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Intermediaries want more insurer support

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Brokers in Australia believe they should get better support from insurers to counter their more nimble and well-funded digital competitors, according to an EY survey.

About 43% are unhappy with the consistency of insurer interactions and only about 20% view insurers as very good or excellent at meeting their needs.

EY Oceania Insurance Customer and Growth Solution Leader Imran Ahmed says digital disruption and changing consumer preferences “are reshaping the insurance industry and intermediated distribution channels are no exception”.

“Online price comparison sites have made pricing more transparent to the end customer and new market entrants in the form of insurtech start-ups and direct insurance propositions are putting increasing pressure on traditional distribution models.”

More than 80% of respondents would value access to technology that automatically identifies opportunities within their books, and 75% say innovation around product bundling could drive growth.

About 81% of brokers expect more support from insurers around product customisation.

“Part of the solution to this problem is about creating closer working relationships between intermediaries and underwriters,” Mr Ahmed says.

“In fact, most brokers surveyed indicated that working more consistently with the same underwriters (87%), having more direct access to them (81%) and making them more relationship-focused (80%) was key to improving the lines of communication.”

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Insurtech opportunities outweigh threats: Aon

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The insurance industry can take advantage of rising insurtech investment to become more efficient and expand into emerging markets, Aon Global CEO of Analytics Paul Mang says.

“Opportunities presented by disruption vastly outweigh the threats and we encourage insurers to build capabilities in what we term open-architecture innovation models,” he told an Aon Benfield conference on the Gold Coast last week.

“This could include partnerships with even the most entrepreneurial start-ups that some have labelled disrupters.

“We can help new technologies and new business models be adopted faster by reducing risk and volatility.”

There are more than 550 insurtech start-ups worldwide with about $US14 billion ($17.42 billion) in investment, with capital rising 55% since last year, he says.

Forces shaping future trends include new sources of behavioural data via the Internet of Things, enhancing pricing and risk selection. New products and services will offer speed and flexibility in an on-demand economy, Mr Mang told the conference.

Adapted insurance products to cover the new risks of digital networks and platforms are beginning to have increased commercial influence over more traditional corporations.

“Analytics, coupled with technological innovations, will enable us to address stubborn industry challenges and open new growth opportunities for the sector to tackle evolving risks such as cyber, pathogens and casualty catastrophes,” he said.

Skills gap causes risk management headache

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A shortage of skills in emerging technologies is stopping insurers and other financial services providers from effectively managing risk, according to Accenture. 

The consultant’s Global Risk Management study questioned 475 senior risk management executives in banking, insurance and capital worldwide.

Despite progress applying smart technologies such as cloud storage, biometrics and Big Data analytics, 66% of respondents feel skills deficiencies impede effective risk management. In Australia the figure is 70%.

While 91% of insurers use cloud technology, only 26% are highly proficient, 36% do not use its full potential and 29% are only just introducing it.

Accenture says without the cloud’s “capacity and firepower, digital simply does not happen”.

Only 13% of Australian respondents believe they will have the internal resources in two years to carry out required functions, compared with 25% globally.

In Australia only 3% have risk teams with the internal resources to carry out required functions (10% globally), and 70% say an increase in the “velocity, variety and volume” of data is a barrier to effective risk management (73% globally).

The results echo a recent LinkedIn article by AIG CEO Brian Duperreault who says insurers need to attract people who grew up with technology in response to a predicted 400,000 jobs shortfall.

Solicitor, health workers charged in CTP fraud crackdown

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A solicitor and two allied health professionals were last week charged over alleged roles in a group co-ordinating fraudulent compulsory third party (CTP) insurance claims in Sydney.

The arrests were part of a crackdown by the NSW Strike Force Ravens team, formed following recommendations by the CTP taskforce.

Detectives arrested the 43-year-old solicitor at an office in Auburn and charged him with 11 counts of fraud and directing a criminal group.

A 31-year-old man from Croydon Park was charged with 11 counts of fraud, two counts of making false documents, using a false document and directing a criminal group.

The third man, aged 30, was arrested at Bankstown and charged with 11 counts of fraud, 16 counts of publishing misleading material to obtain financial advantage and directing a criminal group.

Strike Force Ravens investigators have now arrested 16 people and laid more than 120 charges in relation to a combined fraud of more than $11 million. Further arrests are expected.

Record warm winter blamed on climate change

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Australia’s record warm winter was made 60 times more likely by climate change, according to a report from the Climate Council.

Average maximum temperatures were nearly two degrees above average, and it was also the nation’s second-driest winter, setting the scene for a dangerous bushfire season with above-normal risk across almost one-third of the country.

The council says Australia’s average winter temperature has increased by about one degree since 1910, as a direct result of man-made climate change.

“Winter warm spells are lasting longer, occurring more often and becoming more intense,” it says. “The likelihood of such warm winters occurring will continue to increase as global temperatures rise.”

The report also warns Australia is on course for a warmer than average spring.

EQC teams up to clear flood debris

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The Earthquake Commission has worked with councils and contractors to clear silt and debris from 251 flood-damaged properties in the town of Edgecumbe, acting on a request from the Government.

The work accounts for 92% of all claims received by the commission after the April flood.

GM Customer and Claims Trish Keith says the commission’s response has required “a different approach” than normal.

“We have built an excellent relationship with the Whakatane District Council in regard to the response planning, and therefore we have been able to co-ordinate our resources and approach to the clean-up operation,” she said.

“This has included working closely with all the contracting companies that have been working to clear each property.

“The overall feedback from residents and our partners has been really positive.”

The commission says it is scheduling work for 11 of the remaining 21 properties and will soon finalise claims from the remaining 10 homeowners issued with a Dangerous Building Notice.

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Corporate

Hollard, Fairfax Media join forces to sell insurance

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Fairfax Media-owned property platform Domain and Hollard have set up a joint venture to sell insurance online later this year.

Domain will own 70% of Domain Insure, with the remaining 30% owned by Hollard-linked Envest and the joint venture’s key management.

Envest is a sister company of Hollard Insurance Company and is majority-owned by Hollard Investments.

“The joint venture will become an underwriting agency with delegated authority to sell insurance products on behalf of multiple insurers,” Fairfax Media says.

Financial details about the venture are confidential.

“Our new insurance offering will contribute to growing new transactional revenues for Domain through exposure to a total Australian market opportunity of more than $2 billion per annum in insurance commissions,” Domain CEO Antony Catalano said.

“Domain Insure adds to Domain’s suite of real estate products and services spanning home loans, utilities connections and trade services, which together deliver on our ambition to meet the modern needs of property consumers throughout their property life cycle of buying, owning and selling.”

Domain has not outlined the range of insurance products it will sell, or whether any insurance partners will be involved with the venture.

Domain is the publishing group’s crown jewel, with digital revenue up 22% and total revenue growth of 13% so far this financial year, according to a trading update last Thursday.

Fairfax’s other businesses reported declines in revenue.

Tech changes drive Suncorp marketplace spending

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Suncorp says its $100 million “marketplace strategy” investment this financial year will put it ahead of its rivals, amid rising competition from traditional players and new technology operators.

“There is a small window to deliver the core components of this strategy,” CEO Michael Cameron told the annual general meeting in Brisbane last Thursday. “By accelerating the investment required to create the marketplace, Suncorp can capture this opportunity ahead of others.”

Mr Cameron says the company-wide investment will drive top-line growth by ensuring more customers have more needs met, using Suncorp services more often and for longer.

The company is building an app to “radically change” how customers interact with the group, rolling out new branding to its digital and physical assets, developing integrated offers and looking to new third-party partnerships to fill any gaps, Mr Cameron says.

The investment also includes a new customer reward and recognition program.

“Our customers’ expectations have dramatically increased and we are being measured against companies outside of our industry on aspects such as speed and functionality,” he said.

Mr Cameron says a significant number of products are becoming commoditised, with lower prices the only difference.

Suncorp is also conducting a business improvement program that aims to deliver net benefits of $329 million over three years from measures including claims supply chain redesign and improved procurement and business streamlining.

Chairman Ziggy Switkowski says the company is considering a range of potential impacts from new technology, with driverless cars set to fundamentally change motor insurance.

“Suncorp has been actively participating in and leading industry discussions regarding new insurance models to support our customers through this transition over the coming decade,” he said.

IAG risk chief to retire

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IAG has started an international search for a chief risk officer after announcing Clayton Whipp will retire by next April.

Mr Whipp was group general manager corporate finance and acting chief strategy officer before he was appointed CRO in March 2015.

“Clayton has played a key role at IAG, with initial accountability for our corporate finance function and then the important task of managing risk across IAG and its brands in New Zealand, Australia and Asia,” IAG CEO Peter Harmer said.

Before joining IAG, Mr Whipp held roles at BHP Billiton and KPMG.

Youi upbeat on Australia as earnings rise

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Youi Group is confident its Australian business will continue to grow after it produced a strong set of results amid tough conditions.

The Australian arm of the South African-owned company increased its earnings to $67 million in the year to June 30 from $47 million the previous year.

The claims ratio improved to 55.5% from 58.9%, and the combined operating ratio strengthened to 85.9% from 89.8%.

The strong results partially offset a weaker showing from Youi’s New Zealand business, which remains in the red, although losses narrowed by 40% to $6 million.

“Youi experienced highly favourable profitability metrics for the year under review,” parent company Outsurance Holdings said of the Australian market.

It says the plan to start offering compulsory third party (CTP) products this year will further cement Youi’s position in the market.

“This entry will result in a more holistic motor insurance product offering, which will enhance our product and service proposition,” Outsurance said. “An incremental expansion into the commercial insurance market also presents Youi with a wider footprint to drive future growth and leverage the commercial underwriting capabilities of the group.”

Youi Group, including Australia and New Zealand, grew operating profit by 53.7% to 907 million rand ($84.93 million). Australasia accounts for 47% of the group’s gross written premium of 14.9 billion rand ($1.4 billion).

StartUpCover quotes through Facebook Messenger chatbot

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The Willis Towers Watson and CGU joint venture StartUpCover has introduced a Facebook Messenger chatbot called “Jamie” that gives businesses an indicative quote within five minutes, at any time of day or night.

GM of Affinity and Commercial at Willis Towers Watson Brent Lehmann says start-ups are often too busy to access insurance information within traditional working hours.

“By being available instantly and at any time, our chatbot technology will enable a frictionless and familiar way for people within the start-up business community to learn about the right insurance products,” he said.

A StartUpCover specialist broker is also on hand to tackle advanced questions.

Andi Chatterton, creator of the chatbot and co-founder of inGenious AI, says messaging apps such as Facebook Messenger have surpassed social media platforms such as Instagram and Facebook itself in terms of active monthly users.

Last year’s Global Mobile Messaging Consumer Report, from US communications company Twilio, shows 46% of consumers want to learn about new products through messaging, and 85% want to reply to a message from a business or engage in conversation.

“Our research has shown that Facebook is the preferred tool for start-ups,” Willis Towers Watson Marketing Officer Tim Cotton said.

Allianz announces water partnership

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Allianz Worldwide Partners (AWP) has teamed up with Queensland water supplier Unitywater to offer water-related insurance to customers in the Moreton Bay, Sunshine Coast and Noosa areas.

The partnership is for five years and products include concealed leak protection insurance and emergency home assistance.

AWP CEO Craig Dalzell says the cost of concealed leaks can be high.

“We hope this partnership will provide residents with better assistance and insurance options should they experience a problem in the future,” he said.

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Regulatory & Government

Queensland backs flammable cladding ban

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The Queensland Government says it will push for a national ban on aluminium composite panels with a flammable polyethylene core when it hosts the Building Ministers’ Forum in Brisbane next month.

The Senate inquiry into non-compliant building products proposed a “total ban” on the material in its interim report, but insurers and experts criticised this as treating the symptoms and not the underlying problem.

However, Queensland Housing and Public Works Minister Mick de Brenni says it is “common sense”.

“The Palaszczuk government is banning the use of any [polyethylene] cladding material from government construction, even for uses that comply with the current construction code,” he said. “I think it’s only prudent to take this approach across the rest of the country.

“Commonwealth, state and territory building ministers will gather in Brisbane in two weeks, and Queensland will be strongly backing a ban on these products.”

The Property Council of Australia is also supporting the ban “for the sake of public confidence”.

“Current codes allow this product to be used safely within appropriate fire safety systems, engineered and signed off by fire safety experts,” CEO Ken Morrison said.

“However, we share the same desire as government to prioritise public safety in light of valid concerns about the use of [polyethylene] cladding.”

NZ regulator ponders next prudential supervision move

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The Reserve Bank of New Zealand is considering 42 submissions on its review of the Insurance Prudential Supervision Act 2010 and will provide an update on its next step “in due course”.

An issues paper earlier this year said further consultation on options would take place after the central bank considered submissions, with legislative changes to happen next year at the earliest.

The Insurance Council of New Zealand is continuing to push for future reviews to be conducted by a different organisation, and says the issues paper should have sought views on merit review or strengthened appeal rights for Reserve Bank decisions.

“Most legislative or regulatory reviews are not conducted by the regulator responsible for applying that legislation and regulation,” its submission says.

It also calls for the bank to have a greater role in monitoring disruptive changes to the sector, and raises concerns about differences in regulation of overseas insurers, including exempting them from the requirement to hold sufficient reinsurance cover for a one-in-1000-year catastrophe.

“Regulation in New Zealand should, wherever possible, be competitively neutral between domestic and overseas insurers and should protect the New Zealand policyholder as a priority,” it says.

Submissions take a mixed view on the suggestion that a “statutory fund framework” could apply to overseas insurers, to help protect the interests of New Zealand policyholders.

Chubb says it would help New Zealand policyholders in the case of an insolvency, while the other option is to “at least require overseas branches to meet the same local asset and insolvency requirements as locally incorporated insurers”.

Allianz says it holds reinsurance for its New Zealand operations well in excess of the one-in-1000-year requirement, and current arrangements are adequate without needing to set up statutory funds.

“Competition in the market is good for New Zealand policyholders and also spreads the risk among a higher number of insurers,” it says.

“Any over-regulation or unnecessarily heavy-handed approach may lead to the inevitable conclusion that doing business in New Zealand is simply no longer viable.”

ASIC outlines plans to improve data use

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The Australian Securities and Investments Commission (ASIC) has forecast “significant change” to the ways it handles data when pursuing regulatory activities.

It last week released its data strategy to 2020, outlining actions to improve capturing, sharing and use of data.

“The intelligence and insights we derive from analysing our data will give us a better understanding of the regulatory environment, so we can detect, understand, respond appropriately and ultimately contribute to the financial wellbeing of all Australians,” Chairman Greg Medcraft said.

The strategy sets out principles and proposed actions to better identify data needs, and strategies to manage information effectively and securely.

ASIC plans to share insights on industry trends and emerging issues from its analysis of data sets with its regulated community and consumers.

“We will achieve our vision by improving our data governance, enhancing data quality, expanding digitisation and ensuring our data is integrated, catalogued and accessible,” the strategy says.

“Data sharing will be improved within ASIC, while maintaining data security and privacy.”

APRA seeks accounting change feedback

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The Australian Prudential Regulation Authority (APRA) has written to insurers to assess how they will be affected by new accounting rules making it easier for investors to compare performance across international markets.

AASB 17 Insurance Contracts is due to take effect from January 1 2021, in line with new global rules issued this year by the International Accounting Standards Board.

APRA says the standard is complex and potentially affects insurers in different sectors in different ways, and it is seeking more information to better understand the impacts.

As part of the consultation it will also seek more information on AASB 16, which relates to leases.

“APRA does not intend to alter its prudential or reporting framework for either AASB 17 or AASB 16 until their impacts are better understood, and expects insurers to maintain their APRA reporting obligations,” it says.

Companies planning early adoption should contact the regulator to discuss their approach before going ahead, it says.

Work on a new international standard began a decade ago, prompted by diverse accounting rules that made it difficult for investors and analysts to understand and compare insurers’ results.

It is expected 450 listed insurers worldwide will be affected by the change, with some observers warning earlier this year that implementation will not be easy.

Canberra seeks pre-budget submissions

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Treasury is now taking submissions on priorities for the next financial year’s budget.

“The 2018/19 budget will continue the Government’s commitment to focus on budget repair to ensure the Commonwealth maintains its fiscal trajectory back to balance, while also supporting fairness, opportunity and security for all Australians,” Assistant Minister to the Treasurer Michael Sukkar said.

The closing date for submissions is December 15. For more information, click here.

NZ regulator cracks down on register rogues

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New Zealand’s Financial Markets Authority says it will act against rogue directors in a crackdown on misuse of the Financial Service Providers Register (FSPR).

Businesses and individuals abusing the public register of financial services providers remains a major source of complaints, the regulator says.

“These complaints are focused on New Zealand-registered businesses on the FSPR that have a substantial part or all of their business overseas,” the regulator says.

“We will take action to deregister these businesses and individuals to ensure they are not using FSPR registration to benefit commercially by trading off New Zealand’s reputation.”

The regulator’s enforcement powers range from administrative orders and warnings to criminal charges.

FSPR registration was made compulsory in December 2010 for businesses and individuals providing financial services.

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Life Insurance

Super funds release insurance draft code

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The Insurance in Superannuation Working Group says a draft code of practice released last week will help ensure cover provided through super better meets policyholder needs.

The code outlines industry standards and new measures for all classes of insurance paid for via super, including life, total and permanent disability and income protection.

Many people are unaware they hold insurance automatically through super accounts on an opt-out basis, and can overpay for multiple policies across various funds, reducing their expected retirement benefits.

“The draft code contains a suite of new measures to better target insurance offerings, reduce potential for account erosion and improve the member experience at claims time,” working group Chairman Jim Minto said.

Issues considered include the impact of arrangements on low-income earners, young people, those with less secure employment and women.

The working group intends to seek authorisation for the code from the Australian Securities and Investments Commission, and have enforceable arrangements to ensure compliance.

But Consumer group Choice says the code does not go far enough and will entrench poor practices.

“The sector needs to be bolder if it is going to repair the trust lost in recent insurance scandals,” Choice CEO Alan Kirkland said.

Choice criticises provisions that would allow super funds to continue deducting premiums for 13 months after contributions stop being paid. It suggests seven months would provide sufficient time.

It is also concerned about a lack of standard definitions for common types of default insurance.

“Some super funds have been making cover more restrictive, to control costs, and this has led to wide variations in cover across the sector,” Mr Kirkland said.

“We don’t think this is appropriate for a default product and has seen consumers left unsure if they’ll have cover when they need it.”

The working group has called for feedback on the daft before publication of a final version by the end of the year. The code is to apply to all Australian Prudential Regulation Authority-regulated funds that offer insurance from next July 1, with a one-year transition.

ASFA outlines group life’s role plugging coverage gap

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Life cover sold with superannuation helps cushion the impact of high levels of underinsurance among Australians, according to the Association of Superannuation Funds of Australia (ASFA).

Taxpayers would pick up the tab should automatic inclusion be removed.

It says underinsurance in relation to death, total and permanent disability and income protection currently costs the Government more than $1 billion a year in additional social security payments.

“Given the degree of underinsurance would increase markedly in the absence of default cover on an opt-out basis, so would the burden on the social security system,” ASFA says in a report.

About 75,000 death and disability benefit payments totalling about $5 billion were paid by super funds in 2015/16, it says.

Premiums for life and disability cover in super are typically lower than in comparable policies outside the retirement fund system, according to ASFA.

“For most Australians, the life insurance cover they have through superannuation is the only life insurance they hold. This cover enables members (and their families) to manage the financial risks associated with disability and death during their working life, while also supporting substantially improved retirement outcomes for claimants.”

CBA sells life businesses to AIA

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Commonwealth Bank has sold its life insurance businesses CommInsure Life (Australia) and Sovereign (New Zealand) to AIA for $3.8 billion.

The agreement includes a 20-year partnership with AIA for the provision of life insurance to Commonwealth customers in Australia and New Zealand.

CommInsure Life and Sovereign customers will retain all current policy benefits.

Last year CommInsure faced controversy after media reports it was rejecting customer claims based on outdated medical definitions.

Bank CEO Ian Narev says AIA’s insurance capability and scale, combined with the bank’s distribution, will mean a better experience for customers.

Under the partnership, Commonwealth will continue to earn on the distribution of life and health products.

ANZ pushes for ‘sustainable’ industry

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ANZ Wealth has released a white paper analysing challenges facing the life insurance sector and examining ways to build a more sustainable industry.

The paper says issues of damaged reputation and loss-making products must be addressed.

“Fortunately, the solution is straightforward: clear, core-purpose products that provide genuine protection against the financial impacts of disability at an affordable price.”

If the sector stays on its current path, some products may become unsustainable, the paper warns.

“This will force up premiums, making cover unaffordable for customers and depriving them of the opportunity to protect themselves and their families.

“Even worse, the continuation of loss-making policies could threaten the financial health of the insurance providers that consumers rely on to cover them for years into the future.”

In the medium to long term, insurers must adapt to technological developments and changing customer expectations to produce more personalised products, improve customer experience and become more efficient.

“Using the many sources of customer data becoming available will revolutionise how insurance policies are underwritten, making premiums more manageable where appropriate and making policies more precise, reducing risk and drastically improving the speed and efficiency of the underwriting process,” the paper says.

To view the full report, click here.

AMP establishes resource hub

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AMP has unveiled a Life Insurance Framework resource hub, featuring tools to help advisers prepare for the legislation taking effect from January 1.

Advisers can assess their readiness for the change with a cashflow modeller that enables them to consider the impact different remuneration structures could have on their business.

The resource hub also features video tutorials. 

AMP Director Insurance Proposition Greg Johnson says the online hub will help advisers understand implications of the reforms and take the necessary steps to transition.

“We know advisers are experiencing a huge amount of change as the insurance industry adjusts to a new operating environment, and they need the right support and resources to continue to service the diverse and changing insurance needs of their customers,” he said.

TAL secures global innovation award

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TAL has won an SMA Innovation in Action Award for its online platform TAL CoverBuilder, which lets consumers build their own life insurance policies.

The global award scheme is run by US insurance strategic advisory group SMA (Strategy Meets Action) and recognises business and technology initiatives.

“Our ambition is to ensure our customers understand and value the protection they have and are confident we will be there when they need us most, and this award is evidence we’re making great progress with those objectives,” TAL GM Innovation Dan Taylor said.

CoverBuilder has been extended into TAL’s partnership with Qantas, to deliver Qantas Assure Life Protect, utilising the airline’s Assure wellness program.

The award was presented at an event in Boston, US.

MetLife introduces digital claims tracker

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MetLife Australia has unveiled a digital claims tracker, enabling members to manage and follow their claims more easily.

The technology is optimised for desktop, tablet and mobile devices and was developed in consultation with recent claimants.

AVP Customer Strategy and Innovation Jeremy Simmons says the tool is part of the company’s focus on improving member experience.

“Many claimants are going through difficult times, and what came through strongly when we tested the digital claims tracker was the value they place on being able to keep up to speed with their claims process, even on days when they don’t feel like picking up a phone and speaking with someone,” he said.

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The Professional

Dive In diversity festival begins across nation

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The Lloyd’s Dive In festival for diversity and inclusion kicks off this week with events in Sydney, Melbourne and Perth taking part in an expanding global program.

More than 1300 registered attendees will participate in 10 events over three days, starting tomorrow with a breakfast launch at the Lloyd’s Australia office in Sydney.

Speakers will include Race Discrimination Commissioner Tim Soutphommasane, Greater Western Sydney AFLW player Maddy Collier and social commentator Tracey Spicer.

Sessions in Sydney will cover issues such as the business case for customer diversity, innovation, mental health and the gender leadership gap.

The program expands to other states for the first time this year, with a Melbourne event tackling unconscious bias and Perth visitors hearing ideas on creating positive change in the industry.

Dive In will cover 32 cities in 17 countries worldwide this week, and will reach an audience of more than 1 million insurance sector leaders, Lloyd’s estimates.

Other participating locations include New York, Zurich, Bermuda, Beijing and Mumbai.

The event started in London in 2015 and expanded to 10 countries last year, including Australia.

QBE veteran departs Queensland role

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QBE Queensland Regional Manager Leigh Stalker has left the company after 30 years’ service.

“We’d like to acknowledge and thank Leigh,” a spokesman for the insurer said.

“He built many successful relationships with a number of markets across the country and leaves the Queensland region well positioned for the future.

“We’re now embarking on an internal and external search for a new Queensland regional manager.”

Consumers don’t trust financial services, poll shows

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Australian consumers rank financial services as the least trusted industry behind pharmaceuticals, technology, the Federal Government and telecommunications, a new survey has revealed.

The poll of more than 1500 Australians, conducted by customer experience agency Yell Creative in partnership with YouGov, asked participants to rank the five industries from most to least trusted.

More than one-third of respondents do not trust the financial services sector at all.

Consumers were also asked to rank particular segments within financial services, and insurers and brokers fared particularly badly.

The most trusted by a considerable margin was super fund providers, followed by banks, financial advisers, mortgage providers, insurers, brokers and credit card providers.

Nearly three-quarters of consumers who do not trust financial services say they feel businesses put their own profits and goals ahead of customers’ best interests.

And 63% of respondents indicate a lack of transparency around fees and charges is the reason for their mistrust.

“The risk for established financial services firms is that with new entrants, fintech firms and the like, consumers have more choice,” a spokesman for Yell Creative says.

“This increased consumer power could start to pose a risk for the industry [as consumers] exercise their right to walk and find another provider that aligns better with their values – and there’s an increasing number who do.”

Steadfast wins big in corporate awards

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Steadfast has won five awards, including best company in its category, at the annual East Coles Corporate Performance Awards.

It won the company accolade for the S&P/ASX 101-200 financials sector, while Robert Kelly was named best CEO and Stephen Humphrys best CFO.

Steadfast also took the honours for best investment desirability and best growth prospects.

The awards, presented in Sydney last Thursday, are voted on by more than 50 financial services organisations, with equities analysts from fund managers and stock brokerage houses scoring stocks they cover across 25 categories.

East Coles, a financial markets research group, says proceeds from the event will go to Transplant Australia.

James Coghill and the UBS team were named best insurance equities team.

Wesfarmers took out the evening’s top prize, for best company across the S&P/ASX 100.

Willis Towers Watson names new state P&C leaders

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Willis Towers Watson has appointed Michael Baker as Property and Casualty Leader NSW and Bill Callan as Property and Casualty Leader Victoria.

Mr Baker will start in November, while Mr Callan’s appointment is effective immediately.

Mr Baker will relocate to Sydney from Willis Towers Watson in Singapore, where he has been Head of Corporate and Client Relationship Director since 2013. Before this he was VP casualty division Asia-Pacific for Liberty International Underwriters, and a global client advocate for Willis in Sydney.

He will report to GM Corporate Risk and Broking NSW Katie Simmonds.

Mr Callan was previously state leader of Willis Towers Watson’s construction and corporate teams in Melbourne. He has more than 18 years’ broking experience in Victoria, including senior roles at JLT and Zuellig Insurance Brokers.

He will report to GM Corporate Risk and Broking Victoria/SA Darren Oliver.

NZbrokers recruits tech boss

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John Davison will replace Wayne Quinlan as Technical Manager for NZbrokers at the end of the year.

He joins after 37 years at NZI, where he is National Manager Client Placement Facility.

NZbrokers CEO Jo Mason says the appointment will help deliver the broking group’s next phase of growth.

Elantis hires state BDM

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Bryce Fullerton has been appointed Business Development Manager for NSW at Elantis Premium Funding.

Mr Fullerton joins from Allianz, where he was national account manager.

Before working in insurance, he spent a decade in public relations in Australia and overseas.

Fire engineers spark debate

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The Institution of Fire Engineers will hold its annual conference at Crown in Perth from October 4-6.

The theme is “fire engineering – preparing for all hazards”, and sponsors include the Insulated Panel Council Australasia.

To register, click here.

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International

Mexico quake claims may hit $2.6 billion

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Insured losses from last week’s 7.1-magnitude earthquake in Mexico could range from less than $1 billion to $2.6 billion, according to various estimates by catastrophe modellers.

AIR Worldwide puts the losses at 13-36.7 billion pesos ($919 million-$2.6 billion).

RMS says low insurance coverage in Mexico City and surrounding areas means the bill will not exceed $US1.2 billion ($1.51 billion), but economic losses will be higher, ranging from $US4-$US8 billion ($5.1-$10 billion).

“This is based on current building damage information from the Mexican authorities,” it says.

“RMS has also analysed data on ground motion and examined how property exposures are distributed across the region.”

Rescuers are still searching for survivors, while the death toll from the deadliest quake in 32 years has climbed to more than 300 people.

The southern state of Oaxaca was rocked on Saturday by a 6.1-magnitude aftershock, triggering a seismic alarm in the capital.

US mainland faces ‘direct hits’ from downgraded Maria

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North Carolina is bracing for tropical storm-force winds and rain as Hurricane Maria moves north, according to the US National Hurricane Centre.

Maria has been downgraded to a Category 2 storm from Category 4, but is still capable of producing “some direct hits” along the US east coast.

“Since Maria is a large hurricane, the associated tropical storm-force winds could reach a portion of the North Carolina coast by midweek regardless of the exact forecast track,” the centre says.

The US territory of Puerto Rico was among the worst-hit areas when Maria crossed the Caribbean as a Category 4 storm last week.

Officials warn the island could take years to rebuild its infrastructure, including power grids.

Liberty, Munich Re back emerging markets lending platform

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Munich Re and Liberty Specialty Markets have contributed $US1 billion ($1.2 billion) in unfunded credit insurance to support a lending platform aimed at fighting poverty.

The International Finance Corporation (IFC) says the support will allow the platform to provide at least $US2 billion ($2.5 billion) in loans to banks for onward lending to SMEs, women-owned businesses and climate change strategies in emerging markets.

“The world’s insurance giants such as Munich Re and Liberty Insurance are recognising the value of supporting IFC’s lending operations in emerging markets,” VP Jingdong Hua said.

“They have shown willingness to go beyond convention, using innovation to create impact.”

Lending provided through IFC’s Managed Co-Lending Portfolio Program targets enterprises in low and middle-income countries that often have restricted access to debt finance.

Munich Re and Liberty Re have each contributed $US500 million ($622 million) in capacity.

“By doing do, we [can] contribute to IFC’s objective of stimulating private-sector development and economic growth in low and middle-income countries, while developing future markets for our business,” Munich Re Board of Management Member Doris Hopke said.

The Washington-based IFC is part of the World Bank.

XL business leaves UK as Brexit looms

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XL Group has announced plans to relocate XL Insurance Company SE from the UK to Dublin next year in response to Brexit, but its Catlin subsidiary will remain in London.

The insurer says the move will ensure brokers and clients benefit from “continuity of service” from its European branch network.

The group has operated in Dublin since 1990, and in 2006 established XL Re Europe Ltd, currently XL Re Europe SE.

Dublin was also the domicile for XL Group’s parent between 2010 and last year, before its new holding company, XL Group Ltd, was formed in Bermuda after the acquisition of Bermuda-based Catlin Group.

XL Group has insurance and reinsurance operations and corporate functions based in Dublin.

The group’s Catlin Insurance Company Ltd (CICL) will remain in the UK, along with its Lloyd’s operations (Syndicate 2003 and 3002).

It says the combination of being able to issue cover in both the UK and Europe will ensure XL Group avoids disruption through the potential loss of passporting rights due to Brexit.

CEO Mike McGavick says relocating to Ireland will provide certainty and consistency of service to clients and brokers.

“Dublin is a natural home for us in Europe,” he said. “We have a long and established presence in Ireland and we understand and respect the high-quality business environment, the regulatory environment and the talent of the people here.”

The move is subject to regulatory approval.

Competition grows as M&A market takes off

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JLT Specialty says there was a 76% increase in the number of merger and acquisition (M&A) insurance policies placed worldwide in the first half, amid increased competition.

“The growth in use of M&A insurance has been fuelled by a number of factors ranging from falling premium rates to a reduction in retention rates,” JLT Specialty Mergers & Acquisitions Partner Ben Crabtree said.

The cover, also known as warranty and indemnity insurance, is designed to protect buyers against breaches discovered after completion of a deal.

JLT Specialty’s Global M&A Insurance Index shows average premiums rates fell 12% from last year and 25% from two years ago.

New market entrants competing for smaller deals and wider market growth led to a 44% decline in average policy retention rates.

“The level of cover sought is directly linked to the size of the deal, with smaller transactions often using insurance up to the full deal value,” JLT says.

The real estate sector is one of the main users of M&A insurance, representing 27% of total deals bound by JLT outside the US. The retail, consumer, and technology and communications sectors are increasingly frequent users.

JLT says the number of requests for standalone tax liability insurance is increasing, underlining a desire to ring-fence tax issue risks when completing a deal.

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Analysis

The insurgency: united we stand, divided we fall

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Insurers and brokers need no reminding that the digital age has unleashed a wave of disruptive forces that could demote them to fringe player status.

And they know the drill by now: they should do this, they should do that – there is no shortage of advice on countering the digital insurgents.

But the conversation often overlooks one crucial element: the “strategy disconnect” between brokers and insurers.

A recent EY survey found 43% of brokers in Australia are unhappy with the consistency of interactions with insurers, and 81% expect insurer support around product customisation.

Only about 20% rate insurers as very good or excellent in meeting their needs.

“Market disruption is pressuring existing distribution models,” the survey report says.

“In their efforts to get closer to customers (and reduce costs), insurers’ strategies are evolving, leaving brokers uncertain about their role and some confusion and duplication of effort in the value chain.”

The Broker of the Future – Australia survey featured phone interviews with 273 general or life brokers and managing agents last year.

There is broad agreement that insurers should be providing better online access and tools to support brokers’ clients and businesses.

EY says the sooner the two sides shore up their alliance, the better their chances of co-existing with insurtechs, robo-advisers and the like.

“While insurers have the financial strength and scale to invest in sophisticated digital and analytics capabilities, they have not traditionally had depth in customer data to leverage this,” it says. “Many have minimal or fragmented customer data.

“Conversely, brokers’ long-standing, integral role in managing customer relationships and building trust can generate quality customer data and insights. However, brokers do not always have the tools to mine this.

“Given these dynamics, we believe insurers and brokers will have to collaborate in different and new ways… to optimise the value chain and leverage their respective assets for mutual benefit.

“It is only by working together that insurers and brokers can best serve their customers, giving both parties renewed relevance in a market that is increasingly exposed to disruption.”

Standing still is not an option. Not when the digital insurgents are rapidly expanding, drawing from a huge war chest. Investors increased their funding for insurtech to $US2.6 billion ($3.28 billion) in 2015.

Having upended the personal insurance market, the consensus is the “less complex end of the commercial market” – aka the SME sector – looms as the next target.

More than two-thirds of commercial brokers see the market’s shift towards online and direct as a major growth constraint.

Nearly half of intermediaries view the direct channel as a significant threat.

“Intermediaries relying on business as usual will find it hard to sustain market share and margins,” EY says.

“Brokers need to consider how to participate in the disruption facing the industry.

“In fact, moves towards multichannel create new opportunities for insurer and broker collaboration, including new market revenue and sharing business plans and investments.

“The future broker who collaborates and co-develops with insurers will be better placed to capitalise on this shift.”

Brokers and insurers urgently need to start working on a value chain for the digital era.

Optimising customer experience and deploying technology to improve quality and reduce costs should be the focus.

“Insurers will need to work harder to understand the views and behaviours of intermediaries – and build this into their broker segmentation and account management structures,” EY says.

“Just as the industry has moved to more sophisticated segmentation of end customers, insurers must also apply behavioural and micro-segmentation to brokers, rather than simply relying on traditional product or size factors.”

As the saying goes, united we stand, divided we fall. For brokers and insurers, that has never been more true.

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