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OUR TOP 20 INFLUENCERS

THE NAME WHO FLED LLOYD’S

AAMI’S SOCIAL MEDIA ROMANCE

Rise of the actuaries Finity’s Estelle Pearson on why the number-crunchers are suddenly so important

December 2012/January 2013


Contents 6 Newsmakers » 12 No gouging, but plenty of pain »

CGU launches serious business cover for tradies.

59 They’re excited »

The north Queensland strata title market is paying the price for years of undervalued premiums.

14 The rise and rise of the number-crunchers » Estelle Pearson sees a golden age ahead for the industry’s increasingly influential actuaries.

20 When two worlds collide » Owning capacity and distribution is a growing trend in insurance markets around the world – and Australia is no exception.

QUS does a deal with WR Berkley, and everyone’s happy.

60 It really could happen » If it does, you’d better have ticked ‘management liability for SMEs’ in the Vero bizpak.

60 Striking a deal » SUA launches a general liability product and buys a niche underwriter.

60 Cyber serious » Chartis develops a product to help companies deal with attacks and data loss.

22 Get that name right » …and then design a logo that backs it up. An expert shares some insights into the art of corporate branding.

26 The top 20 most influential people in insurance » Our annual round-up of the people who change people’s minds, affect the industry and make things happen.

38 Modelling uncertainty » They’re not perfect – yet – but catastrophe models do empower insurers to manage risks, says AIR Worldwide’s Ming Lee.

44 Socially speaking » Insurers have embraced social media, where customers set the rules and some things go inexplicably viral.

48 The long arm of Lloyd’s » The market’s pursuit of a former Name lasted over 10 years, ending up in New Zealand.

50 Winners and losers » Who’s to blame? Two governments avoid damaging legal judgements over bushfires.

peopleNEWS 61 62 64 66 69 70 72 73 74 76 78 80

Ace goes for a dip » Having a flutter with CGU » Austbrokers gives hearty thanks » Women in insurance get together » Generation Z switches on to digital » Allianz takes brokers for a quick ride » Joe sent me… to the AILA Young Professionals night » ‘Southerners’ head north and have a ball » Lumley sets the benchmark high » Zurich, ladies, Geelong, gee-gees » Insurance Advisernet soaks up the sun » Expo attendance delights UAC »

82 maglog »

54 Call for action » Sydney’s flood-prone northwest has featured in a major NSW study.

56 Freight angels » From crash site cowboys to recovery professionals in just 10 years. How NTI’s Accident Assist revolutionised the heavy vehicle industry.

companyNEWS 59 Trading up »

December 2012/January 2013

Cover: Estelle Pearson, Managing Director, Finity Consulting Image: Kym Thomson


Code overhaul: The General Insurance Code of Practice is to undergo its biggest overhaul since its inception in 1994. The review, which was brought forward by a year because of last year’s natural disasters, comes amid unprecedented political interest in insurance standards and practices, with five major government reports on the industry released in the lead-up to it. Against this backdrop, independent reviewer Ian Enright has conducted a particularly thorough analysis and poses many complex and difficult questions re-

Fire risk rising: Fire risk has risen across Australia over the past four decades, particularly in the south and southeast, in a clear example of man-made climate change, according to one of the world’s foremost climate experts. A New South Wales report studying changes in Australia’s “fire weather” – conditions that are likely to lead to a fire outbreak – between 1973 and 2010 has found an upward risk trend across most of Australia, and a particularly strong trend in South Australia, western NSW, Victoria and northern Tasmania. Melbourne and Adelaide recorded 49% increases in their cumulative annual Forest Fire Danger Index, a scale used to quantify fire weather conditions by state agencies to announce fire warnings. Professor David Karoly, lead author for the Intergovernmental Panel on Climate Change and a Professor of Climate Science at Melbourne University, says while the report doesn’t link rising fire risk with climate change, its findings are consistent with other papers that demonstrate a connection. He says that as the La Nina weather pattern dissipates, marked by above average rainfall, fire risk would likely rise over the next few years.

lating to all aspects of the code. He has raised 110 questions on 17 key issues, which are now out for industry and stakeholder comments. A primary area of concern is awareness of the code. Another fundamental issue identified by Mr Enright is the code’s coverage. It currently applies only to those general insurers who choose to adopt it. The review sensibly asks whether the code should be compulsory for all insurers operating in Australia. Cracking the code: key questions of the Enright review, November 5

“The code … currently applies only to those general insurers who choose to adopt it” Searles steps up at Austbrokers:

Climate change raises fire risk across Australia, November 12

You can’t take them out:

Tasmanian leads AICLA:

Actuaries pick Pearson:

The Australasian Institute of Chartered Loss Adjusters (AICLA) has elected a new board, with Tasmanian adjuster Michael Cooke being named the new president. The institute’s annual general meeting also elected Stephen Kwang of Singapore as Deputy Chairman. Chief Executive Tony Libke told insuranceNEWS.com.au that AICLA’s international division is continuing to enjoy strong growth, and the institute is close to finalising the program for its Asian claims convention in Bangkok in March.

Estelle Pearson, Managing Director of actuarial and insurance consultancy Finity, has been named Actuary of the Year, recognised for making a key contribution to business, the community, government and the profession. She was chosen by a panel of senior Actuaries Institute members “for her leadership in the actuarial profession, positioning actuaries as providing exceptional service and strategic advice to the insurance industry”.

Tasmanian takes up presidency of AICLA, October 29

Finity MD wins Actuary of the Year award, November 19

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Brokers have made it clear they will take legal action against former employees who they believe may try to poach clients – and court decisions this year have tended to favour the employers. Two cases in the New South Wales Supreme Court have led to orders restraining former staff from soliciting or doing business with clients after their previous bosses challenged them, citing terms in employment contracts. Litigation by Willis against three former executives has ended by agreement, with the court making orders preventing the ex-employees from soliciting or doing business with the company’s clients for set periods. The Willis case was cited in an action by OAMPS against two of its marine specialists who moved to [competitor] FP Marine but who have now been prevented from joining their new employer until the end of next March. Final orders made last Wednesday also prevent the men from soliciting OAMPS employees or dealing with specified clients until December 31 next year. Courts coming down on the side of ex-employers, 26 November

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Incoming Austbrokers Chief Executive Mark Searles (below) says he will focus on supporting brokers with a lower-cost solution for their business operations. Mr Searles is on “gardening leave” until he starts the job on January 1, having quit CGU as General Manager Broker & Agent. Outgoing veteran Chief Executive Lach McKeough will become an adviser to Austbrokers, specialising in acquisitions. Chairman Richard Longes says Mr Searles was appointed after a “significant search”. “Importantly from our point of view he has significant background in IT development,” Mr Longes said. Austbrokers' incoming CEO Searles to target costs, October 22


Climate sceptics among us: Some Australian insurers remain sceptical about climate change, a new survey shows. Only 65% have adopted the formal position that climate change is a reality, according to a survey by actuary Evelyn Chow and actuarial analyst Jessica Egan. The participants represent 70% of all licensed general insurers in the country, and include 19 insurers, four reinsurers and three government insurers. Eight small insurers surveyed are most sceptical about climate change, with one taking the position that climate change is not real. Three others have not adopted a formal position but two of these are taking action on climate change regardless of their opinion. Of eight mid-sized companies surveyed, three do not have a formal stance and are taking no action, while two have not taken a formal position but are taking action. All three government insurers surveyed and all seven large insurers questioned believe climate change is happening and all are taking action.

One Fels swoop:

FIGURE THIS

The Victorian Government is proposing fines of up to $500,000 for individuals and $10 million for companies that take advantage of consumers during the transition from the fire services levy (FSL) to a property-based tax next year. The state’s incoming FSL Monitor is former Australian Competition and Consumer Commission chairman Allan Fels. Legislation introduced to Parliament last week states an insurer is engaging in price exploitation “if it issues a regulated contract of insurance and the price for the insurance is unreasonably high, having regard to a number of factors including the fire services levy reform, the historical fire services levy rates charged by the insurance company and the costs of supplying insurance against fire”.

25,298

State flags $10 million fines for FSL price exploitation, November 19

Percentage of Australian small businesses that don’t have business interruption cover, according to Cameron Research

A shaky system?

Milliner moves up at ICA:

Pricing in the January 1 reinsurance renewals is expected to be relatively flat, delegates at the Baden-Baden meeting have heard. Negotiations continued in the German town last week as insurance and reinsurance industry representatives once again gathered to discuss prices. Munich Re says it expects prices, terms and conditions will “largely remain stable”, with prices in the casualty classes set to stabilise with a trend towards slight increases, especially in the longer-tail categories where “low interest rates are squeezing future profitability”. Swiss Re Chief Executive Michel Lies says adequate pricing is increasingly challenging in the lowinterest rate environment. “Things are getting more extreme, more ugly and more volatile,” Mr Lies said. “Volatility is a fact and, as reinsurers, it is an opportunity to help our clients absorb risk, and we need to be louder about our role.”

New Zealand’s earthquake insurance model is systemically flawed when exposed to a large volume of claims, Vero NZ Chief Executive Gary Dransfield says. Calling for an overhaul of the system at a business function in Wellington, Dransfield said there is no consistency in the terms and conditions of policies being managed by both the Earthquake Commission (EQC) and private insurers. “Having a government insurer and private insurers responsible for claims from the same customer has made the Canterbury recovery extraordinarily complex and has reduced claims management speed and efficiency,” Dransfield said. He had earlier rejected EQC Chairman Michael Wintringham’s assertion that there is an incentive for insurers to reduce their liabilities by shifting costs onto the state.

Suncorp Head of Personal Insurance Mark Milliner has been appointed President of the Insurance Council of Australia for the next two years. Mr Milliner told insuranceNEWS.com.au he will closely monitor and influence the policy issues affecting the day-to-day operations of insurers. “I also believe it is important to take a strong lead on improving the industry’s reputation, instilling an improved level of faith in the industry by customers, stakeholders and shareholders. “Most importantly I am passionate about long-term strategic risks and issues that will affect the profitability of the Australian insurance industry.”

Reinsurance pricing to remain flat, October 29

Vero NZ chief calls for reform of earthquake insurance, November 26

Milliner named ICA President, November 19

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24,983 Number of disputed claims that were resolved through the service

30 Percentage of businesses in Christchurch affected by the earthquakes

65

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Jury still out on climate change, insurers say, November 19

Reinsurance – in a word, flat:

Number of disputed claims referred to the Financial Ombudsman Service last financial year

December 2012/January 2013

Australia’s world ranking for general insurance penetration, according to the World Economic Forum

941,981 Amount in NZ dollars owed to collapsed insurer Western Pacific, including “significant” unremitted premiums held by brokers

110 Number of questions being asked by General Insurance Code of Practice reviewer Ian Enright

25BILLION Expected total amount in US dollars of US crop claims as a result of drought this year 7


FROM THE PUBLISHER

Sandy blows into town: Hurricane Sandy continues to take its toll, with latest estimates putting insured losses at $US20-25 billion. The figure, provided by catastrophe modeller RMS, is backed by local insurer QBE, which has a substantial business in the US. QBE shares took a hammering last week after it revealed its losses would be $350$450 million. Sandy is expected to be the secondcostliest natural catastrophe in US history, behind Hurricane Katrina. The final insured loss remains uncertain but ratings agency Standard & Poor’s (S&P) says it would have to exceed $US50 billion for the storm to have a “material impact” on capital in the reinsurance sector. The uncertainty about total insured loss stems from Sandy’s “unusual characteristics

PUBLISHER/EDITOR: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: publisher@insurancenews.com.au ADVERTISING: NAOMI CONWAY McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: naomi@mccmedia.com.au ARTWORK DELIVERY TO: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road, Ivanhoe VIC 3079 (COURIERS ONLY) Email: naomi@mccmedia.com.au

and coverage complexities”, S&P says. While catastrophe models capture traditional risks such as wind damage and flood, unique features such as widespread power outages, the high tide leading to a significant storm surge, disruption of transport infrastructure and the flooding of New York subways and road tunnels are “not fully reflected in vendors’ loss estimates”, the agency says. Further complicating the situation are calls from US regulators for insurers to avoid applying hurricane deductibles to damaged properties because the National Weather Service ruled the storm was a post-tropical cyclone rather than a hurricane at the time of landfall. S&P says this decision could increase insured losses by 30-50%. Sandy second only to Katrina in insured losses, November 19

Terry McMullan

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ISSN 1837-4972

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A McMullan Conway production

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No gouging, but

The north Queensland strata title market is paying the price for years of undervalued premiums By Jan McCallum INSURERS UNDERPRICED STRATA title cover in north Queensland for years, but the pendulum is swinging back. Now premiums have risen so steeply many residents can’t afford them. Property owners in the flood and cyclone-prone region have turned to their Federal representatives to help them, and the issue is heating up. The Federal Opposition plans to investigate whether the Australian Reinsurance Pool Corporation could be used to reduce the cost of insurance in north Queensland, and Shadow Assistant Treasurer Mathias Cormann has said he will develop a policy response to the increasing cost of insurance in the region. The political response comes despite a report into premium increases in north 12

Queensland strata, released in October, which says insurers got their pricing wrong “by a large margin” in the 2007-2012 period he investigated. The business was unprofitable for the three insurers remaining in the north Queensland property market and low premiums discouraged other companies from entering or staying in the market. Neither insurers nor insureds have emerged as winners on this one. Mr Martin’s report says insurers miscalculated premiums and made a loss on strata between 2007 and 2012. Their losses from big claims years, such as the Mackay storms of 2008 and Cyclone Yasi last year, were so high that they wiped out any profits from low-loss years. The Federal Government asked Mr Martin to investigate price rises for north Queensland strata insurance following last year’s natural disasters, when insurers began to reprice cover and policyholders were hit by premium increases of thousands of dollars. The insurers were accused of pricegouging, but Mr Martin has found no evidence to support this. He says the business was underpriced historically and premiums rose along with the cost of reinsurance and because of disaster losses. insuranceNEWS

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It seems the business was such a small part of insurers’ books that it did not get much attention. As Mr Martin notes: “Loss-making business tends to focus an insurer’s attention.” The insurance problem has been exacerbated by a huge increase in unit development in Queensland in the past decade. Not only have insurers had limited historic data to use when pricing, but many people bought units when the cover was cheap. Increases of thousands of dollars are stretching budgets, and are unaffordable for retirees on fixed incomes. The Federal Opposition has begun looking at using the Australian Reinsurance Pool Corporation to address issues of affordability, prompted by demands for action by coalition MPs representing northern Queensland electorates. But John Trowbridge, who chaired last year’s Natural Disaster Insurance Review for the Federal Government, says the terrorism pool is intended to cover terrorism risk and any other use would be inappropriate. “The terrorism pool has been set up to deal with risks that the insurance industry won’t cover and which the community must have covered,” he told Insurance News. “It’s not a question of price but of availability. “In north Queensland we don’t have an


plenty of pain availability problem but we appear to have one of affordability, and the solution is not obvious. Insurers need to manage their risks and exposures while property owners need insurance cover.” Mr Trowbridge believes the north Queensland strata issue should be looked at in conjunction with the flood insurance problem, and it should be seen as a legacy issue regarding existing properties in high-risk areas. Liberal Member for Leichhardt Warren Entsch and Nationals Member for Dawson George Christensen argue that it is not just unit-holders who are facing massive increases in premiums. They say other residential and commercial properties are affected and some owners cannot get insurance at any price. “Unit-owners are compelled by law to have insurance but some are not able to purchase any at all – either because the insurance companies won’t offer it or because premiums are priced higher than property owners can afford,” Mr Christensen says. He quotes the example of a block of units in Bowen, which has seen the cost of insurance rise in one year from $13,569 to $48,000, while the cost of insuring a home in Mackay has risen from $2642 to $13,616. Mr Entsch says some of his constituents cannot get any cover, which he maintains is based entirely on postcode rather than risk exposure. And Mr Christensen says the data used by the Government Actuary came from a small selection of insurers over a short period that included the 2008 storms in Mackay and last year’s Cyclone Yasi. Only three underwriters now operate in the market. Insurance News understands Zurich has stopped taking on new business in the region and will only renew existing clients. CGU is being selective about insuring older buildings and Vero is new in the market and is being cautious. Zurich Chief Executive Daniel Fogarty says the company could have quit the market but decided to support its clients and to price the risk accurately. “We took a lot of heat, but we also made sure everyone, including the parliamentary inquiry, understood why we were taking the approach we did,” he told Insurance News. “It’s good to see the Government Actuary agrees there hasn’t been any profit for insurers in this small segment for a long time.” An unimpressed Mr Christensen says Mr Martin only failed to find evidence of pricegouging “because the report did not look”. Mr Entsch says the Coalition will investigate mechanisms “that are going to be effective in making it financially competitive for insurance companies to offer policies in our region

and price these policies in a way that accurately reflects the risk”. The risks in any government-initiated “mechanism” have been raised by Mr Trowbridge before. He says there is a risk that government handouts could encourage new development in areas of high cyclone risk. “Just as we don’t want more people to build in flood-prone areas, we don’t want anybody to build in high cyclone areas without accepting the full costs and consequences of the risks involved,” he says. “The solution may require premium relief on a temporary basis to some existing property owners, but [it] must avoid institutionalising hand-outs or subsidies, which can make the problem worse by effectively inviting subsidised property development and inadequate risk management in cyclone-prone areas.” Mr Entsch says if insurers have been underpricing for many years, it is ridiculous for them to try to recoup the losses in two or three years. “I, for one, don’t want to see the fallout from a major cyclone coming through when people have $20,000 to $50,000 cyclone excesses or, worse, no insurance at all.”

premium earned plus investment return. “Pricing errors of this magnitude are unlikely to engender confidence in the insurance industry. Having said that, it is relevant that my analysis has been undertaken with the benefit of hindsight.” Mr Martin also warns it is not possible to guarantee that premiums in the region won’t rise further. “Although my analysis suggests that prices are now more likely to better reflect the underlying risk than previously, the experience of the past six years would not support a view that prices today are unreasonably high.” He says there are no barriers to stop other insurers entering the market and it is noteworthy that at least one significant strata insurer does not write business in north Queensland. But now that prices have risen, he suggests new insurers might enter the market. “I would regard current market conditions as being more likely to attract new insurer participation than at any time during the past few years.” The Insurance Council of Australia agrees. It insists there is no evidence of a market failure and that competition in the north Queensland

“Although my analysis suggests that prices are now more likely to better reflect the underlying risk than previously, the experience of the past six years would not support a view that prices today are unreasonably high.” Reinsurers have taken some of the blame for higher premiums but Mr Martin’s report finds that although the cost of reinsurance has risen by almost 70% since 2007, “when expressed as a percentage of premium charged for strata title insurance, it has decreased”. “This is because the increase in the cost of reinsurance has been more than offset by an increase in the gross premium.” He says that between 2007 and 2012, insurers spent $160 on claims, expenses, commissions and insurance for every $100 of insuranceNEWS

December 2012/January 2013

market and “current conditions” are more likely to attract new entrants than at any time * during the past few years.

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The rise and rise of the number-crunchers Estelle Pearson sees a golden age ahead for the industry’s increasingly influential actuaries By Michelle Hannen

THE GROWING PRESENCE AND INFLUENCE OF the actuarial profession on the general insurance industry is hard not to notice. At the start of the 1980s around half a dozen actuaries worked in general insurance; 10 years later there were 30, then 120 by the end of the 1990s and more than 240 a decade later. The number is still rising. They’ve also come a long way in influence. The image of the nerdy socially challenged actuary in the corner mentally calculating people’s life expectancy has evolved into that of a savvy expert with facts and figures at their fingertips and strong beliefs in where things are going. Among Australia’s actuarial leading lights is Estelle Pearson, the Managing Director of consulting firm Finity and named last month by the Actuaries Institute as Actuary as the Year. Her career in general insurance began in 1989, when, like many other actuaries, she jumped ship from crunching the numbers in the superannuation industry for the “new and exciting” world of general insurance, where she says actuaries were “very involved at a senior level to help make their businesses better”. She joined Finity’s precursor, Trowbridge Consulting, and in line with the growing role of her fellow professionals, Ms Pearson’s stature in the industry also grew. She was promoted to principal at Trowbridge Consulting in 1993 and became a partner following the firm’s merger with Deloitte’s actuarial practice to become Trowbridge Deloitte in 2000. In 2005 a management buyout saw Finity created and Ms Pearson becoming managing director of the firm in 2007. With two teenage children, life is a juggling act between work and family commitments, but at least she has a husband who understands what it’s all about. He’s fellow actuary and Finity principal Scott Collings, who leads the firm’s volatility and capital management practice. 14

Ms Pearson says the profession, as well as her firm, boasts several marriages and relationships – musing that perhaps it is only a fellow actuary that can come to grips with the “complexity” of another actuarial mind. While no doubt complex, many pundits oversimplify the rise of the actuary by linking it simply to the increasingly onerous levels of industry regulation. But Ms Pearson believes it was the egg that came before the chicken. “There is a common belief in the industry that actuaries have done very well out of regulation,” she tells Insurance News. “But the reason that regulations have evolved in the way they have is that, in part, regulators have also recognised the value that the actuarial process can add.” Rather than regulation, Ms Pearson says the availability of increasing amounts of information is the key driver behind actuaries’ growth in profile and influence within the industry. In the days of paper reports the scope of actuaries was fairly limited, but with the vast amount of information available today – and the flexibility of that information – actuaries have been given an opportunity to shine. “Through that, we’ve been able to show the value we can bring to insurance companies,” Ms Pearson says. The role of actuaries in the industry has moved beyond the traditional pricing and reserving functions, to capital management, risk management and even claims. This revolution in the actuarial footprint marks its beginnings in the 1980s, when high inflation and problems with reserve adequacy “led companies to move away from case reserves to actuarial methods to establish outstanding claims provisions”. The introduction of the Australian Accounting Standards Board’s Standard 1023 in the 1990s furthered the growth of the

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Finity Managing Director Estelle Pearson: regulators also recognise the value of actuaries

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“The insurers who are the winners will be those who can conduct a more sophisticated analysis of their capital needs and operate with a lower relative amount of capital than their competitors.”

profession, encouraging the use of actuarial methods and advice. And when compulsory third party pricing was deregulated in New South Wales in 1991, actuarial sign-off was required to establish rates were fully funded. Ms Pearson says that throughout the 1990s, more insurers built internal actuarial capabilities. Additional work and responsibilities under the newly established Australian Prudential Regulation Authority (APRA) regime boosted the stature of actuaries in the new century, with more small insurers employing actuaries. The early 2000s saw the beginnings of address-based risk analysis and the introduction of actuaries into the capital management and risk management fields. Increasingly complex insurance regulations will continue to play a part in furthering the cause of actuaries. For example, Ms Pearson believes the life and general insurance capital standards regime to be introduced by APRA from the start of next year – it requires insurers to make their own determination about the amount of capital they need – will further increase actuarial involvement in capital management. “The insurers who are the winners will be those who can conduct a more sophisticated analysis of their capital needs and operate with a lower relative amount of capital than their competitors,” she says. Hand in hand with improved and increased levels of information, the evolution of technology has been a key factor driving profound changes in the insurance industry over the past few decades, and will continue to be. Everything from the way insurance is priced to the way in which it is sold will be affected. Ms Pearson recounts how in the 1980s, when the fax replaced the telex and brick-like mobile phones were first sighted, 16

mainframes still took up entire rooms and had to be fed punchcard instructions. “NRMA Insurance, who were a leader in insurance pricing technology by a margin, could only do a pricing exercise twice a year, at Easter and Christmas, when the call centre was closed. It took two days for the system to run.” She says the advent of personal computers in the 1990s enabled companies to create office networks, making it easier for colleagues to share work, and as the capacity and speed of computers improved insurers developed “warehouses” for data storage, analysis and reporting. “There was more information available and we had more powerful computers to analyse it with,” Ms Pearson says. Later in that decade, the internet revolutionised the industry, with the advent of email and the beginnings of online shopping. These society-changing revolutions began to shift the insurance relationship from face-to-face or phone-based to a transaction possible without any personal communication. Ms Pearson says the 2000s saw the change from a computer on everyone’s desk at work to one on everyone’s lap. “We became accessible 24 hours a day, blurring the lines between work and leisure.” The rise of aggregator sites this decade – much of it pioneered in the UK insurance industry – demonstrated the power of price comparison, with more than half of all new UK motor insurance now being transacted on these sites. The rise of social media is again changing the relationship between insurers and their customers, Ms Pearson says, and it will continue to do so into the future. She points to customers rating their experiences with companies through online forums, which makes brand image increasingly difficult to manage. On the upside, the internet offers companies lower brand development costs and will allow them to further segment the

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market through the use of carefully selected and targeted brands. Technology will also continue to play an important role on the pricing side, she says. Emerging technologies are allowing for more sophisticated and accurate underwriting. “In the 1980s NRMA was limited to six characters to describe a vehicle. Now, through telematics, we can collect information and price risk for each journey a vehicle makes.” In her 23 years working in general insurance, Ms Pearson has seen several events that have triggered massive change in the industry. At a global level, she identifies the explosion of the Piper Alpha oil platform in the North Sea in 1988 as a game-changer. It triggered the “London Market excess of loss spiral”, whereby losses insurers thought had been laid off reappeared through inwards retrocession arrangements revealing poor exposure monitoring by insurers. She includes the asbestos crisis in the early 1990s which “changed Lloyd’s forever” and the impact the September 11 attacks in the US had on the global terrorism insurance market in the same field. Locally, Ms Pearson says Cyclone Tracy in 1974 changed the way insurance was viewed in Australia. It also changed the

way insurers thought about risk. She sees the Queensland floods of early 2011 as another trigger for change, with the rapid introduction of widespread flood cover and the introduction of the standard flood definition – changes she believes would otherwise not have come. Ms Pearson says actuaries have played a key role in the swift offering of flood products by using geospatial information to develop algorithms that allow for address-based risk assessments, sometimes even in the absence of detailed flood maps. She warns that changing weather patterns will continue to influence and challenge the insurance industry, with insurers yet to feel the impact of climate change in terms of insurance losses. “My expectation is that changes will only occur gradually. However, there is the risk that we will start to see accelerated change over the next decade leading to more extreme, more costly events much more quickly than we have anticipated.” Studying historical weather losses, Ms Pearson says there is evidence of long-term weather pattern changes which suggest that around 2007/08, Australia emerged from a 30-year “good” weather cycle, characterised by low weather-related insurance losses. She suggests Australia may now be part of the way into a decade-long “bad” weather cycle, the effects of which will be

“There is the risk that we start to see accelerated change over the next decade leading to more extreme, more costly events much more quickly than we have anticipated.” felt across the industry. “Weather has a dramatic impact on the Australian insurance industry. Relative to other countries we have a lot of weather,” she says, adding that our weather is also incredibly variable in type when compared globally. Ever-increasing amounts of data – about weather as well as a multitude of other risks – from within and outside the industry will all need sifting through and refining. Ms Pearson predicts the scope and influence of actuaries will continue to grow, extending to an increasing involvement in the claims end of the business, where their unique skills can be utilised to identify fraud patterns, address claims leakage and help to identify best in class claims practices. * In short, the rise of the actuary is far from over.

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When two worlds collide

SRS founder Paul Lynam: big things ahead

Owning capacity and distribution is a growing trend in insurance markets around the world – and Australia is no exception By Michelle Hannen

LAST MONTH’S ACQUISITION OF LOCAL underwriting agency SRS by global intermediary Arthur J Gallagher marks yet another point in the continuing move by large companies to marry capacity and distribution. From Suncorp’s acquisition of AMP’s authorised representative (AR) business earlier this year to CGU’s 2011 buy-out of Perthbased AR specialist broker NAS, to the Wesfarmers Insurance model that embraces direct and inter mediated underwriting, broking and ARs, the line between underwriting and broking ownership is becoming increasingly blurred. And the convergence phenomenon is not just confined to Australia – it’s something of a worldwide trend. The latest high-profile local deal, which sees the fourth-largest global intermediary Arthur J Gallagher buying Australia’s largest independent Lloyd’s managing general agent, SRS, has echoes of the strategy being pursued on the other side of the world by the UK-based Hyperion Insurance Group. Under the innovative management of Chief Executive David Howden, Hyperion spans both underwriting and broking through its ownership of large, acquisitive London broker Howden, Asian broker Accette and capacity-hungry underwriting agency Dual International. While Arthur J Gallagher has been making a splash with its broking acquisitions, buying up brokers across the globe but predominantly in the US and UK, it has also been steadily building its underwriting presence. Risk Placement Services (RPS), its US managing general agency established in 1997, is the largest such operation in that country, and in 2008 Arthur J Gallagher International acquired London underwriting agency Oxygen Insurance

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Managers (now known as OIM) as part of a strategic move to grow the company’s international underwriting platform. OIM Underwriting now operates as Arthur J Gallagher’s international managing general agency, and it is into this business that SRS will fit. Paul Lynam, who established Brisbanebased SRS 19 years ago, will become Chief Executive of Arthur J Gallagher’s Australian underwriting operations and report to

London-based OIM Chair man John Hastings-Bass. Andrew Godden will continue to be Chief Executive of Arthur J Gallagher Australasia, which will operate separately. Mr Lynam will find himself with a lot of business to run, because Arthur J Gallagher already owns another large underwriting agency, Australis. With SRS specialising in hard to place property, liability, construction, prestige home, professional risks, motor, contingency and acci-

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December 2012/January 2013

dent and health cover through offices in Brisbane, Sydney and Melbourne, and Australis writing property, liability, construction, care and corporate business out of Sydney and Melbourne, the synergies between the two companies are obvious. Mr Lynam clearly sees big things ahead for the scaled-up Australian underwriting operation. “The group has market-leading expertise in developing MGA businesses, from OIM in the UK to RPS in the US, and, of course, Australis here in Australia,” he told Insurance News. “The new platform will allow us to continue to invest in our growth strategy, through increasing our depth and reach and enhancing our offering to clients.” Where they exist within the same company, broking and underwriting businesses are usually separately run and managed, but while never explicitly stated, the holy grail of tie-ups such as the Arthur J Gallagher-SRS deal is the ability to retain the insurance dollar end-to-end in a transaction, from commission to premium. Mr Lynam admits that with Arthur J Gallagher’s extensive retail and wholesale broking business in London, SRS’s new owners will probably “take advantage of utilising their London capabilities” to place the $75 million of annual SRS premium into the Lloyd’s and London markets. No doubt that will be to the detriment of Tysers, the major London placement broker that currently works with SRS. But such are the realities of the brave new world of insurance convergence, where managing conflicts of interest, rather than avoiding them, has become accepted practice for large in* dustry players.


Get that name right …and then design a logo that backs it up. An expert shares some insights into the art of corporate branding By Michelle Hannen

THE RECENT UPDATE TO Steadfast’s livery ahead of its sharemarket listing and consumer awareness campaign signals something of a trend in the world of financial services. Several examples of brand changes – from simple updates to complete rebranding – have occurred recently, from high profile companies such as AMP and American International Group (AIG) to smaller firms such as loss adjuster Cerno. So what’s in a name? Plenty, if you consider the time, effort – and money – companies spend on ensuring their corporate identity is just right, says Simon Rowell, the founder and Managing Director of Melbourne-based Brand Intellect. “Branding should be a very strategic element for any organisation and there needs to be a strong case for any change being considered,” he says. The Steadfast rebrand has been co-ordinated to be in place in time 22

for its awareness-raising campaign which will launch in February. The broker group admits it is currently an “unknown” brand in the consumer market, and the campaign aims to create a general awareness of the Steadfast brand and communicate to consumers the value of using a Steadfast broker. The campaign will be supported by a new consumer-oriented website. The rebrand itself features a modernised logo and typography, as well as a change in tagline from “The Strength” to “Strength when you need it”. “Steadfast and Steadfast brokers have an incredible proposition to offer consumers,” says Managing Director and Chief Executive Robert Kelly. “The new brand will take us into the future, ready for our impending listing.” It is no small task guiding more than 280 individual broking firms with more than 400 offices insuranceNEWS

across Australia through a brand upgrade, but Steadfast has recognised the importance of having the new branding in place on schedule. As such, all Steadfast brokers must have switched to the new branding by February 1. “We need to make sure we have consistency of brand in the marketplace by that date,” it says in a communiqué to its members. “It is essential that we maintain brand consistency across the group.” Considering the change Steadfast has made, Mr Rowell sees beyond what to the layman may seem a bit of tinkering. “They are looking to project a more dynamic, less rigid image through the use of more modern typefaces and icons,” he says. “Looking modern and contemporary is important, and this is a major driver of this change. “The dominance of the web in communications is also important here, as colour palettes can be used

December 2012/January 2013

Looking contemporary is important: the new Steadfast logo “projects a more dynamic, less rigid image”


to improve the vibrancy of brands online.” Mr Rowell says the recent move by AMP to revitalise its brand following its merger with Axa Asia-Pacific’s Australian and New Zealand businesses is another example of brand “contemporisation”. The more rounded typography and “spark” logo, accompanied by the new tagline “Own Tomorrow”, were introduced to represent the merged company rather than a compromised blend of either company’s previous logos. AMP Chief Executive Craig Dunn describes the new look as “a modern, highly differentiated identity for the new AMP, representing the promise, energy and dynamism of the merged company”. But the re-brand has attracted its critics, who say the spark looks “chaotic” and doesn’t convey the orderly thinking most consumers want from a financial

services company. The use of the colour blue in financial services brands is also a noticeable theme. “In western culture, blue is subconsciously linked to trust, and this is the reason why so many financial services brands use blue in their branding,” Mr Rowell says. “The issue, of course, becomes that many of the financial services brands start to blend together, so you start to see the use of blue variants and platinum to differentiate brand identities.” Another blue rebrand, Cerno, was also brought about by a merger. Last year loss adjuster MYI Freemans in Australia and McLarens Young New Zealand moved from a “transitional brand” adopted for the merger of the two companies. Cerno – Latin for the action of sifting or even resolving – was chosen as the new name. Mr Rowell says that while it is not mandatory to rebrand insuranceNEWS

following a merger, it does allow a company to reposition itself in the market. “When done correctly, the new brand identity and brand messaging will disrupt the mind of the market, allowing people to reconsider the organisation in a new light. “This is important when a business is changing strategy, trying to re-energise a lacklustre brand or merging brands together.” Mr Rowell says Acerta, the new name for the Guild Insurance Limited intermediary division introduced earlier this year, is “a strange case”. The division was only established two years ago, and Mr Rowell questions why it was not given a strong brand initially. “They are doubling their work when they relaunch with a new name two years later. Whenever a change in branding occurs, it should be based on the idea that it will not need to be updated for at least the next 10 years at a

December 2012/January 2013

From established to toxic to redeemed: “Chartis” replaced the famous AIG brand after the US giant nearly collapsed in 2008, but President and Chief Executive Robert Benmosche wanted it returned after the debts were paid off. He describes the new AIG logo as “contemporary, dynamic, transparent and revitalised”. The Chartis brand will be replaced in Australia by mid-February.

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“Naming in itself is a specialist area and one in which organisations can come unstuck.” – Brand Intellect founder Simon Rowell

minimum.” Guild’s Head of Intermediary David Roddis told insuranceNEWS.com.au the rebrand provides a clear identity for a business that is a growing part of the Guild group. “We felt it was important that our intermediary division had a clear identity working with our broker partners.” Resilium, the recently launched name for the general insurance authorised representative distribution business Suncorp acquired from AMP a year ago, is a good illustration of the pitfalls in the art of branding, Mr Rowell says. While the rebrand has happened with little comment, it hit an early snag when a simple Google search revealed the name was already in use by appliance manufacturer Sunbeam for its range of top-end irons. Suncorp says the name represents the “stickiness” and “lasting confidence” of its customers and that its primary concern was that it wasn’t the name of another company. A spokesman explained: “We did a Google search to make sure the name hadn’t already been taken as a company name.” “Naming in itself is a specialist area and one in which organisations can come unstuck,” Mr Rowell says. “Branding is a specialist discipline and organ-isations should use proven branding experts.” He says financial services organisations will often just get a new logo designed by their advertising agency or graphic designer “without appreciating that the logo is actually a small part of the overall puzzle”. Unlike many of the other changes noted above, AIG’s route 24

back to its original brand – albeit a more contemporary version – is something of an anomaly. Mr Rowell says companies usually only revert to a previous brand identity if the new brand hasn’t stuck in the mind of the market. “The most likely culprit in these cases is a poorly funded or executed brand launch.” But in this case the insurance giant’s old/new brand is replacing the Chartis and SunAmerica brands introduced after AIG’s near-collapse in the 2008 global financial crisis. A US expert described the “new” AIG brand as “so simple and basic it hurts”. “AIG is going from an old school, royal-blue rectangle, serif logo to a friendlier, brighter blue rectangle. “The implications are obvious, if not exactly dramatic: appear less corporate, less scary, and signal – by going to the bare minimum opposite visual cues – that this is a new kind of company. “For a company this size, under this kind of scrutiny, any move is a big move, so the restrained redesign probably makes most sense. In terms of simplicity and bluntness, they got it right.” Mr Rowell says there are many pitfalls in launching a new brand or updating an existing one. He says the way in which the exercise is executed is critical to its success. “If you are clear and direct in communicating the change and new brand messaging to all of your staff, customers and potential customers over the initial three months following launch you will most likely be successful,” he says. “However, if you are unclear or underspend on commuinsuranceNEWS

nication, your chances of failing will be high.” Getting stakeholder buy-in early on in the process is also vital. Mr Rowell recounts an example of being called in to assist a global organisation who, he says, neglected to involve staff in a relaunch only to find that they were still using the old brand name a year later when dealing with clients. “It need not be an expensive process, but it must be done correctly. You only have one shot at * it.”

December 2012/January 2013

From a stately and conservative “trust me” blue logo to one signifying promise, energy and dynamism: AMP’s revitalised brand has attracted plenty of attention with its imaginative “spark”


most influential people in insurance 26

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Our annual round-up of the people who change people’s minds, affect the industry and make things happen

For something intended to be a one-off, the Insurance News Top 20 list has proved to be remarkably enduring. This is the fourth annual list, and each year our reluctance to publish another is countered by demands from industry leaders and other readers to “do it again”. Our list is compiled with input from senior Insurance News journalists, industry contacts and from unsolicited advice received from many people. There is very little (actually, no) science involved in the compiling of this list – no carefully calculated placement of one person over another, no counting and recounting of votes, but plenty of noisy debate. But we’re usually happy with our final list, and are braced for the post-publication phone calls complaining about being moved from position 13 to 16. Only six of the executives on our first list published in December 2009 – Mike Wilkins, Robert Kelly, Heinrich Eder, Patrick Snowball, Rob Scott and Leon d’Apice – are on this year’s list. That illustrates the dynamic nature of the industry and also an accelerating rate of generational change at the top level. A few points to consider: Business success doesn’t seem to be a major consideration of the list. It’s really about the individual’s profile and their ability to do and say things that have an impact on the industry for good or bad. Only one woman – then-Insurance Council Chief Executive Kerrie Kelly – has ever featured on the list (2009), despite so many of our informal list committee being women. And Ms Kelly only rated a mention – after she

resigned – because we regarded the position she held as pivotal to the industry’s ability to communicate and influence. People from the industry associations haven’t otherwise featured in these lists. This year we’ve withdrawn Financial Services Council Chief Executive John Brogden – a three-year listee – because it’s obviously futile to keep pointing out that he has opinions and can communicate them well, is always available to the media, thinks strategically and is influential in industry, politically and in the community. But general insurance isn’t actually in his area of interest, and there’s only 20 positions. There’s a marked preference among our list committee for leaders who stand up and comment on insurance issues to the wider world. As one member pointed out, the “we’re a great industry because…” speeches are routinely rolled out at insurance events by executives who avoid discussing vital industry issues when they’re in a public forum. You don’t have to be a keen orator to make this list, but it helps. You can influence the direction of an entire industry by your actions and decisions. If you’re good at a job that has the potential to influence others, you can be a contender. You don’t have to agree with or even like some of the people on this list. Just accept that their job, their passion or their strategic ability puts them in a position to influence the way you do your job, the way the industry is regarded, or the way you and your peers work. We salute the 20 people who’ve made our list. They worked hard to get here.

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– Terry McMullan December 2012/January 2013

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1

Bill Shorten Federal Minister for Employment and Workplace Relations, Financial Services and Superannuation

As the once-feared New South Wales right wing of the Labor Party implodes, Bill Shorten’s political star continues to ascend. His multiple roles in the stillvulnerable ALP government means his campaign to force the general insurance industry and the wider financial services sector into a more consumer-friendly shape is now being shared more among his Cabinet colleagues. But it was Shorten who did the hard yards after the 2011 Brisbane floods, setting up official inquiries and pushing the industry to accept a legislated standard definition of flood (which makes you wonder how he made it look so easy when the industry had tried and failed for so many years). Today around 80% of homes in Australia are covered against flood, compared with around 3% just six years ago, and that wouldn’t have happened so quickly without Shorten’s persuasive presence in the debate. His impact in the non-general insurance area of financial services has been equally profound, with his Future of Financial Advice (FOFA) reforms “giving consumers a greater voice and creating a greater financial services industry in the future”. General insurance brokers should be aware of the complex “best interests” provisions of the FOFA reforms, which also apply to them. Anyone who has dealt with Shorten tends to describe him as a good listener who will always try first to find a consensus solution. If he doesn’t he has an iron will as backup, as well as a willingness to force through unpopular policies (for some) like FOFA if they have perceived benefits for consumers. Well-connected and highly regarded for his burgeoning political skills, Shorten is a possible future prime minister.

Our three previous lists of the influencers have always featured Mike Wilkins at position two or three – testament to the IAG chief’s ability to stay the course in a trying business. Brought in to bolster sharemarket confidence in IAG during 2007, he has gradually brought stability and a focus on cautious growth. Wilkins sits high in our esteem (he was the Insurance News cover subject for our June issue this year) for his willingness to get out into public forums to spruik insurance and provide perspective for issues that are little understood outside the industry, while most of his peers (with the notable exception of Suncorp’s Patrick Snowball) tend to keep their opinions to themselves. Wilkins is steadily building IAG’s presence in key Asian markets via joint ventures – he’s aiming at 10% of gross written premium coming from Asia by 2016 – and will probably sell off the loss-making UK arm he inherited once it’s worth something. At home the group buys strategic businesses when they make sense, like the acquisition of crippled New Zealand insurer AMI – but most local growth will come organically by investment in existing businesses. Wilkins remains the most willing of the industry’s chief executives to speak about controversial industry issues to non-industry audiences.

2 Mike Wilkins Managing Director, IAG

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3

Robert Kelly Chief Executive and Managing Director, Steadfast

We raised eyebrows last year when we described Robert Kelly as a “passionate, outspoken, muchadmired bulldozer”, but there’s no doubting his influence inside the industry, the strength of his opinions and his determination to always do his best for his legion of members and the wider industry. From the launch of the Steadfast cluster in 1996 to its public float in 2013, the history of Kelly and the organisation he co-founded (he was its first shareholder and company secretary) are intertwined, and his reputation has grown along with the organisation. A hard man to best in an argument, Kelly these days prefers to negotiate and convince rather than bulldoze. An excellent communicator and one of the best-known personalities in the local industry, it’s still tough getting between him and a good idea. His stewardship of ACORD in Australia is an illustration of that. The next year should prove a high point in a career of remarkable individual achievement.


Mark Milliner President, Insurance Council of Australia, Chief Executive, Personal Insurance, Suncorp The new President of the Insurance Council of Australia (ICA) takes the reins from Rob Scott on January 1, and has already demonstrated several times through his career an innovative approach that just might be positive for the industry. The united claims and back-office operations at Suncorp, its “one company many brands” approach and the new developments in faster and more efficient vehicle repairs being rolled out by AAMI all bear the Milliner touch. His two-year term working with the ICA team will be interesting, particularly if Milliner decides the industry body could do with some sharpening up.

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Popular, gregarious and communicative, Day is honing Suncorp’s commercial insurance edge with a good sales team (some of whom followed him from Zurich) and the cost advantages that the “one company, many brands” strategy makes possible. He has a growing global profile, too, running all of the reinsurance arrangements for Suncorp, which is the world’s largest buyer of reinsurance. Expect to see more of Day pushing harder for greater access to statutory insurance markets, particularly in Queensland. As he sees it, Suncorp and by implication the wider industry can do insurance more efficiently and economically than

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5 Mathias Cormann Shadow Assistant Treasurer and Shadow Minister for Financial Services and Superannuation 2013 is a federal election year, and Perth-based Cormann is quite likely to find himself trying on Bill Shorten’s shoes before the end of the year. While there are no guarantees Cormann would get the financial services portfolio, the Belgian émigré (he moved to Australia in 1996) has impressed many with his excoriation of ALP policies and actions, vowing to “move quickly” in repealing parts of the Future of Financial Advice reforms which he says fail to strike the right balance between consumer protection and the need to retain high quality financial advice. He’s also no fan of the view that commissions

Anthony Day Chief Executive, Commercial Insurance, Suncorp

Ian Laughlin Executive Member, Australian Prudential Regulation Authority

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APRA doesn’t have a role that stirs the senses, but you ignore it at your peril. For example, January 1 will signal the implementation of the three-year-old LAGIC reforms, which are intended to achieve greater consistency in general and life insurers’ capital frameworks. Laughlin is one of the trio who run APRA, and he deals extensively with insurance issues. A former financial services senior manager turned professional director, he is also APRA’s representative on the all-powerful executive committee of the International Association of Insurance Supervisors. From Solvency II to stress-testing and reinsurance counterparty risk reports, APRA is increasingly focused on not only how insurers are performing but also how they would perform in a range of scenarios. If overseas trends are anything to go by, Laughlin and his crew are likely to become even more demanding of the industry in the future.

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8 Colin Fagen Chief Executive Australian Operations, QBE NIBA changed the rules to widen the vote, but brokers this year still voted overwhelmingly for QBE as Insurer of the Year – for the 11th consecutive time. Which means that Colin Fagen has kept things on an even keel for the 17 months he’s been running QBE’s Australian business, even as other parts of the empire falter. Growing the division in a competitive market is a challenge he will continue to grapple with, as will most of his industry peers.


Patrick Snowball Group Chief Executive, Suncorp Snowball has made a number of speeches during the year that use his semi-outsider status as an Englishman in temporary residence to great advantage, politely pointing out things in the public arena that he believes need attention. His comment on the Federal Budget in May is typical, noting that it was “not that of a sophisticated, disciplined economy with a clear, long-term strategy and vision” but rather “the message of an economy that runs the risk of squandering a once in a generation opportunity to promote savings and long-term investment…” The former soldier heads up a diverse company that needs an occasional nudge rather than a firm hand on the tiller. He leaves that to his talented lieutenants, who steer while he provides navigational input. His profile as an experienced leader is good for Suncorp and the industry.

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John Neal Group Chief Executive, QBE

We alarmed a lot of readers last year when John Neal’s predecessor Frank O’Halloran went from No 1 to nowhere on our Top 20 list. Our rationale was that the legendary O’Halloran was no longer actively engaged in the Australian market. Neal’s only high-profile appearances in Australia since assuming the top job in August have been when he takes the heat at investor briefings, but we figure he’ll climb out from under in the next year as QBE’s woes pass and he assumes a more varied local profile. The QBE brand carries plenty of persuasive power in Australia, and it will be interesting to see how – and if – Neal feels the need to use it.

Rob Scott Managing Director, Wesfarmers Insurance The companies under Scott’s wing include two insurers, a retailer-based direct personal lines operation and a major national brokerage. Coming out of a twoyear stint at the Insurance Council where he revitalised the post-floods council and gave it more communications heft, Scott has plenty more to concentrate on as the market competition hots up – particularly for Lumley Insurance and the Coles Insurance project, which can’t keep undercutting the motor insurance market forever. Or can it?

Allan Manning

Mark Senkevics

Managing Director, LMI Group

Managing Director and Head of Australia and New Zealand, Swiss Re

Not only is Allan Manning a tireless champion for industry causes (he was the cover subject in our August edition for that very reason), he’s also a successful businessman, an academic and a passionate blogger. Products from his LMI Group are available in a number of foreign markets, and he is regarded as the guru of Australian insurance policy wordings. On top of all that he maintains pressure on state governments over their insurance taxes, and he’s shared some victories to celebrate this year, among them the decision by New South Wales to follow Victoria into transferring its emergency services levy from insurers to property owners. Professor Manning says it as he sees it, which makes him an industry living treasure.

It’s always hard to separate the relative influences of the people who run Swiss Re and its archrival Munich Re, although each company takes a different approach to the local market. There’s been enough for Senkevics to concentrate on over the past 18 months, and his enthusiasm for catastrophe risk products has placed the company in a persuasive position. Swiss Re is also big in Australian life and health wholesaling, including through the Hollard/Woolworths alliance and a Medibank tie-up, which gives Senkevics exposure across a range of markets. He’s also a director of the Insurance Council.

Heinrich Eder Managing Director, Munich Reinsurance Australasia Munich Re has a big profile in the local market, and Heinrich Eder has been on the scene about seven years – long enough to appreciate the strengths and understand the weaknesses. The reinsurers are increasing premiums here and in New Zealand, but not so steeply that they’re impossible. These days Eder is the elder statesman of the reinsurance sector, and his seat on the Insurance Council board gives him added perspective. His underwriting arm Great Lakes is continuing to steadily take up opportunities in the local market, which peeves some insurers who think Munich should stick to its knitting.

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A veteran in the consumer field, Kell knows many of the leading players in the insurance industry, as well as the consumer-related issues. His job is to ensure the consumer gets a fair go, but his gritty determination to make change happen doesn’t mean he’s a firebreathing activist. His career has taken him into many high-profile roles locally and internationally, most notably as deputy chairman of the Australian Competition and Consumer Commission and chief executive of consumer advocacy group Choice. Kell has the power to name and shame and to highlight the industry’s consumer deficiencies, but he prefers persuasion to humiliation. While consumer causes are a hot topic at present – it always is when an ALP government is in power – the emphasis on consumer power would likely slip to the backburner if a conservative government wins the 2013 election.

Richard Enthoven Chairman, Hollard Financial Services, Managing Director, Hollard Insurance

Peter Kell

Richard Who? is no longer an acceptable response when the Enthoven name is mentioned in industry circles. The boss of giant South African family company Hollard has partnerships with 20 brokerages and 12 underwriting agencies, four insurance operations, the growing Real Insurance direct business, and the potentially huge Woolworths retail offering, which covers home, car, life, travel and pet insurance. Enthoven, an Australian citizen born in South Africa but educated in the United States, is a canny player who works quietly but very effectively. Expect more surprises.

Commissioner, Australian Securities and Investments

Leon d’Apice Managing Director, Ebix Australia

John Clayton

While broking organisations spend millions building their own electronic links to insurers, and insurers spend even more building unique links to brokers, Ebix is impossible to write out of the equation – as much as some wannabes wish they could. Its Sunrise Exchange transaction platform and dominance of the back-office systems used by brokers places Ebix, and therefore d’Apice, at the centre of things. New systems are being introduced from Ebix’s vast global resources as the need arises – a new life insurance offering is among the latest – keeping d’Apice and Ebix in front and as hard as ever to catch up to.

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Pacific Region Head and Chief Executive Australia, Marsh He hasn’t been heard from much this year, but the size and industry reach of Marsh in this part of the world means Clayton doesn’t have to sweat it in the limelight. Marsh is doing fine, according to his equally modest lieutenants. The company has a very diverse business strategy, and an 8% third-quarter rise in revenue to $468 million suggests Clayton is pulling all the right strings.

Steve Nevett

Peter Harmer

Chief Executive, Aon Australia

Chief Executive, CGU

Big companies – and Aon Australia is seriously big – tend to influence the industry around them in quite diverse ways. This year Steve Nevett drew a line in the sand to cool off a scramble for rare and expensive specialist brokers, in the process demonstrating Aon’s deep well of available talent. He’ll leave it to his smaller big broker rivals to compete. Experienced and approachable, Nevett is a tough operator who runs a big company with impressive ease.

Turning around CGU to match market dynamics was never going to be easy, but Harmer’s first year in the job has passed with some big and ambitious achievements. Some 600 jobs are going or gone, regional offices are being rationalised and authorised representative company NAS is now a wholly owned CGU subsidiary. The entire company gives a sense of having turned some kind of credibility corner, and with the vastly experienced Harmer at

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Where are they now?

Terry Towell

Shane Doyle

Lach McKeough

John Brogden

Managing Director, Allianz Australia – #8 last year

Chief Executive, Zurich Australia – #11 last year

Chief Executive, Austbrokers – #17 last year

He’s retiring at the end of the year after a stellar career, but don’t be surprised if Towell pops up in some influential position, probably Allianz-linked, in the future.

Doyle’s departure from Zurich in April after a little more than a year in the chief executive’s spot to join Dual International in London was unexpected and dramatic. Straight-talking and highly effective, he had barely set Zurich on a new tack before deciding to take up a “now or never” opportunity overseas.

Nobody knows Austbrokers as well as Lach McKeough, who grew the company from the germ of an idea to a listed company with some of the most profitable brokerages in Australia under his wing. He will move into semiretirement at the end of the year, but expect to see him around for a while yet as an adviser, doing what he does best – wheeling and dealing.

Chief Executive, Financial Services Council – #14 last year Brogden is still around, and he’s still as influential as ever in his role as the sector’s go-to man for ministers and the media. We’ve dropped him from our Top 20 list because it was getting embarrassing spruiking his effectiveness and comparing him with others. If you want general insurance to gain stature and recognition with the people who set the national agenda, he’s the model to follow.

People to watch

Niran Peiris Managing Directorelect, Allianz Australia Allianz is keeping Peiris tightly under wraps until he takes over on January 1. Insiders say he’s a focused, intelligent and inclusive leader, and Insurance News journalists have enjoyed their brief contacts with him over the past few years. We look forward to finding out how different his approach to the dynamic Allianz Australia business will be.

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Frank O’Halloran Chairman, Steadfast Who would have guessed that combining the business abilities of former QBE chief executive Frank O’Halloran with the drive of Steadfast’s Robert Kelly could ever happen? The appointment gives Steadfast the ultimate high-profile chairman as it moves toward its May listing. Expect amazing things in the next year as the industry’s best-known insurance manager helps the industry’s best-known broker float and develop Steadfast.

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Mark Searles

Daniel Fogarty

Chief Executive-elect, Austbrokers

Chief Executive, Zurich Australia

His arrival at Austbrokers in January will come at a time when such developments as the impending Steadfast float will put pressure on the listed company’s seemingly permanent upward profit trajectory. Recruited by CGU from Zurich Financial Services UK in 2010 (he was chief marketing officer and head of channel marketing for Europe), his local role as General Manager Broker & Agent has given him plenty of exposure to the intermediated channel and its vicissitudes.

Stepping into the top job earlier this year after the unexpected departure of Shane Doyle, Fogarty has put his own seal on the role, moving up from being the enforcer of the latest business transformation process to become the frontman. A good communicator with adroit people skills, his wide industry experience is helping him build internal and (importantly) market confidence in a company that has suffered from a few too many strategic turnarounds directed from outside the country.

December 2012/January 2013


Modelling uncertainty

They’re not perfect – yet – but catastrophe models do empower insurers to manage risks, says AIR Worldwide’s Ming Lee By Michelle Hannen

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THE INSURANCE INDUSTRY HAS service-providers of many different types working within it, but few have the power and influence of the catastrophe modellers. Based on their calculations, insurance and reinsurance executives have made the type of decisions that could mean the difference between success and financial ruin. That’s not bad progress for a product that didn’t even exist 25 years ago. Catastrophe models have been a game-changer in the truest sense, but in recent years questions have started to emerge about the industry’s reliance – or over-reliance – on catastrophe model outputs. At this year’s Baden-Baden reinsurance meeting, Validus Re Chief Executive Kean Driscoll told the Guy Carpenter Reinsurance Symposium: “I would argue that our industry relies much too heavily on third-party vendors for the pricing of cat risk. “Billions of dollars of investor capital is being exposed by reinsurers who essentially outsource their pricing function to a third-party vendor.” It is an argument that’s not lost on Ming Lee (right), the Chief Executive and President of one of the industry’s foremost modelling firms, AIR Worldwide. Locally, Mr Lee tells Insurance News, the Christchurch earthquakes, Queensland floods and Western Australian bushfires have caused companies to take a more considered approach when dealing with model outputs. “All of these events have really brought catastrophes to the fore, and simultaneously among regulators there’s an increasing sense that insurance company executives really ought to ‘own the risk’,” he says. As he sees the issue, owning the risk involves fully understanding the nature of the catastrophe risks insurers face and taking a more direct role in managing those risks. insuranceNEWS

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As a consequence, firms are increasingly running the models using their own input data, rather than relying on their reinsurance broker to do it for them. They also no longer rely solely on the model outputs when calculating exposure. “There’s an increasing sense that companies should not take the model output as gospel and that they shouldn’t take any single point estimate as being exactly the one-in-100year loss, because there is uncertainty in the models,” Mr Lee says. “I think that some executives have been guilty in trusting them too much and now we see the pendulum coming back.” Those developments echo a global trend which could be seen as something of a backlash against the modelling industry. But rather than being defensive, Mr Lee seems more like a man with a belief that common sense is finally prevailing. He says that rather than feeling the pressure of more intense scrutiny, the questioning is a “good thing” and his firm is “very happy” to be more transparent, and provide regulators, ratings agencies, government departments and insurance companies with more information about the methodology behind its models. “Model output is really very similar to currency. You have to have confidence in the model output in order to make decisions based on it.” Mr Lee does not attribute the shift in mood towards catastrophe models to any one single catastrophe. He says that since Hurricane Katrina in 2005 there has been a series of large disasters of differing types in different parts of the world, after which companies have commented on the difference between model outputs and their actual losses. “The occurrence of these big events has caused people to examine them, and we’ve had a number of these very large catastrophes recently,” he says. But Mr Lee points out that a model is


only as good as the data it is based on – the old rubbish in/rubbish out argument. “One of the most important elements in running a model is the quality of the exposure data going in.” And that, he explains, is essentially a description of the properties to be insured. It’s data that is captured and quantified by the insurers themselves. Another recent trend is the use of more than one firm’s model in order to cross-check potential exposure limits and get a better handle on the uncertainty. But as different modelling firms require the input data in different formats, comparisons have been difficult. Mr Lee says formatting the data differently for different models has led to greater opportunities for error to creep in. So earlier this year AIR Worldwide struck a deal with rival firm RMS to design software that will enable each company’s model to read the other’s input data format, making the running of multiple models much easier. The shortcomings of the catastrophe modelling industry have also been shown up in the past few years, with major disasters striking in regions of the world beyond the traditional modelling focus of the US, Europe and Japan. One of the most costly recent disasters – 2011’s Thai floods – were a largely unmodelled peril despite the fact that they occurred in one of the most flood-prone countries in the world. But prior to 2011, insurers had not experienced any major flood insurance losses in the country, so it had not been a focus for modellers. Mr Lee says there are still a large number of perils and regions that are not modelled, and he confirms that, as a commercial organisation, AIR Worldwide prioritises which modelling products to develop based on what insurers are requesting. But the future will see an expansion of products from modellers, with more perils and more regions covered. Flood is high on the agenda of

insurers globally at the moment, he says. But flood is a difficult peril to model, requiring a lot of detailed data such as terrain data, elevation data, soil information and building information. A high degree of computation of that data is also needed to enable the effects of both precipitation and run-off to be modelled at a very fine resolution. The industry is also increasingly demanding more complementary drivers of loss to be modelled in future, Mr Lee says. For example, while the effect of ground shaking from earthquakes is currently modelled, the impact of a tsunami following an earthquake is not. Nor is liquefaction and fires following earthquake in models in many parts of the world. In hurricane and cyclone modelling, storm surge and precipitation-induced flooding will increasingly be added to traditional wind damage models, as demand for isolating different components of loss continues. Mr Lee lists hail, pandemic flu and supply chain models as other in-demand products. Locally, AIR Worldwide has recently updated its cyclone and earthquake models for Australia. Earlier this year it also launched a bushfire model for Australia, which he describes as “quite complex”. The national model considers locations where ignition is likely, fuel supply and spread based on winds, topography and fire suppression techniques. But given product development leadtimes, working models are still several years away. Mr Lee says the recent earthquake activity has produced plenty of data to allow for an update of its New Zealand earthquake model. However, he believes the present model “performed quite well in light of the results following the Christchurch insuranceNEWS

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Climate change will not increase the frequency of hurricanes or cyclones, although there may be more of the intense ones. But the data is very inconclusive.

NASA

– Ming Lee

Many shades of grey: Hurricane Sandy bears down on the US eastern seaboard in this natural-colour NASA satellite picture, with a superimposed line showing the coast from South Carolina to southeastern Canada. New York City is marked with a red dot. Catastrophe modellers are “dealing with complex natural phenomena”, says Ming Lee

earthquakes”. Mr Lee sits on the board of atmospheric science research firm Atmospheric and Environmental Research, and says while climate change will unquestionably affect the future of catastrophes, how it will impact on weather-related disaster events is unclear. He says the likely outcome of climate change differs between different perils. “Climate change will not increase the frequency of hurricanes or cyclones, although there may be more of the intense ones,” he says, but adds that the data is “very inconclusive” about the impact climate change will have on severe thunderstorm activity. “We can’t tell. There is no crystal ball and the scientists have no real consensus.” Just as advances in technology in the past 20 years have seen models improve from rating at postcode level to street address level, Mr Lee says advances in 40

technology and computer processing will also impact on future models, making them increasingly flexible and allowing insurers to better adapt the models to their own needs. They will also be increasingly transparent, giving users clearer access to the underlying peril information used in the model, such as the actual windfield of a cyclone. He says advances in mapping capabilities, such as Google Earth, will give users a better ability to visualise risks and perform more robust analysis of concentrations and accumulations, along with “what if ” analysis. For all the flak aimed at modellers in recent times, it must be remembered that theirs is not an exact science. While leaps forward in science and technology will also see the development of more robust models, some uncertainties will remain.

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“We’re dealing with complex natural phenomena,” Mr Lee says. “We’re trying our best to model it but they are models and as such there’s going to be uncertainty.” Perhaps criticisms are better levelled at those who failed to own the risk and confused probability with predicting the * future.


“The element of uncertainty adds to the drama around AAMI’s ‘Rhonda and Ketut’ romance. It’s the audience which makes things go viral, and there’s little the advertiser can do to change that.”

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Socially speaking Insurers have embraced social media, where customers set the rules and some things go inexplicably viral By Ben Oliver

THE INTERNET USED TO BE SUCH AN ORDERLY place, where unemployed 30-year-old bloggers still lived with their parents, company websites were indistinguishable from billboards and video of dancing hamsters took forever to download. Then Mark Zuckerberg changed everything. Or more correctly, it was Facebook’s predecessor MySpace that took the internet from a collection of servers in the Nevada desert hosting billions of interconnected bytes into a truly social experience. Chatrooms and bulletin boards, erstwhile nerdish hidey-holes, were rebadged, rejuvenated, and eventually occupied by the incrowd. But as MySpace gave way to Facebook – the social media juggernaut that one in every two Australians spends nearly half an hour a day checking – something changed in how we communicate. It’s become faster, and more personal and influential. It’s hard to believe the phrase “I’ll Facebook you” made no sense six years ago unless you had an email account with a “.edu” suffix. “Tweeting” wasn’t a verb before July 2006. A decade ago contacts were kept in a Microsoft Outlook account, or for those of a certain generation, rolodexes; LinkedIn didn’t exist. Web 2.0 was, and is, a great leap forward in connecting citizens around the world. But with the monetisation of social media platforms, citizens have become consumers and the corporate sector has smelled an opportunity. Perhaps surprisingly, insurers have proven themselves early adopters. Some are even proving adept. More than most sectors, insurance thrives and dies on its reputation, and Web 2.0 represents a remarkable opportunity for insurance companies to engage customers in a meaningful way. “We often tell our clients the risk for companies is that they won’t exist in five years time if they don’t engage in social media,” Porter Novelli social media strategist Mandy Griffiths tells Insurance News. “This is where it’s going and people have to engage for a reason.” The facts on social media usage make resistance futile. More than 90% of adults with an internet connection use social media, and every minute of the day 100,000 tweets, 684,478 Facebook posts and 2 million Google searches are made. More than 11 million Australians now have a Facebook account – the sixth-highest penetration rate per capita in the world. Another 2.2 million have a LinkedIn account and 2.1 million use Twitter. Most importantly social media has gone mobile, and now accounts for 10% of all internet usage worldwide. More than 90% of mobile internet usage is from social media applications and most tellingly, more than 70% of smartphone owners access social media at least once per day. Insurers and brokers are taking to social media with similar gusto. A recent Zurich survey of 560 brokers found more than half use social media, 44% use tablets – more than double insuranceNEWS

the general population – and 64% work for a company which engages in some form of social media, although most saw it as being “below average”. “Initially, companies didn’t want to hear about it,” Ms Griffiths says. “They thought it was just a flash in the pan. “Now everyone has pretty much realised that it’s here to stay. I think marketing managers have a lot of work to do. “If you don’t have a social media presence you are at a distinct disadvantage, especially if your competitors are doing it, and doing it well.” Most insurers are now doing it, and some are even doing it well. A survey by Insurance News of 20 Australian insurance companies shows 90% use social media. Of those, more than half interact with customers through Twitter, Facebook and YouTube. All of IAG’s brands have a YouTube channel, but only CGU and the NRMA brands are on Twitter. CGU has perhaps the most robust of social media platforms, counting 700 Twitter followers, 500 Facebook “likes”, 67,000 YouTube views and 1211 followers on LinkedIn. “We had a Facebook post the other today that said, ‘Thankyou for doing all the stuff in the social media space, you are the only major insurer that does that’,” CGU Manager Digital Channels Rebekah Taka tells Insurance News. She says social media has given insurers the ability to engage customers in a way that was previously impossible. But being responsive is critical. CGU monitors its Facebook page 14 hours a day, seven days a week and aims to respond to all queries within four hours during the week and 24 hours on weekends. “We monitor everything pretty carefully,” Ms Taka says. At Suncorp, AAMI monitors social media more closely than most teenagers. Executive Marketing Manager Richard Riboni says AAMI employs three people full-time in the social media team, plus another 15 from the retail distribution team who are trained to respond to posts on AAMI’s Facebook page. “We see Facebook and Twitter as extensions of our customer service,” Mr Riboni says. “From day one it was always a customer service channel.” AAMI is a relative neophyte when it comes to social media, having only joined Facebook in September last year and the Twittersphere a few months later. But it’s catching up fast, and has tweeted at least twice a day since and has attracted 337 followers. Mr Riboni says AAMI is using Facebook and Twitter as platforms for two-way conversations and the numbers are starting to show. In October AAMI received 190 questions/complaints via Facebook and Twitter, a fraction of the total the company receives but a rising number nonetheless. Each question received a response within 48 minutes. “We are bit more constrained about what we can talk about on Facebook and many conversations are taken offline, but we respond to every question,” Mr Riboni says.

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“People don’t care about billboards. Before you post anything, you need to ask yourself the question, would I like or respond to this post?” “We see that as another way to be contacted and interact with the brand. It’s a similar situation with Twitter.” Zurich Australia was quick to Twitter and slow to Facebook but now heavily utilises both. Its Twitter account has one of the strongest followings among Australian insurers, with more than 1000 followers. The company has delivered podcasts, online videos, webinars and e-books as part of a broader social media push. General Insurance Head of Marketing Lucy Barrett says that after testing various social media platforms Zurich is now in the process of forming a coherent social media strategy. Ms Barrett’s motivation is not to sell insurance but to establish Zurich as an “opinion leader and influencer”, and through that influence sell insurance. “Essentially we are looking at how we can further support brokers,” she said. “For example, Twitter could be used as an early warning system for natural disaster events, and e-books are already being piloted for certain products. “This will allow brokers to simply and quickly download product information and email product disclosure statements to the insured. “It’s a double win, because it allows Zurich to reduce our cost to the environment through the reduction of volume printing.” Suncorp brand Just Car Insurance has run a company Facebook page since May 2010 and has struck a chord within the car enthusiast community. At last count Just Car had more than 93,000 likes, more than any other insurance brand and 30,000 more than the next-best – its underwriter, AAMI. Importantly, Just Car doesn’t use Facebook as a marketing soapbox. Few, if any, of its posts are sales pitches. Without the Just Car banner, one would assume it was simply a Facebook page for motoring fans, which is exactly the idea. American media strategist David Merman Scott, whose book The New Rules of Marketing and PR has sold 250,000 copies in 25 languages, says Facebook has become a powerful tool for marketers. “Facebook is emerging as a primary means for folks to keep in touch with the people and the organisations that are important to them, and it follows that it has become an important marketing tool for many companies,” he says. “As with other social networking media, success on Facebook comes from being a thought leader and developing information that people want to absorb.” Ms Griffiths agrees. “Companies can fall into a trap of trying to push their advertising and marketing messages,” she says. “People don’t care about billboards. Before you post anything, you need to ask yourself the question, would I like or respond to this post? “You have to fish where the fish are, and people can be greatly influenced by good content. “These days people have thousands of marketing messages on a daily basis and there is no penetration with traditional marketing messages anymore.” That’s not to say that traditional marketing methods have become obsolete. In fact, the speed and reach of social media means an engaging television commercial can travel beyond advertising breaks on Big Brother. AAMI’s highly successful “Rhonda” campaign is a case in point. Created by advertising firm Ogilvy in Melbourne, Rhonda, played by actor Mandy McElhinney, began as an AAMI safe driver whose backstory was developed once AAMI realised the character was resonating with the public. 46

“It’s hard to imagine what will capture the market’s attention,” Mr Riboni says. “We really like the work we put in to marketing campaigns, but you can never gauge it. “I think the Rhonda character is extremely likeable. She’s the real Aussie; there is a bit of Muriel from the movie Muriel’s Wedding about her, and she can laugh at herself. “Aussies can also relate to the notion of Bali, and the Balinese characters added another dimension to Rhonda’s character.” Mr Riboni says social media supercharged the campaign’s success. “What we have noticed is that people have really engaged with the character. Social media has amplified the talkability of the campaign.” At last count, AAMI’s YouTube channel has had more than 500,000 views, a number set to rise as Rhonda and Ketut’s budding romance is explored in further chapters. Ms Griffiths says the key to the AAMI ad’s success was the element of story-telling. “People are entertained by these ads and they want to see them through,” she says. “I think we are going to see a lot more branded entertainment in the future. “As a way of comparison, if you look at the CommBank ‘Can’t’ campaign, it didn’t work well because it was quite self-indulgent and gave nothing back to the viewer.” Social media changes a lot of the rules about marketing, and the element of uncertainty adds to the drama around AAMI’s “Rhonda and Ketut” romance. It’s the audience which makes things go viral, and there’s little the advertiser can do to change that. But as one marketing specialist struggling to tie down the elements that make one ad go viral and another go splat notes: “The ad that people like enough to take it viral also builds goodwill, and in a world where angry customers’ complaints can also go viral, you can use that goodwill to * fix things.”

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The long arm of Lloyd’s The market’s pursuit of a former Name lasted over 10 years, ending up in New Zealand By Jan McCallum

YOU CAN RUN, BUT IF LLOYD’S OF LONDON is on your trail, you can’t hide. A Lloyd’s “Name” who fought the organisation for years finally reached a settlement with his trustee in bankruptcy last year, by which time his debt had risen from £163,000 to £1.25 million. Even then, the outcome for former psychiatrist Alan Geraint Simpson was the rare case of a solvent bankruptcy, with the High Court of New Zealand noting there would be a surplus available to him once the trustee had paid Mr Simpson’s debts. It seems it was about more than money for Mr Simpson, who had been a psychiatrist practising in London’s prestigious Harley Street. In 1984 he became a Lloyd’s Name – a private investor who provides risk capital. Until 1994, the market relied heavily on the Names, who had unlimited liability. Losses related to US asbestos, hurricane and pollution claims in the early 1990s led to many Names losing large amounts of their money, and some were bankrupted. Lloyd’s now sources all but 14% of its capital from corporations, and the declining ranks of Names – private individuals are no longer admitted as investors – have limited liability. In 1998 Lloyd’s obtained judgement against Mr Simpson for £163,078, but he declined to pay and moved to New Zealand. Years of legal battles followed, with Mr Simpson’s trustee in bankruptcy enlisting the help of the New Zealand courts and getting search warrants to look for gold and silver bullion hidden in Mr Simpson’s home. Mr Simpson was among a group of Names that unsuccessfully sued Lloyd’s. He was made bankrupt by the English High Court in September 2009 on a petition from Lloyd’s. By then the amount he owed had risen to £242,920, including interest and costs. Mr Simpson had by that time moved to Hamilton in New Zealand, where he said he had no personal assets of any significance and was paying rent on his home to a trust, which he said provided a car for him to drive his 12-year old daughter to school. He said he had been unemployed for 12 years. Although he regarded New Zealand as his home, Mr Simpson went to England each summer to watch cricket and to visit family. In January 2010 UK insolvency practitioner Steven Williams was appointed trustee of Mr Simpson’s bankrupt estate in England. According to New Zealand court documents he soon discovered Mr Simpson had nothing in the UK but did have assets in New Zealand. Mr Williams applied to the New Zealand High Court for an order recognising the English bankruptcy as a “foreign main proceeding”. The court declined this 48

but made an order to assist the English High Court, which had made a request for assistance to its New Zealand counterpart. The case set legal precedents on the use of New Zealand’s Insolvency (Cross-Border) Act, which allows liquidators and administrators to pursue assets in different jurisdictions. (The Australian version of the legislation, the Cross-Border Insolvency Act 2008, was used in the Federal Court in Brisbane in August against a South African bankrupt who had moved to Australia.) Mr Williams asked the court for a warrant to search Mr Simpson’s home “and to seize gold and silver bullion that Mr Simpson is allegedly hiding from his creditors”, having been told by informers that about $US3 million in bullion was stored there. Justice Paul Heath granted the warrant and suspended Mr Simpson’s right to transfer or dispose of any of his assets in New Zealand. When police raided the house they seized bullion, foreign currency and documents. The raid attracted considerable media interest, and a week later another application was made to search the property again, on information from a builder who said he had built compartments under the floor of Mr Simpson’s home. The builder had been told the compartments were for storage and because Mr Simpson believed the world was going to end. The second search turned up more foreign currency and bullion – including some stowed in a bathroom vanity unit. By November 2010 the total cache was valued at $NZ2.1 million for the bullion and $NZ37,500 for the foreign currency. An English bank account in the name of James Walter Smith was also found, which Mr Williams argued was an alias used by Mr Simpson. The New Zealand High Court also froze funds held with a futures and foreign exchange broker and shares worth around $NZ527,000, although Mr Simpson said the shares did not belong to him. By this time the New Zealand tax office had become interested, leading Justice Heath to request

Mr Williams asked the court for a warrant to search Mr Simpson’s home “and to seize gold and silver bullion that Mr Simpson is allegedly hiding from his creditors”.

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expert evidence on English law as to whether a debt to the Inland Revenue would be recognised as a provable debt in the English bankruptcy. He was told it would not be. In November 2010, Justice Heath declared that all property seized in the searches, together with bullion surrendered voluntarily by Mr Simpson, had vested in Mr Williams. The judge authorised the property to be sold and the foreign currency to be converted, with all the proceeds to be held in a trust account. At another hearing two weeks later, counsel for Mr Simpson and Mr Williams advised that settlement was underway and Mr Simpson had acknowledged that money held in JW Smith’s bank accounts and more than $NZ500,000 in a New Zealand bank account belonged to him. Justice Heath noted the Commissioner of Inland Revenue had been brought into the discussions and Mr Williams recognised he could admit a foreign revenue claim in the English bankruptcy. In February 2011 Justice Heath said assets worth $NZ3 million had been realised, comprising $NZ2.27 million of bullion sold to the Perth Mint, foreign currency, shares, cash and interest earned. He noted Mr Williams had realised the funds in the JW Smith UK account. The original debt was £163,078 in 1998. In 2011, Mr Williams provided a schedule showing outstanding costs and claims of £1.25 million. In thanking the parties, Justice Heath said detailed research had been done on difficult questions of law that had not previously arisen in New Zealand under the cross-border insolvency regime. He said Mr Simpson had applied to the English court to annul his bankruptcy and it was likely there would be a surplus available to him following settlement of his debts. The matter did not end there, however. Justice Heath asked the police to investigate whether there was evidence Mr Simpson had committed perjury over evidence given about ownership of bullion found in the house and his denial of using JW Smith as an alias. Earlier this month Hamilton police said they had decided not to bring perjury charges and that Mr Simpson had moved to Auckland. New Zealand media reports say he has now * moved back to the UK.

NZ Herald

Behind closed doors: Alan Simpson had cash, bullion and shares stored in his New Zealand home

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News Ltd

Winners and losers

The fire finally fizzled: firefighters managed to extinguish the 2001 Blue Mountains blaze, but some property owners unsuccessfully kept the battle going for 11 more years

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Who’s to blame? Two governments avoid damaging legal judgements over bushfires A GROUP OF PROPERTY OWNERS WHO SUFFERED losses in Sydney’s Blue Mountains bushfires on Christmas Day 2001 will have to pay the costs of state government authorities it unsuccessfully sued, while a Canberra group has reached a settlement with the territory’s government over the 2003 January bushfires. If the 26 New South Wales property owners had won their case against the National Parks and Wildlife Service (NPWS), Sydney Catchment Authority and Rural Fire Service, Supreme Court Acting Justice Stephen Walmsley calculated he would have awarded them total losses of $3 million. But he agreed with the authorities that they did not owe the property owners a duty of care. And besides that, he found they were not negligent. Justice Walmsley says some of the property owners in the Warragamba Winery case had used the action as an opportunity to make claims for items they had not lost, or for grossly exaggerated sums which had little resemblance to real values. He directed that the Director of Public Prosecutions be asked to considered prosecution of at least one of the plaintiffs. Meanwhile, across the border in the Australian Capital Territory, QBE and a group of individuals sued the governments of NSW and the ACT over the Canberra bushfires of 2003, which destroyed 488 homes and killed four people. Their case also centred on issues of duty of care and negligence. ACT Supreme Court Chief Justice Terence Higgins reserved his judgement in November 2011, but the territory government and about 100 plaintiffs reached an undisclosed settlement in September. The case continues, however, with one property owner and QBE as the insurer to another 19 remaining in the action against the NSW Government. Although the ACT settlement was confidential, some property owners told The Canberra Times they would receive payments of a few thousand dollars after their legal fees had been paid. The ACT Attorney-General Simon Corbell says the territory’s insurers will pay the Government’s legal costs. The 2001 Blue Mountains bushfire case was based on whether the NSW Government authorities owed residents a duty of care. The 26 parties who brought 15 separate actions argued the authorities should have acted more promptly to put out the fire and should have warned them it was headed their way. The NPWS and Sydney Catchment Authority were sued for breach of duty as occupiers, while the Rural Fire Service was sued for breach of its general duty of care. Justice Walmsley agreed with authorities that they did not owe the property owners a duty of care when the authorities had not started the fires. He says even if they had, any acts or omissions were done in good faith. He described the fires that began on December 23 and 24 2001 in the Blue Mountains National Park as the beginning of one of Australia’s longest and most serious bushfire emergencies. Nearly 50,000 volunteer and paid emergency workers worked to control or suppress the fires and personnel came from all over NSW, Victoria and New Zealand. Two fires began in the park, which was managed by the National Parks and Wildlife Service, and one of them reached the townships of Warragamba, Silverdale and Mulgoa on Christmas Day. By midnight 30 homes, eight factory buildings and two shops had burned down. insuranceNEWS

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The risk stays with the property owner and their insurer The Blue Mountains bushfires decision may give some comfort to the emergency services that they can do their best and not be held liable if the results are not ideal. Australian National University academic Michael Eburn, an expert in emergency law, says the NSW decision, a Tasmanian judgement earlier this year and a recent English case have strengthened the argument that the risk of a fire belongs to the property owner and their insurer. In the English case, the judge commented that the moral of the story is for property owners to take out insurance. When Myer Stores sued Tasmania’s State Fire Commission for negligence after the Myer department store in central Hobart burned down in 2007, Justice Alan Blow ruled the fire authorities had immunity, saying “the financial burden of unfortunate operational decisions should be borne by insurers, or by the uninsured”. The judgement handed down by the Tasmanian Supreme Court in August says this long-standing policy “seems possibly to have been a quid pro quo for the state providing fire-fighting services which, in times long past, were provided by insurance

In a judgement of more than 700 pages, Justice Walmsley says the two fires were started by lightning strikes. Fire authorities managed to extinguish one fire but by the time they tried to put out the second one, known as the Mt Hall fire, it was too fierce. The court heard the Mt Hall fire started in remote, rugged and inaccessible country and the fire service did as much as it could on Christmas Eve to deal with it. Justice Walmsley says a vital part of the property owners’ case was that the authorities should have put ground crews in to fight the fire on December 24. But the evidence is overwhelmingly against them as the track was unsuitable.

“Fighting bushfires is constrained by the resources available and even if equipment is available, there may be competing needs for it.”

The court was told the allegations of negligence against the Rural Fire Service “will be against those right at the top”. Phil Koperberg, who was at the time the service’s commissioner, told the court that until about 11am on Christmas Day 2001 he did not consider the fire a threat to property, and given the weather conditions he considered all that could be done was to leave it to emerge from its remote area. Around that time wind speeds of up to 100kmh were forecast and other fires were spreading. Justice Walmsley says that on Christmas Day the fire danger rose dramatically beyond the 6.37am forecast. He says fighting bushfires is constrained by the resources available and even if equipment is available, there may be competing

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companies, and not at the expense of the public”. Dr Eburn, Senior Fellow at the ANU College of Law, does not believe fire authorities these days will be relying on the Blue Mountains bushfires decision regarding warning property owners, because technology has changed so much since the case began in 2001. The NSW property owners argued the authorities should have warned them the fire was coming, but in 2001 the fire service would have held a press conference, hoped the media turned up and then reported a particular fire among others that were burning. The court notes that on Christmas Day the Blue Mountains local radio station played music all day and says the fire authorities did what they could to warn people. Dr Eburn says these days emergency services have arrangements with local radio stations to broadcast emergency messages and are also using text messaging, social networking and a much wider range of media to send out warnings. In 2001 there was no Emergency Alert, no Facebook and no Twitter. “The world is not the same place,” he says.

needs for it. The Blue Mountains experienced a very dry spell throughout 2001 and in December there were heavy winds and on most days a very high fire danger. Between December 24 and January 23 2002 there were 454 fires in NSW, and on the morning of Christmas Eve, 24 fires had been reported to the Rural Fire Service. The property owners said aircraft were available to fight the fire, but the NPWS and the catchment authority said there was a shortage of aircraft that day and those that were available were better used on other fires, which were of more immediate danger to lives and property. Justice Walmsley accepted the authorities’ argument that bushfires are a natural force that cannot always be coped with “and are often not coped with until they have run or substantially run their natural course”. There was no evidence to show anything the authorities did made the fires worse or aggravated the damage to the property owners, so it must be doubted that any duty of care arose. He says the argument for imposing a duty of care on fire brigades would result in fire officers who have to make split-second decisions having to consider whether their employer will be held liable for negligence. The judge found morale in an organisation such as a volunteer fire service should be considered in such instances, noting the Rural Fire Service in 2001 had 70,000 volunteers. Witnesses called by the authorities “did their honest and diligent best to perform their duties in fighting the Mount Hall fire in what I conclude were exceptional and trying circumstances”. Some of the witnesses agreed it would have been desirable to have given the residents earlier notice, but the failure to do so “is not of itself evidence of bad faith”, according to Justice Walmsley. He says the authorities had no obligation to issue warnings and even if these had been given, almost none of the property owners could prove they would have heard them. They also did not establish they could have taken any steps to reduce their losses. The 89-day trial was described as a “voyage of discovery” for the property owners, and Justice Walmsley concluded there was never a realistic possibility that the Mount Hall fire could have been * fought successfully on Christmas Eve.

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Call for action Sydney’s flood-prone northwest has featured in a major NSW study A FLOOD RISK HIGHLIGHTED BY Insurance News more than a year ago has become a major cause for 10 western Sydney councils who are demanding urgent mitigation action by the New South Wales Government. The call for action from the Western Sydney Regional Organisation of Councils comes on top of a new review of the state’s infrastructure readiness which calls for, among other things, an overhaul of the way NSW handles its flood mitigation. The Insurance News cover story (Revealed: Australia’s biggest flood risk) has reportedly been widely circulated in council, insurance and emergency services circles since its publication in August 2011. It outlined the extent of damage in the region from a devastating 1867 flood and noted that little had been done since to mitigate the flood danger to the now-populated area. The councils, which cover the major population centres of Penrith, Liverpool, Blacktown and Hawkesbury, “have been calling for action on this issue for years”, according to a Sydney newspaper report. Now a study by Infrastructure NSW, which has prepared a wideranging independent assessment of the state’s infrastructure and its strategic priorities over the next 20 years, has detailed the size of the risk and the need for mitigation work in the HawkesburyNepean floodplain. The report studies the possibility of raising the wall of the Warragamba Dam, which was originally designed as a water storage facility but is now also regarded as a central plank in any flood mitigation program for the region. The dam filled to capacity during heavy rains last March, and water spilled over the top. The report notes there are now 21,000 residential buildings in the floodplain – over 5000 more than previously estimated. An additional 143 hectares of commercial and industrial property has been built on the floodplain since 1990. “A repeat of the 1867 flood, the largest on record, could be expected to cause direct damages in the order of $1.7 billion and $3 billion in total tangible damages,” the report says. “Included in the damages cost is flooding of 7600 homes above floor level and the destruction of 1200 homes. “A flood with a [1-in-1000 year chance 54

of occurrence], such as occurred in some Queensland catchments in 2011, would be expected to cause $4.3 billion in direct damages and an estimated $8 billion in total tangible damages. “It would flood 14,000 homes above floor level and destroy 6500 homes. At risk would be 43,000 residents and 9000 employees of local businesses.

“The impact of such a disaster would be felt across the NSW and Australian economy and impact negatively on people and businesses outside the region. “The western railway line, for example, would be disrupted for up to six months which affects coal and other freight exports from central and western NSW. It would also disrupt 6000 daily train commuters from the Blue Mountains.” Infrastructure NSW commissioned a cost-benefit analysis into raising the wall of the Warragamba Dam which found the scheme “has one of the highest benefit to cost ratios of the projects recommended”. insuranceNEWS

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The extension would cost about $500 million and provide “significant flood mitigation” to the region. But an increase in the dam’s height would not occur without criticism from experts who spoke to Insurance News in 2011. Mark Babister, a Sydney-based hydrologist who backed the actions of the operators of the Wivenhoe Dam during the Brisbane floods, told Insurance News that the Warragamba Dam “can only mitigate floods to a limited extent”. The dam wall’s height was raised in 1990, and Mr Babister believes the spillway added at that time would discharge water downstream “at a pretty high rate”. That was a view shared by another hydrology expert, who declined to be named in the Insurance News article. He said the dam could pose a similar complication in a Hawkesbury-Nepean flood as the Wivenhoe Dam did in the Brisbane floods. The Infrastructure NSW report also finds a lack of “clear governance” inhibits effective flood management in the state and calls for the creation of a single entity to manage the state’s flood risks. At present responsibility for flood management is spread across a number of government agencies and local councils. “The lack of clear accountability creates the risk of inadequate risk management, and the dispersion of responsibility to councils without adequate overarching governance creates the risk of sub-optimal flood management,” Infrastructure NSW says. It notes that the lack of clear authority “has the potential to cause excessively stringent planning development controls as well as insufficient management of major risks”. Infrastructure NSW concludes that the Government should “immediately conduct a review of current responsibilities with a view to ensuring a single entity has clear accountability for flood management within the State * Government”.


Freight angels

Revolutionising recovery: an NTI-badged truck helped change an industry 10 years ago

From crash site cowboys to recovery professionals in just 10 years. How NTI’s Accident Assist revolutionised the heavy vehicle industry By Ben Oliver HIS DAY OF HAULING HEAVY FREIGHT through the Sunshine State started much like any other, but for one truck driver in 2002 his day ended with the business end of a handgun pointed in his direction. Told by the gunman to drive north, the driver complied, until several hours later the gun accidentally misfired, sending a bullet through the engine and causing the gunman to flee in panic. The driver found himself stranded in Far North Queensland, but he was far from alone. “This was an early test for Accident Assist,” National Truck Insurance (NTI) Chief Executive Tony Clark says. The incident occurred not long after the program was established in 2002. “We organised repatriation and counselling for the driver and bought the truck back later. “While we couldn’t cure the situation, we 56

did have the right steps in place to ensure both the driver and the truck were taken care of.” It hasn’t always been this good for those in perhaps the most challenging of driving professions. Prior to the establishment of Accident Assist 10 years ago, accident recovery in the heavy truck industry was plagued by safety failures, outdated equipment, supply chain inefficiencies and shady operators riding a fine line of ethical or even legal conduct. Worst were the recovery operators colloquially known as “chasers”, whose often heavy or under-handed approach to locking in truck drivers to a particular repair shop was one of the more loathed facets of the industry. “They were basically hired to drive highpowered cars to get to the accident site first to sign up the drivers,” Mr Clark says. “We would hear all sorts of stories – chasers following drivers into hospitals, using all kinds of, shall we say, ‘inducements’. “There were no standards for employing these guys, it was extraordinary wild west stuff.” Problems existed beyond the unethical conduct of these crash site cowboys. Even those recovery teams which worked within more ethical parameters still used outdated hook and chain trucks to recover and move trucks from an accident scene. Sometimes this method did more damage to the truck than the actual accident. In early 2002, only 25 tow trucks across Australia used under-lift technology, a far more efficient method which prevents further damage. Relations between insurers, heavy insuranceNEWS

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vehicle operators and repairers were fraught. Mistrust, if not outright hostility, was a common feature, with turf wars often overshadowing the primary responsibility towards a good resolution for truck drivers and their employers. Mr Clark says vehicle repairs 10 years ago would often take up to a week to approve and insurers took weeks to process claims. “As the insurer we’d often be the last to know about an accident and had no control over keeping the intermediary and policyholder informed, how a truck was recovered or how potentially significant site damage was managed. “Research showed that earlier involvement of insurance and recovery specialists at accident scenes would benefit drivers and owners, minimise costs and give brokers peace of mind. “We realised that if we were involved right from the time an accident occurred, we could make the recovery process for the driver, the vehicle and the environment as efficient as possible.” That’s what led to the establishment of NTI’s Accident Assist, a service Mr Clark describes as the “missing link” between the three key stakeholders in a heavy vehicle insurance claim. But given the acrimonious relationships that existed at the time, resistance to what essentially amounted to an industry-wide restructure was strong, particularly given the kind of investment NTI was proposing for its partners. The insurer wanted crash repair and recovery companies to invest in people, training and equipment “They were not nervous, but they didn’t


trust insurers,” he tells Insurance News. “Often people would ask, why are you doing this? And we said, because you will be safer, it’s better for customers and more costefficient. “It wasn’t about how much we get paid. It was about doing things that added value to their business. “They definitely didn’t trust us to start with and it took time to build that trust. “But being there and having been involved in the industry for so long gave us credibility, so we began talking to them about new technology and encouraging them to work in a non-competitive fashion.” NTI set out to help truck drivers involved in accidents with automatic claim lodgement, covering clean-up of the accident scene and joint assistance with load recovery. “We would then relay messages to whoever the driver wanted, whether it be their family or employer, and we would provide medical help and trauma counselling,” Mr Clark says. “We weren’t selling anything, but we would work with those who were prepared to invest in their businesses.” For a start, hook and chain tow trucks had to go – along with the shady operators. “If you have the right equipment, the truck is worth a lot more than if it’s attached to a chain,” Mr Clark said. “The repair and recovery operators would be more efficient and that would flow through to premiums and policyholders.” The industry also lacked a common set of standards to guide how operators were accredited and accidents were handled. It was in this new spirit of collaboration between NTI and its recovery operators that the Heavy Recovery Vehicle Association of Australia (HRVAA) was created to act as the body to raise standards

across the industry. NTI also assisted the sector in developing TruckSafe Accreditation specifically for heavy recovery vehicle operators, covering management, maintenance, workplace safety, driver health and driver training. “We also came to an agreement with recovery operators about standard rates, and there would be no more cowboys,” Mr Clark says.

“If we don’t do it, who will? That’s part of being a specialist and the reason we exist.”

customer service rating.” He says claims approvals now also take just 24 hours instead of two weeks. “While the priority of other parties such as police and road authorities may be in getting the road cleared, our approach is holistic. We work with them to do it safely and efficiently without causing more damage.” Over the past five years NTI has also worked with the HRVAA, other key stakeholders and the Transport and Logistics Skills Council to develop the Certificate IV driving qualification for heavy recovery vehicle operators, which was updated by the National Skills Standards Council in May this year. Mr Clark sees big benefits in NTI being involved in every part of the safety, accident recovery and repair value chain, including training and qualifications. “If we don’t do it, who will? That’s part of being a specialist and the reason we exist. “We are partners with every major transport association and we want to be involved in driving * the agenda in every part of this industry.”

Scepticism over the economic benefits of investment soon withered as more than $100 million was invested in trucks with under-tow capacity, increasing their numbers from 25 to 175 in a decade. The notorious accident chasers have now evolved into field operators, requiring accreditation and – most importantly – criminal checks. “Chasers don’t follow people into hospitals trying to get signatures any more,” Mr Clark says. “For us it has dramatically improved our

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Trading up: CGU

They’re excited:

launches serious business cover for tradies

QUS does a deal with WR Berkley, and everyone’s happy

FACED WITH A CHOICE OF MANY TYPES and levels of business insurance, tradespeople can sometimes find themselves shrugging off the whole confusing thing and ending up underinsured. So CGU has created Trade Pack, a package tailored specifically for tradespeople. It covers public liability for personal injury or property damage, as well as product liability for up to $100,000 for damage or loss of goods in the insured’s care. The general property cover includes tools and professional equipment and can be extended to include theft in the open air, theft without forcible entry, worldwide cover and accidental damage resulting from a vehicle accident. And then there’s the cost of a tax audit. The Australian Taxation Office conducted 340,000 business audits last year. CGU says Trade Pack tax investigation cover covers the costs incurred by an accountant or registered tax agent in conducting an audit in relation to tax liability. “Whether it is cover for a carpenter, plumber or an electrician, Trade Pack is a straightforward choice,” says CGU’s Head of Sales and Distribution Andrew Beer. The insurer also offers extra options. “If tradies require additional cover for their work vehicles, workers’ compensation or personal accident, we have the products and the expertise to give them complete cover,” Mr Beer told Insurance News. Brokers can quote and bind through the CGU Connect platform. Trade Pack is now available nationally and all Sunrise-enabled * intermediaries have access to the product.

WR BERKLEY INSURANCE AUSTRALIA is excited, according to National Facilities Manager Christian Garling. The company has reached agreement to issue all policies underwritten by strata specialist underwriting agency QUS from January 1. The deal will allow QUS to expand its market share and increase its capacity for larger risks. “We’re excited to be providing capacity to QUS as it has been looking for significant new opportunities,” Mr Garling told Insurance News. The agency was keen to continue its expansion in the property area and the deal with WR Berkley ticked all the boxes, he says. QUS is profit-focused and is a material player in a niche market, with specialist underwriters who understand the importance of analysing data. “The QUS deal allows us to increase our diversification into short-tail classes which gives further balance to our results without needing a material increase in our capital base,” he said. QUS is excited too. General Manager Craig Hodgson says the change will provide strong financial capacity and allow the agency to generate significant opportunities. “We are pleased to be underwriting on behalf of a leading and secure insurer that is rated ‘A+ (Strong)’ with a stable outlook by Standard & Poor’s,” he says. QUS launched in 2008 as a specialist provider of property owners insurance. This year it agreed with part-owner Calliden

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Group it was time to find another capital provider, and the companies have spent the last 12 months conducting an extensive market review. “QUS is introducing new technology to make it easier for brokers to transact business with us electronically,” Mr Hodgson said. “Our online quoting and binding platform will come to fruition in 2013.” WR Berkley Australia Chief Executive Tony Wheatley says both companies’ focus on brokers makes the deal an excellent fit. “Our brokers and policyholders are treated as individuals by an insurer who understands their specialist business risk exposures and provides long-term solutions in underwriting and claims,” he said. “QUS shares that philosophy and we are keen to help this highly professional, well-respected agency expand its market share. “This is part of our corporate strategy to align with agencies that demonstrate superior knowledge and expertise and thus provide us with opportunities for growth in their specialist niche markets.” Calliden is sticking around, but says it wants a portfolio of risks that suits its capital base and matches its risk profile. “Calliden has spent a lot of time and resources jointly building QUS,” Calliden Chief Executive Nick Kirk says. “This deal allows us to continue to make the most out of that investment while freeing up capital to support our own desired growth trajectory. “We look forward to continuing our relationship as a joint-venture shareholder in * this exciting new chapter for QUS.”

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It really could happen: If it does, you’d better have ticked ‘management liability for SMEs’ in the Vero bizpak BROKERS SAY ONE OF THE GREATEST frustrations they regularly face is the client who waves aside recommended cover with the glib assurance that “it won’t happen to me”. They don’t stop to think the broker wouldn’t have mentioned it if they didn’t think the risk should be covered via insurance. A survey by Cameron Research has found that only 17% of businesses protect their owners and directors with appropriate insurance such as management liability or directors’ and officers’ cover. The researchers questioned the owners of 700 SME businesses in April. Like the broker whose advice is ignored, Vero wouldn’t have bothered developing a management liability product for SMEs in its business pack if they didn’t think it was needed. But the insurer knows that in an increasingly litigious world, it really might “happen to you”. Vero has added management liability as a selectable cover in its business pack, targeted at SMEs. Management liability was previously available on a stand-alone basis only. Any claim against a company or its managers based on alleged wrongdoing could trigger coverage. Common reasons for lawsuits against business owners include unfair dismissal, sexual harassment, workplace bullying and OH&S breaches. “SMEs are especially vulnerable to the cost involved in defending themselves and could go under as a result, even in the event of a positive finding,” Suncorp Executive Manager Commercial Portfolio Chris Stallard says. The coverage is broader than legal defence costs and includes representation expenses involving the costs of attending and being represented at an investigation by an official body such as a regulator. It also includes amounts determined by judgement and award of costs or damages including compensation orders, settlements and insurable fines and penalties. There is also optional cover for financial loss arising from employee dishonesty, including theft and fraud. The Vero policy includes $25,000 cover for consultancy fees in a crisis, including a product recall, death of the managing director or loss of a major cus* tomer.

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Striking a deal: SUA launches a general liability product and buys a niche underwriter BRISBANE-BASED SPECIALIST UNDERwriting Agencies (SUA) has launched a new general liability product. The underwriting agency is targeting medium to corporate lines and hard-to-place risks including engineering, property owners, hospitality, mining, energy, construction, transport, manufacturing and wholesalers. It includes broadform public and product liability, with an optional errors and omissions extension, up to either $20 million or $50 million. Umbrella liability is also available for bigger clients who need higher limits for contractual reasons. If a claim exceeds the cover available under this policy – or a workers’ compensation or automotive policy – the umbrella policy takes effect. SUA has always concentrated on niche markets and sees a big opportunity to cross-sell to its current client base, according to SUA Marketing Manager Kurt Nilsen. “It’s a natural progression for us,” he told Insurance News. “The market is showing signs of hardening, albeit very little, and with that comes opportunity. “We believe capacity in the market will be

reduced over the next 12-18 months so there is an opportunity for an additional player.” The market is crowded in terms of SME business, which is why SUA is concentrating on the hard-to-place corporate end, Mr Nilsen says. Lloyd’s is backing the new product. “It’s a very well known brand and a very secure option. It’s rapidly growing in the Australian market so we want to be part of that.” The agency is focusing on service and offering a quote turnaround time of 24-48 hours. It can also offer tailored policy wordings and conditions. SUA has also bought construction industry niche underwriter iConstruct, which was owned by the late online insurance innovator Guy Stening. It provides material damage and liability policies online to the SME construction industry with capacity from Liberty. iConstruct has retained its brand and staff, and Mr Nilsen says the iConstruct acquisition allows the company to enter a new * market.

Cyber serious: Chartis develops a product to help companies deal with attacks and data loss RECENT MEDIA REPORTS SUGGESTING the risks associated with cyber crime are exaggerated have been contradicted by leading insurer Chartis, which has urged Australian organisations to get serious about cyber risks. It says many current corporate management practices are “inadequate” to protect businesses against the increasing threat of serious cyber attacks. Ian Pollard, Chartis Vice President Financial Lines – Professional Liability APAC and Far East, says cyber attacks increased by 2000% between 2008 and 2011 – and more than 45% of them originated in the Asia-Pacific region. Mr Pollard says the rising threat has prompted Chartis to develop a specialised insurance product called CyberEdge, which will provide what he claims to be Australia’s most comprehensive insurance coverage for cyber attacks and data loss. “CyberEdge provides coverage for first and third-party cyber liabilities that most commercial insurance policies do not cover, including fines and penalties issued by government authorities and costs associated with repairing an organisation’s reputation,” he says. The product covers personal and corporate data liability, as well as outsourcing liability where an outsourced person commits a breach of personal information. It also covers data security liability, including malicious contamination or theft of insuranceNEWS

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data and damage caused by unauthorised access to a system, and defence costs related to civil or criminal claims. Other features include cover for the costs associated with a data administrative investigation, and any penalties imposed following a breach of data protection laws or regulations. Mr Pollard says 85% of Australians say they would stop dealing with an organisation if their data was compromised, but only 54% of Australian organisations have the in-house capability to prevent and detect cyber crime. A study commissioned by Symantec put the cost of cyber crime to Australians at $4.5 billion a year, “so [companies] need to recognise that intentional or unintentional cyber breach can have serious financial, operational, legal and reputational consequences”. He says the current online environment, which includes social media, mobile devices and cloud computing, requires a more sophisticated approach to cyber risk by senior managers and directors. Matthew Clarke, Professional Indemnity Manager for Australasia, says Chartis developed CyberEdge “to fill the gaps in the current market and deliver a product that provides genuine peace of mind to Australian * organisations”.


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Ace goes for a dip Teamwork, focus and determination are the keys to becoming a champion swimmer, as well as a top business operative. That was the message from double Olympic gold medallist Kieren Perkins at an Ace leadership forum in Brisbane in October. About 80 brokers, risk managers and executives at the Brisbane Club heard Mr Perkins recall his swimming career and explain how he translated that success into the boardroom as a NAB executive. Another forum was held at Incontro restaurant in Perth, where former WA premier Richard Court discussed the economy, industrial relations reforms and business skills for emerging leaders. He spoke about the shift in Australia’s key trading partners from the US, UK and Europe to high-growth economies such as China, Indonesia and South Korea.

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Having a flutter with CGU As the only Melbourne-based insurer, CGU sees the week-long Spring Racing Carnival as a great opportunity to mingle with clients from as far afield as Queensland, Western Australia and New South Wales. This year it hosted 85 guests in a marquee with a 200-degree view of the racetrack and an “Arabian nights” theme, with curtains and rose bowls to decorate, and a mouth-watering Middle Eastern menu. The theme even had a historical basis. Some 95% of modern thoroughbred racehorses are descended from three Arabian stallions brought to Britain in the 17th century. Tips were on hand from a professional and a “mug” punter. Winners of the fashions on the field competition for ladies and gentlemen took home a gala hamper. For all the fascinators and fedoras, the events were mainly a relaxed chance for industry people to mingle with some great champagne, good racing and plenty of laughs.

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Austbrokers gives hearty thanks Austbrokers held a “thank you� night for members and key business partners during a special invitation event at the National Insurance Brokers Association Convention on the Gold Coast. The 110 guests included Austbrokers network brokers as well as general managers and senior representatives of the five major insurers. General Manager Acquisitions Fabian Pasquini welcomed the guests, who had plenty of opportunities to relax and mingle during the evening at the Envy Hotel. Austbrokers always uses such events to raise money for a charity that has some personal connection to someone in the Austbrokers network. This year the funds raised from collections on the night and a corporate donation went to HeartKids.

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Women in insurance get together More than 450 women – and quite a few suits – attended the Association for Women in Insurance annual general meeting. The 26-year-old New South Wales networking group hosted insurers, lawyers, loss adjusters and recruiters at Dockside, Darling Harbour, in October. The event’s keynote speaker, former senator Helen Coonan, discussed social media and the Alan Jones saga, plus the best ways to protect a company’s image and reputation online. There was some committee reshuffling, with Anna Moule from QBE 386 taking the role of Vice President, Sherrie Morton of Liberty International Underwriters becoming Treasurer and Hannah Rose of Lander & Rogers Lawyers elected to the committee.

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Generation Z switches on to digital Zurich General Insurance knows client relationships are built in person, not online – but the group also realises brokers face a rapidly changing digital world. With this in mind, the insurer’s latest Generation Z forum aimed to help brokers differentiate themselves in the digital environment. Business strategist Michael Harrison was among the speakers. He says once personal details have been transferred from business cards to electronic contacts managers, the pieces of card are of little use. He suggests laminating one and sending it back to the person you met as a luggage tag, along with a note. Zurich Head of Customer and Product Proposition Nick Cook says he often hears social media compared to yo-yos and hula-hoops – but he does not think it will go out of fashion. LMI Group Managing Director Allan Manning told guests about the Great Fire of London and the birth of modern insurance companies. He also explained the history of business interruption insurance, and how important it is in a world where supply chains stretch across states or countries. Corporate training specialist Nikki Heald encouraged brokers to take control of their personal brands, online and offline. More than 500 guests attended forums in 11 locations across Australia. These photos were from the events in Brisbane and the Gold

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Allianz takes brokers for a quick ride

You may have heard of speed networking before, but this puts a whole new spin on the idea. Fun and business collided at the Allianz-BMW driver training day at Eastern Creek in Sydney. Although there was no shortage of volunteers, just seven members of the Allianz team hosted 15 lucky clients. With a focus on safety, they learnt defensive driving skills off and on the track. The day started with a theory session and an exercise in seating and steering, before the drivers tested their skills in late-model BMWs including the 123d, 328i and the M3. They faced challenging conditions in a controlled environment, manoeuvring the cars on water, oil and skid pads and around traffic cones. Guests tested the acceleration, braking and handling of cars and practised oversteering, understeering and correcting their mistakes. To finish the day, professional drivers including Geoff Brabham performed hot laps, taking guests in the passenger seat for a spin at top speed.

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Joe sent me… to the AILA Young Professionals night The Roaring ’20s were back in style at the Australian Insurance Law Association’s latest young professional networking night, Speakeasy at the GPO. A record 650 guests filled the lower ground floor at Sydney’s GPO. Plenty of lawyers, insurers, brokers, loss adjusters and forensic accountants dressed up and got into the swing of the 1920s theme. Gentlemen on the organising committee even wore white tails. Tarot card readings, cartoonists and a DJ were very popular, while a photo booth made for some great snaps. During the prohibition era in the US, illegal “speakeasies” were the only place to get a drink, although it’s unlikely they were as well catered for as the 2012 version, where the drinks flowed freely and people snacked on sushi, oysters and pizza. The next AILA YP event will be held in March and there are whispers it might be a gambling night. This one was sold out a week in advance so expect a rush for tickets.

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‘Southerners’ head north and have a ball Organisers of the first North Queensland Insurance Charity Benefit were delighted to welcome some guests from “down south”… Brisbane, that is. More than 200 brokers, insurers and assessors enjoyed live music, auctions and a raffle at the Rydges Southbank in Townsville. Guests bid on lots including a framed, autographed Wallabies jersey and a pair of rugby boots signed by North Queensland Cowboys player Matthew Bowen. The ball raised $20,000 for Beyond Blue and Cancer Council Queensland. “It’s well over and above what we had anticipated raising,” event co-organiser Adriano Bellocchi said. Photo booth hire company In The Booth donated its services, which were a big hit with guests, and there were speeches from gold sponsors NTI and UAA. Premium Funding and Cerno were bronze sponsors. Organisers say they are already planning a bigger and better event for next year.

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Lumley sets the benchmark high Driver safety was the order of the day at the 18th annual Lumley Insurance Benchmark awards in Melbourne in October. More than 100 motor fleet and property professionals attended the lunch and presentation at Maià in the Docklands precinct. The guest MC was V8 Supercars champion Garth Tander, who spoke about his path to professional racing and the challenges he faced as a young driver living away from home. Murcotts Driving Excellence General Manager Operations Mark Kelly showed the crowd videos from a new computer-based driver education program that has been developed with Lumley. Toll Contract Logistics and its broker Aon won the Heavy Motor award. Lumley says a focus on managing driver safety and controlling fleet costs benefits both employees and the companies they work for. The inaugural Corporate Solutions – Property award was presented to timber company AKD Softwoods and its broker OAMPS. The prize is awarded to the company that displays the best use of risk management at the forefront of all its processes, dangerous goods handling and storage practices.

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Zurich, ladies, Geelong, gee-gees Ladies’ day at the Geelong Cup has become a Zurich tradition, now in its sixth year. The exclusive women-only event is also now one of the company’s most popular functions. The insurer found there was a need to entertain women in the industry who don’t always want to watch soccer or cricket, but who enjoy doing lunch and getting dressed up. The day began with the company’s males serving a champagne breakfast in the Zurich boardroom in Melbourne before the coach trip to Geelong Racing Club. The 60 brokers and Zurich staff in the Roseview marquee had a great view of the racetrack and managed to pick a lot of winners throughout the day. Because all the ladies look so lovely, it’s too hard to choose the best dressed. Instead, there’s a random prize draw – for women’s shoe vouchers.

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Insurance Advisernet soaks up the sun Delegates from Australia and New Zealand enjoyed a trip to sunny Hamilton Island for this year’s Insurance Advisernet conference. More than 400 staff, insurers and industry partners attended. Because the group sponsors a Kokoda Track walk with the Returned and Services League each year, one conference session included talks from an Afghanistan veteran and the father of a fallen soldier. They discussed their experiences of war and their time on the commemorative Kokoda trek. Later, authorised representatives raised $50,000 in six hours for next year’s walk, enabling eight returned soldiers and parents of the fallen to walk the track in PNG. “We’re pretty proud of it, I must say,” Insurance Advisernet Managing Director Adrian Kitchin said. A charity golf tournament on nearby Dent Island raised more money, this time for children’s charities Variety and KidsXpress. When delegates were not learning, there was time for swimming, mingling at sponsors’ nights and enjoying the sunshine. The group also presented awards to exceptional practices in Australia and New Zealand.

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Criteria included continued growth, community participation and contribution to Insurance Advisernet’s professional standing. CeeJaze Management & Consulting was named Insurance Advisernet Australia (IAA) Authorised Representative of the Year. Principal Craig Fretwell accepted on behalf of the practice. The Insurance Advisernet New Zealand (IANZ) Broker of the Year prize went to Meridian General Brokers, with Principal Bernie Kane accepting. “It was very hard to split this year,” Mr Kitchin said. “There were some outstanding performances.” The Chairman’s Award went to IAA director and Insurance Advisernet UK Managing Director Fred Allsopp. Employee of the Year was IAA help desk consultant Carissa Mitchell. The IAA has 137 corporate authorised representative practices employing more than 350 advisers, while IANZ has 28 broking practices with more than 70 advisers. In the 12 months to June income grew 18% for the IAA and 35% for IANZ. The group attributes this to a recruitment program targeting entrepreneurial, young professional brokers and a focus on in-house training.

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Expo attendance delights UAC The Underwriting Agencies Council (UAC) was thrilled with the turnout at its South Australian Underwriting Expo, held jointly with the National Insurance Brokers Association (NIBA). Some 200 brokers, mostly from South Australia and the border regions of Western Australia and Victoria, attended the event at the Sanctuary in Adelaide Zoo. Fifty-two UAC members exhibited, up from 35 last year and a record for the Adelaide expo. UAC and its strategic partner Vero presented a $2500 cheque to the Royal Flying Doctor Service’s General Manager Public Relations and Marketing Charlie Patterson. It is the second year UAC has supported the charity. UAC Chairman John Iles and NIBA Chief Executive Dallas Booth welcomed and thanked guests.

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insuranceNEWS

December 2012/January 2013


maglog » THE MEDIA AND MARKETING PUBLICATION Mumbrella recently ran an article on office dogs, which sparked a bit of interest here at Insurance News because we have our own office dog. It turns out an amazing number of ad agencies, marketing offices and public relations companies have dogs around the place, each of them happily fitting into working life. The Insurance News office dog is a six-month-old west highland white terrier named Lucy. Her official title is Chief Morale Officer; it’s a tough job that basically involves keeping everyone smiling. Lucy has the run of the place, goes to the post office every morning and enjoys outings to coffee bars. She also accompanies the office addict on her smoke breaks in the busy street outside the office, where being small, white, fluffy and friendly she’s also a bit of a people magnet. Although there’s nothing in the office procedures manual about the Morale Officer’s duties, Lucy does nevertheless have to abide by a set of rules. These include doing her best to keep herself nice, and where she fails to make it to her pad in time her owners, Mr and Ms Publisher, must immediately clean up after her. Having a dog around to talk to, pat and play with – and yes, even senior journalists have been spotted on the floor having a play-fight with Lucy – boosts the immune system and lowers anxiety, depression and blood pressure. Don’t take my word for it. Dr Johannes Odendaal, Research Professor of the Life Sciences Research Institute in Nova Scotia, took blood from humans and dogs before, during and after a dog-petting session. He found a rise in the amount of several neurochemcials in the brain, including dopamine, oxytocin (the chemical released during orgasm, apparently), prolactin, beta-endorphin and norepinephrine – all of which directly influence feelings and emotions of “exhilaration, positive excitement, pleasurable experiences, social bonding, a sense of well-being and contentment, and feelings of comfort and security”. Doug Ford, the Managing Director of major pet insurer Petplan, is a long-time office dog person, who admits that his office is occasionally over-run by pooches. “There’s up to half a dozen dogs in here at one time, but one or two is actually more practical in an office,” he says. “We encourage staff to take their dogs out of the office three or four times a day, and if there’s a mess the owner cleans it up.” Doug says managers should be aware of some liability issues, like a dog taking a dislike to someone and biting them. “When someone makes an appointment to come to the office, we ask them if they have a problem like allergies or a dislike of dogs, and we warn them there are dogs on the loose. That’s important. “But from the overall office point of view, having dogs around here definitely reduces stress.” 82

Sam Pentecost Contributor

Lucy learned early that people eating at the lunchroom table are suckers for the right begging approach. However, apart from the tendency for a begging dog to be annoying, dogs don’t need a great variety of food. Lunchtime loot sometimes results in an unexpected afternoon poop, so the “don’t feed Lucy” rule is strictly observed. Staff also have to be aware that Lucy sleeps much of the day in sunny spots, under desks and around her favourite people, so she can be a tripping hazard. She leaves her toys – an old ugg boot, a hand puppet, a length of rope and a stuffed toy owl she routinely disembowels and scatters – wherever she has lost interest in them. She likes to empty handbags left on the floor under desks (sorry Jan!) and is an efficient but indiscriminate paper-shredder. Despite her less sociable traits, it’s impossible to stay stressed about something when Lucy strolls in for a visit, which may involve her curling up for a kip next to your feet (as she is right now) or a nuzzle and a bit of a pat or even – if you’re lucky – a full-bore cuddle. She attends all news meetings, where she sits on the floor and mercifully keeps her opinions to herself, although she has been known to utter an irritated growl from under the table when a certain politician’s name is mentioned. Perhaps I imagined that last bit. But you’ll eventually find yourself valuing their opinions if you keep a pooch or * two around the place.

insuranceNEWS

December 2012/January 2013


Profile for Insurance News (the magazine)

DEC/JAN 2012/13 - Insurance News (the magazine)  

The December edition of Insurance News (the magazine) is hitting mailboxes this week with its popular mix of news backgrounders, interviews,...

DEC/JAN 2012/13 - Insurance News (the magazine)  

The December edition of Insurance News (the magazine) is hitting mailboxes this week with its popular mix of news backgrounders, interviews,...