December 2021 /January 2022 - Insurance News (Magazine)

Federal Treasurer (now Prime Minister) Scott Morrison and his infamous lump of coal in Parliament in 2017.

He’s still a fan, but underwriters are not. See article, Page 8

DETHRONING KING COAL: How insurers threaten the PM’s pitch A POSITIVE SIGN The profit line is set to rise

THE TOP 20 Our annual list of the industry’s influences and influencers

December 2021/January 2022

www. am a groupl td.com

Contents 4 Newsmakers

companyNEWS

8 Power shift

51 From strength to strength:

The Government says there is room for fossil fuels in its plan to reach net zero emissions, but the insurance market may have other ideas

12 The Top 20

Our annual list of the issues and people who are setting the agenda for the insurance industry in Australia

21 Bad to worse to…better?

The expected profitability recovery didn’t materialise, but the annual Optima report says the rebound may be back on track

24 Insurance News Ad Oscars 2021

How insurance advertisers employed cut-through tactics in a distracting year – and who did it best

Howden launches in New Zealand

51 New horizons:

AUB flags potential overseas opportunities

peopleNEWS 52 Golfers enjoy the links 54 Brokers return for CQIB Convention 56 Zurich partners relish Prawns on the Lawn 58 UAC expo draws 200 brokers

32 Easing the claims pain point

The Australian Financial Complaints Authority’s new insurance ombudsman sees communication and clarity as key to better claims experiences

36 Still a bit up in the air

Adaptability is key as travel insurers take off into an uneasy post-pandemic world

40 Life after Aon

The broking sector’s mega-marriage failed, but Willis Towers Watson is confident about being single again

44 2021: catastrophes, COVID, courts, challenges – and change everywhere

A look back at the events that dominated the industry’s year through our daily Insurance News online service Federal Treasurer (now Prime Minister) Scott Morrison and his infamous lump of coal in Parliament in 2017.

He’s still a fan, but underwriters are not. See article, Page 8

DETHRONING KING COAL: How insurers threaten the PM’s pitch A POSITIVE SIGN The profit line begins to rise

THE TOP 20 Our annual list of the industry’s influences and influencers

Pictured: Scott Morrison Credit: AAP

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insuranceNEWS.com.au is a free daily online news service for the general insurance industry. The website has more than 29,000 subscribers. In October/November we published 526 articles online. These were made up as follows:

60 Local

61

Corporate

47

Regulatory & Government

63

Life Insurance

51

The Professional

46

Insurtech

51

LA NINA ARRIVES The Bureau of Meteorology has declared the flood-inducing La Nina weather pattern is now underway, potentially bringing more rainfall than usual this summer and above average numbers of tropical cyclones.

This is the second straight year that Australia will experience a La Nina.

La Nina years have historically been more costly for the insurance industry due to more extreme rainfall and elevated cyclone formation risk. Insurers on average have paid $3.025 billion each year the La Nina weather pattern was in effect, triple the long-term average and six times higher than El Nino losses.

Bureau Head of Operational Climate Services Andrew Watkins says La Nina typically leads to wetter-than-normal periods for eastern, northern and central

with his name worthy of a Hollywood “Dallas, cowboy, has from the very beginning managed to grab the NIBA thoroughbred by the reins and lead us safely through some of the most significant regulatory reforms we have ever had to face.

Radford Lawyers principal solicitor Mark Radford pays tribute to retiring National Insurance Brokers Association CEO Dallas Booth.

International

9

136 Daily

2

Breaking News

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MILLER TAKES KEY BROKER ROLE

Analysis

More than 34,000 news articles – including 379 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives. Access to news articles and other services provided by insuranceNEWS. com.au is free. 0

parts of Australia.

This year the risk of flooding has increased given the deluge of heavy rainfall that has occurred in recent weeks.

“The issue at the moment is that we already have quite wet soils, quite full rivers and quite high catchments ... so any further rainfall raises the risk of widespread flooding, particularly in south-eastern Australia,” Dr Watkins said at a press conference.

He says while this current La Nina will be weaker than last year, it is still capable of bringing heavy rainfall. The bureau expects this La Nina to persist until at least the end of January.

In relation to cyclones, La Nina means there is a 65% chance of above-average numbers of events this cyclone season, 0 which runs until April.

Suncorp has appointed Michael Miller EGM Commercial & Intermediated after Darren O’Connell vacated the role in August.

Mr Miller, pictured, most recently held the role of EGM Personal Injury Claims at

Suncorp and was formerly CFO Commercial, CFO Insurance and EGM Motor, Property & Speciality Claims during more than a decade at the insurer.

CEO Insurance Product & Portfolio Lisa Harrison announced a merger of the Commercial and Intermediary Distribution teams in August 2020.

She says Vero’s ongoing investment in initiatives like the Insightful Broker series and NIBA Warren Tickle Memorial Award Program, as well as recent

acknowledgement for claims excellence through the Mansfield Awards, demonstrates Suncorp’s commitment to supporting its broker partners and commercial customers throughout their insurance experience.

“Michael is a highly regarded leader in the team and brings not only expertise, but the right energy and passion to the role as we continue to focus on delivering on our ambitions within the Commercial and Intermediated portfolio,” 0 she said.

CYCLONE REINSURANCE POOL ‘ON TRACK’ The Government-backed Northern Australian cyclone reinsurance pool is on track to start in July, with details likely to be released next year shortly before legislation is introduced into Parliament, Assistant Treasurer Michael Sukkar says.

Mr Sukkar says Treasury officials have examined international examples and liaised with local stakeholders in making critical decisions about the design of the pool.

“We have landed on a model that is sustainable, is going to deliver measurable and significant premium reductions, and hopefully, and I am very confident, will create greater competition in a pretty difficult market,” he told the Insurance Council of Australia Annual Industry Forum in October.

Mr Sukkar says there are still some decisions to be taken, with further consultations to take place with a key stakeholder group before details are finalised, paving the way for the parameters to be released more widely.

A Federal election is due to be held by May, but Mr Sukkar says he is focused on making sure, regardless of the election timetable, the pool will be “in the shape it needs to be” to reduce premiums for decades to come.

The reinsurance pool, backed by a $10 billion Government guarantee, was announced by Prime Minister Scott Morrison during a trip to northern Queensland ahead of the May budget. Increased spending on mitigation and resilience measures was also included in the budget. 0

BI APPEAL JUDGMENT AWAITED The Full Court has reserved its decision after concluding appeal hearings on the Insurance Council of Australia (ICA) second test case related to business interruption claims triggered by COVID-19 restrictions.

Justices Mark Moshinsky, Roger Derrington and Craig Colvin did not give any indication of when a judgment would be delivered, but ICA says it’s anticipated by the end of the year or shortly thereafter.

The Full Court considered five claims arising from the ICA second test case hearings as well as an appeal from The Star Entertainment Group against Chubb and

other insurers.

Federal Court Justice Jayne Jagot previously delivered a judgment largely in favour of insurers in the test case matters, while The Star case was separately heard by Federal Court Chief Justice James Allsop, who found in favour of the insurers.

Appeals were brought by both policyholders and insurers on a number of issues arising from Justice Jagot’s judgment.

Law firms say leave to appeal to the High Court could still be sought following the Full Court decision, which would see the legal 0 proceedings extend well into next year.

HORTON EYES QBE PERSONAL LINES GROWTH QBE Group CEO Andrew Horton says he is thinking about building the insurer’s position in the Australian personal lines market.

QBE is a giant in the local intermediated sector but is still dwarfed by IAG and Suncorp in personal lines, and the likes of Allianz and Hollard have boosted their market share in the last 12 months with major acquisitions.

“I’d like to look at our position in the personal lines space,” Mr Horton told insuranceNEWS.com.au.

“If we have a reasonable position in it, what is stopping us from building it?”

Mr Horton took up the Group CEO

position in September, replacing interim chief Richard Pryce who had taken the helm following the sudden departure of Pat Regan last year. He arrived in Australia in November.

Cambridge-educated Mr Horton, previously CEO at UK listed insurer Beazley, says he would like QBE’s divisions to work more closely, and he says the US operations need more stability.

“We have to find a strategy and we need to stick with it. Insurance is all about longterm relationships and consistency and we haven’t really had a consistent strategy in the US for a number of years, so I 0 would like to give it that consistency.”

NIBA PUBLISHES REVISED DRAFT CODE The National Insurance Brokers Association (NIBA) has released a revised draft Code of Practice along with an Independent Reviewer’s report, after an earlier version was criticised by consumer groups and the compliance committee for not sufficiently raising standards.

“Having reflected on the at times strong criticisms levelled at the current Code of Practice, NIBA proposes an entirely revised code that seeks to meet current consumer expectations and build on NIBA’s commitment to greater professionalism as an industry,” CEO Philip Kewin says.

NIBA says the new version addresses many of the criticisms of the original document while respecting the individual business models of broking firms. It’s intended to be accompanied by an implementation guide to assist members putting it into practice.

The new version includes a vision statement, extends the document’s reach beyond current clients, and sets out an obligation to inform a prospective client of the extent of service to be provided, including limits on insurance products the broker can arrange.

Other changes have been made around complaints processes and commitments toward vulnerable clients, and the revision includes “a clear effort to adopt plain language and tone”. 0

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From the

PUBLISHER

Above normal fire potential

Normal fire potential

The cover of Insurance News magazine 12 months ago stated baldly, “Good riddance to a year that changed everything”.

And so say all of us to 2021, also.

If 2020 “changed everything”, then 2021 was about adapting to that change. And as our Wellness Survey in October revealed, many employees who spent much of the year in lockdown – too many – found the pressures of working and living very difficult.

So will we return to “normal” in 2022? A few weeks ago it would have been easy to say we were over the worst, vaccination was the answer and now let’s move on. That was before the Omicron variant of COVID-19 cast its shadow on our regained sense of freedom. At this stage we can only hope it’s not as virulent as early reports suggest.

Below normal fire potential

SUMMER BUSHFIRE OUTLOOK RELEASED While most of Australia shows normal bushfire potential this summer, high grass and crop fuel loads in large parts of NSW and above average forecast temperatures in WA indicate above normal risk for those areas, according to AFAC, the National Council for Fire and Emergency Services.

Below normal summer fire risk is predicted in the ACT, Victoria, and some parts of NSW due to increased rainfall and areas burnt during 2019/20 fires, the “Bushfire Seasonal Outlook Summer 2021: Australia’s national picture of fire potential” report says.

The varied picture for locations across Australia comes after recent rainfall boosted

soil moisture and stream flows across large parts of eastern Australia during La Nina conditions. After a wet spring, the summer outlook is also for above-average rainfall over eastern parts of Australia.

“Destructive and deadly fires can still occur during normal bushfire seasons across Australia. Fire potential can vary greatly, even at the smaller scale, between bordering states and territories,” AFAC said.

“In any season we could see periods of escalated fire danger and fires that require assistance from beyond the area from which they originate, especially if rainfall distribution through the period 0 is not consistent.”

And so to the weather. This is going to be a wet summer over most of Australia, and people are asking if this is part of climate change. The La Nina system filling our dams and flooding riverside suburbs didn’t have a name until comparatively recently, but its characteristics have been identified as far back as 1900.

What is fascinating to weather nerds is the complex way in which La Nina and her bushfire-bringing brother El Nino are measured via the El Nino-Southern Oscillation (ENSO), which involves temperature variations in different parts of the Pacific Ocean. Google it – you’ll be fascinated. These patterns have been around very much longer than the effects of climate change, so feel free to have an argument with anyone who suggests otherwise. That said, research suggests they are becoming more frequent, and more severe.

Christmas is traditionally a time for families, relaxation and fun – but not necessarily for the general insurance industry’s claims specialists. Here’s hoping it’s a peaceful and catastrophe-free period for them. To all our subscribers and readers around the world, the Insurance News team joins me in wishing you a merry Christmas and a happy new year. Stay safe and be happy.

Terry McMullan

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Uncertain future: the Federal Government won’t abandon coal, but will insurers?

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Power shift The Government says there is room for fossil fuels in its plan to reach net zero emissions, but the insurance market may have other ideas

By Andy Swales

L

ess than a month before the start of the UN climate summit in Glasgow, the Australian Government aligned itself with other nations and made a commitment to hit net zero carbon emissions by 2050.

It was a “heroic” step, according to conference host Boris Johnson.

Others were far less impressed. Prime Minister Scott Morrison’s plan came with no accompanying pledge to raise previously set carbon-cut targets for 2030. And the “technology-driven” road map for achieving neutrality in 29 years was light on new policies, with a reliance on carbon offset schemes and controversial programs such as carbon capture and storage.

One thing Mr Morrison was sure of was that doing things “the Australian way” does not include steps to limit the production, use and export of fossil fuels.

“We want our heavy industries, like mining, to stay open, remain competitive and adapt, so they remain viable for as long as global demand allows,” he said. “We will not support any mandate – domestic or international – to force closure of our resources or agricultural industries.”

The Climate Council labelled the 2050 pledge “half-baked”, with Chief Executive Amanda McKenzie declaring: “Net zero is a joke without strong emissions cuts this decade.”

Australian National University climate scientist Emeritus Professor Will Steffen tells Insurance News the Government simply “doesn’t have a plan. Their approach is best described as a thinly veiled coat of greenwash to keep the fossil fuel industry going for decades into the future.”

But despite the Government’s backing, there are signs the tide may be turning against the fossil fuel industries anyway.

How will demand and investment hold up as the world moves to a low-carbon economy?

And will producers still be able to insure their operations?

Australia’s top three insurers – in line with other major (re)insurers, particularly in Europe – have made commitments around exiting fossil fuel underwriting.

IAG, which in November published its latest Climate and Disaster Resilience Action Plan, has committed to no longer underwriting groups that are predominantly in the business of fossil fuel extraction or coal power generation by 2023.

It says that at June 30 this year gross written premium relating to all fossil fuel extraction and power generation was less than 0.005% of the insurer’s total.

“In addition to reviewing and updating our Climate and Disaster Resilience Action Plan every three years, we review all our commitments and goals on an annual basis and report on our progress through yearly scorecards,” IAG’s Executive General Manager Safer Communities Ramana James tells Insurance News.

Suncorp says it will no longer underwrite fossil fuels by 2025, and its exposure to fossil fuel activities already makes up less than 1% of its commercial insurance business.

In the group’s Climate Change Action Plan, published in September, Suncorp Chair Christine McLoughlin says its approach is up for review on a regular basis.

“We now intend to update and publish key priorities and progress against this plan in our annual report each year. This iterative and responsive approach ensures we are well placed to keep pace with the latest scientific and public policy developments and international agreements including COP26 [the Glasgow summit], the UN

Intergovernmental Panel on Climate Change and the Taskforce on Climate-related Financial Disclosures.”

QBE has stopped covering new thermal coal projects and will phase out thermal coal underwriting by 2030. It will start restricting insurance for oil and gas projects using the Paris Agreement as a benchmark from 2030.

Environmental campaign group Market Forces says gaps remain in the major insurers’ commitments and is keeping up the pressure for stronger action in line with the Paris goal of limiting global warming to 1.5 degrees.

“IAG and Suncorp are still open to underwriting new gas-burning power stations and oil and gas pipelines,” Market Forces campaigner Pablo Brait tells Insurance News.

“QBE, the laggard of the trio, has practically no restriction on its oil and gas underwriting, with its policy outlining business as usual until 2030, apart from tar sands. QBE’s do-nothing approach to one of the single biggest sources of carbon pollution in the midst of the climate crisis is unacceptable.”

Mr James expects the trend for major insurers to cut their exposure to fossil fuel projects will gather pace.

“In fact, this is already happening, not only in Australia but globally, and not only in insurance but across a range of sectors.

“We expect to see even further acceleration in action from the private sector as part of the transition to net zero and as new technologies and opportunities emerge to support these businesses.

“While it is good to note this progress by the private sector, we also need consistent and strong policy on climate action from all levels of government in order to support the long-term resilience and sustainability of our economy, society and environment.”

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“There is a natural role for insurers to help create space for innovation by empowering companies to develop, implement and expand the use of net zero technologies.”

Finity Consulting Principal Rade Musulin says Australia will require an “orderly” decarbonisation process.

“Australia, along with other countries, must build a consensus between political parties on the general framework for decarbonisation that can withstand periodic changes in government, because business and communities need a degree of policy stability to make long-term investments,” he tells Insurance News. “This will require compromise between various stakeholders.

“Like it or not, fossil fuels are deeply embedded in our economy, and decarbonisation will take time. It should be done in a way that reduces the chance of a political backlash that could slow the pace of change.

“We have agreed on the goal (net zero by 2050); now the question is identifying the path to get there and the pace at which we do so.”

Insurers can play a role in this orderly shift, he says.

“Individual insurers and reinsurers will make their own assessments of how quickly they reduce fossil fuel underwriting, but most will be moving in this direction over time.

“Insurers provide important loss control services, safety incentives, funds to compensate for accidents and so on, so there are social consequences from risks losing certain types of insurance coverage. This is another argument for an orderly decarbonisation process.”

Earlier this year, in a submission to a federal parliamentary inquiry that has examined the treatment of export industries by insurers and other financial services providers, coal giant Adani hit out at IAG, Suncorp and QBE. The firm behind the huge – and hugely controversial – Carmichael mine project in central Queensland described the insurance industry’s “boycotting” of thermal coal as “misconceived” and warned of consequences for the economy.

“These Australian insurance companies appear to have followed a global divestment

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push led by European insurance companies with little to no regard to their national responsibilities to the workers and companies of Australia,” the submission says.

“The consequence of the banking and insurance sectors removing support for the thermal coal sector has the immediate impact of increasing financing costs associated with developing new projects or maintaining existing operations … In short, by withdrawing services from the Australian thermal coal sector, the finance and insurance sectors are exporting Australian livelihoods offshore.”

The Minerals Council of Australia told the same inquiry – which has yet to report – that miners are facing a shrinking pool of insurers, which is driving premium rises of up to 600%. It says some mines have to self-insure instead.

In April, Insurance News reported how CRE Insurance Broking, which provides cover for the resources and energy sectors, had called for a rethink on the industry’s response to anti-coal activism as clients struggle to obtain cover.

An open letter, written by CRE’s Broking Director Adam Battista, said campaigns accusing insurers of failing to meet environmental social governance obligations have resulted in almost half the global reinsurance capacity available evaporating in two years.

As a result, he said many mining and mining-related clients face commercially unacceptable conditions or premiums, or cannot find appropriate cover.

“Some are already faced with the prospect of self-insuring entirely,” Mr Battista said. “Those insurance companies left in the market that do provide cover can afford to become far more selective of the risks they take on.”

He also noted that often distinctions are not made between metallurgical coal – used to make steel – and power-generating thermal coal. And he said in terms of emissions, Australian thermal coal is preferable to that

supplied by some other countries.

CRE declined to comment for this article. The Minerals Council was contacted for comment.

Mr Musulin says that in the short term, issues around availability or affordability of insurance are only likely to spell the end for extraction or power plant projects that are already “at the margins of viability”, but over time there will be larger effects. It may be that self-insurance, mutual insurance mechanisms or direct government support become necessary.

“Generally, when insurance has become unavailable or unaffordable for other reasons these type of solutions have emerged,” he says.

“One would expect nothing different here. Whether that is good policy or not is another matter.”

In the meantime, IAG’s Mr James expects insurers to increasingly switch their attention to green energy and the technologies that can aid the push to net zero.

“Creating and adopting any new or emerging technologies involves risk and uncertainty, so there is a natural role for insurers to help create space for innovation by empowering companies to develop, implement and expand the use of net zero technologies.”

An Insurance Council of Australia spokesperson says the industry will “continue to support and enable the effective risk management of Australian exporters and associated businesses, consistent with the regulatory guidelines on managing the financial risks of climate.

“We recognise that our regulators are keeping pace with global standards. ICA is working with the community, our members, all levels of government and other stakeholders to be able to continue to offer affordable and accessible insurance.”

The council says it “recognises the important role we have supporting our members’ transition to net zero by 2050 in the most appropriate way for their business”. 0

THE TOP 20 Our annual list of the issues and people who are setting the agenda for the insurance industry in Australia

By Terry McMullan

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I

t’s hard to encapsulate everything that’s happened within – and to – the insurance industry in the past year in a simple list. Fact is, the insurance industry copped it from all sides in 2021 and now sits on the edge of a new year hoping 2022 will be better. It’s a hope starting from a low base.

The annual Insurance News Top 20, born in 2009 as a tongue-in-cheek look at the 20 most influential people in the industry, has evolved over recent years into a review of what really shook things up and who was best equipped to deal with it.

Last year we featured the “10 major things that influenced the industry in 2020, and probably still will be in 2021 and beyond”. We weren’t wrong.

As this year’s list illustrates, many of last year’s influences are indeed still top of mind. But the tone around many of them is changing; potential solutions are emerging.

This year we’re continuing on the same track as 2020, with the top influences and the top influencers – the people with the answers, or at least the vision and ability to lead insurance around those influences.

Please remember this is not a formal study. While we put them in a logical order, in this report all influences and influencers are regarded as equals.

1. CLIMATE CHANGE (2 LAST YEAR):

In the minds of many Australians the natural catastrophes around the country in 2021 – bushfires, floods, windstorms, hailstorms – could easily have seemed like a series of unlinked incidents. But the list of catastrophes – defined by insurers as any event costing more than $25 million – shows a disturbing global trend towards more diverse and more destructive storms, not just in Australia but around the world. Ignoring the political posturing over climate in Australia at present, the (re)insurance industry is doing stuff. It was a significant presence at the COP26 conference in Glasgow in November, and the pressure insurers globally and locally are putting on carbon-based industries, particularly coal miners, is getting noticed. Aon recently defined cyber crime as the biggest threat to business, but we’re sticking with climate change as the phenomenon that most influences the insurance industry’s future stability.

2. COVID (1 LAST YEAR):

In 2020 the COVID virus was an ominous presence, with workforces sent home to work as best they could, insurers reacting in horror to a business interruption policy blunder, lockdowns short and long popping up around the country and states locking out non-residents.

COVID in 2020 dominated our business and personal lives. Today it is a significant presence in our daily – but not long-term, thinking. At the time of going to press (a necessary caveat with the omicron variant already in

Australia) COVID was already beginning to move into the past.

There are still minor inconveniences – masks, QR codes, anti-vaxxers – but thanks to high vaccination levels lockdowns are gone and the focus on “the office” has returned. But work life has not gone back to the old normal; “normal” is in the process of being redefined.

Transitioning to new understandings of what work is all about will take a while, but people now know they can work more flexibly and lead more balanced lives.

COVID caused that.

3. THE MARKET KEEPS MOVING:

The insurance market in Australia is famously competitive, and when it’s at its most challenging – as it is right now – opportunities tend to arise. In June Hollard Insurance pulled off the Deal Of The Year with the $625 million acquisition of the Commonwealth Bank’s general insurance business, expanding Hollard’s business by around 50% and pushing it into fifth spot in the ranks of the biggest insurers locally. Then London-based global broking giant Ardonagh acquired AR company Resilium as part of a brokerage build, and fellow Londoner Howden moved in to offer its global muscle to local brokers. Neither new entrant is afraid of the top end of the broker market, with corporate business in particular likely to feel some competitive winds blowing. QBE is one insurer showing new interest in personal lines, and industry rumours/leaks have speculated about the future of Zurich Australia’s local broker-aligned portfolio.

Stir well, add in the fact that premiums are continuing to rise and profits have assumed a sharp upward trajectory after two tough years, and you have a market showing strong signs of recovery.

4. BYE BYE, OLD BOYS’ NETWORK:

2021 was the year that Insurance News decided to never again mention the fact that a new CEO in the insurance industry was – gasp! – a woman, simply because such a fact is no longer unusual and is therefore irrelevant. Less than 15 years ago very few women could be found in the senior ranks of insurance, but today gender is not a factor in companies’ selection criteria. Merit – covering such aspects as experience, skill, strategic vision, communications and leadership – is now the focus, as it should be. And we should recognise that women are having a much greater influence on the way the industry works and will work. Today

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they are leading major operations across all sectors of the industry, and our two most important representative groups are chaired by women: QBE Australia Pacific Chief Executive Sue Houghton, who is also the President of the Insurance Council of Australia; and Adelaide broker Di Phelan, the President of the National Insurance Brokers Association. They are just two of the many women who are leading and making a difference.

5. CYBER INSURANCE — A CONTINUALLY GROWING RISK:

Cyber crime has swept the world, with recent business risk surveys showing it has toppled climate change as the most significant risk facing business.

That may be in part because the granite-hard directors’ & officers’ insurance market is forcing companies to focus on the cost and difficulties of measuring cyber crime risks, which in five years have moved from “emerging threat” to “nightmare”. The criminals have become more intrusive and the stakes much higher.

Increasing incidences of ransomware, state-sponsored cyber-attacks and increasingly sophisticated methods have exposed the flaws in even the largest companies’ networks. The increasing complexity and size of claims has seen insurers reducing exposure to single risks and introducing sub-limits for ransomware. It’s not going to get better anytime soon.

6. HARD MARKET ACTION:

In the past year the Federal Government has taken the lead in forcing solutions to affordability issues for Australia’s cyclone-prone north, with a reinsurance pool arrangement being sorted out between Treasury and the insurance industry. While the urgency being shown after a decade of reviews and reports is primarily about the ruling coalition’s need to shore up support in the key northern electorates, it will nevertheless bring new (if untried) solutions to an old problem. Meanwhile, business insurers have been positive in their reaction to an Insurance Council-commissioned review by industry leader John Trowbridge calling for, among a range of unusually practical propositions, collaboration between and the industry and business groups, with the insurance industry acting as a clearing house for “problem” risks.

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7. A MORE ACTIVIST INDUSTRY:

The Insurance Council of Australia, long considered an important but low-key part of the industry, is transforming under the leadership of Andrew Hall. He has overhauled ICA’s approach to a swag of issues that have been around for years, placing the insurance industry on the front foot in finding solutions and actions rather than just talking about possibilities. Insurers’ reaction to the alternative approaches highlighted in the recent Trowbridge Review into business insurance affordability illustrates insurers’ new willingness to seek out real answers. While insurers’ stances on issues are often driven by their own priorities, they have shown unified confidence in Hall and his team getting out in front. It’s been more than a decade since ICA had the confidence to act this decisively.

8. MORE ROAD RULES FOR A SOCIAL LICENCE:

Australia’s financial regulators are changing the face of insurance almost by stealth. They have been carrying out the recommendations of the 2018 Hayne royal commission, which demands the industry earn the right to their “social licence” to operate. The regulators’ new rules are many and varied, and place enhanced responsibility on companies in areas like claims and the way they handle customers’ insurance needs.

Most of these new rules have been enacted over the past year, despite the many COVID-related impacts on insurers who already have to deal with the expansive new insurers’ code of practice. New governance, risk and compliance measures that came into effect in October follow on from the application of unfair contract terms to insurance. They require improved internal dispute resolution processes and impose a challenging design and distribution obligations regime, along with a new deferred sales model, strict anti-hawking rules and changes to the duty of disclosure that put the onus of collecting the necessary information for non-commercial contracts on to insurers.

CHAR TERED LOSS ADJUSTERS claims@astagroup.com.au

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From a burnt out motor on an air conditioner to a failure of a turbine in a power station, the ASTA Engineering Team has the expertise to assess all machinery and fusion claims, presenting information in a logical and easy to understand format. ASTA only uses industry qualified specialists with extensive insurance experience to provide unprecedented quality and reliability for all engineering and consulting matters.

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THE INFLUENCERS: 9. RICHARD ENTHOVEN, MANAGING DIRECTOR, HOLLARD INSURANCE HOLDINGS Hollard is a big insurance brand in southern Africa, and its Australian arm founded in 1999 by Richard Enthoven has grown to become a very significant player in the market. Already a shrewd financial backer of a range of mainly broking and underwriting agency ventures, Enthoven’s Hollard Insurance was a surprise buyer of the Commonwealth Bank’s insurance operations in June with a 15-year strategic alliance to make the deal even sweeter. Enthoven has now stepped back to develop new initiatives, leaving the day-to-day insurance operation to new CEO Paul Fahey.

11. ANDREW HALL, CHIEF EXECUTIVE, INSURANCE COUNCIL OF AUSTRALIA: Coming from a political and communications background, Andrew Hall has been busy since his arrival at ICA in September 2020. His task: to turn around the Insurance Council from a light-touch bit player to a strong and capable business leader with a voice. Unlike one of his predecessors, he hasn’t thrown out the baby with the bathwater, retaining ICA’s focus on data while enhancing links with governments and interest groups and seeking solutions to issues that have, in some cases, been hanging around for far too long. Insurance has never been a high-profile industry, but key groups – regulators, politicians, consumer representatives and business groups – are now being consulted as the industry evolves new approaches and solutions that will help to keep its function in line with expectations.

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10. ROBERT KELLY, MANAGING DIRECTOR AND CHIEF EXECUTIVE, STEADFAST GROUP: It shouldn’t surprise anyone that Robert Kelly has always featured at or near the top of the Insurance News Influencers list since it began in 2009. In that time Kelly has grown Steadfast from a buying group into a listed ASX 200 performer that dominates the Australian broking sector. Always a plain-speaker, he has built a fully equipped broker network made up of a continually growing list of partially or fully owned brokerages, as well as independent local and international operations. Steadfast has massive influence within the industry, but its expansive MD has always been careful to focus on the benefits that scale offers his network and their customers.

12. SUE HOUGHTON, PRESIDENT, INSURANCE COUNCIL OF AUSTRALIA AND CHIEF EXECUTIVE, QBE AUSTRALIA PACIFIC: She’s only been in the role at QBE since august, but Sue Houghton has already made clear her intention to make the insurer a more significant player in the local market. In that she’ll likely be backed by QBE Group Managing Director Andrew Horton, who joined in September from global insurer Beazley. Houghton brings to QBE’s most important division some top-level experience at Westpac Bank, where she was GM insurance, and Arthur J Gallagher, Wesfarmers Insurance and IAG. Her ICA presidency began in June last year, followed shortly after by the appointment of Andrew Hall to bring a new dynamism to the organisation and swift progress on balancing the industry’s needs with the community’s.

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Always consider the Product Disclosure Statement and Target Market Determinations available from the product issuer, Insurance Australia Limited, ABN 11 000 016 722, AFSL 227681, trading as CGU Insurance. This advice is general advice only and does not take into account a customer’s individual objectives, financial situation or needs (‘personal circumstances’).

13. NICK HAWKINS, MANAGING DIRECTOR AND CHIEF EXECUTIVE, IAG GROUP: Life hasn’t been all that easy for Nick Hawkins since he replaced Peter Harmer in IAG’s top executive role in November 2020. The group has weathered some hefty financial challenges in the past 18 months or so, but as IAG’s former long-serving CFO Hawkins understands insurance is a long game. He knew what he wanted to do when he took the top job, immediately reshaping the group by splitting the Australia Division formed by Harmer in 2017 and recruiting a new group of managers to run separate personal lines and commercial (CGU) units. Expect to see IAG aggressively pursuing new commercial lines opportunities and continuing to develop its strong personal lines brands to protect them from disruptors.

14. STEVE JOHNSTON, CHIEF EXECUTIVE AND MANAGING DIRECTOR, SUNCORP: While arch-rival IAG struggles to financially fly, over at Suncorp Steve Johnston is managing his company through difficult times with considerable flair. Like his IAG counterpart Nick Hawkins, Mr Johnston engaged in a “reset” of the business after he took over in late 2019, shedding top-level executives and this year seeing the insurer-banker achieve a 42% rise in after-tax cash earnings to $1.06 billion in the year to June 30 – the best result in 10 years. The insurance operation remains focused on revitalising growth, optimising pricing and risk selection, being digital-first in distribution, and being best in class for claims. Suncorp is now well-set for a market resurgence.

15. PHILIP KEWIN, CHIEF EXECUTIVE, NATIONAL INSURANCE BROKERS ASSOCIATION:

16. DI PHELAN, GROUP OPERATIONS MANAGER, BJS INSURANCE GROUP, AND PRESIDENT, NATIONAL INSURANCE BROKERS ASSOCIATION:

When NIBA set out to find someone to succeed Dallas Booth as leader of the nation’s diverse insurance broker sector, Philip Kewin’s track record put him at the top of the list. He came to NIBA in August after four years running the Association of Financial Advisers – a professional group whose members have suffered some intense pressure from consumer groups and regulators. Adviser numbers have fallen dramatically, but AFA’s membership actually grew under Kewin’s management. While this former financial planner and senior Zurich executive’s experience isn’t in general insurance, his familiarity with the Federal Government and regulators will prove invaluable to brokers.

It’s an interesting time to chair an organisation like NIBA, and Di Phelan is more than capable of leading the brokers’ peak body through some long-simmering issues which are coming to the boil. Apart from helping to deal with a mass of new rules imposed by regulators whose focus has been primarily on the financial services side of the intermediary game, Phelan must also front up to the looming debate over broker commissions.

Taking up the presidency in February, she successfully led the effort to lure Philip Kewin across to replace the now-retired Dallas Booth. NIBA represents a very broad church in the broker sector, but she’s a long-serving broker who knows the people and the issues.

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17. RICHARD FELEDY, MANAGING DIRECTOR AND CHIEF EXECUTIVE, ALLIANZ AUSTRALIA: Allianz is strongly placed in the Australian commercial lines space, and claims third spot overall in the pecking order ahead of QBE. That comes about through its $725 million acquisition in June of Westpac’s general insurance portfolio, but its estimated 7.7% share of the local market is still well below that of IAG (21.7%) and Suncorp (12.6%). However, with an extra 350 or so staff from the bank now aboard at Allianz and a 20-year distribution deal with Westpac as well, Feledy now has a prime opportunity to really shake up the personal lines space. A very experienced insurance professional, he’s worked in many specialised parts of the insurance operation after moving to Allianz 21 years ago from HIH. He became MD in January 2018. With premiums continuing to rise and Allianz keen for more organic growth, Feledy is in the box seat.

19. JOSEPH LONGO, CHAIR, THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION: Early this year ASIC’s inaugural chairman, Tony Hartnell, defined exactly what the next leader must be.

He wanted a commercial lawyer focused on enforcement rather than the “fantasy” of setting rules. “People fantasise that it’s a policy job,” he said. “It is not. It is an enforcement job.” That apparently suits new Chairman Joseph Longo just fine. The one-time national director, enforcement for ASIC was senior counsel for a major Australian financial firm before joining Deutsche Bank in 2002. He served in a range of senior roles at the German bank before returning to Australia in 2019.

In interviews since his appointment Mr Longo has been strong on ASIC continuing to pursue court action against companies rather than just serve enforceable undertakings. “I’m absolutely committed to ASIC remaining an active, credible law enforcement agency,” he told the ABC. “We have teeth now and we will continue to use them.” We have been warned.

18. TIM PLANT, CHIEF INSURANCE AND STRATEGY OFFICER, IAG: The new organisation chart at IAG looks similar to Suncorp’s old one – separate divisions for commercial and personal lines, with a manager overseeing the divisional chiefs. But in Tim Plant IAG just might have the management mix right, because he’s the industry’s go-to person when a company is seeking a reliable chief who knows the ropes. Highlights of his 30-year insurance career include a variety of senior roles at QBE over seven years, including CEO of the group’s Australian and New Zealand divisions. After a stint at New South Wales state insurer icare he moved to Zurich as CEO of its regional general insurance division, before joining IAG recently. Well liked across the industry, Plant is IAG’s best hope to get more from its wide variety of brands.

20. MIKE EMMETT, CHIEF EXECUTIVE AND MANAGING DIRECTOR, AUB GROUP: AUB has changed considerably since Mike Emmett moved aboard in 2019. The South African-born accountant has enjoyed a diverse career in insurance, corporate consulting and IT, and his experience shows in the way the broker group has redefined its role and focused on the core businesses – broking and the Sura underwriting agencies. Emmett came to AUB after holding senior roles at QBE and consultant EY, before moving on to Cover-More, a Sydney-based travel insurer with considerable international positioning. It was sold to Zurich in 2017. AUB is the second-largest broker group in Australia with 3000 members. It owns stakes in some of the country’s best brokerages, which returned record growth and net profit last financial year. For the future Emmett has moved AUB away from its previous health and rehab services strategy and forced through performance improvements. The group’s strategy is clear enough – Emmett says it will come from “evolution, not 0 revolution”. There’s money in that, and little risk.

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Behind you for what’s ahead At Allianz, we choose to help secure the future of our customers, partners and community, so they can have confidence in today, and tomorrow. From our new and evolving products, to our claims and customer experience, we’re behind you for what’s ahead.

Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708

Bad to worse to…better?

The expected profitability recovery didn’t materialise, but the annual Optima report says the rebound may be back on track

By Wendy Pugh

T

he COVID-19 pandemic muscled aside natural catastrophes as the profitability wildcard for insurers in the past year and, after dashing expectations for an overall performance improvement it remains a key risk in the outlook.

Profitability, measured by return on equity (ROE) and margins, went from “from bad to worse” last year as the anticipated recovery failed to materialise, the annual Optima report produced by actuarial firm Finity shows. And it identifies the main culprit as the pandemic.

Business interruption claims related to COVID triggered court cases and led to reserves bolstering, while supply chain disruptions added to pressures in householders’ insurance and travel premium volume slumped.

Motor lines benefitted from lighter traffic and fewer collisions during lockdowns, while companies are still adjusting to pandemic repercussions that are influencing operational activities and investment results.

“There is not a class of business that is not affected, nor is there any business in the world that is not affected by what is happening,” Optima report lead author Andy Cohen tells Insurance News.

The Optima report, now in its 14th year, reflects premium increases, investment returns, reserve releases, natural disaster impacts and other influences on personal and commercial lines.

COVID emerged during the previous reporting period, but its impact is heightened in this latest snapshot.

Overall ROE fell to a two-decade low of 2% in the past financial year, slipping from an already poor 3%.

The reported insurance margin contracted to 0.2% of net earned premium, essentially just a break-even result, compared with 2.6% previously.

A two-percentage-point deterioration in the net loss ratio was driven by the strengthening of COVID-19 business interruption loss provisions. That was partly offset by a return to average catastrophe claims and a favourable discount rate.

Gross earned premium growth was “just north of 5%”, similar to the previous period. If figures were

normalised for the loss of 80% of the travel premium, growth was a “surprisingly solid” 7.5%.

The elusive profitability improvement is still expected to take place, with the current period tipped to be better for the industry overall. Nevertheless, profitability levels are likely to remain below desired levels, with significant divergences between classes.

Motor in personal and commercial was the best performer last year and is expected to still lead the pack, while travel and standalone liability are likely to be loss-making. Other lines are set to remain below target, but at least will not be in the red.

“If you look through into the detail you really find it is the motor classes doing all the heavy lifting and delivering the goods,” Mr Cohen says.

“They are above target ROEs and are making up for the struggles the rest of the classes are having in terms of profitability.”

Overall premium growth of 6% is likely to be supported by volume gains as well as rate strength as the market continues to harden in most lines, while the reported loss ratio may improve six points to 69%, stemming largely from an absence of shock COVID-19 business interruption impacts.

The insurance margin is anticipated to rebound 5.5 points to 5.7% and the return on equity should improve to 7.2%, although remaining short of the 10-15% target range.

Profitability will be “very much all about underwriting margins” with avenues that have often burnished results in the past providing little assistance in the current environment.

Prior-year reserve releases, for so long a useful tailwind, have dwindled and investment return expectations continue to edge lower with yields approaching zero.

“Favourable returns from the industry’s small holdings of growth assets along with the credit risk margins earned on corporate bonds are now virtually the only way for insurers to make a significant positive return,” the report says.

The release of some of the business interruption

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Class of Business Outlook Gross Earned Premium Growth

Class

Reported Profitability

Key Risks

Recent

FY22

Overall Industry

5%

6%

Claims inflationary pressures, above average weather-related claims, reserve strengthening (including pandemic-related business interruption claims), low investment returns.

Private Motor

6%

6%

Reversion to pre COVID-19 frequency (FY23+), ongoing claims inflation, inability to achieve efficiency benefits.

Householders

6%

9%

Ongoing buildings claims inflation, climate change and perils.

Travel

-78%

0%

Protracted government travel restrictions, changing travel landscape, customer expectations, regulation.

CTP

-3%

2%

Average size pressure due to psychological claims, regulator pressure on premiums/profits.

Corporate Property

10%

6%

Pandemic-related business interruption claims, claims inflation, cost of reinsurance and slowing rate increases.

Business Packages

7%

7%

Pandemic-related business interruption claims, increasing competition, claims inflation, cyber risk.

Standalone Liability

12%

6%

Prior year deterioration (including worker-to-worker and child abuse claims).

Commercial Motor

4%

6%

Reversion to pre COVID-19 frequency (FY23+), ongoing claims inflation, increasing competition.

Financial Lines

30%

11%

Class actions, COVID-19 impacts, Royal Commission.

Workers’ Compensation

8%

10%

Growth in both primary and secondary psych claims, above inflationary growth in claim sizes, direct and indirect impacts from COVID-19.

Recent

FY22

Profitability definitions Loss making = Below 0% ROE

Below target = 0-10% ROE

Within target range = 10-15% ROE

Above target = Over 15% ROE

“There is not a class of business that is not affected, nor is there any business in the world that is not affected by what is happening,” – Optima report lead author Andy Cohen reserves set aside for pandemic-related claims is possible if legal matters conclude in favour of insurers, but the report makes no assumptions given an industry test case and other actions are running their course.

“There is still a process to go through with the appeals,” Mr Cohen says. “Anything can happen and there is a wide variety of wordings out there. It won’t be a complete get out of jail card, but if it goes well I think some of those reserves could be written back.”

Expense ratios increased only 0.3% last year, with data showing large insurers covering both personal and commercial lines are continuing to see an erosion of a once-significant ratio advantage, while at the same time their market share has reduced.

“Even back 10 years ago the large insurers were clearly benefitting from economies of scale,” Mr Cohen says. “Now there really is a much lower expense advantage that the large insurers are enjoying over the others.”

Looking ahead, COVID-19 uncertainties will continue to touch the various insurance classes, while societal and business environment repercussions are evolving.

Workers’ compensation is an area where COVID-19 did not have a significant impact on claims last year, but it may face much greater risks as states begin to “live with” the virus.

“We are moving into a post-COVID world and we have some idea perhaps of what that will look like, but maybe not a complete idea, and there is a lot of water to

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pass under the bridge,” Mr Cohen says.

“One thing that is unknown, or a wildcard, is the economic trajectory and changes that may come about as a result of changes in ways of doing business and the way we are working.

“Against that backdrop there are expectations of inflation pressures that may come through.”

Inflation has implications for long-tail classes, while in the short-term supply-chain pressures are a major issue for repairs as costs increase for materials, parts and labour. The ultimate strength of that COVID-induced inflation remains unclear and it’s also uncertain how long it will remain.

“If it is temporary, we don’t know if it will resolve itself in the next few months or whether it will take a few years,” Mr Cohen says.

“I am leaning towards a longer time to resolve and during that time you will get extra inflationary pressures on some classes.”

The Optima outlook assumes an “absence of any further large COVID-19 surprises” and average weather-related claims. A La Nina system that could bring a wetter-than-normal summer, somewhat similar to last year, is noted without any conclusions being drawn.

Amid the uncertainties, the report anticipates that insurers can look forward to better times as the delayed recovery actually arrives.

But COVID-19 has joined natural catastrophes as a 0 potential joker in the pack.

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Insurance News Ad Oscars 2021 How insurance advertisers employed cut-through tactics in a distracting year – and who did it best

By Kim McNeil, Partner at The Lead Agency

T

he Ad Oscars awards have become something of a Christmas tradition at Insurance News. Once again, we marketing experts at The Lead Agency have searched high and low for the most effective insurance commercials in 2021, awarding the best with a highly sought-after Insurance News Ad Oscar.

Just as we all thought we were on the road to recovery, 2021 had other plans for us. It turns out we hadn’t recovered from COVID-19, but we were also well over baking sourdough loaves and organising zoom parties.

On top of widespread pandemic fatigue, Australia also had to contend in the past year with riots, storms, floods and even an earthquake.

Businesses and marketers have yet again had to pivot their strategies to focus them on issues that matter to consumers. In 2020 many

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companies embraced the pandemic and used it in their advertising campaigns.

Last year, Youi’s “Life Changes” campaign (https:// www.youtube.com/watch?v=zWUE84tBQwY) earned our accolade as the one that best incorporated the 2020 environment into an advertising campaign. QBE’s “New Normal” (https://www.youtube.com/watch?v=1GIQJVpZ4rg) was a close runner-up.

But this year there was very little mention of the virus in insurance ads. It seems advertisers are also suffering pandemic fatigue and decided to focus on building their brand and reputation instead.

Insurers have needed to find different ways to engage with their customers, who after being in front of screens for a large part of the past 24 months are becoming numb to digital advertising. This year’s Insurance News Ad Oscars focus on those companies that succeeded.

The Greta Thunberg Thumbs-up Award:

For the business that best embraced its corporate responsibility to activate change Society as a whole is evolving to become more aware of global issues and the need for everyone to do their bit in bringing about change. This is particularly prevalent in Millennials and Gen Z, who are fast becoming a key buying segment.

Corporate Social Responsibility refers to the act of companies committing to give back to society. In 2021, where the world is still feeling battered and bruised from the effects of COVID-19, this is a particularly strong advertising focus.

The challenge from a business point of view is listening to the voice of the people and objectively considering how to represent their opinions. In addition, it’s easy for this type of advertising to receive backfire from critics.

Nevertheless, the rewards of a successful corporate social responsibility campaign outweigh the risks, and several businesses in the insurance industry this year have taken on the task.

WINNER: ZURICH – WHAT CAN GO RIGHT? https://www.youtube.com/watch?v=fjxoRQZuKMQ Zurich is making it known they are actively involved in helping create a solution for climate change with their What Can Go Right? campaign.

Statistics from the Australian Institute this year show that climate change and its impacts remain a prominent concern to Australians. There is strong awareness across the country of the need for net zero emissions by 2050, and Zurich has taken on this goal.

Its 2021 campaign has been aimed at the ever-expanding group of consumers who want to make a difference to the planet. The insurer has launched a series of challenges on Instagram, each one tackling a different environmental issue. Zurich also got involved with the COP26 conference in Glasgow, creating a statue from captured CO2 that was placed in a prominent Glasgow location for the duration of the conference.

The company invited people to step inside the statue and make their own pledge to personally combat climate change.

RUNNER UP: AAMI - VAX UP, AUSTRALIA! https://www.youtube.com/watch?v=m6awkkPhnQA COVID vaccination has been a hot topic in Australia over the past 12 months, with a number of brands advocating for the cause. AAMI’s Vax Up Australia campaign tied into its overarching “Together We Are Stronger” campaign. It featured recognised characters from previous AAMI advertising campaigns, including the Queens of Broken Hill and fan favourites Rhonda and Ketut, showing off their vaccinated arms and encouraging other Australians to follow suit. The company reinforced its commitment to the cause by offering free roadside assistance to responders, hospital staff and COVID healthcare workers until the end of the year.

WHAT WE LOVE: The use of previously recognised characters was particularly effective in helping this ad connect to the audience. Rhonda and Ketut were the ideal characters to get the message across, as the classic Aussie ads they starred in are still widely remembered.

Like Zurich, rather than just preaching the message AAMI gave something back to the community with its free roadside assistance offering for frontline health workers.

WHAT WE LOVE: This campaign tackles a global issue in a way that is not at all self-promotional, as the business is truly practising what it preaches.

The timing of the campaign was perfect, coinciding with COP26 while it had massive global interest.

The interactive element of the campaign is a great way to engage the audience and make people feel like part of the change.

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The Kendall Jenner Award for Product Endorsement: For the most relevant and effective endorsement marketing campaign

Brand endorsements or “brand ambassadors” are the connections that we make in our minds between a brand and people, places, things, and emotions. By associating with another brand, companies can take on the associations of that brand, which can help to build their own brand personality and position it favourably in the minds of consumers.

In 2021 insurance advertisers reaped the benefits of association marketing, as many incorporated it as part of their marketing mix.

Zurich appointed AFLW star Daisy Pearce as a brand ambassador, and AAMI featured AFL captains Marcus Bontempelli and Trent Cochin in their “Could’ve Been a Clanger” ads that ran in-line with the AFL season.

Undoubtedly the most famous case of association marketing is the Olympics, which Allianz participated in for the 2020 games in Japan. But the winner is:

their products to an audience that would recognise and resonate with these people.

The messaging was very tightly connected to both the brand ambassador and the insurance products. For example, Lindy Morrison spoke about not being on the road as much now to promote APIA’s “Drive Less, Pay Less” feature.

Unlike many other insurance ads, the APIA ads articulate specific features of the policy.

WINNER: APIA - LIFE STORIES https://www.youtube.com/watch?v=TTXN_pMSb08 Australia’s leading over-50s insurance specialist, APIA, ran a campaign featuring three inspiring stories from well-known Aussies about how they are enjoying everything retirement has to offer. Passion is a common thread throughout the lives of the three subjects: Around-the-world sailor Kay Cottee, famous dancer Li Cunxin and former drummer of the iconic Australian band The Go-Betweens Lindy Morrison.

The campaign messaging focuses on moving into a new stage of life, and how that may result in changing insurance needs. APIA’s ads were optimistic and feelgood, and illustrated that retiring doesn’t mean slowing down.

WHAT WE LOVE: APIA chose their associations very carefully, using well-known older people who are retired to promote

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RUNNER UP: ALLIANZ #SPARK CONFIDENCE https://www.youtube.com/watch?v=w23ccvczunM As one of the first major global events since the start of the COVID-19 pandemic, there was huge global excitement for the Olympic Games this year. Allianz’s global marketing team sponsored the event, tying the sponsorship in with their “Spark Confidence” campaign. The ads feature Olympic and Paralympic athletes talking about the people and moments that spark confidence in their lives.

The messaging in the campaign is inspiring, recognising the people behind the scenes who help others succeed. Allianz asks viewers to share their own amazing stories on Instagram with the #SparkConfidence campaign.

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WHAT WE LOVE: The ads are emotional, with athletes thanking their families for everything they have done, which helps connect with the audience and facilitate consumers’ understanding of the message.

Running a campaign with a social media aspect may help Allianz reach a new, younger audience.

partners that further support was available to them.

This year’s ad has a similar feel but instead promotes the company’s grief support service.

The ad depicts a father and two children sitting at a table with a cake, representing the first anniversary of the mum’s death. The ad and its messaging that “not all scars are visible” is very powerful in communicating this value-add service and its benefits.

The Award For The Not-So ‘not very insurancey’ Ad Campaign

WHAT WE LOVE:

For the brand that communicated its product or service offerings in the most effective way

The ad tugs at the heartstrings, which is an effective method of getting a message through to the audience.

AAMI’s “Not Very Insurancey” ads ran for three years, and have featured in several previous editions of the Insurance News Ads Oscars. While we like many of the AAMI ads, we’ve always questioned their use of the “not very insurancey” tagline. So this category is a nod to the businesses that embrace the “insurance” tag and use the features of their products and value-add services in their communications.

While brand-building through endorsements and corporate responsibility are no doubt effective for the bigger marketing picture, sometimes the most effective communications are the ones that go back to basics and tell viewers what the business is selling and how it benefits them.

RUNNER UP: BUDGET DIRECT – INSURANCE SOLVED https://www.youtube.com/watch?v=HSDaOZJlLwo Budget Direct has long been successful with its product-focused advertising – at least in our annual awards.

Previously their “Insurer of the Year” ads told the audience they had won the award again. Budget Direct has done something similar this year, communicating the effectiveness of their business using key success signals.

The ads depict their Mulder and Scully-type detectives who have been used in several previous campaigns looking into Budget Direct “cases”. The detectives discover the insurer has received more than 30,000 independent 5-star customer reviews, and that they are Australia’s most-awarded car and home insurer.

WINNER: TAL GRIEF SUPPORT https://www.youtube.com/watch?v=cqmeHAlSMwo Last year, TAL featured in our awards with their “Financial Hardship” ad that showed Australians doing what they love and reminding customers and SME

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WHAT WE LOVE: Budget Direct once again uses hard evidence to show consumers they can trust it.

The ads are entertaining and have used the same characters for the past few years, which helps with 0 brand-building and recognition.

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Easing the claims pain point The Australian Financial Complaints Authority’s new insurance ombudsman sees communication and clarity as key to better claims experiences

By John Deex

T

wo of the top five issues raised with the Australian Financial Complaints Authority (AFCA) last financial year – across all financial products – relate to insurance claims.

Whether it’s delays, denials or the amounts paid, claims have always dominated consumer concerns about their insurance, and last financial year around 70% of the almost 17,000 general insurance complaints received were about claims.

But new Lead Ombudsman Insurance Emma Curtis believes a combination of regulatory change and renewed insurance industry efforts provides hope for the future.

Ms Curtis replaced the retiring John Price in August, making the switch from the Australian Securities and Investments Commission (ASIC), where she was Senior Executive Leader, Insurers.

“Claims handling is clearly a key pain point for consumers,” she tells Insurance News.

“You can understand that because that’s when consumers, who have been paying for a product often for many years, have to actually use it.

“Of course, insurers only need to pay out on what they need to under the policy, as long as they’ve acted fairly. But there’s some work that could be done.”

Ms Curtis accepts that sometimes customers complain to AFCA when their insurer was correct to deny a claim, but says that even in these cases better communication might have helped ease the consumer’s concern.

Customers having a clearer idea of what they’re covered for would help, and “ideally consumers should really spend some time making sure the policy is what they need”.

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But Ms Curtis accepts insureds rarely read the whole product disclosure statement (PDS).

“And sometimes when we look at the PDS we find there are internal inconsistencies,” she says. “That doesn’t help because if we can’t work it out, how can we expect a consumer to work out what the cover means in practice?

“Insurance is a difficult concept – it’s complicated. Even the most simple insurance is a fairly complex concept about risk management.”

Ms Curtis says consumers are vulnerable when they make a claim, even if on the face of it the damage is not major. A minor traffic bingle can still mean the claimant’s car is out of action for a while, and having to deal with an insurer adds to stress levels.

So poor communication just exacerbates the problem.

“That’s when things can go off the rails.

So it can really help to try and manage that relationship and clearly communicate to the consumer, even if the claim isn’t able to be paid.”

How does she see that being achieved?

“Focusing on that relationship-building, and the trust, the engagement and regular reporting.

“Providing dedicated claims staff so there’s a consistent person that the consumer’s talking to at the insurer… can really help to build trust, rather than being passed around to different people all the time.

“And then, keeping people up to date with how the claim is progressing so that even if there are expert reports that need to be done, and there are some unavoidable delays, keeping the consumer informed about that can really help.”

Insurers have learned some lessons since concerning claim stories emerged at the Hayne royal commission, Ms Curtis says.

Regulatory change that followed the hearings and the commission’s final report could make a huge difference.

Design and distribution obligations, which took effect in October this year, shift the onus onto product issuers to provide cover that’s consumer-centric, and suitable for the target market.

“I think that’s potentially a game-changer in terms of really shifting the burden away from consumers onto the product issuer to make sure that that products are designed appropriately,” she says.

“It addresses some of the issues that have been raised by regulators about disclosure.

Disclosure does have limitations, in part because we know customers don’t always read their PDS in full.”

Another key reform is making claims handling a financial service. This measure means specialist claims management companies need a financial services licence, and ASIC has greater powers to take action in relation to claims issues.

“Previously, the [claims handling] service that insurers had been providing wasn’t regulated,” Ms Curtis says. “It was specifically carved out so that the regulator was limited in what action it could take.

“More oversight, and a more consistent approach, and higher standards consistently across the industry should help improve consumer outcomes.”

AFCA receives many complaints about claims denied for non-disclosure, and there are regulatory changes happening here, too.

The duty of disclosure has been replaced with a duty to take reasonable care not to

Dispute referee: AFCA’s Emma Curtis

make a misrepresentation in consumer contracts.

Ms Curtis says AFCA is still considering the implications of the change, before possibly publishing an “approach document” on the issue next year.

“It’s only just come in, and we don’t expect to see disputes in relation to that issue immediately,” she says. “It will take some time for the contract to be initiated, and then for any potential dispute to arise.

“But we’ll be looking at other jurisdictions and seeing what we can learn from what’s happened there as well, where there’s a similar obligation.”

Consumer groups have expressed concern about insurers relying on non-disclosure to deny motor claims, suggesting that claims and criminal histories could be verified at the point of purchase instead.

Ms Curtis says it’s interesting research on an important issue, but it’s not for AFCA to form a view.

“There can occasionally be inadvertent non-disclosure by policyholders both at policy inception and at renewal. We do see that issue raised in our complaints.

“But the question of whether the [consumer group] recommendations should be acted on is a matter for government, and industry.”

She believes the new General Insurance Code of Practice is a major step forwards, and says codes play an important role in AFCA determinations, including those about claims.

“When we decide on a matter, we decide on what is fair in all the circumstances, taking into account legal principles, good industry practice, industry codes of practice, and previous relevant AFCA decisions.

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“Did the fact that it ended up in a dispute mean that there was a breakdown of the relationship, so the trust wasn’t there?”

In the 2020/21 financial year…

AFCA received 70,510 complaints 24% related to general insurance Only 7% of closed complaints went all the way to a decision 77% of complaints that went to determination were found in the financial firm’s favour AFCA employs 782 staff A team of around 120 works on insurance disputes

“So, we’ll have regard to the codes, particularly as that’s what the industry has said they consider to be minimum standards.

“The codes of practice set out timeframes, and they set out clear standards about communicating regularly with the claimant. Those are really important standards and they set a really good pathway to dealing with claims.

“Generally, I think what the insurers have done really well is develop a code that seeks to build trust and build on key concepts of respect, accessibility, and fairness.

“Where things might fall short is where perhaps those code principles could have been followed more consistently.

“The key thing is to live those standards every day, in every claim, in every interaction with the customer.”

Only a very small proportion of general insurance complaints to AFCA relate to brokers, and Ms Curtis says intermediaries should be “encouraged by the numbers”. But she adds it’s important that work continues on the Insurance Brokers Code of Practice review, which has been delayed.

“It is timely to take a good look at it and make sure that those standards are up to date and transparently reviewed,” she said.

AFCA has about 270 COVID-related business interruption complaints that are on hold, waiting for industry test cases to conclude in the court system. Once there is certainty from the courts, Ms Curtis says AFCA will apply those principles to the complaints.

“One of the points of the second test case was to select a sufficiently broad but

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manageable group of cases that represent common provisions in these contracts, so that the court’s decision will provide guidance we can apply to the matters in dispute before us.”

Ms Curtis rejects suggestions that AFCA has failed in issuing timely determinations on the business interruption disputes.

“One of our goals is to achieve an outcome that is both efficient and effective, with a result as quickly as possible for both insurers and policyholders.

“But due to the complexity and the unprecedented nature of the event, we agreed that these matters could be run as test cases.

“It was considered that as the matters were sufficiently important as well as unprecedented it was more appropriate for a court to determine these important issues to provide a consistent and robust outcome on an issue with significance for industry and consumers.”

Once AFCA makes a determination and it’s accepted by the consumer, it is binding on the financial firm. That has been a reality since the very beginning of the independent claims review process, which was originally founded, funded and managed by the industry.

“Other than for superannuation complaints, currently there is no right of appeal,” Ms Curtis says. “The Independent Review of AFCA, by Treasury, discussed this question and decided that AFCA determinations should continue to not be subject to a merits review. However we’ll be looking at the analysis closely and we agreed in principle

with the recommendations the report does make about our ‘forward-looking’ review mechanism.”

She believes it’s important to learn from the data, which points to claims as being “where the friction points are”.

And she believes the most critical issue to address is communication – with customers, but also with AFCA. “Better communication and engagement with customers throughout the claims handling process could really help address some of those disputes.

“People will come to AFCA for a variety of reasons, or they’ll lodge a dispute for a variety of reasons, including if they had a misconception about what their cover was.

“There may have been no poor conduct by the insurer, but the consumer has the ability to access free, independent, fair dispute resolution.

“From an insurer’s perspective, what that says to me is, could they have handled it differently so that there was a better understanding by the consumer from the outset that the cover was limited?

“Did the fact that it ended up in a dispute mean that there was a breakdown of the relationship, so the trust wasn’t there?

“Is there anything that could have been done differently in managing the claim, even if it wasn’t paid out, to help the consumer understand the reasons why?

“Was there anything that the firm could have done earlier to help resolve the issue without it ending up in dispute 0 resolution?”

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Still a bit up in the air Adaptability is key as travel insurers take off into an uneasy post-pandemic world

By Bernice Han

T

ravel insurance providers have a Herculean task before them: rebuilding their businesses after a COVID-induced nightmare sparked by the Federal Government’s ban on residents leaving the country.

Sales cratered overnight in March last year when Canberra activated its “do not travel” global advisory in response to the pandemic. The advisory was removed on November 1 this year, the only requirement being that Australian citizens and residents must be fully vaccinated before they embark on their journeys.

The trickle of sales to those who applied and received government permission to leave during the ban was barely enough to blunt the financial blow from the collapse of the leisure and corporate travel market.

Before COVID struck Cover-More earned some $450 million in annual revenues from its 45% share of the share of the Australian travel insurance market.

Around 5% of it came from trans-Tasman and domestic business.

Outgoing Chief Executive Asia Pacific Judith Crompton told a Standing Committee on Economics hearing in June that after the ban came into force the Zurich-owned business saw its revenue nosedive to just $4 million a month, made up mostly of domestic and trans-Tasman sales.

“That is now flipped to the other way around,” she said of the pandemic’s impact on the business, which derives 60% of sales from retail demand.

The task of flipping the travel insurance industry back in the right direction – which was worth in excess of $1 billion until COVID came – is now underway, as departure gates at airports around the country start to gradually fill up again after some 18 months of near-total emptiness.

The travel insurance sector has mostly adjusted swiftly, adapting its offerings to accommodate COVID-related cover such as medical assistance for

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policyholders who catch the virus while travelling. The revamps reflect the changed risk landscape in which there is a general acceptance that the virus and its variants may never be eradicated.

However, the emergence of Omicron as Insurance News magazine went to press shows just how volatile it remains for the industry even as it gets used to COVID being a constant, lurking threat.

And borders and travel bans enacted in response to significant health or safety risks remain a no-go zone for the industry, the Insurance Council of Australia says.

A spokesman tells Insurance News that travel insurers have generally determined these risks are too great to underwrite.

Earlier this year Allianz Partners Australia, a major player in the travel insurance sector, launched a new and simplified policy which has been adapted for travel in a COVID world.

“Travel has changed dramatically since COVID-19 became a worldwide pandemic,” Chief Executive Chris McHugh tells Insurance News.

The business continues to include a general exclusion against epidemics and pandemics, but if an insured is diagnosed with COVID before or during the trip some benefits may apply, subject to terms and conditions.

If a traveller contracts the virus before the trip and is unable to travel, Allianz currently includes cover for cancellation of unused travel and accommodation arrangements that cannot be otherwise refunded or re-scheduled.

In the event that a policyholder contracts the virus during the trip, medical assistance is available.

Should COVID border closures, or mandatory quarantine, shorten or cause a cancellation of travel plans, eligible customers may also be entitled to a partial or full premium refund.

But expenses incurred as a result of a border closure

or quarantine due to COVID are not covered, except in limited circumstances such as testing positive for the virus during the period of cover.

At Cover-More, COVID-ready benefits have been offered since December last year for customers going on domestic trips and to New Zealand, a spokesperson tells Insurance News.

The benefits also offer previously unavailable protection for overseas travel to other countries as the “do not travel” advisory is lifted. This includes cover for cancellation if an Australian traveller contracts COVID-19 and is placed into quarantine and cannot start their trip.

Cover-More also provides cover if an Australian traveller catches the virus while on their trip and is hospitalised or placed into quarantine. But the cost of testing is not covered, as that will continue to be part of required travel arrangements.

“We will continue to monitor our travel insurance cover as Australia and the world learns to live and travel with COVID-19,” the spokesperson said.

“Cover-More expects considerable pent-up demand from Australian travellers and this has started to manifest as a significant increase in sales volumes for international travel insurance compared to this time last month.”

A spokesman for IAG says its NRMA, SGIO and SGIC travel insurance policies do not provide any cover or benefits for claims related to COVID-19, including all medical expenses, cancellation costs and repatriation costs.

While major travel insurers are no doubt feeling upbeat, that’s not the case with everyone else. Brokers, who arrange corporate travel cover, believe it will take some time for demand to recover fully, due in part to airlines and countries having different testing requirements.

Mercer Marsh Benefits Leader Pacific Sarah Brown says it is difficult to assess how quickly the market will rebound. Insurers are regularly reviewing coverage which is being influenced by community expectations, so care is required to understand individual policy terms and conditions at renewal.

“However, we expect an initial spike in domestic and international business travel as business activities resume and return to a new normal following the extended border closures,” she tells Insurance News.

“We then anticipate a plateau in travel movements as organisations review their travel management strategies, including the requirement for travel versus the benefits of a virtual presence, viability of international expat assignments, local resource capabilities and COVID-19 restrictions and infection rates.

“This travel management strategy will be fluid in accordance with the changing travel and COVID landscape.”

Aviso Group General Manager David Bailey says the business, which also offers leisure and expat insurance solutions, has been in touch with its insurer partners to find out where they stand in relation to new underwriting criteria, if any, and exclusions that may apply.

“Unfortunately it won’t be simple,” Mr Bailey tells Insurance News, saying the message from insurance partners is “slightly mixed” at present. He says some have “obviously” exited the business while the ones that have stayed on are “very cautious” with their coverage.

“The good news is there are options available [with] some that will include cover for COVID-related matters,” he says. “There’s solid underwriting behind it, and hopefully as vaccination rates increase across the globe we’ll be able to provide more options to our clients.”

Howden Partner Corporate Risks Carlie Griggs says the brokerage is seeing a stream of inquiries from clients who are now starting to plan business trips in

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“Consumers are still not fully comfortable with the situation out there. They’re still concerned about possible border reclosures and the Delta strain in other places.”

advance. From what she has seen so far, COVID-related questions are the priority when it comes to corporate travel insurance.

“The basic corporate travel policy has certainly changed since the start of COVID,” she tells Insurance News. “Obviously one of the big things for our clients is the safety and wellbeing of their employees, and clients need to make sure they are protecting their employees when they are asked to travel for business purposes.”

She says it is the broker’s job to canvass the market to find the best product to suit the client’s individual needs.

“At present there are some clear differences with each insurer’s wordings. However, I’m confident that COVID exclusions on the travel policies will slowly start to be removed.”

Ms Griggs says Howden has partnerships with many corporate travel insurers, and the broker has been going through the respective product changes to support clients with their cover needs.

“It’s important that the exclusions under the policy wordings are explained to the client in detail so the client is clear on what is covered and what isn’t.”

Ms Griggs, who is a member of the National Insurance Brokers Association’s New South Wales Divisional Committee, says the availability of COVIDrelated travel protections demonstrates adaptability on the part of insurers.

“It’s a great thing for our industry,” she says. “The insurers have sat down, they’ve done their research and are now in a strong position to say ‘yes, we will cover your clients’.

“I think what they are doing is 100% the right thing to do.”

Broker-focused insurer TravelCard was among the biggest casualties of the COVID travel ban. Its Australian operations went into hibernation in October last year, and there have been no updates since then. Its website says the business continues to service existing policies and settle valid claims. Hollard, which underwrites the business, declined to respond to questions from Insurance News.

When TravelCard launched In Australia in 2018, it was named as the travel insurance provider for broker group Steadfast, and Steadfast Chief Executive Robert Kelly says the broking network will “certainly go back to supporting them” if TravelCard returns to the market.

“The people behind the business are really, really

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good people,” Mr Kelly tells Insurance News. “Brokers and their clients were served tremendously and efficiently.”

David McEwan, the Founding Director of brokerage Galvaniize Insurance, agrees travel insurance “isn’t easy” at the moment, with “a lot of declinatures from insurers for anything difficult such as trips to Antarctica”.

Actuarial consultancy Finity says the full recovery of the travel insurance industry is a few years away.

Written premium volumes in the last financial year remained very low, at 90% of pre-COVID levels, according to the actuarial firm’s latest annual Optima report.

“Consumers are still not fully comfortable with the situation out there,” Finity Principal Danielle Casamento tells Insurance News. “They’re still concerned about possible border re-closures and the Delta strain in other places.”

“So our view is that it’s a two to three-year project trajectory in terms of recovery.”

Ms Casamento says the pandemic disruption has “inevitably but in a positive way” forced the industry to examine its business model and review its offerings in response to heightened consumer awareness of the risks facing them when they are away from home.

My Trip Insurance Chief Executive Luke Sawyer says travel insurers will continue to be pressured to find better solutions to fortuitous cancellations and travel disruptions.

His company, which provides corporate travel products through travel agencies, has been working on the technology front to design new solutions.

“My Trip Insurance aims to be a conduit between the travel and insurance industries,” Mr Sawyer says.

“Our software allows an insurer’s technology to read the rules and conditions of a traveller’s booking, thereby getting a very clear understanding of how much risk is attached to the policyholder’s itinerary.”

The need to remain adaptable and available is key going forward, and several insurers have already adjusted their policies to add some coronavirus-related cover. Expect insurers to keep adjusting as the pandemic-related risks evolve.

Mr Sawyer sums it up when he says travel insurers will continue to be pressured to find better solutions to travel cancellations and disruptions.

“Given the complexities involved, innovation will 0 be key and good communication is imperative.”

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Life after Aon The broking sector’s mega-marriage failed, but Willis Towers Watson is confident about being single again

By John Deex

T

he merger of Aon and Willis Towers Watson (WTW) would have created the world’s largest insurance brokerage – a global giant with a combined equity value of $US80 billion.

The deal was first mooted in March 2019, before fading like a mirage and reappearing in more substantial form a year later.

The merger was subject to regulatory approval – something which, thanks to US regulators, ultimately could not be achieved.

Competition concerns sounded the death knell for the project in July this year, and the companies separated.

Aon paid WTW a $US1 billion termination fee – but having gone so far down the road, how difficult is it to turn back?

WTW Head of Australasia Simon Weaver says while much time and effort when into preparing for the merger, WTW is stronger for it.

“In terms of how involved it was and how far the business got down the track, it was a drawn-out and extensive period,” he tells Insurance News.

“But what’s come out of it is really illuminating. I can’t speak for the other side, but from our side it’s probably brought us out re-energised, and certainly refocused and confident and optimistic.”

WTW’s new global leadership team hasn’t been slow in repositioning the company, which has 45,000 employees in 140 countries. It already has a new strategy rolled out – “grow, simplify, transform”.

One unexpected aspect was the decision in August by the newly separated WTW to go ahead with the divestment of its highly regarded reinsurance business to Arthur J Gallagher. That sale, worth up to $US4

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billion, was originally intended to ease European competition regulators’ concerns about the Aon merger.

However, WTW will retain its facultative reinsurance operation and some corporate risk and broking units in Europe that were originally also up for sale.

Mr Weaver says no confidential information was shared between Aon and WTW, but being able to compare his company to a major global competitor “had many benefits”.

“It allowed us to compare strategies, processes, and systems and people. Knowing how we stacked up against a major competitor allowed us to come out feeling actually very confident about our independent status.

“It has given us a clear picture of where we want to focus and where we want to invest.”

And while some staff left as the merger process progressed, Mr Weaver says they’ve returned in droves since the deal collapsed.

“No doubt globally we lost people. We’ve been open about that. But we didn’t lose them because they didn’t want to be part of Willis Towers Watson. We lost them generally because of uncertainty around the future.

“Here in Australia, certainly, our competitors were looking to unsettle us. But actually, over the period we’re talking about, we hired more people than we lost.”

Simplifying the complex global broking business means cutting the number of separate geographies and business segments, and aiming for easier-to-navigate internal platforms, enabling employees to work more efficiently and get to market faster.

The “transform” part of the strategy targets efficiencies, particularly in real estate

as the post-COVID work environment settles down.

As for growth, WTW aims to be earning $US10 billion plus in revenue within three years.

Growth is also a key focus for the local business, which has 700 employees but “isn’t yet at the scale of Marsh or Aon”.

“We’re a pretty significant business, but as a business we feel we should be bigger,” Mr Weaver says.

“We’ve identified Australia and New Zealand as priority areas to invest in. We see an opportunity in the market because there’s a bit of a disruption going on, but also the model we’re developing and the areas we’re focused on have a lot of relevance for clients here.

“I want to double our revenue in five years. That’s our internal target – it’s pretty aggressive.

“We’ll be building off a strong base, but to get to double the size it’s going to be a mixture of organic growth and hiring people and teams. But also, we’ll look at acquisitions if we find those that are relevant and fit in with our own culture.”

Mr Weaver believes that aligning to client demands and market trends will fuel the growth he’s looking for.

He also wants WTW to be a long-term adviser to clients, backed by deep data analytics and benchmarking.

There’s opportunity in the current hard market, he says, because large, sophisticated buyers are “not particularly well served” by other brokers.

“The reason I say that is because board agendas have moved towards a focus on emerging risks. And we’re finding the

Independent future: WTW’s Simon Weaver

insurance market is not particularly capable of responding effectively.

“At the same time, the market has been particularly difficult over the past two or three years.

“If you’re a broker, if you’re an adviser to a client, and you’re just sitting there instructing them that their insurance has gone up in price, or they can’t get the cover they used to have, that’s not a satisfactory conversation to be having.

“We’re really trying to position our engagement over the long term. We’re trying to align the client’s strategy in terms of where they’re taking their business and then advising them on how they’re going to get there and how their risk financing might need to adapt.

“It may be that insurers will not be able to provide cover for certain risks. It may be there are better ways of financing some of those risks.

“But to have that conversation, you’ve got to have some really deep data and analytical capabilities. You need tools. You need benchmarking. You need to be able to run models and loss scenarios.

“Without that sort of intellectual input, it’s impossible to advise those clients about how to build their risk financing strategies over the next few years. We’re trying to move in exactly that direction and we’re finding clients in Australia are becoming more and more receptive to that.”

While not its main focus, WTW is also increasingly interested in the local SME market.

Mr Weaver sees it as an area that’s “ripe for disruption”.

“If you’ve got an established SME model

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“If you’ve got an established SME model that is large, complex, cumbersome, interdependent, full of frictional costs – I think you might be worried now.”

that is large, complex, cumbersome, interdependent, full of frictional costs – I think you might be worried now. You might be thinking, ‘how am I going to adapt to the future?’

“Because the future in this space is going to be very dynamic. It’s going to be digital.

It’s probably going to be AI-influenced. It’s going to be product and industry-specific.

It’s going to be streamlined and low-touch, and very efficient.

“That is an interesting area we’re looking at quite carefully to see whether we can deliver something different to what’s available now in Australia.”

Mr Weaver highlights three risk areas of focus for WTW – climate, cyber and people.

On climate the company has developed its Climate Transition Pathway (CTP), a unique framework that it says could be a game-changer.

If a client gains pathway accreditation from CTP, then WTW has lined up insurers to provide cover for that business.

“It’s not just about setting low targets, it’s about having a proper robust climate transition plan, aligned to the Paris agreement” Mr Weaver says.

“Insurers are exiting the high-carbon industries. They are not interested because of their own investors and ESG policies.

“They will not provide insurance going forward. But if they sit behind Willis Towers Watson’s climate transition framework, insurers – and we’ve got some global insurers signed up – will now provide access to

capacity for those clients.

“So instead of having no insurance at all and having to bear all the risk on their own balance sheet, we’ve got a unique proposition to allow these companies to have certainty around insurance. And we will help them as long as they continue down their climate transition pathway to help provide a sustainable future.

“In this part of that world there are many businesses that may find that an attractive opportunity.”

With cyber, it’s about more than just insurance cover. Mr Weaver says brokers have to understand the client’s industry, systems and the level of protection they have in place to prevent and respond to attacks.

He believes there is a lack of choice in the cyber cover that’s available at present, despite recent growth in the market.

“There’s a very limited set of options available even now. I think if you looked at statistics you’d see cyber insurance increasing year on year, but we still don’t feel that clients are getting the right response from the market, and the market is obviously very cautious. It’s such a dynamic risk.

“That’s one area we will invest in this year. We will bring in more cyber capabilities to have better and broader conversations around what we can do in the market.”

On people risk, WTW is bringing together a broad range of services including workers’ compensation, but also super, health

insurance, training and development.

“The traditional solutions to just about every one of those things are provided by separate products or separate providers,” Mr Weaver tells Insurance News. “And so, while it might be dealt with by the same person in a client organisation, they’ve got to separately work out, who’s going to do my health insurance? How do I structure it? Who’s going to deliver my super fund advice? Who’s setting up my worker’s comp?

“What we’re trying to do is address each of these areas in a combined way, because we have rich data in all these areas, and we can bring them together.

“By combining the data and putting it into a user-friendly tool, we see a really good opportunity to address this in a way that clients haven’t seen before.”

The proposed merger with Aon was heralded as “a natural next step” that would deliver better outcomes to stakeholders and increased innovation – until the US Department of Justice intervened.

But while so much effort went into the failed proposal, Mr Weaver doesn’t see it as wasted work.

So much was learned, he says. Going through the process crystalised the company’s vision for the future, and the collapse of the deal brought an end to a period of uncertainty for clients and staff.

“Now we’re back as an independent business,” he says. “We’re here to stay and 0 we’re here to grow.”

As soon as he could, he switched to broking, and relocated to Asia in 1996 with JLT. “I loved the fact that brokers could sit with clients and design coverage and work with insurers and deliver them what they needed. I thought that was really appealing.

“And then you start to meet clients in all these different industries, and learn about their

industries. I’ve always found it fascinating.”

In 2013 he joined Miller as Asia CEO. When Willis acquired Miller in 2015, he ran Willis in Asia for three years before being appointed WTW Head of Australasia in 2019. Most recently, in addition to his Australasian role, Mr Weaver has taken on the position of Head of Corporate Risk & Broking, Asia Pacific.

Royal appointment While Simon Weaver was at university in his native UK, companies visited to check out potential recruits. The first to offer Mr Weaver a position was Royal Insurance (now part of the RSA group).

“I started with Royal and I loved it,” he said.

“I loved insurance from the first minute, but particularly the client interaction.”

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2021: catastrophes, COVID, courts, challenges – and change everywhere A look back at the events that dominated the industry’s year through our daily Insurance News online service

By Miranda Maxwell

N

o one saw 2021 coming, and a look back through the files of insuranceNEWS.com.au illustrates the fact that life is unpredictable. For the Australian insurance industry, it has been a struggle on all fronts as the pressure piled on and the catastrophe claims kept coming.

Industry professionals at all levels across every industry sector have had to cope with keeping the workflow moving while scattered to their homes by pandemic lockdowns. They have also had to grapple with milestone regulatory reform, insurance affordability issues, five declared catastrophes (and counting), sundry other destructive storms and floods, and a complex court battle over COVID-related business interruption (BI) claims. To name just a few of the issues handled in 2021.

Amid so much gloom it’s heartening to note that insuranceNEWS.com.au’s mostread article of the year was a quirky piece about Melbourne-based IAG employee and guitar hobbyist Fran Porter and her song about the experiences of lockdown life.

The response to her uplifting video was phenomenal.

Here is our month-by-month look back at highlights of the year:

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JANUARY

FEBRUARY

The year kicked off with the Australian Competition and Consumer Commission (ACCC) concluding a three-year inquiry into insurance affordability in northern Australia and calling for broker commissions to be replaced by a fee-based system.

The almost 600-page final report contained 38 recommendations.

Next came news London-based Howden Broking was moving into the Australian market via a strategic broking partnership with Steadfast.

The UK Supreme Court ruled against insurers on COVID BI cover, prompting insurers to reserve millions for potential Australian claims.

Allianz Australia announced a new operating model and the departure of Chief GM Broker and Agency David Hosking, while NSW state insurer icare appointed former Tower CEO Richard Harding as its new head.

Almost 50 customers of US-based file transfer vendor Accellion, including the Australian Securities and Investments Commission (ASIC), the Reserve Bank of New Zealand and insurance law firm Allens, were hit by a cyber breach that affected millions around the world.

Federal Court of Australia proceedings commenced to test pandemic coverage in BI policies in the second industry test case, and as plaintiff lawyers moved in the Insurance Council of Australia (ICA) criticised proposed class actions as “premature”.

The ACCC expressed concerns about the local implications of a planned merger between global brokers Aon and Willis Towers Watson.

On February 5, ICA declared the Perth Hills bushfires the first insurance catastrophe of 2021. Claims came to $88 million.

NIBA published a discussion document on proposed changes to its venerable Code of Practice and the Federal Government considered exemptions to add-on insurance reforms after brokers warned the changes could expose consumers to financial risk.

February was a stellar month for women working in insurance as QBE Group appointed ICA President Sue Houghton to the vital post of Australia and Pacific CEO, and NIBA appointed Adelaide-based broker Dianne Phelan as President.

The London-based Ardonagh Group took up a majority stake in authorised

representative group Resilium as its first move into the Australian broking market, and the Queensland Government agreed to settle the Wivenhoe and Somerset class action – resulting from the 2011 Brisbane floods – for $440 million.

MARCH Some key appointments were announced in March. QBE named Andrew Horton, the head of British insurer Beazley, as its next group chief executive.

Chubb announced Peter Kelaher as its new Local Country President, replacing Jarrod Hill who had moved to IAG to run its intermediated business. IAG also named former chief customer officer Julie Batch to manage the group’s direct insurance operation.

Meanwhile, ICA declared widespread east coast flooding on March 18-24 was the year’s second insurance catastrophe, later revealing 57,000 claims at an estimated $645 million.

The Australian Prudential Regulation Authority (APRA) annual general insurance statistics revealed the industry made an underwriting loss of $78 million in 2020,

driven by natural catastrophe claims costs, falls in investment income and COVIDrelated BI provisions. Just as sombre was the General Insurance Code of Practice Governance Committee annual report showing 32,870 self-reported code breaches, up 5% on the previous year, and 112 significant breaches.

ASIC offered immunity to people who informed it about business misconduct and co-operated on investigations and court action. And QBE started selling home and motor insurance products to Australia Post customers under a partnership agreement. Overseas – or perhaps between seas – the massive container ship Ever Given became lodged in the Suez Canal, sparking a global supply logjam and a marine insurance headache that’s still being sorted out.

APRIL The much-anticipated unfair contract terms protections kicked in on April 5 for consumer and small business insurance contracts. On April 14, ICA declared an insurance catastrophe in Western Australia from Tropical Cyclone Seroja, with the

coastal town of Kalbarri and the community of Northampton bearing the brunt of the storm and raising 7100 claims totalling $306 million.

Hollard announced senior executive changes under which Richard Enthoven would focus on his role as MD of Hollard Holdings Australia and Paul Fahey would become CEO. April also saw a series of announcements from broker groups: Steadfast acquired a 60% stake in unisonSteadfast, a cross-border group that is managed from both Hamburg and Chicago. AUB Group unveiled The Insurance Alliance, an initiative allowing brokerages to access services offered by the company without becoming equity members of Austbrokers.

Financial Services Minister Jane Hume said the issue with commissions received by intermediaries applies purely “when they influence the advice provided” and agreed a flat fee model can be a challenging business proposition.

Insurance News launched a revamped homepage design and introduced a dedicated weekly insurtech section – acknowledgment of the fact that the industry is now inextricably tied to technology.

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Catastrophic: Cyclone Seroja ripped through WA in April. Credit: Sedgwick

MAY Confirmation of a government cyclone reinsurance pool for northern Australia came on May 4, backed by a $10 billion government guarantee.

John Trowbridge’s discussion paper on SME insurance affordability, commissioned by the ICA, put forward 16 potential solutions, including setting up underwriting consortia so insurers could share difficult risks.

The Ardonagh Group, fresh from digesting Resilium, acquired Sydney-based underwriting agency Epsilon. Joseph Longo was appointed the new Chairman of ASIC and Sarah Court became Deputy Chair.

A new strain of COVID first detected in India months earlier was named the Delta variant, a plague of mice continued to cause misery across regional NSW and Queensland and ICA unveiled a fresh logo and website.

JUNE The High Court denied ICA’s application to appeal a judgment in the first test case on BI claims.

In the Deal of the Year, market wunderkind Hollard acquired the Commonwealth Bank’s general insurance business with an upfront payment of $625 million and ongoing links with the bank. The deal will increase Hollard’s annual gross written premium by about 50% and position it as the fifth-largest general insurer in Australia.

On June 13, ICA declared the year’s fourth insurance catastrophe for regions of Victoria impacted by storms and flood. There were 28,000 claims valuing $241 million.

NIBA announced Philip Kewin would

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become the association’s new CEO to succeed Dallas Booth. Mr Kewin is the former CEO of the Association of Financial Advisers.

The UK’s Financial Conduct Authority cracked down on so-called insurance “loyalty taxes,” saying renewing customers must not be charged any more than new ones.

Insurance executives put in a strong appearance before the House of Representatives Standing Committee on Economics in the face of a hostile approach from some MPs. At a separate inquiry, insurers were criticised by politicians for withdrawing cover from coal mining.

JULY “It’s off” was the headline insuranceNEWS.com.au used to report the Aon/Willis Towers Watson mega-merger, which would have created the world’s largest insurance brokerage, had been abandoned due to resistance from regulators. Aon paid WTW a $US1 billion termination fee.

The latest version of the General Insurance Code of Practice came into effect, with significant changes and sanctions of up to $100,000 for code breaches. It is the fifth update of the code and provides comprehensive consumer protections in the postHayne royal commission landscape.

IAG CEO Nick Hawkins delivered the sort of full-year results no first-year CEO would ever want to report – an overall loss of $427 million, which included BI provisions for the pandemic, customer refunds and payroll remediation.

July also saw another top-level move

to IAG when Zurich Australia General Insurance CEO Tim Plant left to become IAG’s Chief Insurance and Strategy Officer.

A law firm launched class actions in the Federal Court against QBE and Lloyd’s over the rejection of BI claims, and APRA said selling policies with outdated wording “exposes clear deficiencies in risk management”.

AUGUST While Australia began to worry about the Delta COVID variant, there was a win at home in the long-running (and still running) myriad cases involving pandemic-linked BI insurance. In stark contrast to both the first test case launched by ICA and adverse rulings against insurers in the UK, the Federal Court found in favour of Chubb and 10 other industry respondents in an action launched

by The Star Entertainment Group. (Although an appeal was later announced.)

Sydney-based Coverforce, a significant brokerage which had gone through some difficulties unconnected to the business of insurance, was acquired by Steadfast for $411.5 million.

And Suncorp CEO Steve Johnston had much to smile about when he announced a net profit rise of 13% to $1.03 billion supported by its strongest financial year performance in Australian premium revenue in almost a decade.

That’s especially impressive alongside the APRA industry statistics in August showing general insurers made a net profit after-tax of $1 billion for the year to June 30, with better investment income and underwriting results contributing.

How are we? Insurance News launched its inaugural wellness survey

The Business Events Council of Australia called for a government-led insurance scheme to enable the recovery of the business events sector, which had been flattened by COVID lockdowns, travel bans and border closures.

SEPTEMBER The second ICA COVID BI test case was heard in the Federal Court, and lawyers put forward final arguments to conclude the eight days of hearings. Meanwhile, Slater and Gordon launched a class action against IAG on behalf of BI insurance policyholders.

Victorians were shaken on September 22 as a record-breaking 5.9 magnitude earthquake struck near Melbourne, causing surprisingly little damage in the city of 5.07 million. ICA put preliminary estimated losses at $147 million.

Aon announced it had promoted Jennifer Richards to CEO Australia, replacing James Baum, who is headed to a new role in London.

The ICA launched a Business Advisory Council as part of responses to the final report delivered by John Trowbridge on availability and affordability issues.

Lloyd’s annual industry-wide Dive In diversity and inclusion festival attracted its highest global audience to date, with 31,000 participants from more than 100 countries attending the three-day hybrid event.

Reinsurers’ much-loved annual Rendez-Vous de Septembre was again an online only-affair instead of in Monte Carlo.

IAG said its IAL brand will no longer accept new business, landlord insurers came under fire for chasing tenants over claims and the Bureau of Meteorology warned of an upcoming La Nina weather phase, promising a wet spring.

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OCTOBER A “once in a generation” set of regulatory changes came into effect on October 5.

ICA said insurers were ready for the sweeping changes.

“Insurers win the day” was the October 8 headline as the Federal Court judged in favour of insurers on the vast majority of issues in the second BI test case on COVID-19 claims – an overwhelming win for insurers in eight of the nine test case claims.

Record “grapefruit-sized” hailstones 16cm in diameter hit north of Mackay in Queensland, and wild weather saw ICA declare an insurance catastrophe for parts of South Australia impacted by significant hail, rain, and strong winds. This was later extended to include affected areas of Victoria and Tasmania.

The first Insurance News Wellness Survey, conducted by Insurance News in the middle of prolonged lockdowns in New South Wales and Victoria, revealed that while many staff working at home were revelling in new-found work/life flexibility and the mixed delights of Zoom meetings, for others the lockdowns had raised levels of exhaustion and anxiety.

As we reported in the October issue of Insurance News, more than a quarter of insurance industry professionals who responded to the survey were so worried about their mental health they had considered or sought out expert help.

However, for housebound Sydneysiders the end to the state’s four-month staged lockdown was in sight, with restrictions lifted once vaccinations had reached 70%.

There was little joy to be found in the annual Optima report from major actuary and consultant Finity, which revealed insurer profitability had gone “from bad to worse”, with return on equity slipping to a sorry 2%.

Something that got people talking – or at least speculating – was unconfirmed

rumours that Zurich Group was considering selling its general insurance business in Australia. We’ll keep you posted on that one.

NOVEMBER The Full Court concluded hearing appeals in the second BI insurance test case after it considered five claims and an appeal from The Star Entertainment Group against Chubb and other insurers.

Separately, Federal Court action taken against Suncorp by a Melbourne restaurant was resolved. Suncorp said judgment will be entered in favour of its subsidiary Vero, but it would make a contribution to the plaintiff’s legal costs given the industry-wide significance of the issue. Suncorp said its reserving was appropriate in light of the decision.

NIBA published another draft Insurance Brokers Code of Practice following strong criticism of its earlier attempt by consumer groups and the code compliance committee.

A class action started in 2018 by Richmond Valley Council on behalf of 12 councils concluded in the NSW Supreme Court. A judgment in the case, which alleges JLT breached its broker duties and arranged cover “at less advantageous rates than were available”, is probably still months away.

Aon’s biennial risk survey saw cyber sit at the top of the pile for the first time, outstripping climate change and COVID, while Marsh’s commercial pricing index highlighted a dramatic rise in cyber premiums.

Industry leaders have spoken out about the climate challenge and what reinsurers, insurers and brokers can do during the UN summit in Glasgow.

ICA said Australian governments need to spend $30 billion on coastal protection measures over the next 50 years as cli0 mate change increases risks.

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From strength to strength: Howden launches in New Zealand International broking house Howden has set up shop in New Zealand, after establishing its Australian operations earlier this year.

The business will also launch Howden Care, its workplace claims management, rehabilitation and wellness arm, as part of its growth plan for the market.

“The establishment of the Howden operations in New Zealand is another achievement in a very short time frame for our business in the region,” Howden Pacific Chief Executive Matt Bacon said.

“Despite the current climate, Howden has gone from strength to strength in Australia, and we feel certain that our New Zealand team will deliver upon the same trajectory.”

René Hattingh, previously a partner at local broking house Donaldson Brown, joins as Chief Executive of Howden Broking New Zealand. Before Donaldson Brown, she was head of FinPro New Zealand at Marsh.

Cliff McCord is appointed Howden Care Chief Executive. He joins from Wellnz, a workplace claims management, rehabilitation and wellness business where he has worked for the last 20 years, including as chief executive in the last six.

“The addition of industry leaders René and Cliff into the Howden family is a huge win for us,” Mr Bacon said.

“We look forward to delivering significant value to our clients through their proven, market-leading expertise.”

Howden Broking, established in 1994, is headquartered in the UK and employs more than 6500 people worldwide.

It launched in Australia through a strategic broking partnership with Steadfast. As part of the partnership, Howden will support Steadfast’s London Market broking requirements while its Australian broking operation will join the Steadfast network.

Mr Bacon, who joined Howden from Marsh, where he was Chief Executive of the Mercer Marsh Benefits business for the Pacific region, says he relishes the challenges of growing the business into a major broking force.

“I love winning,” he told Insurance News previously. “We came into this certainly with a clear plan and a clear understanding of what we wanted to do and what 0 we need to do to make this business a success.”

New horizons: AUB flags potential overseas opportunities AUB Group has signalled that it may pursue international expansion and look at opportunities beyond Australia and New Zealand.

Chief Executive Mike Emmett provided an update on the company’s strategic direction and performance at the annual meeting, while also pointing to possible overseas ambitions.

“While the current focus is on Australia and New Zealand, the AUB business model is well-suited to multiple countries worldwide,” Mr Emmett said. “The careful and considered expansion to new territories is anticipated in future.”

The more immediate focus is to continue to extend and improve the agencies division, further optimise the network of businesses, pursue acquisitions in the pipeline and deliver technology enhancements.

AUB during the past year initiated numerous

business mergers, realigned client portfolios, made strategic disposals and rationalised entities to create scale and a simpler business.

“The objective is to leverage the scale and margin benefits of more significant Austbrokers members to develop fewer, bigger, better run and more profitable operations in the AUB portfolio,” Mr Emmett said.

The company remains on the lookout for opportunities to bring in strategically aligned enterprises, and a number of transactions were completed in the past financial year.

“We continue to be able to add quality businesses to our group, although I will say we are highly selective in our approach to acquisitions and the careful deployment of our capital to generate attractive 0 returns for shareholders,” Mr Emmett said.

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Golfers enjoy the links Golfers were back socialising on the greens and fairways in Queensland in an event that raised funds to support Wesley Mission.

The Council of Queensland Insurance Brokers Golf Day, held at the Royal Pines Resort Golf Course, brought together 103 players from across all sectors of the industry.

Vero sponsored the event and State Distribution Manager, Queensland Peter Roberts says it was great to see people back out enjoying faceto-face networking, despite some heavy rain during the day.

Participants were invited to support Wesley Mission, with a total of $5000 raised though opportunities to buy an extra stroke or have the benefit of using the Golf Pro’s shot as players made their way around the course. 0

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Brokers return for CQIB Convention Crowds gathered for the Council of Queensland Insurance Brokers (CQIB) convention on the Gold Coast in October as delegates celebrated a return to festivities.

The annual convention, rescheduled from August due to COVID regulations, was the first large industry conference since lockdowns.

Two conference dinners were held, starting with CGU’s “Around the world in one night” evening, which featured a variety of international foods, while a dinner sponsored

by QBE invited attendees to dress

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according to a Q, B, or E theme.

Sessions during the day covered topics including regulation, property market impacts, risk surveys and insurtechs. Delegates were also challenged to change their perception and look for opportunities.

Attendees at the event, held at the JW Marriott Gold Coast Resort and Spa, raised more than $40,000, donated to Wesley Kids for a children’s therapy and outdoor sensory area and to provide sessions and groups for vulner0 able children and families.

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Zurich partners relish Prawns on the Lawn More than 250 brokers attended Zurich’s annual Prawns on the Lawn event in Brisbane on November 11, where they were hosted by Queensland Regional Manager Jared Kaplan and his team.

The Zurich team and broker partners caught up over a seafood feast, bringing the year to a close on a positive note.

Prawns on the Lawn is all about bringing Zurich’s most loyal and strongest supporters together face-to-face.

“Having to be the person to cancel an event that has been going for 43 years was not a decision I took lightly, but the fact that we are all here tonight just shows the resilience of our industry and the desire to be together and have fun,” Mr Kaplan said.

“The Queensland insurance community is nothing like any other state. The collaboration, friendships, and support is something that we all have a responsibility to ensure we uphold and continue for years to come.

“And this is what this historical event is all about, bringing good people together to celebrate the wonderful relationships we have 0 fostered over the years.”

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UAC expo draws 200 brokers About 200 brokers turned up for the Norwest Sydney Underwriting Expo on November 24 at the CommBank Stadium in Parramatta.

Organiser the Underwriting Agencies Council (UAC) says the brokers attended the event under the venue’s COVID-safe plan, arriving at separate timeslots to facilitate physical distancing.

The one-day event provided valuable opportunities for the 51 UAC member exhibitors to showcase their niche and specialist offerings to brokers, after more than a year of social restrictions because of the pandemic.

“We found the desire by brokers to have a face-to-face is as intense as ever, especially with

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all the cancellations we all have experienced,” UAC General Manager William Legge said.

Apart from business talk, a lucky few went home with prizes, courtesy of a draw sponsored by UAC Business Service member Sedgwick.

John Dunk of Dunk Insurance was the winner of the first draw, getting a $100 voucher. The Dunk insurance team drove 366km from their home town to attend the expo.

Sam Taverniti of City Commercial Insurance in East Ryde emerged as the draw’s second winner, taking the $250 voucher.

The final voucher, worth $500, went to Susan Cini of Total Asset 0 Insurance Solutions.

December 2021/January 2022

All our very best wishes for the festive season to our army of readers in Australia, New Zealand and around the world.

Congratulations for finding your way through the past couple of challenging years. We’re proud to have maintained our news service through difficult times, keeping you in touch with issues, incidents and developments in insurance. We never forget that Insurance News relies on our advertisers, because without them there would be no Insurance News. So please support our advertisers – they deserve your attention.

From all of us at Insurance News, here’s hoping that 2022 will be a safe and happy year for you, your friends and family.

Terry McMullan

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