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Senate inquiry backs disaster mitigation spending

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The Senate inquiry into the general insurance industry has come out strongly in favour of increased disaster mitigation spending.

As reported in a Breaking News bulletin last week, the Economics References Committee published its final report featuring 15 recommendations.

The report says there is “an urgent need” for governments to invest in targeted disaster mitigation and calls on the Federal Government to reconsider its response to the Productivity Commission’s inquiry, which called for increased mitigation spending of $200 million per year.

The Insurance Council of Australia (ICA) has welcomed the comments.

“ICA agrees the Federal Government should reconsider its response to the Productivity Commission,” CEO Rob Whelan said.

“Investing at least $200 million a year in mitigation and resilience should be treated as nation-building that protects vulnerable communities for generations.”

Other recommendations in the report include a detailed investigation into a “simplified” insurance comparison tool, and an independent review of the standard cover regime.

See ANALYSIS.

Local insurtech lags amid digital surge

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Insurtech in Australia and New Zealand is being left behind in the rush towards fintech innovation, according to a report by KPMG and business lobby the Committee for Sydney.

It finds that more than $US1 billion ($1.3 billion) was invested in insurtech groups globally last year, but in Australia the sector accounted for less than 3% of fintech companies,

“There is high demand from Australian insurers looking for new technologies to improve customer service, deliver services in new ways and to transform operational models,” the report says. “However, despite a clear need to address insurance technology, insurtech has largely been left behind in terms of the fintech agenda in Australia and New Zealand.”

The report notes insurers are becoming more engaged, with IAG and Suncorp partnering with start-up hub Stone & Chalk, while investing and partnering with fintechs such as Trov.

Broader opportunities in areas such as telematics, the Internet of Things, drone technology, driverless cars and wearables will foster innovation, and insurers are developing new offerings such as cyber policies and “just-in-time” cover, it says.

The report finds the number of start-ups in Australia has increased to 579 from 100 in 2014. Last year $US675 million ($852 million) was invested across 25 deals.

The two largest fintech sectors are payments and lending. London is the global fintech leader, but Sydney has an opportunity to become the hub for Asia, according to the report.

“The challenge now is to see the more mature players scale their businesses locally and internationally,” KPMG Australia Head of Banking Sector Ian Pollari says.

Census data shows growth in at-risk housing

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Australians are continuing to build homes near the coast despite the increasing likelihood of natural disasters, according to new research.

The study of census figures by data technology group BigData Earth shows about 670,000 new homes have been built within 10km of the shoreline since 2006.

BigData Earth founder Keping Chen says he expects exposure on the coast to continue growing.

“The rapid exposure accumulation will have far-reaching implications for regional development and planning, infrastructure and emergency management,” he told insuranceNEWS.com.au.

“Given the fact the majority of historical disaster losses in Australia have occurred in the coastal region, the ongoing increase of exposure and its dynamics certainly requires deeper research into the potential heightened risk from natural hazards and extreme events.”

The number of homes within 100km of the coast increased from less than 7 million to 8 million in 10 years from 2006 to last year.

Mr Chen says the study provides a dynamic view of Australia’s exposure to natural perils, and the data is “very reliable and robust”. To see the results, click here.

Contents replacement costs ease despite gadget demand

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The cost of replacing household goods has eased slightly despite rising demand for electronic items, according to the Sum Insured Australian Residential Contents Index.

The research house says replacement costs fell 0.3% in the year to July amid a competitive retail environment and pressure on disposable incomes, after rising 3.4% in 2015/16.

The lower cost of replacing some individual goods was partly offset by homeowners buying more items such as televisions, laptops and audio-visual equipment, including Bluetooth speakers.

“It is now very common for multiple persons in a household to have a laptop, notebook computer, computers with multiple screens and a smartphone,” Sum Insured Commercial Director Mike Bartlett said. “Similarly, home entertainment systems are becoming more sophisticated and TV screens are becoming bigger, have superior visual quality and are more versatile.”

The index is based on the contents of a three-bedroom, two-bathroom home with garage and a family of two adults and two children. Furniture and lighting makes the largest contribution to the index, followed by clothing and footwear.

Sum Insured – which is supported by 25 insurers – says all major retailers are represented in the index, together with more than 400 smaller retailers. The survey involves almost 250,000 prices.

Technology, competition concern NZ insurers

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Change management, technology and competition top the list of risks New Zealand insurers face, according to a PricewaterhouseCoopers (PWC) survey.

Competition ranks more highly in New Zealand than with respondents globally, where it is viewed as the eighth-biggest risk.

“It’s no surprise local insurers are feeling the effects of an increasingly competitive market,” PWC New Zealand Partner and Insurance Sector Leader Karl Deutschle says.

“Insurtech start-ups are bringing in new technologies to the market, and they aren’t held back by legacy systems or outdated business models.”

The report, Reinventing Insurance, One Step at a Time, offers a New Zealand perspective on issues facing the industry and is a supplement to PWC’s global Banana Skins series.

“Insurers are well aware they need to build solutions and products that are focused on the customer,” Mr Deutschle says. “However, their biggest challenge is to convert that awareness into reality.”

Survey respondents also nominate cyber risk, reputation, regulation, human talent, investment performance, social change and cost reduction as areas of concern.

New Zealand ranks around the bottom quartile of countries surveyed on preparedness for changes transforming the sector, alongside nations such as Canada, the US and South Africa.

PWC says New Zealand insurers may feel less prepared to navigate the risks than the global average, but it may also be a sign that they are realistic about the challenges.

“It’s been almost 700 years since the first insurance contract was issued, yet it’s only in the past few years that insurers have faced fundamental changes in the way their industry operates,” the report says.

Pedigree pooches come at a premium

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The number of Australians taking out pet insurance has risen 8% since 2013, due in part to our love of pedigree dogs predisposed to costly medical conditions, according to comparison website finder.com.au.

Last year Australian dog owners spent $18.9 billion on medical bills for dogs.

The Royal Society for the Prevention of Cruelty to Animals says many pedigree dogs suffer genetic conditions such as hip dysplasia, with some treatments costing more than $10,000.

Popular breeds such as French bulldogs, Yorkshire terriers and Neapolitan mastiffs are the most expensive breeds to insure, costing $1397 a year by age five.

Cheaper breeds to insure at five years include cavoodles, Jack Russells, fox terriers, Chihuahuas and Australian shepherds, at an average of $634 a year.

Finder.com.au Money Expert Bessie Hassan says people planning to buy a dog should look into pet cover, particularly if they are considering a pedigree. “Pet insurance premiums are a small price to pay compared to potentially thousands of dollars on veterinary bills – especially if a serious illness pops up out of the blue,” she said.

In Insurance News (the magazine) this month

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Do premium rises in the June renewals season indicate the market has turned the corner? The industry’s most popular print publication, Insurance News (the magazine), has the answers in its latest edition, which will be posted out to subscribers over the next week.

Our August/September edition also tracks progress in Zurich Australia’s revamp, explains how a bunch of insurance leaders are setting up their own “shark tank” so brokers can spruik their brightest insurtech ideas, and examines emerging risks and the future of broking in a technological world.

This packed edition also looks at AUB’s progress in the evolution of its brokers into trusted advisers, and we report on how catastrophe modelling is revolutionising underwriting.

There’s so many news background articles and so much detailed information packed into Insurance News (the magazine) that it’s become the go-to standard for Australia’s insurance professionals. Compiled by experienced business journalists, it’s mailed free to subscribers six times a year.

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Corporate

Vero adds SME packages to online platform

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Vero has given brokers access to SME packages on the VeroEdge online platform.

The major revamp offers simplified business-acceptance rules, a clearer risk appetite, updates to wordings and faster referral turnarounds.

The package also features improvements to occupation and address search and document management functions, the ability to generate on-demand certificates of currency, and greater access to Vero’s technical underwriting capability.

Head of Commercial Intermediaries Anthony Pagano told insuranceNEWS.com.au the changes are more than just a system upgrade.

“The system is just one piece of the puzzle,” he said. “We are upgrading the whole end-to-end solution.”

He says while investment in automation often results in reduced staffing, Vero is taking the opposite approach.

“Actually, we have put on staff to reinforce the human element,” he said. “Some SMEs are large, complex businesses and need the human touch.”

VeroEdge was established in April last year, initially for the underwritten workers’ compensation product.

Mr Pagano says lessons have been learned, and brokers widely consulted, before adding the SME packages.

“We worked closely with brokers to understand some of the pain points they were experiencing,” he said. “We have re-engineered our entire approach to offering our SME packages to address these pain points.

“[It] improves all key aspects of the online broker quote, renewal and underwriting experience. By asking more relevant and timely questions about the right risks, more quotes will go straight through to bind without the need for referral.

“Vero has also invested in our underwriting process to improve turnaround times and free up our underwriters so they can have more valuable conversations with brokers when assessing risks.

He says this move is “only the beginning of our new approach”.

“Over the coming months, we will continue to invest in additional enhancements to business insurance.”

SME packages on VeroEdge are available to all Vero insurance brokers with a Sunrise connection.

Allianz’s Australian P&C profit jumps

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Allianz’s property and casualty operating earnings from Australia grew by one-third in the second quarter, according to figures in the parent company’s financial results.

The total climbed to €121 million ($180 million) from €91 million ($135.5 million) in the corresponding period last year.

Gross written premium increased to €825 million ($1.23 billion) from €772 million ($1.15 billion), while the combined operating ratio improved to 86.9% from 91.9%.

The euro-denominated results are affected by exchange rate movements, and are presented under the International Financial Reporting Standard.

Munich-based Allianz says global property and casualty operating profit grew to €1.45 billion ($2.16 billion) from €1.13 billion ($1.68 billion), due to a more benign period for natural catastrophes and lower attritional losses.

“We made excellent progress in underwriting and by stabilising investment income in the property and casualty segment,” global CFO Dieter Wemmer said.

“The jump in quarterly operating profit growth is a clear sign that our efforts are paying off.”

AR network gathers under new brand

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The NAS/Westcourt group, Australia’s largest authorised representative (AR) network, has met for the first time under its new brand, Community Broker Network.

The new name, first revealed by Insurance News (the magazine) in June, was last week established as the new trading name for the IAG-owned operation.

More than 100 authorised brokers – a term used by the group in preference to ARs – met under the new brand at a conference in Darwin. The group has about 400 broker businesses nationwide.

The conference included an exhibition and market hall featuring 25 strategic partners and insurers.

“Investing this time in our authorised brokers to better understand their clients and communities is invaluable, as is involving our strategic partners as we bring the community broker network to life,” MD Paul Ayton said.

The name change follows expansion of the National Adviser Services (NAS) network after the acquisition of Westcourt General Insurance Brokers in July last year. The new group has also absorbed the former CGU AR network.

Community Broker Network is now part of IAG’s new Australia Division, although it operates independently of IAG. It is also a member of the Steadfast network.

Ebix records strong Q2

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Ebix Australia has posted a strong second quarter and expects revenue to increasingly flow from new initiatives, MD Leon d’Apice says.

“We have a number of new strategic projects that have kicked off, and we are just starting to see some revenue flow from those,” he told insuranceNEWS.com.au.

These projects involve life and general insurance, while the company has also seen good interest from recent product additions such as a cloud solution rolled out late last year, Mr d’Apice says.

Ebix’s global second-quarter net profit grew 2% to $US23.4 million ($29.6 million) after revenue surged 20% to $US87.39 million ($110.7 million).

Revenue growth in the exchanges segment was bolstered by the acquisition of the ItzCash payments business, while risk compliance solutions also had strong gains.

“These are record results for the company in terms of top line and we are pleased to get there with 30.4% in operating margins,” Chairman and CEO Robin Raina said.

The company flagged substantial revenue growth “from a number of areas” over the next few quarters as it aims towards a quarterly run-rate level of $US100 million ($126.6 million).

Mr Raina says drivers will include contracts and initiatives in Brazil and India, plus “many new insurance exchange-related contracts” in the US and Australia.

CommInsure GI income rises

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CommInsure’s general insurance income grew 9% last financial year, with higher renewals partly offset by increased weather-related claims.

It has reported general insurance sales of $145 million and lapses of $97 million, taking the total value inforce to $783 million at June 30, compared with $735 million a year earlier.

General insurance income fell significantly in the second half compared with the first half due to a spike in weather-related claims, but inforce premium still grew 2% over the period.

Total insurance income in the Commonwealth Bank wealth division was $438 million in the year to June 30, down 12.7% on the previous year amid a weaker retail life result, as income protection claims grew.

See other story.

Hannover Re renewal premiums slide on loss-free programs

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Hannover Re says property and casualty renewals were highly competitive for the mid-year period, with Australian and New Zealand price directions varying widely depending on loss experience.

“In Australia and New Zealand appreciable premium erosion was observed under programs that had been spared losses, although significant price increases were booked for loss-impacted treaties,” it says. “This was especially true in Australia as a consequence of Cyclone Debbie and in New Zealand following the earthquake in Christchurch.”

Most of the company’s business in Australia and New Zealand renews mid-year.

Overall, the global portfolio up for renewal in property and casualty showed “pleasing premium growth” of about 10%, Hannover Re said at its mid-year financial results presentation.

Net income grew 9.6% to €535 million ($797 million) for the half-year to June 30 from €488 million ($727 million) in the corresponding period last year. Gross written premium increased 8.6% to €9 billion ($13.4 billion), while the combined operating ratio deteriorated to 96.5% from 95.4%.

Income from assets under own management grew 15.3%.

Natural catastrophe losses declined, with the total including a net loss of €46.4 million ($69.1 million) from Cyclone Debbie, €19.8 million ($29.5 million) from wildfires in Chile and €11 million ($16.4 million) from storms and tornadoes in the US.

The reinsurer confirmed full-year earnings guidance and “expects the underwriting result for the full financial year to come in on a level that will still be good, despite the protracted soft market”.

Suncorp prices five-year debt transaction

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Suncorp says a $500 million debt transaction in the local market has been priced at a favourable level, with good support from investors after the company’s positive annual results.

The five-year senior unsecured debt was priced at 97 basis points over the three-month bank bill swap rate.

Some 101 investors participated in the transaction, including 20 offshore investors, with an order book exceeding $1.3 billion.

“This transaction constitutes an incremental narrowing of funding margins between Suncorp and the major banks and is reflective of the fund management community recognising our stable ratings profile,” Suncorp Banking and Wealth CEO David Carter said.

“This margin represents the lowest funding differential Suncorp has achieved in any term debt market, and reinforces our position as a sustainably competitive alternative to the major banks.”

Mr Carter says it is the group’s first domestic senior unsecured term transaction into the Australian market this year, and formed part of a diversified funding program supported by Suncorp’s A+ credit rating. The transaction was jointly led by ANZ, Commonwealth Bank, Citigroup and Westpac.

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Regulatory & Government

Asbestos imports continue, Senate inquiry told

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Potentially deadly building products laced with asbestos are still being imported into Australia from China, despite growing awareness of the issue, a Senate inquiry has been told.

Simon Pisoni, Assistant Branch Secretary at the Communications Electrical Plumbing Union SA, told an Adelaide public hearing of the Senate inquiry into non-conforming building products that urgent action is required.

“It has been established through repeated and ongoing practice that building products coming out of China contain asbestos, even when the samples provided to potential customers are tested as being asbestos-free and certification is provided with shipments verifying that the building products do not contain asbestos,” he said.

“Despite these facts being known to importers, they continue to import building products from China, motivated by increased profit at the expense of the welfare of the whole community.”

Mr Pisoni says the pain of future victims will be “multiplied many times over” because this generation “did not have the appropriate sense of urgency, the integrity and the responsibility to put the required measures in place to protect our community”.

He believes action to date has been inadequate.

“I’m not aware of any additional funding or resourcing to border security,” he said. “I’m not aware of any bills that are currently being drafted or are before Parliament to address this issue.”

The inquiry will report on the asbestos issue on August 31, with a final report due on October 31.

CBA refunds $10 million over credit insurance

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Commonwealth Bank will refund $10 million to 65,000 customers sold unsuitable consumer credit insurance (CCI).

It is the second financial institution to make a major refund to consumers over so-called add-on insurance. Earlier this month QBE announced it would refund up to $15.9 million to consumers sold add-on insurance through car dealerships that provided little or no benefit.

Industry sources have told insuranceNEWS.com.au that refunds are expected to be made by other companies that offered similar add-on insurance products.

CCI is sold with credit cards, personal loans, home loans and car loans. It is promoted to borrowers to help them meet repayments if they become sick, injured or involuntarily unemployed.

The bank identified the issue and reported it to the Australian Securities and Investments Commission (ASIC), which has been investigating poor consumer outcomes associated with add-on insurance.

ASIC says Commonwealth sold CreditCard Plus insurance for credit card repayments to 65,000 customers who were unlikely to meet the employment criteria and would be unable to claim.

The bank is also refunding $586,000 in premiums to about 10,000 customers after it overinsured them for home loan protection CCI taken out with a Commonwealth mortgage.

“Consumers should not be sold products that provide little or no benefit, and banks should have processes in place that ensure this,” ASIC Deputy Chairman Peter Kell said.

Insurance doesn’t aid corporate misbehaviour: ICA

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The Insurance Council of Australia (ICA) has rejected any suggestion that liability policies covering financial company officials could undermine a crackdown on corporate misbehaviour.

A Treasury consultation paper proposes giving the Australian Prudential Regulation Authority (APRA) tougher powers to remove or disqualify people from senior company roles without applying to the Federal Court.

To ensure a deterrent effect “it may be necessary to prevent individuals from taking out insurance against removal and/or disqualification”, the paper suggests.

ICA says the current Federal Court process operates effectively and should remain, and there is no cause for insurance to be questioned.

Its submission “strongly disagrees with any view that suggests insurance contributes to poor behaviour – this is a misguided view that fails to properly consider the core role of insurance and its necessary conditions and exclusions”.

ICA says the consultation paper is unclear which type of insurance it refers to, but the group’s submission highlights that directors’ and officers’ (D&O) liability cover is critical for securing the appointment of key staff and ensuring they can make decisions.

“D&O insurance policies typically do not cover fraudulent, criminal or deliberately unjust actions, or where an individual acted for personal profit or gained illegal remuneration,” it says.

“Additionally, ICA is not aware of any evidence suggesting the prospect of removal and disqualification, under the current regulatory process, is not an effective deterrence against poor behaviour.”

The proposed Banking Executive Accountability Regime follows a parliamentary committee review of the big four banks, which found no individuals have been fired as a result of recent scandals.

ICA says it recognises that any expanded removal or disqualification powers given to APRA would apply across all institutions overseen by the regulator.

NSW flood defence projects receive $6 million

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The NSW Floodplain Grants Scheme plans to provide $5.94 million to fund 28 flood mitigation projects across the state.

Projects include flood studies, floodplain risk management plans, and investigation and design of mitigation work.

State Minister for Emergency Services Troy Grant says councils play a crucial role in tackling flood risk. “By enabling councils to better understand and manage flood risks, we can help minimise some of the devastation caused by flooding,” he said.

The Floodplain Grants Scheme is jointly funded by the NSW Office of Emergency Management and the Federal Government.

Terror pools urged to unite on strategy

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International co-operation is critical if terrorism pools are to develop effective coverage and mitigation strategies, according to Australian Reinsurance Pool Corporation CEO Chris Wallace.

He told the inaugural International Forum for Terrorism Risk (Re)insurance Pools conference in Paris that terrorism is a global issue and constantly evolving.

“We must remain at the forefront of global efforts to meet the challenges, including appropriate coverage and mitigation strategies,” Dr Wallace said.

“Maintaining excellent working relationships with our global terrorism pools, so we can share knowledge, insights and best practice, is a key part of this.”

Forum Chairman Francois Vilnet agreed, saying the need for international co-operation “has never been more acute” to prevent, mitigate and cover “horrific incidents”.

The conference, attended by 14 terrorism pools, was hosted by French pool GAREAT, the Federation Francaise de l’Assurance and the French Government-owned reinsurer CCR.

Julian Enoizi, CEO of the UK’s Pool Re, says uniting reinsurance pools’ collective expertise would drive innovation in terrorism coverage.

Topics discussed at the conference included non-conventional terrorism – referred to as “hyper-terrorism” – gaps in terrorism coverage, the role of public-private partnerships in risk management and terrorism (re)insurance, innovation in modelling and alternative methods of transferring terrorism risk, and the status of various pool models.

WA Insurance Commission posts underwriting loss

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The Insurance Commission of WA recorded an underwriting loss of $81.3 million last financial year, compared with a loss of $14.9 million the previous year. It follows the introduction of a scheme covering lifelong catastrophic injuries.

The Motor Vehicle (Catastrophic Injuries Fund) recorded a $98.1 million loss in its first year because premium revenue was not collected from motorists in advance of the catastrophic injuries support scheme’s start date.

The loss will be mostly offset by a transfer of general fund proceeds, made available due to sale of the Forrest Centre in Perth last year.

The Third Party Insurance Fund, which funds the compulsory third party scheme that represents most motor injury costs and claims, recorded an underwriting profit of $20 million, up from $5.2 million the previous year.

The commission received $686.6 million in motor injury premium payments for more than 2.9 million vehicles last year.

It managed $2.2 billion in car crash claims, consisting of $462 million in payments to people injured in crashes mostly in prior years and anticipated future claims expenses of $1.7 billion.

RiskCover, which operates the self-insurance arrangement for WA public authorities, posted an underwriting profit of $52.5 million amid lower claims, led by workers’ compensation and property classes.

The commission delivered a positive investment return of 10.4%, with income gains offsetting underwriting declines. Profit before tax jumped to $263 million from $5.1 million the previous year.

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Life Insurance

IP claims dent CommInsure income

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CommInsure says income declined 12.7% to $438 million in the year to June 30 as income protection claims grew to $143 million from $78 million the previous year.

However, it recorded lower group life insurance claims and higher premiums in New Zealand.

Life insurance inforce premium was $1.7 billion, down 12%, with sales of $226 million for the year. Lapses totalled $430 million.

Policy payments and commissions totalled $3.8 billion, up from $3.3 billion.

In a briefing to investors, Commonwealth Bank says it plans to enhance its tele-interviewing for direct life cover.

CommInsure for sale as CBA joins life divestment rush

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Commonwealth Bank is the latest financial institution to put its life insurance business up for sale.

The bank says it is in discussions with third parties about CommInsure.

It follows ANZ looking to divest OnePath and Suncorp weighing up Asteron’s future.

NAB has already sold the MLC life business to Nippon, and Sony is tipped to take control of ClearView. At present it has a minority shareholding.

Dai-ichi bought TAL a few years ago.

Commonwealth Bank says both Australian and New Zealand operations are involved in the talks with unnamed parties.

“While the discussions may lead to the divestment of those businesses, we will also consider a full range of alternatives, including retaining the businesses, reinsurance arrangements or other strategic options.”

Any sale would be a multibillion-dollar deal, meaning the buyer would be an overseas life insurance company. ANZ’s OnePath has been valued at more than $3.3 billion.

MetLife, Zurich, AIA, Prudential, Meiji Yasuda and Dai-ichi have all been tipped as potential CommInsure buyers.

As the two largest life insurers in Australia, it is unknown how Dai-ichi-owned TAL and AIA would square any takeover with regulators.

According to Strategic Insight, TAL had a 16.7% market share in Australia at the end of March, with AIA on 14.5%.

CommInsure’s share was 10.6% and OnePath 10.1%. MetLife and Zurich have market shares of about 4.1% and would still trail the leaders if either bought CommInsure.

If OnePath and CommInsure are sold to overseas interests, it will leave only one Australian-owned life insurer in the market, AMP.

One possible loser in the corporate shake-up is Suncorp, which is trying to sell a small business in a market featuring more attractive offerings.

AMP signs new reinsurance deals as profits dive

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AMP Life has reported a 45% slump in profits from its insurance business in the six months to June 30.

As a result, a new deal with Gen Re and Munich Re will see 65% of the insurance portfolio reinsured for claims from November 1.

The quota arrangement with Gen Re will cover 60% of the National Mutual portfolio, a business that merged with AMP Life on January 1. Gen Re will also provide a surplus cover agreement to assist with managing risk and volatility in individual retail claims.

The second part of the deal renews Munich Re’s cover of the AMP Life portfolio, and extends it from 50% to 60%. The new deals bring together 35 current reinsurance treaties and will release about $500 million in capital.

AMP Life’s profit in the first six months was $49 million down from $90 million.

But operating earnings were up 10.6% to $52 million, and annual inforce premium was up to $3 million from $1.4 billion in the corresponding period last year.

Group life annual premium was unchanged at $440 million.

The lapse rate was flat at 13.4%, but AMP predicts a higher figure for the second half as age premium increases take effect.

“The announcement of further reinsurance agreements, completing the strategic reinsurance program, lessens exposure to retail claims volatility and will further stabilise wealth protection earnings,” AMP CEO Craig Meller said.

“AMP continued to support customers during their time of need, paying $575 million in claims during the six months to June 30.”

FPA joins criticism of ASIC draft SOA

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Opposition to the Australian Securities and Investments Commission’s new statement of advice (SOA) model continues to grow.

The Financial Planning Association (FPA) is the latest organisation to propose changes to the ASIC consultative document.

Head of Policy and Government Relations Ben Marshan says while the latest example SOA features improvements in terms of usability, it needs more work.

He says as smartphone and tablet use make up 63% of time spent on devices in Australia, ASIC should examine the digital delivery of advice.

“We suggest the use of icons, symbols, graphics, audio and video in the sample would create a more engaging delivery of information to consumers.”

The FPA supports changes to how remuneration is disclosed in SOAs, but argues it is not appropriate to start the document with this information.

It believes the statement should demonstrate the value of the advice being provided, then outline costs and what the adviser is paid.

“While an SOA is a disclosure document and not the client’s financial plan, it should still be aspirational,” Mr Marshan said.

“It should help demonstrate the professional diagnosis process a professional adviser undertakes, and how it will help the client achieve a better financial position through an implemented plan.”

OnePath to pay another $10 million in compensation

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OnePath will pay an additional $10.5 million in compensation to 160,000 superannuation customers affected by breaches between 2013 and last year.

The sum comes on top of $49 million paid to 1.3 million OnePath customers from early 2013 to 2015.

The breaches include failing to follow up on whether cheques for claims or premium refunds were cashed.

OnePath says it has contacted most affected customers and finalised most additional compensation payments.

The Australian Securities and Investments Commission (ASIC) has been monitoring resolution of a number of OnePath breaches.

And an independent review, ordered by ASIC, has examined the financial services company’s activities, including life insurance.

ASIC says it will continue to monitor breaches reported by OnePath until the matters are resolved, including remediation where appropriate.

Rethink premiums to keep group life in super, says actuary

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Rice Warner says life insurance should remain an integral part of the superannuation system, despite calls from various quarters for its removal.

“We believe it would be possible to design insurance cover that is closer to the financial needs of members,” the actuary says in a discussion paper.

“Generally, insurance needs grow with the number of dependants in a family.”

Rice Warner says super funds could design group life policies around the characteristics of members based on age and family needs.

Using existing data, funds could shift the default sum insured to one based on needs – all without changing the premium or obtaining additional information from members.

“We would simply assess the amount of the claim based on the dependants at the time of death,” the actuary says.

Rice Warner says its research shows the average default cover for a 20-year-old is $120,000, dropping to $84,000 by the time they are 50.

Its proposed default cover for a single 20-year-old would be $42,000, rising to $681,000 if married with two children. The 50-year-old default cover would be $124,000.

The super industry has responded to some of these issues, with Cbus to begin a crackdown on young people paying unnecessary premiums.

But premium reductions will not happen overnight, Rice Warner says.

“Progress is unlikely to be quick on this front as typical insurance contracts are for three years. Funds will likely have to wait until they can renegotiate.”

Rice Warner says insurers and funds will face pressure from governments and media to make changes sooner. Financial Services Minister Kelly O’Dwyer has already asked the Australian Prudential Regulation Authority to examine mechanisms for fund members to opt-out of automatic cover.

AIA raises new business stepped premiums

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AIA Australia is to increase new business stepped premium rates in its Priority Protection and Priority Protection for Platform Investors products.

The insurer has also introduced a large sum insured discount band, and improved its stepped premiums.

Further changes include adjusting the crisis recovery stepped premiums and level premiums for life cover and crisis recovery.

The large sum insured discount will be 26% for clients with life cover and term cover between $750,000 and $1 million.

The insurer will also decrease life cover stepped premiums by an average of 5-6%.

The crisis recovery adjustments for new business stepped premiums include an increase by an average of 4-5% for policyholders above the age of 35, and 9% for 35 and under.

Crisis recovery rider new business stepped premiums will increase by an average of 5% for policyholders above the age of 35.

AIA Chief Retail Insurance Officer Pina Sciarrone says the changes will “ensure that advisers can offer more value to their clients”.

She says the life and crisis bundled policy has been tailored “to maintain sustainable options and ensure they are competitive in the market”.

FPA to open Financial Planning Week with new research

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The Financial Planning Association (FPA) will focus on the theme “live the dream” for its 17th annual Financial Planning Week, from August 21-27.

The week will begin with the release of a consumer research report that includes data on a link between happiness and having a financial plan.

The report has been created in partnership with McCrindle Research, and the FPA has prepared a series of real-life video stories and a social media competition.

CEO Dante De Gori says the report builds on the “dare to dream” document released for last year’s Financial Planning Week.

“Last year we discovered Australians are optimistic and daring to dream about their future, despite challenging economic times, financial stress and regret at not saving enough,” he said.

“This year we deep-dive into how we are going as a nation at living out those dreams, and release insights into the habits, beliefs and demographics of the enviable group of Australians most happy with their lot in life.”

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The Professional

Vero appoints relationship managers

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Vero has appointed two strategic relationship managers to focus on the commercial broker market.

Holly Burns has joined Vero from Allianz, where she was distribution manager for the Genesis program, while Jonathan Hyde was in Vero’s commercial underwriting unit, working closely with brokers.

“These appointments represent Vero’s continued investment in our relationships with cluster groups and national broker partners,” Head of Commercial Intermediaries Anthony Pagano said.

“Jonathan will manage our Steadfast executive relationship, while Holly will be responsible for executing our market strategy with our key national partners.”

Ms Burns and Mr Hyde become part of Sarah Moltzen’s national strategic relationships team.

McLardy McShane names award winners

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Winners of the annual McLardy McShane awards were announced at the group’s annual conference last week on Hamilton Island.

About 150 staff, authorised representatives (ARs), partners and industry colleagues attended the two-day conference to celebrate McLardy McShane’s 10th anniversary.

Scott O’Neill of CP Insurance Services collected the branch of the year award, and McLardy McShane Assistant Accountant Fatma Kulafi was named employee of the year.

AR of the year was Edge Insurance Services’ Garth King, while Jamie Mercieca and Sharron Healy were recognised for 10 years’ service with the brokerage, and Vishal Kapoor for five years. Marketing Manager Rachel Sozzi received the “McCulture” award and Amanda Taylor of the Albury branch was crowned “rising star”.

LMI MD Allan Manning and McLardy McShane’s former receptionist Maureen Anderson were inducted into the company’s “hall of fame”.

And Macquarie Business Bank National Head of Insurance Broking  Eoghan Trehy was recognised for his performance on the dancefloor with the “McMoment” award.

Quill Club raises $40,000 for soldiers’ charity

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The Quill Club’s annual charity lunch in Melbourne raised $40,000 for the Commando Welfare Trust.

The event at Docklands venue Peninsula A was attended by just under 500 people and included auctions, raffles and speakers who highlighted the trust’s work and issues faced by soldiers and their families.

The sum raised includes a $10,000 donation from the Steadfast Foundation.

A ceremonial hand-crafted commando dagger was auctioned for $3000, with the buyer becoming only the third civilian to own one.

The Commando Welfare Trust was represented by Executive Officer Selena Clancy and a serving senior commando.

Adventurer and former soldier Brian Freeman, who campaigns on behalf of veterans, was guest speaker.

The trust was established in 2010 to provide financial relief and support for Special Operations Command soldiers and families.

The Quill Club, which will celebrate its 40th anniversary in October, is a group of insurance professionals “dedicated to the cause of the development of relationships through social liaison”.

It meets for lunches and other events every second Friday at locations around Melbourne. The charity luncheon is its major annual event.   

Claims Scholarship applications open

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The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and TurksLegal have opened submissions for this year’s Claims Scholarship.

Now in its 10th year, the program recognises excellence in general insurance. Entrants must submit a 2500-word paper addressing one of five questions.

The winner can choose either an overseas conference package valued at up to $8000 – including registration at the Claims Conference & Insurance Services Expo in Orlando, Florida, with return flights, accommodation and $500 spending money, or $5000 cash and registration to the Australasian Institute of Chartered Loss Adjusters/ANZIIF Claims Convention in Australia, including return flights and two nights’ accommodation.

Applicants must be residents of, and based in, Australia and work in the general insurance industry.

Applications close at 5pm on October 9, with the winner announced at the ANZIIF General Insurance Breakfast in Sydney on December 6.

For more information, click here.

ICNZ/ANZIIF scholarship open for entries

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Young insurance professionals can win $10,000 of professional development through this year’s Insurance Council of New Zealand (ICNZ) and Australian and New Zealand Institute of Insurance and Finance Scholarship.

The scholarship, offering attendance at an international conference or seminar, is open to direct employees of an ICNZ member who are residents of New Zealand and aged under 35.

Applicants must submit a 2500-word essay and other supporting documentation.

For more information, click here.

ICNZ Conference opens registration, details program

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Registration for the Insurance Council of New Zealand (ICNZ) Conference in Auckland on November 8 is now open.

The event, at SkyCity Convention Centre, will feature keynote speaker Alastair Newton, an international adviser and expert on geopolitical issues. He will discuss the US-China dynamic’s effect on Asia-Pacific and New Zealand under the Trump administration.

Guy Carpenter CEO Pacific Region Tony Gallagher will discuss the uncertain and changing world of capital and its role changing the types of product available to manage risks.

FinTechNZ Chairman Mitchell Pham will convene a two-hour insurtech session featuring presentations from KPMG Head of Digital Futures Steve Graham, IAG Firemark Labs Director Product Incubation Andrew Stead and Munich Re Australasia MD Ralph Ronnenberg.

Other speakers will include UN Office for Disaster Risk Reduction Director Elizabeth Longworth, Wellington’s Chief Resilience officer Mike Mendonca, IAG CEO New Zealand Craig Olsen, QBE GM New Zealand Bill Donovan and FMG CEO Chris Black.

To register or more details, click here.

Marine forum to elect committee at AGM

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The Melbourne Marine Insurance Forum will hold its annual general meeting on Tuesday next week, with all committee positions to be declared vacant.

The forum hosts regular networking functions and meetings addressed by industry experts, while aiming to raise awareness of marine insurance in the broker community.

Financial members are eligible to serve on the committee and vote at the AGM, to be held at Colin Biggers & Paisley Lawyers’ office in William Street at 11am.

The group was established in 2010 and has a membership of more than 200.

Local young lawyers give Lloyd’s presentation

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Australian law firm Sparke Helmore has sent a team including six young insurance lawyers to deliver a presentation today in London in Lloyd’s Old Library.

The young lawyers are speaking on high-impact insurance issues affecting the London market.

The event has been organised in partnership with the Lloyd’s Market Association Under-35s Claims Group.

“The trip is part of the firm’s ongoing commitment to the London insurance market and to support the professional development of its talented young lawyers, and give them the opportunity to share their Australian insurance industry and market knowledge,” a Sparke Helmore spokesman said.

Topics covered in the presentation include class actions, cyber risk, defective building materials and catastrophes.

RMIA opens conference registration

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Registrations for the Risk Management Institution of Australasia (RMIA) National Conference are now open.

The event, on November 15-17 at the QT Canberra hotel, is expected to attract more than 450 risk professionals, ranging from risk managers to internal auditors to brokers.

Delegates can learn about cutting-edge risk management, foster creative thinking, network and have fun, the RMIA says.

The theme is “risk it” and presentations will include: “responding to cyber events, communication and management” by Craig Searle, the founder of cyber-security group Hivint; “the future of business continuity” by PricewaterhouseCoopers Senior Consultant Cathy Cyphus; and “insurance and the changing digital world and growing digital risk landscape” by Clayton Utz partner David Gerber, among others.

Registration includes conference sessions, the exhibition, a welcome reception and gala awards dinner. For more information and to register, click here.

Zurich names regional liability manager

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Zurich has appointed Jason Henry as Liability Underwriting Manager for Victoria, Tasmania, SA and WA, based in Melbourne.

Before joining Zurich Mr Henry was corporate underwriting manager for liability at CGU.

He has worked more than 23 years in liability underwriting, deals and claims management, working at Lumley, Vero and HIH.

Zurich CEO General Insurance Rajbir Nanra says Mr Henry “will play a key role in the next phase of Zurich’s development, enhancing our market presence and deal-making capabilities”.

Mr Henry will report to Head of Liability General Insurance Alex Tarantino.

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International

Warm Atlantic raises US hurricane risk

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An “active” US hurricane season is increasingly likely as warm Atlantic Ocean temperatures raise the risks, according to forecasts issued as the peak storm period arrives.

The National Oceanic and Atmospheric Administration (NOAA) says there is a 60% chance of an above-normal season, up from its May prediction of 45%. Forecasts indicate 2-5 hurricanes of at least Category 3 strength, 5-9 hurricanes in total and 14-19 named storms.

The Atlantic hurricane season runs from June to the end of November, and peaks from August to October. Because major US population centres are potentially exposed to hurricane activity, the hurricane season can influence global reinsurance and coastal US insurance rates.

“Wind and air patterns in the area of the tropical Atlantic and Caribbean, where many storms develop, are very conducive to an above-normal season,” Climate Prediction Centre hurricane forecaster Gerry Bell says. “This is in part because the chance of an El Nino forming, which tends to prevent storms from strengthening, has dropped significantly from May.”

NOAA says tropical Atlantic temperatures are warmer than models previously predicted.

Colorado State University forecasters Philip Klotzbach and Michael Bell anticipate eight hurricanes, unchanged from their forecast last month, and expect 16 named storms compared with the previous outlook for 15.

For the entire US coastline, there is a 62% chance of at least one hurricane with Category 3-5 strength making landfall, compared with the 52% season average for the past century.

“Most of the tropical and sub-tropical Atlantic is anomalously warm and is likely to remain so,” the forecasters say.

Chinese flooding dominates July cat bill

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Six weeks of flooding in China has caused economic damage of more than $US10 billion ($12.67 billion) and nearly 200 deaths, according to Impact Forecasting’s catastrophe recap for last month.

Hunan was the worst-affected province as the Xiangjiang River crested to record levels. More than 412,600 homes were damaged across 11 provinces, and 3.4 million hectares of farmland was under water.

Turkey also had a costly month, with torrential rain on July 17 and 18 damaging streets, cars and train stations, with claims so far totalling 116 million lira ($41.5 million).

Severe thunderstorms in Istanbul on July 27 have led to 22,000 claims. Payouts could reach 1.2 billion lira ($429.29 million).

The US, Canada, Portugal, France and the Balkans region experienced wildfires, with Canada the worst affected, sustaining economic losses of more than $US78 million ($98.81 million).

Severe thunderstorms and flooding affected many parts of the US, with combined economic and insured losses expected to be hundreds of millions of dollars.

Flooding and landslides damaged more than 2600 homes and buildings in Fukuoka, Oita, Shimane, Kumamoto and Hiroshima prefectures of Japan, with economic losses expected to be near $US1 billion ($1.26 billion).

Monsoon rains in India, Bangladesh and Pakistan caused hundreds of millions of dollars in damage, while seasonal rain in Thailand left at least 23 people dead and economic damage of more than $US300 million ($379.8 million).

Flash-flooding in northern Switzerland prompted payouts of nearly $US90 million ($113.99 million).

Italian officials say prolonged drought conditions have cost the economy €2 billion ($2.97 billion) in economic losses, according to modeller Impact – a subsidiary of Aon Benfield.

Vietnam sustained $US44 million ($55.73 million) of economic damage from Tropical Storm Talas, while strong earthquakes were recorded in the Philippines, Greece, Turkey and China.

UK insurers back pre-Brexit focus on contract law

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The Association of British Insurers (ABI) supports moves by the prudential regulator to put cross-border contract issues high up the agenda in Brexit negotiations.

The ABI says there are concerns about how millions of insurance and pension contracts written pre-Brexit will be fulfilled after the UK leaves the European Union.

“As the deadline for Brexit looms, many insurers’ biggest fear is they will be left with a stark choice between breaking their promise to customers or risk breaking the law if the issue of how to fulfil existing contracts cross-border is not resolved,” ABI Director-General Huw Evans said.

“Agreeing terms to allow insurers to service contracts after March 2019 needs to be part of the exit negotiations between the UK and EU.”

Prudential Regulation Authority (PRA) CEO Sam Woods says in a letter to the UK Parliament’s Treasury Select Committee that there is particular concern over contract arrangements.

“Some form of implementation period is desirable, to give UK and EU businesses more time to make the necessary changes to adjust to the UK’s new relationship with the EU in an orderly way,” he says.

Areas of concern include business insurance contracts, such as liability cover, sold from the UK to the EU, and policies sold from the EU into the UK.

“This is an urgent issue and we are pleased it is high on Sam Woods’ agenda,” Mr Evans said.

“We will continue to work closely with the Government, our membership and the PRA in an effort to ensure a solution is in place in time.”

Zurich hails turnaround progress

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Zurich has reported net income of $US1.5 billion ($1.91 billion) for the six months to June 30, down 7% on the corresponding period last year.

However, business operating profit, excluding the impact of changes to the Ogden discount rate in the UK, was up 14%, and the insurer says it is on track to hit turnaround targets.

Cost savings of about $US550 million ($698 million) have been achieved towards the target of $US1.5 billion by 2019.

“I am very pleased to report results that show what dedicated people can accomplish in a relatively short time, as we grow our businesses in local currencies, improve our underwriting and expand our customer reach, all while reducing our cost base,” Group CEO Mario Greco said.

“Based on that performance, we are confident we will maintain this positive momentum, which positions us well to improve our shareholders’ returns and drive sustainable dividend growth.”

The combined operating ratio for the half worsened slightly to 99.5% from 98.1%, and property and casualty gross written premium (GWP) fell 3% to $US18.01 billion ($22.85 billion). Asia-Pacific GWP was up 3% in local currency, “driven by all countries, but especially Australia and Hong Kong”.

Since June 1 the group has assumed underwriting for a portion of the Cover-More portfolio, with about $US20 million ($25.37 million) of GWP in the quarter. The acquisition of the Australian travel insurer is singled out as a business highlight, “solidifying Zurich’s position as a leading global travel insurance provider”.

Man-made disasters hit Munich Re profit

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Man-made disasters such as the Grenfell Tower fire in London contributed to a 24.8% drop in Munich Re’s second-quarter profit, but it remains confident of meeting the full-year target of €2-€2.4 billion ($2.99-$3.58 billion).

While the German group’s payout for Grenfell is unspecified, the event is part of the €187 million ($279.64 million) claims total for man-made disasters in non-life reinsurance.

Munich Re’s gross written premium (GWP) fell slightly to €11.8 billion ($17.64 billion) from €11.92 billion ($17.82 billion) in the corresponding period last year.

GWP for the reinsurance business was €7.65 billion ($11.43 billion), down from €7.82 billion ($11.69 billion).

The property and casualty reinsurance combined operating ratio improved to 93.9% from 99.8%.

First-half profit was €1.29 billion ($1.92 billion), down from €1.41 billion ($2.1 billion) in the corresponding period last year.

Chairman Joachim Wenning says Munich Re is “well on track” to reach its full-year profit guidance.

“We have the right strategy, and we can concentrate on implementing that strategy by writing profitable new business,” he said. “Both of our fields of business offer many opportunities in this regard.

“The bundling of our competencies in reinsurance and primary insurance allows Munich Re to continue driving digital transformation consistently across the entire value chain.”

Crawford profit rises as cost drive pays off

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Claims management group Crawford & Company has recorded a second-quarter profit of $US10.2 million ($12.98 million), up from $US8.6 million ($10.94 million) in the corresponding period last year, largely due to cost reductions and higher case volumes.

CEO Harsha Agadi says he is pleased with the result, despite softer market trends in the Garden City Group legal services segment.

Garden City Group revenue was $US19.7 million ($25.04 million) in the second quarter, down from $US25.7 million ($32.69 million). Operating losses totalled $US1.7 million ($2.16 million), compared with $US2.6 million ($3.3 million) in the corresponding period last year.

Net income for the Crawford Group grew 18%, driven by consolidated operating earnings growth of 22%, with the operating margin expanding 230 basis points.

Mr Agadi says this reflects cost reductions, higher case volumes and lower corporate costs.

“We believe the decisive steps we took through the second quarter to reduce our expense structure have positioned the company to deliver the financial expectations we set at the beginning of the year,” he said.

The company says it is on course for a full-year profit between $US34 million ($43.28 million) and $US39 million ($49.64 million).

The second quarter featured restructuring costs of $US6.5 million ($8.27 million), described as a reduction in administrative costs, “consolidation of management layers in certain operations” and the phase-in of operations in the Philippines and India.

Mr Agadi says the company will focus on revenue growth, leveraging global resources and containing costs for the rest of this year.

Fairfax profit up as cat losses decline

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Canadian company Fairfax Financial Holdings, which has acquired Allied World, says second-quarter net earnings jumped 31% to $US311.6 million ($393.4 million).

“Our insurance companies continued to have excellent underwriting performance in the second quarter and first half,” Chairman and CEO Prem Watsa said. “All our insurance companies again had combined operating ratios less than 100%.”

Gross written premium grew to $US2.77 billion ($3.5 billion) from $US2.62 billion ($3.31 billion) and underwriting profit increased to $US108.4 million ($136.9 million) from $US82.3 million ($103.9 million).

The combined operating ratio for the insurance and reinsurance operations improved to 94.9% from 95.7% as catastrophe losses declined compared with the corresponding period last year, when the Fort McMurray wildfires destroyed homes and buildings in Alberta province.

Fairfax and co-investors completed the acquisition of a 94.6% stake in Allied World last month and will mop up the remaining shares this quarter. Fairfax will then have a 67% interest, with its partners holding 33%.

The Toronto-based company this year offered to buy New Zealand insurer Tower. But talks were halted after Vero trumped its bid. Vero’s offer was later blocked by the competition regulator.

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Analysis

Senate inquiry: 15 ways to improve insurance

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Towards the end of last year the Senate Economics References Committee was tasked with examining transparency, competition and rising prices in general insurance, along with any potential benefits of a government-run insurance comparator.

The inquiry held public hearings in Sydney and Melbourne, where the atmosphere turned distinctly hostile.

News Corp journalist John Rolfe was one example, declaring general insurance “the biggest stitch-up since the Great Hall Tapestry” and “about as transparent as the Yarra”.

Now the committee has published its report – a detailed piece of work, featuring 15 recommendations.

And overall, the industry will probably breathe a sigh of relief.

Its argument for increased mitigation spending, and the potential for reduced premiums, was heard loud and clear.

“As well as the obvious benefits mitigation provides with regard to protecting life and property, the committee agrees with industry stakeholders that increased investment in well-designed mitigation by all governments should help reduce home and strata insurance premiums over the long term,” the report says.

Last year the Federal Government published its response to the Productivity Commission’s report on natural disaster funding arrangements, ignoring a key recommendation to increase mitigation spending to $200 million a year.

The Senate committee recommends that response be reconsidered, and also that all governments work together to reform national disaster funding arrangements “as a matter of urgency”.

But other recommendations will be less pleasing to the industry.

Despite a raft of submissions pointing out the damaging effect insurance comparison sites can have, Senators won’t let that proposal go.

“The committee… acknowledges the strong concerns raised regarding any proposal to establish an independent comparison service for home, strata and car insurance in Australia, in particular, the risk that such a service could lead to consumers focusing on product price rather than value,” the report says.

However, it recommends the Government carry out a detailed proposal for a “more simplified” insurance comparison tool.

Transparency was a major issue for the inquiry, with the product disclosure statement (PDS) regime considered unfit for purpose.

“The committee is deeply concerned by the apparent lack of transparency in the general insurance industry with regard to product disclosure, and the detrimental effect this has on consumers’ ability to effectively compare similar insurance policies,” the report says.

It recommends requiring insurers to disclose the previous year’s premium on renewal notices and provide an explanation of premium increases when requested by policyholders.

It also says component pricing of premiums should be available to policyholders.

An independent review of the standard cover regime is also recommended, along with the development of standardised definitions of key terms for general insurance.

The use of key facts sheets should also be reviewed, examining their effectiveness in helping consumers understand home and contents policies, and whether they should be introduced to other forms of insurance.

The committee also calls on the Federal Government to release a response to the final report of the Northern Australia Insurance Premiums Taskforce, and recommends a further review into competition in the north Queensland strata market.

It says the Australian Securities and Investments Commission should undertake a comprehensive review of the north Queensland home insurance comparison website.

And it recommends the removal of general insurers’ exemption from unfair contract terms laws – which the industry strongly opposes – and a crackdown on strata manager commissions.

The Insurance Council of Australia (ICA) welcomes the support on mitigation, and says it is already focusing on the disclosure issue.

“Many of the recommendations are already being addressed by ICA through initiatives including the disclosure taskforce and the review of the General Insurance Code of Practice, through measures being implemented by insurance companies and through existing government programs,” CEO Rob Whelan says.

Mr Whelan says the committee received “extensive evidence” from consumer groups, regulators and industry that price comparison websites do not empower customers to choose the best product for their requirements.

“Insurance is highly complex,” he says. “You can’t compare insurance products as though you’re comparing cans of soft drink, and each insurer’s product is competitive on its features as well as its price.

“ICA notes the recommendation relating to a price comparison tool, but believes enough evidence has already been provided to demonstrate a government-run aggregator would not stand up to a cost-benefit analysis.”

National Insurance Brokers Association CEO Dallas Booth says the report shows there is nothing fundamentally wrong with the general insurance industry.

“There are areas for improvement, but certainly there are no signs of fundamental problems or weaknesses,” he says.

He agrees with the recommendation to investigate the standard cover regime.

Standard cover provisions is something we have raised a few times. Clearly the current provisions are not achieving their objectives.

“One way around relying on PDSs is to review the standard cover terms and conditions and have policies that include features 90% of people would assume are in there.”

Mr Booth also backs the move to look closely at strata manager commissions.

“We are concerned many strata managers are being paid commission for distribution of insurance when they are not trained and are not experts. It needs to be addressed.”

He is also concerned brokers do not get more attention in the report.

“If people are confused they have to be encouraged to get advice. That point was not mentioned at all in the report and that worries me.”

The industry will be disappointed that the government comparator proposal is still clinging to life. But it will welcome the strong stance on mitigation.

On some of the other issues, it will feel the Senate committee’s input is an unnecessary distraction.

While some of the issues examined by the senators remain far from being solved – and some of the recommendations would undermine the industry’s competitiveness if they are ever forced on it – insurers have demonstrated previously that solutions can be found where public and political pressure makes it prudent to find them. Flood insurance is a case in point.

In this case it would be far better for the industry to devise its own solutions to the more contentious issues raised at the inquiry before that external pressure becomes an irresistible force.

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