Insurance Business 2.03

INSURANCEBUSINESSONLINE.COM.AU ISSUE 2.3

The groundbreaking research that will send shockwaves through the insurance industry

NAVIGATING THE MAZE FIVE STRATEGIES TO MAKE CLAIMS EASY

AN OFFICER AND AN INSURER GETTING D&O AND MANAGEMENT LIABILITY COVER RIGHT

STIRRING UP THE TROOPS HOW TO KEEP MORALE HIGH WHEN THE WORKLOAD GOES UP

INSURANCEBUSINESSONLINE.COM.AU

EDITOR’S LETTER / 2.3

14

COVER STORY

Special Report: Brokers on Insurers Who is the inaugural Insurer of the Year?

NEWS ROUND-UP 6 | The big five The biggest stories to impact brokers 8 | Quote unquote Straight from the horse’s mouth

SPECIAL REPORT 14 | Brokers on Insurers Who is the inaugural Insurer of the Year?

FEATURES

46

BROKING INTELLIGENCE

When the going gets tough Keep your people motivated through hard times

10 | The big interview David Kearney on changes to insurance law, and moving to Brisbane 26 | Defence against the dark arts How to make claims successful in five easy steps 32 | Crisis management How to ensure you’re not exposed on D&O

BROKING INTELLIGENCE 38 | Build a bulletproof personal brand Scrub up for business success 42 | Standing in their shoes Seeing the world through the client’s eyes 46 | When the going gets tough Keep your people motivated in hard times

2 | JULY 2013

10

FEATURE

The big interview David Kearney on changes to insurance law, and moving to Brisbane

50 | Stats Tomorrow’s risks according to today’s industry leaders

INSURANCE INSIDERS 30 | David Summers Markey’s rising star on client service, generating business, and insuring tanks 52 | Social life The Insurance Council of Australia’s gala dinner 54 | Favourite things William Legge, Underwriting Agencies Council 56 | The final word Why the insurance industry must band together on election night

DAILY INVESTIGATIONS NOW ONLINE: Cluster groups manoeuvre in lead-up to Steadfast IPO How to fix insurance’s image problem Legal experts weigh in on unfair contract terms insurancebusiness online.com.au

EDITOR’S LETTER / 2.3

AND THE WINNER IS…

Kevin Eddy

What makes Australia’s best insurer?

It’s an interesting question and one without a simple answer.

It also depends on who you ask; after all, the view of a policyholder is likely to be very different to that of a shareholder.

That’s why we turned to the people who know insurers best when we decided to rate Australia’s major insurers. The inaugural Brokers on Insurers survey – an industry first – names the Insurer of the Year based on a wide range of metrics, covering all aspects of an insurer’s service offering.

From premiums and claim turnaround times to product innovation and quality of BDM support, our survey has seen vociferous and plentiful feedback from brokers. While the survey respondents are happy to point fingers at failings, they’re just as quick to congratulate insurers when they go above and beyond the call of duty. So just who is the Insurer of the Year? Turn to page 14 to find out.

Elsewhere in this issue, we take a look at the labyrinth that is claims processing, explain why brokers need to know the latest on D&O and management liability insurance, and sit down with one of Australia’s premier insurance lawyers.

Add to that the latest news, industry views, tactics to grow your business, and industry statistics, and it’s another bumper issue to usher you into the new financial year.

Kevin Eddy, Editor, Insurance Business

COPY & FEATURES EDITOR Kevin Eddy SENIOR JOURNALIST Chinwe Akomah CONTRIBUTORS Anthony Day, Roger Ellerton, Leanne Faraday-Brash, Michael Neaylon PRODUCTION EDITOR Roslyn Meredith

ART & PRODUCTION DESIGNER Ginni Leonard

SALES & MARKETING NATIONAL SALES MANAGER Peter Smith COMMERCIAL DEVELOPMENT MANAGER Tom Neville COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Anna Farah TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – BUSINESS MEDIA Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Kevin Eddy tel: +61 2 8437 4793 kevin.eddy@keymedia.com.au Advertising enquiries Commercial Development Manager Tom Neville tel: +61 2 8437 4766 tom.neville@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Singapore, Auckland, Toronto, Denver insurancebusinessonline.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Insurance Business magazine can accept no responsibility for loss

CONNECT

Contact the editor:

kevin.eddy@keymedia.com.au 4 | JULY 2013

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

NEWS / ROUND-UP

THE BIG

FIVE The biggest news from insurancebusinessonline.com.au

PROFIT – AND LOSS? The good and bad news from the latest APRA stats:

$5.3

BILLION

NET PROFIT AFTER TAX INCREASED SIGNIFICANTLY FROM $3.6BN IN THE PREVIOUS YEAR

$18.6

BILLION

NET INCURRED CLAIMS FELL BY 1.1%

Source: Australian Prudential and Regulatory Authority (APRA).

Figures cover the year from 1 April 2012 to 31 March 2013

GOVERNMENT

BUDGET DOES NO FAVOURS FOR BROKERS

IN THE COURTS

DISGRACED BROKER (SORT OF) FACES HARD TIME Former South Australian insurance broker Craig Horsell has been found guilty of dishonesty, fined $75,000 and sentenced to three years in jail.

Horsell, sentenced in Adelaide District Court, pleaded guilty to three charges of dishonestly using his position to authorise payments totalling more than $414,000 into his personal bank account. Horsell was permanently banned from providing financial services in January 2012.

Deputy Chairman Peter Kell said participants in the financial services industry must act honestly and in the best interests of their clients.

Horsell will be released immediately upon entering into a three-year good behaviour bond.

STATS

73% of the insurance sector uses key performance indicators to measure improvements in managing risk and business continuity

The 2013 Budget ‘missed the mark’ for insurance brokerages, thanks to its focus on big business, according to several commentators.

“There is nothing in the budget to stimulate small businesses in Australia,” David Porteous, general manager of Brooklyn Underwriting, told Insurance Business. “It is all about big business.”

Some key budget reforms could even harm brokerages, such as extending the requirement to make monthly Pay-As-You-Go income tax instalments to include all large entities in the PAYG instalment system, including, trusts, sole traders and large investors.

“Small businesses that are contracted out by big businesses will be affected by this. A big business could now turn around and say that they will pay the SME every 60 days rather every 30 days because income tax payments are more pressing,” added Porteous.

Source: Telstra 2013 Banking & Finance Industry Insights report

It’s good news that criminal activity is being acted upon by the corporate and financial services watchdog. However, the sentence – especially the use of a good behaviour bond – is arguably too lenient. As one broker commented, you would receive more than a good behaviour bond if you robbed a bank and stole $414,000.

6 | JULY 2013

Pre-election budgets are always an odd beast, often more about political point-scoring than fiscal responsibility. The real question is whether Labor will still be in power to carry through its promises after September.

INSURANCEBUSINESSONLINE.COM.AU

INSOLVENCY

OFFSHORING

BROKER GOES INTO VOLUNTARY LIQUIDATION

INSURER BLASTED FOR OFFSHORING 600 JOBS

Sydney brokerage All Class Insurance Brokers went into liquidation in May, owing more than $1.9bn.

Documents obtained by Insurance Business conclude that only the company’s plant and equipment are of value, and are worth $55,746. All Class has approximately 51 creditors, largely consisting of major premium funders and insurers.

Consolidated Insurances has bought the bulk of troubled broker All Class’s client book for an undisclosed sum, and will ensure that clients’ agreements with insurers are honoured. All Class’s Australian financial services licence and Australian credit licence has been cancelled, and ASIC is also said to be investigating the broker.

General insurer Aviva is to offshore 600 UK jobs to India as part of a wide-ranging cull of 2,000 jobs across the UK, Europe and Asia.

Aviva hopes to create $600m in savings through the restructure but has infuriated Britain’s biggest union, Unite, which accused Aviva of betraying staff.

"Aviva is betraying its UK workforce by exporting 600 jobs overseas. This is an appalling way to treat the loyal workforce who are the backbone of the company,” said Unite national officer Dominic Hook.

Aviva is not the only insurer on an efficiency drive.

Its streamlining plan is part of a rationalisation trend in the insurance industry across the world.

While policyholders’ claims were apparently not being settled prior to the company going under, the book purchase by Consolidated means that clients shouldn’t lose out. It may, however, be a different story for All Class’s other creditors.

STATS

$9.91

MILLION

The amount cluster group Austbrokers paid for a 90% share in the Guardian and Lawsons underwriting agencies in June

Rationalisation is nothing new in the insurance industry, and it’s clear that the drive for efficiency is crossing borders. This may be a fact of life in the global economy, but understanding the rationale often doesn’t make it any easier when offices are emptying across the Western world.

REGULATION

INDUSTRY SLAMS UNNECESSARY UNFAIR CONTRACT TERMS Legal experts have warned that draft legislation that amends the Insurance Contract Act 1984 to include unfair contract terms in general insurance agreements will be the “source of increased disputes between insurers and their customers”.

Consumers are currently protected from unfair contract terms for all financial products and services, not including general insurance. Last year, the government proposed that unfair contract terms legislation be extended to general insurance. But legal experts warn it could become a catalyst for disputes between insurers and policyholders.

“Significant remedies and safeguards available to consumers already existed in the Insurance Contracts Act, and the industry has worked hard to make its

policies clearer and more easily understood by consumers,” said TurksLegal insurance partner Paul Angus.

The question of unfair contract terms is a controversial one. Whatever the outcome, it’s critical that the solution doesn’t add extra costs that would result in further premium hikes.

JULY 2013 | 7

NEWS / FROM THE FORUM

TALKING HEADS NIBA CEO Dallas Booth argues that the problem for insurance brokers isn’t necessarily a negative image but sometimes no image at all “The extent to which there are negative stereotypes or negative comments [about insurance brokers] is due to a lack of knowledge and information. There are very few people who have used brokers and have a poor view of what they do. The challenge is to break through the group of people who do not know what brokers provide.”

Australia’s number four broker Andrew Faber explains that if you look after your clients they will look after you “We haven’t just focused on going out and finding new business. There has been a focus on maintaining our existing portfolio, making sure the clients we do have stay and that we can grow those. From that alone, the referrals we get from our existing client base are strong.”

RateCity CEO Alex Parsons holds out an olive branch to brokers “There’s scope for price comparison sites and brokers to work hand in hand. I don’t see a direct conflict – we’re all there to get the best product for a consumer. We offer different things at different times to consumers.”

Have your say on the burning issues of the day on insurancebusinessonline.com.au

FORUM FORCES “Perhaps all online quoting sites need to have a link to the Financial Ombudsman's website, in particular the Annual Report 2011-2012, page 28, showing direct general insurers had 7,591 disputes, compared to just 123 against general insurance brokers.

This should show the value of the broker.”

Mark on whether online quoting sites are confusing for consumers

insurers don't get it! Successful small and medium businesses are widening their horizons and realise 23 million people can't sustain their ambitions. Insurers assume only the international brokers deal with clients who have expanded overseas.”

Paul on the launch of Insurance without Borders, a new service providing support to brokers with local clients that have international exposure

“Our online forms could be considered 'complicated' because we ask a lot of questions, but it does a great job of sorting the tyre kickers from those who are serious about business insurance.”

Shane@ Trade Risk on the same subject

“I think it is a pointless piece of legislation that will have no real benefits to the customer.

We have the Insurance Contracts Act and it has all the protection the consumer could ever need.

The problem is that it is not administered. If the Act was understood and administered correctly we would probably have happier insurance customers.”

RB on the looming application of unfair contract terms law to insurance contracts

“I have had much experience dealing with clients whose head offices are in Australia but manufacture and trade overseas. Most mainstream

8 | JULY 2013

THE BIG INTERVIEW / WOTTON + KEARNEY

ALTERNATIVE THINKING

Wotton + Kearney has offered the insurance industry an alternative to the top-tier law firms for over a decade. Chief executive partner David Kearney explains the secrets to the firm’s success and provides an insight into its expansion plans and the key legal changes that lie ahead Eleven years ago, boutique insurance law firm Wotton + Kearney was formed by two disillusioned insurance lawyers. Fed up with the approach taken by multidisciplinary law firms, David Kearney and Phillip Wotton decided to go their own way and set up a practice dedicated solely to insurance law.

Since 2002, the firm has grown from just six lawyers to more than 80, as well as expanding from its original Sydney locale to Melbourne – and it’s about to open a third office in Brisbane on 1 July.

Insurance Business sat down with David Kearney and the man who will run the Brisbane office, Paul Spezza, to find out a bit more about Wotton + Kearney’s approach to insurance law.

Insurance Business: Can you tell us about the nature of Wotton + Kearney’s work?

David Kearney: We’re a boutique law firm that specialises in insurance law. We’re generally

“We approach claims differently.

We understand we’re acting for insurers, who are in the business of resolving claims at the earliest possible point in time” David Kearney 10 | JULY 2013

involved in dispute resolution work around claims under insurance policies. We’re also experts in the mediation processes.

Our client base is essentially local insurers, many of whom have a head office overseas. We also do a lot of work for the Lloyds market, which is domiciled in the UK writing insurance business in Australia.

IB: What sets you apart from the multidisciplinary law firms?

DK: We approach claims differently.

We understand we’re acting for insurers, which are in the business of resolving claims at the earliest possible point in time. Therefore, we ensure we quickly form a view as to how best we can resolve the claim in the best interests of the client. Our lawyers are specifically trained to understand exposures rapidly and resolve claims efficiently.

Paul Spezza: Our fundamental driver is the efficient, cost-effective resolution of claims; that approach is essentially consistent across all clients for whom we work, though there may occasionally be some departure from that approach, depending on the relevant claim.

DK: Saying that, the work we do is incredibly diverse.

Most people picture insurance law as being about car accidents or houses burning down. The reality is that 80 per cent of what we do is related to commercial insurance from professional indemnity and public liability claims: for example, journalists being sued for defamation or architects and engineers being

INSURANCEBUSINESSONLINE.COM.AU

“We’ve acted in financial services class actions, dealt with corporate insolvencies and mine collapses, dealt with claims by asylum seekers against detention centres, and acted in cases relating to natural disasters” David Kearney

DAVID KEARNEY

sued for poor design. They claim on their policy for potential third-party exposures, and the insurer appoints firms like us to defend the claims.

The remaining 20 per cent of our work is just as diverse. We’ve acted in financial services class actions, dealt with corporate insolvencies and mine collapses, dealt with claims by asylum seekers against detention centres, and acted in cases relating to natural disasters, such as the Christchurch earthquakes and the Brisbane floods.

In fact, more and more cases that we’re dealing with involve Queensland in some way. For example, we were involved with the Storm Financial class action, as well as a class action involving the RiverCity airport tollway construction.

Insurers domiciled in Queensland, such as Lumley, and our clients here in Sydney are writing insurance in Queensland. When there’s an incident or a claim up there, they’re looking for lawyers in Queensland who are experts in the dispute resolution process. Therefore, it’s clear there are opportunities for us, which is why we’re opening an office in Brisbane.

IB: Can you tell us more about the new Brisbane office?

PS: The office will open on 1 July. I’ll be managing the Brisbane office and working with Raisa Conchin, a senior associate, who’s been with the firm for three years. We’re also looking at hiring a couple of junior lawyers from the Brisbane market.

DEALING WITH THE AFTERSHOCKS

WOTTON + KEARNEY has played a major role in helping the recovery efforts following 2011’s catastrophic earthquakes in Christchurch, New Zealand.

The firm has been helping to resolve disputes and clarify unique coverage issues that arose as a result of the severity of the earthquakes.

“A number of our key clients have a lot of property business in NZ,” says Kearney. “We have been involved in a lot of disputes between residents and property insurers as to their entitlements under property and industrial special risks (ISR) policies, particularly for commercial businesses.”

Several of these disputes relate to the establishment of the red zone by the Canterbury Earthquake Recovery Authority.

“Often, the question for claims is whether business interruption comes from property damages – the normal policy trigger – or from the fact that the red zone means you can’t actually get back into that core area of Christchurch for two years,” explains Kearney.

That’s just one of many challenges, he adds.

“Liquefaction is another major issue. Normally the cost of remediating the land under a property policy is excluded. However, there are severe problems with the land due to liquefaction. How do you rebuild the property if it costs a lot of money to remediate the land? There’s a myriad of challenges like that across many businesses. We had a team of six or seven lawyers over there at one point.”

The Christchurch earthquake isn’t the only natural disaster aftermath that Wotton + Kearney is helping to clear up. The Melbourne office is also involved in class actions on behalf of insurers against power distributors as a result of the Victorian bushfires earlier this year.

JULY 2013 | 11

THE BIG INTERVIEW / WOTTON + KEARNEY

“Our fundamental driver is the efficient, cost-effective resolution of claims” Paul Spezza

We’re hopeful of seeing a steady flow of work involving public and product liability claims, property and professional indemnity claims. For instance, there’s a lot of personal injury work which is dealt with under the Personal Injury Proceedings Act 2002 (Qld) (PIPA), a statutory regime that governs the way in which those claims are managed in Queensland.

There are also certain classes of insurance work that are contingent on the happening of catastrophic events. Queensland over the years has had its fair share of extreme weather events. While we wouldn’t want to predict what might lie ahead, the Brisbane office will be well placed to service insurance claims arising out of Queensland.

IB: Turning to the national picture, where are you expecting the bulk of litigation activity to come from across Australia over the next few years?

DK: We expect financial services-related claims to reduce slightly. Over the past three or four years business has grown significantly around claims against valuers, planners, securities lenders, margin lenders, mortgage brokers, and so on, as a result of the GFC. The claims against financial planners – of which there have been many over the last few years – will also probably begin to retract due to the new Future of Financial Advice legislation. You never know where claims are going to come from, but you would think the economy is improving. As the economy picks up, construction will pick up too. We’ll probably see a greater volume of disputes around construction, engineering and those sorts of areas.

IB: What about the legal environment? Are you expecting any big regulatory changes?

DK: The Insurance Contracts Act Amendment Bill going through Parliament is probably the 12 | JULY 2013

biggest upcoming change; the sections around unfair contract terms are causing particular concern.

These basically revolve around ensuring that consumer contract law, which hasn’t historically applied to insurance law, will apply to insurance.

While these provisions aren’t in the current version of the Bill, there’s a clear drive from the government to include them. The question is whether they’ll be added to the existing proposed legislation or brought to bear at a later date. [NB: The government published a draft bill containing the unfair contracts proposals for consultation on 10 May – Ed.] The Bill is currently with the Economics Legislation Committee: there’s a chance that when they report back, they’ll recommend the unfair contracts sections should be introduced into the Insurance Contracts Act. We’ll know more on 25 June, when that Committee reports back.

IB: Do you think that extending those laws to insurance is a good step or unnecessary?

DK: Insurance is already heavily regulated, and much of that regulation is in place to ensure that consumers are protected. As a result, Australian insureds have significant rights compared to insureds in other jurisdictions across the world.

Therefore, my view is that the Insurance Contracts Act generally regulates both insurers’ and insureds’ rights well and fairly. Introducing further protection which potentially duplicates existing regulation is probably a bridge too far.

IB: What else is on the horizon that the industry should look out for?

DK: The rise of litigation funders is a major trend. Companies like IMF have been very successful over the last 10 years, running a lot of class actions, and we’re seeing a worrying increase in class actions.

If an insurer is writing D&O or certain types of PI insurance, then litigation funders have to be a concern. Insurers should be conscious of the potential for class actions to impact on underwriting ratios for these products and focus on discrete policy terms like aggregate limits. In addition, insurers should also ensure they’ve got the pricing right to reflect the risk of class actions, so they receive fair premium to reflect the risk of significant exposure to a class action.

SPECIAL REPORT / BROKERS ON INSURERS

14 | JULY 2013

INSURANCEBUSINESSONLINE.COM.AU

AUSTRALIA’S BEST INSURER REVEALED Insurance Business is delighted to present the inaugural Brokers on Insurers report – the first of its kind in the insurance industry. Read on to find out which company is Australia’s Insurer of the Year The inaugural Brokers on Insurers special report is an industry-first survey that canvassed the people who know insurance best – Australia’s insurance brokers – and asked them to rate the country’s major insurers on 11 critical aspects of insurers’ service.

We then collated the results and the insurer that ranked the best across all categories was presented with the inaugural Insurer of the Year award.

We had a tremendous response to the survey, with 342 respondents taking part, representing

brokers from all over Australia and from all areas of the industry.

Thanks to all the brokers who took time out of their busy schedules to cast their votes in this year’s survey.

Turn over to see how the insurers fared and find out who is Australia’s Insurer of the Year.

Kevin Eddy Editor, Insurance Business

JULY 2013 | 15

SPECIAL REPORT / BROKERS ON INSURERS

TURNAROUND TIMES

METHODOLOGY

C

laims turnaround times were highlighted by survey respondents as the most important aspect of an insurer’s offering. The clear market leader was Chubb. Zurich and Allianz filled out the medal spots.

Brokers were quite forgiving of insurers’ performance on claims, accepting that major natural disasters had put significant pressure on turnaround times. However, several highlighted that the centralisation of claims departments was a concern.

P

articipants were asked to rate the performance of nine of Australia’s largest insurers: AIG, Allianz, Calliden, CGU, Chubb, Lumley, QBE, Vero and Zurich.

The insurers were rated between one (poor) and five (excellent) over 11 categories: backoffice support, BDM support, brand recognition, commission structure, information provision, interest rates, online platform, overall service, product innovation, product range, premium stability, training and development, and turnaround time. Brokers were also asked to rank the importance of the categories.

The scores for each of the insurers were averaged to give the insurer a final score in each category. An overall average was then calculated for each insurer going by its performance in the 11 categories. We also asked Australia’s brokers to select their top three insurers in terms of overall perception.

As well as scoring the insurers across the aforementioned sections, brokers were also asked a number of questions about how insurers had performed with regard to BDM support, premium stability, service levels and turnaround times.

56%

improved

44%

worsened

Chubb:

Zurich:

Allianz:

3.8

3.5

3.35

Total industry average: 3.19 BROKERS SPEAK: TURNAROUND TIMES

“A lot of insurers are now stating that your claim will not be looked at for at least 10 days. Unless you chase a claim up, nothing will happen to it” “Centralisation has caused problems: people don’t know the products any more” “Turnaround times have slowed due to natural disasters, but I do get annoyed when you have an old claim put back because of the newer claims. The insured should not be pushed back. Maybe there should be an attempt to sort the older ones first and then work on the newer claims by a designated team”

“At times you can get a claim paid within 48 hours and then the next one can take 14 days. There seems to be more and more claims being assessed and these take a long time to finalise”

“In my experience they have improved. Fewer follow-ups and less chasing for details and updates, which is great. We can keep our clients in the loop of claim payment progress, because ultimately that’s what our clients want!”

“We regularly follow up our claims, and the insurers are more than happy to keep us in the loop and up to date with the progress of the claims. I believe this is constantly improving” 16 | JULY 2013

INSURANCEBUSINESSONLINE.COM.AU

BDM SUPPORT

BRAND RECOGNITION

T

I

his was a controversial category, with brokers weighing in heavily on insurers’ BDM provision. The overall consensus was that the insurers that get BDMs right reap the benefits, especially those whose BDMs have the power and the passion to go the extra mile for brokers. Zurich was the company that drew the most plaudits, followed by Vero and CGU. However, brokers were critical of a perceived loss of authority where BDMs were concerned, especially in relation to influencing underwriting decisions and premium pricing.

n the most highly scored category of all, brokers clearly believe that the big beasts of the insurance industry aren’t backwards in coming forward where their public profiles are concerned.

Allianz was fingered as the most recognisable name, followed by QBE. It’s telling that both have highprofile TV ad campaigns on screens at the time of writing.

However, while brokers think that insurers are good at getting their brands out, it’s also the least important factor of an insurer’s offering in their view. Insurers could be better served by investing in improving service levels rather than billboards.

44%

Improved

Zurich:

Vero:

CGU:

3.4

3.3

3.18

56%

Worsened

Total industry average: 2.95

Allianz:

QBE:

CGU:

4.16

4.11

3.99

Total industry average: 3.37

BROKERS SPEAK: BDM SUPPORT

“Some insurers have really improved (CGU), some have deteriorated (Allianz), some have remained unchanged, and some are providing consistent excellent support (Chubb, Zurich)”

“A BDM has no authority and is basically free coffee” “Due to the floods/cyclones backlog that occurred in the back office support, the BD’s became a lot more involved in the negotiation of premiums and a lot more hands-on with regards to underwriting and processing”

“Some insurers’ BDMs continue to build great relationships with brokers while others allow the relationship to disintegrate.

This does affect where business is placed and BDMs should be aware of this. BDMs also need to have underwriting authority and not just be a ‘mailbox’”

While brokers think that insurers are good at getting their brands out, it’s also the least important factor of an insurer’s offering in their view

“It’s apparent that much of BDMs’ autonomy has been reduced or removed.

We currently appear to be in the worst of times when it comes to getting effective management from BDMs” “There are some great BDMs, there are also some average BDMs. This is no different to five or 10 years ago, but the BDMs nowadays have zero authority to make a decision. Some of them still manage to add value, which is amazing given how much their hands are tied”

JULY 2013 | 17

SPECIAL REPORT / BROKERS ON INSURERS

BACK-OFFICE SUPPORT

ONLINE PLATFORMS

I

t’s not all about the client-facing employees.

Zurich took out its second award for the ability of its back-office staff to support brokers. Chubb and Vero were also rated highly.

Zurich:

Chubb:

Vero:

3.38

3.33

3.14

A

pattern is clearly starting to emerge as Zurich again comes out on top for its online provision. Fellow insurance giants Allianz and Vero filled out the medal positions – perhaps a testament to the ability of larger entities to invest more into developing new technology.

Even so, brokers didn’t seem too impressed with insurers’ ventures into the digital world overall, with the industry average score only 2.98 out of 5 – the third-lowest average score. This suggests that insurers still have plenty of work to do.

Total industry average: 3.01

Allianz:

Vero:

3.49

3.38

3.3

Total industry average: 2.98

TRAINING AND DEVELOPMENT

Z

urich scored a fourth gold medal due to the quality of its broker training and development, with Vero second and CGU and QBE tying for bronze.

However, training and development was the most harshly scored of all categories, with an industry average rating of just 2.6 out of 5. It seems brokers don’t think very highly of the overall level of development provided by insurers, although this may be mitigated slightly by the fact that they also thought it the least important aspect of an insurer’s offering.

PRODUCT INNOVATION

A

nother category, another gold for Zurich.

New CEO Daniel Fogarty’s plans to develop Zurich’s product offerings in a number of non-traditional spaces – including accident and health, financial, liability and property lines – seems to have impressed the broker community, with a significant gap between Zurich and second-placed ties Vero and Chubb. CGU rounds out the medal positions.

Zurich:

Vero:

CGU and QBE:

Zurich:

3.2

3.01

2.76

3.36

Total industry average: 2.6 18 | JULY 2013

Zurich:

Vero and Chubb:

3.24

CGU:

3.11

Total industry average: 3.06

SPECIAL REPORT / BROKERS ON INSURERS

WHAT’S MOST IMPORTANT TO BROKERS? Categories by importance

Average rating vs importance rating 6

Importance Average industry rating

4.48

1

Back-office support

4.46

4.17

Product range

4.15

Online platforms

3.95

Product innovation

3.85

Commission structure

3.76

Training and development

3.47

Insurer’s brand recognition

What’s important to brokers? Service, service and price, it seems. Claims turnaround times were the most critical factor to brokers, followed by overall service and then premium stability.

Less important were issues like training and development, brand recognition and commissions.

It gets really interesting when you compare the overall industry averages for each category with the ratings for each category by importance.

20 | JULY 2013

Turnaround time on claims

BDM support

Training and development

2

Product range

4.55

Product innovation

Premium stability (renewal & new business)

Premium stability (renewal and new business)

3

Overall service level to brokers

4.77

Online platforms

Overall service level to brokers

Insurer’s brand recognition

4

Commissions/commission structure

4.81

Back-office support

Turnaround time on claims

BDM support

5

It seems that the areas insurers do very well in – especially promoting their brands – aren’t the areas brokers think are important. Brokers were particularly critical of insurers’ BDM support, which came in at number four on the importance list.

There’s clearly a disparity here, which suggests there’s a strategic gap that needs to be bridged by insurers in general.

Claims turnaround times were the most critical factor to brokers, followed by overall service and then premium stability

INSURANCEBUSINESSONLINE.COM.AU

COMMISSION STRUCTURE

OVERALL SERVICE

Z

urich takes gold in this category too. Vero and Chubb took out the silver and bronze positions respectively.

It’s possible that Zurich’s broker-only model works to its advantage here, as its resources are dedicated to supporting brokers. Indeed, the conflict between broker and direct channels was a bugbear that came up in brokers’ comments in relation to several insurers.

This category also saw the widest range between best and worst, with the last-placed insurer scoring only 2.5 out of 5. This suggests that, while brokers are prepared to reward good service, they’re merciless when it comes to bad service.

Z

urich comes out on top yet again where commissions are concerned, thanks to its Zenith program. CGU was also rated highly for its commission structure, while Allianz and Vero tied for third place.

Zurich:

CGU:

3.57

3.39

Allianz and Vero:

3.38

Total industry average: 3.28

Zurich:

Vero:

Chubb:

3.47

3.39

3.18

43%

Improved

57%

Worsened

Total industry average: 3.05

BROKERS SPEAK: OVERALL SERVICE

Zurich comes out on top yet again where commissions are concerned, thanks to its Zenith program

“It’s a mixed bag, and not nearly as efficient as insurers should be. Most underwriters are rarified beings who never talk to brokers but rather let junior staff run around as go-betweens”

“I feel that insurers have finally started to see how important brokers are to them, due to the poor public image of insurance companies. They see how brokers are their customers’ first contact and some situations can be defused before getting through to us”

“Insurance companies are spending millions of dollars to go direct and bypass brokers. They just haven’t got the guts to tell us that they’re going to do that” “Insurers’ employees are tired! They have been hammered as much as we have and a lot of good staff have left or are going. Look after your staff and they will look after you” “From a broker’s perspective, more online control means that we are getting quicker turnaround times for our enquiries”

JULY 2013 | 21

SPECIAL REPORT / BROKERS ON INSURERS

PREMIUM STABILITY

PRODUCT RANGE

Q

L

BE becomes one of only three insurers to break Zurich’s stranglehold on the top spot, thanks to its extensive product range.

In fact, Zurich doesn’t even feature in the top three, with CGU and Vero claiming the lower medal positions.

QBE:

CGU:

Vero:

3.66

3.63

3.59

ast, but definitely not least, of the subsidiary categories, premium stability was highlighted as one of the most important areas for insurers to get right. It also sparked the most debate among brokers, with seemingly unjustified premium hikes causing consternation for many respondents.

It’s clear that Zurich is again getting it right, as it takes out the top position for the eighth time.

The equally familiar names of Chubb, CGU and Allianz round out the silver and bronze spots.

Total industry average: 3.26 42%

QBE becomes one of only three insurers to break Zurich’s stranglehold on the top spot, thanks to its extensive product range

58%

Worsened

Improved

Zurich:

Chubb:

3.4

3.18

CGU and Allianz:

3.09

Total industry average: 3 BROKERS SPEAK: PREMIUM STABILITY

“The implementation of flood cover to household policies created a lot more work to give the client a product with a reasonable premium. We are now starting to see some stability as the bugs have been ironed out in most insurers’ systems” “All brokers want is a consistent approach. Unfortunately, at the moment it is like a seismograph with the premium fluctuations”

“As usual, some insurers are ‘adjusting’ their prices whilst others are aggressively seeking new business. They will all have their turns during their cycle to do either of these things” “Premiums are pretty stable. If it does increase, you can go back to the insurer to ask for a reduction and generally you will receive one”

“Some insurers have been great. However, there is one insurer which has increased premiums 10–20% across the board. I have moved every one of these renewals as this is not acceptable”

“Weather events have produced some unholy increases to make up for years of underpricing.

Affordability is going to be a national issue in the next 12 months” 22 | JULY 2013

INSURANCEBUSINESSONLINE.COM.AU

BROKER PICKS: THE MARKET PERCEPTION TEST

INSURER OF THE YEAR

A

s well as obtaining detailed ranking information, Insurance Business also wanted to get a sense of overall market sentiment – essentially, brokers’ ‘gut feel’ about insurers.

Therefore, we included a question at the end of the survey asking brokers to list their top three insurers in terms of market perception as of April–May 2013.

So, which insurer came out as brokers’ favoured choice?

It may come as no surprise that the three insurers who scored highly in our formal rankings also benefit from brokers’ goodwill, with Zurich leading the way.

It looks like the big beasts are clearly dominating the market across the board – at least for now.

Rank

Bank

Gold

Zurich

Silver

Vero

Bronze

Allianz

Vero:

3.28

Zurich:

3.44

Allianz and CGU:

3.24

I

t’s the moment you’ve all been waiting for.

Insurance Business is delighted to announce that Zurich is the inaugural Insurer of the Year.

From the moment the ratings started to flow in, it was clear that one insurer was head and shoulders above the rest. Coming first in eight categories out of the possible 11, and second in a further category, it’s clear that Zurich’s broker-only distribution model pays dividends with Australia’s insurance brokers.

Congratulations also go to silver medallist Vero, which appeared in the top three in no less than eight categories – and to joint bronze medallists Allianz and CGU.

From the moment the ratings started to flow in, it was clear that one insurer was head and shoulders above the rest JULY 2013 | 23

SPECIAL REPORT / BROKERS ON INSURERS

A WORD FROM THE WINNER

Z

urich general insurance CEO Daniel Fogarty is delighted with the company’s win, saying that Zurich will continue to work hard for brokers.

“I’m very excited about these results. They show that brokers appreciate what we’re doing. They are rewarding us with more business, but we know we have more to do.

“Gaining an insight into what matters to brokers is highly valued by Zurich. As an intermediated insurer, we spend all our energy focused on how to better serve brokers and their clients,” he says. “To receive gold over eight of 11 categories and silver in the ninth is a reflection of the value we place on broker relationships.”

Fogarty adds that Zurich will continue to work hard in product and service innovation.

“The strong support we receive through z.streamXpress, XpressQuote and other platforms tells us we’re on the right track. We’ve streamlined our underwriting process across all lines so underwriters can spend more time developing the right customer solutions with brokers. We are investing in our marine business on z.streamXpress, and in bringing the full benefit of Zurich’s capabilities as the world’s largest underwriter of marine cargo.”

Zurich will also continue to be a champion for brokers.

“The critical nature of insurance means it warrants the best professional advice, so we’ll keep enhancing our broker development forums

“I’d like to thank all brokers who voted for Zurich. We value you and will continue to work hard with you” Daniel Fogarty, CEO of Zurich

24 | JULY 2013

like Generation Z, and bringing Zurich’s global knowledge to supplement our local experience.

And we’ll always champion the value of insurance, not just to business and the community but also as a rewarding career.

“I’d like to thank all brokers who voted for Zurich. We value you and will continue to work hard with you for the benefit of your customers and to stay the best insurer for brokers.”

FEATURE / CLAIMS

DEFENCE AGAINST

THE DARK ARTS Submitting a claim to an insurer can feel like an arcane spellcasting ritual – one that can yield unpredictable results if not carried out precisely. Insurance Business finds out how brokers can make sure claims go through smoothly and speedily Claims are a critical part of the effective operation of an insurance policy. After all, that’s what the policy is for – to pay out when things go wrong.

However, claims can also be one of the most frustrating and confusing aspects of the insurance industry, with a wide range of administrative and evidence requirements, many of which differ from insurer to insurer.

Assisting clients with claims can be one of the most important tasks a broker can undertake, and can cement a relationship forever. By using the following five key strategies – strategies that can be applied to any type of insurance line – brokers can proactively work with clients and insurers to ensure successful resolution.

THREE MUST-HAVES FOR A SUCCESSFUL CLAIM

ONE: Make sure adequate cover is in place to begin with.

TWO: Lodge the claim as soon as possible, with as much information as possible.

THREE: Provide evidence of damage with the claim – digital photos showing the original condition of an item and subsequent damage are ideal.

26 | JULY 2013

INSURANCEBUSINESSONLINE.COM.AU

INSI

1. NEVER KNOWINGLY UNDERINSURED

DER T Make IP sure t he in match es the sured par ty nam pap situat erwork; for e on the ion ex are no s in which f ample, amily ted as but as the insure trusts d s by tra ets are own party ding e ed n titie cause proble s can ms.

The first step in ensuring claims go through smoothly is to make sure clients have the right insurance, adequate levels of cover, and any appropriate policy extensions; and that these are reviewed on a regular basis.

“If clients are underinsured, that impedes underwriters’ ability to deliver an outstanding claims experience and results in difficult situations from the outset,” says Stephen Brooks, former executive general manager of claims at Zurich.

Admittedly, that’s an easy argument to make in general terms, but the situation can be very different when brokers are confronted with a client trying to save money, and who is willing to drive down cover limits or forego cover altogether.

In these instances, it’s critical that brokers make firm recommendations as to what cover is needed, and document those recommendations. Not only can this strengthen the case for cover, but it also serves as evidence that the issue was discussed if cover is not taken up.

One type of insurance that is often overlooked is business interruption. Brooks and his counterpart at Vero, executive manager of claims services Donna Stewart, both comment that this cover can mean the difference between business survival or failure after a major incident, and that brokers should warn clients against foregoing this cover.

2. PREVENTION BETTER THAN CURE The next step that brokers can take also comes before a claim is lodged. OAMPS broker David Clarke, who came in at number seven on Insurance Business’s Elite Broker list last issue, argues that brokers should take the time to educate their clients before trouble strikes.

“Brokers should provide information on risk management and mitigation to clients before they’re in a situation where they might need to make a claim,” says Clarke. “For example, you could

email advice on how to protect property ahead of storms, or advise them how to put together a disaster recovery plan.”

Ideally, this would mean that clients would not need to put in a claim in the first place – saving a whole lot of disruption and heartache. Even if a claim does need to go in, it also means that the client is prepared, and can easily provide any supporting evidence as required.

For example, Vero’s Stewart suggests that digital images of assets could be attached to asset registers – enabling easy comparison between an item’s original condition and subsequent damage.

3. KNOW YOUR INSURER The claims process may be similar across different insurers, but each has its own quirks. One of the most valuable services a broker can provide is to be a guide to the particular processes of each insurer.

Of course, in order to do this you need to be familiar with those processes. Therefore, it’s worth spending time with business development managers, claims staff, and underwriters at insurers that you use regularly to ensure you’re up to date with their requirements and any recent changes. You should also find out if an insurer has an email or online claim lodgement service, as this can save valuable time in periods of high demand, such as after a natural disaster.

A particular area of confusion is whether you need to obtain quotes prior to lodging a claim.

“We increasingly prefer that customers and brokers do not provide quotes,” says Stewart. “While this used to be standard practice, now it’s just wasted time and effort. We have relationships with a wide range of suppliers, can source items quickly, and our

JULY 2013 | 27

FEATURE / CLAIMS

THE PROCESS

CLAIM LODGED

INSI

CLAIM SETTLED IN FULL

FURTHER EVIDENCE

ASSESSOR SENT OUT

CLAIM FULLY OR PARTIALLY DECLINED

AMENDED CLAIM SETTLED

CLAIM GOES TO INTERNAL DISPUTE RESOLUTION

CLAIM GOES TO EXTERNAL DISPUTE RESOLUTION

CLAIM GOES TO LITIGATION

It’s critical that brokers make firm recommendations as to what cover is needed, and document those recommendations

28 | JULY 2013

DER T Mos IP lodgin t insurers enab g of c le bulk online laims via broke portal. Th email or a is c rs n of tim significant an save e a m in ou pe dema nd, su riods of h nts a natu ch as follo igh w ral dis aster ing .

purchasing power is such that we can almost certainly get a better deal than a client can.”

Stewart concedes that there are situations when waiting for an insurer to procure items on a client’s behalf may not be feasible – for example, if there has been a break-in and there is a risk of further loss – but she maintains that clients and brokers should notify the insurer of a potential claim before carrying out any work.

4. EVIDENCE IS KING Even if an insurer doesn’t ask for evidence upfront – Vero state that 20% of claims it handles are resolved without any need for documentation – forewarned is forearmed.

Brokers should ensure that all relevant evidence to support a claim is at hand and can be supplied to the insurer as required. In the case of most property or motor claims, this typically consists of things like: • proof of ownership, • purchase costs of insured items • evidence of damage – such as digital photos or physical samples • evidence of any claim-related costs • evidence of income.

While neither insurer we spoke to provides supporting evidence checklists, Zurich’s Brooks suggests that brokers can use claim forms as a guide to the information required.

David Clarke argues that any costs relating to a claim should be documented – no matter how small.

“Much of my portfolio is marine insurance, and sailors have a habit of making ‘handshake agreements’ in post-claim situations. For example, they’ll agree to pay their mate $500 to tow them back to shore if they break down on the water. What they may not realise is that we may be able to claim money back if we have paperwork to support it.”

Vero’s Stewart adds that businesses should also consider creating claim-specific cost centres to keep track of claim-related expenses, especially for large or complex claims.

INSURANCEBUSINESSONLINE.COM.AU

JUDGE, JURY AND CONCILIATOR If a claim is disputed, the Financial Ombudsman Service offers a cost-effective alternative to litigation.

Chief Ombudsman John Price explained FOS’s role The Financial Ombudsman Service (FOS) plays a critical role in resolving financial services disputes that have progressed beyond internal dispute resolution but where the involved parties are keen to avoid litigation.

In the 2011/12 financial year, the FOS received over 10,000 complaints relating to general insurance. Of those complaints, more than 2,500 were resolved by the insurer or broker in question within 45 days of registration. Of the remaining 7,591 general insurance disputes, around 5,000 were resolved by agreement being reached between the parties. About 2,400 of the disputes went to decision; 59% were found in favour of the insurer and 41% in favour of the consumer. Of the 7,591 general insurance disputes accepted by the FOS, 123 involved insurance brokers.

“There are several stages of the FOS process,” explains Price. “First is the initial contact and registration stage, in which the financial services provider in question is given 45 days to resolve the complaint before it goes further. Then, we have what we call the acceptance stage. Here, we gather more information about the dispute and encourage both parties to resolve their differences.”

If this fails, conciliation is one method the FOS may use to try to resolve the dispute. Only a small number of disputes reach this stage. In 2011/12, conciliations for general insurance disputes numbered around 250. Around three quarters of these resulted in a solution to the dispute that both the financial service provider and consumer agreed to.

For the few cases that remain disputed, the Ombudsman will then issue a recommendation, followed by a formal determination. The latter is binding on an insurer or broker, but consumers always have the option to pursue matters further through the courts.

“FOS is an alternative to the courts, not a substitute,” says Price. “For the conciliation process to be successful, however, the parties involved must be prepared to compromise and be willing to communicate. Brokers can play a key role in the process, particularly if they’re advising clients and helping gather evidence.”

5. PROACTIVELY MANAGE THE CLAIM

INSID

ER TIP If a cla im is e xp be sub stantia ected to l, clien sho dedica uld create ts a ted c simpli ost centre to fy exp trackin ense g.

Last but not least, brokers should be on hand to provide technical guidance and advice to clients throughout the claim process.

“Brokers can add a lot of value to the claims process,” says Clarke.

“We’ve got a deep understanding of our clients’ businesses, their exposure and risk appetite, so we can ensure the right level of protection.

We can help make the claim process more efficient by providing advice at the point of claim, and even minimise the impact of claim events.

“Finally, by staying on top of the claim and bringing insight into technical issues, we can ensure claims don’t stagnate and that all questions are being answered – from both client and insurer.”

JULY 2013 | 29

BROKER Q&A / MARKEY INSURANCE BROKERS

SUMMER

SCHOOL

Rising star David Summers talks about life at Newcastle’s Markey Insurance Brokers, the impact of technology, and the difficulty of insuring army tanks Q: Why did you become an insurance broker?

A: My father sells life insurance so I’ve always been

Q: What is unique about Markey Insurance Brokers?

A: The people are what makes Markey’s unique.

aware of the industry. Two opportunities arose after business college: general insurance and real estate.

I chose general insurance because it meant I didn’t have to work weekends.

We are all hardworking people who care about doing the right thing, above and beyond winning business. We have a dedicated claims, accounts, domestic and processing team.

We also understand that the head can’t work without the body: every person within the organisation is important. There is no way that I could manage a portfolio this size without great support, especially from my assistant Ruthanne Murdoch and our new addition to the team Katie Wilson.

Q: Do you concentrate on any particular insurance lines or industries?

A: I work within an amazing group of people and our portfolio is a mixture of small- to medium-sized clients. Originally, I targeted anything and everything, but now I predominantly focus on the mining industry. However, if an insurer comes out with a new product which stands out from the rest, I’ll then target clients to that specific market.

Q: What’s the strangest thing you’ve ever been asked to arrange cover for?

A: One of my deranged mates once called up requesting cover for his army tank!

“You won’t grow your portfolio by sitting at your desk waiting for prospective clients to call” 30 | JULY 2013

Q: How has the industry changed since you took up insurance broking?

A: Time! Insurance isn’t the ‘golfing and long lunch’ industry it once was. Now the phone rings 24/7: everything is urgent.

To make your mark in this industry you have to be everything to everyone. Technology has played a big part in this; we fit twice as much into a day compared to when I first started broking 10 years ago. Portfolio sizes have doubled and clients demand more.

Q: How do you see it evolving over the next decade or so?

A: I couldn’t tell you, as I don’t know what to expect one day from another! I hope for a greater awareness

INSURANCEBUSINESSONLINE.COM.AU

of how important brokers are, and that direct insurer policy placements become a thing of the past.

Q: What are the most important things a broker can do to develop their business?

A: Evolve and stay ahead of the times. You won’t grow your portfolio by sitting at your desk waiting for prospective clients to call. Get off your arse and make it happen! There is so much business out there and there are so many different ways to target them. Get inventive. Think outside the box. Enjoy what you do.

Q: What are the biggest challenges facing insurance brokers at the moment?

A: Cowboys – they will ruin it for everyone. Also, all it takes is one legislation change and our industry could be turned upside down.

Q: What advice would you give to new entrants to the insurance broking industry?

A: You need to differentiate yourself and make yourself irreplaceable. Business no longer just walks through the doors. Become creative in order to generate new business leads, pick your targets and learn your products. Always offer the best: treat your clients the way you want to be treated. Finally, you should always be closing – on every phone call, every meeting and every little contact.

Q: What has been the highlight of your career?

A: The day when the boss gave me a car parking space downstairs!

JULY 2013 | 31

FEATURE / D&O

CRISIS MAN

32 | JULY 2013

INSURANCEBUSINESSONLINE.COM.AU

AGEMENT A rash of high-profile legal cases over recent years have given company directors the jitters, with the result that many are looking closely at their insurance cover. Kevin Eddy finds out how to make sure your clients – and you – are adequately covered Company directors are no strangers to stress.

Indeed, many thrive on uncertainty and adrenaline from constantly changing situations. However, like anyone else, directors also need certainty in certain aspects of their lives, particularly in terms of protecting themselves and their families from litigation related to their responsibilities as captains of industry.

Depending on the size of the company, this protection has been provided by one of two types of insurance. For larger – usually listed – companies, directors and officers (D&O) insurance has fulfilled this role, while insurance for smaller firms has rolled this coverage into broader management liability policies.

However, the advent of the GFC has changed the game somewhat. Several high-profile corporate

collapses have seen the law around directors’ duties tested, resulting in directors becoming more anxious about whether they are indeed as protected as they thought they were.

Broader changes have also had an impact, particularly on management liability policies. New regulation, such as operational health and safety harmonisation, and changing business risks mean that policy coverage needs to be looked at carefully.

Brokers need to take both D&O and management liability policies seriously. If the coverage you arrange is inadequate, you run the risk of having a claim brought against you. On the flip side, there’s also the opportunity to profit from the current anxiety over management cover by ensuring your clients are well protected.

JULY 2013 | 33

FEATURE / D&O

PRIVATE PRACTICE MANAGEMENT LIABILITY

Management liability insurance is increasingly being taken up by private companies as a cost-effective alternative to D&O, which is typically targeted at listed companies.

Management liability cover typically comprises a number of elements, including: • crime • D&O cover • employment practices liability (EPL) • fines and penalties • operational health and safety (OH&S) • tax audit Declan Rye, director at London Australia Underwriting, says there are significant opportunities.

“When looking at the total number of SMEs and not-for-profit organisations within Australia compared to the number of these entities that

Management liability cover should not be sold as an ‘add-on’ KEY CONSIDERATIONS FOR MANAGEMENT LIABILITY AND D&O POLICIES THE LEGAL STATUS OF THE ENTITY

Not-for-profits or companies limited by guarantee will offer less exposure than, for example, listed entities.

FINANCIAL HEALTH AND A GOOD CLAIMS RECORD

Even where the applicant is carrying an element of debt, the risk should still be considered as long as they can demonstrate an ability to service that debt without impacting on their ability to trade forwards over the foreseeable future.

HOW LONG THE PROPOSER HAS BEEN IN BUSINESS

Expecially in the same industry or occupation. A proven track record provides comfort to the underwriter.

STRONG CORPORATE GOVERNANCE AND INTERNAL CONTROLS

This is attractive to the market. For example, a good peer-review strategy and regular rotation of non-executive positions demonstrates a culture of transparency.

Source: London Australia Underwriting

34 | JULY 2013

currently purchase management liability or D&O insurance, there is huge scope for growth in this product line, even with the large number of brokers and insurers that already operate in this space,” says Rye. However, management liability specialist and manager at ProRisk Neil Sheppard warns that management liability should not be sold as an ‘add-on’.

“Management liability is often seen as a commodity, with brokers simply asking clients to fill out a proposal form or just gathering some company figures and providing a quote,” says Sheppard.

He adds that the evolving regulatory environment adds complexity.

“You’ve got to be informed on what’s changing.

OH&S and fines and penalties cover were seen as add-ons a few years ago, but now they’re very real covers as a result of governments giving departments powers to levy fines easily.”

Sheppard adds that brokers should push for the removal of insolvency cover exclusions and for increased sublimits, particularly around tax audit and crime. Most importantly, though, brokers should take the time to understand clients businesses and tailor cover accordingly.

“To sell management liability cover effectively, you have to know the business’s drivers,” says Sheppard. “So, if you’re talking to a manufacturing firm, their OH&S exposure and their exposure to fines and penalties will be significant. White-collar firms’ exposure, meanwhile, is typically more about crime and EPL.” Rye agrees.

“Without a doubt, full disclosure of all material facts is essential to avoid any policy disputes down the track. This is a particular issue in today’s market as we are seeing more and more online transactions in the management liability arena,” he says. “This does not necessarily encourage full disclosure in all cases. As a result, the broker is under pressure to advise his or her client of their duty of disclosure.”

FEATURE / D&O

THE BIG END OF TOWN D&O

Directors and officers (D&O) insurance has long been a relatively uncontroversial ‘must-have’ for public companies.

However, several high-profile legal cases that emerged as a result of the GFC, and an increase in the number of class actions brought against companies, have brought the coverage provided by these policies into question.

The sensitivities around D&O relate to two key legal issues – one related to a case involving the collapse of Centro, and the other related to two ongoing disputes, the New Zealand Bridgecorp case and the NSW Great Southern case.

CENTRO The Centro case saw the Australian Securities and Investment Commission (ASIC) pursue the board of the property group for breaches of their duties when they failed to notice multibillion-dollar errors in the property group’s accounts in 2007.

The upshot was that directors, including parttime non-executive directors, could not simply rubber-stamp material prepared by management or external parties like auditors. Instead, they needed to apply independent judgment.

The verdict, delivered in June 2011, sent shockwaves through corporate Australia and caused many companies to look closely at the levels of cover provided by their D&O policies.

“It can be difficult to find the time for education when it’s not your core business, but it’s even more risky to sell products you may not understand” Mark Brookes, Carter Newell 36 | JULY 2013

Geoff Connellan, head of insurance at law firm Moray & Agnew, argues that some of the anxiety over the Centro case may have been unjustified.

“The decision isn’t as groundbreaking as many thought it was at the time,” says Connellan. “It’s more of an application of existing facts – that directors have to act reasonably.”

Even so, brokers need to ensure that policy limits reflect a perceived increased risk of legal action.

“There was a high point where it seemed that cover would need to be significantly increased,” he adds. “However, that’s been reconsidered – it’s not as high as we originally thought. But directors are certainly more sensitive about what cover they need to have and their duties.”

BRIDGECORP AND GREAT SOUTHERN A potentially more significant issue relating to New Zealand and NSW law has been raised by the ongoing Bridgecorp and Great Southern cases.

These cases relate to the extent of application of D&O policies, explains Connellan.

“D&O covers directors and officers against two things: the cost of defending against claims and the cost of claims if you are found negligent,” he says.

“However, there is legislation in New Zealand and New South Wales that charges the proceeds of the insurance fund under the policy, so there’s an argument that the insurer cannot give you the defence costs, rendering this part of the policy void.”

This presents a major problem for D&O policies.

In New Zealand, the assumption was tested by the Bridgecorp case. At the time of writing, the decision in this case argues that the insurance policies take precedence, but this is under appeal.

The Great Southern case is arguing the same point in NSW, but a decision has not yet been reached.

This obviously introduces considerable uncertainty for brokers when writing a policy, with separate defence policies being sold as a temporary solution. While Connellan concedes that these are

INSURANCEBUSINESSONLINE.COM.AU

THE POLICEMAN’S PERSPECTIVE

Insurance Business sat down with ASIC to discuss its regulatory approach.

IB: Since the GFC, ASIC has taken a much more proactive stance on pursuing directors for breaches of duties, etc. Is this a conscious decision or a symptom of events?

ASIC: One of ASIC’s strategic priorities is to ensure investors and financial consumers are confident and informed. This includes holding gatekeepers to account. Directors are an important gatekeeper for our market. The role of a director is significant as their actions may have a profound effect on the community, and not just shareholders, employees and creditors.

ASIC’s expectations have not changed. We expect directors to: • be competent • fulfil their role • delegate appropriately • act honestly and with good faith IB: What are the most common breaches that you see?

ASIC: In 2012 we published our first report detailing ASIC enforcement actions. The report outlines categories of gatekeepers, including directors, against whom ASIC has taken action. ASIC now publishes these reports every six months. Reports to date highlight that ASIC look at director breaches across various aspects. Some of these include: • dishonestly withholding information • submitting false or misleading documents • not assisting liquidator and failing to act with reasonable care and diligence • failing to act on information available • managing a corporation while disqualified • dishonestly using a position as a director or officer of a corporation IB: What does the outcome of recent high-profile cases (such as Centro and Bridgecorp) mean for companies and brokers looking at their insurance cover?

ASIC: Insurance is but one risk mitigation strategy for directors. We note that indemnities from companies and insurance cover need to be consistent with the provisions of the Corporations Act - for instance, a company cannot pay a premium for conduct by a director that is a wilful breach of duty to the company.

Cases like Centro served as a reminder to directors of their responsibilities. In relation to recent high-profile cases, we encourage directors to reflect on what is expected of them under the law.

Understanding and meeting these expectations should be the primary way directors endeavour to minimise their risk of liability.

IB: There’s been some concern about the definition of ‘officers’ expanding beyond the ‘traditional’ definition, including external consultants and advisors. What’s your response?

ASIC: We don’t speculate. We note that s.9 of the Corporations Act sets out a definition of “officer”. When taking action against “officers” of a company, we apply this definition. We also note that persons who are not officers of a company may in any event: • contravene particular provisions of the Corporations Act that apply more generally, not just to officers; or • also be liable as being involved in a contravention of the Corporations Act by an officer (see s.79 of the Corporations Act) Where we find persons engaging in wrongdoing, we may in some instances act against them even if they are not an officer.

an acceptable solution, he warns that they are still untested in a court of law.

WHAT BROKERS NEED TO DO Mark Brookes, partner at Cartner Newell, is concerned that brokers are at risk of legal action if they’re not careful when arranging policies.

“Brokers need to know their clients, especially their needs and exposures,” he says. “Brokers also need to keep well informed about the policies they recommend and have access to a good range of underwriting options for different client needs.”

When recommending policies, brokers should pay close attention to any exclusions and monitor how policies in the marketplace are evolving, for example in relation to D&O. “If directors are at all concerned about the solvency of the company, recommending a policy with an insolvency exclusion would obviously be unwise. Another area that can be problematic is the wording of conduct exclusions. While you wouldn’t expect directors or officers to be covered for dishonesty or fraud, the wording of some policies excludes criminal or unlawful acts. There can often be debate as to what constitutes a criminal or unlawful act, for example in the context of a breach of operational health and safety laws or environmental protection legislation.”

In situations where there is no clear judicial guidance on how a particular exclusion will be interpreted, Brookes suggests that brokers should identify any areas of concern and resolve any ambiguity by seeking confirmation from underwriters about the extent of cover well before the policy is entered into.

Brookes also comments that brokers should be conscious that the definition of ‘officers’ can extend beyond board members and senior management, highlighting that anyone acting in an advisory capacity to a board could potentially be caught by corporation law.

Ultimately, brokers need to ensure that they thoroughly understand what they are selling, says Brookes.

“Brokers should ensure they enjoy the benefits of the education available through their various professional bodies. Underwriters are also generous with their time in explaining their products through seminars and workshops,” he says. “It can be difficult to find the time when you’re busy, but it’s even more risky to sell products you may not fully understand.”

JULY 2013 | 37

BUSINESS STRATEGY / PERSONAL BRANDING

BUILD A

BULLETPROOF PERSONAL

In this day and age, giving yourself a personal brand that makes you stand out from the rest of the pack entails far more than wearing a snazzy suit. Michael Neaylon explains how to get it right, and the fatal mistakes to avoid

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We all have a personal brand, whether we’re working for others or for ourselves. A personal brand can sometimes be seen as lightweight, but it’s not just about your image, as important as that is.

Personal branding is also about how you manage who you are, how you lead your clients, and how effectively you partner with your associates.

Truly effective personal branding is about how you’re perceived, because all brands exist in the minds of their market. Sounds a little lofty? Let’s get tangible.

JUDGMENT DAY Let’s say you’re a real estate agent. You’re judged by your vendors, prospects, and associates on the way you manage the sales process, the value you add to your vendor through expert advice and superior negotiation skills, the integrity you bring to the sale process, and the manner in which you handle expectations.

Add to that the cut and style of your clothes, your promptness (or lack thereof ), your emotional and social intelligence, the car you drive, and your grooming.

Now add to that your online presence: your website and your social media profiles. They all tell a story. The more they align with who you are and the value you bring face-to-face – the more ‘on brand’ your digital channels are – the better they serve you.

If any of these don’t match, however, you’ve just spent a lot of time and effort on putting out mixed messages that could cost you business.

Everything we do and say, display, drive and wear, tweet, blog or video – even the company we keep – impacts our personal brand. That has a direct impact on our bottom line, whether we assess that by the number of sales we make, the influence we wield, or the career milestones we achieve.

Here is the one biggest mistake I see people make with their personal brand:

IT’S ALL ABOUT THEM Yes, your social media, marketing material, website, personal appearance, character, reputation and

Everything we do and say, display, drive and wear, tweet, blog or video – even the company we keep – impacts our personal brand style all play a huge part in your personal brand. But is it all about you?

One place I see this in spades with clients is in their marketing copy. Look at yours right now. Is it about your clients and the results you achieve for them? Is it superfluous or does it purposely position you as trusted adviser to your prospects and clients alike?

If your current marketing is all about you and not enough about how you can benefit your clients, there are some simple ways to remedy the situation.

1. KNOW YOUR VALUES AND VISION The more aligned with these you are, the easier it is to attract your ideal clients. Is it integrity, wealth creation, reliability, or perhaps a combination of all three?

In fact, three is the number I often ask people to give, as one is rarely enough, and any more than three dilutes our impact and focus. Some people say ‘courage, clarity, and integrity’. For others it is ‘joy, responsiveness, and detail’. There are no right or wrong ‘three values’. They must be yours, and must be something you believe in and know you can deliver on.

If you could define your three main values, what would they be?

2. WHAT DOES THAT MEAN FOR YOUR CLIENTS? Now that you’re even clearer on what you stand for, this is just the tip of the iceberg, because no matter how clear you are, if those values aren’t ‘valued’ by your clients or colleagues then you’ll be stranded on your own personal branding island.

So picture your ideal client and ask yourself

JULY 2013 | 39

BUSINESS STRATEGY / PERSONAL BRANDING

the following questions: • What specifically do they gain from doing business with me?

• Is it less stress? More money in their pockets?

More time with their family?

• Can you be even more specific than that?

The more you know these benefits, the easier it is to capitalise on them in your marketing copy, on your website, and on social media. You can even work them into your business conversations.

It makes you much easier to buy and recommend because people know what they’re getting by doing business with you. Even more than that, they know whether it’s something that matters to them or not. It’s easier to become known as the go-to person in your industry or office, not only for what you do but also for the way in which you do it.

It’s also healthy to remind yourself of these statements as much as you can, because for all of us in sales (whether that’s selling products, services, or an idea), the first sale is often made to ourselves.

3. ASK YOUR CLIENTS OR COLLEAGUES WHY THEY LIKE WORKING WITH YOU

Michael Neaylon is a speaker, author, and consultant specialising in sales, marketing, and branding for service professionals who want more business, greater profits, working with more of their better clients.

He is the author of True Brand Toolkit: How to Bring in Big Money for Your Small Business and the national president of the National Speakers Association of Australia. For more information, visit http://mcme.com.au/ michael-neaylon.html.

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This is vital 360-degree feedback on your brand.

You’re often so close to your own work or appearance that you can’t see how you’re being perceived.

Ask your clients why they keep coming back.

You can do this casually or formally: over the phone, at the end of a meeting... wherever. The beauty is that the sheer exercise of asking them to do this will also help your clients remind themselves why they keep coming back to you.

You can also reread your referrals and testimonials. There will undoubtedly be words and phrases that keep coming up again and again. Highlight the words that reinforce your brand and, importantly, the benefits it brings to your clients.

4. LEVERAGE SOCIAL MEDIA TO AMPLIFY YOUR BRAND If you’re not already using social media to leverage your brand, I highly recommend you do so. But, as with any branding, you’re better off going deep into two or three channels than diluting your efforts across multiple networks and not gaining any real traction in any. My personal top three for service professionals are LinkedIn, Twitter, and YouTube.

TOP THREE SOCIAL NETWORKS LinkedIn is a powerful search engine that connects you to a global community of professionals and has ever-increasing functions. One function we’ve begun using more and more in one of our businesses, Presentability, is a private (closed) forum. Just like hosting your own mastermind group can be good for your reputation as a serious player who’s also a seriously good connector, the same impression can be made in an online forum, as long as you give value. If you have a blog, post it to the forum, or simply contribute articles and questions for your audience, further establishing your ‘go-to’ value, with the added benefit of being a connector.

Twitter is more than just about tweeting about the incidental moments in your life, or self-promotion. One of the most underutilised aspects of Twitter is its use for research. By staying focused on who you follow and how ‘on brand’ you are with what you post, you gain much more credibility here too. Always leave enough room for your followers to have an opinion when they retweet (say 10–20 characters). If you’re retweeting an article yourself, have an opinion of your own. That way you strengthen your status as a trusted adviser.

YouTube is owned by Google. That means it’s powered by the most powerful search engine in the world. If you’re not already getting video content up, consider it. As a service professional we want to know about you.

Personally, I’m a professional speaker, so for me it’s vital. However, even clients who don’t speak for a living gain so much more traction by allowing people in to see who they are and the passion behind what they do, not to mention their own personal style.

5. STAY ON BRAND WITH SOCIAL MEDIA Where many people fail to gain momentum in their social media is in failing to have an authentic voice in the channels they choose. If you’re new to social media, then play with it, keeping an eye on who follows you and the impact you have on the market.

Follow people in your industry who have many followers or connections, and observe what they do, then infuse those practices with your own style and – most importantly – your own opinions.

BUSINESS STRATEGY / COMMUNICATION

STANDING IN THEIR SHOES Making sure you understand a potential client’s world view is often the best way to effectively influence them, argues Roger Ellerton

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People may not remember exactly what you did, or what you said, but they will always remember how you made them feel - Maya Angelou As an insurance broker, you are constantly influencing others to accept you, your ideas, products or services.

Many people have difficulty influencing others because they tend to use the same strategies and emphasise the same needs and values with other people that they would like other people to use with them. Alternatively, they take the ‘spray and pray’ approach, hoping their clients will find something useful in the information provided.

Each of us has different needs and different strategies for buying. To be truly effective at influencing others, you need to view the situation from their perspective; that is, to determine what is important to them and how they like to purchase.

Take me, as an example: I am not an insurance broker. From my perspective, all insurance brokers are the same – you have access to insurance policies with various types of coverage and premiums. It is up to you to be the difference that makes the difference. I want you to help me feel good about the process, and to allow me to buy the insurance that I need rather than sell me insurance.

DETERMINE YOUR CLIENT’S NEEDS AND VALUES Far too often we think it’s the product or service that people want to buy. In reality, people buy the benefit that the product or service provides. If you are not certain what is important to your client, you will not be able to present your products or services clearly. Having an understanding of your client’s needs and values can:

• shorten the whole influence process • provide a better understanding of how to present your offering • lead to a better agreement for both parties • give you an opportunity to suggest something the other person forgot, did not think was possible, or that was out of their awareness • create a firmer foundation on which to conclude this and future interactions positively How do you become the difference that makes the difference? Begin by asking questions. Listen for what is important to your client and how they express what is important to them.

Some clients will come to you with their minds already made up as to what is the best insurance for them, having usually obtained ‘expert’ advice from their friends or an internet search. They may be incorrect, but rather than telling them why their choice is not a good idea given the current financial climate, or simply offering the best available premium, acknowledge their choice and explore the reason behind it. Once you have clearly identified the underlying need or value, you can raise the possibility that this need could be addressed in ways that provide additional benefits.

With some people, you may have to ask lots of

Each of us has different needs and different strategies for buying.

To be truly effective at influencing others, you need to view the situation from their perspective

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BUSINESS STRATEGY / COMMUNICATION

FIGHT FOR YOUR RIGHTS Use this profile to refresh your memory about each client, and modify it as you repeatedly meet and focus on their specific needs. By refining this profile, you will improve the way you interact with your clients, increase your closing success rate, and receive more referrals.

questions. With others, you may have to interrupt politely to ask questions to get them back on track.

A client’s needs and values can be intangible, such as respect, or tangible, such as a monthly payment that is within their budget. Having an understanding of your client’s specific needs and values provides clarity on what is truly important to them and will help you recognise where you can compromise, suggest trade-offs or hold firm.

I have found that specifying your client’s most important needs and values in terms of the acronym ‘RIGHTS’ (see box opposite) can stimulate your thought processes, encourage you to take a more concerted look at their needs and values, and help you remember what is important to your client.

SPEAK TO ME IN A WAY THAT MAKES ME FEEL UNDERSTOOD Equally important is how your client expresses their RIGHTS. Each one of us experiences the world around us in our own unique way; that is, we tend to focus on certain types of information to the exclusion of others. For example, some people focus on what they want to achieve; others are more interested in avoiding potential problems.

With the former, you would emphasise how your proposed solution would help them to achieve what they want. With the latter, you would point out how your proposed solution would allow them to avoid potential problems.

The words and phrases we use give away our world view. By listening carefully to a client’s communication style, we can work out what’s important to them and adjust our responses appropriately. And these are exactly the words you can use to motivate them. Listen for the key words and phrases that betray your client’s views, and use the same words and concepts to explain your offering.

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R I

    

Reputation Risk (minimisation) Reduce (costs) Respect (their viewpoint) Responsive (to their needs)

 Information (on premium or how to better handle their coverage)

G

 Guarantees (premium for a specific period of time)  Green (environmental priorities, such as electronic rather than paper documents)

H

 Health (reduced stress)  Helpful (quality service)  Heard and feels understood

T

 Time (meetings are convenient)  Time (to procuring cover)  Timely (response to requests)

S

 Safety (affordable payments)  Savings (money)  Satisfaction (with process and results)

Assessing your clients’ needs using the acronym RIGHTS can help you understand their point of view. For each client, identify at least one key need or value for each letter that is most important to your client. By doing this, you can build up a quick profile of that client.

INSURANCEBUSINESSONLINE.COM.AU

The added advantage is that these words also have a clear meaning to your clients, reducing the risk of misunderstanding. Therefore, if they talk about ‘avoiding a potential problem’, then say that when presenting your offering, instead of referring to ‘mitigating undesired consequences’.

1. TOWARDS VS AWAY FROM Towards people are focused on their goals. They are motivated to have, achieve and attain. They are clear about what they want.

Key phrases: accomplish, attain, get, achieving, goals, results and outcomes.

Away-from people often see only what may go wrong in a given situation; they notice what should be eliminated, avoided or repaired. They are motivated when there is a problem to be solved or something needs fixing.

Key phrases: avoid, steer clear of, prevent, eliminate, solve, get rid of, fix, prohibit.

2. INTERNAL VS EXTERNAL Internal people have internal standards and use them to make their own judgments about you or your offering. They have difficulty accepting other people’s opinions. If they receive negative feedback regarding something they believe to be correct, they will question the judgment of the person giving the feedback. They assess the validity of information from outside sources according to their own internal standards.

You can motivate this type of person with the following phrases: Key phrases: I just know, it feels right, I’ll be the judge of that, I know what’s best.

External people need outside direction and feedback to decide on the insurance that is best for them. Without external validation, they may feel

The words and phrases we use give away our world view. By listening carefully to a client’s communication style, we can work out what’s important to them, and adjust our responses appropriately confused. They will turn to you as an expert for your opinion.

Key phrases: according to the experts, your friends will think highly of your choice, is this the package most people are choosing?

3. OPTIONS VS PROCEDURES Options people are motivated by the possibility of doing something in an alternative way. They enjoy bending the rules or exploring new ideas and possibilities. An options client may continue to explore other alternatives, even when the best one for their situation has been identified.

Key phrases: alternatives, bend the rules, flexible, unlimited possibilities, expand your choices, options.

Procedures people like to follow established rules and processes. They are more concerned about how to do something than about why they should do it. Bending the rules is sacrilege. A procedures person will be interested in the process, rather than the outcome. To motivate a procedures person, for example, state that there are five critical steps to acquire an insurance policy. Tell them what these five steps are. Then lead your client through these steps in the order you specified.

Key phrases: correct way, tried and true, first, then, lastly, proven path.

Roger Ellerton is a public speaker, coach and author. This article is based on his book, "Win-Win Influence: How to Enhance Your Personal and Business Relationships". For more information, see www. renewal.ca.

JULY 2013 | 45

BUSINESS STRATEGY / MOTIVATION

WHEN THE GOING Ensuring your team stays productive when the pressure’s on can be a challenge for any manager. Leanne Faraday-Brash highlights nine ways to keep your people motivated

In the space of three days, the unthinkable happened.

I read that China’s annual economic growth had slowed to 7.7%. Goldman Sachs was quick to point out that the market must shed expectations that continued double-digit growth could be sustained.

Then, after digesting that one, I was sent reeling again when Apple reported its first profit decline in a decade.

As someone who’s mad for an allegory, it got me thinking about those individuals and teams who sustain extraordinary performance for an extended period, so much so that the unexpected is what we come to expect. What pressure is there on a manager and team members when the extraordinary becomes ordinary? How do you continue to inspire and how do you keep your staff’s hunger burning without burning out yourself in the process?

In the course of a typical working week, I found that four separate clients were puzzling over this same issue in very different contexts and which they described in very different ways (see box overleaf ).

In all these situations, an almost idyllic past has been replaced by a fraught, stressful state of play that requires balancing the needs of the team with the needs of the organisation, and the needs of the team with the needs of the individual.

HOW TO KEEP A TEAM ON TRACK The most critical balance to strike is between relationship and outcomes. If we’re too soft on relationships, teams can run amok. If we’re too hard on relationships and only serve profits, targets, senior management and our own careers, we will have a target on our backs long after any problems have abated.

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GETS TOUGH… strike this balance effectively. These nine strategies will help you manage your people effectively and keep their momentum heading in the right direction.

Communication is critical. If you are asking the team to shift gears, make sure you spend more time on the why than the what. The former is more likely to be heard as inspirational, while the latter will be viewed as transactional. You will also need to be more accessible and visible, as your team will resent and disrespect any hint of abandonment.

1

2

Be honest when you’re asking a lot from them. They know it, but need to know you know it so they can feel less exploited.

Be compassionate, but don’t let anyone get away with murder. Don’t let anyone jeopardise good culture because they’re bringing home the bacon. That’s how we create vulture cultures that ravage the organisation.

3

Don’t get sucked into doing other people’s jobs for them. Resist the temptation to do so, and take every opportunity to coach your people. Astute managers have worked out that it is more sustainable and impactful to get everyone to do 5% more than for you to do 60% more on your own. Besides, stepping in or stepping on your people can result in one of two untenable outcomes: either communicating a lack of trust that stifles initiative and innovation, or allowing the lazy to take a leisurely ride on a titanium road bike while you wear yourself out running alongside them.

4

Distinguish between those who want to and can’t right now, and those who can but won’t. The former deserve our compassion; the latter, an enunciation of potential consequences. I am not suggesting we ever become threatening or punitive for its own sake, but individuals who are not living up to the team code need to understand this is not acceptable. Ensure they see the line in the sand that you’ve drawn before

5

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BUSINESS STRATEGY / MOTIVATION

you ever penalise them. Set them up to win, but red card them if they refuse to take the field or play dirty.

stressed if you walk in the door and someone says, “Oh, it’s you.”

Don’t be too proud to bring in reinforcements. Unless you have advanced training in mental health first aid (and even if you do), don’t give struggling employees gratuitous advice, or tell them they should be at home when perhaps only work is getting them up in the morning, or pretend you have the answers or know how they feel. Let those who aren’t coping tell you what support they need and defer to expertise while checking in with your staff tactfully, discreetly and often.

Adopt a stable yet flexible style. Too many of us lurch from a relaxed management style (aka team neglect) to authoritarian when people “take advantage of our good nature”.

Sometimes we lash out with exaggerated intensity because we got told off for seemingly letting the lunatics take over the asylum. The professional embarrassment alone may make us want to pay out on team members when, in effect, we were asleep at the wheel and blamed the tree when we crashed.

Put on your oxygen mask first. Don’t be selfish, but don’t assume you must be selfless. Martyrdom isn’t attractive and is often self-serving anyway. This is a time to take care of yourself. Opt for peer support over beer support, get a coach, have a confidant, and don’t ruin your relationships at home or become sick with guilt because you gave your life to the workplace and your kids don’t recognise you any more. Unless you really want to travel incognito, you’ll only get more

Finally, don’t get too bogged down in the day-to-day. You’ll miss the bigger picture.

This might be convenient and less confronting but not helpful to you or your team. If you’re a people manager, the best you can do for all concerned is to embrace the role and truly manage your people. Ensuring roles are clear and meaningful, expecting excellence, and providing compassion when required balances what you want from your team and what your team needs from you.

6

Leanne Faraday-Brash is an organisational psychologist and principal of Brash Consulting.

She is the author of Vulture Cultures: How to Stop Them Ravaging your Performance, People, Profit and Public Image.

Leanne can be reached at www.brashconsulting.com.au.

7

8

9

WHEN THE STATUS QUO CHANGES Every team is different, and every stressful situation requires a different approach. How would you tackle these situations?

the smooth way in which the new recruit has masterfully made rain in a short space of time, but this one is truly a law unto himself.

MANAGER ONE

MANAGER THREE

Manager One is a full-blown creative and runs a loose confederation of creative cowboys (yes, they are all boys). They have enjoyed lots of trust and freedom for several years.

Our manager’s issue is that his team have become so accustomed to a permissive, supportive and encouraging regime of loose leadership that they’ve become entitled and precious.

They haven’t adjusted to a more constrained fiscal environment.

They pout and tantrum when told “we can’t afford this”, and now bicker with each other over whose project should be supported.

The executive have said this team doesn’t want to be handled, and that they forget they are part of a bigger organisation. This manager is upset and disappointed that this mutually supportive team has morphed over time into a kindergarten cohort who now won’t share and are more likely to want to hit others over the heads with their buckets and spades when no one is looking.

Manager Three runs a tax team in a second-tier firm. The firm has always been profitable, but some of their clients are doing it hard.

Margins are squeezed, bills are contested, write-offs are up, and two associates who left within weeks of each other have not been replaced.

While the team is not traditionally known for oozing excitement out of every pore, the manager can see the beginnings of real disgruntlement and withdrawal. Some staff are quietly telling others they’re feeling vulnerable to layoffs. Others are resentful about workloads increasing but do the work anyway. Others are working to rule, having acquired a profound interest in watching the clock.

MANAGER TWO

Manager Two runs the trading floor. She is used to mavericks and would peg herself as one. However, in the wake of several scandals in other organisations, she has always instilled some notion of the importance of boundaries in the team.

While living on the edge of their authorities, they haven’t stepped over the line, until she hired her latest recruit; that is, a tiger that doesn’t want to be tamed. They all see the brilliance, the flair and

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MANAGER FOUR

Manager Four had a dream team, albeit a small one; cohesive, friendly, purposeful and focused. Regrettably, one supervisor separated from their life partner some five months ago. This took everyone by surprise as there had not been any hint of problems until it was blurted out at a team morning tea.

People didn’t know where to look or what to say. It’s obvious to all, even without clinical qualifications, that the supervisor’s mental health has been in steady decline since then, and the manager freely admits she’s out of her depth. The supervisor is barely functioning and the rest of team are having to make major allowances.

BROKING INDUSTRY

INSURANCE

STATS

THE VIEW FROM THE TOP:

THE CIO VIEW...

CHIEF INVESTMENT OFFICERS THINK CENTRAL BANK POLICY FIDDLING IS THE BIG ISSUE FOR THE NEXT YEAR, ESPECIALLY IN THE AMERICAS AND EUROPE WHICH ISSUES POSE THE GREATEST RISK TO INSURANCE COMPANIES’ INVESTMENT PORTFOLIOS? 25

0

23%

of insurers believe investment opportunities are improving

10%

Accommodative monetary policies

MORE THAN

European debt crisis

18%

40%

of CIOs intend to increase overall portfolio risk

13%

Credit and equity market volatility

31%

MORE THAN

Slow US economic growth

1/2

of insurers believe interest rates will increase significantly in the next two years

14% Inflation

INCREASED VOLATILITY LOOKS TO BE THE WATCHWORD ACROSS THE BOARD DO YOU EXPECT VOLATILITY IN THE FOLLOWING MARKETS TO INCREASE, DECREASE OR REMAIN THE SAME OVER THE NEXT 12 MONTHS? Currency markets

28% 4%

68%

Equity markets

31% 5%

64%

Interest rate markets

32% 4%

Increase

64%

Credit markets

41%

48%

11% Decrease

Remain the same

INSURANCEBUSINESSONLINE.COM.AU

A GLOBAL LOOK AT TOMORROW’S BIG ISSUES

Source: GSAM Insurance Survey, Goldman Sachs Asset Management, April 2013

...THE CFO VIEW

THE SURVEY SAMPLE 252 insurance industry financial executives, made up of:

CHIEF FINANCIAL OFFICERS ARE MORE CONCERNED WITH MARKET VOLATILITY THAN THEIR INVESTMENT-FOCUSED COUNTERPARTS WHICH ISSUES POSE THE GREATEST RISK TO INSURANCE COMPANY BALANCE SHEETS?

90

%

of CFOs believe insurers are adequately or overcapitalised

189

chief investment officers

0

30

13%

1/4

of CFOs think excess capital should be used to support organic growth

8%

chief financial officers

14% European debt crisis

Slow US economic growth

80%

54

Accommodative monetary policies

9

14

%

who serve as both the CIO and the CFO

29%

Inflation

of CFOs expect M&A activity to pick up in the next three years

Credit and equity market volatility

Where are they based?

WHICH OF THE FOLLOWING DO YOU CONSIDER TO BE THE GREATEST ENTERPRISE RISK IN THE NEXT 12 MONTHS? (%)

36

60

146

67

63

Americas

63

33

32

Europe, Middle East and Africa

25

5

9 9 9 Life

Interest rate risk

5

0

5

13

10 10 10 10 0

0

P&C/Non-life Underwriting risk

Multi-line Regulatory risk

13 0

13 0

Reinsurance Credit risk

$6 trillion

in insurance balance sheet assets

CFO’S CONSIDER INTEREST RATE RISK AND UNDERWRITING RISK TO BE THEIR BIGGEST CONCERNS ACROSS A NUMBER OF LINES

65

In total, the respondents represented over

Equity risk

0

0 0 0 Health Inflation risk

43

Pan-Asia

JULY 2013 | 51

SOCIAL LIFE

The Insurance Council of Australia’s (ICA’s) Annual Dinner featured comic Kitty Flanagan as master of ceremonies this year.

The night of celebration followed what ICA CEO Rob Whelan termed “the most intense couple of years on record for the general insurance industry”

ICA ANNUAL DINNER 2013 / SOCIAL

JULY 2013 | 53

FAVOURITE THINGS / WILLIAM LEGGE

Favourite things...

William Legge, general manager, Underwriting Agencies Council

Book: I really enjoy reading, both non-fiction and fiction. As far as a favourite, I think that overall this would be the Hornblower series of books

Place to be: For holidays, Fiji or Venice; for business, Milan Drink: Always a red

Food: Nearly anything prepared

wine, with preference going to a Pinot Noir

and cooked by someone who loves good food

Sport: All codes of football, but especially rugby union and Aussie Rules

Best thing about working in insurance: Meeting and interacting with people across the business spectrum, as well as the need to keep learning a little about a lot of occupations

Music: For relaxation or thinking things through, both JS Bach and Vivaldi work wonders for me

Celebrity: I’ve always admired business celebrities who Movie: The Godfather Part 1, Rocky, Analyse This, and Sleepless in Seattle stick in my mind

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‘just do it’ and, when they succeed, put back into the community, such as Warren Buffett and Rupert Murdoch

THE LAST WORD / ANTHONY DAY

TIME TO SPEAK WITH ONE VOICE

The forthcoming federal election is the perfect opportunity for the insurance industry to stand together, says Anthony Day

Anthony Day is CEO of commercial insurance at Suncorp

Insurers and brokers need a collective voice on important issues. This is even more crucial with elections looming.

While some of the industry players, particularly industry bodies, engage in dialogue with both state and federal governments, we all need to be in regular, consistent dialogue with the various ministers, politicians and bureaucrats, not necessarily as critics but as advocates of the industry to help the governments understand the issues and help find solutions.

In September the country goes to the ballot box.

Whatever the outcome, the insurance industry needs to ensure it has a clear voice with the government on how the insurance industry can contribute to the community and, at the same time, build a sustainable industry. The bottom line is the insurance industry has to shape its own destiny by having a proactive voice. Otherwise it will be shaped by others.

The National Disability Insurance Scheme (NDIS) and, in particular, the National Injury Insurance Scheme are good examples of where the industry can add value to government and community debate. As the NDIS continues to take shape, the industry needs to demonstrate we have a strong interest in getting the best result for the whole community, and that we have something positive to contribute.

Suncorp has a strong position on the NDIS and has already been working with the government. As Australia’s largest personal injury insurer, we are also

“The insurance industry has to shape its own destiny by having a proactive voice. Otherwise it will be shaped by others” 56 | JULY 2013

in constant dialogue with governments and regulators on various workers’ compensation and CTP schemes.

SPEND NOW TO SAVE LATER The future of insurance affordability in general relies on the reduction and management of risk, with insurers, governments and councils working together to reduce the risks in the community. Sometimes that involves hard decisions.

This was the case for Suncorp when we announced last year that we would not be writing any new business for the flood-prone Queensland townships of Roma and Emerald until appropriate mitigation plans were in place. We felt we had little choice but to proceed down this path unless clear decisions were made to build or implement improved mitigation to protect the residents of these towns.

It is widely recognised that for every dollar spent on disaster prevention governments save anywhere between $2 and $10. So it was very pleasing when the Queensland Government announced flood mitigation grants to Roma, Emerald and the Lockyer Valley.

The Federal Government has also announced a $100m grant, which will complete the levee work in Roma, help mitigate Ipswich, and go towards reviewing mitigation around Warragamba Dam in Sydney.

The funding commitments are a major step forward in reducing flood risk and, with it, premiums.

Suncorp believes that reducing risks will help keep premiums affordable. Better protection of communities relies on better coordination and a commitment between governments to change their approach to building and mitigation in high-risk areas, increased and easily assessable funding pools, and coordinated commitment by private and public sectors.

Over time, greater investment in mitigation will inevitably reduce the economic and social cost of natural disasters in Australia.