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OUR TOP 20 MOST INFLUENTIAL

AVIATION COVER: CROWDED SKIES

Why the soft market December 2010/January 2011

FAMILY BUSINESS: THE KIDS MOVE IN


Contents 6 Newsmakers » 12 Why the soft market will end » Reinsurers don’t need a catastrophe to push rates up, says General Re’s global chief Tad Montross.

16 Reinsurance: high-pressure business » The Gulf of Mexico oil spill illustrates how major catastrophe claims can spread far and wide, too.

54 Chartis gets an edge » 54 The credit goes to Principal » 55 Vero expands its PI product »

peopleNEWS 56 The next generation » Meet six dads and their children who keep the ‘family’ in business.

18 The 20 most influential people in insurance » Meet the ‘go-to’ people of 2010 – the individuals who wield power and influence the industry’s direction.

32 Huffing and puffing, made to order » A new US insurance research facility can duplicate windstorms, hail and wildfires.

34 The West Outlook » CGU’s chief executive quits to be with his family.

36 Insurers held to ransom » The insurance industry has little power to control rising violence, as Somali pirates demand millions to free hostages and cargo shipments but the United Nation says ransom payouts could be intensifying the problem.

64 65 66 68

Lumley fosters fleet thinking » All class at UAC’s first training day » Glamour as Zurich goes to Ladies Day » Lawyers and insurance people make a happy mix » 70 Things go better with Vero awards » 71 Creating a precedent » 72 Blue Eagle builds relationships » 74 maglog »

40 African Express » How an insurance company formed to open up risks in South Africa has expanded all over the world – especially Australia.

46 Storm clouds looming » Aviation insurers are operating in an increasingly crowded market.

48 A bad year for airline insurers » More accidents, more fatalities, rising claims, falling premiums.

50 Flying up the front » QBE Aviation celebrates 50 years of service.

lawNEWS 52 Where’s there’s smoke, there’s fire » The NSW Dust Diseases Tribunal deals itself into a bigger caseload

companyNEWS

December 2010/January 2011

Cover image: Cameron Ramsay


newsmakers at

insuranceNEWS.com.au No sale: Hollard It’s the time of year when finance writers jump at shadows, so scarce is the news to fill their empty columns. Which may explain how a major finance newspaper rattled the solid towers of Hollard Insurance with a report they were selling up in Australia, discouraged by an overcrowded market. Hollard’s Chairman, Richard Enthoven, who also runs the SouthAfrican based group’s Australian operations, was unimpressed – very. “I categorically deny that we are planning to quit Australia,” he thundered. “To suggest we would do so flies in the face of our whole strategic direction.”

Right man, wrong three letters Early in September insuranceNEWS.com.au reported on London scuttlebutt that former Aon Australia Chief Executive (and most recently No 1 man at Aon UK) Peter Harmer, above, was about to join QBE as heir apparent to the legendary Frank O’Halloran. As the speculation went viral the normally reticent QBE finally admitted Harmer didn’t feature in its succession plans, and that O’Halloran intended to be around for a good while yet, thanks. About six weeks later Harmer – who quit the UK job in June last year – did emerge as the new chief executive of… CGU. He replaces Duncan West, who has resigned from the Melbourne-based CGU job to spend more time with his young family at home in Sydney [see article, page 34]. Mike Wilkins, the Chief Executive of CGU’s parent company IAG, says Harmer’s 30-year career has included senior roles in underwriting, claims, reinsurance broking and commercial insurance broking. “His depth of experience, established relationships and proven leadership qualities make him a valuable addition to our organisation.” Harmer’s other recent responsibilities at Aon included being Chairman and Chief Executive of Aon Re, Chairman of the Lloyd’s Market Reform Group and a member of Aon’s global executive board.

Since arriving in Australia in 1999, Hollard has invested in a wide range of insurance enterprises and is seeking more [see article, page 40]. It also has insurance businesses in Africa, the UK, the US and Asia.

Credit code quandary An insurance premium financier is joining a growing number of companies calling for broker exemptions under the new National Consumer Credit legislation. Introduced in 2009, the law prevents brokers from arranging pay-by-the-month schemes for clients unless they hold a credit licence or comply with “reasonable lending obligations”. However, insurers were given exemptions under this rule, which many believe should be applied across all sectors of the industry. The Insurance Premium Financiers of Australia (IPFA) has joined with the National Insurance Brokers Association to call for all brokers and funders to be exempted after Adelaide premium funder Principal Finance negotiated its own exemption. Chairman Bob Dodd says IPFA members have had “a number of positive meetings” with the Australian Securities and Investments Commission and Federal Treasury over the issue. He says the application list for exemptions has grown beyond the IPFA membership, which is a positive step towards gaining an industry-wide solution.

NZ: shaken and very stirred It’s been a rough few months in New Zealand’s South Island. As the country counts the cost of the September earthquake that rumbled across the eastern province of Canterbury and crushed the main city of Christchurch, on the other side of the island last month 29 miners died in a series of explosions in the Pike River coal mine [see page 8]. Between the two disasters had come an unseasonal snowstorm that blanketed much of the southern half of the island, killing livestock and crushing the roof of a sports stadium in the southern city of Invercargill. The storm caused $NZ47 million ($36.6 million) in insurance claims, including the $NZ25 million ($19 million) cost of the stadium repair job. The uninsured damage bill was much higher, with farmers anticipating their losses to be as high as $NZ100 million ($77.9 million). The Christchurch earthquake has already been declared the largest insurance event in New Zealand’s history, with the repair bill continuing to rise. The NZ Treasury says Earthquake Commission (EQC), private insurance and individual costs may reach as high as $NZ4 billion ($3.1 billion). The EQC faced its own aftershocks with homeowners voicing their discontent over the time taken to process claims and start repairs. But it says it’s processing up to 1000 claims a day.

Figure this

15

75

81

Percentage of Queensland Percentage of people in a Choice Percentage of people in a Choice homes that suffered storm survey who said they’re satisfied survey who said they’re satisfied damage in the past five years with their home insurance 6

insuranceNEWS

December 2010/January 2011

57,971 Number of vehicles stolen in Australia in 2009/10 – a 7% drop


Matcham takes the ARPC plunge: Former Lumley Chief Executive David Matcham has taken over the top job at the Federal Government’s Australian Reinsurance Pool Corporation (ARPC). Matcham, who replaced Neil Weeks in October, worked at Lumley for more than 32 years before leaving in June 2009. The Federal Government established the ARPC in 2003 following a number of insurers withdrawing clients’ terrorism cover. Weeks, a former Chief Executive of Darwinbased TIO, had been with the ARPC since the beginning. He stepped down following his official retirement in July.

APRA wary over profits and shocks:

QBE takes home Insurer of the Year award No 9 QBE Australia’s Executive General Manager Intermediary Distribution Colin Fagen is getting used to this – walking on stage at the National Insurance Brokers Association (NIBA) Convention to accept the General Insurer of the Year award from NIBA President Steve Lardner. It was the ninth year in a row QBE has won the award. New South Wales broker Rebecca Wilson of Austbrokers Sydney won the Warren Tickle Memorial Award for young brokers. The Vero-sponsored prize includes a trip for two to London with spending money. Melbourne broker Lyn Blackwood from Marsh won the Lex McKeown Trophy for services to broking and the association. NIBA also launched a new education award dedicated to the memory of long-serving director and former president Frank Earl, who died in July. It aims to support brokers to study for their Graduate Diploma in Financial Services and will be sponsored by Pacific Premium Funding. And CGU pledged $25,000 a year to help support up to 10 brokers studying for their

AMP tries again

Winners are grinners: These five award-winning professionals have plenty to smile about at the annual industry awards night organised by the Insurance Brokers Association of New Zealand. From left they are Michael Carswell of NZI (Emerging Professional Insurer of the Year), Dean Garrod of McLarens Young (Loss Adjuster/Assessor), Nigel Grantham of Willis (Broker), Allan Beverwijk of QBE (Insurance Professional) and Conal Beban of FMR Risk (Emerging Professional Broker). Vero was voted Insurer of the Year for the sixth time in eight years.

Neal moves up: John Neal has been appointed to the new post of Chief Executive of Global Underwriting Operations for QBE from January 1. He is at present Chief Underwriting Officer of QBE’s European operations. Neal will be responsible for the underwriting operations of QBE’s three new geographical divisions – the Americas, Europe and Australia Asia Pacific, and the divisional chief executives, Group Actuarial Officer, Group Chief Risk Officer, Global Head of Distribution and Group Human Resources “will report to him on all matters relating to the role’s responsibilities”.

20.9

MILLION

Amount in dollars that general insurers paid to APRA in net levies and penalties last financial year

The long-running battle for the local operations of financial services company Axa Asia-Pacific Holdings (Axa APH) took another turn last month when major rival AMP came back to the party with a higher offer. Following the Australian Competition and Consumer Commission’s rejection of a bid by the National Australia Bank, Axa APH’s minority directors agreed to get into detailed merger talks with AMP. AMP has come up with a new offer to buy out the minority shareholding, offering $13.3 billion. It will then sign over the company’s lucrative Asian operations to Axa APH’s French parent, Axa SA, for $10.4 billion. Axa SA owns 51% of Axa APH, but is precluded by legislation from taking over the company. It has been trying for several years to take over the Asian business and had a similar agreement with the bank if it had succeeded. But despite AMP and Axa APH signing a binding agreement there are still a number of hurdles to be faced, including obtaining shareholder and court approvals and the green light from Federal Treasurer Wayne Swan. Axa APH’s minority shareholders are expected to vote on the deal around March.

In its annual report for 2010 the regulator notes the industry carried almost twice the minimum capital requirements at the end of the financial year, but it is still concerned about profitability and the industry’s ability to withstand shocks. The profitability of the general insurance industry came under pressure during the global financial crisis due to weakening premiums, severe weather events and tort law reform. “Industry profits in recent years have been significantly boosted by higher levels of prior-year reserve releases that may not be sustainable and are masking the deterioration in underlying accident year loss ratios,” APRA says in its report. “This deterioration has been driven by both premium rate reductions and adverse claims experience.” APRA notes strong increases in premium rates for most classes of insurance will help improve profits in the future but insurers are subject to active market competition negating some of its potential growth. This is being compounded by a number of new entrants providing webbased motor and home insurance. Against this background of profitability pressures, APRA says it continues to focus its supervision of general insurance capital management. “APRA has emphasised to insurers the importance of understanding the drivers of profitability and the linkages between them so that they are well placed to withstand adversity and grow their business.”

0

Number of general insurance organisations represented on the Federal Government’s roundtable on climate change insuranceNEWS

The general insurance industry may have escaped the worst ravages of the global financial crisis, but the Australian Prudential Regulation Authority (APRA) says general insurers still need some close monitoring.

December 2010/January 2011

During the 2010 financial year APRA also conducted a survey of stress-testing undertaken by general insurers and says it found room for improvement.

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FROM THE PUBLISHER It’s now nearly three years since Insurance News was launched with a promise that we would continue to develop new services for our subscribers. Much of the action in the past year has revolved around our core product, the weekly online insuranceNEWS.com.au, which hosts an expanding range of services. Last year we launched Links, which contains more than 500 direct website links to insurers, brokers, adjusters, underwriting agencies, government bodies, trade associations, premium funders and insurance lawyers. A one-stop portal to the industry at large. In March we launched our Jobs website, which we believe is the cheapest and most effective insurance industry online recruitment channel around. Feedback from recruiters has been excellent.

NZ Herald

At the same time we introduced Moves, a service to keep subscribers informed of the various personnel appointments around the industry.

Counting the cost of Pike River disaster Flames leap from a ventilator shaft on a hillside above the stricken Pike River coal mine on New Zealand’s West Coast on November 29 as the country mourned the loss of 29 miners, killed after a gas-fuelled explosion on November 19. Despite confirming it has up to $NZ100 million ($77.6 million) in material damage and business interruption insurance cover, the operating company, Pike River Coal, believes it could take months for the final cost of the disaster to be settled. It started preparing a claim in late November but was unable to ascertain the full extent until a formal damage assessment could be undertaken. The New Zealand Accident Compensation Corporation has agreed to spent $NZ10 million ($7.76 million) supporting the 29 miners’ families. As Insurance News went to print, Pike River was still attempting to stabilise the mine so that the recovery phase could begin. Pike River Coal Chairman John Dow confirmed in a statement to the NZ Stock Exchange

that the insurance cover involves various sub-limits and stand-down periods which are common to “such policies issued by international insurers”. Although Pike River has not divulged who the insurers are, Insurance News understands it’s a London-based consortium. In a bid to keep the mining corporation out of administration, its creditors have agreed to put their loans to the company on a 90-day standstill. Late last month Prime Minister John Key announced the appointment of High Court judge Graham Panckhurst as the royal commissioner in charge of the official inquiry into the Pike River disaster. Two people with expertise in mining safety and regulation are being sought to assist him. Mr Key says an international mining expert will also be recruited to carry out an urgent safety audit of all underground mining in New Zealand.

We pay a lot of attention to the feedback we get, and we’re planning to launch new services next year in response to readers’ suggestions. Our online growth has been entirely viral, and the insuranceNEWS.com.au subscriber list is now close to 16,000. We started with some 3500 subscribers in February 2008. We’re very confident we reach more brokers and other intermediaries – and their staff – than any other industry publication, online or print, and our audience includes all sectors of the industry. Meanwhile Insurance News (the magazine), launched in October last year, also continues to grow in reach and effectiveness, with nearly 7000 subscribers. Everything we provide at Insurance News is free to our subscribers, and we intend to keep it that way. That means we’re totally dependent on revenue from advertising, so please support our advertisers! Thank you for your continuing interest and enthusiasm for Insurance News through 2010. The administration, editorial and production teams join me wishing all our readers a safe and happy festive season. Terry McMullan

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Why the soft market will end Reinsurers don’t need a catastrophe to push rates up, says General Re’s global chief Tad Montross By Terry McMullan

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THE GLOBAL SOFT MARKET FOR REINSURERS IS COMING TO an end – not because of a major catastrophe but because it’s simply no longer sustainable. General Re Chairman and Chief Executive Franklin “Tad” Montross believes the impending correction will be relatively gentle, but it has to come because reinsurers have reached a point where low interest rates and dismal profits are turning off investors. Mr Montross, who was in Australia late last month to visit the global company’s local operations, says the soft market will simply “peter out”. “We’re likely to see single-digit rate increases in different lines in different territories, instead of a huge disruptive jump upward,” he told Insurance News. “In the past the defining factor has been a large catastrophe, but the underwriting cycle should turn without a cat this time.” It’s inevitable that an upturn in reinsurance rates would result in insurers pushing up premiums in response. Mr Montross’ view adds weight to the prediction last month by major broker Marsh that commercial premiums in Australia will begin a gradual upwards movement in the second quarter of next year. While Mr Montross didn’t put a timeframe on when the upturn in reinsurance will come, he is opposed to the popular market view that the reinsurance sector is over-capitalised and soft rates are the new norm. He says that’s a view being put across by reinsurance brokers, and “I guess I’m just trying to counter the banter. I don’t think it’s that simple.” He believes the perception that the industry is over-capitalised is based on such factors as three years of negative premium growth, increased client retentions and the absence of a large catastrophe. “Those perceptions can change very quickly,” he says. “The cost of capital has increased because uncertainty and the perception of risk have increased.” Mr Montross says waiting for the impetus of a large catastrophe to end the soft market is no longer realistic. “I’m hopeful that as an industry we’re better stewards of our capital today than we have been in the past,” he says. “And if it needs to be managed it should be a capital management issue, not a two-for-one sale on the product side.” Vastly improved rate monitoring tools and more sophisticated reserving practices – “the scorecard for any insurance company” – mean reinsurers have “a better sense of where we are relative to a technical rate”. “And as such, it’s just a question of having the emotional discipline to act on that as opposed to writing underpriced business for a couple of years.” Harvard-educated Mr Montross joined Gen Re 32 years ago as a casualty facultative underwriter, moving to top positions in the North American operation before becoming chief underwriting officer of Gen Re globally in 2000. He became chairman and chief executive in 2008. Softly spoken and friendly, he nevertheless has earned a reputation for straight-talking when it comes to discussing the sometimes capricious nature of the reinsurance sector. Since the 87-year-old company was acquired in 1998 by legendary investor Warren Buffet’s Berkshire Hathaway group, Gen Re has been able to develop along its own path, comparatively insulated from the pressures that public companies like Swiss Re and Munich Re must endure. Unlike his competitors, Mr Montross has only Mr Buffett to answer to. He doesn’t have to prepare short-term growth plans and explain quarterly performance to his shareholders, and he also has the sort of confidence that

only a rock solid AA+ credit rating can give you. Not that Mr Montross discounts the hefty responsibilities he carries to turn in a good performance for his boss. “He’s a pretty demanding shareholder, but he’s a patient shareholder,” he says. [see panel, next page]. “We do have a lot of pressure to produce appropriate results over the long term, but quarter to quarter doesn’t matter at all,” he says. “We put no premium plan in; we put no plan into Berkshire at all. We basically try to do whatever we think is appropriate during the year. And as I like to say, we have an add-it-up approach at the end of the year.” Unlike practically all its competitors, Gen Re works directly with its clients. Its only contact with brokers is through its Faraday syndicate at Lloyd’s. The company has always dealt direct, and Mr Montross sees no reason to follow the example of his two largest competitors and open the doors wide to intermediaries. “In the last few years brokers have gained market share and many of the large directs, Munich Re and Swiss Re in particular, are accepting business both on a direct basis and through the broker,” he says. “I just think it’s difficult to do both well. “We have a broker platform isolated in London, but the rest of our reinsurance operations, both property/casualty and life/health, are direct. “I think it’s the only way to really build a franchise. The brokers are trying to control the relationship. They often try to commoditise the business. They spend a lot of time selling price. “We prefer to have the direct contact with the client. We have an opportunity to understand the risks better and have more transparency on the exposures that we’re taking. “Our business model… is also about underwriting discipline and expertise, and knowledge-sharing with our clients on a broader array of different products and classes of business around the world.” While the pressures of low profits and rising costs are being felt across the reinsurance sector, it’s inevitably the smaller companies that feel the pinch first. And while Bermuda-based reinsurers remain a force within the sector – the island nation claims 16 of the top 35 reinsurers writing 16% of aggregate global reinsurance premiums – Mr Montross sees significant change happening. “You’ve got companies re-domesticating out of Bermuda, so it’s become really a global reinsurance industry and people are looking to places with the most attractive regulatory and tax jurisdictions. So you have people moving to Zurich or Ireland. “Until recently private equity and hedge funds have poured money into Bermuda after large catastrophes, riding share prices up and then bailing out often in just two or three years. That recipe hasn’t worked as well for this last class of investors, so we will have to wait and see what the appetite is for reinsurance start-ups in this new environment. “In terms of all the start-ups we’ve seen – the class of 2001 and the class of 2005 – there will definitely be consolidation within that group. “The investors had a short-term time-horizon when they made the investment. The class of 2007 have already been in that investment longer than they wanted to be. They talk about exit plans, and for the most part they want to be in at book value and out at 140% of book within 18 months or at the outside three years. “This is fascinating, because if you think about the insurance business and its longevity, and the commitment and the duration of the commitments that we make, having a bunch of capital providers that jump in and

“The brokers are trying to control the relationship. They often try to commoditise the business. They spend a lot of time selling price.”

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only want to be in the business for 18 months is really counter to the comGeneral Re two-and-a-half years ago – he had been president of the commitments that we’re making to our clients. But that’s the way the world has pany since 2001 – at a stressful time for Gen Re. He got the top job when been working.” his predecessor resigned as a result of the notorious financial reinsurance Mr Montross says the biggest detriment to a faster pace of consolidascandals of 2000 and 2001 which also involved AIG and Prudential. Four tion is “what they refer to as the social issues; everyone wants to be the former senior Gen Re executives were convicted at the same time of corconsolidator, no-one – or very few – wants to be consolidated”. porate fraud and conspiracy. Those convictions are now on appeal. But while the various impacts of cat losses and capital costs on smaller Rodney Adler’s FAI also bought financial reinsurance from Gen Re reinsurers may grab the headlines, Mr Montross says the critical global isAustralia in 1998, turning a potential $50 million loss into an $8.6 million sues that the entire reinsurance sector has to deal with at present are equally pre-tax profit. HIH bought FAI early in 1999 for $300 million and colsignificant. lapsed two years later. Several Gen Re Australia executives were banned “The global recession has had an impact, but the long-term implicaover the sham reinsurance. tions of the remedies may be even greater – particularly the threat of Mr Montross doesn’t duck the issue, agreeing that it was a “painful” expeinflation,” he says, adding that looming regulatory and accounting changes rience, but one the company learned from and immediately acted on. “will be a huge challenge and a signifi“Our attitude was that we [would] cant expense”. fully co-operate with regulatory agencies “There is also significant uncertainty and be completely transparent,” he says. surrounding property catastrophe “Where we’d made mistakes we made models, both the PMLs [probable maxour amends [including a $US31.7 milimum losses] and the average annual lion settlement to the US Government in expected losses.” January] and we straightened out our inBerkshire Hathaway Chairman and Chief Executive Warren While he has been critical in the past ternal processes. Buffett – who bought General Re in 1998 in the middle of a of over-reliance on risk modelling, Mr “And we put in place a complex soft market – “loves insurance”, according to Tad Montross. Montross insists he’s a “huge fan” – it’s just transaction committee – which I chair – the ways it sometimes gets used that conwhich sets very rigorous risk transfer pro“He’s been in the property/casualty insurance business for cerns him. tocols for all of our businesses around probably 50 years,” he told Insurance News. “I’ve been As an example he points to US the world. Chairman of General Re for two-and-a-half years now and I banks’ reliance on enterprise risk models “We’re much more disciplined in report directly to Warren. His rule is: ‘Call me anytime you which emphasised quantity rather than terms of the way we manage the business want, but if you have bad news call me immediately.’ quality. “I think it got the banks in a lot today than we were back then.” “I like to joke that luckily I haven’t had to call him too often.” of trouble.” In a fast-moving and complex busiHe says risk models “are only as ness like reinsurance, the past is just Mr Montross and his famously hands-off boss talk “probably once a month, and I send him a quarterly report on our good as the information you put in and about the only certainty, and Mr results and underwriting activities around the world. And I how good the correlations and the varMontross agrees it’s hard to see where get together with him four or five times a year. ious assumptions are. One needs to put a the new challenges for Gen Re and the model into context, to do sensitivity entire reinsurance sector might come “He’s a great boss; he’s got a wonderful sense of humour. testing on that model and just recognise from. And as for where the market might He’s very direct – he’ll let you know exactly how he feels its sheer limitations. be in a few years, he says it’s impossible about something. “The one thing we all know about to know. “But he doesn’t get involved in the day-to-day Gen Re cat models is that they are always wrong. “We will continue to be out there operations at all. If he’s comfortable with the strategy and Having said that, cat models instill a disevery day working with our clients and the management, he just lets you run the business.” cipline in the management of aggregate trying to be as disciplined as we can and While the person responsible for the company’s operations exposures that is very good for the inas thoughtful as we can in terms of what can’t be quite so detached, Mr Montross says he runs Gen dustry. Sensitivity testing and those clients’ needs are,” he says. “We’re Re’s global operations in the same spirit as Mr Buffett. understanding the tails of distribution is very lucky we’ve got a very strong balthe real trick. ance sheet and we’ll do everything we “I try to run the company in a very collaborative way. We “We use them and we will continue can to keep it that way and be there to have a holding company board of directors, and we set the to use them – but we will constantly be make good on all the past commitments tone and the strategy for the company. challenging their credibility. We won’t that we’ve made. “Then we give our businesses a lot of autonomy in terms of blindly run the company based on a “But we’ll also be willing to put cahow they run their business. Once we agree on the ‘what’, model output.” pacity out and take risk for clients that we do not micro-manage the ‘how’. * And there are plenty of new risks we want to do business with.” emerging for reinsurers to research and “They’ve got a lot of latitude to use their own style, and that obviously varies from country to country and market and understand. Mr Montross nominates market. nanotechnology, electromagnetic fields and data damage as three risks that loom “But when it comes to the fundamentals of business, we’re large. very consistent around the world in terms of the way we “Today nanotechnology is probably think about risk, the way we manage it and the way we think the least understood emerging risk. It’s about putting risk on the balance sheet.” everywhere right now; it’s in cosmetics, it’s in some food products, it’s in a lot of products that we don’t even really know about. There’s a real question mark as to the long-term implications.” He also sees big risks inherent in the flourishing of the internet. “It basically is at the core of the way almost every business and the way most communication is handled today. The business interruption implications if the internet were to go down would be absolutely devastating. “From a terrorism perspective it’s probably one of the most attractive ways to really strike out at a country or a segment of the population.” Mr Montross came into the chairman and chief executive’s role at

Working with Warren – a hands-off experience

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Reinsurance: high-pressure business The Gulf of Mexico oil spill illustrates how major catastrophe claims can spread far and wide, too

CATASTROPHES, BOTH NATURAL AND Mr Coleman says the basis of all modelling man-made, have put the global reinsurance inis the data and its quality. dustry under a lot of pressure this year. These “While the accuracy and understanding of catastrophes will cost the reinsurance industry more the models for peak events is improving, nonthan $US350 billion this year, according to a new peak perils are less well understood and will test report by Standard & Poor’s (S&P). the accuracy of reinsurers’ expected losses,” he The Gulf of Mexico disaster, which began says. in April with an explosion on the Deepwater Trying to predict what catastrophes are Horizon drilling rig and ended three months going to happen and where has become very diflater with a massive area covered in oil, is currently estimated to have cost insurers between $US1.5 billion and $US3.5 billion, although broker Willis estimates the losses could eventually cost $US20 billion to $US30 billion. The losses to reinsurers so far have been mainly picked up by the Europeans (67%), with Bermuda (21%) and the United States (12%) picking up the rest. They have filtered through to the reinsurers’ second and third-quarter results and will probably keep appearing on balance sheets for many months to come. S&P says claims to date have included property, liability, business interruption, loss of life and injuries, pollution and the possibility of claims under directors’ and officers’ liability policies. “Litigation could take several years to play out and will involve the well owners, rig operators, product manufacturers and various contractors.” The report says many cases have already been filed and there will be the addition of legal expenses. With so much complication and variety in policies that can be claimed against, can reinsurers therefore be sure they are pricing Staring into the abyss: Christchurch resident Nina Young examines a damaged road following the major risks correctly? September earthquake. Global reinsurers are already London-based S&P insurance analyst reporting financial impacts from the quake Mark Coleman says reinsurers use different catastrophe modelling strategies and there are many different ways of pricing risk. ficult as this year alone reinsurers have been “Proprietary catastrophe models are unexposed to losses from earthquakes, hailstorms, common, so most reinsurers rely on third-party drilling rig explosions, riots, floods and snowcatastrophe models to price and model risk,” he storms across the world. told Insurance News. Mr Coleman says it’s very difficult to model “How accurate this risk is then priced will catastrophic risk and this is leading to significant very much depend on how well understood the variations in reported losses for reinsurers. limitations and sensitivities of the model are, and But he says reinsurers can “model the risk to whether the modelled output is adjusted to rea degree”, and with adequate capital withstand flect the reinsurers’ own assumptions regarding the unexpected. f r e q u e n c y / “Provided the reinsurers have appropriately severity/damage factors.” modelled their aggregate exposure and have suffi16

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NZ Herald

By John Wilkinson cient capital to withstand the risks they have reinsured, they will cover they claims. “The capital markets also have a role to play in ensuring there is sufficient risk capacity for more extreme events.” Raising capital to cover these risks means the reinsurers’ credit ratings play an important role. S&P has warned that some reinsurers will have to be re-rated in light of this year’s catastrophes, but no action has been taken yet on any reinsurer. “One of the elements of our enterprise risk management analysis is emerging risks, assessing the extent to which reinsurers have established practices for identifying, preparing for, quantifying and mitigating against unknown or large-impact, hard-topredict and rare events,” Mr Coleman says. “This assessment is incorporated within the overall rating.” The S&P rating process also looks at capital stress and the ability of the reinsurer to withstand a one-in-250 years catastrophe loss. Although many reinsurers are operating at a discount to book value, which may make it hard to raise extra capital following a major catastrophe, history shows this is ignored when the call goes out for more capital. This was the case after the World Trade Centre and Hurricane Katrina losses, Mr Coleman says. “New capital is usually raised after a big loss as investors look at the expected price increases that usually follow such losses.” The Gulf of Mexico oil spill might grow into one of these catastrophes and the reinsurers will have a number of years to raise capital for claims. Another major oil spill – the Exxon Valdez grounding in Alaska – is still working its way through the courts and claims are still being settled 21 years after the event. But always waiting in the background are other major catastrophes, such as the Chilean and Christchurch earthquakes this year, which have the potential to put even more pressure on * the reinsurers.


The 20 most influential people in insurance Meet the ‘go-to’ people of 2010 – the individuals who wield power and 18

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LAST DECEMBER INSURANCE NEWS PUBLISHED A LIST OF THE 20 most influential people in risk insurance. Our intention was to explain to readers why some individuals are the “go-to” people of the industry. The list included several surprises – two government regulators, for example – and attracted an unexpected amount of comment, most of it favourable. People found the list educational and thoughtprovoking. The people we listed were “the go-to people of risk insurance [who] influence attitudes and shape opinions inside and outside the industry”. They’re the professionals who make things happen. They’re influential through the authority of their position, by their profile in the business and by their qualities of leadership. Last year we started our list by asking our editorial team who they thought were the movers and shakers in general insurance. After all, they speak to industry leaders and managers at many levels every day, and they know who is admired by their peers and highly regarded in the wider industry – and why. This year we also asked a number of high-level contacts in the industry for their input, which we found very valuable and sometimes surprising. As you would expect, there are many on our list who featured last year. But as we noted then, the industry changes quickly, and nearly half of the people on this year’s list weren’t there last year. A list limited to 20 people logically has to exclude people who perhaps deserve to be mentioned as industry influencers, but who for many reasons don’t make the cut this time. This year we’ve also added a new list of “people worth watching”, who we would expect to see on this list in the future. We don’t expect readers to agree with all our selections, but if it provokes discussion about the qualities and responsibilities that make people influential, we’ll be happy.

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1

Frank O’Halloran Group Chief Executive QBE Group

Frank O’Halloran doesn’t have to do much at all to retain his position as Australia’s pre-eminent general insurance industry person. He’s not a regular speaker on the local or world stage, but when he does speak he’s guaranteed an audience. O’Halloran’s grip on the reins at QBE remains strong, despite recent concerns about the company’s recent financial performance and his plans for the future. At 64 he’s showing no signs of wanting to slow down, although QBE’s earnings have been doing just that in the past year as its overseas operations encounter tougher economic conditions. Chairman Belinda Hutchinson said in September that “Frank will remain CEO for the foreseeable future [and] has publicly stated his interest and willingness to continue as CEO”. With well over 100 acquisitions under his belt during his 13 years in the top job, insurance awards aplenty and induction into the International Insurance Society’s Insurance Hall of Fame in June – one of only two Australians to gain such recognition – O’Halloran has nothing left to prove but apparently still plenty he

wants to achieve. QBE Australia continues to win brokers’ accolades year after year, but the local branch’s big-bang growth opportunities are limited at present. Nevertheless, his acumen and his foreign successes ensure Frank O’Halloran still casts a very big shadow in the local business scene.

#3

#2 Mike Wilkins

Bill Shorten Federal Minister for Financial Services

Chief Executive Insurance Australia Group He’s been around for years managing the complexities of large insurance companies selling many products through different channels, and his achievements have made Mike Wilkins a bit of a shareholders’ darling. When he took up the reins at IAG in 2008 after Mike Hawker gave up trying to restart the stalled company, Wilkins gave employees and shareholders hope that the worst was over. After putting people he trusted into the top jobs, he did nothing dramatic but stuck to his knitting, concentrating on such fundamentals as appropriate pricing, underwriting risk selection, claims management and cost control. Having weathered QBE’s 2009 merger overtures, IAG’s rising results have seen the group’s self-confidence return. Usually a behind-the-scenes player, he’s media-friendly and happy to discuss wider industry issues like taxes on premiums, the economy, underinsurance and noninsurance. Softly spoken but very aware of his ability to influence governments and public opinion, Wilkins is an industry go-to person. Growth is now back on IAG’s agenda, with a joint venture in India looking very attractive and UK assets trimmed back.

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Charming, ambitious, ruthless, articulate, clever, impressively connected, a super-networker, consultative, results-driven – they’re all words that have been used to describe the new Financial Services Minister, whose slightly sinister reputation as a Labor Party toe-cutter is balanced by admiration for what he achieved in his previous role as Parliamentary Secretary for Disabilities and Children’s Services. Shorten is the former national secretary of the powerful Australian Workers Union and replaced Chris Bowen in the financial services portfolio following the federal election in August. So far he has concentrated most of his efforts on sorting out the superannuation industry, because it needs sorting out. Whether he will get to the complex issue of commissions on intermediated risk insurance products – an issue many (but not necessarily the Government) see as a purely life insurance issue – isn’t clear at this point. But it is a reform that has been recommended and is likely to have popular support, so it’s possible Shorten could hold off doing anything about commissions until the Greens assume the balance of power in the Senate next year. Entering Parliament at the 2007 election as MP for the Victorian seat of Maribyrnong, Shorten was the best-known parliamentary rookie of all time thanks to his television exposure during the Beaconsfield gold mine collapse and rescue the year before. Often touted as a future Labor Party prime minister, his contact with insurance has been peripheral – pushing hard for a national disability insurance scheme in his last portfolio and acting as the Federal Government’s go-between with victims of the Victorian bushfires. While financial services is a good non-cabinet portfolio to build experience in, intermediaries should hope he’ll find superannuation reform takes up all of his time.

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#4

#5 Rob Scott

John Brogden

Managing Director Wesfarmers Insurance

Chief Executive Financial Services Council

Wesfarmers has made it very clear in the past year that it likes general insurance and is in the industry for the long haul. Rob Scott, a highly qualified manager with a broad range of business experience, has the job of developing Wesfarmers’ investments in insurance broking (OAMPS in Australia and the UK and Crombie Lockwood in New Zealand) as well as direct insurance (Wesfarmers Federation Insurance) and intermediated insurance (Lumley in Australia and New Zealand). Of course, he’s also deeply involved in the Coles supermarkets insurance venture, which this year went national. Scott has built a strong management base and has invested heavily in the businesses he controls. He’s open in his belief that Lumley Insurance in Australia could attain fourth spot in terms of intermediated business, and says Lumley NZ still has plenty of potential. The broking businesses are tending more to organic growth as purchasing opportunities dry up, and several under-performing businesses have been shed in the past year. As a mover and shaker, Scott faces new challenges through his appointment to the presidency of the Insurance Council of Australia from January 1. He certainly has the drive to help the council develop a more active role as an advocate for the general insurance industry.

When former high-profile politicians are appointed to run trade associations, it’s usually because the organisation wants to trade in on his/her political contacts and media profile. That may have been the thinking behind the appointment in July 2009 of former New South Wales opposition leader John Brogden to run the Insurance and Financial Services Association (IFSA), an organisation highly regarded as a research-driven group with a softly-softly approach to the wider world’s issues. Brogden swept all that away in June when he announced the rebranding of IFSA as the Financial Services Council, with a more confident agenda more in line with the sector’s prominence in Australia’s economy. With the power of the $1.4 trillion retail and wholesale funds management, superannuation and life insurance industries behind him, Brogden is pursuing a much more active role in Australian public life, pushing for a “big Australia” in population, tax reform – including a higher GST rate and the abolition of inefficient state taxes – and positive regulatory change. As life insurance continues its unprecedented growth spurt – admittedly from a low base – Brogden is the right person in the right place to ensure issues like underinsurance and non-insurance are understood and acted on. As debt in the community rises, the importance of life insurance rises with it. And Brogden also has crossover to general insurance through a number of his members. The Financial Services Council could yet emerge to be the organisation whose views can’t be ignored.

#6

Where are they now? John Trowbridge, Executive Member, Australian Prudential Regulation Authority – #2 last year: Retired in July at the end of his second three-year appointment.

Terry Towell

Terry Ibbotson, Chief Executive, QBE Australia – #4: Became QBE’s Global Head of Distribution in April.

Managing Director Allianz Australia President, Insurance Council of Australia

Chris Bowen, Federal Minister for Financial Services – #5: Became Minister for Immigration and Citizenship following the August federal election. Kerrie Kelly, Chief Executive, Insurance Council of Australia – #9: Quit late last year to become Director-General of the Association of British Insurers. Resigned from that post in July.

Terry Towell has been there, done that. He managed NZI and Suncorp’s general insurance operations before constructing the Allianz Australia powerhouse. He’s been a leader in the industry through some of its most troubling days – like the collapse of HIH in 2001 – and is highly respected w i t h i n the Allianz organisation. He’s been a member of the German group’s international executive committee, which advises the board of directors, since 2000. A conservative player in the local industry and a low-profile player in business circles, he’s respected for his tough and uncompromising attitude. Allianz says its Australian arm is “one of the group’s leading companies in terms of growth, profitability and efficiency”.
 Towell has built up a talented pool of managers, from which it’s assumed 22

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Russell Higginbotham, Head of Australia and New Zealand, Swiss Re – #11: Appointed Swiss Re’s Head of UK and Ireland operations in June. Graeme Samuel, Chairman, Australian Competition and Consumer Commission – #13: With top-level industry mergers now unlikely, his oversight is now more likely to be consumerdriven. Duncan West, Chief Executive CGU – #15: Resigned in November. Steve Lardner, President National Insurance Brokers Association – #17: Retires this month as president. Keith Stern, General Representative for Lloyd’s – #20: Became Lloyd's Regional Manager UK and Ireland in July.

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#7

#9

Mark Milliner

Robert Kelly

Chief Executive Personal Insurance, Suncorp

Executive Chairman Steadfast

Anthony Day Chief Executive Commercial Insurance, Suncorp At this stage in the development of the resurgent Suncorp, it’s pretty much impossible to separate these two movers and shakers. While Group Chief Executive Patrick Snowball takes the running on the “one company many brands” strategy for the overall group, success nevertheless hinges on the performance of the general insurance operations. Milliner – who represents Suncorp on the Insurance Council board – has built a reputation for effective recovery strategies, and has worked closely with Day to reinvigorate Suncorp’s insurance lines and its financial fortunes. Their plan to build united pricing, claims and distribution to work across all the group’s general insurance brands is being watched with considerable interest. Milliner is regarded as a strategic thinker and leader, and while Day brings similar qualities to the equation, he’s also a competitive player in the complex commercial insurance area. Balancing the service mix right for some big money-earners like AAMI and APIA against the more bare-bones approaches of the personal lines niche brands is the sort of juggling act Milliner enjoys. But the biggest growth potential rests with the commercial insurance operation, where Day and his team are investing heavily in technology to gain the ascendancy in an increasingly fractious market. Working together is going to be the only way through for these two increasingly influential executives.

#10

Steadfast is a powerful broker cluster group whose potential is remarkable. Robert Kelly has been a primary mover and shaker since its earliest days and few would dispute his influence and presence in the wider industry. Kelly commands the nearadulation of his members, whose 280 brokerages and more than 400 offices give Steadfast remarkable leverage in the industry. With premium income of more than $2.5 billion, the group is the largest cluster of all, and it’s also the one to watch when it comes to the development of radical solutions. Kelly is driven by the need to open up new opportunities for his members, and his support of the controversial Steadfast Virtual Underwriter platform has put him offside with a number of powerful insurers. No new technology is easy (or cheap) to develop, but if vision and determination count for anything, Kelly will have his day.

Steve Nevett Chief Executive Aon Australia When you run the country’s biggest insurance brokerage/risk consultancy/many other things besides, you tend to get noticed. Steve Nevett has been Chief Executive of Aon Australia since 2007, and has fostered the local operation’s growth into many different areas. If it’s in any way associated with risk, Aon seems to have a service to match. Nevett has well over 35 years’ experience in the business, working with such underwriters as Commercial Union and FM and major brokers Marsh and Sedgwick. He tends to take a holistic view of the industry, making public statements over the past year or so on subjects as varied as the need to present a united front to attract high-quality recruits, pushing the industry’s role in disaster recovery exercises and the need to blow its own trumpet more, as well as the essential nature of risk management. Nevett joined Aon in 2002 and after a stint managing the vital corporate client portfolio moved into the chief executive’s chair in 2007. He’s regarded as an excellent networker and adviser, and has runs on the board for growing the big client sector by 24% in a few years. He still maintains close links with some of Aon’s largest clients. Aon claims to be the largest organisation of its type in the Australia-Pacific region, with about 1600 employees. Melbourne-based Nevett is running a powerhouse whose influence – when he chooses to use it – is strong.

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# John Clayton Pacific Region Head and Chief Executive Australia Marsh

Like Steve Nevett at Aon, John Clayton would probably have a much greater influence on industry affairs if he only had the time. He has been the Chief Executive of Marsh in Australia and the Head of the Pacific Region since July last year, and the job is doubtless a demanding one. With more than 37 years’ experience in the insurance industry, the last 21 with Marsh, Clayton commands a workforce of about 1000 working across many parts of the industry. The broking game at the giants like Aon, Marsh and JLT has become very different from that played by their smaller competitors, with a holistic approach to risk management, advice and placement befitting the major industries they routinely deal with. But as competing in the top end of broking becomes increasingly complex, Marsh is also working successfully in the “new battleground” – middle and SME markets – areas in which Clayton has considerable experience. Highly respected within the industry and a confident speaker, Clayton represents Marsh with aplomb.

#12 Allan Manning Managing Director LMI Group If there’s a mega-claim happening somewhere that involves complex corporate issues, the chances are Allan Manning will be involved. This qualified accountant with a doctorate in business administration is the best-recognised loss adviser/adjuster in Australia. He has been working on high-level claims since the late 1980s, and founded the LMI group in 1999 – a company with two arms dealing with losses before and after they occur. The developer of such innovations as PolicyComparison – a webbased training and comparative tool – he has also developed online services supporting brokers in such classes as business interruption, business continuity and industrial special risks. He routinely appears in court cases as an expert witness, has also developed an academic career alongside the business and has written nine books on insurance. His passionate campaign against the Victorian fire services levy went further than many industry associations’ efforts, and now he’s focused on the levy in New South Wales. The NSW Government should be worried.

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Damien Coates Chairman Underwriting Agencies Council There was always going to come a time when the Underwriting Agencies Council (UAC) would realise that its combined weight is considerable. Damien Coates took over as chairman of the council last year, and immediately set about putting it on the path to achieving its potential. Last year he surveyed his underwriting agency members to establish they have more than 1600 people working with a combined premium income of more than $2.5 billion. This year Coates has launched new partnerships with legal and educational suppliers, and begun establishing a new professional qualification aimed specifically at employees of underwriting agencies. He also intends to build a higher profile for the council in industry affairs, and has worked on building a closer relationship with the Lloyd’s market. Coates is the Managing Director of Dual Asia Pacific, which he set up in Sydney in 2004 to operate in financial lines and accident and health. It now has $60 million in premium income and 45 staff in five cities. Last year he took the company into Hong Kong, along the way forging an important Asian underwriting alliance with Mitsui Sumitomo Insurance Group. With 18 years’ international experience in a number of markets and an irrepressible enthusiasm for keeping things moving along, Coates is well on the way to lifting underwriting agencies into the industry’s mainstream.

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#15

# Vince McLenaghan

Leon d’Apice

Chief Executive QBE Australia Asia Pacific

Managing Director Ebix Australia

Vince McLenaghan has moved through many high-profile roles at QBE in the past few years. In the past year alone he has been Group Chief Operating Officer, Chief Executive Australia and now chief executive of one of the group’s three geographic operating units. A likeable and shrewd operator, this 35-year industry veteran has had little opportunity yet to establish himself within the local industry’s powerbrokers, but it’s only a matter of time. The super-sharp Australian operation remains important to QBE, even if growth from here on is more likely to be based on relatively small acquisitions. But the company remains the trendsetter in Australian commercial insurance, routinely pulling in major awards for service and excellence. QBE’s John Cloney, Raymond Jones and Terry Ibbotson before him served persuasively on industry bodies like the Insurance Council, and McLenaghan is no back-seat passenger either. He’ll be a strong advocate for the industry – and, of course, for QBE’s considerable regional interests.

Everyone, it seems, wants to dethrone Leon d’Apice and his Sunrise Exchange platform from its pre-eminent role in online quoting and placement. Since 2007 Ebix Australia has gradually been adding capacity and capabilities on to the platform and to the equally dominant WinBEAT broking system it also owns. Ebix and d’Apice continue to be the target of complaints from insurers that Sunrise Exchange is simply too expensive. His counter is that technology isn’t cheap and the alternatives are more expensive and less reliable. While broker groups and some insurers are developing their own systems to bypass Sunrise Exchange, none have yet pierced d’Apice’s imperturbable calm. Discussing the purchase of the BrokerCentral system by cluster group IBNA in October, he noted that the insurance IT road “is littered with corpses”. Ebix spent $50 million buying Sunrise Exchange and millions more developing it. d’Apice doesn’t intend his operation will ever be roadkill.

#

# David Smith

Patrick Snowball

Chief Executive Zurich Financial Services Australia Experienced, professionally adventurous and forthright, David Smith is gradually building a new understanding in the local operations of the Swiss-owned company, embedding the fact that Zurich isn’t just a top six performer in the Australian market but also a key part of a major global insurer with massive leverage, financial stability and expertise at hand. New managers in Zurich Australia’s corporate, wealth management and general insurance arms are helping to boost the company’s local operations in an increasingly competitive environment. Smith ran IAG New Zealand before moving to Zurich Australia in 2006, and during a two-year term as President of the Insurance Council of New Zealand he earned a reputation for his consultative approach to issues involving insurance and the wider community. In Australia he introduced flood cover for Zurich’s commercial clients and then advocated universal flood cover – an approach that hasn’t been popular in conservative corners of the industry. A constant spruiker of insurance and its value, he says insurers need to do more to lift their profile as a valuable friend of the community when disaster strikes.

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Chief Executive Suncorp A strong and compelling personality who has guided Suncorp into a clear direction after several years of indecision, Patrick Snowball nevertheless has held himself back from getting involved in the issues of the wider industry. As a former high-profile figure in the UK insurance industry running Norwich Union Insurance and Aviva’s general insurance operations, he made it clear in the UK business media before embarking for Brisbane last year that his term at Suncorp has a definite endpoint – he’s out of here in 2013, and his next job will be back in London. Having put some heavy-hitters into positions of responsibility at Suncorp and sorted a way through the complexities of owning the country’s second-largest regional bank, Snowball can now spend time keeping shareholders up to speed on developments and happy with their rising dividends. While he would be welcomed into industry and government councils where his experience and leadership skills would be greatly valued, it’s clear that’s not on his agenda. Meanwhile, Suncorp is beginning to show what it can become, and Snowball is letting his top managers do the running. He’s also letting them take up the slack in industry affairs outside his immediate responsibilities at Suncorp. He could be influential anywhere outside Suncorp, but he doesn’t choose to be. December 2010/January 2011


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Heinrich Eder

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Managing Director Munich Re Australia The two major reinsurers have real power in the Australian insurance industry and also the wider community. If the reinsurers raise their rates, they’ll bring to an end a prolonged hard market, with the additional costs rapidly being passed on by the insurers to their customers – adding just a little more pressure to inflation and rising costs. Heinrich Eder is a career-long Munich Re man who is recognised at all levels of the industry and at many levels of government. A compelling speaker on difficult subjects like climate change – where Munich Re has long been an opinion-leader – his company’s influence on a reinsurance-reliant Australian industry is significant. And alternatively, he’s a good advocate for Australia with the numbers men back in Germany.

Vivek Bhatia

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Chief Executive Lumley Insurance

Lach McKeough Chief Executive Austbrokers By Lach McKeough’s measure, the past year has been a relatively quiet one for Austbrokers. There’s a drought in good brokerages for sale at present – he expects 2011 to be better – while rates are soft, investment earnings are lower and organic growth is difficult. Through it all Austbrokers continues on its winning way, ending the last financial year with a 14.4% increase in net profit over 2009. McKeough has been with Austbrokers from its unlikely beginnings in 1985 as an offshoot of an insurance company, taking it through its public listing five years ago and always keeping the profit meter ticking over. Today the company is also a significant operator of underwriting agencies – their combined annual premium income is $75 million – and working through the Austbrokers/IBNA joint venture provides Austbrokers with 120 brokers and a considerable market edge. He has around $20 million sitting in the bank for acquisitions, so expect McKeough to be shopping around as the economy perks up in 2011.

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As a young gun whose company sits at the edge of the top five insurers, this Indian-born technocrat with the common touch is taking Lumley Insurance on a fascinating journey. Once regarded as an unexciting mid-tier insurer with not a lot of future, Lumley under Bhatia’s guidance (and Wesfarmers’ cheque book) has developed in massive leaps. Bhatia’s rise within the rapidly growing Wesfarmers Insurance operation has been dramatic. With degrees in engineering, business administration and finance, he worked as a business transformation consultant before joining QBE Mercantile Mutual in 2003, moving through a succession of jobs there and at QBE before joining Wesfarmers Insurance as Chief Operating Officer in January 2008. A year later he moved across to Lumley as chief executive. What followed involved some top-level redundancies, an equally impressive recruitment of key managers and a redrawing of the company’s strategic plan. Earlier this year Lumley launched its corporate solutions department – a move that signaled the insurer’s determination to claim a place in the top five. Apart from power and know-how, Bhatia also has a patient sole shareholder to bankroll his growth plans. It will be interesting to observe how he positions his re-energised company during the next year.


People to watch:

Shane Doyle

Jacki Johnson

Ian Laughlin

General Manager General Insurance, Zurich Financial Services Australia

Chief Executive, IAG New Zealand

Executive Member, Australian Prudential Regulation Authority

Doyle worked for AIG in some far-flung corners of the empire before joining Zurich Australia earlier this year. His most recent posting was as Senior Vice President Financial Lines for AIG UK. The general insurance role at Zurich is equivalent to a chief executive role in other general insurance operations, and Doyle hasn’t been slow since his arrival in setting the company off in some new directions. New initiatives include upgrading Zurich’s online platform and a bold plan to cut pricing by as much as 20% in a wide range of products to boost its exposure to brokers.

Bright and inspiring, Johnson’s been climbing the executive ladder at IAG since 2001, and held a range of senior jobs at the insurer before getting the New Zealand posting a few months ago. She set up The Buzz, IAG’s first online insurance business, but has also handled tricky assignments in areas like risk management, workers’ compensation, affinity groups and so on. Adept at organisational effectiveness, the Auckland-based job will give her some valuable experience in managing a significant insurance operation with multiple distribution channels.

Running the risk insurance side of APRA is a job for a heavy-hitter, and Ian Laughlin has the experience to carry the load. He replaced John Trowbridge on the APRA executive group in July for a three-year term. An actuary with senior management experience at AMP, Suncorp and National Mutual, he also has extensive board experience. While his introduction to the industry has been relatively low-key to this point, there’s a range of reforms coming the industry’s way over the next few years. So expect Laughlin to become a much more familiar name and face.

John Neal

Rob Whelan

Chief Executive Global Underwriting Operations, QBE

Executive Director, Insurance Council of Australia

Currently QBE’s Chief Underwriting Officer in Europe, Neal will take up his newly created role in Sydney on January 1. He will be responsible for underwriting in all the group’s divisions, and oversee the group’s actuarial, risk and human resources groups. Neal is a man on the rise. Until 2004 he owned Lloyd’s managing agency Ensign, and later joined the QBE European Operations board. He became Managing Director of QBE Europe in 2005, Chief Operating Officer of European Operations in 2007, and Chief Underwriting Officer for European Operations in 2009.

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Mark Senkevics Head of Australia and New Zealand, Swiss Re An Australian who joined Swiss Re in Australia in 2003, Senkevics moved back to Australia in June after five years in Taiwan and Korea. As the past few years of wild weather and massive property claims have demonstrated, reinsurance is something local insurers have to get right. And as one of the leading catastrophe reinsurers, Swiss Re’s role is very important inside and outside the industry. The local insurance market and weather risks are rapidly changing shape, so Senkevics has been busy since his return mid-year getting the company’s priorities sorted.

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The Insurance Council isn’t the communications powerhouse it once was, but then the issues the industry has to deal with have changed as much as the way they deal with them has. Where once the council would speak on behalf of its members, today its larger members tend to do the talking for themselves. As ICA President Terry Towell put it late last year in response to criticism by members of the council’s “invisibility” on the taxes issue, ICA’s effort “shouldn’t be assessed by the number of quotes in the media”. Whelan joined the council in March from Suncorp, where he was Executive Manager Policy and Projects in the Personal Lines division. The communications knots have unravelled a little since he arrived. ICA has a full hand of issues to deal with, and Whelan’s strategic approach to them is, as yet, unclear – at least to his wider constituency. *


Huffing and puffing, made to order

A new US insurance research facility can duplicate windstorms, hail and wildfires By Tania Martin

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YOU COULD BE FORGIVEN FOR thinking a house being blown away by more than 100 industrial fans at full blast was a scene out of an upcoming MythBusters episode. But it’s not – it’s a serious test at a new facility financed by United States property insurers. In a bid to counteract the devastating effects on buildings of catastrophic weather events like windstorms, hailstorms and fire, a simulation centre has been built in rural South Carolina to produce catastrophe-causing conditions. It houses a massive contingent of insuranceNEWS

December 2010/January 2011

105 1.7-metre electric fans used at speeds up to 225kmh to simulate a severe weather event. Each test costs about $US50,000, with the 1950 square metre testing chamber able to simulate all weather contingencies from category one, two or three hurricane-force winds to thunderstorms and wildfire ember showers. A demonstration test at the opening of the centre in October resulted in a house being literally blown away by hurricane-force winds. Scientists at the industry-owned Institute of Business and Home Safety


Blowing the house down: the Fortified system house on the right cost $5000 more to build than its weaker neighbour

(IBHS) are using the facility to test and research the effectiveness of various residential and commercial construction materials and systems. Recreating the effects of wind, rain, hail, hurricanes and firestorms, the stateof-the-art centre was developed following mega-disasters such as hurricanes Andrew, Katrina and Ike. IBHS Chief Executive Julie Rochman says these catastrophic events “created a sense of increasing urgency in the different parts of the country that were affected”. “We want to make sure we replicate what happens in the real world,” she told Insurance News. As part of the demonstration test, IBHS used two identical houses – one conventionally constructed and another built to the institute’s Fortified for Safer Living system. The fortified house was constructed using metal straps tying the roof and the walls to the foundations, making it more resistant to hurricane-force winds. The laboratory’s 2.8 million litre water tank supplies the test chamber’s 200 hose nozzles to create more than 20cm of rain an hour. Testing against all extreme weather events will see hailstones, burning embers and different types of “debris” introduced into the windstream through a series of special ducts and other mechanical systems. The centre has installed 1.8 metredeep trenches along the front of the fans, which can be filled with several different kinds of combustibles. Ms Rochman says embers, flames, and sparks can then be brought into the windstream to simulate a fire. “We also anticipate putting trees and other types of embers and flames into the chamber to look at flame length, impinging across defensible space, and crowning from the tops of the trees over the structures.” Although recreating hailstorms has been done before, IBHS hopes to make its experiments more realistic than was previously possible. The centre also features an 18.2 metre-high “hail rigging” in the testing chamber which can be hooked up to a hail delivery mechanism. The aim is to test the effects of multi-

layered hailstones of different shapes and sizes similar to those found in the field following a storm. Other hail testing centres use steel balls instead of ice and only use one ball at a time. “We plan to deliver multiple hailstones at the same time, which would be unique,” Ms Rochman says. The only weather events the centre can’t test for is floods and earthquakes. While flood effects can be fairly easily replicated anywhere, several laboratories IBHS partners with already have extensive earthquake research facilities. Ms Rochman says the centre aims to strengthen the relationship between theoretical and real building performances. She says proving the affordability and value of better building structures is one of the key long-term goals for the project. “This will enable commercial and residential builders to identify more resilient and durable construction materials and techniques. “They can then make better choices when building, renovating or recovering from loss,” Ms Rochman says. General results from experiments will be released to the public but more specific “granular level” findings will only be shared with IBHS members. Ms Rochman says use of the Fortified safer house system is gaining greater interest from the insurance industry, policymakers and the building industry. One US state has even passed new legislation for a mandatory reduction in property insurance rates for all new and existing houses that meet the fortified standards. Several other insurers are also offering incentives to builders to use the standards. Ms Rochman says she hopes the centre will able to work with agencies across the globe, including Australia, in researching better ways to protect against * natural catastrophes.

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The West outlook CGU’s chief executive quits to be with his family By Terry McMullan

LET’S GET SOMETHING CLEAR straight away. Duncan West has resigned as chief executive of CGU, but he hasn’t retired. He’s enjoying a break, but he’s still intent on working in the insurance industry in some capacity. He quit because after several years commuting between his home in Sydney and work in Melbourne, he wants to spend more time with his wife and their two adopted children. Mr West has been around the Australian general industry for around 10 years, working in several key jobs. After running Royal Insurance Direct in the UK, he worked in the commercial insurance area of the newly merged Royal & SunAlliance (now simply RSA) before being sent overseas to establish the company’s Indian liaison office in New Delhi. From there he was transferred in June 1998 to the Royal & SunAlliance operation in Sydney, where he ran general insurance before setting up the Vero commercial insurance operation following the establishment of the Promina group. In March 2007 he found himself out of a job after Suncorp bought Promina – but not for long. He moved into CGU as chief executive in January 2008, with a brief from IAG Chief Operating Officer (and soon to be chief executive) Mike Wilkins to get the company back on track. His departure from CGU after only 34

two-and-a-half years and his replacement by former Australia and UK chief executive for Aon Peter Harmer came as a surprise to many. But Mr West had apparently done what he set out to do, anyway. Mr Wilkins pointed to a $130 million improvement in underlying insurance profit as proof Mr West had already accomplished his primary mission to “place the business on a clear turnaround path”. Mr West was open about his reasons for leaving, saying in a statement: “I believe it’s the right [decision] for my family. My wife and I have adopted two children from India and my priority is to care for and support them. Living in Sydney and leading a company based in Melbourne is simply not sustainable in these circumstances.” He tells Insurance News it was a difficult decision to leave a job he really enjoyed and people he liked working with – although the recent addition to the family of a five-year-old Indian boy seems to have made that decision one his new dad won’t lose sleep over. Being able to comment on industry issues without needing to worry about corporate compliance is just one of the freedoms Mr West has at present. In a sweeping run through major industry issues with Insurance News, he opened up on a range of subjects. The following is a summary of his comments. Regulation: “If you look back over the insuranceNEWS

December 2010/January 2011

last five or seven years, clearly the whole regulatory environment has changed dramatically – and for the better, by and large. Whether it will go too far now is one of the prospective issues.” Technology: “I think the industry has to finally face up to the legacy issues and do something about it. It’s difficult and it’s risky and it’s expensive, but the banks have already embarked on massive change programs based around technology. You will increasingly see that in insurance, because nothing much has really changed in the past five or 10 years in the technology space.” Industry expertise: “We’ve continued to see the denuding of the industry’s expertise. We talk about training and we talk about the drain of talent, and where all the expertise in the industry has gone; but we still haven’t cracked that issue of how to attract the really high-calibre talent we need. I do think the overall capability in the industry has reduced.” Recruitment: “The interesting question is why the industry has never put together a united front for recruiting. One reason is the high level of rivalry that exists in the industry; people should work collegiately on things that are non-competitive. “We need some clear articulation of why


this industry is a good industry and what we need to do to enhance the skills of the people who are already in it. “Everybody who has the ‘gravitas’ to do this is actually so busy that they don’t have time. It needs an industry statesman/leadertype person to step up and say, ‘That’s what I’m going to do for the next stage in my career’. This isn’t a job interview, by the way…” Training: “It does need to continue to evolve and develop. We need to ensure that the product on offer from training institutions actually keeps pace with where the industry is and not five years behind it. Investment in upgrading both the content and also the means of delivery, and touching people in rural areas and internationally – that’s very important. “I also think we need to take professional education to another level, because the industry is more and more complex.”

Held to ransom The UN says insurers are encouraging pirates by paying up to free captured ships and crews. But what else can they do? By Tania Martin

Consolidation: “It will be businesses that are not performing or can’t get into market segments that will be most exposed, and that won’t just be small insurers. “And in the intermediary commercial side there will at some point be another round of consolidation at the top end.” Brokers and distribution: “The whole distribution/manufacturing model will probably change over the next five to 10 years. How will that happen? I think the jury is firmly out on that, but depending on how things evolve we could end up in a very different landscape. “That being said, I still believe that medium-sized and larger enterprises and complex businesses really value brokers’ independent and professional advice. The role of adviser and advocate will be there for as long as I can see. But exactly how the broker sector evolves, and how it plays out at the lower end, is going to be fascinating to watch over the next few years. How will it evolve? I don’t know.” Brokers’ challenges: “There’s a big drive for lower costs, so you need more efficiency. But that’s a two-edged sword because if you’re not careful you’ll end up commoditising. And if you commoditise, why do you need advice? “You’ve got the internet and increasingly savvy consumers. You’ve got the relatively high cost of the transaction. You’ve got the whole commission disclosure debate going on – and I don’t think it’s an issue that you want to ignore, the greying of the broker force, and what the biggest [broker] cluster groups might do about more consolidation. “Brokers are increasingly owning underwriting agencies, which is really another way to clip the ticket on the way through and get more of that underwriting profit. But how long are the manufacturers going to allow that to con* tinue?”

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A HELICOPTER DROPPING OFF millions in ransom payments to pirates off the coast of Somalia may seem like something out of a Hollywood blockbuster, but it’s fast becoming a reality for the insurance industry. Piracy is now big business, and the insurance industry is increasingly being dragged into playing an unwilling role as bankroller. Last month 20 ships holding 438 officers and crew were anchored off the coast of Somalia, waiting for a ransom to be paid before they could be released. And there’s every likelihood the payments will be sourced through insurers. The insurers have little alternative. Their policyholders have insured against being hijacked by pirates, and the values of their ships and cargo far exceed the amounts demanded by the pirates. And the amounts keep climbing. Last year the average ransom for a cargo ship and crew was up to $US2 million. Last month the chief executive of a Danish shipping group said ransoms have reached $US6 million. Marine insurers won’t discuss the issue publicly, although Insurance News is aware of instances where insurers have negotiated and paid ransoms. The United Nations, which is trying to sort out the rogue East African state’s piracy problems through diplomacy, says ransom payments are just encouraging more people to try their hand at piracy. The money is being used to buy more sophisticated weapons and boats that can move away from the coast and into the Indian Ocean. A UN Political Office spokesman told Insurance News the payment of ransoms is wrong. “It’s perpetuating the problem of piracy and it’s making finding a lasting solution inside Somalia more difficult.” insuranceNEWS

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He says the UN acknowledges the difficult position the shipping industry is in, with cargo, ships and crew often held captive for up to six months. “But we feel strongly the continued payment of ransoms is making the situation worse and encouraging piracy further.” UN Secretary-General Ban Ki-Moon issued a report two months ago that notes shipowners can take out private insurance covering the negotiation and ransom costs. Mr Ban says the increase in piracy is just another symptom of the instability and lack of law and order in Somalia. In most cases where pirates have established bases in Somalia, the local economy revolves around the hijacking of ships. “It has become woven into the social and economic fabric of everyday life,” he says. He wants to see police and coastguard services developed to patrol the Somali coast. The multinational naval force patrolling the region has also been instrumental in containing pirates, but Mr Ban says more security in Somali territorial waters is also required to deter the pirates from going to sea at all. The UN spokesman reiterated Mr Ban’s belief that shipowners must also do more to protect their vessels and crews from attack. “The maritime industry must be more robust at forcing their ships to sail within the industry guidelines and safe transit corridors offered by maritime forces,” he told Insurance News. Mr Ban says the International Maritime Organisation’s (IMO) recommendations on deterring pirates “have proved to significantly reduce the risk of being hijacked”. The measures include having a ship se-


Reuters

Waiting for the ransom helicopter: Somali pirates patrol the foredeck of an Eastern European cargo ship

curity plan, while vessels’ structures can be modified to prevent or delay pirates from gaining control. The IMO also suggests the use of nonlethal measures such as netting, wire and electrical fencing, long-range acoustic devices and fire hoses to prevent boarding. There’s no doubt the increased naval presence in the waters around Somalia which lead through the Gulf of Aden to the Red Sea and on to the Suez Canal has encouraged the pirates to wander further afield. International Marine Bureau Director Pottengal Mukundan says pirates are using mother ships to go east and south in the Indian Ocean. “They then launch attack skiffs when a target vessel comes into view,” he says. “The skiffs typically have four to seven people on board with automatic weapons and rocketpropelled grenades. They also carry seven-metre long ladders.“ Captain Mukundan also provided Insurance News with some insight into how the ransoms are set and paid. He says the pirates usually contact the ship’s owner using the vessel’s satellite phone. “Negotiations are done over the phone and owners are advised to have a professional negotiator to handle these talks,” he says. “Once the ransom is agreed, it’s dropped off in cash – usually US dollars – to the

vessel. This is either done by an air drop or by a tug which is manned by ex-military security personnel.” Insurers are often unwilling parties in the negotiations and deliveries, although Great Lakes Marine General Manager of Claims Willum Richards says the industry’s involvement in providing cover against the effects of pirate attacks is nothing new. “Piracy cover has been around for hundreds of years,” he told Insurance News. “For years ship and cargo owners have been able to safeguard against pirates under general hull, machinery and equipment cover. “It’s always been part of the basic cover and, until recently, it was a rare event. “There have always been a number of attacks around Africa and the Straits of Malacca in Southeast Asia, but these have been relatively minor and usually involved smaller local vessels. “Many ‘acts of piracy’ were essentially maritime muggings with vessels’ cashboxes and a few personal items taken. “The difference with Somalia is the nature of the vessels being taken, the geographic scope of the attacks and the size of the ransoms being demanded.” These developments have resulted in a move towards specialised kidnap and ransom markets, and as attacks increase so has the popularity of this cover. insuranceNEWS

December 2010/January 2011

It’s designed to help shipowners to deal with issues such as threats to the crew, how to communicate with the pirates and how to address ransom demands. As the Somali pirates expand their areas of operation, marine insurers are keeping a wary eye on other coasts around the world where impoverished fishermen in lawless countries could follow the Somalis’ lead. “It’s a 16th century problem with a 21st century twist,” one insurer told Insurance News. “You can’t just eliminate the problem on the world’s oceans – something has to be done about neutralising where these people come from. “Otherwise the weapons are going to get bigger and the dangers more acute.” For marine insurers, protection of their customers’ ships and cargo remains the main focus of their role. And if that means paying pirates to secure the freedom of crews and cargoes, then that’s how it has to be until * someone comes up with a better idea.

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Significant players in unexpected places: Hollard founder and former chairman Patrick Enthoven with his successor, son Richard, who also runs the company’s growing Australian operation

AFRICAN By Terry McMullan 40

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December 2010/January 2011


IN 1960 SOUTH AFRICAN BROKER PATRICK ENTHOVEN HAD A PROBLEM. THE COUNTRY’S UNDERWRITERS WEREN’T INTERESTED IN HANDLING SOME OF HIS CORPORATE CLIENTS’ RISKS, BUT PATRICK WAS FOCUSED ON SOLUTIONS AND WASN’T ABOUT TO LET A BIT OF INSURER APATHY GET IN HIS WAY. WHICH IS WHY HE FORMED HIS OWN INSURANCE COMPANY. “They say that all the best businesses grow out of a particular need,” he says today, sitting in the boardroom of Hollard Insurance high above Sydney’s Hyde Park. “We bought a dormant licence for 200,000 rand, which would have been about $30,000 in Australian dollars. Even by the terms of those days, it was a paltry sum.” He called the new company Hollard Insurance because the Johannesburg stock exchange was in Hollard Street. “We thought it added just a little bit of respectability.” Patrick’s brokerage was established by his father Robert, and had grown into one of South Africa’s largest. This year he passed on to his son Richard a much larger legacy – the chairmanship of the Hollard Group, a global company with strong ties in some unexpected places. Hollard is the largest independent insurer in South Africa, and also has operations and investments in a number of other African countries as well as Australia, India, Pakistan, China, the United Kingdom and the United States. It provides insurance products and services to more than 6.5 million customers globally, employs more than 1500 people and holds assets exceeding $1.7 billion. And while Hollard keeps on growing, it does most of its business so quietly that many people don’t realise just what an insurance powerhouse it is.

“So when we find people with that kind of talent we say, ‘Let us help you build a business around yourself’” Yet since it set up in Australia in 1999, it has invested in 12 underwriting agencies and 22 insurance brokerages, provides life insurance products to three major companies and runs its own direct insurance brands, Real Insurance and Pay As You Drive. So in the Australian risk insurance space, Hollard can’t be ignored. Patrick Enthoven built a global company using what the company’s publicity blurb describes as “a strong spirit of innovation, unyielding integrity and a passion for developing long-term, mutually rewarding relationships”. His son Richard is one of three children; his two sisters don’t work in the company. Richard has worked for AIG in South America as well undertaking project management roles for two US insurance companies. He moved to Australia in 1999. While he and his family live in Sydney and have become Australian citizens and Patrick has lived in California for the past 25 years, the Enthoven family’s roots in South Africa are still deep. The South African business has 6 million policyholders and more than 1000 employees, and Richard spends a month every year overseeing the extensive Hollard operations there. By any measure Hollard is a huge success story. Yet the company’s approach to the business of business is entirely of its own making. “We came here very quietly in 1999 and set up an agency insuranceNEWS

business,” says Richard. “In 2000 we got a licence, and then we spent five or six years with a licence just testing things out – trying different things and finding where there were some opportunities to play. “It was only really when we got a degree of confidence in about 2005/06 and we had a team in place, we knew the lay of the land and we started to invest some quite significant money into this market.” Hollard’s Australian focus is based on a “partnership model” supporting insurance entrepreneurs it believes can demonstrate a sustainable competitive advantage, specialist underwriting skills, solid distribution, brand awareness or operational excellence. And they’re not afraid to have a go with start-up businesses. Patrick Enthoven says people tend to think of international insurance companies as large European or American corporations “with head offices in Germany or London or New York and then a bunch of satellite companies doing what they’re told. We have conscientiously decided not to do that, and we have no holding company structure of any substance. “Each company manager runs an independent business leveraging off our capital and expertise and people and clients – but really tailored to the local market “Our view is you need to find the best people and management that you can. You need to share a vision and a set of values with them, and then back them.” The company has been following this partnership model for more than 20 years. But with understanding comes opportunity. In Australia Hollard provides its partners with equity funding and working capital, as well as support in critical areas such as product development, pricing, reinsurance optimisation, actuarial analysis, management reporting, accounting, finance, marketing, legal, compliance, information technology, and exposure to Hollard’s international business network. As the company literature explains it: “We have found that our greatest successes come from focused, owner-managed insurance businesses with niche underwriting skills, which offer tailor-made solutions and superior claims service.” Richard Enthoven says underwriting agency Mecon is a good example of the Hollard approach. “Early in our development here we met Glenn Ross, who is a phenomenal underwriter in the construction and engineering space, and truly an exceptional talent. He was looking for someone to back him into becoming a shareholder in a business. “We don’t see ourselves as construction people, of course – we see ourselves as in the people business. So when we find people with that kind of talent we say, ‘Let us help you build a business around yourself ’. And that’s what we did. “We really incubated Mecon, and today it has branched out. It’s very much its own entity, it’s out of our offices, it’s off our systems, and it has a fabulous footprint in the market. “That’s the game we’re in. Where we can find exceptionally talented people who genuinely have a competitive advantage in their chosen niche, we can put the money, the systems and the people behind them to help them become entrepreneurs. “Underwriting agencies, for us, aren’t really hugely exciting, but building great people into successful businesses – that is.” Glenn Ross’ perspective on the Hollard experience is equally positive. “I’d been pushed around a bit trying to set up Mecon

December 2010/January 2011

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“By empowering brokers to make policy and claims decisions and handle critical administrative responsibilities, we’re able to minimise red tape”

with various parties dictating terms to me and stonewalling, but then Richard gave me a call,” he told Insurance News. “The negotiation itself was trouble-free, and then they said ‘Just do it and we’ll provide you with what you need’ – and they did. “We worked initially from their offices, and from the start it was a true business partnership. There was real mutual respect, and they never tried to push us around.” Hollard also has ambitions in the broker market. It has 22 broker partners at present, and wants to grow that number to about 50. As with underwriting agencies, it’s looking for owner-managers who know their businesses inside out. Membership of a cluster group is no obstacle. “We provide a lot of support to their businesses and we work very closely with them to give them the tools to compete effectively,” says Richard. “We’re trying to identify across Australia 50 brokers who we can work really closely with. We make sure they know who their clients are, and we try to align our interests wherever we can and work really closely with them.” Under the broker model, Hollard puts its selected brokers in control of key insurance functions. “By empowering brokers to make policy and claims decisions and handle critical administrative responsibilities, we’re able to minimise red tape, improve risk selection, reduce loss ratios, improve claims handling and generally operate more efficiently. “This in turn minimises expenses, which helps us keep our premiums competitive, and also allows us to properly remunerate brokers for administering policies and claims on our behalf.” Hollard isn’t looking for flow-on business, however. Richard Enthoven says he’s “not suggesting that they don’t do business with anybody else. In fact, we normally don’t hold more than 10% of any broker’s book. What we would rather do is get 10% of 50 brokers rather than 1% of 500.” The company is also offering its broker partners access to a non-advice life insurance sales platform. Richard says some brokers “are getting quite effective cross-selling rates. It’s an opportunity to develop a sort of passive income for brokers with their core clients that they previously may not have taken advantage of.” The investment in the Australian market has been “very successful”. “We’re going to report the Hollard Group in Australia profit of just under $30 million this year and second only to South Africa, where we’re going to report about $150 million,” says Richard. “This is a country mile ahead of any other foreign market we’re in. “We’ve got a significant footprint here and we’ve got some areas where 42

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you could fairly say we’re market leaders.” And Hollard is in a mood to expand in Australia and in Africa. “In terms of growth we have identified through a reasonably rigorous process a handful of key areas that we’re going to focus on,” he says. “The first is extending our Africa footprint, so we want to become a pan-African insurer. We’d like to have the capacity to serve clients in every major African market.” Its Indian business is a life insurance distribution joint venture which now has 250,000 clients. “We think that’s probably the next market that we’ll make a big investment in.” He describes the company’s entry into China as being “as much about hope as it is about anything else”. “Anyone who’s been in China just can’t help but feel overwhelmed with what you see,” he says. “We sort of had the feeling that we had to be there. We’ve formed a joint venture with a retailer and set up a third-party administrator and a brokerage with that retailer to sell mobile phone insurance. We’re selling 6000 policies a month now, so we’ve got a toehold, and we’ve got a team of people and we’re learning the game.” Hollard is following an even longer-term softly-softly approach in China than it used in Australia. “We’ll be there for a long time before we invest any capital,” Richard says. “We’ll want to make sure that the guys on the ground have a strong business case, that they have the capacity to deliver.” Interestingly, Patrick Enthoven’s first foray into a foreign market – the United States in 1984 – was a disaster. He describes it as “brave and stupid”. “We made an investment in an insurance company, [but] we didn’t really understand the market. We thought because we’d had a measure of success in South Africa that we could move that success to other environments.” Typically, he sees an upside. “It also educated us into the ways of the world outside of South Africa. It was a fantastic lesson for a business that wants to grow beyond its borders.” Hollard is still in the US market, but in an unexpected space. “If you fail as an underwriter you can still become a loss adjuster,” he says with an ironic grin. “We’ve got the third-largest loss adjusting business in the US – Frontier Adjusters – in partnership with the guy who runs the business.” While father and son live outside South Africa, the evolution of their business in that country is still very important to them. And Hollard in South Africa is not a low-profile player in the market – December 2010/January 2011


“We’re not governed by the next financial report, and that’s a huge advantage, particularly in the insurance industry”

it has evolved to be very much part of the Rainbow Nation’s story. “We’ve really tried very hard to foster an innovative culture,” says Richard. “What we are seeing now in South Africa is the traditional companies servicing a smaller and smaller segment of the population. “Companies like ours and other very successful companies are innovating to serve the new and emerging needs of the growing middle class. “I think philosophically there is a big desire to be in tune with contemporary South Africa. But it’s not so much a business strategy as it is a result of the culture. “I think the World Cup demonstrated that there is still a culture of ‘we can’ in South Africa, which had been lost a little bit,” says Richard. “And for us it’s very pleasing to see that culture re-emerge.” Possibly the benign attitude the Enthovens take to their company’s development might not have been possible if it was a listed company. Yet a privately owned company is often seen as an impediment to growth. Lumley Insurance, for example, reached a point where growth was constrained by family pressures. But Patrick Enthoven says private ownership allows a company to plan further into the future. ”We’re not governed by the next financial report, and that’s a huge advantage, particularly in the insurance industry,” he says. “I think underwriters and insurance companies make a big mistake in thinking too short-term. “We have a very exciting business here in Australia, but it’s taken 10 years to build. A listed company would have found it extremely difficult to take such long-term strategic decisions.” Hollard’s decision to move into the direct personal lines market through Real Insurance and Pay As You Drive was a step outside the company’s normal comfort zone. Personal lines in South Africa is mainly intermediated, and despite the success of fellow South African-owned direct insurer Budget Direct in the local market, the move was cautious if inevitable. “We try to stay out of the real bar fight, which is where everybody is focusing, and focus on areas where we think we can do something different or have a unique position in,” says Richard. “Underwriting agencies are the traditional area of strength of the Hollard South Africa business, and that was our first foray here. “By and large they’ve been quite successful, some spectacularly so. But then we took a decision in 2004/05 that in order to be a player in Australia you had to have a retail personal lines capability. So we’ve invested very heavily in building the Real Insurance business. 44

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“It is a business that requires significant scale and it does require a lot of investment in terms of brand-building and systems development. But we’ve now got 300,000 or so clients, and it’s growing 10,000 a month. So we’re very happy. “We’re particularly happy with Pay As You Drive. It’s a concept that we’re now going to look at potentially taking to other markets, because we think we’ve developed a unique offering.” Richard Enthoven believes the battle for dominance of the personal lines market is just beginning to heat up. “When we launched Real Insurance, you basically had two large players and very few challengers. Now we’re seeing the retailers, aggregators, financial institutions… At the moment it’s game on. “You’ve got two players with nationally large market shares. It’s going to be hard for them to hang on to those shares. How do you defend a 40% market share? It’s going to be very, very interesting to see what emerges.” Life is good for the Enthovens. Patrick says he has passed on the chairmanship to his son without regret, and Richard says excellent managers working in companies the company owns or invests in makes being chairman “pretty easy”. “I’m very happy here,” he says. “I’ve got married here, I’ve had my children here; we’ve all become Australians. “You know, we’re like millions of other immigrants to this country – unbelievably grateful for the opportunity to live here. So I have no desire or inclination to leave. You can’t rule anything out, but given how exciting our Australian operation is, something extraordinary would have to happen for * me to leave here.”

December 2010/January 2011


Storm clouds looming Aviation insurers are operating in an increasingly crowded market By John Wilkinson

COSTS RULE IN AUSTRALIA’S GENERAL AVIATION industry. Regulators are proposing new liability provisions for pilots and operators, while the cost of maintaining ageing fleets are climbing beyond the ability of many owners to replace their aircraft. Meanwhile, the aviation insurance sector is overcrowded and therefore highly competitive – which means premiums, at least, are stuck on the ground. All this is taking place against a background of declining accidents in general aviation – although the number of fatal accidents in the past year has been the worst in 10 years. The Australian Transport Safety Bureau’s (ATSB) 10-year review of Australian aviation safety finds general aviation accidents per million flying hours were 68.9 in 2008 (the latest figures available). This is well below 2000, the worst year in the past 10 when the accident rate was 105. However, fatal accidents per million flying hours during 2008 were 11.8. In 2008, 22 of the 128 accidents recorded during the year were fatal, with 34 people losing their lives. Although 2008’s accident figure was well below some years, it recorded the highest number of fatalities in the 10-year period. There are many factors behind the safety figures, but surprisingly the global financial crisis did not have the impact expected on pilots flying and operating aircraft. This goes against perceptions that private flying is a discretionary spend 46

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item and susceptible to economic changes. But while it has curtailed some flyers, Honan Group National Account Manager Wayne Cottier says government taxation and weather has had more impact. “The crisis has hit discretionary spending, but I haven’t seen much impact on private flying,” he told Insurance News. “The rising cost of living through increased government taxation has had more of an impact.” Mr Cottier says the increasing amount of regulation and taxation on the private pilot is also having an impact and causing some private pilots to cease flying or to move their aircraft to the “recreational sport” category, where costs are lower. “New regulations by the authorities are adding to the cost of operating general aviation aircraft, especially in the charter or commercial category, and combined with general aviation airports trying to reduce traffic, it is becoming a tough business,” he says. Allianz Regional Manager Aviation Michael Dalton agrees the financial crisis had little impact on private flying, and that the move to the “recreational sport” category has had more influence. “Rather there has been a shift toward recreational or light sport aircraft, which are not as heavily regulated and are less costly to purchase and maintain than traditional general aviation aircraft.” December 2010/January 2011


Specialist areas of general aviation flying, such as ballooning, have also not escaped the impact of the financial downturn, but changing weather patterns in Australia have had a bigger impact. “The weather pattern of the past few years has resulted in a decrease in ballooning activity, far more than the global financial crisis,” says Honan Group National Account Manager Wayne Cottier. Lower levels of discretionary spending among Australians has meant balloon companies have had less customers. Honan Group covers the majority of balloon flying in Australia. The Civil Aviation Safety Authority says Australia has 322 balloons.

been in dollar terms, driven by an oversupply of capacity in the local market. “Traditionally, there were only one or two larger players in Australia and they were almost exclusively underwriting agencies. “However, during the past 10 years insurers such as Allianz, QBE, AIG, Catlin, Vero and Assetinsure have aggressively sought market share in their own right, and this has driven prices down as the new players strive to grow their books and the established insurers fight to retain theirs.” Mr Cottier agrees there is an oversupply of insurers in what has become a shrinking market. “In 2000 there were three primary local underwriters, two being underwriting agencies. “Now there are five mainstream first-class insurers in the market with 20 serious aviation brokers, all fighting for a market that is worth less than $100 million in premiums in Australia. “The market is now is probably worth about $85 million and continuing to fall, so I expect there will be some insurer casualties in the next couple of years.” Insurers are also facing reduced margins due to the accident rate for general aviation, Mr Dalton says. He says some underwriters are reluctant to increase premiums in poorly performing sectors for fear of losing business. “Helicopters are a perfect example, where the premiums continue to decrease despite an increasing accident rate. “Some insurers seem to be satisfied with ending the year in the black overall, rather than looking decisively at each sector of their business and im-

News Ltd

But the number of aircraft in the general aviation category has nevertheless continued to grow, mainly driven by the strong Australian dollar. “The favourable exchange rate with the US dollar has seen growth in the number of new and second-hand aircraft imported from the United States to Australia,” Mr Dalton says. However, this opportunity hasn’t filtered down to the flying schools, where rising costs are a major concern. Despite the schools attracting large numbers of local and overseas students working towards airline pilot licences, rising costs have hampered the schools’ ability to renew or upgrade their fleets. Mr Cottier says Australia now has one of the oldest training school fleets in the world. Adding to these rising costs are new rules, which have seen changes to airspace rules around general aviation airports in capital cities, as well as an increase in security procedures. Mr Dalton says the major problems facing general aviation in Australia relate to over-regulation, inappropriate property development adjacent to aerodromes, increasing fuel costs, airways and airport charges and the ability to maintain an ageing aircraft fleet. “There has been significant criticism by industry groups of the Federal Government’s aviation white paper, its lack of recognition of general aviation as an important industry in the overall economy and a general disengagement with the industry,” he says. Mr Cottier says general aviation “runs very close to the wind” and the white paper proposals would add to insurance costs for private operators. The white paper proposes to lift compulsory passenger liability insurance under the Civil Aviation (Carriers’ Liability) Act 1959 from $500,000 to $725,000 and make third-party surface liability cover compulsory. Currently operators can buy a combined single limit (CSL) policy that covers third parties and passengers. “The Government’s requirements will probably require this CSL to be replaced by separate single limits for each third party liability and passenger liability,” Mr Cottier says. “The compulsory third-party surface liability or ‘third-party liability’ amount will be governed by an aircraft’s maximum take-off weight. “That will mean that buying CSL cover will probably disappear.” Mr Cottier says this could add up to 20% to the cost of insurance for aircraft owners, especially in the charter or commercial category. “When combined with the administration costs it is expected to significantly impact the operating costs for aircraft owners, which again will lead to a shrinking market for insurers.” Despite increasing costs and regulation, aircraft owners are not reducing their insurance coverage, Mr Dalton says. “Locally, aviation insurance premiums are the lowest they have ever

Down and out: insurers are facing reduced margins due to the general aviation accident rate

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A bad year for airline insurers More accidents, more fatalities, rising claims, falling premiums…

Reuters

By John Wilkinson

Claims this year are over $1 billion: a Boeing 737-800 of Columbian airline Aires lies in three pieces after crashing while landing at San Andre Island in the middle of a thunderstorm, leaving 114 of the 121 passengers injured and one dead (from a heart attack)

WHILE ENGINE PROBLEMS ON NEW Qantas A380 super-jumbos in November dominated the headlines in Australia, globally the airline insurance sector has also been having a lousy year. Accident rates are up and the airline insurance sector is only now showing the first signs of recovery in premiums. This year the value of public transport aviation claims has risen well above the average, according to the Aon Airline Insurance Market Indicators 2010/11 report. Claims in 2010 have exceeded $US1 billion, well above the 15-year average of $US600 million a year. The number of global airline accident fatalities has also risen, with the Flight Safety Foundation saying that by mid-October there were 800 fatalities from 24 accidents. This compares to the foundation’s 10-year average of 692 fatalities and 26 accidents annually. While 2010 is shaping up to be one of the worst years for hull losses and fatalities, the losses are more focused on certain areas of the 48

globe. Africa has an appalling safety record. Aon says losses in the continent this year will be close to $US400 million. This compares to losses of about $US200 million in Asia, $US50 million in Europe and $US6 million in North America. “Africa has had the highest value of losses during the January to July period since 1995,” the report says. “The $US359 million of losses is nearly seven times the $US52 million long-term average of claims for the region, while the 174 fatalities are more than triple the long-term average of 56.” But while the losses are higher this year, for aviation insurers the premium renewals on air transport aircraft have also fallen, adding to the gloomy outlook. According to Aon, total renewals for the first three quarters of this year were down 6% despite fleet values rising 9%. However, it is not all bad news, as hull and liability premiums have risen by 7% on average. “Lead hull and liability premium has risen insuranceNEWS

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in all of the regions so far this year, but the fact that exposure also appears to be recovering from the ravages of the global economic downturn suggests that confidence is returning to the sector,” the report says. The insured world airline fleet is now valued at $US158.9 billion which is up 9% on the previous year, the report says. “At 36%, Africa has seen the most significant increase in average lead hull and liability premium so far in 2010. “One African airline has experienced a premium rise of about 80% compared to the cost of its 2009/10 insurance program. “The increase is mainly the result of a major loss coupled with a significant increase in average fleet value and forecast passenger levels,” Aon says. By comparison, lead hull and liability premium for airlines in the Middle East have * grown by only 5%.


Flying up the front

Celebrating a QBE Aviation milestone: ABOVE, from left, Manager Aviation SA Chris Sperou, Executive General Manager Intermediary Distribution Colin Fagen; and foundation general manager Ken Gowans. TOP RIGHT: Senior Underwriter Aviation Martin Hodgson, General Manager Aviation John Buckley and DLA Phillips Fox partner Andrew Tulloch. BOTTOM RIGHT: Regional Manager Vic/Tas Jason Clarke with brokers Mike Wilkinson and Peter Philp

QBE Aviation celebrates 50 years of service OCTOBER 1 1960 MARKED A HISTORICAL date for the Australian insurance industry, as the Australian Aviation Underwriting Pool (AAUP) commenced operations to provide a local insurance market for general aviation operators all across the country. Headed by The Victorian Insurance Company, “the Pool” established its headquarters in Queen Street, Melbourne, with an initial membership of 16 companies. Among those was the Bankers’ and Traders’ Insurance Company – better known today as the “B” in QBE Insurance. John Buckley, General Manager – Aviation at QBE Australia, says it didn’t take long for the Pool to make its presence felt. “Prior to AAUP, insurance for aviation in Australia had been exclusively supplied out of Lloyd’s and company markets in London,” he says. “But from its early days, the Pool progressively grew market share, albeit at the expense of the London markets. “From the outset it appointed aircraft dealers as agents at airports all around Australia. This quickly grew into a formidable network, particularly in the 1970s as primary producers prospered – with wool and beef fetching healthy prices – and a thriving aerial agricultural industry emerged. “All of this meant that sales of Cessna, Beechcraft and Piper aircraft were very solid for a decade and the Pool prospered as a result.” AAUP’s founding clients included Qantas, TAA, Ansett /ANA, TEAL (later Air New Zealand), East-West, Airlines of NSW, MacRobertson Miller, Connellan Airlines and the Royal Flying Doctor Service. Its business initially ranged from a small line on major airlines to feeder airlines, flying 50

schools, aerial ambulance/flying doctor, aerial agriculture, aero clubs, helicopters and private aircraft. Personal accident cover and various liability covers were also provided, including airport operator liability and hangarkeeper’s liability. In 1981, AAUP developed its Plane Words Aircraft Policy, a progressive wording which reflected the Pool’s very strong direct private aircraft owners base. The policy was a major development from the traditional London historic wordings. In the 1970s the Pool had grown its membership to 26 and the ranks of its members began to fluctuate. As companies merged, the numbers gradually grew smaller. By 2000 only eight members remained, and by 2001 QBE had accumulated a 51% majority shareholding among the remaining four. QBE commenced operations in its own right in 2002, combining its acquisition of Australia Aviation Insurance Group (AAIG) in July 2001 with the AAUP portfolio. “AAUP had long been established as market leader so, with AAIG combined, QBE was able to boast a dominant share in the Australian general aviation insurance market,” Mr Buckley says. Today QBE is the largest aviation insurer in Australasia, with an extensive distribution network providing a range of products principally for general aviation in Australia, New Zealand and the Asia-Pacific region. The company steadily holds more than a 50% market share in Australia. QBE’s aviation portfolio offers cover for aircraft hull and liability, aircraft non-ownership liability, aircraft aerial application liability and hangarkeeper’s liability, among other specialist cover. Policies such as ground handlers’ liability, aviation political risks, aircraft refuellers’ liability and airport operators’ liability are some of the additions available to customers’ general insuranceNEWS

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cover. The aviation team at QBE recently celebrated 50 years in the business with a cocktail function in Melbourne for key clients and partners. “It’s remarkable to think the Pool started with just little over a dozen employees,” Mr Buckley says. “Fifty years on QBE has its own pool of 40 very talented employees in Melbourne, Sydney, Brisbane and Adelaide generating significant profitable returns for the entire business. “The past three years, in particular, have seen a rapid increase in aviation sales.” QBE’s aviation team includes trained pilots, engineers and aircraft owners experienced in all aspects of the insurance business. Strong advocates of risk management and accident prevention, the team members actively participate in a range of initiatives designed to further improve safety in all sectors of the aviation industry. Mr Buckley is currently the Vice President of the Executive Committee of the International Union of Aerospace Insurers (IUAI), the global body of the aviation insurance industry. He says the members of QBE’s aviation team have an “unmatched understanding” of local conditions. “Our philosophy is based on rewarding customers who demonstrate a professional commitment to operational safety, and we continually strive to offer competitive rates and rebates to those who successfully complete pilot proficiency programs,” he says. “QBE prides itself on its long-standing relationships with its clients, and some of our aviation clients have been with us since the Pool was first established in 1960. Our success wouldn’t have been possible without their sup* port over the years.”


lawNEWS

Where there’s smoke, there’s dust The NSW Dust Diseases Tribunal deals itself into a bigger caseload By Andrew Spearritt, a partner, and Helen Woods, a solicitor at Curwoods Lawyers A RECENT CASE IN THE NEW SOUTH WALES COURT OF Appeal has significantly expanded the jurisdiction of the state’s Dust Diseases Tribunal, by allowing the definition of “dust” to include smoke. In March 1992, Joanne Turner, an air hostess on the now-defunct East West Airlines, was on a flight between Sydney and Brisbane. As the aircraft was descending into Brisbane, smoke entered the cabin for about 20 minutes. The immediate effect of that smoke on Ms Turner included coughing, a burning throat, sore eyes and a headache. Thereafter she suffered from a persistent cough and in November 2001 she commenced proceedings in the Dust Diseases Tribunal seeking damages. Under the NSW Dust Diseases Tribunal Act 1989, the tribunal has exclusive jurisdiction to hear and determine claims in which a person is suffering, or has suffered from, a “dust-related condition”. This is defined in the Act as being a disease specified in Schedule 1 (such as asbestosis), or alternatively, any other pathological condition of the lungs, pleura or peritoneum that is attributable to dust. It was agreed that Ms Turner did not suffer from a disease specified in Schedule 1, so the issue was whether her injury was a condition of the lungs “attributable to dust”. The word “dust” is not defined in the Act, so the tribunal was required to consider its meaning. At trial, it was determined that the substance ingested by Ms Turner was smoke emanating from oil in an auxiliary power unit within the tail of the aircraft. The trial judge described the substance ingested by Ms Turner as containing ultra-small particles of carbon, which would be recognised by most people as a dust and more specifically, as an aerosol containing solid matter. He held that Ms Turner’s condition was “attributable to dust” and therefore the tribunal had jurisdiction to determine the claim.

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East West appealed, arguing that the legislature had never intended smoke to be included in the meaning of dust. But the Court of Appeal held that what was being challenged by East West was a factual finding, and accordingly it was not appealable. It said there was ample evidence for the trial judge to find that the specific smoke to which Ms Turner was exposed could be correctly described as dust. East West then applied for special leave to appeal to the High Court, arguing that its challenge related directly to the tribunal’s jurisdiction. It said whether oil smoke could be described as a dust was itself a question of law. But the High Court refused the application, saying there was no reason to doubt the tribunal had made the correct determination. The High Court’s findings significantly expand the jurisdiction of the Dust Diseases Tribunal. Clearly all smoke contains particulate matter, and the same could be said of any airborne substance such as fumes or vapour. Therefore cases involving firefighters, tobacco smoke, industrial exposure and related occupier and public liability cases could all conceivably be brought in the tribunal. The tribunal has a number of significant advantages to plaintiffs seeking damages for personal injury. With very few exceptions there is no limit to the damages awarded; there is no limitation period; and the plaintiff can seek an award of damages on a provisional basis. It will be interesting to see whether or not the New South Wales Government will now amend the Act to provide more clarity to the question of precisely what substances may or may not be a “dust” within the * meaning of that Act.

December 2010/January 2011


companyNEWS

Chartis gets an edge New management liability product boasts broker-friendly features

A variety of covers: the new Chartis policy gives clients the choice

The credit goes to Principal: Premium funder is first to gain credit code exemptions for brokers BROKERS AND OTHER INTERMEDIARIES can now access a new premium financing product from Principal Finance following its successful deal for an exemption under the National Credit Code. The Adelaide-based premium funder released the new product – called simply Pay By The Month (PBM) – in November following a nine-month negotiation with regulators for the right to offer the scheme to brokers. Managing Director David Palyga told Insurance News his negotiations resulted in his company becoming the first premium funder to provide the same exemptions as insurers for bro54

CHARTIS IS USING NEW TECHNOLOGY in a bid to move ahead of the field in management liability cover. After months of discussions with brokers, it has launched its PrivateEdge product as an Australian market “first”. It says PrivateEdge, which can be accessed via the Sunrise Exchange platform, is the first product of its type and capability to be offered through Sunrise Exchange, according to Chartis Regional Manager of Financial Lines Michael Pryce. He says that unlike other web rating programs, PrivateEdge is a true life-cycle product that only requires data to be input once to get a quote or receive policy documentation. Traditionally online platforms have required repetitive data input from brokers to be able to provide a comprehensive quote. “For the first time brokers are not required to key information more than once into their broking systems which link through to Sunrise Exchange,” Mr Pryce says. The program also provides brokers with a “Quick Quote” function giving them the ability to get a quote with minimal information. Mr Pryce says having an inflexible management liability product has always been a problem for brokers and their customers, and predicts PrivateEdge will revolutionise the way they do business.

“Currently, brokers and clients can select only the covers and limits required – either an aggregate limit or separate towers.” Historically, the industry has been faced with this restricted approach to management liability cover, but this new program is set to change that. “Our findings indicate clients only wish to arrange and pay for covers and limits that they actually need,” Mr Pryce says. “Clients now have total choice in building the policy they need. They can choose the sections of cover they require, and not be forced into buying them all. “PrivateEdge allows brokers and clients to buy what they want and need rather than be sold a ‘one size fits all’ policy.” He says Chartis has been thrilled with the response to the new product so far. “We have taken a consultative and methodical approach to the launch, choosing to individually train brokers and staff, and the results we have seen in the first four weeks are on track as expected.” In a bid to broaden the product’s scope, Chartis is also working on setting up a webbased broker portal for those who don’t use Sunrise Exchange. This will be available in early * 2011.

kers and other intermediaries. He says brokers could now access Principal’s new PBM product without needing a credit licence or having to comply with the responsible lending obligations required under the National Consumer Credit Protection Act. The exclusion was the result of a ninemonth negotiation with the Australian Securities and Investments Commission (ASIC). Mr Palyga says he applied for an application for relief through ASIC, which was separate from other applications lodged by the Insurance Premium Financiers Association, but was denied. He then took the matter to the Administrative Appeals Tribunal, where ASIC refused to consider industry-based relief but committed to look at Principal Finance’s application. “The appeal gave us access to ASIC’s reasoning for its rejection, so we were able to put forward our own unique and specific detail as to why we deserved the exemption,” Mr Palyga says. Mr Palyga says although insurers were exempted brokers were not included and feared

this would lead to brokers transferring their business to insurers for their “pay by the month” facilities. PBM is a simple one-page deduction authority which continues on renewal of the policy. The client pays 12 equal monthly instalments. It introduces “Accept On Net”, a feature which allows clients to complete the PBM application either by sign-and-return or electronically over a secure internet site – delivering efficiencies to brokers by removing the need for staff to scan, send and file applications returned by mail. Mr Palyga says PBM gives brokers the benefit of a premium paid in full. “This does away with receiving commissions a little at a time and adds the benefit of accelerated trust account income.” Other benefits include increased client retention, ability to add a broker fee, funding commissions and competition for direct writers * and financial institutions.

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December 2010/January 2011


Vero expands its PI product: New features are aimed at helping to retain the insurer’s market edge VERO IS PUSHING FORWARD IN THE highly competitive professional indemnity (PI) market, with the release of a new extended policy. Head of Casualty Alex Green says it’s vital for Vero to continue to keep developing its products to maintain its market edge. “We’ve been in this business a long time and understand the professional risks being faced by the market,” he told Insurance News. “We wanted to expand the cover and protection offered by our policy to ensure it remains relevant for our brokers and clients.” The improved cover, released last month, retains the old policy’s wide range of services while offering a raft of improvements, with a new emphasis on guarding against litigation. Mr Green says Vero is maintaining its civil liability cover resulting from professional services conduct, which includes insuring clients for libel and slander and for infringements of intellectual property rights under the Trades Practices Act. Indemnity covers in relation to employee dishonesty and for any losses or costs associated with damaged or lost documents will also remain a feature of the policy. He says the expanded cover is very important for professionals and specialists in today’s litigious society. “Unfortunately just a simple error or omission is all it can take to trigger a claim against a professional service provider, and often this can involve expensive and time-consuming litigation,” he says. The new PI policy also protects professionals against pending litigation by providing up to $10,000 per claim for court attendance and up to two hours’ free legal advice. Indemnity is also available for contractors who work directly under an insured client and for work experience students. Mr Green says these changes come after more than 12 months of work on the product, which included obtaining brokers’ feedback. That feedback revealed that while brokers had been “largely satisfied” with the old PI product, Vero needed to take a proactive approach to improving it. “It reinforces Vero’s commitment to this segment of the market, and we also saw this as a good opportunity to incorporate some features which were already offered across some of our other products – like our directors’ and officers’ * liability policy.”

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December 2010/January 2011

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peopleNEWS

The next generation Meet six dads and their children who keep the ‘family’ in business By Tania Martin

INSURANCE BROKING IS A RELATIVELY YOUNG BRANCH of a venerable industry. Many of the brokers who started up their own businesses 30 or 40 years ago – most came from the ranks of the underwriters – are now contemplating retirement.

On the following pages you’ll meet just a few of the fathers and their Generations X and Y offspring who work together. Some fathers have already handed over control of their company, some are now moving towards a handover and some are just starting to think about it.

While many of these brokerages have since become part of larger groups, there’s still dozens of the so-called “family businesses” around. And many of the veteran brokers at their helms are experiencing the pleasure of handing over to their children.

What becomes clear from these snapshots of family businesses in various stages of transition is the mutual respect fathers and children have for each other as they work side by side.

As we noted in a cover story last year, Generation X is taking over from the Baby Boomer generation, and things will never be quite the same again.

Although it may seem reasonable for Generation X children to find it difficult making that transition from domestic relationships to the more stark authority lines of business,

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it actually doesn’t seem to have been a problem for most of our interviewees. In many cases the children have gained a much greater appreciation of – and respect for – what their fathers have achieved. Most of the Gen X managers we’ve interviewed grew up indifferent – in some cases outright hostile – to the concept of insurance as a career. Most never intended to work with their fathers. And most have stories to tell of their surprise at the enormous satisfaction they found from their involvement in the industry in general and broking in particular. Insurance News has covered the issue of generational change and the issues of work/life balance before. We

insuranceNEWS

know that everyone has a different way of achieving that balance. For families who work together, the matter of balance is something they’re acutely aware of. For some there’s a solid line between work and family time; for others the barrier is more permeable. As one father says in these interviews, “If we are having a barbecue and something comes up we’ll have a chat about it”. In the following pages you’ll meet six dads and their kids working together while maintaining their personal relationships. And for all the different ways they deal with the relationship, one thing shines through: these dads are proud and delighted to have their children following in their

December 2010/January 2011

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Terry, Justin and Damien Lane Midland Insurance Brokers FATHER: TERRY LANE, 68 MANAGING DIRECTOR THE FAMILY BUSINESS WAS NEVER PART of Terry Lane’s grand plan for his two sons, but that changed when his partners decided to move on. “I was never a believer in nepotism and it wasn’t the plan at all to work with them,” says Terry, whose inner-north Melbourne brokerage employs 20 professionals. But that all changed when his partners Sam Cilmi and John Wigley decided to sell their shares in the business more than 10 years ago. “I opted to buy the business out and approached my eldest son Damien about this new venture, and that’s how it all started,” Mr Lane says. His other son Justin was at university at the time and worked for OAMPS for five years before joining the family firm. Despite never expecting to work with his two boys, Mr Lane says he feels “proud and privileged” they would want to work with him. “We all get along really well together, particularly the boys – there’s never a harsh word between them,” he says. Like most family teams, the Lanes try to keep business at the office and enjoy family time together. “We spend enough time at the office. The business is part of the family but we do try to put it in a compartment. “We have other interests with our boat, jet skis and holiday house, so we tend to keep our minds off the business – the key is to always do stuff as a family.” Mr Lane also says the key to their success as a team is giving each other space, even

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at work. “We don’t live in each others pockets. I let them do their own thing and some days I don’t even see them.”

SON: JUSTIN LANE, 32 DIRECTOR SPORTS MANAGEMENT IS A FAR CRY from insurance, but Justin Lane couldn’t ignore the call of the family business. He has grown up around broking, but it wasn’t until his university days that he felt a pull towards it. Learning about business practices as part of a sports management degree was all it took for Justin to change career paths. “I just caught the bug from there – it was inevitable, really,” he says. After learning the ropes at OAMPS as a broker he made the move to the family business more than five years ago. It’s a move he says he hasn’t regretted for a single moment. “It’s really enjoyable – I love working in the family business. “We get along really well and we do try to keep business and family life separate – although the other two might think differently.”

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December 2010/January 2011

SON: DAMIEN LANE, 33 DIRECTOR IT’S A STORY THAT HAS BEEN TOLD TIME and time again in the insurance industry, but Damien Lane has no other way of explaining how he came to be working at the family firm. “I guess I just fell into it,” he says. “I never had any intention of working in insurance.” But that all changed about 10 years ago when his father, Terry, was given the opportunity to buy out the controlling interest in the business. “We brought out the other partners and I then joined the business,” Damien says. Although working for Colonial at the time in superannuation, insurance had never been a path he was interested in taking. But the opportunity to work towards something bigger – the family business – was not to be passed up. Damien says it’s a great honour to be able to one day take over the family business alongside his brother Justin. The two siblings and their father “have never had a problem working together”, and Damien says it was “really easy” making the transition from Colonial to the family business. “We all work well together,” he says. Like many families in the same situation, the Lanes try to leave the business talk behind at the office, but he says it’s not always possible to ignore something that may need discussion. “We do talk a bit about work and if we do, away from the office is a good place to do it,” Damien says.


peopleNEWS

Peter Brown, Samantha Johnson, Georgina and Scott Brown Peter L Brown & Associates

FATHER: PETER BROWN, 62 MANAGING DIRECTOR PETER BROWN HAD NO QUALMS AT ALL about “dragging” his son Scott “kicking and screaming” into the family business. He says his kids – Scott and sisters Samantha and Georgina – were one of the reasons he set up his Wagga Wagga brokerage more than 28 years ago. “We wanted to make sure that if they didn’t get an opportunity anywhere else it was here for them,” he says. But he’s still more surprised than anyone that Scott has developed into his right-hand man in the thriving brokerage. “He would probably say we dragged him kicking and screaming into the business,” Mr Brown says. Scott had been working towards getting an apprenticeship as an electrician when he decided to turn instead to the family business. “He found working with dad in an air-conditioned office was better than being in the blazing hot sun digging trenches,” Mr Brown laughs. Although he says he didn’t pressure his kids into joining the business, Mr Brown says most parents start their own companies to be able to pass it on to the next generation. However, his children still had to start in the broking business from the bottom up. Mr Brown fondly remembers the time his son spent on reception and was crowned “Receptionist of the Year” by a local radio station. “I’m not sure he was game to put his head over the reception desk again.” Like many families working together in the industry, the Browns have no problem getting along at work. “Most Fridays we manage to get all the blood cleaned off the walls,” Mr Brown laughs. “But seriously, we get along really well. “I recognise Scott is now representing the

next generation and is taking the business where it should be heading,” he says. At home, the Browns never really escape from the business, with office matters never far from conversations. “With my two daughters in the industry conversation inevitably comes around to insurance – but not all the time,” Mr Brown says.

SON: SCOTT BROWN, 37 GENERAL MANAGER LIKE MOST TEENAGERS SCOTT BROWN was at a loss when finishing high school, but the family business was always there as a fallback. It’s a similar story for three of the four Brown children. While trying to work out what sort of career he wanted, Scott “came down here to the office to help out and I never left”. He admits he never expected to end up working for the family business, let alone training to one day take over. But today he’s the company’s general manager, overseeing an operation with branches in Griffith and Tumut and 17 staff. “I feel very privileged,” Scott says. “Dad had built up a really good business here and it’s a real honour to be working in it.” Like his two sisters Samantha and Georgina, Scott has had no problems taking orders from his father over the years. “We all get along really well in the office – it just seems to work. I don’t know how, but I think it’s mainly down to Dad seeing the next generation coming through. “And he’s open to new ideas.” The Browns try to keep business at the office, but inevitably the best-laid plans go awry when somehow the subject of work comes up. “It’s very difficult to keep it separate,” says Scott. “Many Sunday nights it will creep into the conversation, but we have other common interest such as football. We’re insuranceNEWS

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always happy to talk about something else.”

DAUGHTERS: SAMANTHA JOHNSON, 31 AND GEORGINA BROWN, 25 CLAIMS DEPARTMENT IT’S NOT AN UNUSUAL STORY IN THE insurance industry and no surprise at all to Samantha Johnson and Georgina Brown that they just fell into the family business. Both found their feet in an industry mostly dominated by men fairly easy, moving straight into the family business from school. For Samantha there was no question what she would do after leaving school at 16. But after learning the ropes from her father, she moved to work in Sydney then London and Switzerland before gravitating back to the family firm in Wagga Wagga. “I was always interested in it,” she says. “There was never anything else I wanted to do, and when it’s the family business it’s all you ever hear about when you’re growing up.” It was much the same story for Georgina, who landed a job in reception after finishing high school. She had planned on going to university but was unable to get into her chosen course. And although working for her father was only meant to be temporary, she soon grew to love the insurance broking business. “I was surprised I liked it,” Georgina says. Both sisters agreed the family dynamic makes for a great working environment. “We work surprisingly well together – we tend to know when to be siblings and when to be employees,” Georgina says. “We are really lucky to have this here. Sam and I both came straight out of school and were lucky to have somewhere close to home that would give us skills that can transfer to a lot of other things.”

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Laura, Tony and Cameron McCormick McCormick Harris Insurance Brokers

SON: CAMERON McCORMICK, 19 TRAINEE ACCOUNT EXECUTIVE

DAUGHTER: LAURA McCORMICK, 21 ACCOUNT EXECUTIVE

FATHER: TONY McCORMICK, 48 MANAGING DIRECTOR

WORKING IN RECEPTION FOR THE FAMILY broking business wasn’t really far from where Cameron McCormick wanted to be. Growing up around insurance, he’s always had an interest in financial services. He says if he hadn’t been offered a job in the family business in the Victorian regional city of Bendigo, he would probably have opted to study insurance at university. “It’s something I have thought about for a while – it’s always been on my mind,” he says. “It would be great to stay in this job for a while. It’s a really great environment and I’m just lucky I got the opportunity.” Cameron says growing up around the family company has made it very easy for him to transition from school to work. “I already knew everyone here, so it’s a good thing working for the family business,” he says. Although he doesn’t really see his father Tony that much at work, Cameron says working in the office has proved to be a steep learning curve. “He’s in Melbourne a lot, so most of the time we talk over the phone, but I have definitely got a different grasp of Dad and how he works in the industry.” Although still living at home with his parents, Cameron says he prefers to leave the business behind at the office. “It might come up if you’ve had a busy day, but I really like to finish the day off and not talk about it,” he says.

LAURA McCORMICK ADMITS SHE STILL doesn’t know what she wants to do in her career – but for now it’s insurance. She started in the family firm just three years ago straight out of high school, preferring to earn a living than spend years at university. “Dad works here and it was pretty easy to get a job, and I was looking to earn some money,” she says. “I’ve never really left!” Although Laura still has no clear idea about her ideal career, she’s “enjoying insurance for the time being”. She admits she never really understood what the family business was about until she started working in the company during Year 11. “I then realised how busy it is and what hard work goes into it all. It was a bit of a surprise to learn what Dad did while we were at school.” Laura agrees that she has thought about one day being able to take over the management of the company, but she knows she would have some stiff competition. “You never know what’s in store, and there might be some other young guns out there that have the same idea as me.”

TONY McCORMICK NEVER INTENDED TO push his children down the path towards a career in insurance, but he admits he felt very proud when first Laura and then Cameron decided to join the family company. Three years ago when his daughter Laura finished high school and had no idea what she wanted to do for a career. It was much the same story when Cameron finished high school last year. Now, he says, they both love the insurance business as much as he does. “With my 30 years’ experience I have found insurance is one of the best industries around, and I suggested that if they weren’t going to go to university they should come and do a traineeship here,” Mr McCormick says. But he says his intention was never to groom either of his children to take over the company one day. “There are so many areas in insurance, both locally and globally, and I want them to go as far as they can in the industry. McCormick Harris is only a tiny part of it.” Like most family teams in the insurance industry, the McCormicks don’t seem to have a problem working together. “We get along really well and I see a lot more of them now than when they were in school,” Mr McCormick says. He says the key to a good family work/life is keeping business talk at the office and not allowing it to intrude on family time. “We all spend enough time working in it; we don’t want to get home and keep talking about it.” Mr McCormick says he couldn’t be prouder of his two children following in his footsteps, and says they are “probably miles better at it than I was at their age.”

“We get along really well and I see a lot more of them now than when they were in school” 60

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Trent, Troy and Wayne Brown SON: TRENT BROWN, 30 NATIONAL GENERAL MANAGER

SON: TROY BROWN, 32 MANAGING DIRECTOR

SWAPPING HIS BRICKIES’ TROWEL FOR a suit and tie was never high on Trent Brown’s list of priorities, but a call from his father changed all that. Like so many in the insurance industry, he just fell into it and soon found out what all the fuss was about. “I was never much of a scholar and I never thought insurance was for me but I didn’t realise how much fun it would be – I just love it,” he says. He had been working as a bricklayer and has almost finished his degree in sport science when the call from his father came. “An opportunity came up when dad was setting up another part of the business and needed someone he could trust.” Although working with family can often be an intense situation, the Browns don’t seem to have a problem. But they do try to keep business at the office when they’re at home, and they enjoy family life. “We’re also trying to give Dad as much spare time as we can. Our goal is to get him out to the track as much as possible as he’s got a racehorse that’s going really well at the moment.” Trent has never regretted the move to insurance, saying it’s “like being part of a big extended family”.

STRUGGLING TO FIND THE RIGHT career, Troy Brown always had a passion for helping people. So it’s not surprising he found his ideal career very close to home – in the family business. He likens the insurance industry to a humanitarian organisation. “There are not many industries that can have such a positive impact on society,” he says. “It’s nice to know you can help people coping with really bad events in their lives.” Troy says he was always interested in insurance, but never quite knew which direction to take. In the end he chose law, but soon found it wasn’t the right fit for him. He also studied accounting and was thinking of a move to banking or finance when he decided to give the family business a go. “It’s the best move I ever made,” he says. “I had always hoped there would be a role for me in the family business that suited me, but I was never a great salesman so I was never quite sure where that was going to be.” Although Troy says he, his brother Trent and father Wayne all have quite different personalities, “we seem to make the perfect partners”. “Working together has been really beneficial. We all have skills in different areas and we get along really well.”

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FATHER: WAYNE BROWN, 55 FOUNDING DIRECTOR; AREA MANAGER FOR VICTORIA AND THE ACT NO ONE CAN SAY CHANGE IS EVER EASY, but for Wayne Brown it has worked out perfectly. His dreams for his two sons to be part of the family business are now coming true. “I really didn’t think either of them would come and work for the family business, but it’s something that’s evolved,” he says. With Trent working as a bricklayer and studying sport science and Troy immersed in work as a lawyer, he didn’t think there was much chance they’d ever want to switch across to insurance. But there was always a faint hope… Despite growing up around insurance and broking, Mr Brown feared his sons “only saw the boring part” – the filing. “They would both do the filing and the coffee run for pocket money when they were younger,” he says. “I know how much enjoyment and pleasure I get out of the industry, and I knew if only I could get them to have a taste of it they would love it too.” In the end that faint hope was realised, when both sons decided to change their career paths. Today he says it seems that insurance was in their blood after all. Now, handing over control of the business to his sons has been “the best thing I’ve ever done”. He says Trent and Troy make the perfect team, with Trent concentrating on the technical side and Troy taking care of all the finer details of running the business. Although the Browns try to keep their business and private lives separate, Mr Brown admits it’s not always possible. “We don’t cut a line down the middle, but we try to keep them separate,” he says. “But if we are having a barbecue and something comes up we’ll h a v e a chat about it. “Ausure has been our life for 30plus years, so it’s really hard to separate it out all the time.”

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Steve and Trevor Markey Markey Insurance Brokers SON: STEVE MARKEY, 47 MANAGING DIRECTOR HE WAS DETERMINED TO NEVER WORK in insurance, but Steve Markey found his need to get away from union hassles was a strong motivator to at least give his father’s insurance broking business a try. Growing up around the industry, he “always wondered what all those blokes walking around in suits” really did. “To me they didn’t seem to do much – they didn’t make or do anything of any use that I could see,” he says. With this attitude towards the industry it’s hard to believe he has been working in insurance for more than 20 years – and still loves it. In the end it was the desire to work for himself that led Steve to the door of Markey Insurance Brokers in Newcastle. He had been working as an engineer for the New South Wales Electricity Commission but was fed up with the union politics and decided to look at other career options. “For me it wasn’t so much the draw of being able to take over the family business as it was finding a new direction,” he says. He joined the family firm in 1989, and learned quickly. Just as well, because the earthquake which struck Newcastle later that year was a tough teacher. “Having an engineering degree under my belt, I knew how to learn and I wasn’t afraid to

start over from scratch,” he says. “The rest is history.” Today Markey Insurance Brokers provides a full range of financial services and employs about 45 people. Like most father-and-son teams Steve and his father Trevor – now the company’s chairman – have learned to work together over the years without any earth-shattering conflicts. Steve attributes this to his father’s laidback nature. “It wouldn’t have worked if he wasn’t such an understanding bloke,” he says. “I’m not as easygoing as he is.” The experience of working with his father in the family business has proved useful. His wife Simmone, a chartered accountant, is now the Chief Financial Officer, and a sister also works in the company. “I think the biggest pressure we have faced has not been so much external but internal,” Steve says. “Working with family puts a whole new dimension on decision-making.” He has also learned over the years just how important family life is and the need to keep business separate from it. “In my early days I had less experience and a lot more steam under my hat and there was a lot more work talk,” he says. “But now I’m determined not to talk about work and let it get in the way or spoil a nice family outing.”

From left: Steve, Simmone and Trevor Markey

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FATHER: TREVOR MARKEY, 73 EXECUTIVE CHAIRMAN TREVOR MARKEY ALWAYS HOPED THE family business was a big enough carrot to dangle in front of his son to convince him to switch from engineering to insurance. But he was never quite sure his plan would work. He says he “lured” Steve to the firm with a 12-month deal, “and 20 years later he’s still here”. “Steve was working at the electricity commission when I asked if he would like to come and see if he wanted to work in the insurance industry,” Mr Markey says. “The deal was for him to give it 12 months and then give me his answer, and he decided to stay on.” At the time, Mr Markey’s two daughters also worked with the company and his son joining the fold was the icing on the cake. “Steve came up through the ranks working as a broker’s assistant and in 1996 I passed over the reins to him and he’s been successfully running the show ever since,” he says. Mr Markey always wanted to keep the business in the family but was never quite sure who would be his successor. “It’s a good businesses and I couldn’t see any point in letting it go if Stephen was interested – it was a good thing we stuck with it.” While the transition of management was pretty easy, Mr Markey admits he and his son “have had our fair share of disagreements” over the years. He says he appreciates Steve is moving the business into the future “but as chairman I still like to know what’s going on”. “These days I only come in to be of assistance to Stephen when I’m required. But everything is pretty rosy in the Markey family.” Like his son, Mr Markey prefers to keep business and family separate. “Steve and Simm-one live down the road from me, but I don’t discuss business outside of work. We prefer to keep it as family time. “It’s a bad thing involving business in your family life.”


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Leo Driessen and Angela Driessen-Clancy Driessen Insurance Brokers

FATHER: LEO DRIESSEN, 63 DIRECTOR PUSHING HIS KIDS INTO A LIFE THEY didn’t want was never an option for Leo Driessen, even if it meant the end of a 100-year family history in insurance. Until Angela came to work with him 11 years ago, he didn’t hold out any hope the family brokerage founded in 1968 would have a Driessen at the helm after he retired. Both his son and daughter had their own careers, and the 63-year-old says he would never have pressured either of them to take the helm. “I don’t think you should push anyone like that,” he says. “Even if my son lost his job I wouldn’t push him into the business, because I don’t think he would happy. You have to be happy and want the job.” He says the difference is that he loves what he does, and Angela’s embrace of broking came as a surprise. He says Angela had to step in after his wife broke both her legs in 1999, and he needed help running the office. He welcomed the assistance. Mr Driessen says it was a proud moment for him when Angela announced she was swapping her nurse scrubs for a spot with the family company. “I had been throwing in enough money to keep [the business] going until I retired, to keep the name going for the future,” he says. “That’s why I haven’t sold it.” And although working with family isn’t always the easiest way to a happy relationship, father and daughter take working together com-

pletely in their stride. “I have always had good relationships with all my employees, and Angela and I have always had a very good relationship – we never fight,” Mr Driessen says. At home they talk little of business, preferring it be “family time”. Mr Driessen says he strongly believes people need to take time to have a “break away” from the pressures of business.

DAUGHTER: ANGELA DRIESSEN-CLANCY, 36 CHIEF EXECUTIVE SHE HATED INSURANCE BECAUSE SHE thought it was boring, so it still surprises Angela Driessen-Clancy more than anyone that she is passionate about working in the industry. More than 11 years ago fate in the form of a family emergency stepped in to change the course of her career from nursing to insurance. “My mum fell down the stairs at home and broke both hers legs, and my dad really needed help,” she says. So she took a break from nursing and moved into the family business at North Ryde in Sydney to help her father Leo while her mother recovered. But the temporary move to broking became permanent after Angela discovered something she’d never expected – insurance broking is amazingly involving and satisfying. “I never expected to like broking, but now I have a real passion for it,” she says. insuranceNEWS

December 2010/January 2011

“I just love it.” Angela doesn’t regret the career move, although she confesses she still sometimes misses nursing. “But in this job I still get to talk to people and have that personal contact, and I love working in our family business.” It’s an amazing turnaround for a daughter who grew up around broking, which she admits she had no time for. “I used to think, who would want to be insurance, it’s so boring! But once you’re in it, you love it.” Although it’s not always easy working with a parent or a sibling, the Driessens seem to know just how to juggle family life and work. “We are just so similar. We get on so well and we always have.” Angela agrees people with similar personalities usually clash, but for some reason she and her father get on just fine. “Many people ask me how I can work with my father and still get along with him, but it’s really weird – we’ve never had a problem working together.” She says they have “very different personas” for home and work. “When we are at work we are there to work. We both have the mentality that we are here to do a job and that’s what you do. “At home we are very different. We always have a cuddle like any father and daughter, but at the office it’s different.”

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Lumley fosters fleet thinking More than 100 motor fleet professionals from across Australia attended the 16th annual Lumley Insurance Motor Benchmark Awards in Melbourne. The all-day event saw fleet managers presented with information and statistics to help them benchmark their own fleets against the industry average. The Lumley Insurance Sedan Fleet Benchmark Award was given to Mission Australia and its broker Marsh, while the Heavy Fleet Benchmark Award went to Beaumont Transport and its broker Steel Pacific. Also speaking was Research Fellow – Fleet Programs Darren Wishart from the Queensland-based Centre for Accident Research and Road Safety, who said companies are not managing the risks involved with their motor fleets in the same way as they would look after other industrial accidents. The Lumley Benchmark Awards were compered by Top Gear Australia

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All class at UAC’s first training day The Underwriting Agencies Council (UAC) has broadened its training program following a successful professional development day. It was the council’s inaugural training event and was held in conjunction with UAC’s training provider, the Australian and New Zealand Institute of Insurance and Finance. It attracted about 85 participants, made up of UAC members and staff. Council Chairman Damien Coates says a massive transfer of knowledge specifically targeted at the underwriting sector made the day a huge success. Participants were given plenty of information on topics as diverse as regulatory obligations to relevant legal issues and even time management. Following the training day’s success, the council is investigating running it in Melbourne as well, and plans are also underway to run another similar training day next year.

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Glamour as Zurich goes to Ladies Day Zurich Melbourne’s female staff know there’s never a better excuse to get all “frocked-up” than a day at the races – especially when it’s the lead-up to the Spring Racing Carnival. The insurer invited 55 female brokers and staff to let their hair down at the Geelong Cup’s Ladies Day extravaganza in October. It was the first event of many as racegoers got ready for the “race that stops the nation” – the Melbourne Cup. Now in its fifth year, the Zurich Ladies Day was a great success, with a myriad of best frocks and fabulous fascinators for the event. Champagne of course was another key staple for the day with the ladies enjoying a spot of bubbly and orange juice before setting off for the races. A Zurich spokesman says there was lots of punting on the horses, flowing champagne and fashions on the field to keep guests entertained. And some of the punting was fearless. One woman scored a trifecta before the group had even made it to their marquee…

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Lawyers and insurance people make a happy mix A cocktail party again proved to be a great excuse to bring together young professionals from the insurance and law sectors for a night of great entertainment in central Sydney. The Australian Insurance Law Association’s “Spring Fling” networking event attracted almost 500 professionals from both industries at the city’s exclusive GPO. Traditionally the legal and insurance fraternities work closely together, so there was – as usual – plenty to talk about.

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Things go better with Vero awards Cocktail hour was the perfect way to toast Vero’s fifth annual RMAdvancer Awards. And who better to raise a glass to than… Coca-Cola! The awards recognise the best work of risk managers, and this year leading beverage company Coca-Cola Amatil won the RMAdvancer Achievement Award for its efforts to reduce site and operational hazards at its Kewdale facility in Perth. Major entertainment group Amalgamated Holdings won the RMAdvancer Advancement Award in recognition of its work in improving attitudes and approaches to managing risk in its Event Cinemas division. More than 110 people attended the function in October, including clients and major international brokers who work with Vero’s Global and Risk Management team. Suncorp Commercial Insurance Chief Executive Anthony Day (left) presented the awards.

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Creating a precedent… Insurance and financial services bosses didn’t mind admitting defeat to their more junior colleagues at the Create Foundation fundraiser in November – after all, it was for a great cause. A “Beat the Bosses” trivia night was held at Doltone House in Pyrmont, raising more than $100,000 towards supporting young children and adults in the home care system. More than 250 professionals were put to the test with quiz questions ranging from insurance to music, movies and a “that’s embarrassing” category. Bosses and their teams could also purchase “elevator insurance” for $50 to ensure they where bumped up a level when the scores were counted. The big winner on the night was the Calliden team.

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Blue Eagle builds relationships Allianz Australia took its Blue Eagle broker development program on the road in September and October to celebrate phase four of the initiative. The program, which was launched in 2008, aims to further strengthen relationships with brokers by tailoring a series of financial and nonfinancial benefits to meet their individual needs. Those selected for the program are chosen on their future potential, their relationship with Allianz and the amount of premium they place with the insurer. More than 200 Blue Eagle participants attended lunch or dinner functions in Perth, Brisbane, Adelaide, Melbourne and Sydney where the latest benefits of the program were outlined. During the roadshow Allianz announced that Blue Eagle and selected brokers will now be able to access professional indemnity cover via Sunrise Exchange.

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maglog »

Sam Pentecost Contributor

I LIKED MARK BOURIS’ COMMENT AT THE NIBA convention that businesses in Australia stop for the Melbourne Cup and never really get going again until February. While I do wonder what life must be like in his alternative universe, there’s a smidgen of truth in what he says. Let’s face it, very few of us scurry back behind our desk the moment the race finishes on that first Tuesday in November. Hell, half of us have been stuck in a bar or restaurant since 1pm, and we ain’t going back. Which proves the Melbourne Cup really is the race that stops a nation. But do we stay stalled until February? I mean, there’s all of November to go before you get to December. And then there’s Christmas and all that, and then there’s January when the city streets are empty and… Bouris has a point. Look at all the big merger deals. They never happen in mid-summer – that’s when the bosses are all out on the tennis court, swapping suggestions for future conquest. The takeover – er, merger – will be all set to go by autumn.

There’s only two exceptions to the “never in midsummer” rule. If you work for a North American or European company – and I know many of you do – they’ll either want to haul you up to their end of the world for a weeklong planning conference beginning on January 2, or suddenly want to buy something. Not a Christmas present, a company. Now. It’s not that they don’t know you’re stuck in the office talking to them on the phone for days and nights on end while the weather is wonderful; it’s just that they don’t care. They’re cold and miserable, so live with it. They love those year-starter meetings, and they envy Australians their summers. To make matters worse, the Poms are in town and the Ashes are up for grabs. So hope and pray you won’t be hearing too much from them Up Top.

Imagine you’re a major sponsor for a sporting team. You spend a fortune linking your product with the team and its stars, and then it all goes pear-shaped. Someone’s photographed with a $100 note rolled up his or her left nostril or, um, pretending to molest a dog. The question is, can you get insurance to protect you from the nosedive in reputation your product may be about to take? Of course you can – disgrace insurance, right? Tiger Woods’ major sponsor had it, and no doubt they’re still negotiating how much it cost them. They say Tiger’s peccadilloes cost him around $20 million a year in sponsorships. The clauses covering sponsors against sports stars falling off the wagon are usually referred to as “death, disability and disgrace” clauses. They’ve been around for 30 years at least, but now that mobile phones can take good pictures in nightclubs, there has apparently been a significant rise in companies wanting cover. I can’t find any brokers here who handle it, but I’m sure there must be. Trouble is, no one has a business card saying 74

“Disgrace Specialist”.

I’m sure CGU has thought through all the “disgrace” elements. They’ve just taken up a seven-year sponsorship deal with Melbourne AFL club Collingwood, Australia’s largest sporting club. I guess they know what they’re doing. After all, Aon took over from AIG sponsoring Manchester United, and QBE is welded on to the Sydney Swans. But anyone who follows AFL knows that you’re either a Collingwood supporter or you’re not. And if you’re not, you’re really not. You barrack for your team or any team that’s playing Collingwood. The folks who run Insurance News are in the “really not” category. But CGU is a major sponsor of insuranceNEWS.com.au. Imagine if you will the howls of consternation when they realised CGU was going to plaster Collingwood logos all over their precious website. I suggested they needed embarrassment insurance, but their laughter was a bit forced.

I notice there’s an article about pirates in this issue. I was in a bar a few weeks ago when someone heard I worked in insurance and asked me if I’d ever considered how much money could be made from insuring pirates. After all, he said, they’re out there day after day pirating in one of the most heavily patrolled areas in the world, risking life and limb in bad weather, climbing up the steep sides of ships, hauling around heavy weapons – they don’t even have workers’ comp! Do you realise, he said, how dangerous it is hefting a rocket-propelled grenade launcher over the ship’s rail, fearful that at any moment twitchy-fingered Ali coming up right behind you might twitch? And what do they do with all the ransom money? They buy Range Rovers. And are they insured? There has to be a business opportunity there somewhere for a very brave broker. Well, it was fairly late at night. I make these points for anyone who might be remotely interested in exploring the subject further. Don’t tell them I sent you.

As the festive season is upon us, I will leave you with the comments of writer Dave Berry, who said: “In the old days, it wasn’t called the holiday season. The Christians called it Christmas and went to church; the Jews called it Hanukkah and went to synagogue; the atheists went to parties and drank. “People passing each other on the street would say ‘Merry Christmas!’ or ‘Happy Hanukkah!’ or (to the atheists) ‘Look out for that wall!’”

Have a terrific summer. We’ll be back – like Mark Bouris – in February.

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December 2010/January 2011


Profile for Insurance News (the magazine)

DEC/JAN 2010/11 - Insurance News (the magazine)  

It’s back by popular demand – the Insurance News list of the 20 most influential people in the industry. Publisher Terry McMullan says this...

DEC/JAN 2010/11 - Insurance News (the magazine)  

It’s back by popular demand – the Insurance News list of the 20 most influential people in the industry. Publisher Terry McMullan says this...