Insurance Business 1.03

INSURANCEBUSINESSONLINE.COM.AU ISSUE 1.3

The finest insurance brokerages in Australia revealed

ADRIAN HUMPHREYS LLOYD’S AUSTRALIAN BOSS ON BROKERS

UNDERWRITING AGENCIES THE GENUINE ALTERNATIVE FOR BROKERS

MOTOR INSURANCE HOW BROKERS CAN ACCELERATE THEIR PROFITS

INSURANCEBUSINESSONLINE.COM.AU

EDITORS LETTER / 1.3

JUST DESSERTS This issue of Insurance Business is very much a landmark moment not just for us, but for the industry as a whole. For the first time ever, the very best insurance brokerages are being rewarded for their hard work and application.

Our Top 10 Brokerages ranking is not about creating brokerage conflict though. This is about ensuring the very finest brokerages in this country are acknowledged for their fine achievements. This is something new for the industry, but the reaction we have garnered from brokerages indicates that it fills an essential void in how the insurance broking industry is accredited.

We have made the system as fair as possible to reward not just the large brokerages, but also the smaller firms punching above their weight. Our entirely objective ranking system attempts to strike a balance between those types of companies to ensure there is a mix of companies in that Top 10.

Elsewhere, we have interviews with Lloyd’s Adrian Humphreys, Swiss Re’s Kurt Karl, while Jim Penman, founder of Jim’s Group, has some controversial things to say about insurance brokers. This issue’s specialist features look at the option of brokers using underwriting agencies, and the opportunity for brokers in the motor and transport insurance space.

There is also exciting news for our online news service, insurancebusinessonline.com.au, where official audit figures have confirmed Insurance Business Online as the number one website for the insurance industry, with traffic five times higher than the nearest rival. In our first official month of auditing in July 2012, Insurance Business Online recorded 32,964 visits and 60,292 page views in Australian-only traffic. Be sure to sign up for our daily newsletter if you have not done so already.

We have also opted to increase the frequency of this magazine.

Australia’s broking community will now receive Insurance Business on a bi-monthly rather than just quarterly basis. There will continue to be no cost or membership fee needed for us to independently educate and champion the insurance broking cause.

We hope you enjoy this issue and be sure to drop me an email if you have any suggestions.

COPY & FEATURES MANAGING EDITOR Trevor Treharne SENIOR JOURNALIST Robin Christie CONTRIBUTORS Cameron Brown, Tarquin Taylor PRODUCTION EDITOR Carolin Wun

ART & PRODUCTION DESIGN MANAGER Rebecca Downing DESIGNER Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Peter Smith COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Anna Keane TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Trevor Treharne tel: +61 2 8437 4789 trevor.treharne@keymedia.com.au Advertising enquiries National Sales Manager Peter Smith tel: +61 2 8437 4740 peter.smith@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Singapore, Auckland, Toronto insurancebusinessonline.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Insurance Business magazine can accept no responsibility for loss

Trevor Treharne, Managing Editor, Insurance Business

CONNECT

Contact the managing editor:

trevor.treharne@keymedia.com.au 2 | SEPTEMBER 2012

Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

CONTENTS / 1.3

14

COVER STORY

Top 10 Brokerages “Good medium-sized brokers offer real value to those clients who usually deal with internationals”

NEWS ROUND-UP 6 | The big five The biggest stories to impact insurance brokers 8 | Attracting young staff How to get fresh blood into your brokerage

COVER STORY

34 FEATURE

Motor and transport insurance “Most customers have motor vehicles to insure”

14 | Top 10 Brokerages We unveil the finest brokerages in Australia for the first time ever

FEATURES 10 | Adrian Humphreys Lloyd’s local supremo on a tough year and dealing with brokers 26 | Underwriting agencies Underwriting agencies pitch their case for why brokers should be using them 34 | Motor and transport insurance How brokers can accelerate their profits in this fast-moving space

4 | SEPTEMBER 2012

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40

FEATURE

A plan to succeed “A business plan ensures you know where you’re going”

10 FEATURE

Adrian Humphreys “One of the things we offer is assessing each risk on its own merits”

WEEKLY INVESTIGATIONS NOW ONLINE: Fire levy scrapped New flood definition Motor insurance reform insurancebusiness online.com.au

40 | Plan to succeed A good business plan is essential for keeping you on track

50 | Social life The best snaps from the industry’s latest shindigs

44 | Kurt Karl Swiss Re’s chief economist on the dominance of brokers

54 | Favourite things Broker Candice Klau on birthday cakes and Chris Hemsworth

INSURANCE INSIDERS

56 | The final word Get your approach to Twitter in order

48 | Broker focus Founder of Jim’s Group, Jim Penman, on breaking into insurance broking

SEPTEMBER 2012 | 5

NEWS / ROUND-UP

THE BIG

NEW DIVISION

BROKER OVERHAULS MANAGEMENT TEAM, FORMS NEW DIVISION

FIVE The biggest news stories from insurancebusinessonline.com.au FRAUD

BROKER PLEADS GUILTY TO 25 CHARGES AN AUCKLAND INSURANCE BROKER who was being pursued by numerous creditors after he went bankrupt owing $41m has pleaded guilty to 25 counts of fraud and perverting the course of justice.

According to reports in Fairfax Media, Marcus Friedlander, 57, pleaded guilty to two counts of attempting to pervert the course of justice, three counts of using a document for a pecuniary advantage and 20 counts of making forged documents.

Court documents said he was being pursued by “numerous creditors” including $2.5m owed to Stari Holdings, $2m owed to NZHB Holdings and $400,000 owed to Rusher & Bell.

Under a now-defunct section of the Insolvency Act, Friedlander proposed to pay off his debts at 15 cents for every dollar owed, stated the Fairfax report.

In support of his proposal, he disclosed assets of $23,000 and liabilities of $11.1m. Those liabilities included a purported debt to P & A Herzog for $4.8m which Friedlander has now admitted he had fabricated to ensure his proposal would be accepted.

Friedlander was remanded on bail and will be sentenced on 3 October.

6 | SEPTEMBER 2012

TRADE CREDIT Trade credit insurance broker NCI has revealed that its credit risk index score has continued to rise from the 4th quarter of 2011, indicating a worsening of the current credit risk environment. For the second quarter of 2012 there was a 3.5% lift from the first quarter of the year

JLT HAS MADE FOUR KEY APPOINTMENTS to its management team as it launches a new National Placement Division.

Bob Mann has been appointed as chairman of the Specialty Division and chairman of the new National Placement Division.

David Stanborough will be the managing director of the National Placement Division, while Jeremy Rowsell will be the managing director of Casualty Placement within the National Placement Division.

Wayne Holcombe will be the managing director reinsurance working within the new division, while Harry Georgoulas, who has been JLT’s leading placement broker for some time, will be part of the National Placement Division, too.

The new division will work alongside Andrew Barrowman, managing director of Specialty, to continue to drive their strategy and focus on industry specialisation.

JLT added it is anticipated these appointments will be effective in the new year when commitments to current employers have been honoured.

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RESULTS

PAYOUT

BROKERS CREDITED FOR SUNCORP’S STRONG RESULTS

QBE BOSS DEPARTS WITH GIANT PAYOUT

SUNCORP HAS REPORTED A RISE of nearly 60% in its net annual profit and was quick to credit the involvement of brokers for the success of its Commercial Insurance (CI) business.

Net profit for the 2012 financial year came in at $724m, compared to $453m last year. Profit for the insurance division was $493m, with life insurance earning $251m, and the banking arm just $26m – down from $84m last year.

“Suncorp’s Commercial Insurance (CI) business is demonstrating strong growth momentum and was a significant contributor to the Group’s annual results,” said Anthony Day, CEO of Commercial Insurance at Suncorp.

“Our distribution strategy is working. We are continuing to see the benefits of having the broadest range of channels of any Australian commercial insurer, allowing us to scale up or down in line with changing customer preferences.

“In particular, our broker channel continues to strengthen, aided by delivering a market-leading claims experience and turning customers into advocates. Measurement of broker satisfaction – a good lead indicator of growth – has improved considerably for our Vero and GIO brands.”

Day said CI has improved underlying performance by removing complexity, demonstrating its expertise in pricing, disciplined expense control and strong claims performance. “We have also progressively refined our functional model to further increase the focus on our customers,” he said.

“We embarked on our simplification journey early and anticipated market changes early,” added Day.

CHIEF EXECUTIVE OF QBE, FRANK O’HALLORAN, has departed the insurance giant, but is heading towards a comfortable retirement after receiving a gargantuan payout.

O’Halloran will farewell the insurance company with up to $37m of shares and benefits. He will get as much as $16.25m, on top of the $20.9m of shares he already owns in the company where he has worked for the past 36 years, the last 14 as chief executive.

QBE said it will pay O’Halloran cash of up to $8.4m, including his salary up to the end of August, a $2.34m retirement allowance from March 2013 as well as $4.5m of holiday entitlements and pro-rata cash bonuses.

O’Halloran will continue to work with the firm on a consulting basis until December, while he has also agreed on a three-year, non-compete deal.

The company has also agreed to allow the early release of 137,253 prior years’ conditional share rights and said that from 2016 to 2018 he would have access to 24,137 deferred equity awards and to rights over shares that were subject to performance conditions.

Belinda Hutchinson AM, QBE’s Chairman said: “Frank’s commitment, loyalty and leadership have been the cornerstone of QBE’s success over his tenure.”

John Neal, QBE’s Group Chief Executive Officer elect, added: “Frank leaves QBE well positioned for further success in the global non-life insurance and reinsurance market places. We remain grateful for the mentoring he has provided to QBE’s future leaders.”

AWARD WINNERS The winners of the 2012 Australian Insurance Industry Awards have been announced, after an awards night took place in front of a record audience of 840 insurance industry leaders in Sydney.

Small Broker of the Year was Simplex Insurance Solutions, Medium Broker was InterRisk, while Aon took out Large Broker of the Year

WAGES

BROKERS’ WAGES DWARFED BY INSURANCE COUNTERPARTS PayScale Australia has revealed the insurance industry’s wages – with brokers lagging behind some of their insurance counterparts – and suggested that you can only earn over $100,000 at one of the big companies.

PayScale Australia looked at the Commercial Insurance industry in Australia and provided the national median salary by job. It finds: JOB

MEDIAN SALARY/ COMMERCIAL INSURANCE

Account manager Insurance underwriter Insurance broker Senior underwriter Actuary

$55,000 $61,040 $67,000 $104,000 $107,500

It must be caveated that due to Australia’s vast range in wage differences – what you earn in Sydney’s CBD will greatly differ from that of a Northern Territory wage – the median wages that PayScale provides are unlikely to match any of the earners in Australia’s major cities.

While the median insurance broker wage is higher than account managers and underwriters, once more experience is gathered in the underwriting space much larger wages can be garnered than if you stay in insurance broking.

It seems the disparity of pay between men and women that is an issue across almost every industry also applies to the insurance industry.

PayScale Australia revealed that the median wage in Commercial Insurance for a male is $80,950, while females lag behind greatly at just $52,102.

SEPTEMBER 2012 | 7

NEWS / ROUND-UP

ATTRACTING

YOUNG STAFF Zurich’s Michelle Hay discusses how brokers can attract young people into insurance and why it is so important that they do

Insurance Business: How does an insurance broker go about attracting a young professional into the industry?

Michelle Hay: It’s important to consider the value that your organisation can bring to a young professional’s career and to ensure the job advertisement is positioned accordingly. As an example, younger professionals are attracted to Zurich as they often see it as a stepping stone towards an international career. Brokers should also consider what you would be able to provide in terms of development (both internally and externally) and what steps are involved to get there.

IB: Why is it so important that a broker ensures they have a good amount of young workers in the company?

MH: Zurich values diversity and believes that a blend of both seasoned and young professionals is ideal. This helps create a more stable environment where the more seasoned professionals, for example, share their experience by imparting their skills and knowledge.

Younger employees are essential as they are ‘generation next’. We need a strong talent pool so we can replace people who retire in coming years. Current recruitment strategies are a genuine opportunity to ensure the industry’s depth of talent into the future.

Michelle Hay

8 | SEPTEMBER 2012

IB: How does a broker sell working in insurance to a younger worker? Why would a young worker want to get involved in working in insurance?

MH: We have a critical product that people will always need. Insurance and the insurance industry puts people, businesses and communities back on their feet after suffering a loss. It is important to tailor talent attraction messages around this – highlighting that you can have a long career in the insurance industry, with a job that can make a difference. For an insurance broker, their role is especially critical in providing clients with peace of mind and helping them during the claims process – a period when relationships with insurers matter most.

IB: What does Zurich do to attract a younger workforce?

MH: We focus on the recruitment of both graduates and non-graduates who have the attitude and behaviours we are looking for. There are many channels in which we advertise and then we run an ‘assessment day’ where each candidate interacts in a group environment. This is imperative in uncovering team players. These assessment days also allow Zurich to share with candidates what it can offer employees – essentially both parties are being interviewed.

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ASIC CLOSES COMPANY

OVER PI INSURANCE FAILURE

LEVY REMOVED The Victorian government has made the landmark decision of replacing the state’s fire services levy with a property-based charge to fund Victoria’s fire services from 1 July 2013

THE FINANCIAL SERVICES LICENCE OF AN AUSTRALIAN FIRM has been cancelled, with its chief executive also being banned, after a failure to have adequate professional indemnity (PI) insurance in place.

ASIC found that Lion Advantage had breached a number of the financial, reporting and other obligations of a financial services licensee in contravention of the Corporations Act. ASIC also found that chief executive David Hickie had not complied with financial services laws.

Hickie has been banned from providing financial services for two years.

Specifically, ASIC took this action on the grounds that Lion Advantage repeatedly failed to: •• have adequate professional indemnity (PI) insurance in place

•• lodge audited financial reports on time for Lion Advantage and the schemes it operated •• hold membership of an ASIC-approved external dispute resolution (EDR) scheme in 2007 and for the period between 31 October 2011 and 7 March 2012 Lion Advantage provided financial product services to retail clients and acted as a responsible entity, operating four registered managed investment schemes which invested in real property.

“Companies have important obligations that are central to ensuring the transparency and accountability of the reporting process and must comply with their reporting requirements to ensure users of financial reports have the information available to help them make informed decisions,” said ASIC commissioner Greg Tanzer.

SEPTEMBER 2012 | 9

INTERVIEW / ADRIAN HUMPHREYS

PROVING ITS

LOCAL WORTH Dogged by the myth that it is a London organisation just dipping its toe into the Australian market, Lloyd’s of London’s local representative Adrian Humphreys is getting brokers to understand it is here for the long run

Insurance Business: Considering Lloyd’s does business in over 200 countries and territories worldwide, it seems an incredible stat to learn that the Australian market is the fourth largest source of revenue for Lloyd’s globally – why is this?

Lloyd’s is A-plus rated with record levels of capital and $3.4bn in trust in Australia. That speaks volumes.

Adrian Humphreys: We have been writing risks here since 1860. The Australian legal system is very similar to the UK which makes the transition of expertise easier. It is also culturally very similar so the way of conducting business is also very similar. For example, Australia is very much a broker-lead market which is very important for Lloyd’s because this is our distribution model.

We’ve also got a fantastic brand and a reputation that has been built over a long period of time.

AH: An example I use to explain how Lloyd’s works is to draw a comparison with the iPhone.

You buy an iPhone because of the ability to utilise applications that suit you, and for the iPhone itself, much like Lloyd’s is a fantastic, secure and trusted platform for businesses to operate in. The infrastructure that Lloyd’s provides allows multiple companies to co-exist together, offering a wide variety of flexible, market-focused products to their customers. In return, we expect those businesses to abide by our guidelines, our compliance framework, our capital standards and regulations.

IB: Will that broker focus be remaining moving forwards?

AH: Lloyd’s is a broker market and, as outlined in our recently launched Vision 2025, that will remain the case.

IB: How much does having that famous Lloyd’s brand behind your business help in operating in Australia? How much do you lean on that global standing?

AH: Lloyd’s is a trusted brand due to the level of security and our reputation for paying valid claims.

10 | SEPTEMBER 2012

IB: Can you expand on the notion that “Lloyd’s is not an insurance company, we are a market”?

IB: Lloyd’s has talked of a focus on claims processing and making sure it is done as speedily as possible – what has been your strategy to ensure this area has improved in Australia?

AH: Lloyd’s has paid all valid claims for the last 324 years. In Australia, many of our agencies now have local claims handling authority which speeds things up. If a decision does have to go to London,

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“Lloyd’s is a trusted brand due to the level of security and our reputation for paying valid claims”

SEPTEMBER 2012 | 11

INTERVIEW / ADRIAN HUMPHREYS

100 YEARS ON FROM A TITANIC CLAIM When you have been in business for 300 years, you have a history of large pay-outs, but few match Lloyd’s involvement in covering the RMS Titanic The tragic sinking of the Titanic is part of the story of Lloyd’s. It’s been 100 years since the ‘unsinkable’ RMS Titanic – dubbed the most luxurious ocean liner ever built – hit an iceberg on 14 April 1912 and sank in just two hours and 40 minutes, causing the ill-fated deaths of 1,514 passengers.

A human disaster that caused widespread shock and outrage, it is also a story that remains strongly linked to the history of the Lloyd’s market, where the ship was insured for £1m.

From Lloyd’s perspective, the Titanic will long be remembered as one of the market’s biggest losses alongside other major natural and man-made catastrophes such as the loss of HMS Lutine in 1799, the 1906 San Francisco Earthquake and more recently 9/11, Hurricane Katrina and last year’s Tohoku earthquake and tsunami.

At the time of the disaster, the market – and media – was in the early stages of using wireless telegraphy to communicate with ships at sea.

Lloyd’s was a significant contributor to this new technology and, with the help of inventor

we have identified some areas for improvement as part of the Claims Transformation Programme (CTP). Before CTP, claim files going to London would be paper-based, which was inefficient and took time if more than one person needed to assess the file. In short, those files are now electronic and can be shared simultaneously. Because Lloyd’s is a subscription market, another issue was the need for multiple syndicates to agree on claims, which was slowing down the decision making.

Now, on the majority of claims, the leader agrees a claim on behalf of the market. These two changes have resulted in a 44% reduction of the time taken to respond to claims transactions.

IB: Part of your role is dispelling some of the ‘myths’ that surround Lloyd’s operations in Australia such as it being more of a London firm than an Australian one.

Can you comment on this?

AH: We support 100 Australian underwriting agencies employing local people with local knowledge. These agencies write close to 50% of 12 | SEPTEMBER 2012

Guglielmo Marconi, set up signal stations from Cornwall to Canada allowing ships crossing the Atlantic to communicate with land.

The Lloyd’s story of the Titanic began on 9 January 1912 when broker Willis Faber & Co came into the Lloyd’s underwriting room to insure the Titanic and her sister ship, Olympic, on behalf of the owners White Star Line.

Considered a prestigious risk to insure, cover for the ship’s hull alone was £1m – around £95m in today’s money. Numerous Lloyd’s syndicates put their names down on the slip to cover amounts ranging from £10,000 to £75,000. Willis was able to negotiate a favourable premium for the ‘unsinkable’ vessel of a mere £7,500.

Despite the high level of claims that arose from the disaster – an estimated £50,000 for Lloyd’s underwriters – insurers paid out in full within 30 days of the tragedy.

Along with the hull – which was widely insured within the Lloyd’s market – Titanic, the ship built for millionaires, was a significant insurance loss from a marine cargo, specie and life insurance perspective.

our premium. People forget, but we have been writing Australian business since 1860, and have $3.4bn in trust here.

IB: An obvious local issue has been the number of various natural disasters.

How did those events affect Lloyd’s?

AH: We are in the business of paying claims and we specialise in insuring against catastrophes. It has surprised quite a few people in the industry that so many catastrophes have happened in the AsiaPacific region, but we model for these events and capitalise accordingly. We incurred claims of US$21bn in 2011, of which catastrophes accounted for US$1.95bn in Japan, US$2.2bn in Thailand, US$1.4bn in New Zealand, and US$300m for the floods here in Australia. Interestingly, if you look at the 10 largest claims in Lloyd’s history, nine are natural disasters (the only exception being 9/11) and have all happened in the last decade.

IB: Such catastrophes could remain common: is that a new challenge? Are

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you making sure that plans are in place to minimalise the impact on yourselves?

AH: We just need to make sure we are charging the right premium appropriate to the risks. Whatever the cause of these events, they seem to be happening more frequently in the Asia-Pacific region. People have to charge the correct amount for premiums. If the insurers don’t make money, eventually it will be impossible for them to pay claims, so it is in everyone’s interest that adequate prices are charged.

We won’t make money every year, but you have to make sure the insurance industry is robust and profitable at least over the mid to long term. One thing in everyone’s interest locally must be flood mitigation. I would really like to see more insurance companies working together with local and federal governments, and supporting brokers to try and minimise the risks that people face.

IB: How do you see Lloyd’s role in Australia changing in the future?

AH: As we grow and provide more capacity to the local market, I would like to see

“In Australia, many of our agencies now have local claims handling authority which speeds things up … and the electronic files can be shared” Lloyd’s more embedded as a local insurer, which I feel is happening. I would also like to see Lloyd’s increasing its share of the reinsurance market by continuing to provide solid underwriting expertise and secure capacity. In regard to agency business, I see them as continuing to provide bespoke products and high levels of service directly to brokers. One of the things we offer is assessing each risk on its own merits; I would never want to see Lloyd’s disappear behind a computer screen.

SEPTEMBER 2012 | 13

SPECIAL REPORT / TOP 10 BROKERAGES

14 | SEPTEMBER 2012

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Australia’s finest insurance brokerages at last have the rankings which reward their efforts, as Insurance Business launches its Top 10 Brokerages and names Australia’s finest insurance intermediaries The hard work of insurance brokerages will no longer go

unrewarded. The inaugural Insurance Business Top 10 Brokerages ranking has, for the first time ever, offered an independent ranking of the very finest firms in the brokerage space. It is a landmark moment for insurance broking in Australia and sets the marker of achievement for every brokerage to aspire towards.

So often it feels like the tireless and professional work of the best insurance brokerages is ignored. Public trust reports place insurance brokers lower down on the list than they deserve and while we are unable to reward every worthy broker (as that is effectively all of the broker community in Australia) we have made the step to reward the Top 10.

Those who make the ranking will be able to carry the Insurance Business stamp of achievement everywhere they go and be able to further reassure potential clients that they are dealing with a brokerage who has excelled in the marketplace.

As ever, we welcome your feedback on this ranking

So often it feels like the tireless and professional work of the best insurance brokerages is ignored and our approach, but by using an objective system of measurement, we hope there can be few arguments over the firms which have made the list.

There is a wide range of brokerages in the Top 10, from all around the country, of difference sizes and with an eclectic mix of focuses. It was also great to see that many of the firms had vast charitable interests and were so willing to give back. That charitable ethos was almost unified across all brokerages and we should be incredibly proud that the insurance broking industry does so much for worthy causes.

SEPTEMBER 2012 | 15

ERAGE 20 1 OK

2

BR

SPECIAL REPORT / TOP 10 BROKERAGES

“Since 2008, the group has allocated a percentage of profit to be invested into community and charitable pursuits as part of our ‘triple bottom line initiative’ ” MGA Insurance Brokers

COMPANY GROWTH

1

MGA Insurance Brokers

2

Mega Capital

3

Roderick Insurance Brokers

4

Unity Insurance Brokers

5

Insurance Advisernet Australia

6

Brookvale Insurance Brokers

7

Lea Insurance Brokers

8

Scott Winton Insurance Brokers

9

LTM Risk Partners

10

BJS Insurance Group

TOTAL REVENUE

BROKERAGE

BROKERAGE

1

LTM Risk Partners

1

Insurance Advisernet Australia

2

Roderick Insurance Brokers

2

MGA Insurance Brokers

3

Unity Insurance Brokers

3

Unity Insurance Brokers

CLIENT RETENTION

POLICIES WRITTEN

BROKERAGE

16 | SEPTEMBER 2012

BROKERAGE

1

Mega Capital

1

MGA Insurance Brokers

2

LTM Risk Partners

2

Insurance Advisernet Australia

3

MGA Insurance Brokers

3

Roderick Insurance Brokers

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METHODOLOGY The Insurance Business ranking system is an entirely objective means of ranking the best performing insurance brokerages in the country. Due to the advanced and detailed information needed, each brokerage had to supply their own details to Insurance Business to be eligible. When we talk of performance though, this is not just about the biggest firm with the most resources. We aimed to reward the smaller firms punching above their weight. In total, there were eight measurements, covering: • total revenue • policies written • revenue per broker • policies per broker • new clients per broker • new revenue per broker • company growth • client retention Every brokerage who entered was then ranked in each of these measurements and the sum of all of their rankings were added together.

The brokerages were then placed in order of who had the lowest overall score (think of it as a golf score,

REVENUE PER BROKER

where having higher rankings in each section means you have a lower total score).

By inviting only locally-headquartered brokerages to enter (excluding the giant global brokerages) and ensuring that the majority of our measurements rewarded business per broker rather than just critical mass, the very best brokerages were rewarded rather than just those producing a critical mass of business (one of the top five has less than 10 brokers working for them).

“At IAA, we passionately believe in making a real difference and sharing our prosperity to leave a social legacy. Alone we contribute over $200,000 each year to community and charity groups” Insurance Advisernet Australia

NEW CLIENTS PER BROKER

BROKERAGE

BROKERAGE

1

MGA Insurance Brokers

1

Mega Capital

2

Unity Insurance Brokers

2

MGA Insurance Brokers

3

Insurance Advisernet Australia

3

Scott Winton Insurance Brokers

POLICIES PER BROKER

NEW REVENUE PER BROKER

BROKERAGE

BROKERAGE

1

Roderick Insurance Brokers

1

MGA Insurance Brokers

2

MGA Insurance Brokers

2

Mega Capital

3

Unity Insurance Brokers

3

Unity Insurance Brokers

SEPTEMBER 2012 | 17

SPECIAL REPORT / TOP 10 BROKERAGES

10

09

BJS Insurance Group BILL DE VOS, MANAGING DIRECTOR

LTM Risk Partners ROD TANCRED, EXECUTIVE DIRECTOR

What is unique about working at your brokerage?

What makes a good insurance brokerage?

As a result of our marked growth, we provide opportunities for advancement within our organisation. In any event, the only proper way to answer this question is to interview our staff, which I always welcome. We have an open door policy at BJS – if there is an issue or idea which is important to a staff member, we listen.

Many things. First and foremost, though, you must have the right team around you to provide quality service and advice to your clients.

Bill de Vos

What challenges has your brokerage successfully navigated in the past 12 months?

There are a number of challenges, but here a few: continuing to build our national profile, which has created HR challenges in Queensland and South Australia, as well as a greenfield start in WA; structuring a very successful national Professional Indemnity Insurance facility for Architects, despite fierce competition; and a significant IT upgrade on a national platform.

What would you change in the insurance industry to enable insurance brokerages to flourish further?

My answer in relation to this is frank, if not brutal. On a daily basis, insurers seek the opportunity to underwrite more business, however, their distribution channels just don’t always work.

Insurers rely on distribution channels such as Sunrise Exchange, but BJS are the insurance broker to a number of significant insurance buyers, whose risk profiles demand that we must negotiate on a face-toface basis with insurers in order to convince them to support our underwriting submissions.

Insurers provide access to BDMs who are not qualified to understand the risk profiles we present and, mostly, have no authority to provide solutions. I have said earlier that insurance broking is based on relationships, yet insurers don’t seem to empower their staff to engage in such relationships.

What will change in the insurance industry in the coming year?

From our point of view, the single major change will be the proposed float of the Steadfast Group. From an insurance broking perspective, this float will potentially lead to a period of significant ownership change of insurance brokers, as well as amalgamations, mergers and acquisitions.

18 | SEPTEMBER 2012

Rod Tancred

Why do you feel your brokerage was able to make the list? What sets your firm apart from rivals?

We were formed in 1972 as an arm of an accounting & financial planning group. Very strong corporate and financial management of our company has allowed us to maintain strong and healthy growth. We also have clear, ongoing strategies for the growth of our business, which has often led to us being referred to by industry peers as being “very innovative and progressive.”

What challenges has your brokerage successfully navigated in the past 12 months?

Natural disasters in the local market has put significant pressures on insurers and tested their capabilities not only to deal with losses and the claims process in a timely manner, but understand the significant negative perceptions that are created from not accepting liability for large flood losses. Developing our claims staff to deal with these market pressures has been a challenging but rewarding process. The reluctance of insurers to be open minded in their underwriting philosophy has meant that we have had to turn to newer, unconventional insurance programs to fulfil client needs.

How do you compete with some of the large global brokers who have a presence in Australia?

We manage very well against global brokers. One of our latest projects is in direct competition to one and we have made outstanding progress. Good medium-sized brokers offer real value to those clients who usually deal with internationals. Large clients have a preference to be a large fish in a small pond rather than the reverse. They see real value in being important in a medium-size broker than possibly being lost in an international.

What targets have you set for the next 12 months?

Client service to support retention, which should always remain paramount; developing our technology to assist in new markets; and looking for the opportunities that will be created in an ever-changing industry.

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07

Scott Winton Insurance Brokers RON TATARKA, MANAGING DIRECTOR

Lea Insurance Brokers DENNIS KEATING, CEO

What makes a good insurance brokerage?

What makes a good insurance brokerage?

An ability to listen to and understand their clients’ needs, as well as seeking expertise from professionals in the industry in order to provide the best possible outcome while not compromising the level of cover over price.

One that can develop successful relationships with clients and underwriters.

Why do you feel your brokerage was able to make the list? What sets your firm apart from rivals?

Ron Tatarka

Established in 1992, Scott Winton has earned a reputation for integrity, professionalism and responsiveness.

Backed by Steadfast, Scott Winton prides itself on its service, performance and genuine commitment to its valued clients.

What is the primary value of using an insurance broker compared with going direct?

When not dealing with one specific company, there is the ability to obtain a variety of quotations together with the level of experience and knowledge gained through having over 20 years of experience, which is superior to direct companies.

How do you go about competing with some of the large global brokers who have a presence in Australia?

Whilst maintaining the independence and personal touch of a local broker, Scott Winton has a large pool of industry specialists to draw upon, ensuring the highest quality products and services, and providing optimum value. Our business structure is designed to put the client’s needs first. If specialist expertise is required, our clients are referred to our network of independent consultants, surveyors, valuers and risk management experts. Our focus is on fully protecting clients and making sure the cover provided is the widest possible for the premiums charged.

What will change in the insurance industry in the coming year?

The insurance industry is changing in a number of ways: the industry is contracting by virtue of a range of mergers and takeovers; the way we do business is changing through the application of digital media; and the demands and expectations of the clients are increasing.

Why do you feel your brokerage was able to make the list? What sets your firm apart from rivals?

I believe we strive to exceed our clients' expectations and have developed a reputation we are proud of.

What is unique about working at your brokerage?

Our people are clear about our aims and objectives, and opportunity for advancement is always available.

Dennis Keating

What challenges has your brokerage successfully navigated in the past 12 months?

Achieving the right staffing levels when the loss of large clients to the GFC impacted us heavily.

What would you change in the insurance industry to enable insurance brokerages to flourish further?

The government has tried to make retail insurance more transparent: we offer advice across a range of policies and companies. I feel that retail products should not be marketed by direct companies and brokers adding value with advice and claims assistance is essential.

What is the primary value of using an insurance broker compared with going direct?

I believe brokerages have more experience in their staff than direct insurers. Using the internet or phone marketing adds no value or advice to clients.

How do you compete with some of the large global brokers who have a presence in Australia?

Larger brokers can often make our job difficult, as they have special deals with underwriters. Overall, though, we offer a better quality of service across our whole client base and, with support from underwriters, we are able to compete in our chosen markets.

What targets have you set for the next 12 months?

We will explore the possibility of small acquisitions and aim to grow the business organically by 10%. Many of our staff are involved in study programs and we expect to be in a good position to promote from within.

SEPTEMBER 2012 | 19

SPECIAL REPORT / TOP 10 BROKERAGES

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Brookvale Insurance Brokers CRAIG OLOFINSKY, GENERAL MANAGER

What’s your reaction to making Insurance Business’ Top 10 Brokerages ranking?

We are placed in the middle of the client spectrum with a mix of large and small clients. We place a strong emphasis on client retention and value receiving referrals from existing business. Across our office there is a willingness to always go that extra yard to assist clients. We have a successful business model that has gone from strength to strength over the past 30 years.

ADRIAN KITCHIN, MANAGING DIRECTOR

What’s your reaction to making it into the Top 10?

It is excellent to know that we are in the top 10 brokerages. Naturally, we’re competitive, although we see rankings as a by-product of delivering on our promise of excellent insurance advice.

It’s nice to be recognised amongst our peers. We don’t normally participate in or seek industry recognition.

Why do you feel your brokerage was able to make the list? What sets your firm apart from rivals?

Insurance Advisernet

Craig Olofinsky

What makes a good insurance brokerage?

Having a culture amongst advisory staff of offering high quality and relevant advice, rather than simply a cheap price.

Why do you feel your brokerage was able to make the list? What sets your firm apart from rivals?

Adrian Kitchin

Sixteen years of continuous improvement and a focus on recruiting the best talent available in the market.

What is unique about working at your brokerage?

We have a great team of people and a geographical location that assists in attracting and retaining staff who appreciate being able to work near home. We encourage all staff to achieve their goals – as they grow, we grow.

What challenges has your brokerage successfully navigated in the past 12 months?

The median age of our team in recent times was close to 55, and succession planning was an issue. This has now changed. We have a youthful yet experienced team that is out looking for opportunities and will take the business forward.

What is the primary value of using an insurance broker compared with going direct?

In everything we do, we act on behalf of our client, not the insurer. In discussion with the client, we can provide advice and help a client understand the risks they face. A good broker has access to many different markets and policies and is able to create an insurance program that meets the clients’ needs, whereas the direct markets sells only what they have within their suite of products. In the event of making a claim, we are here to help, but the direct clients are on their own.

What targets have you set for the next 12 months?

We are looking to attract more good quality authorised representatives into our business. We will continue to work smarter and celebrate our 30th year in style.

20 | SEPTEMBER 2012

What is unique about working at your brokerage?

An excellent embracing culture overlaid by an entrepreneurial spirit as each IAA practice is independently owned whilst being a part of the much larger Advisernet organisation.

What would you change in the insurance industry to enable insurance brokerages to flourish further?

The industry peak bodies need to understand the value of the broker compared to direct insurers. And they need to focus on ensuring the broader community understands the benefits of dealing with a broker. Then it’s up to individual brokerages to position themselves within an educated environment that isn’t so focused on price.

How do you compete with some of the large global brokers who have a presence in Australia?

Our brokers operate on a more personalised basis with clients, and we target clients who value advice. Our footprint and technical resources are second to none, and we’re more flexible, too.

What targets have you set for the next 12 months?

IAA has a financial growth target, but it’s not just about the financials. IAA is aiming to become more valued by its clients. We also have a target to find the highest quality advisors to join our team. And finally, to make a difference in the communities in which IAA operates.

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03

Unity Insurance Brokers NOEL WINZER AND WAYNE HOLT, DIRECTORS

Roderick Insurance Brokers KEITH RODERICK, DIRECTOR

What sets your firm apart from rivals?

What makes a good insurance brokerage?

Our business model creates a flat structure, where the principals are responsible for their own client portfolios. As a result, our clients receive ‘hands-on’ service from the business owners. For example, the person handling the claim is most likely the person who made the sale and arranged the cover.

Good staff and always looking after clients.

What is unique about working at your brokerage?

Noel Winzer

What challenges has your brokerage successfully navigated in the past 12 months?

What challenges have you had in the past 12 months?

The move to a hosted solution using the internet. We can now work on our ‘desktop’ from anywhere we can access the internet, even with mobile phones and iPads.

We have fibre-optic cable running past our front door which guarantees the internet speeds required for such a system, and our IT consultants provided a smooth transition during the switch over.

We take care of our staff and foster the 'family' environment. We also make sure we have fun.

Renovating our office – and experienced growth despite the very challenging market conditions.

Keith Roderick

What would you change in the insurance industry to enable insurance brokerages to flourish further?

A new licensing system where ‘everyone’ is licensed, as well as the banning of advertising on price.

SEPTEMBER 2012 | 21

SPECIAL REPORT / TOP 10 BROKERAGES

02

Mega Capital MICHAEL GOTTLIEB, DIRECTOR

What’s your initial reaction to making Insurance Business’ Top 10 Brokerages ranking?

We are incredibly proud to rank in the top 10. It is a validation of our business model which is built around two core principles: unyielding advocacy for our clients; and constant innovation to improve the client’s experience when sourcing and buying insurance. Further, it is a testament to our outstanding team who are absolutely committed to our client fixation philosophy.

What makes a good insurance brokerage?

For us, it’s all about the client. That’s why we are here!

Brokers should provide high levels of expertise in advising and sourcing insurance solutions, and should be advocates for their clients at claim time. This is the key focus of our advisory business, Mega Capital. Too often the ‘after-sales service’ in our industry leaves a negative impression with clients. Intermediaries should strive to be innovative around their process and improve the transparency of insurance quotations. This will reduce the administrative burden and increase the confidence clients have in our industry. This is the proposition behind our younger business – BizCover, which is the first online business insurance marketplace in Australia, where clients can instantly compare, select and buy a policy in a matter of minutes. BizCover offers professional indemnity, public liability and business insurance from many of Australia’s leading insurers.

What is unique about working at your brokerage?

We have a culture of excellence, innovation and an obsession to WIN. Therefore, we attract extremely driven individuals who – even if they are the best – want to continue to improve!

“As a boutique, you need to be the best and therefore offer a much higher level of expertise, client service and advocacy for your clients” 22 | SEPTEMBER 2012

What would you like to see change in the insurance industry to enable insurance brokerages to flourish further?

We believe that there is an opportunity to evolve the industry to make it more transparent, hassle-free, and convenient, in a world that is full of time-consuming paperwork and lengthy face-to-face discussions via traditional broker channels.

What is the primary value that using an insurance broker provides compared with going direct?

Client advocacy and advice that is not aligned with the insurer.

How do you go about competing with some of the large global brokers who have a presence in Australia?

Like most industries, the large global players are often the average in the industry. As a boutique, you need to be the best and therefore offer a much higher level of expertise, client service and advocacy for your clients.

Otherwise, your clients may as well use the global brands. The non-international general practitioner will continue to be marginalised in our industry. You need a value proposition!

What do you think will change in the insurance industry in the coming year?

It’s a very mature industry. It’s unlikely there will be any major changes in the coming year.

What targets have you set for the next 12 months?

For Mega Capital, to be the knowledge leader in our chosen segments. For BizCover, to continue to innovate the process around procuring insurance for the SME segment.

INSURANCEBUSINESSONLINE.COM.AU

SEPTEMBER 2012 | 23

SPECIAL REPORT / TOP 10 BROKERAGES

01

MGA Insurance Brokers PAUL GEORGE, GENERAL MANAGER

What makes a good insurance brokerage?

The common thread is a balance of quality personnel, sound relationships with stakeholders, and excellent technology infrastructure, all underpinned by a strong compliance and training culture. The net result of this approach is client service excellence.

Why do you feel your brokerage was able to make the list? What sets your firm apart from rivals?

Our founding directors set a new course for growth some 15 years ago which involved plans for acquisition growth outside of our home state of South Australia. As part of that plan, we had a careful look at our support infrastructure and have been building on this ever since. During this time, there were a number of structural things that took place fairly naturally. This

“Maintaining a ‘flat’ structure promotes better relationships and communication across the group”

included the formation of our Central Processing Unit and MGA’s Smartbroker system. Around five years ago, our Operations Division was formalised which supports these systems and provides services to portfolio managers and brokers, along with their broker assistants and support staff. These people are at the absolute heart of our business.

What is unique about working at your brokerage?

Our structure is not a corporate one. We have always been mindful to maintain a ‘flat’ structure which promotes better relationships and communication across the group. Our operations area includes our compliance/training, IT, accounts, systems and marketing.

These individual managers along with their staff have one very important customer – our brokers and their staff. We are a large, private company, and I think the successful family business approach reflects that. The MGA Group has a distinctive brand which continues to get stronger in the marketplace. We are all proud of that and the way in which the individuals behind the brand support their relative communities.

What would you like to see change in the insurance industry to enable insurance brokerages to flourish further?

Operationally, it would be good to see some broader comparative quotation solutions. Interfacing electronically is a large task, especially where rates are getting more technical and we believe that insurers who come off EDI platforms do so at their peril; this said, we are very keen to work with insurers that work with us for the right solutions – this is an industry issue, not necessarily an individual one. There is also the ongoing question of the public perception of insurance brokers and how we can better get the message out as to what we do. Through our own advertising, we have always found the best method to communicate to customers is through another customer’s testimonials. Most brokers promote the industry well and we know that our clients place significant value on the right advice.

Trevor Treharne, editor of ge Insurance Business, with Paul Geor

24 | SEPTEMBER 2012

How do you go about competing with some of the large global brokers who have a presence in Australia?

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Members of the MGA Board

MGA is now becoming known as a national network and we are seeing more opportunities to service national accounts across borders and be able to compete on all stages for these national customers, including associations and industry bodies. We are not predominantly operating in the large corporate space; however, a number of our brokers do look after some individual large accounts. We certainly don’t shy away from these types of risks, and through our association with the Austbroker Network, we can draw on a number of specialist brokerages for assistance where we don’t have some expertise or market access – for example, mining risks, specialist PI, trade credit to name a few.

What targets have you set for the next 12 months?

We are continually looking for new opportunities in the marketplace for either partial or full acquisition and

hope to achieve the milestone for our 25th branch prior to the end of this calendar year. We have a number of new system developments which are planned to be completed by and demonstrated at our Broker Assistants Conference in mid-November.

We have taken measures to increase and freshen up our advertising (both in television and radio) in targeted regional areas, and also in metropolitan areas, through specific publications, and in select industry sectors. Distribution in the retail and small business space needs improvement and we have a number of strategies in mind to address this – this segment is changing fast and we plan to be well ahead of these changes which are starting to present themselves now.

This year, our results have delivered growth of 10.5%.

Over the past decade, we have experienced such overbudget results year-after-year and, all things being equal, will continue to do so.

SEPTEMBER 2012 | 25

FEATURE / UNDERWRITING AGENCIES

DOES THE

ALTERNATIVE

?

K C O R

While big insurers have d ominated the broker spac e what is the case for usin g an underwriting agency for years, inst allow the agencies the ch ance to pitch their case to ead? We the brokers 26 | SEPTEMBER 2012

INSURANCEBUSINESSONLINE.COM.AU

T

The broad and diverse insurance industry is able to house companies of many different ilks and sizes across many disciplines. However, as with the majority of industries, the large and powerful will often get to state its case first and loudest.

The old falsehood that dogs the insurance industry is the consumer scepticism of getting the pay-out they deserve should a claim need to be made. This again might seem to play into the hands of the bigger players, with reputations they cannot afford to tarnish. There certainly stands a greater chance of that being the case in direct insurance, but when a specialist broker – working on behalf of the client – gets involved it should enable those small specialist players some greater air-time.

This is where underwriting agencies and their familiar, niche and specialist focus can come into view. With the technical expertise needed by brokers to handle some unique policies, having that type of relationship with an underwriting agency could be the difference in securing the most appropriate cover.

So what is the case for using an underwriting agency as a broker?

“Brokers get direct and immediate contact with the person who is a specialist in their field and who understands the challenges facing the broker and who can then negotiate and make the decision to give the broker’s client a superior outcome, thus also enhancing the client’s image of their broker,” says William Legge, general manager of the Underwriting Agencies Council (UAC).

Rhys Mills, managing director of Solution Underwriting Agency, says that because underwriting agencies are inherently smaller businesses compared to insurers, they are able to adapt to changing market demands and conditions quickly.

“This provides us with the opportunity to

provide up-to-date solutions to brokers when market conditions change,” says Mills. “An excellent example of this was the Tax Agents and BAS Agents legislation which was introduced in 2011. Speaking from our experience at Solution Underwriting, we were able to recognise the need and the requirements of the legislation, adapt our rates, minimum premiums and coverage offering, educate the brokers on the changes and also adapt our quoting system on our website to allow brokers to transact this business, all within a day or two. This ability to adapt is extremely important

“Brokers get direct and immediate contact with the person who are specialists in their field and who understands the challenges facing the broker” William Legge for underwriting agencies and is certainly something that we pride ourselves on.”

Mills says Solution Underwriting has built a business around providing excellent service and expertise to brokers. “Generally, underwriting agencies offer a smaller number of classes of insurance business when compared to insurers, so we must offer expertise and service over and above that of insurers wherever possible,” he says.

“Brokers need and deserve quick and efficient SEPTEMBER 2012 | 27

FEATURE / UNDERWRITING AGENCIES

ARE BROKERS AWARE OF AN UNDERWRITING AGENCY’S BENEFITS? WILLIAM LEGGE, GENERAL MANAGER, THE UNDERWRITING AGENCIES COUNCIL

William Legge

“For quite some time the broking fraternity has been aware of the benefits of using the particular skill sets of the underwriting agency market to achieve beneficial outcomes for their clients. This awareness is having an immediate effect which is shown by the increased percentage of the Australian General Insurance premium pool being written by the underwriting agency market and also the increasing number of individual brokers who now enjoy dealing with our members on a regular basis.”

PAUL O’LEARY, UNDERWRITING DIRECTOR, SRS UNDERWRITING AGENCY

“I suspect some are and some are yet to experience it.

What I do know is that when a broker has a serious underwriting problem – and I don’t mean a capacity shortfall or they can’t get a cheap enough rate – and they come to us and we solve it for them, we then have a very appreciative broker who is converted.”

RHYS MILLS, MANAGING DIRECTOR, SOLUTION UNDERWRITING AGENCY

BRAD FRENCH, MANAGING DIRECTOR, SLE WORLDWIDE AUSTRALIA

“Most brokers are aware of the benefits of dealing with underwriting agencies. As an intermediary ourselves, we understand the importance of service and the demands that are placed on brokers, and we

“I think that most are. There are still some who have the wrong impression of what today’s MGUs are. I also think there are some who have incorrect views on Lloyd’s IT security and service.”

“In specialist areas, managing general underwriters (MGU) offer more specific knowledge on their products than say a large insurer who may not specialise in that particular field” Brad French replies to enquiries simply due to the way in which the business world operates today. A client may be tendering for, or have won, a project and needs to place insurance that same day; brokers know that in dealing with the decision makers at an underwriting agency that they’ll be able to place a policy and have documents issued to a client as quickly as possible,” says Mills.

Paul O’Leary, underwriting director at SRS Underwriting Agency, agrees that service and access to specialist underwriting expertise is the main area where underwriting agencies generally have an advantage over the big insurers in the local market. “The response times from an agency are far superior to those that will generally be available in the market,” claims O’Leary. “An underwriting agency will have targeted or preferred business and, along with that, will have 28 | SEPTEMBER 2012

react to their needs accordingly. We therefore concentrate heavily on ensuring our brokers are provided with the very best service.”

specific underwriting expertise to that business.

For a broker, it is far easier to access that expertise because an agency will promote it heavily.

“But to access that same expertise at one of the big insurers, a broker will have to pass through numerous channels in order to find someone who can help them find someone to help them. It only takes one link in that chain to say ‘no’ and the broker will never reach the right person. On the other hand, the underwriting staff at an agency are all heavily motivated as they feel – and are – integral to the business. This is what makes it easier for agencies to achieve these two differentiators,” says O’Leary.

Brad French, managing director of SLE Worldwide Australia treads a similar path: “In specialist areas, managing general underwriters (MGU) offer more specific knowledge on their products than, say, a large insurer who may not specialise in that particular field. MGUs are often able to turn around decisions quicker on harder-to-place or specialist areas.” So, with many brokers still using the big insurers for their policies, what does the underwriting community need to do to further champion its advantages with brokers? How does it lift that awareness?

“I think the MGU space is being served well by the UAC and also by the larger MGU groups, like ours, educating brokers,” continues French.

Legge says UAC members compete in a market

FEATURE / UNDERWRITING AGENCIES

UNDERWRITERS MOVING INTO INSURANCE BROKING There is a general shortage of qualified candidates across the insurance market, resulting in many underwriters moving into broking, according to the latest Hays Quarterly Report.

The report also found senior level insurance workers in personal and commercial motor claims and workers’ compensation claims are in high demand.

“Underwriters in niche areas are in high demand, with accident and health, liability and professional indemnity classes of underwriting very short staffed. Candidates with 10 or more years’ experience are in most demand,” says Jane McNeill, regional director of Hays Insurance.

“In most cases commercial underwriters will be considered and offered good training in order to make the move to broking.”

The shortage of domestic candidates means the majority of today’s available candidates with good skill sets have recently relocated from New Zealand, drawn to Australia for the lifestyle, job stability and more attractive remuneration.

In addition, some larger insurers are recruiting inexperienced candidates and training them to ensure that skill shortages will not occur as frequently in the future as in the past several years. This is occurring in both workers’ compensation and general insurance.

“The response times from an agency are far superior… at a big insurer, a broker will have to pass through numerous channels to find someone who can help find someone to help” Paul O’Leary with insurance companies who have substantial budgets to assist them in achieving their business goals. “So, we look at continual and focused exposure to our major market, being insurance brokers, by way of participating in on-the-ground trade expos run by us, as well as having a strong presence at the conventions run by the various broker cluster groups,” says Legge. “These are, of course, alongside the individual visitation programs conducted by our members to their broker markets around Australia.

“The Underwriting Agencies Council, in partnership with Lloyd’s, is rapidly raising the profile of our members by a continuous annual cycle of underwriting expositions around the capital cities and selected regional cities which are aimed solely at the insurance broker market. We are currently seeing an average of 300–400 brokers coming through these expos so, with up to six underwriting expos a year, this results in our members being exposed to some 2,000 brokers annually which is a major part of the broking 30 | SEPTEMBER 2012

market,” he says.

Mills agrees that Legge’s UAC and its expos across Australia each year provide an excellent forum for brokers to meet with underwriters that they may already deal with, and also with those that they may not have been aware of.

“Of course that responsibility also falls on the individual agencies themselves and we certainly spend as much time as possible visiting brokers in order to keep them as up to date as possible on what we’re doing and how we can assist them,” says Mills. “We also provide NIBA-approved training to brokers on our classes of business so that they can feel more comfortable in speaking to their clients about their insurance needs and requirements.”

O’Leary suggests that underwriting agencies must continue to hire staff that are leaders in their field both in claims and underwriting. “We must engage and challenge our brokers with innovative covers and underwriting solutions that match their client needs,” he says.

“There are various methods we use to raise awareness of this. but the best by far is face-to-face communication. The UAC NIBA Expos are part of this but we find we have far greater success when we get out of our comfort zone and visit brokers in their offices, particularly in the areas of Australia where we don’t have an office. Brokers are truly appreciative of the effort you take because they understand it is far more difficult for an agency to do this,” says O’Leary.

So what does the underwriting agency crystal ball display? What will the future hold for underwriting agencies and dealing with brokers?

INSURANCEBUSINESSONLINE.COM.AU

SEPTEMBER 2012 | 31

FEATURE / UNDERWRITING AGENCIES

DIRECT LIFE INSURANCE

“The future is bright,” says French. “As the larger insurance companies grow and look at more ‘vanilla’ areas of insurance, it leaves space for specialist MGUs to operate and provide risk solutions to brokers and their clients.”

Legge feels there is a reasonable expectation that this sector of the insurance underwriting market will continue to increase its share of the Australian premium pool. “We calculate that this sector currently writes around 9% of the total premium pool in Australia. If the statutory classes of business are excluded from this premium pool, the percentage written is naturally much higher,” says Legge.

“Our member companies have the unique skill set and expertise within their selected product lines to offer immediate and professional responses to challenges facing the insurance broking market; this aptitude by itself lends credence to the concept of an increase in the market share being written by our members.”

Legge says that an often-overlooked benefit of using the underwriting agencies market is that it can offer to insurers and other capital providers an opportunity to gain market share in the open market for new products in competition with other general insurers without the need for a significant infrastructure investment. In these days of cost containment strategies, this is an advantage that really bears consideration, he adds.

32 | SEPTEMBER 2012

Insurers are removing some of the barriers for being approved for life insurance cover in the hope that it will aid Australia’s underinsurance problem.

According to financial research and ratings company CANSTAR, a change in the market now means insurers are looking to refer potential customers to underwriters rather than knock back applications on the grounds of occupations or pre-existing conditions.

“When direct life insurance first appeared in the market it was pretty much a black and white product. If you ticked all the boxes you got cover, but if you put a cross in just one, you were excluded,” says CANSTAR research manager Chris Groth.

However, blanket exclusions have given way to a more realistic approach where it’s still quick and easy for most of us to get cover but also caters for those in different circumstances.

“For example, there are many more people working in the mining industry these days but many of those are white collar workers who never see a mine site. They would typically obtain direct life insurance easily,” says Groth.

“The future is a promising one for underwriting agencies,” says Mills. “We continue to develop new and exciting insurance products which allow brokers to grow their businesses and provide even better cover for their clients.”

“I am very excited about our future in the Australian insurance market,” says O’Leary. “The market is an ever-evolving one and in an era where more and more business is being transacted online the future might be considered by some as grim.

“There is no doubt there are challenges to be met; however, at the end of the day we specialise in negotiated contracts and that is exactly what brokers deal in, because if they are not negotiating insurance contracts for their clients, what value are they adding? The future is excellent so long as we keep differentiating ourselves and don’t lose sight of what is important to our brokers. We have survived soft and hard insurance cycles. Our capital providers clearly see a need for our expertise and we continue to build new broker relationships, and while this continues we will continue to defy those that seek to run us down,” adds O’Leary.

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SEPTEMBER 2012 | 33

FEATURE / MOTOR & TRANSPORT

L E C C A 34 | SEPTEMBER 2012

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INSURANCEBUSINESSONLINE.COM.AU

E T A R E PROFITS LYOUR Commercial motor insurance might be a complex piece of policy at times, but for the brokers who comprehend its nuances, it could be a key driver of business in uncertain times

I

Insurance is, of course, about managing risk and for commercial enterprises, vehicle insurance is not only a massive financial outlay, it is vital to accident prevention and contributing to the overall success of a business.

The commercial motor insurance industry has historically been seen as highly complex – and often in a negative way. The purchase of insurance may be seen as a bill or transaction at best, or a resented grudge purchase at worst. It can be difficult for business owners to be sure their needs are being correctly assessed, that they are properly covered for everything from public liability to technology breakdown, that loss control is being well managed, and that their insurance coverage will help in the prevention of accidents, reduce the potential for down time and contribute to long-term business success.

These complexities can significantly influence the relationship between clients and their brokers, potentially impacting a business owner’s sense of control and trust. It’s often simply perceived that

premiums are kept as high as possible with payouts kept to a minimum.

A recent report by Vero on Australia’s commercial insurance market states that “views on brokers and insurance in general are undergoing a significant shift, with those aged under 50 (around half of respondents) being significantly less trusting of the industry, more price sensitive, and seeing brokers as less differentiated”.

Those who do not use an insurance broker, according to Vero’s SME Insurance Index 2012, “struggle to see how they add value and frequently see them as little more than ‘middlemen’ as opposed to trusted advisors. They also tend to believe they would pay more through a broker, with around a third thinking a broker would increase the cost of their insurance by 10% or more.”

So just how well are brokers faring in the current commercial motor insurance market?

What are brokers offering and where are the opportunities for them to be successful to be found

SEPTEMBER 2012 | 35

FEATURE / MOTOR & TRANSPORT

MOTOR INSURANCE AT A GLANCE VERO

“Demonstrating value is something many clients are looking for from their commercial insurance, and was a theme that came up frequently in the qualitative research discussions.”

QBE

“Our research shows that the motor/ commercial transport insurance market is growing annually and we believe that growth will continue in the foreseeable future.”

Those who use brokers view their service positively, their costs as lower and see them as trustworthy. Those who don’t tend to view brokers as expensive middlemen who fail to add value to their business.

Maintaining quality, sustained relationships during periods of market turbulence is essential.

“The broker must have a market dedicated to supporting his cause – providing good reliable service.

Otherwise he faces the risk of becoming irrelevant for the client’s other insurance needs” Peter Morgan

36 | SEPTEMBER 2012

in an industry that will be facing significant shifts in coming years?

John Iles, director of specialist underwriting agencies at SUA, says its current focus is on aggregate deductible solutions to the long haul heavy haulage operators. “SUA deals predominantly with brokers that are experts in this class of insurance, and it is the dominant class that they provide their clients. However, they are very aware of other risks their transport operator clients face outside just ‘truck insurance’, such as marine cargo, general liability, property and statutory liability risks.”

With brokers becoming more aware of benefits in the aggregate deductible space, Iles says it is see-

ing “a general hardening of rates in the conventional space which, for larger operators, makes the aggregate deductible offering much more attractive and cost effective. Although most of this is claims driven, there is also pressure to increase rates systematically.”

Zurich’s fleet, commercial SME and Taxi (transguard) commercial insurance options are faring well in the current market, according to a Zurich spokesperson: “It’s a very competitive market. All major players are seemingly attempting to hold or grow market share.

“The underwriters with the best value proposition are having the most success.”

Zurich’s brokers “are going very well in regards to commercial motor. Zurich’s Z.stream has been a great enabler in driving the commercial motor product offering to the market. It makes the transaction simple and cost effective.

“It’s a very large market, with most customers having motor vehicles to insure. This gives them a good lead into other insurance needed by the customer. Zurich has market-leading products, experienced staff and a suite of value-added products that can help our customers manage their risk,” says Zurich.

While most customers have motor vehicles to insure within such a large motor vehicle insurance arena, few brokers offer specialist motor/commercial transport insurance in the current market, according to Peter Morgan, CEO of Enthusiast Underwriting. From classic cars and modified models to vintage, exotic and prestige vehicles, and historic trucks and trailers, the question arises as to the opportunities for brokers in offering commercial transport insurance to such a niche market.

“You never know what other client business sale rests behind a specialist motor insurance product sale,” says Morgan. “Any broker in business today must remain relevant to his customer and whether or not the inquiry comes from a specialist motor, private motor or commercial motor position – the reality is that the broker must be able to service that inquiry,” says Morgan.

“Otherwise he faces the risk of becoming irrelevant for the client’s other – perhaps commercial – insurance needs.”

Indeed, for brokers to stay relevant to their clients’ needs and sell more motor/commercial transport insurance, according to Zurich’s spokesperson, it is “a critical business risk, and it needs to be managed as effectively as possible. The better

FEATURE / MOTOR & TRANSPORT

you manage this risk, the cheaper your ongoing costs to your business will be – including insurance, down time and OH&S.” The current market is testament to what remains a challenge to many in the industry: to provide and remind clients of the benefits of having appropriate insurance coverage by demonstrating good value for the premium paid.

Looking to the future, globalisation, industry consolidation, and technological innovation are all influencing changes to traditional insurance business models.

Iles looks beyond the general hardening of rates in the current market: “I can see the potential for consolidation in the transport industry as issues such as driver shortages and increased pressure from retailers and wholesalers for costs and timelines to reduce continue to evolve. The recent media attention over a number of transport companies be-

“We know from past studies that being a professional driver or truckie are among the most dangerous jobs in Australia – it’s up there with mining and construction in terms of fatality risk” Mervyn Rea ing investigated by the Roads and Maritime Services, NSW, will also impact many operators.”

The insurance industry is constantly looking for opportunities to reduce theft and improve driver safety, and insurers now have access to recent technological advancements that provide a flood of new data with enormous implications for risk and claims. While these technologies theoretically present opportunities to alter and improve the value proposition for consumers in unprecedented ways, some insurers are struggling with the new technologies.

Just what is the future of technology offering and are they disruptors, opportunities, or both?

Among these technologies are global positioning systems (GPS) and telematics, and on-board ‘black 38 | SEPTEMBER 2012

boxes’ in cars and trucks that allow companies to track the physical location of vehicles, the speeds at which they travel, and even seat belt usage.

On-board cameras that are activated during hard breaking, swerves, or speeding have recorded accidents, exonerated fleet drivers, and helped insurers reward companies with lower premiums thanks to good driving.

ADVANCING TECHNOLOGIES Zurich’s spokesperson says the future of commercial motor insurance requires out-of-the-box thinking and a more proactive approach to on-road data provided by telematics technology.

“Telematics will be more prominent on transport fleets – this will monitor every aspect of a vehicle’s movement – and this knowledge will be used to manage not only risk but business efficiencies.”

Capabilities like stolen vehicle recovery, automatic crash notification, and vehicle data recording can minimise direct and indirect costs for providers while offering effective risk management. In addition, access to vehicle-specific data from telematics applications can help insurance companies fight fraud. Basic vehicle data can say a lot about the real cause of an accident or why a car has disappeared.

Zurich Fleet Intelligence (ZFI) telematics systems, currently being rolled out in Australia and New Zealand, will provide an interface to monitor and manage driver behaviour, vehicle performance and environmental impact.

Zurich senior risk engineer Mervyn Rea says although the benefits of ZFI are three fold – improved safety, better business performance and less environmental impact – it was the safety improvements which would have fleet operators most interested.

“We know from past studies that a professional driver or truckie is among the most dangerous jobs in Australia – it’s up there with mining and construction in terms of fatality risk,” says Rea. “There are around 460,000 Australians working in the transport and logistics industry and generally speaking they are up to seven times more likely to have a fatality than other Australian workers.”

Through such technological innovations, insurance carriers have been able to better reconstruct events that took place at an accident and, in the process, better determine appropriate damages and deter fraud. As vehicle manufacturers implement further safety systems, such as systems to detect if a vehicle is approaching another vehicle too quickly, more information will be at their disposal. That

INSURANCEBUSINESSONLINE.COM.AU

CAUGHT IN A WEB means that risks become more perceivable, allowing for better risk control, prevention, and reaction.

Such tracking technologies, however, can have negative consequences for insurers – particularly in regards to levels of distrust among privacy advocates. To overcome such issues, it is suggested that insurers will need to plan and consult with a range of entities and individuals, sparing no expense in gaining confidence among their customer base – which will benefit brokers in the long run.

THE INTERNET CHALLENGE The internet is transforming the commercial transport insurance market, and answers demands for more choices, increased transparency in areas such as rates and claims, and greater convenience – potentially raising some challenging questions about the continued role of agents.

For the smart online shopper, getting the cheapest deal will often be as simple as conducting a quick search and getting online quotes. As this trend continues, it’s possible that more organisations will purchase and manage their commercial policies over the net.

Online opportunities have also helped smaller brokerages avoid the costs of directly competing against the insurance giants, meaning that savings made can be passed on to consumers in the form of cheaper rates. Business owners can then also benefit from discounts for signing up to online insurance services, with hundreds of special offers providing significant savings to a business’ yearly insurance costs and, ultimately, boosting the bottom line.

Indeed, as more consumers turn to the internet, it is a reminder that while the future of commercial motor insurance is uncertain, customer service has become an all-important domain for insurers.

Assistance and the active support of customers carries immeasurable benefits for insurance companies, including fewer cases of insurance fraud.

Morgan also believes any successful brokerage is utterly reliant on service. “Service, service, service,” he says. “It is absolutely vital to remain relevant, and anyone providing a good reliable service will matter to the client.”

In essence, it is essential for all in the insurance sector to highlight the reassurance, the certainty and the peace of mind that appropriate insurance cover brings – particularly in this business climate.

On the flip side, it is equally important in the current economic environment for insurance buyers to work closely with brokers to ensure that their or-

68% apply for car

insurance online

75% search for car

insurance online A Google survey found that more Australians are using the internet to shop for personal car insurance, with 68% of customers applying online and 75% searching for car insurance online. While buying through a broker is still standard commercial procedure, smaller SMEs in particular are exploring buying direct from insurers – and beginning to look online.

One reason for this trend is the relatively small policies these businesses require, which makes it difficult for brokers to efficiently service the SME sector. Vero reports some brokers are struggling to turn a profit on these smaller clients and may instead take the opportunity to focus on larger, more lucrative clients.

ganisation’s risk profile is optimised and that the level and scope of cover can be readily reviewed for ongoing cost effectiveness. The big change in the insurance industry still has not happened yet. As stated in Vero’s report, the research gathered “paints a picture of an industry which can expect some turmoil in the immediate future and shifts in perception in the longer term.”

Indeed, centuries-old models persist at many leading firms, and strategic planning efforts remain focused on traditional sources of competition and growth. There is an enormous opportunity for those insurers to adapt more quickly and effectively to unexpected change than the competition.

New technology must be accompanied by changes in work practices, processes, and organisational culture. These changes bring together the benefits of new systems and software with the skills, knowledge and experience of the people whose talents drive business performance.

On a positive note, as Vero’s report states, “the industry is generally performing well and working hard to prepare itself to meet the challenges it faces.”

SEPTEMBER 2012 | 39

COLUMN / BUSINESS PLAN

PLAN TO SUCCEED

F

A good business plan can act like a compass, not only helping you stay the course, but also gets you where you want to go

For new insurance brokers setting up shop, a business plan is an essential tool in helping you realise your goals.

“Without a business plan, you have a dream with no stepping stones,” says Michael Griffiths, small business coach and CEO of Michael Griffiths & Associates.

“A business plan ensures you know where you’re going, what you want to achieve and the action steps required to get to your goals,” Griffiths says.

“Business owners without a business plan usually find themselves not growing or taking the required steps to move the business forwards. Their heads are usually stuck in day-to-day routines rather than business growth strategies.”

Even veteran business owners often fail to recognise the importance of creating a business plan, adds Michael Altenburger, Small Fish business coach.

“In my experience, only very few SMEs have a formal written down business plan. Not many know exactly what a business plan is or what pur-

40 | SEPTEMBER 2012

pose it serves. Those who do know often feel overwhelmed by the daunting task of creating one. Lack of experience adds to the problem.”

Altenburger adds that having a plan – especially in written form – helps to quickly determine that things are heading in the wrong direction (hence ‘not going to plan’) – not when it is already too late.

PUTTING IT TOGETHER Simply put, a business plan is a written description of your business and your business goals. It can be used to help you describe your business to potential investors, attract employees, or prospect for new business.

The structure of your business plan will reflect who is using it. If you’re looking for finance, your business plan might be slightly more detailed than one that will be used internally for staff.

So step one in creating a plan is to determine who the plan is for. Deciding whether the plan will be used internally or viewed by third parties will help you target your answers. According to Grif-

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SEPTEMBER 2012 | 41

COLUMN / BUSINESS PLAN

TOP MISTAKES

“Remember, a goal is no good unless it has action steps to get you there” Michael Griffiths

Michael Griffiths fiths, it doesn’t need to be pages and pages long.

There are many variations of business plans, but a basic business plan typically includes: Description of the business: This is your management plan. It typically covers information regarding the structure and premises, staff, your relevant experience and services.

Market analysis and strategy: This section includes an analysis of your industry, your target market, and your competition. It should also outline your key marketing tactics to reach your target audience.

Future planning: You might want to include your business’ vision statement, your plans for the future, your business goals (short and long term) and how you intend to reach them.

Finances: This includes how you’ll finance the business, and outlines the operational costs and earnings, and projections.

Executive summary: This can be short and sweet – just a one-page overview of your business.

When it comes to outlining your goals, Griffiths suggests: “Start with 12-month goals and ask yourself what outcome do you want in the next 12 months; set three to five goals you want to achieve, then break it down to three months, six months and the next 30 days. For example, if you want 100 customers in 12 months then how many do you need in the first 30 days? What stepping stones or action tasks do you need to be doing to ensure that your goal comes true? Remember, a goal is no good unless it has action steps to get you there.”

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TOO VAGUE

Part of the value in putting together a business plan is to help you visualise and focus on your objectives. A plan that fails to clearly identify tangible and realistic goals misses the point.

POORLY WRITTEN

Maybe this is not a huge deal if the plan is for your eyes only, but if it is to be viewed by third parties, you want to ensure that there are no mistakes in spelling, punctuation or grammar.

STOPS SHORT OF BEING A GUIDE

It’s great to outline your goals, but to get real value from your business plan you need to clearly identify how you intend to reach them.

INADEQUATE RESEARCH

Failing to properly identify and research your target market can lead you to make foolish marketing choices. Get some facts. Find out as much hard information about your target market as possible. Do they read the local newspaper, are they mums and dads of the local footy team, and/or are they tech savvy?

GOING SOLO

You may be a one-man show, but there is no reason why you have to create your business plan in isolation.

There are tons of resources available for small businesses. Get professional help. The right business coach can help you turn what may seem like a daunting task into an invaluable tool for your business.

UNREALISTIC

If your goals are over-ambitious and rely on too many forces that are out of your control, then perhaps you need to scale back your expectations. Creating a 10-page plan with world domination as the end goal can only lead to disappointment.

AND AGAIN

UNDERESTIMATING THE COMPETITION

There are no hard and fast rules regarding how often you revisit your plan, although Griffiths suggests business owners check at least on a quarterly basis.

“We revisit ours every month to ensure we focus on the next 30 days and what needs to be achieved.”

According to Altenburger, a formal review of the plan should be conducted annually.

“On these occasions the goals would be re-evaluated based on new information available.”

Failing to recognise that there are other brokers operating in your space is foolish. You need to look at their business and figure out how you can offer a point of differentiation.

PUTTING IT OFF

Don’t wait to write a plan until you absolutely have to.

Too many businesses make business plans only when they have no choice in the matter. So get cracking!

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5 REASONS TO UPDATE YOUR PLAN

1. MARKET CHANGES

2. REGULATORY CHANGES

3. PERSONNEL CHANGES

4. DIVERSIFICATION

5. NEW FINANCIAL PERIOD

If there has been a significant change in the market, for instance, with the earlier floods impacting pricing and industry reputation, you might want to revisit your plan and figure out how this affects you

All industries undergo changes due to new regulations. You need to ensure your business plan is in line with the regulatory demands of the current market

Perhaps you are in the process of adding new brokers, or maybe the business has lost a partner – the business plan should be revised and each person should be aware of the management structure

One way to grow your business revenue is to look at how you can incorporate diversification into your strategy. Your chances of embracing new opportunities will increase if you visualise how it will fit into your business

There are no hard and fast rules on how often you should update your plan, but a new financial period – annually, quarterly, monthly – can be a good time to update if your goals are being met and your plan is realistic

SEPTEMBER 2012 | 43

Q&A / KURT KARL

WHY BROKERS

DOMINATE

Swiss Re’s chief economist Kurt Karl sits down with Insurance Business while on his recent trip to Australia to discuss the global insurance industry and why brokers have never been more relevant Insurance Business: What is the overall picture you would paint of the global insurance industry?

Kurt Karl: Australia has suffered with the various catastrophes, but so has Japan, New Zealand and Chile, so prices have moved quite a bit this year. In the past we saw a global price movement, but Europe has not had a catastrophe so prices are quite subdued. Motor insurance is improving globally, too. The key market we always worry about is casualty, but we see it stabilising. We have seen that in the brokers’ reports. Prices have gone up a little bit on the casualty front in Australia, but not enough to make it more profitable given the low interest rates you are facing. So we do have the prices slowly moving up, but we don’t see any genesis as we do not expect everyone to bail out and give us a big price increase. The broker market has been gaining dominance and is very dominate here in Australia, with brokers gathering market share off direct insurers. On the commercial side, it has been a tough environment and a lot of companies are stressed so they are pushing back. On the economic front, as you might have heard, Europe has a few problems!

44 | SEPTEMBER 2012

That is affecting the world, with exports from Asia to Europe moving down. The four major banks in Australia borrow often from European banks so there has been a tightening of credit there. But we do expect Europe to be improving slowly over the next two years.

IB: What have you learned about the situation in Australia since arriving here?

KK: In Australia, you have become more commodity export-driven. You did quite well out of this financial crisis – you do not have a lot of inflation or debt. Your economy is doing pretty well, as a consequence there is a lot of money pouring in here! A weakening global economy hits commodities, then you have the fact that the Aussie dollar is strong.

IB: How well did the Australian insurers cope with the floods that hit Australia?

KK: Floods are a difficult risk to insure, because people love to move into flood plains for some reason and they do not like to pay the riskbased price for that. You need to have transparen-

INSURANCEBUSINESSONLINE.COM.AU

“The broker market has been gaining dominance and is very dominate here in Australia, with brokers gathering market share off direct insurers”

SEPTEMBER 2012 | 45

Q&A / KURT KARL

cy for the consumer as well as appropriate pricing for the insurance company. What should happen is that it should be expensive enough to ensure less people go to the flood plains. Otherwise, it is not risk-based pricing. It then becomes a tense political issue.

IB: In Australia there ended up being a stand-off with insurers charging an extremely high premium until the local councils had implemented an appropriate flood mitigation plan.

KK: We are not sure why, but floods have become much more common. Part of it has to with people moving to flood areas, but it might be global warming too. No country is immune from flooding, it could happen anywhere. You have flood mitigation

“Floods are a difficult risk to insure, because people love to move into flood plains for some reason and they do not like to pay the risk-based price for that” PROMOTING BROKERS KARL ON HOW TO GET CLIENTS TO UNDERSTAND THE VALUE OF THE BROKER

“This is all an education process for the industry. The insurance industry is not the most popular, a lot of people feel you pay for your insurance, but the insurers never want to play their claims. This is a very common refrain.

It is about education, it is a process. The industry needs to be adept when the claims are due and manage that process well. Sometimes in the US, some of the motor companies will just not pay quickly, that is how they make money. Others have figured out that if they pay claims quickly and work with clients, they get loyal clients and get a premium from that.

People would rather deal with that type of insurance company. Sometimes we do our own industry a disservice on that level.”

46 | SEPTEMBER 2012

issues, but you also have the contract issues. If the government pushes the wrong policies and steps in and says ‘we have to have the prices at X’ there is no private insurance market for it. There is then not enough risk-based pricing to get people out of these areas. This is the case in the US, where for example people in the Mississippi will move right back in after it has been flooded as they do not have to pay the risk-based pricing. From what I understand about Australia, you are on track to get things clarified. It is a dialogue between the insurance industry and the government first to be able to provide for the policy holder the appropriate policies at the appropriate price. You cannot stay in the business if you do not make profits to pay off the claims.

IB: Something that did come from the floods was how much better covered clients who used brokers were.

KK: That is what brokers bring to the market – an expertise on not only the pricing, but on the packaging of the policies. The ordinary business or homeowner is not going to have that expertise.

Brokers offer the product you need for your individual situation.

IB: One of the challenges brokers face is getting clients to understand that it is not about the cheapest policy, but the one that covers you most comprehensively.

Is that all part of that education process?

INSURANCEBUSINESSONLINE.COM.AU

KARL’S GLOBAL OVERVIEW

“The US economy slowed in the second quarter, but is likely to be stronger in the second half of the year.”

"In Europe, the risks remain elevated.

The pending decision on the legality of the European Stability Mechanism (ESM) by the German constitutional court is increasing uncertainty.”

KK: The insurance industry needs to clarify to customers, both on the business and the individual side, the value of the appropriate policy. This has not been easy for our industry. One big issue on the life insurance side is the protection gap. People just do not insure enough if there is a death in the family. People think it is too expensive, when the insurance for this is usually quite cheap. So what qualifies as the ‘cheaper’ insurance is the most comprehensive, not the one which costs the least. Insurance becomes expensive when you have the accident and you are not fully covered.

IB: There has been a fair amount of consolidation in the Australian insurance industry and especially with brokers. What does that mean for an insurance market?

KK: It depends on how much consolidation there has been, but it only takes two to compete! You have four banks and that can be quite competitive. On the insurance side you have the big insurers, a whole bunch of smaller insurers, but even if two companies swallow up all of the little guys there will still be a competitive market between those two firms. You do not want just one company anyway – that is a little hazardous for the consumer!

IB: What are you expecting for the next 12 months?

KK: We have had a big improvement in

“Japan is still recovering from last year's earthquake/ tsunami and reconstruction will help to sustain real GDP growth at around 1.8% this year and 1.6% next year.”

“Growth in China has slowed but both fiscal and monetary policies are poised to boost growth. The Chinese central bank has lowered lending rates twice since June this year.”

the catastrophe pricing; we think that will hold but will be softening over the next three or four years unless we get more catastrophes. The casualty lines take a lot of underwriting discipline in this low yield environment. Motor has firmed globally and I do not expect a lot more there. It has become more profitable and hopefully we will have that for a few years. It is a very stressful environment for the insurance industry globally; you have weakening economic growth, you have low investment yields and you have regulatory change all over the world. With change in any sort of regulatory matter, you have to adjust and there are costs involved. You might find your book of business needs to be tweaked quite a bit in order to get in line for the new regulations. As a consequence of changes in the industry, we think the turnaround will need to come on the underwriting side.

IB: Will there be any changes for the brokers?

KK: In this kind of environment, the need for the broker goes up. You have lots of changes and lots of stress, so you need to have an insurance package which is the most efficient. From the consumer side, you need to have that correct package, too. It is all about tailored solutions, which is right up the alley of brokers. The more tailored the solution, the more the broker is needed. The long-term trend is the brokers strengthening in the market.

SEPTEMBER 2012 | 47

BROKER FOCUS / JIM PENMAN

ULTIMATE AUSSIE ENTREPRENEUR Jim Penman has created a franchising empire and his diversification into insurance broking with Jim’s Insurance is partly inspired by how poorly other insurance brokers had been performing for his many franchises Insurance Business: When and why did you opt to move your business into the insurance side?

Jim Penman: We had been recommending [insurance] brokers for years but were discouraged by the poor service received, especially delays in treatment of claims and the sending out of renewals. At one time we were getting a call every week or two from franchisees asking us to apply pressure to get things done. We were also amazed at the limited use of IT by the brokers we dealt with, far less advanced than the systems we use to communicate with our franchises and clients, maintain customer service standards and so forth.

We believed that by combining rigorous customer service systems and the most advanced IT with our brand awareness, we could provide a first rate service to the public at competitive rates.

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INSURANCEBUSINESSONLINE.COM.AU

JIM’S WAY

Experience from our other divisions shows that people are very happy to use us when we provide first rate service, even with minimal advertising.

We spend only about 1% of our turnover on advertising but had more than 80,000 unserviced leads in the past year. An added advantage was the ability to cut insurance costs for our franchisees, and to ensure that all of them have the essential public liability cover.

IB: Do you basically operate as an insurance brokerage? Which insurers/ underwriters cover your policies?

JP: Yes, we obtained our broker licence in February 2011 and operate as an insurance brokerage with a team of highly skilled staff members headed by Jadran Sango who manage a book of over 5,000 policies. We currently have a number of supportive underwriters and partners that cater for our current insurance requirements. With a view to expand the business, we look forward to increasing our underwriter panel in the future.

IB: What types of insurance do you offer? Where are you seeing the most success across those areas?

JP: At present, we’re mostly providing public liability, personal accident and illness, tools, trailer, motor vehicle, commercial property and home and contents insurance. But we’re starting to have success with motor vehicles and property. Our best areas to date are personal accident and motor vehicle. Jim’s Group franchisees often prefer to have all insurances with a single broker. This gives them one contact for any issue with leads, billing and insurance, and they can also contact me directly by mobile or email.

IB: What’s your philosophy towards offering insurance? What’s different with Jim’s Insurance compared with other insurance providers and brokers?

JP: We have rigorous systems that measure and maintain quality, we invest heavily in IT, and win customers with excellent service. All Jim’s Group customers are given my direct email address if their difficulties cannot be solved at another level, a policy we intend to follow with insurance clients.

Started in 1982 as a part-time gardening business, Jim’s Group now has over 3,200 franchisees in four countries, and is growing at the rate of around 200 per year.

Jim’s Group now has 32 divisions, encompassing everything from Jim’s Bath Resurfacing and Jim’s Blinds Cleaning through to Jim’s Dog Wash and Jim’s Pest Control.

With an average annual revenue of $100,000 per franchise, that means a total group revenue of around $320 million.

“We had been recommending [insurance] brokers for years but were discouraged by the poor service received, especially delays in treatment of claims and the sending out of renewals” Jim Penman We will always strive to do better. We will work closely with underwriters to minimise claims and reduce their administration costs, allowing us to negotiate better rates for our clients in the future.

We will put the interests of clients and underwriter relationships before short-term profits. As a privately-owned company we can afford to think long term.

IB: What are your future plans for the insurance side of your business?

JP: We aim to make Jim’s Insurance our largest and most profitable division within three years. This will be done by providing clients with personal customer service, attending to all matters with the utmost urgency, and constantly striving to provide the best product. We also want to establish a reputation in the insurance market of being a highly professional organisation whose numberone focus is our clients’ interests. We are currently working on a new website, and look forward launching to the public in September.

SEPTEMBER 2012 | 49

SOCIAL LIFE

The Underwriting Agencies Council (UAC) continued its national tour of expos with its Brisbane leg recently, where brokers and other members of the insurance industry gathered at the Sebel & Citigate, King George Square

UAC BRISBANE EXPO / SOCIAL

SEPTEMBER 2012 | 51

SOCIAL LIFE

The Women In Insurance gathered for their Winter Luncheon at Cockle Bay Wharf, Darling Park, where bestselling Australian author, television presenter, journalist and former model Tara Moss was the guest spokesperson

WOMEN IN INSURANCE / SOCIAL

SEPTEMBER 2012 | 53

FAVOURITE THINGS / CANDICE KLAU

Favourite things...

Candice Klau, Eagle Insurance Brokers Vacation spot: For dancing, great food, a steady flow of ouzo and the friendliest people around – you need to get to Greece!

Celebrity: Chris Hemsworth… for obvious reasons. Just Google him if you don’t know who he is

Movie: The Hangover. Just so many classic lines and one of the few movies I can watch over and over and still cry with laughter every time

Book: The Brothers Grimm Fairytale Collection. Because you are never too old for a good fairytale

Sport: Just to annoy the East Coasters… AFL!!

It’s what real men play

Music: Big fan of Kings of Leon and older bands like Blink 182, Blue Öyster Cult

About working in insurance: In addition to making some great friends, I’ve quickly moved up the ranks, and working in the insurance industry was also responsible for my move to Byron Bay, which I definitely can’t complain about

Place to be: Byron Bay, of course. Sitting on the beach or at The Balcony, watching the world go by. There’s no place quite like it

Food: Birthday cakes. I have a bad reputation in the office for eating the birthday cake before it is even presented to the birthday person

54 | SEPTEMBER 2012

Drink: Being an Adelaide girl who’s moved up the coast, I definitely miss Farmers Union Iced Coffee. Someone, please bring me some!!!

THE FINAL WORD / SOCIAL MEDIA

WHAT’S YOUR KLOUT SCORE?

Making meaning in 140 characters Confused about who to follow and what to say? Patrick Durrant provides some insights into how insurance brokers can get the most from Twitter There is certainly a level of fear in the insurance community about using Twitter professionally – nearly every week a corporate or celebrity social media blunder hits the headlines. Tweeting something that was ill-thought or could be misconstrued is a frontline concern. Yet when social media is used properly, it can promote your personal brand and foster innovative ideas.

It comes as little surprise that tech companies and Gen Y tech-savvy employees have been quick to recognise the benefits of social media. One such company is Atlassian, a fast-growing Australian software company which is quickly making a name for itself in the tech world, and also becoming known for innovative work practices. Talent and HR head at Atlassian Joris Luijke says that using Twitter is integral to his social media presence.

Luijke has amassed a following during his four years on the social media platform, and refrains from tweeting details related to his personal life.

“Mostly, what I do on Twitter is research… I follow people who have a lot of great ideas, they are my gateway to new ideas,” he says. Luijke follows people at ‘forward-thinking organisations’ and those who write about management, leadership, and coaching. He attributes many of the policies and initiatives that he has implemented at Atlassian to leads “borne from the ideas from the community knowledge that lives on Twitter”.

Harvard Business Review (@harvardbiz), the Management Innovation eXchange (MIX - @hackmanagement), and Q & A site Quora (@quora), all rate on Luijke’s ‘follow’ list.

From an organisational perspective, other advantages of Twitter are easy to see. Atlassian has 56 | SEPTEMBER 2012

What’s your influence in social media circles? The Klout score is just one of several means by which this can now be assessed. It amalgamates information from people’s social media involvement, looking not at the number of connections people have, but rather the quality of those connections and how often posts get repeated (or retweeted).

Ratings offered by Klout, Kred and PeerIndex are not just a concept on the horizon, but have already attracted real world value. For example, earlier this year Hong Kong airline Cathay Pacific was offering any customer with a Klout score above 40 (considered the minimum score to demonstrate online influence) free entry to its business and first class lounge at San Francisco International Airport.

doubled its headcount in the last two years, and with it the challenge of finding world-class software developers from across the globe. “Recruitment is not just limited to the HR department – we get the entire organisation involved,” Luijke says.

When a campaign is being initiated, as most of the staff at Atlassian have Twitter accounts or blogs, those who wish to participate are asked to “spread the message as far and as wide as they possibly can”.

The company encourages staff to be creative in the way they spread the word, and Luijke says the interesting, quirky messages are always more likely to go viral on social media.

However, experts caution that ‘tweeting’ does take some getting used to. “After about a month or 100 updates (Tweets), the student starts to ‘get it’. It becomes obvious the value of these conversations and connections, and many become firmly entrenched in the fabric of their Twitter community,” one states.

The Harvard Business Review has some top tips on what not to do include: Me now. If a tweet answers the question, “What are you doing right now?” don’t send it. Unless you’re a celebrity, people don’t care about your every move.

Whining. Don’t complain about something unless you’re also giving useful advice. Just like in person, people on Twitter don’t like to listen to moaning.

Presence maintenance. Don’t send a tweet for the sake of making your presence known. Instead of typing “Good morning, world” wait until you have something insightful or useful to share.