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Local

‘Storm-chasers’ blamed for spike in post-storm claims

RACQ Insurance’s payouts for damage from a hailstorm in Gympie may reach $50 million – 50% more than was expected – as a result of opportunistic “storm-chasers”.

The insurer defines “storm-chasers” as third-party contractors who persuade householders to lodge “dodgy” and frivolous claims after an extreme weather event.

The total claims received from the Gympie hailstorm in October last year is more than 2760, which RACQ Insurance says is up to 50% more than expected for such an event.

Spokesman Paul Turner says the “storm-chasers” phenomenon can drive up insurers’ costs and directly affect reinsurance prices.

“We’re seeing a huge number of claims come in such a long time after the event, and we’re hearing from our members who are worried these ‘storm-chasers’ are trying to take advantage of them and make a buck,” he told insuranceNEWS.com.au.

“Often, [claimants] are up for expenses out of their own pockets for something they would never have lodged normally.

“What’s different in Gympie is the large number of late lodgements and what’s driving this.”

RACQ Insurance has paid out more than $40 million on an “unprecedented” number of claims for property damage, compared with the normal pattern for catastrophic weather events in Queensland over the past five years.

Mr Turner says reinsurers have questioned the third-party trend, which has also been seen in the US and Japan.

“We’d normally see about 20% of claims lodged after the four-week mark post-event,” Mr Turner said. “This event has seen almost 50% of claims lodged post the four-week mark and we’re still seeing between 40 and 50 claims lodged per month.

“We believe the ultimates may be more than $50 million. It’s a disturbing trend for Queensland that these people have moved in. It’s not something we’ve seen a lot of in the past.”

The Insurance Council of Australia said in December the Gympie storm “was initially not declared an insurance catastrophe. However, two months after the event, claims lodgements had steadily increased in a non-traditional trajectory.”

Last week RACQ Insurance warned Gympie residents to avoid contracts with third parties, because they may have to pay for expensive repairs themselves if their claims are not accepted. It may also affect the affordability of insurance for the broader community.

“As a result of this event, we may need to review our product offering and premiums for the area and apply additional diligence to claims,” Mr Turner said.

Deferred sales not the answer for all add-ons: Finity

Actuarial consultant Finity says proposed deferred sales model regulations for add-on insurance should be applied in some areas only, allowing new product design and distribution rules and intervention powers to provide wider protection.

“Regulations should be applied to a narrow range of products, not all add-on insurances,” Finity says.

“Our reasons are, firstly, that there is a risk of onerous changes being applied that are against consumer interests, rather than protecting them.”

In an article prepared in collaboration with The Fold Legal, Finity notes new product rules and intervention powers given to the Australian Securities and Investments Commission (ASIC) are also a “more nuanced set of measures”.

The Hayne royal commission called for regulations that would protect consumers from pressure selling tactics common in add-on insurance and recommended a Treasury-led working party should develop a deferred sales model for add-on products “as soon as reasonably practical”.

The sale of add-on insurance through motor dealerships was a particular focus during the royal commission hearings.

ASIC last month announced further repayments of $14.7 million for consumers sold “worthless” products at car yards, bringing the total value of remediation to more than $130 million.

A general insurance code governance committee report published last year identified more than 20 add-on products.

Finity says anti-hawking recommendations may also have a major impact on add-on sales, depending on the approach taken.

The Fold Legal says it is important for insurers to be heavily involved in any consultation, with discussions to date focusing on the motor dealer channel. It also supports narrowly applying a deferred sales model in the first instance.

“We think it is unlikely that the regulators will have yet formed a view or have much prior exposure to the multitude of distribution channels and the differences in selling models in the market,” it says.

“For this reason, the industry should assist in shaping the regulation.”

Insurer ‘discriminated’ against child sex offender

A tribunal has ruled NRMA Insurance engaged in discrimination when it rejected a child sex offender’s bid to buy public liability cover for his gardening business.

The insurer relied on an “irrelevant criminal record” to turn down the Canberra man last year, the ACT Civil and Administrative Tribunal says in a ruling published last week.

The IAG-owned insurer is reviewing the decision, a spokesman told insuranceNEWS.com.au. The case has been listed for submissions on remedy on July 26.

NRMA Insurance says its decision was guided by its internal “moral code” and the group’s “moral risk” underwriting guidelines.

The ruling notes its refusal was based on a belief that “people with serious criminal convictions were perceived as constituting so great a risk that they could not be insured”.

But NRMA Insurance could not provide the actuarial data to back its assertion.

“Accordingly, the tribunal is satisfied on the evidence before it that [NRMA Insurance] has refused the service of insurance… on the basis of a moral assessment, guided by the moral guidelines, and not on the basis of any relevant actuarial considerations,” the ruling says.

“The tribunal is satisfied that the [insurer] has discriminated against the [man] by refusing to supply him with commercial insurance because of an irrelevant criminal record.”

The man had personal lines policies with NRMA Insurance when he called twice last year to ask about public liability cover for his gardening business.

He lodged a complaint about the rejection with the ACT Human Rights Commission, which referred it to the tribunal.

Disputes rise 20% in AFCA’s first half-year

The Australian Financial Complaints Authority (AFCA) received 7969 general insurance disputes in the six months after its launch last November, up 20% from a year earlier when the Financial Ombudsman Service oversaw external complaints.

General insurance accounted for 23% of all disputes received in the six months, the second-highest behind banking and finance on 61%.

Delays in claims handling led to most disputes, with 1476 complaints, followed by claim amounts (1327), denial of claims linked to exclusions or conditions (1227), denial of claims in general (1011) and service quality (422).

“The high number of complaints we see relating to delays in claims handling and service quality indicate the industry is still not meeting customers’ expectations,” AFCA says.

“In our view, complaints relating to delays or service quality should be… resolved by financial firms internally and should not be one of the top issues in complaints we receive.

“General insurers need to make sure their teams are adequately resourced and have the right skillsets to deal with these sorts of complaints at the internal dispute resolution stage.”

Comprehensive motor vehicle cover topped the dispute list by product, with 1789 cases, followed by home building (1176), travel (793), motor vehicle for uninsured third party (529) and home contents (300).

AFCA resolved 60% of all complaints during the period and helped achieve $83 million in settlements for consumers and small businesses.

PI trouble drives hardening NZ market

Rates in New Zealand are rising, fuelled by external factors including the professional indemnity (PI) crisis affecting Australia’s building industry, a Willis Towers Watson market update says.

Insured losses sustained in major markets, the industry’s move to remediate risk and greater regulatory oversight are the other price triggers.

“It is fair to say that New Zealand is no longer a buyers’ market,” Willis Towers Watson New Zealand CEO Peter Lowe said.

PI cover providers are demanding tougher conditions, spooked by the cladding crisis in Australia and the UK.

UK-based Landmark Underwriting, the last provider of exclusion-free PI in Australia, left the market this month to limit its exposure to the trouble-plagued building industry.

“There has been a significant shift in the PI market globally, and insurers in New Zealand are starting to follow suit,” Willis Towers Watson National Manager Construction Tony Seto said.

“Aluminium composite panels continue to be an issue for insurers as they impose exclusions and conditions to address the increasing level of claims experienced overseas.

“The market capacity available for project-specific PI placements has reduced significantly. This makes achieving the contractually required limits increasingly challenging.”

Claims-affected accounts can expect “a lot greater increases” in premiums, he says, while clients with favourable track records are in line for moderate rises.

The directors’ and officers’ market is also feeling the effects of hardening conditions in Australia, with a surge in class actions triggering sharp rate increases.

Companies with dual listings in New Zealand and Australia face more stringent requirements from insurers and underwriters.

“We are forecasting that premium rates will continue to increase, and more dramatically so where clients have a dual listing in Australia or require Side C cover,” Willis Towers Watson’s National Manager Financial and Executive Risks Nigel Grantham said.

Side C cover typically insures listed companies against liabilities arising from securities market conduct breaches.

“Insurers will reduce capacity and we envisage more co-insurance among insurers to fill clients’ required capacity,” Mr Grantham said.

Building code ‘needs rewriting for climate change’

The next review of the National Construction Code in three years must include climate change provisions, according to the Australian Strategic Policy Institute.

The Insurance Council of Australia has long called for changes to the code so new structures are less exposed to future extremes.

Australia trails Canada and the UK in efforts to prepare for the challenges that climate change poses, the institute says.

“In many parts of the country, we’re already starting to see the effects of climate change,” it says. “Australia’s National Construction Code doesn’t include any specific reference to climate change adaptation.

“As the code provides the minimum standard for the construction and liveability of new buildings, work needs to be done now to include climate change provisions in the next iteration of the [code], which will be reviewed in 2022.”

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Corporate

RACQ Insurance CEO departs

RACQ Insurance is searching for a new CEO following the resignation of John Myler last month.

GM Insurance Product and Distribution Tracy Green is Acting CEO until a replacement is identified, the insurer told insuranceNEWS.com.au.

The company is undertaking its CEO search internationally.

Mr Myler took the job in May 2017, joining from Allianz Australia, where he was the chief market manager.

In May he was appointed a director of the Insurance Council of Australia.

Griffiths Goodall sells to PSC, but brand remains

Regional broker Griffiths Goodall will retain its brand identity following a $48 million acquisition by PSC Insurance Group.

The Shepparton-based brokerage was raided by the Australian Securities and Investments Commission (ASIC) earlier this year.

But PSC MD Tony Robinson says his business completed “a lot of due diligence” before striking the deal.

“We spent a lot of time with [the Griffiths Goodall management team] and we are really comfortable that it is a well-run business full of capable people with a terrific client base,” he told insuranceNEWS.com.au.

Griffiths Goodall’s branding will remain prominent, in line with the PSC practice when it buys a company with a strong identity.

“If it has got great resonance with the customer, we don’t look to make changes,” Mr Robinson said.

The purchase price will be paid in three tranches. The first, comprising $28.8 million in cash and $9.6 million in PSC shares, is due on completion of the deal. The remainder will come through payments in the first half of 2020/21 and in the following year, and will depend on revenues.

Griffiths Goodall, established in 1989, has become one of the largest regional independent insurance brokers, although much of its business is generated outside its Goulburn Valley base.

It has more than 30 staff, an additional office in Melbourne and a strong presence in commercial, industrial, transport, logistics, pleasurecraft, agri-risk and personal insurance.

Griffiths Goodall’s key managers will continue overseeing day-to-day operations and all staff will be offered new employment agreements.

Director Benjamin Goodall says he and the other directors “will be remaining in the business to grow and enhance our client offerings”.

ASIC and Australian Federal Police officers arrived at the Griffiths Goodall Shepparton offices in March with search warrants and seized a number of files.

Mr Goodall has previously said the issue being investigated by ASIC does not relate to anything of a criminal nature, with discussion focused on a paperwork-based issue that was denied.

“We’re very confident that we have always operated within the law,” he said after the raid.

PSC is buying the assets of the broking business and not the corporate entity, which would leave ASIC free to continue any matters with the licence-holder.

Canopius hires for Australian operation

Canopius has made key appointments to its office in Sydney, which opened recently to support the global specialty insurer’s growth plans for Australia and New Zealand.

The business has also received binding authority approval from Lloyd’s.

Head of Australia and Pacific Claudio Saita says more appointments will follow as the business “continues to develop our proposition as a committed, technology-enabled and locally empowered carrier”.

Suzanne White started work last month as Accident and Health Underwriter, joining from Brisbane-based Woodina Underwriting Agency, where she had a similar role.

She has almost two decades of experience, having previously worked for Aon Risk Solutions and Ace.

Jeanene Hill will start next month as Head of Coverholders and Binding Authority Asia-Pacific. She was previously delegated authorities manager and class underwriter for property at Talbot Underwriting, which closed its Australian operations recently.

Former Talbot assistant delegated authorities manager Ann Gi Ho will join as Portfolio Manager, Coverholders and Delegated Authority. Before Talbot, she worked for QBE Syndicate in Singapore.

Subhadra Vasilevski, formerly a senior operations analyst with XL Catlin, has been recruited as Finance, Compliance and Operations Manager.

The Sydney office operates as a local underwriting hub, and targets SMEs through coverholders, wholesale direct and facultative, and reinsurance treaty business.

Canopius has separately announced Jamie Jeffers will join its Singapore office in September as Underwriter Credit and Political Risk. He was most recently Willis Towers Watson executive director financial solutions credit and political risk, based in Sydney.

His appointment signals the insurer’s goal to grow in the region, particularly in the banking and corporate sector.

Majors’ earnings in doubt as personal lines premiums slide

New-customer premium prices in personal lines insurance are declining this year, continuing a seven-year downward trend that throws projected earnings for Suncorp and IAG into doubt, according to Morgan Stanley.

The analyst’s New Premium Index shows motor insurance pricing down 0.5% compared to the previous quarter due to soft new car sales and motor clubs such as RACV taking market share.

Year on year it is up 3.8%. Inflationary costs for car parts and new technology are still contributing to claims severity, Morgan Stanley says.

Home insurance pricing was down 2% compared to last quarter, and down by 8% compared to last year.

However, Morgan Stanley warns these figures are likely overstated as insurers avoid overcollecting emergency services levies at the end of a two-year business cycle.

IAG is struggling with falling reserve releases, a rising catastrophe budget, lower yields and elevated compliance costs, Morgan Stanley says. It bolstered its catastrophe reinsurance program from $8 billion to $9 billion this year.

Suncorp needs to balance a growth campaign involving cutting premiums against the need to increase prices for a higher catastrophe budget and lower yields next year. Increasing compliance costs pose a threat to the momentum of Suncorp’s business improvement program.

CEO Michael Cameron recently stepped down after failing to deliver acceptable earnings growth.

Suncorp has consistently missed its natural hazard allowances, and cash earnings declined by 4% in the 2018 financial year. They are expected to have declined another 4% in financial year 2019.

Sure goes direct to tough north Queensland market

Underwriting agency Sure Insurance says disclosure and claims handling will be a focus as it starts writing home and contents policies in the cyclone-prone region from Bundaberg to Cape York.

The company, backed by Liberty Mutual, is providing cover through direct sales and will consider distributing through mortgage brokers as part of its next phase.

The Brisbane-based agency, led by former RACQ Insurance CEO Bradley Heath, began accepting quote requests on its website this month and formally launched in Townsville last Wednesday.

Soaring premiums in the north have been the focus of numerous government reviews, including an Australian Competition and Consumer Commission inquiry that delivered an interim report in December.

“I think we found a lot of our strategy was very compatible with what the ACCC had to say,” Mr Heath said.

Sure intends to provide quotes throughout northern Queensland, with the exception of the coastal islands.

“Like every insurer… there will be higher prices for higher risks, but importantly we are asking people a lot of detail about what they have done to their house and their individual circumstances,” he said. “We will tailor that premium accordingly; it is not one size fits all. We want to spend time understanding individual risks and that will be reflected in the price that people get.”

Sure says it will save customers on average more than $1000 a year, or 32% on home insurance premiums.

Mr Heath says several insurance capacity providers were considered before it decided to team with Liberty.

“We spoke to a number of potential backers and there were varying levels of interest and varying levels of appetite,” he said.

“We found [Liberty’s] approach and their ethos to be very compatible with our own.”

Luke Saxby, a former senior manager at RACQ Insurance, is also an executive at the new company, and former RAA Insurance executive Michael Boucher has joined as GM.

Mr Heath says Sure Insurance will also draw on external specialists and services.

Tower ditches disclosure duty for clients

New Zealand general insurer Tower has started to remove the “duty of disclosure” placed on customers from its sales and claims processing systems for home, contents and car products.

It comes amid a review of insurance laws including changing the disclosure rules for consumers.

Tower will instead ask customers a series of questions, similar to one of the practices the New Zealand Government has proposed in a public consultation.

“We’ve been told one of the things that concerns people the most is not knowing for certain if their claim will be accepted and paid,” CEO Richard Harding said.

“It comes back to the tricky, catch-all question that insurers can ask when you buy insurance, along the lines of, Is there anything else we should know?”

“Which means that if customers unwittingly leave something out, they can be disappointed when it comes time to making a claim.”

Tower expects to complete the transition by the end of the year.

COO steps up to run Flamingo Ai

Flamingo Ai has promoted COO Olivier Cauderlier to the CEO position, freeing-up founder Catriona Wallace to focus on growth.

Mr Cauderlier has been the insurtech’s COO since April. Ms Wallace said in February that she wanted to move to head up business development.

Dr Wallace will switch to part-time employment from September, she told the Australian Securities Exchange last Thursday.

“Olivier has deep experience in product strategy and management, technology, operations and customer success,” she said.

The Sydney-based Frenchman was formerly COO at cloud-based contact centre provider ipSCAPE.

Flamingo has bases in Sydney and the US, working on cognitive virtual assistants, journey assist platforms and unsupervised machine learning algorithms.

In recent months it has announced agreements to license its virtual assistant software to HSBC Australia and US-based Nationwide Mutual Insurance Company.

IAG backs referendum on Indigenous recognition

IAG, a vocal supporter of calls to enshrine Indigenous viewpoints, has commended a proposed referendum on giving First Nations people constitutional recognition.

It follows the launch earlier this year of IAG’s third Reconciliation Action Plan, aiming to provide employment, education and professional development for Indigenous people.

The Government has set aside $160 million for a referendum once a model has been determined.

“It’s important that Aboriginal and Torres Strait Islander peoples are given the opportunity to have a voice on decisions that affect their communities,” IAG MD and CEO Peter Harmer said.

“This is an opportunity for positive change that will benefit First Nations peoples and communities – and the wider Australian community.”

Other organisations supporting the referendum alongside IAG include BHP, KPMG, Lendlease, PwC, Qantas, Richmond Football Club, the NRL, Rio Tinto, Swinburne University, Woodside, Curtin University and law firm Herbert Smith Freehills.

Indigenous Australians Minister Ken Wyatt wants to secure a consensus option for constitutional recognition during this parliamentary term, but says he will not “rush it”.

“I do not want to proceed if we are not going to be successful,” he told the National Press Club last week.

“We need to design the right model to progress to a point at which the majority of Australians, the majority of states and territories and Indigenous Australians support the model.”

“The development of a local, regional and national voice will be achieved.”

EBM freshens up RentCover product

WA broker EBM has rebranded its RentCover product and introduced a range of interactive marketing materials.

“We want to ensure our customers have an absolute understanding of what they are covered for, so they can be confident when it comes to making a claim,” EBM RentCover MD Sharon Fox-Slater said. “With this understanding comes certainty they are partnered with the right landlord insurance provider.”

EBM RentCover insures more than 150,000 rental properties nationwide, and has paid out more than 5500 claims for more than $20 million in the past year.

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Regulatory & Government

ICA joins fresh call for building reforms

The Insurance Council of Australia and four other industry bodies have today issued a joint call on the Federal Government to take a lead on reforming the troubled building industry.

Failure to urgently address the issues of cladding and building defects in high-rise apartments across major capital cities will continue to drive insurers away from providing professional indemnity and domestic cover, they say in a letter to Industry Minister Karen Andrews.

The other four signatories are the Property Council of Australia, the Australian Industry Group, the Australian Construction Industry Forum and Master Builders Australia.

The call comes after UK-based Landmark Underwriting, the last provider of exclusion-free professional indemnity cover in the country, left the market this month.

“Building surveyors, engineers and architects are now struggling to obtain the insurance they need to do their job, which in turn could seriously affect future building or construction activity,” the letter says. “Consumers, building owners, building practitioners and their insurers need certainty and confidence in building regulation.

“As organisations representing the building, construction, property and insurance industries, we urge the Federal Government to play a leadership role.”

Canberra should develop a consistent rectification strategy for buildings with combustible cladding materials and set up a joint government-industry taskforce to act on recommendations proposed in the recent Shergold-Weir report, it says.

Victoria joins states easing PI conditions for surveyors

Victoria has moved to allow building surveyors to hold professional indemnity (PI) cover with a cladding exclusion.

The change, which comes into effect on August 12, was announced by Planning Minister Richard Wynne.

It follows similar moves by the NSW and Queensland governments after Landmark Underwriting, the last provider of exemption-free PI cover, pulled out of the market  this month.

Building surveyors and certifiers in the three states are required by law to have PI cover free of exclusions to operate.

But the flammable cladding crisis has prompted insurers to demand exclusions that will limit their risk exposure to the dangerous materials found in many buildings in Australia.

The changes in Victoria will apply also to building inspectors, quantity surveyors, engineers and draftspeople.

SIRA consults on new licence conditions

The State Insurance Regulatory Authority (SIRA) is consulting on its plans for insurers to comply with new rules around claims.

Insurers in the NSW schemes for workers’ compensation, compulsory third party and home building compensation would have to observe the proposed customer service conduct principles.

These include a requirement for insurers to complete regular statements on how they have performed against principles described in the consultation paper.

Insurers must also undergo regular independent measurement of their performance and publish the results.

“SIRA acknowledges that insurers within these schemes already have licence conditions regarding their conduct and interactions with customers,” the regulator says.

“However, the ones proposed in this discussion paper are intended to apply to all schemes and all customer interactions.

“As the mechanism of imposition and enforcement of the licence conditions varies by scheme and insurers, SIRA will consider the most effective approach for inclusion of the conduct principles in licence conditions in parallel with this consultation process.”

The closing date for submissions is August 19. For more, click here.

ASIC forces credit insurers to repay consumers

The 11 lenders providing consumer credit insurance (CCI) in Australia have been ordered to undertake a large-scale remediation program for more than 300,000 customers.

The exercise ordered by the Australian Securities and Investments Commission (ASIC) is expected to cost the companies at least $100 million.

ASIC says product manufacturers need to drastically redesign consumer credit insurance (CCI) policies after it issued a damning report last week setting out tough new standards for the sector.

It wants insurers to improve claims ratios from the current level of 19 cents in the dollar, provide proper benefit assessments, including payments for periods of unemployment rather than arbitrary limits, and unbundle CCI from credit cards so consumers can select cover they are eligible to use.

Insurers should not charge premiums for CCI where primary benefits are no longer available, should provide annual communication about prices, limits and exclusions, and contact customers every two years asking whether they want to keep or cancel their cover.

They should also record the number of withdrawn claims and halted claims.

ASIC warns that without immediate and sustained improvement in the design and sale of CCI, it will use its new product intervention powers to stop sales and pursue court action against insurers and lenders.

The report details instances of CCI being sold to consumers who were ineligible to claim or unlikely to need the cover, plus pressure selling and unfair sales practices. It also records examples of consumers being provided non-compliant personal advice.

And the regulator plans to ban unsolicited sales calls for CCI.

“ASIC expects lenders and insurers to meet these standards or cease selling CCI until they do.”

NSW regulator slugs uninsured businesses

The NSW State Insurance Regulatory Authority has issued more than 50 fines to employers that don’t have the right workers’ compensation insurance.

More than $1 million in unpaid premiums has been recouped in recent months from employers that deliberately avoided paying their workers’ compensation insurance premiums.

“Employers that are not insured are liable for any medical and rehabilitation costs for injured employees,” Executive Director of Workers and Home Building Compensation Regulation Darren Parker said. “Company directors can be held personally liable for these costs.”

Fines could reach up to tens of thousands of dollars per employer depending on the type of injury.

Uninsured workers who are injured are supported through the NSW Government’s Uninsured Liability Indemnity Scheme, the costs of which are recovered from the employer or relevant directors.

Keep disclosure duty on commercial contracts: ICNZ

The duty-of-disclosure rule should stay for commercial clients, the Insurance Council of New Zealand (ICNZ) says, while backing reforms to consumer contracts.

New Zealand is reviewing its insurance laws in three areas: disclosure of information to insurers, unfair contract terms exemptions and insurance policy wordings.

“We support reform of the duty of disclosure for consumers, while recognising the case for change in regard to business insurance contracts is limited,” ICNZ says in a submission on the proposals.

“There are key differences with insurance for businesses, including that most business insureds are advised by brokers and that commercial insurance comes in many forms and can relate to complex business risks and involve bespoke cover, making understanding the specific nature of the risks particularly important. This latter aspect also makes it more difficult to cover all possible issues in a set of standard questions.”

ICNZ says there is merit in the proposal to ask consumers a series of questions.

This option has the backing of most ICNZ members “on the basis it is most certain for consumers because it reduces the risks of inadvertent non-disclosure by recognising insurers are better placed than an insured to identify the categories of information they consider relevant”, the submission says.

On the unfair contract terms regime, ICNZ says current provisions relating to its regulation under the Fair Trading Act are appropriate and should be retained.

“Importantly, it should be noted that the current provisions applying to insurance… do not permit insurers to issue unfair contracts.

“The act requires insurance terms to be fair and specifies a limited number considered to be reasonably necessary to protect the legitimate interests of the insurer.”

If the Government presses ahead with removing insurance exemptions from unfair contract terms law, the proposal of tailoring generic provisions to insurance would be the most appropriate way forward, ICNZ says. It does not support two other options flagged in the review.

The Ministry of Business, Innovation and Employment is reviewing submissions after consultation closed last month.

The duty-of-disclosure rule should stay for commercial clients, the Insurance Council of New Zealand  (ICNZ) says, while backing reforms to consumer contracts. 

 

New Zealand is reviewing its insurance laws in three areas: disclosure of information to insurers, unfair contract terms exemptions and insurance policy wordings. 

 

“We support reform of the duty of disclosure for consumers, while recognising the case for change in regard to business insurance contracts is limited,” ICNZ says in a submission on the proposals. 

 

“There are key differences with insurance for businesses, including that most business insureds are advised by brokers and that commercial insurance comes in many forms and can relate to complex business risks and involve bespoke cover, making understanding the specific nature of the risks particularly important. This latter aspect also makes it more difficult to cover all possible issues in a set of standard questions.” 

 

ICNZ says there is merit in the proposal to ask consumers a series of questions. 

 

This option has the backing of most ICNZ members “on the basis it is most certain for consumers because it reduces the risks of inadvertent non-disclosure by recognising insurers are better placed than an insured to identify the categories of information they consider relevant”, the submission says. 

 

On the unfair contract terms regime, ICNZ says current provisions relating to its regulation under the Fair Trading Act are appropriate and should be retained. 

 

“Importantly, it should be noted that the current provisions applying to insurance… do not permit insurers to issue unfair contracts. 

 

The act requires insurance terms to be fair and specifies a limited number considered to be reasonably necessary to protect the legitimate interests of the insurer.” 

 

If the Government presses ahead with removing insurance exemptions from unfair contract terms law, the proposal of tailoring generic provisions to insurance would be the most appropriate way forward, ICNZ says. It does not support two other options flagged in the review. 

 

The Ministry of Business, Innovation and Employment is reviewing submissions after consultation closed last month. 

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Life Insurance

RBNZ throws spanner in works for AMP Life sale

The Reserve Bank of New Zealand (RBNZ) has effectively killed the sale of AMP Life to Resolution Life in its current form, after AMP failed to meet necessary preconditions.

The central bank warned Resolution last week it would not consider its change-of-control application unless it agreed to separate and “ringfence” AMP’s New Zealand assets for the benefit of New Zealand policyholders – a condition inconsistent with the current branch structure, which exempts AMP Life from a number of New Zealand legislative requirements.

Resolution informed AMP it does not expect the RBNZ to approve a change-of-control application that would satisfy that condition.

AMP says addressing these requirements would adversely affect the sale’s commercial return for both parties. It is now negotiating new terms with Resolution.

Its board has left the door open to keeping AMP Life as a specialist life insurance business “with a focus on policyholder outcomes, cost and capital efficiency” if it cannot negotiate a deal.

The RBNZ’s opposition will reduce the sale’s long-term valuation by about $400 million, based on best estimates, and cost AMP a further $300 million to implement group insurance legislation.

“The failure to meet this condition precedent is exceptionally disappointing because the sale of AMP Life is a foundational element of AMP’s strategy,” AMP said.

AFCA warns against genetic testing discrimination

The Australian Financial Complaints Authority (AFCA) has warned life insurers it will assess complaints against them based on how fairly they treat customers.

Media reports suggest consumers have been denied cover or are being asked to undergo genetic testing, including when seeking travel insurance. AFCA can resolve complaints when an insurer has discriminated against a consumer due to genetic test results.

It expects insurers to consider if prospective policyholders have taken measures to reduce their risks – such as undergoing mastectomies – when assessing applications.

“Since July 1, in many cases, life insurers are not able to ask you to undertake genetic testing,” Lead Ombudsman June Smith said.

“The value of the insurance product determines whether the company can request such testing.”

Zurich research reveals financial literacy gender gap

There is a significant gender gap around knowledge of life insurance and possession of policies, according to Zurich.

The insurer’s study of the labour market reveals a much smaller proportion of women have taken out one type of insurance when compared with men – 31% and 47% respectively.

About 20% of women and 31% of men own term life policies, while 21% of women and 34% of men own income protection.

Overall, 39% of Australians own either life or income protection, or both. Life policy ownership is highest among people aged in their 30s and 40s.

About 34% of men are familiar with term life insurance, compared with 22% of women, while 30% of women have good self-reported knowledge of income protection, compared with 41% of men.

The study forms part of a three-year research program with Oxford University to examine how more workers can be provided flexible protection in a fragmenting labour market.

Insurance product design does not match new patterns of work and retirement, Zurich’s study report says.

Agile protection is needed, with flexible insurance and associated worker protection tailored to individual career trajectories, addressing different transition points in a worker’s life.

Freedom chief to leave as wind-down continues

The CEO of Freedom Insurance Group, Sean Williamson, will leave next month after the role was made redundant.

Freedom has nearly wound down all its operations, reporting a $33.4 million loss for the first half of the year.

During this period it has halted unsolicited life insurance sales calls after they drew criticism at the Hayne royal commission, run a remediation program for affected customers and written down goodwill with respect to its advisory business Spectrum Wealth.

Freedom has endured a protracted process of closing down and selling different parts of its business since it began discussions with key financial backers in March and suspended sharemarket trading.

It sold its policy administration business to Genus Life Insurance for $5 million. Freedom shut Spectrum Wealth last month after an exodus of key personnel.

“Freedom would like to recognise the significant contribution Sean has made in navigating Freedom through what has been a complex and difficult process,” the company said.

MLC slashes approval times

MLC Life Insurance has halved its underwriting approval times through adoption of UnderwriteMe’s technology.

Its new underwriting rules engine is powered by Pacific Life Re.

MLC says it has reduced the amount of medical information supporting an application by 20% and lifted the completion rate by 10%.

More than 7200 policies have been accepted automatically, a 20% lift in digital applications, as the insurer undergoes a $500 million transformation program.

“Innovation in underwriting is a key part of our transformation program, building our technology platforms to help put in place the capabilities to be successful,” Chief Underwriter Mick Jones said.

AFA appoints partnerships executive

The Association of Financial Advisers has appointed Rob Coulter as GM Partnerships.

He was previously head of corporate development at IPAC Securities and OnePath’s head of employer superannuation sales.

In his new role he will be responsible for developing strategic partnerships.

Association CEO Philip Kewin says Mr Coulter brings “a wealth of experience and expertise that will ensure we continue to build our member proposition, while enhancing our relationship and engagement with key stakeholders”.

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The Professional

Dive-In seeks greater impact

Lloyd’s global Dive In Festival aims to have a greater impact on the industry’s approach to diversity and inclusion, as it enters its fifth year.

The festival takes place from September 24-26 and will include 17 events across Sydney, Melbourne, Brisbane, Perth, Adelaide and Auckland. Registrations for the Australia and New Zealand events open next month.

“Dive In has united the insurance industry in striving for greater awareness and more inclusive workplaces, with more than 25 companies supporting the festival across Australia and New Zealand this year,” Lloyd’s General Representative in Australia Chris Mackinnon told insuranceNEWS.com.au.

This year’s event has the theme #inclusionimpact and aims to build on last year’s campaign of putting “awareness into action”.

Mr Mackinnon says the festival will build on significant progress across the sector, with a record number of companies pledging their support and more industry professionals participating.

“We now have 10 insurance companies in Australia that have signed the Inclusive Behaviours in Insurance Pledge – an industry initiative that emerged from a 2018 Dive In event,” he said.

Dive In started in London in 2015 before becoming an international event and debuting in Sydney the following year. It has since grown to include events in more than 30 countries. This year’s London events launch was last Thursday.

The festival highlights the business case for greater diversity and recognises the need to ensure the industry attracts the best talent and keeps pace with change.

Dive In organisers say it also encourages the industry to look beyond traditional definitions of diversity, encompassing gender, age, cultural background, sexuality, social mobility, faith, caring responsibilities, mental health and physical impairments.

See ANALYSIS.

NIBA names NSW/ACT award winners

Damien Coorey has won the National Insurance Brokers Association (NIBA) broker of the year award for the NSW and ACT region.

Mr Coorey became a director of Crown Insurance Services in 1991, helping to establish Crown Risk Management in 1999, which later becoming CRM Brokers and this year celebrates its 20-year anniversary.

His award success was announced at a gala lunch at the Hyatt Regency in Sydney on Friday, where three finalists were in the running.

The young professional broker award winner was Scott Hardiman of Bruce Chiene Insurance Brokers.

The pair will now contest the national Stephen Ball Memorial Award and Warren Tickle Memorial Award respectively, with winners announced at the NIBA Convention on the Gold Coast in October.

WTW appoints former BHP exec to risk role

Willis Towers Watson has appointed Matthew Frost as Head of Risk Advisory Australasia, effective from October.

Mr Frost was previously miner BHP’s VP of risk finance and has worked closely with Willis Towers Watson as a client. He has also worked for drinks-maker Diageo and earlier in his career was employed by Willis in the UK.

“Having been involved with our business as a client for many years, he will bring a fantastic fresh perspective to our Australasian team,” COO and Head of International Risk and Analytics Rob de Jonge said.

Head of Australasia Simon Weaver says businesses are seeking help reviewing risk financing strategies in a hardening market.

Financial institutions and catastrophe-exposed businesses, in particular, want expert advice as they face increased premiums, reduced capacity and imposition of higher self-insured retentions.

Mr Frost will be based in Melbourne and report to Mr Weaver.

Bob Richards’ service recognised through new award

The Australasian Institute of Chartered Loss Adjusters’ (AICLA) Victorian branch has launched the Bob Richards Award to recognise academic performance.

The annual award will be presented to the student with the highest exam mark for any module completed in the Diploma of Loss Adjusting course offered by AICLA and the Australian and New Zealand Institute of Insurance and Finance.

This year’s winner will receive a framed certificate and $500 at an event in Melbourne.

Mr Richards started his insurance career in 1962 and was the inaugural AICLA president in 1997. He was a strong supporter of training and education, and continues to be involved with the industry.

In 2015 he was presented with the Medal of the Order of Australia for his significant community service over 40 years.

Recruiters on lookout for risk and compliance experts

About 47% of insurance businesses intend to hire more permanent staff over the coming year, recruiter Hays says.

Demand for risk and compliance specialists remain strong as the industry prepares for tougher regulatory oversight following the Hayne royal commission.

“The impact of the royal commission is still being felt across the industry… employers are acting now to bolster their risk and compliance teams,” Hays says.

Insurers are also looking to recruit climate change experts, project managers and business analysts and digital specialists.

“Climate change experts are a growing area of demand. The number of high-risk regions across Australia is increasing and it is possible that some may become ‘uninsurable’ in future,” Hays says. “As a result, candidates who can paint a better picture for boards of what the future of insurance will look like are sought.”

Final call for Valerie Baker award nominations

Entrants to the Valerie Baker Memorial Award have only two weeks to get their applications in.

The award, organised by Gold seal, recognises excellence in professional practice among brokers and underwriting agents. Anyone can enter, but a strong interest in helping to fly the flag for Australian brokers in the London market will be highly regarded.

The winner will travel to the UK to experience the London broking market. Nominations close on July 26. Find out more here.

icare renews mentor deal with Paralympians

State insurer icare has extended its relationship with Paralympics Australia for three years.

The program, now in its fourth year, includes bringing Paralympians to speak and mentor in workplaces across NSW, sharing personal stories of their own workplace or motor vehicle accidents.

The renewal means icare will support the Australian Paralympic Committee through the next two Paralympic Games in Tokyo and Beijing.

“To have the support of Paralympic athletes is immensely valuable in helping to prevent workplace accidents and making safety a priority at work and on the road,” icare CEO John Nagle said.

Aboriginal artists help drivers ‘connect with land’

NRMA Insurance has partnered with three Aboriginal land councils to create artwork for billboards in NSW.

The three pieces, illustrating the traditional land of First Nations people from Wonnarua, Wiradjuri and Dharawal countries, are placed on the Princes Highway in Heathcote, the Newell Highway southwest of Dubbo and the New England Highway south of Singleton.

Phil Lockyer, the insurer’s EM Safer Communities, says the signs are designed to “help drivers connect with the land as they pass through and contribute to a proud and shared national identity for all Australians”.

NRMA Insurance hopes to work with more local communities, land councils and First Nation artists in NSW to create similar signs.

Parent company IAG launched its third Reconciliation Action Plan in February, which focuses on providing employment, education and professional development for Indigenous people.

EML backs trauma study for emergency workers

Workers’ compensation mutual EML and the University of NSW will conduct a three-year research project seeking ways to overcome depression and anxiety in emergency services personnel.

The study, awarded an Australian Research Council grant, will explore links between post-traumatic stress disorder, depression and anxiety.

The project will evaluate a NSW emergency services rehab program that is designed to address depression but impedes returns to work in personnel affected by psychological trauma.

“There is a significant lack of research on how to optimally manage their stress reactions and enhance rehabilitation outcomes to help them return to work and their lives,” University of NSW School of Psychology researcher Richard Bryant said.

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International

‘Reimagined’ Lloyd’s platform takes shape

Lloyd’s is working “in earnest” on building and delivering prototypes as it revamps how it does business after six radical initiatives met enthusiastic global feedback.

On September 30 the market will deliver a blueprint detailing its future, and it expects some solutions to be operational early next year.

“The reimagining of the Lloyd’s platform… offers our market an incredible chance to create the most customer-centric digital insurance platform in the world,” CEO John Neal said.

“The outstanding level of support we have received so far… demonstrates that the Future at Lloyd’s goals and proposals offer a compelling and relevant foundation on which we can begin building a blueprint,”

A 10-week global consultation on the proposed changes generated more than 4000 responses, the 333-year-old insurance market says, with the majority reporting “they are confident the proposals will deliver the aims of the Future at Lloyd’s”.

The consultation ran from May 1 to last Wednesday, guided by a prospectus outlining six key responses to industry challenges.

It proposed the creation of a Lloyd’s Risk Exchange to place simple risks in minutes, and at a fraction of current costs.

Lloyd’s promises its blueprint “will ensure buying insurance is faster, simpler and better value”.

Its aims are improved risk management products and services, simplified access to the market, reduced cost of doing business, and an inclusive, innovative culture to attract the best talent.

Lloyd’s, which lost £1 billion ($1.8 billion) before tax last year and £2 billion ($3.6billion) in 2017 after natural catastrophes spiked, warns threats from new and traditional perils are rising and the industry must create products and services relevant to customer needs.

Discussion questions in the prospectus asked what it will take to cut the cost of insurance placement in half and what must be done to make Lloyd’s more attractive to third-party capital.

Ambitions include reducing “request to bind and policy issuance” lead times from weeks to days, and cutting acquisition and administration costs for the most common risks from 30-40% to 10-20%.

European storms take heavy toll

Severe weather in Europe is expected to have caused up to $US2 billion ($2.87 billion) in economic damage, with insurers expecting $US830 million ($1.19 billion) in claims from central Europe, Impact Forecasting’s June catastrophe recap says.

German insurers recorded 250,000 claims from hail, strong wind and intense rainfall, with Munich bearing the brunt of hail damage. Insured costs will reach $US785 million ($1.13 billion).

Similar weather in France caused economic losses of $US560 million ($804.38 million), with insurers covering most of the cost, the Aon-owned modeller says.

Flash flooding, hail and wind in Switzerland, Italy and Poland caused at least $US150 million ($215.46 million) of damage.

Elsewhere, China suffered flash flooding in the Yangtze river basin that caused at least $US6.1 billion ($8.76 billion) of economic damage, with nearly 200,000 homes and other structures flooded. An earthquake in Sichuan province caused $US1.3 billion ($1.87 billion) of economic losses.

Wind in the US from the Rockies to the northeast caused $US1 billion ($1.44 billion) of economic losses, with insurers covering most of the cost. Insurers have covered about $US400 million ($574.56 million) of damage from powerful thunderstorms and floods in the Plains and the southeast regions.

Severe weather in Texas caused $US150 million of insured losses, with total economic losses at $US200 million ($287.28 million). More severe storms later last month caused another $US100 million ($143.64 million) of economic and insured losses.

The Midwest and mid-Atlantic suffered hail, wind and 15 tornado touchdowns, with insurers paying out $US75 million ($107.73 million).

Lloyd’s makes case for smart contracts

Lloyd’s is keen to explore the potential for smart contracts after a study it undertook suggested the technology could increase efficiency and add value for customers.

The technology reduces the time taken to deliver policies to customers and it can perform various insurance processes such as risk placement, premium payment, warranty enforcement, and claims assessment and settlement, the study shows.

“While smart contracts are a nascent technology, they offer exciting potential to transform the customer experience and it’s something we are looking to develop at Lloyd’s,” Head of Innovation Trevor Maynard said.

Smart contracts comprise computer code designed to start executing tasks automatically in response to external triggers such as receiving storm or flood data.

The joint study with the Centre for Commercial Law Studies says smart contracts could be employed in cargo, contingency and aviation, agriculture and property catastrophe classes.

A separate Lloyd’s report on parametric insurance says policies based on pre-agreed parameters benefit the industry.

“Because policies are based on definitive information such as previous loss events and independently verified data, insurers have more scope to design products for risks that could otherwise be uninsurable or underinsured,” Lloyd’s says.

FM Global warns on ‘preventable’ machine failures

Nearly one-third of the 232 large-risk property-related claims FM Global handled last year arose from equipment breakdowns.

A large-risk loss refers to claims exceeding $US3 million ($4.3 million), excluding natural hazards events.

“During the past five years we’ve seen increasing numbers of losses from equipment breakdown, especially in the pulp and paper, chemical, electric utility and mining industries,” Senior VP Engineering and Research Brion Callori said.

“Importantly, our analytics tools, based on thousands of location site visits by our loss prevention engineers over many years, continue to accurately predict large losses.”

About 62% of machine failures stem from lack of maintenance and 25% happen after repairs or during start-up.

“A large number of those equipment breakdown losses last year could have been prevented,” Mr Callori said. “However, in a booming economy, many companies aren’t necessarily taking their facilities offline for preventive maintenance, often choosing instead an expensive roll of the dice rather than a more conservative bet.”

Meanwhile, in a white paper on heritage property, FM Global calls for greater investment in fire protection systems to safeguard irreplaceable structures.

Modern fire protection mechanisms are mostly shunned due to concerns they could affect architectural authenticity.

The blaze in April at Notre-Dame Cathedral is the most recent high-profile heritage catastrophe. Last year a fire at the National Museum in Rio de Janeiro destroyed the largest anthropological collection in Latin America.

“These fires will continue unless there is a commitment to something quite possible but very different,” the white paper says.

“It is vital that we open our thinking to the means by which we can protect such buildings and retain their character but limit the potential significant damage from such fire events.”

Regulator prepares UK personal lines probe report

The UK’s Financial Conduct Authority (FCA) will release interim findings from its investigation of pricing practices in home and motor cover before September, followed by a market study by the end of the year.

Concerned at “evidence of consumer harm arising from differential pricing in the retail general insurance sector”, the FCA wrote to insurance CEOs, launched its investigation and published a wider discussion paper on pricing fairness in financial services.

The action came after a preliminary review highlighted a range of problems.

“Our initial diagnostic work found that some long-term home insurance consumers pay much higher prices than those paid by new consumers,” the FCA said.

“Our market study will consider whether pricing practices are leading to competition working well in these markets and if they deliver competitive and fair outcomes for all consumers.”

Concerns around so-called “loyalty penalties” and a lack of transparency have also been raised in Australia.

Lloyd’s stands firm on strong balance sheet: Best

AM Best has affirmed Lloyd’s credit ratings, reflecting a strong balance sheet and operating performance.

The ratings agency affirmed its “A” financial strength rating and A+ long-term issuer credit ratings for Lloyd’s UK, China and Brussels.

It has also affirmed a long-term issuer credit rating of “A” for Society of Lloyd’s, and A- on £500 million ($898.18 million) 4.75% subordinated loan notes maturing on October 30 2024 and £300 million ($538.90 million) 4.875% subordinated notes maturing on February 7 2047.

The outlook remains stable.

“The ratings reflect Lloyd’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management,” AM Best says.

The assessment reflects Lloyd’s strong position in its core markets as a leading writer of reinsurance and specialty property and casualty insurance.

“Lloyd’s has an excellent brand in these markets, but an increasingly difficult operating environment poses challenges to Lloyd’s competitive position,” AM Best says.

Capital adequacy is supported by a “robust risk-based approach to setting member-level capital” and a strong central fund able to meet the policyholder obligations of all Lloyd’s members.

Lloyd’s Brussels subsidiary was set up following the UK’s Brexit decision and began writing business at the start of this year.

Markel fills key roles in Asia

Specialist commercial insurer Markel International has appointed an MD and director for its Asian business, to develop its regional growth strategy.

Christian Stobbs, previously strategy director for the Asian operation, takes over the MD role from Matt Cannock.

He will manage the daily operations of Markel’s offices in Singapore, Malaysia, Hong Kong, Shanghai and Mumbai.

Colin Fordham has been appointed Asia director, to lead business and growth plans for Asia, working closely with Mr Stobbs. He has 25 years’ experience in shipping and marine insurance, including underwriting, claims and broking.

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Analysis

All set for the fifth festival of diversity and inclusion

By Chris Mackinnon, Lloyd’s General Representative in Australia

For the past five years Lloyd’s has been at the forefront of promoting diversity and inclusion in the insurance industry, globally and in Australia.

Inherent to a culture that strives towards creating a diverse and inclusive work environment, the Corporation of Lloyd’s has made great strides to ensure everyone is treated equally, and it is a place where team members can fulfil their potential.

Some of these efforts have included a commitment to gender balance in senior leadership, pledging our support for institutions and charters such as Women in Finance and Women in Reinsurance, as well as the formation of a steering group for diversity and inclusion within the Lloyd’s market – Inclusion@Lloyd’s.

We understand that the global risk industry is facing complex challenges. To attract the best talent, the insurance industry must focus on its reputation as a good sector in which to work.

This means looking beyond traditional definitions of diversity to consider a broader range of factors, such as age, cultural background, sexuality, social mobility, faith, caring responsibilities, mental health and physical impairments.

However, change within Lloyd’s alone is not enough.

In 2015, Lloyd’s co-founded the Dive In Festival in London, which was attended by a small group of companies from the Lloyd’s market, to highlight the importance of diversity and inclusion in the insurance industry.

This single event has grown into an international festival, with more than 110 events being held this year in 50 cities around the world.

In 2016, Dive In became the first and only initiative of its kind in the Australian insurance industry, helping the industry get fit for the future.

Dive In has helped highlight the business case for diverse and inclusive workplaces and provided practical ideas and inspiration for how to bring about positive change.

It has grown far beyond its roots to include some of the world’s largest insurance companies, brokers, underwriters and associated service providers.

This year we are doing our part again, spearheading 17 Dive In events across Australia and New Zealand that will take place from September 24- 26.

Dive In has united the insurance industry in striving for greater awareness and more inclusive workplaces, with more than 25 companies supporting the festival across Australia and New Zealand.

Now, after several years of raising awareness, the diversity and inclusion agenda needs to transcend the aspirational messages of previous years and turn awareness into action.

The 2019 festival is built on the significant progress that has been made across the sector. A record number of companies have pledged their support and more industry professionals than ever are participating.

Perhaps one of the most resounding messages for Lloyd’s, as organiser of the festival in Australia and New Zealand, is how Dive In has become a true collaboration across the entire insurance industry.

Dive In demonstrates the goodwill that exists between competitors, and highlights the commitment to working together on an initiative that will benefit the entire industry.

We now have 10 insurance companies in Australia that have signed the Inclusive Behaviours in Insurance Pledge – an industry initiative that emerged from a 2018 Dive In event. As we continue to raise awareness, we hope more companies will sign the pledge to exemplify their commitment to diversity and inclusion in insurance.

As we finalise our preparations for Dive In, this year promises to be our biggest event yet. It highlights the unwavering commitment that Lloyd’s has in its ambition to build a better industry.

Registrations for Dive In Australia and New Zealand events open on August 1 on the Dive In website.