28 September 2020
Hard market conditions and the impacts of the coronavirus outbreak are presenting challenges for businesses seeking renewed or expanded insurance cover, Gallagher says in a fourth quarter report.
Losses, largely driven by recent natural catastrophe claims, lack of investment returns, higher costs from the treaty reinsurance market and increased litigation are among key issues affecting the availability of cover.
“COVID-19 implications and constraints on key insurance market operators, such as Lloyd’s of London, have had a significant impact on turnaround times for terms offered by overseas insurers,” Gallagher says.
Accountability pressures from shareholders are also making obtaining insurance cover more difficult in sectors engaged in activities with environmental impacts, such as mining and coal-based energy.
Property premium rates are typically priced 10% higher for lower risk renewals and significantly higher for more challenging risk types.
Public liability cover is also subject to increases of at least 10%, irrespective of claims activity or turnover increases.
Risk areas include high bushfire exposure, high worker-to-worker exposure, amusement rides that lift and spin, trampoline and inflatables entertainment centres, coal risks and tailing dams, and buildings with aluminium composite panels.
“On a primary basis, insurers are looking to exclude COVID-19 transmission risks, making expertise in market selection crucial to obtaining appropriate cover for an organisation,” the report says.
Gallagher highlights that an economic downturn and uncertainty also makes risks more acute in professional indemnity, which is seen as a “recessionary-prone” class.
“There can be no room for error or expectation gaps at times when there is pressure on revenue and costs,” it says. “This is when the results of professional services tend to be more heavily litigated.”
Gallagher says insureds should build a strong relationship with their broker, start renewal preparations early, be prepared to provide detailed information and be open to changes in the way programs are constructed.
Travel is the insurance line suffering most from the COVID-19 pandemic, according to the annual Radar report from actuaries Taylor Fry.
It says many insurers have stopped issuing near-term travel policies due to government restrictions, and premium volume descended into negative territory in the June quarter as refunds for unused travel policies were provided.
Radar contributor and Taylor Fry principal Win-Li Toh says the sector can recover, although it is unclear when that recovery will start.
“There is uncertainty around when borders might reopen and whether people actually want to travel again when borders reopen,” she told insuranceNEWS.com.au.
“It could be that once we get out of a pandemic world, people won’t just jump on a plane and fly here and there for no good reason.
“They might plan trips that are longer and more thought-through. Instead of going to Italy for a week you might think, ‘I’ll just go once every three years and I’ll go for three months’.
“Trips could be fewer but longer and more considered, and premiums could recover.”
The report, which analyses the impact of COVID class by class, warns that while travel is hardest hit, all insurance lines are likely to suffer to some degree.
Taylor Fry Principal Kevin Gomes says while travel insurance has been hit particularly hard, “in time, most lines of business are likely to experience adverse effects, as poor economic conditions and increasing community hardship constrain premium increases and apply ongoing pressures on claims”.
Click here for the full report.
Chubb and other insurers have filed a concise statement to the Federal Court outlining the reasons why The Star Entertainment Group’s claim for business interruption (BI) losses was denied.
They are being sued by the casino group after months of unsuccessful talks failed to settle the matter.
The insurers’ statement seen by insuranceNEWS.com.au states that COVID-19 is excluded in the industrial special risks policy issued to the casino group.
“Put another way, the peril in question, COVID-19 and its economic consequences, are already the subject of a specific provision of the policy which denies cover in respect of it,” the statement says.
“The Star cannot satisfy the extended definition of damage and has suffered no harm as it cannot access the insuring clause under the policy. As such, no question of indemnity being available under the insuring clause arises.”
Chubb, as the lead insurer of the policy, is the first respondent in the lawsuit. The insurers that took part in the insurance program are AIG, Allianz, Allied World Assurance, Assicurazioni Generali, HDI Global, Liberty Mutual, Swiss Re International, XL Insurance and Zurich.
The Star says in its concise statement that the policy insures its businesses and subsidiaries against certain special risks, including “certain risks of business interruption” and that its BI claim falls within the terms described in the cover.
But the insurers say The Star has neglected to mention in its concise statement several important facts, and also referred to others in a manner which is “amorphous and infused with stated assumptions”.
In clause 9 of the Memoranda to Section 2 of the policy, the insurers say “there can be no sensible debate that the term ‘quarantinable disease’ as it appears in the Infectious Diseases Clause should be construed in any way other than as a ‘listed human disease’.”
The clause specifically states a special provision will apply if “an occurrence of a human infectious or human contagious disease which the competent local authority has stipulated shall be notified to them, with the exception of any occurrence, whether directly or indirectly, arising from quarantinable disease listed in the Biosecurity Act 2015, which are all specifically excluded hereunder”.
They say the reference to “quarantinable disease” is a term used in the Quarantine Act 1908, the predecessor to the Biosecurity Act 2015. The Biosecurity Act uses the term “listed human disease”.
The insurers also rejected The Star’s position that the Civil Authority Extension in the policy “extends to cover loss resulting from or caused by a lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe”.
They submit that “damage is defined in the insuring clause as ‘loss, destruction or damage’ to buildings or other property used by the insured at the premises, being physical loss, destruction or damage”.
“The Star does not allege that damage of this nature has been suffered.”
The Star says the insurers’ reasons for declining its claim, including grounds that the cover did not cover non-physical losses, are in breach of the policy.
Chief Justice James Allsop has ordered the casino group to file an amended concise statement before October 20. The insurers are to submit their response before November 10. It must include a clear and complete identification of the basis or bases for the denial of the claim as made by the casino group.
The case management hearing, which was set for last Friday, has again been adjourned. It is now set for November 17.
Businesses must not put off risk management processes to save cash during the COVID-19 pandemic, insurer FM Global warns.
Writing for insuranceNEWS.com.au, Senior Vice President Division Manager Asia-Pacific Alex Tadmoury says coronavirus will force businesses to adapt business models and tighten budgets.
“One of the biggest risks – and a key danger facing the region in the next six to 12 months – is the postponement of risk management and mitigation processes in an effort to protect cashflow,” he says
“As businesses reassess, reframe, adjust and adapt, our advice to all businesses is that these cutbacks must be short-lived, if they happen at all.
“Risk management may come at a cost, but unmanaged risk is far costlier.”
The coronavirus pandemic and associated restrictions have led to a significant decline in vehicle theft.
The National Motor Vehicle Theft Reduction Council says there has been a nationwide impact, with 10,638 thefts nationally in the April to June quarter, down 35% from the previous quarter and 26% from the same quarter last year.
The council says there were “sizeable reductions” in most jurisdictions compared to the previous quarter, including 28% in NSW, 30% in Victoria, 39% in Queensland, 42% in SA and 47% in WA.
Theft numbers also fell across all vehicle types. Motorcycle thefts declined 40% while the passenger and light commercial and other vehicles categories were down 34% and 33% respectively.
“The analysis clearly demonstrated an association between the COVID-19 nationwide lockdown restrictions and motor vehicle crime,” the council said.
“However, with the ongoing financial impact of the pandemic and an established correlation between the performance of the economy and crime generally, it is almost certain there will be an uplift in vehicle crime that will extend into 2021.”
A government-back insurance solution for pandemic risk would have merit for a number of reasons, Finity says in a report for the Insurance Council of Australia (ICA).
Such a solution could provide predictable coverage, generate mitigation price signals, offer funding options and could allow existing insurance infrastructure to be used, it says.
“We anticipate consumers and businesses across Australia will want some form of pandemic cover in insurance policies going forward,” the consultancy says. “Long-term, the insurance industry will need to work with government to clarify its role in future pandemic events.”
ICA engaged Finity to identify insurance-related options the Government may undertake to mitigate the economic effects of pandemics, including where insurance-based mechanisms may be relevant, and the potential role of the private sector.
The paper presents four frameworks for consideration, but the consultancy was not tasked with making specific recommendations.
The frameworks start with a status quo baseline option, followed by limited arrangements similar to UK and EU action on trade credit, involving narrowly defined solutions for specific industries
Framework Three suggests a new form of business protection designed to provide a short-term limited benefit, while Framework Four involves a government-backed pandemic facility that could be similar to existing terrorism pools.
Finity says the paper provides a basis for discussion, with further investigation and modelling and public policy decisions required before any path could be chosen as the best way forward.
“This issue is not one that can be easily solved, and it does require quite a bit of thought and study to try and create a framework for funding these events in the future,” Finity Principal Rade Musulin told insuranceNEWS.com.au.
“Some of this involves some public policy choices around what the Government wants to prioritise. There is a process that has to be gone through to arrive at the right answers.”
Finity sees no prospect for significant private sector reinsurance support for widespread pandemic coverage in the foreseeable future, and says exclusions are likely to be tightened.
“Any insurance solution for pandemic will require government support to fill the financing gap created by the absence of reinsurance support,” it says.
The study includes an examination of options also being considered in the US, the UK and Europe.
The paper is available here.
The Australian Financial Complaints Authority (AFCA) received 15,665 disputes involving general insurers in the last financial year, second only to banks who had 28,176 cases filed against them.
For COVID-19 disputes, travel was the most complained about financial product with 2610 cases lodged between March 3 and August 31, AFCA says.
General insurance accounted for 41% of overall disputes related to the pandemic, followed by the credit sector, which had 35%.
“The early impact of COVID-19 can be seen in the spikes in complaints relating to travel insurance,” AFCA Chief Ombudsman David Locke said. “With so many travel plans impacted, it was inevitable that there would be a big increase in travel insurance claims.”
AFCA received a total of 76,880 complaints overall and awarded $246.1 million in compensation to complainants, according to the latest edition of the AFCA Datacube.
The Datacube provides details about financial firms with four or more complaints in a given period. Information given includes service and products involved, naming firms and how they have been resolved.
Home building cover topped the list of general insurance products with the most complaints, at 2789. Motor vehicle insurance was a close second on 2602, followed by travel insurance on 1220, uninsured third party motor vehicle on 797 and home contents on 614.
Major personal lines insurers IAG and Suncorp each had more than 3000 complaints in 2019/20. There were 1189 complaints against Allianz, 1156 against QBE and 655 against Hollard Insurance Company.
A Suncorp spokesman told insuranceNEWS.com.au the business is focused on “continually improving customer outcomes by proactively identifying and responding to trends in complaints”.
“Our response rates show we treat our customers with the priority they deserve and we work with them to finalise simple complaints quickly, which allows us to focus resources on resolving those more complex matters,” the spokesman said.
Click here to access the Datacube.
The escalating risk from natural hazards anticipated for years in Australia is now manifest and is outstripping the nation’s preparedness to manage the fallout, a Royal Commission hearing was told last week.
The hearing heard Australia faces more frequent and intense disasters due to climate change and now is the time to make policy changes.
“We've now surpassed the tipping point,” Mark Crosweller, former head of the National Resilience Taskforce, told the Royal Commission into National Natural Disaster Arrangements.
“The hazard and risk base had been anticipated in this way for a number of years. It's now manifest … more intensive, more frequent.”
IAG EM of Natural Perils Mark Leplastrier and meteorology specialist Bruce Buckley also appeared at a hearing last week, and closing submissions were made on Friday by Commissioner Mark Binskin and senior counsel assisting Dominique Hogan-Doran.
The final report from the royal commission, which has held 35 days of hearings over four months, is due on October 28 and is expected to detail recommendations relating to national co-ordination, decision-making and accountability.
Mr Crossweller says Australia is “a long way behind on recovery capacity and capability”.
“Our anticipatory capacity in that space is nowhere near where it needs to be,” he said. “We need to anticipate loss.
“On the recovery framework alone, I think so much more could be done in public policy to anticipate these events sensibly … and do something about it. Likewise with resilience.”
Culturally, resilience was viewed as a problem for emergency management, yet that field did not have “the reach” across government, Treasury, the Prime Minister and cabinet to influence best practice, he said.
“It just simply doesn't have it, and nor should it. As a function it's probably not appropriate, but resilience has a role and I think therefore structurally there does need to be some amendments.”
Mr Crosweller says efforts are under way to improve access to natural hazard data. “It needs an enormous amount of work to improve the knowledge base,” he said, citing examples of local governments making planning decisions on 1950s flood data during his tenure.
“If you try and get a national bushfire risk map it doesn't exist at the moment,” Mr Crosweller said. “If we wanted to get a comprehensive understanding of the flood plains of Australia, well there's some data on that, of course, but is it contemporary? Probably not.”
Dr Buckley told the hearing there had been a marked increase in large and giant hailstorms in some areas over the past 20 years, including parts of Sydney, north of Newcastle and near Wollongong.
“The evidence…was actually quite consistent and somewhat alarming because it showed that what we thought could be occurring was occurring,” he said. “It was actually occurring at a faster and more substantial rate than we had anticipated.
“If you get a giant hail event over a motor vehicle it will destroy that vehicle. It will be a writeoff.”
The IAG team has identified “connected extremes,” and Dr Buckley says there is a high prospect of a major tropical cyclone being coupled with the pandemic next summer in Australia.
AUB has appointed PwC to assist with the potential sale of its Altius rehabilitation and health business as the company returns to a focus on its core broking operations.
The move to sell Altius, in which AUB has a 56.9% share, follows the group’s exit from Allied Health at the start of last financial year's fourth quarter.
PwC has commenced early discussions with potential trade and private equity buyers, with a structured auction expected to follow, the Australian Financial Review reported last week. AUB declined to comment when contacted by insuranceNEWS.com.au, but has flagged the possible sale of the business.
“We are very pleased with the progress made to transform the performance of Altius, which has strong momentum,” CEO Mike Emmett told the results briefing last month. “As previously mentioned, we anticipate exploring options regarding our investment in Altius during FY21.”
Majority stakes in Allied and Altius were acquired in 2015 as part of a diversification strategy pursued by previous CEO Mark Searles, who led the group for six years.
Mr Emmett, who took over in March last year, has refocused the company on its core broking operations in Australia and New Zealand, rather than seeking to expand through complementary services.
In the year to June 30 health and rehabilitation contributed $4.2 million to AUB’s pre-tax profit. The Procare business – which provides diversified services to insurers and insurance broking clients – moved to the Austbrokers division in July last year.
The State Insurance Regulatory Authority (SIRA) says it intends to issue a compulsory third party licence to Youi, making it the first insurer to be added to the scheme since reforms were introduced in 2017.
SIRA says a rigorous application process has found Youi meets all requirements for licensing, and it's satisfied the firm has the financial sustainability and capacity to effectively deliver services to policyholders and injured road users.
“This is good news for motorists as increased competition in the market will encourage even better premium affordability,” the regulator said.
At present the CTP insurers in the state are AAMI, Allianz, GIO, NRMA Insurance and QBE.
Youi has previously offered CTP insurance as an agent for QBE in an arrangement that ceased in April last year.
The reforms, which started three years ago, introduced no-fault cover and aimed to reduce the cost of premiums.
A Youi spokesperson says the company is unable to comment at this stage on the SIRA licensing announcement.
Brisbane-based Ryno Underwriting has rebranded as ShieldCover from October as part of a business growth strategy.
The change separates the underwriting division from Ryno Insurance, which will continue to focus on the enthusiast motoring sector while ShieldCover will focus exclusively on servicing the broker market.
Founder and MD Greg Rynenberg says the agency model is “receiving a fresh new look” to establish itself as a more prominent market player.
"With Ryno Insurance and Ryno Underwriting both continuing to grow in two different markets with two different audiences, it makes sense to give Ryno Underwriting an independent brand,” Mr Rynenberg said.
“While the ShieldCover brand is a little different, the agency is not being reinvented – rather, revitalised.”
ShieldCover is a division of East West Insurance Brokers and specialises in blue collar, hospitality, property owners and small retailers.
Aon has announced new partnerships with the Real Estate Institute of Victoria (REIV) and the Real Estate Institute of the Northern Territory (REINT).
Aon is also exclusively aligned with real estate institutes in Queensland and WA and is an endorsed provider to the peak national body the Real Estate Institute of Australia.
Client Director for Real Estate Richard Silberman says a softening of capital city property markets, bushfires and COVID-19 have created a “perfect storm” for real estate agents in Australia.
“That two real estate institutes have subsequently decided to make a change is a signal to the industry that we need a new approach,” he said.
The announcement follows the introduction of Aon’s new real estate insurance product solution.
Professional Risk Underwriting, or ProRisk, has introduced a new association liability policy for SME associations and not for profit organisations.
To celebrate the launch ProRisk is giving away a Sonos Beam speaker to one broker every month between now and January 31.
“All brokers need to do to enter is get a quote for association liability at probind.com.au,” the company says.
Association liability is suited to organisations in Australia with up to 500 employees and a turnover of less than $25 million. It is underwritten by Swiss Re.
The policy covers commercial crime and statutory liability and offers complimentary legal advice, contract reviews and a whistleblower hotline. It is modular, with dial-up or dial-down limits and deductibles. It also offers a single excess applying across all coverage sections.
ProRisk employs 32 staff in Melbourne, Sydney, and Brisbane with annual gross written premium of more then $64 million.
Former IAG MD and CEO Mike Hawker has been appointed to the board of Westpac, effective in November.
Mr Hawker held senior executive positions with Westpac before joining IAG in 2001. He left the group in 2008.
Among a long list of associations, Mr Hawker was president of the Insurance Council of Australia, chairman of the Australian Financial Markets Association, a board member of the Geneva Association think-tank and a member of the Financial Sector Advisory Council.
He will retire from the boards of Macquarie Bank and Macquarie Group prior to starting his role at Westpac.
QBE has signed on as a participant of the UN Global Compact on sustainable development, supporting its 10 principles on human rights, labour, the environment and anti-corruption.
Group Executive Corporate Affairs and Sustainability Viv Bower says the group is committed to making the principles part of its strategy, culture and day-to-day operations.
The compact was launched in 2000 and involves more than 1200 companies from over 160 countries and includes representation from a range of sectors.
More than 200 participants have signed up from Australia, including Suncorp, Coles, Woolworths, Qantas, BHP and the four major banks.
“We are continuing to progress our commitment to sustainability and look forward to working collaboratively with the Global Compact Network Australia on projects which advance the broader development goals of the UN,” Ms Bower said.
The National Insurance Brokers Association (NIBA) has criticised a NSW Independent Pricing and Regulatory Tribunal (IPART) proposal to end the mandatory use of brokers in the state’s building defects compensation scheme.
IPART says the use of brokers and the purchase of certificates of insurance adds about 15% to the cost of cover provided under the Home Building Compensation Fund (HBCF).
“Providing builders with more options around how they manage their obligations under the HBCF provides a greater incentive for brokers to demonstrate value for money, placing downward pressure on their fees, as well as allowing builders to avoid these costs entirely,” a draft report says.
NIBA says the proposal has the potential to negatively impact many of its members involved in the area.
“Also concerning is the lack of understanding the report shows as to the nature of the HBC space and the requirements set out of [NSW state insurer] icare,” it says.
“NIBA will be providing a submission to the review to ensure that these misconceptions are corrected and that the tribunal is provided with the appropriate information to make informed recommendations.”
icare is the only provider for the scheme, which provides a last-resort recourse for owners of new low-rise properties when they are unable to be compensated for defects due to a builder becoming insolvent or disappearing.
Changes were made in 2018 to open the market to other insurers, but new entrants have been discouraged from entering as icare’s fund has continued to make losses after premiums were previously set below break-even levels.
IPART recommends changes to allow non-insurer providers, such as fidelity funds, to offer alternative indemnity products under the scheme, and also recommends offering separate construction period and warranty period products to encourage new entrants
But the report says icare is still likely to remain the default provider in the short-to-medium term, particularly as the COVID-19 pandemic is likely to increase insolvencies and claims.
“Consistent with the NSW Government’s approach to regulating other monopoly service providers, an independent regulator should determine icare’s premium prices to replicate the outcomes of a competitive market,” it says.
Recommendations also include that the State Insurance Regulatory Authority increase its oversight of icare by reviewing the builder eligibility model and claims handling processes.
Under the scheme, builders are responsible for taking out HBC insurance on behalf of homeowners.
A virtual public hearing on the draft recommendations will be held tomorrow and submissions on the report are due by October 16. A final report is due by November 30.
The draft report is available here.
NSW state insurer icare has started the process of recruiting a new CEO and MD following the departure of John Nagle.
The role has been publicly advertised and executive search firm Boyden selected to manage the appointment.
Incoming Chairman John Robertson says the recruitment of icare’s CEO is one of his “top priorities”.
“The Treasurer has given me a clear mandate as incoming Chair of icare to ensure key actions are met to help manage this leadership transition as smoothly as possible for all stakeholders and to ensure icare is delivering on its commitment to support injured workers,” Mr Robertson said.
“Ensuring we have the right leader at the helm of the organisation at this critical time is essential to driving forward the necessary improvements.”
icare has been subject to intense scrutiny and criticism since a joint investigation in July by ABC’s Four Corners program and The Age/Sydney Morning Herald newspapers.
Mr Nagle resigned last month after a parliamentary committee grilling over his approach to conflicts of interest and the performance of the organisation. Group Executive Don Ferguson was named as interim CEO and MD.
The role is being advertised via the IworkforNSW website as well as in print media nationally.
The successful candidate will need to demonstrate strong leadership “to build trust, respect and belief in icare”, the ad says.
“The Sydney-based Chief Executive will possess significant leadership experience within the insurance industry as well as outstanding communication and stakeholder management skills.
“They will also have the ability to motivate icare’s people, external service providers and all stakeholders to partner in the ambitions and aspirations of icare.”
Applications close at midnight on October 18, and the new CEO and MD is expected to be selected before the end of the year.
Temporary rule changes to prevent opportunistic class actions over stock exchange disclosures during the coronavirus pandemic have been extended by six months.
The changes introduced in March mean companies and officers are only liable for a breach if there has been “knowledge, recklessness or negligence” around price sensitive updates.
Treasurer Josh Frydenberg says evidence to date shows the move has assisted listed companies to continue to update the market during the current difficult and uncertain time.
“Given the impact of COVID-19 and the uncertainty it generates, it remains considerably more challenging for companies to release reliable forward-looking guidance to the market,” Mr Frydenberg said.
Without the change, companies may have been encouraged to hold back from providing information due to concerns they would be hit by securities class actions if information was later found to be incorrect.
Increased securities class action activity supported by litigation funding has been blamed for a surge in directors’ and officers’ premiums and reduced insurance capacity in the market.
The temporary disclosure rule changes will continue until March 23.
The SA Parliamentary Economic and Finance Committee has made 11 proposals aimed at improving the state’s motor vehicle insurance and repair sector.
The proposals are contained in a final report released last week by the committee, which began its inquiry in July last year.
Key suggestions include introducing legislation in SA to mandate the national Motor Vehicle Insurance and Repair Industry Code of Conduct – at present it is mandatory only in NSW – and adding penalties for breaches.
The report says insurers are complying with the “minimum requirements” of the code by informing customers about their policies through product disclosure statements.
“However, these documents can be improved to provide consumers with greater transparency to make better-informed decisions about their choice of repairer.”
The report also wants the SA Government to provide an annual report on insurance companies that breach the code or have adverse findings against them.
The committee also wants motor insurers to disclose direct or indirect ownership or contractual arrangements they have with specific crash repairers. This disclosure should be made to policyholders who are told to go to a certain repairer, the report says.
The report also suggests the SA Government should review motor insurers’ alleged practice of forcing some customers to accept cash settlements. It says insurers should be made to reveal the number of cash settlements and vehicle repairs they have undertaken.
Click here to access the report.
The WA Government plans to introduce new legislation that will close a loophole allowing so-called phoenix builders to declare bankruptcy and start in the industry again under a new business name.
Builders with a history of ripping-off subcontractors will also be removed when the Building and Construction Industry (Security of Payment) Bill 2020 becomes law.
The WA Government says the legislation aims to create a fairer system for the state’s building and construction industry.
A mandatory retention trust scheme will be introduced when the bill becomes law. This will protect subcontractors' retention money from being misappropriated or lost altogether in insolvency at each level of the contracting chain.
“The building and construction industry is a vital part of our economy, ” WA Commerce Minister John Quigley said.
“The current reality is businesses need to always contend with the fear of not getting paid on time or at all, and without access to effective rights and protections under the law.”
NSW state insurer icare says the adverse impact of the coronavirus outbreak on return-to-work rates is likely to continue over the coming months.
“The impact of COVID-19 on return-to-work rates is being felt differently across industries,” it says in its latest update published last week.
“The manufacturing industry, for example, appears to be remaining stable, while industries including accommodation, cafes and restaurants, retail trade, culture and recreational services have been experiencing declining return-to-work rates since the pandemic began in March.”
icare is shifting the way it reports the outcomes, moving to data based on work status codes rather than a cessation of benefits measure, following pressure from the State Insurance Regulatory Authority (SIRA).
In the latest update it reports data using both methods and says it will work with actuarial experts to investigate how they can be improved to provide a more accurate picture.
The 26-week return-to-work rate based on the status code measure was 80.6% in June, compared to 80.1% in March, and a deterioration from 88.8% in July 2018.
Using the cessation of benefits measure, the rate was 80.8% in June, down from 81.7% in March and compared with 81.9% in July two years ago and 85.6% at the start of that year.
SIRA Chairman Carmel Donnelly has warned that reliance on measures based on ending weekly benefits can create “perverse outcomes” rather than a focus on early co-ordinated support that will deliver a return-to-work.
The latest update from the Australian Securities and Investments Commission (ASIC) reveals progress in enforcement action in the first half, including significant civil penalties imposed against large financial institutions such as AMP.
AMP was ordered to pay a penalty of more than $5 million for failing to prevent life insurance “churn” by its financial planners.
ASIC says its Office of Enforcement also has a number of investigations into pandemic-related misconduct.
“We are pursuing our pandemic-related priorities by taking swift enforcement action in response to misconduct taking place in the midst of the pandemic, Deputy Chair Daniel Crennan said. “We have obtained urgent orders to protect vulnerable consumers during this trying time.”
During the first half ASIC successfully completed action in two long-running matters, Octaviar and Storm Financial, which resulted in civil penalties and disqualification orders.
The High Court upheld ASIC’s appeal in relation to civil penalty proceedings against officers and a fund manager of investment company MFS, also known as Octaviar, resulting in civil penalties totalling $1.89 million being imposed on five individuals, as well as substantial compensation orders and disqualification orders.
The Federal Court also confirmed an earlier decision that the directors of Townsville investment company Storm Financial had breached their directors’ duties resulting in civil penalties totalling $140,000. Each director was disqualified from managing corporations for seven years.
ASIC also had significant civil penalties imposed against large financial institutions including CBA, which was ordered to pay a civil penalty of $5 million and publish a corrective notice regarding its AgriAdvantage Plus Package.
Individual enforcement outcomes included:
ASIC has also commenced civil penalty proceedings against Colonial First State Investments Limited (CFSIL) over alleged misleading and deceptive statements made to members of its FirstChoice superannuation fund, and over alleged conflicted remuneration paid by CFSIL to CBA between 2013 and 2019.
The Actuaries Institute has published for consultation a report proposing sweeping reforms for the ailing retail disability income insurance (DII) market.
The report comes a year after the institute began looking into ways to solve the loss-making sector’s problems.
A key recommendation by the institute’s Disability Insurance Taskforce is a review of the Life Insurance Act to see if it is still fit for purpose.
“Our recommendations are aimed at saving the market from failure,” Taskforce Convenor Ian Laughlin told insuranceNEWS.com.au. What we want to do is have all these changes made so you end up with a sustainable business and good products for the long term.
“The message for everyone is to understand the big picture.”
The report says insurers should develop simpler and cheaper products with a focus on return to health and work. They should also gain better insights into customer claims experience, impose strong controls on levels of benefits and income replacement and embed loss minimisation principles in policy contracts.
The institute says the retail DII market in its current state “is at risk of failure” unless every stakeholder including regulators, insurers, Treasury, advisers and company boards agree to work together to support the recommendations.
Mr Laughlin says the report has not taken into account the likely negative impact of COVID-19 but believes “it could well make things worse”.
About 850,000 DII policies are on issue. A KPMG report commissioned by the institute found life companies lost $3.4 billion over five years selling complex products, ultimately threatening the viability of the sector.
The Taskforce report says the Australian retail DII market offers a “smorgasbord” of product features, typically resulting in difficult-to-understand covers for customers.
Under-pricing has also harmed the market, with policyholders subsequently paying in later years through multiple increases in DII premium rates.
“These increases have been steep, unanticipated and frequent which has undermined the value of this product for customers,” the report says.
Insurers have also underestimated the impact of changes to product features and underwriting standards, particularly their cumulative effect over a period of years.
“And they have not properly understood or managed the uncertainty in claims flowing from the changes to attitudes and norms in society,” the report says. “This has been compounded by the inability under the Life Insurance Act of insurers to modify product terms and conditions after policies are issued.”
Consultation closes on October 31.
Click here for more details.
MLC has created a new Life Insurance Division in a shake-up that new Chief Life Insurance Officer Sean McCormack says recognises its current service experience “is not acceptable”.
Mr McCormack, who reports directly to CEO Rodney Cook, joined MLC last August. He was formerly CEO at Freedom Insurance and also held GM roles at TAL.
He is responsible for the company's group and retail distribution channels, underwriting, operations, pricing, product, brand and marketing units.
MLC, which is 80% owned by Nippon Life, has also handed Mr McCormack with the task of finalising MLC’s technology transition program, which includes a new policy administration system and adviser and customer digital portals.
“In response to the fast-changing operating environment for the life insurance industry, exacerbated by the impacts of COVID-19, I will be spearheading changes to our business operations,” he says in a statement.
“Frankly speaking, I recognise that the current service experience we are delivering is not acceptable to our retail partners and customers as we are transitioning to new, legacy-free technology platforms.”
As a part of the restructure, the following roles have been created and filled:
Chief Group Insurance Officer – Sean Williamson
GM Underwriting and Operations – Fiona Guscott
GM Product, Pricing and Proposition (Retail) - Angela McLaughlin
GM Product, Pricing and Proposition (Group) – Craig Harrison
GM Retail Distribution Partnerships – Russell Hannah
GM Strategic Partnerships – Michael Oliver
GM Partner and Customer Channel Experience – Tim Roso.
A temporary measure to enable financial advisers to provide consumers with affordable services during the pandemic crisis has been extended by six months to April 15 next year.
The Australian Securities and Investments Commission (ASIC) announced last week that the extension reflects the continuing uncertain impacts of COVID-19 on the industry.
The measure, one of three initiatives unveiled in April, aims to help advisers support clients. They can forgo preparing the required statement of advice, subject to certain conditions, for clients who need guidance on early access to super funds.
ASIC says it will continue to monitor the appropriateness of the temporary action in light of the impacts of COVID-19 on demand for financial advice.
“If ASIC considers it appropriate to end the relief before the expiration dates or to further extend it, ASIC will give sufficient notice before any early repeal or extension is implemented,” the regulator says.
One of the other measures allowing super trustees to temporarily expand the scope of personal advice that may be provided has also been extended, to December 31. This will align with the extension of the COVID-19 early release of superannuation scheme.
Click here for more details on ASIC relief measures.
Suncorp New Zealand has promoted Grant Willis to a newly established Head of Life role at Asteron.
Auckland-based Mr Willis has held the role of EM Life, Insurance Solutions at Suncorp for two years.
His former roles at Suncorp New Zealand include deputy CFO, CFO at Suncorp Life NZ and acting CEO at Suncorp Life NZ. He was also CFO at AIG NZ and worked at ASB Bank and at Commonwealth Bank in Fiji.
In his new position he will oversee sales, operations, product, pricing, claims and client servicing.
Advisers in Victoria have been given more time to comply with fee disclosure statement and renewal notice obligations under temporary changes made by the Australian Securities and Investments Commissions (ASIC).
ASIC says its “no action position on obligations” are intended to help Victorian advisers who may find it difficult to meet the obligations because of the state’s COVID-19 Stage 4 restrictions.
Victorian advisers will not face regulatory action if they have not provided fee disclosure documents that were due between August 2 and October 26. But they must ensure the documents are given to clients by December 7. This applies to clients who fall under pre-Future of Financial Advice (FOFA) legislation.
For post-FOFA clients, ASIC says advisers must inform them in writing that ongoing fee arrangements have been terminated if fee disclosure documents and renewal notices have not been given by the required deadlines. Advisers must then enter into new fee arrangements with clients.
“ASIC does not have the power to provide an exemption from the [fee disclosure document] and renewal notice obligations or modify how the obligations apply,” the regulator says. “However, to assist these businesses, ASIC has provided a no-action position in relation to these obligations.”
The Association of Financial Advisers has welcomed the moves, saying ASIC has “done everything that they can within the limits of the law to find a solution” for Victorian advisers.
“Broader relief measures are in the hands of the Government and we have communicated with them to explain the difficulties confronting financial advisers and to suggest potential solutions,” the association said.
Click here for more information on the ASIC announcement.
A Financial Markets Authority (FMA) report on New Zealand’s financial advice sector has found weaknesses in areas such as conduct and culture, prompting the regulator to warn it would take “increasingly strong action” against those who fail to remedy the problems.
The other areas in need of improvement are governance and oversight, compliance assurance programs plus compliance and controls.
“We are at a point now where the volume of FMA guidance, level of engagement and maturity of the regulatory regime mean there are no excuses for conduct that presents the risk of harm to investors, customers and the integrity of the markets,” CEO Rob Everett said.
“Where we identify significant breaches of the rules, or where entities do not address our recommendations in an appropriate or timely manner, we may take further action.
“I anticipate this action will be increasingly strong.”
Mr Everett says the FMA has observed good progress overall by the industry, but the attitudes of a few firms suggested “they saw good conduct as something that only needs to be demonstrated when we visit”.
“This is not a box-ticking exercise. It needs to be woven into the culture of providers.”
The report, based on monitoring engagements, complaints and other information received from January 2019 to June this year, focuses on adverse findings with the aim of highlighting areas in need of further action.
Many financial advice providers were covered in the report, including authorised financial advisers and qualifying financial entities.
The FMA has described as disappointing the findings on financial advisers and qualifying financial entities.
While many of them have invested significant effort in complying with the legislation, several had lapses in the way adviser business statements were prepared. Some statements were filled with incorrect information, and in other cases sufficient details about processes and responsibilities were missing.
A number of them also did not meet their customer disclosure requirements. They only provided disclosure on request, rather than in interactions as is the obligation.
“When customers make decisions based on incomplete information, they may experience poor outcomes,” the report says. “Customers need to be given disclosure about products and services in a way that does not conceal or complicate the information.”
Click here for the report.
Bermuda-based PartnerRe has appointed John Mok as CEO, Life & Health Asia Pacific, with effect from February.
Mr Mok, who is an actuary, will be based in Singapore. He was most recently head of client markets in Japan for Swiss Re.
Lloyd’s has hailed the success of the Dive In festival, which finished last week on a strong note with its biggest audience yet despite the pandemic disruption.
Held virtually because of COVID-19, the diversity and inclusion conference had 21,000 registered attendees from 144 events in 35 countries.
The 12 events in Australia and New Zealand drew more than 2500 attendees, who between them filled more than 7500 “virtual seats” over three days from September 22-24.
“As predicted, the lack of geographic boundaries driven by the virtual nature of the events meant that we were able to welcome attendees not only from Australia and New Zealand, but also from Asia Pacific, the UK and the US,” Lloyd’s Australia GM Chris Mackinnon told insuranceNEWS.com.au today.
“Importantly, we were also able to include industry colleagues from around Australia and New Zealand who are not located in capital cities, and who may not otherwise have had the opportunity to participate in the Festival.”
He says the benefits of engaging through virtual events has been clearly demonstrated, and expects 2021 will be a hybrid version.
In one of the Australian events where opportunities for women in leadership roles were discussed, it was generally agreed COVID-19 has changed the conversation for good.
Sparke Helmore Partner Gillian Davidson, one of the event panellists, says the sudden move to flexible working arrangements meant women juggling career and families no longer had to justify themselves.
“For those who are still trying to explain flexibility it was not just about working mothers or perhaps a small cohort of carers… [this pandemic shows] that actually it applies to every single one of us,” she said.
“That has been a great thing, because I feel so much of the conversation that we were battling with no longer had to happen. We’ve felt it, we’ve lived it. That’s great for me and for women. It has been a tremendous thing.”
McLardy McShane has named the winners of its annual company awards in recognition of their contributions to the Melbourne-based insurance group.
The awards announcement followed another strong performance from the business, which achieved a 22% rise in premium income in the last financial year.
“It’s looking very exciting, CEO Don McLardy told insuranceNEWS.com.au. “We’re still moving forward very strongly. Last financial year, the results were very strong. We’re still in a growth phase.
“Profits are one thing but we’re more interested in the quality of people and personnel that we have.”
The winners of the awards are:
Suncorp employees have participated in a professional networking event hosted by Multicultural Australia, giving this year’s graduates in its career mentoring program Shape Your Future the chance to build connections.
The program matches newly settled Queenslanders from culturally diverse backgrounds with Suncorp employee mentors who help them gain meaningful work experience and professional connections in the state.
Suncorp EGM Consumer Distribution Chris Fleming says programs like Shape Your Future help promote cultural diversity and inclusion in the workplace.
This year five Suncorp mentors and mentees were paired, completing a range of activities together including CV and LinkedIn development, searching and applying for roles and developing interview skills.
CGU Insurance is calling on Aboriginal and Torres Strait Islander business owners to enter a scheme to win one of five $5000 grants.
This year’s Kayku Kumpa awards follows the success of last year’s competition, the insurer says. The grants provide First Nations business owners with support for personal and professional development.
“It’s been a tough year for many small businesses due to the pandemic, so we’re looking forward to launching the CGU Kayku Kumpa Award again to support the growth and skills development of First Nations small business owners,” CGU EM Phil Lockyer said.
“We received strong applications during last year’s awards program from a range of innovative small businesses, which makes us excited to see what this year’s ingenious ideas from First Nations businesses will bring.”
The Kayku Kumpa awards takes its name from the local language of the Gringai people of the Wonnarua nation of the Hunter Valley in NSW. Kayku Kumpa means “strong yesterday, stronger tomorrow”.
Click here to apply before October 25.
Perth-based broker EBM has appointed Sharon Fox-Slater to its board of directors, effective later this week.
Ms Fox-Slater is EBM’s RentCover MD and joined the firm in 1993.
CEO Ward Dedman said she has been at the forefront of RentCover’s growth and innovation and “will be instrumental” as EBM plans the next phase of the business.
“She has worked to transform EBM RentCover from a small start-up into a national operation of more than 90 employees and 160,000 policyholders.”
Underwriting agency ATC Insurance Solutions has appointed James O’Donohoue as Plant and Machinery Underwriter, based in Melbourne.
He started earlier this month with the business and will direct the expansion of the agency’s plant and machinery portfolio for the eastern states.
ATC Insurance Solutions says Mr O’Donohue, who has 11 years’ experience mainly in fleet and motor, will bring invaluable market knowledge to the business.
The UK Financial Conduct Authority expects new laws to ban pricing practices that disadvantage loyal customers will take effect next year as part of a proposed package of reforms.
The changes would mean a customer renewing their home or motor insurance would pay no more than if they were a first-time purchaser through the same provider, and cracks down on “price walking” practices that affect loyal customers over time.
“We are consulting on a radical package that would ensure firms cannot charge renewing customers more than new customers in future, and put an end to the very high prices paid by some long-standing customers,” Interim CEO Christopher Woolard said last week.
“The package would also ensure that firms focus on providing fair value to all their customers.”
The FCA also proposes new data reporting requirements, so it can check rules are being followed, and making it simpler to stop automatic renewals.
The regulator has sought comments on its proposals by January 25, and expects the new rules would come into effect four months after publication of its policy statement.
Association of British Insurers Director General Huw Evans says it is vital that price comparison websites and insurance brokers are subject to the same level of supervision and monitoring by the FCA to ensure a balanced approach.
“We will consider this package of proposals, so that we can engage with the FCA on the most effective measures possible,” he said.
The FCA says a measure of success from the measures would include less switching, but the British Insurance Brokers Association says it’s important to remember that price is not the only consideration.
“Our broker members always aim to offer their customers insurance that meets their needs both in terms of price and cover,” CEO Steve White said.
“Their long-held concerns about dual pricing will be addressed by the FCA’s proposed measures and we look forward to working with the regulator constructively.”
The coronavirus pandemic has highlighted the need for insurers to review enterprise risk management frameworks and guard against complacency, AM Best has warned.
The ratings company says enterprise risk management has evolved rapidly over the past decade but COVID-19 has shown weaknesses in the identification, measurement and management of risk.
“Lessons learned from the past and by this pandemic should equip companies to better understand their exposures and adopt even more robust risk practices in the near future,” it says in a new report.
“Complacency can be viewed as cone of the factors that can lead to the downfall of a company’s risk management framework.”
AM Best says conventional wisdom had led most observers to expect the greatest impact of a pandemic would be to the life and health sector, but now it’s likely that property and casualty insurers and reinsurers will feel the brunt of the current event.
In May, Lloyd’s estimated combined underwriting and investment loss for the industry as a whole of up to $US203 billion ($285 billion).
“With uncertainty over the scale and duration of the pandemic and any lockdown measures, the financial impact could be well in excess of this,” AM Best says.
“How organisations use lessons learned from the pandemic to strengthen ERM frameworks against such ‘black swan’ risks will be a key area of interest to AM Best over the coming months.”
The ratings company says while the insurance industry is well capitalised, the pandemic will affect balance sheets and operating performance to varying degrees.
Price comparison websites will become even more popular in insurance as consumers look for savings wherever possible as economies enter recession amid the COVID-19 pandemic, GlobalData says.
In the UK 31% of motor insurance sales, 27% of home insurance sales and 22% of pet insurance sales are directed through price comparison websites, a GlobalData consumer survey last year found.
It says direct buying is the most popular channel across these three lines of business, and the websites will gain ground as consumers seek the best deals. The four largest sites are Comparethemarket.com, Moneysupermarket.com, Confused.com and Gocompare.com.
Analyst Yasha Kuruvilla says while economists predict a return to growth in 2021, price comparison websites are poised to enjoy a period of increased traffic from consumers in the near future.
“Travel insurance may be one line where the opposite occurs, with price comparison sites seeing less traffic as consumers value extensive cover to protect themselves against coronavirus-related events more than the price of a policy,” Mr Kuruvilla says.
Just over half of global GDP, equal to $US41.7 trillion ($59.1 trillion), is dependent on high-functioning biodiversity and ecosystem services such as pollination and climate regulation, the Swiss Re Institute’s new Biodiversity and Ecosystem Services Index reveals.
The index gives stakeholders a new tool to manage the operational, transitional, and reputational risks connected to biodiversity and ecosystem decline.
“In recent times, we have noticed an increasing interest among our clients in the topic as all stakeholders start to understand how biodiversity and ecosystem decline affects asset values and the economy in general,” Group CEO Christian Mumenthaler says.
“Biodiversity and ecosystems underpin all economic activity in our societies globally and should be part of strategy discussions across financial services.”
The report comes ahead of a United Nations Summit on Wednesday which is set to call for “urgent action on biodiversity for sustainable development”.
Biodiversity measures the number, variety, and variability of living organisms.
Australia ranked as the second most fragile biodiversity among G20 economies and eighth of all countries, with a 34% fragile ecosystem share. Water scarcity is a driver, alongside coastal protection and pollination.
Zurich will sponsor an eight-year reforestation project in Brazil to convert barren farmland back into native forest.
The project will plant a million trees in recognition of the importance of healthy ecosystems in the fight against climate change and the devastating effects of biodiversity loss.
Brazil’s Atlantic Forest will be restored with native trees in collaboration with non-profit Instituto Terra. A tree will be planted for each of Zurich’s 55,000 employees, with the remainder available to customers through offers to plant trees when they purchase insurance policies.
“Tree planting can be a powerful tool for curbing climate change and preserving the variety of animals, plants and ecosystems we have on our planet,” Zurich’s CEO Europe, Middle East & Africa Alison Martin said. “We are contributing to an aspect of climate change mitigation that is often overlooked: biodiversity.”
Zurich was the first insurer to sign the UN Business Ambition for 1.5°C Pledge, and says the COVID-19 pandemic has highlighted the significance of biodiversity. If ecosystems deteriorate, the natural barriers between humans and disease break down.
The trees will recreate a self-sustaining subtropical forest on land in Minas Gerais province that was cleared for cattle farming last century, with up to 120 different species of tree on 700 hectares of land. Just 7% of Brazil’s original Atlantic Forest remains.
Zurich has halved carbon dioxide emissions per employee since 2007 and has offset remaining emissions with carbon credits at the Rimba Raya Biodiversity Reserve in Borneo, making it a carbon-neutral business since 2014.
Swiss Re has announced further changes to the legal entity structure of the group, with Swiss Reinsurance Company to be made the sole direct wholly owned operating subsidiary of the business.
Swiss Reinsurance Company Ltd will in turn have separate holding companies for the Reinsurance and Corporate Solutions business units, as well as the iptiQ high-tech division.
“The streamlining of the group's legal entity structure will not change the fact that these businesses continue to operate independently,” the business says in a statement.
Swiss Re aims to have the new structure implemented by the end of next year.
By Alex Tadmoury, Senior Vice President, Division Manager Asia-Pacific, FM Global
The COVID-19 pandemic and its economic repercussions have been tough on almost everyone.
Shrinking margins, layoffs and furloughs remain top of mind in many of the worst-hit sectors like leisure, hospitality, transportation and retail.
The medium-term impact of the coronavirus will not only force businesses to adapt their business models, but also to tighten their budgets.
One of the biggest risks – and a key danger facing the region in the next six to 12 months – is the postponement of risk management and mitigation processes in an effort to protect cashflow.
As businesses reassess, reframe, adjust and adapt, our advice to all businesses is that these cutbacks must be short-lived, if they happen at all.
The exposures today during the pandemic may be different from when the global economy was running full tilt – managing risks associated with keeping up with a high demand for goods is something that only a few fortunate businesses face today, for example – but they are nonetheless just as acute and pertinent.
In many ways times like these require heightened vigilance. The ability to recover quickly from a loss may be hampered through a lack of easy access to expertise and spare parts; and the potential damage to market share and consumer confidence can be much worse due to the longer recovery time.
Key risks to watch out for in these pandemic-dominated times arise from idle facilities, retooling to develop new products, restarting idled equipment and hazardous material storage. Many sites are also experiencing more frequent stops and starts with all the ongoing change management and unpredictable lockdowns across international and domestic boundaries. Equipment breakdown and the higher risk of fire damage must remain top of mind.
Additionally, increased reliance on technology and a rise in cyber attacks points to the need for vigilance. We have already seen clear evidence of how opportunities have abounded for hackers during the pandemic, compounding the multitude of other risks.
In the first week of August, a new cyber threat assessment from the Australian Government noted malicious cyber attacks against Australian businesses and government agencies from a state-based actor have increased over the previous two months. Cyber attacks are now "one of the most pervasive threats facing Australia and the most significant threat in terms of overall volume and impact to individuals and businesses".
Then there is the ever-present climate change perils of bushfire, storm, and flood, among others.
There’s no free lunch. Risk management may come at a cost, but unmanaged risk is far costlier. And while risk management comes with a cost, research and science can support greater efficiency. With tools such as predictive analytics it is possible to pinpoint the highest priority risks and the solutions which are most likely to be effective.
Analytics are also helping organisations identify locations that are most predisposed to loss, as well as the individual engineering recommendations that have the highest likelihood of preventing such outcomes. CFOs can use these surgical tools to prioritise, plan and execute risk management in a strategic way.
Loss prevention and insurance have to co-exist. There’s never been a more important time for insurance professionals to work with their clients in this regard.
Close collaboration between insurers and brokers with both operational staff and heads of finance within a business is essential, including providing advice around the types of tools that can be used to support risk management planning and execution.
Risk mitigation and improvement are as vital in these trying times as they have ever been. Understanding exposures, having the right partners and making the most of data will ensure organisations come back stronger when we finally recover from the pandemic.