for the future In Commissioner Hayne’s vision for the future of the financial services sector, these provide the fundamental norms around which all legislation is designed, with explicit connections being drawn between the particular rules and their policy objective of driving behaviour consistent with these norms. Each of the central recommendations falls to be judged by their capacity to drive such a cultural and behavioural shift in which the best interests of the customer become the prime focus of behaviour. Consumer expectations are backed by firm enforcement of both laws and industry codes. Conflicts of interest are removed. Remuneration programs are designed having regard to both financial and nonfinancial risk – both what is done and how it is done. Financial service providers are prevented from taking unfair advantage of unsuspecting consumers. The public nature of the Royal Commission has created an environment in which Commissioner Hayne’s vision can take root. Where financial services institutions, and the sector itself, need to rebuild community trust not just because it is the right thing to do but because it is vital to their economic and social sustainability. The next few years will see great change as the individual recommendations set out in the Final Report are consulted on, drafted into the form of legislation and enacted. But ultimately Hayne’s legacy will be determined not by the success of any of these specific recommendations, but by the ability of the sector to embrace – and live – this paradigm shift in culture and conduct which forms the centrepiece of Hayne’s Manifesto.

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n March 23, something unprecedented started to happen in the skies over northern Australia. Cyclones Trevor in the Northern Territory and Veronica in Western Australia were lining up to make landfall as category 4 systems at the same time. Never before had two such intense cyclones struck our coastline simultaneously. As it happens, Veronica’s eye never crossed onto land, and both systems hit relatively unpopulated areas. Scientists are increasingly focused on how climate change is affecting cyclones, and the impact this could have on residents, businesses – and insurers. So first, the good news. Research suggests climate change may lead to reduced frequency of tropical cyclones. Fewer systems are expected to make landfall in Australia. The bad news is that those that do cross the coast will be more intense and could move across the landscape

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more slowly. A recent study published in the journal Nature shows the speed of tropical cyclones worldwide over land has decreased by 10% in the past 70 years. Nobody is quite sure why that’s happening, but when destructive winds and heavy rainfall sit over one location, the potential for damage and severe flooding soars. While scientists are always reluctant to pin particular events on climate change, there’s no getting away from the fact that Queensland’s Cyclone Debbie and Hurricane Harvey in the US, both in 2017, were slow-moving systems that dumped extraordinary amounts of rain on communities. The monsoonal low that brought devastating flooding to Townsville earlier this week stalled over the north Queensland city for more than a week. Cyclone Veronica was also slow-moving, Trevor less so. Thomas Mortlock, the Senior Risk Scientist for


Double trouble Two cyclones at once, and a new tendency to go slow – is climate change altering cyclones? By John Deex

Pincer movement: cyclones Veronica and Trevor hover over Australia. Credit: Satellite image originally processed by the Bureau of Meteorology from the geostationary satellite Himawari-8 operated by the Japan Meteorological Agency.

catastrophe modeller Risk Frontiers, says while the slow-movement phenomenon is now clear in the northern hemisphere, it is less so in this part of the world. Dr Mortlock says Australia’s climate is so heavily influenced by El Nino and La Nina that long-term trends can be masked. “The jury is still out. It can be hard to see, but that doesn’t mean it’s not there.” He says factors that cause the slowdown trend are easy enough to pinpoint. “As the tropics warm, they expand, and as they expand circulation slows down. Townsville was quite remarkable, with a tropical monsoon hanging around for a very long time. “Cyclone Debbie crossed the coastline at 7kmh – you could run faster than that. “If we do have slow-moving cyclones, there is the capacity to rain down more volume on one location,

and that could have a major impact.” Dr Mortlock says climate change is also pushing cyclones further south, bringing more heavily populated areas such as Brisbane into reach. Writing in The Conversation, Steve Turton, Adjunct Professor of Environmental Geography at CQUniversity Australia, says there is a “plausible link” between climate change and slow-moving weather systems. He points to the Tasmanian heatwave and bushfires earlier this year, and the Townsville floods. “One common feature of many of these events… was that they were caused by weather systems that parked themselves in one place for days or weeks on end.” Professor Turton says Australia has been hit by many extreme weather events already this year, with records broken. And if the go-slow trend intensifies, “their effects on individual regions could be more 0 devastating still”.

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AN INSURANCE NEWS SPECIAL REPORT ON THE INNOVATIONS, CHALLENGES AND PEOPLE CHANGING INSURANCE THROUGH TECHNOLOGY

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The best of both worlds »

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Looking for a fair share »

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It’s a cinch »

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Analyse this »

For tech start-ups, disruption or collaboration is far from a binary choice

With males dominating insurtech, gender inequality has become an issue with serious consequences

Algorithms rule. An innovator’s journey to build a completely inclusive insurance platform

Tech innovators are finding novel ways for the industry to utilise its vast data resources

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SPECIAL FEATURE: INSURTECH

The best of both worlds For tech start-ups, disruption or collaboration is far from a binary choice By Benjamin Levy

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s the insurtech industry continues to grow, the companies within it have fallen into two broad camps: disruptors and collaborators. Most are collaborators, working with established insurers to improve the insurance value chain and address challenges across distribution, claims, underwriting and administration – and taking a slice of the pie at the same time. The smaller proportion of disruptors, according to a recent EY report on the insurtech ecosystem, provide risk transfer solutions without relying on an incumbent’s supply chain. Yet to an insurtech, the definitions of “disruptor” or “collaborator” are a false dichotomy, and a restrictive one at that. Perry Abbott, Chief Executive and Managing Director of insurance technology developer Friendsurance, says describing yourself as a collaborator or disruptor limits what you can do. Friendsurance sees itself as adding value for everyone in the chain. Its model assists both the customer and the insurer, Mr Abbott says. Any insurtech that focuses on enhancing value for customers must consider the insurer’s interests at the same time, whether through reducing fraud or changing a product’s loss profile, or other means. “If you ran around the market just trying to create products that got you lots of customers and didn’t look after the insurer, you wouldn’t have a very long life,” Mr Abbott says. Many insurtechs focus on creating new products outside the present value chain. But according to the EY report, only 10% of

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these consider themselves disruptors. Yet Mr Abbott argues most disruptors are, in reality, collaborators, because they have to rely on insurers to underwrite their products. Friendsurance’s local peerto-peer bike insurance policy uses Lloyd’s underwriters. The product is proof that insurtechs can collaborate with incumbent insurers to create something very different for the marketplace, he says. “It’s not about being a collaborator or a disruptor – you can be both.” EY partner Andrew Parton says “disruptor” is a vague term. Although his company’s report uses the word, he believes it merely reflects the concerns of incumbents that insurtechs are going to take business from them. They won’t cause much disruption for long. The established insurers are just as focused on developing new products to respond to evolving customer expectations. They are partnering with insurtechs to create products with agile policy submission processes, new policy coverage, dynamic pricing and personalised service, the report says. But the process of incorporating an insurtech into an incumbent’s value chain is extremely slow, partly because of the complex procedures and processes carried by insurers. Insurtech BeThere sits in the loss prevention and claims space. It sends a team of photographers with 3D cameras to an insured’s property to create a high-resolution virtual tour. A claims consultant can then “walk through” the property and see damage as if they were there.

Friends with insurers: Perry Abbott

It’s a sorely needed innovation, with consultants often relying on poorly taken photos and using old green-screen imaging technology; incumbents should be jumping at it. Yet co-founder Grant Beck tells Insurance News the company has been in talks with an insurer for nearly eight months and has only just started operational talks, after receiving documents from the insurer’s legal department. Delays like this – and sometimes resistance from IT specialists within a company – can cause serious financial problems for insurtechs. EY says 56% of insurtechs can survive less than a year based on their current financial positions. Unsurprisingly, insurtechs are growing frustrated. About 81% of those surveyed for the EY report say incumbent insurers are not doing enough to collaborate; 60% are


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SPECIAL FEATURE: INSURTECH Predicting partnerships: EY’s Andrew Parton

The evolution of insurtech will not resemble a contest between disruptors and collaborators, but between insurers that embrace the future and those that don’t already working with insurers but want more on board. Mr Parton tells Insurance News one insurtech entered a collaborative process with an insurer for nine months without winning a contract. “A young, dynamic, innovative, agile business, needing to move quickly, working alongside a characteristically risk-averse traditional insurer causes problems when they’re unable to operate in the way each of them needs the other to be,” he tells Insurance News. There is a certain amount of luck involved in landing a contract with an incumbent, Mr Parton says. Will collaborators become disheartened with the slow process and decide to develop more independent businesses, not reliant on the old insurer value chain? Not unless they want to become insurers themselves, Mr Parton says. “If you’re going to disrupt the insurance industry and do something without relying on insurance, that means you’re fundamentally going to become an underwriter and take on the risk yourself.” The difficulty and expense inherent in this means insurtechs will work to some extent with insurers, creating business for both sides. As Mr Abbott says: “The reality of the cost of getting your own insurance licence means we work with existing insurers in Australia.” While they wait on incumbents, insurtechs should look beyond the industry for business opportunities. No insurtech should sit solely inside the insurance space, Mr Abbott says. “The industry has evolved into these little silos where everyone wants to fit in, like fintech, insurtech, risk-tech, this-tech, thattech,” he says. If insurtechs want to get closer to a sales partner to acquire customers – and every insurtech does – they can’t live only within the

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insurtech silo, Mr Abbott says. Successful companies create technological solutions that can be applied across different sectors. Friendsurance’s bancassurance stream was developed to interact with customers in a new way within the banking system, and to create a better-informed customer. BeThere’s Mr Beck says while insurtechs may need to consider business opportunities outside insurance, the aim is to do it in a way that leads back into insurance. His business has had interest in its 3D model from WorkSafe Victoria, which examines accidents from a liability perspective. Liability insurers could then use its data in claims. It has also tried to improve its technology and marketing, to help incumbents see it as beneficial to their value chains. BeThere is always investigating ways to get more people looking at its technology, Mr Beck tells Insurance News. And it is working with other insurtechs to see how they can combine their technologies. Collaborators will eventually work together on single products to market to incumbents, Mr Beck says. Mr Abbott believes the need to seek opportunities outside insurance will create a second phase of evolution for insurtech. “The second phase is, you have a broader view as to how you can bring something new and agile and faster to a partner that probably is not 100% what you envisaged in the first place.” He says the small scale of the Australian insurance industry means insurtechs will end up working within or alongside multiple incumbents. Mr Parton says the evolution of insurtech will not resemble a contest between disruptors and collaborators, but between insurers that embrace the future and those that don’t. “The insurers that bring insurtechs into their own ecosystems will disrupt those that 0 can’t.”


SPECIAL FEATURE: INSURTECH

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SPECIAL FEATURE: INSURTECH

Looking for a fair share With males dominating insurtech, experts say the sector faces serious implications if gender inequality isn’t addressed quickly By Miranda Maxwell

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nsurtech is the fastest-growing technology sector in the world, with $7 billion invested globally last year and projections for a twelvefold rise over the next five years as organisations ramp up their artificial intelligence (AI) capability. Tech start-ups are irreversibly transforming the general insurance industry and, while the incumbent heavyweights may be notoriously slow to commit, this phenomenon is unstoppable, opening new markets and reducing costs. But is everyone getting a fair slice of this multibilliondollar pie? Those close to the ground say an uncomfortable truth lurks: your daughters are significantly less likely than your sons to partake in this lucrative transformation in insurance practice. Perhaps equally worrying, the product will have conscious or unconscious bias embedded if poor representation of certain groups in the workforce is not addressed. An overwhelming 90% of AI coders are male, and leaders are concerned gender bias is being built into machine learning start-ups, producing suboptimal

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results for female buyers of insurance products. “We don’t see a high representation of females in insurtech,” concedes Catriona Wallace, the head of Flamingo AI. “There are very serious implications. “Without a representative group at the table doing the coding, design, quality assurance and testing, there is a very, very high likelihood that we will build not only gender bias, but probably all sorts of bias into the way the code operates.” Ms Wallace, a high-profile figure in insurtech, founded ASX-listed Flamingo, which has developed AIpowered virtual assistant “chatbots”. She says examples of embedded gender bias are already in play; for example, in recruitment where AI is deployed and in automated police and emergency services applications. “If we do not have diverse groups at the table actually designing it and coding it, that is a significant problem and we are seeing those things play out in a very dangerous and undesirable way. “Having women actually building the product for women is critically important. It is not enough to just


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have marketing departments knowing they have to market to female buyers.” She says retail, health and food are easier career paths for women than technology, and representation in those fields is consequently far more visible. She points to a lack of female leader role models in insurtech and says it is vital to promote stories of the pioneer women leading these revolutionary companies. “That would be one way to solve it. The problem is the absence of women that other women can see have gone ahead of them and been successful in this field… women attract women. ” A study of 535 insurtech companies worldwide by German-based company Friendsurance found just 20, or 4%, were founded by women. Flamingo’s staff comprises about 35% women and boasts a strong culture of inclusion, making efforts to represent racial, sexual and neuro diversity, which management believes promotes harmony and productivity. Its recruiters look for expertise in engineering, design, financial services, operations and marketing. Such women are out there, and qualified, but they are hard to find, Ms Wallace says. The issue begins at school, where Australia has been particularly poor at encouraging women into so-called STEM (science, technology, engineering, maths) courses. There is also evidence that women aged in their 30s in technology and finance careers often do not go into leadership roles, and instead consider other career paths. “We haven’t evolved enough yet to a position where women are growing up and aspiring to have occupations and practice professionally the same way men are,” Insurtech

Rare example: Catriona Wallace is one of the few female insurtech leaders

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SPECIAL FEATURE: INSURTECH

Sharing knowledge: Ms Wallace speaking at the ANZIIF Insurtech Conference in February

Australia Chief Executive Simon O’Dell tells Insurance News. “We are living through the turning point of that at the moment, which is good – females and that gender-equality drive.” One in five of Insurtech Australia’s members has a female founder or leader, and more than half the leadership team are women. The group also tries to represent women equally on panels when hosting industry-related discussions. “We definitely understand the value that brings in terms of the performance of our business and also to be leading by example, given this is such an important topic for this decade and the next decade until we realise some more traction on this front,” Mr O’Dell says. “It is very much a conversation being had at the centre of the tech start-up community and it represents the values of the community really well, I think. “There is no silver bullet answer, but it is a great conversation.” Still, Flamingo’s Ms Wallace laments the fact there is “something that happens” at the 30-40 age group in terms of women progressing to senior roles. “So there does need to be a lot more effort made to encourage girls into STEM and also to acknowledge that what is going on currently is only moderately successful,” she tells Insurance News, adding there must be effective paths back into insurtech for women who take time off to have children. She argues that even if they are not leaders, ensuring women participating in insurtech are given a high profile would lift the number of women in the fast-growing space. Identifying women in insurtech and having them regularly profiled, speaking at events and featuring in

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newspaper and magazine articles assures other women who are looking at the sector that there are women doing well there – women who have chosen this as a career and are happy. Insurtech Australia recently published a feature profile on Annette King, who co-founded and chairs Galileo Platforms in Hong Kong, an insurtech offering insurance policy administration using blockchain technology. A B2B business, its clients serve retail clients who need general, life or health insurance. With only about 3% of available venture capital going to women-led start-ups, US innovation consultancy Quesnay is doing its part with its Female Founders in Insurtech competition, aimed at addressing the gap by recognising and supporting female leaders. Juliette Murphy, who co-founded Brisbane-based FloodMapp, was one of three recipients last year, out of 73 qualifying applications from 15 countries. FloodMapp, which offers an intelligent flood alert system that reduces losses for business, received $US25,000 and the chance to partner with the competition’s sponsors. Research for the Global Start-up Ecosystem report last year, produced by Startup Genome and the Global Entrepreneurship Network, looked at the differences between male and female start-up founders and how mindset differs across demographic groups. No particular mindset was found best suited to succeed, though male and female founders did differ on some variables. Female founders had a greater orientation towards big-picture thinking, or “breadth”, and towards structure – which can be detrimental in the start-up phase when agility is required, but is a strength for scale-up success. “If founders can adapt and adjust as their companies mature and grow – in this case, moving towards a greater preference for structure – they will be better positioned for success,” the report says. There is a move towards gender equality in the space and it is gathering pace. The largest employment sector for Millennials is the tech sector. These new-knowledge workers value gender equality, and Mr O’Dell says our focus should be on the promisingly rapid pace at which the industry is progressing. “You can’t change where we have been, but I think the rate of change is quite strong, quite solid, and is getting significant traction,” he says. “The new generation coming through into the workforce is joining a sector that embodies those types 0 of values.”


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SPECIAL FEATURE: INSURTECH

It’s a cinch The algorithm rules. An innovator develops his own insurance platform that can serve brokers as easily as it aids consumers By Terry McMullan

Striking the right note: Warren Burns sees insurance opportunities

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SPECIAL FEATURE: INSURTECH

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n February 2016 Warren Burns appeared on the cover of Insurance News as the very model of a modern disruptor. A former head of technology at European consumer goods giant Unilever, we described him as “a bender of traditional business concepts and a prophet for commercial change”. His company BurnsRED now counts among its clients some of Australia’s biggest companies, from resources giants to banks. And insurance companies. He likes insurance because it’s full of opportunities, thanks to what he says are, in the main, antiquated IT systems and some user-unfriendly technology. “When you enter an industry sideways and you’ve never had any exposure to it before, you’re able to spot things that people who’ve always been in it can’t see,” he tells Insurance News. In that 2016 article Mr Burns predicted technological disruption in insurance would come from within, and that’s how it has panned out so far. It’s the insurers that have taken the lead by collaborating with specialists like him to develop new systems that help them reach and retain customers. Exposure to the industry’s inner workings has also tempered his once-caustic view

of intermediaries’ role and his doubts about the long-term survival of broking. Which is just as well, because over the past couple of years Mr Burns has been developing his own insurance platform alongside a lot of other work for companies large and small, and brokers have emerged during the process as an important component. The platform is called Cinch, a word originally intended for the girth strap on a saddle but more readily used these days to describe an action that’s simple and easy. He has developed it at his own expense to bring together many of his beliefs about an “ideal” insurance tool. It has been a longer and more expensive journey than he originally anticipated, because as he became more immersed in insurance processes, he discovered more challenges. As the project progressed, so did its scope. Cinch was originally based on Mr Burns’ desire to build a platform for personal consumers and SME business owners. He charged his team of data science specialists – their skills include human-centred design, behavioural economics and algorithm-building – to make it as open and accessible as possible. “It was originally designed purely as a

tool to provide families and small businesses access to all of their insurance information, regardless of vendor, from a single source,” he tells Insurance News. “You could log in to Cinch and see all of your policy information, take out new cover as and when you need it, renew your current policies and even make a claim – all from one dashboard.” That’s all there ready to go, but a lot more has happened along the way. Today there are versions designed specifically for insurance companies and for brokers. The aim with each is the same: to remove complexity from the users’ daily lives and provide “a beautiful, simple experience”. In the case of brokers, Mr Burns uses a recent example of another industry to show how and why his original gloomy assessment of their future role has changed so radically. While designing a system for cardiologists that brought together information that could be used in the diagnosis of heart problems, he realised that no matter how sophisticated he made it, the algorithm would never do what a specialist doctor can do: look at a patient and decide purely on appearance whether they need immediate hospitalisation.

Speaking of algorithms… The core of any successful platform is algorithms built on data – the more data the better. And insurance, Mr Burns says, is awash with the stuff. “The insurance industry asks lots of questions on lots of forms, and that information is so vast we can make some really solid algorithms.” Algorithms. The word causes more confusion than practically any other. “They’re just a set of mathematical instructions that take data and process it using information provided by the person building it,” he says. “Structured information from repetitive forms provides structured logic. Repetitive forms are what makes algorithms shine.” Achieving that “shine” may involve as many as 100,000 copies of any form, “filled out in a structured way, with ‘choose your own adventure’ logic built into it”, before the designers have something that has machine learning capability. “With insurance, we have amazing material to learn from,” Mr Burns says. “What you get at the end of all that is a machine that can learn.”

Team that capability up inside an easy-to-use platform such as Cinch, and the end user has a powerful aid to maintaining and improving their insurance cover. Once a user has supplied a name and address, the platform interrogates an array of public sources (more than 100 for small businesses, many of them industry-specific, and about 16 for personal lines buyers) in a few seconds and turns up an extraordinary amount of information. Some of that information comes from Google, which Mr Burns says contains “an amazing raft of information we can use. “If you want your company to have a public presence you’ll be on Google, and we find we can obtain about 80 pieces of usable data from each inquiry.” That information – along with supplied data and the platform’s own vast array of information and statistics tied up in an algorithm – forms the basis for a proposal that’s detailed and accurate. “This offers the broker access to a technology solution that enhances positive perceptions of their offering and brand,” Mr Burns says.

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Moving the ‘general advice’ border In its direct personal lines/SME form, Cinch has the ability to grab a startling amount of information from many sources off the internet and use the data to decide on the policy or policies best suited to a customer’s needs. It can also recommend policies that aren’t essential but would be wise to consider, for risks the client probably hadn’t even been aware of. Pitching the platform to insurers around the industry, developer Warren Burns found himself being cautioned that such capabilities should be considered “personal advice” – which can only be offered by an Australian financial services licensee. The border between general advice and personal advice exists for very good and obvious reasons, but with the advent of algorithms that can assess individuals’ risk factors to an unprecedented level of accuracy, is the border less defined that it was before? Yes, it is – and the blame for letting it happen must rest to a large extent with brokers. Mr Burns took the general/personal advice border issue to an internal team at the Australian Securities and Investments Commission. “Basically, they said they will rigorously examine every aspect of what we’re doing and hold us to the same standard as anyone else, which I expected,” he says. “Our advice and the reasons behind it can be measured much more easily than advice from human advisers.” His argument is thus: for the past 10 years many brokers have been “peppering general advice warnings” across every quote “like a ‘get out of jail’ card”. “There’s a feeling that the practice is so widespread the advice provided by Cinch could easily be considered ‘general’, because that’s the standard,” he says. Cinch is designed for premiums of up to about $4000, “where ‘general advice’ is the norm” – even if the standards set a decade ago might have considered such advice “personal”. 60

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“The same can be said for brokers,” he says. “For brokers, Cinch is a support mechanism that makes their jobs easier and ever more accurate. But no algorithm in the world is ever going to take a client out for a coffee to discuss risk and the best ways to manage them. “What it does do so effortlessly is all the background work that brokers have to do in order to have that chat over coffee. “What a broker does isn’t rocket science, but their knowledge and experience is incredibly important in assessing the overall risk and presenting it.” Mr Burns says building an algorithm that still recognises human intuition is important for brokers. “So what we’ve tried to do is design a ‘decision-support’ mechanism for the person that’s using the tool. It doesn’t replace their intuition, but it does enable the machine to learn and do all the hard and tedious stuff.” That “human” factor is now central to the Cinch experience, he says. “A business needs insurance, but a person buys it. That person has their own views on risks they’d be willing to transfer and risks they think they can manage themselves. “It’s the broker’s intuition, formed through experience, that drives their approach to decide what kind of policies to put in front of the client, and why. “So we still need the broker to be able to override the algorithm and use their intuition to say, this is the best way for this client.” “What is different is the amount of background information backing them up. Cinch can look at a company’s structure and risk factors to a very high degree of accuracy – higher than a broker would be able to do, and in a fraction of the time.” There’s a lot of interest in Cinch and its inner workings from several sectors. When Insurance News interviewed Mr

Burns in March, he was celebrating the signing of an agreement with “a medium-sized broker” to run its affinity lines through the Cinch For Affinity tool. The aim is to eventually have every insurer on board, and one major insurer has already agreed to work with the platform by providing policy information, quotes and renewals. More will follow, but it’s very early days. Mr Burns remains critical of the general insurance industry’s technology achievements, particularly when compared with platforms available in other parts of financial services. He says broker systems aren’t what they could be. “Even the ones that have been introduced recently have obviously been designed inside the industry. They’ve learned nothing from the other industries that have been down this path before. “There’s lots of ‘protectionism’ with these proprietary systems. That’s not healthy when you’re trying to run a process that’s open and accessible and where the customer can see all their relevant information any time they want. “Cinch began out of a sense of frustration with the kinds of technology that were being provided to manage people’s relationship with the industry. As we began to work with insurers and brokers, we got to understand that they shared our frustration. “The insurance technology market has been under-invested in compared with other similar sectors. Software that was built in the ’90s is still in common use and we found customers were feeling the pain through low levels of automation, heavy reliance on paper and poor user experience.” Digging deeper into the industry’s systems and processes, the BurnsRED team found the advice side of the industry “isn’t where clients are feeling the pain”.


SPECIAL FEATURE: INSURTECH Insurance information is scattered across many insurers, some with multiple brands. “It’s not all that easy to centralise all that information into one usable and accessible electronic portfolio. So we decided that to make this work for everyone, we would need to give brokers an option as well to make their lives easier.” While the advantages of the Cinch platform for brokers might be obvious, it would be wrong to surmise Mr Burns has turned away from the direct market he first set out to capture. “The capability is there for consumers who really want to own their own responsibilities,” he tells Insurance News. “They want a direct experience.” A variety of research – most notably the annual Vero SME Index – supports his contention that “there are people out there who are willing to educate themselves about how to deal with their risks. There are small businesses that will use a broker if they have a complex risk, but that will otherwise shoulder the task of managing their normal risks themselves.” He points out most of these risks are now dealt with through the ubiquitous bizpaks, which he says have become so similar “that to all intents and purposes they’re the same, give or take some wordings and price”. Cinch can work for such customers, he says, and in its direct market form it won’t take commissions from insurers, “because I don’t want it to ever be subject to an imperative to recommend one product over another”. However, he has no problem with brokers receiving commissions for the work they do for clients, because, as he sees it, that payment covers a range of other services – ongoing professional advice and claims support among them. “While we originally intended Cinch to be a robo-advice tool, we worked out that all the various parts of insurance are there for a very good reason,” he says. “You can’t ignore them. “And there are some large inefficiencies that were just too big for us to ignore, too.” The focus at present is on gaining the support of more insurers. “We want to get all the insurers on board so they’ll be willing to put products through our platform,” he says. With some insurers hamstrung by legacy systems and other complexities, and a market that’s slow to respond to new directions, plenty of challenges remain in the Cinch saga. But Mr Burns is undeterred. “Considering what we started out to do, there’s been a very big lift in scope. But this is a platform that has enormous potential right across the industry. “A really good illustration of that is the advantages brokers can gain from Cinch and use to enhance their own businesses. If I can make a cardiologist’s life easier, I can do the 0 same thing for insurance brokers.”

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SPECIAL FEATURE: INSURTECH

Analyse this Tech innovators are finding novel ways for the industry to utilise its vast data resources By Andy Swales Ecosystem enabler: Codafication’s Daniel Sandaver

E

very era has its emblems: think of the first industrial revolution and you are likely picturing steam engines, soot-smeared factories and a cast of characters from the pages of Dickens. Fast-forward a couple of centuries and steam has given way to zeros and ones, as we enter the age of information – a time of intelligent machines and smart devices. Big Data and the almighty algorithm are transforming every aspect of our lives – at work, at play, at home and everywhere in between. Insurance is no exception. In a report last year, the Geneva Foundation think tank noted advances in “Big Data analytics, artificial intelligence and the Internet of Things are transforming the insurance industry and the role data plays in insurance”. But Simon O’Dell, Chief Executive of peak body Insurtech Australia, reckons the industry – awash as it is with underutilised data – is still in the early stages of its transformation. “I think there is definitely a sentiment in the market that utilising data to the utmost is of importance, and there are a lot of incumbent [insurers] scrambling to find the best way to use their data and discover the value of the data they’re sitting on, because insurance companies are sitting on a lot,” he tells Insurance News. Fortunately, help is at hand – up and down the value chain – from the burgeoning insurtech sector. “Some insurtechs are using machine learning to analyse sets of data to achieve automation… that has various applications in different areas of the value chain,” Mr O’Dell says. “Insurtechs will go to incumbents and say, ‘Provide us with some of your data… and we’ll demonstrate to you what we can achieve with it.’ ” Brisbane-based Codafication is a case in point.

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Managing Director Daniel Sandaver says its Unity cloud platform is “a digital connective tissue that sits between legacy systems, best-in-class technology and the Internet of Things”. The tool enables information from different data sets to connect and communicate, for example, better utilising otherwise siloed customer information and interactions to prompt more effective engagement. “For the insurance industry, Unity allows traditional insurers to design new customer experiences, distribution models and claims processes today, no matter what the legacy technology is sitting behind it,” he tells Insurance News. “Furthermore, Unity also provides a future-proofed framework to start to migrate or decommission legacy systems or business logic processes that need to be modernised towards new best-in-breed systems or technologies. “The future operating model of insurance will be ecosystems, where structural partnerships, technology and nimble modular operations can scale up – or down – quickly, allowing insurers to be profitable in a competitive landscape. We see our platform as an enabler to this next evolution of business.” Mr Sandaver says it is too early to reveal which insurance companies Codafication is working with, but it is “doing business with some large brands that we all know and love in this industry… a great mix of multinational and domestic partners in a few different lines of business”. He says data is “critical to the insurance industry”. “Previously human-driven calculations that would take hours take computation milliseconds now, but so does the consumer decision-making cycle.” He says data collection and analysis improves the “sensing” of customer needs and wants.


SPECIAL FEATURE: INSURTECH

Paul McKeough

Donna Garry

Paul Jeffery

National Underwriting Development Manager

Underwriting Development Manager

National Product & Development Manager

Tel. 02 4904 8309 Mob. +61 417 000 559

Tel. 02 4904 8321 Mob. +61 403 183 562

Tel. 02 4904 8305 Mob. +61 437 439 312

paul.mckeough@360uw.com.au

donna.garry@360uw.com.au

paul.jeffery@360uw.com.au

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SPECIAL FEATURE: INSURTECH

Assessing information: Reask Chief Commercial Officer Nick Hassam

“Data… will be critical in a competitive landscape as it affects all elements of the underwriting, pricing, policy and claim management process.” Closer to the underwriting end, Sydney-based Reask is using advanced data analytics to improve catastrophe modelling for clients including Axa and insurance-linked securities manager Twelve Capital. Chief Commercial Officer Nick Hassam says different parts of the value chain are at different stages of their data evolution. “Pricing in insurance has utilised fairly advanced methodology because of the focus on actuarial practice, so they’re doing fairly well, and then you come to the back end, on the claims side, and… you see in the insurtech space claims is starting to pick up a bit in terms of organisations building solutions that try to leverage large volumes of information,” he tells Insurance News. “Some of these big insurers have vast reams of information on the claims side, and that information can be very valuable.” Reask, for its part, derives value from external information. It collates raw climate data from “gatekeepers” such as the US National Oceanic and Atmospheric Administration-linked Physical Sciences Division, and processes it to create “effectively our own proprietary database of climate information”. “We’re taking vast amounts of quantitative information in the instance of atmospheric perils and utilising different methodologies that are novel and modern – utilising machine learning and other data science methodologies to process that information at scale,” Mr Hassam says. This is, he says, a unique approach, building on a traditional catastrophe modelling technique that largely relies on statistical analysis of historical events. As well as creating more sophisticated models, Reask “can utilise that information and the methodology we have to look at risk in the very short term, so it allows us to do forecasting in the short term”. Early results are encouraging. “Last year, during the tropical cyclone seasons around the world, we put forward a forecast of our expectations for the seasons in each basin, in terms of how many cyclones we expected, and so far we’ve proven to be very accurate,” Mr Hassam tells Insurance News. While Reask is focusing on tropical cyclones for now, “we know we can extend that [approach] to other atmospheric perils such as hail, rainfall or lack thereof, and also straight-line windstorms and thunderstorms”.

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Start-ups such as Codafication and Reask are helping the old industry giants break new ground, benefitting the businesses and their customers. But rapid change is rarely without its dangers, and warnings around the data revolution have been well documented in Insurance News: the threat of redundancies and a shortening of the value chain as automation takes over; “granular” underwriting that leaves more and more individuals facing unaffordable premiums or simply rated uninsurable; privacy and security concerns as more connected devices harvest our information. Mr O’Dell says the issue of individualised underwriting came up in a discussion on legal issues at the ANZIIF Insurtech Conference in Sydney in February (Insurance News was the media partner for the conference). “If there’s going to be what’s called a negative externality in the industry, that’s usually when government needs to step in and provide some sort of service, so it’s going to be quite interesting,” he says. “You used to get your house insured based on the flood profile of the postcode; now it’s the flood profile of your house against your neighbour’s house or the one across the street.” Mr Sandaver says Big Data’s impact on commerce will throw up “some interesting areas of thought. At Codafication, we toy with concepts around the poisoned chalice with data. “Can you inherit or receive volumes of data that disadvantage your ability to price and service customers due to inaccurate sources or complexity in the data? “There may also be a huge shift in the industry one day in relation to software engineering, artificial intelligence (AI) and Big Data with compliance. Like financial services or the construction industry, we all have to have qualifications, licences and adhere to regulatory law and compliance within an industry. However, AI and cognitive services don’t have these requirements yet.” As for the security risks, he says: “The truth of the matter is the dark web probably already has your details, and rogue nations have already accessed your systems, you just don’t know it yet. “How we manage breaches with data and social welfare related to this in this new world where digital footprint is everywhere will be interesting. “Maybe like your fingerprints on the door handle at work, as society we may accept it, or push for higher standards from a government-control point of view. 0 It will be interesting to see.”


SPECIAL FEATURE: INSURTECH

Revolutionising Claims Digitally

GET IN TOUCH TO FIND OUT MORE: Daniel Lukich

Business Development Director - Australia

daniel.lukich@360globalnet.com www.360globalnet.com

Full article at /en/news/insurance-news

Digital is becoming increasingly important for insurers. One of the global leaders, 360Globalnet, has recently set up an operation in Australia. We’re delighted to have had the opportunity to catch up with 360Globalnet’s founder and CEO, Paul Stanley, and Doris, one of his digital employees. We got to delve into the business, hear Paul’s thoughts on digital technology and obtain insight into the future of the business and the insurance sector worldwide.

W H O A R E 360 G L O B A L N E T ? → 360Globalnet is an international online digital technology business focusing on claims and risk assessment. We have the most advanced “end to end” digital claims system available anywhere to insurers, which enables them to deploy state of the art claims processes that simultaneously delight their customers and increase their profitability.

W H AT I S D I F F E R E N T A B O U T Y O U R T E C H N O L O G Y ? → It is the first online digital claims platform which is completely configurable by business users themselves at the desktop in plain English. The platform contains all the digital functionality an insurer needs such as the ability for online self-service by any participant to a claim. The entire supply-chain linked one to another, automation of tasks and orchestration of the various participants to a claim, online and offline video/imagery, anti-fraud protection, self-service data/analytics and the ability to extract intelligence and data from documents, forms and email etc.

T H I S A L L S O U N D S V E RY E XC I T I N G, A R E T H E R E C U R R E N T I M P L E M E N TAT I O N S I N A U S T R A L I A? → Our Chief Systems Architect is Australian, and we have been on the ground here for about twelve months with half a dozen implementations of our technology in insurers, brokers and suppliers. Overall, we have twenty five implementations across the world including two global carriers, five of the top ten Insurers in the UK and four carriers in the USA.

D O I N S U R E R S H AV E T O R E T I R E T H E I R E X I S T I N G S Y S T E M S T O O B TA I N T H E S E A D VA N TA G E S ? → Everything we do is designed to be flexible and puts the power to change into the hands of the business itself, so our technology can work alongside legacy where that acts as a system of record and all the dynamic claims handling is done by our system in the cloud, or it can operate standalone and finally in hybrid form where functionality can be called off from our system to enhance legacy.

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Ready for take-off: HDI builds aviation team HDI Global Specialty SE has launched a bid to become a major player in the Australian aviation market. HDI has recruited Jamie Bowes from QBE as Head of Aviation to oversee the new Melbourne-based Aviation team, which is expected to increase in headcount as the portfolio expands. “We are extremely pleased that we could get [him] to head up our new aviation venture,” Head of Branch Mark Fleiser says. “He has an excellent background in this market, and we look forward to leveraging his market knowledge and connections. We hope to launch our offering as soon as possible.”

HDI Global Specialty is a joint venture set up last year by Hannover Re and HDI Global SE. It began operations in Australia in January and will write agency and specialty business in lines such as errors and omissions, directors’ and officers’, legal expenses, sports and entertainment, aviation, offshore energy and animal insurance. Mr Bowes was with QBE Insurance for 10 years before joining the specialty lines insurer. He started in 2009 with QBE as international aviation underwriter and later became international aviation manager in

2018 until he took up the job offer from HDI Global Specialty in the past month. His recruitment underscores the insurer’s ambitions to replicate its aviation success in Europe. “By setting up a new team for General Aviation in Australia, HDI Global Specialty SE takes another step to maximise the opportunities that exist within specialty lines,” Chief Executive Ralph Beutter said. “Getting such a highly regarded market leader as [Mr Bowes] on board gives me comfort that Melbourne will be another successful hub in our aviation line of 0 business.”

Two become one: Marsh/JLT deal goes through Marsh & McLennan’s $US5.6 billion acquisition of rival global broker JLT has taken effect after a final court order, with Australia a key market for the combined business. The expanded group spans more than 130 countries and provides advice and solutions for more than $US100 billion of annual property/casualty insurance and reinsurance premiums placed globally. “Today marks the beginning of a new era with Marsh & McLennan and JLT coming together,” President and Chief Executive Dan Glaser said. “This is a combination of strength and strength, and the primary focus is growth – in talent capabilities, revenue and earnings.” Scott Leney, previously Marsh Pacific Chief Executive, has taken up the role of Head of Australia, which now ranks as the third-largest country for Marsh.

Mr Leney has three decades of experience in the industry and is responsible for the strategy of Marsh in Australia, leading more than 1800 colleagues to deliver risk advice and insurance solutions, the company says. Former JLT Chief Executive for Australia and New Zealand Nick Harris has taken over the Marsh Pacific Chief Executive role. He is one of many JLT senior executives to assume leadership positions under the post-merger arrangements. Global Chief Executive Dominic Burke has become Marsh & McLennan Vice Chairman and a member of the executive committee, as well as Chairman of the new Marsh-JLT specialty business. The deal also combines the two companies’ reinsurance broking operations, with JLT Re Executive Chairman Ross Howard becoming Vice Chairman of the expanded Guy

Carpenter division, led by Peter Hearn. Mr Glaser said last year that the acquisition of London-based JLT would make the group stronger in the UK and Australia and add to Marsh’s position in growth areas such as Asia and Latin America. “Australia is a ‘top six’ country for Marsh and McLennan,” he told a conference call. “JLT is quite large and significant there too, so I love the idea of how that combines.” Marsh had to temper its ambitions in global aerospace broking after the European Commission raised competition concern, leading to the sale of JLT’s aerospace business to Gallagher for about £190 million. The company last year flagged potential job cuts globally in areas including finance, human resources, IT, operations, legal and administration, but said “natural attrition” 0 would play a role.

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IAG settles in From city centre to harbourside, these new offices are all about connection and agility Connected: IAG says its innovative new office space serves customers better

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AG’s new office in Sydney’s Darling Park commercial precinct, on the eastern shore of Darling Harbour, has been designed around the insurer’s aspiration to be “closer, braver, faster”. Chief Executive Peter Harmer and more than 2500 employees from departments including Australia Division, Customer Labs, Group Technology, Group Finance, and People, Performance and Reputation made the relocation from the central city building in George Street last year. Occupying 15 floors in Tower 2, the 27,000-square-metre space “enables us to be more agile, connected and innovative, so we can better serve our customers’ needs and build deeper and more trustbased relationships with each other”, an IAG spokesman told Insurance News. “Our new activity-based working environment has changed the way we work. “The spaces have been designed to help us work the way we want to work, standing or sitting, quiet or collaboratively. It’s our commitment to doing things differently. “It also allows us to have stronger alignment with our culture of closer, braver, faster, supporting us to be a higher-performing company.” A central staircase that connects 14 levels of workspace and different business units is a key feature. “The stairs are a focal point, central to the social spaces on each floor to provide a physical and visual link across levels,” the spokesman says. On level 10 is the social hub, which has proved a hit with employees who enjoy the informal settings, lunchroom and coffee machines. Four New South Wales Indigenous artists have been commissioned to produce artworks to reflect the cul0 ture and significance of the site.

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ANZIIF leads way on insurtech The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Insurtech Conference was a huge hit, with more than 500 people attending. The event, which took place in Sydney in February, is Australia’s premier insurtech conference and featured an unrivalled range of expert speakers. It is designed to connect insurers, start-ups and incubators from across AsiaPacific and drive new thinking. ANZIIF Chief Executive Prue Willsford was delighted with the turnout. “It was great to see so many people in attendance with a shared passion for insurtech,” she said. The event was supported by Insurtech Australia and Insurtech NZ, and Insurtech Australia Chief Executive Simon O’Dell says it grows in size and quality every year. “The industry is evidently behind insurtech and embracing the challenge of digital innovation,” he said.

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Positive verdict for Lloyd’s ‘mock trial’ Lloyd’s Development Group’s “Insurers in Court: A Mock Trial” event was a winning formula with industry executives for the second year running. The joint initiative with the Australian Insurance Law Association aims to educate young insurance professionals on how an insurance law dispute unfolds in court, and the processes and procedures involved during hearings. This year about 120 brokers, underwriters, claims professionals and lawyers packed the Banco Court in Sydney for a hypothetical policy rectification case. Steadfast Underwriting Agency Chief Executive Simon Lightbody and Guy Carpenter Vice President Jade Wahlen participated in the mock trial as witnesses. Supreme Court of New South Wales Chief Justice Thomas Bathurst presided over the hearing. Attendees later proceeded to the Verandah Bar for a lively networking session.

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Adroit conference shifts focus Adroit Insurance & Risk’s annual conference explored a mindset shift from “traditional insurance broker to true risk adviser”. The two-day event took place in February at the RACV Cape Schanck Resort, featuring renowned speakers including innovation thought-leader Peter Williams and LMI Group’s Allan Manning.

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The conference ended with the 140-strong team celebrating success at the Adroit Annual Awards party, MC’d by Chief Operating Officer Ash Dowie. Adroit Albury was named Branch of the Year, Dave Stott took out Broker of the Year for the third time in four years, and Julie Hawkins won Support Person of the Year.


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Cruising and celebrating with BHSI Berkshire Hathaway Specialty Insurance (BHSI) celebrated its recent expansion in Western Australia with a cruise to Rottnest Island, and also hosted brokers on Melbourne’s Yarra River. BHSI has achieved strong growth in Perth since opening an office in St George’s Terrace last year. The firm also has Australian offices in Sydney, Melbourne and Brisbane. About 40 brokers participated in the cruise to Rottnest Island, a popular travel destination about 19km from Fremantle. The BHSI Perth team was represented across all business lines. In Melbourne, brokers were invited to the Arbory Afloat bar and eatery, which this summer returned to the Yarra to bring some Amalfi Coast atmosphere to the city.

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Hollard launches new brand More than 200 broker partners and industry representatives attended Hollard events to launch new brand Hollard Commercial Insurance, or HCi for short. The insurer also unveiled its new campaign, Long Live The Broker, to guests in Melbourne, Sydney and Brisbane. Hollard says the broker-focused theme underscores its commitment to intermediaries, which remain an integral part of the insurer’s business model. Melbourne kicked off the three-city launch at the State Library of Victoria, followed by events at Sydney’s Australian National Maritime Museum and Brisbane’s Lightspace Venue in Fortitude Valley. The new brand combines Hollard Select Brokers and Calibre, which was acquired in 2017, and its range of products will be delivered via low-referral electronic platforms to maximise efficiencies.

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UAC expo draws record numbers The Underwriting Agencies Council (UAC) 20th annual Sydney expo drew a record 105 exhibitors this year as the event moved to the Hyatt Regency Hotel to cater for larger numbers. The day began with a breakfast at which Lloyd’s Head of International Regulatory Affairs Andrew Gurney spoke about the market’s future plans. More than 500 brokers later toured two expo halls, including a record 382 brokers who registered via the UAC Events app to gain quick entry, collect continuing professional development points and be in the running for a prize. The expo demonstrated products available to brokers from UAC members plus offerings from business services members. BluePrint Insurance broker Mary Latouf was the winner of $5000 in travel vouchers.

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HDI throws sizzling summer fiesta HDI Global held its annual summer fiesta at the Cruise Bar in Sydney’s bustling Circular Quay. About 80 guests including brokers, business partners and staff joined Managing Director Stefan Feldmann and other senior executives at the rooftop bar, enjoying views of the iconic Sydney Opera House over champagne, wine and beer. Mr Feldmann gave a short speech thanking everyone for their support.

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Women to the fore at Insurance Advisernet workshop Insurance Advisernet’s annual Empowering Women Workshop attracted more than 40 participants. Host Mim Bartlett gave presentations around the “finding and owning your influence” theme. The initiative was launched in 2016 for female executives looking to amplify their influence, gain clarity and selfawareness, and build confidence – vital ingredients seen as key to corporate success. A panel of authorised representatives and an executive from Elantis Premium Funding later held a question and answer session. The event at the Emporium Hotel in Brisbane was open to all Insurance Advisernet’s associates, insurer and funder partners.

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Steadfast sparkles on Gold Coast The annual Steadfast Convention lived up to its billing as the largest insurance convention in Australasia. More than 2000 delegates attended the Gold Coast event in March, where industry movers and shakers gave their take on key issues. A dash of sporting royalty was added to the conference with keynote speeches from AFL legend Adam Goodes and Olympic champion Sally Pearson. Jessica Dametto, of Webber Insurance Services in South Australia, was presented as the winner of the SteadfastANZIIF Outstanding Insurance Professional Award during the conference. The convention wrapped up with a gala anniversary dinner. About $263,000 was raised throughout the convention for Black Dog Institute, the mental health charity Steadfast supports. The 22nd edition of the convention will take place next year in Perth from March 22-24.

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maglog >

Sam Pentecost Contributor

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ou may have noticed that our online news service now provides a facility for readers to comment on articles. While we haven’t yet received a deluge of comments – or trolls, so we should probably be grateful – please feel free to add your thoughts and opinions. All comments are monitored before being approved. Prior to this, the Publisher and the Managing Editor have always received comments from readers who do/ don’t agree with something someone said. And then there are the thinkers. Here’s one sent directly to me by a senior broker whose identity, alas, must remain a secret. I note the recent mea culpa by many insurers saying they will no longer insure coal mines. I take it this is based on their “responsible attitude” and not wanting to be involved in anything affecting climate change and global warming. If they are so worried about being “morally right”, why don’t they stop insuring other things that have negative effects on society, such as: • Any company where workers could get silicosis [presumably stonemasons] • Power companies whose lines are responsible for the “electromagnetic effect” • Tobacco/cigarette manufacturers • Let’s not even start on the Catholic Church [who have their own insurance company, thank God] • Fibreglass manufacturers • All cattle farmers – because let’s face it, cattle produce way more methane and contribute to global warming much more than coal [Sort of. The farts of cattle do indeed generate 12% of the world’s anthropogenic greenhouse gas emissions – about twice the methane emissions of coal-fired plants.] • Then there’s brothels, pubs and clubs, hotbeds of alcohol and gambling and immoral stuff. • Dare I suggest all this coal mine “moral responsibility” stuff is merely a case of insurance companies’ board members being trendy? Suggest away, sir! And another comment, framed in the form of a question: You sometimes used to run a column about a family in the Outback who were always experiencing floods and droughts and trying all sorts of schemes to make bogus insurance claims. I remember during one flood a loss adjuster got taken by a crocodile in the lounge. It was hilarious. What has happened to them? Ah, the folk from Rabbit Flat. Yes, well… You’ll remember the dad got elected to Federal Parliament, leaving Mum to run the station. He was discovered enjoying a liaison with a member of his ministerial liaison staff, which resulted in many jocular newspaper headlines

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and his return to the backbench. Mum, who you may also recall was quite attracted to the local insurance broker, seized the opportunity to be morally incensed and ran away with him to Noosa, where they were last heard of running a newsagency. Dad, loitering on the backbench and sniping at whoever the prime minister was/is, was kicked out a few years ago when he confessed to having been born in Venezuela. He has now retired to a rugged beachside shack somewhere in his homeland, where he has employed some of his old habits in staunchly criticising that unpleasant chap with the big moustache who runs the country. The daughter is now a mother of five and still lives in Western Australia, where she’s running as an independent at the next election to “fulfil my destiny”. Politics obviously runs in the family. The son now owns a small underwriting agency in Sydney, where he minds his own business and is getting on with life. Nothing in the least amusing there, so I’ve left them to their own devices. If you want more, you only have to ask. And finally, a comment that’s really a question. I would like to know the background to how some of the classes of insurance originated, and some general history of insurance, but where do I look? Are there any books? Insurance enjoys a rich and amazing history and there are plenty of books available, although you may have to dig around a bit to find them. Locally, you could search out some of the less technical works of Allan Manning of LMI Group, whose illustrated books cover a number of historic incidents that affected the industry, including the origins and aftermath of the Great Fire of London in 1666 (his on-the-spot research suggests the blaze didn’t start in Pudding Lane); and the “snail in the ale” incident of 1928, which led to the tort of negligence and the establishment of product liability insurance. While these books were co-authored by Dr Manning’s son Steven, the latest publication, Lessons Learned: Chicago, involves his daughter Susan, whose doctorate in clinical psychology is put to good use in an examination of the affects on people involved in historic disasters and emergencies in that city. Of more recent historic import comes the forthcoming launch of Peter E Daly’s autobiography. A former chief executive of insurance companies in South Africa and Australia, he ran the Insurance Council through much of the 1990s, leading (and sometimes pulling) the industry into the new era of consumerism and self-regulation. An influential operator at many levels of the industry and public life, Daly knows where the 0 bodies are buried. Will he tell? Stay tuned.


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