MINISTERIAL MINDSET: Kelly O’Dwyer’s views on insurance issues THE MANSFIELDS: Claims excellence awards rebooted NOT THAT EASY: SME buying behaviour is complex
LLOYD’S TAKES THE BRAKES OFF Chief Commercial Officer Vincent Vandendael details new steps towards a faster future
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Contents 6 Newsmakers » 10 Question time » Insurance News puts Revenue and Financial Services Minister Kelly O’Dwyer on the spot with a series of questions focusing on the issues that matter most to the insurance industry.
16 Red alert » A set of underwhelming financial results has forced the major insurers to review their strategies.
18 No time to go slow » Lloyd’s is accelerating its technological program as it plans for an expansive future.
22 Real danger » AI promises world-changing benefits – and some truly terrifying downsides.
28 Big Data, big ambitions » Insurers are moving to utilise the vast reserves of information at their disposal, but the process is creating new risks.
32 Front runners » Insurance News spoke to four insurtech leaders to find out what they believe the most exciting start-ups and industry trends will be this year.
34 Broking rebooted » Robo-advice is coming to general insurance, according to fintech Clover – but it doesn’t have to spell the end for human intermediaries.
36 Sticking to the strategy » JLT has secured a strong position in the local market, and new Chief Executive Nick Harris sees opportunities ahead.
42 In the mix » SME broker usage appears to have stabilised, but insurance buying behaviour may be far more complex than previously realised.
46 Delivering in style » Elyse Henderson draws on a diverse business background as AUB Group’s Chief Operating Officer.
50 The Mansfields return »
51 Where the money went » This is how we’ve used the surplus cash from last year’s Mansfield Awards for Claims Excellence.
54 Standing firm » ASTA Group’s Dave Bazen believes traditional loss adjusting values still hold true in a digital world.
60 From beta to alpha with Epsilon » Chairman Paul Lynam says the underwriting agency is gaining broker support as it expands.
62 The good way to deliver bad news » ‘Incremania’ is rampant in the commercial motor space, so the broker’s approach is important.
64 Shifting landscape » Insurance law firms are experiencing unprecedented change as the sector evolves.
companyNEWS 66 School cover » QBE product shelters parents from fees default.
66 Strata options » CHUiSaver expands digital offering.
peopleNEWS 68 70 73 74 76 78 81 82 84 86 88
QUS celebrates decade » Marsh conference a hit with partners » Making a splash at HDI party » LMI throws birthday bash » McLardy McShane highlights putting prowess » Allianz brokers tee off » Lights, camera, action at CGU brunch » JLT marks International Women’s Day » AIG shines light on cyber » Lloyd’s toasts 20 years in Australia » UAC celebrates Sydney expo success »
90 maglog »
Claims excellence comes under the spotlight with the second awards event in July.
Cover: Lloyd’s Chief Commercial Officer Vincent Vandendael Image: Kym Thomson
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Destruction: a Florida trailer park after Hurricane Irma struck in September last year
Experts predict active hurricane season
Colorado State University experts have forecast a slightly above-average Atlantic hurricane season this year. Research scientist Philip Klotzbach and forecast co-author Michael Bell envisage 14 named storms, seven hurricanes and three major hurricanes in the season from June 1 to November 30. “We anticipate a slightly above-average probability for major hurricanes making landfall along the continental US coastline and in the Caribbean,” they say. Last year was the busiest US season since 2005,
with 10 of the 17 named storms reaching hurricane strength. Hurricanes Harvey, Irma and Maria caused extensive damage and contributed to one of the worst years on record for insurance losses. The National Oceanic and Atmospheric Administration says a typical year has 12 named storms, six hurricanes and three major hurricanes rated Category 3 or higher. The forecast will be updated on May 31.
CSU forecasters flag another busy Atlantic hurricane season, 9 April
The committee is not persuaded that the current voluntary approaches… are sufficient to deter misconduct and address the poor practices that have become all too prevalent in the life insurance industry.
– The Parliamentary Joint Committee on Corporations and Financial Services pulls no punches in its final report on the life insurance industry
Zurich chief resigns
Zurich Australia’s General Insurance Chief Executive Raj Nanra will leave the business later this month. The company said this afternoon that Mr Nanra “decided to resign” and will depart on April 20. Chris Waterman, the Singaporebased Head of Commercial Insurance Asia Pacific, will oversee the business in addition to his current responsibilities. “Chris will spend a significant amount of time in Australia and work closely with the local leadership team to manage the business, support Zurich's partners and ensure that customers’ needs are fully met,” Zurich said.
Mr Nanra joined Zurich in June 2014, first as regional audit director Hong Kong. He then moved to the Australian team holding several roles including Chief Financial Officer, before being promoted to Chief Executive General Insurance. Asia Pacific Chief Executive Jack Howell says Zurich has the team in place to build on Mr Nanra’s achievements. “Our goal is to build on and accelerate the positive changes we’ve seen in our Australian general insurance business in recent years,” he said. Zurich CEO announces sudden exit, 11 April April/May 2018
Mega-ships spark cyber fears Technological advances in the shipping industry are raising new concerns, alongside risks associated with operating ever-larger vessels, the International Union of Marine Insurance (IUMI) says. “IUMI is… concerned about advances in the digital applications involved with naval architecture and the operation of vessels – particularly crew training and their ability to manage cutting-edge technology and large amounts of data,” the union says. There is evidence collision frequency is increasing, possibly due to the introduction of new technology, IUMI says in a market update for its spring conference in Hamburg. The hull casualty frequency of total losses within the past three years has stabilised, but market concerns remain. “The global premium base has been eroding year on year as a result of reduced
asset values, reduced activity in some sectors, and reduced premium rates,” Ocean Hull Committee Chairman Mark Edmondson says. “Increasing values of single risks bear the potential risk of new record losses, and attritional losses are a growing concern.” The cargo market is improving and stabilising but remains highly competitive with an abundance of capacity. “As underwriters, we are being challenged to improve our approach and utilise tools such as third-party data, sensor technology and predictive analytics,” Cargo Committee Chairman Sean Dalton says. He warns the recent NotPetya ransomware attack on shipping company Maersk “highlights potential cyber exposures and consequences”. Mega-ships, technologies raising risk: IUMI, 9 April
Telematics trial launched New South Wales will trial telematics to improve young drivers’ safety and reduce the state’s compulsory third party (CTP) insurance costs. Telematics, described as a “black box” for cars, is widely used by insurers overseas to record and rate driver behaviour such as speed, acceleration, braking and turning. “The research shows that drivers who use telematics become safer and better able to adapt to changing driving conditions as a result of the real-time feedback,” Finance, Services and Property Minister Victor Dominello said. “We want the NSW CTP scheme to be cutting-edge and this technology has the potential to reduce premiums for young drivers. “Most importantly this technology has the potential to save lives.” Up to 1000 drivers under the age of 25 will take part in the six-month trial, which will start in the second half of the year. “Western Sydney drivers under 25 years are up to 4.5 times more likely to be involved in casualty crashes, and up to five times more likely to be involved in crashes resulting in serious injury or fatality,” Roads Minister Melinda Pavey said. Eligible participants will receive $100 via the CTP scheme, with a partial payment at the start of the trial and the remainder on completion. Young NSW drivers to trial telematics, 9 April
Insurers set for increased profits Australian property and casualty insurers are in line for “sound” underwriting profits this year after navigating a spike in claims last year, according to S&P Global Ratings. “We expect the full benefit of incremental [premium] hardening for commercial lines to fully flow [this year], supplemented by further rate increases,” the ratings agency’s Australian sector review says. Gains are likely despite highly competitive conditions locally and internationally. “It is a watching brief in terms of how much rate increases can be put through, and it is very much an account-by-account proposition,” Primary Credit Analyst Craig Bennett told insuranceNEWS.com.au. “I don’t think the momentum has died at all in terms of the willingness to try to increase rates. It is just balancing that with the competitive environment we are in.” Operating results were slighter above S&P’s expectations last year, as earnings proved resilient in the hardening market despite large catastrophe claims.
Reinsurance programs have been effective, covering a higher percentage of claims in the past couple of years. Mr Bennett says global overcapacity has put pressure on reinsurance rates, and large insurers are structuring more complex programs across a range of reinsurers. “There is more ‘optionality’ embedded, which is really in favour of the insurers,” he said. The report – called Pricing for Risk is Helping Australia’s Property and Casualty Insurers Navigate Choppy Waters – gives the sector a stable outlook. S&P expects moderate premium rises in domestic motor and home and contents, with newer market entrants creating price tension and offering differentiated products. Incumbents are responding to an “uncompromising” competitive environment through digital technology investments, operational efficiencies, particularly in claims management, and customer experience improvements. insuranceNEWS
The agency says insurers are not immune to “conduct risks”, with the Australian Securities and Investments Commission requiring refunds for add-on products sold through vehicle dealerships. “At this stage, we believe such misconduct findings have not materially affected the insurers’ brands or reputations to the extent that their… competitive positions will be diminished.” Some investment portfolios showed a slight increase in risk appetite last year, but S&P says capital adequacy remains an overall strength. Rate gains help insurers through ‘choppy waters’, 9 April 2018
Home ownership: LMI helps keep the dream alive
Lenders’ mortgage cover ‘helps home owners’ The Insurance Council of Australia (ICA) has rejected suggestions lenders’ mortgage insurance (LMI) is unnecessary and could be replaced with increased interest rates on loans that require the cover. It says overseas experience suggests costs could be higher under the interest rate approach, and borrowers with less than a 20% deposit would find it harder to obtain home loans without LMI. “Affordability and accessibility to home ownership has and continues to be a key focus of Australian governments,” ICA says in a submission to a Productivity Commission’s draft report on financial system competition. “This is the key purpose and benefit of LMI, and LMI providers specialise in managing the higher risks presented by that cohort of borrower.” Consumer group Choice’s submission says LMI “masquerades” as a consumerfacing product while protecting only the lender. It wants the cover abolished.
The issue was discussed at public hearings in Sydney and Melbourne. A Genworth submission says Genworth and QBE have about 64% of the LMI market, while Westpac LMI and ANZ LMI are captive providers. It notes Australian LMI pricing is “significantly lower” than in some other jurisdictions. ICA says there is a “robust” dynamic between QBE and Genworth and disputes a draft report observation that the competition incentive is limited as costs are passed on to consumers. “The nature of the tender processes that these LMI providers engage in is highly competitive and ensures the best possible price is offered to the lender and the least expensive price is passed through to the borrower,” it says. “In addition, there are competitive pressures on the domestic LMI providers due to the role of offshore reinsurers.”
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Broking at the SME level is a relatively new art. Prior to the 1970s, small businesses commonly bought their insurance from agents who were “tied” to one or possibly two insurers. The move to those agents becoming independent brokers came about because the insurers wanted to eliminate the cost of maintaining agencies all over the country. Today the broker sits between the customer and the insurer, but the rise of technology gives insurers the opportunity to once again reduce a significant distribution cost. There’s no doubt that algorithms and Big Data are central to insurers’ drive to build a new interdependency between them and their customers. The endgame is to retain the customer for life. Is that a threat to the role of the broker? You bet. New technology with strange names (why do so many developers ignore vowels?) holds the promise of untangling the complexities of insurance policies, which is good for consumers. At the AIMS Conference in Perth in April, General Manager Glenn Schultz pointed out that insurance broking is itself evolving as customers’ needs change. He sees brokers becoming risk specialists, with insurance just one of a series of service lines that meet customers’ risk concerns. (We will have a full interview with Mr Schultz in the next edition.) So brokers are most likely to find that insurtech holds the key to their futures, rather than being something to be feared. But it will be an enabler for brokers, not the whole answer that it seems to be for insurers. Mr Schultz also believes the broker of the future must be recognised as a true professional, which has implications for training standards. Uncertainty is now normal. In this issue of Insurance News we look at the upsides and the potential downsides of technological change, discovering along the way that like so much of the world’s radical developments, we only know what we know and we don’t know yet where all this is going to end up. But ignoring change isn’t the answer.
ICA defends lenders’ mortgage cover, 9 April
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What prompts SMEs to review their insurance? The results might surprise you.
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Insurance News puts Revenue and Financial Services Minister Kelly O’Dwyer on the spot with a series of questions focusing on the issues that matter most to the insurance industry
The Insurance Council says insurers have already paid out more than 95% of residential home and contents claims for Cyclone Debbie. How do you rate the industry’s response? Cyclone Debbie now ranks as the second most expensive cyclone in Australian history, and the most expensive cyclone to hit Queensland. The industry’s response to Cyclone Debbie claimants shows the insurance industry has improved its response to disaster recovery and this is a great outcome for consumers. The Government has agreed with the Northern Australia Insurance Premiums Taskforce that mitigation is “the only way to reduce premiums on a sustainable basis”. So why have calls to increase mitigation spending to $200 million per year been ignored? The Australian Government is committed to working closely with the insurance sector, as well as with states and territories and other sectors, to improve our national approach to mitigating the impacts of natural hazards. The report of the taskforce found that mitigation should be the central focus as a sustainable long-term way of reducing premiums. However, mitigation is complex and the options canvassed in the report involve 10
action from insurers, all levels of government and property owners. Insurers play an important role in reducing the cost of premiums by taking account of efforts made by consumers to reduce their risk and through any mitigation work that is undertaken by households as well as by developing more innovative insurance products. Insurers (and several previous reviews) assert that high premiums in northern Australia are simply a reflection of the risk. Why then do we need the Australian Competition and Consumer Commission (ACCC) to carry out another inquiry? The Government recognises that insurance premiums in northern Australia are generally higher than in southern cities and have increased significantly over recent years. This has a real impact on people – as it affects everyone in those areas in a significant way – and the Government remains committed to developing solutions. This is the opportunity for anyone in northern Australia who has faced rising insurance premiums to raise their concerns directly with the ACCC. The ACCC inquiry, which commenced on July 1 last year, is coninsuranceNEWS
sidering the competitiveness of markets, consumers’ access to information, regulatory issues and the key cost components for insurance pricing, especially catastrophe risk. The Government will closely monitor the inquiry and findings. If there is evidence to indicate that the market is not competitive, or that premiums are not properly reflecting the risks facing residents in northern Australia, the Government will consider the options available to it to improve insurance affordability. The Government has confirmed it “will not intervene directly in the insurance market”. Does this mean government-run reinsurance pools, mutuals and comparison websites have been ruled out? The Northern Australia Insurance Premiums Taskforce found that mitigation activities to reduce the risk of damage from cyclones are the only way to reduce premiums on a sustainable basis. The Government accepts this finding, and will not intervene directly in the insurance market at this time. The Government has established a North Queensland Insurance Comparison Website, which has been operational since
“If there is evidence to indicate that the market is not competitive, or that premiums are not properly reflecting the risks facing residents in northern Australia, the Government will consider the options available to it.”
Committed to improving competition: Kelly O’Dwyer at the Insurance Council of Australia forum in March
March 2015, that provides comparison information on available home buildings and contents policy features and indicative premiums for nearly 800 Queensland towns and suburbs north of Rockhampton, including coastal and inland regions. What can be done to assist consumers in understanding and comparing insurance products? In addition to continuing the North Queensland Insurance Comparison Website, the Government is proceeding with a set of important reforms to place downward pressure on insurance premiums through increased accountability and transparency within the industry, as well as proposals to increase consumer understanding of insurance, which were recommended as part of the Senate inquiry into the general insurance industry. The Government has tasked the Australian Securities and Investments Commission (ASIC) to develop options to improve consumer understanding of insurance products as part of the development of a financial literacy strategy, and to work with industry on its ability to provide guidance to consumers on their insurance needs.
Do you believe there is enough transparency from insurers over premium calculations and increases? In response to the Senate inquiry on Australia’s general insurance industry the Government has committed to developing proposals to improve consumer understanding and access to information through better transparency and enhanced disclosure practices in the insurance sector. The Government looks forward to working with industry and consumers to develop sensible and worthwhile reforms. A recent headline said that “insurers should be ashamed” after the recent ASIC crackdown on deficient add-on insurance. Do you agree? ASIC’s investigations into add-on insurance sold through car dealerships identified negative outcomes for consumers, such as low claim payouts relative to premiums, a lack of price competition and the sale of poorly designed products. The Government supports ASIC’s actions to seek compensation for consumers who bought add-on insurance products with little or no value. In fact, ASIC’s work will result in some of their insuranceNEWS
largest ever compensation programs with consumers receiving refunds of around $123 million. We encourage the industry to continue to work with ASIC to help address the market failures that were identified and improve consumer outcomes. The Government takes consumer outcomes seriously and has recently consulted on draft legislation to give ASIC product intervention and design and distribution powers. These reforms will ensure that financial products are targeted and sold to the right consumers. Does the Government feel it should act on the Productivity Commission’s belief that there is an “illusion of competition” in the general insurance industry? If so, what sort of action could be taken? The Government is committed to improving competition across all industries within the financial services sector – that is precisely why the Government has tasked the Productivity Commission to look at these issues. The Productivity Commission’s draft report is out for consultation and the Government will take a close look at its findings and its recommendations. 11
“I want to see equal numbers of women in leadership roles not just in the insurance industry, but across all industries.”
Can you give any further details on when unfair contract terms will apply to insurance contracts? Why has the insurance industr y’s argument against this failed? The Government has publicly committed to look at removing the unfair contract terms exemption for insurance contracts. This is in response to the Senate committee report on the general insurance industry, as well as the recommendation from the Australian Consumer Law Review final report. Treasury will be consulting on the detail of how the reforms will be implemented. The consultation on these issues is expected to occur over the coming months. Are vulnerable consumers, such as those with mental health conditions and victims of family violence, being treated fairly by the insurance industry? If not, what can be done about it? With respect to victims of family violence, I believe more can always be done to help the very large number of people – the majority of which are women – to be more at ease when interacting with the financial services sector. The work the Insurance Council of Australia is undertaking in improving the 12
insurance industry’s standards on how it interacts with customers experiencing vulnerability, including those experiencing family violence, is timely. I am very open to having a dialogue with industry about further improvements they can make, and any regulatory barriers they see which prevent them from working in the best interest of victims of family violence. In relation to mental health, this is an issue that I acknowledge some in the general insurance industry have acted on in relation to policy coverage. However, given the prevalence of mental health conditions I am very conscious industry needs to consider what further steps can be taken to assist those suffering from a mental health condition, particularly in relation to policy coverage. The Institute of Actuaries report on mental health and insurance, which was released last year, provides good insight in to the complexity of mental health issues and the insurance industry. It is incumbent upon insurers to ensure their claims processing procedures support those who are suffering from mental health conditions. You were the only woman to make Insurance News magazine’s Top 20 influencers in general insurance this year. Is the insuranceNEWS
industry doing enough to promote diversity, particularly at the higher levels? What else can be done? I want to see equal numbers of women in leadership roles not just in the insurance industry, but across all industries. The Australian Public Service – another one of my ministerial responsibilities – is tracking in the right direction. Today, eight of the 18 departmental secretaries are women, as are 43% of the Senior Executive Service. As of December 31 last year the proportion of women on Government boards is 44.5%, with women holding 33.7% of chair and deputy chair positions. This is the highest overall result since public reporting began in 2010-11. Our target is for women to hold half of all Australian Government board positions. And in order to maintain our focus we will publish our overall progress on our 50% target every six months in addition to reporting in detail in the Gender Balance of Australian Boards Report. By contrast, women currently make up a mere 26% of ASX 200 directorships and last year comprised 35% of new appointments to ASX 200 boards. We need them to continue climbing. Given the current levels of representation
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â€œThe Federal Government continues to advocate for the abolishment of inefficient stamp duties, strata commissions and other levies on general insurance premiums.â€?
on ASX 200 boards is 18.5% points less than the Government sector, the private sector, including the insurance industry, can, and must, do better. They need to double down on their efforts by ensuring that have the right policies and settings to ensure women can build their careers and the pipeline remains full. The general insurance industry feels it is unfairly dragged into inquiries and reviews sparked by issues in life insurance and banking. It also feels fatigued by the sheer number of reviews that have taken place in recent years. Do you sympathise with these views? I note the insurance industryâ€™s concerns regarding the number of inquiries and reviews it has been involved with in recent years. That said,3 it is pleasing to see the insurance industry engaging with government, regulators and consumer representatives to address the issues raised by these inquiries and reviews. It is important to continuously review and improve the industry to benefit consumers. I want to note the wonderful work the Insurance Council of Australia is undertaking in its review of the industry code of practice. 14
Many in the industry believe mainstream media campaigns and politicians seeking easy wins with their electorate too often set the agenda on insurance regulation and reform, which can lead to a focus on the wrong issues. Could the Government listen to the industry more, and have greater faith in its ability to solve its own problems? The Government has a good relationship with the insurance industry and has committed to work with the industry to improve disclosure practices and consumer understanding of insurance products. A number of reviews over the last decade have highlighted the inefficiency of state insurance taxes, yet many remain. Should these taxes, which contribute to underinsurance, be abolished? And what can the Federal Government do to encourage this? This is a matter for state and territory governments. Our position, however, remains clear. The Federal Government continues to advocate for the abolishment of inefficient stamp duties, strata commissions and other levies on general insurance premiums. These taxes increase the cost of insurance for policyholders and can lead to under or non-insurance. Removal of these taxes would see an immediate reduction in insuranceNEWS
insurance premiums for policyholders. For instance, in Queensland, the stamp duty removal would mean a 9% reduction immediately. Broadly speaking, what, if any, concerns does the Government have over the performance of the general insurance industry in Australia and what are the main areas where it would like to see improvements? The insurance industry is crucial to the Australian community and wider economy and relied upon by individuals in times of need. Because of this, the stability and reputation of the general insurance industry is very important. There are often negative perceptions of the insurance industry in the community or the media so I acknowledge the industry has had to work hard to regain consumer trust. However, this should be an ongoing effort especially given the current focus on competition and misconduct in the financial services sector more broadly. While we have already touched on some of the areas where improvements could be made, I look forward to continuing to engage with the industry on various issues which are in progress and likely more which * will come.
Red alert A set of underwhelming financial results has forced the major insurers to review their strategies By Bernice Han
QBE’S HEADLINE-GRABBING $US1.2 BILLION LOSS LAST YEAR just about sums up the earnings season for the Australian insurance market’s three powerhouses. Costly foreign adventures, underperforming units and huge catastrophe bills marred the results of QBE, Suncorp and IAG to varying degrees. Losses from a Victorian hailstorm were among the culprits behind a 34.6% decline in first-half net profit to $234 million for Suncorp’s Australian general insurance business. While IAG delivered a 23.5% jump in half-year net profit to $551 million, the insurer signalled it will pull the plug on its moneylosing Asian operations – a move some analysts say is long overdue. Of the trio, QBE appears to have suffered the biggest setback, following an $US844 million net profit in 2016. Chief Executive Pat Regan, who took over at the start of this year, made good on his vow to take tough choices to revitalise the insurer’s fortunes. One of his first major decisions, more than a month into the job, was to sell the Latin American operations to Zurich Insurance Group for $US409 million. “While QBE has a number of strongly performing businesses in major insurance markets, our portfolio remains diverse both in terms of geography and product mix,” Mr Regan says. “There is scope to simplify the business to ensure we operate only in markets and products where we have a competitive advantage and can deliver profitable growth. “Following a strategic review of our footprint in Latin America, we have decided to exit the region to focus on our core markets and improve the quality and consistency of our results.” Bell Potter analyst TS Lim says the withdrawal from Latin America makes sense. “QBE is a work in progress – QBE is a very complex business, it has too many operations everywhere,” he tells Insurance News. “It’s very hard to manage. It may be global, but I believe it doesn’t have operating scale like true global players such as AIG, Allianz etc.” Mr Lim does not rule out QBE putting up the “for sale” sign on more assets, pointing to the insurer’s use of the words “reposition” and remediate” in its earnings presentations. “Be that as it may, QBE’s result [last year] is largely academic now and [this year] is shaping up to be another transition year, with lots of business remediation to be done,” Mr Lim says in his post16
earnings report. “At least QBE is now free of the Latin American millstone and we think more asset sales will be forthcoming. “QBE’s focus on core markets, simplification initiatives and back-to-basics underwriting also gives us cause to be optimistic in the year ahead… QBE in its current form remains a very complex organisation with resources and capabilities that are believed to be stretched too thin across the globe.” Hurricanes and California wildfires cost QBE dearly as the North American operations ran up a pre-tax $US236 million loss, down from a profit of $US155 million the previous year. Its Asia-Pacific operations were also in the red, with a pretax loss of $US93 million. The Australian and New Zealand business and the European operations were in the black with pre-tax profits of $US438 million and $US335 million respectively. Suncorp’s domestic general insurance arm faced strong headwinds from natural hazards, which cost the Queensland-based financial services group $395 million – about $65 million above its allowance for the period. Net incurred claims grew 14.7% to $2.7 billion in the six months to December 31. The big question for Suncorp is whether its much-vaunted Marketplace strategy to offer a one-stop shop for insurance, banking and other financial products will work. Chief Executive Michael Cameron has made no secret of the fact Marketplace is inspired by the success of tech giant Apple’s retail stores. “We understand he is seeking to provide a range of products connected to a series of needs depending on a particular lifestyle or stage of life,” S&P Global Ratings Director Financial Services Group Craig Bennett tells Insurance News. “It’s easy to say but can prove difficult to achieve. This will, in [Suncorp’s] view, improve the interconnectedness of customers with the group, and support future retention.”
But what works for the iPhone-maker does not necessarily guarantee success for others hoping to emulate the retail formula, according to sceptics. “I don’t think it’s going to work,” Morningstar analyst David Ellis tells Insurance News. “Many people forget it’s an insurance, bank and wealth manager. “It’s not an Apple or Google. The fact Suncorp has one of its retail stores in Sydney’s Pitt Street Mall sums up what is not right about the Marketplace strategy. “They are all high-level fashion stores [on Pitt Street]… and here you have a Suncorp store right in the middle of the most expensive precincts in Australia. It doesn’t belong in there, but it is consistent with the Marketplace strategy. “Is it going to make them any money or is it just an advertising issue, rather than a serious attempt to increase customer numbers and ultimately shareholder value? There is a big question mark there.” Suncorp is pouring significant resources into making Marketplace succeed. It could have been better invested in Suncorp’s core businesses, Mr Ellis says. “It’s not just the amount of money. It’s the management distraction, focusing on a massive project rather than focusing on the nuts and bolts of making the business generate more consistent profits.” Over at IAG, Chief Executive Peter Harmer has given the clearest signal yet that his group is ready to walk away from its Asian business, which narrowed its underwriting loss to $6 million from $12 million. IAG is examining all options under a strategic review of operations in Thailand, Indonesia, Vietnam, India and Malaysia. The review is due to be concluded this year. “We have always taken a measured approach to Asia and we believe this is the right time to review the immediate and longerterm strategic options for our individual Asian businesses given the * limited expansion opportunities,” Mr Harmer says.
The big question for Suncorp is whether its much-vaunted Marketplace strategy to offer a one-stop shop for insurance, banking and other financial products will work.
No time to go slow Lloyd’s is accelerating its technological program as it plans for an expansive future By Terry McMullan
THERE’S SOME IRONY IN THE FACT that Lloyd’s is planning to showcase its technology to brokers and underwriters in a display outside its in-house coffee shop. The venerable insurance market began life in 17th-century London at Edward Lloyd’s coffee house, and several-hundred years later the practices pioneered there are still proving more than a little difficult for some 21st-century brokers and underwriters to let go of. But paper-based files, glacially slow processing and three-year delays in reporting financial results are now things of the past, and Lloyd’s is dragging the luddites along with it as it charges into an expanding business world and a technologically driven future. The drive towards swift, no-nonsense change is being led by Chief Executive Inga Beale, ably supported by her lieutenant, Chief Commercial Officer Vincent Vandendael. Mr Vandendael was in Sydney in April to help celebrate Lloyd’s 20th anniversary of operations in Australia. He also met key partners and was a keynote speaker at the Steadfast Convention in Melbourne. His presence underlined the important place Australia holds for Lloyd’s. The Asia-Pacific region, which includes China, is an important growth market, contributing some 14% of Lloyd’s premium income. About one-third of that regional income comes from Australian businesses, which account for about 4.5% of Lloyd’s total premium income. In an exclusive interview with Insurance News in Sydney – even at the end of a day in which he had arrived from London and attended a series of meetings – Mr Vandendael displayed plenty of enthusiasm describing the market’s progress modernising and expanding. The most recent major business step at Lloyd’s was the implementation of its elec18
tronic placement platform, with brokers and underwriters encouraged with some force to switch to electronic trading in an “expeditious and phased” manner. The Ebix-developed platform already handles more than 60% of Lloyd’s financial and professional lines placements, and will eventually process more than $US40 billion of premium every year. It’s a core component of the London Market Target Operating Model – better known simply as “Tom” – which is the centrepiece of Lloyd’s strategy to speed business flows and cut processing costs. Apart from pushing innovation outside its basement coffee shop, Lloyd’s is also making space on its fourth floor for an innovation lab – the kind of “fast-track, fast-fail” facility that’s becoming a must-have feature for leading financial services organisations. Once it’s set up around the end of this year, market participants and entrepreneurial geeks will be able to work together designing technology-driven solutions to old market challenges. For Mr Vandendael, it’s yet another exciting step in a process he has been following and facilitating since he joined Lloyd’s in December 2012 as director of global markets. Earlier this year he became Chief Commercial Officer – a role that brings his focus closer to Lime Street and sharpens his influence. He says his responsibilities now also involve “promoting and protecting” Lloyd’s business across the globe, seeking new business opportunities and monitoring the development of emerging markets, while managing Lloyd’s international operations. That’s no easy task in an organisation that has seven years left to run on its ambitious Vision 2025 global expansion and technological transformation program. He tells Insurance News his new role is more closely matched to the changes Lloyd’s is undergoing. insuranceNEWS
Modernising Lloyd’s: Vincent Vandendael
“We decided last year to structure ourselves around what we call the three Ps – ‘protect, promote, provide’. Within that we thought the title of Chief Commercial Officer is a better reflection of the ‘promote’ role that my entire team does.” Not that “promote” necessarily means spruiking the market’s business around the world, although that’s also in the job description. At its core is responsibility for making things happen at Lloyd’s, wherever it operates. While the market is best recognised for its oversight of insurance performance and processes – in the UK it’s a regulator in its own right – it’s now also muscling its way through technological change, with the upcoming innovation lab a “soft” example of an increasingly hard-nosed approach. Mr Vandendael is a leading player in the move by Lloyd’s management to mandate use of the new placement platform. With the “carrot” approach of the past few years having proved ineffective in shifting the market’s broking and underwriting traditionalists onto the electronic placement platform, Ms Beale introduced the “stick” in February. The mandate forces them to get a move on. It requires each syndicate to have written no less than 10% of its risks electronically by the end of June, with the target rising 10% each quarter until it reaches 30% at the end of the year. At that point, new targets will be imposed. “Clearly if the market had embraced it in a very extensive way, we probably would not have gone the way of a mandate,” Mr Vandendael tells Insurance News. “There is still work to be done, and the biggest part of the journey is changing behaviours and changing mentalities that haven’t changed. “In an organisation like Lloyd’s, you need to take people along with you on that journey, and I think the innovation lab and also showcasing how technology can change insuranceNEWS
“It’s important to us that we support continuous change, because otherwise someone else will do it for us.”
underwriting while also supporting and progressing it – that will help build understanding and aspirations.” Mr Vandendael recognises the change journey for Lloyd’s follows a road with no end, with innovation constantly offering more efficient and effective ways of doing things. That will be a challenge for older brokers and underwriters, but he says the incoming generation is already aligned with the concept of constant change. “I just have to look at how my daughters are using technology,” he says. “They no longer shop in the high street. They shop around online and send back what they don’t like. They use technology in a very different way. “Now we need to ensure the younger generations, brokers or underwriters, stay on that journey as well. It’s relatively easy to be sucked into an old model and not go with a change environment. It’s important to us that we support continuous change, because otherwise someone else will do it for us.” Other points made by Mr Vandendael:
Capital and catastrophes Capital hasn’t been frightened by the insurance losses it has seen in recent times, Mr Vandendael tells Insurance News. “If you look at pension fund capital, what they have allocated to insurance is still only a very small fraction of what they have available. “There is no reason at this moment… for me to believe that would change, and the reloading of capital in the recent past is evidence of that. “We think that, in the main, capital is here to stay, although you might see a shift if interest rates go up significantly.”
Lloyd’s exposure to catastrophe risks Mr Vandendael says the pre-tax loss of $US2.7 billion experienced by Lloyd’s last year has only encouraged the organisation to “focus even more on underwriting performance across the board – and not just on natural catastrophes”. The loss, reported in April, was the first in six years and a dramatic turnaround from the $US2.6 billion profit of 2016. It was driven by what Ms Beale called “one of the costliest years for natural catastrophes in the past decade”. Catastrophes in the second half led the market to pay out $US5.8 billion, resulting in a $US4.4 billion underwriting loss and a combined operating ratio of 114%. Mr Vandendael says the combined operating ratio “isn’t a good number”, but adds underwriting catastrophe risks is “an important aspect of what we do”.
Vision 2025 – growth and reality The market’s famous Vision 2025 strategy sets a deadline for Lloyd’s to become the global centre for specialist insurance and reinsurance by (among other things) accessing emerging markets and developing a more diversified capital base and equally diverse talent pool. With seven years to go, Mr Vandendael agrees the insurance environment is changing just as quickly as Lloyd’s. He sees the market modernisation program as core to meeting the strategy’s aims, but points to other aspects of Vision 2025 to illustrate how change is happening. A prime example is the call for a more diverse talent base at the market – a plan originally conceived to address the high proportion of white, middle-class men who dominate the market.
“Lloyd’s is a natural catastrophe writer and that’s not going to change. We are proud of our history and proud of our underwriting expertise, the modelling and everything else we have in that space. “But we do need to look at our underwriting performance – the large losses, the attritional losses and our expenses. Bringing that combined operating ratio below 100 is very important.”
But that narrow focus has itself diversified under Ms Beale’s patronage. The call for diversity and inclusion in insurance has echoed around the industry and is the catalyst for the Lloyd’s-led Dive-In festivals, held each year in an increasing number of cities around the world. While the strategy also saw considerable growth coming from developing markets, Mr Vandendael agrees we now live in less economically confident times. “Today growth is not always easy, and we need to make sure we focus equally on our mature markets. For example, The US will always be very important for us, as will Australia.” In Asia, the expansion program is making progress, he says. “Look at China. We now have more than 30 syndicates on the China platform. We’ve got our licence now in India. Singapore is maturing really well. We have just opened a representative office in Casablanca, Morocco. We also have a platform in Dubai. “I think what you will now see is us consolidating what we already have. “We need to make sure that what we have works well and we have licences in most of the places that are really important growth opportunities for the future.” Brexit and Lloyd’s move to set up a European operation Technology will be a key factor in the establishment of the market’s new European headquarters in Brussels, the political centre of the European Union and, coincidentally, the capital of Mr Vandendael’s home country, Belgium. (“I swear I had no real part to play in that decision,” he laughs.) In the face of so much uncertainty about when and how Britain’s exit from the EU will be handled, he says organisations “have no other option than to prepare contingency plans”. “We do know that the [UK] Government says it has an agreement on
what it calls an implementation period or transitional agreement until the end of December 2020, which is good news. We’ve been lobbying for that. “But the devil is a bit in the detail, so as long as we don’t know those details we have to continue to plan for a ‘hard’ Brexit. “There will be a point when it is triggered, and we will have to work on transferring people or hiring people in the countries where the various insurance organisations have decided to set up.” He says Brexit is “a terrible distraction” that involves significant costs, but he is hopeful the transitional arrangement being negotiated between the governments will allow Lloyd’s to maintain its access to
Europe and give it the time needed to set up whatever local infrastructure it needs. Mr Vandendael says the transfer of data around the market – and the number of times data must be rekeyed – is taking on a sharper focus as the Brexit deadline nears. “The number of times data has been rekeyed before it ends up in our system, and the data managing agents are exchanging – that is being addressed by the target operating modernisation program, and it will be even more important once Brexit happens.” New systems being introduced now will “make us more efficient, eliminate duplication or possibly even triplication, whether that’s on the risk, on the premium or the claims data.”
The need for reinsurance “We are definitely strong supporters of free trade and the free movement of capital,” Mr Vandendael says. “We will continue to strongly support that. “The more conservative or protectionist you are, the less we believe there are transfer mechanisms in place. Look at the example of New Zealand, where reinsurance has allowed them to recover quickly [from earthquake catastrophes] because capital poured in. “Other markets don’t have that, and they have struggled to recover from similar events. If you can’t get market access, if you don’t get a licence to trade, then you can’t * really offer your solutions.”
Real danger AI promises world-changing benefits – and some truly terrifying downsides By Andy Swales
ARTIFICIAL INTELLIGENCE HAS ALREADY begun to transform the world, and further giant strides are expected in coming years. From the search engines and virtual chess masters of today to the fully automated vehicles and robo-medics of tomorrow, the potential uses are vast and varied. But if Hollywood has taught us anything, it’s that for every good robot there’s a bad one lurking ominously in the background. A report from a team of UK and US academics and tech experts sounds a stark warning about the flipside – the “malicious use” of artificial intelligence (AI) by crooks, terrorists, tyrants and other bad actors. “AI systems and the knowledge of how to design them can be put towards both civilian and military uses and, more broadly, towards beneficial and harmful ends,” the report says. “Since some tasks that require intelligence are benign and others are not, artificial intelligence is dual-use in the same sense that human intelligence is.” The idea of super-smart, self-aware robots overthrowing their weak, fleshy mas22
ters is a staple of speculative fiction – and now a real-world concern for tech visionaries such as Elon Musk. For now, though, it seems the human factor remains key: robots don’t want to take over the world just yet, but the people who control them may. The report suggests AI may make known cyber threats more sophisticated and widespread, while creating new attack types across the digital, physical and political realms. Essentially, AI systems – with their propensity to exceed human performance in their given tasks – may be used to “control aspects of the behaviour of robots and malware that it would be infeasible for humans to control manually”. Examples of digital risks include using AI to automate elements of cyber attacks, which “will alleviate the trade-off between the scale and efficacy of attacks”. This may elevate the threat from “labour-intensive” attacks such as spear phishing, where highly personalised emails or other communications are used to trick recipients into exposing information or giving money. insuranceNEWS
“We expect novel attacks that exploit human vulnerabilities (through use of speech synthesis for impersonation), existing software vulnerabilities (through automated hacking), or the vulnerabilities of [other] AI systems (through adversarial examples and data poisoning),” the report says. In terms of physical threats, AI could “automate tasks involved in carrying out attacks with drones and other physical systems” such as autonomous weapons. “We also expect novel attacks that subvert cyber-physical systems (causing autonomous vehicles to crash) or involve physical systems that it would be infeasible to direct remotely.” On this latter point, the report raises the terrifying spectre of “swarms” of centrally controlled and co-ordinated drones attacking places and people, perhaps using “facial recognition technology to kill specific members of crowds”. Under political risk, the report flags “the use of AI to automate tasks involved in surveillance (analysing mass-collected data), persuasion (creating targeted propaganda)
“[AI could] automate tasks involved in carrying out attacks with drones and other physical systems.” and deception (manipulating videos)”, warning this may expand threats associated with privacy invasion and social manipulation. For example, AI systems can now make synthetic images that are nearly indistinguishable from real photographs. If they are used to produce fake photos and even video of world leaders and influential figures, even the most discerning of audiences could be fooled. As the 2016 US election showed, “fake news” can have wide-reaching impacts. Global broker JLT’s Head of Cyber, Content and New Technology Risks Sarah Stephens tells Insurance News that, as “computing power becomes cheaper and AI
applications become more simple to use, you will see hackers using that – particularly using AI to combat AI-based security systems or launch spear-phishing attacks that are very customised”. While AI will produce new threats, it may also hold the key to countering them: email spam filters already do this, for example. Ms Stephens envisages two fronts to the cyber battle – “the cyber-security front, with people using and controlling the technology, and then another front that is almost being fought AI to AI”. “There are applications [for AI in] sifting through threat intelligence and… sorting through internet traffic and the insuranceNEWS
huge volumes of reported incidents and making sense of them,” she says. “For the cyber insurance industry in particular, [it will facilitate] trawling through all reported incidents and gathering more information for the purposes of building effective databases on which to model cyber risk… there are a lot of [security] applications, potentially.” The exhaustive UK-US report limits its scope to current and developing technology or that which is plausible in the next five years. Fergus Brooks, Aon’s National Practice Leader for Cyber Risk, says it includes some “scary stuff”. 23
“We’re diving into a whole new set of technologies without adequately knowing where the security controls are and what the risk management measures are.”
But he has not “seen that much conversation in our [cyber-risk] community about how we’re securing this stuff. My concern is we’re diving into a whole new set of technologies without adequately knowing where the security controls are and what the risk management measures are.” He compares AI with other recent digital breakthroughs, from the birth of the internet to cloud storage and the Internet of Things, when “technology advancement has moved faster than the security industry has been able to keep up”. Mr Brooks says: “Every new technology brings a new set of risks and, from a risk management point of view, it’s, ‘Do the benefits outweigh the risks, have we calculated the risks correctly and what are we doing to mitigate those risks?’ “That’s what I’m not seeing in this respect. I’m seeing a lot of very excited people… not necessarily the risk conversations that should go alongside it. “That’s what happened with the internet. I don’t think a lot of people were prepared, myself included, for the fact it was going to be the Wild West out there. In 24
AI, we’re entering a whole new risk – maybe this time we can look at this technological advancement with some maturity.” Mr Brooks’ note of caution echoes the UK-US report’s call for action from a range of stakeholders, conveyed in several “highlevel” recommendations. It says governments should collaborate with technical researchers to “investigate, prevent and mitigate potential malicious uses of AI”, while researchers and engineers should “take the dual-use nature of their work seriously”, considering potential malicious applications of their work. Best practice should be identified in research, and authorities and the research community should “seek to expand the range of stakeholders and domain experts involved in discussions of these challenges”. In this country, one potential stakeholder is waiting in the wings. Last year the Australian Reinsurance Pool Corporation (ARPC), the nation’s terrorism insurance scheme, called for an extension of its coverage to include property damage arising from cyber attacks. Chief Underwriting Officer Michael insuranceNEWS
Pennell tells Insurance News there is a gap in coverage: private cyber and industrial special risks (ISR) policies can cover property damage from cyber attacks, but they exclude terrorist events. “As it stands, in the Terrorism Insurance Act in Australia, we exclude cyber from the [ARPC] scheme. If there’s an attack and it’s not deemed to be terrorism, those ISR and cyber policies will respond for physical damage. “If it’s found to be an act of terrorism, once that is declared, the policies that would normally respond will no longer. At the moment, our scheme won’t respond either. We think that’s an anomaly that should be reviewed and addressed.” The ARPC’s triennial review is due this year, and it hopes this will be considered. Mr Pennell says examples of property damage arising from cyber attacks include an exploded gas pipeline in Turkey in 2008 and the shutdown of the Ukrainian power grid in 2015. AI could make such hacks easier for terrorists to carry out, and more effective. It also widens terrorists’ scope for physical attacks.
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Fake faces: AI systems can make increasingly realistic synthetic images
Digital brains The UK-US report – The Malicious Use of Artificial Intelligence: Forecasting, Prevention, and Mitigation – defines AI as “the use of digital technology to create systems that are capable of performing tasks commonly thought to require intelligence”. It notes the field of AI dates back to the 1950s, but “several years of rapid progress and growth have recently invested it with a greater and broader relevance. Researchers have achieved sudden performance gains at a number of their most commonly studied tasks.” The report says once AI systems reach human-level performance at a particular task, they generally go on to exceed it. “Nearly all AI researchers in one survey expect AI systems will eventually reach and then exceed human-level performance at all tasks surveyed. Most believe this transition is more likely than not to occur within the next 50 years.”
“One of the areas we look at around [AI] is drones,” Mr Pennell tells Insurance News. “We’ve been analysing a biochemical attack using co-ordinated drones. “You could have that happen in a CBD area... in the most extreme situation you could get major losses in Australia. That’s mostly business interruption and residual damage to buildings from material that can be spread over a large area.” Mr Pennell says government agencies have enhanced their focus on cyber terrorism in recent years and “the right departments are very cognisant of that risk”. JLT’s Ms Stephens says, on a global scale, “we’ve seen evidence that governments and private enterprises are investing more money in cyber security”. She points to projects such as the UK’s National Cyber-Security Centre and – on the corporate front – notes about 60% of businesses surveyed for JLT have increased cyber-security spending in the past few years and intend to do more in coming years. “We’re definitely seeing more money put into security,” she says. “I think what’s not always happening is that investment is insuranceNEWS
wrapped around a strategic plan with Csuite engagement.” Ms Stephens visited Australia in March to promote cyber-security issues to business and government figures. She says recently introduced data breach notification laws have been a wake-up call for businesses and “we’re seeing increasing engagement” on cyber strategies. Aon’s Mr Brooks wants to see governments “spearheading” regulation around AI research and applications, and for all AI and machine learning developers and stakeholders to “put the brakes on and have a long hard look at what we’re doing”. He says the rise of AI “brings with it some very concerning aspects; are we jumping towards convenience and benefit before we have proper governance, proper risk management? Who is looking at that… is one of the key questions that has come out of the [UK-US] report. “Everyone wants the bright shiny thing, but are we looking into governance and that kind of thing? It becomes very scary… when we start looking at tools such as * speech synthesis and drone control.”
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Big Data, big ambitions Insurers are moving to utilise the vast reserves of information at their disposal, but the process is creating new risks By Bernice Han
EVALUATING HOW SUCCESSFUL the insurance industry is when it comes to using Big Data is always going to be difficult, or arbitrary at best. There is no set of universally agreed measures to define what success looks like. But one thing is certain: insurers have, as much as advances in technology permit, been employing the vast and valuable reserves of information available to run almost every critical aspect of their businesses. Routine tasks such as pricing, risk selection and underwriting are already performed in one way or another by computer-powered predictive models, which draw on information from the Big Data vault. A report by Willis Towers Watson last year showed twothirds of property and casualty insurers in the US – the world’s biggest insurance market – use 28
predictive models to assist with underwriting and risk selection. Survey respondents plan to extend the use of Big Data and predictive analytics to other areas including fraud potential, litigation potential, case reserving and claims triage. Major Australian insurers have also invested heavily in Big Data to sharpen their competitiveness, under the broader digitalisation wave sweeping the industry. Last year Suncorp introduced artificial intelligence (AI) technology to provide rapid liability decisions in its online motor claims system. “We ‘trained’ the AI system using data collected from 15,000 claims scenarios, so it would be able to accurately determine liability based on a customer’s written description of a claim,” a Suncorp spokesman tells Insurance News. “As a insuranceNEWS
result of this, our process can provide decisions with a high degree of confidence in more than 90% of online claims. “The proportion of customers who were fast-tracked through the process has tripled, enabling claim consultants to focus more time on complex scenarios. “This capability has also created more data, which has further improved the consistency of our liability decisions, while establishing a reliable reference point based on a very large history of claims and industry guidelines.” Data is a vital cog in a successful insurance business, Suncorp says. The Queensland-based financial services group builds its data strategy around creating customer value, lowering costs, cutting risks and ensuring strong data governance. April/May 2018
“Insurance is a data-centric business,” the spokesman says. “Suncorp is no different. Data is critical to our operations and the use of machine learning is also driving increased underwriting accuracy. “We have seen the value of data for a long time and continually invest in uplifting our ability to generate insight and act based on what data assets we have. “The continuously growing volume of data today and our data analytics capability increases our understanding of customer needs and builds on the value we offer to our customers.” Suncorp’s data strategy also involves “personalisation analytics”, where a series of models link customer behaviour, customer “journeys” and interactions with the insurer’s products. “This allows us to make cus-
tomer offerings increasingly relevant to individuals by matching their needs with the right products and services from Suncorp and our third-party partners,” the spokesman says. IAG, in its half-year results, reported on progress made by its Customer Labs division, which is tasked with increasing understanding of what the market wants through harnessing data. The division has, among other achievements, deployed a voice-activated AI capability to gain insights from IAG’s enterprise data hub, and expanded fraud analytics across portfolios to detect and prevent false claims. Reinsurance giant Swiss Re is employing Big Data extensively, having last year established a fully automated flight delay compensation product for short delays in Europe and Asia.
Using data from about 200 million flights and more than 10 years of weather history, the reinsurer has built a machine learning model to identify key delay drivers, to predict individual flight hold-ups. A dynamic pricing engine was further developed to price millions of flights every day, leveraging Swiss Re’s risk knowledge. “The customer receives an end-to-end digital experience by purchasing the insurance through a mobile phone app,” Head of Digital and Smart Analytics Asia-Pacific Matthias Fischer tells Insurance News. “Once a flight arrives at the destination and if the flight is delayed by more than the time the customer selected, a claims payout is automatically generated. “This innovative compensation product is a combination of making smart use of risk insights insuranceNEWS
through the processing of Big Data with machine learning techniques, and enhancing the digital customer experience with an end-to-end automated solution,” As technology continues to make breakthroughs, opportunities have grown for insurers to use Big Data. Claims management is one aspect of the business that is benefitting enormously. US insurtech Lemonade has shown claims handling – an area where the human touch has been considered indispensable – can be fully automated using AI. Across the industry, sensors are being installed to identify risks at an early stage and drones deployed to determine the scale of damage during claims handling. “Digital collection and analysis of data makes it possible to take quick, dependable deciApril/May 2018
sions instead of having to rely on subjective estimates, as was frequently the case in the past,” Munich Re Head of Claims Tobias Buttner says. “Consolidated, central databases ensure greater transparency and highlight loss trends. Robust risk and loss forecasts are now possible much earlier. “Not only does this make it easier to identify errors, but also to learn from losses and prevent such errors in the future. “Last but not least, claims processing is becoming faster and in many cases less expensive – something that should go a long way to increasing insurance client satisfaction.” In motor cover, telematics increasingly determine premiums based on an individual driver’s on-road habits and other related information. “If telematics make insurance for under-25s more 29
“One of the key risks around using data and analytics is trust… that is, do I have the confidence to trust the output my data and analytics is telling me?”
affordable… that’s where Big Data is the most relevant here,” Perry Abbott, Chief Executive of Friendsurance Australia, tells Insurance News. “Customers are given the opportunity to respond to controllable factors. “If people have an active choice to pull the levers towards the direction where insurance becomes affordable, that is a good thing.” Still, a host of pitfalls await as insurers move deeper into the world of Big Data. Is the information insurers use to make decisions trustworthy and reliable? This is an emerging concern as humanengineered machines play increasingly dominant roles in the day-to-day running of an insurance business. “Insurers are going to continue to expand their use of data and analytics in both pricing and tailoring of prod30
ucts to customers,” KPMG Partner, Audit, Assurance and Risk Consulting Scott Guse tells Insurance News. “However, one of the key risks around using data and analytics is trust… that is, do I have the confidence to trust the output my data and analytics is telling me? “The old saying of ‘garbage in, garbage out’ applies to data and analytics. If you don’t have accurate, reliable and cleansed data that you can trust… when running your data and analytic models, then you will not have confidence or trust in the output or analysis produced.” Data and analytics rely almost exclusively on the assumption that past information in use is accurate and a good indicator of the future. What happens if that is no longer the case? Mr Guse says technological changes are taking place so rapinsuranceNEWS
idly that historical data may no longer be as reliable a gauge of the future as it once was. Even if the data is 100% accurate, there will always be events beyond human control. “Events caused by Mother Nature or events caused by erratic human behaviours will never be fully factored into your analysis,” Mr Guse says. “Data analytics is really important, but it is not the absolute answer. “Insurers are aware of these risks, so they try to implement controls and procedures to mitigate the impact of those risks where possible. “They will ensure the input data is cleansed for anomalies, they will ensure the input data is complete by reconciling key aspects back to other underlying source records, and they will ensure the input data is still relevant to the environment in which they are operating. April/May 2018
“By implementing these practices and controls, it eliminates part of the risk and allows an insurer to trust the output more than if you didn’t have those controls in place.” Tim Macdermid, Managing Director of database supplier MarkLogic Australia, says insurers need the right tools to manage and best utilise the growing volume of data. “It’s all very well to have all this data, but how do we add value to this data?” he says. “The trick to that is to ensure it’s collected on a flexible platform that allows us to use it in real time, build applications fast and deliver value around those applications to our customers, and understand what the data is telling us. “The move from collection and maintenance to how we can add value – it’s an evolution rather than a new approach to * anything.”
Front runners Insurance News spoke to four insurtech leaders to find out what they believe the most exciting start-ups and industry trends will be this year
Brian Siemsen, Global Chief Executive for Claim Central Consolidated
1. WiCover: Seamless digital experience specialists WiCover have grown from the company’s specialisation in understanding customer loyalty and “wow” experiences. WiCover’s suite of customer engagement technologies cover the insurance customer life cycle from buying insurance to claims, personal concierge and messaging capabilities.
2. Hello Claims: Fast becoming the motor claims management insurtech of choice in the Australian and New Zealand markets. Hello Claims is led by a deeply passionate motor claims expert who converts new-age process thinking into the Hello Claims platform. 3. Blue Panther: A new-age policy administration platform designed not by technologists but insurance people. Influenced by brokers, insurtechs, actuarial and insurance executive thinking, Blue Panther is well positioned to deliver on its promise to provide higher levels of service and better levels of cover with more efficiency than ever.
Chris Bayley, Co-Founder and Head of New Products, Cover Genius
1. Amazon Protect: This Amazon product has turned warranty products into a competitive marketplace, for the benefit of consumers and probably in exchange for lower insurance margin. This is a threat to retailers that pocket pretty fat margins on ancillary insurance.
2. Platforms that empower e-commerce sites will help unbundle profitable lines from big insurers: This year and beyond will see every e-commerce company able to explode their ancillary sales revenue. In the past, the insurance industry couldn’t build technology for those guys, nor could they understand the scope and scale of the opportunity. The next few years will see e-commerce giants selling insurance online in massive quantities, aided by global platforms that can bring a deep integrated stack alongside service design and optional underwriting services. 3. The UK Financial Conduct Authority: While its market interventions haven’t dropped off that much, who knows how the industry and its regulator will fare once the Brexit terms are decided? We have multiple clients that have moved their operations teams to continental Europe to safeguard for a future where UK managing general agents are no longer passported. 32
Simon O’Dell, Chief Operating Officer, Insurtech Australia
1. Fitsense: A great tangible Internet of Things/connected devices insurtech. Its service provides insights into risk profiles on a granular level and enables the development of sophisticated health and life underwriting models to incentivise consumer behaviour. A win for all stakeholders and the taxpayer.
2. Traity: With the world becoming increasingly digital, we have less frequent in-person interactions. As such, people are searching for new ways to develop trust with our peers, clients and service providers. With trust comes effective relationships. Traity helps consumers to develop trusted relationships by providing an online reputation profile. Traity leverages online content, for example social media profiles, and uses unique technology to provide insights into people’s character, enabling consumers to digitally navigate the world of people. 3. Claim Central: Claims are the point at which insurance becomes a tangible product and service. If the head of business development for Facebook is to be believed, retention is the most important growth driver for any high-volume business. As such, claims management is likely the most important function to get “on point” in the insurance value chain. Claim Central’s global progression is a testament to its ability to drive customer value at claims time, while maintaining an insurer-centric view. Claim Central deploys a unique balance between people and technology to deliver its market-leading function.
Alex Scandurra, Chief Executive, Stone & Chalk
1. Flamingo AI: There are not many women working in the field of artificial intelligence (AI), but Dr Catriona Wallace paved the way by founding Flamingo AI in 2014 and listing on the ASX in November 2016. Her flagship technology is the Artificial Intelligent Cognitive Virtual Assistants, the delightful Rosie and Maggie, which guide customers through their online research, quote, purchase, application, on-boarding, service or claim process. Faster and easier than static web forms or convoluted processes, the Cognitive Virtual Assistants also give organisations invaluable data assets through the “machine learning brains” that are created through each customer interaction.
2. WordFlow: WordFlow’s technology is the pathway from analogue to digital documents. Insurance companies and their customers face mountains of different documents in different formats such as Word and PDF – but you can’t be a digital insurer while you are still producing all your documentation in analogue formats. WordFlow automatically transforms this content into enriched web pages. insuranceNEWS
Broking rebooted Robo-advice is coming to general insurance, according to fintech Clover – but it doesn’t have to spell the end for human intermediaries By Andy Swales
Technology pioneer: Clover’s Sahil Kaura
ROBO-ADVISERS HAVE BEEN ROLLING out across the financial planning and life insurance landscape for several years, particularly in the US. Now the fintech pioneers have turned their attention to general insurance. In Australia, automated investment start-up Clover hopes to be among the first to make the move. “It’s part of our medium-term plan,” the fintech’s Co-Chief Executive Sahil Kaura says. “We will look to partner with certain providers in terms of accessing benefits that enable us to get to market quicker in the insurance domain.” The traditional insurance players’ penchant for investing and partnering with insurtechs suggests Clover will not be short of suitors. “We’re looking at how these markets are developing overseas, what kind of models are gaining traction abroad, how they can be applied to the Australian market,” Mr Kaura says. “Based on that we’ll narrow down the list of potential partners.” Clover’s ambitions in this space extend beyond the simpler, more commoditised lines: SME cover is firmly in play. “Life insurance is certainly a very natural [target],” Mr Kaura tells Insurance News. “On the general insurance front, based on how the target market evolves, it might be home and contents, but if we’re finding that a lot of small business owners are becoming clients of Clover, we might prioritise their insurance.” Clover established its investment roboadvice platform last year following a year of testing. It aims to open financial advice to a wider market, offering goal-oriented plans for people who may have relatively little capital: it offers a $5-plus-GST monthly management fee for sums as low as $2500. 34
Mr Kaura says about 80% of Clover users are people who might not normally invest or seek financial advice – or who would simply struggle to access traditional advice. “Especially for young Australians, the concept of going to a financial adviser, it doesn’t really exist,” he tells Insurance News. “And even those who have thought about it, unless you have sizeable amounts of money, to get access to an adviser… the hurdle is high. Unless you have a couple of hundred thousand dollars, it’s very hard to get access to a good financial adviser.” He says the way Clover’s robo-advice works “is not too different from how a financial planner operates. You come to the website, we ask certain questions to assess risk appetite and risk tolerance, then we present you the investment plan, and where technology can do a much better job than a financial planner is communicating visually some of the key drivers: the balance you start with, how much money you have… the amount of risk you take. The more risk you take, the more the returnability of your presented outcomes, and visually we can describe that really well.” Once the user selects an investment plan, “we invest that for you and manage it 24/7 using our algorithms. We do all of this for a third of the cost of the traditional financial advice model.” Mr Kaura sees no reason why the technology cannot be used to offer similar cost and process benefits for general insurance buyers. “Small business insurance, especially in Australia, is an area where we’re likely to see algorithmic processes,” he says. “Wherever you have a lot of [information] markers to take in and a set of rules that define the outcome, algorithms can conquer those areas very quickly.” For more complex needs, the technology may require time to learn its trade. insuranceNEWS
“Small business insurance, especially in Australia, is an area where we’re likely to see algorithmic processes.” “Where there is more subjectivity required in assessing inputs, that’s where the artificial intelligence processes need time to collect a lot of data, build intelligence, test whether they are working… that tends to come later. “Areas of general insurance where the inputs are more black and white than grey and all the rules can be quantified, you can see the distribution being taken over by robo-advice-type platforms sooner rather than later.” Of course, online aggregators already offer automated quotes and purchasing options, as do individual direct insurers. But Mr Kaura says a robo-advice platform will be more sophisticated from day one, and grow even stronger from there. “Where you see the turning point is where a platform has operated for, say, 1218 months, because the data collection gets to a critical mass where the value-add can start increasing exponentially, because the machine learning and artificial intelligence
have been through those testing and validation processes, and you can switch them on to provide value to the end user. “In the early years the reliance on a more rules-based validation is higher, but even from day dot, compared to an aggregator it’s far more advanced because… it’s far more than just a handful of questions… it is running simulations, taking into account market conditions in the case of investments or, in the case of insurance, changing claims experience far more quickly and more nimbly than what would happen in the traditional sense.” That may sound like an existential threat to human intermediaries, but it doesn’t have to. On the investment advice side, Mr Kaura says Clover does not consider itself “a replacement to financial advisers – there are many aspects of good financial advice that technology cannot replace at the moment: issues such as tax structuring, estate planning. What we hope to enable is that good financial advisers can spend more time on the [complex] activities and engagement, and be more a financial coach. “We see ourselves as being that nursery for young Australians who cannot get financial advice, and for financial advisers to service clients who [we] wouldn’t be able to service.” He compares it to the way automated accounting software such as Xero is used by small businesses, allowing their traditional accountants “to focus on the more valueadd stuff”. Likewise, he sees an ongoing role for general insurance brokers. “Technology will allow you to take 7080% of the more process-oriented task, which can be automated… and spend more time on what technology cannot replace, which is the human engagement, looking at
the client across the table; in terms of insurance broking, really understanding what are the risks you as a business owner are most worried about. We see technology really complementing a lot of the value-add stuff that human advisers and brokers can do.” This chimes with the latest Vero SME Insurance Index, which finds most small business owners use a mix of brokers for some insurance purchases and the direct market for others. The key, as brokers are repeatedly told these days, is to focus on and expand areas in which they add value for clients; maybe even add a robo-advice element to their own service. Mr Kaura notes traditional players have largely changed their attitudes to fintech start-ups. The financial services industry “as a whole has realised the best thing is to work with the next generation of technologies, rather than completely ignore them, otherwise the severity of the disruption for the incumbents is far greater”. And even disruptors such as Clover must not let their guard down. “Disrupters can be disrupted very quickly. Uber is a good example: within five years it has started to spend a lot of money on self-driving car technology, because it knows its traditional model will be disrupted by self-driving cars. “Whether it’s incumbents embracing start-ups such as us, or start-ups such as us always being open to the next advancements in technology, that’s really critical.” And those advancements are coming thick and fast. As Mr Kaura notes, roboadvice has been around “2-3 years at most in Australia”, and not much longer in the US. “The technology is now about 5-6 years old and continues, of course, to advance. It’s still early days in the grand scheme of * things.” insuranceNEWS
“We see technology really complementing a lot of the valueadd stuff that human advisers and brokers can do.”
A new leaf CLOVER WAS FOUNDED IN Melbourne by former AIA investment portfolio manager Sahil Kaura, investment and financial planning expert Harry Chemay and Darcy Naunton, Managing Director of the York Butter Factory start-up “incubator space” and a partner with early-stage venture fund manager Adventure Capital. The partners say they “set out to make sophisticated investing services usually reserved for institutional and ultra-high-wealth investors accessible to all Australians”. They “abandoned the old rules and rebuilt investing from the ground up… adopting a technology-led platform, cutting unnecessary fees, and eliminating the gobbledygook of finance jargon”.
Sticking to the strategy JLT has secured a strong position in the local market, and new Chief Executive Nick Harris sees opportunities ahead By Wendy Pugh
A LOT CAN HAPPEN IN eight years. At the start of the decade, Nick Harris was working for JLT in London and had just finished speaking at a conference when Group Chief Executive Dominic Burke approached him for a chat. “I hadn’t really spoken to Dominic much before, and I had visions of my career flashing before my eyes, but he said, ‘We are thinking of restructuring the business in Australia and we are trying to find someone to go out and set up an employee benefits business’,” Mr Harris tells Insurance News. Mr Harris accepted the challenge and arrived in Sydney for the first time three months later with his wife and two young children. After holding several leadership roles, he became JLT Australia and New Zealand Chief Executive in January, taking over from Leo Demer, who remains with the wider group. “It has been quite a journey and I have been very lucky,” he says. “I have inherited a fantastic business. JLT under Leo 36
has doubled in size over the past eight years.” JLT’s profile has risen as it has expanded, and Mr Harris says there are no plans for a shift in strategy. A culture of listening to client needs and tailoring outcomes will remain at the forefront. “We don’t go to the client with a solution pre-built and then say to the client we will try to shoehorn your problem into our solution,” Mr Harris says. “Our goal is to attract the most talented people we can find, with deep-rooted specialisation, deep-rooted knowledge of the subject matter, and we then allow them to be entrepreneurs.” When Mr Harris arrived in Australia, JLT’s presence included a large local government business, while the company was only a small player in corporate specialty. After joining in employee benefits, Mr Harris took leadership roles in the affinity business, which includes sporting associations, and heading up the retail business. Over the past two years he led the specialty business, insuranceNEWS
which was growing following a recruitment drive, and became deputy chief executive. The company invested heavily in bringing broking and placement expertise to the group, powering a national expansion and building a strong position in the specialty corporate sector. Last year it represented 13 of the top 50 companies on the Australian sharemarket. “We started to attract larger corporate clients, and we started to attract people and the momentum started to build and people started walking around with a bit more swagger and a bit more belief,” Mr Harris says. “We used to be thought of as probably a credible small alternative to the main brokers, but we are now absolutely front and centre. “JLT is now considered as one of the big brokers in town and it has been a hugely successful strategy.” The gains have come in a highly competitive market, contested by the major international broking companies and local-listed groups. April/May 2018
Happy to be here: JLT’s Nick Harris
In the past decade the stakes have risen as brokers and insurers have fought for turf while capacity has flowed into the global market and premium growth in commercial lines has languished. Some say the market has bottomed out and premiums are set for a period of relative strength due to global events and local changes. Worldwide insured catastrophe losses topped $US130 billion last year, reinsurers Munich Re and Swiss Re estimate, making it one of the most expensive on record. In Australia commercial premiums have firmed as insurers take a stand to improve profitability following a long spell in the doldrums for some classes. Mr Harris says the market is transitioning, rather than hardening, with certain risks more difficult to place as underwriters become more circumspect. At the same time, JLT’s investment to build expertise has it better positioned for exactly this scenario. It requires brokers to “get under the bonnet”, to understand client needs and to 38
“You have to get in front of the client very early and understand the client. Then if you have the placement team that we have... you are in a fantastic position.” present the best case to underwriters, Mr Harris says. “You have to get in front of the client very early and understand the client. Then if you have the placement team that we have, which is second to none, you are in a fantastic position. So we are quite excited by the market.” Globally, insurance capacity remains plentiful, limiting the pricing impact from the past year’s string of natural disasters. Wider changing economic conditions could yet have a greater impact. “If interest rates start to creep up, there would be a lot of capacity and capital leaving the market, and that insuranceNEWS
would be a massive sea change,” Mr Harris says. JLT Australia and New Zealand risk and insurance operations made an underlying trading profit of £36.1 million last year, up from £34.1 million in 2016 amid favourable currency moves. The UK-based company is reorganising into reinsurance, specialty and employee benefits divisions, and has started a twoyear program to cut operating costs and streamline technology to improve data access across its global interests. Mr Harris says Australian revenue will gain a boost from new business wins, including success in a tender this year April/May 2018
that was his first as Chief Executive. It follows a large contract won last year in the buoyant construction sector. The life and workers’ compensation business is another key area identified for growth. In 2015 Mr Harris managed the acquisition of rehabilitation company Recovre, which has proved a successful and significant addition. JLT is encouraging closer links between its specialty general insurance areas, such as mining and construction, and the people risk business, encompassing workers’ compensation, life and health cover, personal accident, salary continuance and travel. Mr Harris says people risk is sometimes overlooked by businesses – despite the size of workers’ compensation spending relative to other insurance – amid a view that few savings are to be found. “We have totally blown that myth apart,” he says. JLT continues to lead the local government sector, where it provides mutual schemes and services more than 500 councils.
“We are very conscious that we are very privileged to have that business,” Mr Harris says. The mutuals model gained favour in the 1990s after liability concerns caused private insurers to withdraw from the market, causing council costs to rise as they sought cover. The mutuals and JLT’s role have recently been questioned by critics, who say better value can be found elsewhere. Looking ahead, potential growth areas include cyber insurance. JLT is keeping a close eye on developments, as businesses face rising risks from security breaches and tougher regulatory demands. Mr Harris notes varying views among clients and underwriters about what cyber cover should encompass, and what it means to them. It is an area set for further exploration, and it remains to be seen whether the Australian market follows growth trends in the US. “I have sat in meetings where cyber has meant one thing to one client and something completely different to another. “People think somehow cyber is this box over here, 40
“I have sat in meetings where cyber has meant one thing to one client and something completely different to another.” which stands completely separate, but it is actually across all your business.” The company will keep an eye out for acquisitions, typically looking for “bolt-on” buys that enhance its offering, rather than major transformational deals. The market for any opportunities that arise is also highly competitive. “If something comes along that we think is a good fit, or we decide we want to get into an area that is a good cultural fit, and a good strategic fit, we will certainly have a look at it,” Mr Harris says. “But my goal is to grow JLT organically this year.” He says Australia is a great insuranceNEWS
place to do business, offering a large market featuring a range of international and local brokers, sophisticated clients and a little more flexibility to transact compared with other very heavily regulated markets. “I think people in Australia like to trade and do business. When you are working with clients, underwriters, whoever it happens to be, you can discuss deals and get deals done.” Mr Harris, who grew up in London, considered a career in advertising after leaving university, but decided on a different course when an interviewer asked him: if he was a fruit, what sort of fruit would he be? “I thought, I don’t think this is for me. I fell into finanApril/May 2018
cial services and have loved every minute.” Board meetings will have Mr Harris travelling back to London several times a year, and he is currently busy visiting JLT offices and clients across the local market, in a welcome part of the new role. One of his great pleasures is seeing client names on hoardings and noticing new buildings, construction sites and other ventures supported by the company. It’s an appreciation he encourages the wider team to share. “When you walk past with your family on the weekend and you see a huge project, or you see an advertisement or something, you can tell your family that we helped insure that, and have that sense of pride,” he says. Mr Harris says his family have enjoyed the move to Australia, with his son now starting high school and his nineyear-old daughter in year four. He appreciates the weather and a culture of easy mateship. “It is a great place to live and a great place to work. My wife loves it, my kids are very happy at school, and I am very fortu* nate to work at JLT.”
In the mix SME broker usage appears to have stabilised, but insurance buying behaviour may be far more complex than previously realised By John Deex
“Using a broker for some, but not all, business insurance appears to be widespread in Australia.”
Broker usage trend
Broker users Direct buyers
80% 70% 60%
Under-serviced Online preference
Ease and convenience
Main reasons for using a broker less
Percentage of policies bought through broker Total
THE HEADLINE FIGURE FROM THIS YEAR’S VERO SME Insurance Index appears to be good news for brokers. The report, based on a survey of almost 1700 business owners late last year, says 37% of respondents used a broker for their last insurance purchase. This figure had been steadily dropping, to a low of 34% in last year’s report. But Vero accepts this measurement does not give the whole picture – far from it. Through a series of more probing questions, this year’s survey concludes the largest proportion of SME owners use brokers for some insurance purchases and the direct market for others. About 31% don’t use brokers at all, 42% use brokers for 1-89% of policies, and 27% use brokers for 90-100% of policies. So clearly it’s not black and white, and putting SME owners into two groups based purely on their last purchase is rather arbitrary. The new figures make brokers look a little healthier – 69% of SMEs say they use brokers to some extent. But there is bad news too, because almost one third of SMEs say they use brokers less than in the past. Some 56% of those say it’s down to seeking ease and convenience, with 46% highlighting price and 39% saying they have received poor service or advice. Vero takes the positive viewpoint in all of this, seeing plenty of opportunities for brokers to raise their game. By focusing on improving satisfaction, they can stop clients insuranceNEWS
Non users (0%)
42% Mixed users (1-89%)
27% Broker users (90-100%)
looking elsewhere, and by streamlining processes and considering easy online platforms where appropriate, they can become just as convenient and easy to use as the direct players. It is also crucial to be aware of a client’s entire insurance portfolio, so brokers can bid for a larger share of the total insurance spend. “Using a broker for some, but not all, business insurance appears to be widespread in Australia,” Vero’s Head of Commercial Anthony Pagano says. “Brokerages may not be losing clients, but rather are getting a smaller share of clients’ total insurance spend because SMEs are using a mix of channels to purchase their insurance. “If you can understand why your client is more comfortable obtaining certain products via direct channels, you’re much better placed to explain the value you can provide and gain a greater share of their entire insurance portfolio. “SMEs told us one of the most common reasons to use a broker less is ease and convenience, particularly the use of online services. “This really shows that brokers need to streamline processes, consider easy online platforms for administrative tasks, and understand the way their clients do business, so they can offer services at times that suit. “The brokers who do this, and demonstrate their expertise, will find clients have less incentive to try other channels.” This year’s report also delves into how often SMEs review their insurance cover, and what prompts them to do so. April/May 2018
“The challenge for brokers is communicating the value of their expert insurance advice, and there’s no better way to do that than through clients who will advocate on their behalf.”
Insurance review triggers in more detail Standard review Regular review (e.g. once a year) When my broker, accountant or other adviser recommends me to Insurance changes or events When there is a change in insurance premiums When I’ve experienced a significant insurance event (e.g. had to make a major claim) Business changes When making a large business purchase When transitioning to a different business model or type When upgrading IT systems When there are significant changes to staffing levels Set and forget I haven’t reviewed my insurance since starting my business I couldn’t say
About 59% of SMEs says they have a standard review in place, either annually or prompted by a broker, adviser or accountant. About 37% say a change in insurance premiums or having to make a claim will prompt a review, while 26% say a change within the business will have the same effect. Only 16% “set and forget” their insurance arrangements. The report suggests brokers set up reviews with clients to make it easier for them to reassess insurance arrangements regularly. They should also have a deep understanding of the client’s business, so they can provide the right advice at times when they are likely to be reviewing. Brokers should also provide the right level of support after claims or significant increases in premiums. “The community is getting smarter,” Mr Pagano says. “What is good for today is not necessarily good for tomorrow. “There is a real opportunity for brokers to understand when clients are making changes, and they can help when clients are most likely to be renewing. “They need to be continually asking whether the insurance need has been met.” The last area the report investigates is the increasing prevalence of peer advice. Some 58% of SME owners will turn to peers, colleagues, friends and family for advice – up from 52% in last year’s index. In one way this finding is concerning for brokers, because it suggests SMEs may shun professional advisers for those with no training 44
59% 46% 22% 37% 32% 10% 26% 12% 8% 8% 8% 16% 8% 8%
or formal skills. But the upside is brokers can tap into this trend by encouraging clients to refer them to others. Vero says almost eight in 10 clients would be willing to recommend their broker, but fewer than two in 10 have been asked by their broker to do so. The report encourages brokers to develop referral strategies, and ask clients to recommend them. “The trend demonstrates the power of word of mouth for brokers, yet the index suggests there are very few exploring this option,” Mr Pagano says. “The index shows SMEs are continuing to put their trust in a range of advice-givers for their insurance needs, potentially underinsuring their business, or taking out inappropriate cover. “The challenge for brokers is communicating the value of their expert insurance advice, and there’s no better way to do that than through clients who will advocate on their behalf.” Vero believes one of the defining features of the modern era is an increase in choice, with the digital age bringing an almost endless number of options. This trend, it says, is clearly evident in insurance, and SME owners face a complex task as they try to manage risk. This environment represents both challenges and opportunities for brokerages, the report says, but understanding is key. “Through understanding how SMEs approach insurance, we will have a more meaningful perspective of the challenges facing the * industry and will be better equipped to meet them.” April/May 2018
FINALLY, SOMETHING THAT IS SET TO DISRUPT THE BROKER DISTRIBUTION MODEL Australian Broker Network (ABN) is offering an innovative approach for insurance specialists interested in becoming part of a group with shared ownership of the network, increased profitability and transparent fixed licence fees. Principal and Managing Partner Tremayne West says ABN has deliberately defined a strategy to introduce a broker partner model that provides a better proposition for insurance distribution in the sector. ABN doesn’t follow the traditional approach where the ARs and brokers finish last. This new model was conceived by working from the broker first and the network owner/ licensee second. It empowers the brokers by giving equity into the licence whilst they fully own and drive their specialist client focus. With the broker top of mind ABN is “system agnostic” minimising any transition issues in joining, and
the centralised services it provides include licensing, compliance, accounting, systems and preferred suppliers and underwriters. Mr West says that the ABN model works by charging a fixed fee, not a percentage-based amount, and gives equity to the broker partners, rather than forcing brokers to sell part of their business to the network. “The partners that join save money, increase business volume, and receive dividend payments from ABN, all whilst the total value of the collective broker partner books increases. It’s a win, win, win, win.” This new model creates value over time as a well-run and professional organisation that will collectively be worth much more than the sum of its parts. Within ABN the brokers have a real voice, with direct access, real influence and a say in the performance of the partnership. “This is something very different that no-one else does,” Mr West says. “It is an inverse model that will shake the traditional broker ownership structure for the better. It’s provocative and thrilling.” The partners ABN is seeking to attract include brokerages with a speciality or niche across a product line, occupation or geography. Mr West says: “One thing that is always going to be present is the need for clients to receive advice on complex risks and the matching of insurance products so hence my building of a specialist broker partnership.“ ABN is set for success due to the expertise of its people. Mr West
has extensive experience in the insurance sector that directly contributes to this new and impressive model. Most recently he was director and co-owner of Westcourt General Insurance Brokers, and chief executive of Perthbased Capricorn Mutual. Previous positions included Allianz head of strategy, while he has held senior roles at insurers Vero and CGU. Mr West says he is often asked “why did you choose broking?” to which he easily replies, “I realised just how tough but equally rewarding broking can be… and I saw an opportunity to do it differently”. ABN, founded in July last year, currently has four partners, with one in Victoria and three in New South Wales. Negotiations are under way with another six with increasing interest every day as people understand the benefits of this model. The company subscribes to the National Insurance Brokers Association (NIBA) Code of Conduct and is part of the Steadfast network. ABN has general insurance distribution, underwriter agency and discretionary mutual licensing options available to develop products and distribute direct to market. Mr West sees a very exciting future for ABN as it gives brokers shared ownership of the network, increased profitability and transparent lower fixed licence fees. “ABN is unique, respects the value of the broker’s book and business, and it’s real.”
T 1300 239 234 www.australianbrokernetwork.com.au/become-a-broker-partner.html
Delivering in style Elyse Henderson draws on a diverse business background as AUB Groupâ€™s Chief Operating Officer By Wendy Pugh 46
“Brokers have a unique proposition in a way, where they get to spend time with the customer year in and year out.”
BANKING, CONSULTING, RESOURCES and small business have provided the perfect pathway to insurance for AUB Group’s new Chief Operating Officer Elyse Henderson. Her combination of skills and experience caught the eye of recruiters casting a wide net for the position at AUB, where Chief Executive Mark Searles is looking to expand beyond the group’s Australian broking roots and drive further changes. Ms Henderson, most recently National Australia Bank’s head of transformation, joined in January and will play a key role, providing a broad perspective and overseeing day-to-day business areas. “It is very much future-looking, as well as keeping those things humming along at the same time,” Ms Henderson tells Insurance News. “Mark and the board wanted someone to come in and say, what does our service delivery model for the whole of the group need to look like to take us into the future, where do we have to dial up or dial down and where do we need to add more services?” At NAB, Australia’s largest business bank, Ms Henderson held positions ranging from the local and regional level to larger corporate roles. As transformation head she focused on design and delivery of productivity initiatives in business and private banking. The mandate included revenues, costs and capital, plus customer advocacy, technology and new segments.
Initial discussions at AUB have thrown up similarities and differences between banking and insurance. Technological disruption is a common theme, along with improving the customer experience. “I think both businesses have that goal in mind,” Ms Henderson says. “We might just get there in slightly different ways. There are a lot of parallels.” Roles in business banking highlighted the importance of understanding the client, what they might want to “fix, accomplish or avoid”, and helping achieve those aims, Ms Henderson says. Early responsibilities after her start in banking in 2010 involved dealing with repercussions from the global financial crisis on the Gold Coast, helping businesses and people facing tough circumstances. “A huge proportion of that book was impaired,” she says. “The nature of banking in that location at that time was probably different to anywhere else in the country.” Banking and insurance both involve an assessment of risk and margins, reflected in interest rates and premiums, with insurers on the line when something goes wrong. The broking advisory role also requires a strong understanding of customer needs and the most suitable products and services. “Brokers have a unique proposition in a way, where they get to spend time with the customer year in and year out, assuming they work appropriately to maintain those relationships, so they get to understand over time a customer’s business,” Ms Henderson says. insuranceNEWS
Mr Searles’ strategy for AUB takes a holistic view of client risk across physical, people and financial perspectives. The group has expanded its network of partner businesses to address those key areas and is emphasising the value of adviser expertise. Clients are mainly SME and midmarket-sized businesses. Australian broking provided about two-thirds of profits in July-December, down from more than 90% five years ago due to the group’s diversification. Underwriting agencies, risk services and New Zealand operations also drive earnings. Teams reporting to Ms Henderson include the business centre functions, marketing and business intelligence. AUB is outsourcing its technology services to cut costs and improve security and performance. Ms Henderson has previously examined the benefits of data-gathering and analysis in financial services and the potential to gain useful insights and identify trends that can assist partners and clients. “I think we have got real opportunity to add value to our businesses by enhancing that somewhat, and bringing together the marketing and business intelligence teams,” she says. “So if you think about the next steps from the capabilities we have already got, that’s something I am really excited about.” The chief operating officer position had been vacant since 2015, when Sunil Vohra 47
“My entire employment history is working in what would be considered male-dominated industries.”
moved to a newly created divisional chief executive role for the expanding risk services business. AUB told investors the new chief operating officer position would support a drive to deliver “excellent services” to partners and clients, in turn supporting margin improvement. “I have been particularly impressed by the way Elyse has leveraged her practical SME management experience and related that to the consulting and banking worlds at a senior level,” Mr Searles said when announcing the appointment. “Having the customer and partner lens is so important to the success of this role within the group.” The position offers an end-to-end view of the company, allowing Ms Henderson to draw upon her diverse background while providing a different perspective from roles at NAB. Ms Henderson gained experience as a business owner in her early working life, with a pipeline fabrication and installation enterprise that evolved from a small labour hire operation. A university degree focusing on organisational psychology led to a position at Queensland Rail, examining risks and injuries on the train network. In the next few years Ms Henderson shifted focus, completing a masters of business administration part-time, joining Deloitte and raising her daughter while a single mother. “It was quite a lot to handle all at once. I think it took me five years to do my MBA.” 48
Complex and interesting work at Deloitte complemented the masters studies, with her daughter sometimes coming to night classes and doing homework alongside Ms Henderson. At Deloitte her specialty was energy, infrastructure and resources – a sector with long associations for Ms Henderson, who was born in Mt Isa and lived in towns such as Singleton and Blackwater in central Queensland due to her father’s work as a mining engineer. Rio Tinto, one of Australia’s largest resource companies, was her first major client. Ms Henderson co-chaired a Deloitte “innovation council”, chaired the Inspiring Women committee and was named the group’s businesswoman of the year in 2009. The honour followed testimonials from within the consultancy and from her 13year-old daughter. “I thought, if anyone knows why I might be the right person for this, surely she knows best,” Ms Henderson says. “I think she just got to see that if you want certain things in life, you have got to really work hard for them.” The prize provided the chance to complete a short course on negotiation and competitive decision-making at Harvard Business School, with Ms Henderson chipping in extra funds to attend the Boston-based program. An MBA networking event hosted by NAB led to the shift into banking and insuranceNEWS
financial services, and a move to Sydney, where she is based for AUB Group. Ms Henderson says the lack of women in senior positions is a noticeable difference in the insurance industry compared with banking. “My entire employment history is working in what would be considered maledominated industries. I’ve worked in the railways and I have worked in piping and engineering and construction, and consulting and banking and so on. “It is not something I’m not used to, but I was surprised by the difference. But I think things are changing as well, and I see that.” Ms Henderson says networking can play an important role in driving change, both through organised events and informally. She has already reached out to other women in the sector and is looking to become more involved. Since late January Ms Henderson has been observing and learning the AUB business, and is enthusiastic about the way ahead. She has welcomed the move into insurance following a surprise recruitment contact through LinkedIn. “Mark and the board have got a really clear vision of what the strategy is for the business, and I feel like I’ve got accountability and responsibility for a really important part of helping them to deliver on that,” she says. “If we could say we have achieved the aims of that strategy and really did it in style, I would feel I have accomplished something.” *
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The Mansfields return Claims excellence comes under the spotlight with the second awards event in July
THE SECOND ANNUAL MANSFIELD AWARDS FOR CLAIMS Excellence event will be held in Sydney on Thursday July 5. The non-profit awards event, which is organised by Insurance News and claims specialist LMI Group, is designed to promote and recognise claims excellence across the general insurance industry. Following the outstanding success of last year’s inaugural event and participants’ enthusiasm for the concept of the Mansfield Awards, the organisers have decided to make it an annual fixture on the insurance calendar. The awards are named after William Murray, the First Earl of Mansfield, who as Great Britain’s Lord Chief Justice first introduced the concept of utmost good faith into insurance practice and law. His famous decision in the case of Carter v Boehm in 1766 stated that “good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary”. Insurance News Publisher Terry McMullan says the decision to mount the awards came about in a casual conversation with LMI Managing Director Allan Manning regarding the lack of recognition the claims process receives. “It should be understood by any insurance professional that the claim is the most important part of the entire insurance process,” he says. “A failure or controversy in the area of claims remains the biggest cause of critical headlines in the mainstream media, and also feeds the current affairs shows on television. It’s an area of expertise that deserves better, because the vast majority of claims are paid without fuss or fanfare.” He says established awards events may have found it difficult to measure claims performance, which needs an accurate way of comparing results. “It’s not something you can establish from a bunch of submissions generated by companies that want to win an award.” The LMI-generated Claims Comparison website – a free source of information on insurers’ claims performance based on a range of criteria – makes the Mansfield Awards possible. Using Claims Comparison and other data sources, including the Insurance Information Service and a large national survey, mainly involving insurance brokers, LMI specialists then “weight” the results to ensure small and large insurers’ results are viewed equally. Major consideration is given to “speed, proactiveness, accuracy and fairness”. [See panel, How we rate claims performance]. “It’s as independent and as accurate as it can possibly be,” Mr McMullan says. The awards are also organised on a not-for-profit basis, with finance provided by sponsorships from organisations that share the belief that claims performance is a vital measure of insurers’ success. Any money left over from the awards is given to a charity and the expenditure reported back to the industry by Insurance News and LMI [see accompanying article, Where the money went]. This year’s awards event will follow on the lines of last year, Mr McMullan says. “A few short speeches, plenty of networking opportunities and the presentation of the awards.” This year’s awards will again be for a small range of product lines: personal lines, SME, specialty, corporate and an overall winner. 50
How we rate claims performance THE MANSFIELD AWARDS ARE BASED ON DATA USED TO RATE insurer claim services by policy class, with products grouped into two broad categories to assess performance. Personal Lines are assessed as Category 1 products and examined under methodology outlined on the LMI ClaimsComparison.com website, which awards ratings of up to five stars. Ratings are based on quantitative and subjective data as well as policy features considered important for a positive claims experience. Products included in the category are domestic building and contents, private motor, personal travel, residential strata, caravan, pet and pleasure craft. Criteria are given varying weightings, with information sourced from the Financial Ombudsman Service (FOS), policy documents, insurer websites and a quarterly survey of brokers. FOS provides data on the chance of a dispute being lodged, the average length of resolution time, resolutions by agreement and decisions in favour of an applicant. Contact hours for claims handling are taken into account, while choice of repairer and repairer guarantees are considered for motor. The quarterly survey provides input from brokers, service providers such as builders, investigators and loss adjusters, as well as individuals. The factors for rating classes of insurance are speed of service, accuracy of service and fairness in settlement. The Mansfield SME, Specialty and Corporate awards are based on the claims star ratings for Category 2 products, where the survey provides the information. Equal weighting is given to speed, proactiveness, accuracy and fairness, with performance graded as good or excellent, satisfactory, poor, unsatisfactory. For speed, survey respondents (mainly insurance brokers) consider performance on initial acknowledgement of the claim, its acceptance or denial, action on receipt of assessment, progress payments (if applicable) and final payment. Proactiveness considers whether the loss adjuster, if appointed, checked on the respondent or client and for claims departments, whether it was necessary to keep chasing them. For accuracy, respondents are asked if circumstances giving rise to the claim were correctly identified by the loss adjuster, investigator, insurer, engineer and consultants, and if policy terms and conditions were correctly interpreted. Fairness covers whether an entitlement was explained, if the claimant was refused assistance they felt the policy provided or the insurer ought to have supplied, and whether the original settlement offer was fair and reasonable. LMI directors and employees are not permitted to participate in any survey that could affect the star rating of an insurer listed on the site. The overall Mansfield Award For Claims Excellence winner is the insurer with the highest rating across all classes of insurance.
Support: Allan Manning and Greg Pynt with children at the Bengkulu orphanage
Where the money went This is how we’ve used the surplus cash from last year’s Mansfield Awards for Claims Excellence By Terry McMullan WHEN INSURANCE NEWS AND LMI SET UP the Mansfield Awards for Claims Excellence last year, we needed sponsors to help us finance the event. Steadfast and Insurance & Care NSW immediately offered their support, with the chief executives of both organisations saying they believe strongly that claims performance is an essential but under-recognised aspect of insurance. The addition of a nominal charge to attend the event also helped solve the funding issue. But we were left with a niggling problem: we wanted to highlight and encourage the work of claims professionals, but we didn’t want to be accused of gaining personal advantage from doing so. There are already too many awards events that run at a healthy profit, and we believed this one had to be demonstrably fair in measuring companies’ performance and free of any profit motive. So what
would we do if there was money left over at the end? The solution was simple enough. If there was any surplus – and we budgeted to ensure it would be small – we would give the money to a worthy charity and report back to the industry on how it was spent. In 2016 a group of Australian insurance claims professionals and lawyers gathered in the small Sumatran city of Bengkulu to commemorate the 250th anniversary of Carter v Boehm, a landmark English contract law case in which Lord Mansfield, the lord chief justice of Great Britain, established the duty of utmost good faith (or uberrima fides) in insurance contracts. Insurance News has reported on the 1766 case in previous editions. Essentially, the principle espoused by Lord Mansfield in his verdict established a concept that remains at the heart of the insurance industry. insuranceNEWS
The case revolved around a disputed claim by Mr Carter, who lost property during a French privateer’s attack on a coastal fort owned by the East India Company at Bengkulu. The claim was made against a policy he had taken out with Mr Boehm, a London underwriter. During the 2016 conference Australian attendees visited a nearby orphanage set up to care for children who lost their families in the devastating 2004 earthquake and tsunami. The orphanage now takes in disabled children, but receives little or no government support. With a geographic link to Lord Mansfield and the case that established a guiding principle in insurance law, the orphanage seemed an ideal recipient of the small surplus from the Mansfield Awards event in Sydney. And so it has proved. Several participants in the 2016 conference have retained links with the orphanage, most notably Perth lawyer Greg 51
Grateful: donations to the orphanage have been well received
Pynt, who has made several visits since to organise the purchase of a refrigerator, stove, fans and a rice-maker. Thanks primarily to Mr Pynt and LMI Managing Director Allan Manning, we have ensured that every rupiah spent has been for the childrenâ€™s benefit. Recently Mr Manning visited Bengkulu and reported on how the money has been spent. Here are excerpts from that report: The orphanage currently has 23 residents. Adjacent to it is a school that has 63 students, including the residents. The children are happy, clean and well looked after and are being educated. They support each other and there is clearly a great relationship with the staff. The teachers work virtually as volunteers, receiving less than half the basic wage payable in Indonesia. The headmistress is also head of the orphanage. She is highly respected. 52
â€œThe whole place is operated on a shoestring, but it amazes me what is being achieved. All the students have uniforms, and are well groomed and polite.â€? The whole place is operated on a shoestring, but it amazes me what is being achieved. All the students have uniforms, and are well groomed and polite. Before we invested anything further in the orphanage, I wanted to make sure the items Greg had purchased during a visit insuranceNEWS
last year were still all at the orphanage. They are. The fridge is locked in a special room because the children put it under strain by continually collecting ice. The stove is kept in a cardboard box, while the fans still have the plastic around their base to protect them.
They have had some water enter the roof in a couple of areas, so I arranged a builder who has a reputation for honesty o repair it. I also asked him to replace eight doors, construct a double bunk bed and repair another. The new doors cost the equivalent of $51. They swing outwards, so they will be much safer should there be a fire or earthquake. The school had arranged for seven beds to be built, although one was only half-finished. So I arranged for it to be built at a cost of $139.50, which was cheaper than any store in town. With the aid of a local tourist guide, Krishna, I purchased eight new single-bed mattresses. The new beds and mattresses will be used for new orphans who are coming in this year. To keep costs down we went to a sepa-
rate place to purchase the sheets. They were made for us, along with pillowcases, with two sets for each bed. The big-ticket item was water supply to the orphanage. When it was originally set up with government assistance, the well was not dug deep enough and the pump burned out. They have been forced to purchase town water, but this is polluted due to coal mines upstream, and their attempts to filter it have been far from successful. The cost to buy the water is equivalent to a teacherâ€™s monthly salary. I arranged for a new well to be drilled. This has gone down more than 80 metres to fresh water, and a new pump has been installed and pipes to taps, toilets and showers in the complex are being repaired or replaced. The total cost of all of this was just under $1400. The builder has agreed to replace corinsuranceNEWS
rugated plastic roofing that is cracked and leaking, and one iron roof sheet that is rusted through. He will also fit new flashing where the roof is leaking and paint the entire roof. Again, the cost of this was very reasonable. At no time during my visit did anyone try to hit me up for a bribe or cash, and I think the amount spent was very reasonable for the work done. Wherever I went, when I mentioned the items were being purchased for the orphanage, we received discounts. We have spent less than 60 million rupiah, or about $5444. I am confident the money spent represents good value and has been a great benefit to the orphanage, the residents and students. It goes a long way to helping the poorest of the poor, many of whom have been disenfranchised because of their phys* ical or mental handicaps. 53
Standing firm ASTA Group’s Dave Bazen believes traditional loss adjusting values still hold true in a digital world By John Deex
THE NATIONAL LOSS ADJUSTER network ASTA Group is about to celebrate its fifth birthday, and it’s going from strength to strength. The group has 95 adjusters across 42 locations in Australia and New Zealand, up from about 60 adjusters at formation in 2013. Chief Executive Dave Bazen puts this steady growth down to a number of factors. ASTA benefits from the work ethic of its independent, small business members, and has also modernised loss adjuster reports. But its main strength and point of difference is the preservation of a traditional, personal service-based style of loss adjusting that goes against the accepted trend towards technology and automation. Mr Bazen is in favour of progress, but not at the expense of the principles he holds dear. “The market is very much pushing on with technology,” he tells Insurance News. “Insurtech is the buzzword, you hear it all the time. If you are making a claim you can be sent an app and you can walk around with your phone showing the damage, and a loss adjuster remotely will view it. It sounds great, but I think it’s a load of rubbish. “The funny thing is ASTA Group’s point of difference in the market is that we are standing still. The focus in the industry is how technology can be used to streamline the claim process. “But what they are really saying is, how can we use technology to minimise the amount of contact we have to have with the insured to get the claim finalised?” Mr Bazen says his interest in technology comes from a different angle. 54
He wants it to tackle the onerous administration load loss adjusters face, giving them more time, not less, to spend with clients. “It is the one thing we won’t compromise on. The loss adjuster who shakes hands with the insured at the start of the claim is the loss adjuster who signs the final report, and that’s how we do business. It’s very traditional. “There is a view that time marches on and everyone needs to progress. I agree, but from the ASTA perspective we firmly believe the underlying principle of loss adjusting is a person to assist an insured and an insurer with the claim process.” Mr Bazen believes loss adjusters handing files to central administration agencies to manage, or using technology or apps instead of sending out an adjuster, results in “dumbing the industry down” and removing the service aspect. “Imagine how the insured is going to feel if the insurer won’t even send anyone out. The new way of thinking, that all the major insurers and major loss adjusters are promoting, is very much like the self-service checkout in a supermarket. “You drive yourself to my shop, you gather your groceries, you bag them, you organise the payment, and I’ll sit here and collect the money. “Personally, I’ll stand in the queue for 10 minutes so I can have someone process my transaction. I’m not against automation or technology, but I am against technology at the cost of human interaction.” Mr Bazen is not stubbornly sticking to principles for the sake of it; his approach is successful too. “The interesting thing is that a number insuranceNEWS
of insurers have been taking notice and saying, ‘Actually, this is what our clients want, so we are going to align ourselves with you.’ The industry is marching on with technology and heading into its new insurtech world, where everything is automated. We are standing still, and yet we are growing at a rapid rate.” Mr Bazen believes ASTA now holds third place in Australia, behind loss adjusting giants Crawford & Company and Cunningham Lindsey. He is delighted with that, but has no aspirations to climb higher, because he won’t sign contracts with the top four insurers. “That has been a very deliberate move, because in times of catastrophe the claim numbers are enormous and can be crippling,” he says. “You can’t be caring and compassionate if you have 50 claims to deal with on the same day. “We would rather focus on insurers with lower claim numbers, where we can give a higher level of service.” ASTA Group specialises in the property sector, particularly strata and machinery engineering, but also business interruption, liability and motor. “We focus very much on specialist insurance and insurers that are like-minded. Two of our biggest clients are AIG and Chubb and these are two of the biggest insurers in the world. “It’s not like we are only dealing with small insurers, but the types of policies they are writing and type of work they are looking for is very much in line with us.” Mr Bazen says while his clients are insurers, he views the insured as equally
Committed: Dave Bazen believes personal service is crucial
important, and he is not interested in finding ways not to pay a claim. “We pick the insurers we work with and our client’s policy tends to be, if you can do the right thing, find a way to pay the claim. While we are being paid by the insurer, we must always remain impartial, which means we are acting for the insured and the insurer. “Empathy is really important. While it is just a job for us, it could be a life-changing event for the insured. “It is important to build rapport and assure them you are here to help. We have a responsibility to be honest as well. If we are attending a job and it looks like it is not a claim, then you need to prepare the insured for that as early as possible. “By the time I’ve finished a claim, I want the insured to feel they have been fairly dealt with. I can’t make sure they are happy, but as long as they feel the process was fair, to me that is a successful job.” Mr Bazen says the worst part of the job is when someone turns out to be badly underinsured or not covered – an increasing problem as some SME owners abandon brokers in favour of online direct insurers. “A lot of people will go online thinking, ‘How many boxes can I tick to get the bottom line to say what I want it to say?’ They don’t realise that as soon as they make a claim the loss adjuster turns up on the doorstep with a policy saying, ‘I’m really sorry, but you are not covered for any of that because you didn’t select the cover.’ “It’s a gut-wrenching thing to do. I’ve had insureds in tears. It is an awful part of the job, but it comes down to fairness. If the 56
“People think the chances of a total loss are minimal, so they roll a dice and take a chance.”
insured did not take out the cover, then they are not entitled to it regardless of what the circumstances are. Flood is the classic example.” Mr Bazen says many people – and even some brokers – don’t understand the true implications of underinsurance. He says many businesses are more than 50% underinsured, having adjusted the sum insured to get the premium to a level they find acceptable. And while everyone understands that the sum insured is the maximum amount of money they can claim, not everyone understands the knock-on effect this can have on smaller claims. “Let’s say there is a business that has $100,000 of contents, and they have opted for $50,000 worth of cover. “If the business is a total loss, they are only going to get $50,000 not $100,000. “But they are 50% underinsured. What that means is, if they have a $20,000 claim, even though they have $50,000 of cover they don’t get the full $20,000. They are 50% underinsured and they only get $10,000 paid. insuranceNEWS
“People don’t realise that. People think the chances of a total loss are minimal, so they roll a dice and take a chance. They don’t realise it actually affects all claims below that as well, unless it is a very small claim. “As loss adjusters we are facing this all the time. The world is going internet-based, people think they don’t need a broker and they can go to the meerkat site and compare 10 insurance companies and pick the one they want. “While those sites are great for price comparison, they don’t give the proper information about what you need to consider when you are preparing your own cover. “As that market grows I can see underinsurance becoming more and more of a problem because brokers themselves are being pushed out. “Brokers have an essential place in the market as the insurance professional to advise the insured about the cover they need before it gets to a claim. “Because once we show up on the doorstep, it’s too late. We have got a policy in hand and that is all we can work to, we have no flexibility around that.”
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Chocks away: Dave Bazen with his Cirrus SR20
High flyer DAVE BAZEN SAYS HIS CAREER PATH has been as far from the traditional loss adjuster’s as you can imagine. He started as a licensed electrician, before becoming a refrigeration engineer, then switching careers to become a paramedic, before finally settling on loss adjusting. When he was a refrigeration engineer he used to service the airconditioning system for a loss adjusting business in Perth, and was asked to write a report after a fire. He started doing some machinery breakdown loss adjusting, which continued while he was a paramedic, before eventually buying the business in 2009. Jarm Adjusting in Perth has 10 adjusters, five in the engineering team and five in the property team. Mr Bazen and one of his colleagues are pilots, and fly a Cirrus SR20 out to more remote loss adjusting jobs. “It’s a low-wing aircraft, so in really hot weather when you are low to the ground it can get pretty bumpy. “I’ve had to land on a few regional airstrips on cattle stations where the airstrip is really nothing more than a rough dirt road. “When you have got the 40-degree temperature and the wind is howling in the wrong direction and you are being bounced around and you have to hit a dot on the ground not much bigger than a football, then it makes for some interesting times. “I love it and it is an interesting thing to do.” Mr Bazen has also been a volunteer firefighter and is studying a masters in fire investigation.
While ASTA likes to stick to the personal service style of loss adjusting, it has modernised in other areas. When Mr Bazen joined the industry he found the style of loss adjusters’ reports was too dense and difficult for claims examiners to understand – so he changed it. “I started talking to people and I was finding out that what the industry was doing was not what the clients wanted at all. “Loss adjusters had been using a certain layout and language, like old-school legal talk. “The claims examiners were having to do a whole heap of extra work to get it to what they needed. I said, ‘Tell us what you want and let’s give you that instead.’ “We reorganised the headings of the report to make it flow like a story, and changed the language to make it a little more plain English. “We took a different approach and it turned out to be exceptionally popular. We started getting more and more clients.” Despite ASTA’s contentment with its position in the market, it is still looking to grow. Target businesses are small independent loss adjusters that are qualified and follow the Australasian Institute of Chartered Loss Adjusters line. “It has to make good business sense as well, but I’m happy to talk to anybody,” Mr Bazen says. “We’re looking for a diverse range of skill sets. “We pride ourselves on the fact we hand-pick the people in our group.” Mr Bazen understands that the loss adjusting industry could face a recruitment crisis unless action is taken soon. He is currently training his seventh adjuster, and encourages other ASTA members to do the same. insuranceNEWS
“The only way the industry is going to survive is to train more people,” he says. “In five or 10 years there may be a mass exodus. We need to bring in new people and pair them up with the older generation. That’s exactly what we have been doing. “I am actively pushing our network members to identify new and younger talent and bring them in and give them the benefit of the experience of the older talent before they decide to pull up stumps and go.” Mr Bazen believes ASTA reaching its fifth birthday is a “pretty big achievement” in the sometimes unforgiving insurance industry. “Any new business in the insurance industry is a risky move. There are a few organisations with an enormous amount of power. Launching something new into the market is always fraught with danger.” And he is committed to backing the traditional style of loss adjusting, despite the industry focus on automation. “I started 15 years ago and back then people were talking about how in the future loss adjusters would no longer be needed. “Some 15 years down the track and we are no closer to getting rid of loss adjusters. Does that mean we’ll always be around? I’m not confident loss adjusting in its traditional form will always remain in the long term, but I am in the short to medium term. “Everything I hear is that the industry is moving away from the traditional loss adjuster model and through to insurtech, that is where the world is going. “Yet month by month, year by year, we * are growing on the traditional model.”
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From beta to alpha with Epsilon Chairman Paul Lynam says the underwriting agency is gaining broker support as it expands By Wendy Pugh EPSILON UNDERWRITING IS BUILDING a stronger position in the market after widening its product range, opening a Brisbane office and expanding the team by about one-third since the middle of last year. It has added accident and health and construction to a portfolio that already included casualty and property heritage products, and cyber cover. Chairman Paul Lynam, who joined Epsilon last July, says the new products have exceeded budget expectations and per60
formed well from the start, underpinned by strong market support for an underwriting agency that is not owned by a retail broking group. “A lot of brokers will come our way because we don’t have those conflicts,” he tells Insurance News. “We have the independence card, where brokers feel confident in dealing with us.” Mr Lynam has plenty of experience in the market, founding Lloyd’s agency SRS, which was acquired by Arthur J Gallagher in 2012. He became chief executive of insuranceNEWS
Gallagher’s Pen Underwriting before leaving at the end of 2015, then re-entered the sector with Epsilon. “At SRS we grew the business under its independent ownership to be the largest independent Lloyd’s coverholder in Australia,” Mr Lynam says. “It is my vision to replicate this somewhat, in providing motivated entrepreneurial underwriters a home where they can thrive.” Epsilon also aims to provide Lloyd’s underwriters a vehicle that ticks their distribution box and allows them to
Leadership team: Paul Lynam, Morgan Long and Paul O’Leary
“set and forget” given the depth of experience within the coverholder management group. The leadership team includes Chief Executive Morgan Long and Chief Underwriting Officer Paul O’Leary, who also joined last year after holding the same role at SRS and Pen. In other appointments, former Beazley underwriter Tim Curling came on board to head accident and health, Lester Scott was named Underwriting and Portfolio Manager – Construction, and Ellie Hazelwood joined as Senior Property Underwriter. Mr Lynam says Epsilon management team members are known for their entrepreneurship, and the company aims to be an employer of choice that offers a bespoke working environment. Epsilon was started in Sydney in 2001 and later became part of UK-based Cooper Gay, a wholesale insurance and reinsurance broker that rebranded with the name Ed. The underwriting group has expanded in the eastern states and engages with brokers across the country in Western Australia. In January it opened a new office in Mary Street in the Brisbane CBD.
“Queensland has a great broker market, which has been supportive of Epsilon over the years,” Mr Lynam says. “Knowing the team was growing and seeing the need for a CBD location, we did not hesitate in taking a long-term lease.” The expansion comes amid a strengthening in premiums, requiring brokers to be more diligent in presenting their client cases and highlighting the importance of having the right partners. “You can feel things changing,” Mr Lynam says. “The good brokers will come in with more thorough information to get their clients’ business placed for the most competitive price they can.” There will also be a greater focus on working with underwriters that are independent, responsive and have the technical ability and capacity to support more complex risks in the shifting environment, he says. The property insurance market started moving north from the middle of last year following some large waste site claims, then shifted further as major players supported rate increases and reduced capacity in some areas. “I think this year and next across all the product lines you will see rate increases on the harder-to-place accounts.” Mr Lynam insuranceNEWS
says. “The casualty market remains competitive across a number of sectors, but I think that will change as the year progresses.” Insurers are looking to restore profitability in certain lines after a long period of depressed premiums. Lloyd’s posted a pre-tax loss of £2 billion last year, its first deficit in six years, with the market stressing the importance of correct pricing for exposures assumed. Mr Lynam says cyber insurance is a potential growth area that will be considered more seriously by brokers and insureds due to mandatory breach legislation, which came into play in February. “I think it will get traction, but it has been slow,” he says. “The public haven’t really engaged with it yet, but I think eventually it will be a common product that everyone will have.” Epsilon will continue to seek growth opportunities, provided they are beneficial across the company’s three pillars: shareholders, the capital providers and the employees. “We don’t believe any one pillar can miss out as that can only end in short-term relationships,” Mr Lynam says. “If it makes * sense we will get involved.” 61
The good way to deliver bad news ‘Incremania’ is rampant in the commercial motor space, so the broker’s approach is important By Steven Hamilton
Incremania [in-kree-mey-nee-uh] noun: a state of fear suffered by brokers passing news of premium increases to clients.
THE MOTOR MARKET IS SEEING increases in premiums for the first time in several years. Many brokers, particularly those who are younger or with less experience, will for the first time be faced with delivering premium increases to their clients. These rises can be down to a variety of reasons, some specific to each account (fleet growth, less favourable loss history) and others market-wide. Account-specific increases due to loss ratio performance, vehicle acquisitions and the like are easily explained and, in most cases, expected by the client. Rises driven by factors such as insurers exiting the market or no longer being prepared to write accounts that are underpriced are more difficult to justify. Renewal reports need to be more detailed, with greater substance, than in the soft renewal years. Remember the simple maths: if a client has been enjoying a 10% decrease per year for five years, a return to past premium levels requires closer to a 100% increase (albeit this is simple not accurate maths). When presenting renewal terms to clients, brokers should consider showing not only last year’s premium, but also premium levels back to four, five or even six years ago, reminding clients not of the cheapest price from last year, but the rest of the market pricing and canvassing exercises that showed the expiring premium to be 20%, 30% or even 40% below the general current market. Often there may have been a standout low price that is no longer available, and the best premium options this year may be at the level of the third or fourth-best price last year. insuranceNEWS
A sensible view of commercial motor prices will help the client understand their increases. For example, clients will understand, but may not consider until it’s pointed out, that a commercial work vehicle on the road 40 hours a week has significantly more exposure, and therefore requires much greater premium, than a private vehicle, yet for several years the premiums have been similar. The “no secrets, no surprises” approach is vital for client communications in the hardening motor market, and alerting clients very early to the challenges they may face on renewal pricing is a must.
Renewal reports need to be more detailed, with greater substance, than in the soft renewal years. Providing clients with their loss history records at early pre-renewal meetings will help in setting premium level expectations. Most businesspeople understand that pricing of commercial motor is heavily weighted on clients’ loss history. A fear of the client seeking alternative terms from competing brokers is preferable to delivering bad news at the last hour. There is no doubt the commercial motor market has hardened and brokers
will be presenting premium increases to clients. The following tips will help in preparing your renewal report or client visit: 1. Early communication – don’t be delivering surprise bad news only a week or two before due date. 2. Year-on-year comparisons – make sure the client knows what the per-unit premium cost or percentage rate for the past few years (ideally five) has been. It had to go up at some stage! 3. Understand any change in the make of vehicles in the fleet. Are expensive-to-fix European brands becoming much more prevalent in your client’s fleet, for example? 4. The sniff test. How much should you really pay to insure a $50,000 ute or $100,000 rigid truck? It’s a lot more than $750 and $1500. 5. Should check quotes be obtained, even if the premium is coming off a very low-expiring base? 6. Offer alternatives – options with different excesses may be worth considering. 7. The client’s loss history is the key driver of premiums and analysis of current data for the past few policy years is crucial. Remember to factor in yearly fleet number size when considering loss trends. 8. Understand which external factors are pushing up premiums across the board that your client will have to share: weather events such as floods, cyclone, fires; more congested roads; large infrastructure exposures such as tunnel accidents; safer yet more expensive technology in vehicles; replacement of, instead of repairing, * components. Steven Hamilton is General Manager, Client Services at Fleetsure insuranceNEWS
Shifting landscape Insurance law firms are experiencing unprecedented change as the sector evolves
AS HAS BEEN WIDELY REPORTED, insurer margins are under pressure as a result of increased competition, the availability of excess capacity, and low investment returns. But what is less often considered is the knock-on effect on service providers such as insurance law firms. Insurers cannot absorb increased charge-out rates, and the ramifications in the legal sector have been significant with a number of longstanding law firms failing or being forced to merge in recent months. Managing Principal at Meridian Lawyers Paul Baker says firms like his have had to adapt and look at using technology and improving operational efficiencies, given their inability to increase their lawyers’ hourly rates. He also says law firms must be able to demonstrate how they can add value and achieve better claims outcomes for their clients. As the landscape is changing quickly, things like accurate reserving and prompt claims resolution are now the accepted norm. Mr Baker says law firms also now need to know and understand the insurer’s business and what makes them tick in a financial sense. He says it is about expertise, and how a law firm can differentiate themselves from their competitors in order to be successful. 64
The number of law firms on most insurer panels has been reducing in recent times, meaning more of the work is going to fewer players. The end result is consolidation in the market, with key talent shifting to a number of successful firms that remain, including Meridian. “We have not been able to increase rates, and neither have our competitors for some years, yet our operating expenses are increasing. As such we are experiencing our own margin compression,” Mr Baker says. “We as a legal service provider have had to look at ways of working more efficiently and meeting the challenges of that status quo. The underlying need to use innovation and technology is heightened. “We can’t continue in the way that law firms have traditionally operated. We have seen a number of law firms that have closed or been forced to merge in the past six months in particular. The whole landscape of law firms in the insurance space has and is changing rapidly.” Insurers have been reducing panels as they search for increased consistency, but this has had a major impact on the companies that have missed out. Those that have succeeded however, like Meridian, have been able to grow and attract quality talent. insuranceNEWS
Meridian already had offices in Brisbane, Newcastle, Sydney and Melbourne, and recently opened in Perth. It has added 28 new employees over the past eight weeks, taking the total to 135, with a further 15-20 additions expected over the coming months. “One insurer panel that we are on has gone from nine firms to two,” Mr Baker says. “That is significant for those firms that missed out, but the firms that are successful have been able to recruit some pretty exceptional talent and to offer their lawyers quality legal work and a true employee value proposition. “You had a multitude of law firms practising in the insurance space, but not anymore. “I have not seen so much lateral movement at partner level in the last 30 years. It is unprecedented.” Mr Baker puts Meridian’s success down to a strong investment in innovation, a willingness to search for efficiencies and work smarter and in being able to show how Meridian can add value. “It is all about differentiating our offer,” he says. Meridian has focused on collating data to benchmark performance, and invested significantly in technology and robotics. “For one client insurer we actually load our reports and all relevant documents
Open to change: Meridian’s Paul Baker
onto the insurer’s claims management system, so that reduces double-handling and the insurer’s cost of running claims. “We have invested $1.7 million in technology and in automating processes over the past two years. We are introducing an accounts payable system that through robotics streamlines our system and reduces our own operating costs. “And we are using templates to help standardise processes to ensure a consistent product and quality legal service offering to our clients. “It’s all about law firms and other service providers making it easier for our insurer clients and that’s why we’ve been very successful in being appointed to a number of panels over the past couple of years. “We’ve been able to demonstrate a commitment to the insurance industry, differentiate ourselves and show how we can work with our clients to value add to their insureds and wider market offering. “That then means you make key appointments and improve your team, it’s a compounding effect.” However, Mr Baker warns investing in technology and searching for efficiencies does not mean abandoning “the personal approach”. “Individuals and their experience and technical knowledge are so critical to the legal services offering,” he says.
“I think we will continue to see a decrease in the number of insurance law firms and we will see bigger, more specialist insurance law firm offerings in the short term.” “Insurance has always been about relationships. The relationship piece is still quite persuasive. If you have a capable team with individuals who are well known in the market, you are still in a position to be looked on favourably. “Firms that don’t continue to offer the personal touch will struggle to survive, in my view. “While there are these pressures, and demands on lawyers’ time is at an all-time high, you have got to balance it. “The challenge is using time effectively and efficiently without compromising the relationship and the quality of the legal service being provided.” Mr Baker believes the current consolidation trend in the industry has some way to run. insuranceNEWS
But he is confident that firms which like Meridian are prepared to differentiate, adapt and innovate, have a very bright future. “I think we will continue to see a decrease in the number of insurance law firms and we will see bigger, more specialist insurance law firm offerings in the short term,” he says. “The call on legal advice is still there. We have been through a period of a decline in the number of claims across a number of lines of business but insurers are saying that they are now seeing an increase in claims. That in turn will lead to hardening of rates and from there we go through the cycle. “Firms which are smart and those which * are open to change will prosper.” 65
School cover: QBE product shelters parents from fees default New development: strata owners have more choice
Strata options: CHUiSaver expands digital offering Strata insurance digital underwriting agency CHUiSaver has added legal expenses and lot owners’ fixtures and fittings to its residential policy as optional covers. CHU Chief Disruptor Ani Kakulapati says the options were added after feedback from intermediaries and clients and reflected growing demand for tailor-made strata covers. “This will help strata owners to have the backup and peace of mind, if they wish to opt for these covers,” he says. “CHUiSaver was started with the intention of challenging and disrupting the traditional strata insurance products. Providing the flexibility to opt in or out of certain covers as required is part of that.” The fixtures and fittings addition covers a potential risk due to installations or replacements that lot owners may complete without the body corporate’s knowledge. As a result they may not be included in a building replacement cost, increasing the possibility of underinsurance. The policy covers the replacement costs of the installations after loss or damage by any event that’s not part of the exclusions. Options for cover include the expense of professional fees if audited by the Australian Taxation Office or another government organisation. Cover is also available for the cost of appealing against common property health and safety breaches and the cost of defending litigation brought under certain legislation. CHUiSaver is the digital arm of specialist strata insurer CHU, which was established in Sydney in 1978 and became part of Steadfast Group three years ago. Polices are underwritten by QBE. The insurer launched CHUiSaver to offer budget conscious customers with an online alternative, while also allowing the company to explore more innovative approaches. The latest extra CHIiSaver options were added with minimal cost and the insurer is continuing to look at ways to better understand and meet client needs, * Mr Kakulapati says. 66
QBE has launched School Fee Protect Insurance, a product designed specifically for parents who have children in private schools. The initiative has been well received since launching in March, a QBE spokesman tells Insurance News. “Since launching, [the product] has received encouraging feedback from parents and seen a huge spike in web traffic and quotes, with sales tracking in line with expectations,” the spokesman says. QBE is the exclusive underwriter and claims manager of the product, which does not work like a typical income protection cover. It has no waiting period, does not consider occupation type and will pay benefits in addition to other income. It was developed following consultation with headmasters and bursars from feepaying schools. Fees for a year 12 student at a metropolitan school range from $6000$40,000. “One third of all Australian school students, or 1.3 million children, attend a private school,” QBE General Manager Consumer, Affinity and Banking Partnerships Eleanor Debelle said. “This is creating enormous financial stress on ordinary families who pay … to send their children to non-government schools. “Those parents will now be able to take out school-fee insurance as a safety net if they lose their job, have an accident or get sick.” *
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QUS celebrates decade More than 100 brokers, suppliers and guests joined the fun when strata insurer QUS celebrated its 10th anniversary in March. Steadfast Chief Executive Robert Kelly, Steadfast Underwriting Agencies Chief Executive Simon Lightbody, AIGâ€™s Head of Client & Broker Engagement Jared King and SME Property & Casualty Manager Peter Bailey were among those attending. QUS General Manager Craig Hodgson thanked his staff, brokers and clients for their support and said the insurer is on the right footing to scale new heights.
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Insurance products are provided by National Transport Insurance, a joint venture of the insurers Insurance Australia Limited trading as CGU Insurance ABN 11 000 016 722 AFSL 227681 and AAI Limited Trading as Vero Insurance ABN 48 005 297 807 AFSL 230859 each holding a 50% share. National Transport Insurance is administered on behalf of the insurers by its manager NTI Limited ABN 84 000 746 109 AFSL 237246.
Marsh conference a hit with partners Insurers and partners had a fruitful outing when they journeyed to the Gold Coast for Marsh Advantage Insuranceâ€™s (MAI) annual conference at the Sanctuary Cove Resort. Over four days they enjoyed industry discussions with the Marsh family including the regional and rural-based Landmark business, Indigenous partner Origin Insurance Brokers and the MAI Retail Life Adviser network. There were almost 190 attendees at the peak of the conference. One highlight was the special appearances of former Sydney Swans greats Adam Goodes and Michael Oâ€™Loughlin.
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Insurance products are provided by National Transport Insurance, a joint venture of the insurers Insurance Australia Limited trading as CGU Insurance ABN 11 000 016 722 AFSL 227681 and AAI Limited Trading as Vero Insurance ABN 48 005 297 807 AFSL 230859 each holding a 50% share. National Transport Insurance is administered on behalf of the insurers by its manager NTI Limited ABN 84 000 746 109 AFSL 237246.
Making a splash at HDI party Poolside style and a warm summer evening evoked the atmosphere of a Palm Springs resort vacation when HDI staff and guests gathered for an annual celebration. The Ivy Pool Club, located above George Street in the heart of Sydney, provided the venue for the Summer Fiesta Pool Party, transporting guests away from the busy city streets below. Glamour attire included light, short-sleeved sundae suits worn by some HDI staff, while a variety of refreshments and canapĂŠs were served through the evening as clear weather remained perfect for the occasion. HDI Global Australia Managing Director Stefan Feldmann welcomed around 130 people to the event.
LMI throws birthday bash Brokers, clients and contacts gathered at the Melbourne office of LMI Group to celebrate the loss management specialist’s 19th birthday. Managing Director and founder Allan Manning, sporting his “Make Insurance Great Again” red cap, led the celebrations with the 60 invited guests and staff at the garden-themed party in March. He thanked everyone for their support before handing out the Phoenix Awards in recognition of businesses that have rebounded strongly after sustaining losses or disruptions. Bolwell Corporation and Director Linley Hughes went home with an award, as did client broker Harry Kechris of Morphou Insurance Group for his work with Abitza Café.
peopleNEWS McLardy McShane highlights putting prowess McLardy McShane offered more than just vintage wine and fine champagne at its annual underwriter drinks party in February. Some of the 100 guests took part in a putting competition held at the Melbourne officeâ€™s new on-site Empire Sports Bar. Contest winner Johan Steyn from Attvest gave his $1000 prize money to non-profit organisation Fight MND, and another $1000 was donated by other competitors. Chief Executive Don McLardy used the occasion to thank staff and guests for supporting the broker throughout the past year.
Allianz brokers tee off Birdies, eagles, and albatrosses dominated the minds of Allianz Blue Eagle brokers when they battled for state honours and earned the right to contest the grand final in May. Who can blame them when a trip for two to the prestigious Ryder Cup competition in Paris in September is on the line? Daniel Curnow and Alan Knell from Centrewest won in Western Australia, Josh Jellett and Michael Ciavarella from Garden State Insurance Brokers triumphed in Victoria, Regional Insurance Brokersâ€™ Dustyn Brown and Kris Minns won in Queensland and Craig Olofinsky and Tom Saddington from Brookvale Insurance Brokers were victorious in New South Wales. The South Australia team has yet to be decided. The teams will compete at the final in Sydney at the Australian Golf Club.
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Lights, camera, action at CGU brunch Oscar-winning actress Susan Sarandon was the special guest at a CGU-hosted brunch to celebrate the insurer’s sponsorship of the Tropfest short film festival. Ms Sarandon was part of this year’s festival judging panel, which awarded top honours to the coming-of-age story Two Piece after a screening of the finalists at Parramatta Park. Tropfest was started in a Sydney café in 1993 by John Polson, who was also among the guests at the CGU brunch at the Park Hyatt Hotel. Brokers attending the event had the opportunity to catch up with CGU representatives including Executive General Manager Business Distribution Ben Bessell, Executive Manager Broker and Agency Solutions Phuong Ly and Executive Manager Business Underwriting Damien Gallagher. CGU stepped in to support Tropfest when the event, which had become the world’s largest short film festival, ran into financial trouble in 2015. The insurer signed a sponsorship deal in 2016 to continue its support for a further three years.
JLT marks International Women’s Day More than 440 people joined broker JLT to celebrate International Women’s Day in March at a series of events around the country. Head of Cyber, Content and New Technology Risks Sarah Stephens headlined celebrations at the Sydney office where she urged women to go beyond just “breaking the mould”. “There is a lot of talk about ‘breaking the mould’ ... but why adhere to the ‘mould’ in the first place? Create your own structures and environments which work for you, speak up about it and start advocating for change,” Ms Stephens said. Other prominent Australian women who joined the celebrations included Cricket Australia Head of Big Bash League Kim McConnie and Digivizer Chief Executive Emma Lo Russo. Events were also held at JLT offices in Brisbane, Perth, Melbourne and Auckland. JLT says the March celebrations are the biggest in the company’s history, and underscore its commitment to promoting workplace gender equality. About 52% of JLT employees are women.
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AIG shines light on cyber Centre for Internet Safety Director Nigel Phair was guest speaker at AIGâ€™s launch of its CyberEdge policy. Mr Phair, who worked for the Australian Federal Police for two decades, discussed latest technology trends in business, the impact of breaches such as the WannaCry attack and potential solutions. Guests also gained insights from a panel of IT and public relations experts from KPMG, Clyde & Co and Fleishman Hillard. The Sydney launch was at the Zeta Bar, while events were also held at the Skybar Lounge in Melbourne and Mr & Mrs G Riverbar in Brisbane. More than 150 people attended across the three venues.
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Lloyd’s toasts 20 years in Australia Champagne flowed freely at a Lloyd’s cocktail function in its Sydney office as Chief Commercial Officer Vincent Vandendael led the celebrations to mark 20 years of doing business in Australia. The Australia team, former staffers and guests including brokers and coverholders joined in the occasion. Mr Vandendael, who flew in from London for the event, thanked everyone who has made Lloyd’s success possible. Lloyd’s is now the fifth-biggest player with about $2.3 billion in written premium last year, General Representative Chris Mackinnon says. “It has been a pleasure to work with our loyal network of coverholders and brokers, and it has been immensely gratifying to slowly see the growth and success of the Lloyd’s Australia business,” he said.
UAC celebrates Sydney expo success Just like vintage wine, the Underwriting Agencies Council’s (UAC) annual Sydney expo seems to get better every year. The March event at the Hilton hotel set new records with 98 exhibitors and almost 400 brokers in attendance. Lloyd’s Head of Global Operations Joe Dainty spoke about the ongoing modernisation of the London market at a Macquarie-sponsored breakfast before the expo opened. UAC General Manager William Legge is already looking forward to next year, promising “an equal or better” event to celebrate the expo’s 20th year. Sydney-based INK Insurance Services Director Ilona Kalima was over the moon as the lucky winner of travel vouchers worth $5000. Other winners were Insurance NSW General Manager Meisam Salimabadi, who went home with a Microsoft Surface tablet, and Brooklyn’s Jeremy O’Connor, who won a Google Home device.
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WELL, THAT’S ANOTHER CONFERENCE SEASON OVER – the big ones, anyway. All that remains is a long string of smaller conferences ranging from 20 people up to a hundred or so. And, of course, the NIBA Convention. In early September the National Insurance Brokers Association will hold its annual gathering, this time in Hobart. It’s the only industry conference where no commercial brand dominates and where the affairs of the industry rather than pure commerce are paramount. It’s not only the oldest conference on the broker landscape; over the past dozen years it’s become the most vulnerable. For many years the NIBA Convention was the unchallenged leader in the industry conference stakes. It was usually held in spring at what was then Jupiter’s Casino on the Gold Coast. I’ve been attending the convention since 1991, when it was in its heyday. Brokers, their families and their staff would descend on Jupiter’s in great numbers, and for several days the casino would become the centre of the local insurance universe. Anyone who was anyone attended. Chief executives spent the days in their suites meeting brokers and only venturing outside to play golf. NIBA set the standard for high-quality speakers, whether they were local industry leaders or foreign bosses happy to share their views on the wider insurance world. The final night dinner was always hosted by QBE, and thanks to local boss Terry Ibbotson – a committed rock’n’roller – it always featured Australian rock legends. Then it was out of the dinner and on to the, umm, networking, much of which was conducted on the casino’s top two floors. Insurers with names like NZI, Sun Alliance, Mercantile Mutual, Royal and CU would welcome one and all to their suites for more dancing, drinking and chat. Mornings were usually spent dodging the official sessions or visiting the exhibition area in favour of a lounge by the pool. This would be followed by lunch and maybe then a couple of sessions before getting ready for the evening’s frivolity, lavishly hosted by one insurer or another. I remember those days as happy and filled with laughter. You wished it could go on forever. But it couldn’t, of course. The whole insurance environment has changed. In cold reality, the NIBA Convention, like the vast majority of such industry events, was funded primarily by insurers. Delegate and exhibitor fees helped make it a profitable affair for the association – so much so that for some years it was NIBA’s biggest revenue source. Insurers were happy to pay for marketing staff and managers to attend the convention, host special nights and take up exhibition space – all for the opportunity to establish relationships with the hundreds of brokers who attended. But that was then. Insurance brokerages in those golden days were predominantly owner-operated, and brokers identi90
fied strongly with NIBA. Today most are tied either by affiliation or financially (or both) to networks like Steadfast, and those networks want to get all their members together once a year under their own brand. The Steadfast Convention has grown year by year until it’s so big it’s restricted as to where it can gather all its brokers, underwriting agents and assorted hangers-on. This year’s convention in Melbourne, for example, attracted some 2300 delegates and featured a massive exhibition area where most of the networking got done. (It was also the first time Steadfast has organised the event in-house, and congratulations to all those involved.) AIMS approaches its annual event in a different way, inviting only principals and sponsors. The exhibition area is always compact but well-used, and the three or four hundred who attend are handled in a far more relaxed way. The emphasis is on remarkable speakers, many flown in from overseas, who speak to a central theme. This year’s Perth conference carried the intriguing title “Clarity is the Future”. Then there are 26 smaller conferences held by brokerages around the country, all of them intended to bring together employees, build camaraderie and promote teamwork. But still these brokerages expect the insurers with whom they have strong relationships to pay anything from $10,000 up to $50,000. For Steadfast and AIMS it rises to $75,000 or more. Then add the cost of entertainment of selected guests, plus staff airfares and accommodation. As brokers have grown to identify more strongly with their central brand, the profile of NIBA has been diminished – and with it the drawing power of its annual convention. NIBA’s primary role is representation, and in an environment of regulator agitation and legislative distrust of financial services, the association really should have the financial support of every person who makes a living from insurance broking. After all, it’s the only thing standing between brokers and what could eventually be onerous changes to the work they do. To benefit from its representation without paying for it hints at parasitism. NIBA no longer makes a fat profit from its convention, because of diminishing numbers. Fewer brokers attend the convention because they have their own gatherings to focus on. That leads to insurers becoming less willing to provide financial support. It’s a situation where everyone loses. Older brokers should attend the Hobart event if only to relate old convention war stories, like climbing up the outside of Jupiter’s late at night as a shortcut from one insurer’s suite to another, or pulling all-nighters in the casino while losing $5 at blackjack. Younger brokers should attend to learn more about the environment they work in, rather than just the straight business stuff. Come right down to it, the survival of the NIBA * Convention is an issue for brokers, not insurers.
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Meet leaders and thinkers from across the industry, check out the social scene and gather so much more from Insurance News (the magazine) –...
Published on Apr 17, 2018
Meet leaders and thinkers from across the industry, check out the social scene and gather so much more from Insurance News (the magazine) –...