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A better way? Broking leader criticises lack of consultation on SME support

Insurer measures to support virus-affected SME clients by deferring premium payments are “well-intentioned” but not the best solution, AUB Group CEO and MD Mike Emmett says.

As reported last week, insurers Suncorp, QBE and Allianz have announced a joint Australian Competition and Consumer Commission-approved scheme to assist COVID-19 impacted customers, including the option to postpone premium payments for six months. IAG had already announced its own similar measures.

But Mr Emmett says if brokers had been consulted he would have suggested an alternative plan to spread premium payments rather than defer them.

“The first we knew about what was actually in the ACCC package was when it came out,” he said.

“The problem is that after six months, will these SME businesses be any more able to pay the annual premium? They won’t be able to access premium funding at that stage – it will be too late.

“If they can’t pay and decide to cancel, then the insurer is still going to want six months’ of premium.

“Simply moving the payment date just creates other challenges at that point.”

Mr Emmett believes there is a simpler way.

“Personally I would have designed a monthly payment scheme,” he told insuranceNEWS.com.au. “If we can spread the impact rather than deferring it, that is better. The cashflow impact can be more easily managed and everyone could have used it.”

Mr Emmett says broker concerns about the impact of the premium deferral on their own operations are genuine and significant.

“A lot of brokers are SMEs, so you are just shifting that cashflow problem from one set of SMEs to another,” he said.

“For a business the size of AUB Group there are cashflow implications, but for smaller brokers it could be a death blow.”

The National Insurance Brokers Association (NIBA) said last week it is “critical” that ways are found to maintain the viability of brokers.

Following the ACCC authorisation, CEO Dallas Booth called for greater clarity around how it would work.

“There are a number of aspects of the ACCC authorisation, and the insurer proposal, that will need to be clarified,” he said.

“Most importantly, the need for insurance brokers to notify the ACCC before participating in the program needs to be clarified.

“NIBA is making inquiries about how this is intended to occur and what procedures will need to be followed.”

See Analysis.

Insurers offer SME help as ACCC clears way

Suncorp, QBE and Allianz have outlined assistance measures for small businesses, following action by IAG, after receiving regulatory approval that also clears the way for other insurers and brokers to provide similar support for customers during the coronavirus outbreak.

Suncorp CEO Insurance Gary Dransfield, QBE Australia Pacific CEO Vivek Bhatia and Allianz Australia CEO Richard Feledy say the measures will provide financial relief while maintaining coverage.

“We have laid a platform for the industry to sustainably support the tens of thousands of small businesses who have been heavily impacted by this crisis, which follows the summer of bushfires, floods and storms across the country,” they say in a joint statement.

The Australian Competition and Consumer Commission’s (ACCC) interim authorisation approves a package that includes the deferral of premium payments for up to six months and continuing cover when premises are left vacant due to the COVID-19 outbreak.

Unused premiums will be refunded where an SME customer has to cancel cover, while all policyholders will be able to receive refunds on travel insurance premiums if they can no longer make the journey.

Insurers have also committed to reducing payment times for SME suppliers and contractors involved in servicing claims to no more than 15 days.

The approved assistance measures are open to other insurers or brokers who choose to take part, as long as they notify the regulator.

The Insurance Council of Australia (ICA) has been working with members on measures that will give crucial support to customers. IAG moved ahead independently, but the ACCC ruling addresses concerns that development of a widely offered package may have been considered anti-competitive.

“The ACCC understands that at least some insurers are individually implementing their existing hardship programs; however, enabling insurers to co-ordinate so that there is a minimum standard of relief provided will assist with small businesses during this time,” the regulator says.

The interim authorisation, following an urgent application from Suncorp on behalf of the insurers, took effect immediately. The regulator says it will hold a consultation before issuing its final decision.

Suncorp, QBE and Allianz say in the joint statement they will “continue working closely with our broker partners on a range of hardship measures to support businesses, and acknowledge the critical role intermediaries play in commercial insurance”.

SMEs covered by the ACCC approval include businesses that employ fewer than 20 people, or 100 if a manufacturer, and have an annual turnover of less than $10 million.

Travel insurers receive 15,000 virus claims

Travel insurance customers have lodged almost 15,000 claims related to the COVID-19 outbreak, but the Insurance Council of Australia (ICA) warns many will not be paid due to pandemic and “known event” exclusions.

ICA Head of Risk and Operations Karl Sullivan says customers should still lodge claims if they have suffered a loss, as insurers will be as accommodating as they can be and “many claims will be paid, depending on when the policy was purchased”.

Mr Sullivan says there is little data at this stage on SME claims. ICA declared the outbreak an insurance catastrophe on March 11.

As part of the declaration, an insurance industry taskforce was formed “to ensure that accurate claims data is captured by industry, and that industry positions on the virus can be understood by stakeholders”.

Bushfire potential 'remains higher during autumn'

Some regions, including parts of WA, face above-normal fire potential this autumn, according to the latest seasonal report from the Bushfire and Natural Hazards Co-operative Research Centre (CRC).

Heavy rainfall in the early weeks of this year have eased the fire risk on average, but the centre says considerable danger remains in areas that continue to suffer from the long-running dry conditions.

“The fire potential remains high in some specific regions due to the long-term low rainfall,” the report says. “It is important to remember that areas designated as normal or below-normal fire potential may experience bushfire. Normal or below-normal risk does not mean there is no risk.”

Prescribed burning will be important if weather conditions and resources permit, the report says, although it is unclear at this point if the coronavirus outbreak will impede efforts to carry out the fire mitigation measure.

“It is anticipated that there will be impacts,” the report says.

In WA, above-normal fire potential remains for parts of the Swan Coastal Plain, Jarrah Forest, Warren, Mallee, Esperance Plains, Nullarbor and Hampton biogeographic regions.

“In the past two years the southwest has experienced unusually strong and dry pre-frontal winds associated with cold fronts in late autumn, highlighting the need for good burn security and situational awareness in the conduct of prescribed burning operations,” the centre says.

It says NSW faces a normal fire outlook for autumn but must watch out for unusual weather events that occasionally crops up at this time of the year.

A normal fire potential is also expected for SA, Victoria, Tasmania and the NT.

Perils estimates February storm losses at $794 million

An east coast low which hit Queensland and NSW in February caused property losses of $794 million, catastrophe data company Perils says.

Storms and flooding were triggered by a low pressure trough, which drew in moisture from a warmer-than-usual Tasman Sea, particularly near Sydney.

“With a combination of heavy rainfall, strong wind gusts and storm surge, considerable insurance losses were experienced,” Perils Asia-Pacific Head Darryl Pidcock said.

The February 5-13 event caused the third-largest Australian east coast low insurance losses in three decades, and followed bushfire and hailstorm catastrophes over summer.

An east coast low in June 2007 caused losses of $2.4 billion, using adjusted figures, while a similar event in April 2015 cost insurers an estimated $1.2 billion, the data group says.

Perils will update its east coast low loss estimate on May 13.

Consumer focus strengthened in revised NZ code

Commitments to act transparently, with integrity and in utmost good faith have been made clearer in the revised Insurance Council of New Zealand (ICNZ) code of practice that took effect on Wednesday.

The Fair Insurance Code includes an expectation that insurers will develop, market and sell their products responsibly, and provides more guidance to consumers on how to complain and timeframes for responses.

The privacy section has been rewritten and a logo introduced and trademarked for display on member websites and certain documents.

ICNZ CEO Tim Grafton says promotion of the code is being stepped up and it will be translated into all of New Zealand’s official languages, with copies available in Te Reo Maori and as an audio version.

“Our annual research tells us that only one in four people are aware of the code,” he said. “To address this issue, we have mandated the inclusion and promotion of the logo on all member websites, claim and complaints materials.”

The latest code, which updates the 2016 version, is overseen by a compliance committee comprising independent legal experts Sir David Carruthers, David McGee and David Caygill.

Sanctions, which are the same as under ICNZ member rules, include membership termination, imposing a fine of up to $NZ100,000 ($92,275) and requiring public acknowledgment of a breach.

The latest version updates the 2016 document and comes as life and general insurance cultures comes under greater scrutiny in New Zealand and Australia.

Commerce and Consumer Affairs Minister Kris Faafoi says the release of the strengthened code comes at a pivotal period given regulatory moves and the coronavirus emergency.

“It is important that in these times we keep the consumer at the centre of the insurance industry’s work,” he said.

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Corporate

QBE eases trade credit cover cutback

A backlash from brokers and customers has prompted QBE to soften its plan to cut back its trade credit protection cover in response to the coronavirus crisis.

Some 7000 trade credit customers with policy limits up to $US250,000 ($416,526) will have their limits halved, with QBE continuing cover for many businesses that would have had the insurance cut completely under an initial proposal.

About 2000 customers still face their coverage being nilled, but QBE has extended the timeframe for introducing the changes to Wednesday, and an appeal mechanism is in place to allow individual sectors or businesses to seek a review of their situation where there are essential needs.

The insurer is reducing cover by 25% in the $US250,000 ($416,526) to $US1 million ($1.7 million) range, and above that level in high-risk categories it is reducing limits by 50%.

“The current situation is unprecedented and we have made changes to future trade credit coverage to reflect this unique situation,” a spokesman told insuranceNEWS.com.au.

“These changes will allow us the flexibility to provide support to critical industries such as the health care sector, food and transport.”

Changes were initially announced by emails received at the start of last week, taking brokers and customers by surprise and sparking complaints by firms, including construction businesses.

Revisions to the plan were announced later in the week, in conjunction with other measures introduced more widely by the insurance industry to assist SME policyholders.

“We have listened to our customers and understand they need support now and will continue to do so over the coming months,” Asia Pacific CEO Vivek Bhatia said.

Sportscover offers payment, online training assistance

Sportscover will offer payment assistance and online fitness training coverage to clients facing coronavirus pressures as part of measures agreed with its Lloyd’s syndicate partners.

The underwriter is offering a three-month policy extension without extra payment, in certain circumstances, to enable clients who have paid to gain a full 12-month benefit, while also taking into account a period of downturn.

Clients with renewal payments or renewals due between March 1 and May 31 may also in some cases defer payment until June 30.

Cover will be extended to online coaching and training courses if a sports group has created a way for members and athletes to receive instruction remotely.

Members would be covered while participating under the direction of an accredited coach, but not if they are undergoing their own private training outside of that.

Sportscover CEO Simon Allatson says the group continues to urge the sports industry to look at working together across disciplines to drive efficiencies and reduce costs.

“The power of sport as an aggregated buying group has not, to date, been sufficiently explored,” he said. “Economic pressures may encourage sports to investigate their options.”

PSC moves ahead with Asia expansion

PSC Insurance Group will expand into Asia after shareholders last week overwhelmingly approved the purchase of Hong Kong brokerage Charter Gilman and another business that is also based in the financial hub.

The business will now proceed to acquire 50% of the share capital of Charter Gilman, giving it outright control of the brokerage. PSC already has a stake in the Hong Kong business through a $1.01 million investment made last July.

“PSC believes the Asian market presents an outstanding long-term opportunity for the company,” Chairman Brian Austin said. “These acquisitions provide an opportunity to enter this market via Hong Kong through existing known businesses.”

Shareholders at the group’s general meeting last week – which was held remotely in compliance with COVID-19 social distancing measures – also approved the acquisition of the insurance broking business of Globe Insurance from P Capital. The acquisition will be made via Charter Gilman when it becomes a wholly owned business of PSC.

The acquisitions total about $3 million.

“While the investment by PSC to acquire these businesses is modest… with the expectation of further modest investments of similar total values in the short to medium term to build scale, the company believes this can form a foundation of a business unit that can provide a sound contribution to group results,” Mr Austin said.

QBE puts LMI sales on hold over COVID-19 risk

QBE has informed its bank partners the business will not be providing lenders’ mortgage insurance (LMI) to borrowers who work in sectors that have been severely affected by the coronavirus outbreak.

The insurer has not mentioned which particular group of home loan borrowers would be affected by the temporary sales embargo, but says exceptions will be considered on a case-by-case basis.

“We expect responsible lending obligations would have put a stop to much of the lending to those impacted by the COVID-19 crisis,” a spokesman told insuranceNEWS.com.au. “The embargo provides clarity and consistency.

“We recognise the need to look at individual borrowers’ circumstances and therefore all of our lenders have the ability to seek an exception to this embargo.”

Lenders require home loan borrowers to obtain LMI if their deposit is less than 20% of the property’s assessed value, although this may vary according to individual banks’ policies. LMI protects the bank in the event of a default by the borrower.

QBE is the second-biggest player in the LMI market after Genworth Mortgage Insurance Australia.

“Genworth has not changed our underwriting standards and guidelines at this time,” a spokesman told insuranceNEWS.com.au. “We support our lenders who must apply responsible lending standards and assess applications on their merits.

“We note the standards require lenders to consider borrowers’ current circumstances at the time of lending.”

Johns Lyng 'doing everything' to carry out repair works during virus outbreak

Building services provider Johns Lyng has put in place new measures to ensure the business can continue to keep up with “unprecedented demand” during the coronavirus outbreak.

New hygiene and distancing measures have been introduced in line with federal and state government regulations to slow the spread of the virus.

“We are doing everything we can to continue to service client needs in the context of this changing environment,” CEO Scott Didier said.

“Construction work has been listed as an essential service that can continue during the current social restrictions as mandated by state and federal governments.”

The volume of work has increased significantly, fuelled in large part by last summer’s bushfires and other natural catastrophes. Its Insurance Building and Restoration Services arm achieved a 55.9% rise in revenue to $183.2 million in the December half, as catastrophe-linked income more than doubled to $38.2 million.

“Following a spate of recent extreme weather events…we are currently managing an unprecedented level of demand for our services,” Mr Didier said. “To the end of March, the group has continued to perform strongly, relative to our forecast.”

“This is why continuing to deliver our services remains important.”

BHSI launches liability protection for tech firms

Berkshire Hathaway Specialty Insurance (BHSI) has today launched customisable professional liability protection policies for technology firms in Australia and New Zealand.

“BHSI is committed to simplicity and that is evident in these easy-to-navigate policy forms which are readily tailored to the individual needs and exposures of technology firms,” Head of Executive & Professional Lines for Australasia Cameron McLisky said.

“We take a partnership approach to this market, with our brokers and customers collaborating with our decision-makers, from underwriting, to claims service.”

Customers can choose any or all of three separate “towers” to secure professional indemnity, cyber and general liability covers.

Limits and coverage can be structured to address the individual needs and preferences of a wide variety of tech firms, including those involved in software design and development, systems integration, technology consulting, telecommunications and IT training.

Emergence upgrades cyber policy wording

Specialist cyber underwriting agency Emergence Insurance has upgraded policy wordings to expand coverage, following consultation with brokers and clients.

Emergence says it has “responded to the growing market need for more complete cyber protection by providing a solution with broader coverage and higher limits”.

Emergence’s insured cyber events now include crimeware, cyber espionage, cyber extortion, denial of service, distributed denial of service, hacking, insider and privilege misuse, privacy errors, payment card skimming, point-of-sale intrusion and web app attacks perpetrated against insureds.

“Our criminal financial loss cover protects against cyber theft, socially engineered theft, identity-based theft, telephone phreaking and cryptojacking,” Head of Underwriting and Product Development Jeff Gonlin said.

“Cyber crime is huge. It’s well organised and a sophisticated industry, and every business is vulnerable.”

JAVLN platform joins Amazon's digital marketplace

Business software developer JAVLN has secured a spot to sell its insurance software platform through Amazon Web Services (AWS) Marketplace and its associated Consulting Partner Private Offers program.

The Amazon marketplace is a digital catalogue made up of thousands of software listings from independent vendors.

“Customers will now have access to JAVLN’s insurance software platform and services internationally,” CEO Dale Smith said.

The cloud-based insurance platform offers full policy lifecycle management and also offers historical client information, automatic notices renewals and payment reminders.

Claim Central steps up to meet 'overwhelming demand' for remote assessing service

Claim Central Consolidated has expanded its remote desktop assessing service to meet increased demand from insurance clients, who have had to adjust their practices to comply with the Government’s social distancing rules to contain the spread of the coronavirus outbreak.

“At this unprecedented time, we are doing everything we can to support our clients, their customers and employees,” CEO Brian Siemsen said.

The move to expand its Virtual Inspections as a Service (VIAAS) product will allow more claims to be processed faster while ensuring health and safety needs are protected at the same time.

VIAAS involves connecting remote desktop assessors directly with policyholders to inspect and assess their claims using LiveLogik, a live video streaming and collaboration platform. Insurers can choose to use a range of options including inspection, estimate and reporting services. Alternatively they can set up LiveLogik for their internal claims teams.

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Regulatory & Government

COVID-19 disruption should not delay Hayne reforms: Finity

Actuarial firm Finity has advised insurers against putting on hold the implementation of reform measures pushed forth by the Hayne royal commission during the coronavirus outbreak.

The advice came after the corporate and prudential regulators announced most of their planned policy and supervision initiatives have been suspended to free up resources to focus on managing potential fallout from the virus crisis.

“Clearly this is an opportunity for the regulatory teams in insurers and distributors to take a deep breath and have a look at priorities,” Finity says in a report.

“It does not mean ‘down tools’ but it does mean that people committed to these projects can be redeployed to more pressing activities if needed.”

Where vulnerable customers are concerned, it is even more critical that insurers stepped up their focus during this uncertain period, Finity says.

“If anything it makes sense to try to accelerate it. The very nature of the COVID-19 creates whole hosts of newly vulnerable customers. Even if new policies and procedures are not yet in place, actions will be judged through the lens of those expectations.

“It is hard to imagine a more serious first-up opportunity for financial institutions to demonstrate they have taken heed of the lessons delivered by Hayne than the present COVID-19 situation.”

NSW sets up resilience agency for disasters

NSW has established a new resilience agency to lead disaster preparedness and recovery from catastrophes affecting the state.

Premier Gladys Berejiklian says Resilience NSW will allow the state to step-up efforts to deal with crises, and its role will include recovery from the coronavirus outbreak.

“The NSW community has shown extraordinary resilience in the face of many disasters – bushfires, drought, flood and now the COVID-19 pandemic,” she said.

“We know the next six months will be very difficult, but we must already turn our mind to recovery.”

The agency will be led by NSW Rural Fire Service Commissioner Shane Fitzsimmons, who is retiring after 12 years in the top position. He is also a member of the NSW State Emergency Management Commission and the NSW State Rescue Board.

The new agency will lead a “whole-of government” response and will oversee and coordinate emergency management policy, service delivery and all aspects of disaster recovery at a state, national and international level, he says.

icare return to work rate declines, liability decisions improve

NSW state insurer icare says its 26-week return to work rate saw a slight decline at the end of last year while the pace of liability decisions has improved.

The return to work performance measure moved to 81% in December compared to 82% in the two proceeding months, but it was still up from 79% in the middle of the year.

Some 99% of liability decisions were made within seven days in January, and the average of 3.7 days for initial decisions was the lowest over the previous two years.

“While we have reduced the number of claims where we accept full liability at first decision, the number of claims where we accept provisional liability has increased,” icare says.

“This enables quicker time to treatment and more time to investigate before liability decisions are made.”

The number of active claims in December was 46,079, compared with 46,943 in November. Total claims payments were $213.3 million, up from $207.8 million.

The percentage of calls answered within 60 seconds by agent EML rose to a high of 91% in January, up from 88% in December and 70% a year earlier.

Industry urges NSW to scrap ESL

The NSW Government has again been urged to reconsider funding the state’s emergency services via a broad property-based levy.

The Insurance Council of Australia (ICA) says the reform is critical to post-disaster recovery and rebuilding efforts.

It says the current Emergency Services Levy (ESL) scheme, which relies mainly on taxing insurance products, discourages residents and businesses from taking up insurance. The consequences are often brought to the fore when disasters strike, with many struggling financially to rebuild their properties and businesses.

“The role of insurance companies in this [ESL] system is to act as tax collectors for the NSW Government,” ICA says in its submission to the NSW Independent Bushfire Inquiry.

“This is not a new situation and it is well understood that the higher rates of non-insurance and under-insurance of buildings and contents in NSW is, in large part, an outcome of how NSW has chosen to fund its emergency services.”

ICA says last summer’s bushfire catastrophe will be no different, with many expected to find it difficult to recover financially as they are either under-insured or have no insurance at all.

It has engaged an expert to analyse claims data from the bushfires to determine the extent of under-insurance among affected policyholders. The analysis is yet to be completed.

ICA’s submission urges the NSW Government to replace the ESL with a broad property-based levy, similar to the model introduced by Victoria after the 2009 Black Saturday bushfires.

A property-based levy was supposed to be introduced in NSW in July 2017, but the State Government abruptly called it off a month before its implementation.

The cost of buying insurance in NSW is about 21% higher on average than the rest of Australia because of the ESL. The layering of insurance duty and GST can result in taxes adding more than 50% to the base premium for an insurance policy.

The National Insurance Brokers Association (NIBA) has also urged the Government to reconsider its position, describing the current arrangement as one that “cannot be allowed to continue”.

“In these increasingly uncertain times, property owners must be encouraged and supported to adequately insure their risks,” NIBA says in its submission.

“It is the Government’s responsibility to ensure that barriers that impede responsible property ownership, such as the ESL, are removed, especially as the Australian public becomes more price-sensitive.”

Building guidelines support continuation of catastrophe repairs

New guidelines set by the housing industry body will enable insurers to continue with ongoing repairs and rebuilding of insured properties, the Insurance Council of Australia (ICA) says.

The guidance from the Housing Industry Association (HIA) includes applying social distancing measures at worksites, and is aimed at minimising the risk of exposure to the coronavirus.

ICA says the HIA’s nine guidelines means the industry can press on with recovery works in communities affected by the recent bushfire catastrophe and other natural disasters last summer.

General insurance has been classified an “essential service” while government measures are in place to curb public activity in a bid to slow the spread of the virus.

The nine guidelines are:

  • Applying social distancing measures on worksites
  • Meeting government self-isolation rules on and off worksites
  • Keeping the property owner informed of all COVID-19 prevention measures including site management plans
  • Isolating construction areas from non-building areas
  • Managing project schedules to reduce the number of trades on site at the same time
  • Ensuring workers have access to appropriate personal protection equipment
  • Ensuring workers have access to appropriate hygiene and safety facilities
  • Encouraging contactless payments and deliveries, and travelling off-peak
  • Organising site inductions and updates on the latest government requirements.

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Life Insurance

Disagreement over disclosure costs TAL $365,400

The Australian Financial Complaints Authority (AFCA) has found TAL Life has no grounds to reject a claim for critical illness benefit lodged by a policyholder who had aorta repair and replacement surgery in November 2016.

TAL had declined the claim in May 2017 on grounds that the claimant failed to disclose his medical history including problems with aorta root dilation, tingling or altered sensations, and major depression with suicidal ideation.

It said it would not have insured the complainant had the disclosures been made when the life policy was bought in March 2015 through an adviser.

TAL listed the conflicting answers provided by the complainant and his adviser to support its position before AFCA. In his application form the complainant said he “disagreed” with the answers but the adviser, when contacted by the insurer for further clarification, gave a copy of an earlier declaration that showed otherwise.

“The insurer’s submissions seek to play down the importance of the ‘I disagree’ responses,” AFCA says. “I reject those submissions.

“The declarations are of central importance. Although the declarations are sent to the insurer by the adviser, they are declarations of the complainant himself.

“If a person refuses to declare their answers are true and complete that is a very serious matter for the insurer.

“All insurers, including this insurer in particular, routinely rely on ‘I agree’ responses to this sort of declaration in non-disclosure and avoidance cases.”

AFCA decided that TAL must pay the complainant $365,400 less any premiums refunded, but include interest at the statutory rate from May 3 2017 until the claim is finally paid.

Click here for the AFCA ruling.

COVID-19 puts spotlight on life policy exclusion clauses

The coronavirus outbreak has underscored once again the importance of understanding exclusion clauses in life policies, according to Finlaysons Lawyers.

In recent weeks, many life insurers and super funds have had to clarify whether existing policyholders are covered for COVID-19 after it emerged most covers come with a standard exclusion for pandemic.

Some like AIA and TAL have informed super fund partners that they will not be invoking the pandemic exclusion. At the same time, an exemption clause specifically for COVID-19 may be made for new policyholders or for existing customers who want to raise the scope of cover.

“I think COVID-19 has opened the eyes of a lot of people to what is covered and not covered in a range of policies and particularly what the effects of exclusions in policies are,” Special Counsel Ralph Bonig told insuranceNEWS.com.au.

“Everyone looks at what is covered. It’s just as important to also look at what is not covered.”

Mr Bonig says buying a life policy is “not as easy as just ticking a box” because failure to make proper disclosures may end up being costly in the event of a claim.

While life policies are renewable once they have been instated, the onus is on policyholders to provide any relevant disclosures when they want to review their covers.

“COVID-19 is an opportunity for everyone to review their life insurance policies but also to be careful when choosing cover,” Mr Bonig said. “Firstly, make sure that you disclose everything and secondly, that the cover suits your particular needs. And also be warned that if you have a genetic profile, your insurer might ask for that.

“If you don’t disclose something, the insurer has a number of options. One is to void the cover and the other is to reduce the payout, so it doesn’t automatically void the cover but if it has materially affected the risk you certainly run the risk of having your cover voided.”

Funeral product obligations rise as exemption ends

The Australian Securities and Investments Commission (ASIC) has spelled out new obligations for funeral cover providers as Hayne royal commission reforms take effect this month.

Funeral expenses policies were previously exempt from being a financial product under the Corporations Act, leaving consumers exposed to such practices as high-pressure telephone sales.

Providers, distributors and advisers who don’t have an Australian Financial Services (AFS) licence must now obtain one before issuing funeral cover products, while existing licensees will need to comply with additional obligations from the end of this year.

“ASIC can take enforcement action if you breach your obligations as an AFS licensee,” the regulator says.

Funeral expenses facilities captured by the reforms include insurance products and non-insurance arrangements that enable a client to manage financial risks relating to funeral services.

The changes do not affect prepaid agreements with funeral service providers.

CBA receives further payment from CommInsure divestment

Commonwealth Bank (CBA) has received further payment of about $865 million from AIA as part of the sale agreement for its life business CommInsure.

The latest payment takes the aggregate proceeds received from the divestment to $1.6 billion, CBA says.

“The steps towards the completion of the divestment of CommInsure Life via either a share sale or a statutory asset transfer continue to be progressed in line with previous announcements.”

CBA sold the business at a $150 million discount on the original $2.5 billion, after it had to quarantine its efforts to sell its 37.5% interest in Chinese insurer BoCommLife from the rest of the agreement.

FSC backs strengthened compliance, enforcement

The Financial Services Council (FSC) supports greater compliance and enforcement activities aimed at strengthening the legality and penalty framework of the current unfair contract terms (UCT) regime.

In a submission to Treasury, the FSC says it is against the two other options made in the consultation paper.

Making UCTs illegal and attaching heavy penalties is one of the recommendations under consideration. According to FSC, the civil penalty regime is a “penal sanction of the state” and is not appropriate for determining UCT obligations.

“In any event, the civil penalties proposed are not commensurate to the subject matter of the contravention,” the FSC says. “Prior period turnover bears little or no relationship to the conduct involved in contravening the UCT regime.

“This may result in a very large amount which may not correlate in any way to the seriousness of the offence or the actual benefit obtained and is therefore inappropriate.”

Under this proposal, a court would be allowed to apply up to 10% of annual turnover as a penalty for UCT contravention.

On giving more powers to regulators, FSC says infringement notices or determinations are suitable for relatively minor offences or absolute liability type but not for UCT provisions.

“In an insurance context, the UCT regime is not appropriate for [Australian Securities and Investments Commission-issued] infringement notices as complex actuarial and pricing and detailed factual and legal analysis is required to assess whether a term is fair or unfair in light of the UCT legislation,” the FSC says.

“Given the complexity and potential for subjective analysis in UCT cases, we believe these should be assessed by a court, and therefore the infringement notice regime is not appropriate for unfair contract terms.”

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The Professional

NIBA cancels convention, continues awards

The National Insurance Brokers Association (NIBA) has cancelled its convention in October due to the coronavirus but plans to continue with its annual awards program.

Regional awards for Broker of the Year and Young Broker of the Year are normally presented at capital city events before the national winners are announced at the convention.

CEO Dallas Booth said last week that plans for the timing and presentation of the awards program for this year are being finalised.

“Clearly we are not going to be able to make announcements at our major events in the middle of the year for our state winners, or at the convention for the national winners,” he told insuranceNEWS.com.au.

“Nevertheless, we think it is critically important to celebrate the good things that happen in broking and to recognise excellence.”

The annual convention, which was planned for Melbourne on October 26-27 this year, typically attracts hundreds of delegates. It’s the latest industry event to be halted as Australian governments warn of an extended period of social distancing measure.

Mr Booth says it is difficult to predict what the situation will be in October and what restrictions will remain in place, and after careful consideration the decision was made to cancel the event.

Former QBE executive takes up Littlewoods compliance role

Sydney-based services provider and (re)insurance adviser Littlewoods Services has appointed former QBE executive George Thwaites as Senior Manager for its risk, compliance and finance areas.

Mr Thwaites was most recently group head of regulatory compliance at QBE. Previously he has been QBE’s head of regulatory and government affairs and group chief risk officer.

“His skillsets are critical in today’s environment and his appointment will allow Littlewoods to continue to strengthen its capabilities,” Littlewoods Director Nik Lytas said.

HDI Global appoints underwriting manager for WA

HDI Global Sydney-based Property Assistant Underwriter Kirsten Murray has been promoted to Property Underwriter for the WA business.

She will relocate to Perth for her new role, reporting to WA Underwriting Manager David Gibbs.

HDI says Ms Murray’s appointment will strengthen its growing business in WA, particularly in regard to supporting broker partners.

Mr Gibbs says Ms Murray has been working closely with the WA branch since its establishment “and her promotion is thoroughly deserved”.

RACT launches $100,000 community grants fund

RACT Insurance has launched a $100,000 grants funding program to assist community groups affected by the coronavirus outbreak.

CEO Trent Sayers says the COVID-19 Community Response Fund will support projects in Tasmania which build resilience and the ability of groups to rebound after the outbreak, and will help with fixed costs that are ongoing although operations are restricted.

“Local community groups make a big difference to life in Tasmania and will play an important role in rebuilding and bringing our communities back together once the threat of COVID-19 is over,” he said.

“As Tasmanians we are all in this together and we take our role of supporting our community through this difficult time seriously.”

RACT Insurance also says there are a number of options it can offer customers facing hardship, including payment flexibility and waiving of obligations for short periods of time.

It has also committed to immediate payment of invoices for its preferred repairers and suppliers and is maintaining continuity of access to available work.

Claim Central appoints Chief Commercial Officer

Claim Central Consolidated has appointed Eben le Roux as Chief Commercial Officer, effective today.

Mr le Roux was most recently Global CFO of equipment rental and industrial services business Waco International, and has previous experience in investment banking and financial services.

Claim Central says he has worked with boards and executive teams in Australasia, Africa and the UK, and will assist the company with its growth plans.

“His understanding of the dynamics of various international markets and verticals will help us with our services technology and data focus in key regions,” CEO Brian Siemsen said.

The Sydney-based claims management firm also has offices in New Zealand, South Africa and the US.

Mr le Roux will report to Mr Siemsen.

AMI launches kindness campaign

IAG-owned New Zealand insurer AMI has launched a kindness campaign to “lift the spirits” of the public during the coronavirus outbreak.

Since last Thursday, the insurer’s KindCast initiative has begun airing the messages of kindness penned by New Zealanders on TV, social media and web channels.

“It could be a message to their loved ones to let them know they are thinking of them, or it could be a message of gratitude to an essential worker,” AMI spokesman Alex Geale said.

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International

How US and UK insurers are helping customers

Insurance companies and their representative organisations are working out ways to help their customers as communities around the world begin to experience the challenges of prolonged coronavirus control initiatives.

US and UK companies have not committed to extensive industry-wide assistance programs in the same way as Australian insurers have, instead making concessions for specific cases.

In New York, the Insurance Information Institute says some insurers are offering payment relief and extending coverage to customers who are in financial distress, “while at the same time keeping employees on the job to serve these same customers”.

US insurers are hampered in devising united support programs because each state has its own insurance regulator, but trade groups representing insurers have voiced support for the proposed COVID-19 Business and Employee Continuity and Recovery Fund which will be financed by the US Government to provide essential funds to impacted employers and employees.

In the UK, The Association of British Insurers (ABI) is reassuring people that its motor and home insurance members are offering enhanced help and support to all their customers who may be affected.

The commitments include waiving any requirements to extend cover for key workers who may need to drive to different locations, people who want to help their communities by transporting medicines or groceries to support those affected by coronavirus, and office workers who need to work from home.

“Insurers are doing everything possible to support their customers at this worrying time,” the ABI says.

“For example, people working from home will be covered by their home insurance, as will motorists using their vehicles for essential reasons.”

ABI flags pool solution for pandemic risks

The Association of British Insurers (ABI) has suggested reinsurance pools like those used for terrorism and earthquake risks could be part of solutions for protecting against future pandemic risks.

ABI Director General Huw Evans says it will be necessary for governments and insurers to work together in future to find new solutions, given the risks exposed by the current coronavirus outbreak.

“If global pandemics are to be a more regular part of our world, we need to start talking about how to protect more businesses and individuals than has been the case with COVID-19,” he says.

The ABI notes that protection-gap schemes already in existence include New Zealand’s Earthquake Commission, the California Earthquake Authority and the UK’s Flood Re and Pool Re.

The schemes have different levels of state involvement, but all seek to enable insurance protection for risks that would otherwise be uninsurable, Mr Evans says.

The coronavirus pandemic has highlighted a lack of widespread cover under business interruption policies, designed to respond to more usual risks such as damage to premises and supplier failure.

Mr Evans says the size and scale of government support packages and central bank interventions show why insurers have long been wary of the huge potential costs of protecting against pandemics.

“Even in the UK, providing widespread insurance cover against pandemics would be virtually impossible without state support because the amount of capital insurers would have to hold against the risk would result in completely unaffordable prices for customers,” he says.

Despite policy limitations, UK insurers expect COVID-19 to be a major event with £275 million ($559 million) of travel insurance claims, and claims for cancelled events, school trips and some elements of business disruption.

Chubb announces donation to pandemic relief

Chubb has committed $US10 million ($16.66 million) to pandemic relief efforts and has pledged not to retrench employees while the crisis is ongoing.

The funds will be made by the Chubb Charitable Foundation and will go to emergency frontline services and “most financially vulnerable members of the community”.

Chubb says it will work with partner organisations in the US and other countries to provide essential resources “in areas facing the most acute need”.

Separately, the company announced it will not conduct “any layoffs of Chubb employees” while the COVID-19 pandemic health crisis continues.

“We are committed to supporting people, business and communities most impacted by this global crisis,” Chairman and CEO Evan Greenberg said.

“Our $US10 million commitment will add to the urgent efforts required to meet the immediate health and nutrition needs of those most affected.

“Concerning our no-layoff pledge, we want our 33,000 employees around the globe to be assured that their jobs are secure at this difficult time.”

Munich Re warns of 'considerable' earnings hit from virus pandemic

Munich Re’s property and casualty (P&C) arm has suffered a “considerable claims burden” in the first quarter because of the coronavirus pandemic, forcing the global reinsurer to withdraw its €2.8 billion ($5 billion) profit guidance for this year.

Last year the group reported a net income of €2.7 billion ($4.9 billion).

The claims expenditure in the first quarter is related mainly to the cancellation and postponement of large events, the reinsurer says.

For the first quarter, Munich Re has flagged a drastic drop in profit to the “low three-digit million euro range”. The business made €633 million ($1.14 billion) in the first quarter last year.

The reinsurer will go ahead with its planned dividend of €9.80 ($17.60) per share but will put on hold its share buyback program until further notice.

Early reinsurance renewals avoid virus impact

Reinsurance renewals in April were mostly fully placed before the impact of coronavirus escalated and without specific exclusionary language after buyers started negotiations well in advance, Willis Re says.

“This organised approach proved to be prescient in light of the COVID-19 outbreak, which started to challenge the operational model of the market in the last two weeks of March,” Global CEO James Kent says in the group’s quarterly First View report.

Renewals were completed on time as industry participants began working from home, while several reinsurers sought to impose exclusions on programs completed closer to the renewal date.

“In some cases, reinsurers achieved these exclusions but in other cases buyers have been able to provide comfort that their original policies have no exposure to COVID-19 related losses by issuing letters of understanding to reinsurers,” Mr Kent says.

The reinsurance industry is well-placed to manage the longer-term financial challenge of the coronavirus outbreak despite current volatility, Willis Re says.

“The extreme gyrations of financial markets have had a significant impact on the assets of reinsurance companies, but fortunately, the timing of the COVID-19 disruption has coincided with the global reinsurance market being in a very strong financial position supported by strict regulation.”.

The April renewal period saw significant rate increases on loss-affected accounts and “a measured approach” on loss-free contracts and less-stressed classes, following a gradual hardening over the past 12 months, Willis Re says.

Most traditional reinsurers and some insurance-linked-securities (ILS) funds were able to offer increased capacity, while some ILS funds reduced offered capacity with the message that there had been recent redemptions by investors.

Casualty renewals were again under scrutiny for loss development, while specialty classes with losses also saw reinsurers pushing hard on pricing.

“The aviation market saw price increases in excess of 20% for the first time in nearly two decades,” the report says.

AM Best says in a report that global reinsurers are well capitalised and the industry is resilient.

“We expect that any covered losses will be manageable and that relevant policy exclusions will hold up,” it says.

“Adverse impacts from the pandemic both underwriting and investment-related may act to restrain capacity, which will further support positive pricing trends that were already in motion.”

UK flood losses top $600 million after February storms

Storms that swept through the UK in February have caused insurance property losses of £297 million ($606 million), Swiss-based catastrophe data firm Perils says.

Flooding was mainly associated with named storms Ciara, Dennis and Jorge and caused the greatest damage in northern England and Wales. Northern Ireland and Scotland were also affected.

Perils says an estimated 4800 properties were damaged, while many other locations were successfully protected by flood defences.

The UK insurance industry suffered total losses of about £650 million ($1.3 billion) from flood and wind-related events during the past winter, according to Perils.

The February 9-29 storms have caused the largest UK flood losses since December 2015, when inundations cost the industry £1.1 billion ($2.2 billion).

An updated estimate for the storms will be released by May 29.

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Analysis

Aid to SMEs: it's not too late for some alternative thinking

The insurance response to the coronavirus pandemic, which played out over the past week, was supposed to be an industry-wide solution to keep SME businesses insured and engaged. But it ended up being a solution that angered brokers and caused a great deal of debate.

What started off with the best of intentions has devolved into a bit of a mess. But – with the thought of that industry-wide solution still in mind – today’s bulletin features suggestions from senior industry figures that could resolve most of the objections and make for a better support package.

This whole thing started pleasantly enough. Several weeks ago the National Insurance Brokers Association (NIBA) said it was discussing the best way to “support communities” with the Insurance Council of Australia (ICA) and premium funders.

The insurers were under pressure to follow the major banks with concessions for SMEs, which risk being lost to insurance. But as insuranceNEWS.com.au has pointed out previously, insurance companies are not like banks.

The Australian Banking Association has 22 members, dominated by the Big Four, who are Australian-owned and tend to make decisions in lockstep. ICA has around 56 members, many of them internationals and each with their own business and strategic directions.

Australia is a tough insurance market. When it comes to working with competitors at ICA, agreement is achievable but it rarely comes quickly – especially when you’re discussing taking a voluntary revenue cut. Try explaining that to your boss in Asia, Europe or North America at a time when global earnings are in a coronavirus-infused nosedive.

At some stage in the past few weeks ICA and (presumably) its directors put together the plan being rolled out now by Suncorp, QBE and Allianz, with others to follow. The item that has stuck in brokers’ throats is the biggest one – a decision to defer premium payments for up to six months for small businesses experiencing financial hardship. It’s a move that move that will impact most sharply on brokers’ commissions, and hence their cashflows.

Did the insurers consult NIBA? Apparently not. Like Asian steel companies dealing with foreign iron ore producers, the insurers seem to have decided that when they take a hit (however self-inflicted), brokers who share the benefits in the good times should also “share the pain” in the bad.

Perhaps they took heed of the March 23 comment by NIBA President Eric Harris challenging “insurers and premium funding companies to support our communities”, which kind of indicated that he didn’t see brokers as active participants.

Whatever the insurers were thinking, the brokers were cut out of the process at some early point. But then IAG, the largest and the most conscious of the need to be seen doing something, changed the dynamic. While it was ready to go, IAG faced interminable delays while the competition regulator was formally consulted, and fellow members ran the numbers and obtained clearances from their bosses and boards here and overseas. Comforted by the regulator’s more relaxed attitude to decision-making in these trying times, IAG jumped off the ICA bandwagon and went solo.

From IAG’s point of view at least, it was a very rational decision, and the public response to its announcement of ways it would help SMEs was very positive. But not in the industry. The other insurers, gazumped and locked into a tediously long regulatory process, were incensed. But their heat was nothing compared with the brokers’.

NIBA CEO Dallas Booth said the IAG announcement “effectively meant the opportunity for an industry response was lost”.

Pointing out that the initiative could result in some brokerages collapsing under the weight of servicing customers without payment, he said these concerns could have been “ironed out” if an industry-wide position had been persevered with.

While Mr Booth’s comments did result in some rejoinders from brokers who saw merit in the IAG/ICA approach – or at least were willing to do whatever they could to support their clients – what has become obvious over the past week is that wider consultation would have given the insurers some options that are both more sophisticated and could be more effective in actually helping SMEs stay in business and buying insurance – without exposing brokers.

Many senior brokers were not willing last week to engage on the subject with insuranceNEWS.com.au to the point of being named, but some were prepared to privately express misgivings at the thinking behind the insurers’ solution.

Then AUB MD Mike Emmett stepped up on Friday to offer an alternative approach. He favours a monthly payment scheme rather than a deferral.

“If we can spread the impact rather than deferring it, that is better,” he said. “The cashflow impact can be more easily managed and everyone could have used it.”

Those sentiments are reflected in a suggestion doing the rounds of brokers late last week, which raises the fact that underwriters have given retail clients six months to pay, or – as one broker put it – “extended credit terms for brokers to 180 days where they are the intermediary”.

Under this idea brokers could work with premium funders to offer more competitive funding with a reduced commission rate – say 1% or 0.5% – which would represent a sacrifice of revenue for the broker to ease the load for the client.

Brokers could then extend the settlement terms with a funder to 170 days – except for their broker fees and commission, which they would require to enable them to stay in business processing renewals and dealing with changes and claims.

The clients would benefit by not paying interest during the 170 days, while still making monthly payments.

The present assistance package devised by the insurers is hobbled by the fact that many brokers, large and small, are unhappy with it. That doesn’t mean brokers are not prepared to make sacrifices for the benefit of their clients. But if there are more effective alternatives available, they should be considered, even if only as an option for SME customers.

The details of how the insurers’ support program is all going to work hasn’t yet been settled, but brokers are adamant that a deferral of premiums for six months isn’t going to be helpful at the end of that period to an SME struggling to get back on its feet. And some brokers would risk financial collapse.

That’s why it’s important to consider alternative arrangements that might have come up during the insurers’ deliberations had the brokers been asked.

For the sake of a united industry with genuine shared interest in supporting their SME customers, it’s not too late to think again.