February/March 2022 - Insurance News (Magazine)

HOOKED ON INSURTECH How Robert Kelly’s Steadfast has built its future What’s next?

Our leaders’ survey tackles 2022

Rough road Finding solutions to supply chain pain

February/March 2022

Contents 4 Newsmakers

companyNEWS

8 The year ahead

53 Expanded offering:

So many challenges, so many opportunities. We’ve tackled the key issues for 2022 with industry leaders in insurance, reinsurance and broking

16 Hooked on tech

Steadfast’s homegrown IT systems have changed the way brokers interact with their clients and – crucially – with insurers

24 Crash tests

Shipping delays, rising prices, labour and parts shortages are just some of the factors challenging motor repairers – and insurers

32 Mind the gap

Women in insurance say the industry could deal with the shortfall in pay compared to men with a bit more genuine effort and transparency

Berkley adds PI to Steadfast platform

53 Giving back:

Steadfast supports children’s cancer charity

53 Zeroing in on net zero: QBE joins alliance

peopleNEWS 54 Festive feel at awards night 56 Claims Convention provides year-end highlight 58 maglog

36 Looking beyond

Christine Bell sees positive times ahead for Swiss Re Corporate Solutions as businesses take a fresh look at how to manage risks

40 Clear and present dangers

Businesses fear inaction over worsening climate change, cyber threats and other risks could derail their pandemic recovery

44 Flying high

Insurers see drones as a way to revolutionise claims processes through safer, more efficient inspections

48 Heavy weather

Industry estimates of losses from last year’s natural disasters vary, but there’s solid agreement that climate change inaction will only make things worse

HOOKED ON INSURTECH How Robert Kelly’s Steadfast has built its future What’s next?

Pictured: Steadfast’s Robert Kelly Credit: Kym Thomson

Our leaders’ survey tackles 2022

Rough road Finding solutions to supply chain pain

February/March 2022

insuranceNEWS

February/March 2022

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Analysis

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February/March 2022

ZURICH ASSETS ‘NOT FOR SALE’ Zurich Insurance Group CEO Mario Greco says the company’s Australian operations are not for sale.

A report in German insurance magazine Versicherungswirtschaft-heute quotes Mr Greco as saying he “intends to hold on to” the Australian operations.

While the company has never confirmed or denied that its Australian general insurance assets were for sale, media reports locally

have made it clear the group was sounding out the local market. insuranceNEWS.com.au has previously reported that any such sale would attract widespread interest.

“You have nothing to lose and everything to gain by having a look and at least understanding the assets,” one analyst said.

Zurich says it does not comment on mar0 ket speculation.

From the very top-down, women are “ undervalued in Australian businesses and

”

underrepresented where decisions are made.

Workplace Gender Equality Agency Director Mary Wooldridge highlights ongoing issues as the latest pay gap figures are released.

IAG DEFENDS FACTORY CLAIM DISPUTE IAG has successfully defended court action over a declined multi-million dollar claim after it argued that a massive fire at a Queensland bedding factory was started deliberately.

Cassa Bedding Pty Ltd claimed on its policy following the August 2015 blaze at its leased factory premises at Yeerongpilly.

But after a lengthy investigation IAG refused to pay the claim, saying the fire had been

deliberately started by Cassa’s sole director John Cassimatis, and the policy excluded such circumstances.

Cassa launched legal action claiming damages for breach of the policy.

Mr Cassimatis has consistently denied any involvement in starting the fire and, despite police and fire service investigations, nobody has been charged with any criminal offence in relation to the blaze.

But Justice Martin Burns at the Supreme Court of Queensland ruled in favour of IAG. “On the whole of the evidence I am satisfied that [IAG] has proved to the standard required that Mr Cassimatis was the perpetrator. That is the only reasonable and definite inference available on the proven facts.”

Cassa’s claim was dismissed and judgment entered 0 for IAG, with costs.

POOL TRICKLES THROUGH PARLIAMENT The cyclone reinsurance pool bill was referred to the Senate Economics Legislation Committee, which is due to report back by March 24, as the Federal Government faces a tight timetable to meet a planned July start for the scheme.

The referral follows the introduction and second reading of the bill in the House of Representatives by Assistant Treasurer Michael Sukkar.

The next joint sittings of the House of Representatives

and the Senate will be held on March 29 and 30. The Federal Government is set to deliver the Budget on the last Tuesday of March, ahead of an election due by the end of May. “Improved access to affordable insurance is vital to the economic prosperity and resilience of households and small businesses alike,” Mr Sukkar told Parliament.

Over 10 years, the pool is estimated to reduce premiums by $2.9 billion and it is expected to cover more than

880,000 household, strata and small business property insurance policies in northern Australia, he said. Small business marine property insurance policies will be added from July next year.

The Federal Government has said homeowners in northern Australia with the most acute cost pressures would be expected to benefit from up to 46% premium discounts, strata properties up to a 58% discount and SMEs up to a 34% 0 discount.

Pacific pricing: Rate of increase declines, matches global pace Insurance pricing in the Pacific region increased 13%, down from 17% in the prior quarter and the fourth consecutive in which the rate of increase slowed (see Figures 12 and 13). It was the first time since 2016 that composite pricing in the region was not higher than the global average.

Pacific region (including Australia) 12|composite Pacific composite insurance pricing change insurance pricing change 22%

Pacific 19%

Global

20%

‘DOC’ STARTS AT IAG

18%

15%

15%

14%

13%

13%

11%

8% 6%

1%

1%

Q4 17

Q1 18

2%

2%

2%

Q2 18

Q3 18

Q4 18

3%

Q1 19

Q2 19

Q3 19

Q4 19

Q1 20

Q2 20

Q3 20

Q4 20

Q1 21

Q2 21

Q3 21

Q4 21

Source: Marsh Specialty and Global Placement

Source: Marsh Specialty and Global Placement

RATE RISES STILL SLOWING Commercial insurance rates in the Australia-led Pacific market continue to moderate, rising 13% in the fourth quarter of last year following a 17% increase in the prior three-month period, Marsh’s latest price index shows.

Marsh says the December number marks the fourth consecutive quarter in which the rate of increase has slowed and the first since 2016 that composite pricing in the region was not higher than the global average.

Globally, commercial rates also grew 13% in the fourth quarter, according to the broker’s Global Insurance Market Index, a

quarterly price monitor.

Like the Pacific market’s recent trends, the global rise marks a slowdown in the pace of increases, confirming the broker’s earlier assessments that pricing has peaked after recording a 22% spike in the final quarter of 2020.

“We expect pricing increases to continue moderating throughout the year, barring unforeseen changes in conditions,” Head of Global Placement Asia & Pacific and MD John Donnelly said.

“We believe this trend has now been established in the market. Cyber, however, con0 tinues to go against the trend.”

IAG announced Darren O’Connell has joined as EGM Underwriting at its Intermediated Insurance Australia (IIA) division headed by Group Executive Jarrod Hill.

In the same announcement, the insurer says Christa Marjoribanks has been permanently appointed as IIA EGM Product Pricing and Governance. She has been in that role in an acting capacity since late 2020, joining the business as a consultant from PwC early the same year.

Mr O’Connell, known as “Doc” by many in the industry, was most recently with Suncorp where he led the commercial and intermediated portfolio, responsible for pricing, and profitable growth strategies as EGM Commercial & Intermediaries.

He left Suncorp last August after 35 years with the business. Mr Hill previously said in a IAG business update last month that he was establishing a dedicated underwriting office for IIA to drive “a step change” in its underwriting process and said he expected to appoint a senior leader for the role soon.

He says the appointments of Mr O’Connell and Ms Marjoribanks complete the IIA Leadership Team – an important step for the business as he aims to improve the division and achieve an insurance profit of at least $250 million by the 2023/24 financial year. IIA lost 0 $10 million in the last financial year.

NANRA TAKES CHARGE AT SLE Newly appointed SLE Worldwide Australia CEO Raj Nanra, pictured, has started in the role, taking over from Brad French, who left the underwriting agency at the end of last year.

Mr Nanra will be responsible for the leadership, strategic delivery and sustainable financial result of the Sydney-based underwriting agency and Lloyd’s coverholder that provides a broad range of specialty property and casualty products, with a focus on the sports, leisure, and entertainment markets.

He says he looks forward to working alongside the firm’s “extremely talented” individuals in driving the business forward.

“SLE continues to deliver solid growth,” Mr Nanra told insuranceNEWS.com.au. “This is a testimony to the strength of the business and the SLE team as we continue to also focus on our customers’ needs.”

Mr Nanra was most recently CEO of Steadfast-owned premium funder IQumulate with responsibility for the general oversight, management, and strategic development of the business. He left in February last year.

He has more than 25 years’ experience in the insurance industry, including as Zurich General Insurance CEO from January 2016 to May 2018 before joining IQumulate, according 0 to his LinkedIn account.

LIGHTBODY LEAVES STEADFAST Steadfast Underwriting Agencies (SUA) CEO Simon Lightbody has stepped down from the management role but will continue as a non-executive director on the SUA subsidiary boards.

Group CEO Robert Kelly says Mr

Lightbody has made a “massive contribution” to the evolution and success of SUA over the past two decades.

“Simon has significantly strengthened SUA by forging new underwriting agency partnerships, which now includes 24 specialist

agencies and over 100 niche products, while building a solid professional team,” he said.

“Simon leaves SUA in a power position with strong foundations for the future. We wish him well in his non-executive life.”

The change took effect from February 1. 0

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From the

PUBLISHER

COMMISSIONS DISCLOSURE ‘CRITICAL’ Transparent disclosure of commissions, fees and charges is critical to trust and confidence in the industry and in averting heavy-handed government action, consultant John Trowbridge told the National Insurance Brokers Association (NIBA) convention.

Mr Trowbridge says the lack of visibility around general insurance remuneration has been a problem and will come under scrutiny as part of a Federal Government review of financial advice that will be completed this year.

“With the Quality of Advice review coming up, if the insurance industry, and in particular the broking industry, doesn’t deal with that, then I think you are at risk of

the Government forcing the issue in some way,” he said.

Outcomes in that case could include controls over commissions or, in a worstcase scenario, banning the payments, he said.

“I think that would be a very bad move,” he told the Adelaide leg of the multi-city convention. “In order to clear the decks so the issue can be looked at thoroughly, I do think disclosure of commissions and avoidance of conflicts of interest around incentives should be tackled.”

NIBA plans to launch its revised code of practice, which includes tougher measures around disclosure remuneration and conflicts of interest, on March 1, with implementation 0

by November.

It’s probably tempting fate to note that Australia and the rest of the world are emerging from the pandemic. The articles in this edition of Insurance News magazine point out that despite wobbly global financial markets, rusting supply chains and insurance industry issues everywhere, we are making our way back to a form of normality – one that is quite different from the previous normal.

In this edition we have surveyed industry leaders to gain their views on where we’re at and where we’re going. Their predictions and observations make for absorbing reading. They also illustrate how much technology has already changed the industry’s ability to measure and react.

The next article looks at broker group Steadfast’s commitment to build a data-driven business, with Managing Director Robert Kelly emphatic that the traditional insurance cycle has been replaced by a new pragmatism relying on timely company and industry data that simply wasn’t around a few years ago.

While we tend to look at technology primarily as a way to speed processing, it’s the mountains of data flowing from things like transaction platforms that are providing insurers with realtime data they can use to alter their premiums and even their risk appetite according to the immediate vagaries of the market.

By analysing their own performance and that of the wider industry in real time, they don’t have to rely anymore on figures that may be up to a year old. Dud classes of business don’t need to be propped up by better-performing business, because individual risks can be easily assessed. Guesswork is gone.

Insurtech is a great way to build efficiencies and cut back on back-office staff (a major expense), but we should consider the advantages that can come from the data collected in processing.

Today individual risks can be measured and assessed on a laptop. Brokers have support material to make their “risk adviser” claims real. Underwriters are getting immediate and reliable risk information allowing them to measure their performance against their competitors’. The list is infinite.

By making insurance more efficient, technology is also making the industry more effective in meeting the needs of clients and customers. That can only be a good thing.

Terry McMullan

PUBLISHER:

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The year ahead So many challenges, so many opportunities. We’ve tackled the key issues for 2022 with industry leaders in insurance, reinsurance and broking

By John Deex

2

021 was a big year for insurance. The industry was under serious scrutiny thanks to the covid pandemic, while participants also had to adjust to a storm of once-in-a-generation regulatory change.

Affordability was front and centre, not only in northern Australia but across a range of locations and sectors as the market went from hard to harder. And climate change – a perennial issue that isn’t going to go away – emerged from covid’s shadow thanks in part to Glasgow’s COP26 conference.

Border closures and lockdowns brought their own challenges as supply chains slowed, and talent streams from overseas dried up.

That was 2021, so what happens in 2022?

We asked industry leaders across Australia how they see the next 12 months panning out.

The participants were National Insurance Brokers Association (NIBA) Chief Executive Phil Kewin; Insurance Council of Australia (ICA) Chief Executive Andrew Hall; Lloyd’s General Representative in Australia Chris Mackinnon; Steadfast Chief Executive Robert Kelly; Suncorp Chief Executive Steve Johnston; Aon Head of Commercial Risk Australia Ben Rolfe; WTW Head of Australasia Simon Weaver; Hollard Chief Executive Paul Fahey; Munich Re Managing Director Australasia Scott Hawkins; IAG Group Executive Intermediated Insurance Australia Jarrod Hill; PSC Chief Executive Australia, New Zealand and Hong Kong David Hosking, MGA Managing Director Paul George; Insurance Advisernet Managing Director Shaun Standfield; CBN Chief Executive Richard Crawford and Executive Manager Distribution Leigh Frost; and Resilium Managing Director Ben Hastie.

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How do you see the hard insurance market developing over the year?

The most forthright on this subject is Steadfast’s Mr Kelly, who declares there is no hard market – just the current market, where insurers are pricing to make a profit. And that’s the way it’ll be for the foreseeable future.

He believes the “traditional” insurance market is dead and buried. There’ll be no return to a soft market where underwriters drop prices to compete for market share, because regulators and capital providers won’t allow it any more.

Other respondents agree that while the rate of rises is slowing, we are not about to see price drops any time soon.

“The question is, will it ever go back to the stupidity of the pricing that created the current environment?”

Mr Kelly said. “In my view it never will.

“I don’t think that the capital markets will allow publicly listed insurers to not produce profits, and on the other side there is the APRA control.”

Mr Kelly says that moving away from the traditional market cycle will provide more stability and certainty for consumers.

Suncorp says “multiple influences” such as covid, supply chain issues and variability in natural hazards are playing their part “over and above working losses across each class of business”.

“All speak to an ongoing focus on underwriting discipline, risk selection and intelligent pricing and the overall market conditions being maintained,” Mr Johnston says.

Aon’s Mr Rolfe says conditions for customers are

finally starting to improve, “albeit in pockets”.

“This has been the longest consecutive period of positive property rate increases we have experienced in decades, so it’s a very welcome sign for buyers.”

Mr Rolfe says there is an increasing distinction between good and bad risks, and this will continue over time. Well-managed risks with a low natural catastrophe footprint are well placed, but cyber, some elements of casualty, professional indemnity and complex property “remain significantly challenged”.

Insurers are united in their efforts to reduce volatility, he says. “This makes some industries and product lines hugely attractive to all, while others are borderline uninsurable.”

IAG’s Mr Hill says claims cost challenges, including increasingly severe natural disasters and elevated claims inflation from pandemic-related supply chain disruption, will continue, along with ongoing modest pressure on long-tail classes.

“As a result of these claims cost pressures, we’re expecting these market conditions to continue into FY23.”

Hollard expects above-inflation increases for home insurance to persist. “The ongoing shift to work from home is a key question for the motor book, with a possible permanent shift in motor portfolio claim frequency which would dampen premium inflation for a period,” Mr Fahey says.

“The impact of supply chain challenges, particularly for the motor sector and especially imported cars and parts, could work against this potentially permanent shift in frequency.”

WTW’s Mr Weaver says insurers this year will continue their scrutiny of terms and conditions, sub-limits and exclusions.

“That means it’s not so much a matter of rates coming down, but a stabilisation of premiums in 2022, after consecutive years of high-end increases.”

Do you see the insurance affordability issue worsening in some locations or insurance lines?

All respondents agree that insurance affordability issues facing certain sectors and locations will continue this year.

While price rises might stabilise to a degree, they aren’t likely to drop, and climate change is expected to lead to increased severity and frequency of natural catastrophe events.

Munich Re’s Mr Hawkins says the reinsurer’s analysis shows Australia faces “a material increase” in the average annual loss from perils like tropical cyclones and floods.

“In Queensland we expect that the cost of damage to residential properties caused by cyclones will increase by over 30% by 2050 without significant mitigation,” he says.

“As a result of climate change, insurance affordability issues will almost certainly get worse unless there are targeted resilience and mitigation efforts.”

Lloyd’s agrees that affordability issues “will continue to challenge our industry”, but Mr Mackinnon also sees opportunity for product innovation.

“In the past 12 months Lloyd’s has backed two new coverholders that offer innovative, affordable parametric style covers to customers that help protect them from the immediate financial consequences of natural catastrophe risk.”

Aon’s Mr Rolfe says “the affordability of some policy

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“We believe there is a risk that the intended affordability outcomes [of the reinsurance pool] will not be achieved.” Hollard’s Paul Fahey

lines will continue to challenge buyers” with cyber, construction professional indemnity, some areas of casualty and complex property continuing as “the main areas of pinch point”.

Coverage is still being heavily scrutinised, and restrictions are being imposed across the board, he says.

“Over the past 12 months Aon has seen a large uptake in clients exploring captive or cell solutions to manage increased retentions, create a bridge to parametric solutions or simply accessing additional capacity via the reinsurance market.”

CBN believes intervention and collaboration is needed to solve the “significant” social problems, with Mr Frost noting that greater consultation between the insurance industry and government is required “to look at ways in which we might tackle these issues”.

ICA’s Mr Hall says the council is working with the business community on solutions for affected sectors.

Do you welcome increasing government involvement via reinsurance pools or mutuals? Do you have any concerns?

While the industry spent a long time resisting the concept of government-run reinsurance pools, most now welcome the upcoming facility for northern Australia. But some suspicion of solutions outside the private market remains.

NIBA’s Mr Kewin says pools and mutuals “are not necessarily the answer, as there are too many risks with this approach. And in any event a mutual must take out insurance against major loss events anyway”.

IAG, while welcoming the pool as “an important step”, believes the private insurance market “remains the most effective and economically sustainable solution to ensuring the maximum number of Australians choose to cover themselves for their risks”.

“We don’t think mutual insurers are the answer because they create an insurance market where companies are operating in a regulatory vacuum for the sake of ensuring cover is available to those who seek it, no matter what the quality,” Mr Hill says.

“That is not a good outcome for customers or a good public policy result.”

Hollard’s Mr Fahey says it’s a “delicate balance”, while casting some doubt over the eventual success of the pool. “It will be interesting to see how the cyclone and related damage reinsurance pool plays out over the next couple of years,” he says. “We believe there is

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a risk that the intended affordability outcomes will not be achieved.”

Munich Re also welcomes the pool, but says the “balance between premium subsidies and resilience measures needs to be right”.

The message on resilience and mitigation spending is repeated by many respondents who believe it is the only long-term solution to the problem.

“Australia must build for the weather we will be getting in the next 50 years, not the weather we had 30 years ago,” Mr Kewin says.

Suncorp says it has stood by communities in North Queensland for more than 100 years and welcomes the Government’s cyclone pool, but says it “needs to be accompanied by investments in public and private resilience infrastructure, enhanced building codes, better land use planning and removal of unfair insurance taxes”.

“To ensure a lasting impact on insurance premiums we need to address the underlying cause of high insurance costs in the area, which is the frequency and scale of natural disasters,” Mr Johnston says.

MGA’s Mr George believes government support is sometimes needed but ideally “should be as little as possible and, like trainer wheels, designed to come off”.

But PSC’s Mr Hosking says clients must remain the focus.

“Businesses and individuals need a solution to obtain affordable insurance,” he says. “If the insurance industry can’t provide this, there will need to be some form of intervention and the cyclone reinsurance pool is a start.”

What are the positive and negative influences of the Covid-19 pandemic on the insurance industry, and how do you see these playing out in 2022?

All survey respondents recognise the terrible impact of the pandemic on some clients’ businesses and lives, but say better use of technology has emerged as one of the key positives.

“As in most industries, the pandemic has led to fast-tracking technologies and processes that make it easier to deal with businesses digitally,” IAG’s Mr Hill says. “We’re improving and expanding our digital experiences and propositions, and across IAG’s brands we’re aiming to drive 80% of our customers’ activity through digital channels.”

“Feedback from brokers is that one of the negatives of working from home is the lack of experience-sharing ... resulting in a sense that it seems easier to just say no.” NIBA’s Phil Kewin

Technology also enabled a rapid switch to remote working as lockdowns took effect. But many observe that this has negatives as well as positives.

“Feedback from brokers is that one of the negatives of working from home is the lack of experience-sharing, where decisions are being made independently rather than being discussed with senior colleagues, resulting in a sense that it seems easier to just say no,” NIBA’s Mr Kewin says.

Insurance Advisernet’s Shaun Standfield agrees. “I feel service standards from insurers have started to wane a little the longer the pandemic has gone on. This is due to fatigue and in some part lack of training or declining organisational culture in terms of service and responsiveness.”

Lloyd’s notes that remote working can lead to a loss of team culture and reduced learning opportunities, while WTW’s Mr Weaver wonders “whether this will start to erode the ability to train our new generations of talent”.

The leaders of both ICA and NIBA flag issues with closed borders in Australia, while Hollard raises concerns about supply chains.

“From a business performance perspective there continue to be complications with supply chains, with significant global pressures affecting availability of new cars and parts, a shortage of housing materials and inflation in labour costs,” Mr Fahey says.

Resilium’s Mr Hastie says the lack of industry gatherings has been a “huge negative”.

“Historically speaking these get-togethers are a great way to share new ideas with like-minded people, as well as cultivate new business relationships and connections.”

Should governments do more to support a transition towards a net zero carbon emissions economy?

As governments and businesses continue working towards emissions reductions, our survey respondents are keen to support their clients on that journey.

ICA’s Mr Hall says it will support an industry-wide transition to net zero, “via the development of a climate change roadmap”.

“Gradually decarbonising Australia’s economy will help to limit the worsening extreme weather events that can affect the availability and affordability of insurance, while also unlocking substantial new capital across all asset classes.”

Respondents did not criticise Australia’s political leaders directly, but NIBA’s Mr Kewin calls on governments to “provide leadership and set out clear roadmaps for the changes that need to be made, so business and insurers can plan and act appropriately”.

Hollard’s Mr Fahey says governments should do more, and could learn from other countries.

“Government policy decisions such as those in Europe are required,” he says.

“The insurance industry can support these through innovative approaches to encourage zero emissions where relevant to the products we deliver and the way in which we operate.”

IAG’s Mr Hill says action on climate change “must be a government priority”, from supporting emissions reductions to investing in mitigation against natural disasters.

“Across a range of industries, both in Australia and globally, we’re seeing the private sector increasingly taking action to tackle climate change and support the transition to net zero. We expect this to accelerate as new technologies and opportunities emerge.”

Munich Re’s Mr Hawkins believes collaboration is key. “To achieve a net zero goal will require a co-ordinated effort of business, the insurance industry and government to be achievable.

“Insurance will play a role in providing risk transfer products to assist in the transition to green technologies.”

Mr Kewin says the industry has a critical and positive role to play – as investors as well as insurers.

“I think we are already seeing this happen in areas such as mining, where insurers are making decisions based on socially responsible grounds, and it is flowing through to smaller businesses that support the mining industry directly or indirectly.”

But Insurance Advisernet’s Mr Standfield warns against pulling away too quickly as a result of “activist” pressure.

“I don’t believe you can have the situation where you say to companies that have supported the past prosperity of this country that your suppliers, whether they be banks or insurers, now can’t support you through this transition due to ‘activists’ that put pressure on banks and insurers to withdraw their support,” he said.

“The insurance industry is in the risk business and part of managing risk is to provide solutions to companies, whether they be transitioning from high carbon emitters to those that have greener credentials.”

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“To achieve a net zero goal will require a co-ordinated effort of business, the insurance industry and government to be achievable.” Munich Re’s Scott Hawkins

How has the industry adjusted to the significant regulatory changes introduced in 2021?

NIBA and ICA want regulatory change to slow down this year, after a rapid-fire onslaught of reform in 2021.

ICA’s Mr Hall says insurers support the reform process, but warns that “insurers, their customers and regulators need time to assess the impact of these far-reaching changes before any further regulatory changes are considered”.

Mr Kewin goes further, saying: “There is a sense that the Government has over-reached on regulation and governance in insurance and financial services.”

And CBN’s Mr Crawford says the work created by the reforms “is not commensurate” with the protections delivered for consumers.

“In many cases the legislation, while well-intended, was impractical in its delivery and has not delivered the intended behaviours or protections. The wide variety of industry approaches is not helping the situation.”

Insurance Advisernet believes continuing education of both clients and staff will be key.

“There is no doubt the costs of running brokerages have increased significantly in not only enacting the changes but in monitoring compliance with these changes moving forward,” Mr Standfield says.

Lloyd’s Mr Mackinnon says the industry has responded positively to “all the change that has been thrust upon us”, but believes that there is still work to do.

“There is a danger that the end objectives of better consumer outcomes could be eroded by the very significant financial burden placed on industry to implement change,” he says. “There is also now significant complexity and overlap in the raft of regulations and legislation that is in play, and we need to work with government to now look to improve efficiency and reduce complexity, while maintaining the same outcome objectives.”

MGA’s Mr George says “the big one” for the industry has been the decision to make claims a financial service, creating “instant challenges around a lack of qualified staff”.

“Along with the difficulty with lockdowns and insurer work coming back onshore – this was an enormous challenge,” Mr George says. “To put some quite significant weather and fire catastrophes among this has created somewhat of a perfect storm.

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“As brokers, we’ve never held our clients’ hands tighter than we have in the past couple of years. As an industry, I think we managed this very well, considering the circumstances.”

Is the industry suffering from a skills shortage as we head into 2022?

WTW says the impacts of a “war for talent” within the industry are already being felt, and the situation is expected to worsen thanks to this year’s predicted “great resignation”.

“With strong capital inflows into insurance and new market entrants, there is significant competition for the existing relatively stretched talent pool – exacerbated by border closures that prevent overseas talent entering our market,” Mr Weaver says.

“The gaps are in specialist underwriting and a lack of experienced replacements for retiring veterans.

There will likely be an increased demand for digital and analytical skills, which the market can source from other industries and professions.”

ICA’s Mr Hall says the industry will continue to diversify “at a cracking pace” this year with the focus on emerging sectors such as cyber insurance, climate change and net zero targets, harnessing artificial intelligence and understanding industry disruptors.

“With these new sectors comes the opportunity to employ specialist team members skill-ready to drive these new parts of the industry forward,” he says.

“ICA will be working with external stakeholders to ensure we have a workforce ready to meet Australian policyholder expectations.”

IAG’s Mr Hill admits the group is “finding it hard” to recruit in some parts of its business, including customer-facing teams, and technology and risk teams.

“We believe we’ll continue to see a tight employment market in 2022 and want to see the Government prioritise restoring migration to get more skilled and critical workers back to the country to help accelerate Australia’s economic recovery.”

PSC’s Mr Hosking says “without doubt” there is a shortage of quality people “across all areas of the business. Borders opening and immigration may assist but in the interim it is about developing people and ensuring the DNA of PSC retains and attracts the right people for our business.”

Steadfast’s Mr Kelly says while insurance is a “great

“There is a danger that the end objectives of better consumer outcomes could be eroded by the very significant financial burden placed on industry to implement change.” Chris Mackinnon, Lloyd’s

industry”, young people could be put off by negative media coverage.

“Insurance is never boring, never dull, it’s always vibrant. It does a great public service. It actually does what it’s supposed to do.

“But if you’re a young person looking at insurance and everything you read is that the insurance companies didn’t do the right thing [during covid], didn’t pay their claims, they’ll think, ‘what sort of industry is this to get into? They’re crooks.’ That’s not the truth, of course.”

But it’s not an emerging problem, Mr Mackinnon says, noting the local insurance industry has struggled to position itself as a desirable career for younger generations “for many years”.

“More work needs to be done promoting the insurance industry in schools and universities to the next generation,” he says. “Employers need to make themselves attractive to the next generation of employees by providing meaningful work environments that make a difference to individuals, and particularly younger generations that seek employers that have strong positions and policies on diversity and inclusion, sustainability, etc.”

Resilium’s Mr Hastie applauds the work of NIBA in this area but says “I think we need to take this issue on as a collective group”.

“Looking beyond the square and hiring graduates who might be ‘green’ but are willing to learn, and giving internships to young school-leavers keen to learn the trade firsthand are both possible steps in the right direction.”

Do you foresee any other significant opportunities or challenges for the industry in 2022?

The industry leaders are looking to this year with optimism, and renewed hope that most of the disruption from the pandemic is behind us and the market will stabilise.

Lloyd’s, for example, sees “great opportunity for sustainable, profitable growth”.

“With the majority of the ‘unknowns’ surrounding the royal commission outcomes now known and following five to six years of hardening conditions we are really excited about 2022,” Mr Mackinnon says.

“After four years of tough performance management strategies we are now seeing the benefit in terms

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of underlying attritional loss ratios, and so we are once again targeting sustainable growth within our network.”

Resilium’s Mr Hastie predicts significant M&A activity this year, “which presents excellent opportunities for all parties involved and indeed the industry itself”, while Hollard’s Mr Fahey believes innovative approaches to product design are on the horizon.

“This could include one or a combination of things, such as a policy to cover your car, home, etc. all in one with choices on peril, or using data to understand the greater insurance need of that customer rather than a vanilla, one-size-fits-all policy.

“Or it could be a bespoke product for lower socio-economic areas where insurance affordability is a key issue and the policy considers the basics required to get them back on their feet at a lower cost.”

MGA’s Mr George would like to see more emphasis on retail, “and it would be good to see some new competition come in with a broker alignment”.

“These markets have been under some incredible strain in recent years so, there is a hope that the increases could lead to portfolio profitability. The direct arena appears to be the big game here, and I do think brokers have a place in this segment of the market. I just hope we don’t get pushed out of it.”

Steadfast’s Mr Kelly ends with a warning about the impact of inflation on claims.

“The biggest worry that I see is the reserving on claims and the impact of inflation on how the final payment will be made on the claim.

“If you think about policies that were rated at an inflation rate of ‘x’, and will be paid at an inflation rate of ‘y’, there’ll be a gap between the actuarial triangulation of what the claim should be worth and what actually will be paid out.

“I think that’s something that could compound the current market and keep prices going up because the actuarial calculations could be wrong, and beyond the control of the insurer – because of the inflation that is occurring at the moment on a whole range of things.”

And ICA’s Mr Hall reminds us that a federal election is due in the next few months.

“We will be spearheading a number of significant projects during the course of 2022. An election year always brings about both challenges and opportunities for highly regulated sectors like insurance.”

Watch this space.

0

Long road: Robert Kelly has been working on Steadfast’s tech platform for 13 years

Hooked on tech Steadfast’s homegrown IT systems have changed the way brokers interact with their clients and – crucially – with insurers

By Terry McMullan

E

lectronic trading platforms are relatively common in financial services, but when Robert Kelly started talking about building one for his Steadfast broking group around 13 years ago, few outside his tight-knit management group wanted to listen.

Telstra’s Sunrise Exchange trading platform had only recently been taken over by US-based insurance technology company Ebix, and insurers saw that as the focus of their budding online capabilities.

Such platforms only work when they have insurers and brokers pumping business through them, and Steadfast’s go-it-alone scheme raised more questions than answers. Where would they find the IT specialists to build it? Where was the money going to come from?

Who would want to use it?

Mr Kelly and his team ploughed ahead, perhaps following the hopeful theme of the 1989 movie Field of Dreams: “Build it and they will come”.

Today, he laughs, “it’s an overnight success we’ve been working on for 13 years”.

But the development years were tense, with Steadfast starting from scratch. Most of the major insurers initially snubbed the project, while Steadfast’s own members were wary until the platform was well developed.

Today the dust has settled. Sunrise Exchange continues to do what Mr Kelly describes as “a very good job”, but his brainchild, he says, is better suited “to what brokers need right now”.

Leading insurers and a gaggle of underwriting agencies – most of them Steadfast-owned – now use the Steadfast Client Trading Platform (SCTP), which is expected to process “very close to” $1 billion in gross written premium (GWP) this year.

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“When we started this 12 or 13 years or so ago I was looked at as a bit crazy,” Mr Kelly tells Insurance News.

“The insurers were dead against it at the start – they hated it.

“Take-up by the Steadfast broker network was also slow at first, because we were up against Sunrise Exchange which was doing a good job, but not necessarily doing the job that modern broking needed.

“We wanted to have it so one piece of information could be sent out to insurers and connect with back offices. We wanted to automate the processes to give [clients] several quotes and with it a view of the market.

“Today the insurers are absolutely in raptures that we have a system transferring data digitally that does full life-cycle policy issuing and gives the consumer a view of the market to help them choose.”

More than 450 brokers now routinely use the SCTP, with usage between 2020 and 2021 growing by 26%.

It handles commercial business pack, professional indemnity, commercial liability, industrial special risks and commercial motor, as well as domestic home and landlord, private motor and landlord, private motor and domestic strata.

There’s been a paradigm shift then in the way the industry perceives technology, Mr Kelly says.

Insurance technology, insurtech for short, “helps to provide the consumer with a full-range view of the market without expensing a huge amount of money to the broker. That’s what we set out to do in the beginning.

“Our system gives the insurer the ability to watch 24/7 365 days of the year the ebb and flow of premiums and pricing over the product ranges that they have on our digital system.

“The smart ones are monitoring that carefully and

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February/March 2022

17

Evolving market: Mr Kelly says the traditional insurance cycle may have gone for good

looking at their risk appetite and aligning it with what they’re writing or not writing. They can look at the areas where they’re being beaten and adjust their pricing to compete.”

He says the broker-insurer relationship has changed as a result of the platform, with less business being done over a cup of coffee or lunch and more. Today, he says, “it’s not really palatable anymore. There’s too much to do and it’s too expensive to have people handling it that way.”

While the new approach has changed the pattern of relationships and lowered brokers’ costs while raising their efficiency, Mr Kelly admits that developing new technology approaches to make it possible still requires deep pockets, and a willingness to keep investing.

The principle that Steadfast adopted 14 years ago when it committed to investing big in technology remains “perfect”, but Mr Kelly warns that “the software you develop today is probably out of date by the time you get to run it, because someone else has found a different way to transmit the data”.

That’s why for the past two years Steadfast has been examining its systems to address any areas that can be improved or updated.

Key to that is the application programming interface, or API, which is essentially a software intermediary that allows applications to “speak” to each other.

“We need to rewrite certain sections to allow an API to click straight into our systems,” Mr Kelly says.

“The towers of software that we used before are completely different now. It’s a very difficult tailchase just to keep up.” Which helps to explain why the Steadfast IT division has an annual budget of around $18 million.

The restructuring of Steadfast’s systems to enable “anyone to communicate with us from any system” also highlights the speed of change in technology. “You’ve really got to rewrite your systems every five or six years now,” he says.

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The project will ease the pain of communicating with insurers’ often-antique back office systems. “I’m critical of the fact that many of them aren’t up to date, but I also have great empathy for them because to change their back office systems is very difficult. Some of them are running on old clunker systems that require complex – and often slow – interfaces.”

While such inefficiencies are very expensive to resolve, Mr Kelly shrugs it off. “It is what it is,” he says.

While ever-changing systems are essential to maintain Steadfast’s trading platform, they’re also essential to meet another challenge: the need to provide member brokers with information and data that helps them and their clients devise better risk solutions.

That’s where the Steadfast Risk Group headed by Executive General Manager Martyn Thompson comes in. It uses data-driven risk management tools to help brokers identify clients’ major risk hazards and exposures.

Eye on expansion: Mr Kelly sees opportunity overseas

Farewell to the insurance cycle?

The traditional insurance cycle, where insurers’ premiums, risk appetites and willingness to compete is guided by the slow rollercoaster effect of investment returns, is no more, Mr Kelly tells Insurance News.

“It used to be ruled to a large extent by predictability.

You used to have a very good idea on what was likely to happen over the year in terms of claims, and it was easy to understand.

“Claims inflation wasn’t something that people thought about – it only occurred every now and again – and insurers could make 100% loss ratios because they were making 12-14% on their money. The good ones were making a 20% margin.”

How things have changed. “Now we have the effects of climate and weather-related events that are unpredictable.”

The impact on insurance has been severe, Mr Kelly says. “You can’t say we’ll have a benign period at this time and we can be sure our investment income will stay the same.

“If you take out the ability to make big returns on investment, as is happening now, then take out the ability to be predictable about [catastrophes], all of a sudden you’re sitting around the boardroom table saying, ‘we’ve got to write for profit, because we have to give our shareholders a return’.

He says the investment community “which has invested billions in local insurers” is putting pressure on them to plan for profit.

“There’s no more cavalier approaches to capital by the major insurers, and that’s why I say there’s no more cycle, it’s just about profit.

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“Market share, while it’s important, isn’t the be-all-andend-all of running an insurance company anymore, profit and the bottom line are what it all has to be about.”

This change in emphasis means the competitive nature of the industry has had to change, he says. “Competition is about investors putting capital in for capital gain because of the efficiency of the insurance company.”

There are other, related, factors forcing change in insurers’ long-established attitudes to profit. “I can’t see interest rates rising in the foreseeable future. I can’t see a change in APRA [Australian Prudential Regulation Authority] requirements on risk, or APRA allowing a more flamboyant approach to investment.

“All I can see is the cost creep that’s going to be aided by inflation. There’s going to be inflation niggling you at the bottom line. So from an investment point of view I don’t think [insurers] are going to get much in the way of returns on capital allocation at all.

“APRA is saying don’t take on a risk without having the capital behind it, and the reinsurers are deciding they really should make money out of reinsurance. So the market is the market – make a profit!”

He says insurers around the world have changed in the ways they regard risk.

“The ability to be coming off big profits that enabled you to write business that carried heavy risks isn’t there anymore,” he says.

While premiums in many classes are continuing to rise, Mr Kelly rejects any suggestion of “gouging”. “All they’re trying to do is get back to the price they should have been getting in the beginning.”

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“That’s part of the future: to get efficiency in the claim process and the consumer satisfied.”

The risk management tools, called iSurveyRisk, iProfileRisk and soon to be launched iMonitorRisk, allow brokers to progress from “merely comparing this year’s premiums with last year’s to analysing the client’s risks – including some the client may not even know they have.

It may be regarded as a powerful new aid to brokers, but Mr Kelly ruefully admits the concept “had a gestation period longer than an elephant’s”.

The risk management tools are initially focused on Australia and New Zealand, but he says they have been “built for a world stage, using global information”.

“The nuts and bolts of them are built on a world standard, and we can particularise them for other jurisdictions without much difficulty”.

Mr Kelly points out that that the risk management role was once the domain of insurance companies’ inspectors, who advised the client.

“The broker’s job then was basically to fill out proposals and get prices. Those days have long gone. That’s why we’ve gone into risk evaluation, analysis, surveys… The advice the broker gives should always transcend price.”

And the swing to risk management advice has opened up another access point for brokers. “Crucially, the broker’s access to relevant data gives them more power in the claims process,” Mr Kelly says. “I always found it a bit bemusing that London would say they wanted an independent person to evaluate and process

a claim, so you had a situation where the broker had a binding authority, but when a claim came in you had to hand any claims over to third parties.

“Now we’re getting more pressure from insurers and from some Lloyd’s syndicates saying they want more efficiency in the claims process. The claims solution is to give empowerment to someone who works very efficiently with the underwriter. That’s part of the future: to get efficiency in the claim process and the consumer satisfied.”

So where to next in Steadfast’s quest to drive efficiency and professionalism? Could we one day see Steadfast becoming an end-to-end insurance operation, working from sales to underwriting to claims?

Absolutely not.

“Our aim is not to be an insurer,” Mr Kelly says, adding somewhat facetiously: “I stand before you a commission salesman; I am a distribution function; I am efficiency and data being moved around. But I am not a capital man.”

He points out that when Steadfast acquired listed insurer Calliden in 2014 it retained the company’s underwriting agencies but wasted no time in selling the insurance operations on to Munich Re’s Great Lakes Australia.

“We knew we could distribute product better than they could, but we also knew they could do a better job 0 as an insurer. We have no illusions.”

How can Steadfast keep expanding?

When you’re as big as Steadfast is in the Australian and New Zealand markets, further growth can become an issue.

Mr Kelly points out that Australia is actually a very small market in global terms. “The Australia continent is the size of the United States with the population of Shanghai. Let’s get realistic about where we fit in the world.

“New Zealand has $6.8 billion GWP for the whole country, so we’re really small potatoes.”

Growth means moving overseas, and Steadfast has made some significant forays into carefully chosen foreign markets.

While the move into Singapore about eight years ago hasn’t resulted in significant returns on the investment, Mr Kelly notes that Asian markets are “always a slow burn”.

The London office is purely used for liaison with underwriters, and Mr Kelly says Steadfast has no ambitions to develop a broker network into that market, but will grow the Steadfast Placements London team to accommodate

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its global network business.

Far more significant is the company’s decision last April to take a 60% holding in UnisonBrokers, a network based in Hamburg and Chicago, which has members in more than 140 countries and generates US$40 billion GWP. Now renamed UnisonSteadfast, it’s a “sensational business”, he says. “We’ll put more effort into UnisonSteadfast commencing in July, and we will build it. It won’t be a massive drain on our capital.”

A “senior Steadfast executive” will move into a new role to focus on global assets, “which indicates just how seriously we see this business”.

That brings us back to the subject of Steadfast’s continuing development of systems that assist brokers to do more, and Mr Kelly’s desire to see the company’s homegrown software rejigged for other jurisdictions.

“When we surveyed the brokers in UnisonSteadfast, technology was the number one thing they came up with,” he says.

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Crash tests Shipping delays, rising prices, labour and parts shortages are just some of the factors challenging motor repairers – and insurers

By Wendy Pugh

I

f you own a Chevrolet in Australia, at some time you’re going to need to buy spare parts from the United States. That can be an expensive proposition for insurers right now, as global shipping slows down and containers pile up in ports.

A Chevrolet owner complained to the financial umpire after shipment delays held up repairs for months.

His case has reflected carmaker, repairer, insurer and driver frustrations over supply disruptions.

The Australian Financial Complaints Authority found in favour of the Chevrolet driver on some elements in the dispute, while accepting the delays were not the insurer’s fault given the needed parts hadn’t arrived from the US. Ultimately, the insurer was ordered to pay $4410 for 49 days’ car hire and $2500 compensation and was criticised for not proactively keeping the policyholder informed on progress and for not following up with the repairer.

Covid-triggered supply chain frictions are delaying vehicle and part deliveries, elevating freight charges, fuelling used car prices and increasing rental costs.

Closed borders have also worsened skilled labour shortages.

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February/March 2022

Crash repairer AMA Group, which works closely with the insurance industry, is among firms seeing the impacts as covid variants have emerged and disruptions have rolled on.

“There are lots of pressures all the way through the repair life cycle chain and these things are resulting in increased costs of working and increased costs of parts,” AMA Group Chief Commercial Officer Andrew Mair tells Insurance News. “Ultimately, the average cost of claims will increase and that will then flow through to insureds in terms of increased premiums.”

Reporting by insurers suggests this is already the case amid efforts to mitigate some of the impacts caused by a plethora of inter-connected problems.

A shortage of microprocessors – an essential item for the increasingly sophisticated systems on modern cars – has particularly delayed new car deliveries, adding to other logistical issues slowing production.

Australia, a relatively small market and far from Northern Hemisphere manufacturers and the most lucrative trade routes, must compete for scarce shipping capacity and limited supplies of all sorts of automotive goods.

After arriving in local waters, vessels can then

languish offshore if a positive covid case emerges among crews, while vehicle import processing bottlenecks are occurring at some Australian ports.

“The impact of the pandemic on supply chains has meant that we have seen an increase in claim costs largely due to shipping delays and the cost of freight, which has risen significantly,” Allianz Australia General Manager Short Tail claims Danny Adams tells Insurance News.

“Subsequently we have seen an increase in the duration for vehicles to be repaired, which has had a further impact on hire car costs, with customers needing to keep their hire car for a longer period of time.”

Auckland-based insurer Tower points out that a high proportion of materials are imported for motor, home and contents claims across New Zealand and the Pacific, and supply chain problems can have material impacts.

The insurer has raised premiums and worked with suppliers and its networks to moderate the effects, as outlined in its annual financial report.

“Supply chain issues for new vehicles drove up the value of second-hand vehicles by 13% year on year, significantly increasing the cost of total loss motor claims,”

Chief Executive Blair Turnbull told the February annual general meeting.

“The Covid-19 lockdown late in the year resulted in higher levels of open claims, and therefore higher claims costs, due to significant delays in completing repairs as repairers struggled to obtain parts. We have taken decisive action to address these challenges.”

A new vehicle delivery date estimator on the Price My Car website recently showed average wait times of 243 days for a Kia Carnival and 241 days for a Toyota RAV4. The Volkswagen Polo had the shortest waiting time, with 22 days. The overall average waiting time for a new car in January was 118 days, compared with 39 days in March 2020.

Used car prices have surged in a knock-on effect as owners retain ageing vehicles for longer and potential buyers search for local options available to drive straight away.

Mr Adams says Allianz is seeing an increase in the cost of total losses for market value policies, which is only partially offset by stronger salvage values, as a result of the booming second-hand car market.

“On policies where we offer a replacement vehicle option we are seeing delays sourcing new vehicles,” he

Under pressure: supply disruptions have hit the car repair market

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February/March 2022

25

Finding solutions: AMA Group’s Andrew Mair

says. “In cases where the delay is unacceptable to the customer, we are offering cash settlements at the full retail value and forgoing our dealer discount.”

Cascading pandemic impacts have added to labour shortages faced by crash repairers. Many were partially reliant on overseas personnel, shut out by border closures, and some staff opted to return to their countries of origin. Local covid restrictions have additionally affected staff availability.

Panelbeaters and spray painters have been in short supply, and smash repairers are competing for key skills with other industries, such as the mining sector, which is also chasing personnel. Wages in mining are, of course, higher.

“With the pandemic, everyone was in shock for the first part of the two years, and it took a little while for all the ramifications of the lockdowns and the border closures to work their way through the system,” Mr Mair says. “But there aren’t many industries that are untouched.”

Pandemic and supply chain tensions have also coincided with new claims handling regulation and the introduction of a revised general insurance code of practice that holds the industry to higher standards.

Mr Mair, who joined AMA after previously working with Suncorp, says the repair firm is working closely with insurers on managing customer expectations from the start of the claims process.

“People are reasonable, and given everything that is going on in the world, from hospitals to transport,

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everyone understands there are delays at the moment,” he says. “The important thing is still to communicate with people about what is going to happen.”

While supply chains are stretched, insurers have benefitted from relatively empty roads and fewer collisions as cars stayed in garages during the pandemic.

Suncorp and IAG half-year results show the two dominant personal lines insurers have also been putting through motor premium increases to offset claims inflation and have been seeking to improve repair process efficiencies.

IAG is increasing the number of sites operating through its Repairhub joint venture, which aims to get cars back to policyholders more quickly, and is seeking to benefit from economies of scale on parts procurement. The inflationary pressure coming through in Australian personal motor and home is forecast to persist for a while yet.

“We expect that to be there for about another six-12 months before supply chain pressures ease,” IAG Direct Insurance Australia Group Executive Julie Batch told an analysts briefing.

Suncorp reported its first-half net loss ratio in consumer motor was “broadly flat” as pricing increases and management of claims costs mitigated inflation impacts.

Chief Executive Steve Johnston says the group’s motor business has continued to see some frequency benefits as people have continued to work from home and limit movement in response to the omicron wave and

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“There is an opportunity to take some heat out of the system by using more recycled parts, and from an environmental point of view it is also a win.”

rising case levels in January.

“While we don’t have formal lockdowns, people are travelling less,” Mr Johnston tells Insurance News.

“Patterns of behaviour have changed, Some to the positive and some to the negative in terms of frequency.

“People are less on public transport and are driving their own vehicles, which means more cars on the road, but equally with high case numbers, and people a bit anxious they are not travelling as much. They are bunkering down, or they were through the peak of this infection phase.”

How long that situation persists remains unclear and insurers are monitoring developments. Road travel and crashes may increase and add stresses into the system as public transport use remains low and supply chain issues continue in a possible scenario that could heighten challenges.

Rental car companies are among firms that have been hit by pandemic movement trends on the way down and on the way up. Globally, rental companies that sold vehicles early as leisure and corporate travel collapsed have now found cars are in short supply.

The price of rentals, their availability and the likelihood they will be needed for longer periods of time are among factors insurers have had to take into account.

Allianz’s Mr Adams says domestic claim volumes, excluding catastrophe events, have increased 25% since the height of the lockdowns in the 2020 June quarter as states have eased lockdown restrictions and mobility has increased. But claim volumes are still 10% below 2019 levels.

The increase in claims cost is not expected to normalise until well into this year when the availability of parts and replacement vehicles improves, while traffic

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volumes and crash trends will be influenced by the severity and infectiousness of new covid variants.

The pandemic and supply chain shortages has led to some calls for fresh thinking from insurers and repairers. AMA’s Mr Mair says greater use of recycled parts is an area where changes could be made.

Some policies require new replacement parts to be used, while recycled parts also seem to have a “cheap and nasty” stigma attached – although they can be as good as original manufacturers’ equipment, he says.

“When a two-year-old BMW gets hit on one side, all the other panels are still very new and there is nothing wrong with them,” he says. “There is an opportunity to take some heat out of the system by using more recycled parts, and from an environmental point of view it is also a win.”

Mr Mair says arrangements between insurers and repairers also need to recognise pressures the sector is experiencing, with many smaller businesses in the industry particularly challenged by volume uncertainties and cost increases.

“A lot of the business practices and models that have worked for insurers and repairers in the past haven’t necessarily weathered the storm well,” he says.

“They have not been shown to be as effective in these difficult times as they were in good times.”

Constantly easing travel restrictions and more relaxed quarantine rules are expected to improve local logistical problems and transport delays, although predictions remain fraught, and there are few quick solutions to the difficult issue of skilled labour shortages.

As Australian businesses respond to international developments and manage local variabilities, people awaiting new cars and completed repairs may still 0 experience frustrations for some time yet.

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Mind the gap Women in insurance say the industry could deal with the shortfall in pay compared to men with a bit more genuine effort and transparency

By Miranda Maxwell Not fixed: Simone Dossetor says unconscious bias is still a problem

32 insuranceNEWS

C

onfidentiality around salaries and prioritising short-term bottom lines is holding the insurance industry back from closing its stubborn gender pay divide, according to senior women working in the sector.

Statistics published recently by the Workplace Gender Equality Agency (WGEA) say the financial and insurance services sector has a gender pay gap of 29.5%.

While the gap is down from 37.5% in 2015, it is still the second-worst offender of all Australia’s industries, just behind construction (30.6%).

WGEA’s financial and insurance services survey covered 257 organisations and included banks and superannuation firms as well as insurers.

Its survey of general insurance alone examines 21 insurers and more than 13,000 employees – of which 54% were woman. It reveals a narrower gender pay gap of 24.7% – down substantially from 30.4% in 2015 but still wider than the all-industries gap of 22.8%.

Gabriele McDonald, the Managing Director of underwriting agency Protecsure and a long-time prominent figure in mentoring young entrants to insurance, says the industry must actively sign on to consciously closing the gap – and this means it must “make the necessary financial commitment”.

“In reality, this could be addressed a lot quicker than it is if the company sentiments were genuine,” she tells Insurance News during a series of interviews leading-up to International Women’s Day, March 8.

February/March 2022

Sydney-based Ms McDonald, who has previously worked in senior commercial insurance roles at Suncorp and Allianz and joined the Protecsure board as an executive director in 2015, says a lack of transparency and an attitude that money is the “last taboo” is holding the industry back.

“We should celebrate the businesses that are committed to equality and call out those that aren’t,” she said.

“Unfortunately, salary data isn’t readily available to an employee unless all your colleagues are sharing their salary information at the water cooler.”

WGEA Director Mary Wooldridge agrees businesses promoting transparency and making efforts to progress on gender equality in the workplace should be commended.

The 21 general insurance companies that reported to WGEA in 2021 and agreed to have the results made public were the local divisions of Aioi Nissay Dowa, Avant, Berkshire Hathaway Specialty, Catholic Church Insurance, Chubb, Eric, FM, Genworth, Guild, Hannover Rueck, HDI Global Specialty, Liberty Mutual, MDA National, Munich, QBE, RACT, RACWA, Steadfast, Hollard, Youi and Zurich.

“We applaud employers who are taking their pay gap accountability even further and reporting this data in public reports or on their websites,” Ms Wooldridge says, adding that allocating resources and investigating

inequality really matters.

For example, despite its second-worst pay gap ranking, financial services boasts one of the strongest rates of reduction in the gender pay gap over time – shrinking the gap by more than 9 percentage points in around eight years.

She says “it’s no coincidence” that the financial and insurance services sector also had a commendable 76% of organisations – the highest proportion of all industries – conducting pay gap audits last year.

Businesses with accountable audits saw an average reduction of 3.3 percentage points in their gender pay gap in just a year.

Insurtech Australia Chief Executive Simone Dossetor, formerly Chief Operating Officer at Munich Re in Australia, says she still comes across unconscious bias in terms of executives “not really getting it and it being all about communicating and marketing their strategy rather than actually doing things”.

“That is the frustrating part. We are trying to say it will happen. For the past few years people have said ‘We will just get them from university and they will stay’, and that hasn’t happened,” she tells Insurance News.

“There is some progress but I think it could be much

better. Companies have just said they’ll do it and put up a target and do a marketing campaign and it hasn’t gone anywhere”.

She says industries such as banking and mining have demonstrated that closing the gender pay gap can be done, and they illustrate the need to think differently about leadership, role and skillsets and “make difficult decisions”.

“Companies want to fix the pay gap but then don’t want to affect the budget,” Ms Dossetor says. “You are going to have to do a step-change which affects profitability as a once-off.”

The conversation has progressed from just gender towards diversity more broadly to making sure insurance teams as a whole are representative of general society. One tangible and noticeable shift, accelerated by covid, is a change in the role both genders play in work, home and family life.

Men taking on parental responsibilities is “one of the biggest things helping women get senior roles, and to being inclusive,” Ms Dossetor says.

“We’re all working from home with covid and that then levels the playing field, which has been one of the challenges.”

Protecsure’s Ms McDonald agrees a desire to lead, having family support, access to childcare and changing social views have all played a part in the journey of women toward workplace equality.

“It’s not just the businesses that needed to change – there have been many other factors that had to change too,” she says, noting that insurance has undergone a multitude of significant working shifts during her years in the industry.

“I’m not going to say it’s perfect, but we have come a long way from the stereotypical secretary in the short dress making coffees,” she says. “If you truly want to achieve something you can, but you need to set yourself up for success.

“This means being the best person for the job and working in a business that promotes people accordingly. If you’re in a business that still has ‘jobs for the boys’, then you’re in the wrong business.”

She encourages women to know their worth, and says while mentoring young women she has witnessed them undermining their own value by selling themselves short in job interviews when asked their salary expectations.

Role models are key, because it’s “easier to aspire to something that’s real”. On the thorny issue of gender quotas in senior roles, Ms McDonald agrees it’s a “contentious topic”, but perhaps a necessary evil.

Pushing for commitment: Gabriele McDonald

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Listening to all: an inclusive culture is key, says Alana Garnett

“Sometimes they’re needed to force change,” she says. “I know women who have clearly been overlooked for a role, but I also know of businesses that have tried to hire senior women and haven’t had any women apply for the role.”

There are opportunities tuned solely for women, such as BizCover’s Women in IT scholarship, which is open to Australian-based female final year undergraduate students studying a bachelors degree in business information systems, advanced computing, design computing or computer science and technology.

Only 28% of Australian IT employees are female, and only a quarter of IT graduates are female.

Insurtech Australia has seen a number of female-founded entities emerging recently, with the women involved being attracted to setting their own career path.

Ms Dossetor says the digital transformation in insurance is an opportunity to drill down into why valued technical skill hires “always tended to be men,” why males are successful in those roles and what it is about that skill set that has paired with masculinity.

“As the skills that are needed in the industry change, we need to make sure that along with that we bring a whole range of people,” Ms Dossetor says.

There are now more women occupying leadership roles in the industry, moving into the C-suite, guiding companies and even industries. Obvious examples are Sue Houghton and Dianne Phelan, the first female presidents of the Insurance Council of Australia and National Insurance Brokers Association respectively.

“Now it is not as unusual, so it is not as commented on,” Ms Dossetor says. “Women are now starting to take those next-level leadership roles.

“We have progressed in the conversation over the

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past 10 years. When I started my career there were maybe eight men in the leadership team and one woman, and still here I am – I was the one woman in all my executive roles over the past 10 years. So it seems like it hasn’t really changed.”

She advises young women to seize opportunities, take ownership of their own career path and “not wait for someone to deliver it to you”.

New Zealander Alana Garnett, winner of the broking sector category Making a Difference recognition award from the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), says it is vital to foster a culture in which everyone feels heard, management is approachable and there “isn’t any stepping on someone’s toes”.

“That’s when you are going to see your business flourish,” Ms Garnett, who is Bridges Insurance Compliance and Office Manager, tells Insurance News.

“I firmly believe that. Culture eats strategy for breakfast. If your culture’s not right there’s just no point.”

The Bridges directors have successfully created an inclusive culture, she says, with “no one on a pedestal” and everyone welcome to approach senior management.

“They lift the women up to be their very best. We support each other. There’s a lot of equality. It is open, honest and collaborative, and everyone empowers everyone. It’s what you want and that’s where a lot of our success comes from.”

Protecsure’s Ms McDonald says there is “no silver bullet” to fixing the gender pay gap in insurance and financial services, but persistence and scrutiny is vital.

“We need to keep chipping away at holding business leaders accountable and nurturing women to have the confidence to believe they are good enough,” she says. 0

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Looking beyond Christine Bell sees positive times ahead for Swiss Re Corporate Solutions as businesses take a fresh look at how to manage risks

By Wendy Pugh

C

hristine Bell has taken up the top job at Swiss Re Corporate Solutions in Australia at a critical – and opportune – time following a period of disruption.

Natural catastrophe losses are testing underwriters globally, businesses are facing insurance market challenges and there’s debate about what the “new normal” will look like as firms reconsider their risk exposures.

“I’m not sure we know what a ‘new normal’ actually is, but for all of the uncertainty it has brought, the anxiety, the stress – there has been an abundance of that – I do feel the pandemic has probably taught us many things as well,” Ms Bell tells Insurance News.

“We have probably all learned a great deal around resilience, and from a business perspective it has really put the emphasis on business continuity plans, risk management, and really thinking about the ‘what if’ scenarios in an organisation.”

Ms Bell was named Swiss Re Corporate Solutions Country Head Australia and New Zealand in the middle of last year, taking up the role in August. Previously she was Chubb State Manager NSW/ACT and has held significant roles at QBE and Vero during a three-decade career that started with AMP. “Swiss Re Corporate Solutions is synonymous with innovation, and it’s an organisation that is all about sustainability and making the world more resilient for future generations, which is inspiring,” she says.

The global primary insurance arm of Zurich-based Swiss Re Group has had its challenges in recent years, leading to pricing increases, portfolio pruning and expense savings. The unit reported a net income rebound in the first nine months of last year and was on track to achieve its profitability target.

“Having observed its turnaround journey as an outsider, the opportunity to contribute to the company’s growth journey is absolutely what drew me to the role,” Ms Bell says.

When she arrived at the company’s Barangaroo base a lot of heavy lifting had already been done around reviewing the strategy and resetting the business. She says it was an opportune time for someone new to come into the local operation, and to bring

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fresh eyes in taking it forward.

Swiss Re Group dates back to 1863, while Corporate Solutions began in 2007, and has some advantages as a relative newcomer that can draw on the global firm’s strengths.

“We are not encumbered by legacy technology systems, and I feel that helps differentiate us in this market,” Ms Bell says. “In addition to that, it’s an organisation that continues to make investments not only into data and digitalisation, but also into operational efficiency, underwriting discipline and excellence.”

The insurer has traditionally been recognised as a property and energy underwriter, with a strong lead position in the mining sector. In other segments it has been more a provider of additional layers of cover.

“We are focusing on our next phase of our journey, which is to make our strategic repositioning sustainable and resilient through market cycles,” Ms Bell says.

The business plans to expand its position as a primary lead underwriter for property and liability, including in mid-market and commercial risks, and is diversifying the portfolio through long and short-tail products, with a renewed focus on primary casualty, and expansion of the professional indemnity and executive risk portfolio.

“The other exciting part of our growth strategy also includes a really strong focus on our international program business in all the primary markets,” she says.

The insurer is increasingly focusing on innovative services that go beyond traditional risk transfer, aiming to get closer to customers and enabling it to understand their data and gain greater familiarity with their businesses and their requirements.

The emphasis on sustainability has included investments that enable clients to quantify the impact of physical climate risk on portfolios currently and into the future.

Climate is one of the biggest risks for the insurance and reinsurance industry and is a priority for the business and its customers, she says, while Swiss Re in general has a strong focus on environmental, social and governance (ESG) issues.

“Through our group sustainability strategy we aim

Fresh pair of eyes: Swiss Re Corporate Solutions chief Christine Bell

to reinforce our efforts to make the world more resilient, which involves managing and monitoring risks and opportunities associated with ESG issues,” she says.

“We are focused on long-term value generation, and this sometimes means we reduce our underwriting activities in a particular sector that we don’t consider sustainable, such as thermal coal, or that we stop investing in companies with poor ESG ratings.”

Swiss Re has also expanded in parametric products, an alternative option that can deliver fast payments based on pre-set triggers. The products, which have a rising profile in the northern Australian cyclone context, have application beyond wind damage and are continuing to evolve.

“By no means have we set what our offering is and locked it in there,” Ms Bell tells Insurance News. “We are continuing to learn, particularly as we talk to customers and understand new pressure points that they are facing with their businesses.”

She says the issues around covid have compounded a hardening market, with firms in the most affected sectors facing budget constraints. An “asset heavy to asset light” shift is taking place in the business world.

“It’s unsurprising that we are seeing more customers re-evaluating their retention strategies and reconsidering what risks they should transfer, retain or possibly self-fund by other means, and I think we have also observed an increase in risk awareness.

“Many companies were taken by surprise by the extent and the severity of disruption caused by the pandemic. It’s not an exposure that risk managers probably had at the top of their minds, and this has made corporations more alert about the potential gaps in their insurance programs.”

Businesses relying more on intangible assets are looking toward different approaches

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to complement traditional insurance programs, including tailored structured insurance solutions.

Interest in self-insurance arrangements, generally referred to as captives, has seen the insurer offer “virtual captives”, which keep the risk off the client’s balance sheet and leverage Swiss Re Group’s financial strength.

“We are seeing a rising interest in hard-market solutions, which are designed to provide longer-term certainty in this volatile market and optimise self-insured retentions,” Ms Bell says. “As needs are changing, we really have to think differently about what our customers need.”

Longer-term, covid has highlighted social inflation as an emerging risk for the insurance industry, she says.

Heightened societal expectations are being addressed via the legal system, resulting in larger legal costs, while the pandemic is also heightening the complexities of workplace safety risks, particularly in the most exposed sectors.

“I think everyone is doing their best to do a good job there and put the right measures in place and protect their people, but we don’t know what is to come,” Ms Bell says.

Remote and hybrid working and other changes to traditional office-based arrangements have also had implications for management styles.

Ms Bell says while senior positions come with common deliverables around strategy, achieving plans, driving change and shaping culture, how executives lead is critical to effectiveness.

“Reflecting on what we have faced over the past two years shows that leadership styles need to adapt, and they need to adapt as our workforce adapts,” she says.

“What I feel it has really shown is that leaders need to embrace flexibility and technology as key enablers of doing business.”

Trusting and empowering staff to make decisions

around managing workloads to deliver on business priorities and individual goals also goes to challenges around attracting and retaining talent, she says.

“Having been in this industry a long time, in the early days it seemed like there was this endless pool of talent we could tap into,” she says.

But in the current competitive environment, the industry has to ensure it is clear about what it offers employees in terms of career paths, personal growth, and the sector’s diversity of opportunity.

“That is an area that has really changed over the past few years and is something that many businesses have been conscious of,” she says.

Amid other changes, insurers and policyholders have recently seen a “whirlwind of activity” in the broking community, with mergers, new entrants and significant movement of individuals between organisations.

“If I look at the short-term, this change within the intermediary space limits the potential for a softening of terms and conditions and pricing in the market, because brokers are really needing to establish themselves in a new status quo.”

At the same time there is increased tender activity, particularly in the large risk management account space where the insurer has a significant footprint.

“For an organisation like Swiss Re Corporate Solutions, our focus on innovation and alternative risk transfer and offerings to customers puts us in a pretty good situation where customers will be able to see what we can offer them,” she says. “From our perspective it creates a great environment.”

Ms Bell says the insurer has established a sustainable base that has set it up for the future.

“I can really see the opportunities to build on the momentum that has been achieved so far, to diversify our portfolio, grow and partner with our brokers and customers and go together on that journey forward.” 0

Hitting the fairways Golf has attracted many converts as an ideal sport for a time of social distancing and lockdowns, and Christine Bell is among those to have discovered its advantages.

It’s a preoccupation she shares with many insurance people, although she had previously seen the sport as too time-consuming.

“I wasn’t actually a fan of golf,” she says. “I didn’t really know the rules, but I took up golf and learned to play, and now it’s something our family do together.”

Ms Bell now has a Golf Australia handicap, which she is aiming to improve, is playing competitions and has a new appreciation for all the sport has to offer.

“In the local competitions there are people in their 90s still playing golf. It is something you can do no matter what your age, and best of all we can do it as a family,

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and I really enjoy that.

“To have four and a half hours with a teenage son not on a screen is pretty unique time.”

Golf was a “permitted activity” during Sydney’s lockdowns, and Ms Bell found opportunities to sample courses on family holidays in NSW while state and international borders were closed.

She is also a long-time avid snow skier, enjoying visits to Northern Hemisphere slopes during Australian summers. She now has some additional ideas for future international travels.

“I typically in the past researched ski fields around the world and that consumed my interest. Now I have funnily enough started to look at the world’s great golf courses!”

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Clear and present dangers Businesses fear inaction over worsening climate change, cyber threats and other risks could derail their pandemic recovery

By Bernice Han

F

ebruary 1 heralded the start of the Year of the Tiger, an animal symbolising strength and bravery. Australian business leaders – like their counterparts around the world – are going to need plenty of both in 2022.

With the pandemic entering its third year, the World Economic Forum’s (WEF) Global Risks Report finds the mood overwhelmingly downcast as the coronavirus shows no sign of going away.

The covid health crisis and its long-term side effects on the global economy are not the only issues preying on the minds of C-suite executives, according to the annual WEF report produced in collaboration with Marsh McLennan, Zurich and other partners.

Business leaders have told the researchers that damaging extreme weather events, climate change inaction, worsening cyber crime and other pressing problems pose grave threats to the world economy.

Released ahead of the virtual Davos summit in January, the report’s Global Risks Perception Survey brings together the views of more than 12,000 respondents.

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Asked for their outlook for the world over the next three years, only 10.7% said they believe economic recovery will accelerate during the period. About 23% say they are “worried”, 61.2% describe themselves as “concerned” and only 15.8% feel “positive” or “optimistic”.

In Australia, business leaders say their top shortterm risk in the next two years is cyber security measures failing. This is followed by extreme weather events, climate action failure, infectious diseases and debt crises in large economies.

Globally, the top short-term risks over the next two years are extreme weather, livelihood crises, climate action failure, social cohesion erosion, infectious diseases, mental health deterioration, cyber security failure, debt crises, digital inequality and an asset bubble burst.

Scott Leney, the Head of Risk Management Marsh Asia & Pacific, tells Insurance News the “sombre” mood is “understandable given the disruption that business and society has encountered over the last two years and the ongoing fatigue about the pandemic’s future path”.

He says the next two years will be “primarily about

resilience” as businesses look to navigate the challenging environment.

Tellingly on the climate change front, there are grave concerns that the world may fail to avert a catastrophe, resulting in knock-on effects on the environment over the next 10 years.

Climate action failure, extreme weather, human environmental damage and biodiversity loss are medium and long-term global risks, the report says, reflecting a widespread consensus that too little is being done to save the planet. About 77% of the WEF survey respondents said international efforts to mitigate climate change haven’t even started yet or are in “early development”.

A global risk is the possibility of the occurrence of an event or condition that, if it occurs, could cause significant negative impact for several countries or industries.

“The climate crisis remains the biggest long-term threat facing humanity,” Zurich’s Group Chief Risk Officer Peter Giger says in the report.

“Failure to act on climate change could shrink global [gross domestic product] by one-sixth and the commitments taken at COP26 [the United Nations-led climate change conference held in Glasgow last year] are still not enough to achieve the 1.5-degree goal.

Striking a hopeful note, Mr Giger says it’s “not too late for governments and businesses to act on the risks they face and to drive an innovative, determined and inclusive transition that protects economies and people”.

The Global Risks Report says accelerating and widespread climate change manifests itself in irreversible consequences.

“Without stronger action, global capacity to mitigate and adapt will be diminished, eventually leading to a ‘too little, too late’ situation and ultimately a ‘hothouse world scenario’ with runaway climate change that makes the world all but uninhabitable.”

In the meantime, efforts to progress the green transition are being disrupted by covid economic recovery measures that mostly favour short-term stability at the expense of sustainable decarbonisation initiatives.

The report points out that some “business actors” have continued efforts to slow the green transition away from carbon-based energy.

“Climate-sceptic lobbying, ‘greenwashing’ [falsely

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claiming climate-unfriendly products are environmentally sound] and sowing misinformation and distrust about climate science remain pervasive in many countries,” the report said.

Cybercrime, already a big problem before covid, ballooned into an even bigger one during the pandemic in the past two years, the report says.

In 2020 alone, malware and ransomware attacks increased 358% and 435% respectively as cyber robbers pounced on the business community’s overnight shift to remote working when the pandemic broke out.

While the “digital is everything” mindset has proved crucial for businesses because it allowed them to continue operating smoothly during long months of pandemic lockdowns, the dependence on technology has also come at a high price: worsening cyber attacks.

Not only have breaches surged sharply, so have the tactics used by cyber criminals to hold hacked businesses hostage for ransom payments. The report says attacks themselves are also becoming more aggressive and widespread.

Insurers have already responded to the deteriorating cyber landscape. In the US, the largest cyber market, insurance pricing rose 96% in the third quarter of last year, marking the most significant increase since 2015 and a 204% year-over-year increase.

And it could become even more costly to acquire cyber protection. Businesses fear they are playing catchup to the cyber criminals. Lower barriers to entry for cyber-threat actors, more aggressive attack methods, a dearth of cybersecurity professionals and patchwork governance mechanisms are all aggravating the risk.

“Cyber risk is ubiquitous and cyber cecurity is not set and forget,” Mr Leney tells Insurance News. “The constant game of cat and mouse between the [chief information security officer] and cyber criminals is growing exponentially.

“The cyber security of organisations’ needs constant review and updating in order to keep them working effectively and efficiently.”

In this the Year of the Tiger, businesses will indeed need to draw on every ounce of strength and bravery to overcome the risks that threaten to throw them off course.

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Safer strategy: IAG was able to view drone images following severe fires on the Great Ocean Road

Flying high Insurers see drones as a way to revolutionise claims processes through safer, more efficient inspections

By John Deex

T

echnological developments are often talked about but most never seem to quite make it in practice.

That’s not the case with drones.

The potential of unmanned aerial vehicles (UAV) to assist with insurance claims – especially rooftop surveys – was flagged years ago, and now it’s being realised with thousands of inspections carried out every year.

Leading drone network AirAssess, which has partnered extensively with IAG, tells Insurance News its work with insurers has spiralled over the past five years.

It has now carried out more than 45,000 inspections, and co-founder Anthony Marsh says he’s looking at ways to expand the service further.

The format is simple enough. AirAssess provides a network of 250 vetted drone pilots across the country, and liaises with insurers or their builders via a specialised web platform to get inspections completed quickly and efficiently.

It’s great extra work for drone pilots, many of whom might have tried to launch their own businesses before discovering it isn’t quite that simple.

But it doesn’t end with the inspection photos.

AirAssess then prepares a report based on the images secured by the drone.

“At the end of the day most insurers want a PDF that says whether a claim should be paid,” Mr Marsh says.

“We found they didn’t want to sit there scrolling through 100 photos.

“When a job comes into our platform we can see all the pilots nearby, when they’re available and then we can allocate them a job with one click. They do the inspection and upload the photos to our platform. Then our plumbing and reporting team pull it through and write a report.”

Mr Marsh says the benefits of a drone inspection are clear to most insurers. And because his company doesn’t venture into the repair side, there’s no real

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Easy access: AirAssess co-founder Anthony Marsh carries out a rooftop inspection using a drone

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concern from tradesmen about losing work.

Independence, safety and thorough objectivity are key, he says.

“If the builder sends a plumber and they write the report, and do the scope of repair and then the repair, there’s a lack of independence. We provide that.

“The imperative for IAG was safety. A couple of people in the industry have fallen off roofs and didn’t do too well.

“IAG had a huge desire to eliminate risk, and the drones are very small and incredibly low risk. The risk compared to climbing on a roof is tiny.

“And it’s objective. A plumber is really only looking at what is in the claim details. Someone will say ‘I’ve got a leak above my kitchen, I think it’s my skylight’.

The plumber goes and looks at the skylight, takes a photo and writes a report.

“Every inspection we do we inspect the entire roof.

And the good thing is if we ever need to go back, we always have the image of the roof at that point in time.”

Mr Marsh says privacy concerns about drones are misplaced. Any neighbours seen on imagery during a rooftop inspection are pixelated, and he says it’s not much different to a plumber being on the roof with a smartphone.

But AirAssess still wants to do more. It’s working with the Civil Aviation Safety Authority (CASA) to iron out some concerns that are preventing larger scale studies of towns or regions being completed.

This could be very useful to insurers following a large-scale catastrophe, Mr Marsh says, because the resolution from drone imagery is better than that from satellite or planes.

February/March 2022

But there are certain rules in place that currently make it tricky.

“You’re not allowed to fly within 30 metres of a person, and you can’t fly near a controlled airport,” Mr Marsh says. “Now that we are well established we are looking at how we can fly in some of those trickier parts.

“But we are working with CASA towards getting regular regulatory approvals so we can fly near some of the busier airports.

“We’re trying to get an exemption to fly in ‘populous’ areas. Google is one of the few companies to have an exemption, for delivering coffees and other goods.

We are trying to go down the same path.”

AirAssess has also developed AirPass, a CASAcertified drone safety app that tells pilots where they can’t fly and why.

Mr Marsh says AirAssess already goes beyond just rooftop inspections, and thinks there’s still “huge untapped potential” for drones.

That could include maintenance or audit inspections, and the company already does fire work.

“In one chemical plant fire we actually flew the drone inside the building while it was still smouldering.

“The fire service sent a robot in and the robot got stuck. We just flew in slowly and we were able to see what the internal damage looked like.

“Sending a human into a live fire is pretty dangerous. Sending a drone, if you lose it, it’s not a big deal.

“Drones aren’t the silver bullet to every problem.

But it’s about finding the areas where they give the most value.”

IAG says it’s always looking at the latest technology

for new ways to provide the best possible claims experience. Keeping assessors safe following fires, floods or storms is also a top priority.

“There’s a range of safety issues that we have front of mind while also completing property assessments as quickly as possible,” Executive General Manager Direct Claims Luke Gallagher tells Insurance News.

“That’s why when the opportunity came to look at how we could use drone technology to provide a safer, more efficient claims assessment process, we jumped at it.”

IAG says it was the first insurer in Australia to use drones to capture damage caused by the devastating Christmas 2015 Wye River and Separation Creek bushfire in the Great Ocean Road area of Victoria, where more than 100 homes were lost.

“As news of the severity of the bushfire started to come through, we immediately arranged for our teams to be sent to the area to support our customers,” Mr Gallagher said.

“We knew the steep terrain would make access very difficult, on top of the other safety issues on the fireground, so through a property repair partner we used drones to inspect our customers’ properties before physical on-the-ground access to the area was granted by the emergency authorities.

“We conducted 87 drone assessments and we worked with the Country Fire Authority throughout the process to ensure the use of drones would not impact firefighting efforts.

“Aerial imagery shot by the drones allowed our assessors and customers to review the damage from a safe location, removing the risks associated with a physical site visit.

“That meant we were also able to lodge our customers’ claims immediately and start working through the next steps around planning repairs and rebuilds, which is also a crucial step in helping people and communities recover from what is an incredibly stressful and distressing experience.

“We had really positive feedback from our customers, while also ensuring the safety of our assessors and partner builders.

“Since then, drone technology has advanced very quickly and over the past few years, drones have become easy to buy and affordable, with high-quality imagery.”

IAG says in Financial Year 2020 it arranged 15,293 drone assessments of properties across the country.

The following year that fell to 9621, due to more builders buying drones as part of their own for assessing roof and property damage.

“Understanding the benefits of using drones for property assessments also meant we had confidence in quickly adopting virtual assessments for property claims,” Mr Gallagher says.

“These tools have complemented each other and

have been particularly important given the impacts of Covid-19. We were able to move quickly to reduce the need to visit our customers’ homes while also ensuring their claim progressed as quickly as possible.

“The additional benefit is we’re able to share the insights from the drone assessments with our customers to help them understand the condition of the roof and where maintenance may be required, which helps them to be better prepared before the next wild weather hits.”

Suncorp says it’s working with insurtech provider Arturo to apply artificial intelligence models to aerial imagery to see damage and distribute critical data insights following a severe event.

The technology – which uses drones and other image sources – is fed back to Suncorp’s new Event Control Centre where it’s layered over pre-captured imagery of the area to generate a detailed report on damage exposure.

“It means that teams in Suncorp’s Event Control Centre can identify damage to property before a customer has even realised there’s a problem,” the insurer says.

It says it created the market-leading technology in November 2020 following the Halloween hailstorm in Springfield Lakes, Queensland.

The machine’s custom-built damage detection model gives each damaged property a severity rating and allows Suncorp to see who has and hasn’t yet made a claim. It also allows the Disaster Response Team to plan their response and prioritise customers who require urgent assistance or accommodation.

Previously, Suncorp would gather much of its damage data insights from the ground and rely on information gathered by assessors, customers and builders.

“Suncorp is using industry-leading technology to take its customer response to the next level following devastating weather events,” Head of Disaster Response & Event Claims Cath Stewart said.

“The AI technology is trained to detect severe damages including smashed solar panels and extensive broken roof tiles. By quickly identifying the extent of the damage, our teams can make calls to customers to see what support they need – whether it’s a make safe, lodging a claim or providing an assessment.

“This proactive approach and ability to quickly scale up and get boots on the ground is part of our best in claims ambition for Suncorp.”

As the technology continues to improve, so will the take-up across the industry. Drones reduce the risk to insurance staff and contractors, and speed up claims handling following major events.

“Anyone who thought drones were a fad has hopefully learned that that’s not the case, they’re here to stay,” Mr Marsh says.

The evidence suggests he’s right.

0

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Heavy weather Industry estimates of losses from last year’s natural disasters vary, but there’s solid agreement that climate change inaction will only make things worse

By Bernice Han

F

loods, storms, wildfires, hurricanes and other natural catastrophes combined to inflict yet another devastating year on insurers, in terms of economic and insured damages, prompting the insurance industry to again warn of the dire consequences of inaction on the climate front.

From the worst floods yet experienced in Germany to La Nina-induced record rainfall in eastern Australia, raging wildfires in California and the deep freeze in Texas, the manner in which many of the disasters struck adds to growing evidence of weather patterns turning more erratic and unpredictable, the result of accelerating climate change.

While Munich Re, Aon and Swiss Re differ in their overall economic loss estimates of natural catastrophes for last year – $US280 billion, $US343 billion and $US250 billion respectively – in one area they were united: the climate connection.

Trent Thomson, Swiss Re’s Australia & New Zealand Head Property & Casualty, tells Insurance News climate change continues to be one of the “most pervasive threats” facing the world.

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February/March 2022

“At Swiss Re, we see first-hand how the effects of climate change manifest in natural catastrophes, especially when it comes to secondary perils, such as floods, drought or bushfire,” he said.

“To enable affordable re/insurance in an environment where catastrophe losses are steeply on the rise, and for a nation which is vulnerable to the impacts of climate change, it is even more vital to build our future resilience through a combination of mitigation, smart planning, and financial risk management.”

Aon’s meteorologist and Head of Catastrophe Insight Steve Bowen agrees, saying the path forward for organisations and governments must include sustainability and mitigation efforts to navigate and minimise risk as new forms of disaster-related volatility emerge.

“Many global communities are exposed to increasingly volatile weather conditions that are in part enhanced by the growing effects of climate change,” Mr Bowen said.

“This includes record-setting episodes of extreme temperatures, rainfall and flooding, droughts and wildfires, rapidly intensifying tropical cyclones and late

season severe convective storms.”

Aon says its estimates show the economic cost solely resulting from weather and climate-related events – defined as being caused by “atmospheric-driven phenomena” – totalled $US329 billion last year. This makes 2021 the third-costliest year on record for weather and climate-linked disasters after adjusting for inflation, behind 2017 and 2005.

The $US329 billion figure is 45% higher than the 21st century average and 52% above the median, according to the global broker’s annual Weather, Climate and Catastrophe Insight report.

Aon says the most notable takeaway from the economic costs of natural disasters is the frequency of “large-scale and highly impactful” events. Four individual events stand out for topping the $US20 billion economic loss threshold: hurricane Ida in the US, the July floods in Europe, the summer seasonal flooding in China and the February polar vortex in North America.

Aon says the four disasters mark just the second time on record in which a quartet of loss events with damage of at least $US20 billion each has been

registered in a calendar year, with all four linked to weather or climate.

The polar vortex was the costliest winter weather event on record for insurers, with $US15 billion in losses to property and agriculture.

The vortex occurred in February last year when an area of low pressure and cold air surrounding the North Pole descended into North America. It plunged the usually mild winters experienced in Texas into a “deep freeze”, resulting in nearly a full week of Arcticlevel temperatures to an area extending as far south as the US-Mexico border.

“The February 2021 polar vortex event brought renewed focus on what potential role climate change may have on various weather phenomena,” Aon says, pointing out that the winter weather peril has historically resulted in a one or two billion-dollar economic or insured loss events on an annual basis.

Of the $US343 billion in direct economic losses and physical damage from natural disasters last year, Aon estimates about $US130 billion was insured. Hurricane Ida ranked as the costliest event for insurers, at $US36

Most expensive event: hurricane Ida smashed into Louisiana in August last year

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Under water: floods caused devastation across Europe, including Germany, in July

billion, followed by the polar vortex event.

Turning to the Asia Pacific region, Aon says the floods that inundated parts of eastern Australia in the summer resulted in insured losses of about $US700 million, making it among the top-five most significant disasters in the region.

Munich Re Chief Climate and Geo-scientist Ernst Rauch says the reinsurer’s 2021 disaster statistics are “striking” because some of the extreme weather events are of the kind that are likely to become more frequent or more severe as a result of climate change.

“Among these are severe storms in the US, including in the winter half-year, or heavy rain followed by floods in Europe,” he said.

“Even though events cannot automatically be attributed to climate change, analysis of the changes over decades provides plausible indications of a connection with the warming of the atmosphere and the oceans.”

The reinsurance giant says the insurance industry absorbed about $US120 billion in losses last year from natural disasters, making it the second-costliest for the sector alongside 2005 and 2011.

Its provisional data ranks hurricane Ida as the top loss event for insurers at $US36 billion, followed by the

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February deep freeze winter storm at $US15 billion and the floods in Germany and Europe at $US13 billion.

Swiss Re says insured losses from natural catastrophes last year reached $US105 billion, the fourth-highest since 1970 when it started tracking the financial impact of disasters.

Its preliminary figures place Ida as the top insured loss event at $US30-32 billion including floods in New York.

The July floods in Germany and Europe led to insured losses of up to $US13 billion and an overall economic hit in excess of $US40 billion.

And just as in Australia, the Swiss reinsurer called for governments to be prepared for the future by investing more in stronger infrastructure.

“The impact of the natural disasters we have experienced [last] year once again highlights the need for significant investment in strengthening critical infrastructure to mitigate the impact of extreme weather conditions,” Swiss Re Group Chief Economist Jerome Jean Haegeli said.

“Partnering with the public sector, the insurance industry is critical for strengthening society’s resilience to climate risks, by investing in and underwrit0 ing sustainable infrastructure.”

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companyNEWS 0

Expanded offering: Berkley adds PI to Steadfast platform Berkley Insurance Australia has started to offer its Professional Indemnity (PI) product on the Steadfast Client Trading Platform (SCTP), in addition to General Liability which has been available since the business joined the online marketplace three years ago.

The PI product, available since January, is aimed at miscellaneous professions where the annual premium is generally under $10,000 and doesn’t require a lot of underwriter attention.

Berkley says the professions that fall under this group include consultants, managers, educators and travel agents.

It is providing capacity of up to $20 million for the PI offering, which can be completely automated for a variety of occupations and businesses.

“The great thing about the way Steadfast has designed their SCTP… is that the system is able to ask different underwriting questions based on the occupation of the business,” Chief Executive Tony Wheatley said.

“This means that we are also able to write risks [for professionals] such as accountants, real estate agents and construction professionals.”

The PI product line has been tough in the last few years as insurer appetite took a hit from significant

claims losses but Berkley is not deterred, confident it has found the right formula for success.

Berkley expects the PI product to be as well received as its other SCTP offering, General Liability.

“There have been plenty of articles written around certain aspects of the building professions, financial advisers and financial institutions generally,” Mr Wheatley said.

“These losses are substantial and have the effect of discouraging capacity. At [Berkley] we have had a growing portfolio of SME PI for many years and whilst we have had our challenges we have not needed to react to a frequency of large claims.”

Mr Wheatley says Berkley’s aim is to maintain rate increases at modest levels to ensure the business allows for increasing costs and provide a level of certainty for customers.

“In the last three years Berkley Insurance Australia has a proven track record as the clear leader on the SCTP for General Liability,” Mr Wheatley said. “This is directly attributed to our team who continually look at improving the online broker experience.

“By adding Professional Indemnity to the SCTP we can offer even more flexibility to Steadfast brokers with 0 competitive commission and high limits.”

Giving back: Steadfast supports children’s cancer charity Steadfast Group is aiming to raise at least $5000 as part of its support for the March charity event, 86K for a Cure, by the Children’s Cancer Institute.

“This March, Steadfast is supporting the Children’s Cancer Institute charity event ‘86K for a Cure’,” the business announced.

“We are encouraging staff to walk or run 86km for the 86 children who are diagnosed with cancer each month.

“Every kilometre conquered will be dedicated to funding research that will help families whose children have cancer.”

The Children’s Cancer Institute says 86K for a Cure is a month-long fitness challenge whereby supporters can choose to run or walk throughout the month to complete 86km for the 86 children who are diagnosed 0 with cancer each month.

Zeroing in on net zero: QBE joins alliance QBE Insurance says it is now a member of Net-Zero Insurance Alliance (NZIA), a United Nations-convened bloc that brings together insurers and reinsurers to support the green transition.

NZIA members are committed to individually transitioning their underwriting portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5 degrees above pre-industrial levels by 2100.

QBE says it will work with the insurance industry to help define the methodology needed to assess the carbon intensity of underwriting portfolios and setting science-based intermediate targets.

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“We commit to the gradual transition of our underwriting portfolio to net zero greenhouse gas emissions by 2050, as we continue to also support our customers’ transition to a net zero economy,” QBE said.

“In 2020, QBE joined the UN-convened Net-Zero Asset Owner Alliance and as part of this group we are also transitioning our investment portfolio to net zero by 2050.”

The founding members of the NZIA are: Axa (Chair), Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re, and Zurich. It is convened by the UN Environment Programme Finance Initiative and chaired by Axa 0 Group Chief Risk Officer Renaud Guidée.

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peopleNEWS 0

Festive feel at awards night Christmas was in the air at the Australasian Institute of Chartered Loss Adjusters Victorian Awards held at Crown Palladium.

Snow fell from the ceiling and seasonal decorations adorned the room as more than 560 guests attended the celebratory December event, which commenced with an acrobatic cyr wheel performance.

The Loss Adjuster of the Year award was presented to Andrew Walsh of Sedgwick while Kenneth McCormack of McLarens was named Young Loss Adjuster.

Robert Dang of Sedgwick won the Bob Richards Academic Award and Monique Freund was named Loss Adjusting Support Person of the Year.

Professional Building Group was Builder of the Year and Marshall Restoration was Service Provider of the Year.

The evening also featured the drawing of raffle prizes, including a bottle of Penfolds Grange, Crown and Nike vouchers and a gift basket. 0 54 insuranceNEWS

February/March 2022

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Claims Convention provides year-end highlight The Claims Convention returned to the events program in December, providing a positive ending note for the year after it was previously rescheduled.

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Emma Curtis and representatives from the insurance industry and legal sectors.

Topics discussed at the event included climate change, business interruption, environmental impacts, regulation and technology changes.

More than 230 people attended the convention at the Four Seasons Hotel in Sydney, amid reduced interstate numbers due to covid.

The day wrapped up with a cocktail function.

Delegates heard presentations from Resilience NSW Commissioner Shane Fitzsimmons, Australian Financial Complaints Authority Lead Ombudsman Insurance

The convention is a collaboration between the Australasian Institute of Chartered Loss Adjusters and the Australian and New Zealand Institute of Insurance and Finance. 0

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T

he minister’s senior speechwriter stuck his head around my office door. “Got a minute?”

“Probably not,” I said. “I’m writing the rationale for the next shot at the Religious Discrimination Act.” “Good luck,” said the adviser, without a shred of sympathy. “He’s worn out the carpet on his side of the bed praying for that legislation.”

“Yes, well, the rationale…” I began, which he took for an invitation to step into my tiny office. “I’d like to ask you about the reinsurance scheme for northern Australia.”

I stopped typing. “Why? That’s done and dusted. The final details are being worked out right now with the insurance industry.”

“I know,” said the speechwriter. “But the minister is heading for Cairns and wants to mention it. What I need to know is why we’re doing this. That’s your role, and people tell me you’re really good at it.”

I smiled. It’s not often that the Senior Rationale Creation Officer’s skills are even noted, let alone praised.

“So what about the reinsurance pool?”

“Well, for starters, how does it work?”

“You should ask your minister that.”

“He says he’s too busy.”

We both smiled a knowing smile. In politics “too busy” means “I don’t want to do/ comment on that”. I suggested the story of the northern Australia reinsurance pool would best be explained over a cup of coffee at Aussie’s.

Settled behind a couple of large flat whites (two spoonfuls of sugar for him) I told the speechwriter what I knew. Which I now realise wasn’t very much.

I explained that north Queensland is exposed to the risk of cyclones and flood damage to the point that premiums for property insurance have gone through the roof. “There was a time when the insurance

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By Sam Pentecost Contributor

industry seemed prepared to carry the cyclone risks, but not any more.

“So high premiums became an issue for people up there more than 10 years ago, and they’re rather important electorates for the Coalition.”

The speechwriter nodded. “That much I understand. There seems to be quite a bit of research about this.”

“You’re not wrong. Going way back to Tony Abbott’s prime ministership.

Remember Tony? He got a very intelligent report that actually mentioned a reinsurance pool as an option, but it ended up in a pigeonhole somewhere. We’ve had more reports on this than we’ve had prime ministers.”

“Reports and inquiries are a great way of not having to make a decision,” said the speechwriter. “So the sudden flurry of activity in the past year was mainly about retaining the northern Australia seats at the election?”

“That’s a very cynical thing to say. We just acted on the overwhelming evidence that something needed to be done, and someone eventually looked at the first report again and realised a reinsurance pool would at least ensure the Government’s at the back of the line when it comes to paying out.”

The speechwriter frowned. “I see,” he lied. “And the reinsurance pool underlining the insurance companies’ policies will lower premiums.”

“That’s the general idea.”

“Enough to make insurance affordable again?”

I pulled out my trusty phone and looked up the file. “The Government says premium savings will be in the region of 46% on domestic home policies in the north, plus up to 58% savings on strata and up to 34% for small businesses. The PM says a pool will reduce premiums by more than $2.9

billion over 10 years.”

The speechwriter sat back, impressed.

“Wow. That’s a great solution.”

I said nothing, and after a strained silence he leaned forward, looking over his shoulder to ensure we weren’t being overheard and said quietly: “Will it work?”

The poor, naïve fool. I sipped my coffee and replied just as quietly: “The Australian Competition and Consumer Commission examined the pool option and recommended against it. And the Financial Rights Legal Centre, who are also pretty slick, say the savings on premiums might only be 3%.”

“Ouch. So the modelling is really important to back this up.”

“Yes, but I doubt we’ll see that until after the election. I might be wrong, but…”

He leaned forward on his elbows, suddenly looking weary. “Any other associated issues I should be aware of before I write this speech?”

“Well, you could consider this. People all over Australia are exposed to similarly high levels of risk from bushfires and floods.

Premiums on high-risk properties in the rest of the country are climbing. So why should their taxes be used to fund a scheme that only props up people in the north?”

The speechwriter looked up from his coffee, eyebrows twitching. He swore quietly – we were in Aussie’s, after all. “That has the potential to become a real grudge issue.

What’s the solution?”

“Are you asking me what the real solution is, or the political solution?”

“Political, of course.”

“Maybe extend the pool concept to everywhere – the insurance companies might even like that. Or put together a comprehensive national risk mitigation scheme.

“Or just stay low and hope nobody notices. I really don’t know. I’m not a politician.” 0

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