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Industry profit improves 4.5% on premium gains

The general insurance industry returned better results in the year to September 30, with net profit after tax rising 4.5% to $944 million from a year earlier, according to the latest prudential data.

Rate rises in a number of product classes such as domestic motor pushed underwriting income 20% higher to $1.9 billion, the Australian Prudential Regulation Authority (APRA) says in its quarterly update.

“The [year to September 30] result was supported by improved underwriting results,” the regulator said.

“Within the underwriting results, insurers reported higher gross earned premium in most classes of business, including householders, domestic motor, fire & industrial special risk and professional indemnity.

“This reflects the increase in premium rates across these classes.”

Investment income however remained subdued, falling 0.7% to $1.22 billion, with large increases in longer-term bond yields causing unrealised losses on interest bearing investments. The losses outweighed gains from equity investments over the year.

The APRA data, based on prudential filings from 93 insurers, show gross earned premium during the 12-month period advanced 7.4% to $55.6 billion while gross incurred claims fell 0.9% to $42.8 billion.

APRA says lower claims costs were reported in the householder class, with the decline attributed to lower incidence of catastrophe events and the reinsurance classes of business.

But costs increased materially in the fire & industrial special risk class of business, reflecting moves by insurers to set aside “significant” provisions for business interruption claims in the December quarter last year.

Claims costs for domestic motor also went up during the period, notwithstanding lower levels of vehicle usage during COVID-19 lockdowns in the September quarter.

On a quarterly basis, the industry’s net profit surged 19.5% to $846 million in the three months to September from the preceding period.

Underwriting earnings went up 69% to $1.5 billion.

La Nina declaration points to wet summer, floods

Australia will experience a La Nina for the second year running after the Bureau of Meteorology (BOM) last week declared the flood-inducing weather pattern was now underway.

La Nina years have historically been more costly for the insurance industry due to more extreme rainfall and elevated cyclone formation risk.

BOM says the current La Nina, expected to persist until at least the end of January, will be weaker than last year but is still capable of bringing heavy rainfall.

Head of Operational Climate Services Andrew Watkins says La Nina typically leads to wetter-than-normal periods for eastern, northern and central parts of Australia.

This year the risk of flooding has increased given the deluge of heavy rainfall that has occurred in recent weeks.

“The issue at the moment is that we already have quite wet soils, quite full rivers and quite high catchments ... so any further rainfall raises the risk of widespread flooding, particularly in south-eastern Australia,” Dr Watkins said at a press conference last week.

“[But] the good news about La Nina is it tends to reduce the bushfire risk at least in terms of those big wild bushfires that we saw a few years ago.”

Dr Watkins says the last significant La Nina event was in 2010 to 2012.

“This strong event saw large impacts across Australia, including Australia’s wettest two-year periods on record, and widespread flooding,” he said

Providers of parametric products say the likelihood of increased extreme weather could potentially lead to more interest in the non-conventional insurance offerings, which pay out pre-determined amounts if certain triggers for an insured event are met.

Sydney-based Epsilon Underwriting Agencies Chief Underwriting Officer Paul O’Leary says the business has seen an increase in the number of enquiries for its parametric products in the last couple of months leading up to the cyclone season.

“The point around La Nina is that we are going to see increased rainfall right along our eastern coast and that could potentially cause havoc to the agricultural industry through either destruction of crops or significantly reducing yield,” he told insuranceNEWS.com.au.

“Parametric is not only available for cyclone but also for the effects that higher than usual rainfall might have on a farmer’s yield.

“Farmers can tailor the cover to insure for the period of time their crop is most exposed.”

He says parametric is not the answer to everything but it’s “certainly a piece to the puzzle” in addressing catastrophe exposures in Australia.

New Zealand start-up Bounce, which launched a parametric earthquake offering in the country earlier this year, also sees opportunities for such products to grow in the coming years.

“As there is an increase in the frequency of these type of weather events then we may start to see reduction in traditional insurance capacity in some regions alongside an increase in premiums,” founder and CEO Paul Barton told insuranceNEWS.com.au.

“This may create opportunities for alternative forms of risk transfer such as parametric insurance to support communities and close the gap.”

He says there are many benefits of a disaster risk financing solution like parametric insurance. These include speed of payment, simplicity and transparency as well as broad coverage.

High grass, crop fuel loads lift summer bushfire risk

Forecasts for significantly above average crop yields and delayed harvests in NSW suggest unusually high fuel loads will coincide with the peak of summer and create above normal risk for bushfires in large parts of the state.

AFAC, the National Council for Fire and Emergency Services, says while most of Australia shows normal bushfire potential this summer, areas of NSW and WA indicate above normal risk.

The latest climate outlook from the Bureau of Meteorology says summer is likely to bring warm summer days for much of the country, with warmer nights “very likely”.

There is an increased chance of unusually high maximum summer temperatures over most of WA, the NT, western and central Queensland, most of SA, and western parts of NSW, Victoria and Tasmania.

Minimum temperatures are also likely to be warmer than median for most of Australia.

“There is an increased chance of unusually high minimum temperatures for December to February over most of Australia except south-east WA and north-east, with the highest likelihood for northern Australia,” BOM said.

At the same time, BOM forecasts a wetter than median summer, with rainfall likely to be above median for northern and eastern Queensland, eastern and central NSW, western Victoria, and eastern Tasmania.

The varied bushfire risk picture for locations across Australia comes after recent rainfall already boosted soil moisture and stream flows across the east of the country during La Nina conditions.

“In any season we could see periods of escalated fire danger and fires that require assistance from beyond the area from which they originate, especially if rainfall distribution through the period is not consistent,” AFAC’s Bushfire Seasonal Outlook Summer 2021 report said.

Click here for the full report.

Code committee urges more action on hardship measures

The General Insurance Code Governance Committee (CGC) says measures introduced to assist customers experiencing vulnerability and financial hardship should be reviewed in the wake of implementation.

The CGC says the new Code of Practice obligations that came into effect this year represent some of the most significant changes in the overall update and responses shouldn’t be seen as one-off steps “simply to be completed”.

“The 2020 Code does not require code subscribers to conduct a post-implementation review,” it says in a report. “However, given the importance of these new obligations, the committee considers it is an important exercise that code subscribers should undertake to ensure these obligations are being met in practice.”

The new measures, in Parts 9 and 10 of the code, took effect from January 1, but the CGC says it was disappointed not all insurers met the deadline, despite plenty of notice and with heightened vulnerabilities due to the pandemic.

There has also been “some confusion” around Part 10, with 13 code subscribers saying they didn’t believe they had to comply with the section due to their business models and the nature of their interactions with consumers, it says.

“The committee will continue to engage with these code subscribers to better understand their business models and determine whether they are in breach of their code obligations,” it says.

The review found 86% of subscribers met the deadline for introducing vulnerability measures in Part 9, which applies to retail insurance, while 85% were on time in implementing hardship standards in Part 10, applying across retail and wholesale.

The CGC says it continues to see concerning conduct around the recovery of money from uninsured consumers who are experiencing hardship.

Firms have been urged to remind collection agents and solicitors of obligations to comply with the new code standards when recovering debts from people experiencing vulnerabilities.

Simple cyclone parametric cover seen as fast relief option

Retail parametric cover aimed at Northern Australian enterprises and consumers will help meet a need for a simple option that can deliver fast emergency payments after severe tropical cyclones, provider Redicova says.

Redicova parametric insurance, launched last week, is supported by the Lloyd’s Disaster Risk Facility (DRF), an initiative aimed at closing the protection gap through building resilience against natural disasters.

“Parametrics have been a very complex product with lots of insurance terminology that nobody understands, whereas this is really simple,” MD Karen Hardy told insuranceNEWS.com.au.

Tully-based Ms Hardy says she has seen the need for faster payment of emergency funds after events such as Cyclone Yasi. At the same time traditional capacity has also reduced in Northern Australia amid affordability issues.

“Redicova is not going to be the magic wand that fixes everything, but I hope it helps people get through that initial stage,” she said.

The parametric cover can be purchased in $1000 sum-insured units through the website, with pricing tiered according to location and exposure to cyclones of at least category three strength. Premiums per unit range from $35 to $130 for high-risk areas in the Pilbara.

Lloyd’s broker Tysers gathered support from Disaster Risk Facility syndicate members Beazley, Axa XL, Hiscox and Renaissance Re, together with Hannover Re, INIGO and Agora.

“We’re delighted to provide a new solution at a time where both industry and government are working on issues of affordability and availability of insurance in northern Australia,” Lloyd’s Regional Head of Australia and New Zealand Chris Mackinnon said.

The Redicova website says cover is for financial or economic loss as a result of cyclonic winds, with cover triggered through monitoring of cyclone track maps and Bureau of Meteorology wind strength data.

Those eligible to claim are notified electronically and funds transferred after they respond. Full payment is made when the situation is within the “very destructive wind zone”, while a 30% payment is provided within a 5km buffer.

The Bureau of Meteorology defines “very destructive winds” as events with maximum wind gusts over land of at least 165 km/h.

Turf wars, misalignment threaten M&A success

Significant merger and acquisition activity among insurers, brokers and underwriting agencies has sparked a warning from consultants Frazer Walker on issues that could derail the success of deals.

Partner Nick Careless says organisations often assume they have laid the groundwork because there is a business case for the purchase, but they should also delve into the details of how integration will be achieved if the bid is successful.

“Integration is often considered a technical exercise, with a focus on systems and IT, but typically that isn’t where the main challenges lie,” he said.

“Some organisations assume the acquirer will just assimilate the acquired company, but that can destroy much of the value and purpose of the acquisition.”

Organisations must define the end target for the merged business at the outset and the integration team must drill into contentious and challenging areas that could lead to disagreements, turf wars and misalignment.

“There can be differing viewpoints, but consensus is needed before the integration program can move ahead,” he said. “Some needs are mutually exclusive, so sort that out early in the process.”

Frazer Walker says the value proposition should be clarified by examining what both organisations provide, looking at products and services, claims experience, brands, customer segments, price position and markets, including geographic regions. Findings should be mapped against each other.

“You can’t develop the operational model until the value proposition is clear,” Mr Careless said.

EQC awards hazard research grants

New Zealand’s Earthquake Commission (EQC) has awarded 13 researchers a total of $NZ1 million ($960,570) to identify ways to reduce the impact of natural hazards and better inform policy makers, local councils, designers, engineers and builders.

The Biennial Grants program has been running since 1989, funding more than 250 projects. A record 120 researchers applied this year.

Previous grant-funded research led to new building techniques, identification of at-risk land, and detailed information for planners and emergency managers.

“Investing in science and research and translating that into tangible outcomes is critical,” EQC Research Manager Natalie Balfour said.

Projects fall into five categories: Empowering people, resilient buildings, smarter land use, governance and economics and quantifying hazard risks. Two special grant allocations were introduced this year to ensure opportunity for Māori and early-career researchers.

Following are the 13 Biennial Grant recipients:

Victoria University of Wellington

  • Climate risk and the insurance sector: The law, policy, and economics of climate-related financial disclosures (Prof Ilan Noy)
  • Seismic hazards from earthquakes in the locked zone offshore Wellington (Prof Martha Savage)
  • Detailed mapping of seismicity in Auckland (Dr Calum Chamberlain)

Massey University

  • Improving school-based hazards education outreach programmes (Dr Marion Tan)
  • Long-term communication of volcanic risk for effective decision-making (Dr Julia Becker)
  • Exploring influences on building earthquake resilience in lower seismic hazard zones (Dr Lauren Vinnell)

University of Auckland

  • Application of an endangered indigenous construction practice onto a prototype timber portal frame to assess seismic resilience for use on wharenui (Prof Anthony Hoete)
  • Embodied Carbon: A driver for change towards seismically resilient high-density housing (Dr Charlotte Toma)
  • Risk-targeted design for functionality (Dr Anne Hulsey)

University of Canterbury

  • More resilient wall building structures (Prof Santiago Pujol)
  • Testing of reinforcing steels to guide repair strategies (Prof Geoffrey Rodgers)
  • Māori participatory co-design of educational tools (Kristie-Lee Thomas, Brandy Alger)

Resilient Organisations

  • Dynamic community engagement on disaster risk reduction (Dr Charlotte Brown)

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Corporate

Court date set for Greensill action against IAG

The Federal Court has scheduled an initial hearing for a Greensill action filed last week against IAG over a $US35 million ($49 million) trade credit insurance claim.

The first case management hearing will be held in Sydney on February 2 and will be presided over by Chief Justice James Allsop.

Michael Frege in his capacity as insolvency administrator for Greensill Bank AG filed documents seeking an order that IAG is liable to cover the claim under a policy taken out through underwriting agency BCC Trade Credit.

Documents are yet to be lodged in response to the Federal Court filing, but it is expected IAG will defend the action.

IAG previously owned 50% of BCC, but sold its holding to Tokio Marine Management (Australasia) on April 9 2019 and has previously advised the market that it has no net insurance exposure on Greensill trade credit policies.

Supply chain finance group Greensill failed in last-minute NSW Supreme Court action on March 1 to avert the expiry of trade credit insurance policies that had provided around $US4.6 billion ($6.4 billion) in cover, with insolvency administrators subsequently appointed.

Dr Frege was appointed to the German-based Greensill Bank, while Grant Thornton administrators have been appointed for Greensill Capital.

“Based on various factors, including the determination of policy validity, reinsurance arrangements and the agreements with Tokio Marine, IAG remains confident that for any trade credit claims it may ultimately be liable to pay, it has no net insurance exposure,” the insurer said in its full-year Investor Report.

The Federal Court action filed last week relates to Greensill transactions involving Dubai-based Emirates Hospitals Group.

Peter Lowe to head Lockton New Zealand

Lockton New Zealand has appointed Peter Lowe as CEO after opening a kiwi operation in September.

Auckland-based Mr Lowe was most recently CEO at Willis Towers Watson New Zealand, where he worked for more than 15 years. He was also Senior VP at Marsh for more than 17 years until mid 2006.

Lockton Australia CEO Paul Marsden says Mr Lowe is an outstanding choice, bringing a wealth of international business experience after working in Australia, the UK, Bermuda, the US and New Zealand.

“This appointment marks an exciting new chapter for Lockton as we continue to expand our global reach in markets where we know we can make the greatest difference,” Mr Marsden said. “I look forward to supporting Peter and his team as they fill a gap in the New Zealand corporate space by raising the bar on service levels offered by other brokers.”

In September, Lockton introduced insurance advisers in Auckland, Hamilton and Christchurch and recruited a senior team from Willis Towers Watson. All employees began working remotely in COVID lockdown until permitted to attend the new Lockton Auckland CBD office at 1 Albert Street.

Mr Marsden has previously told insuranceNEWS.com.au as many as 40 people based in New Zealand may be hired in the next three years, with expansion in other locations across the North and South Islands such as Dunedin likely in the short to medium term.

Mr Lowe - who Lockton says is a “champion of risk-led conversations” and brings contacts and understanding - expressed excitement about delivering high quality risk advice throughout New Zealand and the Pacific.

“I am determined for Lockton to continue to be the industry leader and voice in risk advice and risk management,” he said.

The new Lockton New Zealand team includes COO Melanie Harding, Head of Employee Benefits Niall Martin, Head of Captive & Alternative Risk Transfer Jessica Schade and Head of Pacific Ged McCombie.

Tower introduces house fire caps

New Zealand’s Tower has made changes to its underwriting after experiencing an unusual run of large claims from house fires and an 8% drop in full-year earnings.

Frequency of motor claims was flat but Tower experienced the highest number of large house claims and large event claims for many years.

Tower’s underlying net profit for the year to September 30 slipped to $NZ20.8 million ($19.98 million) as the number of large house claims rose to 92, compared with 57 a year ago, costing $NZ21.1 million ($20.27 million).

Most were fire related and Tower says it responded in August by removing an uncapped total loss house fire benefit from new and renewing policies. It now caps the benefit at 20% of the sum insured.

Tower identified no single factor that explained the rise in house fire claims and said the increase could be a changing trend or “random volatility that needs to be explained and managed”.

“It has been a tough year,” Chairman Michael Stiassny told investors last week. “Action is well underway to address these issues and their impact on profitability. Most significantly, we have already implemented rating and underwriting changes, including the introduction of a full house fire replacement cap and risk‐based pricing for inland flooding.”

Tower says COVID-related supply chain issues drove up the value of second‐hand vehicles by 13% year on year, increasing motor claims costs, and there were significant delays in completing repairs due to supply chain issues with motor parts.

Double digit building material inflation was common and Tower has applied premium increases across motor and home as an offset, and is working closely with its supply chain partners to moderate the impact as much as possible.

“As New Zealand is heavily dependent on imports, supply chain issues like those associated with COVID can be particularly challenging.”

Average motor claims increased 6% and average house claims 7%. Most of this inflation was in the second half and the signs point to it continuing.

Seven large events contributed $NZ13.9 million ($13.35 million) in costs, up from $NZ9.7 million ($9.32 million) a year earlier, mostly related to New Zealand floods.

Tower’s combined operating ratio increased 2.7% over the prior year. The New Zealand loss ratio increased 4% to 53.6% for the year.

Coversure offers increased PL capacity for amusement, leisure industry

Specialist underwriting agency Coversure says it can now write up to $20 million for each public liability (PL) insurance policy issued to clients in the amusement, leisure and entertainment industry.

Previously the agency only underwrote a maximum $10 million when it resumed offering PL insurance in August, after securing a “line slip” facility with a new capacity provider in the UK.

“I am delighted to announce that Coversure has received confirmation… that we will be able to offer a $20 million capacity line slip in the near future,” GM Adrian Gamble told insuranceNEWS.com.au.

“We anticipate being able to quote terms within a week with policies incepting at a date before the Christmas break.

“Coversure continues to review submissions for insurance that demonstrate documented, active and contemporary risk management, risk mitigation and risk training.”

He says the agency has five “select” broking partners including HIB Insurance Brokers who act as its distribution intermediaries.

“However, for those brokers in the leisure and entertainment space that are able to genuinely present a submission with the required risk management we will look at those too,” Mr Gamble said.

Many amusement, leisure and entertainment operators are struggling to afford PL insurance, which is typically mandatory as part of their operating licence requirements.

Rates have shot up sharply as insurers’ risk appetite weakened, leading to reduced underwriting capacity available and more stringent requirements for insureds.

Mr Gamble says the market will probably remain difficult although there is scope for “premium moderation” if a client is able to show its business has an “active” risk mitigation program in place.

“And by that I don't mean people just having a collection of documents,” he told insuranceNEWS.com.au. “It’s about actually doing something. We continue to try and support the industry.”

Genworth unveils share buyback program

Genworth Mortgage Insurance Australia will commence a stock buyback program, returning to shareholders up to a maximum aggregate value of $100 million.

The lenders’ mortgage insurer says the purchase, to start from next Wednesday, would represent 11.1% of the company’s issued share capital or around 45.9 million ordinary shares.

The total number of shares to be purchased by Genworth under the on‐market share buy‐back will depend on business and market conditions, the prevailing share price, market volumes and other considerations.

Genworth says the proposed buyback is designed to bring its solvency ratio more in line with the board’s target capital range of 1.32 to 1.44 times the prescribed capital amount on a Level 2 basis.

“The on‐market share buy‐back is consistent with Genworth ensuring we have an efficient capital structure and helps us to deliver improved returns to our shareholders,” CEO and MD Pauline Blight‐Johnston said.

Vero, Good Shepherd NZ extend affordable car cover pilot

Vero and Good Shepherd in New Zealand have extended a product trial aimed at providing affordable car insurance to people on limited incomes following positive early take-up.

Drive was developed after research into why some Good Shepherd NZ clients were borrowing money to buy a car and then not taking out insurance.

“The extension of the Drive trial will allow us to continue to focus on financial inclusion in our community and build our knowledge of how we can meet the needs of these customers,” Vero Executive Manager Consumer Insurance Sacha Cowlrick says.

The 12-month extension will see Vero taking customers through the renewal process, increase the number of people taking out cover, and provide more insights on claims as the value and accessibility of the product is assessed.

Customers taking out a Good Loan of up to $NZ5000 ($4802) to buy a second-hand car will be able to pay a fixed premium of $NZ8 ($7.60) a week, rather than having monthly payments. Trial participants also don’t pay an excess on their first claim.

“It’s been a pleasure working alongside Good Shepherd NZ over the past year to provide positive outcomes for their Good Loans clients, and to learn together how to use insurance to support the financial resilience of customers experiencing vulnerability,” Ms Cowlrick says.

Since it was launched, the percentage of Good Loan clients taking out Drive cover has increased from 6% in November last year to 44% in August.

Genworth board adds two directors

Alistair Muir and Gerd Schenkel have been appointed to the board of Genworth Mortgage Insurance, effective December.

Mr Muir, who was formerly responsible for strategic growth through Data Partnerships, Ventures and Product at IAG for two years, is CEO at fintech and open banking advisory business Vanteum and a director of Humm Group.

Sydney-based Mr Schenkel is a partner at management consultancy Kearney and was formerly executive director at Telstra Digital and founder and MD at UBank after a stint at NAB.

AAMI marks stadium naming rights renewal with concert

Musician Amy Shark is to stage a special solo acoustic performance in February to celebrate the renewal of AAMI’s naming rights partnership with Melbourne’s AAMI Park for another five years.

Ms Shark, who has won eight ARIA Music Awards, will appear before 1000 concertgoers at AAMI Park on February 11.

Tickets can be won through the AAMI Lucky Club customer loyalty program or AAMI's Facebook Page.

Lisa Harrison, Suncorp CEO Insurance Products & Portfolio says the extended naming rights sponsorship of the sporting venue until 2026 demonstrates AAMI’s ongoing commitment to the Victorian community. The insurer has held the rights since 2010.

“We can’t wait to bring some joy to Victorians as the stands fill up again,” she said. “It’s exciting to be part of one of the first live music events on the 2022 calendar.”

Ms Shark won the ARIA Best Pop Release for Everybody Rise last year.

“I can’t wait to bring live music back to the venue after a long hiatus,” she said.

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Regulatory & Government

Government backs AFCA review recommendations

The Australian Financial Complaints Authority (AFCA) and the Federal Government have supported recommendations from a Treasury review to improve the ombudsman’s performance.

The review’s 14 recommendations, mostly for AFCA to implement, include a focus on transparency, the decision-making process and the approach to fairness.

“The Government welcomes the overall finding of the review of AFCA that it is performing well and providing an effective dispute resolution service for consumers and small businesses,” the response released by Minister for Superannuation, Financial Services and the Digital Economy Jane Hume says.

Recommendations include that the funding model should not disincentive financial firms from defending complaints that they consider do not have merit, and that AFCA should better take into account the circumstances of small financial firms.

It also says AFCA should be more transparent in its public reporting of systemic issues, including on a de-identified basis, stresses the criteria it must take into account in making fair decisions and that the service should not act in a manner that compromises the impartiality of the complaints resolution process.

The review rejects any need for further merit reviews of AFCA decisions and finds it is not necessary to raise monetary limits or compensation caps set for the ombudsman service.

“Several respondents put forward proposals for increases to a number of the jurisdictional limits, but in the context of the intended roles for AFCA on the one hand and courts and tribunals on the other, there is insufficient evidence to recommend altering the limits,” the report says.

AFCA opened its doors as a one-stop shop for financial complaints in November 2018 under legislation that required a review early into its operation. Submissions were invited earlier this year.

AFCA Chief Ombudsman David Locke says the report will aid scheme improvement and the organisation will consider any potential impacts on industry costs and the timely resolution of complaints when acting on the recommendations.

“Overall, this is a very positive report card, particularly for an organisation barely three years old,” he said.

“We know there are areas where we can improve as we move out of our establishment phase, and some of these have been identified in the review.”

See ANALYSIS.

Deteriorating WorkSafe performance creates 'emerging financial risk' for Victoria

A Victorian Auditor General’s report has flagged concerns with the performance of the state’s workers’ compensation scheme.

The annual report on the state’s finances warns outstanding clams liabilities at WorkSafe (which manages the workers’ compensation scheme), the Transport Accident Commission and the Victorian Managed Insurance Authority increased by 7.2% in the last financial year to $47.3 billion.

“The performance of WorkSafe is the primary reason for the increase,” the report says, adding that it is an emerging financial risk the government needs to “closely monitor and manage”.

The number of injured workers accessing the scheme has gone up, as has the amount of time they spend on the scheme.

“In 2020/21, an independent review of the financial sustainability of the scheme concluded that its financial trajectory is unsustainable,” the report says.

“WorkSafe is developing initiatives aimed at addressing these pressures and managing long-term financial sustainability.

“To minimise the impact on businesses and provide time to explore options before approving premium increases, the government provided WorkSafe with $550 million in 2020/21 to sustain its financial position over the short term.”

The initiatives being looked at focus on prevention, recovery and return to work, and include a review of the WorkSafe outsourced agent model.

A WorkSafe spokesman told insuranceNEWS.com.au “the growth of mental injuries and impacts of COVID-19 continue to place significant pressure on our community, our workplaces and our workers’ compensation scheme”.

“WorkSafe is ensuring the scheme remains contemporary, fit for purpose and sustainable and is developing initiatives designed to have significant impact on workplace health and safety, outcomes for injured workers and the scheme’s financial position,” the spokesman said.

“WorkSafe’s insurance ratio remains well within the preferred funding range of 100-140%.”

Click here to read the full report.

APRA finalises climate risk guidance

The Australian Prudential Regulation Authority (APRA) has finalised its practice guide on climate change in response to requests from the financial services industry for greater clarity on regulatory expectations and examples of best industry practice.

APRA published CPG 229 Climate Change Financial Risks after wrapping up a consultation it launched in April on the draft version, which received nearly 50 submissions including from the Insurance Council of Australia (ICA), IAG and Swiss Re.

The regulator says the guide is designed to assist banks, insurers and superannuation trustees to manage the financial risks of climate change.

It says there are plans next year for a survey to gauge the alignment between institutions’ management of climate change financial risks, the guidance set out in CPG 229, and the G20 Financial Stability Board’s Taskforce for Climate-related Financial Disclosures.

CPG 229 imposes no new regulatory requirements or obligations, but will instead aid APRA-regulated entities to address climate-related risks and opportunities within their existing risk management and governance practices.

APRA Chairman Wayne Byres says the guide does not prescribe any particular way of doing things.

“Nor does it force companies to [make] any particular investment, lending or underwriting decision – those are matters for the entities themselves to decide,” Mr Byres said. “But we do want to make sure that those decisions are well-informed, and don’t undermine the interests of bank depositors, insurance policyholders or superannuation members.”

The guide says the changing climate creates physical, transition and liability risks, all of which carries potential implications for insurers and the wider financial services sector.

In relation to physical risk, insurers face increased claims from extreme weather events, according to the guide. It can also lead to changes to the cost and availability of insurance.

“How and when specific climate risks will materialise is uncertain, but there is a high degree of certainty that some financial risks will materialise as a result of climate change,” the guide says.

“APRA considers that prudent practice would be for an institution to evidence the management of climate risks within its written risk management policies, management information, and board risk reports.

“Where climate risks are material, this may require updating existing risk management policies and procedures.”

ASIC under microscope as FRAA begins review

The Financial Regulator Assessment Authority (FRAA) will examine the corporate watchdog’s effectiveness and capability as part of a “targeted assessment”, with a report on its findings to be provided to the Federal Government by the end of July next year.

Treasurer Josh Frydenberg announced the review today. It is the first to be undertaken by the FRAA after legislation for the body was passed in July.

The FRAA – created following a Hayne royal commission recommendation – is tasked with assessing and reporting on the effectiveness and capability of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority.

“The FRAA’s first review will be a targeted assessment of ASIC’s effectiveness and capability in strategic prioritisation, planning and decision‑making, ASIC’s surveillance function, and ASIC’s licensing function,” Mr Frydenberg said.

“The first review will also examine ASIC’s use of data and technology in each of these areas of focus.”

FRAA has released a consultation paper, outlining the scope of its assessment and a list of key questions for stakeholder submissions.

Closing date for submissions is January 28.

Click here for more details.

Labourer who took workers' comp while working ordered to return almost $60,000

A labourer who knowingly received workers’ compensation payments while working has been ordered to return $58,121 to WorkSafe Victoria and complete 250 hours of community service.

Lee Sharples pleaded guilty at the Frankston Online Magistrates’ Court to one rolled-up charge of fraudulently obtaining weekly financial benefits from the compensation scheme.

He was convicted and placed on a Community Corrections Order for 18 months.

WorkSafe says in a statement that surveillance footage in April last year showed him entering a workplace wearing a uniform.

Its investigation revealed he earned more than $46,000 working at two separate companies between February 2019 and October last year.

The statement says the court heard that during this period, he also received a number of Newstart (now JobSeeker) and JobKeeper payments, at times receiving wages from two jobs, unemployment benefits and workers’ compensation at the same time.

He had injured his shoulder in November 2017 while working as a labourer and required surgery. He lodged a workers’ compensation claim that was accepted the following month.

In 2019, he also successfully lodged a claim for a secondary mental health injury relating to his injured shoulder.

WorkSafe Insurance Business Unit Executive Director Roger Arnold says the government agency is always on the lookout for fraudulent behaviour.

“Workers’ compensation is to support injured workers who cannot work,” Mr Arnold said. “Those who cheat the system for their own gain undermine the entire scheme.

“Most people do the right thing, but WorkSafe won’t hesitate to prosecute those whose behaviour is dishonest.”

ARPC researches evolving meaning of terrorism

The Australian Reinsurance Pool Corporation (ARPC) has started a research study with the University of Queensland (UQ) Business School on the evolving experience and meaning of terrorism.

ARPC CEO Christopher Wallace says newer forms of attack and social unrest do not typically fit existing definitions of terrorism but may still cause loss of life, disruption to businesses and society and financial losses and social unrest.

“ARPC’s strategic priorities include extending thought leadership and expertise and embracing and evolving to a changing market environment, priorities which underpin our support for research like this on terrorism trends,” Dr Wallace said.

The research study, the second in a serious of ARPC/UQ papers focused on terrorism, is looking at how definitions might evolve over time with various forms of extremist behaviour and civil unrest.

“Attacks such as mass shootings and knife attacks are occurring outside the extremism which underpinned the September 11 attacks in 2001,” UQ research team leader Paula Jarzabkowski said.

The university team on the research project also includes research fellows Corinne Unger and Katie Meissner.

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Life Insurance

Individual DII snaps loss streak as risk products make 'notable improvements'

The troubled individual disability income insurance (DII) product is finally in the black, posting an after-tax profit of $124 million in the 12-month period to September 30 after losing $1.41 billion a year earlier, according to latest statistics from the Australian Prudential Regulation Authority (APRA).

Individual DII and three other risk products – individual lump sum, group lump sum and group DII – achieved $439.1 million in overall net profit, compared with a $1.6 billion loss in the preceding period.

For the September quarter, the four products made a $235.6 million profit. In the previous June quarter, they reported a $168.7 million profit.

“Notable improvements were experienced within risk products, with all four products returning an improved result for the 12 months ended September 2021 in comparison to the previous year’s results,” APRA says in its quarterly update.

The improved individual DII results follow moves taken by APRA to shore up the product line after massive losses in recent years, due to product design and pricing issues.

APRA actions include capital measures in the form of upfront penalties for providers who fail to improve the sustainability of DII products.

The APRA update says the life industry achieved $1.4 billion in net profit after-tax during the period, reversing its year-earlier loss of $1.6 billion.

The result was primarily driven by an increase in investment revenue of $8.7 billion over the past 12 months, the regulator says.

Investment revenue reached $5.4 billion during the period, versus a year-earlier $3.3 billion deficit.

“The overall performance of the life insurance industry is improving,” APRA says.

For the September quarter, the industry’s profit declined 8.1% to $375.2 million from the preceding quarter.

ALUCA white paper sets out individual DII best practice approach

The Australasian Life Underwriting and Claims Association (ALUCA) launched a white paper last week on individual disability income insurance (DII), outlining keys areas where improvements may be made amid an ongoing industry-wide push to return the troubled product line to a sustainable state.

An ALUCA working group developed the IDII Financial Underwriting and Claims Better Practices document after reviewing data from eight life insurers and reinsurers and holding 30 informal meetings with stakeholders.

The white paper is available for ALUCA members but a copy of it provided to insuranceNEWS.com.au shows it has identified five key areas where the biggest impact on individual DII sustainability can be achieved from a financial underwriting and claims perspective.

The five areas are income definitions and treatment; financial profiling, questioning and financial evidence collection; significant income calculation adjustments; what to consider financially should the industry consider a policy term expiry; and underwriting and claims solutions where there is a crossover between individual DII and personal total and permanent disability (TPD).

“It is important that the industry drives and adopts these recommended better practices to achieve industry sustainability,” ALUCA CEO Amanda McKernan said.

In relation to income definitions and treatment, the paper says better practices include clearly defined insurable income, ongoing business income and passive investment income.

Where there is a crossover between individual DII and total and permanent disability, there may be a consideration of a joint offering combining the two into one product.

“This working group would like to highlight that this combination IDII/personal TPD risk could be mitigated to some extent with an amendment to the TPD definition,” the white paper says.

“We believe it is important that TPD definitions be addressed by the industry to see the product provide cover as it is priced and intended.”

The paper says recommendation regarding TPD definition is out of scope for this project.

Class action alleges QSuper overcharged life premiums

Plaintiff law firm Shine Lawyers has filed a class action in the Federal Court on behalf of QSuper’s members, alleging the Brisbane-based fund may have “unfairly overcharged” them life premiums.

Class Actions Practice Leader Joshua Aylward says the superannuation fund’s conduct resulted in significant financial loss for up to 140,000 members.

The fund is accused of breaching its obligations under the Corporations Act 2001 (Cth) and the Superannuation Industry (Supervision) Act 1993 (Cth) by failing to notify its members of changes to premiums.

“QSuper changed their life insurance policy on [July 1] 2016 and failed to adequately notify its members of how to get cheaper premiums,” Mr Aylward said.

“Significantly, most of the fund members impacted are Queensland Government employees and their spouses, teachers and health industry workers like doctors and psychiatrists.”

Shine Lawyers says white collar workers were charged the same increased premiums despite not having the same risk-factors present in their lines of work.

“It's incredibly disappointing that essential workers serving our community at all hours are those taken advantage of by this super fund,” Mr Aylward said.

A spokesman for QSuper told insuranceNEWS.com.au the fund “has no comment on a matter [that is] before the courts”.

Shine Lawyers says its actions against QSuper follow an earlier dispute with a fund member who complained to the Australian Financial Complaints Authority (AFCA) that he had overpaid premiums for death and total and permanent impairment cover he had acquired through his super fund.

AFCA ruled in August 2019 in favour of the complainant. The dispute was sparked by the complainant’s discovery that he was – and had been – eligible to pay a lower premium during the period from July 1 2016 and to December 2018 on the basis that he fell within the fund’s new “professional” occupational rating.

QSuper introduced the new occupational rating in July 2016.

The fund appealed unsuccessfully in the Federal Court against the AFCA ruling on grounds that the dispute-handling body “exercised an impermissible exercise of judicial power” when it decided a complainant should be refunded for overpaid life policy premiums.

Click here for the Federal Court ruling made in April last year.

Unitysure.com launches pre-assessment platform for advisers

Financial software application provider Unitysure.com has launched an online pre-assessment platform for advisers and underwriters.

PreAssess Hero allows both risk specialists and underwriters to handle multiple pre-assessment submissions simultaneously.

The platform empowers advisers and underwriters to put more policies in-force by prioritising accurate, faster and more accountable pre-assessments.

“Pre-assessments are a pivotal step for financial advisers as part of the onboarding process for those clients who are not ‘clean-skins’,” CEO Russell Cain said.

“PreAssess Hero is designed to be an industry-wide initiative that empowers financial advisers and underwriters to optimise the pre-assessment process.”

Mr Cain says the platform launched last week after a six-month trial.

“There are 10 life insurers on the platform whose products are available for pre-assessment,” he told insuranceNEWS.com.au. “These include total and permanent disability, trauma, income, all kinds of life insurance products.”

The business is inviting 25 risk specialists to subscribe as early adopters of the platform.

Click here for details.

APIR looks to build traction in life insurance industry

APIR Systems, a provider of identifiers and data for financial products, sees an opportunity to expand into the life insurance industry following the introduction last month of design and distribution obligations (DDO) laws.

The DDO regime requires a target market determination (TMD) document for every financial product – including life offerings – sold.

The Financial Services Council has prepared TMD templates for its members that include a provision for a product identifier but has not prescribed which supplier of codes should be used.

Having an identifier code will make it clear which product is involved when there is correspondence about a product.

Such codes are already prevalent across the wealth management industry, used by all distribution platforms, custodians and fund administrators.

APIR Systems says since July the business has expanded its capabilities to include life insurers, who are now able to apply for a code for their products.

“Product identifiers will assist in facilitating the obligations set out in the DDO legislation by eliminating potential reporting ambiguities, including nil reports, between the various parties,” CEO Chris Donohoe said.

“The fact that we now have a unique code for these products will also result in a seamless, efficient integration at the back end.”

Mr Donohoe told insuranceNEWS.com.au MLC, an existing client, has already extended its use of APIR identifiers to include a selection of its life insurance products.

He says he has been engaging with the industry for many years about identifier codes.

“The DDO was the catalyst for change,” Mr Donohoe told insuranceNEWS.com.au. “The industry has concluded that it is in the industry’s best interest for efficiency.”

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The Professional

NIBA seeks young broker award nominations

Nominations for the 2022 round of the Young Professional Broker of the Year Award are now open, the National Insurance Brokers Association (NIBA) has announced.

Anyone in the industry can nominate a top emerging talent in the insurance broking space, NIBA says.

The Vero-backed award celebrates an outstanding industry member under the age of 35. There are five state and territory level winners who attend a four-week professional development program and enter the Vero Young Brokers Alumni.

The five go on to compete for the national Warren Tickle Memorial Award and a tailored learning experience worth $10,000, courtesy of Vero.

“The development program sponsored by Vero is fantastic at providing insights into your own personal development, while helping to equip you with tools that you will use to further your career,” 2021 national winner Mitchell Wight said.

Entries are to be assessed by the judging panel throughout March and April, and finalists are announced at regional events in May and July.

“If you are a part of the insurance industry in any capacity and know a young broker who is doing a wonderful job looking after the needs of their clients, you are invited to nominate them,” NIBA said.

Nominations can be made here.

CRM Brokers appoints claims head

Sydney-based CRM Brokers has named Ken Masina as Head of Claims, reporting to Chief Operating Officer Gordon Bell.

Mr Masina was most recently business development manager with strata specialist CHU Underwriting Agencies, a role he took on in July 2019, according to his LinkedIn profile. He has more than 12 years’ experience in the insurance industry.

“His appointment could not come at a more poignant time for the company,” Mr Bell said.

“We are poised to deliver consistency in client service levels that most would class as market-leading. In addition, his extensive expertise and background in the insurance industry will strengthen our claims team.”

Director Damien Coorey says Mr Masina brings to the business his claims knowledge and ability to manage and foster key relationships when it comes to claims handling.

UAC names board nominees

The Underwriting Agencies Council (UAC) says it has received six nominations for four director seats.

UAC Chairman Kurt Nilsen (Lion Underwriting MD), Jeanene HiIl (Head of Coverholder and Delegated Authority, Asia Pacific, Canopius Australia), Eric Lowenstein (Tego founder and CEO) and Anthony Porter (AFA National Business Development Manager) are sitting directors seeking additional two-year terms.

National Transport Insurance EGM Mike Edmonds and CHU Head of Customer Service and State Manager Queensland/NT Ani Kakulapati are the additional nominees.

UAC says the successful nominees will be decided by a ballot at its annual general meeting on December 9.

Board members Deputy Chairman Emily Walker, Company Secretary and Public Officer Heath Amber, Treasurer Trent Brown and Director Simon Lightbody are not required to stand for re-election this year.

Moray & Agnew announces raft of appointments

Moray & Agnew Lawyers has announced 16 senior appointments including the promotion of six lawyers to the Partnership starting January 1.

The law firm says the lawyers are across its national network of insurance, commercial and workplace practices.

“Each of these promotions from within our ranks is very well deserved and further enhances the capabilities and expertise we offer to our valued Australian and international clients in the public and private sectors,” National Managing Partner Geoff Connellan said.

“I am delighted that we continue to promote home grown talent and offer heartfelt congratulations to every one of these lawyers on their achievements.”

Promoted to the Partnership are Chase Deans (Canberra, Insurance), Briony Kerr (Melbourne, Property & Development), Fabienne Loncar (Melbourne, Builders Warranty and Owners Corporation), Gerard Nymyer (Melbourne, Builders Warranty and Owners Corporation), Megan Palmer (Newcastle, Commercial Litigation & Dispute Resolution) and Phillip Vassiliadis (Melbourne, Construction & Projects).

The three senior lawyers who have been promoted to Special Counsel are Daniel Coloe (Melbourne, Insurance), Rory Smith (Sydney, Insurance) and Hilary Stokes (Melbourne, Insurance).

The other members of the legal team who have been promoted to Senior Associate are Ben Garvey (Brisbane, Insurance) John Giang-Nguyen (Sydney, Insurance), Madeleine Graham (Newcastle, Insurance), Billy Liolios (Melbourne, Construction & Projects), Madeline McDermid (Brisbane, Insurance), Rachel Watson (Canberra, Insurance) and Narika Wicks (Canberra, Insurance).

Melbourne marine forum calls for Christmas event RSVPs

The Melbourne Marine Insurance Forum (MMIF) is now taking RSVPs for this year’s Christmas celebration at the Saint & Rogue restaurant and bar.

The event will be held at the Little Collins St venue on December 9 from 4:30pm to 8pm and RSVPs can now be sent to MMIF Secretary and Chubb Marine Manager Adam Billing at adam.billing@chubb.com.

MMIF, which was formally established a decade ago, has more than 200 members, including underwriters, brokers, lawyers, surveyors and other suppliers. Typically, it each year holds a number of educational meetings as well as networking functions.

The Christmas event is free for current Financial Members, or $50 for Non-Financial Members, which includes an annual membership. A range of MMIF corporate memberships can be purchased here.

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Insurtech

Pandemic fuelling insurtech growth: Finity

The COVID-19 pandemic has accelerated insurance sector plans to improve technology capabilities as pathways open up for partnerships, the Finity Optima report says.

“In the post pandemic world, technology support has gained a new urgency, investment has increased and more overseas insurtechs have set up a local base,” the report says. “Insurance industry players looking for solutions are increasingly tapping into the insurtech ecosystem.”

Finity says after years of restructuring and mass redundancies many experienced insurance professionals have started or joined insurtechs, bringing industry expertise and contacts.

“This helps pave the way for smoother partnerships between incumbents and insurtech providers,” it says. “In addition, we have seen more international insurtechs setting up in Australia, looking for growth by partnering with local entities to provide operational tech.”

An estimated $US7.4 billion ($10.3 billion) was invested in insurtech globally in the first half of 2021, which is higher than the total investment last year.

The report says the insurance industry’s inherent conservatism, founded on the need to predict the future using data from the past, has posed a hindrance to building data and tech capability outside the pricing sphere for incumbents.

But changes, which were in train before the pandemic, have gained traction amid increasing recognition that capability development is needed to respond to issues such as shifting consumer preferences, a more competitive landscape and rising costs.

Agency start-ups without a track record have experienced challenges in seeking underwriting capacity, but the report says partnerships with reinsurers are assisting.

“The technology advantages and reach that agencies often have with consumers mean there is still room for growth as they seek to support brokers who are becoming increasingly vocal about their dissatisfaction with service from insurers,” it says.

Future insurtech trends may include growth in modularisation, where technology bolt-ons are provided by third parties, and embedded insurance, where non-insurance players embed cover in offerings at the point of sale or service.

Open, Cover Genius make top 100 insurtech list

Sydney-based Open, best-known for its artificial intelligence-driven brand Huddle, and local “unicorn” Cover Genius have been listed among the world’s top 100 insurtechs in a report by innovation platform Sonr.

Cover Genius was founded in 2014 by Angus McDonald and Chris Bayley, a first employee in Google's Sydney office where he managed the insurance team. It is now licensed in more than 60 countries and 50 US states and recently secured $100 million in new funding, to be valued by Bloomberg at $1 billion after signing 20 new partners from multiple industries and tripling its gross written premium.

Sonr’s latest global top 100 list ranked Cover Genius at 12 – one above Lemonade – while Open placed at 58. The compilation is scored by industry experts.

Sonr CEO Matt Connolly says there has been a “huge uptick” in partnering between incumbents and insurtechs, as well as a rise in insurtech acquisitions.

“The insurtech market is maturing, as is their positioning and relationship with incumbents,” Mr Connolly said. “We’re seeing a year-on-year increase of insurtech investment and most interestingly, half of all deals heading into early stage companies. This signals a continuing healthy and vibrant industry.”

Hollard-backed Open, which launched in Australia in 2016, plans to replicate its business model in New Zealand this year and in the UK by mid-2022. Its partners - such as fintechs, car and home lenders, utilities and insurers - can embed Open car, home and travel insurance into any app or website.

Open’s Huddle car, home and travel embedded insurance offering has over 80,000 customers in Australia.

“We had taken a bet that most problems could be solved by technology. And we won,” Open says.

Taking first place on the Sonr 100 list this year was China-based ZhongAn, followed by US-based Hippo and commercial insurance exchange Bold Penguin.

Also named was California-based Upguard, which has offices in Sydney and Hobart and uses proprietary technology to calculate potential risk of cyber outages and intrusions.

See the full list here.

ATL readies for AV black box data

Heavy motor and passenger vehicle underwriter Australian Transport and Logistics Insurance Group (ATL) says it has “future proofed” its business for the next five years and is ready for an expected step change in automotive technology and data.

A year ago, ATL appointed Nick Evans to the role of Executive Director Digital Transformation to manage the implementation of process-oriented systems. The team have since worked closely with technology vendors Entsia and Grappler to leverage cloud-based systems and extend the reach of the business.

“There are a lot of changes that are going to come into transport: automation, electric vehicles. Being able to consume data – from black boxes inside trucks, driver behaviour – that will come to affect the underwriting and it will improve our claims service,” Mr Evans said during a lunchtime webinar last week.

“There is going to be a lot of third-party data that is going to be available. We are going to lean heavily on our technology partners to be able to assist with those kind of integrations.”

Mr Evans was joined by Entsia CEO and Founder Alistair McElligott and Grappler CEO and Founder Alistair Harold to present the webinar, which considered the potential of new technologies to reshape the future of the underwriting industry.

They explored ATL’s recent digital transformation and how it is enabling the business to scale as technology allows the insurance industry to deliver more seamless experiences and improve processes, from cover to claim.

Mr Evans, who was formerly CEO at insurtech wiCover in Brisbane and South Africa, says being a more digitally focused business has helped ATL recruit new staff and attract a younger cohort and more interviewees.

“We have the ability to look to the future,” he said.

Ride Protect launches rideshare, food delivery driver cover

Local insurtech Ride Protect has launched an insurance and roadside assist package designed for rideshare and food delivery drivers.

Ride Protect’s comprehensive motor vehicle insurance covers private use, food delivery and rideshare activities under one policy.

The product is underwritten by Mercurien Insurance, an agent of HDI Global, which says Ride Protect gives rideshare drivers what they are asking for in their insurance.

“Ride Protect helps rideshare drivers and operators save costs and overheads,” it said.

“You no longer need two separate policy types for your vehicle insurance. Our one comprehensive policy covers rideshare, food delivery and private use. The policy also gives you access to cutting-edge technology that helps make your rideshare business safer and more profitable.”

Founder and CEO Jeremy Bennett says rideshare drivers have been paying an average of $1499 a year for their car insurance, and an additional $150 a year for roadside assistance.

“This is not sustainable and I wanted to find one single solution,” said Mr Bennett, who was formerly director at Insurance & Risk Management Specialists, principal consultant at Marsh, business relationship manager at QBE and account manager at Aon.

Mr Bennett says rideshare drivers are often unfairly stigmatised as high risk drivers and charged excessive premiums, something he wants to change.

“Our mission was to offer drivers unparalleled protection, simplicity and value for money under the one policy," he said. "We needed to recalibrate the way insurers think about this industry.”

He encouraged insurance brokers and fleet management to get in touch.

The offering, which operates on 365 Assist Group technology, incentivises via reduced premiums when policyholders adopt safer driving habits and incudes video coaching to be a safer and more fuel-efficient driver.

“Jeremy has tapped into a niche market which really is a complete and convenient solution for drivers,” 365 Assist Group CEO Peter Richardson said.

“As our first partner to launch a product which harnesses this exciting new technology, we’re proud to work with Jeremy and the team, arming them with valuable driver insights to support them in delivering a game changing insurance product.”

BizCover introduces AI chatbot Frankie

SME online insurance specialist BizCover has been piloting an artificial intelligence chatbot, Frankie, as it looks to pursue efficiencies through technology.

Operational Excellence Manager Brad Hoyle says Frankie is using supervised learning, an artificial intelligence methodology, to develop responses to inquiries, opening another path for customers to interact with the firm at any time.

“Most of Frankie’s human-like responses are powered by a technology called natural language understanding (NLU), which allows it to comprehend questions,” he said.

“The result is a chatbot that feels like you’re chatting with a human. And over time our customers will help Frankie learn and improve.”

Frankie is powered by Einstein Bots, a part of the Salesforce Service Cloud and is expected to soon go live.

“While some situations require the human touch, Frankie will be there for the many straightforward customer queries that we get such as amendments, payment details, claim cancellations – those sorts of things,” Mr Hoyle said.

BizCover says operational efficiency gains are particularly achieved through Intelligent Process Automation (IPA), which pairs automation with artificial intelligence (AI).

The business says technology is proving effective in escalating work items to ensure service level agreements are met and in handling failed payments.

“Automation and AI have helped us service 200,000 small business customers across three countries with just 16 full-time customer service employees,” Mr Hoyle said.

“We can now let humans be humans and robots be robots, which means prioritising the high empathy work to people and using AI and automation to do everything behind the scenes.”

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International

UK payments made on 70% of BI policyholder claims

Financial Complaints Authority (FCA) figures show 70% of business interruption policyholders who have had pandemic-related claims accepted following a UK test case have now received at least an interim payment.

The data shows that 42,616 policyholders have had claims accepted and 30,032 have received at least an interim or initial payment as of November 8.

“We remind firms of the need to handle claims promptly and fairly and to provide reasonable guidance to help a policyholder to make a claim,” FCA says.

“Any BI policyholders who believe they may have a claim but have not yet submitted this to their insurer should do so as soon as possible in accordance with the policy document.”

Final settlements for business interruption claims related to the COVID-19 pandemic in the UK have reached £871.6 million ($1.6 billion), the monthly update shows.

The total value of interim/initial payments made in the case of 4403 claims that are yet to be finalised is £312.2 million ($609.4 million).

The Supreme Court handed down its appeal decision on the pandemic-related test case on January 15.

UK SMEs snub employers' liability

Employers’ liability penetration at UK SMEs has hit a new low, according to data analytics firm GlobalData.

Its UK SME Insurance Survey found the penetration rate for the cover is just 62.5%, leaving many open to the risk of large payouts if one of their employees is injured.

Employers’ liability is required by law but GlobalData says SMEs are exempt as long as they have one employee who is a director and owns 50% or more of the capital, or if they only employ family members or staff outside the UK. But such SMEs represent a small proportion of the total.

“This [penetration] is low for a product which is required by law,” GlobalData Insurance Analyst Ben Carey-Evans said.

“Follow-up questions identified that the key reasons as to why SMEs who need to have such insurance did not have it in place were that SMEs were willing to take the risk as a need to cut costs, and being unaware it was legally required.”

Some 15% of respondents who did not have the cover in place said it was because they did not know it was a legal requirement.

“The 2021 penetration rate of 62.5% is the lowest in the last four years,” Mr Carey-Evans said.

“This indicates that some SMEs could have decided against this type of cover, as budgets have been squeezed by COVID-19, or maybe did not take up on renewals, which fell during periods of lockdown.

“Yet, COVID-19 could help insurers in the longer term. If more SMEs turn to brokers for advice to make sure that their business insurance is fit for purpose, or even simply conduct more research before purchasing insurance for the same reason, the proportion of SMEs who are unaware that employers’ liability insurance is a legal requirement will come down.”

Hull, cargo lines break even after years of loss

Global hull and cargo insurance lines returned to a technical break-even in 2020 after many years of unprofitability, although the International Union of Marine Insurance (IUMI) says a bounce back underway in shipping activity to pre-COVID levels could boost claims frequency again.

Global marine insurance premiums rose 6.1% last year to $US30 billion ($42.08 billion).

The report says early indications in 2021 were that “continued development is uncertain” and IUMI Secretary General Lars Lange says the health of marine insurance remains “mixed”.

“There is concern that a revitalised shipping and offshore industry will generate additional claims which may, in turn, impact on future profitability,” Mr Lange said. “The recovery was from a very low base”.

The hull underwriting sector grew by 6% in 2020 and global premiums reached $US7.1 billion ($10 billion).

The gap between global premiums and global tonnage has begun to reduce. Cargo underwriting achieved a 5.9% increase in global premiums to reach $US17.2 billion ($24.13 billion). However, a likely increase in natural catastrophes going forward - coupled with increased risk accumulations - has the potential to impact cargo underwriting performance this year, IUMI says.

In the offshore energy insurance sector, an oil price rally halted many years of declining premium base, which in 2020 was $US3.6 billion ($5.05 billion).

IUMI says new underwriting potential is likely to result from increased offshore reactivation but this will bring additional risk and the possibility of an increase in the current extremely low levels of claims.

See the full report here.

Aon publishes Lloyd's CFO survey findings

A new report from Aon reveals findings from a survey of Lloyd’s managing agents’ CFOs and provides an overview of how capital and business strategy are connected within the Lloyd’s market.

The How CFOs Connect Capital and Business Strategy report analyses an online questionnaire completed by CFOs at 28 Lloyd’s managing agents, representing 75% of the market’s capacity. It was a collaboration between Aon’s UK Capital Advisory team and the Lloyd’s Market Association (LMA).

Aon says the CFO role has evolved to integrate functions from actuarial, capital, risk and underwriting.

The survey found 87% of survey participants wanted to increase their stamp capacity at Lloyd’s and many were striving for better integration between underwriting and capital strategies.

“The type of capital at Lloyd’s continues to shift, following restrictions on the use of Tier 2 Capital, such as Letters of Credit,” Aon says.

Average tier 2 utilisation was just 28%, well below the current Lloyd’s limit of 50%, due mostly to availability of capital from parent firms or an internal debt threshold.

Across the sample, average return on capital was 12%, well above estimated cost of capital of about 7%. Intragroup reinsurance was utilised by 78% of participants.

“The report reveals that for most survey respondents, capital availability was not a constraint for growth, a trend highlighted in the underutilisation of Tier 2 Funds at Lloyd’s. Respondents generally agreed that capital optimisation was critical in developing a dynamic and proactive approach to capital management.”

Aon says an emerging focus point was managing the volatility of underwriting returns by explicitly looking at a variety of return periods. It says 40% of respondents implemented this.

See the report here.

Talanx places first green bond

Talanx has issued its first “green” bond in what it says is a further step in implementing its sustainability strategy.

At the start of the month, the HDI Global parent published a Green Bond Framework for financing sustainable projects, particularly renewable energy generation and properties with low energy consumption and reduced CO2 emissions.

“Climate change is a serious threat that exerts an impact on our business as an international insurance group in many different ways,” Talanx CFO Jan Wicke said. “It impacts on primary insurance and reinsurance, as well as on our investment.”

Talanx aims to cut CO2 emissions of its liquid portfolio by 30% by 2025 and says the new bond makes a significant contribution to achieving its objectives in the capital market.

The subordinated bond had a volume of €500 million ($794.37 million) and was issued primarily to institutional investors. It was more than three times oversubscribed.

The green bond was rated “A-” by S&P Global Ratings and it is listed on the Luxembourg stock exchange. ABN AMRO was Sole Green Bond Structuring Advisor and Joint Lead Manager. Talanx says it optimises solvency and liquidity with the issuance and the bond took advantage of favourable conditions in the capital market.

The bond has a fixed coupon of 1.75% and the first date for repayment is June 2032.

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Analysis

Fair play: AFCA set for tweaks after positive beginnings

The Australian Financial Complaints Authority (AFCA) has received a generally positive report card after its first Treasury review, with recommendations aimed at fine-tuning and keeping it on track rather than requiring major changes.

The critical question asked in the review was whether AFCA is fulfilling its role in a way that is fair, efficient, timely and independent. Wide consultation was undertaken and plenty of issues were raised.

“It is unsurprising that there was dissatisfaction by some respondents with AFCA decisions where the outcome was not in their favour,” the review says.

Nevertheless, when assessed against the parameters of fairness, independence and efficiency, the review found no evidence of any systemic failings or underperformance by AFCA.

Outcome fairness was the most common issue in “a large number of submissions from a wide range of financial firms”, with inconsistencies pointed out and some objecting to being held to a different standard to those required under the law or contracts.

The review says AFCA has established a fairness project to provide more certainty and has other initiatives underway, while noting the ombudsman “needs to exercise caution in the application of its fairness jurisdiction”.

The related recommendation simply says that “in making its decisions AFCA should consider what is ‘fair in all the circumstances’ having primary regard to the four factors identified in its rules – legal principles, industry codes, good industry practice and previous decisions”.

Independence in decisions was looked at in contexts including a court case last year, DH Flinders Pty Ltd v AFCA, where a complainant was assisted in identifying a different firm regarding a complaint rather than the one originally named.

“While questions regarding AFCA’s independence are raised in the case, the review did not find evidence to support a view that there are systemic issues with the independence of AFCA’s operations.”

AFCA has established an internal working group to review its processes and guidance in relation to assisting those submitting a complaint, the review says.

The report recommends AFCA “should not advocate for, nor act in a manner that otherwise advantages, one party such that the impartiality of the complaints resolution process is compromised”.

The Treasury review process involved bilateral meetings and roundtables and feedback from small businesses, financial firms, industry associations. consumer advocates and government organisations. It received 167 submissions.

The Australian Small Business and Family Enterprise Ombudsman argued there was a strong case to expand the monetary and insurance product jurisdiction for small businesses, while consumer groups said the $5400 cap for compensation for non-financial loss was far too low.

The review rejected change, saying AFCA should continue to collect data on decisions to award compensation for non-financial loss to “help inform future consideration of this matter”.

“We were disappointed with the recommendation not to increase the limits on non-financial loss, but we agree with the overall finding of the report that on balance AFCA is performing well,” Consumer Action Law Centre Senior Policy Officer Cat Newton told insuranceNEWS.com.au.

“We and other consumer groups look forward to discussing the review with AFCA so that it continues to improve and provide effective access to justice, particularly for people who are experiencing vulnerability.”

In addressing other issues, Treasury recommends AFCA provide more information on timeliness of decisions, and makes proposals on the handling and transparency of systemic issues.

The funding model should not disincentivise financial firms from defending complaints that they consider do not have merit, and it should better take into account the circumstances of small financial firms, it says.

The review says the ombudsman should ensure consultation on approach documents, and it proposes AFCA could amend its rules to exclude certain paid advocates where there is poor conduct that is detrimental to the process.

“The overall finding of the review is that AFCA is performing well in a difficult operating environment and a changing regulatory landscape,” the review says.

“While this is an endorsement of its performance in its establishment phase, AFCA will need to continue to develop and improve its processes as it consolidates its place in the financial system.”

The review report suggests that AFCA has managed a generally smooth transition from the model that existed before it opened its doors.

The Treasury report is available here.