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thejournal.cii.co.uk October – November 2018

Party people

The CII at the 2018 political conferences

THEORY OF EVOLUTION How the very nature of insurance is undergoing a profound transformation

Changing lanes

How the auto insurance sector needs to adapt

Reading the Riot Act Analysis of new claims legislation

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PROJECT POLICIES

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LET’S GET DIGITAL The CII are improving your digital options for The Journal You can now choose to receive an ‘Email’ version rather than a printed copy of the magazine, which will be sent to you with quick-links to The Journal online site. Here, you can read all your favourite features, news and interviews, as well as download a full digital PDF.

Manage your subscriptions today at cii.co.uk/preferences thejournal.cii.co.uk / The Journal / October - November 2018

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OCTOBER - NOVEMBER 2018

NEWS

C O N T E N TS

FEATURES

5 President’s letter Jonathan Clark on building trust and the role of claims

16-19 Party Conferences Reflection on the CII’s presence at the two main conferences

6 -9 News UK news from the CII and the further profession

24-25 Lloyd’s Lab The new innovation accelerator for startups, entrepreneurs and businesses

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10-11 International news The CII’s work across Asia, India and the rest of the world 12-13 Regional news News from the local institutes 42-43 Disciplinary matters

27 Disruptive technology Can technologies improve wellbeing within broking? 28-30 Reimagining insurance How the profession is undergoing a transformation

REGULARS

STUDY ROOM

14-15 The Interview – Jeremy Grose The Standard Club CEO talks Brexit, technology and the maritime sector 20-22 Hot topic – Motor We examine how the sector is adapting as the market evolves

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47 Q&A The big 10 questions to test your knowledge 48 A-Z An up-to-date overview of the London market’s core principles

23 Regulatory radar The latest legislation updates from the UK and Europe 39 Legal Review The technicalities of a case concerning the Marine Insurance Act

44-46 Riot Compensation Act Updating riot claims legislation concerning policing and damages

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50 CII blog Anna Barnes on structuring assignments

CONTACT US

The Chartered Insurance Institute 21 Lombard Street, London, EC3V 9AH Tel: (020) 8989 8464 Fax: (020) 8530 3052 Chief executive: Sian Fisher

The Journal is the official magazine of the Chartered Insurance Institute (CII). Views expressed by contributors or advertisers are not necessarily those of the CII or the editorial team. The CII will accept no responsibility for any loss occasioned to any person acting or refraining from action as a result of the material included in this publication. The Journal is online at www.cii.co.uk/ journal (members and subscribers only) Should you wish to send your views, please email: michelle.worvell@cii.co.uk

Editor: Michelle Worvell (020) 7417 4763 michelle.worvell@cii.co.uk Deputy editor: Luke Holloway (020) 7417 4778 luke.holloway@cii.co.uk For sales and advertising please contact andy.penny@redactive.co.uk ISSN 0957 4883 © 2016 Chartered Insurance Institute. Average total net circulation more than 82,000 Cover Photograph: Istock

Publisher: Redactive Media Group Level 5, 78 Chamber Street London E1 8BL Tel: (020) 7880 6200 Senior designer: Yvey Bailey Picture editors: Claire Echavarry, Charlie Hedges Production: Jane Easterman Printing: GD Web Offset Recycle your magazine’s plastic wrap – check your local LDPE facilities to find out how

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Aspire Apprenticeships

Aspire to grow your business? Apprenticeships could be for you Unlock access to the brightest talent in the insurance sector with CII Aspire Apprenticeships.

We make offering apprenticeships easy, cost effective and convenient for your business with guidance and support throughout. High-quality apprenticeship training brings new life to your business. And while apprentices learn and develop, your business is growing too.

Find out more at

cii.co.uk/apprenticeships

CII.10.2018.004.indd 1

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PRESIDENT'S LETTER J O N AT H A N C L A R K

TAKING TO THE FIELD As CII president Jonathan Clark’s year at the helm continues apace, he reflects on the crucial role of claims professionals

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ime flies as my year as CII president takes me to my first local institute dinner and a wonderful evening out at Royal Tunbridge Wells. All this on the same day as a trip to the Chartered Institute of Loss Adjusters lunch, which remains a great gathering of claims people. Meanwhile, the CII’s move to 21 Lombard Street has been completed and we have held our first board meetings there, welcoming many members to the new offices to enjoy the excellent facilities. The keys to Aldermanbury have now been handed over to the City Corporation and all who have been involved in this project to take the CII to its new home deserve our congratulations for a job well done. Public trust sits at the heart of our CII agenda so as I review the public trust index survey we recently published, I can see that while we have work to do, we found that three particular themes were identified around claims. These were key themes important to both consumers and SMEs. And it is claims that are my focus here: ● Control – I have a meaningful say in claim settlement ● Speed – Getting me back on my feet quickly ● Respect – Trust me and treat me in a human way.

Speed of claims is an important opportunity, as claims professionals have recognised in recent years. But this is not just about doing things faster – customers want their insurer to take the appropriate amount of time to provide advice and support specific to the situation, rather than focus solely on the speed with which a claim is processed. I am pleased to see this because since I came into the profession, I have always worked in claims – first as a loss adjuster, then as a claim director for the FSCS and now for a reinsurer. It has always been my view that it is claims that are a key touchpoint for our customers, it is why they buy – even if they hope not to have to use a claims service!

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DELIVERING OUR PROMISE

Claims defines insurance as much as the products we design and sell. It is about delivering the promise and putting the customer at the heart of what we do. I am glad to see respect as one of the key themes from the research. In my view, respect is about meeting customers’ legitimate expectations and their trust in us. I would put it this way – our role in claims should be to make the customer feel that even though the event that started the claims process (the accident) was bad, the process, the experience and the outcome were good – that they were well treated and cared about. Empathy and curiosity are key skills, as much as the technical knowledge that underpins our professionalism. But we should never forget to treat our customers as we might like to be treated ourselves. We should be proud of the service claims professionals provide. To quote the great US President, Theodore Roosevelt, claims professionals are “the man in the arena” – the men and women on the pitch, and in the field, for insurance. ●

WE SHOULD BE PROUD OF THE SERVICE CLAIMS PROFESSIONALS PROVIDE

Jonathan Clark, president, CII

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NEWS

FROM THE CII TWITTERATI »

@ Ka t hry n _C ura I have spent the day taking part on the @CIIGroup New Generation programme and @AlanK_Cura is currently en route to the @HI_Daily #2018HIAwards where we are shortlisted for Best Protection Intermediary. Go Cura!

@ ros e _ st l ou i s Pleased @ZurichInsUK research on the ‘drawdown gender gap’ has fed into the @CIIGroup’s landmark IWF report identifying the root causes of the pension deficit women face in #retirement read the latest #insuringfutures report here! #momentsthatmatter

@ B e aton Fcii Congratulations to Gareth Le Page who has become the latest @guernseycii member to become a Fellow of the Chartered Insurance Institute @CIIGroup

INSURING WOMEN’S FUTURES

IWF COMMITS TO IMPROVING WOMEN’S FINANCIAL RESILIENCE

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Women risk financial insecurity in later life due to a culmination of societal, health and financial factors stacked against them, according to a report from Insuring Women’s Futures. Women today are living longer, are better educated and have greater access to career opportunities, but with earnings forming the basis for pension saving, the gender pay gap is a major contributor to women’s pension deficit. The average pension wealth of women aged 65 is £35,800 – just one fifth of men the same age and a mere fraction of their financial needs in retirement

irrespective of their end-of-life care costs, which are on average £132,000 for a 65-yearold woman entering a care home in the UK.

The Insuring Women’s Futures Market Task Force will take steps to address some of the root causes of the 12 financial ‘Perils and Pitfalls’ that impact women’s financial resilience through life and culminate in an enduring women’s pension deficit. For example: young women’s financial capability; the motherhood penalty and part-time working; and improving how the insurance and personal finance profession serves women in their ‘Moments that Matter’. The report can be downloaded at: www.insuringwomensfutures.co.uk

INSURANCE UNITED AGAINST DEMENTIA

CHARITY FUNDRAISERS RAISE MORE THAN £100K FOR DEMENTIA RESEARCH A group of 25 UK insurance executives, led by Simon Cooter of Covéa Insurance, successfully completed a three-day trek of Mont Blanc in France and Switzerland to raise funds for dementia research. To date, the charity expedition has raised an impressive £103,000 for Insurance United Against Dementia (IUAD). On completing the trek and returning to the UK, Mr Cooter commented: “It’s been the most uplifting experience, not just because we reached altitudes over 2,500 metres. For me it

showed how much good our industry can achieve when we work together for a common cause.” All of the funds raised will go to IUAD, a charity established to channel funds from the insurance industry to the Alzheimer’s Society to spend on vital research into the disease. The amount raised could fund a full-time PhD researcher for three years. To donate and read more, visit: justgiving.com/teams/insuretrek18

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NEWS @TomStore r_In s Thanks for your time and insight today @extonsmith. Really enjoyed the #StrategicThinking workshop. #Leadership #CIINewGen @CIIGroup

@ rsa grou p Our #BrokerLeaderProgramme has launched and our new intake has been announced! Find out more about the intensive seven-month programme which is CPD accredited by the @CIIGroup

@ m i r i am re as on Had a lot of fun finding my voice with Kath Burlinson at the @RADA_London ‘Hold Your Space’ masterclass this morning hosted by @CIIGroup

#CIIGroup Twitter

15,623 Followers and counting...

CHARTERED BODY ALLIANCE

200,000 FINANCIAL PROFESSIONALS CALL FOR NEW FCA DIRECTORY Responding to a recent UK Financial Conduct Authority (FCA) consultation on a new directory to help consumers and firms check the status and history of those working in financial services, the Chartered Body Alliance has called on the FCA to make it easier for consumers to differentiate between individuals who have made a personal commitment to higher standards and those that have not. The alliance, which has a combined global membership of 200,000 individuals, considers the FCA proposals will fall short of its aim to “empower the

consumer” by failing to include key and relevant information. The proposals: 1) Do not include fields to show an individual’s professional affiliations, such as professional body membership and standing, or achievement of a professional standard 2) Do not reference whether an individual holds a valid statement of professional standing (SPS) and with which accredited body. An SPS is required for advisers in the retail investment market to provide advice to customers. www.charteredbodyalliance.org

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MEMBER SERVICES

MY CII GOES PAPERLESS The CII business operations and IT teams have been working to make fundamental changes to members’ ‘MyCII’. Record of Achievements – dating back to January 2017 – can now be found on members’ accounts, along with upcoming exam permits and all current exam results. In future, candidates and members will receive an email advising them of incoming correspondence to their account.

This will mean that no paper will be posted from the beginning of November on these items and more correspondence will switch to this method of delivery during the coming months. The CII has advised all customers to ensure that their customer record information is updated on their MyCII account and to regularly check their online communication tool. The CII customer service team can be contacted directly on 020 8989 8464. Visit MyCII now at: bit.ly/2JcVIkV

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NEWS

TA L E N T

NEW GENERATION GROUP 2018/19

More than forty rising stars from across the insurance profession attended the launch event for the CII’s flagship talent programme: the New Generation Group in October. The 2018/19 group is made up of future leaders from all walks of insurance with representatives from the likes of Allianz, Covéa and Zurich, among others. The New Generation talent programme helps develop future leaders and provides participants with the opportunity to make a difference to the future of their profession across claims, underwriting, broking and the London market. The programme includes: an interactive session with the UK Financial Conduct Authority to help the participants understand how the regulator goes about its task; talks from members of parliament and policy and public affairs experts in the insurance sector, and a tour of the Houses of Parliament; and training on subjects such as strategic thinking and dealing with the media.

Each specialist group will also be asked to complete a project or initiative that could make a difference to the insurance profession and contribute to building public trust. The award-winning claims faculty group from 2017 extrapolated their project into a good practice guide and updated legislation surrounding the Riot Compensation Act. You can read all about their new report on page 44 of The Journal.

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OBITUARY

TOM ROBERTS It is with great sadness we inform you of the death of one of the Founder members of The Worshipful Company of Insurers, Past Master and CII past president from 1981/82, Tom Roberts. Tom joined WCI in 1979 and became a distinguished member of the Court, serving as Master in 1993. In offering condolences to Tom’s wife Rosemary and the Roberts family, the Master Tim Carroll described

Current discussions include: CII LinkedIn Group ciigroup@linkedin

43,906

IINI AWARDS WINNERS Fantastic day spent with this great group of Insurance Professionals celebrating their achievement their educational and professional success! → bit.ly/2EHfWVr

Tom as “a Founder of the Company and a colleague, adviser and friend to so many of us, Tom will be sorely missed and his passing truly marks the end of an important era in the life of the Livery.” Members wishing to write to Tom’s widow Rosemary should address letters c/o The Clerk, Worshipful Company of Insurers, 21 Lombard Street, London EC3V 9AH.

MARINE IMPORT SHIPMENTS UNDER CIF Buyer’s shipment is coming under the CIF [...] Same buyer also has an import open insurance policy to cover their shipments from warehouse to warehouse but there is no ‘Contingency Clause’ → bit.ly/2JeoXUA

IF3 - UNDERWRITING CONSIDERATIONS I am about to take CII IF3 (underwriting) and purchased 2016-17 revision book. Can anyone confirm if the 2017-18 book is much different? → bit.ly/2O5sN38

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NEWS

DIVERSITY

INSURANCE MANAGERS WARMING TO D&I New research from Dive In, the global festival for diversity and inclusion in the insurance sector, has revealed that the vast majority of insurance professionals believe managers have finally got the message that diversity and inclusion are good for business and are taking positive steps forward. The survey was conducted from a subset of more than 10,000 registered attendees in August in the run-up to the festival’s fourth year, held in 27 countries on five continents.

New festival participation this year by insurance firms in the Middle East is further evidence that the sector is serious about building modern, inclusive cultures where talent is valued equally. Both Amman, Jordan and Riyadh, Saudi Arabia held a lens on empowering women in insurance across the region, with guest speakers from both insurance and the wider economy. For more information, visit: diveinfestival.com

BROKING

RSA ANNOUNCES TALENTED NEW BROKER INTAKE RSA, one of the UK’s leading commercial insurers, has launched its broker leader programme for the fourth year running by welcoming onboard a new cohort of ten up-andcoming brokers. The intensive seven-month programme is CPD-accredited by the CII. It enables 10 future leaders from some of RSA’s key broking partners to take part in management and leadership training, tailored specifically for the general insurance market. The course is designed to support the individuals in their careers, helping to equip them with strong skills in areas such as strategy, business planning, HR, talent management and financial management.

Each broker is partnered with a different member of the RSA leadership team, who mentors them and acts as a supportive sounding board throughout the course. To ensure the programme is entirely relevant

9 and practical, each candidate brings into the programme a live project from their brokerage. They continue to work on this business issue, applying the skills they learn from the programme in real time. The programme runs until April 2019, when the brokers will present their business plans for feedback and support by a panel consisting of RSA executives as well as a sponsor from their own broking firm. For more information visit: rsabroker.com

THE CII HAS NOW LAUNCHED ITS OFFICIAL INSTAGRAM AND FACEBOOK SITES! You can find them here...

facebook.com/CharteredInsuranceInstitute instagram.com/chartered_insurance_institute

Follow us now and keep a lookout for lots of new content from around the CII.

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I N T E R N AT I O N A L N E W S

ASIA

AWARDS

CII RAISING PROFESSIONAL STANDARDS ACROSS ASIA

WINNER OF J B WELSON PRIZE ANNOUNCED

10 Melissa Collett (middle) with Helen Roberts, CII regional corporate development director (left) and Jeanette Lim, president of Singapore Insurance Institute (right)

Melissa Collet, professional standards director at the CII, has recently attended the Malaysian Insurance Summit 2018 in Malaysia, the Young Insurance Leaders’ Forum of Singapore College of Insurance, and a CPD seminar of Singapore Insurance Institute. Ms Collet presented at the events,

offering insights on dealing with personal data, handling regulation of data privacy and building trust with customers. The presentations also highlighted the importance of maintaining a professional standard, by both individuals and insurance organisations, to build trust among the public.

Yap Mei Hsien, an adjuster in technical and special risks at Charles Taylor, has been awarded the J B Welson Prize for outstanding achievement in CII qualifications. The award is given to the candidate who performs the best in Dip CII core subjects M05 and M92 or 530. Ms Mei Hsien joined Charles Taylor in 2015 in an administrative role and without insurance background or qualifications. The organisation gave her an opportunity to transfer to an adjusting role, where she thrived and quickly demonstrated skills in dealing with complex business interruption claims. She commenced CII studies in Year 2017 and achieved three distinctions and two passes Ms Mei Hsien is currently involved in non-marine claims handling in relation to liability, cyber and business interruption losses. Find out more about CII prizes at: bit.ly/2ESgHvd

I N T E R N AT I O N A L

NEW AMBASSADORS JOIN CII Three qualified members have joined the CII as goodwill ambassadors. Yogesh Dodani and Jeremy Chia from Singapore, along with Budmaa Tsend from Mongolia, are experienced in the profession and voluntarily assist the CII’s international divisions in

Yogesh Dodani

Jeremy Chia

Budmaa Tsend

promoting qualifications and professional standards to achieve the CII’s core goal of building public trust in insurance. They will offer support by communicating with local businesses, advocating the importance of professional qualifications and sharing best practice to influence sector frameworks.

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I N T E R N AT I O N A L N E W S

INDONESIA

APARI PARTNERSHIP HONG KONG

The CII has signed a collaboration agreement with the Association of Indonesian Qualified Insurance and Reinsurance Brokers, an Indonesian education provider. The formal agreement is the firstever contract between the CII and an institute in Indonesia and represents a

FT ASIA INSURANCE SUMMIT 2018 Sian Fisher, CEO of the CII, appeared at a panel discussion at the FT Asia Insurance Summit 2018 in October. Now in its fifth year, the summit will bring together leading insurers, regulators, asset managers and technology experts from Asia to discuss the best strategies to invest in a huge market where innovation and technology can bring both opportunity and risk. The panel, which also included Jason Kelly, head of international financial lines at AIG International, and Sanjay Aurora, managing director Asia-Pacific and Japan at Darktrace, discussed the development, opportunities and challenges of cyber insurance. Ms Fisher shared the importance of setting up guidelines and professional standards around cyber insurance to cope with the increasing demand in the Asian market.

milestone in CII history. The ceremony, attended by delegates from Indonesian brokers, included presentations by CII representatives John Bissell, chief operating officer, and Melissa Collett, professional standards director, before the signing of the contract.

SINGAPORE

TRAINING PARTNERSHIPS

The CII has signed a collaboration agreement with the Singapore Myanmar Insurance Institute (SMII), an education provider in Myanmar. SMII will be the first training company to provide revision courses for Award- and Cert-level examinations in Myanmar. This follows the announcement that the CII has also signed a collaboration agreement with

the Ahliasuransi Learning Center (AALC), a training company in Indonesia. AALC will develop young professionals from insurance practitioners in Indonesia with specialist insurance training, technical knowledge and professional standards. It is managed by a group of insurance specialists, experts and practitioners with extensive experience in the profession.

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INDIA

THE CII IN INDIA Keith Richards, managing director of engagement, and Sainesh Dar, regional corporate development director, both of the CII, have been meeting key organisations in India to establish the CII’s position as a leading influencer in the Indian insurance profession. In October, Mr Richards and Mr Dar visited the new Insurance Regulatory and Development Authority of India (IRDAI) in Gachibowli. They met with the newly

Keith Richards with students of the IIRM

appointed chairman, Subhash Chandra Khuntia, and other senior officials to discuss areas of mutual collaboration and ways the CII can support the insurance industry in India. The CII representatives were then invited

to the Institute of Insurance and Risk Management (IIRM), a school run by the IRDAI, where they were able to meet with students and faculty members, as well as Dr T Narasimha Rao, managing director of the IIRM.

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REGIONAL NEWS

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NOVEMBER

ISLE OF MAN CONFERENCE → 8:30 am – 1:00 pm The Insurance Institute of the Isle of Man www.cii.co.uk/isleofman

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NOVEMBER

THE RUSTY TRUST UPDATE → 8:30 am – 10:30 am The Insurance Institute of Inverness, the Highlands and Islands www. cii.co.uk/inverness

BRISTOL

NOVEMBER

WEST MIDLANDS

QUESTION TIME COMES TO NXTGEN BRISTOL! NxtGen Bristol, the young professionals group of the Insurance Institute of Bristol, hosted a Question Time-themed evening on Thursday evening 11 October. The group welcomed three speakers – John Marks, sales director, Jelf; Jeff Heasman, a qualified language trainer; and the institute’s own Richard Smith, global head of underwriting academy, Zurich. The theme for the evening was change and progression in the finance/ insurance industries and the direct

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FIT TO DRIVE – FIT FOR WORK → 12:00 pm – 1:30 pm The Insurance Institute of Liverpool www. cii.co.uk/liverpool

impact this has on young professionals today, and the key focus was on technology, key skills/experience, CII exams and diversity. Host David Bryan put various questions to the panel before opening the floor to the audience. Lively debates ensued, with varying thoughts and opinions from people who have gone through the profession with experience and those that are currently part of it or entering. → www.cii.co.uk/bristol

LEICESTER

KENNETH COTTERILL CHALKS UP 82 YEARS AS A CII MEMBER Kenneth Cotterill from Loughborough, a member of the Insurance Institute of Leicester, recently CII. Christopher Macleod, president of the Insurance Institute of Leicester, arranged for a special certificate to mark the occasion, which he and fellow local council members Mal Fairhurst and Keith Torrance visited Mr Cotterill to present. It is now hanging proudly on his wall. Separately, 2017/2018 CII president Dame Inga Beale sent a letter of congratulation, which he was delighted to receive. Mr Cotterill joined the Liverpool & London & Globe Insurance Company (now part of RSA Group) in September 1936 at Albert Square, Manchester. After war service, he completed his Associateship and became head of the fire department at Burnley, then local manager of the office at Loughborough, where he stayed until his retirement in 1980. He was president of Loughborough Rotary and has continued to live independently

Left to right: Kenneth Cotterill, Christopher Macleod (president of Insurance Institute of Leicester), Keith Torrance (membership secretary).

until just a few months ago, when a fall persuaded him to move into a care home. Until a year ago, he was still despatching copies of his church magazine to subscribers by post. During the visit, Mr Cotterill reminisced about his early days in insurance, including the philosophy imparted early in his career by his manager at Leicester: “If your wife is happy, you’ll be happy. If you are happy, you’ll be successful. If you are successful, I will be successful!” → www.cii.co.uk/leicester

2018 WEST MIDLANDS INSURANCE INSTITUTES AWARDS Ra’chael McNamara, president of Birmingham Insurance Institute opens the 2018 West Midlands Insurance Institutes Awards

West Midlands insurance and financial services professionals gathered to celebrate their achievements in September at the 2018 West Midlands Insurance Institutes Awards. Guests filled Marco Pierre White’s restaurant at The Cube in Birmingham for the prestigious event, hosted by theinstitutes of the west Midlands – Birmingham, Coventry, Shropshire & Mid Wales, Stoke on Trent and Stratford upon Avon – with support from the Birmingham Personal Finance Society. Awards were presented to those companies demonstrating excellence in professionalism, reputation and ethical practice across eight specific disciplines. Guest speaker was Dave Watson, the former Scots Guard, who captivated guests with the story of how he lost both legs and an arm in Afghanistan in 2010 but is now competing in the Invictus Games The 2018 winners were: ● Broker of the Year: Norton Insurance Brokers ● Financial Planner of the Year: Matrix Capital ● Training Initiative of the Year: JLT Specialty ● Claims Initiative/Service Provider of the Year: Sparta (Insurance Services Group) ● Insurer/Underwriter of the Year: Allianz ● Community Award: DWF ● Local Merit Award: Philip Haden, Prosperity Wealth ● Lifetime Achievement Award: Frank Corrigan, Corrigan’s Insurance & Financial Services → www.cii.co.uk/birmingham

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REGIONAL NEWS

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NOVEMBER

A GLIMPSE INTO THE FUTURE → 11:15 am – 2:00 pm The Insurance Institute of Bolton www. cii.co.uk/bolton

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NOVEMBER

WORK OF THE INSURANCE FRAUD TASKFORCE → 12:15 pm – 2:00 pm Nottingham Insurance Institute www. cii.co.uk/nottingham

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NOVEMBER

CII Conference: Emerging Risks → 8:45 am – 4:30 pm

The Insurance Institute of Chelmsford and South Essex www.cii.co.uk/chelmsford

PERTH AND DUNDEE

KEY BREXIT DEBATE The Insurance Institute of Perth and Dundee recently held an event that discussed the impact of Brexit on local businesses and the profession. The panel discussion featured key speakers including Michael Russell MSP, Murdo Fraser MSP, Owen Kelly OBE (Edinburgh University) and Frank Carson (Aviva). Cabinet secretary for government business and constitutional relations, Michael Russell, commented: “This event hosted by the Insurance Institute of Perth and Dundee is an excellent platform for participants to share their views on what Brexit means and the impact it will have on businesses in Scotland and the UK, as well

as on people’s lives. “The Scottish Government has consistently argued that the best future for Scotland and the UK is to remain in the EU, or at the least in the Single Market and Customs Union. But we will do everything we can to protect Scotland’s interests in future trade deals in all possible Brexit outcomes.” The event was followed by the Perth and Dundee annual dinner – the first of the season not only in Scotland but across the UK. The event was hosted by president Frank McCaffney who had a very special guest in attendance, his father Colin McGaffney, who was personal lines operations manager for General Accident and also president of The Insurance Institute of Perth for 1989/1990. → www.cii.co.uk/perth-dundee

@CII_Edinburgh Your donations to our chosen charity So Precious will go a long way and they/ we will appreciate anything you can spare for this great charity #ISOEDinner2018 @SoPreciousNNU 13

P LY M O U T H A N D C O R N W A L L

CLEANING UP THE BEACHES Charitable work is not just about raising money – sometimes it is about getting out there and doing it yourself. The Plymouth and Cornwall local institute held a beach clean on Sunday 7 October, with Cornish Mutual and Surfers Against Sewage providing the equipment. Steve Clemence, this year’s president, commented: “Each year we support the Insurance Charities and one other charity. This year, our council picked

Surfers Against Sewage. Plastic really is in the news and this has made us as a family very aware of how much single-use plastic we get through. We have a duty as individuals and as businesses to reduce what we use and save our oceans, and therefore our own future generations. Thanks [must be] expressed to Paula, who has just joined our council, and Claire, our charities officer, for making this happen.” → www.cii.co.uk/plymouth

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THE INTERVIEW: JEREMY GROSE

JEREMY

GROSE

Education

Jeremy graduated from Kings’ College, London in 1986 with degree in law and achieved MSc (Economics) in sea-use law, policy and economics in 1991.

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avigating an ever-evolving shipping market, overcoming environmental challenges, the uncertainty of Brexit and the recent announcement to withdraw from Lloyd’s, all mean it is vital that Jeremy Grose, CEO of The Standard Club, remains ready to adapt. “Recent years have seen huge developments in the maritime sector, both in terms of the technology used and the way in which businesses are run,” Mr Grose tells us. “The incidence of large pollution claims has reduced significantly in the years I have been in insurance. We now have much higher standards of operation alongside much lower levels of tolerance of negative environmental impact, oil spills and biological pollutants, which ultimately has led to a lower level of claims across the board.” Now the world’s fourth largest protection and indemnity (P&I) organisation, The Standard Club is a specialist marine and energy insurer and has been managed by Charles Taylor since it was founded back in 1884. Mr Grose was appointed chief executive in 2014, but in the years before becoming CEO, he was actively involved with raising professional standards within the maritime insurance sector. “I was heavily engaged in the development of a professional qualification for the P&I sector in the early 2000s,” says Mr Grose. “We collaborated with the CII to establish a structured set of exams and modules which lead to a full, accredited P&I qualification. We wanted that to be seen as a solid, valuable qualification in its own right and today these modules now form part of CII learning. “In the same way that the CII aims to raise professional standards, we see those P&I qualifications as very much sitting within the environment of the CII.”

TALENT DRIVE Charles Taylor remains hugely committed to the development of talent today. In part, looking to recruit talent, but also realising that development of individuals forms an essential aspect of being able to attract the best talent to join the insurance sector. “When people begin their careers, they see future development as essential to whether they want to join a company in the first place,” Mr Grose says. “Equally, it is vital from a retention perspective because if you want to keep the best people, you need to train, guide and challenge them. For us, it is hugely important and we focus a lot of time on the development and progression of each individual at our organisation – it is key.” It is not just a focus on talent that the organisation is concerned with but drawing on a rich and diverse pool of talented people to strengthen their workforce. Mr Grose, who is openly gay,

Underwriting

He joined Charles Taylor in 1991 as claims executive and transferred to underwriting in 1992.

Going global

Jeremy held various roles in syndicates responsible for US, Canada and Italy before posting to Greece as Eastern Mediterranean regional director in 2001.

has always been an advocate for diversity in insurance and The Standard Club is actively involved with the Dive In initiative. “Our head of talent, James Shepard, is part of the Dive In steering committee and Oliver Hutchings, managing director marine, participated in a panel discussion at last year’s event. “We have a whole programme of activities at Charles Taylor around diversity and inclusion, and a forum engaged in developing the thinking of the organisation. The gender pay gap is key and one of the broadest areas in which there is inequality in the workplace, and insurance – as a financial service – is hugely affected. “Positive change comes through sustainable action and we have to take a number of steps to make this happen.”

BREXIT IMPACT So, what of the looming subject of Brexit on the maritime horizon? The Standard Club is a global organisation operating both in and out of the European Union and the firm has already made adjustments in preparation for the UK leaving the EU. “We are certainly impacted by Brexit as many of our shipping clients are based in the EU,” says Mr Grose. “The insurance subsidiary that we currently use is a UK insurer and we have now taken steps to set up an insurer in Ireland. “We took the decision some time ago and an application was made to the Irish regulator, which we expect to be approved soon. “Our members will continue to be fully supported by the additional insurer in Ireland, just a different one to who they are currently covered by. There will need to be some adjustment in the way we provide our services but, in any event, we aim to assure our members they will not be in any way affected.” Closer to home, The Standard Club has announced its withdrawal from underwriting at Lloyd’s from 2019, ending a syndicate established in 2015 to underwrite marine and energy risks. Mr Grose cites conditions in the Lloyd’s market as being far more challenging today than they were when the firm launched the syndicate and says it is the right decision to pull out now and allocate the capital to other initiatives. “We are diversifying our business to provide an even stronger and more stable business to meet our members’ core P&I insurance needs. Ultimately, it didn’t appear to be the best platform for us to continue in operation. We could not be sure if we would have our plans approved and we decided to withdraw so we were in control of our own destiny. “We will continue to focus on strong relationships with our clients, alongside strong knowledge and expertise about their businesses as the insurance sector evolves and technology continues to help us improve the way we do things,” concludes Mr Grose. Built on a strong foundation of trust and tradition, the ability to adapt to today’s challenges remains as important as ever. ●

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POSITIVE CHANGE COMES THROUGH SUSTAINABLE ACTION AND WE HAVE TO TAKE A NUMBER OF STEPS TO MAKE THIS HAPPEN

The evolution of the maritime sector means The Standard Club is always ready to grow and adapt, as CEO Jeremy Grose explains to Luke Holloway

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CHANGING MAN thejournal.cii.co.uk / The Journal / October - November 2018

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PARTY CONFERENCES 2018

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Artificial intelligence was high on the agenda at the recent political party conferences, with the CII hosting fringe events at both the Labour and Conservative gatherings. Lawrence Finkle was there…

SHUTTERSTOCK

WHO’S WATCHING THE MACHINES? thejournal.cii.co.uk / The Journal / October - November 2018

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PARTY CONFERENCES 2018

Philip Hammond, UK chancellor

Sian Fisher, CII CEO

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hancellor Philip Hammond addressed this year’s Conservative Party Conference on the future of the UK economy. At the heart of that vision was the fourth industrial revolution. “Technological change is transforming not only our economy, but our society and our politics at a rate that none of us have seen in our lifetimes,” said Mr Hammond. This was the backdrop to the CII’s participation at the party conferences this year. Together with the Chartered Body Alliance – a joint initiative with two other major professional bodies: the Chartered Institute for Securities & Investment and the Chartered Banker Institute – the CII hosted timely fringe events at both the Labour and Conservative conferences on the ethics of artificial intelligence in financial services.

NEW POSSIBILITIES CII chief executive Sian Fisher spoke on the panel at the Labour Conference hosted by Phil Brown, head of policy at LV=, and alongside shadow minister for industrial strategy Chi Onwurah MP, member of the Treasury Select Committee Wes Streeting MP, and Adrian Weller, the AI programme director at the Alan Turing Institute, the UK’s national institute for data science and artificial intelligence. Ms Fisher welcomed the new possibilities afforded to consumers by the adoption of new technologies by the financial services sector, but said that financial services firms had to ensure they were “not just getting carried away and really excited about building the tools, but actually taking responsibility for the outcomes”. Ms Onwurah was keen to emphasise the benefits of technology advances for customers but warned the increasing complexity of the systems was bringing new challenges for the sector.

TECHNOLOGICAL CHANGE IS TRANSFORMING NOT ONLY OUR ECONOMY, BUT OUR SOCIETY AND OUR POLITICS AT A RATE THAT NONE OF US HAVE SEEN IN OUR LIFETIMES

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chancellor Philip Hammond

“There is huge potential in reaching out to the financially excluded, but that will not be achieved without applying appropriate transparency and regulation,” she said. “The opportunity lies with the ability of algorithms to personalise and customise the experience of everyone, but the challenge is that algorithms also automate and industrialise bias.” And Ms Onwurah called on the government to ditch what she referred to as a “light touch” approach to regulation in this space, instead urging tech companies to prioritise transparency by providing regulators with access to their algorithms to ensure that firms were responsible for the long-term impacts of their work.

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PARTY CONFERENCES 2018

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“Just as with software becoming open-source which has not only increased its availability and driven down costs, but which has also improved and de-bugged as it has been continuously tested, then there is an argument for at least sharing the principles behind these algorithms so that we can be sure that they are working to help and empower people in accessing financial services, and not imposing decision making upon them.” Dr Adrian Weller highlighted how the increasing use of specialised algorithms had already delivered a series of benefits for consumers. He said: “[They have brought] great improvements in fraud detection, trade processing, compliance and, where appropriate, personalised recommendations of products – and for insurance, personalised pricing depending on individual risks.” Dr Weller agreed that companies should be held accountable for their use of AI and machine learning, adding: “If an algorithm is doing something, we need to make sure that whoever is behind it is held accountable if the algorithm goes wrong.” (l-r) Dr Adrian Weller and Lee Rowley MP

(l-r) Phil Brown, Chi Onwurah MP and Dr Adrian Weller

REPLACING TRADITIONAL SYSTEMS

CUSTOMER CONSENT IN A WORLD WHERE AI IS USING OUR DATA IS EVEN MORE CRITICAL

The panel event at the Conservative conference was chaired by the former treasury minister and current chair of the Office of Tax Simplification Angela Knight. She was joined by co-chair of the cross-party Parliamentary Commission on Technology Ethics Lee Rowley MP, head of HSBC Digital Bank UK Raman Bhatia, CEO of the Chartered Institute for Securities & Investment Simon Culhane, and CEO of the Chartered Banker Institute Simon Thompson, as well as Dr Weller. AI systems are rapidly replacing traditional systems, remarked Ms Knight at Conservatives, with the main difference being that artificial intelligence learns from its customer base in a way that traditional systems do not. The panel again agreed that this change had been largely beneficial. However, as technology advances, concerns over the ethical adoption of AI and those who use it are growing. For Mr Culhane, AI has created an imbalance in society: “We have seen a great rise in inequality, a huge power shift to a few firms and individuals – the rise of the Facebooks and the Amazons.” What these firms are able to achieve through the application of AI has left consumers wary – especially when it comes to data gathering. “Customer consent in a world where AI is using our data is even more critical,” said Mr Bhatia.

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PARTY CONFERENCES 2018 Angela Knight CBE

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GREATER TRANSPARENCY General Data Protection Regulation (GDPR) laws aimed at controlling how data is handled have been welcomed by many as a positive step towards greater transparency. However, Mr Rowley was unsure if it was the best way forward, explaining: “There is an underlying question as to where we are heading with privacy in society and we are currently at a crossroads. It is either going to go down the GDPR road where everyone owns their own data – about which I’m a bit sceptical – or where people start pulling back in certain areas about the kind of data they share.” To address those concerns, Mr Bhatia suggested that companies should concentrate on how to demystify complex AI models: “If banks are using AI for the risk assessment of a customer, they have to be able to explain how a decision was made. Can they always do that? No they can’t, so that is a key concern.” This issue is particularly prominent in the insurance sector, as noted by

WHEN WE LACK CURIOSITY, FAIL TO UNDERSTAND WHAT’S UNDERNEATH TECHNOLOGY AND JUST EXPECT IT TO ‘DO ITS THING’ AND GIVE US THE RESULTS WE WANT, PERHAPS WE SHOULDN’T BE SURPRISED WHEN IT DOESN’T MEET OUR EXPECTATIONS

Mr Rowley, who added: “Insurance is built on the idea of pooled risk, but when you understand exactly what the profile is of the person coming to ask you for insurance, that does pose some fundamental questions. “There are lots of opportunities but also a lot of ethical questions to answer in terms of who you insure, how you insure, and the premium you insure them with.” Mr Thompson said the focus needs to be on openness: “There should not

be black boxes working away unseen in the background, there should be glass boxes; transparent technology with clear lines of accountability. “Whether that is us as professionals, as customers, or as policymakers putting the frameworks around it – we need to be sure we can understand, monitor and explain what that technology is doing and how it actually works, how it reaches those decisions and whether those decisions are actually in line with expectations when there are unexpected consequences.” He reiterated that it was essential for companies, regulators and politicians to have a basic understanding of how the technology works. “When we lack curiosity, fail to understand what’s underneath technology and just expect it to ‘do its thing’ and give us the results we want, perhaps we shouldn’t be surprised when it doesn’t meet our expectations,” said Mr Thompson. ●

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H O T T O P I C :–MMOOT TOORR

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he UK motor insurance market is going through an interesting time, from adjusting to the idea of a postBrexit world, to changing rules on whiplash claims and investigations by the UK’s Financial Conduct Authority (FCA) into the way motor insurance is priced. The latter has only just been announced and follows a supercomplaint lodged by Citizens Advice. Motor is one of a number of classes of insurance to be investigated after the complaint by Citizens Advice that there is a “systematic scam”. It claims British consumers are losing £4.1bn annually to the so-called ‘loyalty penalty’, with eight in 10 people paying a significantly higher price for sticking with their current provider.

Meanwhile, the Brexit debate rumbles on and Hugh Savill, director of regulation at the Association of British Insurers, reports: “The government and motor insurance bodies across Europe have already agreed a plan to keep the UK in the EU’s car insurance zone – the timeframes simply need rubber-stamping by the European Commission. “We hope the Commission gets on with this as soon as possible to protect motorists and haulage operators, here and in Europe, from the unnecessary hassle and cost of having to return to a Green Card system.” Potentially a bit of good news for a market that is facing so many challenges.

CIVIL LIABILITY BILL Meanwhile, early in September, the second reading of the Civil Liability Bill was heard in the House of Commons. Mark Hemsted, a partner at Clyde & Co, says: “This Bill is all about reducing the cost of motor insurance for the British public. “The ultimate definition of whiplash will have a major impact on this legislation’s ability to stamp our fraud. If it’s not broad enough – for example, it only includes neck injury – anyone with a bruise or scrape elsewhere will use this to avoid the proposed tariffbased systems of awards.” Rob Williams, of Weightmans, adds that insurers will be closely watching the plans to monitor the impact of the Bill on the insurance industry and on UK premium prices, but so will others. “If one amendment is

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H O T T O P I C :–MMOOT TOORR

adopted, the Treasury will be able to empower the FCA to compel insurers writing third-party personal injury cover after April 2020 to provide information aimed at assessing the impact of the Bill.” He explains that the specific information in question is indemnity spend (how much insurers pay out in relation to claims, inclusive of legal costs), premium income and premium prices. In each case, the proposed requirement is that insurers provide information for a period of three years after the reforms, covering both the actual figures and what they consider the figures would have been but for the impact of the reforms. “That proposed amendment will come as no surprise to insurers,” Mr Williams says. “The focus on indemnity spend, premium income and premium prices is also predictable and understandable.

“What the insurance industry will draw comfort from is the requirement that they provide information about what they consider the trends would have been but for the introduction of the reforms. “That requirement is crucial, as it will allow insurers the opportunity to put forward comparison figures that are suitably sophisticated and take account of factors such as premium reductions ahead of the implementation of the reforms, derived from predictive pricing, as well as other factors influencing premiums, such as insurance premium tax, repair costs etc.”

But he also warns: “The danger for insurers is that a less sophisticated approach, simply tracking postimplementation premium levels and presuming claims spend to be the sole factor influencing premium prices, would lead to a skewed and inaccurate assessment of the impact of the reforms.” Mr Hemsted adds: “The sum at which the small claims limit is set is also crucial. Currently it’s £1,000, so claimant solicitors can recover their costs from the losing party on relatively small claims. “If the sum is raised to £5,000, claimant solicitors have a much bigger hurdle to leap before they can recover costs. That could deter claims – or it could lead to a sudden increase in the number of higher-value claims as it clearly creates an incentive to go large, so to speak.” →

£4.1bn THE ANNUAL COST TO UK CONSUMERS OVERALL FOR STAYING WITH THEIR CURRENT CAR INSURANCE PROVIDER

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HOT TOPIC

UK MOTOR

IN NEED OF A TUNE-UP Being ready to adapt will be key to success as the UK motor insurance market goes through a period of change thejournal.cii.co.uk / The Journal / October - November 2018

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H O T T O P I C :–MMOOT TOORR

SOME GOOD NEWS

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The cost of claims and the risk of fraudulent claims remain crucial. Iain Stark, a partner and costs specialist at Weightmans, has some good news on that. He explains that two landmark Court of Appeal rulings regarding Part 36 offers and their implications for recoverable costs provide welcome clarity for insurers. Mr Stark says: “For some years, the sanctity of fixed costs has been under threat. Part 45 of the rules governing civil claims states that for relevant claims, the fixed costs regime can be departed from only in ‘exceptional circumstances’. In those instances, claimants can seek to recover indemnity costs based on hourly rates, rather than the fixed costs. “Costs recovered on an indemnity basis are often significantly higher than fixed costs and this has led to an opportunistic approach from the claimant community where Part 36 offers are concerned.” The good news, he says, is that “thankfully, two landmark cases heard by the Court of Appeal have definitively clarified what counts as ‘exceptional circumstances’ – and perhaps more importantly, what doesn’t”. The Court of Appeal allowed the appeals in both cases. The judgment also confirmed a number of other important points for insurers, namely that the purpose and rationale of the fixed costs regime is to provide certainty and to ensure that both sides begin and end proceedings expecting that the fixed cost is all that will be recoverable.

PRICING As the FCA pricing investigation and the Citizen Advice super-complaint show, motor premium pricing remains a contentious issue. Research by LexisNexis Risk Solutions has found (in a survey of 1,500 policyholders) that 84% take some time to check what is covered by their policy at the point of renewal and 58% consider adjusting cover at this point. Some 13% only look at the cost and just 4% let the policy

renewal happen automatically. However, the research also reveals a “worrying picture” of data manipulation in insurance applications. LexisNexis warns: “This not only renders policies potentially invalid and consumers exposed, it results in losses for insurance providers who may pay claims on policies without ever knowing that the risk was misrepresented.” Some 59% of the motorists report that they think insurance providers consistently charge too much for motor insurance. However, more alarmingly, seven out of 10 of the motorists surveyed admitted that they believe it is acceptable to alter details they provide, to manipulate the quote and obtain a lower premium. In terms of where they buy: ● 84% of respondents used a price comparison website ● 15% of purchases were made through cashback websites ● 24% buy their policy over the phone (a rise of 4% since 2015), including more than one in three of those aged 55 and over. When it comes to claims, according to Aon’s Reinsurance Solutions: “In

the new Ogden discount rate environment, 2017 data suggests that the majority of large claims are settling at an estimated discount at and above 1%, with very few settling at -0.75%. “The firm’s data show that there is emerging experience of lower large-loss claims inflation, compared to historic levels of 5%-7% when the Ogden discount rate was a consistent 2.5%. Richard Evans, head of UK motor within Aon’s Reinsurance Solutions business, says: “The Ogden discount rate has caused us to re-evaluate how we consider large motor insurance losses for the purposes of insurance and reinsurance, presenting many challenges in terms of pricing and reserving strategies. Given the potential for further amendments to the Ogden methodology, this will remain high on insurers’ and reinsurers’ agenda.” ●

E-CALL BUTTONS Aon’s findings mention the influence of social media and changing times, thanks to new technology. So, it is no surprise that there is more change ahead in that context too. Insurethebox has welcomed a recent EU law requiring cars to be fitted with an e-call button that alerts emergency services in the event of an accident. However, it says eCall will only be standard on new cars manufactured after 1 April 2018; it will not be retrofitted to older cars or existing models, leaving potentially millions of motorists without access to this technology – especially young drivers who stand to benefit the most, but whose budget will not stretch to a new car. According to new research by Insurethebox, more than 70% of high-impact alerts recorded by its Accident Alerts service last year were triggered by 17- to 21-year olds. More than 100,000 Accident Alerts have been triggered since Insurethebox launched in 2010 and its most recent analysis shows that the emergency services were called 145 times during 2017. The new research from Insurethebox also revealed that vehicles on a 30mph road are six times more likely to trigger these high-impact alerts, which indicate the driver’s possible involvement in a collision, than on a motorway. Additionally, nearly half of alerts (43%) are recorded after 5pm, with drivers six times more likely to require emergency services between midnight and 5am. In 2017, Insurethebox received the highest number of Accident Alerts in December.

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R E G U L ATO RY R A D A R

CITIZENS ADVICE ‘SUPER-COMPLAINT’ IN TO THE CMA ABOUT THE ‘LOYALTY PENALTY’

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Citizens Advice has submitted a super-complaint m to the Competition and Markets Authorityy an (CMA), calling on it to identify remedies and en recommendations to put an end to the ‘penalty’ paid by loyal and disengaged consumers. TThe ar super-complaint covers five ‘essential’ markets where Citizens Advice has concerns aboutt ssuch ra penalties, one of which is household insurance. The CMA will now investigate concerns ra raised that people who stay with their provider – often on default or rollover contracts – can end up paying significantly more than new customers. Citizens Advice has also asked the CMA to focus on vulnerable customers, who it fears can be hardest hit. The CII’s own Public Trust Index – published earlier this year: bit.ly/2JdVo5y – identified rewarding loyalty as the key opportunity for the insurance profession to build public trust, and where our research found there to be the biggest gap between consumers’ expectations and insurer performance. We found that it is ‘dual pricing’ – charging excessive differences between new customer premium prices and those at renewal for longstanding customers – which has been most corrosive of trust in our profession. Alongside the CMA’s investigation, the UK Financial Conduct Authority (FCA) has also announced a market study looking at how general insurance firms charge their customers for home and motor insurance. The terms of reference for this study are yet to be announced. The super-complaint can be viewed he here: bit.ly/2A3hPY7

WORK CARRI CARRIED ED OUT BY THE FCA ON ACCESS TO INSURANCE INSURA ANCE

The Treasu Th Treasury ry Select Committee haas h as published pu ubllis ishe heed a letter h letter by A has Andrew Bailey o cchair haairr N h iccky k M orggaan MPP on the w or to Nicky Morgan work carried out by ou by tthe hee FFCA C oon CA n ac aaccess ccess cesss to insura ce out insurance. The letter Th lett le etter ttter er ggives ivves es a uuseful sefu se fu ul overvie The overview of the FFCA FC CA’ A s plans plan plan pl anss wh when w en cconsidering o si on sidering ide vuln FCA’s vulnerable cust cu stom omer ers. In n pa p rticular, Mr Bailey makes customers. particular, indust to reference to ‘directing’ the industry serv for implement a new signposting service those with pre-existing medical conditions to help them find specialist travel insurance providers, which they would like to see operating by spring 2019. Although this will be piloted initially in the travel insurance market, the regulator will keep progress under review before deciding whether it could include other types of general insurance. The FCA plans to consult on guidance for firms on the identification and treatment of vulnerable consumers early next year. The letter can be viewed here: bit.ly/2pM3b1B

WHAT’S ON THE RADAR?

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The CII takes a look at what’s new on the policy and public affairs front this month ETHNICITY PAY REPORTING

The Department for Business, Energy & Industrial Strategy (BEIS) has launched a consultation on ethnicity pay reporting by employers. It sets out options and asks questions on what ethnicity pay information should be reported by employers to allow for meaningful action, who should be expected to report, and next steps. The objective of the consultation is to enable government and employers to move forward in a consistent and transparent way. Consultation responses will inform future government policy. The consultation closes on 11 January 2019. Further information can be found at: bit.ly/2Ce4Swh

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TECHNOLOGY

LABORATORY CONDITIONS With global insurtech investment booming, we take a look at the recently opened Lloyd’s Lab

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loyd’s Lab – the global insurance market’s new innovation accelerator – has opened its doors, following a global search for technology talent that drew more than 200 applications from 36 countries. Startups, entrepreneurs and businesses from the US, Canada, Israel, the Netherlands, Ireland and the UK, presented ideas ranging from live-streaming drones for fast risk and disaster assessment, to harnessing the internet of things for live cargo tracking, to on-demand insurance for the gig economy.

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TECHNOLOGY

The teams joining the lab will gain unparalleled access to the world’s largest market for specialist insurance and reinsurance, in support of its digital evolution. This tech talent aims to help deliver innovative solutions to some of the key challenges the Lloyd’s market faces and make a real impact on the market’s performance in a fast-track, fast-fail environment. The selected lab teams have access to a dynamic co-working space located in the Lloyd’s building in London, potential funding and the chance to develop products, platforms and processes that will help transform Lloyd’s into an increasingly technology-driven market. They will be supported by the Lloyd’s market, which will offer its insight and expertise to help develop the ideas for their unique needs.

the first quarter of 2018 and the UK attracted 12% of that funding, placing it second only behind the US. “We’re doing everything we can to maintain this momentum and cultivate innovation in the sector but, ultimately, it is down to firms like Lloyd’s to take the lead, and that’s exactly what they’re doing with their lab.” Inga Beale, Lloyd’s CEO and CII past president, added: “Lloyd’s has always been at the forefront of innovation – the launch of our new innovation accelerator is an important step forward into our technology-driven future and we’re excited to see how the ideas develop. “The lab is an important part of our future-focused strategy, which will further strengthen our position as the global centre for insurance innovation.” Applications for the second Lloyd’s Lab cohort will open later this year, for an early 2019 start. Startups, entrepreneurs and businesses interested in applying for the Lloyd’s Lab should visit: www.lloydslab.com ●

$724m

INSURTECH INVESTMENT GLOBALLY IN THE FIRST QUARTER OF 2018

MAINTAINING MOMENTUM Speaking about the significance of the Lloyd’s Lab as a hub for global insurtech excellence, John Glen, economic secretary to the treasury, said: “Insurtech is booming. There was $724m of insurtech investment globally in

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IMAGE: ALAMY

CURRENT COHORT Ten teams from across the globe joining the Lloyd’s Lab: Layr, an AI-powered insurance platform providing faster access for small businesses buying liability insurance. CargoSnap, a mobile transportation inspection app connected to a powerful online platform to collect, analyse and share information in the supply chain, speeding up claims. DropIn, an on-demand live video-streaming platform to streamline insurance inspections and catastrophe response assessment using mobile phones and drones. Insurercore, a digital-based risk appetite directory for those seeking to place and write risks quickly and conveniently. BelMead Tech, a claims support platform using blockchain and other technologies, to improve the insured’s claim journey while also improving

efficiencies for the claim-handling team. Parsyl, a supply chain data platform that combines low-cost sensing hardware and large-scale data mining to allow insurers to better anticipate risk and improve the claims process. Geollect, creator of proprietary intelligence software for businesses to improve efficiencies, safety and security. ZASTI, an AI technology platform built using proprietary deep learning algorithms to provide predictive and diagnostic solutions to solve multiple business problems. Qnity, a digital insurance that allows individuals to design their own insurance solutions. iCede, a cloud-based platform that enables large insurance companies to interact across borders in order to arrange insurance cover for multinational corporations.

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My CII

Access your exam results, permits and records of achievement online

CII.10.2018.026.indd 1

You can now access your exam permits, exam results and your records of achievement online at My CII. These documents will no longer be received by post as we are going paperless to give you better access at a time convenient for you, wherever you are. My CII is a secure way to find all the information you need in one central place as well as being able to print copies whenever you need to. You will continue to receive your completion certificate by post. We’d like to take this opportunity to wish you every success with your studies.

Visit My CII as soon as you’re ready. cii.co.uk

25/10/2018 12:36


TECHNOLOGY

IS INSURANCE READY FOR DISRUPTIVE TECHNOLOGIES?

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Investment in disruptive technology must provide a payout for the workforce as well as the business and its customers, says Peter Ingram

here is no doubt that technology is changing the way brokers operate. However, when we think about the major technologies disrupting the insurance profession, we tend to think about those that are streamlining processes and driving efficiency. While insurance brokers are switching to digitalised claims handling and encouraging customers to use self-service apps and online portals, back-office processes are being overhauled by robotic process automation. But there are also external disruptors. Take autonomous vehicles – as we enter the era of driverless cars, brokers must turn a corner and find a new approach to vehicle insurance. It is easy for brokers to get caught up in rapidly emerging technologies, as well as the possibilities they present. Yet these examples are centred around business productivity and customer satisfaction. By exploring technologies that improve wellbeing within the workforce, brokers can broaden their efforts towards becoming more agile. More than 50% of all organisations globally have difficulty retaining some of their most valued employee groups, according to a recent Willis Towers Watson study. Research by Kronos and Future Workplace finds that 87% of HR leaders consider improved retention a critical or high priority for the next five years. The insurance profession cannot be immune to these trends.

technology must incorporate autoscaling – available through any technology built with microservices from AWS, Google or MS Azure. Autoscaling should also bring the cost down for the business because the technology provider only pays for what they use, meaning they are not overpaying for servers that they are not yet using at full capacity. Compliance and data security are vital factors and although it has become a saturated talking point, the General Data Protection Regulation is also. Again, this is where a product supported by reputable microservices will provide the best possible value, because they ensure the back-end activities happen in a safe and compliant manner.

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BY EXPLORING TECHNOLOGIES THAT IMPROVE WELLBEING WITHIN THE WORKFORCE, BROKERS CAN BROADEN FUTURE-PROOF THEIR EFFORTS TOWARDS The world is quickly adapting to the demands of younger generations who crave instant BECOMING MORE AGILE

MEANINGFUL DISRUPTION With so many innovative HR tech solutions coming to the fore, it can be difficult to know what is worth investing in. But a good start would be considering integration, scalability and compliance with existing HR and payroll systems. The ability to scale up easily is paramount; a worthwhile

gratification and are now beginning to represent the majority of the workforce. If businesses are to remain relevant to those younger generations, attracting and retaining an agile workforce will be key. Brokers must think about how they too can adapt to better suit their lifestyles in the way the likes of PayPal, Uber and Airbnb have forced whole industries to rethink the ways they operate. While there are plenty of technologies emerging that are designed to help businesses address this very issue, it is essential that those technologies will deliver a return on investment, adding true value for both the broker and the worker while providing simple integration, robust security and unlimited scalability. At a time of falling insurance premiums and increased competition, the insurance industry is ripe for disruptive HR technologies that can result in better staff retention and improved business productivity, ensuring customer satisfaction is guaranteed. ●

Peter Ingram is CTO at Hastee Pay

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MARKET TRENDS

REIMAGINING INSURANCE 28

The very nature of insurance, its role and its relationship with society is undergoing a profound and irreversible transformation. Helen Faulkner, Wendy Hopkins, Hans Allnutt and Simon Jones provide a strategic view of the changes transforming the market

IMAGE: ISTOCK

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wo of the biggest drivers of change in the insurance sector are globalisation and technology, but alongside them is the changing nature of risk itself. At one end of the scale, lifestyle changes and increased automation mean the established model of annual insurance contracts is being overtaken by a demand for short-term cover that, for example, insures people's mobility through car pools and daily leasing arrangements and which is available through a full range of mobile technologies. At the other, we are facing increasingly complex global supply chains, the threat of major cyberattacks and the impact of climate change on natural catastrophes.

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MARKET TRENDS

THE INSURANCE MARKETS AROUND THE WORLD ARE FACING EVER-INCREASING DEMANDS TO COVER CATASTROPHERELATED PERILS AND ARE SIMULTANEOUSLY CONTINUING TO INNOVATE WITH A VIEW TO CUTTING RELATED COSTS GLOBAL SUPPLY CHAINS The global technology revolution is turning even everyday objects into complex products supported by highly connected and equally complex global supply chains. This digital interdependency is creating new, unforeseen and often unmanaged risks, as well as exposing gaps in information and understanding that need to be addressed by both insureds and insurers. It also brings a new focus on resilience and business continuity. Mapping the potential risks along the chain around the world – fire, natural catastrophe, industrial action, regulation, trade wars, the spread of isolationism and cyber to name a few – is fraught with difficulty. And the potential information saviour – sophisticated digital connectivity – is itself vulnerable to cyberattack, system failure and energy supply disruption. There are insurance products designed to protect companies against supply chain disruption outside

standard property and business interruption cover. Policies now exist that provide broad, multi-tier cover, not just for physical damage events but a range of non-physical risks such as industrial disputes, transportation and logistics disruption, supplier insolvency and cyber – but take-up is low. According to the Business Continuity Institute’s (BCI) Supply Chain Resilience Report 2017 (supported by Zurich), 69% of respondents do not have full visibility of their supply chains and more than half do not insure for supply chain losses. It is the issue of the relevant risk information that sits at the very centre of the global supply chain and insurance challenge. If companies do not know – or are not asked – who their second, third or fourth tier suppliers are, how can insurance underwriters correctly assess, measure and price the risks? If underwriting is challenging, then handling claims and identifying liability in this hyperconnected world is

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even more difficult. However, this is an area where insurers can and are helping insureds to undertake basic research into their critical supply chains. There has been a flurry of investment in technology startups using artificial intelligence and big data to help companies drive transparency across their supply chain risks and there is a need to embrace this innovation. Equally important however, is communication.

CYBERATTACKS As technology develops, so too does the risk of cyberattacks, with criminals developing new lines of attack faster than responses can be devised. With cyberterrorism now a serious threat and cyberwarfare between states a reality, the need to rethink the scope of cyber risks and how the insurance industry responds to them has become urgent. Many businesses are ill-prepared for the potential impact of major →

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MARKET TRENDS

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cyberattacks, with smaller firms often believing they are too small to target. This leaves them vulnerable because they frequently do not put the policies, staff training and technical measures in place or buy the insurance protection that would provide them with the right indemnification and support when an attack comes. Awareness of the need to take cybersecurity seriously and insure against the consequences of attacks and data breaches was, however, given a major boost by the arrival of the General Data Protection Regulation in Europe at the end of May. In addition, major incidents such as last year’s worldwide cyberattacks involving the WannaCry and NotPetya cryptoworms dispelled a lot of complacency. The potential for targeted attacks to propagate and have a serious impact on a wide range of businesses creates a potential ‘shrapnel effect’, in which businesses far away from the centre of an attack suffer. Although not the original target of the attack, many small businesses can still be affected by it. Covering this risk means taking a much broader view of the range of business interruption cover required. If that is not already a big enough challenge, identifying the source of attack is getting harder too. Methods of attack are wide ranging and the people motivated to carry them out are increasingly diverse. They could be states, criminals, terrorists, activists – or just a renegade with some basic technology skill. For the insured who has bought cyber cover, they just want the insurer to move quickly to help them mitigate their losses and get back to normality as quickly as possible, secure in the knowledge they will indemnify them against the losses suffered. The policyholder does not want a lot of questions about whether a terrorist or a malicious individual was behind the attack, but insurers are looking for greater clarity and will need to ask precisely those questions. The answers might determine whether – or to what extent – the policyholder is covered. There are no easy answers when

69%

OF BUSINESSES DO NOT HAVE FULL VISIBILITY OF THEIR SUPPLY CHAINS AND MORE THAN HALF DO NOT INSURE FOR SUPPLY CHAIN LOSSES Source: BCI Supply Chain Resilience Report 2017

defining the scope of cover to safeguard both potential victims of such an attack and the insurance profession as a whole. The challenge of reconciling them is going to draw the industry into another debate about its role in modern society.

NATURAL DISASTERS As reported by Munich Re, 2017 was the worst year on record for losses resulting from natural catastrophes. The insurance markets around the world are facing ever-increasing demands to cover catastropherelated perils and are simultaneously continuing to innovate with a view to cutting related costs. Parametric insurance is increasingly being used as a claims solution. It provides a rapid-response solution, making immediate payments based on a specified trigger or intensity of an event (for example, wind speed or earthquake magnitude) or the amount of loss calculated in a pre-agreed model. Unlike traditional insurance settlements that require an on-theground assessment of individual losses, parametric insurance relies on an assessment of losses using a predefined methodology. As the triggers for claims payouts are already agreed, there will be less need to send teams of adjusters out to disaster areas in

the immediate aftermath to carry out a traditional claims assessment and, once the triggers are affirmed as met, claims payments should flow very quickly. There are, however, potential complications, if the assessment of the requirements cannot be proved to have been complied with at the outset. For example, whether a specific area has been impacted by a category one, two or three hurricane is simple, but determining whether there have been sustained wind speeds in a specific area can be far more difficult, particularly if there is no wind speed-measuring equipment at that location or if it is inoperable due to the hurricane.

REIMAGINING THE FUTURE The industry now needs to reimagine the skills insurers, brokers and service providers, including law firms, need to flourish in the future. Regulators will need to move at a pace that supports the profession in responding to the changes in how society wants to buy insurance and interact with the industry. Forging new relationships with society, governments and regulators will in itself require imagination. Those with the imagination and courage to apply it will thrive in the digital age and meet the challenge of protecting society against the consequences of risks that are transforming apace. DAC Beachcroft’s full report, Insurance Remodelled: 2018/19 Market Conditions and Trends, can be found at: bit.ly/2DVFcqC For more information, please visit: www.dacbeachcroft.com ●

Helen Faulkner is head of insurance and Wendy Hopkins, Hans Allnutt and Simon Jones are partners at DAC Beachcroft

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25/10/2018 12:50


BREXIT

EXIT

STRATEGIES With a no-deal Brexit looking ever more likely, Martin Friel examines the potential risks – and opportunities – for the UK insurance market

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rexit is looming, the risk of a ‘no-deal’ exit increases every day and the nation alongside a continent await the outcome of the protracted negotiations. The insurance profession is waiting too. A profession that contributes in excess of £40bn to the UK’s GDP and provides employment to more than 300,000 people is, like everyone else in the country, awaiting the outcome of negotiations to understand how to act and protect that contribution to the economy.

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BREXIT

Of primary concern is the issue around passporting and whether UK firms will be permitted to trade in EU countries following Brexit. The UK has already confirmed that EU-based companies will continue to be able to passport into the UK, but no such reciprocation for UK firms has been forthcoming. As Laura High, director of underwriting agency Yutree and chair of the British Insurance Brokers’ Assocation’s Anglia region, says: “Where there is a lack of solution at this stage is with brokers dealing with clients in the EU on passports. In the event of a no-deal Brexit, brokers will be unable to deal with these clients under their current passports. It is still a wait-and-see situation unfortunately and, until the political position is resolved, we are unable to see how the business position will unfold.” Without any firm agreement, many insurers have acted by setting up subsidiaries in other EU countries. Axa XL has received authorisation in principle from the Central Bank of Ireland (CBI) to move it EU insurance company, XL Insurance Company SE (XLICSE), from the UK to Ireland, and while Ireland is a natural choice for many due to its use of English and familiar legal and regulatory environment, Luxembourg is proving to be particularly popular, while Brussels managed to fight off intense competition to persuade Lloyd’s to set up its subsidiary in the city.

Wray, CEO of consultancy firm Fifth Step and author of The Brexit Readiness Guide. However, he does believe that the risk of a brain drain on the UK’s insurance industry is a real one, just not in the immediate term. “There are a lot of foreign organisations out there who want to take people, experience and business from the UK at the moment. There will be some brain drain – that is inevitable. “But I doubt the UK will lose its position as the capital of insurance, but maybe by 2050 it could have done as geography could be less of a concern in writing insurance,” he says. Preventing a brain drain of

INSURER SUBSIDIARIES Luxembourg AIG, CNA Hardy, FM Global, Hiscox, Liberty Specialty Markets, RSA, Tokio Marine, Sompo International Dublin Beazley, Chaucer, Everest Re, XL Group, Aviva, Legal & General, Standard Life Brussels Lloyd’s, MS Amlin, QBE Paris Chubb Netherlands UK PI Club

IMAGE: IKON / BENJAMIN HARTE

LONDON FALLING? Although these moves will help create a level of continuity following Brexit, will this migration result in a waning of London’s influence on the global insurance market? “I can’t see Brussels becoming the Lloyd’s hub in the short to medium term, as Brussels doesn’t have the access to capital on its doorstep that London enjoys,” says Darren

UK INSURANCE MARKET REVENUES • Generates 26% of the City of London’s total income • More than $90bn of business revenues via 350-plus firms • £12bn paid in taxes to the UK Government

both homegrown talent and EU nationals has implications beyond the immediate withdrawal from the EU. The UK holds a leading position in fintech and insurtech, with more than 80,000 computer programmers working in London alone. A recent report from Kennedys warns that, because much of the UK’s growth in insurtech has been secured by its ability to attract the best talent from across the EU, any restriction on this freedom of movement will have “a negative impact on the quality of the UK’s tech workforce, as well as the insurance sector’s ability to develop homegrown innovation”. It concludes that such restriction seems likely as the UK government has committed to reducing net migration to the tens of thousands, adding ominously: “Closing the door to an international talent pool could put the UK’s position as a global leader in innovation at risk.”

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THE FLIPSIDE But enough of the bad news. Where is the good news coming out of Brexit? Well that is one of the problems that Mr Wray believes is afflicting UK insurance – its leaders are not looking at the opportunities. “I wrote The Brexit Readiness Guide out of frustration at what is going on and lack of support from the institutions that you’d expect to be doing something,” he explains. “If you believe the Leave campaign, there are going to be countries outside the EU looking to do business with the UK, but I don’t see too much interest in pursuing those opportunities yet.” Perhaps, like everything else with Brexit, it is just too early for organisations or even individuals to act on what are essentially assumptions. And although the UK industry is taking some concrete steps to attempt to secure an uncertain future, at the moment, there is not much more than risk for the industry to focus on. ●

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SUBSIDENCE

THAT SINKING FEELING In the aftermath of the summer heatwave, the UK’s property insurers are holding their breath to see if subsidence will result in a wave of claims

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I

nsurers are watching and waiting to see if an expected surge in subsidence claims follows the UK’s long, hot and dry summer. A maximum temperature of 33.2°C was recorded at Kew Gardens (greater London) on 3 August, which followed the third-warmest June on record and the second-warmest July. The Met Office was saying, as summer drew to a close, that it was very likely to be among the hottest summers on record, vying for that accolade with 1976.

FORGOTTEN PERIL

ISTOCK

The bad news for insurers, however, is that it looks like it could be another subsidence surge year, with an associated rise in insurance claims.

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SUBSIDENCE

Rob Withers, executive director of the Association of Specialist Underpinning Contractors, has already been warning that the industry needs to ready itself. He says: “Subsidence has become something of a forgotten peril on the insurance radar until this year, when it will be back to the top of the agenda.” However, it is only now that the claims might start emerging. According to the FT, Kate Syred, managing director of household and partnerships at insurer Direct Line, has warned that September is the critical month for subsidence claims. She adds that, even once movement has been noticed, the cost is not immediately clear. “You start to observe the property and ask if it is still moving,” she explains. Insurers face an average cost of £13,000 per subsidence claim, according to some, and the Association of British Insurers revamped its guidelines to the industry in December last year.

TOUGH YEAR It has already been a bad year for weather-related claims – the ‘beast from the east’ in February and March caused pipes and water tanks to freeze and crack, while a jump in leak claims in 2016 and 2017 has helped to push up the price of home insurance.

According to the AA, the cost of the average combined buildings and contents insurance policy rose by 4% in the 12 months to the end of June, to £163. The cost of buildings insurance has been rising more quickly than the cost of contents cover. Bad news then that, according to Sedgwick and based on the company’s weekly update on current subsidence volumes, there was a rise of more than 350% in the summer weeks and, as The Journal goes to press, the Indian summer continues with dry and unseasonably warm weather expected to continue to affect already dangerously dry soil conditions. Data from the UK’s Meteorological Office Rainfall and Evaporation Calculation System (MORECS) shows the biggest changes for several years, as the effect of the prolonged dry, sunny weather has started to show in monitoring readings. MORECS readings increased sharply from June through mid-August, rising from less than 100, to 302.5. Although dropping slightly to the current 298.5 last week, it is anticipated that the maximum value of 308 will be reached within the next two weeks. With warm weather patterns forecast to continue, especially in southern areas of the UK, Sedgwick estimates that claim volumes will

continue to rise and the company remains watchful of the situation. “With live remote crack monitoring in place, feeding back data every eight hours, we are able to anticipate claim volumes before they occur, along with tracking soil conditions, level monitoring readings and long-term weather forecasts. We also have collated soil samples and weather information to help predict likely claims volumes for this year,” says Kevin Williams, Sedgwick head of subsidence. Looking at the previous surge years of 2003 and 2006, the current position shows that the soil is drier than it was in 2003, but not quite as dry as the surge of 2006. A surge event is dependent on how long the MORECS remains at this maximum level: in 2003 there were maximum readings for seven consecutive weeks; and in 2006 for four weeks. With the warm and dry weather continuing into the autumn and even late-October, 2018 has been declared by claims experts as a subsidence surge year and loss adjusters are implementing plans to resource the incoming claim volumes, according to reports. For once, insurers may be glad to see the start of the autumn storm season. ●

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THE PROBLEM WITH SUBSIDENCE ● Subsidence is mainly a problem in areas with clay soil

– notably south of an imaginary line between Bristol and Hull.

● The main areas affected are London and the southeast, but

even in this part of the country, only one in 50 houses has suffered subsidence problems in the past 30 years. ● Subsidence is caused when a building’s foundations sink because the soil is unstable. Contributory factors are clay soil, vegetation that draws water from the soil, and leaking drains. ● ‘Heave’, on the other hand, is when the ground swells because of increased moisture, causing the foundations to rise. Source: Direct Line

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MARINE

A MARKET

ON THE MOVE? 36

What at first glance seems to be good news for the marine market, in terms of increased premium income, is covering up a serious issue of falling profitability and rising questions around sustainability, as Liz Booth reports

M

arine insurers are increasingly being asked questions as the market continues to face challenges around overcapitalisation and as the premiums paid fail to cover both the cost of claims and expenses. Some 550 delegates at the International Union of Marine Insurance (IUMI) annual conference in Cape Town (the first time the event had ever been held in Africa) heard that a benign claims experience in 2017 has masked IUMI's statistics showing an

increasing mismatch between premium income, covered risk and claims costs. On a global average basis, buffers to cover extraordinary single or accumulation losses are non-existent, they were warned.

DECEIVING UPSWING Vice-chair of IUMI's facts and figures committee, Astrid Seltmann, said that, while global marine premiums were up by 2%, there is an increasing mismatch between income levels and covered risk. “Overall premium income reached $28.5bn in 2017, which represents a 2% increase compared with 2016. This upswing is largely attributable to

growth in trade plus strengthening of European and other currencies against the US dollar. But it masks the dramatic situation which is unfolding when current premium levels are viewed in relation to covered risks and the impact of claims,� she explained. Chair of the ocean hull committee, Mark Edmondson, was among those highlighting a continuing deterioration of premium income against the more positive picture of an improving risk profile. The international market has shown signs of improvement during 2018, although continuing volatility and uncertainty in many sectors remained a concern.

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MARINE

He said: “We estimate around $100m of capacity has been removed from the market over the past year due to very low startup activity and the withdrawal of a number of highprofile hull insurers. “Facilitisation would appear to be under increasing pressure due to worsening performance and heightened regulatory scrutiny. Overall, the deterioration of underwriting results, for what has been a considerable period, has appeared to have triggered a brake in the decline in market conditions.” An enhanced risk profile stemming from better quality tonnage and greater regulatory influence has encouraged a consistent improvement in the frequency of major casualty. However, the ocean hull market is still being buffeted by lower asset values, reduced utilisations, year-on-year erosion of premiums and ever-present volatility, he concluded.

CARGO MARKET On the cargo side of the business, Sean Dalton, IUMI cargo committee chair, reported that the marine cargo market remained the largest commercial marine line of business in terms of premium income. IUMI's 2017 statistics showed global cargo premiums amounting to $16.1bn. Globally, the cargo line has been unprofitable for several years – with rising loss ratios and expense ratios – and this is of great concern to underwriters. Mr Dalton explained that growth in global merchandise trade was expected to remain strong in 2018 and 2019. While this was positive for cargo marine insurers, continued growth was dependent on various factors, both political and economic, and there were some serious concerns. An increasing number of countries are restricting or restraining international trade and this is creating a protectionist operating environment. In addition, 2017 was the worst year for natural catastrophe losses in the history of the insurance industry. Hurricanes Harvey, Irma and Maria all caused cargo losses, particularly with an increase in static risk cover.

Mr Dalton summed it up: “The cargo insurance market is starting to firm but it still has a way to go. Many cargo accounts were severely affected by events in 2017; and 2018 looks set to be another very active year. “Nat cats and large/outlier losses, such as the Tianjin port explosion in 2016, have demonstrated the need for the cargo market to price realistically for such losses and develop riskadequate premiums.” He raised further concerns: “Containership fires and the increasing occurrence of mis-declared cargoes is a worrying trend. The fire onboard Maersk Honam, which tragically killed five crew members, is the most recent example of this issue and the loss is likely to generate the largest general average claim in history. As vessels continue to grow larger, the accumulation of cargo values coupled with the increasing risk of onboard fires needs to be addressed urgently by all stakeholders.”

LICENCES IN THE BALANCE All this comes at a time when Lloyd’s is reviewing the sector and threatening to withdraw the licences of the worst-performing syndicates. As one insurer explained, all marine hull syndicates have had to present their plans for 2019 to Lloyd’s and are still waiting to hear whether they will have permission to operate in 2019 through Lloyd’s. He added that there is a feeling that “quite a few” are about to be forced out. For those that survive the cull, he said, there could be a real opportunity to see prices rise to more sustainable levels. So it is a case of watch this space for a sector that is otherwise banking on low claims for its sustainability. ●

$16.1bn

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GLOBAL CARGO PREMIUMS IN 2017 source: IUMI

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PROJECT POLICIES

THE PROBLEM WITH PROJECT POLICIES Ian Hollingworth examines a recent case concerning a roofing firm that caused a fire at a high school in London

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he High Court’s recent decision that a roofing firm that caused a fire at a secondary school in London was not protected by a project policy, has raised some serious questions over the worth of this type of insurance. Traditionally, employers on larger construction projects take out a project policy to cover damage to the existing structure and possibly the contract works being undertaken by the subcontractors appointed to work on site. A project policy would usually provide protection to named contractors and sometimes all contractors in the contractual chain, in the event of a fire or other damage caused by contract workers on site. The project policy insurer would simply cover the loss rather than each sub-contractor going to their own insurers to recover the cost of their own damaged contract works. This means lengthy and costly litigation between sub-contractors can be avoided and ensures the property and works are adequately covered, preventing any delays in the completion of the construction.

KEY DIFFERENCE However, in Haberdashers’ Aske’s Federation Trust Ltd v Lakehouse Contracts Ltd and others [2018] EWHC 558 (TCC), the High Court found roofing firm CPR was not protected because the terms of the sub-contract required that it should maintain its own insurance. That is not unusual in itself. Usually, a construction contract would contain an insuring clause requiring the individual sub-contractor to take out insurance to

cover their own contract works along with employers liability and public liability. This is even if there is a project policy in place. The key difference with this case was that the project policy insurer dealt with the property loss, but then sought to recover its outlay from the contractor that caused the loss.

WORKING WITH THEIR BROKERS, CONTRACTORS WOULD BE WELL ADVISED TO TAKE A FRESH LOOK AT THEIR COVER This was very unusual as a project policy is usually taken out in joint names – the policyholder and all subcontractors. As such, the project policy insurer would not normally be able to seek a recovery as all sub-contractors would essentially be considered a policyholder and covered under the policy. The court allowed the project insurer to recover the loss from the subcontractor on the basis of two key facts: the main contract had required that sub-contractor to take out their own insurance; and the sub-contractor was not named at the commencement of the construction project and therefore not factored into the cover by the project policy insurer when the policy was taken out. This ruling hascalled into question the effectiveness of project insurance. It has wide-ranging ramifications for the insurers of sub-contractors, as they can no longer rely on the

existence of a project policy to cover any losses caused by those they insure. This could mean higher insurance claims, which may have a knock-on effect in premium increases. Additionally, contractors and subcontractors may no longer rely on a project insurer to pick up a loss in the event of damage they have caused. It is essential therefore that brokers and the wider insurance sector serving the contracting industry, make policyholders aware that a project policy may no longer provide the catch-all cover they have previously relied on. Working with their brokers, contractors would be well advised to take a fresh look at their cover to ensure they are adequately insured for their potential liabilities. ● Ian Hollingworth is claims manager at ECIC

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LEGAL REVIEW

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n The Renos [2018] EWCA Civ 230, the Court of Appeal considered the insurance implications of expensive repairs to a merchant ship. In August 2012, the MV Renos was on a laden voyage in the Red Sea when a fire broke out in the engine room, causing extensive damage. Under section 60(2) of the Marine Insurance Act 1906 (MIA), a vessel is a constructive total loss (CTL) if the costs of repairs exceed the value of the ship when repaired. Where there is a CTL, an owner may abandon the vessel to the insurer by issuing a Notice of Abandonment (NOA) under section 62 of the MIA. The NOA must be given with reasonable diligence after receipt of reliable information of the loss. The parties agreed that if the repair costs were $8m or more, the vessel would be a CTL. Between August 2012 and January 2013 various quotations were obtained, ranging between $2.8m and $9.6m. On 1 February 2013 the owners served a NOA, which was rejected by the insurers on the grounds that it was “given far too late”. In the High Court, Mr Justice Knowles ruled that the owners were not too late. He also rejected the insurers’ arguments that the vessel was not a CTL due to the inclusion of certain recovery costs in the CTL calculation that had been incurred before the NOA was issued. The insurers appealed. In deciding the appeal on the issue of whether the NOA was served with reasonable diligence, Lord Justice Hamblin addressed three questions:

● Did the owners receive “reliable

information of the loss”? What is to be regarded as reliable information will vary according to the circumstances. In this case, the repair costs were on the cusp of making the

A LIFE ON THE OCEAN WAVE?

Graham Bartlett and Maria Carolina de França look at a recent case where a shipowner abandoned the vessel to the insurers vessel a CTL and therefore greater detail and accuracy were required to provide reliable information of the scope and cost of repair. When conflicting information on costs was received from experienced sources, the owners could not be regarded as having reliable information. As Mr Justice Knowles had put it: “It was not realistic to take one source in isolation; the presence of conflicting information from other sources threw the reliability of any one source into question.” The conflicting information meant that the information of the loss remained “doubtful”. ● Did the owners act with reasonable

diligence once they had reliable information? The insurers argued that reasonable diligence required the NOA to be given almost immediately. The case, however, had a long and complex history and the owners were entitled to take time to consider their position when the final reports on the repairs and costs were received. They had also acted reasonably in requesting a meeting with the insurers to seek their views on those reports, a request that the insurers declined.

● Did the owners exceed the

reasonable time to make enquiry? The reasonable time was not exceeded because the enquiry was made more complex and slower by the insurers putting forward figures that would not support a CTL and creating an alternative repair specification, thereby making it harder to get a reliable figure. On the issue of pre-notice recovery costs, the insurers’ argument that the vessel was not a CTL because the calculation included recovery costs incurred prior to the date of the NOA, and that only post-notice costs of recovery should be included, was rejected. The insurers’ case was that a prudent shipowner would assess whether the costs of recovery made a vessel a CTL before incurring those costs and thus the NOA had to be given before recovery costs were incurred. Lord Justice Hamblin said it can be necessary for an owner to recover a vessel, and incur the costs of doing so, to be able to ascertain the repair costs and establish whether the vessel is a CTL. ●

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Graham Bartlett is a barrister at Trinity Chambers in Newcastle upon Tyne. Maria Carolina de França is a dualqualified Brazilian lawyer and English barrister at Vieira Rezende in Rio de Janeiro

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CHAMPION THE CAUSE Become an Education Champion and be part of a movement to encourage new talent into the profession

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ou may well be aware that the CII had an educational outreach programme for some years, delivered using the Discover Risk game. The primary focus has been to raise the profile of the insurance profession to young adults as a career option. Students, teachers and careers advisers have always been quick to comment on how effective Discover Risk is in enabling students to understand the profession and dispel common myths. At the same time, many members have been involved in recent years with local schools, either by attending a careers fair or sitting with sixthform students explaining what the insurance profession offers to clients and as a career. We now feel that the time has come to significantly increase the reach of this programme and to support members who want to engage with their local secondary schools through the new pro bono Education Champions initiative.

FOR TEACHERS, THE SESSION CAN HELP BUILD LINKS WITH POTENTIAL RECRUITERS OF STUDENTS LOOKING AT APPRENTICESHIPS OR GENERAL WORK EXPERIENCE FOR STUDENTS, IT ALLOWS THEM TO GAIN A GREATER UNDERSTANDING OF THE SECTOR AND THE RANGE OF CAREER OPPORTUNITIES AVAILABLE TO THEM

PRO BONO EDUCATION CHAMPIONS The CII’s Education Champions programme aims to deliver Discover Risk to local schools and colleges across the whole UK. We are looking for enthusiastic and passionate members in all roles to come forward and volunteer as an Education Champion. With your help, input, enthusiasm and dedication, we will transform this relatively small-scale programme to a national programme that reaches students all across the UK.

WHAT IS A DISCOVER RISK SESSION? The format of a Discover Risk event is as follows: ● Introduction to the risk profession – insurance to you and me. ● Short case studies about your journey through the sector.

● A competition for 20 to 35 Year 11-13

students based on scenarios from around the world – from film-making and piracy, to transporting chocolate. ● Students break into teams and work together to assess the risks associated with the above – they score points for correct answers. ● Finally, we talk about next steps, such as apprenticeships or degrees – and offer students and teachers free CII Discover Risk membership.

WHAT SUPPORT WILL I RECEIVE? The CII will embark on a nationwide tour to provide training on how to best deliver this type of session in your local school. Registered volunteers will be contacted when a date and time has been finalised in their region.

WHAT RESOURCES WILL BE PROVIDED? Much of the education work in the programme is centred around the Discover Risk game and volunteers will be provided with a school pack to use.

WHAT WILL MY COMMITMENT BE? As with any volunteer-led programme, we understand that people have many commitments so the time you would allocate to this programme depends on you.

HOW CAN I FIND OUT MORE INFORMATION? Full details can be found at: ciistepforward.co.uk/ volunteer-for-discover-risk I would encourage as many of you as possible to look at this; it is a great way to give a little something back to your local community. I look forward to meeting you in one of the Discover Risk training sessions taking place in your region. Together, I really believe we can make a difference and encourage a new wave of talent into our profession. ● George Tsounias is relationship manager – education at the CII

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INDEPENDENT NON-EXECUTIVE DIRECTORS

IT’S TIME TO TALK ABOUT THE INED GAP

D

Gary Dixon explains why now is the time for insurers to make sure they have the right iNED sitting on the board

emand for independent nonexecutive directors (iNEDs) will soar in the insurance sector in 2019, as the Financial Conduct Authority (FCA) looks to improve consumer protections by focusing its attentions on driving up corporate governance standards at board level. As the City watchdog takes a closer look at governance structures, the opportunities for insurance executives are twofold.

PUT YOUR HOUSE IN ORDER First, it is a timely reminder that insurers must put their own houses in order. They must ensure they have the right iNED sitting on the board, one that is adequately armed with the skills and experience necessary to act independently in the interests of all stakeholders. This is particularly pertinent given the super-complaint filed with the Competition and Markets Authority by the Citizens Advice Bureau in September. The charity slammed the practice of overcharging loyal customers, warning again that consumers are being ripped off. It is a wakeup call to insurance executives: is your iNED representing all stakeholder interests at a boardroom level? Are they demonstrably

independent and could you evidence that should the FCA come calling? Now is the time for a board effectiveness review to ensure that you are compliant from the top down. There must be an effort to ensure the board is balanced, and that there is a clear distinction of roles between the executive director and their independent counterpart, reflecting a commitment by the executive to listen to consumer interests and act on them. Only by investing in professional standards can boardrooms ensure they have the right board-level skills, with at least one iNED helping to steer a culture that heads off any regulatory issues before they arise.

HOW TO BE AN EFFECTIVE INED While insurers must be looking to drive up the standards of their own boards, there are growing opportunities for aspiring insurer iNEDs to take c-suitelevel positions outside the sector. In what could be a precursor for insurance markets, asset managers have been mandated to recruit two iNEDs to improve standards of governance within firms and ensure better scrutiny of their costs and charges. It is expected that an additional 480 iNEDs will be needed to fill vacant positions. As this is a sector that has traditionally recruited from within and

with the onus now on ‘independence’, insurance executives are well positioned to be in the hiring line. Insurance is bursting with experienced people who have the potential to fill the available positions. If you aspire to hold an iNED role, take the time to carefully assess your own skillset and source the right training in areas where you feel you could be lacking. While your insurance role will put you in good stead, it might be worthwhile looking to build experience of the iNED position by taking up a voluntary boardroom role in another sector, such as health or education. Insurers must be seen to be embracing independence to address concerns over consumer interests. By investing in the iNED position, insurers will not only drive up professional standards across the sector but also address any weakness in their own corporate governance structures. Make no mistake, the FCA will act if the markets do not. Prevention is better than cure. ●

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INSURERS MUST BE SEEN TO BE EMBRACING INDEPENDENCE TO ADDRESS CONCERNS OVER CONSUMER INTERESTS

Gary Dixon is chair of the Association of Independent Non-Executive Directors

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D I S C I P L I N A RY M AT T E R S

DISCIPLINARY MATTERS BREACH OF EXAMINATION AND/OR ASSESSMENT REGULATIONS

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Timothy John Woodman, T W Wealth Management, 18 Kings Walk, Holland Road, Maidstone, Kent The coursework assessment candidate was found to have plagiarised the AF5 coursework assignment written by another candidate, in breach of the CII Coursework Assessment Guidelines and Instructions. The CII case examiner, invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which was signed on 14 September 2018. The sanctions issued were that the respondent: a) be reprimanded; b) take and complete the CII on line ethics course before booking any further CII examinations, enrolling on any CII assessments or applying for any CII recognition of prior learning. To be completed within 6 months of the date of the order (Reg 12.6d); c) had the coursework assignment result disallowed; d) be excluded from CII examinations and assessments for 18 months from the examinations or assessments held by the Institute (with effect from 1 July 2017) (Reg 12.6l); e) be excluded for a period of 18 months from applying for CII recognition of prior learning (with effect from 1 July 2017) (Reg 12.6p); and f) No examinations, assessments or qualifications obtained by the respondent during the period of the exclusion will be eligible for CII recognition of prior learning with effect from the date of the order (Reg 12.6p). Neil John Ridpath, Neil J Ridpath Wealth Management, 123 Main Street, Frodsham The coursework assessment candidate was found to have plagiarised the AF5 coursework assignment written by another candidate, in breach of the CII Coursework Assessment Guidelines and Instructions. The CII case examiner, invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which was signed on 4 September 2018.

The sanctions issued were that the respondent: a) be reprimanded; b) take and complete the CII on line ethics course before booking any further CII examinations, enrolling on any CII assessments or applying for any CII recognition of prior learning. To be completed within 6 months of the date of the order (Reg 12.6d); c) had the coursework assignment result disallowed; d) be excluded from CII examinations and assessments for 21 months from the examinations or assessments held by the Institute with effect from the date of the order (Reg 12.6l); e) be excluded for a period of 21 months from applying for CII recognition of prior learning with effect from the date of the order (Reg 12.6p); and f) No examinations, assessments or qualifications obtained by the respondent during the period of the exclusion will be eligible for CII recognition of prior learning with effect from the date of the order (Reg 12.6p). Paul Anthony Padden, Ashbourne, Derbyshire The coursework assessment candidate was found to have collaborated with another candidate when completing his AF5 coursework assignment, in breach of the CII Coursework Assessment Guidelines and Instructions. The CII case examiner, invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which was signed on 26 April 2018. The sanctions issued were that the respondent: a) be reprimanded; b) take and complete the CII on line ethics course before booking any further CII examinations, enrolling on any CII assessments or applying for any CII recognition of prior learning. To be completed within six months of the date of the order (Reg 12.6d); c) had the coursework assignment result disallowed; d) be excluded from CII examinations and assessments for 20 months from the examinations or assessments held by the Institute with effect from the date of the order (Reg 12.6l); e) be excluded for a period of 20 months

from applying for CII recognition of prior learning with effect from the date of the order (Reg 12.6p); and f) No examinations, assessments or qualifications obtained by the respondent during the period of the exclusion will be eligible for CII recognition of prior learning with effect from the date of the order (Reg 12.6p). Julian Wall, St James Place Wealth Management, Embankment House, Nottingham The coursework assessment candidate was found to have collaborated with another candidate when completing his AF5 coursework assignment, in breach of the CII Coursework Assessment Guidelines and Instructions. The CII case examiner, invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which was signed on 24 April 2018. The sanctions issued were that the respondent: a) be reprimanded; b) take and complete the CII on line ethics course before booking any further CII examinations, enrolling on any CII assessments or applying for any CII recognition of prior learning. To be completed within six months of the date of the order (Reg 12.6d); c) had the coursework assignment result disallowed; d) be excluded from CII examinations and assessments for 18 months from the examinations or assessments held by the Institute with effect from the date of the order (Reg 12.6l); e) be excluded for a period of 18 months from applying for CII recognition of prior learning with effect from the date of the order (Reg 12.6p); and f) No examinations, assessments or qualifications obtained by the respondent during the period of the exclusion will be eligible for CII recognition of prior learning with effect from the date of the order (Reg 12.6p). Anand Ganesan, ICICI Lombard GIC, Mumbai, India The coursework assessment candidate was found to have plagiarised another candidate’s M92 mixed assessment coursework assignment and collaborated

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D I S C I P L I N A RY M AT T E R S

with another candidate when completing his M92 mixed assessment coursework assignment, in breach of the Mixed Assessment Candidate Guidelines. The CII case examiner, invited the respondent to approve and sign a consensual order under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which was signed on 23 August 2018. The sanctions issued were that the respondent: a) be reprimanded; b) take and complete the CII on line ethics course before booking any further CII examinations, enrolling on any CII assessments or applying for any CII recognition of prior learning. To be completed within six months of the date of the order (Reg 12.6d). c) had the coursework result disallowed; d) be excluded from CII examinations and assessments for 24 months from the examinations or assessments held by the Institute with effect from the date of the order (Reg 12.6l). e) be excluded for a period of 24 months from applying for CII recognition of prior learning with effect from the date of the order (Reg 12.6p). f) No examinations, assessments or qualifications obtained by the respondent during the period of the exclusion will be eligible for CII recognition of prior learning with effect from the date of the order (Reg 12.6p). William Vernon, Lockton, Houndsditch, London The coursework assessment candidate was found to have plagiarised a M05 mixed assessment coursework assignment written by another candidate, in breach of the Mixed Assessment Candidate Guidelines. The CII case examiner, invited the respondent to approve and sign a consensual order (“Order”) under 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which was signed on 10 August 2018. The sanctions issued were that the respondent: a) be reprimanded (DR 12.6a); b) take and complete the CII on line ethics course before attempting to book any further CII examinations, enrol on any CII assessments, apply for any CII recognition of prior learning (Reg 12.6d); c) have the

M05 mixed assessment coursework assignment result disallowed (Reg 12.6); d) be excluded from CII examinations and assessments for 18 months (with effect from 13 August 2017) (Reg 12.6l); e) be excluded from applying for CII recognition of prior learning for 18 months (with effect from 13 August 2017) (Reg 12.6p); and f) No examinations, assessments or qualifications obtained by the respondent during the period of the exclusion will be eligible for CII recognition of prior learning with effect from the date of the order (Reg 12.6p).

BREACH OF THE CII CODE OF ETHICS Nicholas Roberts, Dip PFS, Origen Financial Services, 1 Lakeside Road, Farnborough, Hampshire The respondent was convicted in January 2013 for failing to stop after an accident and driving/ being in charge a motor vehicle while above the alcohol limit (these convictions are now spent). The respondent had breached his obligations under the CII Code of Ethics and failed to disclose these convictions to the CII within a reasonable time and falsely or recklessly declared that he had no convictions when he applied for CII membership in May 2016. The CII case examiner invited the respondent to approve and sign a consensual order under Rule 9.1 of the CII Disciplinary Procedure Rules 2015, to which the respondent agreed, and which came into effect on 23 August 2018. The sanctions imposed were that the Respondent: a) be reprimanded; b) take and complete the CII on-line ethics course before booking any further CII examinations, enrolling on any CII assessments or applying for any CII recognition of prior learning (either as a member or non-member); c) Have a record of this matter be added to the CII’s disciplinary records; d) Be suspended from membership for a period of 3 years from the date of this order. However, in light of the respondent’s contrition and cooperation, this element of the sanctions is suspended

The CII w to make c ishes unless the lear that, ca indicates se reported allegation otherwise, against m s and findings implicate embers do not those m employers embers’ in any way

for a period of three years from the date of this order and will, subject to the respondent not being found to have breached the Code of Ethics during this time, automatically expire following this three-year period (Reg 12.6h and p). If a further breach occurs during this period, the three-year suspension will automatically be triggered, in addition to any further sanctions imposed by a CII case examiner and/or disciplinary panel.

“To date, the CII has dealt with five instances of non-members using CII designations for 2018. As this is an infringement of CII’s trademarks, where people persist in misusing CII designations, legal action will be taken against them”.

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TAKE NOTE Where the disciplinary panel or case examiner has decided to publish details of a disciplinary case ascribed (ie where an individual has been named), every care has been taken to identify members correctly. Please contact the CII if there is any doubt about the identity of a member who may have been the subject of disciplinary proceedings and in relation to whom a report has been published.

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ST U DY R O O M – R I OT C O M P E N S AT I O N A CT

STUDY ROOM

READING THE RIOT COMPENSATION ACT The 2011 riots in the UK revealed shortcomings in outdated legislation concerning damages. Authors of new guidance explain how the new Act tackles these issues

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he Riot Compensation Regulations 2018 came into force on 1 October, broadly finalising the legislative reform of how claims for riot damage against the police should be handled. This article provides the background to the changes, an overview of where they are most relevant to insurers and how the New Generation Claims Faculty Group’s new guide will be used by police responding to riot compensation claims.

IMAGE: ISTOCK

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ST U DY R O O M – R I OT C O M P E N S AT I O N A CT

DRIVERS FOR REFORM

IN THE EVENT OF A RIOT IN THE UK, POLICE AUTHORITIES ARE TREATED AS LIABLE FOR THE RESULTING DAMAGE TO PROPERTY, ON THE BASIS THAT THEY ARE RESPONSIBLE FOR MAINTAINING PEACE AND ORDER

In the event of a riot in the UK, policing bodies are treated as liable for the resulting damage to property, on the basis that they are responsible for maintaining peace and order. Until recently, the legal obligation to pay compensation to riot victims, whether individuals or businesses, and their insurers, was set out in the Riot (Damages) Act 1886 (RDA). Following the riots in 2011, various problems were identified with how claims for compensation were handled by policing bodies, in the context of the RDA, which was archaic and out of date. These included: ● An overly bureaucratic process – claims for compensation had be submitted within 14 days (with the government needing to step in to increase this to 42 days)

● Lack of clear definitions for ‘riot’

and ‘compensation’

● Inconsistency in claims approach

and outcomes between different police authorities ● Delays in settlement and refusal of claims. This assessment was reinforced and developed further by Neil Kinghan in his report, Independent Review of the Riot (Damages) Act 1886, published in November 2013. This report led to a consultation by the Home Office on changes to the law, and the development of the Riot Compensation Bill, which was published in March 2015, and came into law as the Riot Compensation Act 2016 (RCA) in April 2017. →

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ST U DY R O O M – R I OT C O M P E N S AT I O N A CT

CHANGES UNDER THE RCA

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The RCA broadly followed the recommendations made by Mr Kinghan, introducing the following changes: ● A cap on claim value of £1m ● ‘Riot’ definition to be linked to the definition in the Public Order Act 1986 (removing the terms ‘riotously and tumultuously’) ● For motor vehicle damage, riot victims are now entitled to claim, to the extent that they are not insured; this right does not extend to insurers ● Consequential financial losses will not be recoverable (this was previously understood to be the position in any case, although was temporarily in doubt following the Court of Appeal decision in MOPC v Mitsui Sumitomo) ● There is provision under Section 6 for the Secretary of State to put in place a Riot Claims Bureau, to deal with riots that span more than one police authority area, or where a police authority makes a specific request to the Secretary of State.

FURTHER DETAIL The Compensation Regulations 2017 were introduced in April last year to flesh out the detail of how the RCA will operate. Key points from an insurer’s perspective include: ● Time limit for bringing a claim – 43 days from the day a riot ends, with evidence to be provided within 91 days. These time limits apply to riot victims (‘ordinary claimants’) and insurers, with limited circumstances in which the time limit can be extended. ● Compensation calculated on the basis of reasonable cost of repair or reinstatement, or current market value for replacement items. Some insurers currently provide cover on a ‘new for old’ basis but will only be able to recover for possessions from the police on an indemnity basis. ● Participation in rioting or contributing to damage may lead to claims being decreased or refused. This is similar to contributory negligence in personal injury claims and may involve fraud in some

RIOT COMPENSATION REGULATIONS 2018 In a subsequent development, the Riot Compensation Regulations 2018 came into force on 1 October 2018, making various amendments to the 2017 regs, including: ● An anomaly of Reg 4(2) of the 2017 regs was that insurers that covered both buildings and contents could claim separately for each, in effect raising the cap to £2m; this been removed, so that the maximum that can be claimed for one property is £1m ● Confirmation under Reg 9 that where a claim is partially declined by an insurer, the amount not recovered can still be brought as a claim against the police under the RCA ● Clarification on some minor points, such as to confirm that representatives acting for claimants are entitled submit requests to review decisions.

£1m

NEW CAP ON A CLAIM VALUE AFTER A RIOT cases. Insurers need to be aware that the actions of policyholders may impact their ability to recover from the police. ● Policing bodies can delegate authority to parties with the relevant expertise and capacity for claims up to the value of £25,000. It is expected that loss adjusters would be appointed in the event of a large-scale riot, despite caution about doing so in previous events, and this been reflected in the legislation.

KEY AIMS The key aims were to deliver improved outcomes for the public while maintaining the principle of treating claimants fairly through: ● Efficient and fair claims handling ● Clear claims process for the claimant to experience ● Certainty in the outcome of claims ● Helping riot victims to get back on their feet following a traumatic setback.

THE RIOT CLAIMS HANDLING BEST PRACTICE GUIDE It is hoped that the new regulations will not be required in the future. In preparation for the worst, however, there has been some time invested into the production of a Riot Claims Handling Best Practice Guide by the CII New Generation Claims Faculty Group. This guidance was developed through collaboration with key stakeholders, including the Home Office, the Association of British Insurers, policing representatives, the Chartered Institute of Loss Adjusters and Mr Kinghan. In the aftermath of the 2011 riots, the police faced an overwhelming volume of compensation claims, which had to be handled under outdated legislation. They had to manage core claimshandling functions such as assessment of liability, reserving,assessing quantum, methods and timeliness of settlement, insurer recovery processes,, communication and managing fraud. The guide aims to bring the legislation to life, through setting out the core claims procedures and philosophy required for the handling of riot compensation claims, whether by policing bodies, a Riot Claims Bureau, or parties contracted out to handle the compensation claims (such as loss adjusters). The New Generation team hopes the guide can be a practical point of reference for policing bodies, loss adjusters and the insurance profession, and that if a similar event to the 2011 riots were to take place, the riot compensation process will deliver better outcomes and experiences for riot victims. It is anticipated that the guide will be published in November, alongside a report the New Generation team has developed, which includes recommendations on preparing for the operational challenges that the police will face in the event of a largescale riot. ●

Q

Tristan Davison, Claims Adjuster, Markel; Kate Dobinson, Senior Claims Adjuster, QBE; Simon Forsdick, IFA, DHM Wynchwood; Patrick Hayward, Consultant, Altus

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Q&A STUDY ROOM

This set of questions, courtesy of online CII training package Insurance Assess, will test your knowledge of topics. The answers are at the bottom...

QUESTION 1

QUESTION 5

QUESTION 8

Under the Insurance Distribution Directive (IDD), what is the new category of firm called where insurance distribution is not their principle activity? A Secondary insurance intermediary b Ancillary insurance intermediary c Approved intermediaries d Out of scope intermediaries

Which of these definitions describes a suitability statement? A A document required for all insurance distribution activities b A recommendation in writing by a broker for a generic type of client c A standard pro forma document issued to all clients d A summary of why the broker recommends a specific product for an individual client

Under which claims track would a claim for injury compensation of £27,000 be likely to be dealt? A Fast track b Small claims track c Single track d Multi track

QUESTION 2

Under the General Data Protection Regulation (GDPR), an insurer is regarded as which of these? A Data controller b Data processor c Data regulator d Data subject

QUESTION 3 Which of these purchases of insurance does the Civil Aviation Authority require commercial operators of drones to make? A Purchase accidental damage insurance b Purchase contingency insurance c Purchase employers’ liability insurance d Purchase liability insurance

QUESTION 4 Which of these risks are likely to be covered by a cyber policy? A. First party costs B. Accidental damage C. Third party costs D. Loss of share value? A A and B b A and C C B and D D C and D

QUESTION 6

Clive Barwell has a home contents insurance policy and has just bought himself a drone. He would like to know if this will be covered under the liability section of this home contents policy. Which of these statements should be your response? A Yes, drones are considered to be a standard personal possession and will be covered b Yes, drones are covered provided the insurers have been notified c No, drones require a special aviation policy d Insurers vary in their approach to drones and the wording will need to be checked

QUESTION 9

If a third party decides not to hire a car while their own is being repaired, they can submit a claim for which of these? A Punitive damages b Special damages c Diminution in value d Loss of use and inconvenience

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QUESTION 10 Which of these savings should be deducted from a loss of profit claim submitted by a third party? A National Insurance b Income tax c Running costs d Corporation tax

QUESTION 7 Which of these risks are generally excluded under a terrorism policy? A. Cyber terrorism B. Nuclear terrorism C. Biological terrorism D. War risks? A A and B b A and D c B and D d C and D

YOUR SCORE » 1–3 POOR 4–6 GOOD

7–8 VERY GOOD 9-10 EXCELLENT

ANSWERS 1B. The IDD introduces a new category of firm called an ancillary insurance intermediary (AII). 2A. Under GDPR, insurers are classified as data controllers. 3D. Commercial operators of drones are regulated by the Civil Aviation Authority (CAA) which requires that

they buy liability insurance. 4B. Cyber liability cover will usually be on an optional modular basis, and will typically include both first (A) and third (C) party costs. 5D. The suitability statement should record an explanation of why the broker is making the

recommendation. 6D. Insurers currently vary as to their approach to the insurance of drones, some are excluding them from the liability section. 7B. Terrorism cover is ordinarily provided on an all risks basis, excluding cyber and war risks.

8D. Under the Civil Procedure Rules, proceedings for cases in excess of £25,000 are dealt with under the multi track. 9D. In some cases, the claimant doesn’t claim for the cost of hiring a replacement vehicle, but instead submits a claim for the

inconvenience of being deprived of their vehicle – this is known as loss of use. 10C. Any claim for loss of profit should be net of savings such as running costs.

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Study with substance

Our insurance qualifications identify universally as evidence of knowledge and professional competence.

cii.co.uk/qualifications CII.10.2018.048.indd 48

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STUDY ROOM

A-Z OF…

LONDON MARKET MODERNISATION

M

John Chambers examines the key systems which the London market use to drive business in the capital

aking London an easier place to do business is a core focus of the London market. The success of its Target Operating Model (TOM), a key component of this drive, hinges on two core principles: one-touch data capture, and one centralised administration system allowing insurers and brokers to concentrate on their key business objectives. As we move into the final quarter of 2018, it will be interesting to see how managing agents are performing against the Lloyd’s mandate, namely that all syndicates operating on its platform will be writing 30% of their risks electronically. At the end of the previous quarter, some 24% were behind KNOWING on the lower target that applied at that YOUR A-Z time: 20% electronic placement. A administration The shortfall against the target is b business surprising, since data is emerging that c cost demonstrates that electronic placement D data really can deliver the dream: easier and E electronic cheaper placement of both local and f flow global business. g global h handle LIVE SYSTEMS i international Currently, three systems have been j jewellery approved for electronic placement in k key the London market: PPL – the London l lines Market Group’s own Placing Platform m model Limited; the Hiscox system, MEL; n naturally and Opal. o objectives p platform Opal (Online Platform AEGIS London) q quote-and-bind is the online quote-and-bind platform r reinsurers developed in-house by the team at s syndicates Lloyd’s managing agency AEGIS London t target with external technical support. The u using platform was launched in April 2016 v volume with the objective of bringing US and w wind SME business from other international x eXpense zones into the London insurance market y year – business that would not otherwise z zones be seen there due to the cost of the traditional distribution model.

Opal naturally lends itself to handling smaller business, which can be burdensome and expensive to handle in traditional ways. The current offering includes wind and hail deductible buyback, stock throughput, fine art and jewellery, and terrorism – with professional indemnity due to launch later this year. The stats tell the story. For wind buyback, the platform has issued some 35,000 quotes with 4,500 firm orders. The average policy limit is less than $100,000 – business that could not have been handled using traditional London market distribution methods. Significant premium has been generated, such that the cost of developing further products is covered by current earnings. When compared in 2017 to well-known insurtech ‘success stories’ Lemonade, Metromile and Root, Opal had the lowest expense ratio and the second-highest volume of direct premiums written. Targeted on commercial products, not personal lines, Opal’s focus is on giving brokers the tools to take on the threat of the emerging players, by making the distribution chain more efficient and responsive for all. Such a track record is good news for the London market and good news for traditional insurers and reinsurers concerned by the rise of disruptive new competitors. Ultimately, it is proof, if proof were needed, that it is possible to increase the flow of business by removing cost from the distribution chain. ●

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John Chambers is director of innovation and corporate development at Aegis London

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CII BLOG

ANNA BARNES

TIPS FROM THE TOP CII blogger Anna Barnes offers some sage advice on how to structure an assignment

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hen writing an assignment, it is easy to just jump straight into the main body of your answer, but from past experience I find it best to create a basic structure. You’ve probably heard this a million times, but it is very important to first read the question thoroughly to figure out what it is asking you to do. Look at the terms within the question. Does it ask you to briefly describe something, or does it ask you to analyse and explain in detail? Are you required to add advantages and disadvantages or identify problems and solutions? Look first at how many words you can write for your assignment. Everyone writes an assignment differently, so this is important. Also look at how many questions you need to answer and whether they are of equal value in terms of marks. If, for example, the assignment asks you to write about 3,000 words and there are three questions set, does each question require you to write 1,000 words? Again, it is important to look at those key terms within the question. If it asks you to briefly describe something and another question asks you to analyse and explain in detail, then you need to write in more detail when analysing and explaining. Looking more in depth at how to structure your assignment questions, I will explain some top tips that have helped me, such as that there will be keywords you need to look at within the question. As a starting point, I would use the PDF format of your

revision book. This is found on Revision Mate and helps you search for certain keywords in the text. This is a good start. Moving further on from this – if the question asks you to consider an insurance organisation, make sure you choose a company that you are familiar with. I would also suggest looking at past papers, so you can see how answers can be structured. Everyone has their own way of working but again, this is a good start. Writing your plan down on sticky notes can also help with structuring your answer, as it allows you to rearrange your arguments.

IT ALL COUNTS Another top tip: don’t forget that your bibliography goes towards your mark! Don’t wait until to the end of your assignment to start your bibliography; make sure you do it throughout your assignment. When you’ve used a website or book, write it down and also write the date down because, I can assure you, you will forget it by the time you’ve finished your assignment. On a separate note, I would like to finish by saying a huge thank you to a lovely man who rang me the other week to congratulate me on my achievements. Firstly, thank you for reading my blog; and secondly, it gave me a boost of confidence which I am very grateful for. I always feel it is best to surround yourself with positive people who want to see you strive for and achieve your aspirations. ● Anna Barnes is compliance & technical services assistant at Munich Re

◊ DETAILS Read the questions carefully and thoroughly

◊ SEARCH Use the online PDF format of the revision book to search for keywords

◊ REFERENCE Don’t wait to start your bibliography until you’ve finished your assignment

ILLUSTRATION: LUKE WALLER

THREE THINGS TO TAKE AWAY

thejournal.cii.co.uk / The Journal / October - November 2018

50_Blog_October-November 2018_Cll The Journal 50

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£70,000 - £100,000 + Benefits – City of London Seeking a Senior FI Underwriter to underwrite a mixed global portfolio of International Commercial FI business including; Crime, Professional Liability and D&O products. Our client writes large and complex risks a lot of which is on a lead basis. You will be a London Market FI underwriter or broker with strong broker relationships. Contact: Dana.Hill@ipsgroup.co.uk - London Ref:CII137424DH Up to £30,000 + Benefits – City of London Lloyd’s syndicate are looking for an A&H UA to join their team on the box, providing underwriting administration support, working closely with brokers and shadowing client meetings. UA experience required, preferably A&H exposure with a strong technical skillset and good communication skills. Contact: Clare.Aldrich@ipsgroup.co.uk - London Ref:CII136797CA To £60,000 Base Salary + Bonus & Benefits A Lloyd’s Syndicate are looking for a Catastrophe Analyst. They strong candidate who has over 4 years of experience working Models. Experience of using RMS or AIR is a requirement and a good of VBA, SQL and GIS would be advantageous. Contact: Gary.Ahern@ipsgroup.co.uk - London

– City of London want a technically within Catastrophe working knowledge Ref:CII137115GA

To £60,000 + Benefits – City of London Great opportunity to lead a small Delegated Underwriting team both strategically and operationally including setting up new binders, bordereaux management and coverholder audit. As the market face of the team you will manage coverholder relationships, liaise with Lloyd’s, attend market committee’s and have complete end to end oversight of the delegated account. Contact: Alison.Taylor@ipsgroup.co.uk - London Ref:CII137246AT To £45,000 + Benefits – City of London Supported by a pro-active Operations Manager who leads broader strategic operational projects, as an underwriting support team leader you will manage a team of highly capable UA’s who rotate between different underwriting teams to service the demands of the business. You will manage workflow, monitor business KPI’s, resolve stakeholder queries, train, mentor and develop talent as well as lead operational change projects. Contact: Alison.Taylor@ipsgroup.co.uk - London Ref:CII134347AT To £45,000 + Benefits – City of London Working with the Underwriting Management team, this role seeks an analytical graduate that has had some exposure to a Lloyd’s underwriting environment but has the strategic thinking and data analysis skills to collate and analyse the underwriting performance across the group’s Lloyd’s, European and worldwide platforms contributing to business planning and performance evaluation at the most senior level. Contact: Alison.Taylor@ipsgroup.co.uk - London Ref:CII137178AT To £65,000 + Benefits – City of London You will be responsible for Compliance for this expanding Coverholder Management business, working closely with MGA’s, developing the Compliance Monitoring programme and working with the Head of Governance on the development of Compliance procedures. Current experience working in a Compliance role for a UK based Insurer is required. Contact: Tim.Southworth@ipsgroup.co.uk - London Ref:CII137368TS To £70,000 + Bonus + Benefits – City of London In this role you will own and develop the Delegated Authority Internal Control Framework for this high profile Lloyd’s Syndicate and Insurer, acting as the Risk Champion within the Delegated Authority team. You will need to be able to demonstrate current knowledge of Binding Authorities in the Lloyd’s Market, along with experience of managing Control frameworks and ideally Risk and Audits. Contact: Tim.Southworth@ipsgroup.co.uk - London Ref:CII137419TS To £80,000 + Bonus + Benefits – City of London In this role you will handle the more Complex claims across a broad Financial Lines portfolio, which includes Financial Institutions, D&O and Professional Indemnity. The opportunity is with a high profile Global Insurer and Lloyd’s Syndicate. Current experience handling Financial Lines claims for a UK based Insurer or Lloyd’s Syndicate is required. Contact: Tim.Southworth@ipsgroup.co.uk - London Ref:CII137276TS £35,000 - £55,000 + uncapped Bonuses – London This is an exciting opportunity to join a newly established insurance business in a high profile new business role. You should be an experienced legal expenses (or add on/ complementary products) UK Account Executive with a proven track record of new client origination and business development. This can be direct through affinity groups or retail insurance brokers. Contact: Christopher.Dickman@ipsgroup.co.uk - London Ref:CII137474CD London@ipsgroup.co.uk Tel: 020 7481 8111

birm@ipsgroup.co.uk Tel: 0121 616 6096

soton@ipsgroup.co.uk Tel: 023 8048 8799

bristol@ipsgroup.co.uk Tel: 0117 370 2472

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To £60,000 + Bonus & Benefits – London An exciting time to join a multinational mining company, that is now a constituent of the Ftse 250. The appointee will closely assist the Head of Global Insurance in managing the international insurance program. This will include constant interaction with business units around the world as well as the as the various overseas insurance markets. There is an equal measure of attention to detail technical issues, alongside the real need to work with the business leaders and in the process, provide solutions to assist commercial decision making. Contact: James.Dick@ipsgroup.co.uk - London Ref:CII137457JD £50,000 - £70,000 + Benefits – City of London Excellent opportunity to develop your senior audit career with this leading Lloyd’s Insurer. Working closely with the head of audit to lead and deliver audit services throughout the group functions, as well as participation in the ongoing development of a large and diverse I/A function. Contact: Mark.Brady@ipsgroup.co.uk - London Ref:CII137366MB Up to £50,000 + Benefits – Birmingham Key role as a Property & Package Underwriter responsible for the growth of a panel of brokers and clients whilst servicing and developing existing global accounts. Playing a major part in assisting and formulating underwriting strategy, portfolio management and forecasts. Contact: Mark.Fancourt@ipsgroup.co.uk - Birmingham Ref:CII137035MF Up to £40,000 + Benefits – Birmingham This is an interesting position that combines technical insurance duties such as the creation of lineslips and binding authorities along with traditional account handling and relationship management duties, you will also play a large part in the companies BREXIT project. Contact: Mark.Fancourt@ipsgroup.co.uk - Birmingham Ref:CII136560MF Competitive Salary & Benefits – Leeds We are working with a prestigious local broker based in Leeds who are looking for a commercial Account Handler to join their team. 3 to 5 years of experience in commercial account handling is required. Contact: Richard.Jenkins@ipsgroup.co.uk - Manchester Ref:CII137139RJ £45,000 + Car – North West You will manage and investigate a mixed caseload of commercial and domestic property losses from notification through to final settlement. To be considered you must have previous Property Loss Adjusting experience. You will be rewarded with a competitive salary and excellent benefits including company car or car allowance. Contact: Ashley.Blake@ipsgroup.co.uk - Manchester Ref:CII137390AB £35,000 + Benefits – Manchester You will be motivating and supporting the team to successfully deliver an outstanding level of service. You will oversee and be accountable for the operational control within your team. Ideally this person needs some experience in either Commercial Property or Liability Claims along with strong people management and communication skills. Contact: Ashley.Blake@ipsgroup.co.uk - Manchester Ref:CII137075AB Up to £24,000 + Benefits – Watford An opportunity for an experienced Property Claims Handler to progress further as a Property Claims Technical Advisor working for a leading insurance business in Watford. You will act as a claims champion and technical referral point across the team. Contact: Blayne.Kelly@ipsgroup.co.uk - Birmingham Ref:CII137138BK Senior Level package including partnership shares – Oxfordshire/Home Based A fantastic and rare opportunity has arisen to join this well-established niche surveying business as Director of their Insurance Surveying Services Division. As part of the Board, at Director Level you will be in a position that will be able to shape the business going forward. You will take a hands on approach providing insurance surveying services focusing on Indemnity and reinstatement cost asset valuations for insurances including buildings, Utilities and building services, Plant and equipment. Contact: Richard.Coleman@ipsgroup.co.uk - Birmingham Ref:CII137170RC £35,000 - £50,000 – East Midlands One of the leading global Loss Adjusting and Surveying businesses has an opening in their subsidence division to join them as a Field Based Subsidence Consultant in this key role that will suit an experienced Building Surveyor looking to specialise within the insurance industry. In this field based position you will be responsible for managing a caseload of complex subsidence claims and providing technical advice and support to contribute to the settlement of the claims across the East Midlands region. Contact: Richard.Coleman@ipsgroup.co.uk - Birmingham Ref:CII137153RC

manchester@ipsgroup.co.uk Tel: 0161 233 8222

leeds@ipsgroup.co.uk Tel: 0113 202 1577

asia@ipsgroup.co.uk Tel: +852 3469 5339

singapore@ipsgroup.co.uk Tel: +65 6223 1023

shanghai@ipsgroup.co.uk Tel: +86 21 2206 2882

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The Journal October - November  
The Journal October - November