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Queensland braces for ‘destructive’ Debbie

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Tropical Cyclone Debbie is on course to make landfall in Queensland tomorrow, as the state braces for what could be its biggest storm since Yasi in 2011.

The Category 3 storm is predicted to continue moving west-southwest towards the north Queensland coast, bringing sustained winds of 100kmh.

“The very destructive core of… Debbie is forecast to cross the coast between Townsville and Proserpine on Tuesday morning, with wind gusts potentially to 230kmh near the centre of the system,” the Bureau of Meteorology says.

The bureau’s Queensland Regional Director Bruce Gunn says the storm is dangerous and the biggest since Tropical Cyclone Yasi, which resulted in insured losses of more than $1.3 billion.

Suncorp says its main catastrophe program and the additional natural hazard aggregate protection bought for 2016/17 will cover claims arising from Debbie.

The main catastrophe program provides cover from $250 million to $6.9 billion, while the added aggregate protection provides $300 million of cover once the retained portion of natural hazard events greater than $5 million exceeds $460 million.

Appeal court extends Pratten’s sentence

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Former Sydney insurance broker Charles Pratten has been given an extended prison sentence for tax evasion and breaching a restraining order, and will now be eligible for parole from October 2019.

The Commonwealth Director of Public Prosecutions (CDPP) argued his original sentence, handed down in April last year, was too lenient.

The NSW Court of Criminal Appeal has now resentenced Pratten to jail until May 2022 for some of the charges against him.

It has fixed his non-parole period to three years and nine months.

The appeal court found the original judgement was manifestly inadequate, saying there was too much reliance on some of Pratten’s evidence and legal arguments.

“The offender’s evidence also disclosed that [he] set upon a deliberate course of conduct in the expectation that, by returning the monies and calling them loans, he could escape a considerable amount of income tax,” the new judgement says. “This course was neither accidental nor lacking dishonesty.

“It is also clear from his evidence that the offender lacks any remorse and was prepared to dissemble and give explanations that he knew to be incorrect, in order to avoid the consequences of his conduct.

“I consider his prospects of rehabilitation poor, because he rationalises his conduct and considers he has done nothing wrong.”

The appeal judgement also notes Pratten has not paid the tax liability outstanding, despite the original judgement making an assumption it had been paid.

Another factor supporting the CDPP appeal is the dismissal of Pratten being a first-time offender: there were a number of occasions, dating back to 1997, when he was convicted of failing to submit tax returns.

Pratten faces another court case involving the Australian Federal Police, with a hearing due on April 6 in the NSW Supreme Court.

He was initially found guilty of seven counts of obtaining financial advantage by deception and one count of breaching a restraining order.

The deception charges related to not paying tax on about $5 million of income arising from $19 million of premium transferred by Rural and General Insurance Broking to companies in Vanuatu. The restraining order related to the failed removal of a fishing boat to Vanuatu.

Fels links home policy prices to market failure

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NSW Emergency Services Levy Insurance Monitor Allan Fels has attracted industry criticism after saying wide price differences for home cover suggest competition is deficient and providers are making it difficult for consumers to compare policies.

The Insurance Council of Australia (ICA) says price divergence reflects policy variations in a highly competitive market, while the industry is taking steps to look at comparability options.

“Professor Fels would have much stronger grounds to be concerned if all premiums were the same,” ICA CEO Rob Whelan said.

The monitor collected pricing data as part of its role ensuring the emergency services levy (ESL) is correctly removed from insurance policies from July 1 in NSW.

The data reveals an average difference of up to $1100 for basic home and contents policies when comparing quotes for identical properties across 11 suburbs.

The difference between the cheapest and most expensive quote in Medlow Bath, in the Blue Mountains, is almost $1700, with one insurer quoting a price more than 2.5 times higher than another.

“Different suburbs have different characteristics and you would expect to see price differences across locations,” Professor Fels said. “But it’s very concerning there are such big differences in prices quoted for the same property. It suggests competition is not fully effective in this industry.”

Professor Fels says insurers are “ignoring calls” to list last year’s policy costs on renewal notices and have been “very quick to oppose” independent home insurance comparison websites.

Mr Whelan says policies offer varying inclusions and exclusions, with different limits, while some are for total replacement and others for agreed value.

ICA has reiterated widespread concerns, including among regulators, about price comparison websites and says it will this year conduct an industry review of product comparability options.

ESL Insurance Monitor guidelines on providing previous-year prices were released last September.

“Despite the short timeframe and having to operate without full knowledge of the ESL legislation, which is yet to be passed by the NSW Parliament, insurers are exploring the feasibility of doing so within the constraints of their technology,” Mr Whelan said.

Two insurers have committed to the disclosure as part of a trial and ICA is helping to share information across the industry around the impact on consumer behaviour.

“If the trials result in positive consumer outcomes, wider implementation of this disclosure can be encouraged,” Mr Whelan said.


Email attacks dominate SME cyber breaches

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Phishing or email scams account for more than half of cyber attacks suffered by Australian SMEs, according to a survey by cyber-security group Symantec.

One in 10 SMEs has been affected by ransomware attacks, and 34% of those paid the average ransom of $4677 in exchange for their stolen data.

About 8% of businesses that paid did not receive their files back.

Despite the risk of falling victim to cyber attacks, almost a quarter of survey respondents have no internet security solution, because they do not view it as a priority.

“It’s tough running a small business at the best of the times and sometimes businesses overlook things until it’s too late,” Symantec says. “Businesses shouldn’t wait until they’ve been hit by a cyber attack to think about what they should have done to secure their information.”

SMEs should consider investing in cyber insurance, Symantec says.

The Norton cyber-security survey’s summary findings were extracted from a national sample of 1023 business owners and operators last August.

Large Kaikoura aftershock still possible

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A major aftershock following last year’s Kaikoura earthquake remains “well within the probabilities”, according to modelling by New Zealand’s GeoNet.

There is a 15% chance of one or more 6-6.9-magnitude quakes within the next month, GeoNet says in its latest assessment, issued last week. The risk has eased from 18% in last month’s outlook, but remains about five times greater than normal expectations.

GeoNet says 14,796 quakes have occurred since the 7.8 Kaikoura event in November. Of those, four were of magnitude six or greater and a further 56 ranged from 5-5.9.

The aftershocks have mostly been in a broad area from North Canterbury through to Cook Strait, which separates the North and South islands.

Aftershock probabilities in Christchurch, hit by major quakes in 2010 and 2011, are not greatly affected by the Kaikoura event, GeoNet says.

Road safety strategy is failing: campaigners

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More funding is needed to combat road trauma, with an average of 25 deaths and 700 serious injuries occurring in Australia each week, the Australasian College of Road Safety (ACRS) says.

In a pre-budget submission to the Federal Government, the college says the 2011-20 National Road Safety Strategy, aiming to reduce road deaths and trauma by 30%, is failing.

“Road trauma – that is deaths and serious injuries in Australia – is tragically rising after decades of reductions,” the submission says.

“Our performance when compared internationally has fallen from among the top 10 to the bottom of the top 20 countries.”

The cost to the nation is estimated at more than $32 billion a year.

The ACRS wants the Government to “recognise and fund” the National Road Safety Strategy and continue to help it “build knowledge and capacity for road safety professionals”, especially in regional areas, where 66% of trauma occurs.

It wants the Productivity Commission to undertake a full inquiry into the impact of road trauma on productivity, and identify policies to achieve a safer road transport system.

The ACRS calls on the Government to make the publication of target safety star ratings a condition for any Commonwealth investment in the national road network from 2017/18.

The submission asks the Government to secure greater safety results from its current investment in road transport, and to ensure all new vehicles have best-practice safety technology.

The ACRS wants funding for a communications specialist and seven collaborative programs, to the value of $5.2 million over three years.

The Royal Australasian College of Surgeons, Carers Australia and the Australian Automobile Association support the submission.

ABS reveals freight load figures

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Articulated trucks carry most (76.8%) of Australia’s road freight despite accounting for only 5% of all registered freight vehicles, according to Australian Bureau of Statistics figures.

The national domestic road freight “task” is estimated at 204.5 billion tonne-kilometres (tkm), or the equivalent of a B-double truck making about 4250 return trips to the moon.

Each articulated truck travelled 1.75 million tkms, compared with rigid trucks at 99,370 tkms and light commercial vehicles at 5464 tkms.

The bureau’s Director Transport and Tourism Statistics Amanda Clark says the figures should be considered in the context of the Federal Government’s National Freight and Supply Chain Strategy, which “aims to improve the safety and productivity of the freight task in Australia”.

Last year saw 108 deaths from 95 crashes involving articulated trucks, down 5.9% on 2015. Another 90 deaths resulted from 79 crashes involving heavy rigid trucks, a 6.8% increase.

Rigid trucks accounted for 19.2% of all road freight, and light commercial vehicles transported 4.1% of the road haul.

Victoria had most road freight at about 54,306 million tkm, followed by Queensland (47,468 million tkm), NSW (45,225 million tkms) and WA (33,153 million tkms).

About 30% of the total tonnage moved around Australia was crude materials, 14% was food and live animals, and 12% manufactured goods.

The bureau also reports the estimated number of registered motor vehicles on Australian roads is 18.2 million.


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An article in last week’s bulletin said CGU is offering a 25% home insurance discount via a partnership with online mortgage marketplace HashChing. The rebate is provided by HashChing.

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Suncorp to raise $250 million via notes offer

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Suncorp plans to raise $250 million through a notes offer as part of its capital management program.

The company has appointed UBS as arranger and joint lead manager, along with stockbroker Morgans and National Australia Bank.

“The capital notes offer will further strengthen Suncorp’s capital position and is a key part of our ongoing funding and capital management strategy,” CFO Steve Johnston said.

Institutions and Suncorp security holders are eligible to participate in the offer, while the notes will also be available to other investors through brokers.

The minimum investment in the notes is $5000, with holders receiving quarterly payments. The offer opens on April 4 and the capital notes issue date is May 5.

Progressive acquisition a ‘significant step’ for Hollard

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Hollard’s acquisition of US insurer Progressive Direct’s Australian motor business marks a significant expansion, CEO Richard Enthoven says.

As reported in a Breaking News bulletin on Wednesday, the deal is expected to be completed in the fourth quarter of this year.

Mr Enthoven told the acquisition will add $40 million to Hollard’s annual premium.

Before the deal his company expected to write $660 million in premium this financial year.

“It is a significant expansion of our motor portfolio in our quest for scale,” he said. “We have made a handful of bolt-on acquisitions previously, but this would be the largest.

“Progressive has a really pleasing track record of innovation and there is plenty we can learn from it.”

Mr Enthoven believes Hollard is “a few years away” from hitting $1 billion in premium, and further acquisitions are on the cards.

“We are a deeply entrenched top 10 insurer in Australia now,” he said. “We are always on the lookout for opportunities that fall within our risk appetite.”

Ohio-based Progressive Direct, one of the world’s largest vehicle insurers, made its first move into the global market in December 2009 when it moved into Australia, saying its “low-cost, price-competitive online sales/claims model” would suit the local market.

PD Insurance Agency – a company created and partly owned by Hollard and Progressive’s Australian Country Manager Simon Lindsay “and others” – will be the authorised agent servicing Progressive’s Australian policies until the transfer to Hollard, and will start operating this Friday.

The agreement allows Hollard and PD Insurance Agency rights to use the Progressive brand in connection with car insurance in Australia until late 2019.

Ex-Zurich chief establishes SME insurtech

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Former Zurich Australia and New Zealand CEO Daniel Fogarty and two other executives will launch an insurtech later this year targeting SMEs.

Evari’s digital platform aims to simplify the online buying and managing of insurance.

“We are using technology to create a great customer experience and solve challenges that SMEs face when buying their insurance,” Mr Fogarty said.

“I know first-hand the challenges incumbents have trying to get innovation into the insurance process, and I firmly believe there is a better way of servicing the needs of small businesses.”

Evari’s two other co-founders are financial services executive Robert Jeffery and digital innovation expert Brack Norris.

“With experience in insurance, banking, risk, small business, user design and technology… the Evari team [is] working hard to make sure business owners can relax, knowing their insurance is taken care of,” Evari’s website says.

IAG trials multi-peril crop cover

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IAG expects more than 100 farmers to participate in a pilot program offering multi-peril crop insurance for wheat, barley and canola growers.

Under the one-year pilot, the crop income protection product will be offered to identified Landmark customers insured with CGU and WFI in Victoria, WA, SA and NSW.

The cover protects against yield shortfall caused by perils such as flood, frost, drought and vermin.

EGM Agribusiness Andrew Beer says IAG has been working for some time on the standalone multi-peril product.

“Unlike other products in the market, our product gives farmers a choice around the yield amount they wish to cover [and] the ability to select the price per tonne paid for that shortfall,” he said.

CBL seeks US entry point through takeover

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New Zealand-based CBL Corporation is seeking access to the world’s largest insurance market by acquiring New York insurer Affirmative Direct for $US5.7 million ($7.45 million).

As reported in a Breaking News bulletin last week, the acquisition would give credit and financial risk insurer CBL a US vehicle with valuable licences, allowing it to write niche business within its core expertise.

MD Peter Harris says CBL has established business links in the US and expects to start writing business before the end of the year.

“The opportunity to gain direct access to this market in a low-risk, controlled and manageable way when we are ready is one we don’t want to pass up,” he said.

Affirmative wrote non-life insurance from 1987 and began running off its business in 2007.

It has no outstanding claims or run-off insurance, but holds cash and cash investments, regulatory capital and insurance licences in 14 US states.

Affirmative’s capital is enough to write business for several years without the need for additional capital from CBL. The company announced in October that it was seeking to raise up to $NZ63 million ($58.2 million) to finance its expansion plans.

Affirmative will be sold with no employees or employee liabilities. However, CBL will appoint US-resident independent directors.

CBL, which bought Sydney-based Assetinsure in 2015, will also provide initial product capacity, underwriting and claims management expertise, along with the managing general agents appointed to write Affirmative’s business.

Once the business is large enough, CBL expects to build a US-based management structure.

CBL is funding the acquisition through cash resources. The deal is subject to approval from the New York Department of Financial Services, which can take up to four months.

After regulatory approval, a name change is proposed to align with the CBL brand.

CHU unveils energy comparator

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Steadfast-owned strata specialist CHU Underwriting Agencies today launched an energy comparison service, to help consumers in strata properties get the best utilities prices.

CHUiSaver Energy is the first non-insurance product from the CHUServices division.

“The strata sector is poorly represented when it comes to offering tailored solutions and cost savings via collective purchasing arrangements,” CEO Bobby Lehane told

“We aim to fix this by leveraging our strong reputation and distribution networks within the strata sector.”

The comparison and purchase service ranks all relevant products in CHU’s system, and provides exclusive offers based on data provided by the consumer.

Swiss Re finds a global chief in Sydney

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Swiss Re has promoted Sydney-based Mike Mitchell to a global role as Head of Property and Specialty Reinsurance at Swiss Re, and will move to Europe.

He will replace Edouard Schmid, who will become Group Chief Underwriting Officer, from July 1.

Mr Mitchell is at present Head of Property Underwriting and Property Casualty Facultative Asia Pacific. He has worked in the reinsurance sector for 30 years, and joined Swiss Re in 1997.

His previous roles include head of property and casualty for Asia-Pacific, chief property underwriter and head of structured reinsurance solutions.

Mr Mitchell has also worked at Mercantile & General Re in London and Singapore, specialising in property and casualty underwriting.

Melbourne underwriter takes global role

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XL Catlin’s Regional Product Leader Property, Energy and Construction Tim McMahon has been made Global Chief Underwriting Officer, Property, based in London from May 1.

Mr McMahon has more than 20 years’ experience in (re)insurance and joined XL Catlin in 2011 as head of property Asia-Pacific, based in Singapore, before being promoted to his current role based in Melbourne.

“Tim has an impressive track record at XL Catlin and is ideally positioned to further develop our property solutions to achieve profitable growth,” CEO Insurance Underwriting Neil Robertson said.

UK regulator backs Zurich’s Cover-More takeover

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The UK Financial Conduct Authority has approved Zurich’s $741 million acquisition of travel insurer Cover-More.

Cover-More shareholders voted this morning in Sydney on the takeover.

The travel insurer’s board has unanimously recommended shareholders back the Zurich offer.

Genworth outlook downgraded as key customer departs

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S&P Global has revised its outlook on lenders’ mortgage insurer Genworth Australia to negative from stable after it lost its second-largest client, Macquarie Bank.

Macquarie Bank represented about 14% of Genworth’s gross written premium (GWP) in 2015/16 but it elected not to renew its contract, effective next month.

It is Genworth’s second major client loss in the past couple of years, after Westpac left in 2015.

S&P Global expects Genworth Australia’s GWP to deteriorate further this year – a change from its previous expectation of modest growth.

This follows a 2015/16 decline in GWP of about 25%, more than the ratings agency had anticipated.

“While Genworth Australia remains the largest participant in the market, the further shrinking of its business… has pressured its very strong competitive position, in particular its market position and earnings resilience,” S&P Global says.

However, the agency has reaffirmed Genworth’s A+ rating, to reflect the “company’s leading market position, strong capitalisation and solid operating performance”.

“We recognise the decline in GWP has been partially driven by industry-wide contraction, reflecting regulatory measures to curb investor lending growth and reduced lender risk appetite for high loan-to-value ratio loans,” S&P Global says.

About 88% of residential mortgage-backed securities (RMBS) transactions in Australia and New Zealand are exposed to lenders’ mortgage insurance.

Genworth insures about 25% of loans underlying Australian RMBS transactions as of last December 31. In New Zealand the exposure is about 4%.

“Any deterioration in the financial strength of lenders’ mortgage insurance insurers could affect RMBS ratings,” S&P Global says.

It says RMBS exposure to lenders’ mortgage insurance has declined in recent years.

“We expect the trend to continue as issuers move to reduce ratings dependency risk caused by lenders’ mortgage insurance exposure.”

This also reflects a shift away from high loan-to-value ratio loans, for which lenders have traditionally obtained mortgage insurance.

International Network of Churches renews with Ansvar

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Heritage and church insurer Ansvar says it will provide cover for Australian members of the International Network of Churches (INC) for the eighth year.

The renewed policy covers INC’s Australian churches and related programs, and includes a new motor fleet offering.

“INC has a broader range of activities than just churches, including education and community services,” INC CFO Suellen Holmes said. “We greatly value the cumulative knowledge Ansvar has gained of our organisation over the past eight years.”

Ansvar is part of UK-based Ecclesiastical, which is owned by registered charity Allchurches Trust.

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Regulatory & Government

NIBA questions FSI accountability proposals

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The National Insurance Brokers Association (NIBA) “is struggling to understand” how Treasury proposals requiring insurers to identify target and non-target clients can be practically enforced.

Consumers have varying risk requirements, and insurance policies on the market have different sets of significant features, it says.

“In the circumstances, we are not at all sure whether it is possible to determine what might be significant features of an insurance policy,” CEO Dallas Booth says in a submission.

“What would be regarded as significant will undoubtedly vary from consumer to consumer, and from risk to risk.

“NIBA is struggling to understand how a requirement of this nature could be created as a legal obligation, and how it would operate in practice given the very wide variety of risk scenarios in the community, and the wide variation in the ability of consumers to assess and understand the products that are being offered.”

The Government has accepted a series of recommendations from the 2015 Financial System Inquiry, including ensuring products are targeted at the right consumers and giving the Australian Securities and Investments Commission (ASIC) temporary product intervention power.

NIBA expresses a “serious concern” with giving ASIC such authority without first considering the effectiveness of the corporate regulator’s current powers.

“We fail to see how the rights of ASIC under the Insurance Contracts Act for a breach of the duty of utmost good faith, and the ASIC Act in relation to misleading or deceptive conduct, would not allow it to address systemic issues,” Mr Booth says.

“NIBA is also concerned that the proposals will give ASIC very wide, quite subjective powers to intervene in financial markets, where there may or may not have been a breach of the Corporations Act or other relevant law.”

Treasury’s proposal paper says product intervention power includes authority to impose additional disclosure obligations, require amendments to advertising documents and restrict or ban the distribution of a product.

ICA backs NSW insurance law reform

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The NSW Law Reform Commission’s proposal to replace Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946 should be implemented, the Insurance Council of Australia (ICA) says.

Section 6’s relevance is increasingly doubtful because it was enacted more than 70 years ago, and it needs updating to meet current commercial needs, it argues.

“ICA has long advocated for legislative reform to address the inherent uncertainty created by Section 6,” CEO Rob Whelan says. “ICA supports the commission’s proposed draft bill.”

Section 6 was introduced to protect people from parties attempting to escape their financial obligations, but critics say its obscure drafting leaves significant areas of uncertainty and inadequacy in modern-day application.

Its application is unclear around directors and officers’ insurance policies, claims made and notified policies, liability for pure economic loss and contracts for reinsurance, the NSW Law Reform Commission says.

“The new provision should ensure a plaintiff can recover from an insurer in appropriate cases,” the commission says. “It should ensure that the insurer is not liable for more than the insurer would have been liable to pay under the insurance contract.

“It should also ensure the insurer can rely on the same defences and reductions that the defendant could have relied on in an action brought by the plaintiff.”

The commission recommends giving plaintiffs the right to recover against a defendant’s insurer, and discharge of the insurer’s obligation to the defendant under the insurance contract if there is any payment to the plaintiff.

Tasmania casts doubt on comparator

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A government-run comparison website for home and motor cover would be difficult to implement and may not help consumers buy appropriate covers, the Tasmanian Government says in a submission to a Senate inquiry into the general insurance industry.

Instead, insurers should better help clients understand their specific coverage needs, especially at policy renewal time, and use “unambiguous” communication.

“An insurance comparison service would not be able to address the issue of people not being aware of or understanding their specific risks,” the Tasmanian submission says. “In contrast, Tasmania considers that an improved and ongoing program of engagement between the insurers and the insured would address this issue.

“The Tasmanian Government has previously advocated for insurance companies to actively engage with policyholders to provide them with easy-to-understand and unambiguous information about the level of risk from natural disasters that may threaten a property.”

Consumer confusion about coverage was exposed after last year’s floods, which cost Tasmania more than $180 million in damage.

It remains challenging to differentiate between storm damage and flood damage, despite the introduction of fact sheets to explain the definitions, and a comparator may not make the distinction clear to the consumer, the submission says.

“A key issue in relation to how a comparison service may work in relation to coverage for natural disasters, particularly floods, is how a comparison could be reasonably made between the nature and extent of flood coverage that different policies offer when the cause of such flooding is often the subject of complicated legal disputes.”

The Senate Economics References Committee will report by June 22.

ASIC issues guide on risk management systems

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The Australian Securities and Investments Commission has released guidelines on how financial services licensees can maintain adequate risk systems.

Licensees are legally obliged to have such systems in place, to mitigate exposure to relevant risks and inform business decision-making.

“The guidance promotes the early identification and management of risks by responsible entities to help avoid the adverse consequences that may affect investors,” the regulator says.

“There have been a number of collapses of responsible entities that resulted in significant losses to investors and where we consider inadequate risk management systems to have played a role.”

The regulatory guide – RG 259 – provides guidance on establishing and maintaining suitable risk systems, identifying and assessing risks, and managing these risks.

“We consider that the development of adequate risk management systems is not a ‘set and forget’ or one-off process,” the guide says. “The systems should adapt and evolve to take into account internal changes within the responsible entity and the schemes it operates, as well as changes in the external environment.

“To ensure risk management systems are always current, relevant, effective and complied with, they should be monitored and reviewed as frequently as appropriate, given the nature, scale and complexity of the business and the schemes operated.

“This should be at least annually.”

To see the guide, click here.

BOM tightens ties with emergency services

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Emergency services will receive “better weather support” from the Bureau of Meteorology under an agreement that took effect last week.

The National Emergency Services Intergovernmental Agreement follows a three-year drive to implement high-quality, standardised bureau weather and flood services.

“During the past 100 years of the bureau’s history, it has worked closely with individual state and territory emergency services,” Environment and Energy Minister Josh Frydenberg said.

“However, this intergovernmental agreement formalises this arrangement and ensures these high-priority services are provided to all emergency services agencies across the country.”

Senators call for higher penalties on white-collar crime

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A Senate Economics References Committee inquiry into white-collar crime has called for higher civil penalties.

“The committee considers there is overwhelming evidence and support for increasing the current levels of civil penalties for white-collar offences in the Corporations Act,” its report says. “The committee is reluctant to specify a particular penalty amount.”

The penalty for individuals was set at $200,000 in 2001, with corporations set at $1 million two years later.

The Australian Securities and Investments Commission told the committee the penalties have not kept pace with inflation and, compared with other countries, are at the lower end of the scale. It supports an increase but did not give a suggested scale.

Some submissions suggest penalties should be three times the benefit or loss caused by the offender. Others want $1 million penalties for individuals and $5 million for corporations.

Some want proceeds of crime removed from offenders. The Australian Federal Police told the committee confiscation of criminal assets is “a vital tool in taking the profit out of crime and preventing the reinvestment of criminal profits into further criminal activity”.

The report says: “The committee notes the importance of multiples-of-benefit penalties in ensuring white-collar offenders are not able to profit from their crimes and misconduct in this respect. The committee considers there is a need to introduce multiples-of-benefit penalties in relation to non-criminal offences.”

The committee also heard calls for longer maximum prison terms for white-collar crimes.

“The committee is satisfied the maximum prison terms available in Australia are comparable to those available in similar foreign jurisdictions. Broadly speaking, the committee considers current maximum terms of imprisonment for white-collar crime to be appropriate.”

It says courts should impose imprisonment as a last-resort punishment.

And it notes mandatory sentencing would reduce the prospect of co-operation or guilty pleas in what are often complex cases.

Regtech businesses form industry group

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A group of 13 regulatory technology, or regtech, companies including Kaplan-owned Red Marker have formed an association aimed at developing the fast-growing industry.

Regtech generally refers to technology-driven solutions to meeting regulatory and compliance requirements.

The RegTech Association will formally launch on Thursday at law firm Allens’ office in Sydney, when a panel session will discuss ways to foster growth.

“With a unified focus on succeeding through promoting an inclusive environment that will make an impact together… the association will stand as advocates for promoting the achievements, partnerships, collaborations, incubations and seeding of regtech in Australia,” the association website says.

“The association is dedicated to enhancing regulatory outcomes and promoting good corporate practice in the management of compliance.”

The Australian Securities and Investments Commission says regtech has great potential to help companies build compliance culture and meet requirements in a more cost-effective manner.

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Life Insurance

ASIC clears CommInsure of legal breach allegations

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The Australian Securities and Investments Commission (ASIC) has cleared CommInsure of any legal breaches related to using out-of-date medical definitions in policies.

It says the law allows an insurer to define what a policy covers.

“ASIC found there is no legal basis for us to take enforcement action in relation to this concern,” the regulator says in a report.

“This is because the law allows the insurer to set out the cover its policy provides and to define what it means by various terms, including medical terms.

“Under the law, it can use definitions that are out of date, as long as it clearly discloses those definitions in the policy.”

But ASIC says CommInsure has fallen short of community expectations of life insurers.

Regulators met the insurer to discuss reviewing definitions and general exclusions, and meeting conditions of the new Life Insurance Code of Practice.

CommInsure has agreed to apply its updated heart attack definition from October 2012 – when global cardiology bodies published an updated consensus on clinical markers for heart attack.

The insurer will identify consumers affected by this change and pay them compensation.

ASIC has also cleared the company of bullying its panel of doctors to reject claims.

And the regulator found “no evidence that the alleged practice in relation to doctors being selectively chosen to give preferred opinions in favour of the insurer had occurred within the claims handling function of CommInsure”.

ASIC has also cleared CommInsure of legal breaches in its claims handling processes.

“We conducted a range of enquiries, including reviewing CommInsure's relevant policies and procedures, conducting interviews including with representatives of customers, reviewing client files and conducting a review of the data and complaints retained by Financial Ombudsman Service and the Super Complaints Tribunal,” the report says.

“We also spoke to consumer legal centres to understand the issues faced by consumers.”

But again, the regulator says claims procedures fall below consumer expectations or best practice. It has written to CommInsure to address these concerns.

ASIC is continuing to investigate advertising for the insurer’s Total Care Plan, sold through financial advisers, and Simple Life Insurance, sold direct.

“Our review particularly focused on the promotion of heart attack cover within trauma or critical illness cover, and identified a number of potential concerns.

“These concerns related to statements made about the coverage provided by these products before the definition of heart attack was updated in March [last year].”

AFA calls for ASIC levy to reward good behaviour

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Advisers’ good behaviour should be recognised through lower levies to fund the Australian Securities and Investments Commission (ASIC), the Association of Financial Advisers (AFA) says.

“The AFA considers if cost recovery is the primary aim of the model, the levy system should reflect where the costs are being expended with a behaviour-based system,” it says in a submission to Treasury.

“[This would] reward good behaviour with discounts on annual levies, rather than penalise poor behaviour with loadings.”

The AFA says the draft ASIC funding bill does not reflect such a system.

Since draft regulations for the cost-recovery system have not been released by Treasury, the association argues a reward system can still be introduced.

The AFA also criticises the lack of supporting documentation for the bill. It expected a regulatory impact statement to accompany it, but the Government has given no indication when this will happen.

“The reason the AFA considers a regulatory impact statement necessary for this reform is that there must be consideration of the quantum and impact of the levies upon small business practices,” the submission says.

“Small business practices must not be unfairly burdened by being required to carry the same averaged load as larger or institutional licensees.”

The AFA wants a levy in proportion with the risks each licensee type carries.

“It would also be unfair for a licensee that supervises several provisional financial advisers to pay the same annual levy as other equivalently sized licensees if its ASIC regulatory activities are not the same. The AFA queries why the draft bills do not recognise this difference.

“The AFA recommends Treasury reconsider the levy system with variable costs that recognise the differences in size of licensees being supervised.”

BT hails its life insurance business

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BT Financial Group considers its life insurance business an integral part of operations that is delivering good results, according to CEO Brad Cooper.

“We have a disciplined approach to how our products are distributed, with most sold through an adviser, because we believe life insurance is a complex product that needs either personal or general advice to support it,” he said.

Among parent Westpac’s customers, 4.8% hold a BT life insurance policy.

Mr Cooper says BT Life has reported 1.8% growth in market share between 2012/13 and last financial year, compared with declines among its major rivals.

Lapse rates were below the industry average of 15.1% last financial year, at 11.9%.

He says BT’s customer focus has helped it avoid claims issues experienced by other life insurance groups.

“Our strong policy framework and transparent claims management processes has further strengthened our business,” Mr Cooper said. “Our claims philosophy has consistently focused on customer wellbeing, with attention given to early intervention and rehabilitation.”

He says the next steps for life insurance are digital quoting and underwriting, new life stage products, and a digital interface with medical professionals.

BT will consider moving into group life, but only on a selective basis. Mr Cooper believes the master trust segment offers a better risk-return profile.

The business has identified $250 million of savings, but this will involve restructuring its reinsurance in this and the next financial year.

Lump sum, income protection lapses drop

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Declining lapse rates in individual lump sum life insurance have countered flat new business sales in the market, according to Dexx&r MD Mark Kachor.

Last year’s lapse rate was 13.3%, down from a peak of 15.8% in December 2012.

Lump sum new business in the three months to December 31 fell 10% to $336 million, compared with the corresponding quarter of 2015.

Lapse rates for income protection business continue to decline, down to 13.8% last year from 14% in 2015.

Mr Kachor says improved retention rates are helping the market return to profitability.

New sales for income protection grew 8.7% to $521 million last year.

Research house Dexx&r says the largest life insurance company in Australia is TAL with $2.64 billion of annual inforce premium at December 31, giving the Japanese-owned company a market share of 17.1%.

It is followed by AIA Australia with $2.27 billion inforce premium and a share of 14.7%, then AMP, once the market leader, with $1.96 billion and 12.7%.

MLC – now Japanese-owned and previously second in market share – is fourth with annual premium of $1.9 billion and a 12.3% share.

CommInsure holds an 11.5% share with $1.77 billion of annual premium.

Super trustees renew push for life commission ban

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The Australian Institute of Superannuation Trustees has again called for all life insurance commissions to be banned.

In a submission to a Senate inquiry into consumer protection laws, it argues there is no evidence to support the idea commissions deliver better life insurance advice.

“It is reasonable to assume that more than one-third of life insurance advice received by retail clients is still not in their best interests,” the submission says.

“Despite the recommendation of the Financial System Inquiry that upfront commissions should be abolished, subsequent proposals did not go this far.”

The institute notes upfront commissions will remain even after the Life Insurance Framework legislation takes effect this year.

“No evidence has been presented that these [framework] changes will be sufficient to overcome widespread problems with the quality of life insurance advice. There is no basis for allowing the retail life insurance industry to continue to pay commissions, which have been banned for the rest of the financial services industry since 2013.”

Most NZ advisers avoid life sales

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About 40% of New Zealand authorised financial advisers (AFAs) provide life insurance advice, according to the latest Financial Markets Authority report on the sector.

In the year to last June 30 there were 1800 AFAs, with 80 leaving the industry and 120 joining in the period.

Among those selling life insurance, about 35% advised 1-20 clients on the product. About 30% advised 21-50 clients on life cover, and less than 5% advised more than 200.

More than half of AFAs selling life insurance did so on a replacement-business basis to 1-10 clients. Less than 5% provided replacement life insurance advice to more than 50 clients.

More than 40% of AFAs received a commission from their service providers – a figure that has remained static over three surveys from 2014.

Less than 20% received a bonus based on sales volumes – again, unchanged since 2014.

AFAs were asked if they received other benefits from product providers, including training, business development courses, entertainment or international travel.

More than 60% said no, although about 40% attended training sessions.

Retirement income stream products gain tax break

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Life insurers introducing new retirement income stream products will receive a tax exemption on income from supporting assets.

New draft regulations released by Treasury cover products such as deferred annuities that are payable or held for an individual who has reached retirement.

The income stream payments will be treated as super benefits for tax purposes.

“The new standards are intended to cover a range of lifetime products that do not meet the existing annuity and pension standards,” the draft regulation notes say.

“Under the new standards the income streams would be required to be payable for a beneficiary’s remaining lifetime.”

The regulations state the payments could be guaranteed by the provider through returns on a collective pool of assets or the mortality experience of asset pool beneficiaries.

Products may also have a deferral period for annual payments and could be cancelled subject to a declining capital access schedule and preservation rules.

An annuity must meet certain conditions, including payments commencing only after retirement, a terminal medical condition or the customer reaching the age of 65.

Payments must be at least annual, there is no deferral after an agreed start date for payments, and there are restrictions on how much can be paid as a lump sum.

Treasury says there are transition arrangements for a benefit paid from a contract established after July 1 this year.

Revenue and Financial Services Minister Kelly O’Dwyer says the rules will remove tax barriers to the development new annuity products.

“These new rules will provide greater flexibility in the design of income stream products to give more choice to consumers, while ensuring income is provided throughout retirement,” she said. “The development of these new products is a precursor to the development of comprehensive income stream products for retirement.”

Submissions on the draft regulations close on April 12. They can be sent to

Senators push for new financial services inquiry

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Legislation was introduced to the Senate last week calling for the equivalent of a royal commission into the financial services industry.

It demands an inquiry that will report to Parliament, rather than a royal commission that reports to the Government.

The Banking and Financial Services Commission of Inquiry Bill was introduced by Peter Whish-Wilson and supported by senators Pauline Hanson, Derryn Hinch, Jacqui Lambie, Malcolm Roberts and Nick Xenophon.

Senator Whish-Wilson told the upper house the inquiry is needed “to hold the banking and financial services sector to account”.

He says continuous revelations of misconduct within the banking and financial services sector in recent years have undermined the trust of customers.

“This inquiry will reduce risk and improve stability in Australia’s financial system.

“It will allow us to carve out and cleanse the corrosion that threatens the entire system. As a result, our financial system will be stronger and more resilient, and it needs to be.”

The inquiry would be led by a former judge and cover banks, insurance companies, superannuation funds, advisers and financial product retailers.

It would be empowered to examine the extent of misconduct and its impact, and causal factors including incentives, culture, inadequate regulation and regulatory power.

The commissioner would have power to compel witnesses and the production of evidence.

Liberal Senator Jane Hume told the Senate the Coalition does not support the Bill.

“Such a commission will not benefit consumers and nor will it benefit the Australian economy,” she said. “A royal commission will cost taxpayers millions and millions of dollars. It will take so many years to complete. It would undermine the confidence that we have in our banking sector.”

Senator Hume says a number of financial services industry inquiries are being held by both houses, with reports due in the next year.

“It is unnecessary to take it to a further inquiry with royal commission powers or a commission of inquiry,” she said. “We will be plagued by inertia waiting for yet another inquiry – an incredibly expensive and totally unnecessary inquiry.”

Leader of Opposition Business Senator Katy Gallagher says Labor believes current inquiries are leading towards a royal commission.

“Labor’s firm position is that a royal commission into Australia’s banking and financial services sector is the only way to get to the bottom of all the rip-offs, scandals and misconduct we have seen across the sector in recent years,” she said.

“Labor is supportive of the commission of inquiry legislation in a very broad sense, subject to going through our normal party processes.”

The Bill’s second reading will continue after it ran out of time last week.

Extend unfair contracts terms to life cover: AFA

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Unfair contract terms should be statutorily extended to life insurance contracts, the Association of Financial Advisers (AFA) says.

Its submission to a Senate inquiry into consumer protection laws says the move is long overdue.

“The Productivity Commission recommended it in 2008, and in 2009 the Senate Economics and Legislation Committee recommended the same,” the submission says. “Consumers are not provided with adequate protection in insurance contracts under existing law.”

The association argues different policy premiums for individual contracts do not justify exempting the life insurance industry.

“Surely insurers should be subject to the same consumer protection laws that apply to all other consumer goods and services. The AFA recommends the Federal Government reopen the previous attempts to extend unfair contracts terms to life insurance policies.

“This is a glaring gap in the Australian Consumer Law and should be rectified without delay.”

The AFA also calls for the Life Insurance Code of Practice to foster a new culture among life insurers.

It wants consumers’ health and wellbeing put alongside sustainable financial performance, restoring the social licence granted to life insurers to protect families.

“People need to trust insurers to be fair and reasonable.

“A code could be the vehicle to restore this trust and social licence – provided it is constructed to hold insurers to account for their commitments to consumers’ best interests.”

The AFA says the code “needs substantial improvements before it can achieve the intent with which it was promised. A review of the code has been scheduled to take place by July 2019 and if it is not improved shortly after this to restore insurers’ social licences, the AFA considers the Government should consider intervening to develop a statutory code.”

AMP advice boss joins FSC board

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AMP Group Executive Advice and New Zealand Jack Regan has been appointed to the Financial Services Council (FSC) board.

He has also been made co-chairman of the FSC’s Advice Board Committee.

Mr Regan has spent more than 35 years in the financial services industry, including executive roles at St George Bank, IOOF and GIO before joining AMP’s Hillross advice network.

He is now responsible for AMP’s advice and direct businesses in Australia, and the company’s New Zealand operations.

“It’s a privilege to be appointed to the board of the FSC, which plays a critical role in supporting the growth and success of the financial services industry,” he said.

“The FSC is helping to drive positive outcomes for its members and their customers and I look forward to contributing to these endeavours.”

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QBE confirms claims head

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Jon Fox has been appointed EGM Claims at QBE Australia and New Zealand after serving seven months in the role in an interim capacity.

Before that Mr Fox was head of the Elders Insurance division for more than five years.

“With Jon’s strong guidance and encouragement, we’re seeing improvement in the way we manage, monitor and measure claims to provide the best possible service to our customers,” Australia and New Zealand CEO Pat Regan said.

Mr Fox has previously held senior claims roles at AMP General, GIO, Suncorp and Elders, where he led formation of the national claims function.

Andrew Corbett has been appointed GM of Elders Insurance after 10 months acting in the role.

AIG appoints Private Client chief

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David McMurdo has been promoted to Head of Private Client Group (PCG) Australasia at AIG.

Mr McMurdo has spent more than eight years at AIG, most recently as national partnership manager and national underwriting development manager.

He has also held senior roles at Zurich and Allianz in London.

PCG is part of AIG’s Global Personal Insurance strategy, and has been central to the consumer business in Australia for the past decade.

Head of Individual Personal Insurance Australasia Tony Martiniello says Mr McMurdo’s “experience and deep understanding” of the high-net-worth and emerging wealth market make him ideally suited.

Plant joins ANZIIF board

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Insurance & Care NSW (icare) Group Executive Innovation Tim Plant has been appointed to the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) board. 

Before joining icare Mr Plant was QBE Australia and New Zealand CEO and EGM Corporate partners and direct. He has more than 25 years’ insurance and reinsurance experience.

“It’s always wonderful when someone with such extensive experience in insurance and reinsurance can add their voice to the mix,” ANZIIF President Karl Armstrong said.

JMD Ross broker takes board seat

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JMD Ross Insurance Brokers Senior Broker John Davaine has been promoted to the board one year after joining the Sydney-based company.

Mr Davaine is a specialist risk broker with more than 25 years’ experience, joining the industry in 1990 from university.

“[He] has the can-do attitude that epitomises what JMD Ross Insurance Brokers stands for,” CEO John Duncan said. “Client service is paramount and he understands the commitment required to ensure that is always achieved.”

Media marketing chief joins Suncorp NZ

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Former Fairfax Media NZ chief marketing officer Campbell Mitchell has been appointed Head of Customer Experience at Suncorp in New Zealand.

He will be responsible for delivering Suncorp’s customer strategy across its New Zealand brands Vero Insurance and Asteron Life.

Before joining Fairfax Media in 2013, Mr Mitchell was GM digital, marketing and retail sales at The Australian newspaper.

Dual staff in the running for charity

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The Melbourne office of underwriting agency Dual has begun its campaign to raise $30,000 for farmers with its annual Run the Tan event earlier this month.

Commercial Manager Emily Winwood told about 100 brokers and staff from insurance law firm Wotton + Kearney joined the Dual team on the Tan track, raising $1975 for this year’s designated charity Rural Aid.

Rural Aid was founded in 2015 to help farmers hit by droughts, floods and other natural disasters.

For every kilometre run or walked, Dual donated $5 for a staff member and $20 for a broker.

The group has also held a film night in Perth, and a bike ride from Orange to Wagga Wagga, raising nearly half of its $30,000 target for the year.

McLarens appoints construction chief

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Loss adjuster McLarens Australia has appointed George Bejjani as Construction and Natural Resources GM, based in the Sydney office.

Mr Bejjani, who holds dual qualifications as an engineer and chartered loss adjuster, reports to Australia GM Martyn Wicht.

“His appointment complements our existing Australia team and will strengthen our service offering in the region,” Mr Wicht said.

McLarens says Mr Bejjani brings extensive regional experience in operations management and the handling of major losses in the construction, engineering and mining sectors.

He previously held roles as national construction manager and senior engineering adjuster at Crawford & Company, according to his LinkedIn page.

LFI appoints sales head

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Credit insurance specialist LFI Group has begun building its sales team, appointing Kevin Arkell as National Sales Manager.

Mr Arkell comes from LFI parent Liberty Financial, where he was state sales manager Victoria and Tasmania for the past seven years.

Lender Liberty Financial launched LFI – which specialises in products including mortgage protection cover, loan protection insurance and vehicle equity cover – at the end of 2014.

Before this Mr Arkell was executive head of sales at La Trobe Financial.

“With Kevin overseeing national sales, brokers will have an experienced team to tap into for guidance and support,” LFI Group GM Dean Cullen said.

LFI Group now aims to add a number of state-based sales managers.

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Hannover Re buys into Lloyd's with Argenta deal

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Hannover Re will acquire UK group Argenta Holdings, which owns Lloyd’s managing agent Argenta Syndicate Management and Lloyd’s members’ agent Argenta Private Capital.

Argenta has had an Australian presence since 2015, when Argenta Underwriting Australia was established.

The parties have kept the transaction price confidential and aim to complete the transaction in the third quarter, subject to regulatory approvals.

“For some time now we have been interested in a Lloyd’s syndicate, with a view to gaining additional access to international and London market business,” Hannover Re CEO Ulrich Wallin said. “We are delighted to have found an ideal partner in Argenta.”

Argenta Syndicate Management manages Lloyd’s Syndicate 2121, which has a stamp capacity of £300 million ($489 million) for this year. Argenta Private Capital supplies almost £1.8 billion ($2.93 billion) of investor capacity to the Lloyd’s market.

US insurers look to advanced analytics benefits

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Advanced analytics offer the greatest opportunities for the US insurance industry this year, according to almost one-third of respondents to an AM Best survey.

Increasing use of mobile apps to sell and service insurance, and Big Data were also seen as significant opportunities, each gaining about 18-19% of responses.

However, Silicon Valley-backed insurtech start-ups and increasing use of mobile apps to sell and service insurance were also seen as the greatest threats.

In the regulatory sphere, increasing resources and expenses to comply with changes was named the largest challenge, while upheaval of regulations under President Donald Trump was the least of concerns, gaining only 4.7% of responses.

More than 90% of respondents are not sourcing capital in the alternative market through catastrophe bonds, collateralised reinsurance or sidecars.

Most plan no change to their use of alternative capital, while 10.9% anticipate growth in its use.

The survey also shows “cyber risk” and “cyber security” were the phrases most encountered by insurers last year following publicity over attacks by offenders ranging from individuals to foreign governments.

“Many companies have developed cyber products to protect themselves and their customers from attacks and loss of confidential data,” the report says.

Cyber was nominated by about 30% of respondents, followed by low or negative interest rates, increasing regulation, disruptors and the presidential election.

The survey is based on several-hundred responses across the US life and non-life sectors. Property and casualty insurers account for 63% of respondents.

Internet of Things may transform supply chain risk management

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Internet of Things (IoT) data and machine learning may overcome the failings of traditional supply chain risk management systems, which are falling short in a changing world, according to US analytics company Transvoyant.

“By continuously collecting massive real-time data streams from IoT devices around the world, these solutions enable risk managers to be nearly everywhere at once,” the group says in a white paper.

Real-time information enables managers to track every stage of the supply chain, and shows risks from natural disasters, strikes, civil unrest and other events.

“These solutions enable organisations to evaluate both internal and external risks by priority, as scored by advanced machine learning algorithms,” it says.

Global supply chain risks are at historically high levels, particularly with manufacturers in developed countries moving production offshore to low-cost regions.

But a 2014 survey by the Global Supply Chain Institute found 90% of 150 businesses surveyed did not quantify risk when outsourcing production.

Transvoyant says disruption costs on average $US73 million ($95 million) a year for 69% of Fortune 500 companies, while the Business Continuity Institute found 70% of global executives surveyed last year reported at least one disruption in the previous year. Of those, 43% were not insured.

The white paper, on the Risk and Insurance Management Society website, says supply chain risk approaches using new technologies offer benefits beyond avoiding disruption.

“It’s about continuously predicting the future across a living, breathing, complex and interdependent supply chain to achieve superior performance and gain competitive advantage,” it says.

Local business aids Talanx earnings lift

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HDI Global’s parent Talanx earned net profit of €907 million ($1.28 billion) last year, up 23.6% on 2015 as all divisions performed better than expected and major loss claims came in below company estimates.

The Australasian business increased gross written premium (GWP) by more than 15%.

Talanx’s overall GWP fell slightly to €31.1 billion ($43.79 billion) from €31.8 billion ($44.77 billion), but operating profit increased 5.4% to €2.3 billion ($3.24 billion).

The combined operating ratio improved by 0.3 percentage points to 95.7%.

“All divisions exceeded their respective net income targets,” Talanx says. “A large loss burden that remained below expectations and the level of the previous year, as well as fiscal one-off effects, contributed to the positive performance.”

Canadian forest fires amounted to the largest single loss, costing Talanx €128 million ($180.23 million).

Otherwise, last year was generally benign, with the major loss burden falling by €39 million ($54.91 million) to €883 million ($1.24 billion) – below estimates of €1.13 billion ($1.59 billion).

Talanx expects challenging business conditions to persist as the global economy grapples with US President Donald Trump’s trade policies and Britain’s impending departure from the European Union.

“We achieved our good result in an environment that continues to be extremely challenging,” Chairman Herbert Haas said.

“The markets in our reinsurance and industrial lines divisions remain extremely competitive, just like the cut-throat competition in the saturated German retail business.

“These insurance-specific market conditions are coupled with geopolitical challenges such as the British vote to leave the EU and the uncertainty about the future path of the new US Government.”

Global volcano model reveals extent of exposure

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A significant proportion of the 1 billion people who live near active volcanoes are uninsured for eruptions, according to Swiss Re.

The reinsurer says it has developed the world’s first global volcano model, assessing risks posed by more than 500 volcanoes and enabling insurers to quantify expected losses.

The model shows one in seven of the world’s largest urban areas are within 150km of an active volcano, and an eruption could cost a large city up to $US30 billion ($39.4 billion).

Among the top 10 at-risk cities are Tokyo, Naples, Manila, Jakarta and the Nicaraguan city of Managua.

“In some countries the volcanic threat constitutes a substantial part of the insurable risks, and the ability to assess and price such risks with precision is crucial,” the reinsurer says.

CEO Reinsurance Asia Jayne Plunkett says as urbanisation gathers pace, the protection gap for volcanic hazard is widening.

“But economic disruption and large-scale economic losses for people and businesses locally are only one part of the picture,” she said.

A large-scale eruption would affect supply chains, causing economic and insured losses.

Only Iceland has compulsory volcano insurance.

Head of Catastrophic Perils Martin Bertogg says the model will allow insurers to calculate premiums for volcanic risk to individuals, businesses and countries.

“It’s now up to us in the insurance industry to use this new opportunity, together with all partners, to design trustworthy and affordable coverage to help make the world more resilient when disaster strikes,” he said.

UK SMEs slow to take up cyber cover

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British SMEs’ uptake of cyber insurance is not keeping pace with the ever-increasing risk, according to a report by research and consulting group GlobalData.

Uptake has grown from 2.1% of SMEs taking out cyber cover in 2014 to 13.7% last year, but this is low compared with other commercial products.

UK businesses are increasingly dependent on the digital space, creating a greater need for cyber insurance as criminals move online, the report says.

Any business that holds personal information that can be sold on or used for identity fraud is vulnerable, analyst Danielle Cripps says.

“SMEs are increasingly threatened by cyber criminals or system failures, which a cyber insurance policy could help protect against,” she said.

“Indeed, SMEs could be argued to be most in need, because they have the fewest resources to recover from financial losses.”

Businesses’ focus should be on improving cyber security, while insurance will help organisations recover from attacks and mitigate the impact on business continuity.

Cyber insurance uptake in the UK is expected to improve once the EU General Data Protection Regulation takes effect on May 25 next year. It requires companies to notify regulators and customers put at high risk due to data breaches.

“Businesses will also have more accountability and conditions to comply with, making them more liable under the new regulation,” Ms Cripps said.

“The additional risk this creates means businesses are more likely to seek cover, which will help drive the market.”

Security is also expected to improve under the UK Government’s new National Cyber Security Strategy.

Ms Cripps says cyber insurance not only provides financial support, but could give companies access to extra technical expertise.

Allied World shareholders back Fairfax takeover

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Shareholders of Swiss (re)insurer Allied World last week approved a $US4.9 billion ($6.4 billion) takeover offer from Canada-based Fairfax Financial Holdings.

“With [this] vote, we move one step closer to completing the transaction with Fairfax, to the benefit of our shareholders, customers, business partners and employees,” Allied World President and CEO Scott Carmilani said.

Both parties expect to complete the transaction in the second quarter.

Fairfax is also competing with Suncorp New Zealand to acquire New Zealand insurer Tower.

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Beyond the levy: Fels hits out at price divergence

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Monitoring of the emergency services levy (ESL) removal from NSW policies has taken an unexpected diversion into wider issues, with data collected for one purpose being used for another – namely criticising insurers for failing to support comparison websites.

The levy will be removed from policies from July 1, and ESL Insurance Monitor Allan Fels is tasked with making sure companies take out the charge, inform consumers and reduce bills by the correct amount.

As part of that process, the monitor has set up a database of quotations for building and contents insurance on a standard household profile, with details included in a quarterly report to the state Treasurer.

But the information from 12 insurance brands for 11 specific addresses in NSW has highlighted wide price divergences and has proved something of a red rag to a bull.

“It’s very concerning there are such big differences in prices quoted for the same property,” Professor Fels says. “It suggests that competition is not fully effective in this industry.

“Consumers can save hundreds of dollars by shopping around each time they buy or renew their property insurance policy. However, evidence shows most don’t, and miss out on savings.”

It’s not clear exactly what this issue has to do with the role of a monitor employed to ensure fairness in the way the old NSW emergency services levy is removed from insurance policies, but Professor Fels is a seasoned commentator who knows how to put pressure on industries via media statements.

The former head of the Australian Competition and Consumer Commission says insurers are “ignoring” calls to list the previous year’s policy cost on renewal notices, and are “very quick to oppose” establishment of independent home insurance comparison websites.

“Better and more transparent price information doesn’t mean consumer only focus on price and no other elements of a policy,” he says. “I reject the recent Insurance Council of Australia (ICA) claim that focusing on price ‘distracts consumers from researching policy details, such as exclusions and limits’. It is more likely that the opposite is the case.”

Says who? The insurers’ case is based on market research, while the professor seems to base his opinion on little more than – well, his opinion. Ironically, he has focused on price in his reaction to the quotation differences, rather than broader matters at play when it comes to the suitability of policies.

ICA points out these include varying exclusions, inclusions and limits, and the possibility of total replacement or agreed-value cover.

“Contrary to Professor Fels’ assertion, the range of premiums he has identified demonstrates intense competition in the household insurance market,” ICA CEO Rob Whelan says.

ICA notes that the Australian Securities and Investments Commission, Australian Prudential Regulation Authority, the Financial Rights Legal Centre, the Consumer Action Law Centre and the UK Financial Conduct Authority also have concerns about comparison sites.

LMI Group MD Allan Manning says price is a “long way third” after quality of coverage and claims service when it comes to key considerations in buying insurance, and Professor Fels’ comments made him “see red”.

“The fact of the matter is you typically get what you pay for, but it is not easy for the consumer to understand the complexities of the policies, nor the claims service, until it is perhaps too late,” he says on his blog.

“If my broker… came to me recommending I chose a product on price alone, I would change brokers.”

Home policy buyers would prefer to pay more, Professor Manning suggests, if it means an insurer meets a claim with minimum fuss, allowing choice of repairer and showing empathy during a crisis.

Professor Fels for his part maintains a significant amount of literature and international experience can be drawn upon to overcome the shortcomings of price comparison websites.

“A well-developed price comparison website has the potential to enhance competitive price pressure in the property insurance market and would help raise consumer awareness of price differences and price consciousness more generally,” he says in his report.

He also notes the UK Financial Conduct Authority’s new disclosure rules require insurers to provide last year’s premium alongside the current year’s price.

“The evidence from the UK is that home insurance customers who have been with the same

company for five years pay, on average, 70% more than new customers,” the report says.

Professor Fels’ comments come as a parliamentary inquiry examines the costs and benefits of establishing an independent home, strata and car insurance comparison service in Australia.

In the meantime, there is much work to do on removal of the ESL from NSW insurance policies.

Awareness about the current insurance-based funding model is low and a high proportion of consumers can’t explain how the emergency services are funded, and are unaware of the proposed changes, the monitor’s quarterly report says.

An advertising campaign aims to improve the situation, but it is insurance companies’ responsibility to explain in writing to their customers how the ESL is being removed from policyholder premiums.

“The monitor became increasingly aware during the quarter that many insurers are not meeting this expectation and a number of individual companies have been subject to complaints about their communications,” the report says.

The ways insurers add the ESL payment and the fact the financial-year levy sits on top of 12-month contracts, which can start at any time, offers potential for customer confusion during the shift to a property-based charge.

The Victorian fire services levy removal program – also overseen by Professor Fels – indicates there are plenty of challenges ahead. Prospects for a smooth transition during this critical period would be raised by far closer co-operation between the monitor and the industry – and more concentration on the central issues Professor Fels is employed to monitor.

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