Insurance Business 10.03

insurancebusinessonline.com.au Issue 10.03

PROFESSIONAL INDEMNITY

Brokers name the top insurers in a difficult market

SUPPLY CHAIN BREAKDOWN

How to help manufacturing clients prepare for disruption

ENVIRONMENTAL INSURANCE

Why it’s more important for businesses than ever

LOOKING FORWARD ICA head Andrew Hall on how the organisation plans to support the industry in 2021 and beyond

BROKERS ON INSURERS 2021 Which insurers made this year’s list of Australia’s best?

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Behind you for what’s ahead Choices matter.

At Allianz, we choose to be behind our customers and our partners, so they can have confidence in tomorrow. 100 years and counting, we’re behind you for what’s ahead.

Allianz Australia Insurance Limited ABN 15 000 122 850

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ISSUE 10.03

CONNECT WITH US Got a story or suggestion, or just want to find out some more information?

CONTENTS

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UPFRONT 02 Editorial

The inherent exposures in a supply chain under stress

04 Statistics

Key data that should be on your radar

06 News analysis SPECIAL REPORT

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5-STAR PROFESSIONAL INDEMNITY INSURERS

Which insurers are delivering the goods for clients in a tough PI market? Brokers tell all

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SPECIAL REPORT

BROKERS ON INSURERS 2021

For the ninth year, brokers name the best insurers in Australia for claims processing, stable premiums, innovative products, BDM support and more

STEERING THE SHIP

Andrew Hall reflects on a year at the helm of the ICA – and reveals what the peak body has in store for the future

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08 Intelligence

An insurtech launches pay-by-kilometre car insurance

10 Insurer update

How the industry has demonstrated its care for customers during COVID-19

12 Underwriting agencies update Blue Zebra opens its platform to other insurers and underwriting agencies

14 Opinion

Agile is the watchword for insurance in a post-pandemic world

FEATURES FEATURES

PEOPLE

Recent events have underscored the myriad supply-chain risks in the manufacturing sector

A SUSTAINABLE STRATEGY

As companies of all types face pressure to manage their environmental risks, brokers have a key role to play

36 Why wouldn’t you do it for yourself?

Why the authorised representative model is a winner in today’s landscape

PEOPLE 34 Time to step up

Kirsty Dowell on why Stellar Insurance Brokers thrives on complex risks

48 Other life

FEATURES

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RIDING THE DIGITAL WAVE

What should the insurance industry be prioritising in its digital solutions?

Rocking out with musician and entertainment insurance broker Simon Calabrese

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UPFRONT

EDITORIAL

Just in time … or not?

H

ave you ever given the just-in-time supply chain a second thought?

Probably not. We take the supply of consumer goods as a given. We expect the cogs of the global supply chain to keep on spinning so that our every demand is met at the click of a button. But what if a massive container ship – one longer than New York City’s Empire State Building – becomes beached on one of the world’s key trading routes, potentially slowing the supply of essentials like toilet paper and coffee? Then you might take note.

In March, the world’s attention was drawn momentarily from the COVID-19 pandemic when one of the world’s largest container ships, the Ever Given, became lodged in the Suez Canal during strong winds and a sandstorm. The giant vessel was stuck at an angle, blocking the critical trade route – through which about 15% of all global shipping passes – for six days. The blockage delayed about 300 cargo ships, and many others were rerouted, causing significant disruption to the global supply chain.

A disruption in one part of the world can have a profound impact on supply in another part of the world Beyond the immediate impacts of potential market supply challenges, there were also knock-on effects at destination ports and terminals due to schedule disruption, yard capacity strains and the accumulation of cargo. Final-mile delivery carriers also felt the brunt; a shrinking driver pool was expected to pick up the slack and help the market fulfil its just-in-time guarantee.

The grounding of the Ever Given has highlighted the delicate nature of the global supply chain at a time when it was already under monumental stress as a result of the COVID-19 pandemic. It was proof of how a disruption in one part of the world can have a profound impact on supply in another part of the world.

And these disruptions can come in all shapes and sizes: a natural disaster, political tension, war or, these days, a mass technology failure. The point is, there are risks to the offshoring and just-in-time delivery model that dominates the global supply chain – risks with more significant consequences than the caffeine jitters from a coffee shortage.

The team at Insurance Business

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EDITORIAL Managing Editor Paul Lucas Senior Editor Bethan Moorcraft Journalists Maria Hoyle, Mitchell Scrimgeour-Brown, Ryan Smith, Ksenia Stepanova, Mia Wallace News Writers Lyle Adriano, Terry Gangcuangco, Roxanne Libatique, Gabriel Olano Copy Editor Clare Alexander

CONTRIBUTORS Vijay Pahuja, Danny Wood,

ART & PRODUCTION Designer Joenel Salvador Production Coordinators Kat Guzman, Loiza Razon Customer Success Coordinator Isabella Concepcion Traffic Coordinator Kristine Jamir

SALES & MARKETING General Manager Peter Smith Commercial Development Manager Sophie Knight Global Head of Media Marketing Lisa Narroway

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Insurance Business is part of an international family of B2B publications, websites and events for the insurance industry Insurance Business America cathy.masek@keymedia.com T +1 720 316 0151 Insurance Business Canada john.mackenzie@kmimedia.ca T +1 416 644 874O Insurance Business NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business UK gemma.powell@keymedia.com T +44 20 7193 0935 Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO 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 the magazine can accept no responsibility for loss.

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UPFRONT

STATISTICS NATURAL CATASTROPHES IN 2020 AT A GLANCE

STORMS THE TOP SOURCE OF NAT CAT LOSSES Among natural catastrophes, severe convective storms inflicted the most insured losses over the past decade, according to Swiss Re. In Australia, the total insured losses caused by severe convective storms from 2011 to 2020 were nearly twice as much as the losses caused by floods and wildfires combined. Swiss Re’s study revealed that insured losses from both primary and secondary perils have been on the rise since 1970 – a trend that’s expected to continue in the foreseeable future, due to increasing property values and the effects of climate change.

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CUMULATIVE NAT CAT INSURED LOSSES, 2011-2020

Total number of catastrophe events worldwide

NORTH AMERICA Severe convective storms

WORLDWIDE

$192.0bn Floods

Severe convective storms

$16.2bn

$217.9bn

Wildfires

Floods

$53.1bn

$67.3bn Wildfires $56.2bn

$202bn

SOUTH AMERICA

Global economic losses due to catastrophes

Floods $1.2bn Wildfires $200m

$89bn

Global insured losses due to catastrophes

M&A ACTIVITY EXPECTED TO BOUNCE BACK After two years of declining M&A deals globally, Willis Towers Watson expects the number of deals to rebound sharply in 2021. Recovering confidence in the market has already led the number of M&As to surge by 21% year-over-year in the first quarter of 2021.

QUARTERLY GLOBAL M&A DEAL VOLUME 270 240 210

0.24%

Percentage of global GDP lost to catastrophes in 2020 Source: Natural Catastrophes in 2020, Swiss Re Sigma No. 1 2021; all figures in US$

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180 150 120 90

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Source: Quarterly Deal Performance Monitor, Q1 2021, Willis Towers Watson

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CANAL BLOCKAGE AUGMENTS SUPPLY CHAIN WOES The Ever Given’s six-day blockage of the Suez Canal added yet another burden to the ongoing disruption of global supply chains. According to Allianz, other issues, such as shortages in shipping containers and semiconductors, are already expected to reduce real trade growth by 1.4 percentage points in 2021; the Ever Given fiasco could add between 0.2 and 0.4 percentage points to that figure.

EUROPE Severe convective storms $15.6bn Floods $20.1bn Wildfires $200m

19,000+

ASIA

Ships passing through the Suez Canal yearly

Severe convective storms $200m Floods

1.25bn

$26.7bn

Tons of cargo that passed through the Suez Canal in 2019

$9bn

OCEANIA

Daily worth of goods disrupted by the Ever Given blockage

Severe convective storms $9.4bn Floods

$230bn

$2.8bn Wildfires

Expected decrease in real trade growth in 2021 due to supply chain disruptions

$2.5bn

Source: Natural Catastrophes in 2020, Swiss Re Sigma No. 1 2021; all figures in US$

KEY AREAS OF INNOVATION FOR INSURERS Demand for digital insurance premiums and online distribution could displace around 5% of the global insurance market’s revenue by 2025, according to a new report from Accenture, which highlighted four areas of innovation for insurers to focus on to capture this revenue.

$115BN Sharing economy, climate change and cyber threats

As the COVID-19 pandemic continues, the majority of group benefits providers worldwide expect higher medical trend rates in 2021, according to a study by Mercer Marsh Benefits, which attributed this to several factors, including the resumption of elective treatments, delays in care and a continuation of COVID-19-related claims.

10%

IN SHIFTING PREMIUMS

Shift to alternative distribution

$120BN

$120BN

Health/wellness and life products and services

Technology integration within traditional products

IN REVENUE

INSURERS EXPECT HIGHER MEDICAL TREND RATES

$125BN

IN REVENUE

Source: “The Suez Canal ship is not the only thing clogging global trade,” Allianz, March 26, 2021; all figures in US$

Higher than 2020 Same as 2020

27% 63%

IN REVENUE

Source: Insurance Revenue Landscape 2025, Accenture; all figures in US$

Lower than 2020

Source: MMB Health Trends: 2020 Insurer Perspective, Mercer Marsh Benefits

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UPFRONT

NEWS ANALYSIS

Stress-testing supply chains COVID-19 and the Ever Given crisis have revealed the deep-rooted fragility of the manufacturing ecosystem. Where do supply chains stand now, and how can insurance companies support their manufacturing clients?

THE MANUFACTURING sector has been shaken by the COVID-19 crisis, which has buffeted the global supply chain and forced businesses of every size to rethink their operating models. While various manufacturing businesses have been impacted in different ways and thus require varying solutions, there are several cross-sector challenges that COVID-19 has exacerbated.

Chief among them is global and domestic supply chain disruption, which is interrupting both upstream and downstream processes. This disruption has been building for some time, says Michael Burg, managing director of Gallagher’s manufacturing prac-

evaluate those risks and exploring the insurance solutions that are available to address those risks rather than just retaining them on the balance sheet.”

The manufacturing space evolves in waves, says Riskonnect CEO Jim Wetekamp, who first noticed the new wave that came with COVID-19 when supply chains in China first started being impacted. Organisations began looking for better ways to assess their risk, understand the challenges they faced and build agility as COVID-19’s impact started to pivot from transportation to hospitality, healthcare and financial services.

“What [manufacturing businesses]

“We see both supply- and demand-side challenges to the supply chain, so we’re helping our clients evaluate those risks” Michael Burg, Gallagher tice in the US, as supply chains have been getting tighter and more focused on just-intime delivery.

“COVID has certainly accelerated some of the supply chain challenges and risks that we advise our clients on,” he says. “We see both supply- and demand-side challenges to the supply chain, so we’re helping our clients

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have had to do is work through the crisis to establish what continuity looks like moving forward, to think through better workforce planning, alternative inventory policies and planning parameters such as how they think about their supply chains,” Wetekamp says.

“They’ve had to give greater visibility to inbound materials, and while they always had

that for critical goods, they may not have the same level of traceability for some of the more indirect goods or smaller components.”

Awareness of the exposure that exists around single-source suppliers has been growing for some time now, Burg says, so it has long been a part of enterprise risk management evaluations for manufacturers.

Wetekamp says that during COVID-19, manufacturers have had to understand not only their tier-one supplier risk, but also the second- and third-tier risk because of the extent to which the pandemic has challenged freedom of supply.

COVID-19 was something of a black swan event for the insurance sector, but this didn’t stop insurance businesses from working to actively protect their clients throughout the crisis. According to Brian Gerritsen, manufacturing practice lead at Travelers, as soon as the pandemic emerged, Travelers’ risk control team proactively connected with agent and broker partners and customers to provide employee safety recommendations and help

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MANUFACTURING IN AUSTRALIA BY THE NUMBERS

$100bn Annual contribution of manufacturing to Australia’s GDP

900,000 Total number of Australians employed in manufacturing

56,600 Number of manufacturing jobs lost in the second quarter of 2020

10.2% businesses understand the emerging risks associated with the pandemic.

“As part of this effort, we released a robust suite of industry-leading risk management resources for businesses to help them manage the emerging risks to people and property and, where applicable, safely reopen,” says

supply chains that might be most at risk.

Melander says tools like this complement Travelers’ insurance products and services to address supply chain exposures beyond traditional coverage.

The uncertain lay of the land when it comes to supply chain risks is neatly

“Manufacturing businesses are thinking about what it really means to fight a war on multiple fronts at the same time” Jim Wetekamp, Riskonnect Erika Melander, manufacturing practice lead at Travelers. “We engaged with business customers and their agents and brokers to address specific needs based on underwriting and state regulatory requirements.”

One tool Travelers was able to offer is a supply chain pressure test that can help manufacturers identify the links in their

surmised in an anecdote Burg tells of a client who was dependent on manufacturing in China, but who felt confident in their ability to withstand a loss from a key supplier because they had approximately 10 different suppliers. However, Gallagher’s tools were able to pinpoint that all of these suppliers were located within a single region that faced

Proportion of those job losses in the beverage products sector (the hardest hit by COVID-19) Source: Australian Manufacturing Performance Report; Manufacturers’ Monthly

catastrophic weather events.

From his perspective, Burg believes the COVID-19 crisis has opened manufacturers’ eyes to the challenge that supply chain disruption poses to their business and their ability to deliver a product. In the example above, he says the early impact of supply chain disruption in China due to COVID-19 made the client think differently about their contingent business income exposure, resulting in a deeper conversation that wasn’t being had before COVID-19.

“Manufacturing businesses have faced each of these challenges before,” Wetekamp says, “but now they’ve seen these block, bit by bit, next to each other. And so they’re thinking about more comprehensive scenarios, of the interplay of these different risks happening at once and about what it really means to fight a war on multiple fronts at the same time.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

AIA Australia

The Colonial Mutual Life Assurance Society

The Federal Court of Australia has confirmed the transfer of CommInsure’s life insurance business, including CMLA, to AIA

Allsafe Insurance Brokers

QSure Insurance Brokers

The two Aviso Group companies have finalised their merger; QSure will retain its QSelect brand

Envest

All Parks Insurance; Ken Tame and Associates

Envest’s majority investment in All Parks and acquisition of Ken Tame and Associates give the insurance distribution company a presence in Australia’s caravan parks and campervan insurance sectors

The Riverside Company

Altius Group

AUB Group has completed the $57m sale of its stake in allied health business Altius Group

Steadfast Group

unisonSteadfast

Steadfast has increased its shareholding in unisonSteadfast to a majority stake of 60%

Aon unveils solution for vaccine shipments

Aon has spearheaded an industry collaboration to provide supply-chain protection for COVID-19 vaccine shipments. The initiative – which involves Parsyl, Ascot Group, Chubb, AIG, Munich Re and others – will provide transparent cargo insurance coverage, combined with sensor data and analytics, for vaccine shipments. The offering promises timely payment for doses that fall outside of the agreed-upon temperature range while being transported or stored.

Real-time reporting of temperature deviations will also help mitigate losses and maximise the number of doses available.

Steadfast ups shareholding in unisonSteadfast

General insurance network giant Steadfast Group is now the major shareholder of global broking network unisonSteadfast after increasing its existing stake to 60%. Steadfast Group provides services to broker businesses across Australia, New Zealand, Asia and London, generating billings of more than $10bn in 2020. Meanwhile, unisonSteadfast, which is based in Germany and the US, has network brokers in more than 140 countries, generating US$30bn of gross written premium. This strategic move marks a significant evolution in the partnership of the broking networks and solidifies their commitment to growing the global distribution platform for their brokers.

“The focal point of the future strategy will be making unisonSteadfast stronger and putting it into a position to grow into the future,” said Steadfast Group managing director and chief executive Robert Kelly. “We will start this by rolling out our risk management tools worldwide, our London market opportunities and ultimately our bespoke software solutions.”

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TAL partners with virtual healthcare provider

Life insurer TAL has tapped virtual healthcare provider Teladoc Health to provide mental health support to its customers. The program, Mental Health Assist, was initially offered to some of TAL’s advised customers and those with insurance through superannuation; it will now be available to eligible TAL customers on claims with a mental health condition.

According to Dr Priya Chagan, general manager for health services at TAL, Mental Health Assist aims to improve mental health outcomes by fast-tracking access to a team of multidisciplinary mental health experts tailored to the customer’s situation.

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PEOPLE KOBA rolls out pay-bykilometre car insurance

Insurtech KOBA has partnered with software as a service provider By Bits to bring pay-by-kilometre car insurance to Australian drivers. The

By Bits SaaS uses a rating engine to calculate insurance premiums using modifiable underwriting and rating rules, splitting the premium into a fixed amount and a per-kilometre amount.

It also features an integrated policy management system that manages the entire life cycle of the policy. According to KOBA founder Andrew Wong, the partnership will allow KOBA to bring a “fairer usage-based insurance to Australia’s 10 million low-mileage drivers for the first time”.

AXA, Microsoft to develop digital health platform

AXA has cemented a partnership with Microsoft to build digital healthcare platform that seeks to widen the reach of healthcare globally.

According to AXA, the platform will aim to break down health service silos and link the company’s digital health services to support customers at every stage of their e-health experience. The services offered will include a self-assessment and prevention tool, a medical concierge, a virtual consultation interface, a digital document vault, home care services, and a directory of healthcare professionals. The platform is expected to be rolled out globally in 2022.

WTW launches new underwriting software

Willis Towers Watson has unveiled new software to help front-line underwriters make better decisions quickly. WTW’s Radar Workbench is designed to harness a broad range of internal and external data assets to deliver configurable, rich, contextual analysis in real time. It allows case underwriters to make well-informed decisions about the pricing and underwriting of risks, supports better communication with portfolio managers, provides accurate insight and context from the wider business, and is easy to configure for connection with internal systems and external data sources.

NAME

LEAVING

JOINING

NEW POSITION

Andrew Horton

Beazley

QBE Insurance Group

Group CEO

Dallas Booth

National Insurance Brokers Association

N/A

Retiring

David Hosking

Allianz Australia

PSC Insurance Group

CEO, Australia and New Zealand

David Koczkar

N/A

Medibank

Managing director and CEO

Peter Kelaher

N/A

Chubb

Country president, Australia and New Zealand

Phuong Ly

QBE Insurance Group

Allianz Australia

Chief general manager, commercial

Simon Levy

N/A

Risk Management Institution of Australasia

CEO

Tim Scott-Young

Marsh

Zurich

Chief claims officer, general insurance, Australia and New Zealand

QBE appoints new group CEO

QBE Insurance Group has named former Beazley boss Andrew Horton as its new group CEO. Horton, who departed Beazley at the end of March, will take over from interim group chief executive Richard Pryce on 1 September. Horton has more than 30 years of experience in the financial services sector; he joined Beazley in 2003 as group finance director before becoming CEO in 2008.

“I am honoured to be appointed to lead QBE, a strong international insurer with an impressive global footprint and talented people,” Horton said. “I look forward to joining the team and continuing to support QBE’s customers, people, shareholders and broader communities.”

NIBA chief executive announces retirement

After a decade at the helm of the National Insurance Brokers Association (NIBA), Dallas Booth is stepping down as chief executive at the end of October. The trade body has commenced the search for its next CEO; Booth will remain available to assist the new NIBA head amid the review of general insurance remuneration arrangements in 2022.

“The board will continue to utilise Dallas’ support and expertise on this and any other projects where his support is likely to be needed,” said NIBA president Dianne Phelan. “The board has been extremely lucky to have had Dallas as our CEO, and we thank him for his dedication to representing and acting in the best interest of our members.”

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UPFRONT

INSURER UPDATE NEWS BRIEFS Suncorp sells Australian wealth unit to LGIAsuper

Suncorp Group has sold its Suncorp Portfolio Services wealth business to LGIAsuper for around $45m. The total consideration, which is subject to standard completion adjustments, includes a fixed amount of $26.6m, plus regulatory capital. Once the sale is completed, Suncorp will enter into an agreement with LGIAsuper to distribute Suncorp superannuation products to customers for 18 months. Additionally, LGIAsuper has agreed to offer roles to approximately 130 Suncorp employees who work directly or indirectly within the insurer’s wealth operation.

Westpac Group settles life insurance class action

Without admitting liability, Westpac Group has agreed to settle a 2017 class action that revolved around policies issued by Westpac Life Insurance Services on the recommendation of Westpac-owned financial advisers. In the Federal Court case, Shine Lawyers alleged that customers who relied on those advisers and took out a Westpac Life policy were not informed that they could obtain substantially similar or better policies from alternative insurers at a lower price. Policyholders were also said to have been charged higher premiums than those who purchased the same policy on the recommendation of independent advisers. The settlement is capped at $30m.

Hollard announces changes to executive team

Hollard Insurance Company founder and CEO Richard Enthoven is passing on the baton to Hollard personal lines chief Paul Fahey, who will step into the

chief executive role on 1 July. Enthoven plans to shift his focus to his role as managing director of the group’s holding company, Hollard Holdings Australia (HHA), concentrating on the group’s strategic vision. Chief financial officer Ellie Comerford is also departing her post to join Enthoven as a senior strategic advisor; both will also continue as Hollard and HHA board directors.

Replacing Comerford as Hollard’s CFO is KPMG alum Ian Moyser.

Arch rules out underwriting Adani coal mine project

On behalf of its underwriting operations, Arch Capital Group has confirmed that it has not and will not issue any insurance policies covering the controversial Adani Carmichael coal mine in Queensland.

According to the Stop Adani campaign, Arch is the 100th company to rule out support for the project. In addition to Arch, 36 other insurers have ruled out underwriting the project, and major banks have refused to finance it. Engineering tractors and transport and construction companies have also refused involvement.

Suncorp subsidiary hit with class action in Victoria

Suncorp subsidiary AAI is facing a class action in the Supreme Court of Victoria. The case centres on AAI’s sale of loan protection insurance and equity plus insurance through MTA Insurance (MTAI). Acquired by Suncorp in 2014, MTAI specialises in retail motor insurance products sold through car dealerships across the country. A similar class action was launched against Allianz Australia last year over what were described as “worthless” and “junk” add-on insurance policies provided via car dealers. Suncorp said it intends to defend the AAI class action.

Building trust with customers At a critical time for insurance, AIA boss Damien Mu believes the industry has done a good job providing proactive support The COVID-19 crisis has shone a spotlight on how insurance professionals have responded to extraordinary circumstances and how they interact with clients beyond the usual touchpoints – and Damien Mu, AIA’s chief executive for Australia and New Zealand, believes the sector has stepped up.

“I think the industry has come together to recognise that this is a time to build trust and engagement with customers,” he says, “and I think the industry has done a good job to try and look at different initiatives to offer support.”

AIA Australia’s health insurance brand, for instance, made good on its promise last year to provide cash refunds on customers’ extras policies in light of the restricted access to services during the pandemic.

“The extras value protection refund was really about acknowledging and giving customers peace of mind by doing the right thing early to let them know that if they were unable to claim on their extras with COVID-19 and the restrictions in place, they would be eligible to get up to 50% of that back,” Mu says. “Or based on their Vitality status, which is our health and wellbeing program, they get 100% of that back, less any claim. So it’s really about recognising that this is a time where that benefit that they had paid for may not be something they

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could use, and therefore we want to do the right thing.”

The initiative led AIA Health Insurance to pay out more than $1.1m in refunds in Australia, with an average payment of $200 per policyholder, and AIA also offered premium holidays or waivers. Additionally, in 2020, the insurer partnered with mental health advocate Sir John Kirwan to make his wellbeing app, Mentemia, available for free for six months.

“It’s about the industry recognising that we have a critical role to play in society” Acknowledging similar support measures implemented by his peers, Mu says, “For me, it’s about the industry recognising that we have a critical role to play in society to help Australians and their families when they need it. And we have an even more critical role that we can actually now be part of – not just when something goes wrong – which is how we help on the preventative side.

“It’s about helping people in their health and wellbeing journey, both the physical and mental. If we can do that, I think that’ll improve the engagement and the value and the trust that customers have with what we do.”

Q&A

Stefan Feldmann Managing director, Australia; regional head, ASEAN and Australasia HDI GLOBAL SE

Years in the industry 30 Fast fact In addition to Australia, Feldmann has also worked in Germany and Singapore

Seizing new opportunities How are things at HDI Global Australia?

We are very well placed at the moment. HDI Global Australia has worked hard over the past decade to establish itself in the Australian market. We now have offices in Sydney, Melbourne, Brisbane and Perth, and have a presence in South Australia. Our underwriters, claims managers, risk engineers, market managers and international programs manager are very well regarded. As a result, we’ve enjoyed consistent double-digit growth, particularly over the last five or so years. We remain very much in growth mode, and we’re also looking to expand our regional footprint.

From an insurance market perspective, the pandemic hit during the middle of a hard market cycle. We’re finding many competitors are adjusting or reshaping their portfolios. Some are reducing line sizes, some are ceasing to write certain industries and occupations, and some are no longer writing a particular class of business.

As a result, we are seeing a lot of new business opportunities – brokers may come to us needing assistance to fill a slip or look to us to write an account 100%, either where the incumbent has exited that line of business or the broker or client sees HDI Global as a good fit.

So you’re able to pick up business where other insurers have exited?

Where an opportunity fits our underwriting appetite and profile, we will always look to provide a solution. We are definitely seeing success, as there is a lot of business coming our way that does fit our appetite and we haven’t seen before.

Having said this, I’m not suggesting we write every piece of business. At the end of the day, we are an underwriting company with an underwriting philosophy. We underwrite these risks individually. I encourage the team to look to find ways to support our brokers wherever we can.

What’s your outlook moving forward?

We’ve given ourselves ambitious growth targets for the next five years. It’s important that we hit our target for this year in order to lay the platform for success in future years. We have had considerable success with our international programs proposition in a short space of time. We will focus on further enhancing our capabilities this year and into the future.

We generally have our established core underwriting and claims philosophies. What I personally think makes a difference or sets us apart is that we want to be the most enthusiastic or the most passionate insurer in the market. Our message should be that every HDI Global underwriter shows how keen we are to pick up new business – pick up the phone and call the broker, thank them for the new opportunity and support them. That’s something we drive quite a lot – be passionate, be eager, be enthusiastic.

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UPFRONT

UNDERWRITING AGENCIES UPDATE

The fast track to digitalisation Blue Zebra has made its insurance platform available to peers in an effort to help modernise the industry

launched its first product and was tasked with scaling the company’s built-fromscratch insurance platform, Blue Leopard, across a number of dimensions. The platform, which includes the Zebra Lounge used by the company’s broking partners, started out with home insurance and now offers seven products. Developed and improved based on broker feedback, it is updated every two weeks.

With more than 100 releases since Blue Leopard was first rolled out, BZI now has

“It’s rewarding because it’s recognition for the hard work of the team here”

When Blue Zebra Insurance (BZI) came to life in 2017, the vision for the business was clear – to build an underwriting agency with technology at its heart.

“There’s a real bottleneck in terms of being able to come up with innovative insurance ideas and actually being able to go to market with them,” says BZI chief technology officer Amar Roomi. “So, when we started the company, the core concern for us was, ‘How do we make sure that we’re able to go

NEWS BRIEFS

to market with new products at a pace that’s significantly quicker than our competitors and, at the same time, make sure that we’re a digital-first agency as well?’ Because the more we streamline the interaction between our brokers and our platform, the more our business is going to grow in terms of policy count. So, that was the rationale behind why technology was such a big focus for us, even from day zero.”

Roomi came onboard soon after BZI

Envest acquires majority interest in All Parks

Envest has snapped up a majority interest in All Parks Insurance, the underwriting agency founded by Julie Pernecker in 2011 to provide insurance for caravan park proprietors. Pernecker will remain CEO and director of All Parks Insurance and a significant shareholder.

“Envest specialises in acquiring and growing underwriting agencies that have a niche product and distribution – All Parks fits the bill and also has an excellent market reputation and established client base,” said Envest MD Greg Mullins.

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the capacity to share the technology with its industry peers, which Roomi views as a “real opportunity” to help push the entire industry toward what he believes is a more modern way of doing business.

“There’s been a lot of interest in our platform by other underwriting agencies and insurers, so a clear focus for us is actually to sell that platform as a service,” Roomi says.

“And we already have a couple of clients.

It’s rewarding because it’s recognition for the hard work of the team here over the last three years to build a platform, originally just for Blue Zebra. It has that recognition of saying, ‘We’d love to pick up your system and use it for our own needs’.”

Emergence adds underwriter for Queensland and NT

Cyber specialist Emergence Insurance has appointed Katrina Hickson as business development underwriter for Queensland and the Northern Territory.

Hickson brings around 15 years of insurance and premium funding experience to her new role. “We are thrilled to have Katrina join the Emergence team,” said Emergence founder and CEO Troy Filipcevic. “Katrina is a highly experienced business development manager and is well known to a large number of people in the insurance industry, particularly in Queensland and NT.”

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14/05/2021 8:17:47 am

Q&A

Rita Gillam General counsel and chief risk officer DUAL ASIA-PACIFIC

Years in the industry 20 Fast fact A qualified lawyer with a combined commerce and law degree, Gillam’s insurance experience spans claims, broking and management roles

Taking a closer look at compliance With general insurance reforms coming into effect this year, what should companies’ priorities be?

It is critical to recognise that while reforms may affect the organisation as a whole, it is the people within those organisations who will ultimately be the ones implementing them in a material way. As such, it is imperative that companies look to invest in their people by providing adequate resources, training and support required to implement changes effectively. Staff should feel comfortable with new processes and procedures in advance to ensure day-one compliance.

DUAL is a ‘people first’ organisation, which means we prioritise staff training, continued professional development and wellbeing. This enables a culture of dynamism and transparency that assists the company to appropriately and efficiently respond to external changes, both in the regulatory sphere and the marketplace.

What is the biggest challenge when it comes to compliance?

The biggest challenge is the ability to create an effective culture of compliance, which is embedded in the company’s DNA. The regulatory environment is applying significant pressure from a number of different perspectives, including scrutiny from regulators and other stakeholders, ever-changing laws and regulations, and the consequences of failure, which not only include financial penalties but reputational damage.

It is challenging to establish a long-term mindset

ProRisk duo to take on outback adventure

ProRisk general counsel and head of operations Jaydon Burke-Douglas’ upcoming car rally adventure in the outback will be a “completely ProRisk affair”, after he found a new partner in ProRisk national business development manager Chris Varkoly. “My brother was originally going to do the rally with me,” Burke-Douglas said.

“However, he and his wife are expecting their second child, so he’s had to pull out.” The pair will drive a car worth less than $1,000 from Alice Springs to the Gold Coast to raise funds for the Cancer Council.

about regulatory reforms, both in the lead-up to the effective reform date and thereafter. It’s one thing to roll out a few strategies and processes before the reform comes in to achieve initial compliance; however, it is far more challenging to have those processes be effective and sustainable in the long run. That requires staff buyin; operational, technological, data and system updates and changes; and ongoing review and consideration.

Among the changes, which ones do you think will have the greatest impact?

While it is difficult to predict, my view is that the strengthening of breach reporting to ASIC will have the greatest impact. The reforms require all stakeholders and departments across an organisation to incorporate more stringent identification, investigation and reporting processes with strict timeframes that must be adhered to. The changes also impact the various organisational tiers and aren’t just localised to R&F or the C suite, as the collection of quality front-line data is just as important as the reporting itself.

On the plus side, companies will be forced to have better oversight and transparency, which fosters greater awareness and potential to harness the knowledge in a way that is commercially beneficial.

Further, I think these reforms will alert ASIC to systematic issues in the industry before any one company realises its broad-scale nature. In so doing, the reforms may assist ASIC and the industry to nip issues in the bud before they become widespread.

About Underwriting welcomes new underwriter

Selina Fowler has moved from Pen Underwriting to become a senior underwriter at About Underwriting. Fowler, who moved to Australia in 2013 to work at Australis Underwriting, started her insurance career with AXA in the UK in 1999. “Many of you will know Selina and will have dealt with her in her previous role,” About Underwriting wrote in a LinkedIn post announcing Fowler’s appointment. “She is an established and experienced general liability underwriter, one who is also very approachable and always happy to assist.”

CFC Underwriting snaps up Insane Technologies

In a bid to expand its global cyber claims and incident response team, London-headquartered managing general agent CFC Underwriting has acquired Gold Coast-based cybersecurity and incident response firm Insane Technologies for an undisclosed sum. In a release, CFC said having Insane Technologies onboard will not only deepen its bench of in-house technical experts, but also further the company’s mission to offer round-theclock cybersecurity and incident response services to customers worldwide.

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14/05/2021 8:17:55 am

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email ibo@keymedia.com.au

Staying agile post-pandemic Following the massive disruption of COVID-19, the insurance industry will need to embrace new agile operating models, writes Vijay Pahuja LAST YEAR brought the insurance market increased competition, changing consumer expectations and agile opportunities, thanks to the pandemic’s working models.

As COVID-19 bleeds into 2021, traditional insurers are increasing their investments in digital, agile and partnerships. The certainty of these investment decisions is likely to be with us long after the pandemic fades. We will continue to adapt to new agile operating models – likely at a pace that we historically have never experienced.

Insurers are increasingly comfortable with experimentation, a ‘fail fast’ attitude and quick partnership explorations with tech startups to scale their business. Agile is a matter not just of resources or market reach, but also of creating new bedrock business platforms and processes. Insurers’ ability to work with multiple partners simultaneously enables the quick movement from pilot to market to business as usual. The apparent winner will be the one that innovates, creates and can scale.

Claims processing, for instance, has always been conducted by an insurance adjuster.

This model worked well in the past, but today the average insurance company can expect to have hundreds or even thousands of claims submitted in a single day. The quantity of information on a single claim has also skyrocketed to include information ranging from telematics to property sensors. Despite this surge in data, only 5% of insurance companies currently depend on process automation to review claims.

Why is that? Well, it could be as simple as

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vocabulary. It’s been documented that most adults have a vocabulary range of 30,000 to 35,000 words. The experts tell us that to be conversationally fluent in a foreign language, we need to know 1,000 to 3,000 words.

Applying this logic to insurance, the terms glossary of the US National Association of Insurance Commissioners contains approximately 600 definitions, the Construction Design catalogue approximately 500 terms, and let’s add a 1,000-word vocabulary used by every adjuster.

of the game – not only could a machine grasp the complex techniques and abstract aspects of the game, but it was becoming one of the greatest players of it as well.

Insurance executives have long struggled to assess the business value of AI. They understand the potential, but the general lack of institutional AI knowledge has made the evaluation process somewhat uncertain. Despite the uncertainty, executives remain undeterred from doubling down on their AI investments: 71% of AI adopters plan to increase their spending by an average of 26%, according to a recent Deloitte study.

The reason for the flurry of investment is that insurance C suites envision several operational benefits too exciting to pass up.

• Machine learning to determine repair costs and automatically categorise the severity of damage to vehicles involved in accidents, whether the damage is from a collision or hailstorm • Internet of Things (IoT) sensors to mitigate risk and reduce losses, plus the use of home and industrial IoT data to build operational intelligence on the frequency

“Insurers are increasingly comfortable with experimentation, a ‘fail fast’ attitude and quick partnership explorations with tech startups to scale their business” Tools are being built today with that 2,000-plus-word vocabulary and the ability to ingest large amounts of data, including unstructured text, and to parse and learn from that data. My favourite example of this type of deep learning is Google’s AlphaGo. Google created a computer program with its own neural network that learned to play an abstract board game called Go, which requires sharp intellect and intuition. By playing against professional Go players, AlphaGo’s deep learning model learned how to play at a level never seen before in artificial intelligence. It caused quite a stir when AlphaGo defeated multiple world-renowned masters

and severity of accidents and feed into underwriting and product pricing • Process mining techniques to identify bottlenecks and improve efficiencies and conformance with standard claims processes • Increased transparency for all parties, faster claim settlements, and better customer experience and CSAT scores Agile insurance could be the new AI. Vijay Pahuja is corporate SVP of client services for WNS, a provider of global business process management services.

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14/05/2021 8:18:22 am

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14/05/2021 8:18:27 am

PEOPLE

THE BIG INTERVIEW

STEERING THE SHIP A corporate affairs expert and former ministerial media advisor, Andrew Hall brought extensive governance experience when he took the top post at the Insurance Council of Australia last year – and he’s relied on that background to help him navigate an unusually turbulent period for the industry

IN MAY 2020, following an extensive national search, the Insurance Council of Australia (ICA) announced the appointment of Andrew Hall as the peak body’s new executive director and chief executive. A former ministerial media advisor who previously served as executive general manager of corporate affairs at CBA, Hall took over from Rob Whelan, whose reign at the ICA spanned more than a decade. IB recently caught up with Hall to find out how his time at the helm of the ICA has been so far.

“It’s been obviously quite busy and unusual because of COVID, as I started mid-pandemic,” he says. “The upside was there was an opportunity to meet a lot of insurer members quickly because we could use Zoom meetings and the like. On the policy front, it’s been dominated by issues around business interruption [BI] insurance and the court cases. But that’s been an opportunity to really understand what’s happening in the sector and what’s happening within each individual company and get perspectives on the challenges around BI insurance in the context of the pandemic.”

To date, Hall has borne witness to the release of several major reports – including the Australian Competition & Consumer Commission report, the Small Business and Family Enterprise Ombudsman report

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and the bushfire royal commission report – which he says not only keeps the ICA incredibly busy on the advocacy front, but has also been a good opportunity to learn about and understand some of the ongoing issues in the industry.

Lifting the lid on his decision to take up the ICA’s top post, Hall says that when he was

Hall, who moved from CBA following a transformational period both for the organisation and in banking as a whole, adds: “It was all around understanding risk, the importance of culture of organisations, and how that can really impact positive and not-so-positive consumer outcomes. I think insurers, as well, have been through a similar

“[The business interruption court cases have] been an opportunity to really understand what’s happening in the sector and what’s happening within each individual company and get perspectives on the challenges around BI insurance in the context of the pandemic” approached about the opportunity, “it was appealing to me because insurance is a highly regulated market. It’s got a lot of consumer impact. And I like that whole combination of complex regulatory environments, dealing with advocacy in those environments, and trying to ensure that consumer outcomes and business outcomes can be aligned. So it ticked a lot of boxes for that reason.”

process with the royal commission. And I think there’s still a lot of lessons that have to be fully learned and implemented, but everyone is committed to making progress in that space.”

Hall also brings to the role the experience he gained during a decade of working in federal politics, where he learned the importance of building up strong reputational

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PROFILE Name: Andrew Hall Title: Executive director and chief executive Company: Insurance Council of Australia Based in: Sydney Fast fact: Hall started his career as a journalist before moving into politics, then banking and insurance

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14/05/2021 8:19:08 am

PEOPLE

THE BIG INTERVIEW

capital and closely engaging with politicians – both the government and the opposition.

“We need to listen to what they’re saying,” he says, “and we need to understand that their concerns will be driven by concerns from their community and that those community issues need to be addressed.”

Business interrupted One of the biggest issues on Hall’s plate at the moment – alongside the hard insurance market – is BI coverage. Based on the ICA’s estimates, more than 250,000 policies will likely be affected by the outcome of the first test case on the Quarantine Act, with claim values approaching $10bn.

“The first test case, there was always a mechanism for an appeal built into that, and

which will examine the application of further issues beyond the Quarantine Act exclusion.

The second test case will determine the meaning of policy wordings as they relate to the definition of a disease, the proximity of an outbreak to a business and the prevention of access to premises due to a government mandate.

According to Hall, the priority is to get certainty for insurers through the courts.

“As soon as we get court determinations, the industry will move quickly on processing the claims that are eligible for payment,” he says.

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60,000 Approximate number of people employed in insurance in Australia

On the horizon In the area of personal lines, Hall commends the industry for doing a “very good job” in 2020 when Australia emerged from the

“We need to listen to what [politicians are] saying, and we need to understand that their concerns will be driven by concerns from their community and that those community issues need to be addressed” so insurers have exercised that,” Hall says. “So we’re in the hands of the High Court around whether we will receive special leave to appeal. But we’ve been working very closely with regulators and stakeholders to develop a comprehensive set of cases and policy wordings for the second test case.”

At time of writing, the High Court had agreed to hear oral arguments on the application for special leave to appeal the ruling of the New South Wales Court of Appeal.

Arguments will be heard in May or June at the earliest.

Meanwhile, the ICA lodged a second test case with the Federal Court in February,

AUSTRALIA’S GENERAL INSURANCE INDUSTRY BY THE NUMBERS

disastrous bushfires and hailstorms. He highlights the comprehensive claims management processes and services developed by general insurers in response to the catastrophes.

As to what lies ahead, Hall says he’s “looking forward to the vaccine opening up the country again, and maybe we can get back to some sort of normality on how we live life within Australia. I hope that also provides an economic stimulus to the country, and I’m looking forward to really delving further into some of the biggest challenges around insurance and trying to help the industry chart a course in which we can find solutions to these challenges.”

$187.2m Average amount paid out in claims each working day

$53.2bn Gross written premium generated each year

$143.6bn The industry’s total assets Source: Insurance Council of Australia

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14/05/2021 8:19:11 am

SPECIAL REPORT

Brokers on INSURERS 2021

Brokers told Insurance Business which Australian insurers are consistently coming through for their clients

CONTENTS

PAGE

Feature article .............................................. 20 Methodology ................................................ 22 Brokers on Insurers 2021 winners ............. 25

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SPECIAL REPORT BUSINESS STRATEGY

BROKERS ON INSURERS 2021

NAVIGATING A YEAR OF UNCERTAINTY FOR BROKERS and insurers, 2021 has largely presented a continuation of the challenges that arose in 2020. Fallout from the COVID-19 pandemic is still impacting the industry, while natural disaster claims have shifted from bushfires to floods. There’s also the added pressure of rising premiums in a hard market. And many brokers are still impacted by new commission structures across the industry, not to mention more competition from insurers themselves, who

have established more online communication channels with customers.

In IB’s ninth annual Brokers on Insurers survey, brokers weren’t shy about providing unvarnished feedback for insurers, raising concerns about extreme premium increases and slow turnaround from underwriters.

However, they also gave credit where credit was due, praising certain insurers for providing stability in a hard market and increasing communication during COVID-19.

WHAT’S MOST IMPORTANT TO BROKERS WHEN WORKING WITH AN INSURER? Commission structure

4.14 Broker communication, training and development

4.11 Turnaround time – claims

4.05 Brand recognition and reputation

4.03 BDM support

4.00 Product innovation

3.98 Product range

3.98 Premium stability

3.92 Turnaround time – new business

3.91 Online platforms and services

3.89 Overall service level

3.86 1 Very unimportant

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2 Unimportant

3 Neutral

4 Important

5 Very important

The bad and the good Brokers ranked commission structure, communication and training, and claims turnaround time among their top three priorities when choosing an insurer. The top category – commission structure – garnered few complaints from brokers, and insurers managed to improve their average score from 3.41 in 2020 to 3.44 this year.

Brokers were a bit less satisfied with insurers’ efforts in communication, training and development, awarding them an average score of 2.92 – which, while on par with last year’s 2.90, remains below average. Several brokers brought up communication when asked how insurers could improve their service over the next 12 months.

The type of communication is important, too: one broker pointed out that during COVID-19, it was “communication overload in the way of webinars, yet communication almost total blackout in the way of BDM support,” suggesting that brokers are looking for a more personalised approach.

Claims turnaround time, meanwhile, has been a stable category in IB’s Brokers on Insurers survey from year to year – but not in a good way. In this year’s survey, 64% of brokers said turnaround times have worsened over the last 12 months, while 34% said they had improved – roughly the same proportions as 2020. In addition, insurers’ average score in this category came in at 3.22, only a slight improvement from 2020’s 3.20.

Brokers acknowledged that the delay in processing claims could be largely due to

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14/05/2021 8:10:30 am

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14/05/2021 8:10:34 am

SPECIAL REPORT BUSINESS STRATEGY

BROKERS ON INSURERS 2021

COVID-19 restrictions and the recent spate of natural disasters in Australia. “Getting assessors out to regional and rural areas is an absolute nightmare,” said one broker, while another noted that “everything is slower and more disjointed as claims officers are working from home”.

Brand recognition and reputation – the fourth most important factor to brokers when selecting an insurer – was also virtually unchanged from 2020. Allianz, CGU and QBE have taken the top three spots in this category every year since the first Brokers on Insurers survey in 2013, and this year was no

next 12 months. “Some of the insurers offer very archaic systems and products and are not keeping up with the latest demands,” one broker noted.

Brokers were less enthused about the all-important category of premium stability – perhaps not surprising, given the hard market. While 10 out of 13 insurers earned reasonable average scores of between 3 and 3.75 in this category, when asked if premium stability had improved or worsened during the last 12 months, a whopping 88% of brokers said premium stability has gotten worse, up from 79% last year.

BROKER FEEDBACK

“People working from home may be more productive from an insurer point of view, but they definitely are not from a broker point of view” exception. Overall, insurers’ average score did slide a bit, falling from 3.45 in 2020 to 3.34 for 2021.

Fifth among brokers’ priorities when choosing an insurer, BDM support took a hit this year. The overall average score fell from 2.85 to 2.73, and CGU took the gold medal with a score of just 3.27 – the lowest winning score in this year’s survey. While some brokers praised the support they receive from BDMs, many others complained about their lack of authority. “Poor old BDMs have all had their authority taken away. They have zero impact,” said one broker, echoing the comments of many others.

Insurers fared a bit better in product range and product innovation, earning an average score of 3.30 for product range (down slightly from 2020’s 3.41) and 3.15 for innovation (on par with last year’s 3.14).

A few brokers mentioned innovation when asked what insurers need to change over the

While some brokers attributed rising premiums to the perfect storm of COVID19, fires, floods and low interest rates (“The market is doing what we always anticipated would happen,” one broker pointed out), others felt the rate increases were unjustified.

“I mean, I know it is a hard market, but this is the next level,” one broker said. Another noted that “as a broker, it is becoming frustrating hearing the book has been ‘re-rated’ and having clients not understand the whole picture of the market, especially when there are no changes to their business activities and turnover.”

Although it was one of their lowest priorities when choosing an insurer, turnaround time on new business is clearly another sore point for brokers. While the industry average score slipped only slightly (from 3.30 in 2020 to 3.25 this year), 75% of brokers said turnaround time on new business has gotten worse over the past 12 months – and many

METHODOLOGY Brokers from across the nation were invited to rate the performance of a selection of insurers currently operating in Australia. To ensure results were relevant and timely, respondents were asked to rate only those insurers they had dealt with in the past 12 months.

Thirteen insurers were rated by brokers in this year’s survey: AIG, Allianz, AXA XL, Berkley Insurance Australia, Berkshire Hathaway, CGU, Chubb, HDI Global Specialty, Hollard Commercial, Liberty Specialty Markets, QBE, Vero and Zurich. Brokers rated each insurer’s performance on a scale of 1 (very poor) to 5 (very good) across 11 different categories.

For each category, insurers were ranked in order of merit according to an average score calculated from a tally of their ratings. The top three companies in every category received a gold, silver or bronze medal.

Insurers’ combined average score from all categories determined the medallists for Insurer of the Year.

9th

T c

Year of IB’s Brokers on Insurers survey

Insurers rated in this year’s survey

W r w $ w

300+

v

13

Ratings and comments from brokers

*T

s

22

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14/05/2021 8:54:52 am

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SPECIAL REPORT BUSINESS STRATEGY

BROKERS ON INSURERS 2021

generally has had a positive impact, has enabled more and better communication,” said another broker. “Clients have more time to review and question their insurance.”

SURVEY RESPONDENTS AT A GLANCE

YEARS IN THE INDUSTRY

5%

17%

50 + years

LOCATION

24%

10 years or fewer

41 to 50 years

21%

31 to 40 years

12%

21 to 30 years

21%

11 to 20 years

NSW

41%

QLD

23%

VIC

12%

WA

9%

SA

8%

TAS

3%

ACT

2%

NT

2%

BROKER FEEDBACK

“COVID generally has had a positive impact, has enabled more and better communication.

Clients have more time to review and question their insurance” of them put the change down to COVID19-mandated remote work arrangements.

“Some working-from-home arrangements have caused some underwriters to stay elusive,” said one broker, while another complained that “people working from home may be more productive from an insurer point of view, but they definitely are not from a broker point of view”. Others attributed slow quote turnarounds to a lack of skilled underwriters – or a lack of underwriters altogether.

Online platforms were also relatively unimportant to brokers when choosing an insurer. Brokers gave insurers an overall average score of 3.02 in this category (down from 2020’s 3.16), and the three medal winners’ scores fell slightly from last year as well. Respondents had a smattering of

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complaints about insurers’ online systems but were generally more concerned with other aspects of service.

Finally, the category of overall service – ranked last on the list of things brokers consider most important in an insurer – remained stable from 2020. This year, brokers gave insurers an overall average score of 3.22, compared to 3.21 in 2020. However, they had plenty to say about the service they receive from insurers – and particularly how it has been affected by COVID-19.

On that point, feedback was mixed. “It seems that insurers have become harder to contact, have slower response times, are more restrictive [with] covers and are significantly increasing premiums,” said one broker. But some offered a very different view: “COVID

The top insurers of 2021 Despite the sometimes scathing feedback from brokers, three insurance companies managed to rise to the top and claim medals for Insurer of the Year. CGU fell from last year’s second-place finish but still managed to nab bronze with an average score of 3.39 out of 5. This year’s silver medal went to Berkshire Hathaway, which achieved an average score of 3.48 across all 11 categories. And last year’s bronze winner, Berkley Insurance Australia, grabbed gold with a respectable average score of 3.67. Seven other insurers – AIG, Allianz, Chubb, Hollard, Liberty Specialty Markets, QBE and Zurich – managed to earn medals in one or more categories.

Berkley’s gold medal was due in large part to its solid performance in categories where brokers were mostly disappointed with other insurers: communication, overall service, new business turnaround time and premium stability. A broker who awarded Berkley the maximum 5 points across most categories commented: “It’s a hard market, and Berkley has been a standout on premium stability.”

Silver medallist Berkshire Hathaway likewise triumphed in some critical categories, earning gold for commission structure, premium stability and claims turnaround time. One broker who gave Berkshire Hathaway 5 points across all categories praised them for improved turnaround times on claims.

CGU clinched the bronze with an overall score that remained relatively stable from last year (3.39 in 2021 versus 3.41 in 2020) and standout performances in BDM support and online platforms. One broker who awarded CGU 4s and 5s in all 11 categories reported that “the BDM support has been good as always” and “the premiums available for products and services are getting a little better than last year”.

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14/05/2021 8:10:49 am

Brokers on INSURERS 2021

COMMISSION STRUCTURE

Berkley Insurance Australia

BROKER COMMUNICATION, TRAINING AND DEVELOPMENT

Berkshire Hathaway

3.75

CGU

3.65

3.72 TURNAROUND TIME – CLAIMS

Berkley Insurance Australia

Berkshire Hathaway

3.50

Berkshire Hathaway

CGU

3.35

3.67

CGU Chubb

QBE

3.54

3.79

BDM SUPPORT

3.85

Allianz

3.76

PRODUCT INNOVATION

CGU

3.25

3.79

BRAND RECOGNITION AND REPUTATION

3.55

Berkshire Hathaway

Berkley Insurance Australia

3.27

Berkley Insurance Australia

3.17

Berkshire Hathaway

3.75

Berkley Insurance Australia

3.76

Chubb

3.55

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SPECIAL REPORT BUSINESS STRATEGY

BROKERS ON INSURERS 2021

Brokers on INSURERS 2021

PRODUCT RANGE

CGU

3.67

PREMIUM STABILITY

Berkley Insurance Australia

3.83

Chubb

3.65

3.75

3.72 ONLINE PLATFORMS AND SERVICES

Berkley Insurance Australia

AIG and CGU (tie)

3.67

4.14

Hollard Commercial

Hollard Commercial

3.35

3.40

OVERALL SERVICE LEVEL

Berkshire Hathaway

3.50

Liberty Specialty Markets

3.33

TURNAROUND TIME – NEW BUSINESS

Berkshire Hathaway

26

Berkley Insurance Australia

Berkshire Hathaway

3.46

Zurich

3.31

INSURER OF THE YEAR

Berkley Insurance Australia

4.00

CGU

3.42

Berkshire Hathaway

3.48

Berkley Insurance Australia

3.67

CGU

3.39

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SPECIAL REPORT

2021

PROFESSIONAL INDEMNITY INSURERS Insurance Business shines the spotlight on the best performers in the Australian professional indemnity insurance market

CONTENTS

PAGE

Feature article .......................................................... 28 Methodology ............................................................ 28 5-Star Professional Indemnity Insurers 2021 ....... 32

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SPECIAL REPORT BUSINESS STRATEGY

5-STAR AWARDS 2021: PROFESSIONAL INDEMNITY INSURERS

STANDING OUT IN A HARD MARKET THE PROFESSIONAL indemnity market has been a tough nut to crack for some time now, with policy excesses and premiums spiralling upwards, low capacity, tighter policy conditions and, in some sectors, a limited number of insurers who are willing to provide cover.

In its recent Professional Indemnity Market Update, Willis Towers Watson pointed to a widespread reduction in capacity as a significant hurdle in a market that has been hardening since 2017, noting

which led to a big drop in capacity for the Australian market that continued into 2020.

Insurers responded by being more selective about who they will cover; others opted out of renewing binders in certain professional indemnity markets.

Yet the need for insurance for those providing advice or a service, in the event of legal action claiming malpractice or misconduct, has never been more keenly felt. Not only is PI insurance a mandatory requirement for professions such as lawyers,

“Clients who do not understand why they cannot get terms or the significant increase in their premiums depend on a broker’s advice” Paul Burton, PI Direct Insurance Brokers that “reductions from $20m to $10m, or even as little as $5m in some cases, are common”. Premium hikes are also rampant in today’s market, according to WTW, which pointed out that rises of 50% and 100% are common and noted that “we have even seen increases as much as 2,000% in some extreme cases”.

Events in the London market have also had an impact. When Lloyd’s undertook its Decile 10 review in 2018, PI was identified as one of its worst-performing classes,

28

doctors, real estate agents and stock agents, but it’s also becoming increasingly critical for a wide range of other occupations, from contractors to copywriters. The cost of being uninsured or underinsured can be crippling in the event of a claim – it can even put companies out of business.

The hardest markets Two segments of the PI market have been particularly hard-hit. Driven in part by a surge in shareholder litigation, directors &

METHODOLOGY To select the best professional indemnity insurers for 2021, IB surveyed hundreds of brokers to gain a keen understanding of what insurance professionals think of current market offerings. Brokers were first quizzed on what features they thought were most important in a professional indemnity policy and then asked how the companies they dealt with rated on those attributes.

The winners were measured on their ability to handle claims, their underwriting expertise and, most importantly, the strength of the individual products they provide.

80% of brokers said underwriting expertise is very important when choosing a PI insurer

68% of brokers said claims processing and payment are very important in PI

36% of brokers said a PI insurer’s access to risk mitigation partners is very important

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CELEBRATING 25 YEARS

2020

INSURANCE BUSINESS AWARDS

www.mpamagazine.com.au

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SPECIAL REPORT BUSINESS STRATEGY

5-STAR AWARDS 2021: PROFESSIONAL INDEMNITY INSURERS

“Brokers need to always consider what type of risks an underwriter is winning and whether the client they are trying to place is consistent with that and fits into that portfolio”

WHICH AREAS OF PROFESSIONAL INDEMNITY INSURANCE ARE MOST IMPORTANT TO BROKERS?

Very important

Important

Neutral

Unimportant

Very unimportant

Breach of duty Civil liability Third-party loss Legal costs and expenses Breach of privacy or confidentiality Contractual liability Slander (for media organisations) Employee negligence/dishonesty

Christian Garling, FTA Insurance

Bodily injury and property damage Breach of consumer, competition and Fair Trading Acts Employee fraud/dishonesty Reputation repair Defamation 0%

20%

40%

60%

80%

100%

that it had taken out $6.9m in professional indemnity insurance coverage for surveyors, project managers and other contractors engaged in the state’s $600m cladding rectification works on faulty high-rise buildings. The exclusion-free cover was a rare and welcome phenomenon at a time when many PI insurance policies contain exclusion clauses for defective cladding because of the potentially astronomical cost of claims.

A chance for brokers to shine officers (D&O) cover is suffering from a volatile and reactive market. A September 2020 report by the Institute of Directors, Marsh and MinterEllisonRuddWatts noted that a host of local and overseas insurers have withdrawn from the D&O market and estimated that capacity in the London market alone is 50% less for ASX-listed companies than it was in 2017.

The construction sector has also been

30

battered by insurers limiting their cover, according to the WTW report, which noted that “the construction industry has borne the brunt of this tightening as insurers seek to limit cover for contractual liabilities that extend risk beyond the usual standard of care that is expected of professionals in the sector”.

There are notable exceptions – the Victorian Government announced in February

Despite the challenging conditions, there is no shortage of optimism among this year’s 5-Star Professional Indemnity winners.

Paul Burton, managing director of Queensland-based PI Direct Insurance Brokers, sees plenty of opportunities in the hard market. “I recently read a comment, with which I agree, that given how long we have been experiencing these market conditions, perhaps it is time we stopped calling it

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the hard market and just referred to it as the market,” he says.

In these conditions, Burton sees a significant opening for brokers to show the value of their expertise and professionalism.

“Clients who do not understand why they cannot get terms or the significant increase in their premiums depend on a broker’s advice to educate them, manage expectations, guide them through the process and achieve the best result possible,” he says.

“Hence, these conditions provide numerous opportunities to create new and cement existing relationships with their clients.”

Christian Garling, managing director of Sydney-based FTA Insurance, agrees, adding

that with premiums increasing and terms tightening, many insureds are reviewing their coverage to make sure they have market-competitive terms.

“If a broker is staying in contact with potential clients, then this provides an opportunity for the broker to show what they can achieve,” Garling says.

Brokers can also play an invaluable role by pointing out potential gaps in a policy, he adds. “With many clients using online systems, they can receive inappropriate terms, and this is a great opportunity for a broker to show their expertise by pointing out the deficiencies in cover. Alternatively, [they can advise] on new products and expo-

WHAT’S MOST IMPORTANT TO BROKERS WHEN CHOOSING A PROFESSIONAL INDEMNITY INSURER?

Very important

Important

Neutral

Unimportant

100%

80%

60%

40%

20%

0%

Underwriting expertise

Claims payment/ processing

Access to risk mitigation partners

sures that the client might not have appreciated, [such as] cyber.”

Burton stresses that brokers must fully understand the client’s business and requirements to obtain adequate coverage.

“While it may appear obvious, when it comes to completing the PI proposal, it is essential to make sure all questions are correctly completed and, importantly, that the business description is completed and covers all activities for which cover is being sought,” he says. “It is amazing the difference this makes to underwriters and how often this is not done correctly.”

And don’t stop with a proposal form, Burton advises – include additional information like copies of standard contracts and CVs to make your client stand out.

“Engage with your underwriter, discuss the risk with them, involve them in the process,” he says. “Of course, a very simple way to do this is to engage a specialist to assist you through the process and benefit from their expertise and relationships.”

As for the likelihood of more insurers pulling out of the PI market, Garling believes the situation has stabilised for now – although he notes that there are still some very large players “taking corrective action” on their portfolios.

“Brokers need to always consider what type of risks an underwriter is winning and whether the client they are trying to place is consistent with that and fits into that portfolio,” Garling says. “If you see an underwriter applying little in the way of underwriting filter or targeting risks that are distressed, then you can expect that portfolio to experience significant rate movements or even a withdrawal of capacity. However, if you see an underwriter targeting low-hazard and low-exposure business, this will give a broker and their client confidence that the rates should stay consistent and capacity be available into the future.”

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SPECIAL REPORT BUSINESS STRATEGY

5-STAR AWARDS 2021: PROFESSIONAL INDEMNITY INSURERS PROFESSIONAL 2021 INDEMNITY INSURERS EPLI – SMEs

D&O – MULTINATIONAL CORPORATIONS

DUAL Australia

E&O – ACCOUNTANTS AND FINANCIAL PROFESSIONALS

FTA Insurance

FTA Insurance

DUAL Australia

Vero Insurance

E&O – LAWYERS

FTA Insurance

D&O – SMEs Solution Underwriting

Berkley Insurance Australia DUAL Australia

DUAL Australia

FTA Insurance

E&O – CONSTRUCTION

Solution Underwriting

E&O – DESIGN (ARCHITECTS/ ENGINEERS AND CONSULTANTS)

Berkley Insurance Australia

Vero Insurance Berkley Insurance Australia

DUAL Australia

EPLI – MULTINATIONAL CORPORATIONS

DUAL Australia FTA Insurance

FTA Insurance

FTA Insurance

SUMMARY: 5-STAR AWARD WINNERS BY CATEGORY Insurer

EPLI – SMEs

D&O – SMEs

EPLI – multinational

D&O – multinational

corporations

corporations

E&O – lawyers

E&O – design (architects/ engineers and consultants)

Berkley Insurance Australia CGU

DUAL Australia

FTA Insurance PI Direct Insurance Brokers Solution Underwriting

Vero Insurance

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UNDERWRITING EXPERTISE

E&O – MEDICAL

ACCESS TO RISK MITIGATION PARTNERS

Berkley Insurance Australia DUAL Australia

Berkley Insurance Australia

CGU

CGU

DUAL Australia

FTA Insurance

DUAL Australia

FTA Insurance Vero Insurance

E&O – NON-PROFITS/CHARITIES

Solution Underwriting

FTA Insurance

Vero Insurance

Solution Underwriting Vero Insurance

CLAIMS PAYMENT/PROCESSING UNDERWRITING AGENCY/ WHOLESALE BROKER

Berkley Insurance Australia

DUAL Australia

DUAL Australia FTA Insurance

Vero Insurance

E&O – accountants and financial professionals

DUAL Australia

FTA Insurance

E&O – construction

E&O – medical

Solution Underwriting

PI Direct Insurance Brokers

Vero Insurance

Solution Underwriting

E&O – non-profits/ charities

Underwriting expertise

Claims payment/ processing

Access to risk mitigation partners

Underwriting agency/ wholesale broker

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PEOPLE

BROKER INSIGHT

Time to step up Kirsty Dowell of Stellar Insurance Brokers shares her thoughts on the value brokers can provide as risks become more complex

STELLAR INSURANCE BROKERS, a family-owned brokerage based in Brisbane, has a certain fondness for complex risks. Kirsty Dowell, Stellar Insurance Brokers’ administration manager, believes the brokerage shines brightest when it deals with not-so-simple risks.

“For us, it’s about showcasing the value of a broker,” Dowell says. “We don’t like having clients where our competition is the direct market. For us, our ideal client is someone who actually understands the advice that we give them and follows it, and actually values our profession and our involvement in their business. And we work together to make their business more successful by having insurance solutions and good risk management strategies in place.

“So, for us to really shine, we find it best when we have a complex risk, because anyone can write a non-complex policy.”

For Dowell, who is the daughter of Stellar Insurance Brokers founder and managing director Mike Pappalardo, there’s “so much more” to broking than just the cost of insurance.

When it comes to claims, for instance, Dowell believes Stellar Insurance Brokers can showcase its value by bringing in the company’s expertise when negotiating settlements.

That’s critical in an environment where risks are more complex than they were even a decade ago. In Dowell’s view, the complex risks segment

34

has widened, allowing for greater opportunities to assist clients in finding solutions.

“With the market in the state that it is at the moment, it is so hard to place very vanilla risks,” she explains. “So, to have risks that have some complexities – whether they are in the energy sector or mining or manufacturing – anything that sort of makes it that little bit different or unique, the line to define ‘complex’ is dropping quite significantly.

“You look back 10 years ago, and complex risks had to have genuine complexities to them, whereas now it might just be a case of a business importing a product from China, and it’s becoming complex because insurers are saying no.”

Dowell adds that previously, pretty much everything was insurable at a price. Currently, as the hard insurance market shows, insurers can opt not to underwrite certain risks.

Moving forward, she expects things to remain very tough for “a little while longer”, predicting that the hard market will remain for the next year or two – which could lead some clients to reconsider the value they’re getting from their broker.

“I think we’ll see a lot of clients either shopping around for their broker or their insurer, making sure that they’re trying to get the best deal they can, particularly amid increasing rates or changing underwriting guidelines and appetite,” Dowell says. “Clients who don’t particularly have a great relationship with their broker, or if their broker is not doing the right thing by them in terms of making sure that they’re finding them the best deal available, I think we’ll see the client sort of taking a stance where they’re not going to settle for that.”

That will result in opportunities for good

A FAMILY AFFAIR After spending 28 years in the insurance business as an underwriter and state manager, Mike Pappalardo started Stellar Insurance Brokers with one client in 2003 and has built the business up gradually over the last 17 years. A true family-run operation, Stellar Insurance Brokers is named after Pappalardo’s first grandchild, Stella. His daughter, Kirsty Dowell, has been part of the brokerage for 13 years and plays an integral role in its day-to-day operations.

Pappalardo’s wife, Annie, created the brokerage’s website and assists with marketing, and his stepson, Mitchell Reuss, designed the Stellar Insurance Brokers logo.

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STELLAR INSURANCE BROKERS’ AREAS OF EXPERTISE Business property Business interruption and loss of rent Money Glass breakage Burglary Machinery breakdown Electronic equipment Cyber risk Goods in transit Trade debtors Contract works Motor, transport, trucks and trailers Earth-moving equipment Marine – commercial and private pleasurecraft Corporate travel Tax audit Public liability

“For us to really shine, we find it best when we have a complex risk, because anyone can write a non-complex policy”

Products liability Professional indemnity Management liability, including directors & officers Employment practices liability Product recall

brokers to pick up the business, she adds.

“And with all the huge changes coming to compliance this year, I think there will be a lot of brokers that won’t survive,” Dowell says. “It will just be too much of a burden for them to change their practices, or they’ll look to consol-

idate and merge with other brokers. I think there will be a lot of movement in the broker market because of the massive amount of legislation we’re facing this year, and it will bring opportunities for good brokers to step up and shine and grow and be successful.”

IT liability Statutory liability Contractors’ liability

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14/05/2021 8:19:40 am

FEATURES

SECTOR FOCUS: AUTHORISED REPRESENTATIVES

Why wouldn’t you do it for yourself?

An organic understanding of clients’ needs and a strong support system have led to steady growth for Insurance Advisernet’s broker network. IA managing director Shaun Standfield outlines the benefits of the AR model – and why he sees its success continuing in 2021 and beyond THERE ARE many ways for brokers to get to grips with the challenges facing their SME clients. Perhaps the most direct way is to actually walk in their shoes by being a small business themselves.

For 25 years, Australian businesses have been putting their trust in Insurance Advisernet, one of the country’s largest general insurance groups. Its network of advisers in Australia has grown over that time to more than 180 practices – each one well equipped to understand the needs of their customers, many of whom are SMEs. In New Zealand, Insurance Advisernet’s business is just on 15 years old and boasts more than 70 practices across the North and South islands.

“Our advice practices mirror their clients in many ways,” says Shaun Standfield, Insurance Advisernet’s managing director for Australia and New Zealand. “They have gone out on their own, with our support, and taken the risk to develop their own asset and

36

business. In a way, this reflects many of our clients, who also are small to medium businesses that have backed themselves to build a business for themselves.”

This firsthand understanding of the issues clients are facing has undoubtedly contributed not just to the network’s growth, but also to its current 95% customer satisfaction score. This, in turn, means strong referrals from existing customers, plus regular calls from potential clients.

Of course, few businesses were immune to the impact of COVID-19 – Insurance Advisernet’s advisers and clients included.

While Standfield says the financial impact of the pandemic on IA’s business wasn’t nearly as bad as predicted, some practices and many clients in the hospitality, tourism, and entertainment sectors took a heavy hit. Social and physical isolation only added to the stress.

“Isolation did impact people’s wellbeing,” Standfield says. “We implemented many initi-

A GROWING NETWORK

250+

Number of Insurance Advisernet practices across Australia and New Zealand

30+

Practices added to the Insurance Advisernet network over the past year

$1bn

Gross written premium placed annually

by Insurance Advisernet practices

100,000+

Total clients served by Insurance Advisernet practices

atives to keep people connected through the pandemic, such as IA wellness programs and regular updates on the business via Microsoft Teams meetings. We also encouraged as many team members as possible to join local Teams meetings and participate in the many webinars we ran during the year.”

The pandemic has underscored the importance of having a local adviser – someone who will pick up the phone when a business needs help, rather than a call centre. This experience, combined with an existing model that supports advisers, means Insurance Advisernet is well positioned to help SME clients navigate the post-COVID-19 era, Standfield says.

“Our model allows our practices to concentrate on their clients with the support structures we provide in terms of systems, compliance, professional development, finance, business management tools, insurance placement and claims advocacy services.”

As for core principles, it’s business as usual, with advice, choice and value at the fore.

“We don’t lead with a price-driven model,” Standfield says. “We believe advice is the key

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to ensuring our clients are insured correctly by a trusted professional with relevant industry qualifications, access to broad insurance options and value for money.”

A sound prognosis Standfield is buoyant about the future of broking in Australia and says the authorised representative model is empowering advisers to flourish. Supported by sound back-office systems, ARs can focus all their energy on their own business and helping their clients achieve financial growth and freedom.

“I also believe the continued investment in data, systems, marketing and compliance infrastructure is crucial for the continued growth of both the AR’s business and for longevity of the AR licensee holder,” Standfield says.

His optimism for the future of broking isn’t just wishful thinking – it’s backed up by the data. He points to the latest statistics from the

Australian Financial Complaints Authority (AFCA) for the last six months of 2020.

“During that period, there were 7,131 complaints lodged about general insurance; of those, only 180 matters, or 2.5%, were against insurance intermediaries,” he says. “This speaks volumes for the role insurance intermediaries play in providing risk management advice and claims advocacy service to clients.”

Ironically, the one place where Standfield believes ARs and brokers could improve is in communicating to potential clients how great

their service is.

“We need to collectively improve our messaging about our role in providing personal risk management advice against direct insurance companies that offer only general advice,” he says.

He points to recent AFCA findings that it’s “not the insurer’s job to advise on the sum insured”. The statement came after a complainant’s underinsured business was destroyed by bushfires last summer. AFCA found that the onus was on the policyholder

“Our advice practices mirror their clients in many ways. They have gone out on their own, with our support, and taken the risk to develop their own asset and business” Shaun Standfield, Insurance Advisernet

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FEATURES

SECTOR FOCUS: AUTHORISED REPRESENTATIVES

SUCCESSION BENEFITS OF THE AR MODEL According to Shaun Standfield, the authorised representative model lends itself to a healthy succession plan as practice principals prepare for retirement.

“Many of our practices are now merged businesses, and the collegiate nature of IA means professional relationships are formed across the group,” he says. “In time, discussions occur to allow seamless transitions of books of business across the network.”

Going forward, Standfield envisions more and more principals looking at selling their business to the staff that have contributed to its success.

“We all know insurance broking is about the personal business relationships we have with our clients,” he says. “So it makes sense for principals to consider offering the sale of portfolios to loyal staff who can operate as ARs rather than selling into bigger merged businesses that may not always result in great outcomes for the staff who built their business or for their clients.”

realises the ‘onus as a policyholder’ isn’t something they can afford to get wrong.”

Advice before price The broker’s role has clearly evolved in recent years – thanks in part to technology, which allows advisers to spend more time with their clients. At its core, however, a broker’s purpose remains what it always was: to offer good advice.

“Our role is more and more to provide risk management advice to our clients, and part of this is to craft a bespoke insurance program,” Standfield says. “Often, this program will be crafted using a myriad of insurance partners. At IA, we have access to over 100 insurance partners.

– the price paid for an insurance program is forgotten when a claim occurs!”

All of this must be built on a solid foundation of qualifications, he adds. “You don’t visit a doctor who hasn’t got a medical qualification; why should we be able to give advice and receive remuneration if we haven’t also got an industry-recognised qualification? At IA, all our principals and Tier 1 advisers must have a minimum of a Diploma in Insurance Broking.”

On the horizon In 2019, the Hayne royal commission issued 15 recommendations that could bring insurance in line with the more heavily regulated areas of financial services – including the possibility that commissions could be limited

“Every business is unique, and a one-size-fitsall approach doesn’t work. I believe businesses are increasingly likely to seek professional advice for their insurance programs” Shaun Standfield, Insurance Advisernet

– whose destroyed property comprised both her business and her home – to ensure she had adequate coverage.

“This is a great example of the messaging the broking industry needs to communicate more to explain why having a broker in your corner will assist you to have the right policies, and to have a claims advocate working with you if the need arises,” Standfield says.

He adds that the importance of an adviser’s role is also borne out by the recent Vero SME Insurance Index, which showed an upswing in the number of businesses seeking the services of a broker.

“Every business is unique, and a one-sizefits-all approach doesn’t work,” Standfield says. “I believe businesses are increasingly likely to seek professional advice for their insurance programs – after all, the business owner is an expert in their profession and

38

“Technology cannot replace the advice a person can give; good advice only comes from understanding your client’s wants, needs, and risk tolerances, and using data to ensure your clients are aware of the natural hazard risks they face, coupled with the risks associated with the industry they are in.”

Given the hard market, it’s also important for brokers to provide clients with the facts underpinning the rise in insurance premiums – from diving investment markets and rising repair costs to the increased severity and frequency of weather-related events – all of which will assist in planning for increased insurance costs.

“Also, our role as a trusted adviser is to ensure, where possible, that adequate covers are bought to protect our clients in the event they have a claim,” Standfield says. “Trust me

or even banned outright. While this clearly presents a challenge, Standfield sees full remuneration disclosure as the way to address any perceived conflicts of interest.

“The last thing we all want to see is consumers not seeking advice due to the upfront cost of the advice, as has occurred in the financial planning industry, where only people that can afford advice are seeking it now,” he says. “This is an unintended outcome that can be mitigated against through proper full and transparent disclosure of broking remuneration.

“You only have to look at the AFCA statistics for general insurance to see the positive impact brokers have in protecting their clients to prevent needless complaints and frustrations and further eroding of consumer confidence in the insurance industry.”

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FEATURES

SECTOR FOCUS: ENVIRONMENTAL INSURANCE

A sustainable strategy Tougher regulations, the rising cost of clean-up and restoration, mounting public pressure, the need to safeguard the planet – it all adds up to a distinct imperative for companies to efficiently manage their environmental risk, according to AIG’s Jason Thoroughgood and Keith Gardner 40

AWARENESS OF environmental issues is growing fast. Businesses that play nicely with the world around them can no longer expect to receive a pat on the back; the public increasingly expects companies to do the right thing. Added to this is increased pressure from active regulators to make polluters pay. This means companies need to reassess their approach to environmental risk management, says Keith Gardner, environmental team leader, Pacific, at AIG. “Organisations should stress-test their insurance coverage to ensure it responds as expected in the event of a loss,” he says.

“Insureds think it will never happen to them, but quite clearly it can and does. We’re seeing a real gap in cover for insureds who may not believe that an environmental impairment

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WHAT’S COVERED? Environmental insurance protects businesses from a range of environmental liabilities and exposures and is designed to respond to all types of pollution – sudden, accidental and gradual – as well as regulatory clean-up obligations that are becoming extremely complex.

Pollution legal liability (PLL) policies cover liabilities arising from pollution at, on, under or migrating away from a client’s site. The policy can cover new pollution arising from site operations, legacy pollution related to a site’s history, or both new and pre-existing pollution.

Contractors’ pollution liability (CPL) policies cover environmental liabilities arising from a contractor’s operations caused by the introduction of new pollution conditions or the exacerbation of existing pollution conditions whilst working at third-party sites.

liability [EIL] policy is necessary, so they simply rely on general liability cover, which often leaves them exposed.”

This gap needs to be filled because environmental incidents are affecting a more diverse range of business than ever before.

When EIL policies were first conceived and issued, Gardner says, the primary focus was on heavy manufacturing industries, which were perceived to be more likely to face environmental incidents. However, over the past year, AIG has seen incidents and losses from restaurants, universities, service stations, environmental consultants, construction contractors and transportation companies, as well as from fire events at warehouses and depots, plus the mismanagement of waste across various industries.

“Claims statistics demonstrate that an environmental incident can happen in almost

any sector,” Gardner says. “It is therefore critical that brokers review their clients’ exposures and discuss ways that the client can transfer their risk.”

While asbestos has traditionally been the primary cause of EIL concern in Australia, claims trends demonstrate that losses are also coming from fire, importation of contaminated soils and leakage of hydrocarbons, which is also contaminating soil and groundwater.

Fire continues to be an interesting topic for environmental risks, says Jason Thoroughgood, AIG’s head of casualty for Australia. “If your insured is concerned about their fire risk, they should also be concerned about their environmental risk.”

He says the claims trends highlight the need for all contractors to have an EIL policy in place, as environmental damage can come about from any number of events.

“We have seen a number of incidents arising from the importation of contam-

“They are often complex, time-consuming and include dialogue with various regulators,” he says. “Second, government bodies like the Environmental Protection Agency [EPA] are becoming increasingly active with broadened powers. Their enforcement on insureds to clean up or remediate a site is becoming a lot more stringent, meaning claims costs are increasing.”

And there’s a lot at stake if a business gets it wrong. Thoroughgood cites the case of a fire event where runoff from the water used to fight a fire at a manufacturing site collected chemicals then spread them onand off-site. The client was issued a statutory notice of clean-up by the EPA; the cost to comply was approximately $10m.

“Under a general liability policy, a statutory notice of clean-up issued by the EPA is not a trigger, because it is not a claim for thirdparty damages,” Thoroughgood explains. “The insured had to cover this loss. If the client had

“If your insured is concerned about their fire risk, they should also be concerned about their environmental risk” Jason Thoroughgood, AIG inated soil, which is used for different reasons across the construction industry,” Thoroughgood says. “If the insured does not have proper virgin excavated natural material/excavated natural material procedures in place and something goes wrong, the cost of remediation can be significant and damaging for a client’s reputation.”

When costs spill over So why is general liability cover not fit for purpose for environmental incidents? First, Thoroughgood says, environmental insurance is a specialist line, designed to handle the complexity of environmental incidents.

held an environmental policy, they would have had appropriate coverage and would have avoided having to fund the loss.”

So how can brokers ensure appropriate coverage for their clients? While any good EIL insurer should work with the broker to mitigate the client’s risks ahead of finalising a policy, incidents can and will happen. In that event, Thoroughgood says, the policy should promise to do more than just pay the claim; it should also ensure an effective response to the pollution incident itself that minimises environmental harm.

“The client and broker should have 24/7 access to their insurer in order to seek assis-

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FEATURES

SECTOR FOCUS: ENVIRONMENTAL INSURANCE

tance from qualified experts to respond effectively,” he says. “The insurer should then be able to assist by coordinating clean-up experts and advising the client on next steps to ensure the safety of everyone involved.”

This kind of service from an insurer will ensure that even if the client does not have specialist environmental capabilities, they can access expertise to successfully manage the event. And given the high level of public

would react versus an environmental policy, the broker ensures that the client is equipped to make their own fully informed decision on environmental risk,” Gardner says.

It’s important for the insurer to assist in this, providing the broker and client with engaging material and examples of exposures, such as claim scenarios. “At AIG, we also attend discussions with policyholders in tandem with our brokers, ensuring they can

“By outlining how traditional policies would react versus how an environmental policy would react, the broker ensures the client is equipped to make their own fully informed decision on environmental risk” Keith Gardner, AIG consciousness around environmental damage, reputational risk is a huge concern with any claim, Gardner adds.

“Providing clients with access to professional PR consultants at no extra cost with any EIL policy is a benefit that brokers should seek when comparing products,” he says.

The broker’s role Many clients might not be aware of the environmental risks they face, much less the extent to which those risks are insurable.

Because EIL is a lesser-known product, and the exposures are complex and sometimes difficult to explain, education for both brokers and clients is paramount. A broker with specialist knowledge can consider the client’s environmental exposure, whether the coverage they already have (such as general liability and industrial special risk policies) is adequate and, if not, whether environmental insurance is a solution.

“By outlining how traditional policies

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leverage our experienced team and global insights,” Gardner says.

Brokers can also help clients pick their way through the ever more bewildering maze of regulation and legislation governing environmental liability, which can vary from one state or territory to another.

“Some local state environmental regulators also have the power to issue environmental protection orders to parties connected with the holder of an environmental authority – so-called ‘related persons’ – meaning that related corporate bodies and financiers may also become liable for the environmental authority holders’ environmental obligations,” Gardner says.

Recognition of the need for environmental cover is growing in some sectors, particularly construction, Gardner says. He attributes this to two factors: first, increasing legal requirements for contractors to have an environmental insurance policy in place, and second, pressure from large contrac-

CASE STUDIES: THE COST OF CLEAN-UP Asbestos soil contamination A contractor hired to undertake revegetation and landscaping of a site later discovered that the mulch used was contaminated with asbestoscontaining material. The contractor was required to remediate the site in accordance with local legislation; claims costs exceeded $3m.

Liquid waste leaching into soil and groundwater An automotive garage produced liquid waste as part of its normal operations.

While waste barrels were being loaded onto a truck, five barrels slipped off and saturated the ground. The waste leached through the soil and contaminated groundwater that fed nearby wells. The garage was ordered to excavate the contaminated soil and to compensate 40 people for property damage and bodily injury. The garage’s costs, including claim settlements, were more than $1m.

Effluent polluting a waterway A contractor installed a vehicle wash-down bay on a site to prevent mud and sediment from impacting roads. A drain became blocked, resulting in effluent discharge into a nearby waterway. The EPA required the contractor to remediate the nearby waterway; claims costs were approximately $500,000.

Source: AIG

tors wanting to protect their own insurance placements on lower-tier contractors to also take out their own cover.

While this is a positive trend, Gardner stresses that the broker’s role remains pivotal – especially when a company might be tempted to cut costs by ditching their environmental cover. “It is crucial for brokers to be able to highlight the critical need for EIL insurance and the risks presented if they were to opt out of cover.”

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Expert mitigation, effective response When it comes to Environmental insurance, we go beyond just paying claims. We ensure that if an incident occurs, the right experts are involved and appropriate measures are taken to minimise the environmental impact.

Find out more aig.com.au/environmental American International Group, Inc. (AIG) is a leading global insurance organization. AIG member companies provide a wide range of property casualty insurance, life insurance, retirement solutions, and other financial services to customers in approximately 80 countries and jurisdictions. These diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange.

Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIGinsurance www.twitter.com/AIGinsurance | LinkedIn: www.linkedin.com/company/aig.

These references with additional information about AIG have been provided as a convenience, and the information contained on such websites is not incorporated by reference herein.

This document is provided as a general overview of the subject matter and should not be taken as providing any specific advice, legal or otherwise. The content is a guide to coverage benefits and should not be relied upon to determine policy coverage. The precise scope and breadth of policy coverage is subject to the specific terms and conditions of each policy wording. Insurance products are issued in Australia by AIG Australia Limited ABN 93 004 727 753 AFSL No 381686. © AIG – All rights reserved.

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FEATURES

SECTOR FOCUS: TECHNOLOGY

Riding the digital wave Fundamental change is coming to the way insurance is brokered. IB talks to Johan Nelis of Duck Creek Technologies to find out more about the digital revolution and the systems that are at the vanguard

INSURANCE BROKERS and their customers live in a digital world where almost everything can be achieved online, whether it’s buying tailored computers, getting realtime assessment of current computer specifications, leveraging expert advice or obtaining consumer recommendations. The consumer chooses the channel and can swap seamlessly between them throughout the life cycle.

Yet many brokers and customers feel frustrated that they’re not enjoying this customercentric, digital, omnichannel experience in their daily work, says Johan Nelis, director of solution consulting for APAC at Duck Creek Technologies. Getting insurance still involves a plethora of paper forms and many manual, repeatable, and mundane tasks.

“We feel that insurance should also be digital, enabling brokers to better service their customers,” Nelis says.

Duck Creek provides core system solutions (Rating, Policy, Billing, Claims and Insights) to the general insurance industry, which are available either as stand-alone products or as a full suite of systems. The company’s on-demand SaaS delivery solution allows insurers to launch new products more quickly and allows the technology to support the business strategy rather than dictating it, Nelis says. He adds that systems like this are the next generation because the imperative to be creative and adaptable is only growing.

A better experience Founded by brokers in the US in 2000, Duck Creek’s aim from the get-go has been to create insurance solutions that put brokers and clients front and centre. The company designed its innovative suite of software products to bring transparency, integration and consistency to insurance – and, crucially, put the insurer in control.

“Digital insurance is driven by the expectations, requirements and capabilities of the three parties involved: customer, broker and insurer,” Nelis says. “We see customers are

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looking for a consistent experience across all channels, an effortless service experience at every touchpoint throughout the journey and a personalised experience.”

He gives the hypothetical example of a baker who is busy opening another branch and has limited time to enter data – and finds it hugely frustrating having to fill in information the broker or insurer already has.

With next-generation technology like Duck Creek’s, the baker only has to give his broker limited information related to his business, property and vehicles, which is then used to obtain all relevant underwriting data.

If the baker buys an asset like a donut production line, he gets a prompt asking whether he wants to add this equipment to his policy. He has also installed an IoT device near the production line’s water boiler that gets a message as soon as a leak is detected, flagging the need for immediate assistance and triggering the initiation of a claim.

As for brokers, they need quick turnaround times and access from any channel (desktop, mobile, in person); a simple and user-friendly quote, buy and service experience; and targeted information or content to best service customers.

Nelis gives the example of a broker who wants to offer a cyber insurance product with a unique set of coverages, limits and excess.

She wants to be able to sit down with clients and go through the options on her tablet and get instant feedback on pricing, coverage limits and excess. By connecting to an underwriter who can see the screen and provide real-time updates, the broker can make pricing and underwriting decisions within

years; rather, you need a platform that has the right architecture that is nimble, with the ability to quickly make changes with minimal effort and risk; connected to a broader ecosystem of ever-increasing third-party solutions that will enhance your offering; and smart – able to leverage data to streamline

“Customers are looking for a consistent experience across all channels, an effortless service experience throughout the journey and a personalised experience” Johan Nelis, Duck Creek Technologies her authority. She can also access aggregate insurance information from similar businesses (much like Amazon’s ‘people like you bought’ model), allowing her to tailor her advice.

Getting flexible Flexibility is also key, Nelis says – the ability to make a modification if the market asks you to go in a different direction.

“Insurance is evolving,” he says, “so you can’t design everything for the next five to 10

AGILITY AND SPEED: A CASE STUDY In March, Duck Creek announced that global insurer Hollard had gone live in Australia with a new platform to administer its personal motor, landlord and home insurance lines, backed by Duck Creek’s policy, billing, and data hub solutions. Hollard was selected to underwrite three personal lines products for a major insurance broker network, so it had to integrate the portfolio into its newly acquired technology. A successful transition to the broker network’s platform was achieved in just six months through a unique relationship between Hollard, Duck Creek and systems integration partner Xceedance.

“In a competitive and highly regulated market, the agility and speed with which we can go to market is critical to our partners’ success and our continued growth,” Hollard CIO Jamie Smith said at the time. “Duck Creek’s low-code platform enables us to launch products rapidly, add value to the business in a controlled fashion and will play a vital role in automating our operational processes.”

and improve your processes and outcomes.”

He adds that insurers need digital tools “to provide omnichannel experience for brokers and customers – enhanced experience leveraging automation, digitization and integration – and provide predictive analytics that assist brokers and customers throughout all facets of insurance”.

Nelis notes that insurers should also leverage third-party data to get better insights into the underwriting risk. To return to the example of the baker, brokers could assess the business’s cyber risk through automated scanning of all of the client’s digital assets and identify shortcomings that prevent or limit risks and reduce the premium. For example, the behaviour of the baker’s delivery drivers could determine the premium and/or excess for his fleet and provide a dashboard with the telematics scores of each driver.

Typically, insurers have struggled to provide this type of tailoring to the customer and broker because they were hampered by legacy systems with high total cost of ownership and limited flexibility. Many insurers have tried to overcome this by commoditising their insurance offering, at the cost of

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FEATURES

SECTOR FOCUS: TECHNOLOGY

THE BENEFITS OF DUCK CREEK’S NEXTGENERATION SYSTEMS Streamlined processes with no need to re-enter or copy data

Automation of mundane tasks to free up time for high-value ones

Leveraging insights to make the right decisions – for instance, highlighting what the policyholder could do to further reduce risks

“When we talk about legacy systems, we shouldn’t just be thinking about the decadeold mainframes, but also newer solutions that aren’t flexible once installed” Johan Nelis, Duck Creek Technologies catering to unique customer requirements.

“When we talk about legacy systems, we shouldn’t just be thinking about the decade-old mainframes, but also newer solutions that aren’t flexible once installed,” Nelis says. “We heard of an occasion where an insurer using a legacy system took three months and spent more than $1m to not ask a question in the process.”

In the past, it was common for insurance system vendors to dictate how business had to be run on their system. If a business wanted to offer more flexible and innovative solutions, Nelis says, it had to break the system to do that.

“But now you see more insurers saying, ‘This is how I want to set up my products and process’,” he says. “Our solution allows you to

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The ability to combine various commercial insurance products and coverages into a single policy

Flexibility to tailor a solution and vary any aspect of the policy, such as term, coverages, limits, excesses and product components

Speed of delivery

say, ‘This is what the insurance offering is’, and then, because the system is descriptive, it’s easier for IT to deliver.”

Typically, digital change in the industry has been sluggish because upgrading an insurance system is an expensive and time-consuming affair. But with a cloudbased solution such as Duck Creek’s, where a system is updated rather than upgraded, any amendments are almost instant.

Digitalisation has already disrupted many sectors, Nelis says, and the insurance industry is no different.

“The local video store has disappeared, and the local travel agency has transformed into an adviser to survive,” he says. “The insurance industry is also being disrupted – take, for example, Amazon offering insur-

ance to its Amazon Business Prime customers – hence the need for brokers to demonstrate their value and need for insurers to be more responsive.”

COVID-19 has also highlighted some of the industry’s anachronistic ways of working.

“We spoke with an insurer who stated that their staff couldn’t work without the physical files; during the pandemic, their entire workforce embraced digital within a year and have experienced the benefits,” Nelis says. “While insurance has been around for hundreds of years, customers’ needs are evolving at an ever faster pace. You need to find ways, as insurers and brokers, to ensure you continuously provide value.”

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PEOPLE

OTHER LIFE

TELL US ABOUT YOUR OTHER LIFE Email ibo@keymedia.com.au

Calabrese has been leading bands since the late ’90s

3

Number of bands Calabrese has written for and fronted

500+

Shows his bands have performed across Australia and the US

2005

Year Calabrese toured the US with his former band while working as a broker

BAND-FRONTING BROKER Musician Simon Calabrese entered the world of insurance to specialise in entertainment coverage WHEN SIMON CALABRESE began his insurance career in 2002, he’d already fronted two bands: Inequity (from 1997) and Redsands (from 1999); he went on to front Daysend from 2003 until 2006. Now the national manager of Marsh Australia’s entertainment & leisure specialty business, Calabrese is back writing music with

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Redsands, which reunited in 2020.

“If you have a passion for it, it doesn’t go away,” he says. “For me, writing music has always been an outlet. It allows me to express my views and opinions, and it’s very satisfying when you finish writing a song that really works well with the band, and it not only sounds good but also reso-

nates with the people who listen to it.”

As a broker specialising in the entertainment industry, Calabrese also believes clients appreciate the experience he brings to the table. “I think there’s a level of understanding and empathy if you’re actually in the industry that you’re providing advice to,” he says.

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W

W

THANK YOU

From our team to yours we would like to thank all our brokers for naming us 2021 Insurance Business Insurer of Year!

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