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WOMEN: INSIGHTS ON SUCCESS
June/July 2010
TAXES: CANBERRA PASSES THE BUCK
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understanding your clients’ unique insurance needs Call Rob Funnell Head of Corporate Solutions on 03 8627 4329. www.lumley.com.au Lumley Insurance is a trading name of Wesfarmers General Insurance Limited ABN 24 000 036 279
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INTRODUCING
lumley corporate solutions 9 A specialist property and liability insurance team for Australia’s largest public, private and government organisations 9 Personalised service for each and every customer 9 Experienced and dedicated team with a significant depth of experience 9 Ample capacity and strong commitment to the market
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As a broker you want to know your customers’ claims will be dealt with efficiently, but also effectively. Over eighty years ago, we started out doing workers compensation. Since then we’ve honed our knowledge and expertise, so you can be certain the details of your customers’ claims are in safe hands. For more details, contact your Relationship Manager or call 1800 767 991
WORKERS COMPENSATION
In NSW, GIO General Limited ABN 22 002 861 583 (GIO) operates as an agent for the NSW WorkCover Scheme. In Victoria, GIO Workers’ Compensation (Victoria) Limited operates GIO0148/FPC/IRM/R as an agent for the Victoria WorkSafe Authority. In WA, ACT, TAS and NT, Workers Compensation Insurance is issued by GIO.
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Contents 6 Newsmakers » 10 Canberra passes the insurance taxes buck » The Federal Government joins the growing chorus for reform, but says it’s an issue for the states to deal with.
14 Insurers recoup their losses »
Premium rates are on the rise, but the local market is still patchy.
16 Whelan and dealin’ »
lawNEWS
51 A lost chance – but what are the odds? » The High Court has a new focus on causation in medical negligence cases.
52 Related, but not really »
A builders’ warranty claim raises some issues around a shared director.
54 Not enough ‘salient features’ »
The car park was below water level, but was the council’s duty of care even relevant?
A former Suncorp executive takes over at the Insurance Council. Expect some positive changes.
18 Commissions back under the microscope » Federal Treasury will examine a potential ban, but industry leaders aren’t worried.
19 Lack of the Irish »
Bad investments brought about the downfall of Quinn Insurance.
20 YellowBird’s song saves lives »
Stephen Robson has created a simple disaster alert system.
22 i is for insurance »
Smartphone applications represent unexplored territory for insurers.
26 Eyes on the prize for Zurich’s Doyle »
The new man driving Zurich Australia’s general insurance business is focusing on efficiency and technology.
companyNEWS 55
Zurich leaps into accident and health »
56 60 62 64 66 70
Building the new professionals » AILA punts on a bit of a flutter » Sydney Expo attracts record crowd » Miramar celebrates fifth birthday » Cassie tops at CQIB’s big weekend » AIMS Convention goes on safari »
74
maglog »
peopleNEWS
30 The need for speed »
The SME sector is being shaken up by the arrival of contestable platforms for commercial insurance.
34 The quiet revolution: Women moving up » The increasing number of women in risk insurance management roles will change the way we do business.
44 It’s not just about the money »
Workers are increasingly seeking flexible, caring and ethical employers. Insurance fits the bill nicely.
47 Outperforming as the market recovers »
Australia’s insurers must change, adapt and leverage their post-GFC opportunities to stay competitive. Image: Apple Story page 22
June/July 2010
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newsmakers at insuranceNEWS.com.au First-quarter fortunes: Local and international insurers have delivered impressive first-quarter returns despite incurring losses from a number of natural catastrophes during the period. Global insurers and their major local market players Allianz and Zurich Financial Services both made big gains during the quarter compared with the corresponding period last year. Allianz reported a first-quarter profit of €1.6 billion ($2.3 billion) after earning €424 million ($599 million) last year, while Zurich banked $US935 million ($1.07 billion) against $US362 million ($413 million) a year ago. Ace Group reported a 33% rise in firstquarter profit of $US755 million ($861 million) while AIG made a welcome return to profitability with a $US1.45 billion ($1.65 billion) profit. Chubb posted a 26% rise in first-quarter net profit with income of $US464 million ($529 million) during the period. Despite the healthy profits, natural catastrophes have had an impact on underwriting operations, with some insurers’ combined ratios reflecting a heavy exposure. Catastrophes mentioned by major global insurers as affecting the market include the storms in Perth and Melbourne, earthquakes in Haiti and Chile, European windstorm Xynthia, Iceland volcano travel claims, tornadoes in the United States and the loss of the Deepwater Horizon oil rig and subsequent oil spill in the Gulf of Mexico. Locally listed insurers QBE, Suncorp and IAG will reveal the full extent of their exposure in upcoming results, after all three companies reported sound results earlier in the year.
Plugging the gaps: New Zealand homeowners left out of pocket by the country’s $NZ11.3 billion ($9 billion) leaky homes crisis have been offered a compensation deal worth half of their repair bill. Last month the Government unveiled an aid package that will see it and local councils each contribute a 25% share of agreed repair costs. Homeowners will fund the remaining 50% backed by a Government loan guarantee. The aid package sweetens an earlier deal requiring a 65% homeowner investment which attracted widespread criticism for placing too much of the cost on affected owners. A PricewaterhouseCoopers report estimates around 42,000 NZ homes are affected by the leaky homes crisis, which is attributed to loose legislation, poor workmanship and inadequate materials. Building and Construction Minister
Maurice Williamson has likened the crisis to a natural disaster, saying the Government will help citizens despite the fact that it’s not legally liable. “The Government wants to ensure we get a fair solution that will assist affected homeowners to move on with their lives,” he said last month. As well as sustaining water damage, leaky homes have also been associated with potentially dangerous health concerns for occupants. Many homeowners face repair bills of more than $NZ100,000 ($80,000) on houses built between 1992 and 2005. Although first officially recognised in 2002, the crisis has been dogged by bottlenecks in the repair process, with only an estimated 3500 homes repaired so far. Local government authorities were due to respond to the offer by the end of last month.
Legendary QBE Chief Executive Australian Operations Terry Ibbotson is moving his focus out of the Australian market and on to the world following his appointment as the group’s new Global Head of Distribution. Chief Operating Officer Vince McLenaghan has replaced Mr Ibbotson until a full-time appointment is made to the Australian operation. Mr McLenaghan, often mentioned as a frontrunner to succeed Group Chief Executive Frank O’Halloran when he retires, will continue to serve as COO. Mr O’Halloran says the company created Mr Ibbotson’s new global role in response to a “number of opportunities across the globe” with major intermediaries. QBE declined to make further comment, but Morningstar Head of Equity Research Peter Warnes says the appointments are an indication of QBE’s internal succession planning. “They don’t make senior management appointments lightly, and QBE’s track record in selection and continuity of top-line management is among the best in the world,” he says. “If you go back through their history, [former Chief Executive] John Cloney groomed Frank O’Halloran. They pick the right guys to carry on that philosophy.”
6
Reuters
Ibbotson gets global role:
Airlines erupt: Airports faced huge delays in April as Iceland’s Eyjafjallajokull volcano spewed ash into the atmosphere and closed down airports across Europe. After nine days of flight cancellations across Europe and a knock-on effect felt around the world, airlines recommenced services on April 23. However, further eruptions threatened a return to full services, with meteorologists keeping a wary eye on where the winds were blowing the ash. Unfortunately for the airlines and their customers, much of it is continuing to blow southeast over Europe. Flights in Ireland and Scotland were caninsuranceNEWS
June/July 2010
celled on May 4 and 5, while airports in Spain, Portugal, Italy, Austria and Germany were forced to reschedule services on May 9. Irish and UK airspace closed on May 16 but reopened the next day. According to the International Air Transport Association, airline companies lost an estimated $US200 million ($216 million) for every day of cancelled flights. Icelandic geophysicists say there is no way of telling when Iceland’s second-largest volcano will stop. Meanwhile, business interruption experts in Europe are saying the airlines won’t be able to claim on their policies.
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newsmakers at insuranceNEWS.com.au Sale up in the air: For sale: Highly desirable financial services company with assets in Australia, New Zealand and Asia. French parent company wants the Asia assets after sale to highest bidder – or whoever the competition regulator approves. Apply to Axa AsiaPacific Holdings (Axa APH). The future of Axa APH remained up in the air through May as rival suitors National Australia Bank (NAB) and AMP worked to finalise their proposals. AMP has taken the lead after the Australian Competition and Consumer Commission (ACCC) rejected NAB’s bid, but has warned
that its $13 billion offer, which remains subject to approval from the seemingly uninterested Axa APH independent directors who don’t represent the parent company’s interests, is “far from complete”. This leaves time for NAB to re-work its $14 billion bid, which the independent directors prefer but which was rejected by the ACCC on the grounds it would reduce competition. Specifically, the ACCC found that a merger between NAB and Axa APH “would result in a substantial lessening of competition in the market for retail investment platforms for investors with complex needs”. No conflict was
found in the material markets of superannuation, insurance or banking. NAB Chief Executive Cameron Clyne said last month the company “continues to pursue its options to obtain approvals for its proposed acquisition”, leading observers to speculate NAB may look at challenging the ACCC’s decision or even agreeing to sell off some of its investment-related assets. At the time of going to press in late May, AMP was patiently watching from the sidelines, aware that the addition of a well-timed sweetener to its offer might be all that’s needed to get it over the line.
Michael Gill goes global: Leading Sydney Insurance lawyer Michael Gill is the new President of peak global insurance law body the Association Internationale de Droit des Assurances (AIDA). Mr Gill takes on the role after serving AIDA for around 20 years, including a 12-year stint as one of the organisation’s four vice presidents. He is also the founding president of the Australian Insurance Law Association (AILA). He was formally appointed president at the AIDA world congress in Paris last month. The organisation has strong roots in Europe and South America, with the AIDA Secretariat based in London. And Mr Gill has a clear direction for the future of the organisation, which this year celebrates its 50th anniversary. His top priorities include research into the body’s effectiveness and expanding its global foot-
print, including the use of online technology. “Our focus has always been on insurance law and the creation of good law, as well as comparison and understanding of why certain areas are different,” Mr Gill told Insurance News. “Our first objective after 50 years is to revisit whether we are doing that as well as we can.” Mr Gill says he wants to build AIDA’s presence in North America to complement its traditional European roots and growing presence in the Asia-Pacific region. He will remain based in Sydney for the duration of his four-year tenure as president, and says he would like to host a world congress in Australia during that time. Mr Gill retired from full-time practice at law firm DLA Phillips Fox last year, although he still acts as a consultant to the company.
Ignoring the code:
AIG bounces back: Three
Local insurers are taking the industry’s Code of Practice with a pinch of salt, according to consumer groups. They say there’s a “lack of transparency” in the way alleged code breaches are investigated and reported. Just weeks after the updated code of practice took effect, insuranceNEWS.com.au reported that nearly half of the companies reviewed by the Insurance Ombudsman last year were found to have breached the code. Consumer advocate Denis Nelthorpe says the Insurance Council of Australia (ICA) missed an opportunity to improve the self-regulatory system when it updated the code. “It still lacks transparency in terms of its reporting,” he says. “And that is a major concern for all the consumer groups.” The Financial Ombudsman Service (FOS) has revealed 52 of the 108 companies reviewed in 2008/09 failed to comply with the code. FOS investigated 151 matters in 2008/09, finding members had failed to comply with aspects of the code in 71 cases. About 90% of general insurers are signatories to the code, including 80% of ICA members. However, some overseas insurers working in the Australian market have declined to sign the code, which is voluntary.
cheers for troubled US insurer AIG, which has returned to profitability with first-quarter net income of $US1.45 billion ($1.75 billion), reversing last year’s opening quarter loss of $US4.35 billion ($5.25 billion). It was an uplifting result for the world’s largest (and least popular) insurer, even if much of the profit came from the sale of key assets. In total, asset sales worth more than $US51 billion ($61.5 billion) are expected to close by the end of 2010, allowing the company to substantially reduce its obligations to the Federal Reserve Bank of New York. Insurance operations earned $US2.2 billion ($2.65 billion) before tax in the first quarter this year, up from the $US908 million ($1.09 billion) earned last year.
insuranceNEWS
June/July 2010
Figure this
1.85
BILLION
Estimated dollar cost of storms in Melbourne and Perth as at May 2010
10 Percentage NZ life insurers expect premiums to rise due to new Kiwi tax regime
235
MILLION
Amount in dollars Suncorp expects to save annually from its general insurance restructuring
15,000 The number of Qantas passengers affected by flights delayed due to the Iceland volcano
17
MILLION
The estimated dollar amount lost by IAG shareholders on low-ball share offers since 2002
14.5
BILLION
The value of a rights issue used by Prudential to fund a takeover of AIG’s Asian life assets 7
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newsmakers at insuranceNEWS.com.au Storm costs rising: Insurers are still counting the cost nearly three months after wild storms rocked Perth and Melbourne, with total insured losses now approaching $2 billion. Insurance Council of Australia figures released last month reveal West Australian insurers have received 143,451 claims worth a total of $932.4 million, while the Melbourne storm has resulted in 125,178 claims valued at $915 million. Both storms were characterised by massive hailstorms that shattered windows of cars and buildings, causing interior damage to homes and commercial premises. Claims from the Perth event rose 22,951 between April and May, with insured losses increasing by $43.4 million. In the same period, an additional 19,178 claims for Melbourne were lodged, with insured losses increasing by $25 million. The combined cost of the storms has reached $1.85 billion, adding to a costly first-quarter catastrophe bill for global reinsurers. The storms were listed by the reinsurers in their first-quarter reports as a major cost.
Reuters
A dry argument: The dispute between insurers
Oil spill blame game: A catastrophic explosion which destroyed the Deepwater Horizon oil rig and killed 11 men on April 20 has led to an expected insurance bill of $US1.5 billion ($1.8 billion). As BP reveals expenses of $US350 million ($421 million) in containment efforts, relief well drilling, payments to Gulf Coast states, compensation claims and federal costs to date, a US Senate Energy Committee has also heard testimony from executives representing rig owner Transocean and contractor Halliburton. BP blames the well’s eruption on the failure of a device called a blowout preventer, claiming Transocean is responsible for it. But Transocean says the failure of the blowout preventer is immaterial, as drilling had been completed.
Meanwhile Halliburton, which was contracted to provide special cement for the oil well, says it was “contractually obliged” to follow BP’s instructions. With a commission into the disaster appointed by President Barack Obama probing the causes, there’s been plenty of action as experts worked to stop the rogue wellhead pouring oil into the Gulf of Mexico (and on to beaches surrounding the gulf) at a rate of 5000 barrels a day. The most expensive oil rig loss in history is the explosion of Occidental Petroleum’s Piper Alpha facility in the North Sea in 1988, which killed 167 workers and incurred insured losses of $US3.4 billion ($4.1 billion) in 2009 dollars.
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and Queensland flood victims who feel their claims have been unfairly denied has heated up, with a lawyer acting for residents describing their case as “rock solid”. At the heart of the dispute is the ongoing lack of clarity between what constitutes flood vs storm damage. Most insurers don’t cover flood damage, which is generally defined as damage caused by the inundation of dry land by water that has escaped from the confines of a natural watercourse. Storm damage is usually covered. While insurers point to the unique definitions set out in their insurance policies, residents in the Queensland towns of Roma, St George and Bollon are arguing that the hydrologists’ reports on which their claims have been rejected are inaccurate. The residents and the Maranoa Regional Council say the reports don’t reflect the real cause of much of the damage sustained during extreme weather in early March when floods inundated 200 houses in Roma and another 33 in St George and Bollon. They say stormwater inundated properties prior to flooding from local waterways. This is the case being established by Slater & Gordon Practice Group Leader Peter Long, who will pursue the matter on behalf of a group of the residents. “There were two events,” he says. “That’s the message and that’s the conversation we will be having with the insurers to see if the matter can be put to rest.” Both Allianz Australia and QBE-operated Elders Insurance are likely to be targets for any class action.
insuranceNEWS
June/July 2010
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“The Government has neither strengthened, simplified, nor made the insurance industry fairer. It is a real missed opportunity.” – Phil Lee, Deloitte
Canberra passes the
10
insuranceNEWS
News Ltd
Insurance tax recommendation was acknowledged, then passed on: Treasury Secretary Ken Henry’s far-reaching tax review is the latest to call for reform – and the latest to see it fail
June/July 2010
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“Good solid research and strong policy advocacy … has yielded us the recommendation…” – Rob Whelan, Insurance Council of Australia
insurance taxes buck The Federal Government joins the growing chorus for reform, but says it’s an issue for the states to deal with By Jamin Robertson
THE FEDERAL GOVERNMENT HAS PASSED responsibility for reform of insurance taxes back to the states, effectively killing any hope that meaningful change can be achieved in the immediate future. While Financial Services Minister Chris Bowen and Assistant Treasurer Nick Sherry acknowledge there are better ways to raise public revenue, they have done little more than “encourage” state governments to heed widespread calls for reform. Mr Bowen and Senator Sherry outlined the Government’s position on insurance taxes on Budget night last month in a response to the Australian Financial Centre Forum report Australia as a financial centre: Building on our strength. Recommendation 3.7 of the report calls for the abolition of insurance taxes. The official Government response is that it “agrees that these are inefficient taxes, but notes that this is a state government responsibility”. “The Government encourages the states to consider this recommendation.” The announcement is a blow to those who hoped rising opposition to insurance taxation would encourage the Federal Government to take the lead on reform of the system. Those hopes were raised by the release of the tax review conducted by Treasury Secretary Ken Henry, which also called for insurance taxes to be abolished. Intended as a “root and branch” review of Australian taxation at all levels, the Henry Review made a total of 138 recommendations, three of which specifically address insurance matters (see box on page 12). Of those recommendations, it was number 79 that resonated most of all. “All specific taxes on insurance products, including the fire services levy, should be abolished,” the Henry Review says. “Insurance products should be treated like most other services consumed within Australia and be subject to only one broad-based tax on consumption.” The National Insurance Brokers Association (NIBA), Insurance Council of Australia (ICA) and major insurer IAG were swift to welcome the recommendation, but it
would turn out to be just one of many to be ignored by the Federal Government in its initial response to the review. Instead, the Government focused on a few select reforms dealing mainly with superannuation and company tax, including a new resources super profits tax aimed at the mining industry. Insurance failed to warrant a mention. Leading consultancy Deloitte immediately went on the attack, with partner Phil Lee slamming the Government’s failure to tackle insurance taxes as a “missed opportunity”. “The real disappointment is that Henry recognised how Australian insurance taxes are leading to underinsurance and non-insurance, but the Government has not made a response to Henry’s recommendation,” he says. “The reality is that the Government has neither strengthened, simplified, nor made the insurance industry fairer. We believe it is a real missed opportunity.” KPMG partner Jeremy Hirschhorn was equally critical of the Federal Government for passing responsibility for reform to the state governments. “Although [insurance taxes] are state taxes, reform in this area requires federal-level leadership,” he says. “It is somewhat disappointing that the Federal Government has not seized the opportunity to take ownership and bring modern tax thinking to the issue.” Insurance industry leaders remain optmistic in spite of the setback. ICA Chief Executive Rob Whelan is confident the industry is making progress, and says the council will continue to make its voice heard through “good solid research and strong policy advocacy”. “It is this approach that has yielded us the recommendation and it is our research that is highlighted in the Henry report itself,” he told Insurance News. IAG Chief Executive Mike Wilkins also takes encouragement from the Henry Review findings. “The endorsement of the clear social and economic case for reducing the burden of state taxes on insurance policies is a significant insuranceNEWS
June/July 2010
“The Government agrees that these are inefficient taxes but notes that this is a state government responsibility. The Government encourages the states to consider this recommendation.” – The Federal Government’s official response to the Henry Review’s call for insurance tax reform 11
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Recent Recommendations Australian Financial Centre Forum Recommendation 3.7: Remove state taxes and levies on insurance. The forum recommends that all state taxes and levies on the insurance sector be removed. Federal Government response: Support in principle. The Government agrees that these are inefficient taxes but notes that this is a state government responsibility. The Government encourages the states to consider this recommendation. Australia’s Future Tax System (Henry Review): Recommendation 55: Over time, a broad-based cash flow tax – applied on a destination basis – could be used to finance the abolition of other taxes, including payroll tax and inefficient state consumption taxes, such as insurance taxes. Such a tax would also provide a sustainable revenue base to finance future spending needs. Recommendation 63: States should improve compulsory third party insurance to better reflect individual risks. Recommendation 79: All specific taxes on insurance products, including the fire services levy, should be abolished. Insurance products should be treated like most other services consumed within Australia and be subject to only one broad-based tax on consumption. 2009 Victorian Bushfires Royal Commission Insurance and the Fire Services Levy: Submissions of Counsel Assisting Proposed Recommendations: 8.1 (i) The current funding model be replaced with a property-based levy; (ii) The change in funding model be accompanied by the implementation of appropriate measures for exemptions and concessions for those members of the community on low and low to middle incomes who would be disadvantaged by the imposition of a levy that they are not currently required to pay; (iii) The Insurance Council of Australia and members of the insurance industry expand and continue to improve communication with consumers about underinsurance, including in relation to total cover and extended cover policies and the assessment of rebuilding costs; (iv) Members of the insurance industry create or continue to support and to offer “no frills” insurance products which allow fortnightly repayments, receipt of payments through Centrepay, and appropriate levels of cover for people with limited household assets.
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“Reform in this area requires federal-level leadership. It is somewhat disappointing that the Federal Government has not seized the opportunity to take ownership and bring modern tax thinking to the issue.” – Jeremy Hirschhorn, KPMG
step towards ridding our economy of these obsolete taxes,” he says. Although NIBA Chief Executive Noel Pettersen criticises the Federal Government for “handballing” the issue to the states, he agrees with Mr Wilkins, saying the Henry Review at least puts insurance tax shortcomings on the public record. “NIBA is in there for the long haul on this issue,” he told Insurance News. “It’s now getting more traction in the media and NIBA has been relentless in showing how world record taxes impact ordinary Australians. “The pressure is mounting for change.” In the absence of Federal Government action it can also be argued that the Henry Review simply adds to a raft of earlier reviews that all reach the same conclusion: imposts on insurance are bad taxes. If reviews by the HIH Royal Commission and the Independent Pricing and Regulatory Tribunal of New South Wales were ignored, what will encourage state governments now? At present a Victorian Government tax enquiry is underway, and it is here that critics of the existing system will now pin their hopes. It is a particularly sensitive topic in Victoria given the underinsurance issues highlighted in the wake of the Black Saturday bushfires. Industry hopes were buoyed by a submission to the Victorian Bushfires Royal Commission by lawyers assisting the commission, in which they saw eye-to-eye with the industry. Released just a few weeks before the Henry Review, the submission called for the abolition of the fire services levy (FSL) charged on insurance premiums, making a strong case for the Victorian Government to instead introduce a property-based system. Lawyers John Rush QC, Rachel Doyle SC, Melinda Richards, Peter Rozen and Lisa Nichols combined to produce the submission, which attacks the FSL as opaque and unfair. “The commission has heard sufficient evidence (much of which is consistent with the findings of prior inquiries) to recommend the abandonment of the fire services levy,” they say. “The property-based models (such as have been implemented by Western Australia and South Australia) are fairer and more transparent and should be preferred.” It will be a surprise if the Bushfires Royal Commissioners don’t mount a similar argument insuranceNEWS
June/July 2010
in their final report, which is due next month. The Victorian Government is sensitive to the political implications of the commission’s report. But although the royal commission’s findings will add additional pressure for reform, the government of Premier John Brumby already has considerable form in resisting any change at all to the insurance-based fire services funding model. Change is well overdue from the economic and social standpoints, but the Victorian Government has continually baulked at the political risk of introducing a fairer funding system based on local council property rates. The councils are equally resistant, seeing the collection of a rates-based fire services levy as an impediment to their own ability to raise additional revenue. Much the same situation is evident in NSW, where opportunistic ministers last year added insult to injury by imposing a new State Emergency Service levy on insurance-buyers’ premiums. Rising insurance taxation has only increased the burden on buyers as various governments have dithered, with IAG figures showing taxes on insurance now add more than $40 to every $100 of premium sold in metropolitan NSW and Victoria, rising to nearly $80 in rural Victoria. But while the real pressure for change is being aimed at the NSW and Victorian governments, the Henry Review’s recommendation applied to all states and territories. They all take advantage of the fact that insurance premiums are not protected by any GST agreement so they lump stamp duty on to the total payable – after GST has been calculated – to maximise their “share”. Nationally, insurance taxes totalled $4.25 billion in fiscal year 2007/08, up $566 million or 15.4% on the previous year. The fire services levy charged on top of GST and stamp duty in NSW, Victoria and Tasmania makes those states particularly susceptible to the effect of cascading taxes. Given rising opposition to insurance taxes from a chorus that now includes the Federal Government, continued state inaction can only be taken as evidence that the opportunity cost of reforming a $4 billion tax regime is outweighed by the enormous amount of revenue being raised through so-called hidden taxes.
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Insurers recoup their losses Premium rates are on the rise, but the local market is still patchy By Jamin Robertson THEY APPEAR TO BE A PRACTICAL bunch in Queensland, where some insurance buyers simply view rising premiums as a predictable response to severe weather events. It is, after all, a land permeated by wild weather including a succession of floods that last year left tracts of land in the southeast and southwest of the state underwater. “Most of our clients are pretty welleducated and watch the news and understand that insurers have taken a hefty caning from storm damage,” Brisbane-based NCA Insurance Services Director Daniel Gordon told Insurance News. “They’ve got to recover the money from somewhere.” Personal lines clients in Perth and Melbourne will expect a similar trend following a $2 billion-plus hit incurred by insurers from the severe storms in March. Mr Gordon’s comments come after the release of the Aon Australia Australasian Risk Management Benchmarking Survey in April, which found a 6.4% increase in commercial premium rates during 2009, to be followed by a forecast 3% rise this year. Aon points to the global financial downturn and severe weather losses as two factors behind the rise, which was higher than the forecast 1-5% rise in last year’s survey. The Aon poll of 535 executives charts a wide variation in rate hikes across different commercial insurance lines, with an average increase of 1.1% in public and product liability lines rising to 16.9% for professional indemnity. The results are broadly in line with the JP Morgan Deloitte General Insurance Industry Survey published in February, which recorded rises in both personal lines (8%) and commercial lines (4%). While the overall picture suggests rates are hardening, Aon says competitive market forces are keeping a lid on “extreme behaviour”. Insurers are still busy fighting for market share, and are keen to keep hold of
their existing business. As a result, Aon Australia Chief Executive Steve Nevett expects generally flat conditions to prevail. “The insurance market for 2010 is going to be less volatile than the past year and premium increases are expected to be moderate,” he says. “There will be opportunities for single digit reductions on some lines of risks, while others, such as public and product liability, are likely to experience an increase of up to 5% – resulting in a relatively flat market overall.” Aon Corporate Risk Services National General Manager Paul Venning told Insurance News there is still “very healthy competition in the commercial and corporate market”. And where there’s competition, you’re unlikely to find rises across the board – and that’s what’s happening in the risk insurance sector. The Aon survey found that patchy increases in some commercial risks such as certain mining, manufacturing and construction exposures are being offset by continued competition in liability and longtail lines. Smaller brokers contacted by Insurance News report similar trends: competitive market forces are having some restraint on generally hardening rates, but there is substantial variation. In Queensland, personal lines are on the march by up to 15%, with some commercial rates also showing signs of an upward trend. Daniel Gordon spoke to Insurance News shortly after completing 10 personal lines renewals for Brisbane clients. All had increased 12-15%. Though he says commercial lines are showing more moderate trends, factors such as improving turnover post-global financial downturn have had some effect on
covers such as liability. Further south in Sydney, GSA Insurance Brokers Workers’ Compensation and OHS Manager Tony Burns has also noticed commercial rates rising among some manufacturing and construction lines. “Where there is a good claims history it’s still possible to get a discount, but the insurers are being more selective about risk,” he says. Among the specialist lines there is even some evidence of significant price hikes, according to Peter Lewis, Principal of Adelaide firm Newmarket Insurance Brokers. “We had one bespoke cover and on one policy we contacted about eight different insurers,” he says. “Three declined to quote, the current one trebled the existing terms and a couple of others are still looking at it. It looks as though we will get it away for about a 30-40% increase.” Mr Lewis agrees such increases are generally reserved to atypical lines, observing much more reasonable rates among mainstream risks. However, in line with descriptions of a patchy market, he says one specialist bloodstock cover has actually decreased in premium due primarily to the presence of new Lloyd’s underwriters in that market segment. The Aon survey respondents say while there has been clear variation in premium pricing, policy terms remained largely unchanged last year. With pricing assuming even greater importance of late, brokers will be keen to remind clients that quality is key. Mr Venning says the fallout from the massive storm exposures in Perth and Melbourne is unlikely to be a major influence on the price of commercial lines policies, despite the indiscriminate extent of the damage. But there’s no doubt those events will only add to the upward trend in personal lines nationally.
PREMIUM VARIATIONS AND EXPECTATIONS 2003-2010 CLASS OF RISK
ACTUAL 2003/04
ACTUAL 2004/05
ACTUAL 2005/06
ACTUAL 2006/07
ACTUAL 2007/08
ACTUAL 2008/09
ACTUAL 2009/10
FORECAST 2010/11
Property - Material damage Fidelity guarantee/Crime/Bankers’ bond Motor vehicle Liability (Public/product) Medical malpractice Professional indemnity Directors’ and officers’ liability
26.9% 36.6% 8.1% 28.9% 195.6% 34.8% 26.6%
-4.5% 6.8% 0.0% 2.5% 49.0% 2.8% 9.4%
-9.5% 11.8% -2.1% -8.2% 0.0% 0.6% 1.4%
-2.7% -4.7% -4.4% -9.3% -3.8% -4.0% -5.1%
-3.4% -6.7% -1.4% -6.0% -3.2% 2.1% -5.1%
0.4% -4.4% 8.8% -3.2% -3.4% 1.9% 2.3%
5.4% 5.1% 8.2% 1.1% 0.0% 16.9% 8.4%
2.7% 2.7% 3.4% 4.5% 0.4% 3.6% 3.4%
14
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Whelan and dealin’ A former Suncorp executive takes over at the Insurance Council. Expect some positive changes By Jamin Robertson IF NOTHING ELSE, THE APPOINTMENT of a corporate affairs expert as the Insurance Council of Australia’s (ICA) new Chief Executive should provide the industry with some good press. Rob Whelan replaced Kerrie Kelly in the pivotal industry role in March, following her move to London to become DirectorGeneral of the Association of British Insurers. He brings to the job more than 20 years’ experience in the financial services sector, including senior management roles in insurance and banking. And in a sharp divergence from ICA’s approach in recent years, he says he’s keen to encourage a more open and communicative management culture. Mr Whelan was most recently Executive Manager, Policy and Projects, Personal Lines at Suncorp. His strong experience in corporate affairs, policy and management – including prior stints at AMP, Legal & General and Colonial Mutual – suggest ICA will have a strong voice with governments and regulators. Insurance News caught up with the council’s new chief just three weeks into the role. He has plenty to say about ICA that’s positive, but he directly acknowledges that in some areas there’s a need for improvement. The council’s approach to communications has caused general unease in the industry over the past few years. It followed a “behind closed doors” policy, but newspaper articles detailing an angry confrontation with a state government minister and an unusually aggressive relationship with media were widely seen as indications that the council’s effectiveness in some areas was questionable. “We need to engage a bit more effectively on a number of levels,” Mr Whelan says. “We need to listen to people, their concerns and criticism. We need to tell our story a bit more effectively, to promote the fact 16
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The revolution is here
that this is an important industry that is vital to the economy.” He is also keen to foster more interaction with regulators to help them understand the practical implications that their decisions can have on the industry. It’s a fair bet, then, that media and the general insurance industry can expect a bit more openness and activity from ICA in the future. “I’m keen to get our message out about what we represent and enhance understanding of what the industry does out there in the community.” That’s not to say everything needs to change. Mr Whelan says ICA is also doing plenty of things right. He liked what he saw in his previous dealings with the organisation and those impressions have stayed with him. “That made me aware of what an impressive and progressive organisation it is, and what a good job it does,” he says. “I was a bit of a fan.” His appointment comes at a time when ICA is certainly starting to see results from its long-running program on flood coverage. Its work in co-ordinating a national floodmapping program is a key factor in helping insurers to properly assess risk, Mr Whelan says. As a former employee of Suncorp, which introduced automatic flood cover on personal lines policies in 2008, he is aware of the goodwill to be gained. “Under writers need good data, and mapping is an expensive and time-consuming thing to do,” he says. “It’s an ongoing project that is coming to fruition. We expect to have most of the key areas mapped out within the next 12 months.” It’s difficult to gauge the strength of the council’s relationship with the Federal Government – under the previous administration it was a subject off-limits to media scrutiny – but Mr Whelan believes perceptions of an ideological gulf between ICA and the current federal and state Labor
governments don’t always match the reality. The presence of at least one former senior Howard government adviser in a key communications role at the council and the comment last year by Victorian Treasurer John Lenders that ICA is “hardly a friend of Labor” have been seized on in the past as indications that the council’s links with ALP administrations aren’t as warm as they could be. But Mr Whelan dismisses the suggestion. “I’ve had many discussions with the Victorian Government in particular and found them very co-operative. “I think the industry’s response to Black Saturday in particular was a factor, with both federal and state politicians saying we were strongly effective. That earned us a lot of credibility.” The industry will need to utilise every aspect of that credibility to wean state governments off the enormous honey pot – $4.25 billion in fiscal 2008 – gained by taxing insurance premiums. Mr Whelan admits he is particularly frustrated by the continued existence of the fire services levy in New South Wales, Victoria and Tasmania. “It’s a nonsense that prudent and sensible behaviour such as the purchase of insurance should then be penalised,” he says. It’s too early to say whether the council will continue to adhere to its previous lowprofile approach on such issues as the fire services levy – it believed more could be achieved by lobbying behind closed doors – but Mr Whelan says the Henry tax review recommendation to abolish taxes is a sign of progress. In the meantime it’s still early days in the Whelan era at ICA, and the new boss says he’s “getting my feet under the desk” and already has some initial proposals in front of the council’s directors. The industry looks forward to learning about them in the future. insuranceNEWS
June/July 2010
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Commissions back under the microscope Federal Treasury will examine a potential ban, but industry leaders aren’t worried By Jamin Robertson IN A WORLD TURNING RAPIDLY AWAY from commissions as a method of payment for intermediaries, can risk insurance commissions paid to brokers survive? Industry leaders say yes, they can and should. And they have welcomed a Federal Government plan to examine commissions on risk insurance, saying neither insurers nor brokers have anything to hide. Financial services industry consultation is now underway over proposals contained in the Federal Government’s “Future of Financial Advice” reforms issued in April. The reforms are due to take effect in July 2012. They include a ban on conflicted remuneration structures paid to financial advisers, such as commissions and volumebased payments. A new charging regime and statutory fiduciary duty binding advisers to act in their clients’ best interests are also in the pipeline. The ban on commissions for advisers will extend to the distribution and advice of retail investment products including managed investments, superannuation and margin loans. Although the Government announced the commission ban would initially exclude risk insurance, Financial Services Minister Chris Bowen has changed his mind, saying last month that Treasury will now consult on the potential to extend the ban to risk insurance products. He says the final reform package “will go a long way towards building the trust and confidence of consumers in the industry”. Although the possible extension of the commission ban to risk insurance is focused primarily on life insurance products, Treasury has confirmed it will also run the ruler over commissions paid on general insurance products. Where possible, the Government wants to axe financial services commissions in favour of a fee-for-service model, motivated by its desire to avoid a repeat of financial product mis-selling that led to the high-profile corporate failures of Storm Financial, Opes Prime and Westpoint. In the fallout since those firms went to the wall after losing their clients’ money, enquiries have revealed that too many advisers 18
Financial Services Minister Chris Bowen: keen to avoid backdoor mechanisms
recommended dodgy investments as they chased fat commissions. A fee-for-service model is expected to more closely align the interests of financial advisers with their clients by promoting neutral products and simplified payment structures. In the latest development, Treasury has begun consulting with stakeholders on key details for implementing the reforms. The Government has acknowledged the inherent differences between risk insurance and investment products, including the fact that in the case of stand-alone insurance there is no investment fund for consumers to access in order to pay for advice. It concedes that removal of commissions from stand-alone insurance products would raise issues of affordability and underinsurance, given the likelihood of higher upfront costs. By the same token, the Government won’t rush to hand out exemptions. “There are good arguments validly made on both sides of this discussion about whether risk insurance should have its commissions banned,” Mr Bowen says. “My concern is to make sure we don’t exacerbate the problem of underinsurance in Australia. “We also need to ensure that were we to exempt risk insurance in the ban on commissions, we didn’t allow some sort of backdoor mechanism to allow commissions to continue to exist for financial advice more generally.” He cites as an example the potential for providers to dangle large commissions on risk insurance to counteract income lost due to commission bans on other products. insuranceNEWS
June/July 2010
National Insurance Brokers Association (NIBA) Chief Executive Noel Pettersen is adamant that general insurance should be ring-fenced from such developments, saying remuneration disclosure is already well governed by formal conflict of interest provisions in the Financial Services Reform Act, as well as the NIBA Code of Practice. “There is no evidence of market distortion or consumer-driven need to introduce disclosure on risk insurance products,” he says. “The insurance policy is simply an invitation to renew annually and the consumer has the right to shop around if the product or price does not meet their needs.” Although the Insurance Council of Australia intends to monitor the review and provide input where necessary, a spokesman says the council believes general insurance is unlikely to need revision. “Commissions on general insurance policies that are renewed annually are more akin to a fee for service, with minimal scope for conflicts of interest.” Joe Plumeri, Chairman and Chief Executive of global brokerage Willis Group, counts himself as a long-standing opponent of contingent commissions, which are distinct from standard commissions on the basis they are paid exclusively on the particular volume or profitability of business placed with clients. These bonuses are typically paid at yearend and are particularly prevalent in the United States. In a speech delivered in London in February, Mr Plumeri once again railed against such payments for clouding the contract between broker and buyer. “When push comes to shove you might not fight for the best deal in the marketplace or advocate fiercely to recover a claim if you know your compensation from the insurer will suffer,” he warned. Other major brokers have adopted the Willis stance since the company went out on a limb in 2004, but even Willis stops short of outlawing the standard commission payments that are the bread and butter of ordinary brokers. Any move by the Federal Government to impose a total commission ban on these payments would represent a massive industry overhaul. Mr Pettersen is confident that it won’t come to that, expecting Treasury officials to instead confirm that when it comes to the local general insurance industry, the client is key. “There is no doubt that the Australian insurance buyer is already the best protected in the Western world,” he says.
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Lack of the Irish Bad investments brought about the downfall of Quinn Insurance By Ben Oliver
SEAN QUINN MUST HAVE THOUGHT he was on to a winner. The date was January 2007, and the son of an Irish potato farmer had just purchased 5% of Anglo Irish Bank, which was doing a roaring trade lending pots of money to investors. At first, Mr Quinn’s investment appeared to be another example of the legendary Irishman’s business nous; Anglo Irish shares peaked in June 2007, and the head of diversified conglomerate Quinn Group was sitting pretty. But these concrete returns soon turned to quicksand. As home loan defaults in the United States triggered a worldwide liquidity crunch, over-exposed banks began to unravel. The Irish economy spluttered and stalled. Heavily dependant on debt to fund its growth, Ireland was more exposed to the contagion than most. More than €430 billion ($608 billion) had been loaned by Ireland’s banks at the height of the credit binge – more than 250% of the country’s gross domestic product. Swept in a lending frenzy, Anglo Irish had been the most bullish of all. Over the course of 10 years to 2008, its loan book swelled from €5 billion ($7.07 billion) to more than €70 billion ($99 billion). But in the new global reality, debts needed to be refinanced. Barring the inevitable government intervention, which happened on January 15, 2009, the bank would have gone the way of Lehman Brothers. Instead, it became another Royal Bank of Scotland, bleeding the Irish public of some €12.3 billion ($17.4 billion), with the possibility of a further €10 billion ($14.14 billion) just to remain solvent. As Anglo’s stock tanked, Mr Quinn increased his holdings to 25% in a bid to shore up his investment. He publicly announced his support for the institution. By March 2008, in a classic case of robbing Peter to pay Paul, the Quinn Group’s insurance arm, Quinn Insurance, paid the bank’s bills to the tune of €288 million ($407 million) – without regulatory approval. The inter-group loan was deemed illegal by Ireland’s Financial Regulator, and in October 2008 Quinn Insurance was fined €3.25 million ($4.59 million) and Mr Quinn himself €200,000 ($282,882). But these loans were just tendrils in a much larger web. Quinn Insurance, the hugely profitable wing of Mr Quinn’s business empire, was doing more than lending aid to a sick parent. It was keeping it alive;
on March 30, 2010, it emerged Quinn Insurance had actually lent €1.2 billion ($1.7 billion) through eight subsidiaries to the stricken Quinn Group. While these guarantees were keeping Quinn Group solvent, it was also stripping Quinn Insurance of essential reserves. Lacking money to pay potential claims – and in breach of European Union solvency requirements – the High Court appointed joint provisional administrators to Quinn Insurance after an application by Ireland’s Financial Regulator. In a double blow, Quinn Insurance was denied access to the British market for writing car insurance, where about half its customers reside. British insurers have been peeved by the company’s low premiums, and the regulator’s decision to ban the business backed up claims they were unreasonably low. A castigated Mr Quinn objected to the petition and launched a media offensive, calling for employees and the public alike to take to the streets in protest. He was ignored. While the ban on Quinn Insurance writing UK motor vehicle cover has been lifted, the company is to be sold. It’s still hugely profitable, earning about €300 million ($424 million) in profits every year. According to administrators Paul McCann and Michael McAteer, 40 businesses across Ireland, the UK, Europe and the US have expressed an interest in the company. The job axe now hangs over 900 staff at Quinn Insurance, who will be offered redundancies over a 15-month period. Mr Quinn, whose investment in Anglo has cost him €3 billion ($4.24 billion)so far, says he and his family are “devastated” by the job losses. “I just hope that in time the company will return to the dynamic business it was up until March 30, and that employment levels will increase again in the future,” he said. As for the larger Quinn Group, it’s rumoured that the company needs to refinance some €700 million ($990 million) to stay in business. The company says the figure is closer to €100 million ($141 million). Anglo Irish may enter into a deal to acquire part or all of Quinn Group. Mr Quinn’s gamble will be recorded as another cautionary tale of the global financial crisis. His business empire, sprawling across healthcare, chemicals, building products and plastics, will more than likely survive. But the future of Quinn Insurance employees is less secure. insuranceNEWS
June/July 2010
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The Canberra Times
YellowBird’s song saves lives
Cheap and brilliant: Stephen Robson poses with a YellowBird unit outside his workplace
Stephen Robson has created a simple disaster alert system By Lydia Brisbout CANBERRA OBSTETRICIAN STEPHEN Robson is used to saving lives, but an invention he has developed with his own money promises to be a lifesaver on a far greater scale. His YellowBird ALERT (Automatic Linking to Emergency Radio Transmission) system was awarded the Insurance Council of Australia’s 2010 Resilience Award last month. The device is a simple modification to standard AM/FM radio circuitry which allows a tone broadcast in routine radio transmissions to automatically switch the radio on to receive emergency warnings. When the radio is activated, a loud siren and flashing lights attract attention prior to the warning being broadcast. YellowBird is easy to use – including by people with visual and hearing impairments as well as arthritis. It’s robust, can’t be overloaded, uses existing infrastructure and would cost only the price of a phone call to activate. Its inventor, a practising obstetrician and associate professor at the Australian National University, had the idea for the YellowBird system during the 2003 Canberra bushfires, 20
when he and his wife spent the weekend without power, listening to radio updates in his car. But it wasn’t until the Boxing Day tsunami in 2004 that he was inspired to start developing his concept. It has been what he calls his “part-time passion” since then. Dr Robson told Insurance News it was hard to get people to take him seriously at first, with a “crisis of confidence” leading him to consult widely with disability bodies, ABC Radio technicians and senior emergency services professionals. The enthusiasm of these different groups helped drive his development of YellowBird, in which he has already invested more than $200,000 of his own money. In fact, the $50,000 Insurance Council prize that came with the Resilience Award has been the first financial support he has received so far, and has already been invested in a further refinement: a new prototype containing a GPS chip to enable emergency warnings to be tailored to highly specific areas. “The system we are just finalising now is much more precise,” he says. “It would probably allow whoever is running an emergency to run it from their iPhone or Blackberry. “What you do is you call up a map, draw the outline of the area you want to warn – it might be two houses or it might be an entire state – and a bit of software converts that into the latitude and longitude of the boundaries.” When the radio is triggered, the GPS insuranceNEWS
June/July 2010
tells it if it is in the alert area and whether it should switch on. Compared with the estimated $26 million the Federal Government has spent developing its controversial Telstra phone warning system, YellowBird is expected to cost only about $10 a unit if produced in bulk. “We probably only need a few hundred thousand dollars to get this up to the point where it could be manufactured,” Dr Robson says. “So it’s been very frustrating seeing inordinate sums being spent on a system that has well recognised flaws.” He says he would ideally like YellowBird to be developed in partnership with the Federal Government as a humanitarian venture. While the Federal Government has so far been reluctant to support the project, Dr Robson has been invited to demonstrate the device at the Pacific Islands Applied Geoscience Commission’s regional meeting in August. “I would love to see all of the disasterprone Asia-Pacific regions protected with this system so that people have the confidence that if they need to be warned, they will be,” he told Insurance News. “It would be such a wonderful humanitarian venture. You don’t have to build anything [because] your radio stations are already there; no infrastructure is required at all. Supply some radios as a gift, put them with responsible people in each village and your problem is solved.”
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i is for insurance Smartphone applications represent unexplored territory for insurers By Ben Oliver
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FROM TRAMS IN MELBOURNE TO THE TUBE IN LONDON, heads are bowed during the morning commute. In these swaying coccoons where people are squeezed together and personal boundaries tested to the limit, commuters’ attention is focused downward. They’re looking at a shiny device, tightly gripped and fervently utilised. It’s the smartphone – part PC, part music player and part gaming device, and the ultimate techie toy. It’s not what this device is that keeps commuters’ heads bowed in reverence, although owning one does impart a measure of social gravitas. It’s what it does. Put simply, it’s all about applications; applications for working, playing and, in the words of Apple’s marketing machine, doing just about anything. Applications are where the world is at – or going to. And they’re soon to be shown in widescreen courtesy of the new Apple iPad. The “app” is the new king of personal computing, turning what was once a simple enough verbal communication device into a computer capable of practically anything a laptop can do. In just a few years the smartphone – most notably Apple’s iconic iPhone – has become a consumer and business “must-have”. And where a market exists, there is money to be made – a lesson the financial services sector is belatedly applying. Australia’s big four banks all have iPhone applications, as do St George and Suncorp. Even Qantas has launched an app. However, insurers in Australia are under-represented when it comes to mobile software platforms, a problem not reflected in the United States. Farmers Insurance, State Farm, Liberty Mutual, Nationwide Insurance and Allstate are all members of the Apps club. But the absence of Australian insurers from the market could soon change. “There is huge potential in the insurance sector,” iPhone applications developer Evan Davey told Insurance News. “I think the industry is just taking its time to get its head around it.” His company has spoken to a couple of insurance companies about mobile software development. “At the moment they are trying to understand the market.” Mr Davey is the Technology Development Manager for Melbourne-based group WSP Digital, one of Australia’s leading smartphone software developers. He says the past 18 months have witnessed sharp growth in applications development as companies wise up to the needs of the 18-35 year old demographic. Mr Davey doesn’t attempt to underplay the importance of applications to a company’s brand and bottom line. “The iPhone Apps Store has become the 2010 version of a website,” he says. “If your business relies on that demographic you have to be visible in the mobile space.” Others in the industry share a similar view. Speaking at the January Consumer Electronics Show in Las Vegas, NewsGator General Manager Walker Fenton described a presence in the Apple Apps Store as a “requirement”. “You’ve got to be on the iPhone, same as you’ve got to be on the web,” he says. “If you are wondering about whether or not to get on the mobile, the answer is yes – get on the mobile now.”
But why the sudden urgency? Why are smartphone applications suddenly so crucial to a company’s success? “The iPhone has revolutionised the way people see their phones,” Mr Davey says. “It’s a mobile computing device, an extension of their personality.” Different personalities have created a need for different applications, from sports score updates to fitness applications and mindless games to pass the time on a commute. But it’s the ability to monitor the habits of smartphone users that has ushered in the apps gold rush, according to digital marketing consultant Zoe Warne. Ms Warne, the head of marketing company August, says the availability of hard data has educated companies on the sprawling market for smartphone apps. “Companies are getting a lot more savvy about who is accessing their information online,” she told Insurance News. Ms Warne says software applications can be used for just about any purpose: as a sales tool, value-add or even branding device. What’s surprising is the lack of understanding and funding for digital marketing in Australia, she says. “It’s my hope that digital becomes the heart of a brand strategy, rather than a footnote or afterthought. The budget for digital is behind the engagement. “We are at an interesting place where it’s not getting the budget that it deserves.” Unlike Mr Davey, Ms Warne cautions about lauding iPhone apps as the World Wide Web’s second coming. “I wouldn’t agree it’s the ‘new web’, but I would say it has provided new tools. If there is a need for it, then you should create that tool for your audience – but you may be missing out on a much larger audience.” Ms Warne says any company looking to expand their brand in the mobile space should be exact in who it wants to reach and know the most cost-effective means of doing so. For example, converting a website so it can be read on smartphone web browsers is a much cheaper alternative to creating an application, whose price tag varies from $15,000 to $150,000 and takes at least a month to develop for the most simple applications. “Do you just create one app for one set of eyeballs or across multiple platforms?” she says. For the time being, Apple is the first and final word in smartphones. At October last year roughly 720,000 Australians owned iPhones – including 60% of the key 18-34 year-old demographic. Apple’s Apps store is also light years ahead of its nearest competitors Google, Nokia, Windows Mobile and Blackberry. From a seed of just 500 in July 2008, Apples’ App store has blossomed into a software superstore of 200,000 applications. The breadth and scope of the Apps store is dizzying, with nearly 4 billion downloads as of early 2010. However, Google’s ambition to be more than a search engine cash cow is reflected in the release of its Nexus One smartphone and new software platform Android. By April Android had 50,000 applications and it’s growing by 10,000 per month. “At this point in time we are quite excited about the Android
An easy guide to building Apps
Don’t
Do
Use it purely as a marketing tool. Ensure the application has a useful purpose.
Design a slick interface. With apps competing, aesthetics matter.
Tinker with the user interface. Apple has spent millions on design layout and breaking the mould can cause discomfort among users. Develop an app for the sake of it. Take into account your budget, target audience and other technologies.
insuranceNEWS
Make it free. iPhone users are becoming less inclined to purchase applications unless they feel it absolutely necessary. Make the app relevant. Why would people use it? Is there a need for your app?
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iInsure, therefore iPhone Insurance applications have not made a huge splash in the Apple Apps store, but here’s a collection of some of the best.
Just Car iClaim Function: Claims management tool Released: October 27, 2009 (updated) Cost: Free
NRMA Roadside Assist Function: Vehicle breakdown tool Released: December 23, 2009 (updated) Cost: Free
Claim Denied! Function: Game Released: December 22, 2009 Cost: $1.19
Suncorp subsidiary Just Car was the first insurer in Australia to release a claims notification tool, and it’s a nifty one at that. Drivers can use the tool postaccident to complete their claim step by step, before emailing it to Just Car via their iPhone. iClaim allows users to mark vehicle damage on an interactive 2D model and the iPhone’s built in GPS device can track down the nearest tow truck shop.
Only available to NSW and ACT drivers, this iPhone application from NRMA can pinpoint the nearest Thrifty rental car outlet and find an NRMA-approved repairer. Don’t know where you have broken down? Let the iPhone’s built-in GPS work that out for you.
Onyxx Design revels in the messy business of heath insurance claims; you play an up-and-coming executive determined to deny as many health claims as possible. Fire off red denial stamps, block ageing retirees with mounds of paperwork and cite pre-existing condition clauses to save your company from financial ruin.
Insurance Terms Function: Glossary tool Released: January 28, 2010 Cost: $2.49 A veritable treasure chest of insurance terminology. Information is stored alphabetically and best yet, you don’t need an internet connection to view once the app has been downloaded.
MyInsurance Function: Policy management tool Released: December 17, 2009 Cost: $1.19 In lieu of lugging around a filing cabinet containing all your insurance data, this application keeps your details in one place. Users can access and manage their home, motor and health insurance, and even keep tabs on their medical, dental, vision and Medicare contact details. The app is also password protected in case your iPhone is ever lost or stolen.
platform,” Mr Davey says. “There is no waiting process and you aren’t held by the Apple Apps conditions and terms.” Mr Davey says there have been some issues with quality control on the Android platform, but overall he expects the newcomer to make some inroads into Apple’s dominant position. Another competitor in the $US17 billion ($19 billion) mobile apps market is a coalition of 20 mobile phone carriers who have banded together to create the “Wholesale Applications Community” (WAC). This includes an impressive line-up of phone carriers and mobile developers including giant telcos AT&T, Orange, Singtel and Vodafone, as well as Samsung, LG and Sony Ericsson. WAC claims an existing customer base of more than 3 billion users and will create scale “unparalleled by any application distribution ecosystem in existence today”. However, it’s a development that shouldn’t really shake Apple’s leading position, Mr Davey contends. “I just think they are too late,” he says. “The horse has already bolted and Apple is too far ahead.” While Apple’s rivals rush to close the gap, few in the insurance industry have responded to the opportunity presented by Apple and its ubiquitous Apps Store. Suncorp’s specialised insurance subsidiary Just Car, which aims at the 18-30 market, was the first insurer to breach the apps market in October 2009. It and NRMA 24
insuranceNEWS
Quotes on Tap Function: Comparison tool Released: February 8, 2010 Cost: Free This application is only available to US and Canadian iPhone users, but is shows how heavily commodotised the life insurance sector in North America has become. It also reveals the potential for similar price comparison vehicles in the Australian market.
Insurance are the only companies in the local insurance market to create Apps Store products. Their applications allow users to file claims reports, including vehicle damage, time of accident and location. Details are then emailed to the insurers via the iPhone’s email and a response is usually received within 24 hours. Just Car’s iClaim application was launched in October last year and was downloaded 453 times by the end of February. Executive Manager Andrew O’Hara says its target customers are a perfect fit with the iPhone’s key demographic. “We’ve found that more and more Just Car customers are now communicating online and through their mobiles, so we want to interact with them in whatever way they choose, whether it’s online, over the phone or through their mobile,” Mr O’Hara told Insurance News. “Simply put, iClaim gives us another platform to communicate with our customers.” Suncorp has no immediate plans to release applications across its other brands, but other insurers are certainly gauging the market for entries of their own. And while consumer-facing applications are all the rage, future apps may focus on business-to-business (B2B) needs. Mr Davey says companies are realising the potential of field workers utilising the iPhone’s technology to file reports from the road. While B2B and internal apps have few commercial advantages, efficiency gains are obvious. Possibilities for insurers could include claims specialists, who could use iPhones to file reports from disaster zones. “You are going to see a second wave, more focused on businessrelated applications over the next 12 to 36 months,” Mr Davey says. Unlike the dot.com boom and bust of the 1990s, Mr Davey doesn’t see similar pitfalls for apps. “It’s not a fad and it’s not going away. Just having a website is not enough. If your competitor has an application you really need to have one too.” June/July 2010
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Eyes on the prize for Zurich’s Doyle
The new man driving Zurich Australia’s general insurance business is focusing on efficiency and technology By Ben Oliver
THREE MONTHS INTO HIS TENURE AS head of Zurich Australia’s general insurance operations, Shane Doyle makes two points clear: firstly, the company is in good shape; and secondly, the state of his golf game isn’t. On the first point, the New Zealander says the culture and capability of Zurich staff surpassed his expectations after arriving in January from AIG in Europe. Not that his expectations were lowered to an unreasonable base before joining the company. “I think [Zurich staff] are a lot better than they give themselves credit for being,” he told Insurance News. “Coming in from AIG, you do have a bit of that arrogance in that you think you are always better than the competition. But we have a very good group of young, enthusiastic people here.” 26
Mr Doyle worked for the giant American insurer in New Zealand for 12 years, and was National Marketing Manager when he was promoted in 2001 to become AIG’s Vice President and Regional Manager for Financial Lines in the Middle East, Mediterranean and South Asia In 2004 he was transferred to AIG Europe as Vice President Management Liability, before becoming Senior Vice President and Regional Manager for Financial Lines. He held the same title at AIG UK for the past two years before being targeted in London by corporate headhunters working for Zurich Australia. Mr Doyle’s experience at AIG – and his decision to stand fast as investors and other staff baled out of the besieged insurer – speaks volumes for how he plans to coninsuranceNEWS
June/July 2010
duct business at his new employer. He says he “felt an obligation” to stay while the group’s business collapsed around him. “It was devastating at the time,” he says. “It felt like I was kicked in the stomach. “With any position there is risk and reward in staying, but there was a lot of satisfaction in staying. It really tested you as a leader. “When a crisis like that hits, you can’t be worried about things you have no control over. You need to focus on being the best in your areas of control.” When the offer to captain Zurich Australia’s general insurance operations came “out of the blue” from Chief Executive David Smith, Mr Doyle decided it was the right move to make. “It had to be the right offer,” he says.
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Automation and technology in his sights: Shane Doyle (centre) with National Broker Manager Keith Till (left) and Head of Distribution Sam San Filippo at the AIMS conference in Cape Town
“I love working for global organisations and having the career path opportunities. “After living and working in places like Athens, Paris and London, it’s great to be in Sydney.” Which brings us to the second point and Mr Doyle’s depreciating golf stocks. He concedes it’s indicative of coming to grips with Zurich’s immense insurance operations, and too little time spent gripping a driver. “It’s been a while,” he says. “I used to shoot a handicap of around 14 or 15, and I’ve even had a few holes-in-one in my time. But I’m a long way off that now.” Time spent away hasn’t, however, diminished his love of the game. “Golf is fascinating. No matter how well you play, you always feel like you left something on the course.” It’s this perfectionist approach that Mr Doyle hopes to replicate in his work at Zurich Australia as the local branch of the international insurer studies the best approach for tackling the downhill lie that is the Australian insurance market. Zurich Australia is far short of the market-leading force the company’s Swiss masters want it to be, and it’s something that Mr Smith is determined to change. Always strong in areas like fire and industrial special risks, commercial vehicle and
marine, the latest survey by JP Morgan and Deloitte indicates Zurich’s standing among Australian brokers falters in the key areas of professional indemnity, directors’ and officers’ and domestic motor. Since his appointment, Mr Doyle has busied himself mapping Zurich’s complex general insurance business and constructing a new narrative that will mark his own approach after taking over from Andrew Barrowman. He says he’s in the process of “outlining
Of particular interest is the appointment of Ms Taylor, whose role includes, in Mr Doyle’s words, “developing the operations strategy and linking this with the IT strategy and the business strategy”. Automation and technology are areas Mr Doyle agrees have been seen as a weakness of Zurich Australia – the Achilles heel in an otherwise fleet-footed operation. He hopes the reinstatement of its muchvaunted Z.stream system – the first end-to-end web-based commercial policy processing platform in Australia – will also boost its technology stocks. The company aims to grow this critical part of the business by increasing the number of products distributed via the internet, while introducing new efficiencies in systems and processes. As for what Zurich is doing right, Mr Doyle says claims remain a centrepiece item, alongside its technical underwriting expertise. “I believe our claims service is a huge strength,” he says. “If you have a claims experience with Zurich, we want to ensure it will be the best.” With other changes set to be announced in the coming months, industry-watchers will be interested to see how successfully Mr Doyle helps Zurich to complete its underthe-card score.
“The personnel mix that will carry the division forward is already taking shape”
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a vision” for his division, although it’s still in the “embryonic stage”. But he’s not sitting around waiting for inspiration. The personnel mix that will carry the division forward is already taking shape. In April he announced the creation of two new roles to drive strategic policy decisions: Daniel Fogarty was named Chief Operating Officer, while Elizabeth Taylor was made Head of Operations. insuranceNEWS
June/July 2010
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The need for speed The SME sector is being shaken up by the arrival of contestable platforms for commercial insurance By Ben Oliver
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SPEED, SAID ALDOUS HUXLEY, “PROVIDES the one genuinely modern pleasure”. Perhaps pleasure wasn’t the motivating factor driving development of the latest cause célèbre to stir the local insurance industry, but speed certainly was. The commercial insurance sector’s Brave New World comes in the shape of aggregator platforms, also known as contestable platforms or comparators, which pit insurance companies against one another in a competitive model not dissimilar to iSelect and Zippy.com. While commercial lines have not as yet followed personal insurance down the commodotisation garden path – broker involvement is still regarded by all parties as very necessary – these platforms are demonstrating how technology can simplify procuring and renewing insurance in the small-to-medium enterprise (SME) sector, with Australia at the pointy end of the spear. It’s a convergence of innovation and technology that JP Morgan analyst Siddharth Parameswaran says has been anticipated for some time. “Maybe even a year and a half ago, it wasn’t clear that it was going to happen,” he told Insurance News. “It’s a big change in the commercial market.” For brokers, the benefits of conducting business within the walls of a contestable setting are clear. Multiple quotes can be sourced within hours rather than days, paperwork is vastly reduced through back
insuranceNEWS
June/July 2010
office automation and clients are given a clearer picture of how policies and prices stack up. As Aon Australia Chief Executive Steve Nevett told Insurance News, contestable platforms “make the transactional processes far more efficient so that people who are [at present] trapped in offices doing transactions can actually get out and see clients and sell, or service.” Mr Parameswaran agrees the efficiency gains could be enormous. “The insurance industry has been using old systems for a long time,” he says. “Essentially they have been doing much the same thing since the 1990s. “If you look at it from the brokers’ perspective, it just makes it easier to do business.” In the past 12 months, Aon has launched a comparator and competitor Marsh’s own platform has undergone a recent upgrade. Cluster group Steadfast has also developed an in-house comparator as part of its electronic trading hub. All three platforms share a similar reason for existing: cutting the time and paperwork involved in quote-sourcing through automation. However, the Steadfast offering is perhaps the most ambitious. Mr Parameswaran says the Marsh and Aon platforms use set terms and conditions, but the Steadfast offering has more “product flexibility”, meaning clients have a greater degree of control to tweak existing policies. Perhaps its greatest strength – or weakness, depending on your point of view – is
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An accident can turn your life upside down. the pool of insurers the Steadfast platform draws upon. Whereas Aon and Marsh cap the number of insurers taking part in the pool, Steadfast does not. This has ruffled the feathers of some commercial insurers, and led to accusations of turning the quote-seeking process into an “insurance ebay”. They are charges that mystify Steadfast Chairman Robert Kelly, who says insurers complaining about the risks of commodotisation in commercial insurance are still quite happy to underwrite “vanilla” insurance products for banks and other financial institutions. “Commoditisation? It’s a ludicrous comment to make,” he told Insurance News. “Some of the insurers are concerned that the broker may be in a position to know the best possible price at all times for their clients. “But the broker acts on behalf of the client and will seek the best possible terms and the best possible cover. We are facilitating that in an expeditious way.” It’s understood a number of leading insurers have so far declined to provide support to the Steadfast system, but Mr Kelly is unfazed. “If traditional insurers don’t wish to place business [with Steadfast], there are many international companies happy to support this program. “We struggle to understand their argument.” He says insurers have not been quick to embrace contestable platforms – “None of them like it.” QBE, who Insurance News understands is a harsh critic of contestable platforms, declined to be interviewed for this article. In March Aon’s Steve Nevett told Insurance News the commoditisation charge is a distraction from the underwriters’ failure to effectively market insurance products. “If they can’t differentiate themselves, then they are going to become a commodity,” he said. Regardless of whether insurers are grudging or supportive participants of the contestable platform, their rollout is gathering speed.
Steadfast has spent $3 million so far designing and implementing its platform, launching in September last year with professional indemnity (PI) and industrial special risks (ISR) lines. Nearly all of its 286 brokerages are connected to the system, with the remainder due to be online by September 30 this year. In addition to PI and ISR, Mr Kelly hopes to include basic business pack, public and product liability and motor fleet insurance lines – “with a view to increase over time”. Steadfast’s wide net approach contrasts with Marsh’s exclusiveness. Marsh Director Craig Whitehead, the leader of the giant broker’s commercial segment, prefers quality to quantity. “We have constant requests from carriers to join the platform, but we have to veto them to make sure we have the premium to support new players,” he told Insurance News. “Otherwise it ends up reducing the value proposition for the clients.” Mr Whitehead argues Marsh’s approach of limiting insurer involvement provides better outcomes for clients by utilising a broker’s skills. “You don’t need quotes from 10 different underwriters to get the most competitive terms,” he says. “It’s about using reputable insurance companies and making sure the coverage you are offering is superior. “When you are actually sitting down and negotiating the risks it provides a far better model and outcome. Clients expect human involvement.” Marsh has been tinkering with its model, which has been adopted globally, for more than 10 years. “Marsh has a very clear strategic plan to grow in the SME market place and we think this platform is a clear differentiator for us,” Mr Whitehead says. Mr Parameswaran says that with three major brokers already using contestable platforms, it’s inevitable that more will follow. “All the major brokers are looking at it in some way,” he says. “In the future you may also see a common platform developed. The insurers would certainly like that.”
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June/July 2010
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A bit of trouble back home Swiss Re’s Russell Higginbotham heads for the UK and its economic woes By Jamin Robertson
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Swiss Re’s Russell Higginbotham: end of a fantastic four years
mature Australian market providing a good complement to emerging operations in Asia. As an example, he points to the benefit of sending Swiss Re staff to emerging regions and having them return as more experienced and well-rounded professionals. “There’s a very good development loop there in terms of people,” he says. In coming years, Mr Higginbotham expects major Australian insurers such as QBE and IAG to continue to make headway in the region as they build a greater presence in new markets. In terms of consolidation, he expects the “acquirers” to continue their expansionary ways. While that is good news for them, market consolidation is not so pleasing for reinsurers, who he believes may face lower demand for their products as a result of a concentrated market. “I can see the market heading that way,” he says. “Small and medium insurers are heavy users of reinsurance and that business can disappear, although some new clients will emerge.” At present the reinsurance market remains in good health, with a report by Aon Benfield noting capacity has returned to near-peak levels after a 16.9% fall in capital during 2008. Soft reinsurance rates are forecast to dominate mid-year renewals, and Mr Higginbotham can’t see anything to suggest recent trends won’t continue. “It has been a competitive market for a number of years,” he says. “Though events such as the Chilean earthquake and Melbourne and Perth hailstorms can have an impact they are generally within the expectations of the large global players.” He says the rising incidence of natural insuranceNEWS
June/July 2010
catastrophe events is nevertheless a very real phenomenon, particularly for Australia with last year’s Victorian bushfires and recent major storms in two cities. With smaller players often dependent on reinsurance as a result of those major weather events, Mr Higginbotham refutes a suggestion that the cost of reinsurance erodes their ability to compete with the majors. “I would say that it is actually quite the opposite. Reinsurance is really essential for the smaller insurers to compete for the required capacity to write risk. Prices charged are commensurate with that risk. “And in this environment there is very little chance of overcharging.” That is not to say the soft market is unprofitable. In February Zurich-based Swiss Re reported an annual net profit for 2009 of CHF506 million ($503 million), as cost savings, de-risking of the balance sheet and a calm natural catastrophe period helped reverse the previous year’s CHF864 million ($859 million) loss. Mr Higginbotham says that repair work and a focus on core operations have put the Swiss Re business back on track for revival. As he prepares to return to his final few weeks of work in Australia, Mr Higginbotham provides a parting shot for his industry colleagues, with whom he has enjoyed great rapport. “England winning the [cricket] Ashes in 2009 was a personal highlight, and I’m only sorry I won’t be here to see us retain them this year,” he says. “In all seriousness, London is such a central insurance market and people will be passing through quite frequently. I look forward to maintaining my contacts.”
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AFTER FOUR YEARS LEADING SWISS RE operations in Australia and New Zealand, Russell Higginbotham has returned to London armed with fond memories, firm friends and a promotion. On June 1 Mr Higginbotham began a new role as Swiss Re Managing Director and Head of Client Markets UK and Ireland, relinquishing responsibility for Australia and New Zealand to former South Korea boss Mark Senkevics. The significance of Mr Higginbotham’s promotion is illustrated by the difference in payroll; the local operations employ 150 people and today he’s overseeing the activities of 900 in the UK and Ireland. He is fully aware of the challenge ahead of him. While Australia was fortunate enough to avoid the worst of the global financial downturn, the UK was caught in a deep recession. Mr Higginbotham says the land of his birth remains in a comparatively poor position. “Many of the issues faced by both markets, such as intense competition and consolidation, are the same, because they are both mature insurance markets,” he says. “The backdrop for the UK business is of course the economy, which is in a significantly worse state than that of Australia. “That’s quite fundamental because business has become more difficult. In addition to that, the scale is quite a step change, and I have to think about the challenges in regard to management and communication.” The past eight years represent a substantial tour of duty for Mr Higginbotham. Prior to his arrival in Sydney in 2006 he was based in Japan as Head of Life and Health Business for Japan and Korea. He rates the local posting as a particular highlight. “I had a fantastic four years in Australia and New Zealand,” he told Insurance News. “I appreciate the accessibility and openness of senior people in the industry here – as long as you have got something interesting to say. We have an active, vibrant local market, a lot of characters, and a great level of expertise.” Despite his faith in local skill sets, he believes Australia is short on numbers in technical areas, particularly with regard to property and casualty underwriting. Nevertheless, he talks of leaving the regional industry in good shape, with the
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The quiet revolution: Women moving up
34
insuranceNEWS
June/July 2010
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The increasing number of women in risk insurance management roles will change the way we do business WOMEN WORKING IN SENIOR ROLES IN THE RISK insurance sector are no longer an oddity, but neither are they commonplace. True, there has been progress in increasing the number of women in key management roles in risk insurance, but no one is saying this in any way equates to the number in actual employment – yet. Today women are regarded as the equal of men in business. But the number of female managers at the top levels isn’t in proportion to the total number of women employed within companies. That’s as true for most small to medium-sized brokerages as it is for the largest general insurer. It’s not an issue specific to the risk insurance industry; it’s a global issue, and it encompasses most industries. With very few exceptions, women’s evolution in business hasn’t been happy, involving mind-numbingly repetitive factory work and then office support roles. Female managers with real responsibility were a rarity as little as 30 years ago. This publication has reported previously on the changes sweeping through the industry as the Baby Boomer managers move into retirement and are replaced by the more liberal Generation X. Baby Boomers agreed that women deserved more consideration for managerial roles, and set in train some of the attitudes that have led to enormous change in the makeup of the average office. But Gen X is taking it to the next level, because among the many positive traits that characterise Gen X is the assumption that gender equality isn’t an issue to be wrestled with – it’s a fact. A recent report from the World Economic Forum shows leading international companies are still failing to capitalise on the talents of women. Locally, a shake-up looms. The Australian Securities Exchange (ASX) wants companies to report on “measurable objectives relating to gender” in their annual reports, starting in July. This proposition follows a campaign by the Australian Institute of Company Directors (AICD) to see more diversity on boards. IAG Chairman James Strong was among the initial nine chairmen to sign up for the AICD’s new mentoring program. “When I first came on [in 2001], there were three women on the IAG board and we’ve always had two since then,” Mr Strong told Insurance News. In Australia in 2010, bringing women into the top decision-making roles shouldn’t be an issue in an industry like risk insurance, and generally it isn’t. A shining example of the rise and rise of the female leader is the appointment of Belinda Hutchinson to take over the chairmanship of QBE from industry veteran John Cloney. Ms Hutchinson has the experience and the leadership qualities to head up QBE – qualities honed by a successful business career and diverse directorships. And that’s the point. Her appointment by QBE isn’t recognition in any way of her gender, but of her knowledge and ability. Nor is she a trendsetter in QBE – not yet, at least. Women are relatively scarce in QBE’s senior executive ranks – something that outgoing Chairman John Cloney has previously noted is an issue needing attention.
insuranceNEWS
In the wider world of Australian commerce, Ms Hutchinson is one of a tiny number of female chairmen, although board level representation at the three major Australian insurance groups is above the ASX200 average. But what about management, where the real changes have to happen? It turns out that the risk insurance sector is doing better than many others, although not in salary equality. In 2006, 12% of executive positions in Australian business were occupied by women; by 2008 it had dwindled by nearly two percentage points. But a Bureau of Statistics study in February last year found 45% of management positions in risk insurance are filled by women, ahead of property and business (34.7%), government administration and defence (40.9%), and communications services (30.7%). So things are changing, and relatively quickly – allowing for the fact that any major social change doesn’t happen overnight. Other sub-issues, like shared responsibility for rearing children, more flexible work arrangements, as well as wider educational and career opportunities, also have to be re-engineered into the giant work-life equation. In the next few pages we present the views of a number of women who hold senior management roles in Australia’s risk insurance sector. They are representative rather than unusual, because there are many like them at all levels of management. And each is very clear that her achievements are very much her own, won on the basis of hard work, knowledge and ability. Gender doesn’t really come into it, and they wouldn’t have it any other way. Give them a fair go, and they’ll shine anywhere. That said, most women (and, come to that, their male colleagues) would acknowledge that female managers bring to the management table qualities that men in similar roles are less likely to display. And those general qualities will, over time, change the way the industry does business. The findings of a year-long study by management consulting firm Caliper are typical. It says female leaders are more assertive and persuasive, have a stronger need to get things done and are more willing to take risks than male leaders. It also found women in leadership roles are “more empathetic and flexible, as well as stronger in interpersonal skills than their male counterparts… enabling them to read situations accurately and take information in from all sides”. The Caliper study also found women in management “demonstrate an inclusive, team-building leadership style of problem-solving and decision-making” which helps them to bring others around to their point of view. “They genuinely understand and care about where others are coming from… so that the people they are leading feel more understood, supported and valued.” The risk insurance sector is continuing to evolve as our wider society evolves, and most who have worked in insurance for some time would say the transition of more women into management roles is a huge positive. And as the number of women in management roles increases and they keep climbing in greater numbers into the higher branches of the corporate tree, it’s certain we’ll see new approaches and attitudes result.
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Jacki Johnson, Chief Executive, The Buzz
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JACKI JOHNSON BELIEVES THE RISK insurance sector could do with a lot more diversity. She says gender shouldn’t be the primary focus; working on attracting professionals with a diverse set of skills is more important. That’s something she says is paying dividends for niche online provider The Buzz. “When I joined I was seen as having sold out my profession,” says the former occupational therapist. “We now have people from diverse occupations, gender and age coming into the sector. We’ve come a long way, but we’ve also got a long way to go.” Ms Johnson’s own background is illustrative of the unique perspective outsiders can bring to the industry. As an occupational therapist she spent the early 1980s heavily involved in workplace rehabilitation, in many cases helping people return to work after they had suffered traumatic injuries. In those days, there was no legal requirement to keep jobs open for injured employees, so it was vital work. She later worked in rehabilitation consultancy, rising to senior positions with IRS Total Injury Management and later with Allianz and HIH Insurance. Her experience in workers’ compensation was a valuable asset to those insurers, and also saw her take up a position as a director of the NSW WorkCover Authority. “By 1996 I realised I had actually become an insurance person,” she told Insurance News. She joined IAG in 2001, in the same year as current chairman James Strong and former chief executive Mike Hawker, and served in a number of senior group strategy roles during a busy transition period for the group. These included leadership of the
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integration of IAG’s and CGU’s workers’ compensation businesses. She later served a wide brief as Chief Executive Business Partnerships prior to her appointment to run The Buzz in 2008. As an MBA graduate, wife and mother to a 19-year old daughter, investing time in a successful executive career hasn’t been easy. Ms Johnson and her husband reversed traditional parenting roles during the early years to allow her flourishing business career to continue. “We had those honest conversations about work and how at different times in your career you may lead at work while your partner leads at home,” she told Insurance News. Despite already occupying an executive position at one of Australia’s premier insurers, Ms Johnson talks about being only “halfway through” her business career. Positioning The Buzz as an iconic online insurer is among the unfinished items on her “to do” list, though she reports good progress since its inception last year. Greater regulatory harmony is another area she would like to address. As The Buzz is pitched at internet-savvy consumers, many customers are passionate about sustainability and see online communications as one way to reduce society’s drain on resources. They are not impressed when a packet of disclosure documents arrives in the mail. Ms Johnson says she is frustrated about existing laws that force her company to act against its will. “Regulation can be a good thing, but sometimes it does impede the process when it doesn’t change with the times to benefit the consumer.”
LIKE SO MANY OF HER MALE AND female contemporaries, Leona Murphy didn’t so much pursue a career in insurance as fall into it by chance. And like so many others, once she landed in insurance she never felt the need to leave. From an initial position with RACQ Insurance in Brisbane “doing all things from filing to claims management to customer service”, today Ms Murphy is IAG Group Executive Corporate Office, where her portfolio of central senior functions gives her a very wide brief. Her exhaustive list of responsibilities includes IAG strategy, business development, risk and compliance, audit, government relations, business sustainability, general counsel, group secretariat and shareholder services, as well as group human resources. She’s also functionally the chief information officer. Ms Murphy says much has changed since her entry into the industry. “Back in the late ’80s and early ’90s no one really saw insurance as a career,” she told Insurance News. “I finished university in the ’90s during a period of recession. Unemployment was 10% – that was good timing for someone looking for a job!
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TALENT AND ABILITY HAS NOTHING AT all to do with gender, says Paula Dwyer. When it comes to considering why more women aren’t filling top corporate jobs – and it’s a question she has posed countless times to colleagues and industry leaders – she tends to take an economist’s approach. “Survival depends on having the most talented people, no matter what gender, race or sexual persuasion they happen to be,” she told Insurance News. So the pursuit of female equality in management is about far more than reversing decades of apathy; it’s about realising a nation’s potential. “It’s very revealing hearing people’s response if you have a group of candidates for a role who are all male, and you push back and challenge on that,” she says. “It’s interesting to understand why an executive has landed where they have.” Ms Dwyer first became an insurance company director in 2003 after being approached to join the board of Promina, which later merged with Suncorp. A chartered accountant, she was already on a number of Victorian state government boards after a career in finance, including senior positions in funds management and investment banking. She says women aren’t receiving adequate mentoring to assist their rise to senior ranks, and that’s just part of a multi-faceted problem. For example, raising the number of female executives requires assistance on the home front in the form of such things as childcare options. She says parties on both sides of the political fence need to alter their perception of tax-deductible childcare as a “rich person’s benefit”.
“Initially I fell into insurance because I had previous work experience in the industry with CIC Insurance. My employer was looking for a recent graduate with experience in the industry, so I started work in Brisbane.” Ms Murphy says that frontline experience gave her a valuable perspective and a good grounding for her later career. “I’ve been fortunate to work for some fantastic leaders, and learned what it takes to be an effective leader.” Her career to date has included senior roles at HIH Insurance, Promina and Vero, before she was appointed IAG Group Executive Business Services in November 2007. She took on her current multi-faceted role in July 2008. Though she believes the insurance industry is today more disciplined and customer-focused than it was at the start of her career, she believes major personal lines insurers in particular need to keep close to consumers to make the most of the industry’s position “at the heart of the economy”. “We need to make people more aware of the importance of insurance,” she says.
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Paula Dwyer, Director, Suncorp-Metway “That is one of the greatest reasons why women opt out of the workforce – because of how their children are likely to be cared for,” Ms Dwyer says. “You can’t get a tax deduction for paying a nanny; you can’t get a tax deduction for getting a parent to look after the children… and yet if you can get a place in a childcare centre it is subsidised by the Government.” Ms Dwyer says the risk insurance sector tends to attract serious people with an intellectual approach to their work. “Maybe unlike other industries, there are less of these hungry superstars wanting
to get ahead, I have found.” She says women come to insurance from a very strong technical foundation and succeed on their merits. But a measure of affirmative action is still required to balance the ledger. “I am personally in favour of merit-based appointments, but I am also supportive of having at least two women on every list and then having the appointment based on merit. “If you have a short list of five you’d want at least two women, and on a short list of three at least one, and from there it’s a merit-based action.”
“Without the effective risk transfer of insurance we wouldn’t have investment in things like infrastructure. It is really such an important industry. “We must continue to evolve and learn how best to connect with the community, and deliver on our promises with the products that we sell.” Married with a six-year-old son, Ms Murphy admits her job demands a fair proportion of her time, but believes that is typical of all working mothers and not just those operating at the executive level. “It’s difficult for anyone in any job in any industry,” she says. “I know colleagues find the notion of work-life balance equally challenging at various times.” Having managed the various challenges required to reach a senior position in the industry, Ms Murphy has some advice for the new generation of female insurance professionals. “Just have a go,” she says. “Take on those challenges and learn to get rid of your fear of failing. If you’re not prepared to at least try, then you’d have to question what you’re doing.” insuranceNEWS
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Angela Whitbread, Managing Director, Whitbread Insurance Brokers
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WHEN WELL-KNOWN MELBOURNE broker John Whitbread died a few months ago, he had already put in place a succession system for the family company under which his eldest daughter, Angela, had become Managing Director. Nearly a year after taking up the role, Ms Whitbread shrugs off the fact that she’s one of the very few women in Australia running an insurance brokerage. So few, in fact, that she was asked last year whether she would mind being the only woman at a Christmas lunch being hosted by a major insurer. “I said I didn’t mind being the only woman, but I was probably going to be the only vegetarian as well.” Whitbread Insurance Brokers is a strong company, with more than 60 staff in two offices and an annual turnover of more than $61 million. Yet Ms Whitbread, now in her 40s, only started working as a broker in 2006. Prior to that her career had ranged from a graduate position at Price Waterhouse to roles in India and the United States with notfor-profit organisations.
After returning to Australia, a desire to help people better manage their emotional issues around money saw her become a financial planner in Melbourne and start her own business in 1997. She sold that practice in 2002 to move to Sydney with her husband, where a variety of corporate roles followed. Later, the desire to be her own boss saw her set up the Sydney office of Whitbread Insurance Brokers. While it wasn’t an easy decision for her to take over the company her parents had established in 1978 – and for which her brother, sister and members of her extended family work – it hasn’t been a decision she’s regretted. This is not to say there haven’t been challenges – from the March storm in Melbourne which destroyed the top floor of the Whitbread office, to maintaining an acceptable balance between work and her life outside business. On this point she’s refreshingly candid. “It’s a bad week to ask me,” she says. “If you asked my husband, he would say no. He actually came in today to make sure I had lunch.
Denise Bofill, General Manager Products, Wesfarmers General Insurance
DENISE BOFILL RECALLS BEING TOLD by a male colleague in the early part of her career that she would never land a management role because she was a woman. It’s a comment worthy of the protagonist in hit US show Mad Men, a drama following the misadventures of whiskey-swilling 1960s advertising executives. But this wasn’t the ’60s, and Denise Bofill wasn’t going to be deterred quite so easily – in fact, the comment only fuelled her ambition further. “There were plenty of other men who didn’t share those views,” she told Insurance News. “As a result I was able to free myself from that company and move on to another company [to work] with a person who was more than willing to help. “Sometimes setbacks are career opportunities,” she says. “And women today would be unlikely to face those sorts of challenges.” Like many of her peers, Ms Bofill carved out a career in insurance almost by accident. She and a former business partner were winding up their recruitment business when a vacancy appeared for a temp role within HIH’s travel insurance division. Believing it would be a short-term appointment, she 38
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“But I am a meditator and I practise yoga, so I have tools in my life that enable me to really focus and find some peace and relaxation within the workplace.” She credits her success so far to healthy self-esteem, a willingness to take responsibility for outcomes, the knowledge imparted to her by her late father and the perseverance she learned when setting up her first business. With her varied background, it’s no surprise Ms Whitbread says she is out to make changes to the “staid” world of insurance broking, starting with her own company. Her initial focus is on operational changes as well as introducing a new company culture and increasing training and leadership development opportunities. “It would also be really exciting in my career to see more women in leadership roles in insurance,” she says. “I hate to admit it, but I think probably there is a bit of a boys’ club in broking. “I don’t know whether that is because no women are stepping up into the roles, or because [male managers] are holding on tight. “We’ll just have to see.”
When it comes to delivering simple insurance solutions, we’ve reached new heights.
“If you take some risks and adopt a more courageous approach and be willing to speak up and fill any gaps you see, you are more likely to go forward.” agreed to fill in “for a couple of days”. From there she took on more and more responsibility, culminating in her appointment as Executive Director of HIH Travel Insurance. Ms Bofill later took a two-year break, moving to The Netherlands, learning Dutch and “spending some much-overdue time with my children” before returning to Australia – but with no intention of returning to insurance. But again, she was lured back. “It’s the people who made me stay in the industry,” she says. “Coming back to insurance I was reminded of how warm and friendly the industry is. It’s very close-knit, and when I came back to Australia I tended to bump into old colleagues and was very warmly welcomed back.” After stints with Suncorp and Vero – her last role there was as Executive General Manager Intermediated Distribution for the commercial insurance arm – Ms Bofill joined Lumley Insurance in February as National Specialty Lines Manager. In March she was appointed General Manager Products for Wesfarmers General Insurance. She holds Masters degrees in Business Administration as well as in Applied Science
and Psychology of Organisational Coaching, and a Post Graduate Diploma in Management from the University of Melbourne. Her advice for aspiring female executives? Back yourself. “If you take some risks and adopt a more courageous approach and be willing to speak up and fill any gaps you see, you are more likely to go forward. “Ultimately it all comes down to your willingness to learn from the challenges you have.” But she wants to see women doing still more in the workplace. And while she celebrates women’s moves into workplace management, particularly in middle management roles overseeing strategy, marketing, IT, HR and relationship management, she wants to see more women moving into the grittier management jobs – what she calls “profit and loss” roles. “We still have challenges finding women who have experience managing a portfolio of business and handling more of the commercial negotiations,” she says. “One of the challenges insurers face is that this isn’t an industry that women say they want to be a part of.” insuranceNEWS
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Debbie Gibson, General Manager Affinity & Facilities, JLT Australia
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WHEN JLT GENERAL MANAGER AFFINITY & Facilities Debbie Gibson entered the insurance industry in 1986, she immediately liked what she saw. Starting out with Commercial Union in Sydney’s Pitt Street after a year spent scraping by at university, her new job offered good pay, mates and perks. The work was also satisfying, even when it came to frenetic periods processing customer claims following catastrophes. Inevitably she followed the well-travelled path of young Australians to the United Kingdom, where she soon realised the relaxed atmosphere of the Sydney office didn’t stretch quite as far as Edinburgh. “I wore trousers to work one day and word eventually filtered through from senior management that the young Antipodean lady working in claims was wearing inappropriate attire,” she says. “This was in 1989!” Back home, Ms Gibson made the switch from insurer to broker in 1991, and first impressions at Fairweather Turner were again positive. “I was now dealing with the client and it was meaningful,” she told Insurance News. “You become involved with the client as part of their business decision-making process.” In 1995 she joined JLT, where she was introduced to broking luminary Steve Ball, who she describes as a personal mentor. Today, Ms Gibson handles a varied portfolio
of compliance and JLT affinity clients, including major Australian sporting associations. She also has responsibility for JLT’s internal professional development programs. Despite her understated description of her role as “chief bottlewasher”, Ms Gibson’s position gives her a great outlook on the industry’s up-and-coming ranks of young professionals. The signs are positive, with an even split of male and female insurance talent, and plenty of eager enthusiasm from the muchmaligned Generation Y young professionals, who have already earned her praise. “They’ve done some sensational work,” she says of her young charges. “To get them enthused, engaged and focused has been a great experience.” A mother of two children aged four and six, Ms Gibson says she has encountered few obstacles through her career. That has been helped by her company’s awareness of the importance of a proper work-life balance. Given her own experience, she foresees only good things for women as the cluster of male Baby Boomers in senior management roles begin the transition to retirement. “The Baby Boomers have held those positions as the ‘go to’ generation for some time, and Gen X has been very patient,” she says. “It’s their turn now to be successful in those senior roles.”
Rachael Lavars, Division Director, Macquarie Premium Funding IMPENETRABLE AS INSURANCE JARGON is for the outsider, confusion reigns supreme when the topic turns to premium funding. It’s an issue Rachael Lavars often encounters when speaking about her work to those whose grounding in insurance isn’t all it could be. “That’s the journey I have been on as part of my role,” she tells Insurance News. “I sometimes stop and think: how did I become an expert in this field? “It’s been challenging, it’s been diverse and I think that’s what has kept me here.” In the ranks of Australia’s women in insurance, Ms Lavars is a relative newcomer – but she is also the person most nominated for inclusion in this article by colleagues and customers. She arrived in relationship banking in 2001, and three years later switched to Macquarie Premium Funding, where she has been instrumental in developing the business into a thriving boutique operation. In fact, her premium funding model has become so successful for Macquarie that it has since gone global, with the bank buying a Canadian premium funding business and also opening up shop in the United Kingdom. “The business we now have is somewhat unique in the market,” Ms Lavars says. “There are not many banks with such a dedicated offering.” Ms Lavars says she is typical of the “indirect entry” of many insurance executives. 40
“I never set out with a plan,” she says. “I’ve always had a strong work ethic and I’ve always remained focused on the job at hand. “There is still a challenge in the industry with trying to draw people in,” she says. “I’ve spoken to a lot of successful people in this market and when you ask how they got involved, quite often you hear ‘I fell into it’.” She says flexibility is paramount when forging a career in insurance. “Don’t be too limited in the definition of your role,” Ms Lavars says. “Be flexible and open to any opportunities that come your way. And stay dedicated.” As for maintaining a healthy work-life balance, Ms Lavars says it’s possible, even at a place like Macquarie Bank, an organisation with a reputation for getting its pound of flesh from its managers. “It is a challenge at times,” she says. “The growth phase I’ve been through, in terms of building up a small team to what it’s become today, has really required me to get heavily involved at times, and that comes with long hours. “However, I think I’ve done a pretty good job at getting the balance right.” Ms Lavars says the demographics of insurance are changing, particularly in the levels of participation by women. “It’s a building demographic,” she says. “Within our business we do have a good representation of female employees, and I’m seeing the numbers grow. “I have also seen a change in terms of a insuranceNEWS
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broader and younger demographic coming through. My own experience is a good example of that.” She says many of the changes taking place in the industry have only been made possible by advances in technology. “There’s a lot of focus on improving efficiencies and finding ways to work smarter and with a higher level of professionalism.”
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Calling all female brokers…. Calliden are holding a series of events especially for female brokers and you’re invited! You’ll learn some health and beauty tips and more about Calliden’s products. What a recent ttendees of o Perth e u vent sa r “Callid id: en prov id
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Jenny Lambert, General Manager Customer Services, Allianz Australia
NEARLY 30 YEARS AFTER SHE STARTED working in the risk insurance sector, Jenny Lambert still loves the job she’s doing. Today she’s responsible for 560 Allianz Australia staff working in a key area of the company’s operations, and she’s as enthusiastic as the day she started. Aside from her busy day job, Ms Lambert is also a founding member of the Allianz international claims best practice group, set up nine years ago to ensure harmony across the German insurer’s global empire. She says she feels fulfilled at her current career level. “I’m very happy with the international
exposure offered through this role,” she told Insurance News. That is not to say the work isn’t still challenging. Ms Lambert says the recent storms in Melbourne and Perth were not only a tremendous logistical exercise but also a reminder of the meaningful nature of her work. It wasn’t always like this. Nearly 30 years ago, Ms Lambert returned to the workforce after her youngest child started school. Beginning work at SBU Insurance in Canberra working in reception and sales, a few later she had to be “dragged kicking and screaming” into the company’s claims area. She has stayed with claims for much of her career, observing the shifting dynamics of the modern workplace. “When I first started going to company and industry meetings it was very maledominated, and more times than not I was the only female there,” she told Insurance News. “You could say that in certain pockets it was a bit of a boys’ club.” Ms Lambert says that is no longer the case, with today’s workplace featuring a far greater representation of women in senior roles. “That’s not just claims-specific, but also in the technical roles such as product management,” she says. “The most important thing is those jobs are earned based on competence, not on gender.” Looking back on her steady ascension up the corporate ranks, she admits that work-life balance has been a challenge.
WHEN SHE WAS YOUNGER NATASHA Fenech’s father worked in insurance, and eventually became the General Manager for sales and marketing at IAG. “Like a dutiful daughter I followed in my father’s footsteps” she jokes, adding that she first studied to be an actuary before realising her interest really lay in general management. So she took a position as a management consultant with AT Kearney for about four years to broaden her exposure to decisionmaking, then moved to Citigroup. “But I realised I really loved insurance, she says. “I loved taking such a complex product and trying to simplify it and meeting a need.” Fortuitously, at about the same time she realised her future lay in the risk business a former mentor called to see if she would be interested in becoming the General Manager Strategy for commercial and personal insurance at Suncorp. Since joining Suncorp in 2006, Ms Fenech has risen rapidly to her current position and credits her success to having good mentors and taking the opportunity to work with talented people. “I have had some great opportunities presented to me, and I have had some great teams working with me,” she says. “Also, my teams and I have always been empowered to try out new things and really push the envelope. When you’re given that licence you
can normally achieve quite a lot.” What she likes most about her current role is not only the variety but also the opportunity to be involved in driving change in Suncorp’s businesses. “My ambition has always been to be part of a team that really changes the direction of a particular industry,” she says. “[At Suncorp] we have got massive opportunities in the personal insurance business and… being part of the team that is driving that change is really exciting. “If we’re successful in what we do, we could really drive where the industry as a whole is going.” Ms Fenech’s focus and drive are also evident in her hobbies – particularly her passion for racing the PRB Birkin car she and her husband own. With her current responsibilities, she admits it’s not always easy to maintain a proper work-life balance, although it is something she is increasingly conscious of. Ms Fenech, who is only in her mid-30s, believes that her age and gender have been a barrier to advancement in the past, but she says this is no longer the case. She’s hoping to see more women entering the industry and taking up top management and executive roles. “I think the key component for us is that we keep developing women, and that the fact they have to go off to have a family doesn’t impede them and their careers.”
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Back in the ’80s, balancing a burgeoning career with two school-age children was a feat she partly attributes to a supportive partner. Fortunately, Ms Lambert believes today’s workplace offers greater opportunities for women who choose to return to work. “The opportunities are far broader, not necessarily to come in and be general manager within five years but for people who want the opportunity to interact with customers in a mentally stimulating role. “Caring and raising children is one of the most rewarding and important roles undertaken, but some mothers feel the need for an additional focus in their lives. There are great opportunities in insurance, particularly claims, for part-time work, either in the office or working from home. Of course, the extra money never goes astray.” Ms Lambert believes the insurance industry has enjoyed big benefits from employing greater numbers of females. She says women can bring “a degree of compassion” to the claims role, which results in improved customer service. With plenty of bright Generation Y recruits entering the ranks at Allianz, she says the potential for women to enjoy a successful career in insurance is continually improving. “Australia is a highly competitive and sophisticated insurance market, with a limited population,” she says. “That gives you the ability to try things that potentially are not being tried anywhere else.”
Natasha Fenech, Executive General Manager, Personal Customer, Product and Pricing, Suncorp
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Specialist Underwriting Agencies – always thinking.
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It’s not just about the money Workers are increasingly seeking flexible, caring and ethical employers. Insurance fits the bill nicely By Lydia Brisbout
HOW DOES THE INSURANCE SECTOR SHAPE UP AS AN employer? The human resources landscape is a very bumpy one with generational change, the work-life balance conundrum, skills shortages and intense competition for high-calibre employees just some of the issues that have to be addressed every day. And employment research now commonly shows many employees giving precedence to non-wage benefits such as greater flexibility, training opportunities and potential for career development over mere salary increases. So it’s not surprising that more companies are focused on improving their working conditions and employee benefits as a key aspect of recruiting and retaining staff – and ensuring their ongoing productivity and profitability. Insurance companies have traditionally had to fight hard to compete with the banking and finance sectors. They’ve been quick to establish a range of benefits and programs to address the needs of their employees. A particular focus for many has been the introduction of more flexible working conditions with flexitime, part-time and job-share positions, options to take a 12-month “career break” or purchase additional leave, as well as generous maternity leave already established as standard in the industry. Many companies also offer a host of other benefits such as paternity leave, free counselling, health programs and seminars, product discounts and social clubs. On the career development front most now offer ongoing training opportunities, mentoring programs and study leave and study assistance, with larger businesses also offering dedicated graduate programs. 44
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However, with skills shortages likely to increase due to Australia’s ageing population, the pressure still remains on employers to differentiate themselves through their employee benefits in order to attract the best possible job candidates. So what are these competitive advantages? Suncorp Group has about 16,000 employees across Australia and New Zealand and is one of the region’s largest insurers. The company believes its size is a key advantage in the labour market. “Like any large organisation it is particularly important that Suncorp Group companies continue to offer attractive, relevant and competitive working conditions,” a spokesman told Insurance News. “The group’s scale, mix of businesses and geographic footprint means it holds a distinct advantage when it comes to offering employees a rewarding and flexible working environment, development opportunities and a defined career path.” Insurance giant IAG believes its competitive advantage lies in its focus on professional development and managing succession to provide career opportunities to employees. “IAG places a strong emphasis on career development,” Group Executive Corporate Office Leona Murphy says. “We believe it’s our responsibility to develop the talent we attract, and provide opportunities for people to take their career further. This is obviously in our employees’ interests and it’s also in the interests of the group.” To retain a broad pool of talent and experience, IAG also provides a range of flexible work options for staff. But what about when the available pool of skilled workers June/July 2010
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Underwriting agencies... your mainstream specialists
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is small, and the demands high – like insurance broking? Aon Australia says the current skills shortages are more keenly felt in the broking industry. General Manager Human Resources Malcolm McDonald says there is relatively high staff movement in the industry as a result of the shortages, making it essential that companies like Aon have good recruitment and training practices in place. To retain staff, Aon offers ongoing career development programs and opportunities to work in a range of different business sectors and in different locations. The company is also using technology to provide employees with the option to work from home or to work from an office closer to home – the sort of options that smaller broking companies would find more difficult to offer. “Most people are pretty highly motivated and will do what they need to do to get the work done,” Mr McDonald says. “The only limit on that is what they need to do in terms of meeting with clients, but there is a lot of flexibility in being able to address that.” Aon is also in the process of implementing a new performance management system and helping employees – particularly women – better plan their careers and take advantage of opportunities. The majority of insurance professionals acknowledge that while the industry is not yet an employer of first choice, once they’re in the risk insurance business people tend to stay in it. And their working conditions and career opportunities are significant factors in the decision to stay. Thus, as an established “lifestyle” employer, the insurance industry is well positioned to respond to future challenges in human resources: the need to maximise workforce productivity and participation through the greater involvement of women and older workers and the rise of much maligned Generation Y. But pressure remains on companies to respond to the changing
The general insurance industry’s revised Code of Practice is effective from May 1, 2010. The Code of Practice was revised following an independent review by Mr Robert Cornall, AO. As part of the review process, Mr Cornall received more than a dozen submissions and engaged in consultation with community groups and consumers. The reviewer’s final report made 10 recommendations which were formally adopted by the Board of the Insurance Council of Australia. Copies of the general insurance industry’s Code of Practice are available at codeofpractice.com.au For further information on the review process please visit www.insurancecouncil.com.au 46
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priorities of the workforce. And it’s certainly not just about salaries. “Employees are looking for appropriate recognition,” says Zurich Financial Services Australia Head of Human Resources Anne O’Keefe. “More and more it is not just about the money. It’s about other recognition programs, and embedding in the way you do things as an organisation a respect and appreciation for your employees. The ‘one size fits all’ approach just doesn’t work any more.” To attract new staff Zurich has a specialised graduate program, and in 2008 also launched a cadet program for school-leavers that pays for students’ tertiary studies and employs them while they study. Allianz Australia is also a believer in responding to employees’ changing needs and providing greater flexibility. Managing Director Terry Towell says graduate and management programs are in place to fast-track the development of talented individuals, and the company is working to increase the number of women in senior executive roles. The company’s flexible working options can be tailored to suit the needs of employees at different stages in their lives – an approach that has won Allianz the accolade of being named an Employer of Choice for Women. “If you consider the current potential for employees to work outside of the traditional nine to five office-bound environment, the change management challenges from both a productivity measurement standpoint and a manager’s historic need to ‘see their employees working’ can be difficult, but they are not insurmountable,” Mr Towell told Insurance News. So how do smaller employers compete against the big players? Specialist insurer Calliden says its advantages lie in the greater exposure, new challenges and a more involved relationship with employees it can offer. Marketing Director Mike Hooton says these attributes allow Calliden to meet its recruitment requirements from the existing pool of professionals, and also reduce staff turnover. A new flexible work-life program allows employees to adjust their working commitment on a weekly, monthly or quarterly basis. “Flexibility is a major drawcard in both recruiting and retaining people,” Mr Hooton says. “It’s a recognition that peoples’ lives change.” Lumley Insurance is currently translating feedback from an employee survey into improved programs and benefits. “We’re working hard to implement new initiatives that employees have indicated they value,” Chief Executive Vivek Bhatia told Insurance News. “For us, this includes a new reward and recognition program, and also some specific managerial training.” There’s an imperative behind the industry’s move to become more flexible and friendly in its employee programs. The Australian Human Resources Institute says employers could face shortages of up to 200,000 skilled workers within 10 years. National President Peter Wilson says drastic action is needed. He says forward-thinking companies are already embracing technology to allow more employees to work from home or from different offices. “We are seeing much smarter and more flexible work patterns to meet peoples’ individual and lifestyle needs, and the IT revolution has allowed us to break down workplaces to a range of spaces that still enable the work to get done,” he says. These capabilities are driving the decentralisation of corporate offices in favour of regional hubs which provide greater customer service as well as better work options for staff. And Mr Wilson says retaining older employees is also increasingly important. “It will be essential for employers to ensure meaningful roles remain available to prevent them taking their experience off to the bowls club.” Coping with the needs of Generation Y is an inescapable issue. Mr Wilson says employers need to understand that corporate collapses and bad corporate behaviour have left younger people feeling cheated by the lack of ethics and leadership in some companies. With the vast array of social networking media available to dissatisfied employees, there is even greater need for smarter and more flexible business leaders. Overall, with the banking and finance sectors emerging more than a little tarnished from the global financial crisis, now seems the ideal time to promote the insurance sector as a worthwhile and exciting career option providing excellent conditions and a wealth of opportunities. June/July 2010
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Reuters
Outperforming as the market recovers
Insurers are opting for geographic expansion to restore growth
Australia’s insurers must change, adapt and leverage their post-GFC opportunities to keep growing and stay competitive By Glenn Sedgewick, Head of Insurance Services at Accenture Australia
THE AUSTRALIAN RISK INSURANCE industry has survived the global financial crisis, but the strategies that have worked well for many of the big players have also benefitted their competitors, creating a more aggressive industry landscape. The challenge now is how to differentiate and get ahead in this increasingly competitive market. Throughout last year sur vival strategies such as cost control, efficiency and risk mitigation were implemented by many organisations to streamline their operations, increase productivity and lower their costs. As a result of this renewed focus on business efficiency, there’s now a new benchmark on cost which has become the norm for many companies. General cost structures are not the only thing that have made the landscape more competitive. The insurance industry must also consider regulatory change, technology and internationalisation in order to stay ahead. Currently there are a number of regulatory reviews underway which are likely to change the rules and behaviours of the insurance market. The IT industry, in particular, needs to prepare for scenarios which insuranceNEWS
June/July 2010
break the linear trend of development in the industry. This will include responding to demands for new reporting or capital positions and creating innovative products which satisfy the new rules. For example, the recent announcement of regulations based around fee for service to replace existing commission structures for the financial planning industry will have significant implications for existing technology infrastructure. This will create new products that will also require new technology platforms. The emergence and increasing use of social media and other Web 2.0 tools has dramatically altered the ways companies interact with their customers. For instance, purchasing advice and product information is being more actively disseminated from consumers to other consumers – in some cases without involvement or oversight by the provider. Consumer technology presents many opportunities to build a distinctive capability that serves as a building block to high performance – a method to potentially connect more tightly with customers at lower cost, and in a way 47
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“As organisations look ahead to 2012, the ‘One World’ model reinforces the expectation that IT capabilities must support multi-country operations.”
Factors to consider: Regulatory change New technologies Expanding geographically
What to do: Remain aggressive on costs and legacy systems Adopt a non-linear view of strategy Support international operations Make IT part of a larger network
that provides a real differentiation from competitors. It’s critical that these technologies are evaluated to determine how they can be deployed to improve the lives of customers and provide appropriate business outcomes. New technologies will also result in the need for greater skills in the IT sector, especially in responding to new platforms and approaches. For example, in the Japanese general insurance sector, IT and claims management skills are becoming more scarce and expensive. Faced with plummeting demand and poor investment returns, insurers are also opting for geographic expansion to restore growth and to position themselves for increased profitability as markets recover. A recent Accenture survey found that 80% of overseas insurers view international expansion as a critical or important driver of economic value. The Asia-Pacific countries, such as China and India, were high on the agenda, as well as Australia because of its stability and sophistication. Insurers need to recognise that it is not easy to move into new, unfamiliar markets – particularly as current operating models do not provide the necessary differentiation from competitors. So, with a new seascape upon the industry, what do organisations need to focus on to outperform their competitors?
Remain aggressive on costs and legacy systems Despite the economic recovery within Australia, there will be no respite in regard to cost pressures, especially as legacy systems are squeezed out and the insurance industry consolidates and innovates. Sourcing and staffing is critical in evaluating a company’s legacy and cost challenges. Successful companies will have human capital strategies that ensure the right people are equipped with the right capabilities to effectively execute the business strategy. As a result, IT directors are currently looking beyond the apparent unit cost to outsourcing. Recent testing has demonstrated that the outsourcing of specific business processes has delivered substantial savings and upgrades. 48
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Adopt a non-linear view of strategy The world is becoming less linear as consumers demand more flexibility and control in their access to information and transaction processes. Organisations need to create IT capabilities which can handle this level of complexity. They will have to align technology platforms and internal processes to create a consistent and cohesive customer experience. IT leaders need to contemplate a multi-channel approach that uses new connections, shorter interactions such as those that exist on Facebook and Twitter, and which also facilitate the exchange of value far more easily than they do today.
Support international operations Internationalisation of the industry has increased pressure on organisations to change their IT and back office capabilities to facilitate expansion. This can range from having staff on the ground in foreign locations to blending systems with foreign joint venture operations. Traditionally, managing operations in several countries employed the “hubbing” model – an approach that centralised regional management functions such as IT and finance. However, the model most likely to grow in acceptance now is the “one world” model, where strategy, management and operations are handled as a single, globally integrated entity. As organisations look ahead to 2012, the “One World” model reinforces the expectation that IT capabilities must support multi-country operations.
Make IT part of a larger network The challenge in staying ahead of the competition lies in the depth and complexity of expertise required. Organisations need skills in analytics, mobility, social networking, large-scale offshore capabilities and access to investment. Insurers also need to construct their own network of partnerships. They should be long-standing co-operations that deliver not only low unit cost labour but greater investment pools, windows to innovation and wider access to talent pools. These partnerships will provide the structures necessary to handle continual market and technology change.
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lawNEWS
A lost chance – but what are the odds? The High Court has a new focus on causation in medical negligence cases By Eve Bignell, a solicitor at Wotton + Kearney Insurance Lawyers in Melbourne
A medical practitioner’s worst nightmare: there is no magic wand
A RECENT HIGH COURT DECISION creates a fundamental change in the way many injured patients will be able to sue their doctors for medical negligence. The court has rejected the proposition that an injured patient can recover damages where the doctor’s negligence has lost the patient a chance to be cured or to have a better medical outcome, when that chance is less than 51%. Since the 1999 decision in Naxakis v Western General Hospital, a series of lower court decisions have left the entitlements of patients and the obligations of doctors and their medical indemnity insurers in these circumstances uncertain. However, in its decision on Tabet v Gett handed down on April 21, the High Court upheld a New South Wales Court of Appeal finding that the causal effects of the clinical negligence of a medical practitioner should be assessed on the balance of probabilities alone, rather than “on the basis of loss of a chance of a better outcome”. And with this decision, the matter appears finally settled. While this decision can be seen as a win for medical indemnity insurers, the broader implication of this and other recent High Court decisions is likely to be a renewed focus by defendant lawyers on causation defences in personal injury claims. So the question arises: What happens when a medical practitioner fails to diagnose a patient’s medical condition in circum-
stances where a reasonable and competent doctor exercising due care and skill would have diagnosed and commenced treatment for that condition? Answer: Easy, the medical practitioner is prima facie negligent. But medicine is not an exact science, and there is no magic wand. So what happens if the accepted treatment that would and should have been administered upon diagnosis would not necessarily have made a difference in the patient’s overall outcome? What if there was only a chance of a better outcome? And what if that chance was less than a 51% likelihood? Has the patient lost something of value? The majority of people would undoubtedly say yes. But is that “something of value” legally actionable damage in a claim for compensation? In late April, the High Court said no. In the case reviewed by the High Court, six-year-old Reema Tabet was in hospital on January 14 1991 when she suffered a seizure as a result of raised intra-cranial pressure, which was caused by an undiagnosed brain tumour. She was left with irreversible brain damage. The previous morning, a nurse had observed Reema to be unresponsive and staring. After a 36-day hearing in the NSW Supreme Court, Justice Studdert found that Dr Gett, a specialist paediatrician, should have ordered a CT scan upon being advised of the nurse’s observations. insuranceNEWS
June/July 2010
Had a scan been performed that day, the brain tumour would have been detected and treatment – most likely the administration of steroids – would have been instituted that morning. The finding of a negligent omission was not an issue before the High Court. The judge found that had Dr Gett ordered a CT scan on the morning of January 14, there was a 40% chance of avoiding the seizure and deterioration of her condition. This was later reduced to a finding of 15% by the NSW Court of Appeal. The contribution of the seizure to Reema’s overall disabilities was held by the trial judge to be 25%, with the rest of her disabilities being partly a result of the tumour, partly because of the surgery to remove the tumour and partly because of the subsequent radiotherapy. The question before the High Court was whether the common law should recognise as actionable the loss of a chance of a better outcome in cases where medical negligence has been found. The chance lost by Dr Gett’s negligence was the chance of avoiding as much of the eventual outcome (25% of her disabled state) as was attributable to her seizure and deterioration. Two essential elements of an action in negligence are a) proof of damage, and b) the causal link between the plaintiff’s damage and the defendant’s breach of duty. The High Court described these elements as requiring satisfaction that, according to the course of common experience, the more probable inference appearing from the evidence is that a defendant’s negligence caused the injury or harm. “More probable” means no more than that, upon a balance of probabilities, such an inference might reasonably be considered to have some greater degree of likelihood; it does not require certainty. If the chance that is lost is no greater than a 50% likelihood of a better outcome, then the defendant’s negligent act or omission cannot be said to have caused, on the balance of probabilities, the plaintiff’s damage. To address this hurdle, “loss of a chance” claims have seen plaintiffs arguing that the lost chance itself, rather than the physical illness or injury, is to be regarded as the “damage” caused by the defendant’s breach, and therefore should be compensable. The level of confusion in these claims has been compounded by the subsequent attempts to quantify damages where the gist of the action is a lost opportunity. How does 51
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lawNEWS one value a chance or opportunity in monetary terms? The “all or nothing” approach of the common law means that, once causation is proved on the balance of probabilities (greater than 50% likelihood), a plaintiff is then entitled to full recovery of the assessed damages for his or her loss. In “loss of a chance” claims, various approaches to quantum have been postulated, including the “all or nothing” approach, or awarding the plaintiff only that percentage of the assessed damages if the loss of a chance is less than 51% – or alternatively basing compensation on whatever the percentage of the chance lost is. These contrasting judicial approaches have understandably led to uncertainty in dealing with “loss of chance” claims. In five separate but unanimous judgements, the High Court has held that the law of negligence in Australia does not permit an action for recovery when the damage claimed can only be characterised as “the loss of a chance of a better outcome”. In reaching this view, the court held that the long-established and accepted burden of proof, which requires proof of damage on the “balance of probabilities”, strikes a balance between the competing interests of the parties. To shift that balance would require the intervention of Parliament. In this case, the court held that Reema Tabet had not established her injuries were caused by Dr Gett’s conduct to the requisite standard of proof. Justice Kiefel in her judgement noted that the general standard of proof required by the common law is relatively low, in that it only requires probabilities and not certainties of proof that a breach was a cause of the plaintiff’s harm. However, since the High Court’s 1991 decision in March v Stramare, the court’s expression of a “common sense approach” towards causation – which may be informed by “value judgements and policy choices” – has arguably been seen by some to have lowered the bar for plaintiffs in establishing that a defendant’s negligent conduct “caused or materially contributed to” the plaintiff’s loss. A series of recent cases has seen the High Court reverse this trend by repeatedly rejecting claims on the issue of causation where the evidentiary burden has not been met. Rather than inferences, the High Court has emphasised the need for positive evidence that the negligent act is a probable cause of the plaintiff’s harm. Issues of causation have always been high on the radar for medical negligence practitioners, but are often seen as secondary to duty and breach considerations in non-medical personal injury claims. This latest High Court decision and other recent cases indicate that the High Court has directed attention back to “first principles causation” and the importance of meeting the burden of proof. In this regard, personal injury practitioners will need to ensure that a rigorous investigation and preparation of causation evidence becomes a primary focus in bringing, or defending, a negligence claim. 52
Related, but not really A builders’ warranty claim raises some issues around a shared director By the insurance team at DibbsBarker MANY INSURANCE POLICIES REFER, IN one way or another, to “related entities”. While the term is common in other contexts, its application in an insurance context remains somewhat unclear, as a recent case from the New South Wales Court of Appeal demonstrates. The case centred on a retirement village in Yowie Bay, New South Wales. The retirement village had been constructed by a builder under a contract with a developer, Yowie Pty Ltd, which then sold the development to Waterbrook at Yowie Bay Pty Ltd. After Waterbrook acquired the retirement village, building defects were identified and the company made a claim under a builders’ home warranty policy. Allianz declined the claim, and Waterbrook commenced proceedings in the NSW Supreme Court. Under the policy, Allianz agreed to indemnify the “building owner”. The court examined whether Waterbrook fell within the exclusion. The policy defined “building owner” as “the person for whom residential building work is being or is about to be carried out under a contract as defined in this policy, and any person who is a successor in title for the time being of the land or building in respect of which the work was carried out under the contract”. It excluded (a) a developer who does residential building work; (b) a person who does residential building work other than under a contract; (c) the holder of a licence who or which carried out residential building work; or (d) “persons or companies related, within the meaning of the Corporations Law, in [sic] any corporate person referred to in subclauses (a), (b) or (c) of this definition”. Justice McDougall in the Supreme Court decided that Waterbrook was not excluded from the definition. Allianz appealed on that, and other issues. In the Court of Appeal, all three judges upheld Justice McDougall’s finding on that issue – although there were differences between Justice Giles, in the minority, and Justices Ipp and Hodgson on other issues in Allianz’s appeal. Delivering the court’s reasons on this issue, Justice Ipp noted that Allianz’s arguinsuranceNEWS
June/July 2010
One person, two images: the court had to decide about two companies with a common director
ment that Waterbrook and Yowie were “related” hinged on the fact that, at the time Yowie entered into the building contract for the retirement village, one of its directors was also a director of Waterbrook. Allianz submitted that companies could be “related” in two ways: • Because shares in the companies were commonly owned; or • Because one company was able to influence or control the affairs of another. The insurer argued that as the two companies had a common director, they were therefore “related”. But Justice Ipp found the relevant provision in the Corporations Law was section 50, which stated that where a body corporate is a holding company of another body corporate; or a subsidiary of another body corporate; or a subsidiary of a holding company of another body corporate, “the first-mentioned body and the other body are related to each other”. He agreed with Justice McDougall that nowhere in the Corporations Law did any definition of “related entity” actually use the word “related”. The expression appeared only in the defined term itself. It followed that section 50 was the provision that defined when one company was “related” to another. As the exclusion did not use the terms “related entity” or “related party”, but rather required that the companies be “related” to each other, it was consistent with the statutory provisions establishing the Building Insurance Scheme that reference should be made only to section 50. Since none of the relevant relationships covered by section 50 were present, the court found that Justice McDougall was correct and that Waterbrook was not excluded from the definition of “building owner”.
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lawNEWS
Not enough ‘salient features’ The car park was below water level, but was the council’s duty of care even relevant? By Michael Down, a partner at DLA Phillips Fox in Sydney THE NEW SOUTH WALES COURT OF Appeal has confirmed that in cases of a novel relationship, the duty of care is to be determined according to a “salient features” test. The decision in Makawe Pty Limited v Randwick City Council also deals with the question of what constitutes pure economic loss and raises the possibility of a new interpretation of section 44 of the NSW Civil Liability Act 2002. The key points are that a duty of care is unlikely to be imposed where there is no connection between the parties. And in such cases, a “salient features” test is to be employed. It also found that structural defects in construction causing economic loss with nothing more is mere economic loss. The case springs from Randwick City Council’s approval in 1995 of a development application to construct a three-storey residential apartment building of 18 studio apartments. Its basement car park would sit three metres below ground level. The following year, the developer applied for and was granted a building application by the council. At the time of this second approval, the council was in possession of a report by geotechnical experts revealing that the car park was situated at almost the same level as the local water table and would be at risk of flooding as the table rose and fell. Construction was completed at the end of 1996, with no imposition by the council of any condition of consent relating to the level of the car park. In 1997 the building was sold to Makawe Pty Ltd, and the apartments were let to tenants. Just under a year later, the car park flooded, causing minor damage such as staining to the walls and floor. Makawe sued the council for the cost of installing a flood mitigation system, which it
alleged should have been a condition of the council’s original approval. At first instance, the trial judge found that the council owed no duty to Makawe, and the company appealed. The issues before the NSW Court of Appeal were whether the trial judge erred in finding the loss suffered by Makawe to be purely economic loss rather than mere property damage; and, whether the trial judge erred in finding the council did not owe Makawe a duty of care. The court acknowledged that when determining the existence of a duty of care, one must “bear in mind the type of damage… the defendant [allegedly] had a duty to take reasonable care to avoid”. The characterisation of the loss as pure economic loss bore heavily on the primary and appeal decisions. The Court of Appeal consulted the decisions of the 1995 High Court case of Bryan v Maloney [and the 2004 case of Woolcock Street Investments v CDG Pty Limited]. In Bryan v Maloney, inadequate footings in a residential house caused subsequent cracking of the structure. This was held not to be consequent upon physical injury or damage to property and was classified as mere economic loss. The Court of Appeal found no distinction between that case and the present one. Also, in the Woolcock case it was found that where a commercial building suffered stress due to defective construction, there was no personal or property damage going beyond simple diminution of an improvement. The court unanimously followed the precedent of Woolcock and found the claim here was properly characterised as economic loss suffered due to defects in construction. Since Australian courts have been largely unwilling to allow claims for pure economic loss, the Court of Appeal stayed the course and noted that a pure economic loss element would not favour a finding of duty. Importantly, the Court of Appeal decided there was no duty of care owed by the council to Makawe. Since the council was “removed” from Makawe in so far as there was no direct relationship between them, the court agreed with the trial judge that
this was a novel relationship to be determined based on its “salient features”, as noted in the 2009 decision of the same court in Caltex Refineries (Queensland) Pty Ltd v Stavar. However, Justice Hodgson found that the trial judge had erred in two ways: • In finding that an absence of vulnerability was determinative; and • That there must have been actual reliance. Justice Hodgson noted that previous cases of a similar nature had established it is not necessarily actual reliance that is important but “foreseeability or knowledge of that reliance by the defendant that is significant for the purposes of a duty of care”. Nonetheless, these errors were not enough to impose a duty. The “salient features” test, although “quite finely balanced”, revealed that the first seven of these features – foreseeability and nature of the harm; control and assumption of responsibility by council; vulnerability and reliance of Makawe; and the physical, temporal and relational proximity of both parties – were applicable and central to the outcome of this case. Justice Simpson noted that the trial judge was correct not to take into account public policy considerations which would be only neutral to the test. Although the matter was decided in favour of the council based on an absence of a duty of care, the court considered the council’s defence based on section 44 of the Act. Section 44 provides an authority is not liable for failure to exercise regulatory functions. At trial, this ground was dismissed and, indeed, was made redundant in light of the trial judge’s findings. However, the Court of Appeal noted that section 44 was not defined and could be read in one of two ways: • That the word “function” applies to an authority’s broad power to grant applications; and • That the word applies also to discrete functions such as imposing conditions on grants of development applications. The interpretation depends on a reading of section 41, which includes a power, authority or duty. The question was left unanswered, though it merits the attention of public authorities.
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Zurich leaps into accident and health
Bold move: Zurich’s accident and health strategy is part of a global plan
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ZURICH FINANCIAL SERVICES AUSTRALIA HAS MADE A BOLD move into the accident and health (A&H) general insurance sector with the launch of a dedicated business unit. Sean Walker will head up Zurich’s Australian A&H unit as National Underwriting Manager A&H, while David Platt will take up the role of National Underwriter A&H. The initiative is part of the company’s global push into the accident and health market, and is accompanied by the launch of two new product lines which it intends will lead the industry: corporate travel insurance and group personal accident and sickness insurance. Zurich’s corporate travel policy comes with its new travel locator service, a “revolutionary technological initiative” combining mobile wireless handheld technology with its Zurich Assist emergency assistance. The service provides location-specific travel, health and security information and alerts, direct access to emergency medical, travel and security services, web-based tracking and other features. Both policies provide “market-leading cover with the inclusion of war cover” and come with Renewal Rewardz, a feature providing a no-claims discount at renewal. “The local launch is a key strategic position to capitalise on Zurich’s global reach and provides a real alternative in accident and health insurance that delivers value to brokers and their clients,” General Manager General Insurance Shane Doyle says. “Zurich is looking to reshape the future of accident and health insurance by providing a new and innovative range of accident and health products and services. “Zurich Accident and Health focuses on a unique service offering that cannot easily be replicated.” The policies also include access to the Zurich Assist worldwide service, including locally based personnel. The company plans to include accident and health products on its Z.streamXpress system next year. “In recent years the market has gravitated towards centralising claims servicing offshore, using inexperienced third-party claims providers and generally dumbing down the service offering,” Mr Doyle says. “We will be providing a high quality, local claims service focused on the needs of brokers and customers.”
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Building the new professionals
Lots to talk about: delegates in a group session at a Vero Expo earlier this year
Insurers are sharing the load to develop intermediaries’ skills and knowledge By Lydia Brisbout AS THE INSURANCE INDUSTRY STRIVES to improve its professional reputation, the increasing range of training available is not only meeting demand but also driving further aspirational learning. In 2001, the introduction of legislation establishing mandatory continuing professional development training each year for insurance brokers was hailed as an essential part of improving the industry’s reputation and image. Unsurprisingly, this move has seen a greater range of educational and professional development courses become available to brokers. Nor is it surprising that insurance companies are playing an increasing role in providing this training. Not only does it offer them the chance to contribute to the professional standards of the industry they rely on, it also presents a valuable marketing opportunity to promote their products and – just as importantly – their brand. 56
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Rather than regard the insurers as interlopers in their traditional domain, both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the National Insurance Brokers Association (NIBA) have welcomed the entry of insurers into the training sphere. They even have programs in place to accredit educational courses run by third parties. The unexpected benefit of the increasing range of training available has been a rise in aspirational learning, as brokers and other insurance professionals realise that better qualifications are the key to risk mitigation, career progression and mobility within the industry. Most major insurers now offer training courses to intermediaries – some by invitation only. The amount of money being invested is considerable, and so are some insurers’ efforts to make their educational offerings unique and “special”. The approach of Zurich Financial Services Australia is typical. The company has a dedicated team of four staff developing and running courses covering technical, marketing, personal and legal perspectives. Zurich launched its Zenith top-tier “broker recognition” program in 2004, and also runs a second tier Broker Plus program. These programs provide a calendar of about
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“We consider our learning and development offering an investment in our brokers, to help them build and maintain successful businesses.” 100 workshops each year to invited brokers. Zurich also runs 10 half-day “Generation Z” forums twice a year which are open to interested professionals and are expected to attract about 1000 participants this year. With valuable face-to-face time with brokers reserved for dynamic skills and issues training, Zurich’s product training is now provided via short online courses that can be completed at the convenience of the broker. National Intermediary Distribution Manager Nick Cook says the company’s educational programs mark the evolution of insurer training from basic product information to courses providing the support and skills brokers need to develop as insurance professionals. “We speak of our industry being a profession and all of our workshops are focused on building professional ability,” he says. “The other outcome is a strengthening of the relationship with our brokers, but the subset of that is that we are highlighting different points for brokers to be aware of so that our brokers see us as being able to provide solutions for real life scenarios.” In order to remain competitive with other insurers offering training programs, Zurich continually updates its syllabus with specialised courses addressing emerging industry issues. For example, this year Zurich has expanded its climate change training in response to recent extreme weather events that have caused widespread loss and damage around the country, with this course linking in to the company’s flood cover insurance. “No matter what their position may be, everyone has an interest in this area,” Mr Cook says. “These workshops equip brokers with the skills to have a conversation with clients about how they can mitigate their climate exposures.” Suncorp’s Vero Insurance also has a dedicated in-house learning and development team designing and running training events for intermediaries, including workshops at its free Vero Expos. Launched in 2007, the expos have become increasingly popular, with events in Melbourne and Sydney earlier this year attracting about 700 brokers. The company also runs targeted training programs for Vero products, services and systems and last year conducted training for more than 300 individual brokerages. Suncorp Executive General Manager
Intermediated Distribution Andrew Mair says Vero expos are designed to encourage broker education as well as promote an understanding of how the company’s businesses work. “Vero Expo is unique in that in one day brokers can attend several accredited sessions with a focus on local issues, industry trends and personal development, while getting to interact with Vero’s subject matter experts, leaders and underwriters,” Mr Mair says. “We consider our learning and development offering an investment in our brokers, to help them build and maintain successful businesses.” QBE Australia has also been offering broker training for a number of years, with a particular focus on workers’ compensation. It offers a national training program in workers’ compensation as part of its fully integrated approach to claims management, and this year is running 27 courses – 14 more than last year. “Safety First is the theme for 2010, aimed at providing both intermediaries and their clients with practical skills and tools to minimise the frequency of workplace injuries.” QBE also runs an annual eQuip program aimed at developing the capabilities of insurance leaders. Since its launch in 2007, about 120 participants from QBE and its intermediary partners have completed this course. While there is a small amount of inevitable overlap between the insurers’ training courses and those provided by NIBA and ANZIIF, both organisations maintain that insurers have an important role to play in broker training. NIBA Professional Development Executive Linda Evans says the insurers’ programs no doubt involve an element of marketing, but the end result is that brokers and other professionals get better trained, improving industry standards. “Ever since we have started our programs we have recognised that NIBA should not be the source of all of the professional development for brokers,” Ms Evans told Insurance News. “It should be a good component because our programs are more focused on the fundamental foundation knowledge that brokers need without any particular organisation focusing on their own products. “But brokers do need to know what insurers are providing… so insurers should be in the training area to educate their distributors about that.” This sentiment is echoed by ANZIIF. General Manager Education and Knowledge ManageinsuranceNEWS
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Zurich: Two invitation-based education programs are offered to brokers – the Zenith top-tier program and the Broker Plus program, providing accredited workshops throughout the year. Zurich also has a range of accredited Generation Z forums that are open to all brokers and are run in all capital cities and regional centres. Specialised online training focused on Zurich’s products and services is also available. QBE: The company’s Workers’ Compensation National Training Program, tailored to brokers and other professionals, is a key part of its fully integrated approach to claims management. The program comprises accredited courses in all states and territories excluding Queensland. QBE also runs the highly regarded eQuip professional development program to improve the professional capabilities of its own staff as well as the staff of intermediary partners. Vero: Training includes accredited workshops and seminars for brokers focusing on local issues and industry trends. These are run in conjunction with the Vero Expos which are held in Sydney, Melbourne and Brisbane. Vero also provides targeted training in its products, services and systems. Allianz Australia: The Blue Eagle loyalty program for premium partners includes tailored access to Allianz’s eCampus accredited online training system. The company also runs a series of accredited training days for brokers and agents throughout the year in major cities and regional centres, as well as local training initiatives.
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peopleNEWS ment Clim Pacheco says providing “soft skill” training in partnership with insurers is an increasingly attractive proposition. The greater range of training is not only improving the professionalism and reputation of the insurance and broking industries, but also having the added advantage of driving further aspirational education as people realise the benefits of updating their qualifications. “Brokers are now looking more and more at what qualifications they can get, because they have to be marketable,” Mr Pacheco says. “They are also recognising the need for mobility, and mobility comes through recognised higher learning.” He says the global financial crisis actually increased demand for training, reflecting a greater desire among the workforce for transportable, nationally recognised qualifications as well as improved recognition of the need for education to prevent the mistakes of the past. “The global financial crisis was a blessing in disguise, because it showed people that education is fundamental to risk mitigation – if people get educated there is a better chance that they might not make mistakes. “Insurance has to be looked upon as something people aspire to be in, not something one falls into, and so our role is to build the aspirational needs of members – their career progression – and more importantly lift the professionalism of the whole industry.”
Learning and loving it: Brendan Goddard from Macey Insurance Brokers in Nowra, New South Wales, receives a certificate from QBE General Manager, Australian Intermediaries Shaun Standfield marking his completion of the company’s eQuip training course. The 12-month program offers workshops, coaching and networking opportunities.
Haulin’ freight from state to state
King of the road – for a couple of hours, anyway. Peter Michell of The Protectors Insurance Brokers in Liverpool, New South Wales gets to grips with a big rig courtesy of truck insurer NTI. Mr Michell was one of three prizewinners to earn a tour of Perth with a very big difference at the Steadfast Convention. Other winners included Chris Dougherty of Westlawn Insurance Brokers in Grafton, NSW, and Lloyd Walker of Lloyd Walker Insurance Brokers in Dubbo, NSW.
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AILA punts on a bit of a flutter Legal eagles turned into card sharks at the Australian Insurance Law Association’s (AILA) Young Professionals Casino Night in Sydney in late April. More than 400 attendees put on their best poker faces for AILA’s first YP event for 2010, held in the opulent surrounds of the Hilton hotel. Given $1000 in (fake) chips each, the gamblers vied for (real) prizes including a trip to Hayman Island, while one punter converted his initial capital into more than $250,000 in less than three hours. Shame it wasn’t legal tender… AILA’s next YP event will be in early August.
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Sydney Expo attracts record crowd Underwriting agency expos are increasing in popularity as an ideal way for insurance brokers to access the wider market for niche risk products, and the annual Sydney event is becoming a “must attend” fixture.
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peopleNEWS Miramar celebrates fifth birthday with cocktails at the beach Miramar Underwriting celebrated its fifth birthday last month with a cocktail party for staff, board members and brokers at the Sable Bar in the Sydney beachside suburb of Manly. The party was attended by more than 85 professionals and marked the growth of the company from its four founders in April 2005 to the 33 staff it has today. It was also a chance for Miramar to recognise the contribution of it staff and partners and to thank them for their efforts. Guests enjoyed cocktails and canapés as well as speeches by founders Simon Lightbody – “Being five years old in this environment is a significant achievement” – and Anthony Jodrell.
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Cassie tops at CQIB’s big weekend More than 400 brokers and their partners gathered in Surfers Paradise over the Queensland Labour Day weekend for the 18th Council of Queensland Insurance Brokers (CQIB) Convention. The Peter McCarthy Memorial award – dedicated to the memory of CQIB’s late executive secretary – was presented to Cassie Saville of Rockhampton firm Piranha Insurance Brokers (pictured below).
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The award is presented annually to the most outstanding CQIB young professional. Amidst all the networking, discussion and entertainment there was also some serious fund-raising, with CQIB members donating more than $70,000 to the Royal Children’s Hospital Foundation. Images by Ray Lawler Studio
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peopleNEWS AIMS Convention goes on safari If you want a conference far from the usual crowd, where the air is tinged with the taste of adventure and the culture is totally different from anything you’re used to, South Africa would be an excellent choice. And that’s where members of Austbrokers & IBNA Member Services (AIMS) chose to have their 2010 National Convention. Cape Town put on its best autumn weather for delegates as they arrived at the city’s Westin Hotel for five days of seminars, meetings, networking, celebrations and cultural events. The more “conventional” convention features included a presentation by consultant turned game guard Ian Thomas, who provided insights into the corporate behaviour of a pride of lions, and a hypothetical conducted by business guru Don Stammer, in which insurers and brokers battled with the market’s issues three years from now. Sponsors also provided a variety of experts to educate and challenge delegates, with coffee and meal breaks centred on the exhibition area. Events away from the convention centre were totally different from anything Australia could offer. They included dinner in a lavish tent at a vineyard operated by golfing legend Ernie Els, a soccer “World Cup” afternoon in an African township where delegates teamed up with local children in a mini-tournament; excursions to the summit of Table Mountain and to Robben Island, where Nelson Mandela and other anti-apartheid activists were once prisoners; and a final-night dinner in Cape Town’s oldest building, the Castle of Good Hope, built by the Dutch in 1666. AIMS delegates praised the convention as a breath of fresh air, an excellent way to learn more about another culture, and – in business terms – a great environment to listen, learn and network. Next year’s AIMS National Convention will be a lot closer to home, on the Gold Coast. Images by Ray Lawler Studio
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Anzac Day in Cape Town Like many Australians far from home, AIMS convention delegates still wanted to commemorate Anzac Day. A dawn service officiated by convention MC Tim Hyde drew a large number of Australians and even some New Zealanders (pictured above), who shrugged off the previous late night to spend some time honouring the Anzac oath for the fallen: “We will remember them.�
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Music and singing and dancing… AIMS delegates travelled to the Kirstenbosch National Botanical Gardens on the eastern slopes of Table Mountain for a memorable dinner hosted by Vero. And there was a surprise to accompany the lavish fireside dinner in the surrounds of the 100-year-old gardens – some equally inspiring entertainment. This time it was provided by children from the Hout Bay Music Project Trust from south of Cape Town, who played string instruments and drums, as well as singing and dancing to traditional African music and Western pop with an African flavour. Suncorp Chief Executive Commercial Insurance Anthony Day and Intermediary Relationship Manager Joanne D’Amour found themselves surrounded when they were asked to pose with the performers.
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World Cup – with a difference One of the cultural highlights of the AIMS Convention was a soccer tournament devised by Zurich Australia. It brought out all the competitive instincts of delegates and also enabled them to gain a glimpse of life in one of Cape Town’s oldest African townships, Langa. With the soccer World Cup set to begin in South Africa a few weeks after the convention, what could have been more logical than a tournament based around the draw for the World Cup? After being bussed to a soccer club in the centre of Langa, each delegate was given a country to represent, with 10 per team. Each team was also given three young players from the local football club to provide some skill and allow delegates to make liberal use of the interchange benches. To cover for the various levels of fitness, the fields were quarter -size, the halves lasted five minutes and an ambulance stood by, just in case. The afternoon resulted in some great sporting moments, with teams bonding in common purpose. Some went further than others. The New Zealand team, for example, adopted some decidedly Kiwi traits (above). By the time they reached the final – where they were thrashed by the Ghana team (above right) – the NZ team even performed a passable haka. All participants had a great time, and the kids went home full of ice cream and soft drinks and memories of friendly and happy Australians. Each boy carried over his shoulder a backpack containing soccer balls, pumps, shin pads and fitted boots, donated by Zurich Australia, which also made a cash donation to the club. Now, for the rematch next year…
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Ben Oliver
The Scene: The Prime Minister of Australia is reclining on a green Chesterfield, his feet resting comfortably on an American hardwood coffee table. He’s intently watching a nearby TV showing a ping-pong match. The tinny voice of the commentator speaking in rapid Mandarin is at full volume. PM: C’mon Wang! C’mon Wang! Argghh! Mā de! Tā yǒu máfan le!”
A knock on the door interrupts his concentration. PM: Enter!
His butler – er, Domestic Operations Assistant – Eric Smithers enters.
Smithers: Prime Minister, Mr Henry is here regarding the…
It’s before midday. Now, to the tax review… After an exhaustive analysis I have 138 recommendations, which I believe will streamline and simplify Australia’s tax…
Kevin has returned to staring at the ping pong match. He interrupts. PM: Kenny, in brief, what are your recommendations, in 10 words or less?
PM: I’ve told you a hundred times, Eric, my name is Kevin.
Henry: Well, Prime Minister, it’s a little difficult to summarise three volumes into 10 words. If I could go through these recommendations…
The Prime Minister rolls his eyes in exasperation.
PM: Suit yourself. Killjoy.
Smithers: Yes sir. Mr Henry, sir.
PM: Wúliáo! Wǒ tǎoyàn yúchǔn shuì! Smithers: I’m sorry sir?
PM: Nothing, nothing. Send him in. Shuìshōu shì wúliáo!
Treasury Secretary Ken Henry enters. He is struggling under the weight of three massive volumes.
PM: Whoa! Easy there Kenny! I asked for a tax review, not War and Peace! What is all this?
Henry dumps the books on the coffee table, nearly hitting the Prime Minister’s outstretched RM Williams boots and blocking his view of the TV. He remains standing. PM: And would you mind scooching that over to the left a bit? Wang is drilling Jan-Ove Waldner in the world champs and I want to see the end. Henry: World champs, Prime Minister?
PM: Ping pong, Kenny, ping pong! Fantastic game. Picked it up when I was abroad. Did you know Wang was picked for the Chinese men’s national squad when he was only 15?
Henry: Ahh, no Prime Minister, I didn’t know that. PM: Amazing isn’t it! And Kenny, it’s Kevin, remember? Gai lan tea, Kenny? Henry: I’m sorry, Prime Minister?
PM: Kevin, Kenny, it’s Kevin! Would you like some Gai lan tea? Henry: No, thank you, Prime Minister. I’m fine.
PM: I wasn’t paying you a compliment, Kenny, just asking. Care for some rice wine? Henry: I probably shouldn’t, Prime Minister.
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Kevin sighs and turns down the volume on the TV. Henry: I believe first of all we need to replace state-based stamp duty with an alternative form of taxation…
PM: What? Are you crazy? We can’t do that! The states are already peeved about the hospitals takeover. They’d eat me alive!
contribute to the cost of fire services, not just those with insurance… PM: Shénme shì dìyù? Are you telling me that not everyone pays for fire services?
Henry: That’s right, Prime Minister. The state and federal governments contribute some money, but some states still get most of their funding through a levy on insurance. Essentially those without insurance are not contributing towards the provision of fire services. PM: But this is outrageous! Why hasn’t this been brought to my attention before? Henry: It’s been the subject of nearly six different state and federal reviews and commissions of all kinds, Prime Minister.
PM: Make that seven, Kenny! And it’s Kevin. We need to outlaw this tax! Ban it straight away! I can’t believe this has been going on for what, since the Howard years?
PM: Kevin, Kenny, Kevin! Next recommendation?
Henry: Well before that actually, Prime Minister. Insurance levies have been funding fire brigades for at least a couple of hundred years.
PM: Great idea! Why didn’t I think of that! More money in their pockets for retirement means happier voters. And happy voters don’t vote out the government of the day, do they?
The end of insurance taxes will define my Prime Ministership! It is the key message that will take me to a second term! It will…
Henry: But Prime Minister…
Henry: Well, I also think we need to lift super contributions to 12% from their current level of 9%.
Henry: Well, Prime Minister…
PM: No, I’m actually asking, Kenny. Do they? I have no idea. Skipped psychology during my uni years to watch Chinese arthouse flicks. Love Chow Yun-fat. Have you ever seen An Autumn’s Tale? Henry: No, I haven’t.
PM: Seminal piece of work.
Henry: Moving on, Prime Minister. I also wanted to talk to you about taxes on insurance. PM: What about them?
Henry: Well, they are, in the review’s opinion, an unfair tax that disincentivises people taking out insurance.
PM: Disincentivises! Now you’re talking my language! What should we do, Kenny?
Henry: The review recommends moving to a land-based tax, whereby all people insuranceNEWS
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PM: That’s a shame. No matter. We’ll simply pin it on Howard and incriminate Abbott by association! I can see the headlines: Rudd dismantles unfair insurance taxes. No, wait! Action Rudd axes insurance scam!
The phone rings (the Brisbane Lions theme tune).
PM: Kevin speaking. Hello Kochie! What’s happening, pal? What? Now? Are you serious? Oh mate, I totally forgot.
He hangs up and springs from his chair.
PM: Look, Kenny we have to cut this short, mate. I forgot I’ve got Kochie for 18 holes at Chatswood at 10.30. Henry: But Prime Minister….
PM: Look, just choose, oh I don’t know, let’s say four recommendations. Send them through to Swannie and have him take care of the details. Henry: But what about the insurance tax issue? The Prime Minister looks confusedly at his Treasury Secretary. PM: The what issue?
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Club Marine Business Insurance for Boat Dealers, Repairers and Retailers Expert protection for your marine business
Trusted to deliver tailored products and solutions for marine businesses For more information contact our Marine Business Insurance Underwriters on 1300 402 040. www.clubmarine.com.au
Insurance is underwritten by Allianz Australia Insurance Limited (Allianz) AFSL No. 234708 ABN 15 000 122 850. Club Marine Limited (Club Marine) AFSL No. 236916 ABN 12 007 588 347 is a related body corporate and an agent of Allianz. Please read the Product Disclosure Statement (PDS) available by phoning 1300 402 040 before deciding if this product is right for you.
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