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GENERATION X October/November 2009

TAKES OVER


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CHA RTIS is c om ing.


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AIG Australia will soon welcome the Chartis brand. This is a significant milestone towards operational independence and reinforcement of our strong commitment to the industry. As Chartis we will further strengthen the trust and reputation we have developed over more than 50 years in the Australian market. Chartis has a worldwide network throughout 160 countries and jurisdictions and unrivalled breadth of products and services. We look forward to sharing this journey with you.

All insurance products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language.


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FIRST CLASS INSURANCE SOLUTIONS. Commerce and industry. They make the wheels of the world go round But what happens if the wheels fall off? Disaster. Catastrophe. Loss. Limit, reduce or totally avoid your client's exposure to upheaval and ruin with an insurance solution from a truly unique partnership. SRS Underwriting and Lloyd's of London.

SRS1475

FLEXIBILITY AND INNOVATION. SRS UNDERWRITING DELIVERS.

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SRS is Australia’s leading Lloyd's of London Underwriting Agency with offices in Sydney, Melbourne and Brisbane. The team at SRS routinely exceed client expectations by providing professional and flexible solutions across most major and many boutique general insurance product lines. With its own representation based in London, SRS benefits from daily direct contact with the Lloyd's Underwriting market. This has enabled SRS to cultivate long term relationships with an enviable stable of underwriting partners who are ranked within the highest tier in the London Market. With an 'always available' client service ethos, SRS exploits time zone differences to seek and secure opportunities for valued clients. SRS never sleeps. Little wonder then that in Australia, SRS is considered the "Gateway to Lloyds".

Sydney Ph: 02 9323 5000 Fax: 02 9323 5077 Melbourne Ph: 03 9810 0600 Fax: 03 9810 0650 Brisbane Ph: 07 3002 3000 Fax: 07 3002 3077

For more information about the scope and depth of our services, please visit our website.

www.srs.com.au


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iClose On Demand Solutions A new era of Insurance Software Introducing Ebix iClose the next generation of e-commerce business solutions. iClose is the a complete solutions framework developed after a thorough analysis of current available facilities as well as research into industry technology and standards. Designed to bridge the gap between brokers and insurers, iClose streamlines ZRUNÀRZ DQG HOLPLQDWHV GRXEOH KDQGOLQJ

Current functionality will address areas such as: ‡ Negotiated Placements ‡ Claims ‡ Accounting iClose provides a secure, cost effective e-commerce platform that compliments existing market facilities such as Sunrise Exchange and Online Quoting.

For more information on iClose On Demand solutions contact us on 02 8467 3000 or email sales@ebix.com.au


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Contents 8 Newsmakers » 14 Back from the brink » As AIG Australia moves towards rebranding as Chartis, its chief executive recalls a few hellish months as the world fell apart.

22 Next time the bush burns »

The Victorian Bushfires Royal Commission targets the things that cost 173 lives.

24 Death and taxes »

Thanks to antiquated levies, too few people are paying for fire-fighting services.

28 Waiting for a trigger »

There’s no lack of enthusiasm for a hard commercial market after years of low rates. But forecasting the trigger that gets rates moving is proving next to impossible.

30 Generation X takes over »

As the Baby Boomers begin to move into retirement, there’s a new spirit rising in management. Generation X is stepping up.

38 …and then there’s Generation Y »

They’re razor-sharp, tech-savvy, multi-skilling jobhoppers, who are also moral and caring.

40 Keeping on trucking »

Once it had four owners, but NTI is happy the two it has left have agreed to work together.

42 Buy, sell and exchange »

The Steadfast Hub will extend the cluster group’s reach into the data exchange business.

styleNEWS

52 Love that office » CGU’s green and open new Melbourne HQ makes environmental and financial sense.

lawNEWS

54 Looking after the workers » 56 Choosing the battleground » 58 Double trouble »

productNEWS 60 60 61 61

Lawsons fills liability niche » iClosing the gap » When the show-stealer is a no-show » Bookmark this! »

64 66 68 70 72

A smooth blend » Insurance Demons » Claims experts get together » Vero scores a big rugby win with brokers » Big night out »

peopleNEWS

74 maglog »

44 The boy is back in town »

El Niño may increase the risk of bushfires, but it also means less chance of floods, hailstorms and cyclones.

48 You want insurance with that? »

Personal lines products are becoming commodities. No one’s sure yet who will benefit most.

50 Regulatory roulette »

Can insurance intermediaries keep dodging the bullets of reinvigorated regulators?

62 What keeps you awake at night? »

A Perth brokerage is profiting by helping clients with some heavyweight risks.

October/November 2009

Clockwise from left: Nicole Mann, Stephen Brunker, Heath Amber, Vivek Bhatia, Christine Bell and Peter Roberts. Image: Cameron Ramsay Story page 30


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newsmakers at insuranceNEWS.com.au

Good ideas, good performers and good leaders: The annual Australian and New Zealand Insurance Industry Awards night recognises the efforts of individuals and organisations to achieve excellence. This year’s winners crowded onstage in Sydney to acknowledge the accolades of their peers and friends in the industry, and to celebrate their success. For QBE Group Chief Executive Frank O’Halloran, one of the most respected businessmen in Australia, his award as “insurance leader” this year made it a case of second time around, having also been picked by the expert judging panel in 2004. The awards night, organised by the Australian and New Zealand Institute of Insurance and Finance, is unique in the industry for the fact that the little guys get a shot at the big time, too. This year Perth-based Specialised Broking Associates, a small outfit with some very big clients, was named best in the small/medium broker category. A profile of the company is on page 62. Allianz Australia was named General Insurer of the Year and MLC was judged the best life insurer.

The full list of winners: General Insurance Company of the Year: Allianz. Insurance Leader of the Year: Frank O’Halloran, QBE. Large Broker of the Year: Marsh. Small and Medium Broker of the Year: Specialised Broking Associates. Innovation of the Year: World Nomads. Law Firm/Practitioner of the Year: Minter Ellison. Life Company of the Year: MLC. Loss Adjuster of the Year: McLarens Young International New Zealand. Underwriting Agency of the Year: Sportscover. Reinsurance Company of the Year: Reinsurance Group of America. Risk Manager/Team of the Year: Paul Hurrell, IAG New Zealand. Service Provider of the Year: Finity. Services to the Community Award: AMI. Treasurer’s Good Governance and Practice Award: QBE. 

He came, he saw, he shuffled: New Suncorp Managing Director and Chief Executive Patrick Snowball arrived in Brisbane from the United Kingdom then with five trusted former colleagues and advisers proceeded to probe every nook and cranny of the group. As one senior Suncorp executive pointed out, the opinions of five professionals you trust have to be better than those of a bunch of hired management experts you don’t know. Only when he had all the intelligence in place did the former British Army tank commander fire the first shot in his new job. Out went Suncorp’s personal lines supremo Bernadette Inglis, replaced by her commercial lines counterpart, Mark Milliner. Intermediated Distribution Executive General Manager Anthony Day stepped up into Milliner’s old role, with Market Management Executive Manager Andrew Mair appointed to act in Day’s former role. Apart from some minor changes in the management of the nonoperating arms, Snowball confirmed all the other executive positions. Mark Milliner is regarded in the market as a strong Mr Fixit manager with considerable organisational experience gained in a variety of industries. Anthony Day joined Suncorp 18 months ago from Zurich, where he ran the general insurance operation, and is credited with boosting Vero’s relationships with key broker groups. Getting Suncorp into the sort of shape that will attract strong shareholder support is a big challenge, but for now, the market is giving Snowball breathing space while he works out what to do with Suncorp’s underperforming bank  and its dismal share price.



8

Privatisation déjà vu in NZ: UAC elects a new leader: Damien Coates of Dual Underwriting has been elected Chairman of the Underwriting Agencies Council, replacing Martin McAvenna, who has moved from Austagencies to run the Austbrokers/IBNA joint venture management company AIMS. John Iles (SUA) replaces Coates as Deputy Chairman, David Porter (AFA) is Secretary and Frank van Rooy (Australis) is Treasurer. Other members are Kevin Corkery of Lawsons, Heath Amber of Millennium, William Legge of Aurora, and Simon Trowell of  Sportscover. insuranceNEWS

Australian politicians have long grown out of treating their workers’ compensation systems like personal toys, but not New Zealand. The nation’s no-fault universal scheme, the Accident Compensation Corporation, is bracing for double-digit rises in personal injury cover on the back of a $NZ4.8 billion ($3.9 billion) blowout in liability in the year to June. That’s revived talk of privatising the workers’ compensation end of the business, a course Prime Minister John Key favours. Now union leaders and opposition Labour Party politicians are vowing they’ll nationalise the ACC October/November 2009

again, just like they did in 2000. And once again the pundits are predicting that the only ones to profit from privatisation will be “foreign-owned [ie, Australian] and vastly wealthy insurance companies”. The gap between claims liability and current net assets now stands at $NZ12.8 billion ($10.4 billion) – a situation the NZ Government says will take 10 years to turn around. Insurers are staying well clear as the debate rages, with Insurance Council of New Zealand Chief Executive Chris Ryan saying the issue is “very much in the political rather than  business arena” at present.


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newsmakers at insuranceNEWS.com.au

Figure this

120.7 billion

US dollar value of how much AIG owes the US Government after asset sales

8

The percentage that the finance and insurance sectors contribute to Australia’s gross domestic product

Reuters

2

The country comes to Sydney: A fluke of nature perhaps, but the red haze which enveloped Sydney in late September brought home to many that all isn’t well beyond the city‘s borders. Dust storms in the drought-affected inland of New South Wales and South Australia were picked up by a large weather system that distributed the dust across much of the eastern seaboard and as far away as New Zealand. The thick haze – caused by the sun hitting the blanket of dust – came the day after Zurich Financial Services Australia and the National Insurance Brokers Association (NIBA) launched a survey revealing that insurance brokers worry

about climate change but don’t feel confident enough to advise their clients about it. The Zurich survey, launched at the NIBA convention in Sydney, showed one in four brokers have already started adding cover or adjusting clients’ policies to help them cope with climate change risks. But only one in five feels confident talking to customers about climate change risks and are looking to governments and insurers to help them better understand the issues. Zurich Australia Chief Executive David Smith says the survey shows there is a major role for the insurance industry to play in helping people adapt  to the effects of climate change.

NIBA ad campaign falls short:

QBE mooves on Elders: QBE completed the $27 million buyout of the insurance businesses of rural services giant Elders in October. The insurer now owns 75% of a new joint venture underwriting agency and 100% of Elders Insurance. The agency will continue to supply insurance under the Elders brand and holds the exclusive distribution rights for 20 years. At much the same time Zurich announced it’s quitting the rural insurance market. It will stop writing new rural cover as well as renewal business  from December 1.

The National Insurance Brokers Association (NIBA) has set aside plans to mount a multi-million dollar television and radio advertising campaign, citing a lack of financial support from members. The association wanted to spend $1.3 million a year on the campaign, which would have spruiked “NIBA brokers”.

NIBA Chief Executive Noel Pettersen says “difficult economic times” may have deterred some members from contributing, but “it is still difficult to understand why they would choose not to back an initiative to promote the profession that provides their livelihoods”. 



General insurance disputes increased by 34% in the 2008/09 financial year, according to the latest annual review from the Financial Ombudsman Service. This compares with rises of 68% in the investment area, 28% in life insurance and 36% involving credit. Across the board, disputes were up 33%. Chief Ombudsman Colin Neave says extreme weather events such as storms and bushfires have had an impact on general/domestic insurance disputes. Disputes involving home insurance (27%) and contents (10%) trailed motor (39%). Travel insurance accounted for 16% of disputes. The most prevalent source of disputes concerns agreed under standing about the extent of the cover. October/November 2009

9.4

Estimated percentage that Victorian insurance-buyers contribute to the state’s tax take

1.39 Net profit for Australia’s life insurance sector in 2008/09

Disputes on the rise:

insuranceNEWS

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Percentage that car thefts fell in 2008/09, with 6000 fewer thefts than the previous year

billion

The campaign was based on a program run over about 20 years by Canadian brokers, whose contributions are matched by insurance companies.

But 58% of members baulked at a levy to raise an additional $500,000.

Australia’s rank as a financial services centre, according to the World Economic Forum. The United Kingdom is No 1

10

Number of towns in Australia that carry 47% of the country’s total flood risk

1.4 billion

How many dollars will be available in future for oil spill compensation – up from $380 million – after Australia joined an international fund

34

Official percentage of deaths in Australia attributed to heart disease, stroke and heart failure

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newsmakers at insuranceNEWS.com.au DOFIs data plan meets resistance: New data collection and reporting requirements for general insurance intermediaries proposed by the Federal Treasury have met with strong industry opposition. Under the proposal, brokers, underwriting agents and insurers authorised by the Australian Prudential Regulation Authority would need to report every six months on transaction-level data on contracts with direct offshore foreign insurers (DOFIs) as well as aggregated data on contracts with authorised insurers, Lloyd’s underwriters and DOFIs. Data from the first reporting period of November 1 to December 31 would need to be submitted by February 26 next year. The proposal came as a surprise to the National Insurance Brokers Association, whose regulatory consultant John Hanks says intermediaries would be duplicating what is already being provided by insurance companies and Lloyd’s. Added to that, the proposed timeframe is unworkable and the cost “would be prohibitive for smaller brokers”.

Still out in front: QBE’s Colin Fagen receives the General Insurer of the Year award from NIBA President Steve Lardner

For QBE, eight is not enough The general insurance sector becomes more competitive year by year, with innovation and service standards under constant pressure to improve. But as far as members of the National Insurance Brokers Association (NIBA) are concerned, QBE Australia is still top of the heap. Last month the company was named the NIBA General Insurer of the Year for the eighth successive year. The award is based on the votes of about 2500 NIBA Qualified Practising Insurance Brokers, and was presented at the NIBA Convention in Sydney last month. The brokers were asked to nominate the best-performing general insurer across 10 product and service categories, and QBE demonstrated remarkable consistency by

winning in nine categories. The runners-up were Allianz Australia and Zurich Financial Services Australia. For QBE staff, the win comes with a bonus: they all get an extra day tacked on to their leave for winning the award. “For us it’s a motivating achievement and an honour to be acknowledged in this way by our intermediary partners and the industry,” Executive General Manager QBE Intermediary Distribution Colin Fagen told Insurance News. So what’s the secret behind QBE’s eight years of success? Mr Fagen says it’s all due to the commitment, hard work and enthusiasm of QBE staff, with service, strong relationships and commitment to intermediary partners key to “mutual long-term success”.

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 763 Heidelberg Road, Alphington VIC 3078 (COURIERS ONLY) Email: naomi@mccmedia.com.au

Compo morass set to end: Sweeping changes to Australia’s “absurd” mix of workers’ compensation laws are getting closer, with Workplace Relations Minister Julia Gillard saying model laws for uniform occupational health and safety legislation will be ready in late 2011. Calling the present collection of 10 different state, territory and national systems and 400 regulations “confusing, time-consuming and expensive”, she says the new laws will force employers to provide a safe workplace.

SUBSCRIPTION ENQUIRIES: www.insurancenews.com.au/subscribe Email: admin@insurancenews.com.au CONTRIBUTIONS: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538. PRINTING: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia www.insurancenews.com.au/magazine

A McMullan Conway production

ISSN 1837-4972

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‘Bad’ state taxes criticised: Federal Government tax review Chairman Ken Henry has slammed insurance stamp duty and the fire services levy as “bad taxes”. Dr Henry – who is also Secretary to the Federal Treasury – says taxes such as property transfer and insurance taxes are “generally recognised as highly inefficient”. “Many of these taxes… are generally recognised as being highly inefficient, sometimes even by the states themselves.” As for non-insured and underinsured property-owners, he describes them as “those who bear risk where they would prefer to be insured but aren’t, because of tax”.

insuranceNEWS

October/November 2009

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


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Back from the brink

Chris Townsend in his Sydney office: lessons were learned from the AIG crisis

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October/November 2009


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As AIG Australia moves towards rebranding as Chartis, its chief executive recalls a few hellish months as the world fell apart By Terry McMullan

hris Townsend is a long-time AIG man, and he’s as well-trained as any senior manager in a major global company could be. But nothing could have prepared him for the months that followed October last year. His career with the company has taken in London, New York and Hong Kong. He worked in Australia running AIG’s financial lines business from 1996 to 1999, and arrived in Sydney in January 2007 to manage the entire local branch. On 16 September 2008, Mr Townsend woke to the news that the United States Federal Reserve had issued an $US85 billion rescue package to AIG. The world’s largest insurer, worth an estimated $190 billion and operating in 130 countries, had been judged too important to the US and global economies to be allowed to collapse. While AIG had been in serious trouble for months – massive writedowns on then unfamiliar products called credit default swaps, court cases related to sham reinsurance deals, the departure of Chief Executive Martin Sullivan – nothing could have prepared Mr Townsend for the bombshell that had just landed in his lap. While the problems faced by AIG were never about the insurance subsidiaries, the AIG brand was suddenly as toxic as the loans that had unravelled it – and what did that mean for the group’s respected Australian operation? Plenty, as it turns out. In the calm of his Sydney office, the 19year AIG veteran looks back now on the experience and agrees the news then was unfathomable. While his training in the company had included courses in crisis management, “scenario testing and crisis management can never prepare you for something like this”. “It literally changed our landscape overnight,” Mr Townsend says. “We all woke up on a Monday morning to a scenario in which the world’s press and the market here expected us to be the next big US company after Lehman Brothers to fail.” With so much doom-laden news funnelling out of New York, the AIG team in Australia had little time to assemble their thoughts. They knew the general insurance arm of the company had no exposure at all to an estimated $US372 billion in cover for toxic loans. AIG Australia held more than $1.7 billion in assets under a conservative investment program – 2.5 times the amount it was required to hold. Besides that, Australian law prohibited the local company remitting surplus capital back to New York without the prudential regulator’s consent. But how do you get that message of “we’re okay and it’s business as usual” across to anxious insurance brokers and major clients? The AIG management team, with the assistance of outside communications consultants, devised a communications strategy which Mr Townsend now admits was simple enough, but required very hard work and commitment from staff at all levels [See panel next page: Lessons from a crisis]. “For the first couple of days we were scrambling for information which we didn’t have, and the time difference made it very difficult for us to get the correct facts,” he says. “So we lost some clients in the early days.”

C

The new communications strategy involved Mr Townsend and his management team speaking face-to-face with major account customers and brokers. “We knew full well that transparency and candour with the market and all of our stakeholders was an essential approach, particularly when our goal was really about trying to retain or even regain trust,” he says. But one of the most important initial series of meetings was with AIG’s 600 local staff. “We were out there doing video, or virtual ‘town halls’ with all of our staff across the region,” he says. “We got them all together and told them where the company was, how safe it was, what it meant to them and how perfectly safe their position was. “It was vital because I wanted to stop any rumour and encourage them to focus on their job.” Facing up to clients and brokers was a more complex exercise. “If you look at our business historically, we’ve been pretty focused at the top end of the market – the ASX 200 companies. So we could get to a number of clients directly and pretty quickly, and we made it our mission to do that. “Our brokers were very supportive in facilitating platforms for us to meet and speak to clients. For instance, we did a number of ‘town hall meetings’ where major brokers would invite their clients to come along and hear our message. “Thanks to the brokers, we were able to front up to 30 or 40 customers at once. They all got the message at the same time and they got it directly from us. It gave them a position to have proper dialogue, ask their questions and get proper answers.” Mr Townsend admits it wasn’t all plain sailing, especially as the directors of large companies began to take more interest in the situation. “We found that while a risk manager or a chief financial officer would understand our position, they were facing a fair amount of hostility or pushback in the boardroom when they were making their pitch as to where insurances got placed. “So we worked out pretty early on that we needed to get through to the boards. We run a lot of directors’ and officers’ insurance, so it was critical for us to get our message across to that pool.” The AIG management team in New York was quick to swing into action and start managing the information flow. “Every night I would join a conference call with my peers around the world and our Chief Executive to hear what was happening or going to happen that day in New York, and to provide feedback from all of the 10 regions around the general insurance business. We’d talk about what had happened with various relationships and various regulators, and issues which had surfaced in our day. “We had tremendous communication through our executive team in New York, and the mantra we tried to live by here was that everything that came out of New York had to get to our front line in 12 hours.” Mr Townsend credits the “very deep” AIG culture for helping the

“For the first couple of days we were scrambling for information which we didn’t have, and the time difference made it very difficult for us to get the correct facts. So we lost some clients in the early days.”

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October/November 2009

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Lessons from a crisis By Chris Townsend

1 2

Silence breeds fear: We knew transparency and candour with the market and all of our stakeholders was the best approach – particularly when your goal is to retain or regain trust. You’ve got to communicate properly; you’ve got to have the system in place to allow you to communicate in a very timely fashion. Make sure the right people own the relationship: We learned that fairly early on. You have to make sure that you’ve got the appropriate people talking to the different stakeholders. It’s a case of listing who all your key stakeholders are, how frequently you need to get to them and what level of seniority within each of those groups you need to get to, and then pinning the rose of accountability on one of your executive team to make sure they own that relationship. Those people have to be well trained, well briefed and well prepared.

3 4

Stay approachable: From a leader’s perspective, you’ve got to remain very approachable and highly visible – a lot more so than you perhaps would normally. You’ve got to be right out there on the front foot and not being purely reactive to the comments people are making.

“We decided to focus on the trade media, which is more sophisticated and more knowledgeable about our business. It was easier for them to understand our message” global management team to react quickly and effectively, and he agrees his long experience in the company at many levels provided him with a network of contacts. “If you look at the 40 senior people in the [general insurance] business, only one person has departed in the past 14 months,” he says. “Those people have got an average tenure of about 20-odd years in the company – they know the company; it’s in their DNA. That helps to breed a similar culture all around the organisation. “And we’re all a good team of fighters – we knew what we had to do.” Every morning Mr Townsend would have a similar conference call with his local managers, followed at the end of the day with a “wrap-up” meeting before the call to New York. His aim was to stay ahead of “sensationalist stories in the daily media” in Australia, most of which were sourced directly from New York. Throughout the months of the AIG crisis, few articles about the local arm of AIG found their way into the mainstream media. “We decided to focus on the trade media, which is more sophisticated and more knowledgeable about our business,” he says. “It was easier for them to understand our message, and it was easier for us to make sure that the information was a correct depiction of the facts and didn’t rely on hysteria and sensationalist headlines. “All we really did was make sure we picked the right strategic opportunities to publicly set the record straight and make sure we didn’t get pulled from pillar to post with every form of media. “When you have little time to spare, you’ve got to work out where 16

insuranceNEWS

Keep staff in the loop right from the start: It’s vitally important to keep your staff confident in the business, because they’re the ones who’ve got to go out there and deliver your message. When you speak to them, tackle the elephant in the room straight away. Tell them their jobs are safe (if indeed they are) and the company is in perfectly good financial condition.

5

Shorten your executives’ time horizons: Make sure you get the balance right between your longer-term strategic objectives and day-to-day objectives. You have to shorten the timeframe of your key executives to focus much more on shorter-term objectives rather than the medium to long-term objectives on which they would usually be focused.

6

Watch the numbers: Know exactly what is happening week in, week out in terms of your new business and your retention numbers, and exactly what’s happening with your employee pool. Be sure the communication you’re putting out there is working, and if you try something different watch for it to change the numbers – then act accordingly.

7 8

Don’t be afraid to use outside expertise: We’ve got great talent internally, but nothing prepares you for a situation like this. Use outside help to provide some additional firepower. Remember there are upsides: By embracing these challenges and learning from them, it can put you in a much better place. For instance, we now have significantly stronger relationships in the market than we did previously. We’ve got an employee pool which is more committed and understands the business better than they did before; and they’re better communicators. We’re more flexible and more adaptable as a company, and we’re definitely more nimble than we were before.

October/November 2009


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your time can be spent most effectively and where it’s going to reach the audience you need to get to.” Today Mr Townsend credits the communications strategy with not only keeping stakeholders up with the play, but also with changing the way AIG Australia continues to relate to them. “One of the key things we learned early on was that we’d met clients for the first time in that situation and we were never going to let that happen again. We’re going to make sure we get out in front of every major client we’re involved with now, and meet them well in advance of any situation we have to explain to them. We intend to make sure we continue to build that trust and that relationship.” Losing some large clients – or seeing them bring in other insurers to share the risks – was painful, but Mr Townsend says there were some positives from the experience. “There are opportunities for you to grow your business where you don’t have an existing relationship, and we picked up some pretty significant new business as a result of de-leveraging from other companies.” With the rebrand to Chartis now well underway, he’s confident the future is rosy globally and locally. And the culture AIG built will remain at the centre. “We’ve got a proud and rich pedigree of general insurance under AIG, and the most damaging thing for us in the world would be for us to walk away from all of that,” he says. “This is about melding the old with the new – taking all the good parts of what we’ve done over the past 90 or so years and mixing it with the new opportunities we’ve got by being Chartis. The business itself, operationally, will stay largely unchanged.” He says a key benefit of the reorganisation will be the closer ties between the US and international operations. “We’ve operated historically as almost two separate companies. There’s not a company on the planet that has the same physical footprint that we have if we combine those forces. “What we can do from an account management and a service perspective for multinational accounts is very, very powerful. It gives us a real opportunity to put some distance between ourselves and the competition. “We’re committed to building on our culture of customer service. If we can get that right, we have a wonderful opportunity to grow our business even further.” Following a plan finalised early last year, Chartis in Australia will extend its focus from the middle market into the SME market. “But let me be clear on this, it’s a profit strategy and not a growth strategy,” Mr Townsend says. “We will only go into a market where we know we can make money. “We’re going through a process at the moment where we will have a structure which is much more customer-centred. We’ll build on our existing core issues of major account business, and we’re going to continue to deepen those relationships and broaden them where appropriate. “We’ll do that with products and service innovation, while in the SME and mid-market and some of our consumer lines business, we will use technology to give us an edge so that we can compete efficiently.” In the meantime, he’s confident that after what they’ve been through his managers and staff can handle any challenge that comes their way. “All the time there was that negativity towards the brand I took great pride in the way our team responded,” he says. “They really stood up to a huge challenge, because they believed in the organisa tion.”

“We picked up some pretty significant new business as a result of de-leveraging from other companies”

18

insuranceNEWS

Success goes with the Territory NIBA names a Top End broker the year’s outstanding young professional Darwin may seem a long way from anywhere, but it hasn’t stopped local lad Elias Anictomatis being judged most outstanding young professional insurance broker. Mr Anictomatis, 31, was presented with the Warren Tickle Memorial Award at the National Insurance Brokers Association Convention in Sydney last month. The Verosponsored award recognises outstanding professionalism and integrity among brokers aged under 35. Mr Anictomatis is pictured above receiving the award from Anthony Day, Suncorp’s Executive General Manager of Intermediated Distribution (and since promoted to Group Executive Commercial Insurance). “You put yourself out there and if you’re lucky enough to win it’s a big thing for your career,” Mr Anictomatis told Insurance News. “It felt quite overwhelming to be recognised in front of my peers. You don’t quite get a grip on how prestigious it is until you’re named

October/November 2009

the winner and see the reaction.” Darwin-born and bred Mr Anictomatis is the State Executive Northern Territory with Marsh Australia. He started out in the industry as a teenager in 1997 before moving into broking. “This career is always challenging,” he said “Clients are currently encountering difficult times and we have to take a smarter approach to risk. It’s an interesting climate to be working in.” The married father of one’s career with Marsh has already included a two-year stint in London, where he worked on placements for some of the world’s largest construction projects. As part of his prize he will return to the British capital on a study tour, courtesy of Vero. Joining him to contest the final of the Warren Tickle Memorial Award in Sydney were Matthew Korff, representing New South Wales/Australian Capital Territory, Robert Richards (Tasmania/Victoria) and Lana Rose (Queensland).




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Next time the bush burns

The Victorian Bushfires Royal Commission targets the things that cost 173 lives By Jamin Robertson ndrew Berry faced the full fury of the Black Saturday bushfires and emerged as a survivor. On Bald Spur Road in the upper reaches of Kinglake, investment in a comprehensive sprinkler system failed to save the family home but bought valuable time. Time to gather a wife and child and scurry to the shelter of a purpose-built concrete bunker, where the family huddled as the terrible fire swept through shortly after 6pm on February 7. When Mr Berry emerged about half an hour later, little remained of his oncepicturesque little pocket of rural Victoria. Of the 38 people who died in Kinglake, 19 died on his street alone. “It was apocalyptic,” he told the Victorian Bushfires Royal Commission last month. “There’s just fires everywhere, in trees, on the ground, bits of flame coming out of the cars, but it is no problem at that point because the fire front has passed and there is no house left.” With a final report due in July of next year, the royal commission is charged with ensuring there are more survival stories like this the next time bushfires strike an Australian community. And if the experts are right, “next time” is only a few months away. Despite the best efforts of the frontline emergency services, 173 people died in the February 7 bushfires and 2029 homes were destroyed. More than 400,000 hectares burned and insured losses were about $1.1 billion. On August 17 the royal commission delivered its 376-page interim report containing 51 recommendations [see box on page 26 for key

A

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measures] that address short-term improvements to bushfire response co-ordination. They include contentious issues such as the “stay or go” response strategy which came under scrutiny after 113 of the 173 Black Saturday victims died seeking refuge indoors, in line with fire safety guidelines. Much more emphasis will now be placed on getting out of harm’s way early, in an attempt to avoid the last-minute panic that ensued in some cases as residents tried to flee a wall of orange flame. The Victorian Government has since confirmed it will adopt all 51 recommendations, though not all will be in force by this summer. For its part, the Federal Government says work is underway on a national emergency warning system and has instigated other improvements including better fire indices and ratings information and better emergency resource co-ordination. The Insurance Council of Australia (ICA) has been granted leave to appear before the royal commission, which has begun the remainder of six blocks of public hearings. ICA is likely to address key issues such as building standards and insurance taxes, both key industry issues in the wake of $1.1 billion in insured losses. The insurance industry had not addressed the royal commission by the Insurance News publishing deadline, but insurance matters are slated for specific review before public hearings conclude in May next year. In a submission tabled earlier this year, ICA called for reform to the Building Code of Australia, noting that community resilience “will be improved by expanding building codes so they acknowledge and enhance the objective of improving a building’s resistance to hazards such as bushfire risks”. Without those improvements ICA warns the cost of insurance could soar to unacceptable levels and force insurers to exclude highly exposed areas. ICA is set to mount a strong argument against insurance taxes and the fire services levy in particular, in line with many of the 65

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submissions that focus on insurance. Insurers such as CGU and RACV Insurance have called for reform of the levy, which in Victoria provides 75% of the total expenditure for the Metropolitan Fire Brigade and 77.5% of the Country Fire Authority budget. The levy is only charged on buyers of insurance, and although the uninsured get equal access to the fire services they do not contribute to their cost. ICA urges the royal commission to consider more equitable measures, noting the effect of stamp duty, GST and the fire services levy “increase the cost of a basic household insurance premium in country Victoria by more than 50% and the cost of a commercial insurance premium by more than 100%”. That approach appears to be in line with broker sentiment, particularly in country Victoria where there is real anger at the effect of the spiralling fire services levy charged on premiums. Lilydale broker Michael Wilkinson of Wilkinson Insurance Brokers says most of the 25 clients affected by the bushfires have decided to rebuild in the area, but says a lack of insurance affordability has had repercussions. “The Yarra Valley was one of the major areas affected and a number of wineries were badly burned,” he told Insurance News. “Most of them are rebuilding, though underinsurance has been a problem in the area. No one’s really immune from it.” In Bendigo, McCormick Harris Managing Director Tony McCormick reports similar issues. About six of his clients were affected by the bushfires with “three or four” total losses. “I spoke to one fellow last night, and he plans on moving forward now the trauma and stress is behind him and his head is a bit clearer.” Mr McCormick estimates about 50% of about 60 homes destroyed in the Bendigo area were not insured. There can be little doubt that more fireresistant homes incorporating sprinklers and shelters are the way forward in bushfire-prone regions of Australia. Some personal lines ininsuranceNEWS

October/November 2009

surers have already fallen into line by building the extra cost of safety features into their policy terms and conditions. A visit to the devastated township of Kinglake is all that’s needed to demonstrate the vulnerability of wooden houses exposed to thousands of square kilometres of tinder dry forest. In March the Victorian Government announced the state’s immediate adoption of the Australian standard for design and construction of buildings in bushfire-prone areas, scheduled to take effect nationally in May next year. Under the new Australian standard areas will be defined under six categories of “bushfire attack level”, with at-risk homes required to adhere to a range of fire-resistant standards. In late August the second round of royal commission public hearings began, focusing on building standards such as construction materials and bushfire bunkers. Experts from the Master Builders Association of Victoria (MBAV) and the Fire Protection Association of Australia convened during the second round of hearings to discuss those issues. But the experts are quick to point out that despite the advantage of safety features, there is no magic solution. “We welcomed the adoption of new regulations to form a new base minimum, [but] by themselves they would not guarantee people’s safety” MBAV Executive Director Brian Welch told the royal commission. State-of-the-art homes will still burn under extreme conditions, and questions still hang over the question of fire shelters, which can quickly run out of oxygen. The regulation of fire shelters and bunkers is fraught with difficulty, and at present there are no official standards. The royal commission heard a tragic account from one public witness whose partner died in a purpose-built bunker on his St Andrews property, highlighting the fact that such measures come with no guarantees.  23


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“Sadly for most of us in rural and regional Victoria, not only are we slugged with the higher fire services levy, we are the fire brigade, we are the ones in the orange overalls fighting the fires. How insulting is that?” – Victorian farmer Russell Amery, in The Age newspaper

Death and taxes

Thanks to antiquated levies, too few people are paying for fire-fighting services

M

The fire services levy As a percentage of base premium Victoria Rural commercial: Rural personal: Urban commercial: Urban personal:

84% 31% 59% 20%

New South Wales Commercial: Urban:

39% 21%

Tasmania Commercial:

28%

Source: National Insurance Brokers Association

24

ore than eight months have passed since devastating bushfires levelled 2029 homes and killed 173 people in Victoria, and Bendigo broker Tony McCormick is angry. He says that despite the fact 30% of those homes were not insured, the Victorian Government has twice elected to raise the fire services levy charged on insurance premiums to record levels. He says high insurance taxes are contributing to a lack of insurance affordability, which is already regarded as a grudge purchase even in the absence of taxation. Mr McCormick can’t understand the Government’s rationale. “They’ve stepped out of a 1% logical argument to one that’s 100% illogical,” he told Insurance News. “It’s bizarre. That information is now filtering through to clients and they are in a state of disbelief.” Brokers in country Victoria were furious when a 16-percentage point hike pushed the levy on rural commercial policies to a staggering 84% in August. That followed an earlier increase in May, when the levy was raised to 68% from 63%. For commercial buyers in country Victoria, $100 in premium now costs $223 when the levy, GST and stamp duty are added, according to insuranceNEWS

October/November 2009

the National Insurance Brokers Association (NIBA). The Managing Director of McCormick Harris Insurance Brokers has no beef with the fire services, which in New South Wales and Victoria rely on the general insurance industry for three-quarters of their budget. He says frontline members of the Country Fire Authority did their level best on Black Saturday, and is not impressed with the grilling the emergency services have since undergone in the wake of the disaster. “Their hearts were in the right spot,” Mr McCormick told Insurance News. What is less understandable is how the pillaging of insurance buyers through world-record taxation will do anything to resolve the underinsurance problem that stretches beyond Victoria to all of Australia. While an estimated 30% of homes destroyed in the Victorian blazes had no insurance, that figure rises to about half in the Bendigo area where around 60 homes were razed. Across Australia, the Australian Bureau of Statistics has previously determined that almost a quarter of all homes have no home and contents insurance. Concerns around insurance tax have been well articulated by NIBA, which in recent years has taken a lead on the issue. Earlier this year it circulated a tax paper to brokers, urging clients to raise their concern with politicians, and Chief Executive Noel Pettersen slammed the latest hike in August. “Why do people in rural Victoria have to pay more in taxes and charges than they do for the actual insurance policy?” he said. “It’s absurd.” NIBA instead advocates that the state


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governments of NSW, Victoria and Tasmania move to a property-based levy on rates in line with other states. It argues that system ensures everyone contributes to the fire services, not just those responsible enough to insure. The Insurance Council of Australia (ICA) has been quiet by comparison, preferring to do their talking behind ministerial doors, according to industry insiders. ICA President Terry Towell, who is also Managing Director of Allianz Australia, says ICA is continuing to undertake a “huge amount” of lobbying against insurance taxes. “I am aware that ICA has taken some criticism from members about invisibility on the subject,” he told the NIBA Convention in Sydney in September. He says ICA is using “behind-the-scenes” tactics involving private consultation with ministers. “We have tried the head-on approach and don’t seem to be able to get past first base,” he said. “I think we’re making more substantial traction now than at any time during the past. Our efforts shouldn’t be assessed by the number of quotes in the media.” Time will tell. While other states – most recently South Australia and Western Australia – have moved away from the fire services levy system in favour of land-based rates – changes in Victoria would involve massive electoral risk. The states are yet to be swayed from a slice of revenue that according to Australian Bureau of Statistics figures poured $4.25 billion into Federal and State Government coffers in 2007/08. That’s not far behind the $4.85 billion in “sin taxes” reaped from gambling. For the moment, industry hopes lie with the Henry Tax Review chaired by Federal Treasury Secretary Ken Henry. Insurance taxes are due to be addressed in its final re port due in December.

Victorian Bushfires Royal Commission Interim Report Key Recommendations  Improve “stay or go” policy to promote evacuation  Empower the CFA to recommend evacuation

 Improve warnings to include fire direction and severity

 Implement a telephone warning system

 Widen broadcasts to include commercial media  Improve helpline funding to allow surge capacity  Improve the CFA and DSE chain of command  Improve warning information consistency

 Develop community siren guidelines

 Identify and promote community refuges  A final report is due in July of next year

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News Ltd

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Heavy reading: Victorian Premier John Brumby with a copy of the interim report. His government has accepted all 51 recommendations

Are you ready? Not very. Fireblackened Victoria struggles to prepare he 2009 Victorian Bushfires Royal Commission was established days after devastating fires swept through parts of the state on February 7, killing 173 people. An interim report was released in August, the culmination of six months’ work, including four weeks of community consultations, examination of more than 1260 submissions and eight weeks of public hearings involving a total of 87 witnesses. Major issues to emerge included the co-ordination of the official response and the communication of warnings. The Victorian Government has pledged support for all 51 recommendations included in the interim report, but 11 are unlikely to be implemented in time for the onset of bushfire season – which happens about now. Among the items still under consideration are the sites for designated bushfire refuges in each of the state’s 52 bushfire hotspots. These “Neighbourhood Safer Places” are expected to be identified by the Country Fire Authority (CFA) and local councils before the end of November, although the Government has told the royal commission no new refuges will be built until the next bushfire season. Negotiations also continue with commercial radio stations over the broadcast

T

insuranceNEWS

October/November 2009

of bushfire information. Phase one of a national telephonic system in which bushfire warnings can be sent to mobile and landline phones with a billing address in a fire-affected area is expected to be ready by mid-November. Phase two, where warnings go out to all mobiles in a threatened area, is a year away. The key features of the implementation plan include an overhaul of command, control and co-ordination arrangements. Amendments to the Country Fire Authority Act will ensure the chief fire officer has responsibility to issue warnings and provide information to the community about the risk of bushfires. Revised guidelines also mean that CFA and Department of Sustainability and Environment (DSE) incident controllers can recommend evacuation. The most “experienced, qualified and competent person” will be appointed as an incident controller for each fire, regardless of where the fire starts. A national six-tiered fire danger rating system has emerged, including a new category of “code red” (catastrophic) to warn communities of the risk of unpredictable, uncontrollable and fast-moving fires. One standardised warning will be issued on a single portal website for dissemination on CFA and DSE websites, the ABC and potentially other media. It will also be available to Victorian Bushfire Information Line operators. The royal commission has scheduled a progress report on implementing the recommendations by March 31 next year. A  final report is due in July.


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Waiting for a trigger There’s no lack of enthusiasm for a hard commercial market after years of low rates. But forecasting the trigger that gets rates moving is proving next to impossible By Jeff Morse he sky turns grey over the Atlantic. Will this tropical storm develop into a destructive hurricane that ultimately sends commercial insurance rates soaring in Australia? In the sometimes unpredictable world of insurance, that tropical storm is one of hundreds of scenarios that could become the catalyst for commercial rates to rise. Given the increasingly vulnerable capital position of reinsurers, something’s got to give. But no one knows what that something is. In September ratings agency Moody’s downgraded its outlook on the reinsurance sector from stable to negative for the first time since 2005. Fitch Ratings reaffirmed its negative outlook. Reinsurers have replenished capital to some degree via the resurgent equities market, but the negative outlooks fix on the uncertainty of reinsurers’ holdings in the face of major natural catastrophe exposures. The fear is that reinsurers are operating with too much capacity but not enough certainty of capital. Adequate reinsurance capacity has added padding to a generally soft Australian and international commercial market over the past four years – a challenging market particularly now for insurers seeking profits amid a tentative economic recovery.

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There are patches of firmness but in general terms the much-anticipated hard market is yet to occur. There is still capacity, and lots of competition, which is quite surprising when you consider the ghastly global economic conditions in recent times. There’s a scary, almost unutterable feeling in the market that the trigger which sends rates scampering up will need to be a really big one. Marsh’s Australian Executive Director Scott Leney has seen a market cycle or two in his 22 years with the company. Although he can’t see it happening, the hard market trigger would most likely involve a significant amount of capacity from the global insurance market, ushered in by a combination of events. “It would have to be the biggest loss year in history, coupled with the failure of a major insurer, or a significant drop in investment markets,” he told Insurance News. “Since September last year we’ve almost seen the concurrence of those triggers, but not quite. The economic conditions have worsened dramatically. “Last year was the second largest catastrophe loss year on record. AIG didn’t quite fail, did they?” As an underwriter, former Austagencies General Manager Martin McAvenna is among the ranks of those confounded by the prevailing market softness. In September he took on the job of General Manager of Austbrokers & IBNA Member Services (AIMS) in an internal executive reshuffle. But he still keeps a close eye on the market. “It’s as if everybody’s in the waiting room before the real action starts,” he said. “I’ve yet to get a satisfactory explanation as to why. “All the signs are that this market should see at least a general trend to increase the benchmark pricing.” Mr McAvenna says insurers are sending signals that it’s time for higher rates, and the trigger might be as simple as a major insurer taking a lead in the form of an edict. But that hasn’t happened. insuranceNEWS

However, he sees a competitive market remaining, even if prices go up across the board. KPMG Australian insurance practice Chairman Brian Greig says IAG has been standing by a disciplined pricing stance in the commercial side for the past 12-18 months, but how successful the insurer will be is the stuff of crystal balls and tarot cards. There is no evidence of contagion so far, according to JP Morgan analyst Siddarth Parameswaran. “The underwriting authorities are still there for discounting and people are still discounting. It’s across the market,” he said. Mr Leney says modest rises were seen across the board in the small to medium enterprise market in the first half of this year, when insurers independently concluded premiums had to go up to rescue profit margins. But he’s not convinced this will be sustained in a competitive marketplace, as stronger investment returns take the heat off underwriting profitability. Providing the patchiness are lines such as directors’ and officers’ cover driven by disgruntled investors’ claims, and commercial motor, which is coming off a low base. In long-tail classes, the exit of Lumley and CGU from builders’ warranty cover has reduced capacity in that class. Mr Greig says liability and compulsory third party (CTP) will come under upward price pressure as reserve releases taper off, but competitive market forces still apply. Significant CTP rate increases are being seen in Queensland and New South Wales as superimposed inflation lifts settlement amounts. Mr Leney says clients are “doing it tough” in mining and in the expanded polystyrene panelling business. Reinsurers’ capital is vulnerable. But it is, of course, pure speculation that grey skies over the Atlantic will be the catalyst for a firmer commercial insurance market in any case. Who knows what it will be? Or when.  The wait continues.

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 October/November 2009

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GENERATION

TAKES OVER

30

insuranceNEWS

October/November 2009


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As the Baby Boomers begin to move into retirement, there’s a new spirit rising in management. Generation X is stepping up By Terry McMullan

ithin a few years most of the vital roles in the risk insurance industry will be dominated by people born between 1964 and 1982. As the ranks of the so-called Baby Boomers continue to thin out, Generation X is stepping up – and with it is coming a whole new way of doing things. Last year Time magazine defined Generation X as “the ignored generation”. Squeezed between the acquisitive Baby Boomers and the flighty, attention-seeking Generation Ys, they’re paying for the excesses of the Baby Boomer generation – which may be why they’re usually seen as interested in changing the old ways of doing things. At the same time, they’re also portrayed as more conservative than the Boomers – possibly because they’ve been through more periods of economic and social insecurity than the Boomers ever experienced. The term “Generation X” was first used by Canadian author Douglas Coupland in his 1991 book Generation X: Tales for an Accelerated Culture. He intended the “X” to signify the generation's contradictory nature of being independent yet insecure. But Generation X is far more than that. They’re the first generation raised as “latchkey kids”, because their mothers went back to work to make ends meet. And unlike the Boomers, they paid for their own university education – some of them are still paying it off. The sociologists say these things have made Generation Xs more independent and resourceful than their predecessors. They’re also said to be more resilient – all that financial insecurity has helped –

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and more aware of the world and its issues. They are also better at adapting to new technologies and far more accepting of women in positions of authority. They’ve lived through a period where women – including their mothers – worked for and gained greater equality. Gender issues aren’t an issue to them. Generation X are likely to be sceptical about large institutions. They’ve seen big business failures happen, and while they expect to be well managed, they don’t expect the company will necessarily be there forever to provide them with a living. They want job satisfaction and just rewards for their efforts. If they’re not happy with the way they’re treated, they’ll leave. Is the sociologists’ stereotype realistic? It’s worth finding out, because there are thousands of Gen Xs working in risk insurance, and within 10 years many of them will be running the industry. Insurance News selected six Gen Xs working in various roles at a range of management levels and asked them about their lives inside and outside work, what motivates them and how they believe their generation will manage the industry in the future. They’re exceptional people – but we’re well aware there are many more just as talented, just as qualified and just as driven to succeed. Our subjects’ ages range from the early 30s to 40. They’re part of the generation that has already given us such societychanging advances as Google, Youtube, Facebook and Amazon, to name just a few. And Generation X has really only just  begun.

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Christine Bell National Relationship Manager, Australian Intermediaries QBE Australia Sydney

ind the clock back to the start of her career at the age of 18 and Christine Bell was opening mail in the workers’ compensation division of AMP. Her early years in the industry reflect a typical history of hard work and determination, and if QBE’s recent eighth consecutive win of the National Insurance Brokers Association’s General Insurer of the Year award is anything to go by, she knows her stuff. Ms Bell simply “fell into” insurance at the end of high school when she turned up at AMP, and she recognises that the industry continues to undersell itself to potential employees. “It’s been a fantastic career for me so far,” she says. “I realised early on the industry had been undersold. It’s presented me with many opportunities through a variety of roles, and given me a lot of enjoyment. “Insurance gives you the opportunity to meet fantastic people and develop your career. By putting in the hard work and showing proof of performance you can move through the roles.” Like many executives mixing parenthood and a demanding job – she shares the upbringing of three-year-old James with her husband, also a senior executive at another insurance company – she finds the work-life balance equation a key priority. The Gen Xs climbing the corporate ladder are meeting an age-old problem – long hours are at times a fact of life. “A family of two working parents requires organisation when you have a small child, and while you work at it, at times it can get out of kilter,” Ms Bell says. “Time management becomes an exacting science.” She says QBE recognises the strengths of

Generation X and stands to reap the rewards of the contributions of a professional and committed younger workforce. “We are seeing some new thinking with a different generation,” she says. “There’s an element of youth and energy that can reinvigorate a business. “It’s acceptable to challenge the norm and ask why things are done, rather than accept it’s because it’s simply the way it has always been done.” As the 30-somethings ascend to new heights, there’s an equally savvy young army of talent moving in to replace them. Ms Bell says she learned a lot from previous managers and she’s keen to help the Generation Ys in the company with “some of those things you don’t read in a book”. For example? She says while hard work should always be recognised, a bit of proactivity goes a long way, too. “I’ve learned that you can get the runs on the board when you get the chance by doing something that has your name on it – something you can own rather than just going along for the ride. “Not only does it show you’re prepared to give something a go, it helps separate you from the group and shows leaders you’ve got skills they might not know you had.” Looking to the future, Ms Bell is keen to play to her strengths by continuing to focus on the broker distribution channel. “We’re seeing new and blended distribution channels,” she said. “The entry of Australia Post and Coles and other new players may obviously change the distribution landscape, and knowing you do have competition helps motivate you to stay on top of your game. “It’s about reinforcing the value added by brokers to the equation, and knowing that brokers will be a client’s advocate in their  time of need.”

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Stephen Brunker Account Executive, Treaty General Reinsurance Australia Sydney

hen Stephen Brunker was young his father worked in the local office of United States company Combined Insurance, and the autobiography of the company’s mercurial founder W Clement Stone impressed him so much it convinced him to set his sights on a career in insurance. He hasn’t regretted it. He’s been working in reinsurance since enrolling in university in 1996, and has been at Gen Re since 2006. He says someone once described working in reinsurance as “the best-kept secret in the entertainment business”. “But seriously, it is the best-kept secret,” he says. “There are so many different streams and specialities in this industry, and the insurance industry is a passport to the world.” Mr Brunker has worked in London and travelled extensively in Europe and Africa. “I look around this office and there are so many different nationalities represented here. We really are a global industry.” Yet despite the advantages of so many workstreams and opportunities, he’s worried that the insurance industry isn’t doing enough to attract the next generation of high achievers. “We don’t market the full range of great opportunities and challenges of the industry, and we should. Banking and the consultancies seem to have it all stitched up.” Like many Generation Xs, he wants to be committed to his job “rather than just involved”. And while he’s ambitious, he says that at the age of 35 he has 30-plus years to achieve these targets. “The goalposts are going to keep moving, but my responsibilities will keep increasing over that time.” A work/life balance is very important to the happily married father of three children aged five, three and six months, and he places high value on what he describes as Gen Re’s “genuinely family-centric culture”. He also enjoys surfing at Sydney’s Manly Beach every second morning – “my selfish release from the world” – where he

sometimes also catches up with other insurance professionals. Mr Brunker is wary about the growing role of technology in the insurance process. “It’s too easy to hide behind electronic media like email and texting when the true test of positive interaction is face-to-face contact. “I learned the value of personal contact early in my career. It’s how this business works.” He is similarly cautious about the industry’s growing reliance on sophisticated risk models, which he says may have flaws that aren’t obvious until they’re proved wrong. “We need to understand the strengths and weaknesses of models better,” he says. “There will always be a risk of faults or flaws in a model, so we need to understand the inputs and parameters. And the limitations of the models.” And Mr Brunker sees the next generation of industry leaders being called on to grapple with a whole raft of new challenges such as new technologies, latent claims (“what is the next asbestos going to be?”), long-tail risks and bigger disasters, to name just a few. With challenges come opportunities, and he believes they will emerge as China and India further open up their insurance markets and have increased insurance penetration. New distribution methods and the emergence of more competition in Australia will also require new approaches. “There’s going to be a new wave of risktakers with small capital bases who will have leaner distribution systems,” he says. “That will make life interesting for the bigger players. “And working with the Gen X leaders to deal with these developments will be really smart Gen Y people. “They have questioning minds, but I do think we’ll have problems with their perceptions of loyalty,” Mr Brunker says. “I look around at the treaty team we have here at Gen Re, and many of them have been here 10 years or more. Their experience is vital. “The ‘12 months here/12 months somewhere else’ habit of Gen Ys is going to be hard to deal with.”

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Peter Roberts Director Assurity Insurance Brokers Brisbane

s if running a successful brokerage didn’t fill in enough hours in the day, Peter Roberts is also an active participant in the wider industry. He serves as Queensland Divisional Chairman of the National Insurance Brokers Association (NIBA), is an active member of the cluster group IBNA and also a board member of AIMS, the joint management venture between IBNA and Austbrokers. It’s clear that the work ethic of his father, a former senior public servant, has rubbed off on him. “He taught me basically to get the job done, no matter whether it’s menial or highly paid and sophisticated,” he says. “While the rewards may not be there initially, if you work hard it will pay off.” Mr Roberts was just a teenager in the mid-’80s when his father suggested a job in the insurance industry. He began a 16-year stint with Suncorp, initially sorting motor and liability claims and moving up to a range of different roles. He left Suncorp in 2001 to buy into John Bourke Insurance Brokers, and in 2005 he and Mark Fewings took over completely and changed the name to Assurity. It’s a successful company, growing at up to 20% a year and employing 10 staff. He remains heavily involved in the company’s day-to-day operations, and with two sons aged 10 and six and a daughter aged three, he finds it’s a case of “quality time more than quantity time”. “When I’m with the kids I give them my full attention,” he says. “My eldest son has started playing rugby union, and I try very hard to get to his games. It’s the same for the other two. I work at it because they’re very important to me.”

He’s very optimistic about Generation X moving up, saying his generation has unprecedented levels of information technology acumen, and the industry now has the chance to capitalise on it. “Those who can do a lot of that information technology work are always conscious of making things more efficient, and there’s a much greater degree of enthusiasm about it,” he says. “We’ll put our own stamp on things, and we’ll make delivery to our clients faster and easier.” He says he has learned lessons about managing staff from his own bosses, both good and bad. “I’ve been very fortunate to have had some great mentors, but I’ve also had some managers who weren’t so great. Both kinds give you the ability to work out what really makes a good manager.” Like many of his generation, Mr Roberts believes employees deserve fairness and loyalty, and they return it. No one has left Assurity in the past five years. That’s a good thing for customer service, which he says is something that is “at the heart of the industry”. “One good thing about our industry is the level of goodwill,” he says. “If something terrible happens we are there to help get your life back on track.” That’s a message he would like to see taken to the wider community. He’s disappointed that NIBA has delayed its plans for a $1.8 million marketing campaign due to a lack of member support, “but I don’t think NIBA will drop the ball now they have made an initial commitment”. He also wants to see the industry do more to attract the next generation of professionals. “Insurance is a career that gives you the opportunity to work anywhere in the world,” he says. “That’s a great drawcard.” 

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Nicole Mann Executive Manager Broker Distribution (Northern) Vero Insurance Sydney

en years ago the insurance industry was seen as a bit of a boys’ club, but no more. Nicole Mann says all that has changed, and today insurance is an ideal career for women. And the industry will keep changing as the new generation of managers climb the ladder. “I think our generation has the desire and confidence to challenge established mindsets,” she says. “We like stepping up and challenging the status quo.” Born and raised in Sydney, Ms Mann had a brand-new commerce degree with a major in marketing from the University of Wollongong when she took a job with Zurich as an underwriter “because I was desperate to get back to Sydney”. Three years later she moved to Royal & SunAlliance (later to become Vero), where she landed a role as an account manager. Today she manages Vero’s broker business across New South Wales and the ACT, the Northern Territory and Queensland. Ms Mann says she loves her job. “Every couple of years I’ve been presented with a whole new set of challenges as my career has unfolded,” she says. “It’s never boring.” She credits her parents with infusing in her a passion for excellence and achievement. Her father, a former senior manager in BHP, “told me that you stay until the job is done, that you do the best job always and you bring others along on the journey”. Her mother, a nurse, is equally passionate about “working hard and having confidence in your abilities”. Old male-female work stereotypes don’t interest Generation X, she says. “We’re more prepared to get in there together and try new things. We’re much more focused on who can do the job best – the male-female thing isn’t relevant.” Her main focus right now is doing her bit to make Vero’s growth strategy successful. “We’re moving forward so well, we’ve achieved so much and to make Vero the best in the

broker space is what drives me and my team. I’m passionate about being part of the wider team that can make success happen.” Her focus on achievement can get in the way of what others would consider a more balanced life, Ms Mann admits. “I can sometimes find myself concentrating on work to the detriment of my life outside – my family and friends. It’s a constant challenge for me, but I’ve become better at it. If you love your job you sometimes forget about other things.” She believes much of the industry’s future development will rely on its ability to appeal to the attitudes of Generation Y. “How do we make insurance sexy? The next generation is bringing a whole new set of fantastic strengths to insurance, but we will need to develop ways to keep them challenged and interested. “Brokers’ and clients’ needs are changing, too. They expect more from us, and we need to be dynamic and agile enough to meet those needs as they develop, not after.” And she worries about the efficiencies of technology overwhelming the value of personal advice. “We have to find a balance,” she says. “We have to be adaptable enough to make technology provide solutions without losing personal advice, which is so important in this business. And we have to differentiate between the intermediated space and direct space.” One thing Ms Mann is totally confident about is the ability of her generation to carry the industry forward. “Most of the Gen Xs I work with are passionate about what we’re doing and happily challenge the way things have been done before. “We believe in innovative thinking – it’s part and parcel of  who we are.”

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Vivek Bhatia Chief Executive Lumley Insurance Sydney

t’s been a meteoric rise for Vivek Bhatia, who at 36 is the youngest chief executive leading a major Australian insurer. Born and raised in India, he arrived in Sydney in 1999 to work as a strategic consultant with KPMG and PricewaterhouseCoopers before joining QBE Mercantile Mutual in 2003, where he held a number of senior roles for five years. In his last role for QBE, he set up a greenfield joint venture in India. Last year, he moved to Wesfarmers Insurance as Chief Information Officer. He became, in swift succession, Chief Operating Officer and then Deputy Chief Executive of subsidiary company Lumley before being appointed Chief Executive in January. Mr Bhatia’s impact on Lumley has been similarly meteoric, with a rebrand and a revitalisation of the senior management ranks already completed. “Over the next few years we aim to transform Lumley Insurance into a significant insurance player, and it’s my personal ambition to strive to build a culture of success and achievement as an organisation,” he says. As more Baby Boomers begin the transition to retirement, Mr Bhatia wants to ensure their experience isn’t lost and that older workers can pass on their knowledge to the rising generation of managers. But that doesn’t mean Generation X will adhere rigidly to the old ways of doing things. Like many of the 30somethings, he is more than happy to change course if it ensures a better result. “The onus on the new generation of leaders will be to continue to challenge the status quo and aim for continual improvement,” he says.

“There’s a lot of experience among the Baby Boomers that Generation X can learn from, but I think we are also prepared to challenge the sacred cows.” However, some things won’t ever change. He says he learned from his businessman father the need for a strong emphasis on integrity in business dealings, and that’s something he’ll never challenge. As a father of two children aged five and three, Mr Bhatia sees Australia’s long working hours as an issue not only for him for also his employees. “We have to make sure everybody understands that family is an important aspect of our lives,” he says. In an effort to drive home that message, Lumley Insurance has invited employees to bring their children with them to work for half a day during school holidays. He says making time for his children is an important part of a hectic schedule, but it’s essential. “Yes, you are working long hours, but you can work things around so they’re allowed to stay up late half an hour in the evening to read a book with me, and occasionally I have the flexibility to drop my daughter off at school. “There are always opportunities if you are willing to make it a priority.” Finding appropriate staff in the future is a big concern, and Mr Bhatia believes the industry needs to throw open its doors to make the most of the available talent. “If you talk to the person in the street, insurance is all about call centres and claims,” he says. “We all know there are so many other roles that are not visible that we need to talk about. “Not much happens in this world without insurance, and I’m not sure everyone thinks about that. After the world has been engulfed by the global financial crisis, maybe boring old  insurance isn’t looking that bad.”

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Heath Amber Director Millennium Underwriting Agencies Adelaide

ike quite a few insurance professionals making their mark in the industry, Heath Amber is the son of a successful broker and never seriously considered working in any other kind of job. After all, he says, the insurance industry is global and offers a wealth of dynamic opportunities for young professionals. Compare that with the average office job. “When we look for new markets or we’re securing new partners and clients, it’s no longer about the next suburb over – we’re going overseas and into emerging markets, and that presents quite an exciting challenge.” Mr Amber says his entry into the family business – father Allan is one of the founding partners of the MGA Insurance Broking Group – isn’t unique to Generation Xs, but he’s intent on making his own mark. “There are strong foundations and we’re looking to build on them.” His own training has included learning the ropes with QBE Mercantile Mutual and exposure in London working with a broker, negotiating US business into Lloyd’s – experience that has helped in steering Millennium into the world of Lloyd’s. As well as doing a lot of frontline graft, the early days helped him realise he had an affinity for broking and an appreciation of its broad applications. “It’s a real challenge to deal with so many different, dynamic businesses, from manufacturers to corner shops,” he says. “Every business is different and requires unique and specific of advice.” He counts himself as fortunate to have learned from some of the best. “I’m fiercely proud of the hard work and the great ethics of my parents. They had pride in their work, and that filters down.” Today he deals with both Lloyd’s and local security as head of the

firm’s underwriting agency business. He is charged with growing it into a “truly national” firm. “We’re not far off that now, but there are some areas we’ve got to get into.” While he can still bend his dad’s ear for a chat when the need arises, Mr Amber is now a father himself and must balance his work with time for his wife and baby daughter. “At times it’s certainly not balanced, and it’s not easy,” he says. “Technology has provided a medium to manage the work/life mix but I wouldn’t say that’s always a benefit – it can follow you everywhere. “It’s important to get some outside space away from work. I pride myself on prioritising time with my family.” Mr Amber is conscious of the fact that more young managers are pushing through to the top tier, and believes they will face their own set of obstacles. “We’re seeing more regulation coming through. It’s critical to understand that, and we’re going to face clients’ climate change-related issues throughout the rest of our careers.” He nominates the “knowledge gap” as another key concern as the Baby Boomers move closer to retirement. “The generation before me has done so much over a long period of time. It’s important to have these people around to bring a level head and some stability and experience to the office.” Generation Y recruits may confuse and even infuriate some managers, but Mr Amber isn’t one of them. He’s impressed with their enthusiasm and says they already exhibit high standards of professionalism and education. It’s something that Gen Xs can relate to. “When you go to industry conventions you see the passion and energy within this industry,” he says. “People are doing a lot in a small amount of time. “Insurance isn’t a slow-burning career.  There’s enormous potential.”

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…and then there’s Generation Y They’re razor-sharp, tech-savvy, multi-skilling job-hoppers, who are also moral and caring By Jeff Morse

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here’s only a brief silence on the phone line. Glenn Arnold has thought this through. “I think the reality is that Gen Y employees are going to move,” he says. “I don’t think we’re necessarily going to retain them long term.” He’s talking about people born between the late 1970s and late 1990s, and as head of specialist recruitment firm Insurance People Australia, Mr Arnold knows the cold, hard reality better than most. Baby Boomers (people born between 1946 and 1964) are retiring from the Australian workforce in larger numbers than the sharp young folk from Gen Y are coming on board to replace them. The oft-overlooked Gen Xs in the middle continue to put in the hard yards, but the focus is firmly on their junior counterparts, and how to attract and retain people from this ominously small and picky pool. “Job-hopper” is among the less flattering stereotypes ascribed to Gen Y by the older generations. For insurance, a reputedly slow-moving industry into which people traditionally “just fall”, this presents particular challenges in terms of attracting tomorrow’s leaders. Through public education, groups such the Australian and New Zealand Institute of Insurance and Finance are putting school-age youths straight about insurance and the opportunities it offers – but it’s a tough sell compared with the seemingly more dynamic worlds of banking or accountancy, for example. And, as Mr Arnold points out, attracting Gen Y is one thing and keeping them is another. A Hays Recruitment survey last year

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found Gen Ys now entering the workforce demand loyalty from employers to whom they have proven their capability. They also plan to stay for between two and four years, compared with six years for the previous generations. The Hays study found tech-savvy Gen Ys are optimistic and confident – and that they want responsibility and challenges right now, thanks. They’ll solve problems creatively but they expect clear rewards and recognition for their efforts. Flexibility from their bosses is expected and work/life balance is a given, not a benefit. They want their employers to provide ongoing learning and development, good career progression, mentoring and strong leadership. A 2007 international study by KPMG Australia partner Bernard Salt examined Generation Y in the funds management industry and found no discernible improvement in the rate of churn (turnover) across businesses that had, and had not, implemented special retention strategies. “Whatever the funds management industry thinks it’s doing to recruit and retain Gen Y staff, it isn’t working by the measure of staff turnover,” was Mr Salt’s conclusion. Mr Arnold’s advice to employers is to face facts and deal with them. He says the global financial crisis slowed Gen Y job-hopping to some extent, but this will pass. “We can try and mould them into our thinking and our slower way of working or we can speed up with our strategies and get our act together and say ‘Right, you’re only here for two years. How do I capitalise on you quickly?’”


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350,000

300,000

250,000

200,000

150,000

100,000

Born before 1946 3.02 million 14% of population % of the workforce • Today: 25% • 2020: 0%

50,000

Born 1946-1964 5.26 million 24% of population % of the workforce • Today: 36% • 2020: 16%

Born 1980-1994 4.62 million 21% of population % of the workforce • Today: 18% • 2020: 36%

Born 1964-1979 4.62 million 21% of population % of the workforce • Today: 44% • 2020: 36%

Born 1995-2009 4.18 million 19% of population % of the workforce • Today: 0% • 2020: 12%

0 1930

1946

1964

1979

1994

2010

Source: McCrindle Research

Andy Parton, Australia Insurance Partner for consulting firm Accenture, says the “future leaders” segment of the industry is seeing a trend toward more horizontal movement of employees and cross-skilling – even in specialist areas – through job rotation or secondments. Computer desktop platforms offer some useful features to improve internal communication and liven up an otherwise uninspiring technological environment. But the industry’s slow migration from old computer systems is a definite turn-off for the youngsters. “Most of the insurers today are running their core business off old green screen mainframe terminals where there’s no mouse,” he told Insurance News. “It’s tabbing from one field to another, entering a “code A” to do this and “code B” to do that, and actually having a lot of the processes paper-based.” Although security issues need to be overcome, web-based systems in areas such as claims could facilitate working from home, an attractive point of difference for employers. Mr Parton says that apart from minimising time spent on things that don’t add value, processes for performance management, compensation and reward need to be linked to the outcomes sought by the business. As Mr Arnold sees it, the days of new recruits spending years in graduate programs learning bits and pieces are long gone. The way ahead looks like more management worries for Gen X concered about how to harness the energy of Gen Y – for as long as they stay around – while retirement is being awaited by Baby Boomers eager to escape  from the whole mess.

10 things about Generation X managers:

10 things about Generation Y employees:

1.

They’re collaborators, because they believe working in a team gets faster results.

1.

They’re upbeat, confident and positive thinkers.

2. 2.

Hierarchies don’t matter – they want to be treated, and treat others, as equals.

They’re not particularly influenced by authority and role models.

3. 3.

They genuinely care – Gen X managers want to be the best people-managers they can be.

Their peer group is very important – decisions are often peer-influenced – and they enjoy working in teams.

4. 4.

They’re likely to be more skilled in management because they studied it at university.

They’re totally tech-savvy – the internet is a vital tool and most communication is via SMS or social network.

5. 5.

Technology is a tool to be exploited – they’re tech-savvy.

Salary ranks sixth in importance after training, management style, work flexibility, staff activities and nonfinancial rewards.

6.

They say what they think, not what their boss might prefer to hear.

6.

Entrepreneurial and skilled multitaskers, they’re not compartmentalised in their approach to work.

7.

They’re not particularly concerned with job permanence.

7.

Whatever it takes – they’re willing to go around established procedures, take some risks and innovate to make things happen.

8.

They want a work/life balance – family and friends are very important.

8.

Graphics-oriented, they see text as supporting visual material.

9.

When the job ceases to be fulfilling, they’ll quit.

9.

They are impatient if processes are slow.

10. They’re more loyal to their profession than the company they work for.

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10. They’re socially aware, keen volunteers and will speak up against racism, sexism and homophobia.

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Keeping on trucking Once it had four owners, but NTI is happy the two it has left have agreed to work together By Sarah Schwager

Working together: NTI chief Tony Clark flanked by Vero’s Anthony Day (left) and CGU’s Duncan West

he dispute over the ownership of truck insurance specialist National Transport Insurance (NTI) has finally ended, with CGU and Vero agreeing to continue their partnership in the joint venture. It’s welcome news for NTI, ownership of which has been handed around between a swag of local insurance companies for more than 20 years. And it has brought immediate benefits to NTI, with Vero deciding to hand over responsibility for its heavy vehicle insurance to the joint venture. Any Vero client company with more then 50% heavy vehicles in their fleets will be affected by the decision. NTI started out in 1971 as a brokerage, R&G Insurance Consultants, which worked closely with Lloyd’s brokers. In 1986 it gained a licence as an insurer and NTI was formed with major shareholders AMP, Sun Alliance, General Accident – which became part of NZI – and QBE owning 25% each. It had different shareholdings through the 1990s before becoming a joint venture between Promina’s Vero and IAG’s commercial insurer CGU in 2003. When Suncorp took control of Vero after the acquisition of Promina in 2007, the arrangement came under legal scrutiny, with IAG arguing the change of ownership gave it the right to take full control of NTI. Suncorp disagreed, and so began a saga of court action that many outside the company thought might stall its development. That didn’t happen, and NTI Chief Executive Tony Clark told Insurance News the two companies’ representatives on the board never allowed the legal dispute to get in the way of the business. “We still had the support of both shareholders over that period of time, and if nothing else it’s focused us on the business and making sure through the softer market that we kept our focus on returns to shareholders,” he said.

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“The boards of both companies have done a very good job in keeping any issues in relation to the ownership outside the running of the business.” Mr Clark says traditionally the specialist market area of heavy motor has been difficult for insurers, and certainly

focus on delivering excellent service to brokers and innovative products for brokers and their policyholders,” he says. Certainly it means NTI will retain its place in the market, rather than possibly becoming little more than a division within a division of IAG.

through the 1970s and 1980s it was regarded as unprofitable. But he says CGU and Vero have always seen the benefit of having a specialist insurer in the heavy motor area, particularly one that has been able to deliver above average returns over the past decade. He’s very relaxed with NTI having two dominant owners, saying the company has “huge resources” available to it through the dual shareholding. “While having one owner might have had some benefits, the support of two of the three largest insurers in the country allows us the resources to really

Mr Clark says one of the best things about keeping the joint venture is that it ensures the independence of the people who have been part of the business from when it started. “They feel a real ownership of this business, and that’s a very good thing.” He says the company is now working to bringing across the Vero business as seamlessly as possible, then it’s back to the plans NTI has in place for the next five years. “We’re doing all we can to make sure we deliver on everyone’s expectations,” he  said.

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STEADFAST’S Buy sell and exchange The Steadfast Hub will extend the cluster group’s reach into the data exchange business By Jamin Robertson

Steadfast at a glance Shareholders:

282

Offices:

402

Employees and authorised representatives: 4600 Annual premium:

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$2.4 billion

hese days Steadfast means a lot more to its members than just a bodyguard against insurers. Formed in 1996 to aggregate gross written premium in order to negotiate better terms, conditions and pay for its members, it’s now close to shaking up the market with a new electronic exchange facility. Five years in the making and still undergoing final refinements, the Steadfast Hub is intended to deliver a quick and cost-effective way for Steadfast members to quote and bind business. Initial insurance lines will comprise industrial special risk, business pack, public and product liability, commercial motor and marine insurance. Steadfast Group Executive Chairman Robert Kelly expects the system will be up and running by March, but won’t be drawn on talk of growth targets or profitability. “We are rolling it out at the moment, but its true potential is likely to be known in the fourth quarter of next year,” he says. “That’s when we should reach some sort of milestone in the form of sales through our virtual underwriter.” The system is built to adhere to common industry data standards developed under the guidance of United States-based Association for Co-Operative Operations Research

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and Development (ACORD). These standards are expected to lift information technology automation and boost efficiency in the commercial insurance market. The project is a clear shot across the bows to the market’s technological leader, Sunrise Exchange, which has hitherto faced little competition. It rolls out 10,000 quotes per day for around $1.7 billion in annual gross written premium. “We needed to make sure that everything we did was the most economic way of doing it,” Mr Kelly told Insurance News. “Sunrise Exchange is a thirdparty provider that has to make a margin for the operation of its system, while the Steadfast Hub and virtual underwriter are not designed to make a margin. That third-party cost goes out the window.” The prospect of losing the business of Steadfast Group brokers doesn’t seem to be keeping Ebix Australia Managing Director Leon d’Apice awake at night. He accepts competition as a fact of life in the lucrative Australian online quoting market. Mr D’Apice told delegates at the recent National Insurance Brokers Association convention that he envisages a future of “more competition, more players, more industry participation, electronic products, distribution and diversity”. October/November 2009

Ebix shows few signs of complacency, however, announcing it will roll out its new iClose proposition in response to some legacy shortcomings of the Sunrise system [see story page 60]. The iClose architecture aims to “plug the gap” to deliver better messaging, portal delivery, claims, accounting, referral and documentation solutions. Mr Kelly says Steadfast isn’t overtly concerned with the battle for brokers’ and insurers’ hearts and minds, despite the fact the cluster group scored something of a coup earlier this year when it succeeded in attracting across former Sunrise Exchange executive Orlando Trujillo-Ramirez as General Manager of the Steadfast Hub. We appreciate the service Sunrise Exchange has provided the industry over the years, and this is simply a choice model,” Mr Kelly says. “The long-term intention is that most Steadfast business will be done through our virtual underwriter and not Sunrise Exchange, but we don’t intend that they are mutually exclusive. “It will depend on what serves the broking house best.” Besides that, Mr Kelly believes there’s room in the market for more than one data transfer player. “It will show the local market is not completely tied to one form of electronic data transfer and others


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You can call Peter Peirano “typical” if you like, although most people agree he’d be a standout anywhere. In many ways the North Queensland broker is typical of a Steadfast Group member, both for the reasons he first joined and the way he supports it now. His Rockhampton firm – the fact that it’s called Piranha Insurance Brokers gives you some idea of his ironclad sense of humour – was set up by Mr Peirano and his wife Heather in 1978, and joined Steadfast nearly 20 years later. Mr Peirano loves everything about selling risk insurance. Proving his diversity is the fact that he’s a lifetime member of the International Life Writers Association – the famous Million Dollar Round Table.

are available in the market.” The Steadfast Hub has had its ups and downs during development, but it received an important boost recently when QBE signed on despite some initial reservations concerning other suppliers. Mr Kelly admits the move by QBE was an important development in the hub program. “QBE are a strong and valued partner of our group.” Not that Steadfast is going to stand still once its hub is up and running. Mr Kelly says other new developments in the pipeline include a training program on policy selection and risk analysis, followed by others on back office accounting and claims systems. And there’s plenty more to come. The group has been discussing for several years the possibility of floating the company, and Mr Kelly concedes a public listing for Steadfast could be viewed as a logical step. “That’s something we certainly would give a lot of consideration to,” he told Insurance News. “We’re waiting to see what we can achieve with the hub. We wouldn’t discount listing, but it’s not a number one priority. “We’d consider putting that to the members and if they liked it, we’d do it. If they didn’t, we wouldn’t be worried. “We only move for the shareholders and act if they want us to act.”

Like many brokers living in smaller communities, Mr Peirano is also a believer in putting back what he has gained. Apart from involvement in the regional Rotary Club and the Rockhampton Amateur Race Club, he also manages three horse-racing syndicates.

Steadfast Chairman Robert Kelly: seeking the most economic way

The Strength Steadfast describes itself as “The Strength: a national resource of knowledge, skills, products and services”. Brokers evidently like what they see; in 13 years, the Steadfast Group has grown to become the largest insurance broker cluster in Australia. It has more than 400 offices across Australia that are home to 282 individual broker shareholders who write more than $2.4 billion in annual premium. Steadfast members employ close to 4600 people, either as staff or authorised representatives. To become a Steadfast shareholder, members must meet a range of requirements including a minimum $300,000 in broker fees and commissions. Once members step through the door, they can use the group’s central group compliance and other procedures, group insurances, helplines, wordings, forms, training and education and staff benefits, as well as a $50 million professional indemnity cover. Membership also hands brokers business and personal savings through group bulk buying initiatives, accommodation discounts, car rental and purchase deals, competitive flights, bank services, office supplies and gym memberships. In return for group membership, Steadfast takes a management and administration fee, distributing 80% of the income back to shareholders in the form of cash and services.

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The Peirano family’s involvement in motor racing is legendary. It grew from an interest in go-karting to what Mr Peirano happily refers to as “our obsession” – competitive drag car racing. And now he’s quietly educating younger people about insurance and the industry by presenting at school workshops. “I love the broking game and I’m proud of it,” he says. “What Steadfast did for us was provide protection from situations where you could be bullied. “Some insurers would say that unless you wrote a certain amount of premium you couldn’t deal with them. You can’t do that with a member of Steadfast. It’s a wonderful organisation and I bless the day I joined it.” Mr Peirano says Steadfast is a godsend for regional brokers. “We don’t have the contacts of a big city broker and when we go to the group for help, three or four brokers will come back to you in the one day.” He says Steadfast’s training initiatives also help his firm punch above its weight. “I take advantage of the online training such as a podcast Robert Kelly did on things that can go wrong with professional indemnity claims,” he said. “In this game, you learn from the claims that go bad.” That kind of support has helped his business grow to the point where today Piranha Insurance Brokers employs 11 staff and collects about $5 million in annual gross written premium.

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Reuters

The Boy is back in town


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El Niño may increase the risk of bushfires, but it also means less chance of floods, hailstorms and cyclones

Reuters

By Sarah Schwager

26/10/09

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nsurers keep a very close watch on climate variations, and they’d be forgiven for breathing a quiet sigh of relief at scientists’ news that El Niño conditions are forming across the Pacific Basin. El Niño – literally “the boy” in Spanish – refers to sea temperatures in the central to eastern Pacific which become significantly warmer than normal, leading to lower rainfall and warmer conditions across eastern Australia. Climate experts measuring the Southern Oscillation – variations in air pressure between Darwin in northwestern Australia and Tahiti in the eastern Pacific – say the prolonged period of La Niña (“the girl”) weather is coming to an end. While drought and bushfire are usually synonymous with an El Nino-Southern Oscillation (ENSO) event, the weather pattern also means a late winter, spring and summer with less hail, storm, cyclone and flood damage that’s typical of a La Niña event. And while El Nino’s bushfires, drought and heatwaves also aren’t something insurers relish, such phenomena usually have less impact on insurance claims. Over the past 30 years, insured losses in El Niño periods have averaged $122 million while in La Niña periods losses have averaged $421 million. While heatwaves kill about the same number of people as all other natural disasters in Australia put together, the victims are generally elderly and don’t hold substantial life insurance policies. Apart from the Victorian bushfires on February 7, which cost insurers $1.1 billion, bushfires barely register as a proportion of insured losses from major natural catastrophes (those that have a potential for the insured loss to exceed $10 million)

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El Niño was a title originally used by Peruvian fishermen to describe the occasional appearance around Christmas of a warm ocean current off the South American coast. Hence the religious connection with the birth of the “boy-child”. Scientists have adopted the title to refer to the extensive warming of the central and eastern Pacific Ocean which leads to a major shift in weather patterns across the Pacific. El Niño and La Niña are defined by sustained differences in Pacific Ocean surface temperatures when compared with the average value. The accepted definition is a warming or cooling of at least 0.5 degrees. El Niño events begin when trade winds falter for many months. A series of Kelvin waves – relatively warm subsurface waves of water a few centimetres high and hundreds of kilometres wide – cross the Pacific along the equator and create a pool of warm water near South America, where ocean temperatures are normally cold due to upwelling. The Pacific Ocean is a heat reservoir that drives global wind patterns, and the resulting change in its temperature alters weather on a global scale. Rainfall shifts from the western Pacific toward the Americas, while eastern and northern Australia, Indonesia and India become drier.



El Niño also affects weather in the Atlantic, with fewer hurricanes and  drier, warmer weather dominant.

when compared with storms and floods. According to the Insurance Council of Australia (ICA), since 1990 there have been 103 major storm-related events costing insurers $14.3 billion and 11 major bushfires costing $2.06 billion. This figure includes this year’s Victorian disaster. “Many insured losses, particularly for motor vehicles, are related to wet weather,” says Emeritus Professor of Sydney’s Macquarie University Russell Blong. “While they might not be catastrophe losses they are losses on the bottom line for insurers.” Professor Blong, who works for Aon Benfield, told Insurance News he’s unsure whether El Niño is a good or a bad thing from an insurance point of view. “My gut feeling would be that October/November 2009

total insurance losses would be lower in El Niño periods than La Niña periods,” he says. Credit Suisse Analyst Arjan van Veen is much clearer in his predictions. He told Insurance News El Niño events are “generally good for insurers”, while wetter conditions are less favourable because storms are more frequent and cause more damage in wet periods than bushfires do in dry periods. “Therefore, should an El Niño period develop, we see this as positive for insurers and a potential lead to a benign period of weather-related natural catastrophes,” Mr van Veen says. This doesn’t change the fact that the predictions for this coming bushfire season are forbidding, with the promise of even hotter and fiercer blazes. A 45


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Australian weather-related catastrophes (insured losses – $million^) 1987-2009

Sources: ICA, BOM, Credit Suisse estimates, ^equivalent current cost

leaked report tabled by Victoria’s Department of Sustainability and Environment and the Country Fire Authority warns that the potential for the next season to bring an even greater loss of life and property than the February 7 bushfires is “an increasing likelihood”. Part of the problem in estimating potential insurance losses from a bushfire is that the same industry models don’t exist as they do for tropical cyclones, earthquake, hailstorms and even flood. Because regulations require insurers to base their solvency on a one-in-250 year loss, there’s a lot of emphasis on modelling for the one-in-250 year flood, storm or cyclone. But the same modelling doesn’t exist for bushfires. So what would a one-in-250 year bushfire look like? Professor Blong says it wouldn’t be one event but a summer-long series of disasters. “I don’t think it looks like the sorts of bushfires we’ve had,” he said. “It’s likely to be a season rather than an individual fire,

with the whole of the east coast in drought, fires in early spring in southeast Queensland, a month later significant fires around Sydney, a month later fires in Melbourne, and then in February fires in Tasmania. “That’s a very different picture because it means that an insurer’s retentions will be hit several times rather than once, as happens with an earthquake or tropical cyclone.” Fire is also a different beast in that there is more of a man-made component, with a significant proportion of fires lit deliberately, meaning it is much harder to measure and has the potential to be much more significant. While humans can modify losses in other natural disasters, such as releasing water from a dam at a particular time, or leaving an insured car out on the road during a hailstorm, the proportion of loss is much smaller. So just what, and when, will the next big natural catastrophe be? It seems in Australia it is

much too difficult to predict. While most countries only have to be prepared for a couple of major perils, Australia has a much longer list of major threats. For example, the top six insured losses involve six different perils. They are, in order of cost, the 1989 Newcastle earthquake, Cyclone Tracy in 1974, the 1999 Sydney hailstorms, 1974 Brisbane floods, and 2007 Newcastle storms. The 1983 Ash Wednesday bushfires are not far behind. “I find it very difficult to say where we’re headed and even if we weren’t concerned about climate change, I’d still find it hard to say,” Professor Blong says. Insurers such as Suncorp and IAG, whose profits have been hit hard by natural catastrophes in the past two reporting seasons, may rest easy at the thought of a break from flood and storm losses. But odds are they’re already looking to see what Mother Nature could bring next now that El Niño is back in the  equation.

www.insuranceNEWS.com.au/links

Looking for an insurance industry website? Link directly from

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This information has been prepared by Macquarie Bank Limited ABN 46 008 583 542 and is provided for general information purposes only. It does not take into account your investment objectives, financial or personal situation and any other particular needs. You should consider the appropriateness of the information having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. © 0509 Macquarie Bank Limited 46 008 583 542


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You want insurance with that? Personal lines products are becoming commodities. No one’s sure yet who will benefit most By Sarah Schwager

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he launch of domestic insurance products by two of Australia’s best-known brands, Coles and Australia Post, marks another point in the tangled recent life of personal lines products in Australia. The two giants have analysts and consumer groups scratching their heads as to exactly how far they might be tempted to take this – and what it means for the established insurers’ products. Over-the-counter sales of insurance products have been tried before in Australia, and they’re commonplace in other developed markets. Coles is taking a very conservative approach to the sales strategy, launching a trial though its Tasmanian supermarkets. It’s not talking too much about its plan to sell house and car insurance through its Wesfarmers stablemate Wesfarmers Insurance. Australia Post has set up a joint venture with Auto & General, which already underwrites insurance products sold through the British Post Office. The choice of the South African-owned underwriter for Australia Post hasn’t sat particularly well with some locally owned insurers, who would have welcomed the chance to get into the business themselves. Not that the sales job being done over the counter will be much at all. At this stage the only exchange taking place will be a brochure which the customer can take home and examine. If they want, they can contact the underwriter via phone or email. There’s no advice component in the service, and no money changing hands across the counter. What Coles and Australia Post are trading on is their massive exposure in the community. Coles has some 700 stores and handles more than 11 million customer transactions each week. Australia Post is even better placed. Its 4453 outlets make the Federal Government-owned operation Australia’s largest retail network, with an enormous reserve of community trust. No doubt other retail chains are holding their breath to see if the commoditisation of insurance takes off as it has overseas. Christopher Zinn, the spokesman for leading consumer group Choice, told Insurance News that

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until his organisation receives any complaints they will be looking to overseas examples to understand what lies ahead. “Certainly on the face of it these new entrants seem to be offering better deals, but as we’ve always said, insurance is not always just a question of what is the cheapest,” he said. “In principle we always welcome more competition, so we’ll be very interested to see how this plays out, how consumers switch from the existing providers to the new ones and what their experiences are in terms of customer service and other issues like cost.” Even though the underwriters of the products are respected insurers – Wesfarmers Insurance has substantial internal experience to call on and Auto & General already operates successful direct insurer Budget Direct – the quality of the policies won’t really be known until the first claims roll in. Because Coles and Australia Post are only lending out their brands rather than providing overthe-counter advice, the possible damage to their cherished reputations of any mishandled claims will be something they’ll be acutely aware of. As anyone who works in insurance knows, every product really is different. “This is part of the challenge of insurance – products do actually vary,” Mr Zinn says. “There’s always this issue of trying to make product disclosure statements in plainer English, but it’s a very difficult balancing act.” The ongoing saga of flood cover and constant consumer cries for greater policy transparency – an often-misused term in a business where insurers work hard to differentiate their products from their competitors’ – are a problem that the retailers presumably understand. Will customers not read their policies and expect their Coles and Australia Post-branded policies to cover them for every eventuality, including flood? Financial services researcher Cannex has used its latest home and contents star ratings, released in late September, to warn of underinsurance, the need to insure against catastrophes, and the discrepancies over the definition of flood cover and the fact that it


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is still a major exclusion in most home policies. And the Insurance Council of Australia estimates more than 40% of households fail to correctly assess the value of their home and contents. “It’s easy to see why,” Cannex said. “Unlike those in other countries, Australian building insurance policies place the burden of estimating rebuilding costs on the consumer.” Many of these issues can be overcome by consulting an insurance broker. But the increasing pace of commoditisation in personal lines has removed such products from the realm of most brokers. In the United Kingdom, where supermarket giants Tesco and Sainsbury’s have sold insurance for years – through their own insurance operations – the success of direct sales has significantly decreased brokers’ share of the market. At the start of the 1980s, UK brokers were responsible for placing 80% of household insurance premiums. By 2000, their share of the market had decreased to 45%. Since then, market share hasn’t moved much, making it clear customers’ reliance on the “high street broker” is not about to disappear. It’s far too early to say whether the retail products launched by Coles and Australia Post, and other new entrants like Virgin Car insurance and even Aussie Home Loans’ new “Aussie Insurance”, will tip the market away from the large direct insurers like NRMA Insurance, RACV Insurance and AAMI. Not everyone is happy about the rapid diversity in the personal lines sector. QBE Australia Chief Executive Terry Ibbotson is one who sees problems in newcomers using unsustainably low premiums to gain market share. He says there’s a significant downside in consumers taking advantage of low premiums. “While there may be a short-term benefit with pricing [for consumers] the market will have to correct – and when it does, my fear is consumers could be in for significant price increases,” he told the Australian Financial Review. Social analyst David Chalke, from Australia Scan, says right now all that needs to be seen is whether people actually buy the retailers’ products.

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He told Insurance News while the sale of insurance seems a natural transition for Australia Post, which already handles some very important transactions, he doesn’t imagine people will be so confident about buying insurance from a supermarket. “Coles is a grocer, so they’re very good at selling groceries – but do we trust them on insurance? No.” he said. “Why? In a way it almost goes counter to how people are trying to sort out their lives at the moment. “What they’re looking for is a combination of expertise and price assurance so they won’t get ripped off too much. Coles insurance might be cheap, but is it any good?” Mr Chalke says while insurance works for Tesco and Sainsbury’s, the companies have very different heritages and origins and have spent nearly 40 years building up their brands – Christopher Zinn, to be something more than just groceries from a supermarket. “Coles has not done that,” he says. “Just because Tesco can do it doesn’t mean Coles can.” As personal lines products devolve more and more into simple consumer products, transparency and claims performance will become the hot issues. Meanwhile, don’t expect the major players who have spent many years building market share to just sit back. Most are already getting into the niche game themselves, setting up car insurers like Buzz (NRMA Insurance) and Youi, Bingle, Just Car Insurance and Shannons (Suncorp). Chances are we’ll see the personal lines market continue to be led more by niche brands, with established players like Allianz and QBE relying on their established reputations to maintain their hold. Innovative products and sharp marketing strategies may well shape personal lines over the next few years, but reputation – whether it’s a large insurer or a big retailer hiring out its brand – will still matter  most when the claim comes to be paid.

Coming along for the ride: British tycoon Richard Branson at the launch of his new Virgin car insurance product in Sydney

“Insurance is not always just a question of what is the cheapest”

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Choice

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Regulatory Roulette Can insurance intermediaries keep dodging the bullets of reinvigorated regulators? By Jeff Morse

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its members to move to a fee-based system by 2012 to dispel accusations of conflict of interest, while the rival Association of Financial Advisers argues that banning commissions takes away a consumer’s right to choose. ASIC has told the parliamentary inquiry it plans to identify the impacts of remuneration structures on conflicts of interest and on the quality of advice. Insurance brokers well remember when their commissions last went under the regulatory magnifying glass five years ago. That followed a huge public outcry in the United States involving mega-broker Marsh. Crusading New York Attorney-General Eliot Spitzer accused some brokers of steering business toward preferred insurers that paid them higher commissions. They also solicited phoney quotes to make a preferred insurer’s bid looked more competitive. The Australian Prudential Regulation Authority promised to keep watching developments in the US as many states banned so-called contingent commissions and broking companies abandoned them. insuranceNEWS

October/November 2009

Some global broking leaders, like Willis Group Chairman and Chief Executive Joe Plumeri, says brokers can’t be true professionals until they drop commissions and move to a “fee for service” basis. NIBA’s response to the commission versus fees issue was comprehensive: its Insurance Brokers Code of Practice outlines obligations members must follow to avoid conflicts of interest. But whatever course the various intermediary groups take, regulators are exposed to the views of lobby groups that are, for the most part, unequivocal: commissions must go. At high-profile consumer group Choice, Senior Policy Officer Elissa Freeman says if people are getting advice about insurance as part of a holistic approach to financial planning, they should pay for it in a way that can’t corrupt or bias the advice in any way. “That is, in our view, remunerating the adviser through a fixed dollar fee for fixed service,” Ms Freeman told Insurance News. However, the regulators have a plethora of issues to deal with. Notable in the field are new requirements for reporting all contracts with insurers (APRA-authorised and otherwise) and increased dispute compensation caps. Particularly sobering for the insurance industry this year are recommendations from the Senate Economics Committee inquiry into the Trade Practices Amendment (Australian Consumer Law) Bill that highlight the fact that risk insurance isn’t seen as exceptional when it comes to consumer protection. Despite the proposed insurance exemption in the Bill, the committee says it is not convinced insurance contracts are beyond the scope of both industry-specific legislation and general consumer protection laws. A revision of the Insurance Contracts Act 1984 is expected as a result. Mr Vrisakis says this is posing some real challenges for everyone in insurance “in terms of when it might be implemented and the potential compliance costs”. The balance between consumer protection and commercial viability will, no doubt, keep the insurance industry on its toes for  years to come. SUMMIT2072

f you’re wondering about the next set of regulatory challenges the Federal Government might be planning for the risk insurance industry and its clients, you’re not alone. Freehills Sydney partner Michael Vrisakis says everyone involved is “a little bit perplexed”. No wonder. Creeping regulatory reform – and the costly red tape that embodies it – was on the upswing even before the global financial crisis landed last year and gave regulators a whole new impetus. The crisis has served to increase scrutiny on financial services and underline the fact that Australian general insurance, in particular, is interconnected with other sectors and other countries. Mr Vrisakis keeps a weather eye out for looming red tape, and he sees some on the horizon. Commissions, for example. He says it “wouldn’t be a quantum leap” if the Australian Securities and Investments Commission’s (ASIC) current examination of commissions in the managed investment industry spilled over into insurance broking. While no such moves in the direction of general insurance intermediaries have been made to this point, it’s still early days. The joint parliamentary inquiry into financial services and products ostensibly has everything to do with adviser licensing and conflicts of interest surrounding investments in the wake of the spectacular Storm Financial and Opes Prime corporate collapses. Could insurance brokers find themselves caught up in any recommended clampdown on financial advisers’ commissions? The National Insurance Brokers Association (NIBA) is making sure its members are kept out of the line of fire. In a submission to the inquiry, it has argued that any flow-on change in licensing requirements for brokers wouldn’t be warranted. The brokers say they’re doing the right thing in terms of handling potential conflicts of interest arising from the commissions that form the bulk of their income. Remuneration has been a hot topic in other submissions and the ensuing public debate. And it has led to some bitter splits in the financial advice industry. The Financial Planning Association wants


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It’s what we cover and they don’t that sets us apart

Enquiries welcome

For prestige home insurance, the bar has been lifted.

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styleNEWS

By Sarah Schwager he challenge for the architect was simple enough: build a new headquarters for CGU that takes into account advances in work dynamics and environmental sustainability, and brings together all Melbourne-based employees. And then there was the cruncher: the old headquarters in Melbourne’s LaTrobe Street had more than 100 offices, and on most floors they monopolised the view and the natural light. The new building was to be fitted out with an open-plan format where everyone could share the views and the natural light. No exceptions. It could have been a recipe for mutiny, but Don Fairweather, who managed the Melbourne relocation project for CGU, says staff “don’t just say they like the building, they say they love it”. One step inside the insurer’s new headquarters in the city’s CBD and the reasons for such positive reactions quickly become obvious. The building contains a retail centre, intelligent lifts, a parents’ room (complete with workstation, cot, TV and kitchen), “quiet” rooms, and a view from every desk. And while the CGU crew wasn’t initially happy at first with the open-plan layout – even Chief Executive Duncan West has a workstation – the attitude has changed since moving in. Like anyone else in the building, Mr West uses one of the many meeting rooms for private discussions. For casual conversations or a change of scene, there are plenty of open areas to take a laptop and enjoy a cup of coffee. Previously spread across four city buildings, the 1800 Melbourne-based CGU staff now occupy the CBW (Corner BourkeWilliam) 181 William Street building. Designed by Bates Smart and SJB Architects, the building, along with the adjacent 550 Bourke Street, has a five-star Green Star rating. Mr Fairweather says building owners now recognise they have to achieve this level if they want to attract long-term tenants. One reputable Australian analysis has found that Green Star-rated buildings use 85% less energy than unrated buildings, and use 60% less potable water. They also send 69% less waste to landfill. Bosses are also impressed with improvements in employee productivity in green buildings, and CGU studies since moving into the building confirm this, with lower levels of staff absenteeism and significantly fewer incidents of minor ailments like sore throats,

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John Gollings

Love that office


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Images this page Stuart Morley

styleNEWS

eyestrain, headaches, colds and flu. Occupational health and safety incidents have also reduced, while a before and after speed and accuracy typing test revealed a 10% increase in accuracy and 4% in speed. Mr Fairweather attributes this to better air supply, with plants to take the toxins out of the air and an air-conditioning system that takes in 15% fresh air with each cycle. He says the great advantage of moving into a totally new building is the ability to influence the design of the building itself, ensuring the best possible fit-out to suit the company’s needs. “It makes them more attractive – to retain staff and to attract new staff – because the world is recognising the need to be environmentally minded and to be a good corporate citizen.” All amenities areas such as stairs, lifts, toilets and meeting rooms are in the centre of the building, allowing workstation placement around the outside where natural light and views can be shared by all. CGU’s long history in Australia is commemorated with meeting rooms named after antecedent companies like NZI and

Sharing the view: these pictures were taken a few days before CGU staff moved in

Commercial Union, as well as former chief executives. Floors are named after Victorian regions. The building also relates well to the area around it, replicating Melbourne’s laneway system, with Goldsborough Lane incorporated in the design. Ground floor shops join the two buildings under a canopy. “The buildings are worker-friendly, with ample car parking, a lot of provision for cyclists and cycle storage facilities in the basement,” SJB architect Alan Ball told Insurance News. “The idea of the car park is that people come up and exit into the public retail space, then disseminate into the two buildings. “The large lobbies also allow movement through, while the ‘destination control’ lifts have a card that people can swipe and punch in where they want to go and it tells them where to go and what lift to go in.” CGU staff also enjoy such features as energy-efficient appliances and air-conditioning, which cut relevant costs by between 40% and 50%. All rubbish is recycled, and CGU has consolidated its printers, photocopiers and faxes insuranceNEWS

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into multifunction devices which have their own separate exhaust system to suck gases out of the building. Even the floors are environmentally friendly, being made from recycled car tyres. The move has also put parent company IAG at the forefront of the insurance industry as the first insurer to have staff in a Green Star-rated building. Its Adelaide building has a four star fit-out while the Melbourne office already has five stars. In New Zealand, the new NZI headquarters in Auckland housing 700 staff also has green credentials. It features lifts that generate electricity while descending, and a large rooftop garden. Rainwater draining from the garden is filtered and used as grey water for toilets. When you come right down to it, IAG’s investment in green buildings also makes solid financial sense “If the working environment is more pleasant and healthier it means more productivity for the company,” Mr Fairweather says. “And if you can increase productivity, that’s worth even more than the savings in  water and electricity.” 53


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lawNEWS

Looking after the workers In some cases, employees deserve protection from third parties By Nikki Scoble, a senior associate at DLA Phillips Fox in Sydney n 2000 the High Court of Australia held that while an occupier owes a duty of care to people who are lawfully on its premises, that duty does not extend to taking reasonable care to protect them from the criminal conduct of third parties. The court also recognised there may be relationships where such a duty of care was owed. Victorian and New South Wales courts have recently looked at some of those relationships, and it’s clear from these decisions that exceptions to the principle established by the High Court do apply to occupiers and employers. Media reports suggest criminal and antisocial behaviour on licensed premises involving intoxicated patrons has increased. Employers/occupiers can owe a duty to take reasonable care to protect people from the criminal conduct of third parties, especially where there is a high degree of foreseeability of harm to employees and patrons. They also need to consider the following: • Whether an employee’s duties place them in a position of greater exposure to third-party criminal activities; • The nature of threats made to employees and whether those threats could be followed through; • The nature of the establishment or the function being held; • The foreseeability of injury from conduct on the premises, plus the capacity to control the conduct; and • Whether there is actual or constructive knowledge of the dangerous propensities of a particular person. Sue Ogden was the manager of Bells Hotel in South Melbourne. She was held up during an armed robbery early one Monday morning when she was opening the hotel. Ms Ogden sued her employer in the Victorian Supreme Court, alleging it failed to provide her with a safe system of work. She claimed compensation for psychiatric and psychological injury. Bells denied it was negligent, but Justice Williams found Bells had breached its duty of care to her in that it did not provide her with a safe system of work. She was

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awarded $800,000 damages. The court found the robbery was predictable. The robber was able to plan the crime knowing Mrs Ogden’s predictable routine on a Monday morning and the likely significant amount of the potential haul. Mrs Ogden was vulnerable and lacked training in self-protective behaviour. Justice Williams was satisfied Bells breached its duty to take reasonable care to prevent harm to Mrs Ogden as a consequence of the robbery. He found Bells failed to take the following steps to prevent the harm caused by a predictable robbery: • Training Mrs Ogden on the manner of her arrival at the hotel, her approach to it and her entry when alone on Monday mornings, when the hotel held the weekend’s takings; • Having visible external CCTV surveillance of the entrance with signage or other indications of its presence so as to deter would-be robbers; and • Reducing the amount of cash held on the premises after weekend trading and TAB activity, indicated by signage or otherwise that it had been done. In a New South Wales case, Mr Mahina was a security guard on duty outside Rogues Night Club in Sydney’s Oxford Street in June 2002. His employer, PAB Security, had been contracted to provide security services to the nightclub. During the course of the evening, following an altercation between patrons and security guards, including Mr Mahina, one of the patrons said “We’re going to come and get you; we are going to kill you”, which Mr Mahina thought was directed personally at him. He was concerned for his welfare and said he asked PAB if he could go home or alternatively be rotated from the entrance to the nightclub to inside the nightclub. Both requests were refused. Later that evening, a gunman – the brother of the patron who had made the threat – arrived at the entrance to the nightclub. He fired six shots, three of which struck Mr Mahina. Mr Mahina commenced proceedings in the District Court alleging PAB breached its duty of care to provide him with a safe work environment, including protecting him from random or unpredictable criminal behaviour by a third party. He was successful in the NSW District Court, and PAB appealed on liability only. It argued the intervention of a gunman was outside the realm of reasonable foreseeability. The Court of Appeal was satisfied that insuranceNEWS

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given the terms of the threat made it was foreseeable to PAB that the refusal to rotate Mr Mahina involved a risk of injury to him in the event the perpetrator or someone on his behalf came back to carry out the threat. In another case, Mr Quintano suffered traumatic brain damage in 2002 when he was shot in the head during a fight among patrons at a nightclub operated by BW Rose. He claimed damages against Rose and AWS Security Services, which had been contracted by Rose to provide security services at the nightclub. There was a dispute over exactly what services AWS had been contracted to provide to Rose. After considering the evidence, Justice Brereton found AWS was contracted to provide only one security guard on Friday and Saturday nights from midnight to 6.30am. Along with the AWS security guard, Rose employed its own security guard who was also on duty that night. A licensee/operator’s duty to exercise reasonable care for the safety of patrons depends on the knowledge of the licensee/manager of facts which may require intervention to protect patrons from a foreseeable risk of harm. While this duty is a delegable one – such as where a competent security firm has been engaged to carry out the security services – the two security guards including the AWS guard were under the direction and control of Rose. Justice Brereton found Rose had not delegated responsibility for the provision of security services. The duty of care to protect patrons from the criminal activities of third parties does not arise solely out of the fact the premises were licensed. Justice Brereton found it was reasonably foreseeable that unless proper security measures were in place, some level of violence or anti-social behaviour where patrons might be injured was foreseeable, considering the location and history of incidents at Rose, the demographics of the clientele, the operating hours and the supply of alcohol. After hearing evidence from security experts, Justice Brereton concluded that to provide a reasonable level of security, Rose required at least three security guards. As Rose only had two security guards on site, it failed to exercise reasonable care for the safety of its patrons. Rose had not delegated responsibility for the provisions of security services to AWS, Justice Brereton found there was no breach of duty by AWS, which was not bound to do anything more than competently and prudently discharge the duties it was engaged to  provide.


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Lawsons Underwriting Australasia Limited is continuing to provide the following: Labour Hire / Recruitment Combined Liability Package (Vero)

HELP cover for companies that use Labour Hire (Vero)

Our combined package caters for both blue and white collar and includes the following:

Our Host Employer Liability Policy (HELP) covers the liability that the host has if a labour hire and/or contractor gets injured whilst working for them. The benefits of this are:

• • • • • •

Public and Products Liability Professional Indemnity Directors and Officers Liability EPL Fidelity ($250,000) Representation Costs at Inquiries ($250,000) • Statutory Liability ($250,000) • One policy, one insurer, no gaps

• $5,000 standard deductible • No need for indemnities • PL Insurance protected from claims • Cover can be initiated by Host or labour hire provider • Better risk and claims management

Public and Products Liability (Lloyd’s) We specialise in the following: • Nightclubs (includes using own security) • Cleaners (includes shopping centres) • Rail (includes rail contractors) • Engineering • Hotel Groups • Chemicals • Waste Management • Importers/wholesalers

For further details contact one of the following or visit our website on www.lawsonsuwa.com.au: Kevin Corkery 02 8850 0729 kevin.corkery@lawsonsuwa.com.au

Carolyn Meharry 08 9420 8010 carolyn.meharry@lawsonsuwa.com.au

Megan Gobbey 0409 914 899 megan.gobbey@lawsonsuwa.com.au

Lawsons Underwriting Australasia Ltd AFS Licence No. 329017


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lawNEWS

Choosing the battleground A jurisdiction clause prevents an Australian case being heard in California By Andrew Maher, Paul Nicols and Tracey Harrip, partners at Allens Arthur Robinson n any contractual negotiations, particularly those with an international character, it’s important the parties choose how and where disputes will be decided, and for this to be reflected clearly in the contract. Failure to do this can have unintended and potentially adverse consequences for one or more of the parties when a dispute arises. A recent case in the New South Wales Supreme Court has emphasised the importance of clear and precise drafting of jurisdiction clauses. Moose was the Australian manufacturer of an allegedly defective children’s toy, and Ace Insurance was its general liability insurer. Ace refused to continue funding Moose’s defence of class actions in the United States brought by the toy’s consumers. It had ceased funding the defence after deciding that the consumers’ claims were not covered by the insurance policy it had issued to Moose. Moose then brought a proceeding against Ace in California, seeking a declaration that Ace was obliged to fund its defence of the class actions. By bringing the insurance proceeding in California, Moose attempted to benefit from Californian law, which might have required Ace to continue funding Moose’s defence. There is no equivalent law in Australia. The insurance policy contained the following jurisdiction clause: “Should any dispute arise concerning this policy, the dispute will be determined in accordance with the law of Australia and the states and territories thereof. In relation to any such dispute the parties agree to submit to the jurisdiction of any competent court in

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a state or territory of Australia.” Ace relied on this clause when it applied to the NSW Supreme Court for an anti-suit injunction. The application sought, on numerous bases, to have Moose restrained from continuing the insurance proceeding. The insurer argued that Moose’s pursuit of the proceeding breached the jurisdiction clause, which conferred exclusive jurisdiction on Australian courts. Justice Brereton said the question of whether the jurisdiction clause conferred exclusive jurisdiction on Australian courts was one of construction of the particular contract. In that context, he considered previous cases concerning the construction of other jurisdiction clauses. This indicated that the courts had not always been consistent in their approach to the construction of jurisdiction clauses that did not use the word “exclusive”. For example, in one case the words “the parties… submit to the jurisdiction of the courts of England in connection with any dispute arising hereunder” were found to confer non-exclusive jurisdiction on English courts, while the similar words “for all disputes [arising out of the contract] the parties expressly agree to submit to the jurisdiction of the courts of Budapest having jurisdiction in such matters” were held to confer exclusive jurisdiction on the Budapest courts. Justice Brereton drew the following general conclusions from the cases: • While the absence of the word “exclusive” from the jurisdiction clause is not determinative, it tends against the clause being an exclusive jurisdiction clause; • Where the courts identified in the clause are the “natural forum” for the dispute, this supports it being read as an exclusive jurisdiction clause; • Where the clause is ambiguous and contained in an insurance policy, it should be interpreted in favour of the insured; and • The use of words such as “all” or “any” disputes in the clause, as well as mandatory words such as “shall” or “must”, tend to suggest that it is an exclusive jurisdiction clause. Justice Brereton decided that the jurisdicinsuranceNEWS

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tion clause in this case was an exclusive jurisdiction clause conferring sole jurisdiction on Australian courts, despite the absence of the term “exclusive” in the provision. He relied for this decision on these factors: The reference to “any such dispute” was equivalent to “all such disputes” and this was suggestive of an exclusive jurisdiction clause. As Ace and Moose were both Australian companies, made their contract in Australia and provided for Australian law to govern it, Australian courts were the “natural forum” for hearing and determining the dispute. Therefore, the clause was superfluous unless it was read as conferring exclusive jurisdiction on Australian courts. The clause was intended primarily to benefit Ace – the likely defendant in any proceeding arising out of Moose’s insurance policy – and the commercially sensible interpretation was that it was intended to require the parties to litigate in Australia only. Justice Brereton noted that this was a “particularly strong case” for inferring, in the absence of the word “exclusive”, that the clause was an exclusive jurisdiction clause because of the strength of the connection with Australia. Accordingly, he granted the injunction restraining Moose from pursuing the insurance proceeding in California. This case emphasises the importance of contracting parties drafting jurisdiction clauses clearly to give effect to their mutual intention. If an exclusive jurisdiction clause is intended, the word “exclusive” should be used. Conversely, if a non-exclusive jurisdiction is intended, the clause should specify this. These simple measures may avoid costly and inconvenient litigation about the meaning of the provision, as well as the prospect of contractual disputes being determined in unintended and unfavourable jurisdictions. This lesson is particularly important for parties to a contract with a more international character than the insurance policy in this  case.


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Underwriting agencies... your mainstream specialists

Underwriting Agencies Council

When you need a specialist in any insurance class, make a UAC member Your first choice.

UAC’s purpose is to serve the interests of Australia’s underwriting agencies. UAC has about 75 corporate members, representing the vast majority of Australian underwriting agencies. Membership is also open to non-voting associates. Underwriting agencies manage insurance transactions on behalf of their principal insurers, which are based in Australia and overseas.

Visit www.uac.org.au to find out who can help you place your clients’ risks.


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lawNEWS

Double trouble CGU avoids a contribution claim by arguing the detail of section 45 of the Insurance Contracts Act By David Slatyer, a partner at Gadens Lawyers in Brisbane recent Queensland Supreme Court decision exemplifies how some careful preparation of a policy can avoid timeconsuming and expensive arguments about the scope of a policy. Ms D’Arcy and her partner Mr Vinnicombe brought a personal injury damages claim against Queensland Medical Laboratory (QML) in the Queensland Supreme Court. They alleged QML had been negligent because it failed to properly interpret the results of a pap smear on Ms D’Arcy which resulted in a lost opportunity to prevent the development of cervical cancer. Australasian Medical Insurance Limited (AMIL) indemnified QML and paid D’Arcy/Vinnicombe $435,000 in damages and $33,000 for costs. It also incurred costs of about $18,500. QML had another insurance policy, with CGU, and claimed it was entitled to indemnity under it. AMIL therefore sought contribution from CGU towards the amounts it paid in settling those claims. It was not contested that QML was liable to the claimants and that the settlement was reasonable. The main issues were: 1. Whether the QML pathology partners were “insured” entities under the CGU policy, in order for double insurance to arise; 2. If section 45 of the Insurance Contracts Act 1984 applied, whether CGU could sever the void part of its exclusion clause, thus leaving the remaining effective part; 3. Whether the alleged intentions of QML and CGU in taking out the policy, namely for the CGU policy not to cover such a claim, could over-ride the words of the insurance contract; 4. Whether QML was prevented from seeking indemnity under the CGU policy be-

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cause of its earlier representations about the purpose for which it purchased the CGU policy. The CGU schedule named three companies stated to be “trading as Queensland Medical Laboratory Partnership ”. The insurer submitted that these words were adjectival and simply referred to the three companies named in the schedule – not the separate QML partnership as a firm. However the court took note that the proposal for cover with CGU listed the names of the QML partners and the CGU policy defined the term “ insured” to include members of the partnership named in the schedule. The court concluded that the QML partners are to be regarded as falling within the scope of “insured” under the CGU policy such that it would also be on risk. CGU’s exclusion clause stated that the policy did not indemnify the insured in respect of a claim arising from the activities of a pathologist, where such pathologist is entitled to indemnity under a medical defence union or protection society or other professional indemnity insurance. The court held that section 45 of the Insurance Contracts Act rendered the CGU exclusion void, because it was a provision which attempted to limit or exclude the right to indemnity under one policy by virtue of the insured having indemnity in some other contract of insurance. CGU submitted that if section 45 were to operate it should only render void the words in the exclusion “where such pathologist… is entitled to indemnity under… other professional indemnity insurance”, so that the rest of the exclusion remained, namely: “this policy does not indemnify the insured in respect of a claim… made arising from the activities of pathologists”. The court said that the legal principle of severance was not appropriate in this case because CGU’s exclusion was a composite one, not capable of being broken into separate parts. But CGU argued it was the parties’ intention that the policy would be taken out to cover QML only for a risk that was not covered by the AMIL policy. The court held that the intention of the parties could not in this case replace the words of the insurance contract, because the parties chose positively to proceed with the insuranceNEWS

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“other insurance” exclusion, which therefore left no room for an inference that they intended a different exclusion. CGU’s final argument, and its only successful one – but which defeated the claim – was an argument that an estoppel by convention existed, making the present claim on CGU unjust. [Estoppels usually prohibit an individual or group from being harmed as a result of another’s deeds, statements or promises, when later actions or statements contradict or undermine what was originally stated, promised, or inferred. – Editor] CGU argued that it and QML proceeded with the insurance agreement based on a mutual intention that it would not provide cover for QML partners for negligence in their own right, although it would cover them for vicarious liability for the negligence of a non-medical employee. That is, it was not an overlapping or duplicate insurance that the QML partners already had from AMIL. Both QML’s agent and CGU’s underwriter were in agreement that the CGU policy would not cover the D’Arcy/Vinnicombe claim. The evidence on the point included an account of a meeting between the underwriter and QML where it was agreed that the policy would be one which was highly unlikely to be called upon, because it would be rare for a QML employee to be sued directly. Further, CGU faxed QML’s broker noting that the pathology partners were not within the scope of the policy. It was also clear that QML partners were anxious to avoid any double insurance because of the unnecessary payment of additional premium. There was much other evidence supporting the existence of a mutually held assumption in seeking cover from CGU that the QML pathology partners would not be covered under the CGU policy because they were already covered under the AMIL policy. On this basis the court held that QML and AMIL were estopped from claiming from CGU an indemnity or contribution under the CGU policy. AMIL argued that the operation of an estoppel would subvert section 45, but the court held that the estoppel was based on an understanding about the nature of the risk being covered, which had nothing to do with an exclusion of liability to which section 45 was directed. Therefore the claim against CGU failed. 


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Specialist Underwriting Agencies – always thinking We have revamped our image to reinforce the core things that set SUA apart – (a) we think outside the square and (b) we’re always thinking. Sure, we look different now, but SUA still continues to provide our broker partners with unique, innovative and niche insurance solutions. Business Practices Protection Q

Statutory Liability

Q

Employment Practices Liability

Directors and Officers Liability Q Defence Costs Indemnity Q

Heavy Motor Fleet Q

Aggregate deductible solutions for large fleets

Our products, as listed below, are all supported by Australian Insurers and have been developed to provide Business with the most appropriate cover in the market today. Call 07 3624 9400 today, or visit our new website at www.sua.com.au, and get SUA working with you. Business Income Protection – Weekly Q

Stand Alone Business Interruption

Excess Crime Q

Burglary

Q

Money

www.sua.com.au

MJW SUI0032

always thinking.


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productNEWS

Lawsons fills liability niche Specialised cover fills a complex labour hire gap ith the first anniversary of Lawsons Underwriting Australasia fast approaching, the agency says it’s going from strength to strength with its niche liability cover. Director Glenn Simpson reports enthusiastic broker support for the labour hire and subcontracting-related products he and Brian Atkin launched into the market last December, along with a range of other specialist lines. “We provide an outcome-focused service for brokers,” he says. “We’re not just selling another product.” Lawsons Underwriting is able to “maximise the clock” for east coast brokers with its offices in Sydney and Perth providing an additional three-hour window in the summer. Proof of the company’s taste for specialised risk is its Host Employer Liability Cover (HELP), which tackles a grey area emerging in outsourced labour hire. Mr Simpson says compulsory workers’ compensation cover of third-party workers taken out by labour hire companies doesn’t offer complete protection for the employers they are sent to work for. A worker may take action in common law against the “host employer” if he believes there has been negligence, and the workers’ compensation insurer may claim costs through a subrogated action. Some host employers are using contractual indemnities to control their exposure to this liability, but are finding this and other available approaches too convoluted, confusing and uncertain. “HELP provides a simple remedy to this dilemma by providing a separate insurance policy, which allows the exposure to be identified, understood, quantified and managed effectively,” Mr Simpson says. “It can be taken out by the host employer direct or by the labour hire company or contractor on behalf of their client.” Another string to the company’s bow is its Labour Force Professional Liability policy. The policy offers complete liability cover, tailored for labour hire, recruitment, group training and related industry participants. Included in the package are public and product liability, professional indemnity, directors’ and officers’ liability, fidelity ($250,000), representation costs at inquiries ($250,000) and statutory fines and penalties ($250,000). Mr Simpson says Labour Force Professional Liability is getting very strong support from brokers working with the labour hire industry.

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Clients appreciate the absence of gaps and grey areas made possible by a packaged policy that covers a range of liability exposures without the need for a range of different insurers. Host employers generally claim on their own insurance when incidents such as property damage or bodily injury result from actions by third-party workers. Claims against the labour hire company generally follow when the host company’s insurer uses its rights of subrogation. “When that demand comes in, the way it’s phrased could create a conflict between public and product liability and perhaps professional indemnity,” Mr Simpson says. “They might say ‘that person caused that damage because he made a mistake or because he wasn’t properly recruited and placed and he wasn’t the right person for the job’.

“This is a gap we have removed, and it means there’s more certainty for clients when they’ve had a claim against them, that they’re not left in no man’s land while insurers are working out which is the appropriate policy.” Sydney-based Lawsons Underwriting director and underwriter Kevin Corkery brings his formidable knowledge of public and product liability exposures in various industries to the specialist cover the company is placing with Lloyd’s. The risks up for consideration at the agency include hospitality (hotel groups, clubs, nightclubs), rail (including rail contractors), manufacturing, engineering, chemical, contract cleaners and property owners. “We have made some nice inroads in hardto-place areas and our support for brokers as an alternative liability market in key areas such as hospitality,” Mr Simpson told Insurance News. 

iClosing the gap Ebix launches a new e-commerce strategy that strips out cost nsurance technology provider Ebix Australia has come up with an ecommerce platform that makes the relationship between insurer and broker simpler. Called iClose, it incorporates standards, software products, interfaces and services to address all aspects of that relationship, including quotations, referrals, placements, settlements and claims. Ebix Australia Managing Director Leon d’Apice told Insurance News the various components are designed to address a lot of the deficiencies that previously existed in the insurer and broker e-commerce space. iClose Accounting, which automates the settlements process with the underwriter, was launched in conjunction with QBE late last year. More recently iClose Placements was launched. This allows brokers to obtain and manage quotes for typically negotiated classes of risk. The related iClose WebPortal has been designed for under-

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writing agencies and smaller insurers who can’t afford to make the investment that’s required for a Sunrise Exchange product. “Up until the release of iClose you couldn’t do anything outside of quote or policy,” Mr d’Apice said. “iClose is the first to address the whole insurer and broker relationship, and it encompasses areas like claims, accounting functionality, negotiating risk – all the things that haven’t been available to date.” Mr d’Apice says the iClose framework is designed to be a more efficient conduit to alleviate a lot of the manual processes, and to be a cost-effective solution. It’s intended to strip out a lot of backoffice costs for both brokers and insurers. “The people at QBE will attest to the savings they’ve been able to realise on the accounting piece alone,” he said. “Previously all that information was submitted manually.” iClose is also an evolving product, so it will be updated as additional business requirements come to hand. Mr d’Apice says recent popular concepts such as instalment billing for brokers could be offered, as iClose already has the  accounting functionality.


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When the show-stealer is a no-show SRS cover protects event businesses and boosts marketing inancial shockwaves always follow when a big event is cancelled at the 11th hour or the featured attraction suddenly pulls out. Take, for example, the late deletion of the A1GP motor racing event from the recent Gold Coast SuperGP program. Beyond the political fallout when the whole A1GP circus failed to arrive, a lot of businesses with commercial stakes in the event are counting the cost. They’d better have cancellation insurance, says SRS Underwriting Agency director Paul O’Leary. He says the time is right to educate brokers about specialised cover that can help save their clients’ bacon and even provide a marketing edge. Australia’s resurgent dollar is luring even more international

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entertainers to Australia, but the risk of performance cancellation always comes along for the ride. The stark reality of this was felt in Britain with the death of Michael Jackson in June, halting plans for a 50-concert program in London. Uninsured providers of ancillary services faced heavy losses. Closer to home, rock band Simply Red recently cancelled a concert at a winery due to bushfires and Jane’s Addiction cancelled the Australian leg of their tour due to the sudden illness of their drummer “There are a lot of people out there that provide services to events and potentially could get left in the lurch if they’re cancelled, and they just don’t know that they can get interruption style insurance for it,” Mr O’Leary told Insurance News. Potential buyers of cancellation insurance from SRS include merchandise providers, cleaners, caterers and suppliers of audio services. “A lot of times the bands that

come out for festivals might also do side shows at one of the smaller venues as a warm-up for the big venue,” he says. “But those smaller venues might fork out a lot of money promoting it, and cancellation will leave them financially exposed.” On the flipside is prize indemnity insurance. Rather than being defensive, it opens up creative possibilities to businesses looking for a marketing edge. “We see it as an enormous opportunity,” Mr O’Leary says. “Prize indemnity insurance enables companies to offer high-value prizes to help sell products and build media interest. “We’ve written this business for a long time but now we’re seeing it expand. The types of risks we’re being exposed to are becoming more extravagant and complex.” For example, SRS recently underwrote the risk for a retailer in North Queensland who offered to refund the cost of all whitegoods sold over a one-month period if the

News Ltd

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rainfall exceeded a certain level. “Luckily, it fell a little bit short and we didn’t have to pay out! But he got an enormous amount of publicity because it got so close,” Mr O’Leary says. In the sports industry, clubs and sponsors can also use insurance to protect their financial risk. Contractual bonus insurance reimburses clubs’ and sponsors’ liability to pay bonuses, to teams or individual players if performance targets are achieved. For SRS the competitive edge in prize indemnity rests in the depth of its expertise and capacity. “At each of our offices in Brisbane, Sydney and Melbourne we’ve got staff dedicated to this type of business, so we can respond within a couple of days once we have all the information,” Mr O’Leary says. “We have a Lloyd’s of London underwriting company that provides the capacity for this product. So we can draw on that Lloyd’s experience as well as our own in the  Australian market.”

Bookmark this! Free one-stop industry web directory lists more than 500 addresses

ou can find out a lot about any company in the risk insurance industry by checking out their website. But how do you find their address in the first place? A new online directory has come up with a simple solution by making its list of more than 500 industry website addresses available free of charge. This magazine’s online sister publication insuranceNEWS.com.au is set to become an information hub for business contacts with the introduction of its “links” feature. The directory, www.insuranceNEWS.com.au/links, contains more than 500 direct website links to insurers, brokers, adjusters, underwriting agencies, government bodies, trade associations, premium funders and insurance lawyers. Insurance News Publisher Terry McMullan says the new links service is the logical place to go to access industry websites “with just the click of a mouse”.

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“All people need to do is save the address on their computers’ bookmark bar to access the links page,” he says. “They can access any website they’re seeking directly from the directory, with one click. “There’s no longer any need for industry people to trawl through pages and pages of search results using search engines that aren’t specific to the industry.” Mr McMullan says the addresses will be kept up to date and new links added as they become available. “The new links service is the first of several new features we’ll be adding to the www.insuranceNEWS.com.au website over the coming months,” he says. “We will be rolling out a range of services to the industry to complement our free weekly online news.” Companies wanting to have their website listed will find the necessary instructions at www.insuranceNEWS.com.au/links. Go to www.insuranceNEWS.com.au/links to book mark the new links page. 61


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peopleNEWS

What keeps you awake at night? A Perth brokerage is profiting by helping clients with some heavyweight risks By Jeff Morse t’s Monday morning in Perth and they’re talking serious business over coffee at Specialised Broking Associates (SBA). This earnest group is meeting to focus on a relentless challenge – dealing in large and complex risks in difficult ends of the insurance market, while trying not to get too big in the process. It has been an impressive journey since 2003 when the company’s beginnings were humble but carefully conceived. Without a doubt it’s a very successful business. Revenues have tripled and profits have increased 900% in five years. And SBA carried off the award for “small and medium broker of the year” in this year’s Australian and New Zealand Insurance Industry Awards. Managing Director Andrew Godden was among the four founding directors. They came into a marketplace overshadowed by 2001’s HIH collapse and the September 11 terrorist attacks in New York. SBA offered options and ideas at a time of severely limited choice. “We went to the market saying ‘Bring us

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your dead. What are the things that keep you awake at night and people haven’t been able to solve for you? Give us a chance to do them’,” Mr Godden told Insurance News. “We’ve picked up a lot of work doing the impossible, or what some people had told them was impossible.” He calls it marketing on the “blue ocean”, in niches where competitors are few but often big, the work is tough, the rewards are worth it and clients value the service. There are challenges aplenty in SBA’s specialist areas of energy, mining, construction and corporate/institutional including universities and property owner groups. Innovative systems and procedures allow large dollar values of business to be handled by a staff of just 11. But the business is acutely aware of how big – or how little – it needs to be. SBA is a highly specialised brokerage that can’t employ just anyone. “What we’re really trying to do is support our value proposition, which is high-touch, high-contact, superior service by experienced people,” Mr Godden said. SBA respects its big competitors and their ability to be very good at the very big things. However, to borrow mining terminology, there’s a seam of clients under the very big ones that large brokerages can’t get their very best people into. That’s the clients SBA aims to drill down to. The company assigns only senior “big risk” practitioners in client service roles. All account directors have more than 20

years’ experience in complex risks under their belts. And they’re stakeholders in the business, meaning they stick around and provide continuity of relationships with clients. The clients are sticking around, too. More than 85% of SBA’s foundation customers remain on the books. The company built on its top-shelf alliances and informal arrangements last year by inviting major global broker Arthur J Gallagher to take a minority stake in the business. And there’s a serious intent behind even the light-hearted SBA stubbyholder feature on the company’s website, which is featured in pictures from many strange parts of the world. SBA happily encourages clients and staff to perpetuate the stubbyholder gag by photographing the otherwise unremarkable corporate gift wherever they happen to be. Contributions include one from Lubumbashi in the copper-mining area of Congo, to 850 metres below the ocean. “It’s been to some funny places, and it helps to demonstrate that’s where our business goes,” Mr Godden said. “We’ve got business in the deepest, darkest parts of Africa, Europe and Asia and the United States – all sorts of places.” It’s a subtle demonstration of the fact that SBA might be a relatively small player, but with its relationship with Arthur J Gallagher and its track record for professional service it’s far  from being insignificant.

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A smooth blend McLarens Young and Freemans have combined to become Australia’s largest loss adjuster. Now the top three control 90% of the market he merger of McLarens Young Australia and Freemans Australia is complete, creating Australia’s largest loss adjuster. The merger came into effect on September 1, with the business renamed MYI Freemans. The combined company now employs more than 500 staff in more than 80 offices across Australia. However, McLarens and Freemans will continue to operate under separate brands until the integration of systems and operations is completed over the next few months. The merger of McLarens and Freemans marks another chapter in ongoing market consolidation among the major loss adjusters during the past few years, with the three largest players now accounting for an estimated 90% of the market. In February, global group Cunningham Lindsey announced a takeover of GAB Robins outside the United States, including Australia. US-based GAB Robins sold all its international subsidiaries to Cunningham Lindsey except GAB Robins UK where British managers negotiated a majority stake in the business. MYI Freemans Chief Executive Martin Hartcher says there’s plenty of scope for development of the new business, with the two companies proving to be “an ideal fit”. “This gives us considerable economies of scale,” he says. “It provides more people with a wider variety of skills as well as the capital base to explore ways to add value to the claims experience.” Head of Expertise Andrew Thomas said

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the merged firm intends to rationalise backoffice operations such as finance, human resources and IT. “Geographically we are very strong with a team in every capital city and we are now able to provide a lot better service to clients than we could just a couple of years ago,” he said. Mr Thomas says the response from clients has been encouraging. “The reaction was very positive once they realised how much a combined entity could improve service levels,” he says. “The obvious factor is the larger network, but the specialisation between the two firms is also a great fit. Where Freemans might previously have been weaker, McLarens Young is strong, and vice-versa.” Graham Lenzner is now Chairman, while former McLarens Chief Executive Ian Simpson has been appointed Innovation Director. Other senior managers include General Manager Business Relationships Martyn Wicht, Operations Manager Jim Jobson, Chief Financial Officer Nick Johnson, Chief Information Officer Sye Declerck and Mr Thomas. The business has appointed three regional directors: Lee Cooper (Victoria/Tasmania/South Australia/Western Australia and the Northern Territory), Ian Lavin (Queensland) and Tony Button (NSW). Employees of the combined company have been invited into the decision-making process to help engage them in the transition process. Mr Thomas acknowledges the trend toward consolidation in loss adjusting has been irresistible, saying successful firms must evolve to market needs. Diversification and specialisation across a range of services will be key to the MYI Freemans approach. “We’ll be selling new products to existing clients and new products to new clients,” he says. “We’ll shake the trees and leverage off our skill set and evolve the network to stay ahead of the industry and the competition. “We may now be the biggest, but that’s not our central aim. Our aim is to be the best.”  insuranceNEWS

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Meat and greet: MYI Freemans brought together about 150 insurers, brokers, suppliers, clients and lawyers for its annual lunch event held at the New South Wales Bowlers’ Club

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Insurance Demons. Melbourne Football Club tragic (and Insurance News tipping comp winner) Sarah Schwager finds plenty of insurance people cheering for the 2009 AFL wooden-spooners 12.30pm: The first “Demons in insurance” event for 2009 kicks off at the Fawkner Bistro Bar in South Yarra. With Acting President Don McLardy, a director of McLardy McShane Insurance and Financial Services smiling everywhere, insurance professionals with hearts of red and blue mingle in a buzz of football and insurance talk. Melbourne’s former star skipper David Neitz walks in the room (swoon).

McLardy do their best to get the Melbourne insurance enthusiasts feeling good about next season. Organiser of the event, Premier Funding Services’ Bernard Dunn, announces he has already managed to locate 60 Demons aficionados working in insurance. I feel at home among my peers and fellow Demons groupies as a buzz sweeps through the room at the prospect of sponsoring an elite player or two.

1pm: The questions come in thick and fast for the retired captain, who offers renewed hope, four draft picks, a new management and president, and a developing young team. He speaks of the changing face of AFL, from his early days when players still had to hold down a full time job to the defensively oriented game it is today.

2.00: The day also helps raise funds for the club, with Anne Hartree from Insurance Advisernet (pictured above with David Neitz) successfully bidding for a signed and framed collage of historic footy photos. A raffle gives away a signed book on the club and a jersey signed by the entire team – which I won!

1.30: The insurance folk lap it up as Melbourne Football Manager Chris Connolly and Don

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2.30: A personal signed message from David Neitz and a kiss on the cheek make my day complete. Bring on next season and go Dees!




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Claims experts get together When you put a bunch of loss adjusters together, you’re always going to get a lot of discussion. Mix liberally with risk and claims specialists from all parts of the industry and you have the CC09 Claims Convention, jointly hosted by the Australasian Institute of Chartered Loss Adjusters and the Australian and New Zealand Institute of Insurance and Finance.

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The two-day event at the Four Seasons Hotel in Sydney featured a busy exhibition area and included sessions on subjects as diverse as talent management, extreme weather, brand power, infrastructure catastrophes and claims trends. Our pictures were taken at the conference gala dinner at a harbourside restaurant.


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Vero scores a big rugby win with brokers Australia’s iconic Wallabies rugby union team was the centre of attention around the country as Vero Insurance took the opportunity to host brokers at major international matches in August and September. The insurer sponsors the Wallabies, and coach Robbie Deans has spoken at a number of industry events thanks to Vero. Hosted at each event by Suncorp Executive General Manager Intermediated Distribution Anthony Day, big crowds of brokers attended pre-match functions to hear expert commentators including Wallabies legend Tim Horan, former All Black captain David Kirk and even cricketer Adam Gilchrist. It hasn’t been the best of years for the Wallabies, being pipped by the All Blacks 19-18 in Sydney and trounced by the South African Springboks in Perth 35-25. But the team responded to the Queensland brokers’ barracking in Brisbane by subjecting the South Africans to a 21-6 defeat.

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aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaAA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaAA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaAA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaAA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaAA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aa- aa- aa- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- AA- aa- aa- aaaa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa- aa-


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Big Night Out. The industry gets together to celebrate its leaders and achievers The Australia and New Zealand Insurance Industry Awards night in Sydney is one of the industry’s big events, where winners are definitely grinners and losers vow to do it all again next year. This time it was staff from Allianz Australia who were all smiles after winning the “General insurance company of the year” award, with the judges drawn from around the industry in Australia and overseas praising the insurer’s ability to perform profitability while focusing on customers.

Hosted and organised by the Australia and New Zealand Institute of Insurance and Finance, this was the sixth year of the awards. They go from strength to strength, with a large turnout of industry professionals making it a night to celebrate all that’s good about the risk insurance business.

And no one was ever going to argue that QBE Group Chief Executive Frank O’Halloran was a worthy recipient of the “Insurance leader of the year” award, capping off a brilliant 10 years running the international Australian.

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maglog » he Generation X managers on our cover – good-looking, neat, organised and smart – are an excellent way to set the tone for what Insurance News intends to be. They and all the other Gen X managers emerging across the industry are going to oversee an amazing amount of change over the next few years – not just in the way we work but also in the way we think. Insurance should no longer be seen as a conservative, careful and boring industry, because it’s none of those things.

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e were interested in the fact that all the Gen X subjects in our cover story said they struggle to maintain a good balance between home and work life. That’s hardly a new problem, although we Baby Boomers tended to not worry about it so much, insensitive clods that we are. A few months ago I was offered a different insight into the work/life balance issue when I interviewed Bill Berkley, the founder of global insurance company WR Berkley, and his son Rob, who is a senior director (and had to earn the job). I asked them if they spent father-son time together without discussing work. Bill said yes, but the business “is very much a part of who we are”. “It would be disingenuous to suggest that the whistle blows at five o’clock and there’s no discussion of work after that. But the business is not the sole part of our relationship.”

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Terry McMullan Publisher

things in the relationship”. No worries, as it turns out. “We talk about everything, because if you really have a global view of business and what’s around, everything that happens – from human relations to politics – everything impacts people’s views and your lives. They’re all one.” A week or so later Bill sent me from New York a beautifully framed text, and I share it with

all you Gen Xs struggling to find that balance.

very magazine has its own character, and how it reflects the perceptions of its readers is crucial to its success. We produced an insurance industry magazine for 11 years, so we have a pretty good idea what people want to read, and also what they don’t.

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W

The Master in the Art of

Living makes little distinction between his work and his play, his labour and his leisure, his mind and his body, his education and his recreation, his love and his religion. He hardly knows which is which. He simply pursues his vision of excellence in whatever he

Insurance News is not tied to any particular point of view or any single organisation’s issues. We don’t even have an editorial opinion page, and the opinions we do carry in future will be those of people entitled to have them. We are driven simply by a desire to publish something that examines all sides of the story. It will be up to our readers to make up their own minds. Knowledge. as they say, is power. The magazine complements our weekly online news service and allows us to examine issues in more depth than is possible in an online bulletin that concentrates on brevity. This is a little more laidback; there’s time to relax and consider things. Our new “style” section, for example, will allow us to look at things that are important to businesses and individuals in the industry – but which aren’t always just about insurance. For example, this month we’ve looked at CGU’s new headquarters to examine changes in office design and dynamics. Advertising pays our production and postal costs, and the number of subscribers we attract is therefore important. Insurance News already has the largest circulation of any trade magazine we have been involved with, so it’s an auspicious beginning.

does, leaving others to decide whether he is working or playing. To him he is always doing both. Zen Buddhist Text

ill said he was concerned when Rob joined the executive team to ensure they wouldn’t be fixated on work, “so we went out of our way to be sure there were lots of other

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he purpose of this final page (hereinafter to be known as the “maglog”) has been the subject of much debate during the production of this first issue. We’ve decided to use the maglog for whatever purpose it’s best suited to at the time – opinions, amusements, and things we haven’t even thought of yet. Thanks for supporting Insurance News. We’ll be back in  December.

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www.insuranceNEWS.com.au/jobs

Coming soon:

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Whoever you are, whatever you do, CGU’s 100% behind you.

Commercial Rural Personal

At CGU, we’re passionate about working directly with you. We believe successful partnerships are built on shared strengths and actions. We’re committed to the continuous development of value added services for your business and progressive products for your customers. Recent initiatives like our advertising campaign, developed to drive customers to you, and our major sponsorship of NIBA demonstrate we’re here for you today, and tomorrow. Talk to your CGU Account Manager about how working together, we can drive your business further.

www.cgu.com.au The insurer is CGU Insurance Limited ABN 27 004 478 371 AFSL 238291.

Workers’ Compensation


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Life Insurance General Insurance Investments

Moving business forward requires a secure platform.

Deliver with Zurich: Strength and stability to keep business on track You and your clients can rely on Zurich’s financial strength and stability for managing, identifying and planning insurance risks to help business run smoothly. With 135 years of strong, stable financial experience, you can have confidence that we deliver when you need it most. Our solid Zurich is proud to support football as an Official Partner of the Hyundai A-League

balance sheet, disciplined financial approach and global diversification offer a position of true strength in our industry. Contact your local Zurich representative today or visit www.zurich.com.au

Here to help your world Zurich Australian Insurance Limited ABN 13 000 296 640, AFS Licence No. 232507. 5 Blue Street North Sydney NSW 2060 www.zurich.com.au

LBAT 003293-2009 ZU11459

Profile for Insurance News (the magazine)

OCT/NOV 2009 - Insurance News (the magazine)  

The first edition of Insurance News (the magazine) features AIG CEO Chris Townsend talking about what he learned from hands-on crisis manage...

OCT/NOV 2009 - Insurance News (the magazine)  

The first edition of Insurance News (the magazine) features AIG CEO Chris Townsend talking about what he learned from hands-on crisis manage...