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Profits on rise as cycle turns: KPMG

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Insurance industry profits may be on course for a sustained improvement after surging 25% to $4.85 billion last financial year, according to a KPMG report.

Gross written premium (GWP) increased 5% to $42.97 billion, while claims costs and operating expenses declined.

“Overall, this has been a very positive year for the general insurers, and we believe it signifies the start of a long-awaited upswing in the insurance cycle,” KPMG partner Scott Guse said.

Average quarterly growth in GWP was 1.2%, the highest level in recent years, and the gain was largely rate-driven, according to KPMG’s General Insurance Industry Review.

“In our view, this hardening is well overdue and has certainly been a key driver in delivering the positive industry results,” Mr Guse said.

“That being said, while the results for the year are positive, the underlying insurance margin of 16% is still below the results achieved by the industry in 2012, ’13 and ’14, so there is still a way to go.”

Mr Guse says the latest quarterly data from the Australian Prudential Regulation Authority shows premium momentum has continued this year, with the exception of compulsory third party (CTP).

“Putting CTP to the side, premium growth is happening across all lines of business, continuing that upward cycle swing that we are envisaging will happen,” he told insuranceNEWS.com.au.

The loss ratio improved to 63.5%, down 2.5 points due to higher reinsurance recoveries and reserve releases, with Cyclone Debbie the major catastrophe event during the year.

The expense ratio decreased to 24.8% from 26.2%. Distribution efficiencies were a key driver and premium gains also contributed.

But investment income allocated to insurance funds fell to $1.32 billion from $1.69 billion as the low interest rate environment continued.

The report also includes KPMG’s top 10 emerging trends for the Australian general insurance industry. Technological change and innovation dominate the list, with insurtech, digital, blockchain, artificial intelligence, cyber insurance and data analytics making up the top six.

Other trends listed are customer focus, risk mitigation, new accounting standard IFRS 17 and the increased focus on conduct and mis-selling.

See ANALYSIS.

Industry premium climbs to $45 billion

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General insurers recorded gross earned premium of $45.3 billion for the year to September 30, according to the latest Australian Prudential Regulation Authority statistics.

This was a slight increase on the previous year’s figure of $44.1 billion.

Outwards reinsurance expense totalled $13.3 billion, leaving net earned premium of $32.1 billion.

Of this figure, insurers from large groups accounted for 67.8%, personal lines insurers 14.4%, commercial lines insurers 9.8%, reinsurers 5.2% and lenders’ mortgage insurers 2.2%.

Gross incurred claims for the year totalled $33.2 billion, up from $31.5 billion, with the rise due to “increases in the short-tail property classes of business and inwards reinsurance”.

“In both cases this was largely driven by increased gross incurred claims from catastrophes, including Cyclone Debbie in the March quarter,” the regulator said.

The net loss ratio for the industry was 63%, compared with 66% the previous year.

Investment income dropped to $2 billion from $2.9 billion, and total net profit after tax was $3 billion, down from $3.1 billion.

Industry net assets were $27.2 billion at September 30, a decrease of $800 million from the previous year.

ACCC opens debate on premiums in north

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Northern Australians who face rising insurance premiums can air their grievances in public forums hosted by the Australian Competition and Consumer Commission.

The events follow a $7.9 million federal funding allocation to the commission for an inquiry into the supply of residential building, contents and strata insurance in the region.

Minister for Revenue and Financial Services Kelly O’Dwyer says the government will closely monitor the inquiry.

“If there is evidence to indicate the market is not competitive, or premiums are not properly reflecting the risks facing residents in northern Australia, the Government will consider the options available to improve insurance affordability,” she said.

Details of the public forums, which run into next month, are here.

Still a chance for La Nina, but not as we know it

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There remains a 50% chance of a La Nina weather event developing this summer, but experts believe it would not bring the increased rainfall usually associated with it.

The Bureau of Meteorology’s climate outlook for December-February predicts drier weather for northeast NSW and regions surrounding the Gulf of Carpentaria.

Elsewhere, average rainfall is expected, while temperatures are likely to be warmer for the eastern two-thirds of the country.

“Sea surface temperature patterns in the western Pacific and eastern Indian Ocean are not typical of La Nina, and are counteracting its normally wet signal,” the outlook says.

Climate change may also be playing a role in offsetting the usual impact.

“Australian climate patterns are being influenced by the long-term increasing trend in global air and ocean temperatures.”

Local fintechs named in world power list

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Ten Australian companies and three from New Zealand have made it onto the fourth annual Fintech 100 list.

And Cover Genius has become the first Australian insurtech to make the “emerging companies” section.

Australians in the top 50 are Prospa (24), Zip Money (37) and AfterPay Touch (44).

Airwallex, Cover Genius, Hyper Anna, Macrovue, MoneyMe Financial Group, Tic Toc and Valiant all make the “emerging 50”.

New Zealand companies Xero (16) and Pushpay (42) are in the top 50, and Banqer is in the emerging 50.

Insurtech Australia co-founder Brenton Charnley told insuranceNEWS.com.au the entries reflect the strength of the Australian and New Zealand fintech community.

“Australian companies now make up more than 10% of the top 100 fintechs in the world and this reflects the work of the whole Australian fintech community, including work by associations such as FinTech Australia to help further Australian fintech on the global stage.

“The diversity of Australian technology companies featuring in the list this year shows Australian technology is advancing on multiple grounds, with insurtech becoming a more prominent feature this year – with 12 insurtechs overall – and with the first Australian insurtech, Cover Genius, to make the emerging companies list.”

Mr Charnley says insurtechs act more as enablers than disruptors.

“This is because about 60% of Australian – and global – insurtechs are providing technology solutions to support incumbents or improve the existing value chain.”

The 12 insurtechs on the list are ZhongAn (China), Oscar (US), Clover Health (US), League (Canada), VertaaEnsin (Finland), Alan (France), Clark (Germany), Cover Genius, CoverWallet (US), Cuvva (UK), GrassRoots Bima (Kenya) and Sherpa Management (Malta).

All together now – Australian trucking tests on way

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Silicon Valley’s Peloton Technology will test its “truck platooning” systems in Australia in the “near-term”, potentially revolutionising the road freight sector.

Platooning involves multiple trucks driving in convoy, using sensors to closely follow the lead vehicle.

Delegates at the second international Driverless Vehicle Summit in Adelaide last week were told Peloton’s technology links safety systems between pairs of trucks and connects them to a cloud-based operations centre that limits platooning to appropriate roads and conditions.

Peloton’s system also claims to improve safety by using forward collision-avoidance systems.

Australia and New Zealand Driverless Vehicle Initiative Executive Director Rita Excell says the driving conditions and long-distance freight routes in Australia make automated trucks a “particularly promising technology”.

“This provides a realistic solution to the Australian transport industry in attracting and retaining skilled drivers for long-haul trips, by offering far more comfortable and safe working conditions.”

She says trials will begin in a closed road-testing environment, with her group in discussions with regulators and road authorities to determine the most appropriate location.

The summit also heard Australia will host manufacturing of several electric vehicles and their batteries, Ms Excell told insuranceNEWS.com.au.

Michael Molitor, Chairman of Uniti, says the Swedish-based tech company will bring manufacturing of three electric vehicles to Australia next year.

Ms Excell says insurers need to start thinking about new requirements during a “transformative time”.

“Compulsory third party is a key element that needs to be addressed quickly, and regulations that actually suit these vehicles, especially in the trial stages,” she said.

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Corporate

Zurich building in Australia as acquisitions pay off

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Zurich says it is strengthening its presence in Australia as it builds on brand recognition in the market and benefits from recent acquisitions.

Asia-Pacific CEO Jack Howell says travel insurance provider Cover-More, which the group acquired this year, brings a proactive approach to assisting customers and tailoring products.

“That is what makes Cover-More such a valuable proposition to us,” he told an investor day in London last week. “We bring that way of thinking to our other businesses.”

The purchase of Macquarie Life has provided improved distribution and scale, and allowed the company to develop a “stronger proposition”, he says.

“We took the best products Macquarie had to offer and the best products Zurich had to offer, and came up with a new product suite,” he said.

Zurich says it has strong brand recognition in Japan and aims to build its business in emerging markets.

“We can leverage that brand recognition when we move into other markets,” Mr Howell said.

Tower starts $64 million capital-raising

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New Zealand insurer Tower has reported an $NZ8 million ($7.3 million) loss for last financial year, as the Canterbury earthquake legacy continued to hit results and more recent natural disasters took a toll.

The company, which was to be acquired by Suncorp before the Commerce Commission blocked the deal, has also announced a $NZ70.8 million ($64.2 million) capital raising.

“That capital will provide Tower with a strong, durable base to appropriately manage risk and give confidence that the legacy of Canterbury is adequately provided for,” Chairman Michael Stiassny said. “It will also enable the acceleration of Tower’s transformation through investment in IT and digital.”

Tower’s net loss narrowed from $NZ21.5 million ($19.5 million) the previous financial year, while gross written premium increased 3% to $NZ312.4 million ($283.2 million).

“In the past 12 months we have grown our business, reduced management expense and contained claims costs, despite experiencing the highest number of natural event losses in more than 25 years, excluding the Canterbury quakes,” CEO Richard Harding said.

A $NZ1.6 million ($1.5 million) increase in second-half Canterbury provisions brought the full-year after-tax impact to $NZ11.4 million ($10.3 million), while a $NZ7.2 million ($6.5 million) additional risk margin was allocated for claims.

The Kaikoura quake last year caused a $NZ4.1 million ($3.7 million) after-tax impact.

Tower has selected tech group EIS to complete scoping and costing for an IT simplification program that will reduce the number of core systems from four to one.

“The new build is forecast to take 12 months, following which new business will immediately go live on the new platform and migration of the legacy book can start,” the insurer says.

Steadfast’s Kelly joins Johns Lyng board

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Insurance building and restoration services company Johns Lyng Group has appointed Steadfast CEO Robert Kelly to the board.

Johns Lyng, which debuted on the Australian Securities Exchange on October 26, says Mr Kelly will join as a non-executive director from next month.

“Having only recently listed… it is important that we have engaged directors who not only understand the insurance industry and business generally, but can navigate the challenges of the listed company space,” Chairman Peter Nash said.

The Melbourne-based company’s board also includes PSC Insurance Group MD Paul Dwyer.

Johns Lyng’s main business is rebuilding and restoring properties after damage caused by events ranging from floods, fires and malicious damage to large-scale weather events and catastrophes.

Its customers include insurers and underwriters, loss adjusters, brokers and large enterprises, and government departments that manage a self-insurance and maintenance program.

Mr Kelly, who has more than 45 years’ experience in the insurance industry, co-founded Steadfast and oversaw its ASX listing in 2013.

CFO set to depart from AUB

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AUB Group CFO Jodie Blackledge has resigned to pursue career opportunities “outside the insurance industry”.

Ms Blackledge was appointed in 2015 following the retirement of Steve Rouvray, having previously been CFO of The Trust Company.

In a note to the Australian Securities Exchange, AUB says she will serve six months’ notice to enable an “orderly handover”.

“An external search will be undertaken to find her replacement,” the statement says.

Gallagher puts Oatway in placement role

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Gallagher has created a specialist role focused on placing niche risks and supporting distressed accounts, in response to the “hardening market cycle across a number of insurance classes”.

MD of Corporate Broking Mark Oatway will move into the MD Placement position.

CEO Sarah Lyons says the move is a response to changing market conditions.

“As the market becomes more challenging for some clients, we want to be in the best possible position to advise and provide a way forward,” she said.

“In making this move we are not looking to disrupt our traditional operating model, however.

“Placement remains the role of our brokers and that is where we will continue to create value and make a difference for clients.”

Mr Oatway has led the corporate team since 2014.

Chubb shakes up distribution leadership

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Scott Simpson has been promoted to Head of State Distribution at Chubb Australia, under a new structure designed to enhance consistency and collaboration in the distribution network.

He will lead the National Underwriting Centre, Independent Broker Unit (IBU) and Global Broker Unit (GBU) underwriting teams across Australia.

Five state distribution managers will guide Chubb’s IBU and GBU in each branch: Dean O’Halloran (Victoria), Jon Longmore (NSW), Monica Holland (SA), Pat O’Neill (Queensland) and Steve de Gruchy (WA). They will report to Mr Simpson.

Jason Hawksworth will continue to lead the IBU across Australia as Head of Independent Broker Unit, and Perry O’Leary will take on the equivalent role for the GBU.

They are responsible for Chubb’s strategy within each broker channel, and will manage respective strategic carrier agreements.

Paul Martin has been appointed to the new role of Head of Business Analytics, Australia and New Zealand.

Chubb’s Country President for Australia and New Zealand John French says the new structure will “foster collaboration and effectiveness”.

iSelect CFO steps down for health reasons

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iSelect is searching for a new CFO after Darryl Inns resigned with immediate effect for health reasons.

In an announcement to the Australian Securities Exchange, the digital broker says its finance team will be overseen by COO Henriette Rothschild while a new CFO is recruited.

CEO Scott Wilson wished Mr Inns, who was appointed in July last year, the best “for his recovery and the future”.

Gold Seal restructures for post-Brexit world

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Intermediary training provider Gold Seal is establishing an international division to facilitate overseas growth and accommodate the London market in areas such as delegated authorities following Brexit.

MD Sheila Baker says as the UK nears its exit from the European Union, Gold Seal needs to prepare for the international spread of London’s operations and clients.

“We believe we can capitalise on current activity to grow a field of resources that will understand the international requirements of escalating regulation, stricter regimes in the markets and increased delegated authority activity,” she said.

Audit and Technical Services Manager Lorraine Calway and her team will largely lead the international operation.

Gold Seal currently has clients in Australia, Hong Kong, Singapore and New Zealand. From January 1 services to overseas clients will be provided by Gold Seal International.

Youi opens doors to $73m Sunshine Coast HQ

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Motor and home insurer Youi today unveiled its new $73 million global headquarters on the Sunshine Coast, at the Sippy Downs technology precinct.

The four-level building comprises 12,500 square metres of office space and accommodates up to 1700 staff.

CEO Frank Costigan says building the headquarters at Sippy Downs “reinforces our commitment to growing with the community”.

“We are one of the region’s major employers and have been part of the Sunshine Coast since Youi commenced its Australian operation with 30 staff in 2008,” he said.

The technology precinct is close to the University of the Sunshine Coast, enabling collaboration with the university.

Sunshine Coast Mayor Mark Jamieson says Youi’s commitment is expected to inject $1.2 billion into the local economy over the next decade.

The global headquarters will be home to all corporate functions, including IT, marketing and human resources, and it will feature an advice hub where customers can discuss their insurance or obtain information about products.

More than 900 staff will move from Youi’s offices at Birtinya before Christmas.

Stage two of the project will see a 12,500-square-metre wing added to the headquarters, providing space for up to 3000 staff.

Vero NZ helps isolated farmers obtain medical advice

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Vero Insurance New Zealand has partnered with the Best Doctors service to provide rural customers free access to medical specialists.

Best Doctors remotely connects people to a network of peer-nominated medical experts around the world.

It gives patients more information and options regarding their conditions, and helps treating doctors decide on the best course of action.

Vero Head of Rural Insurance Chris Brophy says about 700,000 New Zealanders live in rural communities and access to specialist medical advice is often limited.

“Having owners who are present and healthy is often a farm’s No.1 asset, so we’ve partnered with Best Doctors to help our customers who need expert medical advice but live too far away to get it,” he said.

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Regulatory & Government

Sims warns of collusion between price-bots

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Big Data can produce major benefits for consumers but also creates opportunities for collusion, the Australian Competition and Consumer Commission (ACCC) says.

Chairman Rod Sims believes data-driven innovation can help develop efficient solutions to everyday problems.

“However, these developments clearly have many consequences for markets, and the ACCC is considering cases where algorithms are deployed as a tool to facilitate conduct that may contravene Australian competition law,” he said in a speech in Sydney.

The ACCC has a Data Analytics Unit, which is deployed in a number of market studies and supports the work of investigations teams.

“Some argue that, in the right market conditions, pricing algorithms may be used to more effectively engage in and sustain collusion, whether ‘tacit’ or not, reducing competition but without contravening competition laws,” Mr Sims said.

“It is said that a profit-maximising algorithm will work out the oligopolistic pricing game and, being logical and less prone to flights of fancy, stick to it. To further complicate matters, the development of deep learning and artificial intelligence may mean companies will not necessarily know how, or why, a machine came to a particular conclusion.

“To this end, it is argued that if similar algorithms are deployed by competing companies, an anti-competitive equilibrium may be achieved without contravening competition laws.”

In response to businesses that think algorithmic collusion is a “get out of jail free card”, Mr Sims said: “You cannot avoid liability by saying, ‘My robot did it.’ ”

Cladding crisis prompts NSW building product laws

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New legislation in NSW will allow the Commissioner of Fair Trading to stop unsafe building products such as flammable cladding being used.

Better Regulation Minister Matt Kean says breaches could result in fines of more than $1 million for companies.

“London’s Grenfell Tower tragedy was a horrific and stark reminder of the importance of doing all we can to make people in high-rise unit blocks as safe as possible,” he said.

“We intend to be vigorous in using these new laws to make sure building products used in this state are fit for purpose.

“Any shonky operator who thinks they will be able to continue using the wrong product in the wrong place should think twice.”

Under the new laws, builders, building product suppliers, manufacturers and importers will be compelled to produce records so that dangerous products can be tracked and pinpointed.

Failure to provide this information will be a criminal offence, with penalties of up to $11,000.

Once Fair Trading identifies properties where building products have been used inappropriately, local councils will be notified.

Councils will have increased powers to force rectification where there is a safety issue.

Companies that continue to use a banned product will be liable for fines of up to $1.1 million, with fines of up to $220,000 for individuals.

Large CTP payouts push up ACT claim costs

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Average compulsory third party (CTP) claims costs in the ACT grew 11% to $132,204 last financial year, partly due to the finalisation of several multimillion-dollar payments.

Total payments made in the $1 million-plus category were twice those of the previous year, according to annual report figures. The bulk of claims finalised related to the 2014 and 2015 accident periods, with some from earlier years.

“These trends reflect both the existing CTP scheme design and the percentage of claimants who choose to pursue a court settlement for their claim,” the report says.

GIO has a 35.4% market share, up 4.5 percentage points, with NRMA Insurance’s share down 3.8 points to 56%. AAMI has a 7.8% share and APIA 0.8%, according to the figures.

The ACT is reviewing its CTP scheme, with a “citizen’s jury” this year putting forward ideas for improvement. A stakeholder reference group is to develop several models, with the jury to reconvene in March to recommend the best option to the Government.

The ACT Government says the present scheme does not cover everyone injured in a vehicle accident, and it can take up to two years or longer to get a full payout.

“Despite these gaps, the ACT has among the most expensive premiums in the country,” it says.

ICA calls for GST distribution reform

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The Insurance Council of Australia (ICA) has called for GST reform after a report found current distribution arrangements may discourage the phasing out of insurance taxes.

The Productivity Commission has published a draft report on its inquiry into Australia’s system of horizontal fiscal equalisation (HFE), which underpins the distribution of GST revenue to the states and territories.

The report says states and territories considering implementing efficient tax policies may be deterred by the effects of tax reform on GST redistribution under the present HFE system.

In a submission to the commission, ICA says it is “very concerned” the system may operate as “a material disincentive” to phasing out inefficient general insurance taxes.

“As the commission would appreciate, general insurance taxes, a form of transaction tax, can have a higher distortionary effect than other taxes; they significantly increase the cost of general insurance premiums for households and businesses and contribute to the incidence of non-insurance and underinsurance in Australian communities,” ICA says.

It says the removal of insurance taxes has been advocated by major national inquiries, such as the Henry tax review and the commission’s 2014 Inquiry into Natural Disaster Funding Arrangements.

“In this context, it is very concerning that the present system of HFE may be deterring Australian governments to adopt the recommendations of those important inquiries.

“[Since] the inquiry is considering whether the present system of HFE is in the best interests of national productivity, or whether there may be preferable alternatives, ICA strongly encourages the commission to recommend alternative GST distribution options.”

NIBA not convinced on tougher ASIC powers

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The National Insurance Brokers Association has questioned whether the Australian Securities and Investments Commission (ASIC) really needs greater interventions powers.

In a submission to Treasury on proposed changes, CEO Dallas Booth says the association supports the regulator taking action over breaches, but the consultation paper “appears to be suggesting existing legal remedies available to ASIC are too burdensome”.

“They require ASIC to establish allegations of breach to an appropriate level of proof.

“It would appear the proposals to give ASIC greater powers to issue directions are designed to give ASIC increased regulatory power without having to formally demonstrate or prove that a breach has occurred.”

Mr Booth says the association expects regulatory action to be based on “clear evidence of a breach” that would form the basis of a potential prosecution.

“ASIC’s existing powers are extensive and provide a wide variety of enforcement options, from infringement notices to serious criminal prosecutions and civil injunctions.

“The consultation paper does not critically review the powers and remedies currently available to ASIC. At this time, it is not clear to us that greater powers of intervention and direction are required.”

ICA pushes electronic disclosure case for regulations

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Improved electronic disclosure options could be addressed in revised contract regulations due to take effect next year, the Insurance Council of Australia (ICA) has told Treasury.

ICA is seeking options such as the ability to provide documents by hyperlink or via a website, which it says would support more innovative and contemporary disclosure methods.

The arrangements are available through the Corporations Act, but options are more limited under the Insurance Contracts Act 1984.

“We suggest that regulations be prescribed to make the electronic disclosure rules consistent with the Corporations Act,” ICA says in a submission to a Treasury review.

“We would be pleased to further explore with the Treasury how the regulations could be modified to achieve this.”

ICA’s submission also questions why the definition of “insured person” has been removed from the exposure draft of the revised regulations, due to take effect when the current document expires in April. “This would affect the operation of major insurance classes, such as sickness and accident, travel and consumer credit,” it says.

The submission also suggests several regulation improvements around duty of disclosure and exclusions to the definition of home building.

ASIC issues banning guidance for new panel

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The Australian Securities and Investments Commission (ASIC) says it will refer “banning matters” to a new Financial Services and Credit Panel when there are issues of significance, complexity or novelty.

“Sitting panels operate alongside our existing administrative processes and add an element of peer review to our decisions,” it says in Regulatory Guide 263.

ASIC priorities, the impact of a ban on industry practices, legal or factual complexities and new areas of practice or oversight will influence referrals, it says in the guide.

Individual panels will comprise two members selected from the main panel, taking into account relevant expertise, and an ASIC staff member.

The guide says the length of a ban should consider the risk a person poses to investors and consumers, including whether there are multiple instances of misconduct.

Subjects must be given an opportunity to present their case to a hearing, and they can raise any concerns about the panel’s composition.

“Generally, the affected person does not have to prove or disprove anything. Rather, they are given the opportunity to persuade the sitting panel to make a decision in their favour.”

The regulatory guide includes guiding principles and procedures for hearings, and outlines how decisions will be conveyed and the right of review.

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Life Insurance

Insurer profits drop 16%

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Life insurers are still struggling to build profits, recording a combined 16% decline to $2.2 billon after tax in the year to September 30, according to the latest Australian Prudential Regulation Authority data.

Net policy revenue fell 1.6% to $16 billion compared with the previous year.

The problem for life insurers was an 11.2% rise in net expenses to $9.4 billion. Drilling down into these expenses, claims grew to $9.3 billion from $8.2 billion, while policies maturing totalled $429 million, a slight increase from $427 million the previous year.

Surrenders and terminations fell to $420 million from $459 million. Upfront commissions were static at $1.4 billion, and trails declined to $2.3 billion from $2.7 billion.

Net policy revenue for individual lump sum business was static at $7.1 billion, while net policy expenses grew slightly to $2.8 billion from $2.6 billion. After-tax profit for this sector fell to $782 million from $1 billion.

Insurers are still losing money on income protection insurance: after-tax losses were $285 million, compared with $292 million the previous year. Net policy revenue fell to $1.9 billion from $2.3 billion. Net policy expenses grew to $888 million from $855 million.

Group life also suffered a decline in after-tax profits, to $252 million from $401 million.

Net policy revenue was static at $4.5 billion, while net expenses grew to $3.3 billion from $3 billion.

TAL makes premium gains, but income dips

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TAL has recorded an 8% rise in premium income to $1.79 billion for the six months to September 30, but this has not improved the life insurer’s bottom line.

Individual new business annual premium fell 2% to $70 million, but this was offset by a 154% rise in group life new business to $160 million.

Total annual premium from inforce policies grew to $2.8 billion from $2.6 billion in the corresponding period last year. However, claims were up 11% to $1.2 billion.

Total liabilities increased 94% to $4.8 billion, while operating expenses fell 5% to $316 million.

The outcome was a 29% decline in net income to $55 million.

TAL’s parent Dai-ichi says although revenue was driven by the 8% increase in premium, unfavourable investment conditions pushed net income down.

For the year ending in March, Dai-ichi Life Holdings forecasts TAL’s ordinary revenue will be $3.7 billion, up from $3.5 billion.

But it also forecasts a $31 million decline in TAL’s ordinary profit to $180 million.

Opportunities and risks in genetic testing, says Gen Re

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Insurers and customers alike can benefit from genomic advances “where the interests of both are aligned by a shared desire to avoid early death from known genetic risk”, Gen Re says.

“The [UK-based] PHG Foundation, a genomics think-tank, says applying genomic techniques is essential for insurers that are keen to offer a more holistic approach to customers,” Life and Health Underwriting Manager in Cologne Annika Tiedemann said.

Genetic testing is increasingly common and the cost is falling, encouraging consumers to access services online.

But Ms Tiedemann warns consumers’ use of predictive tests raises concerns the results could influence their approach to life insurance.

“Gene testing is used primarily in diagnosis,” she said. “Predictive genetic tests – the type bought over the counter – can determine a person’s risk of disease.

“Although the personalisation of treatment affords an individual the best chance of survival, in an underwriting context the priority is setting a reasonable premium on the basis of a statistical analysis.”

Ms Tiedemann says international legal jurisdictions have taken different approaches to allowing genetic testing results to be used in life insurance.

In Australia insurers may ask applicants if they have taken a test or plan to, and insurers select the information they use with extreme care.

The US has state laws that regulate when genetic information may be used. Canada has a judicial review considering recent legislation to prevent insurers using genetic tests.

In Europe some countries ban the use of genetic testing results. Others allow limited use on specific policies, while some have no regulations.

“Perhaps this is why the Council of Europe has left open the possibility of the use of genomic data by the insurance industry,” Ms Tiedemann said.

There are arguments for using or banning genetic testing, she says.

“On the one hand, any new information used by insurers must be evaluated carefully, because not all genetic information is useful at accurately predicting risk,” Ms Tiedemann said.

“But it is important to take into account the financial and moral risks to insurance pooling associated with a consumer holding potentially valuable risk information they are not obliged to share.”

Insurers urged to work on product clarity and education

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Insurers must increase transparency and simplicity in their products to win public trust, according to a new report by Zurich and the Smith School of Enterprise and the Environment at the University of Oxford.

The report – called Embracing the Income Protection Gaps Challenge: Options and Solutions – urges life insurers to promote best practice by offering life code-compliant products.

They are also advised to improve coverage of mental health and raise awareness of mental health issues.

Governments should improve product clarity by supporting the design and marketing of products that are transparent and easy for consumers to understand. The report also encourages governments to increase financial literacy by focusing policy attention away from theory-based financial education programs.

They should support programs that combine instruction with application and practice of concepts, plus individual counselling, the report says.

Governments should also consider giving incentives to employers to invest in medical monitoring, and health and fitness programs. Authorities, too, should raise awareness of mental health issues and act to improve the community’s mental health.

The report examines how governments, employers, insurers, financial advisers and individuals can work together to reduce underinsurance.

Australia was among 12 countries assessed. Local research shows people who have experienced income loss due to serious physical issues are more likely to have insurance.

Australian men are more likely to have cover than women, a high percentage of whom are not the main wage earner in their household.

Zurich Australia Life and Investments CEO Tim Bailey says the study throws up a number of issues for the life insurance industry.

“Inadequate or inappropriate life insurance cover could expose Australian families to the serious risk of depleted household budgets,” he said. “The burden of guaranteeing long-term financial security is simply too great for many individuals to bear.”

Mr Bailey says improved financial literacy is “a critical driver of financial security”.

“The recent government announcements about the strengthening and extending of the Australian Securities and Investments Commission’s MoneySmart program are very encouraging, although there is clearly more to be done by all stakeholders,” he said.

ASIC updates guidance on ‘independent’ tag

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Use of the terms financial planner or financial adviser have been included in the Australian Securities and Investments Commission’s revised Regulatory Guide 175.

It also includes guidance on when the term “independent” can be used by an adviser.

The guide covers licensing of financial product advisers and has been updated to reflect terms such as “independently owned”.

Advisers can use these terms only if they do not receive commissions, volume-based payments or other gifts or benefits, and operate without conflicts of interest.

Advisers rebating commissions in full can retain their independent status.

Non-conforming advisers have until December 31 to remove terms such as “independently owned”, “non-aligned” or “non-institutionally owned” from any documents.

Deputy Chairman Peter Kell says the regulator wants to ensure financial services providers are accurately describing their services.

“Consumers should not be misled into thinking a person is free from conflicts of interest solely because they use terms such as ‘independently owned’,” he said.

Other amendments to the guide include changes to statements of advice that will be included in an updated Regulatory Guide 90.

AZ buys Victorian life advice practice

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High-profile life insurance adviser Mark Dunsford has sold his Victorian practice to AZ Next Generation Advisory (NGA) for $6.1 million.

The deal for Dunsford Financial Planning includes swapping 49% of the practice’s equity for AZ NGA shares and a progressive buyback of these shares during the next 10 years.

The remaining 51% stake will be paid to the founding partners in cash over two years.

Dunsford Financial Planning was established in 1983, providing advice on aged care, superannuation and pensions, life insurance, estate planning, business and major life events.

The Australian Securities and Investments Commission’s adviser register shows Mr Dunsford became an authorised representative of Synchron on November 7, having been with Now Financial Group for five years.

Sergio Albarelli, CEO of AZ NGA parent Azimut Holding, says the Australian advice business is growing at a “very solid” pace.

“We keep adding valuable professionals to our team who will enable us to exploit every market opportunity we will come across,” he said.

“We look to close the year with further growth, both organic and external.”

S&P lifts Challenger Life outlook

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S&P Global Ratings has revised its outlook on Challenger Life from stable to positive and confirmed its “A” financial strength and issuer credit ratings.

“The positive outlook on the group reflects our expectations in the medium term regarding Challenger Life’s strengthening business profile,” the ratings agency says.

“We expect Challenger Life’s expansion of its distribution network, including the Japan-based MS&AD Group joint venture and access to material domestic platforms, to lessen the constraints of its limited product diversification.”

S&P says there is a one-in-three chance it will raise the long-term ratings a notch to “A+” within the next two years. This is based on the annuities provider growing its distribution networks and strengthening its balance sheet, without taking excessive risk.

“We anticipate Challenger Life will maintain its very strong market position, focused on the provision of a range of annuities,” S&P says. “The positive outlook incorporates our expectation the insurer will maintain its extremely strong capital adequacy throughout the next two years and continue to improve its risk management controls.”

The outlook could revert to stable if earnings fall below expectations, there is a reduction in capital adequacy, or it experiences growth problems or exposure to higher-risk assets.

Adviser banned for five years over churning

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A Queensland adviser who was found to have churned life insurance policies has been banned from the industry for five years.

Dean Hartmann was the authorised representative of his own practice, Hart Ensole, in Toowoomba.

An Australian Securities and Investments Commission review of client files found he failed to act in clients’ best interests when advising on life insurance, encouraging them to switch policies without demonstrating why they should.

Mr Hartmann did not conduct reasonable investigations into clients’ objectives for insurance requirements.

When he returns to the industry, he will be required to adhere to a number of supervision requirements.

OneView portal goes mobile

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ANZ Wealth’s online adviser portal, OneView Life, now offers mobile access to obtain client and policy information.

Head of Life Insurance Gerard Kerr says the new dashboard provides weekly customised reports and give advisers immediate access to client information and correspondence.

“Advisers [can also] lodge policy update requests such as updating contact information or declining a consumer price index increase without the need of a client signature,” he said.

“These enhancements respond to adviser feedback that efficiency, self-service and mobile capability are critically important for their business.”

ANZ Wealth will offer OneView Life training sessions for advisers in coming weeks.

AMP enhances LIF support for advisers

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AMP has added a practice diagnostic tool and video tutorial series to its Life Insurance Framework (LIF) resource hub.

The diagnostic tool helps advisers identify areas of their business that need attention under the LIF reforms. It also provides an action plan to prepare for the change.

The video tutorial series features eight sessions focused on practice management.

It covers topics including pricing and revenue models, target markets and value propositions.

The series has been developed in conjunction with independent advice expert Sue Viskovic.

AMP Director Insurance Proposition Greg Johnson says advisers are negotiating a period of significant change.

“They’ve worked hard to identify how their businesses will be affected by the legislation taking effect from January 1,” he said.

“The enhancements to the LIF hub will provide advisers with further tools and support to help them get across the line in transitioning their business into the new environment.”

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The Professional

Claimant storms stage at NZ awards event

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The annual New Zealand insurance industry awards night in Auckland last week was briefly hijacked by an aggrieved claimant.

Jerry Larason, a Christchurch resident who has still not settled his claim from the 2011 earthquakes with Vero New Zealand, donned black tie, armed himself with a megaphone and made his way into the function with guests.

However, his protest was stymied because Vero won no awards. When he finally attempted to make his protest, he was stopped and escorted out.

Mr Larason, who has previously protested outside Vero NZ offices wearing a prison costume, received prime-time attention on New Zealand TV news for his ambush attempt.

However, the following day he was invited to meet Vero executives, who say it is Mr Larason who is delaying the payment by refusing to settle.

Winners of the New Zealand Insurance Awards, which were organised by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF), are:

  • Service provider to the industry of the year: Smith & Smith
  • Professional services firm: Cunningham Lindsey
  • Women’s employer, sponsored by Fidelity Life: ANZ (including OnePath Life)
  • Young insurance professionals’ employer: Gallagher Bassett
  • Insurance learning program of the year: Rothbury Insurance Brokers
  • Innovation of the year: NZI for implementing the Guardian system into its fleet
  • Small-medium broking company of the year: Frank Risk Management
  • Large broking company, sponsored by NZI: Rothbury
  • Life insurance company: Fidelity Life
  • Underwriting agency: Delta Insurance
  • Intermediated insurance company: NZI
  • Direct general insurance company, sponsored by JB Hi-Fi: FMG
  • Young insurance professional: Tony Seto, Willis Towers Watson
  • Broking professional, sponsored by Vero NZ: Kim Matthews, Rothbury
  • Insurance leader, sponsored by DLA Piper New Zealand: Peter Harris, CBL Corporation
  • ANZIIF lifetime achievement awards, sponsored by Asteron Life: Max Marsh from Crombie Lockwood and Karl Armstrong from IAG.

ANZIIF CEO Prue Willsford says the awards are an opportunity to celebrate the industry, its people and their achievements.

2018 Valerie Baker Award applications open

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Applications are now open for the annual Valerie Baker Memorial Award, recognising excellence in the general insurance intermediary sector.

The winner will fly to the UK for a tailored education experience that includes visiting Lloyd’s and meeting brokers, underwriters and other senior members of the London market.

This year’s winner, Karen Hardy of Acme Insurance Brokers in Queensland, has donated $1000 spending money for the winner.

“Anyone with passion for our industry and their community should apply – it is the gift that keeps on giving,” Ms Hardy said.

The judging panel comprises Jim Rudkin from Steadfast, Lloyd’s Australia General Representative Chris Mackinnon, Martin McAvenna from Austbrokers & IBNA Member Services and Gold Seal MD Sheila Baker.

They will be looking for examples of ethics and values, business success, client relationships, teamwork, innovation and entrepreneurship, and industry contribution.

Applications close on March 1. For more details and to nominate or apply, click here.

Sura to host broker meeting

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Sura will hold a market day in Perth on November 28, allowing brokers to talk to its specialist underwriting agencies.

To attend the event at Fraser’s in Kings Park from 9.30am-1.45pm, click here.

UAC to vote on board positions

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Five Underwriting Agencies Council (UAC) member representatives will compete for four vacancies on the board at the annual general meeting in Sydney on December 14.

Seeking re-election are Chairman Lyndon Turner, CEO of NM Insurance; Deputy Chairman Kurt Nilsen, MD of Lion Underwriting; and Company Secretary Peter Fryer, Underwriting Governance Manager at XL Catlin.

The other two candidates are Eric Lowenstein, CEO of Tego Insurance, and Leo Abbruzzo, Dual Australasia’s GM for Australia and New Zealand.

“The willingness of member agencies’ key executives to volunteer for board positions illustrates the importance the agency sector has achieved in the broader industry,” UAC GM William Legge said.

AIG appoints A&H head

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Dean Longmuir will return to AIG as Head of Corporate Accident and Health Australia, based in Melbourne.

He will manage all aspects of group personal accident business, including underwriting, segmentation, and broker and client management.

Mr Longmuir was previously sales and distribution manager for metro, broker and agency at Allianz for six years, before which he held senior underwriting roles at AIG and Chartis.

Zurich recruits Vic/Tas manager

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Hamish MacLean has been appointed State Manager Victoria and Tasmania at Zurich.

Before joining Zurich he was GM at Adroit Insurance Group and held senior roles at Marsh and Willis, gaining more than 15 years’ broking experience across Australia and New Zealand.

In his new role Mr MacLean will be responsible for business development, general management and growth across Zurich’s portfolios in the two states.

RACQ Insurance appoints product and pricing boss

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Tracy Green will return to her home state to become GM Product and Pricing for RACQ Insurance, replacing Luke Saxby, who becomes GM Insurance Distribution.

Ms Green has spent the past eight years at IAG in Sydney, most recently as EGM product and underwriting. She has also held senior roles at Suncorp, TIO and NRMA Insurance.

She will manage the underwriting and pricing of product portfolios, oversee new insurance initiatives and product development, and support RACQ Insurance’s partner engagement model.

Gallagher Bassett names self-insurance chief

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Ben Sheat has been appointed GM Self-Insurance at Gallagher Bassett, based in Melbourne.

The former physiotherapist has been the third party claims administrator’s national self-insurance manager since March. In his newly established role he is responsible for management and performance of the national self-insurance business unit.

Before joining Gallagher Bassett Mr Sheat served as a technical specialist and senior manager in the self-insurance and workers’ compensation schemes for Allianz and CGU.

He says the Federal Government’s decision to open the Comcare scheme, which allows federal agencies and departments to partner with third party administrators, will create “a lot of opportunities to roll out innovation and improvement in the those portfolios”.

Mr Sheat’s team was recently appointed to provide self-insurance claims management services for public sector employees on behalf of the NT Government.

Kaplan sets up cyber-security library

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Financial services training provider Kaplan Professional has added a cyber-security library to its professional development platform Ontrack.

CEO Brian Knight says increased cyber-security education is imperative as society becomes increasingly technology-driven and more businesses deliver services online.

“There is no margin for error when it comes to properly protecting customer data, so it is paramount businesses and their employees are well informed and across the latest cyber-security protocols they can implement,” he said.

“A significant number of security breaches are the result of human error, because the employee has not followed policy or has not received the training that would have alerted them to the potential threat.”

The first release of 10 articles addresses topics such as cyber risks, preventing and managing attacks, and legislative requirements, with new content to be added each month.

The cyber-security library is available for standalone purchase or as part of an Ontrack subscription.

RGA Australia board adds ex-MLC director

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RGA Australia has appointed Elana Rubin as an independent director.

Ms Rubin holds a number of other directorships, including with the Victorian Managed Insurance Authority, ME Bank, Transurban Queensland, Mirvac Group and Afterpay Touch Group.

She was previously chairman of AustralianSuper until 2013 and a director of MLC and TAL.

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International

Global reinsurer profitability may hit six-year low

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A catastrophe-ridden 2017 could drive global reinsurer profitability to a six-year low, according to AM Best.

The combined operating ratio for the sector is estimated at 110% following hurricanes Harvey, Irma and Maria, along with Mexico earthquakes, compared with a five-year average of 91%.

AM Best’s global reinsurer composite was last above 100% in 2011 when catastrophes included earthquakes in Japan and New Zealand and flooding in Thailand.

The Best’s Briefing report says return on equity this year may range from zero to minus 5% compared to the five-year average 11%, while insured losses associated with the hurricanes and earthquakes could reach $US90 billion ($119 billion).

Based on company feedback, net catastrophe losses for reinsurers will range from $US20-25 billion ($26-33 billion) with an equal amount of losses incurred by alternative capital, mostly in the form of collateralised reinsurance.

“Using history as a lesson, it is not uncommon for losses related to catastrophe events to develop adversely over time, and the complexity is usually a determining factor in this year,” AM Best Senior Director Robert De Rose said.

“Given the complexity of the hurricane events, it would not be surprising to see losses develop well into next year.”

Natural disasters ‘will increase until 2060’

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Climate change will lead to an increase in natural disasters until at least 2060, according to the World Meteorological Organisation (WMO).

The WMO presented its latest reports on atmospheric greenhouse gas concentrations at the opening ceremony of the United Nations climate change negotiations.

Its Secretary-General Petteri Taalas told delegates annual average concentrations of carbon dioxide exceeded 403 parts per million last year.

“Emissions are levelling out, but concentrations – because CO2 remains in the atmosphere – increased at a record pace from 2015 to 2016.

“[Last year] was the warmest on record – 1.1 degrees above the pre-industrial period, partly due to a strong El Nino event. [This year] is expected to be one of the three warmest years on record, and the warmest not influenced by El Nino.

“The last five-year average global temperature is expected to be the highest on record.”

Mr Taalas says the increase in global temperature is accompanied by other far-reaching changes.

“Sea surface and ocean temperatures are among the warmest on record. Global sea levels continue to rise, so far by 26cm.

“Arctic and more recently Antarctic sea-ice extent continues shrinking. Ocean acidification threatens marine ecosystems and fisheries, and coral reefs are bleaching.

“The North Atlantic hurricane season broke records and led to massive loss and damage in the Caribbean and US. There were major monsoon floods in South Asia and continuing severe drought in east Africa.

“These events demonstrate the power of the climate system to affect the wellbeing of people, disrupt natural ecosystems, threaten food security and trigger displacement and migration.

“Due to the inertia of the climate system, we expect to see the negative trends with a growing [number] of disasters to continue until the 2060s.”

Mr Taalas calls for “greater ambition” in climate mitigation.

“We have a couple of decades to carry out a considerable change in our energy, transport and dietary systems to avoid major problems for future generations.”

US lower house approves flood program renewal as expiry looms

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The US House of Representatives has reauthorised the National Flood Insurance Program (NFIP), putting its extension a step closer as an expiry date nears.

“It’s now the Senate’s turn,” Risk and Insurance Management Society (RIMS) VP Robert Cartwright said. “The NFIP’s expiration would have significant repercussions, affecting both corporate and residential property owners.”

RIMS says the program is a priority and it has established a grassroots advocacy initiative to help secure swift action by the Senate. “We are now asking the Senate to do the same – pass legislation to reauthorise the NFIP and include language that would increase the number of private insurers entering the market,” it says.

Legislation passed by the House of Representatives allows the Federal Emergency Management Agency to enter into and renew flood policies through to 2021/22. That authority is currently due to expire after December 8.

The legislation would also make changes to improve the program’s financial status.

Borrowing from Treasury increased following hurricanes Katrina, Rita and Wilma in 2005 and Superstorm Sandy in 2012, and the program was hard-hit again by this year’s storms.

Climate-conscious insurers pull $26 billion from coal industry

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Fifteen insurers have collectively divested about $US20 billion ($26.36 billion) in equities and bonds from coal companies, or ceased to underwrite coal projects, according to a new report.

The Insuring Coal No More Scorecard rates 25 of the world’s largest insurers and reinsurers on their investment exposure to the coal sector.

It says the shift away from coal is “gathering momentum” and may be approaching a tipping point after Axa became the first global insurer to reduce investment in coal in 2015.

Zurich recently announced plans to divest from and cease underwriting companies that depend on coal for more than 50% of their business.

Swiss Re and Lloyd’s have flagged new approaches, many of which go beyond the efforts undertaken by early movers such as Allianz, Aviva, Axa and Scor.

However, the report says US insurers lag behind their European counterparts, with none having taken meaningful action on coal and climate change.

Berkshire Hathaway, AIG and Liberty Mutual have remained “completely silent” about the catastrophic climate risks affecting their clients.

Elsewhere, Hannover Re, Chubb and Mapfre have taken no action on coal, while Generali and Munich Re have taken “baby steps”.

Dan Gocher from Australian environmental pressure group Market Forces, told insuranceNEWS.com.au the difference in attitudes between US and UK insurers comes down to “societal norms”.

“The US, like Australia, is still debating the science [of climate change], rather than trying to come up with a solution,” he said.

While Mr Gocher does not expect insurers in Australia to start immediately divesting from coal, he says it is a question of stopping the industry’s expansion.

“We’re a big coal exporter, but at least we can start to put the brakes on the industry,” he said.

As more insurers take action to exit the coal sector, the scorecard will be updated at UnfriendCoal.com.

AIR updates California wildfires bill

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AIR Worldwide estimates insured losses from the Tubbs, Nuns, Atlas, Redwood and Sulphur wildfires in California will be $US8-$US10.5 billion ($10.58-$13.89 billion).

The catastrophe modeller’s loss estimates represent damage to home, mobile home, commercial and motor lines, and direct business interruption losses.

They include demand surge – increased rebuilding costs – but do not take account of extra expenses such as debris removal.

However, uncertainty remains regarding vineyard losses, with the value of equipment, machinery and inventory potentially exceeding contents values contemplated in AIR’s industry exposure database.

Talanx profit declines after catastrophe losses

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HDI Global parent Talanx has reported a 30% decline in nine-month earnings after warning its third quarter would be hit by hurricanes in the US and Caribbean and earthquakes in Mexico.

Earnings fell to €444 million ($691.9 million), while the combined operating ratio deteriorated to 103.1% from 96.6% in the corresponding period last year.

Chairman Herbert Haas says Talanx still expects a dividend payout at least equal to a year earlier.

“This shows the group is in a solid and robust position and can also cope with exceptionally severe loss events,” he said.

Losses worth €327 million ($509.6 million) are attributed to primary insurance, while €894 million ($1.39 billion) is attributed to reinsurance.

Gross written premium grew 6.3% to €25.2 billion ($39.3 billion), with the industrial lines division reporting gains in Australia, Hong Kong, the UK, France and Japan.

HDI Global Australasia MD Stefan Feldmann says Australia generated double-digit growth in the first three quarters, delivering solid underwriting results.

“The Australasian office is nicely positioned to benefit from the firming of the insurance market in Australia,” he told insuranceNEWS.com.au.

Talanx forecasts full-year net profit will rise to about €850 million ($1.32 billion) next year from its €650 million ($1 billion) forecast for this year.

UN hails climate resilience and insurance program

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A new global partnership aims to provide insurance to millions of vulnerable people and increase resilience to climate change.

The InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions was unveiled at the United Nations Climate Conference in Bonn, Germany.

It aims to bring the “V20” group of countries most vulnerable to climate change and the G20 group of the world’s strongest economies together around one table.

More than 30 partners from governments, international organisations, academia and the insurance industry have already expressed support and commitment.

The announcement comes after a year of devastating extreme weather events in Asia, the Caribbean and the Americas.

The partnership supports data and risk analysis, technical assistance and capacity-building according to countries’ needs and priorities.

“People devastated by recent weather events and communities vulnerable to climatic impacts are looking to the nations meeting in Bonn for an answer, for support and hope for the future,” UN Climate Change Secretariat Executive Secretary Patricia Espinosa said.

“This new and higher-ambition initiative represents one shining example of what can be delivered when progressive governments, civil society and the private sector join hands with creativity and determination to provide solutions.”

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Analysis

Profits up, but tech challenges looming

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The latest KPMG General Insurance Industry Review presents a buoyant picture, with profitability on the rise as rates increase, while the industry has also seen cost benefits from technological change.

The report says industry profit ended the financial year up 25% to $4.85 billion, while the combined operating ratio decreased to 88.3% from 92.2%.

Gross written premium increased 5%, while the overall improved performance delivered an underlying insurance margin of 16.1%, up from 13.6% a year earlier.

That is still below levels around 18% in 2012 and 2013, but Australian Prudential Regulation Authority data shows premiums have continued to strengthen this financial year, and the industry is well placed for a further profit recovery.

“I still see there is a bit of gas in the tank, so insurers can improve their profitability in future years to get up to those recent highs we had five, six years ago,” KPMG partner Scott Guse told insuranceNEWS.com.au.

Risks to the outlook include whether insurers can maintain pricing discipline and ensure growth is not eroded through short-term market-share competitive forces, according to the report.

On the claims and expenses side, insurers gained some relief in the past year because catastrophes such as Cyclone Debbie were large enough to trigger reinsurance recoveries.

“There hasn’t been a lot of storms or weather events that have fallen just below that reinsurance level, where the insurance companies have had to wear the entire costs themselves,” Mr Guse said.

“I have described it as death by a thousand cuts in previous years, where you have one little storm after another and they all add up.”

The high-risk season for natural catastrophes is still ahead for this year, of course.

The expense ratio decreased to 24.8% last financial year, after hovering near 26% in the past four years, with a shift in distribution channels providing a key driver as technological change accelerates.

At the business and large-scale corporate end, brokers remain the preferred channel, but distribution for retail car, home and travel products is increasingly shifting to mobile, digital or online options, and away from call centres or branch-based alternatives.

“Customers are becoming more comfortable researching and then purchasing their general insurance products on their mobile phones, while on the train or bus going to work or even while they are waiting for their daily coffee,” KPMG Insurance Sector Leader David Kells says.

“While this trend is producing more cost-effective distribution platforms for insurers, it does highlight the need for insurers to make sure their mobile websites are easy to use and tailored for a mobile device.”

Mobile searches related to travel insurance jumped 28% from a year earlier, while for car and home the increase was 26%.

Mr Kells says maintaining cost discipline will likely see some insurers focus on greater automation, with advanced intelligence and robotics, while others continue with offshoring and outsourcing efforts.

More widely, the report notes insurers will need to further explore the potential of technological advances and embrace the opportunities it offers to continue their momentum.

In a list of 10 emerging trends, it names insurtech, digital, blockchain, artificial intelligence, cyber and data analytics in the top six positions. Technological changes and disruption also feed into the seventh-ranked emerging trend, identified as the need to become more customer-centric.

“The reality is that customers, investors and employees demand innovation,” KPMG says. “Indeed, they expect it, not only from technology providers and device manufacturers, but also from insurance organisations.”

The report says Australia is increasingly seen as an attractive place to test customer-focused technologies and the current insurtech buzzword is “partnering”.

A recent survey of more than 100 insurance CEOs, conducted by KPMG International, also found more than one-quarter of respondents see automation – a key step towards robotics – as the answer to managing skills gaps.

Other emerging trends rounding out the top 10 are risk mitigation, the start of new accounting standard IFRS 17 and requirements to manage conduct and mis-selling risks.

“Conduct, culture and customer experience should be thought of as the three legs of a tripod,” KPMG says. “Many established players are so focused on managing conduct risk that it proves a struggle to fix issues relating to culture or customer experience.”

In summary, KPMG sees better times ahead for the industry with the hardening of the insurance price cycle, but a caveat that emerging trends around technology and disruption will determine its longer-term future.

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