Insurance Business 1.04

INSURANCEBUSINESSONLINE.COM.AU ISSUE 1.4

PRODUCTS FOR 2013 THE ESSENTIAL PRODUCTS ALL BROKERS SHOULD OFFER IN 2013.

WHAT ARE THEY AND ARE YOU PREPARED?

BUILD YOUR BROKING BRAND

THE NEW RULES OF INSURANCE BROKING

NINE WAYS TO SELL USING SOCIAL MEDIA

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CONTENTS AND EDITORS LETTER / 1.4

40

BROKING INTELLIGENCE

The perils of online broking What you need to know about selling online

12

COVER STORY

Hot products for 2013 Are you prepared for the coming year? The products brokers must offer clients

NEWS ROUND-UP 4 | The big five The biggest stories to impact insurance brokers 6 | The top insurance apps Get ready to hit the download button!

34

BROKING INTELLIGENCE

Build your broking brand Have you built a personal broking brand yet?

THE BIG INTERVIEW 8 | Daniel Fogarty Zurich’s new CEO on dealing with brokers

COVER STORY 12 | Hot products for 2013 We unveil the six insurance offerings that every broker must provide in 2013

BROKING INTELLIGENCE 34 | Build your broking brand Clients buy from brokers they like – is that you?

38 | The new rules of insurance broking The digital revolution has changed broking forever 40 | The perils of online broking A lawyer discusses online pitfalls for brokers 42 | Nine ways to sell through social media Selling your broking services using social networking

2 | DECEMBER 2012

INSURANCE INSIDERS 46 | Lyndon Turner The CEO of Nautilus Marine on gaining brokers’ trust 48 | Daniel Johnson Apex Insurance Brokers’ boss on starting a brokerage 50 | Stats Australia makes the global commercial insurance Top 10 52 | Social life The NIBA convention celebrates 30 years 54 | Favourite things Broker Andrew Ball on Chilli Mud Crab and James Bond 56 | The final word Should brokers care about the environment?

WEEKLY INVESTIGATIONS NOW ONLINE: Are comparison sites a threat?

Commission levels Overseas workers insurancebusiness online.com.au

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PREPARING FOR 2013 COPY & FEATURES MANAGING EDITOR Trevor Treharne SENIOR JOURNALIST Robin Christie CONTRIBUTORS Cameron Brown, Tarquin Taylor PRODUCTION EDITOR Carolin Wun

ART & PRODUCTION DESIGNER Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Peter Smith COMMERCIAL DEVELOPMENT MANAGER Tom Neville 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 Commercial Development Manager Tom Neville tel: +61 2 8437 4766 tom.neville@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

As we bid farewell to another year, brokers are steadying themselves for what will unfold in 2013 (the year of the snake for those concerned with the Chinese calendar’s annual animal signifiers). Market predictions can be prickly customers, but we have highlighted six hot areas of insurance that will burn brightly for brokers over the coming 12 months.

All areas have key driving forces behind their importance, while also remaining underserviced and open for brokers to do business within. Most of you will be playing in some, or maybe all, of these areas already. But we have laden our cover feature with stats and data which will prove to your clients why they should care about this product. Successful insurance broking partly stems from the ability to sell more to your existing customer base (while adding new clients, of course), and this is a great opportunity to go back to clients and ensure they can head into 2013 fully covered.

Elsewhere, we have an extensive ‘Broking Intelligence’ section, where contemporary issues of insurance broking, driven by today’s digital revolution, means that if your brokerage has not undergone huge changes in recent years, something is amiss. Indeed, research into Australia’s insurance broker community from the likes of Macquarie and Zurich suggests that brokers are lagging behind in using digital platforms and social networking sites. Considering the reach of these platforms, and the fact usage is often free, then it is madness for brokers to be ignoring such opportunities.

Your apprehension may lie in an unfamiliarity of how these platforms work. There is no shame in that. That is why this issue of Insurance Business unveils everything from the new rules of insurance broking in a digital age to how insurance brokers need to manage their individual brand in such times. There are also pointers on how to sell through social media and a warning on the pitfalls of using the web for insurance broking, too. The internet is not to be feared, it is there to enhance your brokerage’s success more than ever before. Make sure this revolution does not pass by your brokerage without inclusion.

Trevor Treharne, managing editor, Insurance Business

CONNECT

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

trevor.treharne@keymedia.com.au DECEMBER 2012 | 3

NEWS / THE BIG FIVE

THE BIG

FIVE

The biggest news stories from insurancebusinessonline.com.au and what you had to say about them BROKERS OUTNUMBERED AGAINST EMERGING THREAT

The Mortgage & Finance Association of Australia (MFAA) has encouraged mortgage brokers to battle insurance brokers by focusing more on offering insurance products. According to MFAA’s Home Finance Index, a national survey of 1,423 people across Australia shows cross-selling presents an untapped opportunity for mortgage brokers, with only half the respondents offering insurance policies. With nearly 11,000 MFAA mortgage brokers, there is a large market to challenge traditional insurance brokers.

RAPIDLY ESCALATING COST OF INSURANCE UNVEILED

Research group Canstar has compared 41 insurers and 104 policies using 10,000 individual quotes to reveal what Australians now pay for home and contents insurance. Canstar’s Home and Contents Star Ratings report claims floods, fires and cyclones have left the majority of the country’s homeowners footing the bill through major changes to their home insurance policies. Policy renewals have skyrocketed too, largely due to insurers re-pricing their policies according to their risk exposure.

BROKERS ‘A SPECIES UNTO THEMSELVES’

A management and business analyst has suggested insurance brokers “are a species unto themselves” when it comes to how they opt to charge their clients for services. Financial industry analyst Max Franchitto has contributed to the debate over how brokers should price their services, telling Insurance Business: “General insurance brokers are a species unto themselves, so commissions are there to stay unless actuaries can improve premium competitiveness by deleting them.”

BROKERS LOSING JOBS TO OFFSHORE WORKERS

One million service sector jobs in Australia are set to head overseas and it seems the insurance industry, including insurance brokers, are at the forefront of filling roles with foreign workers. The National Institute of Economic and Industry Research estimates 80,000 service-sector jobs have been moved overseas in the past four years and predicts the trend could send 700,000 to one million jobs overseas by 2040.

WORKERS’ UNION ATTACKS INSURANCE INDUSTRY

In a vicious attack on the ethics of the insurance industry, the Australian Workers' Union has criticised the removal of the fire levy as it suggests insurers will just pocket the additional revenues.

Paul Howes, national secretary of The Australian Workers’ Union, stated: “We are about to see a colossal cost shift from insurance companies to households.

Insurers stand to gain a whopping $700m a year.”

4 | DECEMBER 2012

GRAHAM HUGHES

FORUM

COMM ENTS

“Any competition from salespeople at the coal face is a threat but I don’t think it’s any more of a threat than the direct insurers bombarding the TV channels every night with their cut-throat pricing! I think the mortgage brokers will be in the same boat as insurance brokers fighting the cheap direct writers!”

ROBERT COOPER

“There’s still a lot of competition, particularly from the direct market and it’s probably been under-priced for years. The main trouble with increasing premiums is the under-insurance issue.

Most policyholders do not have enough cover and this just adds more to the premium if they are advised to increase their limits.”

JOHN DEVANEY

“Lawyers do not have to compete with Coles. Accountants do not have to compete with the ANZ for doing tax work, whereas brokers have to compete with all but one insurer (Zurich, God bless ‘em.) Make the playing field level and the broking profession could change its income structure overnight.”

LUKE CHRZANOWSKI

“Rubbish! Can you (our clients) imagine talking to a person in a foreign country with a thick accent about your business risks? Perhaps accounts and actuarial work will be outsourced, but traditional client-facing broking roles?? Get real!!”

IAN FRY

“It amazes me that so many people can't count. Many states (Qld, SA, etc) abolished FSL years ago. Have a look at the premiums there.

Instead we pay a land-based Emergency Services levy spread across ALL landholders, not penalising those who choose to insure. How much is that? $35 per year for most people.”

FEATURE / TOP FIVE INSURANCE APPS

TOP FIVE INSURANCE APPS The insurance industry has jumped on board the app revolution, but what are the very best apps for insurance brokers to have in their armoury?

DEDUCTIBLES

by ClearRisk Free WHY DOWNLOAD? ✓ Completely free and tailored for insurance brokers, how could we look past ClearRisk’s Deductibles app? The Deductible Calculator App allows you to calculate which combination of premium and deductible will give your client the lowest cost of risk.

✓

The idea is that brokers can calculate deductible and premium options for clients and help them determine the best combination that results in the optimal cost of risk.

✓

The Deductible Calculator App takes some basic information such as claims history (actual or estimated) insurance deductible and insurance premium options then calculates which deductible option would give the optimal cost of risk. This calculation helps you choose the best premium and deductible combination.

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W

BER ONE UM

P AP

You can calculate and print reports to: •• Determine the best terms for clients •• Illustrate the optimal deductible option in a way clients can understand •• Demonstrate deductible options, why one choice would be better than the other •• Show your clients you are helping them find the best possible rate and get them the best value versus best price

N

KEY FEATURES:

IN N E R

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SMARTOFFICE by ebix

INSURANCE GLOSSARY

by Look It Up 4 Me Inc

Free WHY DOWNLOAD? ✓ For very good reason, ebix dominates the insurance IT and app space. You can get a taste of what they can offer your insurance brokerage with this free SmartOffice app.

✓

SmartOffice is a great introduction to what ebix can offer and considering the size of the ebix range which insurance brokers can use, it is worth dipping your toe in here to see if your brokerage would benefit from these types of products. If, like many brokerages, you run a high volume of work off a small team, then SmartOffice could be the ideal way to operate most efficiently with the staff you do have.

KEY FEATURES:

Ebix claims SmartOffice helps financial services professionals: •• Deliver high-touch service, without additional staff •• Generate referrals and ensure client retention •• Systematise proactive, personal communication with your clients •• Keep your clients on track and on place

HOME INVENTORY

by Allianz

$4.99 WHY DOWNLOAD? ✓ We know Insurance Business’ readers are a savvy and knowledgeable bunch, but sometimes no matter how well you know an area of expertise, you might need a little help explaining it in basic terms. Enter the Insurance Glossary – 200 insurance terms and their definitions at your fingertip.

✓

KEY FEATURES:

••

••

KEY FEATURES:

••

•• ••

••

The app comes with 14 commonly used fields that make cataloguing items easier, including make, quantity and price The user can also create custom fields, add photos and include additional notes about the item What’s more, when Home Inventory is installed on two or more devices, recorded items are automatically synchronised with one another, so that your iPhone can access whatever you’ve recorded on your Macbook Your inventory can be viewed in the form of a detailed or summary report by location or category and then printed off for your convenience

It is basic, but it might also be essential. There is also an Insurance Glossary Lite version which is free should you prefer to try out a limited version of the app out before purchasing If you need a memory refresh, want the best way to explain a technical term to a client, or might even be new to insurance, then the Insurance Glossary is certainly worth a download

LMI MOBILE APPLICATIONS

by LMI Group

$4.99 WHY DOWNLOAD? ✓ We will be honest – this app is more about having some insurance-based fun around the home at weekend (what you have always wanted, right?!). Allianz’s Home Inventory aims to make it easier to keep track of what is in your house. Then, in the case of a loss such as a burglary or fire, it will help you claim on your contents insurance.

This is very much a no-thrills app (unless insurance terms thrill you in particular), with the many terms listed as your contacts in your phone appear, with a click through to a standard definition of that insurance term.

Free WHY DOWNLOAD? ✓ We love LMi Mobile Apps, a suite of mobile tools that includes calculators, research tools and training materials, developed by the LMI Group for the benefit of insurance professionals. Professor Allan Manning is the man behind LMI, and the high profile insurance guru is a staunch advocate of insurance brokers. His policy comparison service is an essential tool for brokers, so this app was always going to appeal.

KEY FEATURES:

••

••

LMi’s suite includes an under-insurance calculator which has been designed to enable the insurance broker to quickly demonstrate to their client the uninsured portion of a loss of any size.

LMi’s Building Cost Calculator is an on-the-spot guide towards the actual value of a property based its individual characteristics and its location. There is much more to a property than just bricks and mortar.

DECEMBER 2012 | 7

THE BIG INTERVIEW / DANIEL FOGARTY

FROM

AUDITOR TO

URICH From KPMG auditor in the 1980s to recently appointed CEO of Zurich Australia, Daniel Fogarty on leading the insurance giant in Australia, dealing with brokers and people taking his phone calls now!

Insurance Business: It has been a couple of months now – how are you settling into the new role?

Daniel Fogarty: It’s great! The good thing for me is that I have been in the industry for a while and I have been at Zurich for three years. I have had three very different roles at Zurich during that time, so this is my fourth role at Zurich. I came into Zurich to run the packages business and that side is going very well. I then moved into the chief operating officer role where I worked closely with our previous CEO on the business’ strategy. I then took over the corporate end of town and ran that. So I feel like 8 | DECEMBER 2012

I have been well trained by Zurich to have this role now! The intensity steps up when you get into the CEO role and that is something I am getting used to.

Are people treating you different around the office already? Few more doors being held open for you?!

That’s right, a few more doors being held open! Your name comes up on a person’s phone when you call them here, and generally my phone calls are answered now! The great thing about putting an Aussie in charge is that the group is showing it is happy with the strategy and confident in the people.

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“We should be the best insurance company for brokers in the market, but we are not there yet. We are good at working with brokers, but we are not the best” Daniel Fogerty

DECEMBER 2012 | 9

THE BIG INTERVIEW / DANIEL FOGARTY

Have you had much of a chance to get out and about and meet brokers face-to-face so far?

I try to get out a lot. We only distribute through the broker channel so we have to be out with brokers all of the time. We should be the best insurance company for brokers in the market, but we are not there yet. We are good at working with brokers, but we are not the best. The only way to be the best is to be out with brokers all the time. I see my job as very much leading that charge with brokers. Every week I am trying to get out as much as I can.

What are you hearing from brokers?

What feedback are you receiving?

Brokers want to do more business with Zurich. We have a good name, brand, financial strength and claims service. However, I know there are a few things which make it harder to do business with us. That is what I am working on – how can it be easier and more efficient to do business with us?

We make sure we underwrite well upfront so that when it gets to claim time it is a great experience.

There is nothing worse than not being clear on what you are covered for. Zurich’s Z.streamXpress has made it easier for brokers to place business with us.

As a result of this greater speed and efficiency, brokers are rewarding us with lots of business.

You say you want to be number one for brokers, but what will enable you to become number one?

WHY SHOULD CLIENTS USE BROKERS? DANIEL FOGARTY, ZURICH AUSTRALIA

“Clients should look to get advice from the outset, and brokers are skilled in determining risks.

Commercial customers should get the right advice upfront. Once they have their package and they understand what they are covered for, then at claims time the broker is going to help them through the process. The commercial operator of a business should focus on what they are good at and let their insurance broker focus on determining risk and which insurance should be placed.”

10 | DECEMBER 2012

It is along the lines of what we did for SME. We are good at the big end too, with strong global programs. Where we have more of a challenge is how we make it easier to place business in the mid-market space. We need to be clearer about our proposition and processes in this space so that if brokers send a request for a quote, we have effective business processes in places to respond clearly, quickly and consistently across all lines, at all times.

I do not feel we are doing that consistently enough yet. We are pretty good at it, but are we the best? It is about us setting a very high benchmark. We have five Zurich values and one of them is ‘excellence’, so we need to push ourselves.

What is likely to change at Zurich in terms of your broker relations under your leadership?

Where I would like to be with brokers in 12 months’ time is that they are noticing the difference. I want them to be getting clear responses and they are clear about what business we want to see.

As you mention, you are 100% broker distributed. However, many insurers use a duel direct/broker model – why does the broker-exclusive model work for you?

Fundamentally, customers need advice. Brokers are in the advice business while we are in the underwriting and claims business. Customers who get advice have an easier time at the claims stage. In commercial insurance it is complicated and most SMEs are looking for help arranging their insurance. Using a broker is simply a better value proposition. The challenge brokers have is if customers do not want to pay for advice. We still see overwhelming support for the broker channel. Research has indicated how happy SMEs are with their broker, and the JP Morgan index shows that brokers are expected to dominate the channel.

How do you effectively manage the brokers which regularly use Zurich compared with the brokers who use you more sporadically?

We have our Zenith program, which has around 100 brokers in it, and is for the smaller and mid-tier commercial brokers. Brokers have to hit a premium threshold to be in that Zenith program. Below Zenith we have the BrokerPlus program and they

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LEAD AND GROW DANIEL FOGARTY UNVEILS TO INSURANCE BUSINESS THE FOUR AREAS WHERE ZURICH WANTS TO BE THE MARKET LEADER, AND FOUR AREAS WHERE IT SIMPLY WANTS TO GROW

Hoping to lead…

THE INTERNATIONAL PROGRAMS BUSINESS

Hoping to grow…

FINANCIAL LINES

This is about offering insurance around the world for its customers. Zurich currently issues and services more than 3,200 international programs in more than 170 countries.

Zurich has made a huge investment in financial lines. Its financial lines underwriting team consists of over 20 specialists in Australia.

THE PACKAGE BUSINESS

Zurich’s accident and health includes corporate travel insurance, personal accident and sickness insurance and expatriate insurance.

ACCIDENT AND HEALTH

At the other, smaller end of the market, Fogarty wants Zurich to lead in terms of offering packages to SME businesses through its broker channel.

LIABILITY MOTOR FLEET INSURANCE

Zurich’s motor fleet insurance includes: sedan and light commercial fleets; limousine, hire car and chauffeur-driven fleets; transport businesses; and mobile contractors plant and equipment.

MARINE INSURANCE

Zurich already leads in the marine insurance space through Associated Marine and Fogarty plans to hold onto this position in a vital and profitable space of the insurance industry.

are brokers who have the potential to step up and become Zeniths. We provide special services to our Zenith brokers and they get extra webinars and forums. It is about offering value-add to the brokers in those programs.

There is plenty of research to suggest that clients are much better off going through a broker, but perhaps the public perception is not always the same. How do we go about changing that?

That is a challenging one. Good insurance news does not sell newspapers and does not feature well on the nightly news. Bad insurance news does. It is about the overall position of the insurance industry in the community. Generally, insurance brokers are well connected in their local community and people see they are adding value. This is not just a problem for brokers; it is a problem for the whole industry. We still need to work on the perception of the whole industry. At Zurich we are trying to bring younger people into the industry and have some programs in place to do that. When people get into the industry

The booming management liability insurance space is included in Zurich’s portfolio and it covers crisis containment, environmental mismanagement coverage and customised wordings to meet the needs of larger specialist clients.

PROPERTY

One of the country’s most serviceable and extensive areas of insurance, Zurich has plans to work with brokers to grow its property insurance business.

“Generally, insurance brokers are well connected in their local community and people see they are adding value” Daniel Fogarty

they realise how great it is and, in turn, are then able to be strong ambassadors for the industry.

What would you like to achieve in your first 12 months in the Zurich hot-seat?

There are two things I am really focused on. One is: how can we be easy to do business with? and the other: how can I get my staff to be the best they can be? So much of my job is about my team and getting my team to be more effective and market-facing. I want my staff to be doing much more with brokers. I find the more I am out of the office with brokers, the more opportunities that are presented to me.

DECEMBER 2012 | 11

PRODUCTS FOR 2013

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Here are six offerings every insurance broker must provide and the selling tips needed to drive home their importance to clients. Have you got the ultimate 2013 insurance product suite prepared?

As we navigate to the end of another calendar year, the smart insurance broker will already be pre-empting what lies in wait for 2013. When it comes to insurance though, an industry tied to general market forces which vacillate intensely, and a whole raft of external and uncontrollable aspects such as the weather, then the old adage of uncertainty being the only guarantee seems apt.

However, Insurance Business has taken every effort to see if we can provide some clarity as to what lies in wait over the next 12 months and assembled a rundown of the six products areas you simply have to be providing. These are not the basic and core insurance offerings that you would expect every broker to offer, with perhaps property being a reasonable example. These are the six areas of insurance that are growing and have external forces that will be swelling their relevance for the coming 12 months.

They also all have that ‘pot of gold’ hook for brokers – a reason to get on the phone and ensure their client base has all of this in place. These products can often be overlooked. They are core drivers in Australia’s severe underinsurance problem. But the data to support the risks involved with not taking out these policies should provide any insurance broker with enough sales ammo to drive home the importance of taking out such cover.

Australia’s insurance brokers are in a position of huge potential gain when it comes to the current situation across the country. Australia is underinsured and the country’s business owners are crying out for advice to understand a broad and sometimes confusing insurance policy landscape.

These six offerings are the perfect hooks to land more business in 2013.

DECEMBER 2012 | 13

COVER STORY / PROFESSIONAL INDEMNITY

PROFESSIO NA L Y T I N M E IND High pressured roles need appropriate insurance cover and brokers are best placed to ensure their client base is protected from any professional litigation issues Several issues play into the hands of brokers when it comes to offering professional indemnity (PI) insurance to clients. Firstly, being a specialised area which requires good advice for a range of professions, brokers are perfectly placed to offering this manner of advice. Secondly, new legislation has meant that several professions require PI cover in order to do their role. This is supported by an increasing approach of several other professions who see the value in the cover more than ever before. Thirdly, when it comes to the insurer and underwriter level, the Australian market is flooded with different options. Such competition also ensures that brokers should get the best possible service from any insurer or underwriter who wishes to work with them.

WHAT’S DRIVING DEMAND? Rhys Mills, managing director, Solution Underwriting agency – which specialises in PI insurance – says the area is a highly successful one for brokers and is becoming more so as brokers gain confidence

14 | DECEMBER 2012

in dealing with these products. “Professional indemnity is an area experiencing growth due to the changing professional and economic landscape,” says Mills. He also says that brokers will need to assess and determine whether all clients have a need for professional indemnity insurance regardless of whether they’re required to hold it legally or contractually.

Bernd Bergmann, a consultant at research house Finaccord, says the Australian PI insurance market is generally characterised by high penetration rates and increasing capacity in those segments which are expected to grow fastest such as IT and

HOW TO SELL PI INSURANCE RHYS MILLS, MANAGING DIRECTOR, SOLUTION UNDERWRITING AGENCY

“There are many cases which brokers can use to demonstrate to their clients the exposures they have in relation to the professional advice they provide. In understanding the client’s business and the intention of a professional indemnity policy, a broker will have a much better idea of the exposures their client has, and in turn explain those to the client.”

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A TOUGH PI MARKET TO COVER Despite the opportunities in the PI space, brokers should be warned that regulatory changes are weighing heavily on insurers’ minds as they baulk at offering PI products to financial advisors.

Minter Ellison partner Richard Batten believes that the FoFA regulations, set to come into effect in earnest next July, are creating uncertainty among insurers.

“I suspect there’s a little bit of holding off,” Batten says of insurers’ appetite to write PI cover, which is vital in protecting advisors from bearing the full cost of defending against negligence claims.

“FoFA is creating uncertainty now because you won’t be going back into the [PI] market right now, when you’re uncertain what the liability implications of FoFA are.”

FPA policy manager Dante De Gori added that the effects of regulatory change will be an ongoing discussion. “1 July 2013 is D-Day for a number of reforms in Australia. Regulatory change will affect the industry,” he says.

“From a membership perspective, we’re starting to have conversations with insurance providers and it’s raising alarm bells.”

is an area y it n m e d in l a n io s s “Profe due to the th w ro g g in c n e ri e p x e changing prof es economic lan sional and dscape”

– Rhys Mills

DID YOU KNOW?

business consulting. However, not all areas suited to PI insurance are as affluent as others, so brokers must evoke caution on which areas to target.

“Most professional groups are well-served and have benefited from competition among providers although some property valuers and financial intermediaries have found it difficult to find affordable cover in recent years,” adds Bergmann. “The latter group, in particular, has suffered from an increase in litigiousness in recent years.”

WHY IS IT AN ESSENTIAL OFFERING FOR BROKERS? “The traditional occupations that previously purchased professional indemnity such as engineers, accountants and architects continue to do so,” says Mills. “However, there is an ever-increasing demand from more and more occupations for professional indemnity insurance. This increase in demand has arisen due to both legislative and contractual requirements.”

39% of Australian businesses do not purchase PI insurance until at least three months after they have been in business, with 20% waiting two or more years

COVER STORY / MANAGEMENT LIABILITY

MANAGEMENT

LIABILITY

Management teams are increasingly falling victim to legal attacks and brokers need to protect them An area that ties into PI insurance tightly is management liability, where the demands at the very top of a business can somewhat be protected by a knowledgeable broker.

“Management liability is becoming more successful with a large number of brokers who are now focused on marketing this product to all of their clients,” says John Nagle, chief executive of Lumley Insurance.

“There is a lot of marketing material, including real life claims examples, available that help brokers explain the importance of this product to their clients. Lumley Insurance has also made it very easy for brokers to access this cover by offering it as part of our standard business package or as a standalone product,” says Nagle.

WHAT’S DRIVING DEMAND? An increased awareness of the dangers of not having management liability cover has assisted the growth in the insurance’s popularity. We live in an information-rich era and members of a management team know the risks that come with their role.

“The demand for management liability continues to increase each year,” says Nagle. “We have seen a significant uplift since 2004. It is the fastest growing professional liability product in the professional lines portfolio.”

16 | DECEMBER 2012

KEY ELEMENTS OF MANAGEMENT LIABILITY COVER CRIME

Cover generally only applies to the loss of money, securities or other tangible property, and includes reimbursement of the amount of loss sustained, as well as fees, costs and expenses of a fraud investigator. Risks include misappropriation of monies, fraud and theft of company goods by employees or third parties.

EMPLOYMENT PRACTICES LIABILITY (EPL)

Covers damages and defence costs incurred for employment-related disputes including unfair dismissal, discrimination and sexual harassment.

DIRECTORS AND OFFICERS (D&O)

Cover is provided for investigation costs, defence costs for damages claims and OHS matters. Risks include breaches of D&O and/or fiduciary duties, trust, negligence, misleading or deceptive conduct and omissions.

ENTITY

Covers many of the same risks as D&O where a claim for compensation will typically be brought first against the entity.

STATUTORY LIABILITY

Covers fines and penalties imposed by a regulatory/ government body for breach of statutory requirements.

Source: OAMPS Insurance Brokers

INSURANCEBUSINESSONLINE.COM.AU

MANAGEMENT LIABILITY CLAIMS STATISTICS In conjunction with one of Australia’s leading management liability insurers, OAMPS has analysed their losses sustained. Over the last three years the overall number of claims has increased by approximately 30% each year NUMBER OF CLAIMS

Crime

INCREASED 50%

EPL OHS

INCREASED 20% INCREASED 15%

AMOUNT CLAIMED

Crime

INCREASED 45%

EPL OHS

INCREASED 60% INCREASED 15%

0%

10%

20%

30%

HOW TO SELL MANAGEMENT LIABILITY JOHN NAGLE, CHIEF EXECUTIVE OF LUMLEY INSURANCE

“One of the easiest ways to highlight the value of management liability insurance is to provide real life claims examples for the various exposures that the management liability product responds to. These claims need to relate directly to the industry that the client operates in so they can appreciate the protection and value that the policy provides. The Safe Work Australia website also provides details of statutory fines issued in each state.”

40%

50%

60%

WHY IS IT AN ESSENTIAL OFFERING? “Put simply – it’s a product that all business clients need,” continues Nagle. “The product is competitively priced and provides a very broad coverage to protect a range of exposures that businesses and their directors are exposed to, including employment practice issues, statutory liability, fidelity, trustees’ liability, corporate liability and directors’ and officers’ liability.

“It is also imperative for brokers to raise management liability with their clients or they could potentially face professional indemnity exposure themselves,” adds Nagle.

COVER STORY / BUSINESS INTERRUPTION

BUSINESS INTERRUPTION INSURANCE Scores of Australian businesses fold every year after disaster strikes. Even more alarmingly many of them have failed to take out an insurance policy which could have saved their business…

The data on the ill effects of business interruption is overwhelming. Despite the fact that 80% of businesses who suffer a short-term closure never open again, 42% of businesses still do not have the business interruption insurance in place that could avert such a downfall. The broker opportunity lies in highlighting this damning failure statistic to a business community which has ignored insurance cover which could save their livelihood.

“There’s no doubt the selling of business interruption insurance could be more successful,” agrees Peter Jones, head of SME Underwriting at Zurich Financial Services Australia. “Demand for BI has remained constant albeit at disappointing levels.

18 | DECEMBER 2012

DID YOU KNOW?

80% of businesses affected by a major incident close forever within 18 months

42% of businesses do not have business interruption insurance, according to Austbrokers

INSURANCEBUSINESSONLINE.COM.AU

Over the last 10 years, most attempts by insurers to promote increased take up of BI haven’t been particularly successful and take up rates haven’t improved.”

WHAT’S DRIVING DEMAND? Jones says many brokers are doing their best to drive demand for business interruption insurance, including promoting BI on their websites.

“There are now a number of BI ‘calculators’ available for brokers and customers to use to work through a BI discussion and I think this helps make the potential loss more tangible,” says Jones. “But confusion around the different ‘gross profit’ definitions used by accounting and insurance does not assist in the selling process.

“As an industry, we need to continue to promote the value of BI strongly. Certainly, following the recent Brisbane floods, Victorian bushfires and cyclone Yasi, there are numerous examples of businesses that have failed or experienced extreme hardship because they didn’t have BI insurance,” says Jones.

“There is huge growth potential for business interruption, particularly in the SME space where we typically see a third of policies including the option,” says Twain Abbott, national underwriting manager SME at CGU. “This is despite recent CGU research showing that 86% of businesses recognised the potential financial impact following an interruption to trading.

“We have seen more requests for BI cover in respect of contingent exposures, such as fire destroying the premises of a key customer or supplier and impacting their ability to trade. While these requests can usually be accommodated, it’s important to remember that premiums are paid

“There is huge growth potential for business interruption, particularly in the SME space where a third of policies include the option” Twain Abbott

HOW TO SELL BUSINESS INTERRUPTION INSURANCE PETER JONES, HEAD OF SME UNDERWRITING AT ZURICH FINANCIAL SERVICES AUSTRALIA

“It’s important that brokers continue to build customers’ understanding that insurance isn’t just for physical assets. Brokers need to ask the question “what happens when your business premises has been damaged or destroyed?

How will you repay your debts or pay your staff when turnover or cash flow has diminished or stopped entirely?”

TWAIN ABBOTT, NATIONAL UNDERWRITING MANAGER SME AT CGU

“It’s important for brokers to present the reality of a business shutdown, the implications for trade and the ongoing fixed costs that accrue even when the doors are closed. When no money is coming into the business, how will the owner pay the ongoing bills? Every year there are businesses that shut for good through no fault of their own, but a well-tailored BI policy could have kept the doors open and customers flowing through.”

DECEMBER 2012 | 19

COVER STORY / BUSINESS INTERRUPTION

QUESTIONS FOR CLIENTS

Q1

In the event of a major loss, do you have the cash reserves to meet the ongoing expenses of the business while the damaged assets are being replaced or repaired?

Q2

How much money would you need to have available to carry you through the re-establishment phase?

“ ‘Unlocking the key’ to BI does have the potential for millions of dollars of additional revenue to brokers” Peter Jones based on the total sum insured exposure. While the cost of insurance is in the forefront of business owners, BI cover should not be overlooked just to save a few dollars,” says Abbott.

WHY IT IS AN ESSENTIAL PRODUCT FOR BROKERS? Abbott says that numerous research reports show a disturbingly high failure rate for businesses trying to recover following an impact on their trading. BI cover is designed specifically to provide financial support during the period of interruption and help get the business get back on its feet, he explains.

“With the Australian economy seeing an increasing number of SMEs and self-employed, the need for BI cover is clear,” says Abbott. “Whilst businesses can re-establish operations quickly with improved technology, this can come at a prohibitively high cost. BI cover can meet these costs at a time where a business may not have available funds.

“BI is a cover not often known or understood by small business owners and brokers are in the best position to explain and advise on the importance of this cover and how it can help a business following a major loss,” adds Abbott.

Jones concurs that both brokers and insurers agree that BI is a fundamental and essential cover and that all customers with premises, either owned or rented, should have it. “ ‘Unlocking the key’ to BI does have the potential for millions of dollars of additional revenue to brokers as well as four to five times that in premium to insurers. Finding that key is proving a real challenge,” adds Jones.

20 | DECEMBER 2012

Q3 Q4

How would your customers react to your being closed or unable to supply?

Would your bank or other financiers expect loan repayments to be made even when you are not able to trade?

Q5 Q6

What is the lead-time on replacement equipment and stock?

How long do you think it would be to have your property claim assessed and paid?

Q7

What could be done to speed up the recovery process? How much does it cost, and can you afford to fund this expense yourself?

Q8

How would your lease respond to a major loss? Are you locked into paying rent again as soon as the landlord’s building is repaired and ready for occupancy?

Q9

If you lost a customer or customers during the period of disruption, how long would it take for you to replace them?

BI insurance, subject to the length of cover chosen, will pay any loss of insurable gross profit and increased costs of working until the business is returned to normal trading levels.

Q10

What would you do with your staff?

Many people say they would dismiss their staff. However, after a loss occurs, you may well need them to assist in the recovery process. Can you continue to fund the wage costs? Have your staff served the business well? How would you like to be treated if the situation was reversed?

Source: Allan Manning, LMI Group

COVER STORY / TRADE CREDIT INSURANCE

E D A R T DIT INSURANCE E R C With company insolvencies in Australia reaching GFC highs in recent months, brokers have plenty of sales points when it comes to offering trade credit insurance The biggest opportunity for insurance brokers in trade credit insurance is the underserviced potential of the overall market. “There is still a lot of potential [for brokers], with market penetration in Australia believed to be only 10%,” says Graham Crozier, partner at IMC Trade Credit Solutions.

HOW TO SELL TRADE CREDIT INSURANCE IMC’S GRAHAM CROZIER

“Simply ask the client: what price do you put on business survival? Trade credit insurance can be, and sadly often is, the difference between life and death in a business context. Everything you work long and hard for, your family, colleagues, suppliers, finance partners can all be put at risk if a large bad debt comes out of left field, as many businesses have found out to their detriment.”

22 | DECEMBER 2012

“A lot of businesses remain unaware of the product or have misconceptions about it. In certain overseas markets, including parts of Europe, penetration is significantly higher at 25% to 40%. We have a lot of work still to do in this area but also many opportunities to develop.”

Tania Muñiz, marketing manager of Coface Australia, estimates a slightly higher figure of 15% of Australian companies using trade credit insurance to mitigate risk, but concurs on the broker prospects: “For brokers, this can be seen as an opportunity to sell trade credit insurance to companies in Australia which in turn will be able to offer flexible payment terms to their buyers both domestically and overseas, and be more competitive with new and existing clients.”

While the potential remains prevalent, Kirk Cheesman, managing director of National Credit Insurance Brokers warns the space is not for

INSURANCEBUSINESSONLINE.COM.AU

TRADE CREDIT INSURANCE CLAIMS IN AUSTRALIA 16,000

NUMBER OF CLAIMS

14,000 12,000 10,000 8,000 6,000

Q3/2012

Q2/2012

Q1/2012

Q4/2011

Q3/2011

Q2/2011

Q1/2011

Q4/2010

Q3/2010

Q2/2010

Q1/2010

Q4/2009

Q3/2009

Q2/2009

Q1/2009

Q4/2008

Q3/2008

Q2/2008

Q1/2008

Q4/2007

Q3/2007

Q2/2007

4,000

•• Credit insurance claims in the third quarter of 2012 are the highest they have been since the height of the GFC. There has been a 24% increase in the number of claims placed and a 41% increase in the dollar value of claims.

•• According to ASIC, in the first eight months of 2012, total external administrations were up 3.4% on 2011.

•• The current trade credit insurance index score is 9.8% higher than the third quarter of 2011, indicating a worsening of the current credit risk environment.

Source: NCI

every broker to challenge: “Trade credit insurance is mainly a successful product for ‘specialist’ brokers who operate in this space. Trade credit insurance requires a broker to have a high level of human resources and demands day-to-day contact to assist the insured and manage their credit risks.”

WHAT’S DRIVING DEMAND? “As more companies become concerned about the financial environment, they become more interested in credit risk mitigation solutions,” continues Cheesman. “This may not just be limited to credit insurance solutions, but a whole range of good credit risk management processes including assessing debtor risk, monitoring customers against adverse information and helping with early collection of debts.”

Crozier says there has been a huge increase in interest and demand for trade credit insurance since the GFC across all sectors, and not just from the ‘traditional’ buyers.

“Trade credit insurance requires a broker to have a high level of human resources and demands day-today contact to assist the insured and manage their credit risks” Kirk Cheesman “Insolvency numbers have sky-rocketed from around 9,500 pa in 2009/10 to an expected 13,500 this year, including many household names and long-established companies,” says Crozier.

“Businesses are aware of the increased credit risks they face here and overseas and are more actively seeking the type of solutions we provide.

“The banking and finance industries are also very much aware of the positives, especially in difficult

DECEMBER 2012 | 23

COVER STORY / TRADE CREDIT INSURANCE

KEY BENEFITS OF TRADE CREDIT INSURANCE Coface’s Tania Muñiz on why this cover matters: BALANCE SHEET PROTECTION

“Australian business owners have become more risk adverse and look for more secure forms of payment” Tania Mũniz

DE T I D 24 | DECEMBER 2012

It can avoid accumulation of debts in your balance sheet due to late or non-payments CASH FLOW RELIEF

The loss incurred is indemnified by the trade credit insurer, thereby maintaining your company’s cash flow ENHANCED COMPETITIVENESS

Expand sales securely in existing and new markets

times such as these, and are often the catalyst for a policy to be put in place, with the benefits of trade credit insurance helping to support various funding facilities.”

Muñiz states that Coface has observed an increase demand for cover for both export and domestic markets while the recent failures of well-known companies in Australia has affected the way Australians do business.

“We have many examples of high profile Australian companies that have collapsed in recent years such as Hastie Services, Gunns Limited and Clive Peeters,” says Muñiz.

“Australian business owners have become more risk adverse and therefore look for more secure forms of payment. In terms of export, it is quite clear that the global economic crisis has had a big impact in the increased demand of trade credit insurance to cover overseas transactions.”

WHY IS IT AN ESSENTIAL OFFERING FOR BROKERS? “It should certainly be on the list of risks to discuss with your client,” says Cheesman. “Given the current uncertain financial conditions in Australia and our export markets, it is definitely a good time to review credit risks. However, a broker should only raise trade credit insurance if they know exactly what it offers and how it works. Otherwise, engage the support of a specialist broker.”

Crozier says most of the business owners he talks to believe the business environment is much harder now than it was even throughout the GFC

FINANCE ASSISTANCE

You obtain possible higher levels of funding at better rates

period: “There are no more stimulus packages, we are seeing inertia across many markets, decline in the resources sector, the early impacts of the Carbon Tax and concerns over a number of overseas markets and associated sovereign risk.

Insolvency numbers are likely to continue at high levels into 2013.”

He adds that trade credit insurance will also increasingly be used to support solutions to finance business operations and cash flow.

“Brokers should continue to spread the word and introduce the subject to those many businesses who remain unaware of its existence or who haven’t reviewed their market options for some time. Trade credit insurance will undoubtedly be a vital tool again in 2013 and brokers need to get onboard and promote the product to their clients and prospects,” Crozier adds.

Muñiz says by offering trade credit insurance, brokers have an opportunity to increase the suite of products on offer to their clients.

“Trade credit insurance is a pro-active approach for an unforeseen event,” adds Muñiz. “Trade receivables is usually the second largest asset many businesses have. If they don’t protect it, they incur the risk of weakening their balance sheet or, in worst cases, entering into administration.”

COVER STORY / PREMIUM FUNDING

PREMIUM FUNDING A product area already worth $100m annually in commission income to brokers – with the current financial pressure businesses find themselves up against – premium funding is very much the answer The premium funding sector is injecting close to $100m annually in commission income into the insurance intermediary industry, according to Stuart White, managing director of Pacific Premium Funding.

“It forms an integral part of the overall service provided by brokers and an important income line for many brokerages,” says White.

“With this product, insurance brokers are able to provide a range of payment options for their clients to pay their insurance premiums, and paying their insurance by the month not only assists their clients but also provides a smart option for brokers to improve their own cash flow and premium collections activities.”

26 | DECEMBER 2012

Gary Seymour, CEO of Macquarie Premium Funding, says as evidenced in the Macquarie Relationship Banking 2011 Insurance Broking Benchmarking Survey, brokers who have a strong premium funding focus and debtor management processes tend to also have higher retention rates and generally stronger profit margins.

WHAT’S DRIVING DEMAND? “Premium funding remains an area of untapped opportunity,” says White. “The premium funding industry body, IPFA, estimates that around $5bn, or close to 40%, of all commercial premiums distributed through insurance intermediaries in Australia are now funded. With some brokerages able to

INSURANCEBUSINESSONLINE.COM.AU

THE BENEFITS OF PREMIUM FUNDING NUMBER SIX

NUMBER ONE

No ongoing loan service fees

Smooths business cash flow by paying your insurance premiums in instalments

NUMBER SEVEN

NUMBER TWO

Fast, simple application process – you typically get approval within 24 hours

Interest charges on premium funding transactions are generally tax deductible

NUMBER THREE

NUMBER EIGHT

Gary Seymour

Ability to make additions to existing loans or renew policies without the need for additional paperwork

No additional security or company charges required NUMBER NINE

NUMBER FOUR

Flexibility of structuring the loan including upfront deposit, split settlements and payment options

Retain working capital within your business NUMBER TEN

NUMBER FIVE

Interest rates are fixed so you are protected from interest rate fluctuations

Payment via direct debit from your bank account or credit card

Source: Macquarie

COST BENEFIT ANALYSIS The cost of premium funding can often be fully offset by the more productive use of funds in the business that would otherwise be used for upfront insurance payment, according to Roderick Insurance Brokers.

To illustrate this concept, a cost benefit analysis is shown below which compares the income generated from the funds held in the business versus the cost of the premium funding facility.

Approximate amount to be funded is $5,264.

Cost of premium funding

$558.58

Less tax

$167.57

Net cost

$391.01

Income generate from fund retention

$328.50

Less tax Net benefit

$98.55 $229.95

achieve funding penetration of up to 70% of their own portfolios.”

Seymour adds: “The current economic climate is certainly driving increased demand for premium funding from clients who are looking to smooth their cash flows.”

WHY IS IT AN ESSENTIAL PRODUCT FOR BROKERS? “The economic climate is still presenting a lot of challenges for many businesses, with little change

“The opportunity for brokers to supplement their own income with earnings from premium funding means greater protection to the broker’s own bottom line” Stuart White DECEMBER 2012 | 27

COVER STORY / PREMIUM FUNDING

expected in the short term, so it is essential that brokers can support their clients in smoothing their cash flows through premium funding,” continues Seymour.

“In fact, in our 2011 benchmarking survey, 19% of brokers identified ‘increased premium funding revenue’ as something that would positively impact their profit in FY12/13.”

White says typically, the premium funding sector is counter-cyclical. When the economy is doing well and clients are cashed up, they are less likely to fund. When the economy is challenged, there tends to be more clients looking for alternate finance sources.

Premium funding is an easy and logical alternate finance solution when economic conditions are difficult, White claims.

HOW TO SELL PREMIUM FUNDING STUART WHITE, MANAGING DIRECTOR OF PACIFIC PREMIUM FUNDING

“In the simplest terms, the greatest value to a client of premium funding is that it changes a lumpy one-off annual cash outflow into a smooth, fixed monthly payment – it smooths client cash flow. And, in most cases, this can be done via a simple ‘low-doc’ loan with no additional security required. For the client, they are looking for two key things from their broker – an exceptional insurance product and service as well as a simple, affordable way to pay for it.”

GARY SEYMOUR, CEO OF MACQUARIE PREMIUM FUNDING

“There are many benefits for clients with premium funding, but perhaps the most important benefit in the current business climate is that it smooths cash flow by enabling a business to pay their insurance premium in instalments.”

28 | DECEMBER 2012

“In the past 12 months, we are seeing those who are exposed to the impacts of the high Australian dollar in industry sectors, such as export, manufacturing and retail, continue to look for smart ways to source capital and debt and are utilising premium funding,” says White. “There is now a view forming that we are returning to the experience of premium funding moving back to its traditional countercyclical model.”

White continues that recent statements and monetary policy action from the Reserve Bank indicates caution about the outlook for economic conditions into 2013. In addition, insurers continue to seek increases in commercial insurance premiums to offset the lower investment returns in a low growth environment and increased re-insurance costs. “We expect these conditions will drive a higher uptake of premium funding,” White says.

“The ability for the premium funding product to not only smooth the cash impact of the annual insurance payment but also to assist the broker themselves in more efficiently managing premium collections means it will be – more than ever – increasingly important as we head into 2013.

“The opportunity for brokers to supplement their own income with earnings from premium funding, as well as their own cash flow management, means greater protection to the broker’s own bottom line and with many premium funders now developing simplified and more automated premium funding processes for the broker, the product becomes an easy value add for brokers when dealing with their clients,” adds White.

COVER STORY / WORKERS COMPENSATION

WORKERS An industry worth nearly $8bn a year and a legislative requirement for clients means that brokers need to be aware of the opportunities available in the workers compensation space

According to David Krawitz, chief general manager of workers compensation at Allianz, workers compensation ranks as the single highest insurance expenditure for many businesses. “Workplace risk is a major cost for employers in Australia,” says Krawitz. “The ABS [Australian Social Trends June 2011] has reported the cost of work-related injuries and illnesses at $60bn annually.

“This includes indirect costs of loss of productivity and retraining, but workers compensation accounts for approximately $7.5bn [Comparative Performance Monitoring report 14th Edition – October 2012].”

“Workers compensation can be very successful for brokers, but there are few easy wins as it’s a specialised segment of the industry and requires investment,” says Jason Allison, chief workers compensation portfolio, Suncorp Commercial Insurance. “It’s important for brokers to keep up to date with changes to both workers compensation and OHS legislation.”

Allison says the significant potential exposures that workplace accidents carry mean there’s a great opportunity for brokers to provide high-value 30 | DECEMBER 2012

advice to clients that can make a big difference to a business’ bottom line.

Broker Andrew Herrett of Business Insurance Australia says offering workers compensation provides an introduction to clients. “We explain we offer a set-up service only free of charge and all ongoing documentation and management needs to be handled directly by the client with the insurers.

“Providing we are servicing their other commercial insurance needs, we assist on an as-needed basis going forward. This has worked well for us. We are aware other brokers charge fees such as ongoing management fees, however, we choose to stay out of this as much as possible. Our clients respond well to this,” says Herrett.

WHAT’S DRIVING DEMAND? “Prevention is critical and Work Health and Safety laws are designed to reduce the incidence of accidents,” says Krawitz. “With the harmonisation of WH&S laws in Australia, business has a need for expert advice and support to comply with the new provisions and to establish the required controls.

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AUSTRALIAN WORKERS COMPENSATION STATISTICS 2009–2010 JURISDICTION

EMPLOYEES COVERED

FATALITIES

SERIOUS INCIDENCE FREQUENCY CLAIMS1 RATE2 RATE3

DURABLE RTW RATE4

DISPUTE RATE5

STANDARD AVERAGE PREMIUM RATE

NSW

3,089,100

44

43,950

14.2

8.5

74%

3.90%

1.82%

VICTORIA

2,535,200

39

23,990

9.5

5.8

75%

9.70%

1.39%

QUEENSLAND

1,892,100

44

29,380

15.5

9.4

78%

3.00%

1.12%

WA

1,070,500

18

12,330

11.5

6.8

n/a

2.50%

1.22%

SA

710,400

7

8,850

12.5

7.8

72%

6.90%

2.76%

TASMANIA

205,300

4

3,160

15.4

9.9

82%

5.90%

1.40%

NT

112,900

4

1,340

11.9

6.8

77%

4.80%

1.82%

ACT

130,600

3

1,710

13.1

8.3

n/a

n/a

2.03%

COMCARE

364,400

31

2,720

7.5

4.2

81%

4.30%

0.93%

SEACARE

4,500

0

190

42.8

9.5

62%

11.70%

3.59%

AUSTRALIA

10,115,100

194

127,620

12.6

7.6

75%

4.70%

1.53%

1. Serious claims include all claims for which one or more weeks of compensation has been recorded (excluding journey claims).

2. Incidence rate of serious injuries (claims per 1,000 employees, projected 2009/10).

3. Frequency rate of serious injuries (claims per million hours worked, projected 2009/10).

4. The durable RTW rate is the proportion of injured workers who have returned to work and were still working at the time of interview in a survey conducted by Campbell Research and Consulting, 7–9 months after their claim.

5. A new definition designed to improve comparability among jurisdictions was implemented in CPM 13. The number of active claims in the reference financial year rather than new claims lodged in the reference financial year are used to calculate disputation rates.

Source: Safe Work Australia – Key Workers’ Compensation Information, 2012

‘BROKERS CAN SAVE LIVES’ JASON ALLISON, CHIEF WORKERS COMPENSATION PORTFOLIO WITH SUNCORP COMMERCIAL INSURANCE

“Brokers are well placed to help minimise premium rises by providing their clients with active claims support and risk management advice to help reduce workplace accidents. Investment income is an important factor in containing workers compensation premiums, and when bond yields slump – as they have recently – it has an impact on premiums.

Management of workers compensation claims is most successful when brokers and business owners work closely together with their claims manager to get the injured worker back on the job as quickly as possible. A timely return to the workplace is the best outcome for the worker and the business, and it can result in a significant saving come renewal time.

It’s easy for a business owner who is focused on their operations to give too little attention to risk management, which can prove extremely costly.

Active guidance from brokers can save lives and ensure that the business survives.”

“Over the past decade there has been a big increase in the demand for workers compensation support from business owners and this is reflected in a growth of brokerages developing or expanding their workers compensation capacity” Jason Allison

DECEMBER 2012 | 31

COVER STORY / WORKERS COMPENSATION

“With workers compensation as a major insurance expenditure, management of workplace risk is essential ” David Krawitz This has created significant demand for additional services by WH&S specialists which brokering firms with specialists are generally able to respond to.”

Krawitz says as far as demand goes, workers compensation insurance is compulsory in all jurisdictions so the demand is relatively constant, changing with the size of the labour force in response to prevailing economic conditions.

Allison claims: “Over the past decade there has been a big increase in the demand for workers compensation support from business owners and this is reflected in a growth of brokerages developing or expanding their workers compensation capacity. This is occurring in large and small brokerages alike, and appears to be growing day-by-day.”

It is a complex area, warns Allison, and this will usually involve the brokerage employing workers compensation specialists or engaging a subcontractor. The sophistication of risk management is increasing and more business owners are seeing the benefits of investing in the avoidance of workplace accidents and reducing claims costs for ongoing claims, he says.

“With changes to workers compensation legislation, particularly in NSW, and extensive media coverage, there is a heightened awareness of workers compensation insurance. Being familiar with the issues and being able to offer advice to clients is important for brokers,” says Allison.

32 | DECEMBER 2012

HOW TO SELL WORKERS COMPENSATION ANDREW HERRETT, BUSINESS INSURANCE AUSTRALIA

“The areas of contention lay in the treatment of contractors. Traditional direct employees rarely need explanation when it comes to the need for and value in workers compensation.

The issue, however, of ‘non-standard’ or ‘non-traditional’ relationships between employers and ‘contractors’ means there are exposures that many businesses are unaware of. Identifying this adds significant value to the insured program of protection whilst leading nicely into the issues surrounding broader civil liability covers.”

JASON ALLISON, CHIEF WORKERS COMPENSATION PORTFOLIO, SUNCORP COMMERCIAL INSURANCE

“A business cannot operate without people, and rehabilitating your people if there’s an accident is a business priority.

Brokers can help their clients understand the relationship between claims costs and premiums, and the practical steps that can be taken to help injured employees make a timely return to work. This ­is a sound investment. Employers may find that every $1 of claims cost that is saved results in several dollars of reduced premium.”

DAVID KRAWITZ, CHIEF GENERAL MANAGER OF WORKERS COMPENSATION AT ALLIANZ

“The cost of workplace injuries is a key driver of workers compensation premium costs, let alone the indirect costs of work-related injuries and illnesses. Brokers need to demonstrate the benefit of expenditures to prevent accidents and to mitigate the cost of work-related injuries and illnesses.”

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WHY IS IT AN ESSENTIAL PRODUCT FOR BROKERS? “Workers compensation is mandatory for all businesses and is often the largest single insurance spend, which reflects the level of risk it carries,” continues Allison. “The increasing cost of medical treatment and rise in the frequency of psychological claims are just a couple of the trends to be aware of. Poorly managed workplace safety and workers compensation claims not only have a negative impact on the lives of employees, they can destroy the profitability of a business.

“As the Australian workforce ages, employers face new challenges when it comes to avoiding injury and rehabilitating injured workers.

“There’s a clear need for businesses of all sizes to focus on improving their OHS and return-to-work capabilities,” explains Allison.

Herrett says that the workers compensation space is one that has to be covered off by brokers as a part of any review, as failure to identify and discuss this will leave the broker exposed.

“What it does do, however, is that it identifies the contractor issues, as this is a massively misunderstood and badly handled area of risk management. In discussing this, other aspects of the insured’s liability program can be considered and managed in more detail,” adds Herrett.

“With workers compensation being a major insurance expenditure for business, management of workplace risks is essential if a business is to be competitive in today’s market,” concludes Krawitz.

“Brokers play an important role in supporting business in the management of their risks and a broker’s offering would be incomplete if it didn’t include workplace risk.”

DECEMBER 2012 | 33

BROKING INTELLIGENCE / PERSONAL BRANDING

BUILD YOUR

BROKING

BRAND 34 | DECEMBER 2012

INSURANCEBUSINESSONLINE.COM.AU

Corporate trainer, author and businesswoman Nikki Heald of Corptraining unveils how every insurance broker can build their brand and boost their firm’s success Business is not business – business is personal and people do business with people they like, trust and perceive as being credible. The insurance profession is based on relationships so we need to consider how we can maintain this in today’s digital market. Each day we are confronted with a mass of technology, and there are certainly many benefits to working in a digital world – streamlined processes, ability to work remotely, increased speed and a multitude of choices.

However, in a digital environment the greatest competitor to insurance brokers is the direct market.

Unfortunately, there seems to be the perception of ease and accessibility around purchasing insurance online.

Additionally, people think that it’s not only quicker to jump online to buy their covers, but more cost effective.

So, how does this impact on insurance brokers when selling insurance? Well, it now provides an opportunity for brokers to promote their value and the benefits of dealing with one individual. Something the direct market cannot offer, nor compete with.

VALUE OF THE BROKER The value of retaining a broker ensures personalised attention and this enables clients to build a genuine relationship with one point of contact at the brokerage.

There is also the advantage that brokers are experts in insurance and can carry out policy comparisons, saving time for their client. Additionally, brokers have knowledge of a client’s history and experience, so are in a prime position to ensure correct covers are placed. Of course, the value certainly comes into play at the time of a loss, when clients have direct access to their broker who can provide support and guidance.

PERSONAL BRANDING Another way of promoting your value is to increase your professional visibility and you can do this through personal branding.

Personal branding relates to the way that you market yourself to the outside world and what message you project. It relates to how others see you and thankfully, you do have some influence over it. As we know, perception can be a powerful persuader and your personal packaging speaks volumes.

Personal branding incorporates: • What you are – values, morals, ethics • Who you are – history, skills, qualifications • How others see you – reputation, credibility, trustworthiness • Authenticity – promoting a genuine and honest brand Perhaps you have not thought about your personal brand, however, research has demonstrated the way in which you are perceived can influence a client’s purchasing decision. Getting your personal branding right may be the difference between making or breaking a potential business opportunity.

8 REASONS BROKERS ARE BETTER THAN DIRECT INSURERS DD Consistent point of contact for clients DD Personalised service DD Genuine relationship DD Specialist advice DD Correct covers DD Saves time DD Provides education DD Offers support and guidance

DECEMBER 2012 | 35

BROKING INTELLIGENCE / PERSONAL BRANDING

‘NO FRILLS’ OR ‘QUALITY’?

GETTING THE DETAILS RIGHT… BUSINESS CARDS

Make sure they are clean, crisp and in good condition.

WEBSITE

You need to have a presentable and professional website.

LETTERHEAD

A unified letterhead will present the right message to clients every time.

BIO

List your achievements and attributes and include your bio in all marketing material.

LINKEDIN

This is an excellent way to display your experience and skills online. Make sure you have a professional photo attached.

ONLINE VISIBILITY

Write for online websites and have your profile and opinions online as much as possible.

36 | DECEMBER 2012

Additionally, personal branding has a profound impact on career progression. If you are an emerging leader intending to progress within the insurance profession, ensure you promote your brand both internally (for promotions, opportunities, etc.) and externally to clients and colleagues.

Your current personal brand will influence whether you are perceived as ‘no frills’ or ‘quality’. People like to be associated with quality so it’s worth striving towards developing a credible and authentic brand proposition.

So, you may be thinking what is the value of developing my brand? Well, you may know how fantastic and wonderful you are, but other people may not be so aware! What we do know is that some brands are simply more credible than others. When you think of Mark Bouris, Lisa Wilkinson or even Lara Bingle you will think of a series of terms which you identify with their particular brand or profile. Interestingly, the perceptions we have of those brands will have a huge impact on whether you want to do business with them – your clients are no different. Consider your current personal brand – grab a piece of paper and write down a few terms which describe you. These could include enthusiastic, the go-to-person, solutions-based, creative, dynamic, passionate and knowledgeable.

FIRST IMPRESSIONS COUNT First impressions are powerful and are also an important component of your personal brand. We never get a second chance to create a great first impression, so it’s essential we get it right every time.

Statistics show that impressions are formed within 3–30 seconds so we need to maximise that small window of opportunity. During the first impression, people are assessing three major factors relating to the other person. Those factors, and the weighting of their importance initially, are: Speech

7% 55%

Body language

38% Presentation

INSURANCEBUSINESSONLINE.COM.AU

So, during the first 3–30 seconds, 93% of the first impression we form about others is based on the visual and we either like what we see or we don’t. Prospective clients are no different.

WAYS TO BROADCAST YOUR BRAND So after investing time, energy and commitment into developing your brand, it’s essential you consider ways to broadcast it. This is certainly not the time to be shy.

One way is through networking and hosting events.

You don’t have to host a huge event, you could simply invite colleagues and clients together for a morning tea.

And ensure you network within your target or niche market, otherwise you are simply wasting time.

Getting published is a fantastic way to get your brand out there. Writing articles, newsletters or even books is great for your profile. Insurance Business Online (insurancebusinessonline.com.au) accepts guest opinion pieces from brokers, so get in touch to discuss a suitable

topic. You can also sit on an insurance or broking advisory board and make sure that is included in your bio.

Your bio is a way of promoting you. It should outline who you are, what you’ve achieved and your brand proposition. Be sure to include it in any marketing material that is distributed.

Other ways of promoting your brand include chairing meetings, taking on community service, volunteering for high profile projects and delivering presentations.

GROW YOUR BRAND Continually work on your personal brand and challenge yourself to take it to the next level. Regularly review your brand and ask others for their feedback.

Again, business is not business – business is personal and that’s why people do business with people they like.

Your personal brand increases your viability and influences clients’ purchasing decisions. And, what is said of you ultimately determines the quality of your brand.

Nikki Heald is a corporate trainer, presenter, businesswoman, founder of Corptraining and co-author of ‘Views On The Way To The Top’. Heald works with insurer Zurich to educate its insurance brokers on various aspects of success in business. Head to corptraining.com.au for more information

DECEMBER 2012 | 37

BROKER INTELLIGENCE / RULES OF BROKING

THE NEW RULES

OF INSURANCE BROKING Being an insurance broker today means succeeding online and having a digital brand that clients want to work with. Business strategist Michael Harrison of Strategies Plus Concepts asks: are you playing by the new rules of broking?

38 | DECEMBER 2012

The world has changed. The internet has had a huge impact on the business of insurance broking. It has changed the way we think and more importantly, it has changed the way our clients think and act.

This change is accelerating for three main reasons. Firstly, the internet offers instant access.

Snail mail has been replaced by email for 90% of transactions. Digital tools let us share videos, send claims updates by SMS and ‘auto-respond’ to enquiries. We do not want to wait anymore.

Secondly, the internet is interactive. Communication is more immediate and effective. A Skype video call lets you talk face-to-face with clients and share documents at the same time. Social media sites have become the new frontiers for prospecting and QR codes instantly connect people to our websites.

Finally, this is all inexpensive. Once you have an internet connection, you are in touch with the

INSURANCEBUSINESSONLINE.COM.AU

entire world. This necessitates some new rules for insurance brokers…

1

BEING A SUPPLIER IS NO LONGER ENOUGH

If you are going to feature prominently, you have to be an authority and not just a supplier. It is not enough anymore just to say, “here I am, I am an insurance broker” – you have to be recognised for knowing something about insurance. Seth Godin is a marketing authority. He’s regarded as an expert, not just because he knows about marketing, but because he speaks about it, blogs about it, makes videos about it and writes books about it. In fact, there are more online searches for Seth Godin than there are for marketing. In the digital world you need a footprint in multiple channels.

3

Michael Harrison

OUT OF SIGHT IS OUT OF BUSINESS

Where is the first place you go to look for information? Google. We are all the same. If you cannot find a person or company on Google you think they either do not exist, or if they do, they are not too relevant. A Google search proves that they exist and have some currency. When was the last time you used the Yellow Pages, except perhaps as a doorstop? Why would you? Everything you need to know, from contact details to a satellite view of a building is on the internet, so make sure you are there too.

2

“The internet is an enabler. It provides a plethora of digital tools, but relationships are analogue events and insurance brokers are in the relationships business”

YOU HAVE TO GIVE TO GET

Billboards, telemarketing and the constant barrage of advertisements on television have made us cynical and suspicious. If all you see is someone’s website or Google advertisement on the internet, you lose interest. If, on the other hand, you offer something worthwhile upfront then the client is more likely to interact with you. It might be a free guide to business insurance or an e-book about risk management. Give something first to attract interest in what you have to say.

4

DELIVER AN EXPERIENCE

5

THINK DIGITAL, ACT ANALOG

It is not enough anymore to say, “I sell this”.

You have got to make people feel part of your community. Are they welcomed like friends? Do they have special status; an after-hours number to call in an emergency; an invitation to your business insurance update webinar; a seat at your private economic update briefing held in your boardroom each quarter – which of course you record and webcast for those who couldn’t make it.

The internet is an enabler. It provides a plethora of digital tools, but relationships are analogue events and insurance brokers are in the relationships business. The key to growth and credibility is to use the power of the digital world to enhance your client relationships. Salesforce. com allows you to track client contact details; shoeboxed.com allows you to photograph all those business cards you collected over the years for automatic inclusion in your newsletter list; simplebooklet.com lets you create compelling and engaging content on the web and across mobile devices to engage your clients and prospects; and newspaper websites let you email articles of specific interest to selected clients. All of these are accessible from your smartphone.

Polaroid cameras went out of business because they missed the digital photography revolution.

Encyclopaedia Britannica missed the digital tsunami that created Wikipedia. Microsoft missed the tablet revolution started by Apple’s iPad and are trying to catch up with the Surface.

The digital revolution for insurance brokers is here now.

Michael Harrison is a business strategist who designs growth strategies for professional services firms. He presented these concepts at the recent Zurich GenerationZ Forum.

He can be contacted at strategies.com.au

DECEMBER 2012 | 39

BROKER INTELLIGENCE / ONLINE BROKING

THE PERILS OF ONLINE BROKING Marc Chiarella of CBP Lawyers warns insurance brokers that not all risks are suited to online insurance applications and failure to comply could result in a multi-million dollar lawsuit Insurance brokers must be wary to make relevant enquiries that may affect an underwriting decision.

This is particularly relevant when using online quoting systems that do not ask clear questions about certain risks.

INSURANCE BROKERS MUST NOT LOSE SIGHT OF THEIR DUTIES AND OBLIGATIONS The insurance broker is fundamentally the ambassador of the insurance industry to the consumer of insurance products. They have the widest knowledge of insurance market cycles, insurer appetite and consumer sentiment towards the industry. As ambassadors of the industry for an array of service providers, it is important that brokers are supported when discharging their obligations and duties.

BROKERS MUST MAKE ADEQUATE ENQUIRIES REGARDING RISK

“The writing is on the wall: some risks are not suited to online portal arrangements” Marc Chiarella 40 | DECEMBER 2012

The approach to transacting insurance online will vary depending on insurer appetite. However, generally, online platforms are becoming the status quo when conducting “low risk” cover.

Where a broker uses such systems, it is not enough that they simply advise their client of their duty of disclosure: the broker’s duty to the client remains that it must make adequate enquiries regarding the risk being presented to insurers.

The broker must provide underwriters with necessary information that is relevant to the risk being underwritten. This is the case even if an online quoting portal – or any proposal for that matter – does not clearly ask a specific question of the insured. The burden to make enquiries of such risk and disclose the existence of such risk increases where at industry level, such questions are normally a key factor in whether or not an insurer would write or accept a risk being presented to it.

PRESENCE OF EXPANDED POLYSTYRENE (EPS) ON APPLICANT’S PROPERTY These issues were recently brought to light in the decision of Kotku Bread Pty Ltd v Vero Insurance & Anor [2012], where an insurer directed that its “small business” be transacted on an online portal by one of its subsidiary companies. The applicant, who had previously been insured via the parent

INSURANCEBUSINESSONLINE.COM.AU

ONLINE BROKING CHECKLIST

✓ If in doubt, double check the assessment with the client

✓ Document every stage of the risk assessment

✓ Send details of every stage of the assessment to your insurer

✓ Print off any risk assessments, even ones done online, and get the client to sign the hard copy

Marc Chiarella

✓ Never let the ease of online systems cloud basic broking principles and best practice

company, had disclosed its risk profile to its then insurer in a previous period of insurance.

When the insurer directed that small business transacted by it be directed to its subsidiary, the applicant was required to apply with that subsidiary as if it were “new business”. Application for terms with the new subsidiary was transacted via an online quoting portal.

When completing the online application, the broker was asked about the proportion of the applicant’s property containing expanded polystyrene (EPS). The broker answered “0–33%”. It was subsequently found that the premises contained a much higher proportion of the material.

INSURER DENIES INDEMNITY ON BASIS OF MISREPRESENTATION The insured premises burned down and the insurer denied the claim. The applicant sued the insurer, its parent company and the broker.

Relying on the principle that an insurer may not be imputed with knowledge it holds somewhere unless such knowledge is reasonably in the mind of the officer responsible for contracting, the insurer denied indemnity and reduced its liability to nil under section 28(3) of the Insurance Contracts Act. This was on the grounds that the insured’s answer was incorrect and constituted a misrepresentation.

The court found in favour of the insurer. The applicant’s claim against the broker was brought in contract and in tort. The applicant was successful in receiving an award of $2,716,300, less $10,000 for the additional premium it would have paid to place alternative cover.

DISCLOSURE OF INFORMATION THAT MAY AFFECT AN UNDERWRITING DECISION The court held that the presence of EPS is well known within the insurance industry to be relevant when procuring cover for property insurance. This means that when any application (including an online quoting system) is not clear regarding disclosure of information that may affect an underwriting decision and where a fact influencing the underwriting decision is evident, the broker must make all relevant enquiries regarding that fact and must subsequently disclose the fact to underwriters. Informing an insured about its duty of disclosure under the Insurance Contracts Act does not relieve a broker of such duty.

BROKERS MUST MAKE ENQUIRIES, DOCUMENT RESPONSES AND SEND THEM TO THE INSURER The writing is on the wall: some risks are not suited to online portal arrangements. In the event of any doubt, brokers should make enquiries with the insured and document these enquiries. They should ensure that such correspondence is sent directly to the relevant insurer, even if it takes longer to do so, or a higher premium will subsequently be quoted, and especially where the insurer is offering a higher rate of commission for transacting business on its online portal.

Despite all the operational and transactional benefits of online transacting, it is imperative for brokers to revert to fundamental principles of utmost good faith and duty of disclosure when placing risk with insurers.

DECEMBER 2012 | 41

BROKER INTELLIGENCE / SOCIAL MEDIA

09

TIPS FOR SELLING THROUGH SOCIAL MEDIA

With social media changing how companies sell, social media consultancy Social Centered Selling unveils how to monetise the phenomena

01

THE SALES LANDSCAPE HAS CHANGED

Right now, your prospects are reading about your products and services on blogs and in forums. They are scanning YouTube videos, your LinkedIn profile, Focus forums, Tweets and searching on Google for information about what they want to buy and from whom; they are ignoring the text on your website.

Now that social media has arrived on the scene, the classic formula of selling has been disrupted. Buyer 2.0 does not need you to educate them. Using the web and social tools, they are well educated on the features, functionality and pricing of available solutions long before they have their first conversation with sales.

CONSIDER THESE FACTS:

Studies by Experian Marketing Services indicate that social networking now accounts for 15% of internet visits

1 BILLION USERS

02

WHAT BUYERS WANT YOU TO KNOW

For sales organisations to succeed in today’s social business environment, they must first accept that buyer behaviour has changed! Buyer 2.0 is web savvy, informed and probably knows more about you than you know about them. In this new world, buyers start the sales process without you, which means that sellers must shift from a transactional approach to the sales process to a solutionoriented, value-focused, and socially-connected approach.

These days, most buying decisions now start, move forward, and are very often closed online or over the phone without a single face-to-face meeting. That’s a frightening thought for the sales professional who has long believed that the only way to “close a deal” is to be sitting across the table from the prospect.

In addition to great people and sales skills, salespeople must also demonstrate that they are social media savvy and have strong business acumen. In Selling to the C-Suite, authors Stephen J. Bistritz, Ed.D. and Nicholas A.C. Read conducted extensive research on what buyers want salespeople to know. The question posed was: What has to happen in meetings with salespeople for the executive to feel it was effective?

THE ANSWER:

100 MILLION USERS

150 MILLION USERS

DEMONSTRATED RESPONSIBILITY

65 MILLION USERS

UNDERSTOOD MY BUSINESS GOALS

LISTENED BEFORE PROPOSING A SOLUTION

DISPLAYED KNOWLEDGE OF MY INDUSTRY

42 | DECEMBER 2012

INSURANCEBUSINESSONLINE.COM.AU

Your prospect expects you to understand their business and with social networking tools like LinkedIn and Twitter, and business intelligence tools like InsideView, there is just no excuse for not having done your homework. We’ll get into that in more detail, but for now what you need to understand is that the days of walking in the door blind to your prospect’s issues are over. During the meeting is not the time to ask questions that you should already know the answers to. Meeting preparation is not optional.

03

UNDERSTAND THE TECHNOLOGY

There is often confusion about the difference between LinkedIn, Twitter and Facebook and how each applies to the sales process. In a nutshell, here is how these platforms fit.

LinkedIn is your business networking tool and aids salespeople on the front-end of the sales cycle.

Networking, lead generation, opportunity qualification, securing referrals and establishing business credibility in your field are just a few of the ways that you can use LinkedIn to your advantage.

04

Social selling has risks, but sitting on the sidelines is the greatest risk of all!

You have been selling successfully for some time, so you may be asking, why do I need to worry about social media? The answer should be obvious. Your prospects are there! They are checking out what you offer and what your competitors offer. Who do you want them to choose?

Einstein said the definition of insanity is doing the same thing over and over again expecting a different result. Sales approaches that worked five or 10 years ago are just not effective; it is time to let them go. Yes, it will take a little upfront work to establish your foundation, but it is not as complicated as you may think.

Positioning yourself to succeed in a social selling world includes these elements: HAVING A PLAN

CRAFTING YOUR MESSAGE

PICKING THE RIGHT TOOLS

MEASURING AND TRACKING

DEFINING YOUR AUDIENCE

AND INVESTING IN TRAINING!

IMPLEMENTING ACTIONABLE TACTICS

05 Facebook is more conversational and personal in nature. For business, a Facebook fan page is often used by marketers to create customer loyalty and retention on the back-end of the sales cycle. By cultivating fans, marketing helps to ensure that your company remains front and centre in people’s minds.

Twitter is a micro-blogging tool and the real-time nature of the information being shared is a gold mine of business intelligence. You can follow your competitors to see what kinds of messages they are sending out. Or, follow the company that your prospect works for and stay on top of what kind of information they are sharing, what questions they are asking and the vendors they may be recommending.

THE SOCIAL SELLING APPROACH

TRAITS OF A SOCIAL SALESPERSON

In addition to being relationship oriented and committed to serving the customer, the social salesperson is, well ... social. They understand that a give-first-beforeexpecting-an-immediate-return mindset is what sets them apart from the majority of their competitors.

People still buy from people and they need to trust you.

Trust takes time. Just because you have connected with someone on LinkedIn does not mean that you have earned trust in their eyes. Creating a perception of trust does not have to be difficult thanks to social media. By using LinkedIn or Twitter you can share content that has value, like white papers, case studies, presentations, industry information and more.

Social salespeople listen before engaging. Their goal is to help to solve problems rather than pitching what they have to sell. Impatient salespeople have found out the hard way what happens when they use social media to sell. For example, you connect with someone on LinkedIn and then turn right around and send them a sales spam email. In the

DECEMBER 2012 | 43

BROKER INTELLIGENCE / SOCIAL MEDIA

mildest of repercussions, you are merely removed as a connection. But annoy the wrong person and you just might find that ill-conceived sales spam is blasted to the online world for everyone to see.

COMMITTED ENGAGING

06

LISTENS TRUSTING

YOUR ONLINE PRESENCE MUST ROCK!

Remember that buyers are doing their homework and looking for solutions to their business problems. They search Google, LinkedIn, Twitter, Facebook and anything else that they can find. If your ideal buyer lands on your LinkedIn page, you need to stand out.

Your profile must be compelling enough for your prospect to want to know more. Make the time to clean up your profile and then commit to keeping it fresh with content that you update on a regular basis. You may have only one shot at capturing the attention of your prospect, so make the content on your profile count.

07

INTELLIGENCE IS KEY

As we use tools like LinkedIn, Facebook and Twitter, the number of people that we maintain some degree of one-to-one contact and connection with via-peer networks and groups has dramatically increased in the past few years. Social salespeople will use these tools to become more adept at what you know about successfully navigating the first few critical phases of the sales process: investigate and early qualify. Better information leads to better qualification of sales opportunities. And, used effectively, social networking shrinks the physical time it takes to move the opportunity to close.

Social selling is about recognising that the buying

44 | DECEMBER 2012

process is controlled by a better informed and more connected customer.

While sales remains relationship-driven business, the power of "who you know" is trumped by "what you know about who you know." The new social customer is demanding relevance from salespeople, expecting them to know about them, their companies, and their needs before engaging.

Before you decide to engage with your prospect, do your homework and leverage the information in a way that leads to building rapport. How you do this makes the difference between being perceived as someone who is paying attention and one who is stalking people.

08

THE ROI: MAKE IT MATTER

Use social media to research, target, and connect with your ideal (pre-qualified, most likely to buy) prospects. Then track social interactions along with phone and email. Using social media in conjunction with phone and email can increase sales cycle conversion metrics such as the critical connect rate. Busy people (a category that almost unanimously includes every business executive) are less likely to engage with salespeople than ever before.

Create a target list of the right companies and the right ACCORDING TO INSIDEVIEW,

92%

OF EXECUTIVES SAID THEY WOULD NOT RESPOND TO A COLD CALL OR EMAIL FROM SOMEONE THAT THEY DID NOT KNOW

prospects for you. Know which companies and titles your offering is most likely to entice, and then connect with them through personal, customised, and relevant messages rather than generic scripts.

09

MANAGING TIME

There are lots of tools available for managing your social networks but HootSuite is our favourite! With HootSuite you can monitor and post to multiple social networks, including Facebook, Twitter and LinkedIn, from a single dashboard. You can also schedule messages to reach your followers when they're most likely to be logged in.

Social Centered Selling is a consultancy focused on bringing sales and social media capabilities to sales organisations. Its website is: scs-connect.com

Q&A / NAUTILUS MARINE

SHIP SHAPE Nautilus Marine CEO Lyndon Turner on building a business from scratch, getting brokers onside and if you should be offering marine insurance

Photography by: David Smyth 46 | DECEMBER 2012

INSURANCEBUSINESSONLINE.COM.AU

Insurance Business: Nautilus Marine has been operating for seven years – what have been the major changes you have witnessed over that period?

Lyndon Turner: The business has gone through very rapid growth. The major change has been the market’s wider acceptance of the business. The perception at the start was that, in the eyes of our opposition, we were a short-term player. What has been encouraging is the support we have had from our broker partners.

What was the reaction from the broker channel when you first launched?

It was very positive. However, the broker’s job is to provide the best for their client in not only coverage, but also structure and support if something goes wrong. We took our time to earn our stripes with certain brokers, but we are happy now that they are embracing what we are trying to achieve; the value offered is too strong and brokers have responded with their support.

What is your approach to working with brokers?

We love the value the brokers provide to our clients. The broker’s job is to interpret value and we feel our lines have some of the broadest wording in all of the market. It moves away from being a price situation, to providing value to a client. In the pleasure craft line, it is the client’s passion and they love their boats. So if a broker can satisfy their client’s passionate insurance placements, then it will make it easier to do business on that client’s other insurance needs.

Is marine insurance just the domain of the specialist insurance broker? Can general brokers play in this space too?

General insurance brokers should get into it.

However, we take the mindset that we are slightly different to a traditional marine insurer. The majority of what we do is more retail focused. The bulk of general brokers understand boat insurance as it has a plain English wording in the policies.

What would you say to a broker looking to get into marine insurance?

We are here to hold their hand. For the majority of broking houses that we deal with, pleas-

“Brokers just need to ask the question – they will be surprised at how much opportunity there is in this space” Lyndon Turner ure craft insurance and businesses servicing this industry makes up a very small part of their portfolio. However, for us it is 100% of our portfolio.

So it is in our interest to sit beside the broker, explain the nuances of the lines we do and provide them with the training required. We can do that training either in our offices collectively or one-onone with the broker.

How complicated Is the marine insurance space for brokers?

The concern might be how the adaption of the wording relates to the asset being insured.

Boating has different nuances attached to its terminology. We employ within our business a number of people with a variety of skill sets, including former boat builders and business people who have been in the boat industry for several years.

Brokers want offerings that complement their existing portfolio and give them another conversation starter with clients. Is marine one of those complementary areas?

Brokers are often surprised by how many boats there are in the market and insuring their client’s boat is an important add-on. That could be a commercial client and the business directors have a pleasure craft too. Brokers just need to ask the question – they will be surprised at how much opportunity there is in this space.

What does the future hold for Nautilus Marine?

We are focusing on the structural elements of the business to support the next phase of our growth. That includes the complete autonomy of our state offices in terms of development, underwriting and claims. We are also developing our non-Hull lines, our liabilities, our property lines and there will be some further products coming through shortly.

DECEMBER 2012 | 47

BROKER FOCUS / DANIEL JOHNSON

BROKER

FOCUS After several years in the industry Daniel Johnson opted to start his own insurance brokerage, APEX Insurance Brokers. So was the risk worth it? And should you do the same?

APEX’s top three areas WORKERS COMPENSATION

“It’s a segment that all brokers in underwritten states love (the joy of commission), but in those statutory states there is significantly less interest. We believe that it’s a service obligation to manage all of our clients’ insurance/ risk requirements – not just the high yielding ones.”

Insurance Business: You spent years working in insurance before opting to go it alone with your own brokerage.

What triggered the move to go solo in business?

Daniel Johnson: Like a lot of people who want to start their own business, I sensed I could do things better. Bigger companies do some things well and other things not so well. So I thought I would put my money where my mouth was and give it a shot.

LARGE FLEET BUSINESS

“We encourage all of our teams to develop a particular niche that is of particular interest to them. Large motor fleet is one of those that has worked particularly well.

Through a client in the early days, we managed to build a specialty that incorporated the full range of services, including claims. We now operate over 7,000 vehicles just in this space.”

PROFESSIONAL RISKS

“Professional lines is a market space that, despite the attempt to commoditise via electronic options, still is highly specialised. Clearly these lines are more widely transacted throughout the broking community than they used to be because of the advent of online raters and the ‘sunriseability’ with some markets, but there are still very specific exposures that some industries have that will cause brokers significant PI issues if they don’t understand the nuances.”

48 | DECEMBER 2012

How were those early days and those first years running your own business?

It was pretty tough – going from a corporate salary to effectively no salary at all. That first year was very light and the second year was almost the same. However, once I had got through those first two years, things improved significantly. The first year was all about getting set-up. I had been a broker previously, but left underwriting to start my business so I had not dragged across a whole set of clients either.

The thought of establishing one’s own brokerage crosses the minds of many insurance professionals. What would your advice be to someone considering doing it?

INSURANCEBUSINESSONLINE.COM.AU

Your own motivation is critical. If you think that it will be a lifestyle thing, then forget it! Starting your own business is not a lifestyle choice. The whole work-life balance thing is a delusion. But it does give you a sense of challenge and achievement if you can break through those first few years. You have that ability to decide how you want to run your business and what types of relationships you want with your clients. That is challenging, but very rewarding. Cash flow is one of the significant challenges. But you need to understand what sort of person you are – you cannot be unhappy with the idea of working long hours and being unappreciated. No one is going to appreciate you as the boss! It may be a more sensible approach to buy into a business, as you get that critical mass straight away and you have the support of other people within that business. When you start off on your own, every piece of business is something you want to get.

Even down to the household and motor vehicle insurance, you just want to get some dollars through the door and build a relationship. Starting from scratch is a really tricky value proposition unless you have a clear vision and contact base.

What is APEX’s philosophy towards insurance broking?

We are a full-service broker but we operate in niche areas. So while we do everything from workers compensation to business liability, we try to identify niches where we can do something a little better. We are strong in professional lines; that is my background. One of my team is in the construction and liability space, and we have some aviation specialisation, too. We are a general-specialist!

When you try to build that specialised focus, is the best idea to go out and recruit an expert in that discipline to head up that focus?

If you are a start-up, it is very difficult to do that. But once you have enough scale to bring in the right people, then absolutely. However, you have to make sure there is an alignment to the people you are recruiting and your style of operation. I merged my business with another broker business four-and-ahalf years ago and the process we adopted as part of that was making sure the alignment was there in terms of principles. You have to be on the same page regarding how you want to run the business, treat your staff, interact with your clients and the way you want to earn money. If those aspects are

•

“Starting your own business is not a lifestyle choice. The whole work-life balance thing is a delusion” Daniel Johnson

not aligned, you are in trouble from day one. That idea flows through to the way you recruit, especially with senior staff.

What does the future hold for APEX insurance brokers?

Growth and critical mass is important in the insurance broking game, as you need to have the right resources. Technology is becoming more important and if you do not have enough infrastructure and support, that becomes difficult.

Ideally, we would like to see another merger. We have done it before and it worked incredibly well.

The merger model is more attractive than the acquisition approach as it allows you to bring more principles in, so you have people who are aligned, motivated and have a skills-set you may not have.

DECEMBER 2012 | 49

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$24.4bn US$81.1bn 30% 1.0%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$13.9bn US$45.0bn 31% 0.9%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$236.8bn US$479.4bn 49% 1.6%

OM INGD ED K /10 T I UN ANK: 4 R

CE AN 6/10 R F K: N RA

CA RA NAD NK : 7/ A 10

US$28.3bn US$69.7bn 41% 1.2%

UNITED S TATE S RANK: 1 /10

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US

$600 BILLION

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$600bn US$1,450bn 41% 1.0%

D WORL

STATS GLOBAL INDUSTRY

INSURANCE

THE WORLD’S 10 LARGEST COMMERCIAL

The value of the commercial insurance market globally, with the US accounting for 40%

IBIS

INSURANCE MARKETS

The new Swiss Re sigma study shows that the commercial insurance marketplace is leaning towards liability risks and high-growth markets. Australia remains a major global player too…

ITALY RANK: 8/10

GER RAN MAN K: 5 Y /10

The growth rate of commercial insurance premiums in emerging markets over the last decade

RA

IA 10 SS 0/ RU K: 1 N

14%

NA CHI 3/10 NK: RA

JAPAN RANK: 2/10 AUST RA RANK LIA : 9/1 0

Source: Swiss Re Economic Research Consulting

US$12.7bn US$47.5bn 27% 0.6%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$26.5bn US$76.7bn 35% 0.8%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$9.3bn US$17.6bn 53% 0.6%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$30.7bn US$59.4bn 52% 0.5%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$35.4bn US$82.8bn 43% 0.6%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP

US$11.7bn US$26.6bn 44% 0.9%

Commerical insurance premiums Total non-life insurance premiums Commercial share of market Premium as a % of GDP DECEMBER 2012 | 51

SOCIAL LIFE

Insurance brokers from around the country gathered for the 30th anniversary NIBA Convention on the Gold Coast in October. One of the exhibitors was the Underwriting Agencies Council (UAC) who handed out $10,000 worth of gold to one lucky delegate.

NIBA CONVENTION / SOCIAL

DECEMBER 2012 | 53

FAVOURITE THINGS / ANDREW BALL

Favourite things...

Andrew Ball, Shortland Insurance Brokers

Movie: The Adventures of Ford Fairlane – love it or hate it, it’s a classic spoof of a private eye

Vacation spot: Broome is a great place to get away from it all. Sensational fishing, hovercraft or just lazing around the pool are just some great things to do

About working in insurance: There is something different every day with new challenges continually arising

Book: Anything by Wilbur Smith as he always takes you away into the story, which is well researched on where it is set

Sport: Football (soccer) live

Drink: Matso’s Mango

at the ground is a fantastic atmosphere with all the highs and lows that go with it.

Great, though, to bring the community together.

Beer sounds like an odd beverage but ice cold in Broome or in the Australian summer is fantastic

Music: Pink should have been an Aussie. We love her as seen by the sold-out 2013 concerts

Food: Chilli Mud Crab

Celebrity: James Bond outwardly refined with an overpowering need to succeed

54 | DECEMBER 2012

Singapore Style is challenging to deal with but worth the effort

Place to be: ReviveR is a new classic cocktail bar in Gosford which is the perfect place to unwind after work

THE LAST WORD / ANTHONY SAUNDERS

SHOULD BROKERS CARE ABOUT THE

ENVIRONMENT? Broker and environmental insurance specialist, Anthony Saunders, on if environmental risk identification should concern insurance brokers

ANTHONY SAUNDERS Anthony Saunders is an insurance broker, plus risk transfer and environmental insurance specialist at EnviroSure. For more information head to envirosure.com.au

56 | DECEMBER 2012

Insurance brokers have an intrinsic role to play in creating a sustainable environment (built or otherwise). The insurance sector achieves this by issuing covers that provide the necessary funds to return the environment back to the same condition it was in prior to the degradation (‘reinstatement’). The processes involved in environmental repatriation (or remediation) will vary depending on the funds available. Some sites (such as service stations) remain abandoned.

In the US, lawyers make mincemeat of insurance brokers for issuing covers that ought to have protected the insured for their pollution risks. Not understanding the inherent risks associated with the business is no defence, so here are some tips: • Insist that insurers explain the purpose behind the pollution/environmental exclusions that are beginning to appear in every single policy.

• Risk surveys can be designed to prompt the right questions to identify pollution risk, but what are we doing as an insurance community to protect our environment? How does the issuance of correct insurance help?

• The cost of environmental insurance is not the stumbling block; it’s the cost of environmental security, the risk management procedures that safeguard our environment.

• Environmental insurance is not only affordable; it increases awareness to risk and deployment of material strategies.

Climate change has resulted in world ‘100 year’ phenomena events including massive floods, tsunamis, tornados, hurricanes and earthquakes, and our need for resources has resulted in factual significant loss of environment. If insured, how would the story change? Would nuclear reactors be built in tsunami zones? Would they be built at all?

The intrinsic values of insurance can be champi-

oned effectively by insurance brokers who have arguably the greatest significance in the chain of true corporate social responsibility. For example, a service station owner may avoid having to report a leaking underground storage tank if there was no professional indemnity insurance policy in place.

When insured, we have an obligation to act responsibly and be accountable without fear.

The ability to address environmental risk is the intrinsic role that insurance brokers must play if we are to take up the ranks as contributors to enhancing environmental security (and avoid litigation).

Through correct insurance, we can educate our community and environmental advisors of the importance of respecting the laws governing the protection and sustainability of our environment, simply by issuing policies that will respond to those laws. Insurance advisors at all levels have a very important role to play, and becoming educated in the inherent environmental risks associated with the many and varied professions that insurance brokers come across is essential.

The community also needs to understand how our environment can be protected by encouraging them to raise the question of insurance! For example, if proposed commercialisation of coal seam gas extraction (commonly termed ‘fracking’) is generating so much community concern, why don’t we ask; “if insurance is arranged to cover the future liability associated with possible contamination of groundwater or loss of use of land, what risk measures need to be employed?”* We need a whole new breed of environmental insurance advisors adept in interpreting the fortuitous components of potential environmental liability. *Lawyers in the US have mapped cancer clusters and superimposed them over the myriad of fracking sites dotting the country. Guess what, the sites overlay the cluster areas.