BUSHFIRES TO FLOODS No respite for insurers as La Nina arrives
Virus on the Radar Examining the pandemicâ&#x20AC;&#x2122;s impact, class by class
Diverse voices Dive In Festival confronts and inspires October/November 2020
This information is general advice only and does not take into account your objectives, financial situations or needs. You should obtain and consider the relevant Product Disclosure Statement and Policy Wording (as applicable) from zurich.com.au before making a decision. The issuer of general insurance products is Zurich Australian Insurance Limited (ZAIL), ABN 13 000 296 640, AFS Licence Number 232507 of 5 Blue Street, North Sydney NSW 2060.
COVER FOR SMALL AND MICRO BUSINESSES
Zurich is stronger in SME with improved price competitiveness across a variety of occupations including property owners, personal and professional services, road freight transport, trades and retailers.
ZURICH.COM.AU/ ZSTREAM CALL: 1800 426 021
ZURICH INSURANCE. FOR THOSE WHO TRULY LOVE THEIR BUSINESS.
ZU23667 V2 09/20 TFMC-016045-2020
Contents 6 Newsmakers 10 A land of drought and flooding claims
A wetter summer is forecast as La Nina looms, but will this provide a reprieve for insurers?
16 Deep impact
A new report analyses the effects of COVID-19 on insurance, class by class, and finds all are likely to take a hit
24 Bigger is even better
Scott Leney has moved into a new regional position after playing a key role in the Marsh-JLT integration
28 Searching for cover
Governments, insurers and businesses around the world are discussing how to improve risk protection for the next pandemic
34 Navigating a pandemic
IAG Crisis Director Suzanne Storrie says adaptability will be key as the virus lingers
38 The ultimate side hustler
How a failed claim led Naby Mariyam to create ‘cool, rebellious’ insurtech Hustle for people in the gig economy
60 Bolt from the Blue
Building Blue Zebra has been like a three-year sprint. But Colin Fagen’s race is far from run
67 Catch me if you can
Motor insurance fraudsters go to great lengths to falsify claims, raising the stakes for insurers
companyNEWS 72 Taking flight:
360 Aviation teams with Axa XL
72 Future direction
BAIS to unveil new logo and plans
72 Stronger together
PSC combines AR networks under one banner
73 New name, same commitment Ryno becomes ShieldCover
peopleNEWS 74 maglog >
42 ‘I speak with the strongest Australian accent I can manage’
More than 2500 insurance professionals attended local sessions at this year’s virtual Dive In diversity and inclusion festival, to hear some confronting and inspiring messages
48 COVID whiplash
The challenges for Australia’s biggest insurers have grown more complex, with the coronavirus halting earnings growth
55 Dealing with data overload
An expert explains the complexities and opportunities in business technology, what’s available and what it can (and can’t) do
October November 2020
insuranceNEWS.com.au is a free daily online news service for the general insurance industry. The website has more than 28,500 subscribers. In August/September we published 520 articles online. These were made up as follows:
HAWKINS STEPS UP AT IAG IAG has named Nick Hawkins as its new Chief Executive, taking over from Peter Harmer, who will retire on November 1. Mr Hawkins, pictured right, was chief financial officer for 12 years before being named deputy chief executive in April. He has served as chief executive of IAG New Zealand and was considered one of the two most likely candidates for the job. Chief Executive Australia Mark Milliner was also considered a
Regulatory & Government
Breaking News More than 31,357 news articles – including 354 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
strong internal candidate. Chairman Elizabeth Bryan said Mr Hawkins “has a deep understanding of both global and domestic general insurance along with operational and financial experience, and this will ensure a smooth transition for IAG”. Mr Hawkins, 52, joined IAG in 2001 from KPMG, where he was a partner specialising in financial services and worked in the firm’s offices 0 in Perth, London and Sydney.
…WHILE REGAN STEPS DOWN AT QBE QBE has begun its search for a new Group Chief Executive in a testing pandemic environment following the sudden exit of Pat Regan, pictured left. insuranceNEWS.com.au reported in a Breaking News bulletin in early September that Mr Regan would leave the company following an external investigation concerning workplace communications that “revealed poor judgment”. Chairman Mike Wilkins says the board took “decisive action” after the
probe, which was sparked by a complaint made by a female employee. Mr Wilkins has assumed the role of Executive Chairman, taking on day-today oversight of QBE while the search for a new CEO is carried out. Mr Regan received just $310,000 in his severance payout. The payout is in lieu of a reduced notice period plus statutory leave entitlements and represents a drastic cut from his annual remuneration, which came up to 0 $US4.43 million last year.
Up until today, every single player “ in the market has been hooked on introductory pricing – the crack cocaine of the insurance industry – insurers and consumers alike. Today’s ruling…requires firms to go cold turkey.
UK market analysis firm Consumer Intelligence on the Financial Conduct Authority’s ban on insurers’ “loyalty penalties”
UK CASE MAY INFLUENCE LOCAL ISSUE Herbert Smith Freehills, which represented the UK Financial Conduct Authority (FCA) in the recent London UK business interruption test case, says there are implications from the decision for the Australian market. The High Court decision handed down in mid-September favours policyholders on key issues around disease wordings and local versus national impacts, also minimising the ability for insurers to reduce recoveries through reliance on wider impact arguments.
Partner Mark Darwin says issues examined in the case “represent some real pressure points” for insurers both in the UK and Australia. A test case launched by the Insurance Council of Australia (ICA) and the Australian Financial Complaints Authority was scheduled to be heard by the Full Bench of the NSW Court of Appeal as this edition of Insurance News went to print. Casino operator The Star Entertainment Group 0 is also taking legal action over its policy.
JUDGES LAY DOWN THE LAW OVER ACCESS The Federal Court has again struck down an application by class action plaintiffs to access confidential insurance documents held by a respondent. Law firm Allens says the court’s decision, which involves a shareholder lawsuit against the company that owns the Dreamworld theme park in Queensland, shows such applications will be rejected if it is
for the purpose of lining up a litigation strategy. Allens says there is now “a growing body of case law that supports the proposition that class action applicants are unlikely to be able to obtain documents from a respondent (or insurer) concerning the respondent’s insurance position for the purposes of informing litigation strategy,
mediation or settlement”. “Furthermore, a condition precedent in litigation funding arrangements requiring applicants to obtain access to a respondent’s insurance policies, and the potential termination of litigation funding if access is not granted, will not hold sway with the courts when considering whether to grant access to a respondent’s
insurance policies.” Shareholders in the Dreamworld class action had submitted to the court they needed access to the insurance documents of Ardent Leisure to decide if it was commercially viable for the lawsuit to proceed. In April the Federal Court struck down a similar application made by another class action. 0
HERE COMES A WET AND WILD LA NINA The Bureau of Meteorology has declared Australia’s first active La Nina since the flood-causing event a decade ago triggered one of the wettest two-year periods for the country on record. Manager of Climate Operations Andrew Watkins says a La Nina typically brings more tropical cyclones than normal and also increases the chance of rainfall and floods across parts of the country. “Typically, La Nina brings more rainfall, particularly across northern Australia and into eastern Australia as well, and as that wets up the soils it does increase the risk of flooding whenever we get a big rainfall event,” he said.
The last event started in 2010 and extended into 2012, triggering insurance catastrophe events such as Tropical Cyclone Yasi and the Brisbane flooding.
Dr Watkins says events more typically fade out in the autumn and the current La Nina is likely to be a little more 0 moderate.
BUSHFIRES ‘MORE EXTREME, LESS PREDICTABLE’ Catastrophic fire conditions may become more common, rendering traditional bushfire prediction models and firefighting techniques less effective, the Royal Commission into National Natural Disaster Arrangements says in “interim observations” reported by insuranceNEWS.
com.au on August 31. Warning that bushfire behaviour “has become more extreme and less predictable”, the royal commission says the bushfires caused more than $2 billion in insured losses alone, with the economic impact on tourism, hospitality, agriculture
and forestry estimated at around $3.6 billion. “There may have been a further $2 billion in health costs”. It says all Australians must take steps to prepare themselves and their families for natural disasters. “It is for this reason that
preparation for, response to, and recovery from, natural disasters has been called a ‘shared responsibility’…between individuals, private enterprise, not-for-profit organisations and all levels of government”. The final report is due at the 0 end of this month.
…WHILE BUSHFIRE REVOLUTIONARIES SEE SWIFT ACTION Insurers have applauded the Minderoo Foundation’s newly released blueprint for lifting Australia to be the global leader in fire and flood resilience by 2025. The ambitious technology-led plan to transform Australia’s fire detection and response capability was revealed in Canberra by the Minderoo Foundation, a philanthropic organisation founded by mining billionaire Andrew ‘Twiggy’ Forrest. Launching Fire Shield on September 20, Minderoo Chief Executive Adrian Turner
outlined an ambition to be able to detect and extinguish blazes anywhere on the continent by 2025. “We’re setting a target of less than five years to deliver generational change,” he said. “We are determined to radically change the way we predict, detect, monitor and respond to fire, in collaboration with communities, government agencies and emergency services.” The project brings together a coalition of more than 50 corporate partners and scientific organisations, including IAG, Suncorp, Allianz,
Munich Re, Swiss Re, Risk Frontiers and the Bushfire and Natural Hazards Co-operative Research Centre. It accelerates the use of technologies such as automated monitoring cameras, drones, satellite technology, remote sensing and machine learning to rapidly detect and respond to bushfires. Existing and emerging technology should enable fire agencies to extinguish dangerous fires within an hour, according to research backed by 0 the program.
D&O MARKET ‘HARDEST EVER WITNESSED’
On September 25 insuranceNEWS.com.au reported that the market for directors’ & officers’ (D&O) insurance in Australia is experiencing the hardest conditions ever seen, with a new report warning policies are likely to become even more restrictive in future. Marsh Chief Client Officer Steve Walsh says the amount of D&O capacity in Australia sits at just a third of the level three years ago. He says insurers are now asking, “Do we want to actually insure you? The impact then is obviously in relation to premiums, how much capacity they are prepared to offer and the introduction of new excesses.”
Availability is being impacted by claims and the withdrawal of insurers, resulting in increased premiums and excesses. The D&O insurance sector is estimated to have under-reserved for losses by somewhere between $3 billion to $5 billion in recent years, despite a significant rise in premiums. Claims payments in Australia and New Zealand have dwarfed the total insurance premium pool as litigation funders become more commonplace and as the regulatory environment evolves. Capacity available in the London D&O market alone for those companies with an ASX presence is 50% less than it was 0 in 2017.
TERRY McMULLAN Email: firstname.lastname@example.org
Insurance News Pty Ltd Tel: + 61 3 9499 5538 PO Box 116, Ivanhoe VIC 3079 Australia
MANAGING EDITOR: JOHN DEEX Email: email@example.com
ADVERTISING: MADISON SEYMOUR Email: firstname.lastname@example.org
SUBSCRIPTION ENQUIRIES: www.insurancenews.com.au/subscribe Email: email@example.com
The coronavirus is still dominating our lives, but there’s one thing we will notice has changed when we finally emerge into a post-pandemic world. Locked down or forced to work from home, Australians have become adept at using the internet to arrange everything from groceries to insurance. The insurance industry, long seen as slow to adopt customer-friendly technologies, is on the move like never before to intercept this change in buying behaviour. Just how much things have changed is illustrated in this edition by Lisa Woodley, who has spent her entire career immersed in insurance technology, from the first tentative steps into those early (and clunky) broker systems to the specialised transaction platforms like Sunrise Exchange and the Steadfast Client Trading Platform. Ms Woodley takes us step-by-step through the various types of systems and technologies that are already having such an impact on the industry – systems that she says free people up to attend to their clients and customers. One of the driving influences on insurance is Big Data. As technology innovator Warren Burns noted in an article in Insurance News last year, the industry is “awash with data” that can be used to enhance customer experiences and also highlight risk factors that might otherwise go unnoticed. More generic data from third parties is also becoming readily available, and Ms Woodley notes this will enable brokers and insurers to provide much wider and relevant services to clients. The take-up of new technologies in the insurance industry is being given added impetus by the coronavirus crisis, which has decimated the profits of reinsurers and insurers. No one is sure yet how or when the insurers will recover their equilibrium, but rising premiums aren’t going to be the whole answer. In this edition the Insurance News team has examined the latest financial results for both insurers and brokers. Particularly worth noting is insurers’ gloomy outlook compared to the confidence being shown by the major broking groups. Our cover article this edition focuses on what we can expect Mother Nature has in store for in the coming summer. Just a year ago the bushfire season was beginning early, building up to become a massive catastrophe by Christmas. This time around floods and cyclones will dominate the headlines, at least in Australia’s most populous south-east. For the insurance industry it never rains, it pours.
PRINTING: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia www.insurancenews.com.au/magazine
CONTRIBUTIONS: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management. Please contact the Editor, +61 3 9499 5538.
Material in insuranceNEWS (the magazine) is protected under
the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders. The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion. Printed on PEFCTM certified paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification. ISSN 1837-4972
A land of drought and flooding claims A wetter summer is forecast as La Nina looms, but will this provide a reprieve for insurers? By Miranda Maxwell
s California and neighbouring states burn and Australia’s own horror bushfire summer is still fresh in the national memory, forecasts of a wetter summer sound comforting, even reassuring. The climate influences this year are mercifully very different to those that led to the extreme dry conditions of 2019, something of a wry irony as the royal commission into Australia’s natural hazard management gets ready to deliver its findings by the end of October. That verdict will be pored over by insurers who were swamped with 38,416 bushfire-related claims with losses estimated at $2.33 billion, a devastating fullstop to the years of widespread drought which had affected much of Australia since early 2017. The latest key indicators signal the atmosphere is responding to changes in the ocean first detected some months ago. In September, the Bureau of Meteorology (BOM) declared an active La Nina, the ocean-atmosphere phenomenon that is the colder counterpart to El Nino, the two forces which have the strongest influence on
year-to-year climate variability for most of Australia. La Nina occurs when equatorial trade winds become stronger, changing ocean surface currents and drawing cooler deep water up from below. This results in a cooling of the central tropical Pacific Ocean, which the BOM says at the moment is 0.8°C cooler than normal and has resulted in changes to trade winds and pressure patterns. The last significant La Nina, named after the Spanish for “little girl,” was in 2010-11, and that was Australia’s wettest two-year period on record and saw tropical cyclone Yasi cause widespread damage in far north Queensland. Climate models indicate this latest La Nina will persist until at least January. La Nina typically sees above average spring and summer rainfall over much of eastern and northern Australia. Also in play and suggesting wetter times ahead are a negative Indian Ocean Dipole (IOD) index in the Indian ocean and weakly positive Southern Annular Mode (SAM). Both La Nina and negative IOD typically
increase the chance of above average rainfall across much of Australia during spring and across eastern Australia during summer. Atmospheric indicators, including the Southern Oscillation Index (SOI), trade winds and cloud, are also at La Nina levels. There are some benefits from the onset of a wetter summer, the Bushfire and Natural Hazards Co-operative Research Centre says. “Rainfall so far in 2020 has eased the fire risk for large parts of eastern Australia.” Australia’s 2020-21 season bushfire risk has to date been deemed “normal,” with the notable exception of parts of Queensland. But what is normal? And have we let our guard down to the risks of floods, cyclones and eastern lows in the coming natural hazards season to April? Mark Leplastrier, the Executive Manager Natural Perils at IAG, says we cannot relax. “It’s hard to say whether it will be better or worse,” Mr Leplastrier told Insurance News. “It only takes one event in a heavily populated area, and you never know where it will hit.” The latest climate science promises
Familiar sight: fire has once again ripped through California
Australia fewer cyclones this season, but says their intensity will be greater. Cyclone season continues through until the end of April and brings with it claims for wind, rain, hail and lightning damage. This year, the storm risk is higher. “The tropical cyclone season, which typically starts in November, is likely to be more active this season than in recent years for both Queensland and Western Australia due to the influence of La Nina,” the Bushfire and Natural Hazards Co-operative Research Centre says. At a live stream to launch IAG’s Severe Weather in a Changing Climate research paper, the buzzword of the day was “amplitude” – the measurement from one point of the magnitude of a variable’s extreme values. Working with the US National Center for Atmospheric Research (NCAR), an IAG team painstakingly researched the latest extreme weather event predictions, based on temperatures ranging up to 3 degrees warmer than pre-industrial times. NCAR Senior Scientist Greg Holland
says the study reveals that where a La Nina may have previously led to Australia having a “significant but not particularly bad” increase in the number of intense tropical cyclones in a La Nina year, that could “go up to being a substantially higher number of tropical cyclones” as small changes make a greater impact. “With the onset and the continuing growth of climate warming, all of those changes are happening at a much greater amplitude,” Dr Holland says. The joint research warns Australia will experience more frequent and intense extreme weather events. Tropical cyclones and giant hailstorms will move further south, threatening densely populated areas of the eastern Australian coastline and its largest cities. Warming oceans off eastern Australia will see tropical cyclones retain higher intensities further south and penetrate further inland, increasing risks in south-east Queensland and north-east New South Wales. “That’s not good, because it places major
population centres like Brisbane in increasing potential danger,” Dr Holland says. “Substantial increases in high surge occurrences, the really extreme ones – the ones we’re going to see a lot more of – that could be anything up to 10 or 20 times as many of those storms as we’ve observed in the past.” Aon calculates cumulative insured losses show the tropical cyclone bill was going up $US3-5 billion a year globally before 2003, $US12 billion a year from 2005-2016, and since 2017, it’s been going up by $US25 billion a year. IAG meteorology specialist Bruce Buckley agrees “this amplitude is a big issue”. The climate is changing “quite dramatically,” and this will alter the relationship of the impacts of El Nino and La Nina too. “The key point is the amplitude. That is really one of the big issues here and one of the things you have to be careful of,” Dr Buckley says, noting that statistical techniques placing an accepted index value on impacts in Australia may quickly be superseded. “That is fine if you have an unchanging
“We are going to see bigger hailstorms, bigger tropical storms, more severe tropical storms, and more floods.” climate. We have to bear in mind that relationships we have relied on historically between things like El Nino, the Indian Ocean Dipole, the Southern Annular Mode and all these other global measures will be changing with that changing climate. “So we have to be a little bit careful of just looking at simple numbers and trends, because the impacts themselves can vary and are likely to vary into the future.” Complacency is never an option in dealing with Australia’s natural hazards, so famously dubbed the land of “droughts and flooding rains” in Dorothea Mackellar’s iconic poem My Country. Since that was published in 1908, Australia’s climate has warmed by around 1.4°C, while southern Australia has seen a reduction of 10–20% in the April–October “cool season” rainfall in recent decades, according to the BOM. While the total 2019-20 bushfire season bill of close to $2.5 billion dominated headlines, it was actually overshadowed in monetary terms by $3.07 billion in combined insured losses clocked up since November
from storms and floods. According to the Insurance Council of Australia (ICA), January hailstorms in the ACT, Victoria and NSW produced 129,201 claims with losses estimated at $1.625 billion, February east coast storms and floods in Queensland and NSW produced 100,384 claims with losses of $958 million, and November hailstorms in Queensland produced 29,782 claims with losses of $481.92 million. The long-term warming trend means above-average temperatures now occur in most years. Temperatures in Australia for 2019 were the warmest in 110 years of records, at 1.52°C above the 1961–1990 average. Mr Leplastrier says Australia’s climate has always featured a variable swing from dry to wet to dry – what Ms Mackellar described as the “pitiless blue sky when sick at heart around us we see the cattle die”, followed by “the drumming of an army, the steady, soaking rain…over the thirsty paddocks”. What is new is that as the average temperature gets warmer, periods described as
What a difference a year makes: 2020 bushfire risk looks considerably lower so far
“normal” – such as the coming bushfire season – are not completely reset and are “always slightly higher”. “It’s off a different base,” Mr Leplastrier notes. Cindy Bruyere, NCAR’s Director of Capacity Center for Climate & Weather Extremes, says the variability of extreme weather won’t change, but the intensity will. “Some years we don’t have a lot of tropical storms and some years we do. That variability is going to remain going out into the future,” she says. “It is not like we are suddenly going to have all years with a lot of tropical storms. We are still going to have the same variability. It is the severity of the storms that is important. “That is the same for all the storms, including drought, so we are going to see bigger hailstorms, bigger tropical storms, more severe tropical storms, and more floods.” University of Wollongong Research Fellow Hamish Clarke says Australia’s “very variable” climate will always mean there will be higher danger years and lower
We’re not just an insurance company We’re a global partner in risk. In an environment that demands answers, we first ask questions. Together with you we adapt to new technologies and respond with innovative solutions. At AXA XL we go further than the standard insurance model. So your business can go beyond the unexpected.
Find out more at axaxl.com AXA XL is a division of AXA Group providing products and services through three business groups: AXA XL Insurance, AXA XL Reinsurance and AXA XL Risk Consulting. AXA, the AXA and XL logos are trademarks of AXA SA or its affiliates. ©2020.
“We’re getting more of the extreme years with very high frequency of high fire danger weather conditions, but we’re also getting relatively more dangerous ‘down’ years. It’s a complex equation.” Still on alert: IAG’s Mark Leplastrier
danger years, but adds: “There is an unmistakable upward trend in fire danger.” It is this higher base experienced in the “down” years that is worrying, he says. “We’re getting more of the extreme years with very high frequency of high fire danger weather conditions, but we’re also getting relatively more dangerous ‘down’ years. It’s a complex equation.” Parts of Queensland face above-normal fire potential in the south-east and central coast, extending to the north. Despite above-average rainfall for much of south-eastern Australia and parts of the inland northwest and Northern Territory during one or more months this year, serious or severe longer-term rainfall deficiencies persist over very large areas. “Normal bushfire risk does not mean there is no risk,” the Bushfire and Natural Hazards Co-operative Research Centre says. While 2019 was the warmest and driest year on record for Australia, with many climate records set, 2020 has seen a shift away from drier conditions inmost of Australia. However, the past six months has seen drier than average conditions in Queensland and also large parts of Western Australia, which recorded its warmest June on record this year. More than half of Australia remains in severe rainfall deficiency for the 29-month
period from April 2018 to August 2020. The regions affected include south-east Queensland, pastoral South Australia, most of south-west WA, and much of the Northern Territory and central Australia. “Persistent, widespread, above-average rainfall is needed to lift areas out of deficiency at annual and longer timescales and provide relief from the impacts of this long period of low rainfall, such as renewing water storages,” the BOM says. The bureau’s climate model factors in the atmosphere, oceans, ice and land surface combined with millions of observations from satellites and on land and sea. It projects that the remainder of the year is likely to see above-average rainfall across much of the eastern two-thirds of the country, though parts of northern WA and western Tasmania are likely to buck the trend and be drier than average. A greater than 75% chance is given for much of the eastern half of mainland Australia to experience wetter than average October to December weather. Days are likely to be cooler than average in western and southern WA, and eastern NSW. Multiple years of below-average rainfall means that eastern SA and south west WA require a much longer period of above-average rainfall for the wider environment to fully recover. While water levels in storages across the northern Murray Darling Basin
Concerned about climate: NCAR Senior Scientist Greg Holland
have increased in recent months, they remain at only 21% capacity. June and July were largely drier than average nationally, especially in the south-west. “Much of south-eastern Australia received above average rainfall for April, keeping these areas out of deficiency at slightly longer timescales including April, but have generally received below average rainfall since then,” the Bushfire and Natural Hazards Co-operative Research Centre says. For this coming hazard season, insurers worn down by the COVID-19 pandemic will be summoning Australia to showcase “her beauty” and not “her terror” this summer and beyond. Unfortunately, the research centre’s Chief Executive Richard Thornton warns that while the rainfall outlook is good news in the short-term for the bushfire risk, the rain could increase that risk come summer. “While these wetter conditions in eastern Australia will help for spring, they may lead to an increase in the risk of fast-running fires in grasslands and cropping areas over summer,” Dr Thornton says. “Areas designated as normal fire potential will still see fires. “When the wind is up and the weather is warm, fires can occur right across the 0 country.”
With an experienced global claims team and a large, stable balance sheet, BHSI has the ways and the means to help customers successfully navigate even the most complex claims. We also have a commitment to claims excellence, and to doing the very best for each customer â&#x20AC;&#x201C; so they can face down the worst days with confidence and peace of mind.
www.bhspecialty.com The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
Looking to innovation: Taylor Fry’s Win-Li Toh
Deep impact A new report analyses the effects of COVID-19 on insurance, class by class, and finds all are likely to take a hit By John Deex
hile there are some standout contenders – see travel, trade credit – Taylor Fry’s recent Radar report suggests very few, if any, lines of insurance will escape unharmed from this year’s pandemic. The annual analysis draws on Australian Prudential Regulation Authority data to look at trends across each class of insurance, and unsurprisingly this year’s findings are dominated by the impact of COVID-19. “By highlighting the challenges and opportunities in these particularly testing times, we offer you a clear picture of the industry, where it’s headed and your place within it,” Taylor Fry principal Kevin Gomes says in the report’s introduction. That picture, unfortunately isn’t too pretty. Mr Gomes says the impact of COVID on insurers is “significant”. Travel is in a mess. So too is trade credit, which doesn’t feature in the report because APRA doesn’t provide separate data. While experience varies by class of business, it could be that none will escape entirely. “Most lines of business are likely to experience adverse effects, as poor economic conditions and increasing community hardship constrain premium increases and apply ongoing pressures on claims,” Mr Gomes says.
Taylor Fry believes that during “an unprecedented time of disrupted living, uncertainty and historical change”, insurers are grappling with five big themes – pandemics, a warming climate, mental health, cybersecurity and restoring consumer trust. While COVID has been the focus for most insurers over the past six months, Mr Gomes says the industry must not take its eye off other longer-term risks such as climate change “with its ongoing and far-reaching implications”. Radar contributor and Taylor Fry principal Win-Li Toh told Insurance News that while the issue of restoring consumer trust isn’t covered in detail in the report, in the light of the Hayne royal commission findings it is still a key concern. “The insurance industry is very much in the headlights but in kind of a negative way,” she says. “It has some work to do in restoring consumer trust, and to really educate the public about what’s covered and not covered. “If the insurance industry is innovative and works together to create products that respond in people’s time of greatest need, then that’s what is required.” Here are highlights of some of the key sectors dealt with in the report.
17 statistics Travel
Reporting quarter Reporting quarter 140% 140% 120% 120% 100% 100% 80% 49% 80% 49% 60% 60% 40% 40% 20% 20% 0% 0%
52% 52% Sep17 Sep17
43% 43% 51% 51%
Sep18 Dec18 Mar19 Jun19 Sep18 Dec18 Mar19 Jun19 Loss ratio Expense ratio Loss ratio Expense ratio
39% 39% 43% 43% 78% 78%
47% 47% Jun20 Jun20
Reporting quarter Reporting quarter
0 0 -100,000 -100,000
Mar18 Jun18 Sep18 Dec18 Mar18 Jun18 Sep18 Dec18 Gross written premium Gross written premium
Jun19 Sep19 Dec19 Mar20 Jun20 Jun19 Sep19 Dec19 Mar20 Jun20 Average written premium Average written premium
-$50 -$50 -$100 -$100
Source: Taylor Fry Radar report Actual vs. forecasted Actual vs. forecasted
High positive impact High positive impact
Travel is the big loser from COVID, with many in“That has implications for staff morale and surers having stopped issuing near-term travel poliengagement. cies due to government restrictions. “You might have no premium for a whole year, The Radar report shows that premium volume so can you keep the business going? A lot of travel Premium Claims Overall impact Claimsof organisations Overall impact descended into negative territory in the June quarter Premium insurers are part that also sell oth(P –impact C) (P –impact C) Premium Claims Premium Claims Overall as refunds for unused travel policies Overall were provided. er types of insurance so they have capital, and even (P – C) (P – C) Loss ratios were “generally stable” over the past though there is no income they might continue in12 reporting quarters, with a notable spike in March vesting for the longer term.” 2020 “mostly due to cancellation claims arising fromimpact Ms Toh says the industry must respond to the High negative COVID-19”. High negative impactlevel of complaints around declined cancellation Actual (Jun20 quarter) Forecasted (year to Jun21) The declaration of a pandemic by the World claims. Actual (Jun20 quarter) Forecasted (year to Jun21) Health Organisation in late March likely activated “Either it makes it very clear that these sorts pandemic exclusion clauses, explaining the drop in of things are uninsurable, or finds a way to insure loss ratio seen in the June quarter. them by charging more or being clever with differCOVID-19 has caused a “sharp increase” in travent reinsurance arrangements.” el insurance-related complaints to the Australian But she believes the travel insurance industry Financial Complaints Authority, the report notes. can recover. “Balancing financial concerns and customer “People talk about climate change and the freloyalty is delicate territory for insurers – how they quency of flying, but it could be that once we get out handle claims and refunds will impact community of a pandemic world, people won’t just jump on a perception of their brand.” plane and fly here and there for no good reason. Ms Toh told Insurance News travel is “clearly “They might plan trips that are longer and more the hardest hit class” and it’s not clear when things thought-through. Instead of going to Italy for a week might improve. you might think, ‘I’ll just go once every three years “There is uncertainty around when borders and I’ll go for three months’. might reopen and whether people actually want to “Trips could be fewer but longer and more contravel again when borders reopen,” she says. sidered, and premiums could recover.”
5 Domestic motor statistics
Reporting quarter Reporting quarter 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% Sep17 Dec17 0% Sep17 Dec17
Reporting quarter Reporting quarter 3,000,000 3,000,000 2,500,000 2,500,000 2,000,000 2,000,000 1,500,000 1,500,000 1,000,000 1,000,000 500,000 500,000 0 Sep17 0 Sep17
Sep18 Dec18 Mar19 Jun19 Sep18 Dec18 Mar19 Jun19 Loss ratio Expense ratio Loss ratio Expense ratio
$670 $670 $660 $660 $650 $650 $640 $640 $630 $630 $620 $620 $610 $610 $600 $600 $590 $590 $580 $580 $570 Dec17 Dec17
Mar18 Jun18 Sep18 Dec18 Mar18 Jun18 Sep18 Dec18 Gross written premium Gross written premium
Jun19 Sep19 Dec19 Mar20 Jun19 Sep19 Dec19 Mar20 Average written premium Average written premium
Source: Taylor Fry Radar report Actual vs. forecasted Actual vs. forecasted
High positive impact High positive impact
The June quarter loss ratio of 48% is the lowest on “It’s hard to know what is going to happen in the record for domestic motor, driven by a reduction in colnext nine months. There might be more driving rather lision claims. than less driving. COVID-related restrictions led to a substantial re“Repair costs have been going up and up. The techPremium Claims Overall impact Premium Claims Overall impact (P –which C) (P – impact C) duction inPremium the number of Claims cars on the road, “re- Premium nology is reallyClaims quite sophisticated.” Overall impact Overall C) (P – C) duced claim frequency and generated (P a –short-term It’s a similar story in commercial motor, which also windfall for domestic motor insurers”, the report says. featured a record low loss ratio in the June quarter. But it says the longer-term outlook for profitability But if the recession forces industries to scale back High negative is “not so rosy” as car use may increase following theimpactthere will be a “flow-on impact to commercial motor High negative impact (Jun20 Forecasted (year Jun21) warns, and the repair end of lockdowns ifActual people seequarter) public transport as too premium volumes”, thetoreport Actual (Jun20 quarter) Forecasted (year to Jun21) risky an option during a pandemic. cost pressures are the same as in domestic motor. “With a decline in public transport use and more In Compulsory Third Party (CTP), combined ratios people driving, claim frequency may exceed pre-panfor all jurisdictions have increased over the past three demic levels.” years and are now above 100%. New vehicle sales have also declined since 2017, And while reserve releases have reduced reported and this trend can be expected to accelerate during the loss ratios, their effect has lessened over time. COVID-19-induced recession. “Although COVID-19 reduced traffic volumes and The increasing prevalence of technology in motor claim numbers, the full impact on costs will take longer vehicles is also raising the cost of repairs for insurers. to realise,” the report says. Many insurers provided some refunds to customers “This is due to the nuances in CTP claims, such as to account for fewer claims, but Ms Toh says it was hard the time for claimants’ injuries to stabilise, and the size for insurers to estimate the correct level. and complexity of claims.”
7 Householders statistics
Reporting quarter Reporting quarter 140% 140% 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% Sep17 Dec17 0% Sep17 Dec17
Reporting quarter Reporting quarter 3,000,000 3,000,000 2,500,000 2,500,000 2,000,000 2,000,000 1,500,000 1,500,000 1,000,000 1,000,000 500,000 500,000 0 Sep17 0 Sep17
Sep18 Dec18 Mar19 Jun19 Sep18 Dec18 Mar19 Jun19 Loss ratio Expense ratio Loss ratio Expense ratio
$840 $840 $820 $820 $800 $800 $780 $780 $760 $760 $740 $740 $720 $720 $700 $700 $680 $680 $660 $660 $640 $640 $620 Dec17 Dec17
Mar18 Jun18 Sep18 Dec18 Mar18 Jun18 Sep18 Dec18 Gross written premium Gross written premium
Jun19 Sep19 Dec19 Mar20 Jun19 Sep19 Dec19 Mar20 Average written premium Average written premium
Source: Taylor Fry Radar report Actual vs. forecasted Actual vs. forecasted
High positive impact High positive impact
Despite the immediate focus on COVID, natural natural catastrophes are more crucial. perils remain key to householders insurance and “With COVID, there is discussion around fewer highlight the urgency of climate change. burglaries, because people have been at home for Severe weather events resulted in underwriting three months, or that with burst pipes and so on losses in the December 2019 and March 2020 quaryou can see to them quite quickly because you are at Claims impact Premium Claimsin the office. Overall impact ters, and Premium there is upward pressure Overall on reinsurance home rather than (P –impact C) (P –impact C) Premium Claims Overall Premium Claims Overall rates. “But on the other hand, there are higher risks (P – C) (P – C) COVID-19 is likely to exacerbate insurance afaround natural perils.” fordability issues, the report says, and as the econoShe says the affordability issue could get worse, my moves into recession increasing numbers of cusbut believes more effort is now going into discussions High negative impact tomers will seek hardship assistance. High negative impactabout mitigation. Actual (Jun20 quarter) Forecasted (year to Jun21) “The expectation is that total premium volumes “ThereForecasted is a lot more discussion and co-ordination Actual (Jun20 quarter) (year to Jun21) will drop and under-insurance will increase, due to between governments and private insurers and inthe pandemic and associated economic recession.” dividuals about how to prevent these things. I think Ms Toh says that while COVID has had an impact, there is a lot more desire to work together.”
Workers’ compensation COVID-19 and the associated economic impacts are expected to adversely impact workers’ compensation schemes across Australia. Lower premium volumes and an increase in claims costs are expected, but the full impact is not yet visible in the APRA data. Challenges include managing indirect claim impacts such as shifts in working arrangements and demands, and COVID-related restrictions which are expected to lead to an increase in psychological claims. “In addition return-to-work rates may deteriorate
due to difficulties with injured workers finding suitable duties in industries impacted by COVID-19,” the report says. Lower and more volatile investment returns will place pressure on future premium rates and funding positions. And Australia’s first recession in almost 30 years means there will be fewer employers paying premiums in future, and “there will likely be resistance to future premium increases from industry and government”.
THIS IS AN AD FOR AUSTRALIAN QUALIFIED INSURANCE ADVISORS Does your current network provide you with: • Multiple options including 100% ownership or participation in a financial equity model? • A flexible remuneration structure that rewards hard work and commitment? • Full transparency and no joining or transactional fees? • A fully funded and comprehensive PI program? • Access to Regional Managers who provide technical and placement support? • Access to in-house IT Help Desk, Claims, Compliance, Marketing and Training solutions? • Access to Steadfast Member benefits including Client Trading Platform, Exclusive wordings and Legal Support? You are not the only one to answer NO to some of the above benefits
With Local Knowledge and Global Reach We offer you flexibility as a business owner to realise your aspirations that will allow you to build an asset to support you and your family.
Are you a Committed. Professional. Team-player? Talk to us at PSC Network Partners to discuss the best way forward to achieve your business goals.
www.pscnetwork.com.au PSC Network Insurance Partners ABN 23 141 574 914 AFS License No 344 648
15 Commercial property statistics 15
Reporting quarter Reporting quarter 140% 140% 120% 120% 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% Sep17 Dec17 0% Sep17 Dec17
Sep18 Dec18 Mar19 Jun19 Sep18 Dec18 Mar19 Jun19 Loss ratio Expense ratio Loss ratio Expense ratio
Reporting quarter Reporting quarter 2,000,000 2,000,000 1,800,000
1,800,000 1,600,000 1,600,000 1,400,000 1,400,000 1,200,000 1,200,000 1,000,000 1,000,000 800,000 800,000 600,000 600,000 400,000 400,000 200,000 200,000 0 0
Mar18 Jun18 Sep18 Dec18 Mar18 Jun18 Sep18 Dec18 Gross written premium Gross written premium
Jun19 Sep19 Dec19 Mar20 Jun19 Sep19 Dec19 Mar20 Average written premium Average written premium
$4,000 $4,000 $3,500 $3,500 $3,000 $3,000 $2,500 $2,500 $2,000 $2,000 $1,500 $1,500 $1,000 $1,000 $500 $500 $$-
Source: Taylor Fry Radar report Actual vs. forecasted Actual vs. forecasted
High positive impact High positive impact
Profit trends in commercial property “remain poor” recent UK test case decision, as well as preparing for despite rate-hardening, the report says, “with signifithe findings of the Insurance Council of Australia case cant catastrophe claims emphasising the ongoing and in the NSW Appeal Court. far-reaching implications of a warming climate”. The Australian case aims to determine whether inThe insurance cycle turned in 2017, with commersurers can rely on pandemic exclusions that refer to the Premium Claimsto harden Overall impact impact cial property rates continuing over the past Premium Quarantine ActClaims 1908, givenOverall the legislation was repealed (P –impact C) (P –impact C) Premium Claims Overall Premium Claims Overall three years. and replaced by the Biosecurity Act 2015. (P – C) (P – C) But this year “profitability remains poor, with “Now that the rates are turning, we have had the combined ratios well above 100% over the first half of bushfires and storms,” Ms Toh told Insurance News. the year and consistently above 100% for the past fiveimpact “There was almost $1 billion in commercial properHigh negative years”. High negative impactty claims. Climate change is a big issue for commercial Actual (Jun20 quarter) Forecasted (year to Jun21) Business interruption cover is often written as an property and all insurers taking climate change exActual (Jun20 quarter) Forecasted (year toare Jun21) add-on, the report says. Insurers will be studying the tremely seriously.”
Professional indemnity Despite rate increases, professional indemnity loss ratios have increased over the past year, the report says. “These have been impacted by reserve strengthening and class actions affecting directors’ and officers’ (D&O) liability cover. “Class actions have adversely impacted D&O claims over several years, with potential for the economic downturn under COVID-19 to instigate further claims activity.” The report says market conditions deteriorated significantly for some sectors, with price increases and capacity decreases particularly affecting financial advisers, property valuers and building surveyors. Elevated cyber risks highlight the need for insurers to fully understand cybersecurity and how to
properly price for it, with particular emphasis on ‘silent cyber’ claims, where an insurer may have to pay claims for losses under a traditional insurance policy not designed for the purpose. “As a whole [professional indemnity] looks profitable but certain sectors have had market positions that are poor,” Ms Toh says. “Some professions will be better, some less so. D&O has been impacted by class actions. There are some regulatory changes recently that might stem some of the more predatory activity. “Certain sectors are hit harder, such as building surveyors due to the issues with flammable cladding. It’s getting harder and harder for building surveyors 0 to get cover.”
Ryno Underwriting is now ShieldCover. Letâ&#x20AC;&#x2122;s connect.
New role, new challenges: Scott Leney
arsh’s merger with rival JLT last year not only doubled the size of the global brokerage in Australia but also delivered benefits that Scott Leney says have made the group particularly well-placed to assist regional clients facing a tough insurance market. Mr Leney has taken on the newly created position of Risk Management Leader for Asia and the Pacific, broadening his focus after last year playing a key role in the integration of the merged business as Marsh Australia Chief Executive. The new position reflects an accelerated pace of change that has amplified existing risks and created new ones, with the situation exacerbated by COVID-19 and market impacts from higher prices and capacity changes. “These things are felt most acutely in the large complex end of town, and really our clients have never needed us more,” Mr Leney tells Insurance News. “Organisations have got to manage through this, but also create their own future in a post-pandemic world.” New York-based Marsh & McLennan Companies has also named Mr Leney Country Corporate Officer in Australia, encompassing the broking and consulting businesses of Marsh, Guy Carpenter, Mercer and Oliver Wyman. More than 3100 people work for the combined group in the local market. Mr Leney says the broad regional and Australian roles are complementary and the focus is on bringing the best the company can offer across its client base.
Bigger is even better Scott Leney has moved into a new regional position after playing a key role in the Marsh-JLT integration By Wendy Pugh
“If you put the brand names aside, Marsh & McLennan is in the business of risk strategy and people, and it has huge breadth and depth and capabilities to help our clients meet the challenges of the world and thrive,” he says. The risk management position involves working with major clients across Asia and the Pacific and includes those operating in countries such as South Korea, Japan, Hong Kong, Singapore and Australia, as well as emerging markets. Mr Leney, who is based in Sydney, reports in the regional role to Marsh Asia Chief Executive David Jacob and Pacific Chief Executive Nick Harris, whose area now includes Australia, New Zealand, Fiji and Papua New Guinea. “The larger the client the more complex in terms of the breadth of their business, the size of their geographic spread, the more the need to get across quite complex risks and design a program that blends self-insurance with traditional insurance, alternative risk capital and those sort of things to bring about the right risk program,” Mr Leney says. The coronavirus pandemic is currently the top risk focus for clients around the world, affecting a number of insurance lines and with impacts likely to remain unknown for some time. Business interruption has emerged as a controversial area where the insurance
industry is facing battles over cover. “It is an interesting situation,” Mr Leney says. “In some cases insurers may be held liable for business interruption claims perhaps they didn’t intend to provide coverage for. “But secondly, the reaction to that point is to implement very broad exclusions going forward, which has the potential to exclude coverage that they don’t actually intend to exclude, so going from one extreme to the other.” Marsh is among firms flagging the concept of government and private partnership arrangements through risk pools to respond to future pandemics, helping to minimise economic and social consequences of outbreaks and assisting businesses to plan ahead with more confidence. “We think that the right solution is a collaboration between the industry and the Government to come up with insurance pools similar to the terrorism insurance pools that have been created around the world, including in Australia,” Mr Leney tells Insurance News. “If there isn’t sufficient protection for organisations as they think about the ongoing risks of pandemics, you would think it would lead to a more conservative approach, less investment, those sorts of things.” Among the broker’s major clients in Australia, directors’ and officers’ cover also ranks as a top risk issue. The market has
continued to deteriorate, with premiums surging and capacity reduced as insurers withdraw from an increasingly volatile market. Securities class actions against listed companies and a rise in litigation funding has been blamed as a major cause of problems, and Marsh has been highlighting the need for reforms to alleviate market pressures. The firm has made submissions to the Australian Law Reform Commission and to a Federal Parliament committee inquiry examining litigation funding and regulation of the class action industry. The committee’s report is due before the end of the year. “We are hoping the outcomes of that parliamentary inquiry will help to alleviate some of these underlying causes that are giving rise to a dysfunctional insurance market for directors’ and officers’ liability insurance,” Mr Leney says. “We are at the point now where clients are beginning to question the value of purchasing all or parts of their D&O coverage. For ASX companies particularly, this is verging on a market failure situation.” In other lines, Mr Leney says the hardening market still has some way to run, with price drivers differing from past cycles dominated by catastrophe event impacts. “The difference with this particular market that we are in now is that it is a consequence of sustained soft pricing and
“We are at the point now where clients are beginning to question the value of purchasing all or parts of their D&O coverage. For ASX companies particularly, this is verging on a market failure situation.”
sustained lack of insurer profitability,” he says. “COVID-19 has just exacerbated matters.” He says there’s a sense that pricing is nearing levels insurers feel are needed for risks they are now underwriting, but reserve blowouts from prior years are still hitting results, particularly for those with large liability portfolios. “The unknown is the continued reserve development from prior years and the impact that is having on their book of business, and obviously, right now, how big and impactful the COVID-19 related losses are going to be on their portfolios.” The Marsh and JLT integration was fortunately completed well before the coronavirus outbreak created extra complexities. Marsh & McLennan gained all clearances for its $US5.6 billion takeover of JLT early last year, with Mr Leney assuming the local Marsh chief executive role as soon as the deal took effect on April 1. Australia became Marsh’s third-largest country as a result of the transaction. Mr Leney says there are many business world “war stories” about acquisitions, and statistics to the tune of 80% never truly working as anticipated, but the Marsh-JLT integration has been accomplished smoothly, with colleagues old and new embracing the opportunities. “We did a lot of work in the early stages educating ourselves on the importance of culture and the dos and don’ts. The single most important thing not to do, which is the contributor to most M&A failures, is to wash out the acquired culture.” While he found a lot of similarities
between the firms in terms of values, there were also different cultural approaches and ways of doing things. The merger has involved blending teams as much as possible, bringing fresh ideas and new approaches to legacy JLT or legacy Marsh clients. “JLT was a lean and hungry contender to the big two brokers of Marsh and Aon, and they were very successful in that space,” Mr Leney says. “Our plan was to embrace the best things of both organisations and create a new culture for our organisation moving forward. That is even more necessary, and makes plain sense, when you think that these were two companies about the same size in Australia and the Pacific region that were coming together.” Mr Leney is well-placed to appreciate the evolution of Marsh, and what JLT could bring, after entering insurance more than three decades ago through a cadetship program run by UK-based broker Sedgwick. The program included tertiary education, rotations around the company and a six-month secondment to London. Sedgwick was acquired by Marsh in 1998, and Mr Leney has continued to take up new opportunities and broaden his experience within the company as it has grown. That has included sitting on the Asia Pacific executive committee and the international executive committee, as well as the Australia and Pacific chief executive roles. He established a diversity and inclusion committee within the Australian and New Zealand businesses, and says the issue will remain a focus. “I certainly don’t intend to take the foot
off the pedal on those types of things because of this role change I am moving into now,” he says. “I still think I have the scope to be able to make progress in those areas with the rest of my executive peers.” Mr Leney would normally be jumping on planes to travel across the region at this time as he takes up his new responsibilities, but says there are advantages in using video conferencing to link up with his network overseas as COVID-19 restrictions remain in place. “It is much easier to get all of the right people, regardless of where they are located, on a video conference and the meetings are more efficient,” he says. “I am finding it a bit of a blessing in disguise in terms of my ability to get up to speed quickly and engage with the network.” Mr Leney says he has always been impressed with Marsh’s capabilities, its talent and how well positioned it is to help clients, and that is even more the case now with the strengths contributed by JLT through the merger. “You obviously go through a period of time where the focus goes internally as you are bedding down such a large acquisition, but now the whole focus on the organisation is outward and completely focused on our clients in these pretty tough times,” he says. “When you blend those two cultures together what you have is a highly professional large organisation, with a huge breadth of capabilities but with a new rigor around challenging the status quo, moving quickly and really concentrating on the challenge a 0 client needs to solve.”
Who better to host your broking system than the people who designed and built it?
More and more businesses are looking at Cloud options as a means to streamline operations, reduce capital expenditure and increase operational efficiencies. Feel confident your business' data is in good hands as the Ebix team take care of the full scope of the project, moving your broking system from on-premise to the cloud.
Enterprise Level Cyber Security • Automatic system updates and patches • Enjoy access to a secure VPN • Rest easy with enterprise level of cyber security • Your private data is kept onshore, under Australian jurisdiction.
Better Protection for Your Business • Industry leading Tier III Data Centres • High speed connectivity • Uptime levels of 99.9% • Optional disaster recovery. Save While you Upgrade • Upgrade to new, state-of-the-art hardware • Save on your overall hardware expenditure • Only pay for what you use with user-based monthly pricing • Ease of scalability, both up and down.
film industry group representing companies responsible for award winners such as The Hurt Locker and the Lord of the Rings trilogy is among organisations taking up the cudgels over insurance coverage during pandemics. The Independent Film and Television Alliance (IFTA) includes firms outside the studio system that have produced 70% of Academy Award Best Pictures over the past three decades. But without diseases cover financing is not available and productions come to a halt. “The United States has already seen a loss of films this year in the neighbourhood of 250-400 that have not been produced that normally would have been,” IFTA Chief Executive Jean Prewitt told a video roundtable last month. “Production cannot happen without insurance against communicable diseases, which was always available in the past, but which since March has been explicitly excluded from all of our companies’ production insurance policies.” IFTA is among groups throwing their weight behind the proposed Pandemic Risk Insurance Act (PRIA) championed by New York Congresswoman Carolyn Maloney, who hosted the video roundtable. The Act would provide a public-private partnership
response similar to arrangements in place for terrorism, reflecting the reality that pandemic business interruption risks are beyond the capacity of the insurance sector to take on alone. The concept has support from Marsh & McLennan Companies and the Risk and Insurance Management Society (RIMS), while the roundtable also included proponents of alternative plans involving government backing. Chubb, which participated in the event, has proposed a two-tiered approach, with government taking on the lion’s share of the risk. Its model includes parametric cover to speed funds to the small end of the market and a separate public-private model for larger enterprises. Similar discussions are well underway in Europe and the United Kingdom, where the terrorism-focused Pool Re is suggested as a model for a new Pandemic Re. Respected insurance veteran Stephen Catlin, who has raised concerns over reputational damage to the industry from COVID-19, is chairing a steering group to develop possible solutions. Lloyd’s has also distributed a white paper in global markets which outlines three models, labelled ReStart, Recover Re and Black Swan Re, to deal with immediate and long-term challenges from events such as COVID-19.
Searching for cover Governments, insurers and businesses around the world are discussing how to improve risk protection for the next pandemic By Wendy Pugh
The market’s General Representative in Australia, Chris Mackinnon, says the paper has been tabled as a discussion point with the Insurance Council of Australia (ICA) board, and Lloyd’s has also engaged on the subject with the Australian Prudential Regulation Authority. Munich Re says governments are preoccupied with the complex and ongoing nature of the COVID-19 pandemic, but should also focus on how models such as pools could provide cover in the future. While such efforts appear to be gaining greater traction in the US and Europe, the reinsurer also notes activity in other parts of the world. “We are aware that there are several ongoing discussions regarding the possibility of pandemic pools for future pandemics in the Asia Pacific region,” General Manager Non-Life Australasia Scott Hawkins told Insurance News. “However, these are still in the preliminary stages of discussion.” Existing cover shortcomings have been highlighted in the US, UK and Australia by court battles over business interruption claims, with various issues in dispute, while the industry globally has highlighted it would face an existential threat without pandemic exclusions. US media have reported more than 1000 shutdown-related matters starting to work their way through the courts, and the insurance industry has also
had to fight the threat of retroactive legislation. Whatever the judicial outcomes, and however much they may favour insurers that never priced for a global pandemic, there is rising momentum to consider action around better assisting businesses in the case of future threats. “It is important that we have a solution so that customers can be protected in the event of another pandemic,” the British Insurance Brokers’ Association said after a UK High Court ruling on wordings that provided mixed results for policyholders and insurers. “It is our belief that a public-private partnership would be the best means.” In Australia, ICA has commissioned a report from consultants Finity on options for the future as it looks toward the longer-term issues. Finity’s mandate is to identify insurance-related options the Federal Government could undertake to mitigate economic effects of future pandemics, including “where insurance-based mechanisms may be relevant” and the potential role of the private sector. The core question is whether the Government should form some sort of public-private partnership to make pandemic coverage available through general insurance policies. Frameworks outlined start with a status quo
“It is important that we have a solution so that customers can be protected in the event of another pandemic.” British Insurance Brokers’ Association
baseline and progress to a Government-backed facility that could be modelled after terrorism cover in Australia and overseas. Middle options include a more targeted approach, such as UK and European Union programs for trade credit. Alternatively, a new form of business protection to provide a short-term limited benefit, potentially over one to three months, could be considered. Finity Principal Rade Musulin says further investigation and modelling, and public policy decisions, are required before any path can be pursued as the best solution. “The issue is not one that can be easily solved and it does require quite a bit of thought and study to try to create a framework for funding these events in the future,” Mr Musulin told Insurance News. Governments spending billions of dollars on pandemic support programs such as Jobkeeper may have a strong incentive to tap insurance expertise for a public-private approach, while the extent to which the industry should participate remains an open question. “Insurers have a motivation to offer insurance where they can, and I think insurers are mindful of the expectations of their customers for coverage,” Mr Musulin says. “I don’t think this is a case where the insurers would want to just wash their hands of the whole thing.” Finity says solutions would need to be crafted carefully to ensure a well-functioning Australian insurance system that delivers cost-effective products in many lines is not disrupted, while business interruption presents its own challenges. “It is not clear to us that insurance involvement would be practical unless steps are taken to streamline products and reduce the complexity of coverage,
pricing or claims handling,” it says. “This is because the current way business interruption cover is provided involves relatively complex processes, such as determining the amount of turnover which would have occurred without an event, which may be difficult to administer in a situation where a large proportion of businesses in the country are experiencing a loss event.” Issues for any private-public arrangement include who it is targeting, whether it would be compulsory, should it only cover a COVID-19-type pandemic, the funding mix of premiums, levies and government taxes and should it be “post-funded” after an event. The Australian Reinsurance Pool Corporation (ARPC), among existing arrangements highlighted for comparison, started in 2003 after the Terrorism Insurance Act was passed by Federal Parliament in July that year. The pool was needed as private terrorism cover disappeared following the September 11 2001 attacks in the US. Marsh & McLennan Country Corporate Officer Scott Leney says pandemic risk is a top issue for clients globally and the ARPC and other international models point to a way forward. “We think that the right solution is a collaboration between the industry and the Government to come up with an insurance pool similar to the terrorism insurance pools that have been created around the world,” he told Insurance News. “It is something that Marsh is advocating in all the major countries around the world, including here.” Pools and other government-backed programs are also used around the world to cover catastrophes including flooding and earthquakes, and have been flagged for their potential to extend to a wider range of
BLUE ZEBRA INSURANCE PTY LTD ABN 12 622 465 838 | AFSL 504130 firstname.lastname@example.org | www.bzi.com.au
Blue Zebra Insurance is celebrating its third birthday!
We are starting our new year with some exciting announcements: · Personal Accident – available NOW on our Zebra Lounge system · Commercial Motor – launching this month · Cyber – currently in pilot, with a broad launch this quarter · SME Business Pack – will hit the market before year end! · Household, Landlord and Motor – business as usual
THANK YOU FOR YOUR ONGOING SUPPORT If you are not on board already, get in touch: email@example.com
“We think that the right solution is a collaboration between the industry and the Government to come up with an insurance pool similar to the terrorism insurance pools that have been created around the world.” Scott Leney, Marsh
risks, with varying funding arrangements. IAG Chief Executive Peter Harmer, who is retiring from the company at the start of November, says governments are clearly best placed to meet costs from pandemics, which present different challenges compared to terrorism risks. “Terrorism is a more isolated event in a sense, in that it might be, for example, an attack on a particular city, whereas a pandemic obviously can hit the entire country, and as we have seen in the last couple of months around the world,” he said. “There is a size of loss that becomes quite systemic where governments need to act as the shock absorber. That is what we are seeing now in this COVID-19 world.” Insurers emphasise the support they have provided during the pandemic, assisting customers facing hardship, and paying claims to help people get back on their feet after all manner of disasters and losses that don’t stop because of a disease outbreak. QBE Executive Chairman Mike Wilkins says the pandemic has nonetheless also shone a spotlight on some areas where insurance policies do not respond. “This should trigger a broader discussion within the industry, together with regulators, governments and others, about how we can better plan for and respond to low probability, high impact events in the future,” he says in the group’s half-year report. Munich Re says state-backed risk pools would allow insurers to participate with limited capacity, while contributing know-how in assessing risks, distribution and claims settlement. The firm suggests mandatory coverage, given voluntary arrangements often have low take-up rates and are prone to adverse selection. It says parametric options could be triggered by an epidemic declaration by an official body and legally ordered lockdowns as
part of a broader solution. Munich Re notes the problem with pandemics is not just the lack of diversification across regions and types of business, and the impact on assets as well as claims. An issue is also the unpredictability of government responses that make it difficult to price the risk. “The fact that almost 100% of the business interruption losses have so far been caused by political decisions, by the so-called lockdown decisions, is another reason why they are not really insurable,” the reinsurer’s Chief Underwriter Stefan Golling says. Looking ahead, increased funding for research and mitigation measures may help to make private sector insurance more viable in future, as has happened to some extent in terrorism. But pools are still required in that market and uncertainty remains. In Australia, Federal Treasury declined to specifically comment on consideration of pandemic cover when contacted by Insurance News, but it’s on the radar. “Given the impact of the COVID-19 pandemic, Treasury is continually monitoring the operation of the domestic insurance market, as well as studying international insurance market developments,” a spokesman said. RIMS Board Director Patrick Sterling says risk management is all about being proactive, and without a public-private program a future pandemic could be catastrophic. “While it may take years to fully put a dollar amount on the losses due to COVID-19, renewals are happening now,” he told the US roundtable. “How can risk professionals prepare our organisations for next year and years to come without a solution today? “Operating with this level of uncertainty 0 is harmful to business.”
Government’s spotlight on cyber As the scale, sophistication and frequency of cyber-attacks continue to rise in Australia, Wotton + Kearney considers the impact on the insurance industry of the government’s efforts to improve Australia’s cyber-resilience and crack-down on e-crime and state-sponsored cyber-attacks.
The Australian Government has pledged $1.67 billion to enhance cyber-security capabilities.
Our growing dependence on technology and our hurried transition to remote working has increased opportunities for malicious cyber-actors to target vulnerable organisations. Crowdstrike reports that there has been a 330 percent increase in cyberattacks across the Asia Pacific region this year1. Since March, the Australian Cyber Security Centre (ACSC) has received an average of two COVID-19 related cyber-crime reports daily2. While it has been estimated that cyber-crime costs the Australian economy up to $29 billion per year3, the potential impact of state-sponsored cyber-attacks against critical infrastructure is even more concerning. The government has projected that a large-scale disruption to critical digital infrastructure could cost the economy $30 billion within a month4, which is worrying given the concurrent ‘economic hibernation’ caused by COVID-195.
Cyber-crime and cyber-resilience
The ACSC reports that many of the cyber-crime incidents reported over the past year could have been prevented or substantially mitigated6. Against that context, it is unsurprising that cyber-resilience is a priority in Australia’s recently released 2020 Cyber Security Strategy (Strategy). The Strategy includes $1.67 billion pledged over the next decade to enhance cyber-security
capabilities across government, businesses and the community through programs and regulatory reforms. These are aimed at: • protecting Australia’s critical infrastructure and systems of national significance, and • building cyber security support and standards for businesses, with tailored support for SMEs.
On 19 June 2020, Prime Minister Scott Morrison announced that Australian organisations and critical infrastructure were being targeted by a state-based cyber-actor in large-scale ‘copy-paste’ hacking incidences7. While the government did not attribute these attacks to any particular state, it has ramped up its cyber-defence, disruption and resilience capabilities. On 30 June 2020, the Prime Minister committed $1.35 billion over the decade to enhance the capabilities of the Australian Signals Directorate (ASD) and the ACSC8. This investment represents the bulk of the funding proposed under the Strategy and reflects the government’s acknowledgement that state-sponsored cyber-attacks have been increasing in frequency9. While it is easy for Australian businesses to understand that e-crime actors attack them for financial gain, many don’t understand – or are less
1 https://itbrief.com.au/story/crowdstrike-uncovers-key-cybersecurity-findings-following-covid-19 2 https://www.cyber.gov.au/acsc/view-all-content/advisories/threat-update-covid-19-malicious-cyber-activity-20-april-2020 3 Microsoft and Frost & Sullivan (2018), Understanding the Cybersecurity Threat Landscape in Asia Pacific: Securing the Modern Enterprise in a Digital World 4 https://www.homeaffairs.gov.au/cyber-security-subsite/files/cyber-security-strategy-2020.pdf; https://www.austcyber.com/resource/digitaltrustreport2020 5 https://www.austcyber.com/resource/digitaltrustreport2020 6 https://www.cyber.gov.au/sites/default/files/2020-09/ACSC-Annual-Cyber-Threat-Report-2019-20.pdf 7 https://www.pm.gov.au/media/statement-malicious-cyber-activity-against-australian-networks 8 https://www.pm.gov.au/media/nations-largest-ever-investment-cyber-security 9 https://www.pm.gov.au/media/statement-malicious-cyber-activity-against-australian-networks 10 Mondelez Intl. Inc. v. Zurich Am. Ins. Co., No. 2018-L-11008, 2018 WL 4941760 (Ill. Cir. Ct., Cook Cty., complaint filed October 10, 2018); https://www.ft.com/content/8db7251c-1411-11e9-a581-4ff78404524e 11 https://www.dfat.gov.au/sites/default/files/australia-attributes-notpetya-malware-to-russia.pdf
Partner & Cyber Specialist
concerned by – the interest of state-based actors as the focus of the attack is not often disruption, customer data or personal information. While the immediate impact might not be visible, businesses should be very concerned. There are businesses with IP of immediate value to statebased actors, as illustrated by the widely-reported COVID-19 research attacks. Other businesses that have data stolen often don’t see the true value of that data until copycat products go on sale and competition drives prices down. For this reason, the government is stepping-in to help protect Australian businesses. Another big, unanswered question is whether you can prove that an attack was state-sponsored – and if you can, what does this mean? The insurance industry faces its own unique challenges in this regard. In the US case Mondelez v Zurich10, an Illinois state court is currently considering whether losses incurred by Mondelez due to the 2017 Not-Petya cyber-attacks, which have been attributed to Russia11 and tied to its conflict with the Ukraine, fall within an ‘act of war’ exclusion in the policy. While this case is being litigated on a property policy, ‘act of war’ clauses (also common in cyber policies) are becoming increasingly relevant as advances in forensic technology and intelligence better enables attribution. The insurance industry is closely monitoring this case, as the outcome may have significant consequences on whether attribution is possible, the steps required to achieve it, and whether a cyber-attack can be considered an ‘act of war’. Even putting the attribution question aside, the Australian Government’s focus on building public and private sector cyber-capabilities, and increasing cyber-security awareness, can only be a good thing. This should ultimately benefit the insurance industry by reducing the risk profile of preventable cyber incidents.
For more legal and claims insights, visit: www.wottonkearney.com.au/knowledge-hub
Leading the response: IAG’s Suzanne Storrie
Navigating a pandemic IAG Crisis Director Suzanne Storrie says adaptability will be key as the virus lingers By Wendy Pugh
eading a coronavirus outbreak response became such an immersive experience for IAG’s Suzanne Storrie that it led to a personal rethink on achieving work-life balance in a pandemic. Ms Storrie was already well set up for home working and made a relatively seamless transition when the coronavirus outbreak escalated, but like many people she found in the new circumstances the day didn’t have a clear end, and it was possible to become too focused. “I was living and breathing and dreaming COVID and I had to stop doing that,” she told Insurance News. “I had to, for myself, say it is OK and it is important to go for a walk, and [to] not just listen to COVID podcasts, listen to something else.” Ms Storrie quickly established a better routine and says company team leaders also recognise the importance of beneficial breaks taken during the day, whether it’s lunch hours or other time out. “We are now in this for the long haul; we don’t know what the end date is, and we have to set up sustainable behaviours,” she says. Ms Storrie was named Crisis Director, leading IAG’s COVID-19 Response Team, in March in an appointment that required her to quickly assess the requirements and come up with solutions at a rapid pace. Chief Financial Officer (now Chief Executive) Nick Hawkins flagged to her on a Wednesday that a new role focusing on IAG’s response was needed. By the Friday she had been appointed to the position and from there, through the weekend and afterward it was a case of working flat out on a response. Previously she was Executive General Manager
Enterprise Finance and Operations and over her career built skills in bringing people and teams together to address problems. The coronavirus outbreak was also already on her radar. “I had already been doing a lot of research around COVID because I have a couple of underlying autoimmune issues and so I was concerned at a personal level,” she says. IAG had been encouraging flexible working, but the wholesale move out of offices was a significant project. People using office desktops now required laptops set up by the IT team. Deadlines were tight as equipment was imported, with Australians everywhere scrambling for supplies, while delivery plans needed to minimise in-person contact. “It wasn’t as easy as saying go home and work – we actually needed to get kit to them,” she says. “So we had to be creative and one of those solutions was creating a drive-through pick-up. “People could get their technology in a box and then go home and set it up and start working.” IAG provided $400 each to employees for home office costs, and an additional $40 a month to cover expenses. Protocols were developed for those who faced risks or particular issues due to the changes. Social connection and interaction also became a focus for team leaders amid uncertainty over how long the changes would last. “At one stage, we were still working on effectively transitioning people to working from home and we were already considering how to open our worksites effectively,” Ms Storrie says.
“Our purpose is that ‘we make your world a safer place’, and we take that seriously, so we want to make sure we are doing that in an appropriate way and not putting people’s health at risk.” The situation remains fluid around Australia as companies assess future working arrangements. Melbourne faces a slower path to re-opening after entering tougher Stage Four restrictions. New South Wales has been keeping new daily case numbers under control while an outbreak in New Zealand after mostly returning to normal shows the virus is not easy to vanquish. Ms Storrie says there is little certainty without a vaccine, and risk management requirements could keep changing for three months, six months or longer as responses remain in a state of flux. “People are going to need to be adaptable to the local circumstances,” she says. “That might mean that they start coming in and working in the office, and then if a flare-up happens they may need to go back to working from home. So, people being adaptable is pretty important.” Australia’s first recession in nearly three decades was confirmed last month, putting the heat on the Federal Government as political battles wage over
border re-openings and the path ahead. Ms Storrie says IAG will remain cautious as physical working arrangements are adapted, precautions put in place and events assessed. “We are being quite considered about that and of course working with the Government to understand their approach as well,” she says. “We will continue to work with the authorities and with our people to weave our way through that.” Experience in Western Australia, where life is close to normal, points to a shift toward employees embracing a greater level of remote working arrangements, even as the risks have eased. “What has shifted through COVID is that there have been people who previously may not have considered working from home, or were maybe working flexibly a day a week, and now they are saying, ‘actually I could work flexibly and work from home two or three days a week’.” IAG’s existing support for flexible working was a factor in Ms Storrie joining the company from the
Rip currents and coronavirus Safety at the beach has a different meaning this year as summer holidays are pencilled in amid the uncertainty of the coronavirus. Both water safety and COVID-19 matters are of particular interest to Suzanne Storrie, who is on the board of Surf Life Saving Australia and chairman of Surf Sports Australia. The virus has already caused the annual Coolangatta Gold endurance race to be cancelled, given difficulties in competitors from around the country attending, while usual beach activities have been affected by restrictions. “Each of the different states have had to work with their government authorities to determine what is safe and when they could patrol, or if they had to close down patrols given COVID, and we are working through plans to re-open for the summer,” Ms Storrie says. Surf life saving has become a passion for Ms Storrie, who grew up riding horses rather than waves on a farm near the small town of Ungarie, some 500km west of
Sydney. Later she went to boarding school in Albury and then moved to Sydney for university, opening the way for her interest in life saving. After years of active participation, including with her children, she is a strong advocate for the iconic organisation. “We have 173,000 voluntary members contributing 16 million volunteer hours a year. It is a huge organisation really focused on saving lives and building communities,” she says. Ms Storrie, who sits on the board Finance, Audit and Compliance Committee, was Australian Surf Life Saver of the Year in 1996 and gained her bronze, silver and gold medallions. She has this year launched a women’s mentoring program and is a life member. “I remember earning my bronze medallion and learning how to do resuscitation, and thinking ‘wow, I have actually learned a skill in a night that could save someone’s life’, and I have had to use that skill,” she says. “It’s something that I certainly love being involved in.”
Inclusive approach: Ms Storrie wants to break down barriers to flexible working
National Rugby League, where she was Chief Operating Officer. Previously she had worked for firms including Qantas and Commonwealth Bank and had completed university masters studies in tax law and accounting. The shift into the insurance world came after a chance meeting with a corporate recruiter at the Derby Day spring carnival races in Melbourne. A few weeks later he got in touch and declared he had “the perfect job” at IAG. Ms Storrie was well-disposed toward the company, having heard good things about its culture, and was a long-term NRMA customer. Soon she was being interviewed for the position of Executive General Manager, Operational Partnering. At that stage she was seeking a work arrangement that would allow time for active involvement in the care of her father, who had been diagnosed with Lewy Body Dementia, and who died about two years ago. “I would take my Dad out to lunch, buy him fish and chips, which was his favourite meal, and a beer and spend some time with him because I knew that opportunity was going to pass,” she said. “That was really important to me and I remember my final interview was with (now former chief executive) Peter Harmer, and us having a very real conversation about my need for flexibility and why, and Peter being perfectly okay with that and completely supportive. “I don’t know that there would be many organisations or CEOs who would be, because I was taking on a big role.” Ms Storrie says there’s a need to break-down perceptions that working full-time is necessary for senior roles, and allowing flexibility when it’s needed is important and brings benefits for employees and companies. At IAG Ms Storrie has also promoted measures to
enhance diversity and inclusion, including developing a platform for celebrating women in the company and working with Australia Chief Executive Mark Milliner on an industry approach through the Male Champions of Change initiative. A framework used at Qantas in relation to safety was adapted to group leadership team commitments in support of diversity, with actions aligned to the personal values and concerns of individual members to underpin a strong focus. “There was no point just picking names out of a hat and allocating them to different stream or themes of diversity and hoping the magic would happen,” she told Insurance News. “It really created this concept of a mosaic of people’s interests, matched to them supporting different elements of diversity.” The enterprise finance and operations position that Ms Storrie took up in April last year offered a role with wide responsibility across the group, reporting to the chief financial officer. “People said ‘oh my gosh, it is a big broad role’, but I’d spent 30 years of training for that role,” she says. “Certainly, big broad roles and leading large change programs is what I have enjoyed in my career.” While the future in relation to the coronavirus is still uncertain, Ms Storrie says a commitment to safety remains a priority as IAG considers the path forward and the way in which people are able to return to workplaces. “Our purpose is that ‘we make your world a safer place’, and we take that seriously, so we want to make sure we are doing that in an appropriate way and not putting people’s health at risk,” she says. “We know that this will be around for some period of time so we have built systems and processes and governance to really support an extended response.” 0
Determined disruptor: Naby Mariyam
rowing up in the Indian Ocean nation of Maldives and achieving certification at Le Cordon Bleu isn’t an obvious path to founding an insurance business. But that’s exactly what Naby Mariyam did when she created Sydney-based Coverhero. The insurtech’s inaugural Hustle income protection product is designed to meet the needs of a growing casualised workforce, targeting “dreamers, influencers, entrepreneurs, Airbnb hosts, gig workers, business owners and Uber drivers”. Although it’s very early days, Coverhero’s effervescent boss is serious about capturing the income cover niche with Hustle, and ranks 99th on the Insurtech 100 list compiled by market intelligence platform Sonr. As an enthusiastic and high-profile participant in the local insurtech scene, Ms Mariyam is Coverhero’s most valuable asset, building awareness of the company, its products and her aspirations to make a big difference. Her company is an authorised representative of Sydney-based financial services advisory firm Enva Australia, and is underwritten by underwriting agency Agile Insurance. As the brand name indicates, Coverhero isn’t aimed at the conservative side of town. Comparing itself with traditional insurers, its website says “the majority of [their] tech is like them, super-old”, and that insurers’ efforts to change “is like trying to turn the Titanic” while “we are on jet-skis”.
The ultimate side hustler How a failed claim led Naby Mariyam to create ‘cool, rebellious’ insurtech Hustle for people in the gig economy By Miranda Maxwell
“We position it as kind of a rebellious, cool brand,” Ms Mariyam told Insurance News. “On the outside we are super-edgy, but inside we still have to follow all of the regulatory and compliance requirements for Australia, always balancing between being funky and super-diligent at the same time.” The “contingent workforce” Hustle targets is estimated to make up almost half the working population by 2025, and the COVID-19 pandemic has dramatically exposed the vulnerability of this sector. “We didn’t even understand the magnitude of what we were doing until COVID happened,” Ms Mariyam says. “We thought of something before it became a thing.” This is a woman who sees an opportunity and does something about it. She has worked in food, travel, academia, consulting and “everything in between”. A social scientist by profession, she moved to Australia at the age of 23 with a six-month-old baby on a scholarship to study French cuisine, working in upmarket Sydney restaurants before starting a PhD investigating what motivates choice in food tourism. “I am the ultimate side hustler,” she says. “I never just had one job; I always had two or three jobs, consulting, studying at uni and also working.” Other ventures in her varied career include a travel documentary series, launching Australia’s first rideshare platform for kids in 2015, and a short stint
at the United Nations Development Project working on start-up innovation. So was her move into insurance just another of those sudden changes of direction? Alas, no. Ms Mariyam says her motivation was personal after a “terrible, traumatic” claim experience. Three years ago she planned an extravagant world trip with her boyfriend but they were forced to cancel “at great cost” when he was diagnosed with cancer. “He survived, we lost a lot of money, we broke up, I lost my job and I was very angry with the insurance industry.” Her regret at not having suitable insurance cover – “if I had only read what I was buying, all of the ifs and buts”– propelled her to devise Hustle to provide a safety net for the self-employed. “I was building something for myself really, because I was that hurt. Thanks to my naivete, I went headfirst into building a start-up to solve all of the problems of the insurance industry.” So far she hasn’t, but her understanding has grown from finding the industry “so backward” in technical innovation to an appreciation of it as “an incredible industry that provides a great value to [the] community”. “I couldn’t wrap my head around why it is so complex. I am a social scientist, so I understand it from a consumer perspective, but I did not understand the industry’s challenges.”
Building community: Ms Mariyam says money is not the only motivator
Ms Mariyam says she spent time in Germany and New York talking with major insurers and other experts during Coverhero’s development phase, learning about the value chain from a reinsurance perspective, underwriting, distribution, claims and so on in what she says was like a “fast track MBA”. “This was a huge learning journey that I really enjoyed, and I also built a lot of appreciation for the industry that I did not have before. We have such a huge role to play in building things that are relevant for our generation.” Coverhero’s point of difference is building a “community”, helped by advocates and brand ambassadors and collaborations with like-minded companies that target the same user base. Historically the insurance industry’s interactions with these “communities” have been mostly ticking a box rather than an enhanced experience, Ms Mariyam says. She mentions airline rewards or gift vouchers or discounts to counter “this thinking of money or cheaper premiums as the only reward”. As for Coverhero, “we have a cult-like following,” she says. “People love our products because of what we stand for and because we are not from the industry and they trust us more.” She says not all market segments just want a cheaper product, so her business focuses on understanding the key drivers for key segments and being able to meet them at the point of their need – “remembering that insurance is a service rather than a product”. “If you cannot create touch points to connect, and the only interaction you have with your customers is buying and claiming, that is not a service industry.” She says Coverhero and Hustle use “much broader
thinking that we can do in terms of engaging. That comes from in-depth understanding of human behaviour and what drives choice and motivations for individuals. Money is not the only motivation. “Engineers and actuaries do not have the lens that I bring to the table. I spent years studying human behaviour, culture and society, and that is really valuable for insurance.” Coverhero has several other “stealth mode” products in the pipeline, with one contender expected to launch in the second quarter of next year. The company is now looking to raise $5 million to fund its next phase of expansion with a portfolio of products serving the self-employed and gig worker markets. Ms Mariyam sees a “disturbing” gender imbalance in the industry, saying she has spoken with up to 400 insurance executives over the past eight years, and less than 20 were women. The industry needs to address this, she says. She says she encountered “a lot of pushback” in setting up her company, but relied on her “very competitive” nature and self-belief. “Being misunderstood is something that I have learned to live with, but every now and then you will find one or two people who just get it. They become champions, they become supporters, they become investors. That is the nature of innovation.” Had she heeded all the advice she received from executives, investors and venture capital firms, “I wouldn’t have a business today”. “If you’re doing something radically different, most people won’t understand it. You just have to continue with your own self-belief and keep going 0 forward.”
attraction to McLardy McShane?
Come ﬁnd out.
Fun, ﬂexible, forward thinking and growing fast. AUTHORISED REP | JOINT VENTURE | BRANCH | EMPLOYEE | BUSINESS IDEAS
Call Don or Meg for a conﬁdential discussion. Don McLardy M. 0411 868 092 E. firstname.lastname@example.org Meg Long M. 0434 613 546 E. email@example.com
Asking tough questions: Ming Long
‘I speak with the strongest Australian accent I can manage’ More than 2500 insurance professionals attended local sessions at this year’s virtual Dive In diversity and inclusion festival, to hear some confronting and inspiring messages By Miranda Maxwell
ing Long, QBE Independent Non-Executive Director, spent a lot of time at the pub as part of her trajectory to becoming the first Asian woman to lead an ASX-listed 100 company. The self-declared introvert and teetotaller adopted a ‘fake it ‘til you make it’ approach but says it is now time for those in leadership roles to do their own adapting. “I changed myself to be what they wanted to see in a leader … an alien exterior to help the thinking that I am one of them,” Ms Long told almost 200 virtual attendees at this year’s Dive In Festival. “I am a non-drinker. I went to all the bars and I drank water every single time because they needed to see me as one of the blokes – that they could accept me – and also then see me as less risky, because it is difference that scares people.” In insurance especially, difference is seen as a higher risk profile, she says, because “diversity is going to challenge the status quo”. Ms Long, who is also AMP Capital Funds Management Chairman, was made a Member of the Order of Australia for her significant service to the financial and real estate sectors and to diversity and inclusion. She took up her current QBE director role in June last year and also chairs the insurer’s Board Audit Committee. She is frequently asked how she “made it” to such senior roles and reveals she felt the need to conform, for example deliberately speaking with the strongest
Australian accent she can muster to overcome stereotyping in which “people see me as a woman, people see me as a person of an Asian heritage”. “It’s like this Jedi mind trick: this is not an Asian woman that you see in front of you, she’s Australian.” In a remarkably candid session, “Diversity in the C Suite: Why we need more voices around the table,” Ms Long says Australians need to ask themselves whether their team members feel truly comfortable and included. “I’ve never felt like one of you. I’ve unfortunately never felt like I belong in this country and I’ve pretty much felt I had to pretend the whole time,” Ms Long shares. “Ask yourself, do you think that they feel like they belong?” Ms Long says all of those with seniority need to champion others who don’t have the capacity to be as resilient and advocate for themselves. At a recent board meeting, she questioned whether there was consideration for those with a disability, or Indigenous Australians, or socio-economic excluded people. “If they are in our midst, why are we not using their perspective and their skill and the fact that they’ve had to navigate some of these challenges throughout their life in forming a strategy that is going to be more inclusive of them?” Australian boards are too weighted toward candidates who went to “sandstone” universities, live in affluent suburbs, row or play rugby and other characteristics that are irrelevant to leadership capability.
“Women still disproportionately continue to do most of the bulk of the load in households and we know this has a profound and real impact and implications for women’s ability to fully participate in the workplace.” It is these biases that are too often unconscious and Ms Long urges insurance industry powerbrokers to “recognise your blindness” and be inclusive of people who are “not like you”. “The responsibility lies with leaders. Don’t just keep on looking back at the capability we have seen in the past and think that’s relevant for the future. There’s a plethora of talent around you if only you would
recognise their capability. “If you sit with the status quo you absolutely have more power than someone who does not.” Ms Long expresses frustration that she is always challenged that promotion should just be down to “merit”. This is in the eye of the beholder, she says, and “at the moment for CEOs is a six foot two Anglo Saxon man”. “I’m sounding a little bit frustrated because I
Here to stay COVID-19 forced businesses to hastily shift to flexible working arrangements, bringing into the mainstream a concept that has paved the way for women to pursue a career and raise a family at the same time. And the way the corporate world has adapted to the sudden change has been welcomed by panellists who participated in a Dive In festival event on what the post-pandemic landscape could mean for female representation in leadership roles. Gillian Davidson, a Partner with Sparke Helmore Lawyers who was on the panel, believes the developments in the last several months have pushed the conversation forward in a positive way. “For those who are still trying to explain flexibility was not just about working mothers or perhaps a small cohort of carers… [this pandemic shows] that actually it applies to every single one of us,” she said. “That has been a great thing, because I feel so much of the conversation that we were battling with no longer had to happen. We’ve felt it, we’ve lived it. That’s great for me and for women. It has been a tremendous thing.” She isn’t the only one who is feeling upbeat. More than 80% of the 600 attendees who signed up for the virtual event say they were more optimistic about the increase of women participation and representation in senior leadership positions in 2021. But the work is far from over even as flexible workplace arrangements inevitably become the new office normal post-COVID. Emma Walsh, Chief Executive of Parents at Work and panel moderator of the Future Opportunities for Leadership event, says stereotypes and perceptions still surround the concept. “Traditionally they have been a barrier to women’s participation into more senior roles,” Ms Walsh said.
“Women still disproportionately continue to do most of the bulk of the load in households and we know this has a profound and real impact and implications for women’s ability to fully participate in the workplace, develop their potential and obviously rise to leadership positions.” Kevin Bates, Group Head of Risk and Insurance at Lendlease, a listed property group, thinks the “flexible working” term has reached its expiry date. “The observation is I actually hate the phraseology,” Mr Bates, who is one of the panellists, said. “I think we need to get that out of our lexicon. “It’s working. It’s that simple. It shouldn’t be a point of difference now for employers to say we offer flexible working. You offer a working environment. It should be up to me to decide how I execute and how I perform. Don’t tell me it’s a differentiator and I expect it.” Closing the gender gap when it comes to female representation in senior leadership roles remains a challenge for many industries. The insurance industry is no exception. At Zurich, the insurer has committed to a 40% target of female representation in leadership roles by 2021. Tim Plant, Zurich General Insurance Chief Executive and host of the event, told attendees the business has an equal number of men and women on its general insurance executive team. “At Zurich, we are committed to increasing the number of women in senior leadership positions,” he said, adding there are also a number of initiatives underway to support the company’s female talent pipeline. “These include our female sponsorship program and a new partnership with a job recruitment platform Work180 to help attract more females into our advertised roles.”
It’s a challenge to run a successful broking business, whether you have been at it for 5 years or 50. Add to that, we are facing a hardening market, more regulatory demands and increasingly complex client relationships. At United Insurance Group, we see these as the problems we are there to solve for you, leaving you to focus on meeting your client’s needs. In addition, UIG continues to offer Authorised Reps: •
A true partnership with a team who fully understand your business and partner with you to ensure success.
Support from our experienced in house Placement Team who will help you win or maintain your client programs.
Access to the wide range of underwriting and support services through the Steadfast Group.
An easy transition with data transfer, on-site training and constant management support.
All with a very competitive fee structure that has no extra charges for PI or systems access and rewards growth in your business.
Call Trevor Howard on 03 8676 0344 or email: firstname.lastname@example.org www.uig.net.au
“You can be excluded from industry functions or miss out on opportunities to travel because people assume you are a mum with young kids, you can’t be involved.” always get asked the merit question,” she tells festival attendees. “Of course we are picking people on merit but it depends on how you define it.” Insurers must avoid paying short lip service to diversity and be mindful it is what you do not just what you say. People will watch for the signs of authenticity in efforts to be more broadly inclusive and will quickly detect disingenuous corporations. “It is like your children. They can tell when you are arguing even though you haven’t told them,” she says. Self-interest can play a role in incentivising change though, as while cultural shifts are hard in the short term, those who don’t embrace diversity risk making themselves corporate dinosaurs.
“If you don’t want to lead a diverse team, you will be less successful … because if you haven’t by the time you encounter me, unfortunately I am not going to promote you,” Ms Long says. “Eventually it is going to come undone. You are less relevant to me as a leader in an organisation of the future.” Ms Long urges insurers to take on these difficult conversations at the board table and compensate for the starting assumption of many employees down the ladder that there is no future for them in the organisation if there is no diversity at the top. “What are you going to do about that?” Ms Long asks. “It’s very easy to have G-rated discussions at work. 0 I think we need to move to MA.”
‘Free of fear’ Brenda Mukomberanwa remembers speaking with people who were angry, bored and lonely, and some conversations that were simply weird, during a personal insurance call centre job that marked her entry into the industry. Originally from Zimbabwe, Ms Mukomberanwa, says juggling family life and a new job in a new country was challenging, and the calls could be stressful. Once, after a technical fault, lines suddenly lit up with a queue of disgruntled people who thought phones weren’t being answered. “It was probably the toughest job I have been in. There are hundreds of calls coming in daily,” she told a Dive In Festival session. “I would find myself mentally exhausted at the end of the day.” Ms Mukomberanwa moved on from that rocky start to build a rewarding career in insurance, working in New Zealand and Australia, gaining experience in underwriting and broking and meeting amazing people who have offered support. “This is such as an amazing industry with so many opportunities,” she says. “I guess from the outside it looks all stuffy and boring, which is why it is so important that we change the image to attract talent.” Ms Mukomberanwa, Principal at broker Marsh in Perth, says the industry has come a long way in its willingness to talk about diversity and inclusion, but there still needs to be more awareness and education, particularly
around unconscious bias. In her past experience, that has included perceptions around women juggling family responsibilities. “What I found is that people would make assumptions about my availability without even checking with me,” she says. “You can be excluded from industry functions or miss out on opportunities to travel because people assume you are a mum with young kids, you can’t be involved.” Her advice to those building their careers is to seek out mentors who can offer advice, be pro-active around pursuing goals and take advantage of the opportunities on offer. It’s also important to raise issues that may be causing concern or distress. “You spend most of your day in the workplace and your mental health is important,” she says. “Which is why it is also important as well for organisations to create environments where people can actually feel free to speak up without fear of any backlash.” Ms Mukomberanwa told the session on attracting and retaining diverse and high performing talent that as a leader she encourages instilling pride and accountability for work accomplished, while also highlighting the importance of being approachable and finding areas of connection with team members. “You don’t want a manager who is always angry and grumpy,” she says. “You don’t know what is going on in someone else’s life, and we all deal with life’s challenges very differently.”
Addressing changing market dynamics with A&H cover The challenges facing Australia, New Zealand and the Pacific Islands in restarting their economies, post pandemic mirror those of many other mature insurance markets. Yet here, workplace dynamics were already changing before COVID-19, which coupled with the exodus of insurers from the region, has created a unique set of dynamics for insurers and brokers working within the Accident & Health (A&H) sector. Australia, which is currently suffering its deepest slump on record, is considering restarting its manufacturing industries to help boost recovery and create jobs and economic stability for the longer term. New Zealand and the Pacific Islands have also set in place measures to reset and rebuild their economies for the future. Meanwhile many people venturing back to work in these countries will do so as part of the flourishing gig economy.
New working practices shifting behaviours for good The app-enabled, on-demand gig or sharing economy is expanding so quickly that, according to global research firm Gartner, it will account for 40% of the global workforce by 2025, comprising those attracted by its flexibility and variety. Extensive research recently concluded by the Queensland University of Technology, the University of Adelaide and University of Technology, Sydney found the gig economy to be much bigger than previously thought. This shift in traditional employment presents opportunities for insurers but it also poses challenges. Traditional insurance, such as sole trader policies, are not really appropriate and the conventional definition of a subcontractor to a company doesn’t really fit either, as a worker is likely to be delivering goods or carrying out tasks for multiple companies. This has also caused confusion among gig workers and their employers. The aforementioned
study found that 45.5% of gig workers surveyed reported that their main platform does not provide any type of work-related insurance such as injury or professional indemnity, 39.7% said their main platform requires them to arrange their own insurance, and over 20% did not know if their platform provides insurance or requires them to obtain their own.
Furthermore, as we face changing workplace dynamics and new unknowns, there is an increasing need for science and data to give a perspective to insurance decision-making. Canopius has actuarial talent down on the ground here, who, as part of our partnership approach they undertake risk modelling to examine ways to cost save for their clients.
It is unclear if these workers believed they were employees but the reality is they would not be deemed as such under the workers compensation act. So there is a need for greater clarity and brokers and coverholders can be extremely effective in helping to educate employers and arranging suitable protection accordingly.
Canopius A&H to the fore, post-COVID
As the gig economy matures it is likely legislation will tighten but in the meantime brokers and coverholders can help employers protect themselves and their workers in this fast-changing area of employment.
Lloyd’s carriers a good fit for changing working dynamics Lloyd’s insurers in the region are often regarded as the place to go if domestic carriers are unwilling to accept a risk. Yet with a succession of insurers recently exiting, Lloyd’s carriers are looking to fill the gap, offering products that are often sold worldwide and provide much more comprehensive protection. Canopius are here in Australia to not just help with distressed assets, but we can support portfolio growth. This could be illustrated as we address the new gig economy. Pricing and products for these new types of business might not be straightforward. But Lloyd’s insurers are well placed to come up with a solution as we are used to pricing for ‘scale’ businesses. As those enterprises that rely on flexible workforces grow, they will need insurance solutions that grow with them.
In the past, there was always an impression that some businesses dismissed A&H coverage, and saw it as an afterthought. But now, after we have all lived through a pandemic, many of the risks A&H coverage mitigates against have come to the fore. From travel restrictions and cancellations, to staff suffering from psychological trauma as a result of lockdown, it’s time to have new conversations with business leaders as to how they protect their workforce. It will also require brokers and coverholders to reassess their business plans. There are new opportunities and new challenges, coupled with a shrinking pool of insurance carriers who are likely to be forced to implement broader exclusions. This will require smarter thinking and working more closely with insurers to find solutions. With an employment revolution well under way, the tripartite approach of insurer, coverholder/ broker and customer has never been more important to support clients as they work to address the changing dynamics of a workforce recovering from a pandemic.
Suzie White +61 409 717 749 Suzanne.email@example.com Canopius Australia & Pacific L9/1 O’Connell Street, Sydney NSW 2000
COVID whiplash The challenges for Australia’s biggest insurers have grown more complex, with the coronavirus halting earnings growth By Bernice Han
he numbers certainly weren’t pretty when Australia’s three major insurers reported their earnings results recently. QBE suffered a $US712 million net loss for the six months to June, wiping out the $US463 million profit it had enjoyed a year earlier. The half-year loss included a $US335 million underwriting impact from COVID-19. At IAG, the country’s largest insurer, net profit for the last financial year crashed by more than half to $435 million as its insurance margin weakened to 10.1% from 16.9%. The headline figures at Suncorp looked much healthier but only because it made a tidy sum of $285 million from selling its automotive businesses, Capital Smart and ACM Parts. The sales helped pushed full-year net profit up fivefold to $913 million. Cash earnings at the Brisbane-based financial services group were down 32.8% to $749 million, dragged down partly by weaker insurance earnings. Profit from its key Insurance Australia arm slumped 33.9% to $384 million, while its banking and wealth unit posted a 33.5% drop in income to $242 million. There is no doubt the three leading insurers – and by extension the industry at large – have endured an
unusually rough period. First came the earlier-than-usual arrival of the bushfire season last spring, which grew in intensity and spread rapidly in the eastern states, culminating in the Black Summer of 2020. Other body blows came in the form of the floods and hailstorms that hit parts of Queensland, the Australian Capital Territory, New South Wales and Victoria. Claims from last summer’s natural disasters are expected to cost the industry at least $5.4 billion, according to the Insurance Council of Australia. Then in March came the fast-spreading and sometimes-fatal coronavirus, landing a damaging punch on an industry that was already dealing with the aftermath of the Black Summer. “It’s been a very disruptive year,” Frank Mirenzi, Vice President and Senior Credit Officer at Moody’s Investors Service, told Insurance News. “The effects of COVID-19 are much more broad-based than what they would be for a natural catastrophe event. “While no one has control over natural catastrophes as well, the only difference is that the effects of COVID-19 are much more long-lasting and less certain.” The uncertainties are definitely weighing on
insurers’ outlooks for the months ahead. QBE has forecast a future impact of $US265 million from the pandemic, mainly in lenders’ mortgage insurance and trade credit. This will take QBE’s total projected COVID-19 cost to $US600 million. Meanwhile IAG has set aside a $100 million provision for the virus impact, covering potential claim cost pressures in areas such as landlords’ insurance, workers’ compensation and business interruption. Suncorp is expecting a significantly smaller impact, recognising just $85 million of provisions including risk margin to cover COVID-19 uncertainties such as landlords’ loss of rent and potential business interruption claims. Analysts say the just-concluded earnings season has highlighted a few key things about the three major insurers. They believe IAG and Suncorp should cope better with the pandemic disruption than QBE because they are more invested in personal lines. In the case of Suncorp, a $140 million benefit to the business came from lower motor claims frequency in the last financial year – the result of lockdown measures that led to sharply reduced vehicle usage in the June quarter.
“What you’re seeing is the ones that have more retail lines haven’t been affected in the same way,” Mr Mirenzi said. “Then when you look at insurers that have more commercial risk exposure, there is a bit more uncertainty. “Obviously longer-tail lines of businesses take longer for the claims to emerge and be assessed, and the final cost is subject to inflation expectations. “So there is probably more likelihood that over the next year or two insurers that have more commercial lines will see more volatility in claims. And because of that, there is probably a bit more downside risk in terms of the earnings.” Seldom have Australian insurers been through anything quite like the last eight or so months. They are used to handling cyclones, bushfires and one-in-100year floods – risks they have become adept at managing. But a pandemic is an entirely new game. It’s fraught with hidden dangers because of its unpredictable nature, meaning insurers can’t forecast with a high degree of accuracy how they could be affected. “There is a unique challenge around COVID because of the lingering social and economic uncertainty,” Scott Collings, the Managing Director at actuarial services
“The worrying thing about COVID is it’s like a long drawn-out catastrophe. It’s not clear what it’s going to do or when it’s going to end.”
firm Finity, told Insurance News. “General insurers are used to the random nature of catastrophes and investment markets. They are used to falling discount rates, because that’s been happening for a decade. “What they don’t really know is how the pandemic is going to play out, because it’s not finished. The worrying thing about COVID is it’s like a long drawn-out catastrophe. It’s not clear what it’s going to do or when it’s going to end. “And the fact that it is a global event, not just Australian, creates further uncertainty about capital, reinsurance and pricing on a global level.” What insurers know so far about the pandemic and its corrosive effects on earnings are not encouraging. Mainstream business classes such as travel and motor have been affected to varying degrees. Mr Collings expects impacts in the liability and workers’ compensation lines will emerge in the longer term. The Australian Prudential Regulation Authority is similarly concerned, warning the “ultimate claims impact of COVID-19 is likely to remain uncertain for some time given the prospect of litigation across multiple classes of business (most prominently in business interruption insurance)”. It says there are further potential concerns arising in regard to the future availability and affordability of particular classes of insurance more broadly. Now more than ever, the three major insurers need
strong and stable leadership to steer the businesses, because COVID-19 isn’t the only challenge facing them. Before the pandemic erupted, the insurers were grappling with an array of regulatory reforms arising from the Hayne royal commission, and also having to deal with pressure to contain costs. For QBE, having a safe pair of hands to lead the businesses during this period has taken on even more urgency as it searches for a candidate to fill the chief executive role. Its former group chief executive Pat Regan departed in September following an external probe sparked by a complaint from a female employee. Chairman Mike Wilkins is overseeing the day-to-day running of the complex global business until a replacement is found. At IAG, former chief financial officer Nick Hawkins has been named Managing Director and Chief Executive, taking over from Peter Harmer in November. Whoever finally takes up the reins at QBE, they, Mr Hawkins and Suncorp Group Chief Executive Steve Johnston are in for a torrid time. Climate change-related catastrophes are expected to become more intense and numerous, while the coronavirus crisis is straining the risk appetites of reinsurers and insurers around the world. Coupled with the need for Australia’s insurance giants to become more nimble in the face of innovative new market entrants, these new leaders will have to focus not only on holding the line, but how they can re0 gain the momentum of growth.
Back with a swagger In contrast to big insurers, the leading local brokerages have rewarded shareholders with sparkling results By Bernice Han
entiment is a fickle beast. In late March Steadfast and AUB Group withdrew their initial upbeat 2019/20 guidances within days of each other. They didn’t know how big a blow the COVID-19 lockdown measures would inflict on their clients and their own operations. Their understandably sombre mood lasted only a few months, however. By the time earnings were announced in August, the relief the two local broking powerhouses exhibited was unmistakable. They had regained their confidence, buoyed by how they had weathered the business storm of the pandemic in the runup to the last financial year. Leading the charge was Steadfast, the country’s largest brokerage network. The business performed at the higher end of its pre-virus forecast of $215-225 million. Underlying earnings before interest, tax and amortisation (EBITA) rose 15.5% to $223.5 million and for this financial year, it is projected to fall somewhere between $235-245 million. Steadfast has also set a higher target for underlying net profit, anticipating it will improve to $115-122 million. If that is achieved – and no one is doubting it – it would exceed the $108.7 million earned in the 2019/20 year. While the guidance is subject to uncertainties, especially over the speed of economic recovery from the pandemic crisis, Steadfast co-founder and Chief Executive Robert Kelly believes the business is capable
of producing another strong year. “I can tell you I have no idea what’s going to happen in the second half of [this current] financial year,” he told a post-earnings conference call. “What I can tell you is… we put out what we think we can actually achieve regardless of the impact of what is occurring out in the market. “And I rely on our track record over the last seven years.” Mr Kelly, who has again agreed to extend his tenure and will now stay on until after the annual general meeting in October 2023, says Steadfast is “on reasonably solid ground” based on trading figures for the June quarter. He says member brokerages have generally fared well, also citing the results of AUB and PSC Insurance Group as examples of the sector’s resilience. AUB Group achieved a 15.2% rise in underlying net profit to $53.4 million from the previous corresponding period, the largest gain since fiscal 2013. For this financial year, it is projecting a 9.5-14% increase. Fuelling the optimism are continuing signs of “strong momentum” towards the end of 2019/20. “We are a fitter and more complete organisation than ever before and are confident that the group is well placed for continued accelerated growth in FY21 and future years,” Chief Executive Mike Emmett said. The group’s largest division, Australian Broking, reported a 14.6% rise in pre-tax earnings to $62.1 million, assisted by an
average 6.3% increase in commercial line premiums. PSC Insurance Group, which has steadily expanded its presence at home and abroad through a series of shrewd investments, says underlying earnings exceeded $57 million as previously flagged. The Melbourne-based business projects the numbers for this financial year will improve to $65-70 million. Continued hardening market conditions, along with solid organic growth and contributions from key acquisitions in the UK and Australia, will support the business in the current financial year and beyond, PSC said. Morningstar Equity Analyst Nathan Zaia, who tracks Steadfast, predicts further earnings upside potential for the broker network – and by extension for the other big local brokers too – as rates continue to harden. “We are going to see premium rates go up and that should benefit the commission that the Steadfast broker network makes,” he told Insurance News. So why are the broking groups performing so much better than the leading insurers in the local market? Mr Zaia points to the issues the insurers have had to deal with so far this year. “For the insurers it’s not just COVID. They’ve been hit by the higher natural peril events and on top of that, you have reinsurance costs going up. “Their investment income has taken a beating. That’s probably due to COVID but 0 also due to lower cash rates.”
llence in place rsity and sion
rwriting cy of ear
20182019 WINNER WINNER
2019 2018 WINNER WINNER
20172018 WINNER WINNER
2018 2017 WINNER WINNER
Excellence in Workplace Diversity and Inclusion
Excellence in Workplace Diversity and Inclusion
Excellence in Underwriting Workplace Agency of Diversity and the year Inclusion
Underwriting Underwriting Agency of Agency of the year the year
Excellence in Underwriting AgencyWorkplace of Diversity and the year Inclusion
Underwriting Underwriting of AgencyAgency of the year the year
Underwriting Agency of the year
Excellence in Workplace Diversity and Inclusion
Underwriting Agency of the year
Underwriting Agency of the year
Dealing with data overload An expert explains the complexities and opportunities in business technology, what’s available and what it can (and can’t) do By Lisa Woodley
’ve spent most of my career spearheading, building and driving change with electronic insurance distribution platforms, as well as broker and insurer back office systems. With the advent of these and so many other technologies businesses are facing the problem of data overload. Just think about how much data your business collects and how many processes your staff execute each and every day: • Email • Text messages • Voice messages • Websites • Social media, LinkedIn, Instagram, Facebook and the myriad of other platforms • Accounting systems • Policy management system • Claims management systems
• Customer relationship management (although some CRMs interlink and share data with the policy management system) • Data exchanges with insurers, funders, banks, surveyors, assessors, etc • Application forms, claim forms, contracts, invoices, policy schedules, word documents, PDFs… Over the years, I’ve seen new technologies help us better process and manage our data. Each generation of technology helps us process and manage our data more efficiently. But there is so much data now that it is becoming difficult to know what you have and how to use it effectively. This generation of technology includes “AI”, “machine learning”, “RPA” and “bots”. • What are they? • How can they help your business deal
with the volume of data • How do you measure the value they bring to your business? • What will be the impact on your business? So let’s first understand what some of them are:
Artificial Intelligence (AI) Siri and Alexa are prime everyday examples of Artificial Intelligence. AI is a collection of many different technologies working together to enable machines to comprehend, act, and learn with human-like levels of intelligence. Maybe that’s why it seems as though everyone’s definition of artificial intelligence is different. Technologies like machine learning, image recognition and natural language processing are all part of the AI landscape.
Each one is evolving along its own path and, when applied in combination with data, analytics and automation, can help businesses achieve their goals. (Source: Accenture)
Machine learning At a very high level, machine learning is the process of teaching a computer how to make accurate predictions using historical data. Those predictions may be answering: • whether a photo contains a car or a truck, • whether the use of the word book in a sentence relates to a paperback or a hotel reservation, or • whether an email is spam. The key difference from traditional computer software is that a human software engineer hasn’t written the software code that instructs the system how to tell the difference between the car and the truck. Rather, the machine looks at all the data and develops its own algorithm based on correlation of data from past events. A machine-learning model has to be taught how to reliably distinguish between the different types of data by being trained on extremely large amounts of data. For a machine to tell the difference between a car and truck it needs anywhere between 10,000 to 1 million images containing cars and trucks (and different types of cars and trucks) in order to train it. The more images you provide, the more accurate the machine learning is likely to be.
AI in your office It is very likely that your business is using AI and machine learning today. If you
use Microsoft Office, you may have experienced its intelligent writing assistant, Microsoft Editor. This is a day-to-day example of a machine learning-based tool. It provides you with suggestions to improve your grammar, conciseness and readability, among others, while you type. Microsoft Outlook uses machine learning to suggest what emails you should read first. It can also read out your message. Outlook uses machine learning and natural language processing to suggest quick replies to the emails you receive. These replies may include a “looking forward to it,” or schedule a meeting. Microsoft Excel uses natural language processing (NLP)) to enable you to ask questions about your Excel spreadsheet data, and Microsoft PowerPoint uses machine learning as it analyses the structure of your slides and makes suggestions on different slide layouts.
Robotic Process Automation (RPA) RPA is the automation of physical and digital tasks that human workers usually perform. The task is performed by software and/or hardware which are called “robots”. The robot can be taught a workflow with multiple steps and applications. For example: • taking received forms from emails • sending a receipt message to an email recipient • checking a form for completeness • filing the form in a folder or document management system, and • updating your CRM or back office system with the name of the form, the date filed, and so on.
RPA software is designed to reduce the load of repetitive, simple tasks that your staff perform.
RPA in your office RPA can help your staff manage the volume of information and requests you receive every day. Instead of spending time updating various systems, your staff can be doing more valuable things for your business like talking to clients. Some more simple processes you can automate using RPA include: 1. Application form automation 2. Proposal form automation 3. Updating client profiles 4. Claim lodgement notifications 5. Certificates of insurance 6. Policy administration/servicing But there are few “gotchas” you have to know and some key things you need to look out for with robotic process automation. RPA won’t fix a process you don’t fully understand or that is otherwise fundamentally broken. That’s a basic – and frequent – misstep that commonly leads to an RPA project failing to achieve its goals. Most processes can be automated but they may not save time, and the cost to automate the process may outweigh the value it brings to your business. A recent ITnews article detailed how RACQ has been automating processes for the past two and a half years in its contact centre. Although a number of these were successful, they attempted to automate a complex process that required the robots to access multiple systems, analyse information and deliver the results back to the service staff.
WE’VE SEEN YOU THROUGH BEFORE, WE’LL SEE YOU THROUGH AGAIN.
Our structure and strength enables us to step up and face challenges head on. We’ve shown up for our Australian clients and partners for more than 20 years. Staying connected, responsive and accountable. As a mutual we are wholly devoted to our policy-holders and partners: providing continuity and assurance in an unpredictable world.
For Mutual Advantage libertyspecialtymarkets.com.au
Liberty Specialty Markets is a trading name of Liberty Mutual Insurance Company, Australia Branch (ABN 61 086 083 605) incorporated in Massachusetts, USA (the liability of members is limited).
RACQ shut the project down before it went to pilot because of the time it took the robot to perform tasks. It just wasn’t feasible for them to expect their customers and service staff to wait that length of time for a result. Vendors can prototype potential processes very quickly and can show you “quick wins”. As tempting as it may seem, RPA must be treated like any other application from an implementation and ongoing maintenance perspective. You need to consider the setup and implementation costs as well as your ongoing costs. • What are the ongoing licence fees? • What other hardware and software will I need? • Can my existing servers and desktops handle the additional capacity? Implementing any new system or application requires a degree of rigor and planning. EY produced a paper recently titled “Get Ready for Robots” Why planning makes the difference between success and disappointment. This explains why RPA projects fail and the top 10 things you need to prepare for to ensure you get the value from your investment. So how does all this tie back to data and helping to deal with the data overload? To leverage any of the new tools, you need data. The insurance industry has a phenomenal volume of data. Both insurers and brokers have access to more data than ever before. However, we have a data challenge. A report published by Jeffrey Bohn, the Chief Research Officer at Swiss Re Institute, says the challenge facing the insurance
industry “is that much of these data are incomplete, noisy, not well curated, not available at the time most needed, and sometimes lost somewhere in an organisational silo”. He says that finding and curating the right data “is a vital first step in the creation of an algorithm”. “A data item only has value if it is collected, curated, transformed, and processed in a way that meets a specific need at the right time and in a form that makes sense for the objective.” So accessible, clean data will make your AI and RPA journey faster and cheaper. But before you start, you need to think about: • How much do you want to know about your customers, staff, partners and products? • Where will you store the data? • How will you continually collect, clean and validate the data?
• • • • •
Email sources Document management systems Web application data Insurer platforms or other data exchanges Information related to mobile app usage statistics You should measure the quality of your data, because it is often: • Inconsistent: It contains both relevant and irrelevant data. • Imprecise: It contains incorrectly entered or missing information • Repetitive: It often contains duplicate data. So you may need to invest in cleaning up your data.
Sadly there is no silver bullet. But data is like unrefined gold buried deep in a mine. It is a precious resource for your business, but you need to know where it is and unearth it. In order to find gold, you need a good map. To find data, you need a good plan. To build your plan, you first need to:
2. Understand your business processes Once you identify your data sources, you then must determine what business processes update these data sources. Some questions you might want to ask are: • What kind of information do they contain? • How does the information in one data source relate to another source? • What’s the process to connect different data sources together. Once you’ve completed these steps, you will then be able identify the data and business processes that will deliver the most value to your business. This will help you prioritise your investment in automation. You are now ready. Start digging for gold!
1: Understand your Data Identify and review your data sources. Examples of data sources include: • Databases attached to different business systems • Accounting software • CRM platforms
Lisa Woodley has worked in insurance technology for her entire career spanning some 40 years. She was until recently EGM Broker Technology at Steadfast, working on the development of the Steadfast Client Trading Platform and the redesign of the 0 group’s Insight broking platform.
Where should you start?
Bolt from the Blue Building Blue Zebra has been like a three-year sprint. But Colin Fagen’s race is far from run By John Deex
e believe we have a business that over the next five to 10 years can exceed half a billion dollars in premium,” Blue Zebra founder and Managing Director Colin Fagen says. He concedes that may sound arrogant, but insists it’s not. It’s more about starting a project with the target in mind, so that decisions taken in the early days reflect where you’re aiming to be. Blue Zebra began in September 2017 and was launched to the market in February 2018, led by former QBE executives Mr Fagen and Blair Nicholls, and backed by Zurich. Three years on, chief executive Nicholls has left the business, while Zurich ended its agreement to provide security in March this year, stating that the underwriting agency’s performance was “not aligned” with its expectations. But Mr Fagen is as confident as ever about achieving his ambitions, after signing a long-term deal with South African-owned insurer Youi that he says brings stability and opportunity. And he’s proud of what has been achieved so far. “The biggest thing is that we have put together a very strong and capable team of 17 staff,” he says. “At June the rolling annual premium was a touch over $100 million. We’ve built a business very quickly to have good critical mass, and we’ve built a
market-leading and broker-friendly policy administration system. “We’re dealing with more than 350 broker firms around the country, we’ve got good relationships around the market and we’ve been able to improve our system on feedback from the brokers. “We’re very nimble and adaptable compared to organisations that are stuck with their legacy systems – that’s the culture of our organisation and the tools that we’ve built. “Anything that’s repetitive and continual – and big chunks of insurance are – we’ve been able to build systems to do that work so we can continue to develop, evolve and create critical mass and scalability.” Blue Zebra’s initial aim was to bring personal lines back to brokers. While many small business owners use a broker to arrange their business insurances, they have often become accustomed to accessing direct insurers for personal lines cover. Mr Fagen says Blue Zebra has helped change that. “In growing our business we monitor who the previous underwriters were, and a material amount of business that we’ve been able to write with brokers was previously with direct players.” Blue Zebra “believes in the advice model”, he says, which helps in getting the right cover in place and
Aiming high: Blue Zebra founder Colin Fagen
assistance at claims time. “History suggests that clients that are with brokers have a lot fewer issues when it comes to underinsurance and ensuring they have the correct types of cover,” Mr Fagen says. “In personal lines, particularly in householders and landlords, the coverages aren’t homogenous. Often the home is the biggest asset of an individual or a household. It is particularly important that clients have the right cover, and brokers meet that need.” The majority of Blue Zebra’s business comes from clients that already have a relationship with a trusted broker but may not previously have put their personal lines policies with that broker. “The whole idea is, how do we help the broker who may have a relationship around the small business to bring in all the associated insurances,” Mr Fagen says. “That has enabled brokers to cross-sell and build their relationships with their clients. “There is still a much bigger opportunity there for brokers to build that up over time with their SME customers – their customers who come to them for specialised advice.” But going through a broker doesn’t necessarily mean increasing complexity. Mr Fagen highlights the low number of referrals – occasions when human interaction is required and the
quote cannot be completed automatically – when using the Blue Zebra system. “On the personal lines side we have always talked about minimising the number of referrals so we don’t have to touch individual accounts if possible, and brokers can operate efficiently. “Our referrals are less than 5%. I don’t know of any other organisation in the market that would turn over more than $50 million in personal lines that would have that low a referral rate. “We do that through external data relationships where we are bringing in data from more than a dozen different organisations. It’s about access to Big Data, bringing that into our system, pre-filling the information.” Almost all of Blue Zebra’s premium currently comes from personal lines, but that’s changing. “Within two or three months we’ll have a number of commercial products in the market.” A cyber pilot is already under way with about 30 brokers, and SME is “virtually ready to go”. A fleet motor product for fleets up to 10 vehicles and a “Blue Point” offering with specialist underwriting agency Point for personal accident and sickness will launch in October. While Youi will continue to underwrite personal lines, SME and fleet motor, other Blue Zebra products
“We know this is a 12-month period where we are working on bringing through a different rating model.”
will source capital from other providers, including Lloyd’s. Mr Fagen believes Blue Zebra’s adaptable system will come to the fore in SME, with products and platform designed with broker collaboration. The new business package will have a single quote entry point and use Big Data to streamline and automate the process. “A lot of the market is caught up with legacy systems in the SME area, so they’re unable to move and adapt quickly,” Mr Fagen says. “We can change our wordings and create endorsements to wordings on the spot in real-time. “We have strong relationships and understanding of the commercial market. The bulk of the team has already worked in the commercial area around the country and have those relationships and understanding of what is required on the ground.” Mr Fagen says his company’s commercial products will have a broad risk appetite, “starting with businesses least affected by COVID-19 and continually expanded”. But despite launching new commercial lines, personal lines will remain Blue Zebra’s bread and butter. “If we write half a billion we would anticipate more than 60% of that being personal lines,” Mr Fagen says. The switch from Zurich, which backed Blue Zebra for more than two years, led to a period of “calibration”, Mr Fagen says. But he believes it will result in a stronger and more stable business ultimately. Youi’s expertise in pricing personal lines has been a huge help, he says, while it shares Blue Zebra’s focus on modern systems and the use of external data. “It has been interesting working with Youi; they are a very advanced organisation and have different models.
“They have a lot of deep-seated expertise in the personal lines markets and the rating models behind that. “Their knowledge in pricing personal lines has given us more depth to the information we are using in our underwriting and our pricing.” Youi’s lack of experience in the intermediary market is not a problem either, Mr Fagen says. He believes Youi is “in it for the long term”. “We are their vehicle to the intermediary market,” he says. “I believe that Youi’s strategy isn’t necessarily to go out and purchase companies that work in the broker market. It is to work with us to grow organically. “They very much want to grow their presence in the intermediary market, to achieve channel diversification over time. I don’t see it as being any different to the three or four major players.” Mr Fagen accepts Zurich’s veiled criticism of Blue Zebra’s loss ratio as “fair”. “The loss ratio wasn’t where we would have liked, but equally it was a very big [catastrophe] year,” he says. “I don’t think you’d find too many organisations who write personal lines in the Australian market who were happy with the loss ratio last year.” The changeover of underwriters has slowed growth, due to Youi’s different approach. The South African-based insurer has a different risk appetite and exposure experience. “We need to continue to work with our brokers on being clear on our risk appetite. We know this is a 12-month period where we are working on bringing through a different rating model.” Blue Zebra’s changing risk appetite comes in train with renewal retention “dropping a little bit”, he says. “New business is picking up because [Youi has]
“Most of us come from larger organisations and we are used to dealing with premium pools much bigger than that, so the number doesn’t frighten us.”
different areas where they’re very comfortable writing, and we are able to access the intermediary market very widely. “We are back to writing the $6 million a month premiums that we were previously, and building that up. That churns into a stable renewal portfolio early next year, so that’s when we will start to see the growth curve kick in. “We fully expect to move back to renewal retention in the vicinity of 80-90%. We are at a plateauing stage on the premium, and we are very comfortable that it is a short dip.” Mr Fagen stresses the importance of a strong claims service to the intermediary market, and says some fine-tuning has taken place following the spate of catastrophe claims last summer. “It was one of those periods where demand exceeded supply for the whole market in respect of the number of claims. We’re very comfortable that’s in a good position now.” A new partnership with claims management specialist Procare will assist with commercial claims, while the relationship with Insurx/Claim Central continues for personal lines claims management. Mr Fagen says Blue Zebra’s modern technology and nimble culture stood it in good stead when the COVID-19 pandemic hit. In fact, he says, the switch to remote working accelerated some projects. “The premium turnover has met expectations [and] the system has held up. In a number of areas we were able to speed up and deliver new products more quickly than otherwise, with people working from home and being focused. “In the right situation the ability to do some of
those medium-term projects can actually be accelerated in an out-of-the-office environment. In the office we sometimes get short-term distractions.” Mr Fagen says most staff have started returning to the company’s office two days a week, but it’s “pretty optional”. “If they wish to stay working from home we are comfortable with that as well. We have had no issues in respect of delivery. “Previously the trend towards people working from home was changing slowly over time, but it has probably jumped forward 10-15 years. “Organisations are a lot more comfortable with their teams working from home. The productivity is there. “One of the things that underpinned it for us is that we have a lot of people with very strong, long term relationships in the market, so the interactions didn’t falter when not being able to meet face-to-face.” He says neither the switch in underwriter nor the pandemic has derailed Blue Zebra’s original ambition to reach that half-billion dollar target. “It might sound ambitious, but we believe in the statement that you start with the end in mind. “In thinking of having premium turnover of that size, we are ensuring that we are building for that level of scalability. That means you make different decisions in your initial build. “Most of us come from larger organisations and we are used to dealing with premium pools much bigger than that, so the number doesn’t frighten us. “Half a billion dollars doesn’t create any fear with 0 us. It’s just about how we do it.”
Your local marine experts. Australiaâ&#x20AC;&#x2122;s leading marine insurance specialist. With the largest team of experts in marine insurance claims, underwriting and sales in Australia, weâ&#x20AC;&#x2122;re responsive whenever you need us. The marine industries never stop, and neither do we.
To get to know your local experts, visit
marineprotect.com Insurance products are provided by National Transport Insurance, a joint venture of the insurers Insurance Australia Limited trading as CGU Insurance ABN 11 000 016 722 AFSL 227681 and AAI Limited trading as Vero Insurance ABN 48 005 297 807 AFSL 230859 each holding a 50% share. National Transport Insurance is administered on behalf of the insurers by its manager NTI Limited ABN 84 000 746 109 AFSL 237246.
Total loss: but some motor claims are not all they seem to be
Catch me if you can Motor insurance fraudsters go to great lengths to falsify claims, raising the stakes for insurers By Bernice Han
nthony has seen it all in his 20 years of investigating bogus motor insurance claims. He is familiar with just about every trick fraudsters have used to try to swindle insurers. Deliberately setting fire to a car. Conspiring to fake a crash late at night in an obscure unlit lane. Staging a car theft. Or even making up a tale about how a car ploughed into a tree – usually blamed on a kangaroo or some other animal appearing out of nowhere. “It never ceases to amaze me that some of these things have been going on for years,” says Anthony – who prefers to be known by his first name only. He is a senior investigator with Prime Investigations. “People seem to think they can get away with it because they don’t know the extent of the investigations that will be conducted,” he told Insurance News. “They don’t know the extent of what we can possibly find out. We can certainly uncover as much information as is available.” And finding out as much as is possible is what firms like Prime Investigations, which helps insurer clients with suspicious claims, excel in. Anthony says poring over every detail, big and small, leaving no stone unturned, is crucial. The information gathered will decide whether or not a claim is legitimate. Take as an example a collision. A claimant says he
was travelling at about 60 kmh when a car emerged without warning from a side street and hit the rear end of his vehicle. Anthony says there are several ways to verify if the accident was premeditated. A check of the tyres of both cars for skid marks will give an indication of the speed the vehicles were travelling at and the point of impact. Signs of recent dents are another area of interest to investigators. “Quite often when they’re staged, a lot of the damage is already pre-done,” Anthony said. “Where they come unstuck is that the damage they do at the accident scene does not line up with the damage that was previously done. “The damage needs to be consistent with the claim. It has happened many times where they make a claim and it’s just not consistent.” Insurance fraud is a huge problem for the industry globally. Financial gain is the usual motivation. In the US, the Federal Bureau of Investigation estimates fraudulent acts to deceive insurers cost more than $US40 billion a year. Of course, it also ends up hurting the hip pockets of the average American insurance buyer, who pays some $US400-700 more in premiums annually. In Australia motor insurance fraud is equally concerning. Insurance Council of Australia (ICA)
“Ninety-nine percent of people are decent, but 1% will go the other way because it is an opportunity.”
spokesman Campbell Fuller says a large proportion of suspected dishonest activity reported to the Insurance Fraud Bureau of Australia (IFBA) is attributed to motor-related claims. The bureau was set up by ICA members in December 2010. While ICA has no breakdown of fraud by product lines, it says conservative figures last tabulated in 2017 put the cost of fraud, excluding statutory schemes such as compulsory third party, at some $2.3 billion a year. The bureau believes motor vehicle insurance fraud is growing, possibly because of the economic impact of the recession and pandemic. “However, this has not been quantified,” Mr Fuller told Insurance News. Peak insurance bodies in New Zealand and the United Kingdom have warned of a potential across-theboard spike in fraudulent claims during this economic slump. They say that in previous downturns consumers have tended to submit more fake claims or exaggerate their losses. While no exact figures for motor-related claims and fraud are available, a report by the Australian Securities and Investments Commission (ASIC) last year revealed how seriously insurers see the problem. Out of 1.6 million claims received from September 2016 to September 2017, insurers flagged 4.85% as suspicious and investigated 1.1%. Of the 17,587 claims that were investigated, ASIC found 4% were eventually declined for fraud, 10% were rejected for other reasons and 15% were withdrawn. The five general insurers whose data were used for the study – Allianz, Auto & General, IAG, Suncorp and Youi – paid out 71% of the claims during the period. The aim of the ASIC study was to review how insurers investigate comprehensive car insurance claims where fraud is suspected. The corporate regulator was scathing in its assessment of some of the methods used, saying insurers caused significant consumer harm. Consumer research with 52 policyholders with valid claims that also formed part of the study found many felt the investigation process left them “feeling like criminals”. Their claims were paid but they were angry,
frustrated, helpless and overwhelmed with the treatment shown by insurers, the report said. But ASIC agrees fraud is a real and serious issue. “It is important for insurers to identify, investigate, decline and deter fraudulent claims,” the corporate regulator said in the report. “Fraudulent claims increase the cost of insurance for other consumers.” Consumer Action Law Centre Policy Officer Tom Abourizk says insurers in some cases go to drastic and unwarranted lengths when investigating a suspected fraudulent claim. “We hold concerns that insurers use the suspicion of fraud to justify fishing expeditions to try to find a reason to refuse a claim, or to encourage withdrawal of a claim, by making the claims process more difficult for consumers to manage,” Mr Abourizk told Insurance News. He says in one case the centre handled, a client successfully challenged his insurer who had refused to accept his comprehensive motor claim, alleging the insured had intentionally crashed his vehicle. Many flaws in the insurer’s investigation were pointed out during the external dispute resolution process. It took the insurer more than six months to agree to pay the claim. “While there were some unusual circumstances to the claim, in our view these did not invalidate the claim or suggest fraud,” Mr Abourizk says. “The long investigation and dispute caused the client significant distress and financial hardship.” In the last financial year consumers lodged 106 complaints against insurance providers for denying their claims on the grounds of fraud. The Australian Financial Complaints Authority (AFCA) gave no further details on how these claims have progressed. “Where there are allegations of fraud, there must be clear and cogent information to support the allegation, such as information as to motive, opportunity, character and credibility and supported by independent expert forensic evidence,” AFCA says in a statement to Insurance News. “If appropriate the Ombudsman may conduct an interview with all parties to allow for issues such as
allegations of fraud to be clarified.” AFCA says it approaches fraud-related complaints the same way it addresses other disputes. The dispute mediator is guided by the principle of what is fair in all circumstances with regard to legal principles, applicable industry codes and other relevant factors. IAG, a major motor insurance player in the local market, says it uses an intelligence-led approach that includes fraud detection technology, data and analytics to identify and scrutinise claims with a higher level of risk. The vast majority of IAG customers submit genuine claims, says Executive Manager Fraud and Investigations Anthony McGrath. However, it is generally accepted across the local and global industry that 5-10% of all claims will be fraudulent or contain elements of fraud. Since the pandemic broke out in late March, the business has not identified any changing patterns or trends relating to insurance fraud. “We don’t want [our customers] to be impacted by the cost of fraudulent claims,” Mr McGrath told Insurance News. “Our priority is to minimise any impact or delay in ruling out fraud so we can process our customers’ claims as quickly as possible.” He says when fraudulent claims are uncovered, IAG assesses them individually to determine an appropriate response. It could be one or a combination of the following measures: deny the claim; refer the involved parties to law enforcement; cancel the policy; refuse to renew the
policy; refuse to offer future insurance to the involved parties; and/or closely review all future claims from the customer. In a recent suspicious motor claim involving a collision between two cars, IAG had a factual investigator and forensic experts to help determine if it was genuine. The insurer felt it was necessary to investigate further after interviews with the insured and the other party whose car was involved. The claim was denied after the forensic experts found supporting evidence to show the insured vehicle was not in a roadworthy state before the collision. From the damage sustained by the two cars it was also concluded that the accident, which happened at a roundabout, was planned. Mario Bekes is the Managing Director of Insight Intelligence, a firm that works with insurance clients on fraud matters. He says the onus is always on insurers to prove there is intent to cheat, and they must have evidence to support their position. “Money is always a great motive,” Mr Bekes told Insurance News. “Ninety-nine percent of people are decent, but 1% will go the other way because it is an opportunity. “Fraud is very, very hard to prove and insurance companies have limitations. They are not a judicial system or law enforcement where they have more resources and logistics to deal with it. “If [fraud] is not proved the claim gets paid, and this 0 encourages other parties to do the same thing.”
Following are some rulings made by the Australian Financial Complaints Authority (AFCA) in disputes where motor insurance claimants have challenged insurers’ refusal to pay: Case number: 673031. Insurer: Suncorp Suncorp rejected a claim from a policyholder whose car was involved in a two-car collision in 2019. A forensic investigator hired by Suncorp concluded that, among other things, the accident could have been avoided. It was also found the Mercedes-Benz involved in the claim was insured well above the relevant market value. The complainant stood to gain nearly $19,000 if the claim was accepted. AFCA ruled in favour of Suncorp.
Case number: 626535. Insurer: Hollard Insurance Company The complainant’s BMW was involved in a collision in 2018. Forensic evidence gathered by the insurer showed the car was stationary at the point of impact, countering the complainant’s initial evidence that he was travelling at 30-40 kmh when the accident occurred.
AFCA accepted there was an opportunity to stage the accident and that the complainant stood to make a financial gain. The vehicle was insured for $24,000 more than it had been purchased for two months before the incident. AFCA ruled in favour of Hollard.
Case number: 671930. Insurer: RACQ Insurance The complainant gave different accounts about his accident. In his claim lodged last year, he said he braked but still could not avoid hitting a kangaroo. He later changed his story to say he did not collide with the kangaroo; instead, he had crashed into a tree while trying to avoid the animal. A forensic expert hired by the insurer found the claimant’s Toyota had pre-existing hailstone damage and collision damage prior to the incident. AFCA determined RACQ was right to reject the claim.
Stronger together: PSC combines AR networks under one banner Taking flight: 360 Aviation teams with Axa XL Specialist underwriting agency 360 Aviation has gained a coverholder binding authority agreement with Axa XL, enabling it to expand the business. The aviation agency was launched two years ago as part of 360 Underwriting Solutions and provides cover in areas such as aircraft hull insurance, liability, infrastructure and other associated risks. The firm says the partnership with Axa XL will expand its ability to write general aviation and hangar keepers business within the scope of the permitted parameters. “As a team 360 have been working closely with Axa XL, both in Australia and worldwide, to ensure we have a clear and
sustainable approach to writing aviation business in Australia,” the firm says. The partnership comes at a time when capacity within the local aviation arena has been challenged amid difficult market conditions. “Our joint aim with Axa XL is to provide a high grade, reliable security provider, with a consistent approach to the general aviation sector, in turn providing the coverage needed to protect the insured’s interests,” 360 Aviation says. The business is led by Craig Davie who has more than 30 years of aviation insurance broking and underwriting experience, having worked in London for the majority of that time. He is currently based in Sydney. 0
Future direction: BAIS to unveil new logo and plans Insurance technology firm BAIS has redesigned its logo and revealed key initiatives, including a major upgrade of its flagship iBAIS product, to grow the business. The new logo has added a short “insurance technology” line positioned to the top right hand corner of the company’s name to reinforce its expertise and offerings of digital solutions for clients in the industry. Additionally, the company name will appear in lower case instead of capital letters. “BAIS has been a significant part of the insurance landscape for almost 30 years and we decided to develop a bold, new brand look to reflect where we are and the exciting growth plans we have moving forward,” Managing Director Jim
Armstrong said. “We believe now is the time for significant investment in technology and we are positioning the business to help clients into the new post-COVID era, with streamlined and integrated process solutions.” BAIS says the upgrade to its iBAIS insurance application is planned for early next year. The business has purchased new offices in Pymble, Sydney, to support its growth plans. “Our vastly experienced team is progressing several new developments and is looking forward to moving into our new offices once restrictions are lifted,” Mr Armstrong said. “I can’t wait to see where our business will be 0 by the end of 2021 and beyond.”
PSC Insurance Group has brought its two authorised representative networks under one structure in a move to improve efficiencies and provide a clear platform for further growth. The newly branded PSC Network Partners combines PSC Connect and PSC Reliance Partners which have been operating independently as well-established AR groups. “This gives us an opportunity to provide consistency, improved capability and enhance our business model to brokers already with us or looking to join,” PSC Connect CEO Tony Walker, who becomes CEO of the combined business, tells Insurance News. “Our experienced management team is solely focused on providing support to each and every broker in our network. We operate in every state and territory as well as New Zealand so can provide local support and service to all our insurance advisers.” PSC Network Partners will have more than 500 insurance advisers and support staff, handle in excess of $300 million in gross written premium and assist more than 70,000 clients. PSC Reliance Partners CEO Shane Upton says the combined network further eliminates any back-office duplication and provides wider leverage support with strategic insurer and agency trading partners while taking on the best parts of both models. “The combined business will also eliminate any confusion with market messaging and Tony and I along with the rest of the experienced management team are excited to build on the significant potential of PSC Network Partners,” he says. Distribution is a key focus area for PSC Insurance Group, which listed on the Australian Securities Exchange in 2015. The company since then has continued to expand its reach through acquisitions and 0 organic growth.
New name, same commitment: Ryno becomes ShieldCover Ryno Underwriting has completed its rebranding after months of preparations. The Brisbane-based specialist agency is now called ShieldCover. Greg Rynenberg, founder and Managing Director of the business, says the name change reflects the growth of the agency as a preferred partner of brokers in the Liability and Accident and Sickness product lines. The new name gives the agency an independent brand, distinguishing it from Ryno Insurance, which offers motor solutions directly to consumers. “With Ryno Insurance and Ryno Underwriting both continuing to grow in two different markets with two different audiences, it makes sense to give Ryno Underwriting an independent brand,” Mr Rynenberg said. He assures brokers and clients nothing has changed in terms of how the agency is managed despite the switch to a new name. “You can be sure our agency model is not changing,” Mr Rynenberg said. “We are just getting a fresh new look which hopefully allows us to better support our market… [and] establish ourselves as a more contemporary and prominent market player.” He says the rebranding “revitalises an established underwriting agency”. The agency has informed partners and brokers of the name change, assuring them that they can continue to expect the same service with the same approach by the same people. “Don’t fret. Our business isn’t changing,” the agency says in an email to communicate the branding makeover. “Peeling off from the established Ryno name, ShieldCover will now stand on its own two feet as a specialist under0 writing agency.”
maglog > I
nsurance professionals who want to deepen their understanding of the issues and influences driving the industry turn each Monday to the Analysis section in insuranceNEWS.com.au. There they find insights, opinion and expert views that dig deeper than our normal news stories, which focus more on “what happened/is happening” than “why it happened/is happening”. We turn to expert reports and opinions from a vast store of sources to analyse and explain the how and why. Here’s some excerpts from recent Analysis articles that serve to illustrate the variety of subjects and approaches insuranceNEWS.com.au publishes in its Analysis section each Monday.
September 7: So what now for QBE? (This article looked at the consequences for QBE in dismissing its Chief Executive, Pat Regan.) While the “decisive action” demonstrates governance standards are high, uncertainty remains as to the impact on the group’s broader strategy and its ability to maintain momentum, [S&P Global Ratings] says. However, other analysts have been quoted as saying Mr Regan is “respected but not irreplaceable”, and that the insurer’s immediate future depends more upon continued market hardening. S&P notes that Mr Regan isn’t the only executive heading for the exit, and that there has been “substantial change” at the board and senior executive level across all regions. As a result some commentators suggest that, while some well-qualified internal candidates remain, Mr Regan’s replacement is most likely to come from outside the company.
September 14: Quiet Monte Carlo reflects a sombre reinsurance season Hopes for a festive mood at the annual Monte Carlo Rendez-Vous de Septembre have been doubly dashed this year, with the event cancelled due to the coronavirus pandemic and reinsurers facing tough times despite long-awaited rising rates. Assessments highlight firming prices, while noting COVID-19 has thrown up new challenges for claims and investment returns, as the sector also faces rising pressures from more common catastrophe
By Terry McMullan Publisher
and casualty risks. Moody’s last week downgraded its reinsurance outlook to negative from stable, while S&P Global Ratings affirmed its negative view after assessing the sector again won’t earn its cost of capital this year. “Entering 2020, the expectations were that this year the reinsurance caravan was set on the right route and reinsurers would improve their results,” S&P says. “However, COVID-19 losses and the ensuing market volatility became the straw that broke the camel’s back.” S&P says if insured catastrophe losses this year reach about $US60-70 billion ($82-96 billion), which is an average level, at least eight of the Top 20 could suffer a “capital event”.
August 24: Tech talk accelerates in the midst of upheaval An internet meme doing the rounds depicts a survey asking, “who led the digital transformation of your company?” Of possible choices between the CEO, CTO and COVID-19, it is the virus that’s heavily circled by a thick red line. Sydney-based Genpact APAC Insurance VP Steven Raynor says…there’s no doubt there has been a surge in interest in digital technology that is potentially far-reaching. Insurers… are examining the changing behaviours and shifting cover needs of their customers, and how the industry should respond. Trends that may accelerate include the greater use of third-party data that can provide detailed risk information. Looking further ahead, Genpact flags opportunities for insurers to enhance their role by moving beyond collecting premiums to becoming more proactive in providing advice for customers. “Society’s expectation around the insurance industry and financial services more broadly is that they should have a strong focus on protecting and looking after consumers. A natural extension to that is moving more to prevention.” There’s also scope for loss data for sectors and details on major events to be shared broadly by the insurance industry to customers, alerting them to risks that have affected similar businesses.
August 10: IAG’s next big challenge – succession With the results for IAG’s financial year behind them, the group’s directors now
have another major matter to settle – who will lead the group into what MD Peter Harmer has described as “an increasingly complex and dynamic environment”. A leading management consultant familiar with the group’s operations…told insuranceNEWS.com.au…he doubts the IAG board under Chair Elizabeth Bryan will fall into what he says is a common trap in such situations: “Disregarding operational leaders and going for bright and shiny objects.” No matter who takes IAG forward, it will have to be a very different sort of company from the insurer of today, relying on innovative products and an ability to understand and seize opportunities in a rapidly changing market. That’s why the choice facing the IAG board is so weighty. It is blessed with two strong candidates who have clear-cut differences in experience and (possibly) vision – one finance, one operations. But the directors must also consider how to cover the potential loss of one of IAG’s two key executives.
August 17: Bad news: pandemic infects the industry’s reputation We’ve all seen the headlines. Across the world from the US to the UK, mainstream media news titles have been all too eager to attack the insurance industry’s perceived failings as coronavirus and associated shutdowns took a heavy toll. When it became apparent travellers and small businesses would not be able to claim for COVID-19 associated losses, the backlash was harsh. Here in Australia…insurers moved quickly to support customers. But the use of outdated policy wordings in business interruption policies has opened up a debate that the industry here had hoped to avoid, and negative sentiment has spread to these shores, too. Analytics firm GlobalData tracks news sentiment and says insurance has “fared particularly poorly” since the pandemic struck. It says three months of “extremely negative coverage” will leave a lasting mark. The insurers’ logic is routinely ignored by media groups which have little understanding of insurance and how it works – a lack of knowledge that plays to most mainstream journalists’ willingness to portray large companies as villains while giving the impres0 sion of sticking up for “the little guy”.
2018 & 2019 WINNER Authorised Representative Group of the Year
We value and respect our people for what makes them unique.
We know it’s not just what we do that matters, it’s how we do it that makes the difference to our people, customers, communities and shareholders. Diversity is part of our QBE DNA.
Our people, their stories “The Share the Care program of paid parental leave for all employees regardless of gender allowed my son to see I play an equal role at home and has seen my team step up, feel empowered and grow.” Sam Morgan, QBE Australia Property Claims Manager
“I’ve had varying experiences over my career. I have had workplaces where I was told it was probably better for my career if I didn’t come out and others where I came out only after being there a while. QBE has been by far my most positive experience. Given the visibility of QBE Pride and so many openly out people, I felt comfortable enough to be out as soon as I arrived.” Lisa Hilton, QBE Australia Pacific Head of Technology
QBE recognises the value of diverse perspectives and experience. We are committed to an inclusive workplace where everyone feels valued and respected for who they are. We are proud to have been Voted #5 in the 2019 Top 20 Australian Workplaces for New Dads – HBF Direct Advice for Dads and achieved Gold employer status in the 2020 & 2019 Australian LGBTI Inclusion Awards.
QBE Insurance (Australia) Ltd. ABN 78 003 191 035 | AFSL 239545. Consider the PDS to see if a product is right for you. J10906