Brought to you by:

Local

Technology trend ‘increasingly urgent’ for brokers

Growing revenues and healthy margins mean broking businesses are prospering, but they are increasingly worried about technology and preparing for the future, a new Macquarie Bank report says.

Regulatory intervention, increased price sensitivity among clients and heightened competition are other major issues identified in an online survey of 194 brokers.

“All of these trends have been foreshadowed in earlier benchmarking studies,” Macquarie Business Banking National Head of Insurance Eoghan Trehy says.

“However, it seems they are becoming increasingly urgent, and that Australia’s leading insurance brokers are now actively embracing change.”

He says “high-performing brokers” are still feeling their way with technology but are “ahead of the curve in harnessing innovation to increase productivity”.

Strategies include partnering with tech companies and launching pilot projects to automate and streamline operations.

Macquarie’s research confirms most broking businesses are prospering amid recent premium hardening, with average revenues and average profit margins up.

Market researcher Fiftyfive5 surveyed the brokers last year for the Macquarie Insurance Industry Pulse Check, titled Thriving Through Change.

See ANALYSIS.

Consumers seek review after IAG’s Wellington pullback

Consumer advocates have called for a wider review of the role played by New Zealand’s government-owned Earthquake Commission (EQC) after IAG announced it is taking a more conservative approach to home and contents cover in Wellington.

“The fact that IAG is being a lot more selective about new customers is significant because it is one of the biggest players in the market,” Consumer NZ Head of Research Jessica Wilson told insuranceNEWS.com.au.

“When you get one of the big players pulling back, it does raise an issue for consumers about what is going to happen if a natural disaster strikes and they don’t have cover.”

A review of the EQC’s handling of claims after the 2010/11 Canterbury earthquakes is under way, but Ms Wilson says a wider examination of its role is needed.

Consumer NZ surveys reveal significant premium increases for Wellington residents over the past couple of years as risk is reassessed after the 2016 Kaikoura quake, which caused substantial damage to some city buildings.

IAG says it is not withdrawing or retreating from Wellington, where it has about half the market, but it does intend to review its position regarding new and existing customers.

“Our approach is about being sustainable and being here for our customers now and in the future,” IAG EGM Customer and Consumer Kevin Hughes said.

The change includes giving priority to existing customers, taking a case-by-case approach.

This means some Wellingtonians approaching the insurer for contents cover may be unable to obtain it, a spokeswoman said.

Cover for contents claims up to $NZ20,000 ($19,328) will be removed from the EQC’s mandate in July under amendments that also include increasing the building cover cap to $NZ150,000 ($144,963).

Tower, New Zealand’s third-largest general insurer, last year moved to risk-based pricing across the country to more accurately price cover at specific property locations.

A spokesman told insuranceNEWS.com.au the company continues to offer cover for new and existing customers in Wellington. “Tower’s recent move to risk-based pricing provides customers with a sustainable choice to buy insurance at a price that is fair for the risk they face,” he said.

A Suncorp spokesman told insuranceNEWS.com.au the group’s approach to providing insurance in Wellington remains unchanged.

“We continue to accept applications for house and contents, subject to normal underwriting conditions,” he said.

EQC Minister Megan Woods notes that an Insurance Council of New Zealand submission last year supported the EQC contents change and said the private market could provide cover.

Townsville braces for king tide flood as losses pass $1 billion

A king tide could cause further flooding in Townsville tomorrow as the north Queensland city struggles to recover from last month’s devastating rainfall.

Townsville City Council says the king tides are expected from tomorrow to Thursday, with peak of 4.1 metres at 9.11am on Wednesday.

“Residents living in or visiting areas such as South Townsville, Railway Estate, Hanran Street and Ogden Street may be impacted by saltwater flooding,” the council says.

Meanwhile, insured losses from last month’s downpours have reached $1.041 billion. The latest Insurance Council of Australia figures show 25,778 claims received, with 23,090 open, 82 denied, 148 facing internal dispute resolution and seven in external dispute resolution.

The vast majority of claims are domestic (91%), but in terms of value, commercial claims account for 22% of losses. More than 11,000 claims relate to domestic buildings, almost 8000 to domestic contents and more than 4000 to domestic motor.

A second roundtable was held on Friday between politicians and insurance industry representatives.

Speaking before the meeting, Townsville Mayor Jenny Hill said insurance companies have a vital role to play “as families and businesses rebuild”.

The city council has also emphasised the importance of involving local tradespeople in the recovery.

The Townsville floods are Australia’s second $1 billion insurance loss in three months. Losses for December’s Sydney hailstorm now stand at $1.04 billion.

FNQ faces heavy rain as Cyclone Trevor gathers pace

Cyclone Trevor is forecast to bring heavy rainfall and potential flash flooding across Far North Queensland over the next few days.

The Bureau of Meteorology’s tracking map suggests the Category 1 storm could reach Cape York Peninsula tomorrow about 7pm AEST.

“Tropical Cyclone Trevor continues to intensify while moving towards the Cape York Peninsula coast,” the bureau says. “It is expected to continue to intensify to Category 2 before crossing the eastern Cape York Peninsula coast later on Tuesday.”

Current projections have the cyclone moving west-southwest towards a sparsely populated region, with sustained winds near the storm’s centre of 85km/h and gusts to 120km/h.

The bureau stresses its forecast is a best estimate and incorporates uncertainty associated with cyclone monitoring.

Last month a cyclone watch for storm Oma was cancelled after initial projections showed it could hit the southeast Queensland coast, including Brisbane, and northern NSW.

There are about 10-13 tropical cyclones on average each season and four typically cross the coast. The season ends next month.

ICA hits back at ‘scaremongering’ climate risk analysis

A climate research group’s suggestion that many homes may become too risky to insure because of climate change has been criticised by the Insurance Council of Australia as “scaremongering”.

Analysis by Climate Risk’s Director of Science and Systems Karl Mallon indicates at least 850,000 homes, or nearly 10% of dwellings, could fall into an “uninsurable” category by 2100, an increase from about 220,000 in current studies.

But ICA has rejected the theory, although it acknowledges homeowners in high-risk areas may have to pay more.

“ICA does not believe any part of Australia will become uninsurable, though risk rating may mean high premiums for many property owners,” spokesman Campbell Fuller told insuranceNEWS.com.au.

“Australia’s general insurance industry is adept at managing the prudential risks that flow from natural disasters, as well as its response to policyholders.

“It doesn’t feel that scaremongering serves the best interests of the community.

“However, it believes governments should play a more active role in informing each property owner about the specific risks they face.”

Dr Mallon says homes in areas prone to floods, cyclones, bushfires and other hazards are looking increasingly risky to insure as climate change takes hold.

“The problem will be the impacts are very concentrated in certain communities and so the situation economically, financially will be disastrous for those people,” Dr Mallon told insuranceNEWS.com.au.

ICA says one of the best ways to address climate change-fuelled weather extremes is through early action.

“The predicted long-term impacts of climate change are a clear reminder to all levels of government that communities should be protected from the impact of known as well as anticipated extreme weather,” Mr Fuller said.

“This should be in the form of nation-building investments in permanent mitigation, incentives to improve the resilience of buildings in at-risk regions, better land use planning, and stronger building codes.”

In Insurance News magazine this month

Yet another government agency’s report on insurance in northern Australia comes under the Insurance News microscope, with the devastating Townsville floods demonstrating one inescapable truth – the north is far more prone to natural catastrophes than the southern regions, and that’s why property cover costs more.

Insurance News also looks at the fallout from the Hayne royal commission, with particular emphasis on its recommendations regarding brokers’ commissions.

We’ve also examined the industry’s financial performance as premiums start to rise after a prolonged flat period, how amusement park operators are battling a tough combination of soaring premiums and low capacity, why hail is Australia’s most expensive natural hazard, and why customers stick with their insurers.

You’ll find interviews with the new chief executives of Zurich and Sedgwick, a house designed to withstand bushfires, an analysis of the emerging risks and opportunities of virtual reality, and an expert’s view on how climate change is making natural hazards more common.

The online version of the magazine can be viewed here.

Climate Index confirms extreme heat on the rise

The frequency of hot days in recent winters and springs has exceeded historical levels, according to the Actuaries Institute’s Climate Index.

Parts of northern Queensland had more hot days than usual last spring, while the southern regions had lower winter rainfall and parts of the east remained extraordinarily dry.

It is the first update to the institute’s index since its launch last November.

The next update, likely due at the end of next month, will include weather data from the Townsville floods and bushfires in Victoria and NSW, and information on mass fish deaths in the Murray Darling Basin.

“What I am expecting we will see is some of the extreme heat conditions that prevailed in the few areas that led to some of the bushfires and some of the extreme rainfall that we saw in Queensland,” Finity Consulting Principal and index lead author Tim Andrews told insuranceNEWS.com.au.

“The index is definitely showing there are more extremes of weather conditions now than there previously were.”

Mr Andrews says insurers have shown interest in the index readings, but he emphasises it is not designed for setting premium rates.

“I think more work needs to be done over time to measure the extremes and specifically how the extremes relate to the insurance risk, and then to develop an index that is actually of insurance risk rather than of weather extremes.”

Index readings are compiled using weather data from the Bureau of Meteorology.

NMVTRC cheers Queensland’s return

Queensland’s decision to rejoin the National Motor Vehicle Theft Reduction Council has been welcomed by CEO Geoff Hughes and industry stakeholders.

In 2012 the Newman Government stopped funding the insurer-backed national initiative to reduce vehicle theft.

Since then, industry stakeholders including RACQ Insurance and Suncorp have been working to persuade Queensland to rethink its position.

“It’s great – we were very disappointed when the former Newman Government opted out,” Mr Hughes told insuranceNEWS.com.au.

“Local stakeholders such as RACQ Insurance and Suncorp in particular have been making representations on our behalf over a long period leading up to the last state election.”

The Palaszczuk Government made the announcement last week after new figures showed a severe 47% jump in the state’s car theft rate since 2015.

“I’m delighted to announce that this government, through a partnership between police and fire and emergency services, will deliver the funds to ensure Queensland is once again part of the council,” Police Minister Mark Ryan told insuranceNEWS.com.au.

Preparations are being made for the state to rejoin from July 1.

RACQ Insurance says Queensland quitting the council cost the state’s drivers up to $131 million in theft losses last year.

“The Police Minister’s commitment to rejoin this theft prevention group is the right move,” Head of Technical and Safety Policy Steve Spalding said.

“Since 2012 our leaders have... missed out on receiving funding for locally delivered crime prevention programs, so we’re now looking forward to seeing our state reap these long-awaited benefits.”

Queensland reacts to spike in vehicle thefts

Motor vehicle theft numbers in Queensland were 48% higher last year than four years ago.

The National Motor Vehicle Theft Reduction Council’s latest data shows a rise in stolen motorcycles and passenger and light commercial vehicles led to a 12% jump overall in the state last year, compared with 2017.

As insuranceNEWS.com.au reported on Friday, the rise has prompted the Queensland Government to rejoin the council, seven years after the Newman government quit.

Profit-motivated theft increased 17% in Queensland, and 16% in Victoria.

Nationally, motorcycle thefts jumped 7%, causing overall thefts to rise marginally to 53,564 vehicles taken. Only 47% of stolen motorcycles were recovered.

Thieves took fewer heavy vehicles last year, with a 5% decrease in short-term and profit-motivated theft.

Holden Commodores remained the most popular light passenger vehicle for thieves, with 978 stolen last year.

Queensland cities took the top three spots for passenger and light commercial vehicle thefts last year, with Brisbane on 2137, followed by Gold Coast and Logan.

Overall, 42,683 of these vehicles were stolen last year.

WA recorded the biggest theft decline at 7%, with drops also recorded in Tasmania, the ACT and the NT.

Brought to you by:

Corporate

Steadfast brokers ‘not obliged to use acquired funder’

Steadfast says its brokers will not be required to use the premium funder it now owns 100%.

As reported in a Breaking News bulletin earlier today, the broker network has acquired the remainder of Macquarie Pacific Funding from Macquarie Bank.

Steadfast already owned 50% of the operation, which will be rebranded from Wednesday as IQumulate Premium Funding.

Asked whether Steadfast brokers would be pushed into using IQumulate, MD and CEO Robert Kelly said “never”.

“Competition is in the DNA of this business,” he said, adding only a competitive environment would lead to IQumulate continuing to improve its customer offering.

Macquarie Pacific Funding was formed in 2003 and offers more than $1.5 billion in premium funding loans each year to more than 60,000 clients.

In October former Zurich CEO Raj Nanra was brought in to lead the business, after previous CEO Rachael Lavars resigned to pursue other opportunities.

Mr Kelly says Macquarie Bank will continue to fund the rebranded operation.

“Both parties have been happy with the business, but it needed one set of hands controlling it to get to the next step,” he told insuranceNEWS.com.au.

“Eventually you get to a situation where you wonder who is best to take it forward, the bank or the distributor. This deal frees us up to look at the future. For the next iteration of this business we needed to have control.”

Mr Nanra told insuranceNEWS.com.au the timing of the move is ideal.

“Not just around the hardening market, but because there is a heightened focus on the customer,” he said. “We want to have conversations early in the renewal and help brokers to drive clients to make the right choices.”

Mr Kelly declined to put a figure on the deal, but says Steadfast is not required to announce it on the Australian Securities Exchange.

Steadfast says it intends to sell equity to IQumulate management following completion of the transaction.

Fusion grows with Zurich agency deal

Fusion Specialty Insurance has expanded its Asia-Pacific mergers and acquisitions (M&A) capacity through an underwriting agency partnership with Zurich.

Co-founder and executive partner Killian McDermott says the partnership helps Fusion M&A provide solutions for middle-market transactions throughout the region.

Fusion is a subsidiary of Pop Insurance Holdings, established last year by Sydney-based David Rogers and Barcelona-based Mr McDermott, who together have 50 years’ experience in specialty and affinity insurance businesses.

The partnership sees Zurich delegate its underwriting authority to Fusion to write warranty and indemnity insurance on its behalf.

“Our partnership with Fusion M&A is another tangible demonstration of how we are deploying our capacity to support brokers in financial lines,” Zurich Australia and New Zealand Chief Underwriting Officer Sean Walker said.

Pop last month launched a partnership with Rakuten Insurance Co focused on M&A deals in Japan and supporting the Tokyo-based company’s regional growth.

In January it announced a partnership with Allianz Australia.

QBE ordered to pay $10 million PI claim

The WA Supreme Court has ruled QBE must pay $10 million plus interest for a professional indemnity (PI) claim held by a company that has since been deregistered.

QBE is contractually bound to the policy because liabilities payable to the plaintiffs occurred before Australian Stockbroking and Advisory Services (ASANDAS) ceased to exist.

WA Chief Justice Peter Quinlan rejected QBE’s defence that two exclusions in the financial institutions civil liability PI policy apply to the liability ASANDAS owed to three investment companies making the claim.

The three companies had won a separate case in the Federal Court against ASANDAS over losses suffered.

But they did not receive the $12.2 million in damages before ASANDAS became deregistered in 2016 and its authorised representative Stripe Capital was liquidated.

The companies then sought to recover the money by making a claim against the QBE policy, which had an indemnity limit of $10 million for each claim and an aggregate limit of $10 million for all claims.

QBE declined to answer an insuranceNEWS.com.au query as to whether it plans to appeal the decision.

December hailstorms dent Youi result

Hailstorms in Sydney and Gympie in Queensland cost Youi a combined $17 million in the December half.

The storm bill hit Youi’s Australian business, as operating profit fell 9.8% to $46 million and normalised earnings dropped 11.1% to $32 million.

The claims ratio worsened to 56.2% from 55.4% and the combined operating ratio moved to 86.9% from 84.9%.

Gross written premium (GWP) grew 2.9% to $351 million, while net earned premium was flat at $310 million.

Increased expenses in the first half took the cost-to-income ratio to 30.7% from 29.5%.

Parent group Outsurance Holdings says the expenses involved large investments in support infrastructure, call centre capacity and marketing capacity to drive new business.

Regulatory compliance expenses also contributed to the jump in cost-to-income ratio.

Youi’s New Zealand arm returned to the black with a $500,000 operating profit, following a $1 million loss in the corresponding period of 2017.

GWP fell 8.3% to $11 million, but net earned premium remained at $3 million.

The claims ratio improved to 46.6% from 53.7%.

Trade credit specialist Prasidium joins IBNA

Trade credit insurance specialist Prasidium has joined Insurance Brokers Network of Australia (IBNA).

The expanding business, previously an authorised representative of Insurance House, has also aligned with global credit insurance broking network Astreos.

Prasidium’s principals are Stuart Prendergast, Mark Smith, Mark Browning and Paul Daniele, and the group has offices in Sydney, Melbourne and Brisbane.

Mr Prendergast says demand for trade credit insurance is rising amid tighter lending conditions and more insolvencies.

“Credit insurance is really at the forefront of a lot of businesses risk mitigation programs,” he told insuranceNEWS.com.au.

IBNA, which represents more than 90 independently owned and operated members, who place more than $1.3 billion of gross written premium annually.

AM Best maintains Tower’s ratings

Tower Insurance has a “very strong” balance sheet, according to AM Best, which has affirmed the insurer’s financial strength rating of A- and long-term issuer credit rating of a-.

The ratings agency has maintained parent company Tower Limited’s long-term issuer credit rating at bbb-.

“The ratings reflect Tower Insurance’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management,” AM Best says.

“Other balance sheet considerations include the company’s conservative investment strategy and prudent reinsurance arrangements.”

The New Zealand insurer’s exposure to the 2010/11 Canterbury earthquakes is a “partially offsetting” balance sheet factor, which has led to reserve strengthening actions.

It had about $NZ62 million ($60 million) in net provisions for these events as of last September.

Last month Tower said it is on track to top $NZ222 million ($215 million) in underlying profit this financial year.

Allianz hires former Westpac information chief

Allianz Australia has appointed Mike Wood as CIO, to oversee a range of IT initiatives across Australia and New Zealand.

He replaces Thomas Ruedesheim, who is returning to Europe in May to take another role within the Allianz Group.

Mr Wood was previously CIO for Westpac Institutional Bank.

Brought to you by:

Regulatory & Government

NZ’s contentious fire levy to get a ‘clean-slate’ review

The New Zealand Government plans to issue a discussion paper that may lead to removal of the controversial insurance-based fire and emergency services funding levy.

Fire and Emergency New Zealand (FENZ) was formed in 2017 through the amalgamation of rural and urban authorities, but the introduction of revised levy arrangements was delayed.

Internal Affairs Minister Tracey Martin says the proposed changes, which are still based on a levy on insurance premiums, present problems for some businesses and property owners. So now it is time for a fresh look at the funding.

The review has been welcomed by the Insurance Council of New Zealand (ICNZ) and the Insurance Brokers Association of New Zealand (IBANZ), which have been outspoken opponents of the decision to continue with insurabnce-based funding.

“We have an opportunity to take a clean-slate approach rather than simply stick with the model we’ve had historically,” Ms Martin said.

“We will be looking to achieve a model that is stable, universal, fair and flexible. No single option will fully satisfy all of these criteria, but I think we can do better than what we currently have.”

She Martin says a number of funding regimes are used for fire services internationally, and there appears to be a trend away from insurance-based levies, including in Australia.

“FENZ, like the fire service before it, is funded by a levy on property insurance and there are flaws in insurance-based funding,” Ms Martin said.

ICNZ CEO Tim Grafton says the levy is “grossly unfair” because it is imposed only on people who insure their homes, contents, motor vehicles and other property.

“This is now an opportunity for the first time in many years to get this right,” he said. “Hopefully, all parties will support change to a fairer system.”

IBANZ CEO Gary Young says levy collection is a “huge imposition” and changing systems to meet the proposed new arrangements could have cost the industry about $NZ40-$NZ50 million ($37.9-$47.4 million).

He told insuranceNEWS.com.au that his association and ICNZ “have worked long and hard on this issue and it’s very rewarding to at last have the Government prepared to listen and act on our concerns”.

Levy changes due to be introduced under the FENZ Act will now be delayed until 2024, to allow time for all options to be considered.

Consultation begins on code enforcement

Treasurer Josh Frydenberg has issued a consultation paper on the controversial Hayne royal commission recommendation to make parts of industry codes of conduct enforceable by law.

The Government has agreed to act on all code-related proposals, which include giving the Australian Securities and Investments Commission (ASIC) greater involvement in regulating them.

“Industry codes are vitally important in promoting best practice and raising standards,” Mr Frydenberg said. “Through these changes, it will also be made clear that certain promises made in codes are enforceable against financial services firms by consumers.”

The Treasury paper asks 15 questions and welcomes comment more generally on the proposed changes.

Key issues include the level of enforcement power ASIC should have, what criteria it should consider when approving voluntary codes and whether subscribing to codes should be a condition of licences.

The paper asks what level of supervision and compliance monitoring there should be and when codes should attract a civil penalty, and it addresses matters involving external dispute resolution.

Commissioner Kenneth Hayne has urged the Insurance Council of Australia (ICA), Financial Services Council and ASIC to “take all necessary steps” by June 30 2021 to have enforceable provisions designated.

ICA told insuranceNEWS.com.au it welcomes the release of today's paper.

"The recommendations of the royal commission raised important questions which go to the very nature of self-regulation," spokesman Campbell Fuller said.

"The Insurance Council will work through the consultation paper carefully with its members." 

The move to a more legalistic approach was highlighted at the ICA Annual Forum last month.

ICA CEO Rob Whelan said companies’ cultures have changed for the better since the adoption of a voluntary code and taking a “blackletter law” approach “changes the whole picture”.

Former long-serving compliance committee chairman Michael Gill, who has been involved with industry codes since the 1970s, told the forum confusing voluntary codes with the law is “very, very dangerous”.

Submissions are due by April 12. For more details, click here.

IAG supports motor repair information sharing

IAG has backed a proposed Australia-wide mandatory scheme for the sharing of motor vehicle service and repair information.

In a submission to a Treasury consultation, the insurer says it authorises 400,000 repairs every year, making it “one of the largest customers of the motor vehicle manufacturer sector”.

“It is IAG’s policy that all repairs authorised by us must be performed in accordance with manufacturer repair procedures,” the submission says.

“Therefore, ready access to technical information for parts and materials used in construction, along with detailed repair procedures, is crucial, not only to our business, but also to road safety, timely service and consumer satisfaction.

“It is essential that technical and diagnostic repair information is available to all repairers and not restricted only to those businesses operating within manufacturer networks, to ensure vehicles are serviced and repaired efficiently, to a high quality, with an emphasis on safety and at a reasonable price.”

To see the Treasury consultation paper, click here.

Warming poses threat to ‘coverage, financial stability’

Climate change-fuelled extreme weather events may affect “access to insurance”, Reserve Bank of Australia Deputy Governor Guy Debelle warns.

This is among the many consequences the economy can expect as cyclones, droughts, floods and other events become more severe and frequent.

Insurers have already moved to re-price cyclone risks in response to their “frequency and severity”, Mr Debelle says.

“Challenges for financial stability may arise from both physical and transition risks of climate change. For example, insurers may face large, unanticipated payouts because of climate change-related property damage and business losses. In some cases businesses and households could lose access to insurance.”

Policymakers and business leaders need to stop seeing unusual events such as drought in the east as simply cyclical episodes.

“We need to think in terms of trend rather than cycles in the weather,” Mr Debelle said last week.

“Droughts have generally been regarded, at least economically, as cyclical events that recur every so often.

“In contrast, climate change is a trend change. The impact of a trend change is ongoing, whereas a cycle is temporary.”

Climate scientists say the dry spell, described by farmers as the worst they have experienced, is exacerbated by global warming.

Mr Debelle says the drought has cut GDP by about 0.15% and will continue to weigh on the economy this year even if rainfall soon returns to average levels.

APRA review panel outlines key issues

Treasury has released terms of reference for a capability review of the Australian Prudential Regulation Authority (APRA).

The three-person review panel will consider factors that support the regulator’s ability to deliver its statutory mandate. These include well-considered and clear strategies that take into account the future operating environment, decision-making that balances financial safety and financial stability, culture that supports supervisory and enforcement actions, and robust internal governance arrangements.

Appropriate resource allocation, responsiveness to emerging issues, engagement with financial sector regulators and statutory powers are also under consideration.

Issues raised by the Hayne royal commission and reviews of the superannuation and financial services industry will also be taken into account.

Former Australian Competition and Consumer Commission chairman Graeme Samuel heads the panel. The other members are former Westpac executive Diane Smith-Gander and former New Zealand Reserve Bank deputy governor Grant Spencer.

The review is among recommendations from the Hayne royal commission, which was highly critical of the way APRA and other regulators have handled issues facing the financial sector.

The panel will report to the Federal Government by June 30. The closing date for submissions is April 10.

For more information, click here.

State to help flood-hit business owners

Recovery efforts are continuing in flood-stricken Townsville, with the Queensland Government sending outreach teams to help businesses in the area with financial matters including insurance.

The teams will visit 20 towns including Townsville, which bore the brunt of the worst floods in the state’s history.

“Getting into these towns and talking through the challenges faced by businesses such as insurance, leasing, finances, looking after staff and working with their suppliers, customers and clients – it will really help these owners get a handle on things and prioritise the steps they need to take to recover,” said Small Business Champion Maree Adshead, who is employed by the state to act as an advocate for the small business sector.

Insurers have so far recorded $1.02 billion in losses from the floods, according to the Insurance Council of Australia.

NZ central bank prepares for actuary probe

The Reserve Bank of New Zealand will hold feedback forums next month to prepare for its planned thematic review of the appointed actuary regime.

It will also hold meetings with key stakeholder groups.

The thematic review aims to give the central bank a better understanding of the work of insurers’ appointed actuaries, and identify areas for improvement.

Forums will be held in Wellington and Auckland on April 2 and 3 respectively.

Brought to you by:

Life Insurance

FSC moves to prohibit genetic test disclosure

The Financial Services Council (FSC) will introduce a moratorium on life insurance genetic test results as a binding standard from July 1, following stakeholder feedback in the Life Insurance Code of Practice consultation.

Under the moratorium principles, consumers can obtain up to $500,000 of cover without having to reveal adverse genetic test results.

They will not be required to take genetic tests when applying for cover, and insurers can only use relevant test outcomes when the policy involves more than $500,000 for life or total and permanent disability, $200,000 for trauma cover or $4000 a month for income protection.

Consumers are not required to disclose genetic tests taken as part of other research if they are not given the results.

The moratorium will be in place until at least June 30 2024, although a review is expected in 2022.

“We had originally planned to introduce a range of new consumer protections to the revised code by July 1,” FSC Senior Policy Manager Nick Kirwan said.

“The industry doesn’t want consumers to have to wait for new protections like the moratorium, so we are introducing it from July as a standard and looking at a range of other proposed code changes to see what can be implemented via standard while the code is rewritten.”

Submissions calling for the code to be written in “plain English” and be approved by the Australian Securities and Investments Commission will be further reviewed.

“These are not overnight jobs and to give each suggestion the consideration it deserves, more work is required as part of the current code review,” Mr Kirwan said.

Use budget to tackle legacy problems: FSC

The Financial Services Council (FSC) has urged the Federal Government to use next month’s budget to cut red tape preventing the retirement of substandard legacy financial products.

At least 600 legacy structures across life insurance, superannuation and managed investments disadvantage about 2.44 million people, the FSC says.

Considerations include the complexities of transferring customers to new products, with capital gains tax and stamp duty implications. Superannuation trustees must also ensure that transferring members from one fund to another without their consent is in their best interest.

The FSC gives the example of a life insurer that needed a computer programmer fluent in 1950s code to implement a regulatory system change. Another has customer records on microfilm.

It warns system failures are more likely with legacy products because support systems are less resilient and they are harder to restore.

They are less economic to run, and it is harder to find support staff.

The FSC wants taxes removed from transfers to other life insurance schemes. A test should ensure the transfer is in the interests of consumers, it says.

A Productivity Commission inquiry into superannuation estimates $160 billion of assets were held in legacy products in 2017.

TAL doubles up on industry award

TAL has been named the Association of Financial Advisers’ life company of the year for the second year running, beating AIA, OnePath Life and Zurich Financial Services.

Zurich triumphed in the service quality category, AIA in term life and total and permanent disability, and BT in trauma and critical illness.

MLC won the income protection award and Asteron Life the risk product innovation category.

Challenger was named annuity provider of the year and won the long-term income stream and the annuity and income stream innovation categories.

CommInsure won the investment bond award.

The awards are based on quantitative studies by Strategic Insight, actuaries and other researchers.

CBA delays wealth management sale

Commonwealth Bank of Australia (CBA) has “suspended” the sale of its wealth management operations, including its financial advice business, to concentrate on Hayne royal commission recommendations.

“CBA is prioritising the implementation of these recommendations, refunding customers and remediating past issues,” it says in an Australian Securities Exchange announcement.

“CBA has suspended preparations for the demerger in order to support the focus on these priorities.”

A spokesman told insuranceNEWS.com.au a strategic review of the bank’s general insurance business is proceeding as planned.

APRA tells insurers to update stress testing

Life insurers should incorporate emerging risks such as cyber attacks into their stress testing scenarios, the prudential regulator says.

The Australian Prudential Regulation Authority (APRA) last year assessed nine life insurers’ ability to conduct internal stress tests, which are used to calculate capital adequacy.

It says disruption from competitors and scenarios arising from improperly integrating acquired businesses should be part of the tests.

APRA says life insurers should use their test results in a broader context and integrate results into capital, risk management and business strategy processes.

It has advised them to self-assess their stress-testing frameworks and consider how they can improve them.

FPA reaches out to uni students

The Financial Planning Association has launched a new networking program aimed at attracting university students to the profession.

The Careers in Financial Planning series allows people studying commerce, business and financial planning to meet dealer groups, education providers and recent graduates.

For more information, click here.

Brought to you by:

The Professional

UAC expo draws record numbers

Last week’s Underwriting Agencies Council (UAC) annual Sydney expo drew a record 105 exhibitors this year as the event moved to the Hyatt Regency Hotel to cater for larger numbers.

The 20th annual event began with a breakfast at which Lloyd’s Head of International Regulatory Affairs Andrew Gurney spoke about the market’s future plans.

More than 500 brokers later toured two expo halls, including a record 382 brokers who registered via the UAC Events app to gain quick entry, collect continuing professional development points and be in the running for a prize.

The expo, which took place on March 8, demonstrated products available to brokers from UAC members plus offerings from business services members.

BluePrint Insurance broker Mary Latouf was the winner of $5000 in travel vouchers.

Aon appoints Queensland director

Aon has announced the appointment of Grant Rovelli as Southeast Queensland Regional Director, to lead growth in the area.

Former NRL star Mr Rovelli reports to MD Commercial Kevan Johnston, and will be responsible for 47 staff across eight branches.

“Grant will also join the commercial leadership team and I am incredibly pleased with the diversity of thought at the senior leadership level in our business, which will be further enhanced by this appointment,” Mr Johnston said.

For the past three years Mr Rovelli has been manager of Aon’s Mackay branch.

During his NRL career he played for North Queensland Cowboys Young Guns and then Sydney Roosters, where he captained the 2004 grand final-winning side.

Insurance brokers debut on US top jobs list

Insurance brokers rank second on an annual “best jobs” list in the US, with insurance advisers rated fourth.

It is the first time broking has made the list, compiled by jobs website Indeed.

“The insurance industry is hungry to attract new, young talent, which is especially good news for Millennial jobseekers,” Indeed says.

“Even better, a college degree is not required, though brokers must be licensed to practice.

“Insurance is a broad field, encompassing everything from health to home to travel.

“Its brokers specialise in risk management and work independently of insurance companies, helping clients select the best possible options for loss protection.”

Machine learning engineers top this year’s list of the 25 most desirable professions, with an average base salary of $US146,085 ($206,291).

An insurance broker in the US earns an average of $US86,498 ($122,146) and advisers can expect $US81,479 ($115,059), according to the list.

NTI opens raffle for vintage truck

National Transport Insurance (NTI) says raffle tickets are available for the 1946 Ford “Jailbar” truck it is restoring to raise funds for motor neurone research.

The restoration will use an Isuzu donor vehicle to provide smooth driving and modern inclusions, while retaining the Jailbar’s features and exterior. (The truck earned its nickname for the vertical bars that make up its radiator grille.)

“In short, it’s going to be a hot piece of nostalgia with the perks of a new truck,” NTI CEO Tony Clark said.

Tickets cost $10 each or $50 for six, and all proceeds go to the MND Research Institute of Australia to support the NTI Research Grant, and the MND & Me Foundation.

The winner will be drawn on the final day of the Brisbane Truck Show at the city’s Convention & Exhibition Centre in May, with the truck to be on display at the event.

NZ minister to address IAG climate change forum

New Zealand Climate Change Minister James Shaw will speak at an IAG-hosted event in Auckland focusing on adaptation for global warming.

Westpac and other major businesses will discuss how they are approaching the challenge, and the event will examine practical adaptation responses.

IAG is one of 13 members of the CE Leadership Group, which wrote the founding statement for New Zealand’s Climate Leaders Coalition in 2017.

The climate change adaptation event will be in Auckland on April 11 from 4-7pm. Details are available here.

Seminar examines public liability issues

The National Insurance Brokers Association (NIBA) will hold a breakfast seminar in Melbourne this week on public liability insurance, focusing on sub-contractors and vicarious liability.

Claims management company Proclaim will host the event and issues will be discussed by members of its public liability team.

Ananya Tiwari will look at the employer/employee relationship in light of a recent UK court case regarding whether Uber drivers are employees or subcontractors.

Tim Kasen will examine the manner in which an employee’s actions or negligence has the capability to directly affect their employer’s liability position on a claim.

The event, including a light breakfast, will be held at 9/271 Collins St from 8am on Thursday.

Registrations can be made here.

Brought to you by:

International

Brexit extension ‘must not be wasted’

The UK Parliament’s decision to seek a Brexit extension presents an opportunity that “must not be wasted” to reach a deal, the Association of British Insurers (ABI) says.

“This is really the only choice available given the amount of time left and the economic damage a no-deal Brexit would cause, but we should be under no illusions about the continued uncertainty an extension creates,” ABI Director-General Huw Evans said.

“Should the EU agree to it, this extra time must not be wasted. There would be no second chances in June.”

Prime Minister Theresa May is to seek an extension until June 30 after Parliament voted to defer the March 29 leave date.

Ms May still hopes to convince MPs to support her twice-rejected Brexit deal.

The ABI earlier this month warned crashing out of the EU with nothing but World Trade Organisation (WTO) rules in place would be an “unforgivable act of economic and social self-harm”.

“The WTO framework is designed to provide a mechanism for states to resolve trade disputes – it is not designed to be a safety net for the world’s fifth-largest economy leaving the world’s biggest trading bloc,” Mr Evans said.

“This matters because the EU is – by a very long distance – the largest export market for the UK insurance and long-term savings industry.”

Rare ‘bomb’ storm blasts US Midwest

The “bomb cyclone” that hit the US Midwest last week is the northern winter’s biggest insurance event, the Insurance Information Institute says.

States of emergency were declared in states including Iowa, Nebraska, Wisconsin and South Dakota as the “bombogenesis” – an extraordinary combination of wind-driven snow and severe rainfall – rolled in.

The storm caused flooding along the Mississippi and Missouri rivers and strong winds and heavy snowfall across many Midwest states. At least two deaths have been reported, and thousands in affected towns were evacuated as floodwater surged.

“This phenomenon is a rare one for the landlocked region and has the potential to break all-time, low-pressure records for parts of Colorado and Kansas,” the National Oceanic and Atmospheric Administration said.

Winter storms usually cause more than $US1 billion ($1.41 billion) a year in insured losses in the US.

New terror threats put more UK businesses in firing line

Evolving terrorist methods are exposing more businesses to economic loss, according to UK reinsurer Pool Re.

Militants no longer target symbolic buildings or monuments but instead aim for mass casualties, the terrorism pool says.

Terrorist groups encourage attacks using simple methods, such as stabbings and car rammings. This means property is no longer the primary exposure.

A much wider range of businesses face economic losses because distance from symbolic targets is no protection, Pool Re says.

About 40% of terrorist attacks in Europe since 2014 have occurred in areas with populations of fewer than 1 million people, it says.

Nearby businesses are likely to be cut off by wide police cordons lasting for days. Small businesses are particularly vulnerable, with cash flow interrupted and stock perishing.

Disruption to supply chains and reduced foot traffic can also have an impact.

The 2016 Brussels airport bombing resulted in losses of €200 million ($319.67 million), but property damage accounted for only €3 million ($4.8 million).

Pool Re is extending its coverage to non-damage business interruption losses following a change to legislation in Parliament.

Its old insurance methodology was based on high-impact attacks against high profile targets.

Former UK head of counterterrorism policing Mark Rowley says terrorist methodologies are less predictable and evolving rapidly. Vigilance and resilience are increasingly important, along with physical protective measures such as bollards.

Insurers monitor Boeing crash probe

Insurers could face large claims related to the Ethiopian Airlines crash this month, which reportedly bears a striking resemblance to another deadly accident involving the same aircraft model.

All 157 people on board died in the crash near Addis Ababa – the second deadly incident in six months involving Boeing’s 737 MAX 8 aircraft, after Lion Air flight 610 went down off the Indonesian coast, killing all 189 passengers and crew.

Ethiopia’s transport minister says flight data from the Ethiopian Airlines disaster suggests “clear similarities” with the Indonesia crash last October.

The second crash led to Boeing recommending grounding of the global fleet of 737 MAX aircraft while investigations continue.

While no Australian airline has yet taken delivery of the aircraft – the first of 40 for Virgin Australia is scheduled for delivery in December – a small number of MAX 8s are operated by airlines that fly into the country.

The insured value of the recently introduced plane is believed to be about $US50 million ($70.66 million).

Industry sources say initial insurance payments to victims’ families will be made by Ethiopian Airlines’ insurers. Willis Towers Watson is the airline’s broker and Chubb the lead insurer.

The cause of the crash is of vital importance to the Chubb-led consortium, because if it can prove the aircraft was defective it may recoup its losses from Boeing’s insurers, of which UK-based Global Aerospace is the lead insurer.

Insurtech recovery helps Charles Taylor profit

Professional services provider Charles Taylor recorded a $25 million profit last year, up $4.7 million on 2017.

Revenue growth to $17.3 million from $4 million in the insurtech business led to a $100,000 profit, turning around a $3.2 million loss in 2017.

Overall revenue increased to $263.6 million.

Claims management profit increased to $12.6 million from $7.7 million. However, the insurance management division’s profit fell to $12.3 million from $13.8 million.

New contracts from leading insurers lifted profit in the claims management division, with revenue up by $31.4 million.

Broker hits revenue milestone

Specialist (re)insurance broker BMS recorded revenue growth of 25% last year, helping it break the £100 million ($186.27 million) barrier for the first time.

The London wholesale business grew revenue by 32%, while its US reinsurance division gained 28%. Overall, the reinsurance division achieved an 18% revenue increase.

BMS is investing heavily in its US platform to capture new clients in the reinsurance and managing general agent space.

CEO Nick Cook attributes the result to the company’s staff and its employee-owned business model.

Recruitment in Australia – where BMS has offices in Melbourne, Sydney, Brisbane and Perth – and elsewhere in the group’s international network has increased employee headcount to 390.

Brought to you by:

Analysis

No holding back: it’s tech time for brokers

Brokers are set to adopt technological innovation at a faster pace than has so far been experienced as the relatively buoyant insurance market provides them with a stronger foundation for investment.

A new report from Macquarie Bank suggests there is already a growing sense of urgency, with companies scared of being left behind as innovations make transacting business easier for customers in a range of sectors.

Higher-performing broking businesses are already taking advantage of opportunities, but for many the challenges are daunting.

Brokers in general are scrambling to determine which from a large range of tech options will deliver the best results, even as they realise it is time to take the plunge.

“There is this constant discussion around insurtech, there are regular pieces in the press about what technology can do for customers, and they are looking at the future for their own businesses and saying, ‘If we want to be successful, what is it going to take?’ Macquarie Business Banking National Head of Insurance Eoghan Trehy told insuranceNEWS.com.au.

An online survey of 194 brokers for the Macquarie report finds 79% are uncertain what to invest in, while 77% say knowing how much to invest is a key question.

Keeping abreast of technological change is identified as an emerging challenge by 84% of respondents.

The focus on technology comes as brokers in general are prospering, with revenues rising in a hardening insurance market that may still have some way to run.

Average revenues grew to $2.51 million last financial year, a 5.4% increase on two years earlier, the Macquarie report says. Average profit margins edged up to 23.8% from 23.2%, while 30% of respondents had margins above 30%.

“It is a perfect time for them to think about what else they should be doing to future-proof the business and just try a few things,” Mr Trehy says.

“It doesn’t have to be big and it doesn’t have to be costly.”

He says responsibility for technological change and innovation doesn’t need to fall exclusively on the older-generation owners of broking businesses.

“Empowering the team is going to be the key to actually embracing the change. It doesn’t have to be on the person who owns and runs the business.”

The survey shows six core drivers mark the difference between higher-performing brokers and others: investing in technology; willingness to act in uncertainty; streamlining operations; harnessing data; focusing on innovative offerings; and using technology to improve the client experience.

High performers are defined as having financial-year revenue above $1 million, profit margins of more than 30%, revenue growth last year and a commitment to continuously driving innovation.

The “profile of a higher performer” includes median gross written premium of $16.5 million, compared with $6.3 million for others, and an average margin of 37.5% compared with 20.5% for others. They are also 91% self-licensed, while 78% are multi-partner businesses.

The survey finds 50% of higher-performing insurance brokers are investing in technology and 41% in broking systems, compared with 44% and 24% respectively for others in the sector.

Typically, they are looking to simplify or automate various functions and free brokers to spend more time working with clients and providing advice.

Looking ahead, brokers see challenges from increased price sensitivity among clients and heightened competition and regulatory intervention.

“The level of concern is remarkable for an industry with healthy margins and a history of strong revenues across economic cycles,” Macquarie says.

“Clearly, many insurance brokers believe change could be just over the horizon.”

More than 80% of respondents nominate increased regulation and compliance as key issues to be tackled.

Macquarie notes these are “hygiene factors” – a cost of being in business that is important but difficult to influence. Technology and innovation, on the other hand, are within the grasp of individual businesses, even as they face uncertain times.

“In other industries, the impact of technology has been profound,” Macquarie says. “First movers and fast followers are likely to lead the way, building a business that can withstand change.”

The survey confirms that higher-performing brokers are already setting the pace and more businesses are weighing their options. The long-predicted winds of technological change are blowing more strongly around insurance broking.