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This is the final Monday edition of for 2019, with our Daily update service continuing through to Friday. We will be back in action from Monday February 3.

During the recess our Breaking News service will continue to operate, ensuring coverage of any important industry developments.

I’m delighted to report that continued to grow during 2019, with several thousand more professionals signing on to bring our subscription list to well over 28,000.

Including today’s bulletin, we have published 2617 articles since February, covering a vast range of insurance subjects. Those articles have generated a remarkable 6,669,335 pageviews. We can confidently say no competitor comes close to achieving such figures.

A very large industry audience is a big advantage for advertisers, which is just as well because without our advertisers there would be no Insurance News. So we thank our sponsors sincerely for their continuing support and urge readers to click through to their sites as often as possible. Try it. It’s good for everyone.

Thanks also to all those professionals who have helped us through the year with tip-offs, on and off the record. You’ve trusted us to treat sensitive information responsibly and you’ve talked to us even when sometimes you would have preferred not to.

It’s the insights of our large field of contacts that have helped build its reputation as the go-to source of reliable insurance industry news and information. Our coverage corrects market gossip, expands understanding and illustrates to everyone the vital role insurance plays in an increasingly crazy world. We’re proud to be accepted as a part of the industry.

The team at joins me in wishing all our readers a safe, healthy and happy festive season.

Terry McMullan

Above-normal fire threat remains, new report says

The eastern region stretching from north Queensland through to NSW and Victoria faces above-normal fire risk this summer, the Bushfire and Natural Hazards Cooperative Research Centre (CRC) says in a report released today.

A significant part of the areas identified as under threat, in particular in NSW and Queensland, has already seen some of the worst fire outbreaks since the start of spring.

“A long and challenging fire season is expected, and all states and the ACT are warning of increased fire danger as the fire season progresses,” the CRC report says.

It says all states have had challenging fire conditions, which have been exacerbated by the second-warmest January-November period on record for Australia.

“Catastrophic fire danger ratings have been issued in NSW, WA, SA and Victoria, and there has been loss of human lives and animals, and damage to property and the environment,” the CRC says.

A separate release from the Bureau of Meteorology today predicts several days of “significant heat” for the south-east region this week.

Temperatures in inland SA, Victoria and NSW could soar to as high as mid-40 degrees.

“For many areas, severe to extreme heatwave conditions will be felt,” BOM meteorologist Sarah Scully said.

The NSW Rural Fire Service reports at least 700 homes have been destroyed by the ongoing fire catastrophe.

A massive bushfire in the Blue Mountains destroyed a number of homes last night, the service says.

In WA, a massive bushfire has burned almost 12,000 hectares of land north of Perth.

Calls for national reinsurance scheme fall on deaf ears

The Building Ministers’ Forum (BMF) concluded on Friday with an agreement to follow up on the professional indemnity insurance crisis but did not take up the Victorian Government’s call for a national reinsurance scheme.

Victoria had pressed for stronger action ahead of the BMF meeting in Canberra, saying a reinsurance scheme to provide coverage for new construction is one way of addressing the professional indemnity crisis facing building practitioners.

The Victorian Government’s push for a national fund to pay for cladding rectification works also failed to gain widespread support at the forum.

Since July insurers have stopped providing exemption-free covers, placing many certifiers and surveyors in limbo. They have also sharply increased the excesses and premiums to account for the risk that comes with insuring clients involved in the problem-plagued building industry.

At the next BMF meeting in February, Federal Industry Minister Karen Andrews and her state counterparts will meet with the Insurance Council of Australia (ICA) to “discuss a suite of measures” to address the professional indemnity crisis.

The BMF communique says the discussion aims to explore ways to “reduce the cost and improve the availability of professional indemnity insurance premiums for building industry practitioners”.

“Enduring solutions, that reduce the cost of insurance for building industry practitioners and ensure protection for consumers, must be underpinned by the systemic reforms that are being implemented,” the communique says.

“States and territories agreed to achieve greater national consistency with regards to licensing requirements for professional indemnity insurance.”

ICA spokesman Campbell Fuller says the industry looks forward to engaging with the ministers at the February meeting.

“ICA will reiterate the improvements required before insurers would consider providing unrestricted professional indemnity insurance products,” Mr Fuller said.

Hardening rates will keep industry growth intact: S&P

Overall return on equity (ROE) for insurers will exceed 10% over the medium term, S&P Global Ratings has predicted in a moderately upbeat report on the industry’s outlook.

S&P uses ROE as an indicator of profitability, and says the industry has achieved an average 10.8% ROE over the past five years.

Hardening rates and efforts to ramp up efficiency are the key factors that will underpin the sector going forward, the ratings agency says.

These same factors will help the industry to ride out the temporary blip caused by last summer’s Townsville flood catastrophe and hailstorms in NSW and Queensland. The events impacted insurers’ earnings as ROE declined to 7% in the year to September.

“We expect market growth prospects for the Australian property and casualty market to be moderate, with growth to benefit from some further rate hardening and supplemented by the return of unit growth,” the ratings agency says.

“Further rate hardening in commercial lines will be added to with moderate rate growth across home and contents and domestic motor reflecting claims costs. Claims have recently been affected by natural perils and higher repair costs.”

From now to 2021, gross written premium in personal and commercial lines is projected to increase at a moderate pace on the back of incremental rate rises and stable unit growth.

S&P rates the industry risk as low, supported by sound profitability and a strong institutional framework.

Premiums to keep rising, claims costs increasing: KPMG

Premium rates are set to continue rising as insurers also battle rising claims costs, KPMG says in its annual review of the industry.

Gross written premium (GWP) rose 5% to $44.8 billion in the past financial year, driven by rate rises and despite reduced compulsory third party contributions as part of scheme reforms in NSW and Queensland.

KPMG Insurance Partner Scott Guse says the past few years have seen steady upward price momentum, with gains of about 4% to 5% in retail products such as home and motor. Similar increases are likely in the current year.

“At the same time claims costs are rising, so it is not as if they are getting all the increases to the bottom line,” he told “But price increases are here, I think, for the next few years.”

Among the challenges are the increasing sophistication of vehicle computerised systems, which is boosting repair expenses, while regulatory and compliance burdens have also increased since the Hayne royal commission report.

Insurers are also pursuing operational efficiency programs and are investing in technology to drive future returns.

“The majority of these programs focus on enhancing digital capabilities and automating businesses, but also to improve product offerings and enhance the customer experience,” the report says.

Insurance industry profits fell 12% to $4.4 billion in the past financial year as catastrophes such as the Sydney hailstorms and the Townsville floods increased natural hazard costs.

The combined operating ratio worsened to 92% from 88%, with the loss ratio deteriorating five percentage points to 68%. The expense ratio improved to 24% from 25%.

“The previous two years were relatively kind in terms of claims, but this year saw a less favourable claims experience for insurers, while lower than expected reserve releases added to the decline in profits,” KPMG Head of Insurance David Kells said.

Catastrophe costs were offset by higher reinsurance recoveries and reserve releases, mainly related to compulsory third party schemes.

KPMG’s report also identifies 10 emerging trends, led by digital demands and the need for companies to become connected across their front, middle and back offices.


White Island tragedy raises questions over responsibility

A Miami-based law firm says cover provided by New Zealand’s Accident Compensation Corporation (ACC) won’t prevent US legal action against cruise company Royal Caribbean over injuries and loss of life caused by the White Island eruption.

Tourists of all nationalities who were hurt while visiting White Island are eligible to have local medical costs met by New Zealand’s ACC, while travel insurers have also confirmed cover for expenses.

The ACC legislation provides accident insurance for everyone in New Zealand, including international visitors, but prevents anyone suing for damages arising directly or indirectly from the injuries.

Most of those caught up in the tragedy were visiting the island as a day excursion after arriving in the Port of Tauranga aboard Royal Caribbean’s ship Ovation of the Seas, which had sailed from Sydney.

Walker & O’Neill Maritime Lawyers’ Jim Walker says under US General Maritime Law a cruise line is legally required to warn its passengers of dangers in foreign ports of call which it should know about.

“The cruise line will try and avail itself of all possible defences of course, but the no-fault laws of New Zealand should not be enforceable in litigation filed against Royal Caribbean here in Miami,” Mr Walker says in a comment on the law firm’s website.

“The fact of the matter is that cruise passengers [or their estates] killed or maimed during cruise excursions routinely file suit in Miami seeking compensation for damages in a wide variety of mishaps which occur in ports of call around the world.”

WorkSafe New Zealand says it will be investigating and considering all the relevant work health and safety issues surrounding the event, which will also be examined through a coronial investigation.

An ACC spokesman told that the damages bar applies to proceedings in New Zealand, but it is likely those brought elsewhere would be struck out “as the court generally applies the law applicable to the jurisdiction in which the injury occurred”.

Some 47 people were visiting White Island when it erupted. New Zealand Police have confirmed the number of deaths has risen to 16, with two people still missing.

Travel insurers Zurich, Nib and Allianz say that policyholders affected by the White Island eruption will be covered.

“This is a tragic situation and the safety of our customers is our first priority,” a Zurich spokeswoman told

“As the underwriter of Cover-More travel insurance policies we can confirm that passengers on the Ovation of the Seas Cruise who took out travel insurance with Cover-More are covered for their trip to White Island, and as such we are working with individuals and families that have been impacted.”

Cyber breach transparency critical after hacks

Companies hacked by cyber criminals should inform their customers even if they’re not legally obliged to do so, a webinar for insurance brokers has been told.

“The cost involved is not burdensome, and notifying customers could prevent further harm,” Sparke Helmore Lawyers consultant Colin Pausey says.

The event was hosted by cyber specialists Emergence Insurance.

Australia’s notifiable breaches data scheme came into effect in February last year and is overseen by the Office of the Australian Information Commissioner.

But Mr Pausey says companies hold other vital client information that is not subject to the notifiable breach scheme, and reputational damage could be significantly greater if businesses did not inform customers whose information may be at risk.

Organisations should look to Australian Privacy Principle 11 (APP 11) as a guide on their duty of care to protect information, he suggests.

“There’s no automatic liability, but you can mount a defence if you’ve taken reasonable steps, consistent with APP11,” he told the webinar. “You can be negligent if your conduct falls below a standard that can reasonably be expected.”

APP11 requires organisations to take reasonable steps to protect information they hold from misuse, interference and loss, and from unauthorised access, modification or disclosure.

Staff training was also highlighted at the webinar as an important mitigation defence.

“Your staff are your last line of defence,” Emergence National Head of Sales Gerry Power said.

“Analysis of claims within Emergence’s portfolio shows claims costs are three times higher than average for clients that have no written procedures for their staff.”

WFI highlights risks of burglary on farms

Farmers are urged to keep their properties and valuables safe after nearly 700 farms across Australia lodged insurance claims for theft in the last year, according to claims data at IAG subsidiary WFI Insurance.

Power tools, chainsaws, motorbikes and quadbikes are common items stolen from farm sheds, as well as personal items such as jewellery and watches, cash, mobile phones and devices. Car keys and the matching vehicle are also a prime target for thieves.

WFI says livestock are also exposed, with its claims data revealing more than 4000 animals were reported stolen in the past year.

“It’s easy to become complacent when it comes to farm security,” IAG Executive Manager Agri Solutions Andrew Beer said. “Sometimes it’s just more convenient to leave the ute keys in the ignition when it’s parked in the shed, or leave the front door unlocked when you’re off down the paddock.”

To keep properties safe, WFI recommends farmers become more conscious of the need to secure their homes and sheds at all times, particularly if they plan to be off their property for a period.

They should keep an inventory of all tools, machinery and equipment, with serial numbers and photographs.

Mr Beer says that apart from locking up equipment, fuel should also be secured. “It’s among the top items stolen from farms.”

Vehicle theft rises 7% as Queensland battles rising trend

Motor vehicle theft rose 7% nationally in the year to September, with Brisbane and the Gold Coast the top two locations targeted by criminals stealing passenger and light commercial cars.

The National Motor Vehicle Theft Reduction Council (NMVTRC) says motorcycle theft jumped 12%, while an increase of 9% was reported for heavy vehicles.

Theft of passenger and light commercial vehicles, the largest category, rose 6%. Top models targeted included the Holden Commodore VE, Toyota Hilux and Nissan Pulsar.

The five-year trend for short-term passenger and light commercial thefts shows improvements in NSW and Western Australia, while Queensland’s theft volume doubled. Other jurisdictions remained stable.

The trend for profit-motivated theft for the past five years also showed worse outcomes for Victoria, Queensland and SA, while NSW and WA improved.

The NMVTRC says it is working with stakeholders such as Queensland Police, RACQ and Suncorp on initiatives that will help motorists reduce theft risks, divert young offenders from crime and close loopholes that allow some older stolen vehicles to be traded as scrap metal.

A total of 56,846 vehicles were stolen during the 12-month period.

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Communications broke down in Resilium dispute

Communication between representatives of private equity firm Pemba and Coverforce founder and MD Jim Angelis broke down amid a dispute over funding for an acquisition of Resilium.

A summary of the now-concluded case in the NSW Supreme Court says discussions between the two sides were taking place through independent Coverforce director Ian Neal, with Pemba sidelined as Mr Angelis pushed ahead with the deal.

Justice James Stevenson says Mr Angelis regarded Coverforce as a family business and clearly wished to bring about a situation where Pemba ceased to be a shareholder.

“He certainly did not wish to be forced into a trade sale as a result of Pemba exercising its drag right, and thus to lose what he saw as being a family business,” Justice Stevenson said.

Coverforce issued shares to Resilium MD Adrian Kitchin and partners Benjamin Hastie and Drue Castanelli as part of an arrangement that also provided $20 million to fund an acquisition of the AR network from Suncorp through a management buyout.

But last week the court found Coverforce did not have the proper board approval to complete the transaction or to issue the new shares.

The management buyout parties led by Mr Kitchin are entitled to “in effect ‘unwind’ the Resilium transaction or recover damages” from Coverforce, Justice Stevenson says in his decision.

Under a 2017 agreement, upheld by the court, Coverforce shareholder Pemba had a 49% stake and “drag rights” which allowed it to trigger the sale of the entire company if it received an acquisition offer.

Mr Kitchin made clear at the time there could be no agreement with Coverforce over acquiring Resilium unless Pemba surrendered its drag right, as he understood Suncorp would not agree to a transaction where such a right existed and he did not wish to be forced to sell his shares.

The court found he went ahead with the deal after assurances from Mr Angelis that the issue would be taken care of. However, Pemba did not approve an alternative to the drag rights.

Mr Angelis told last week the company will “definitely be appealing” the decision. He declined further comment.

AUB said last week that it wouldn’t go ahead with a proposed acquisition of Coverforce after it did not receive due diligence materials on time.

AUB CEO Mike Emmett told the company had kept a close eye on the court proceedings.

“Given the matters raised and the potential implications on the Coverforce and Resilium businesses, we are comfortable that AUB made the appropriate decision to allow the conditional sale agreement with Pemba to lapse in accordance with its terms,” he said.

A Suncorp spokeswoman told the court proceedings did not affect its sale of Resilium via the management buyout in March.

Justice Stevenson has invited submissions from the Kitchin parties “as to what, if any, further findings or orders should be made”.

Mr Kitchin provided a brief comment to following the decision.

“We are very pleased with the judgment of the NSW Supreme Court and look forward to continuing to grow the Resilium business and cementing our reputation as the number one independently owned AR network in Australia,” he said.

Suncorp confirms Jeremy Robson as CFO

Suncorp has confirmed Jeremy Robson’s formal appointment as CFO after he moved into the position on an acting basis in May.

Mr Robson joined Suncorp in 2013 and has since held roles including deputy group CFO and Life CEO. Previously he worked at ANZ, Axa and KPMG and has more than 20 years’ experience in financial services.

The CFO position was previously held by Steve Johnston, who became CEO in September after the departure of Michael Cameron.

The company also said last week that UBank CEO Lee Hatton will become Banking and Wealth division CEO, starting in the first half of next year.

NSW broker becomes Aviso’s 11th partner

Aviso Group has added NSW regional brokerage Sutton Insurance Brokers to its growing broker network.

Inverell-based Sutton has been in business for more than 25 years and becomes Aviso’s 11th partner.

“Partnering with Aviso and its investment partner, Envest, is a tremendous opportunity for our brokerage,” MD Matthew Sutton said.

Aviso Group and Envest aim to build a national network of brokers representing regional and metropolitan areas.

“We like investing in regional brokerages,” Envest MD Greg Mullins said. “Typically these businesses have been around for a long time giving great advice and service to a loyal client base.

“Sutton is no different. With Matthew and his team we have a young but experienced team who want to grow into a formidable business in the north-east of country NSW.”

Aviso Group now combines 20 offices nationally, with more than 200 employees, 17 principals and $265 million in gross written premium.

Tower seeks new CEO to drive digital change

New Zealand’s third-largest insurer Tower is seeking a CEO to deliver results from the company’s investment in new technology.

The executive search has been made necessary by the decision of incumbent CEO Richard Harding not to extend his contract part its current term.

Mr Harding, who joined Tower as CEO in 2015, will to return to Australia toward the end of next year.

Chairman Michael Stiassny says the board has started a domestic and international search for a new CEO that can continue driving Tower’s shift into a digital challenger.

“We have fixed the foundations of the business and will be using digital to challenge the New Zealand market, grow the business and deliver shareholder value, and the new CEO will focus on delivering these benefits,” he said last week.

Mr Harding formerly led Darwin-based TIO, which was acquired in 2014 by Allianz. Prior to that he held senior positions with IAG including head of China and head of strategy and mergers and acquisitions.

“He has decided to return to Australia to be with his family after commuting for some time,” Tower said in a statement last week.

Tower reported net profit of $NZ16.8 million ($16.1 million) for the past financial year, returning to the black after climbing from a loss of $NZ21.5 million ($20.6 million) three years ago as it battled the impact of the Canterbury earthquakes.

An attempt by Suncorp subsidiary Vero NZ in 2017 to acquire Tower for $NZ236.1 million ($212.5 million) was blocked by the New Zealand Commerce Commission and the company has since moved ahead with an overhaul of the group’s operations.

Customer migration to the new platform is set to be completed by December next year, paving the way for legacy systems to be decommissioned.

Tower also announced last week that CIO Peter Muggleston will take up a new role as COO, providing executive oversight for Tower’s claims, underwriting, Pacific and IT business units.

NTI moves into new road freight niche

Specialist transport and logistics insurer NTI has joined with leading freight marketplace to launch direct single transit insurance.

The partnership enables users an option to take out the cover on qualifying jobs booked through the platform.

NTI GM Direct Alan Hasted says the partnership marks the insurer’s first foray into the direct single transit niche.

“We have an opportunity with Truckit to tap into a largely untapped section of the market – individuals who purchase goods through online marketplaces or micro/small businesses shipping to consumers,” he said.

“Currently these groups don’t insure because they don’t know they need to.” MD Robert Russell says the partnership is the first of its kind in Australia.

“Our customers have made it clear they want the additional confidence provided by insurance that covers their materials while on the road,” he said. “Our users will now have a seamless, fully integrated option to insure their goods while in transit.

“NTI has gone above and beyond to ensure our customers have access to the best insurance coverage at the most affordable price and we look forward to growing the relationship in the future.”

New software deals with challenging new accounting rule

Willis Towers Watson has designed a software product to help general insurers migrate to IFRS 17, a new accounting rule that will bring about significant changes to the way earnings are prepared.

The global broker says ResQ Financial Reporter offers an easy-to-implement and efficient framework to generate financial statements when the new standard comes into force.

“The software essentially takes the complexity out of IFRS 17, so insurers can focus on the core activities that matter most to their business,” Global Product Leader for ResQ Tina Gwilliam said.

She describes the product as one that will help insurers “move through a flexible, intuitive and well-governed audited process that supports the analysis, review, reporting, validation and sensitivity testing required” under the new rule.

Insurers in Australia and globally have asked for more time to prepare for IFRS 17, citing the complexity of the accounting requirement.

IFRS 17 requires all insurance contracts to be accounted for in a consistent manner, making it easier to compare performance across international markets. A new item, “insurance service revenue”, will take the place of premium revenue in profit and loss statements.

New insurance venture measures corporate culture

Sunil Vohra, formerly AUB Group’s divisional CEO of risk services, and ex-IAG executive Kate Stone have launched The Workability Index, a corporate culture ratings platform that measures companies’ organisational culture and transparency.

Billed as the first of its kind globally, the index offers an analytics-driven digital tracker to reach assessments against a set of benchmarks such as risk culture, trust, wellbeing and leadership.

“Until now, organisational culture has largely been viewed as an internal metric, typified by highly bespoke – and not always relevant – measures,” Mr Vohra said.

“We have standardised protocols for reporting financial results. It is now time for this same rigour to be applied to the primary non-financial metric – corporate culture.”

He says the index aims to be “the new standard for corporate culture, ensuring that all stakeholders connected to the organisation can quickly and easily understand current performance against the index.”

Funke Kupper joins Suncorp board

Elmer Funke Kupper has accepted an invitation to join the board of Suncorp as non-executive director from January.

Mr Funke Kupper was formerly CEO at the Australian Stock Exchange and Tabcorp and also held senior executive roles at ANZ for over a decade.

“The pace of change in our industry is increasing, driven by the rapid adoption of technology and a demanding regulatory environment,” Suncorp Chairman Christine McLoughlin said. “Elmer’s experience in navigating these changes will complement the skills of the existing Suncorp board,”

Mr Funke Kupper is currently a non-executive director of the Australian holding company of the MYOB Group and has previously held board positions at Tabcorp and The Business Council of Australia.

In September the Australian Federal Police dropped a seven-year long investigation into allegations of foreign bribery relating to Tabcorp and 2009 and 2010 payments to Cambodian government officials.

Despite never being named in the investigation, Mr Funke Kupper stood down from the ASX and resigned his directorship of Tabcorp in 2016 amid the police probe.

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Regulatory & Government

icare challenges critical report

NSW state insurer icare has contested some aspects of a critical report that identifies the scheme’s new workers’ compensation claims model as the “primary driver” behind its deteriorating performance.

The State Insurance Regulatory Authority (SIRA) commissioned the review of the nominal insurer scheme, partly in response to growing concern about its operation, with independent reviewer Janet Dore publishing her findings on Friday.

The report makes 13 recommendations for improvement. They include a review of the claims management model.

icare has welcomed the report and accepted the recommendations that are within its control. But CEO and MD John Nagle says the report doesn’t present “a true reflection” of the scheme’s overall performance and has also “omitted some key facts”.

He also says while the report provides “extensive coverage” of employer feedback, “the voice of injured workers was largely absent”.

“Our focus has always been to balance the needs of employers and injured workers to create a fairer system,” he said.

Mr Nagle says the scheme is moving into a more stable period and is “well on the way to addressing the concerns raised in the report”.

“It’s the biggest change to the workers’ compensation scheme in 30 years,” he said. “We accept that we underestimated some of the challenges of implementation, which have resulted in a poor experience for some customers, which is regrettable.”

Ms Dore says icare pursued “an ambitious model based on principles of triage, injured worker empowerment and straight-through processing”, with one insurance agent – EML – for all new claims. A single IT platform was also introduced for operating the new claims model.

“The ambition of the model was matched by the ambition of the timeframe for implementation,” Ms Dore said.

“The new claims model led to a significant deterioration in the performance of the [nominal insurer] through poorer return to work rates, underwriting losses, no competition and therefore, concentration of risk.

“While investment returns for icare have bridged the gap in underwriting losses, the current economic environment of low returns does not bode well.”

Ms Dore notes that icare suggests deteriorating performance is the result of factors “beyond its control”.

But she says “while there have been some external factors…the primary driver for the decline is the implementation and operation of the new claims model implemented by icare”.

icare has already implemented improvements but Ms Dore says “they have not yet abated the ongoing deterioration”.

The report’s recommendations include a suggestion that icare consider “allocating files to other agents with expertise to reduce the load on EML and provide time for skills and experience to improve”.

icare should also “address the staff turnover at EML as a matter of priority” to ensure case management services are improved, and the legislative powers available to SIRA should be “reviewed and strengthened to enable proper oversight”.

SIRA has backed many of the recommendations and issued its own 21-point plan.

Through its new authorised provider model icare has already offered a choice of agents to larger businesses, but SIRA wants greater choice to be offered to smaller employers as well.

SIRA also recommends icare commission an independent review into “the culture, governance and accountability in the icare team and agents”.

Tribunal reviews NSW home building compo scheme

The Independent Pricing and Regulatory Tribunal (IPART) is reviewing the NSW home building compensation scheme, which helps property owners recover money for faulty or unfinished work if their builder can’t be pursued.

The scheme, regulated by the State Insurance Regulatory Authority, can gain a court-provided money order in cases where a builder is insolvent, has died or disappeared or had their licence suspended for non-compliance.

The review will examine whether the present arrangements provide sufficient protection, taking into account other avenues open to consumers, and consider how changes might affect the financial sustainability of the home building compensation insurance market.

Currently the scheme applies to residential building work projects over $20,000, such as the construction of new houses, terraces, villas, multi-units up to three storeys in height, as well as renovations and swimming pools.

Submissions on the draft terms of reference close on January 24 and a draft report will be publicly released within six months of the terms of reference being finalised.

More details are available here.

Drought-hit NSW renews push for farm insurance scheme

NSW has again called for a dedicated insurance scheme to protect farmers and the wider agricultural sector from future droughts and other natural disasters.

Agriculture Minister Adam Marshall urged his federal and state counterparts to back the idea, saying the current drought underscores the need for “bold action” to weather future dry spells.

Last July the NSW Government announced it would spend $2 million to explore the feasibility of such a scheme with the National Farmers’ Federation.

“This is the worst drought on record and it’s become a truly national crisis,” he said last week following an urgent meeting of agriculture ministers in Moree, NSW.

“Now is the time for bold action and we must take the learnings of this drought to prepare for the inevitable next droughts after this.

“That’s why I continue to urge other governments to support NSW in developing a national farm income protection scheme.

“There is a clear market failure when it comes to farm income protection models in Australia, and that is why I am of the firm view there is a role for government in getting such a scheme off the ground.”

The $2 million feasibility study includes looking at insurance schemes available to farmers in the US and Europe.

Victoria goes ahead with cladding levy

Victoria will introduce a levy next month to help pay for the cladding remediation works of affected high-rise buildings.

The state announced in July a $600 million program to remove the dangerous materials from private residential complexes.

The levy will be imposed on building permits for non-regional construction works of $800,000 or more.

The Victorian Building Authority will collect the levy for the Government.

Grenfell fire investigator tapped for building review

A team of experts including Judith Hackitt, who led a review into UK building regulations after the Grenfell Tower fire, will convene next year to look at ways to reform Victoria’s troubled construction sector.

Better Regulation and Red Tape Commissioner Anna Cronin will chair the panel. The panellists’ first task will be to set principles to guide the review and identify the key issues to be investigated and addressed during the reform process.

The review will also look at the proposals made by the Victorian Cladding Taskforce last July as well as the ones that have been raised in the Building Confidence report by Peter Shergold and Bronwyn Weir.

“This panel has a wealth of knowledge and experience and is the first step towards delivering the most comprehensive review ever undertaken into Victoria’s building system,” Minister for Planning Richard Wynne said.

“Our building and construction sector underpins much of our growth and economic activity so it makes sense to support this with a modern and effective legislative framework.”

Masters Builders Victoria CEO Rebecca Casson has welcomed the setup of the review panel.

“There is a great deal of work to be done in implementing the recommendations of the Victoria Cladding Taskforce and Building Confidence report,” Ms Casson told

“It’s good to see that the review panel includes some outstanding people from the building and construction industry.”

Stephen Burton, National Deputy Chairman of Engineers Australia Society of Fire Safety, says Ms Hackitt would provide valuable input to the review.

While voicing support for the review, Mr Burton told that “fixing the building industry’s woes is a national issue”.

“This should be conducted on a national basis rather than through piecemeal actions by states and territories independently. I fear duplication and division could result.”

SIRA investigates CTP for taxis, ride-sharing

The NSW State Insurance Regulatory Authority (SIRA) is consulting on compulsory third party (CTP) arrangements for taxis and ridesharing services such as Uber after transitional requirements expire next December.

A discussion paper outlining five options has been released following a workshop in September, with submissions on the paper requested by January 24.

“The new CTP arrangements will focus on fairness, affordability and sustainability; promoting competition as well as road safety; simplicity and privacy,” SIRA says.

Once feedback is received, further workshops will be held on putting the preferred option into effect.

The proposals include creating a new class for all passenger service vehicles, with insurers identifying relative risk-rating factors within the class.

Other arrangements could see existing separations maintained, while various risk factors to be considered by insurers – such as distance travelled, location or time of day – are also up for discussion.

Taxis currently choose either a fixed annual premium based on average annual kilometres or opt for instalment payments adjusted for actual kilometres.

Rideshare premiums are a combination of those paid by other private passenger vehicles, plus rates for when a vehicle has a fare-paying passenger.

The options paper says states and territories are taking various approaches in response to rideshare vehicles being “in the point to point industry”.

Most jurisdictions, with the exception of Victoria, separate ridesharing and taxis into different vehicle classes in their schemes.

“SIRA notes that there are multiple possible solutions that should be explored when it comes to the new CTP arrangements for the point-to-point industry,” the paper says.

More details on the consultation are available here.

ACCC acts on profiteering messages after hailstorms

The Australian Competition and Consumer Commission (ACCC) has warned tradespeople against using anti-competitive pricing following natural disasters.

The call came after the competition regulator took action against two roofers who used social media to discuss raising their repair rates for hail-damaged properties.

Chairman Rod Sims said last week that “attempts to take advantage of people whose homes were damaged in natural disasters like hailstorms is something the ACCC takes very seriously”.

“The community will not just find this outrageous – it is also anti-competitive and illegal under Australian competition laws.”

The ACCC took action against Sydney roofers ANZ Roofing, Ivy Contractors and directors Mark Burtenshaw and Brent Callan-Kerkenezov over Facebook messages posted after tennis-ball sized hailstorms caused widespread damage last December.

A message on one Facebook group from Mr Burtenshaw showed an image of a large hailstone and read: “I think this latest storm is the perfect opportunity for the roofers of Sydney to increase pricing across the board as a standard that doesn’t decrease!”

The ACCC says Mr Kerkenezov said on one of the Facebook posts: “Let’s agree that we start from $65 and go up”, apparently referring to the price per linear metre to install new quad guttering.

The ACCC obtained enforceable undertakings but decided not to take court action due to the small size of the traders and their co-operation with the investigation.

The roofers acknowledged the price-fixing implications of their social media discussions and agreed the messages could have raised concerns under laws banning “concerted practices which have an anti-competitive purpose or effect”.

The undertakings involve commitments not to repeat the behaviour and for Mr Burtenshaw and Mr Kerkenezov to receive compliance training in competition and consumer law.

Hospitals embrace study on early intervention

An early intervention program backed by claims manager EML has proved so successful at reducing costs and lost workdays for injured staff that it has been adopted by all NSW public hospitals.

The Work Injury Screen and Early Intervention (WISE) program was run over two years for hospital workers at high risk of delayed injury recovery. It found fewer lost workdays and substantial cost reductions when compared with the usual practice of “stepped care”.

The research was undertaken by EML, University of Sydney researchers and NSW Health, with the findings published recently in the Journal of Occupational Rehabilitation.

“EML invests heavily in outcome driven research to benefit our customers,” Member Benefits Manager Elisa Hitchens said. “To be a part of a research effort immediately implemented by NSW Health is an excellent outcome."

At the end of the two-year post-injury period, the mean lost workdays for the usual-care program was 66.5 days. The WISE program was less than half at 31.7, and showed a saving of just under $7000 per case – or 30% lower costs.

The report also established that fewer WISE program workers reported ongoing chronic pain.

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Life Insurance

Advisers urged to trim costs as commissions fall

Advisers must cut their expenses by 20% to 25% to stay financially viable when upfront commissions are further cut to 60% next year, an MLC Life-commissioned white paper says.

The other option would be to start charging clients a fee for advice if the cost base is not overhauled.

Commissions for new policies have gradually been lowered as part of the Life Insurance Framework reforms. The next phase of reforms will see commissions fall from 70% to 60% from January 1.

Apart from shrinking commissions, advisers have also had to grapple with declining sales, which have fallen to $850 million in 2017 from $1.05 billion in 2012.

The challenging environment means advisers have to review their cost base or they may find it hard to survive financially as commissions fall further, the white paper says.

About 67% of advisers say profits have declined since the commission reforms started.

“With upfront commissions being reduced…many advisers are grappling with the profitability and sustainability of their businesses,” MLC Life Chief of Group and Retail Partners Sean McCormack said.

“What is clear from the research is that there is a need for more detailed knowledge of the true operating costs associated with providing advice and how each facet of the process such as marketing, administration, client servicing and compliance, can impact overall profitability.”

The life insurer’s white paper says that with upfront commissions reducing further next year, it is imperative that advisers act.

“Combined, these headwinds are creating a ‘perfect storm’ for the adviser and licensee community,” the paper says.

The white paper was prepared from responses to an online survey of 161 advisers and face-to-face interviews with another 19.

It finds 42% of advisers have stuck to the same operating model despite the many changes in the business environment, including declining commissions. Only 48% said they are ready for the next phase of remuneration reforms.

When commissions are capped at 60%, preparing and setting up a simple policy of $1500 in annual premiums will put advisers in a $100 deficit. Under a complex $5500 policy scenario, the cost gap will rise to $1700.

“To return to profitability, advisers dealing with clients with complex needs will have to either reduce expenses by as much as 20% to 25%, or alternatively charge a full fee or have a combination of fees plus commissions,” the white paper says.

Lump sum sales decline

Individual risk lump sum new business sales dropped 16.4% to $1.02 billion in the year to September, according to research house Dexx&r.

The decline is the result of weaker sales through advice channels and the suspension or cessation of sales of direct lump sum products by many major life insurers.

Sales in the September quarter fell 29.6% to $254 million from a year earlier.

“Ongoing restructuring of large institutionally owned dealer groups has exacerbated dislocation in the advice channel, and with alternative direct channels to be banned from engaging in unsolicited calling there is little prospect of a short-term turnaround in individual risk product sales,” Dexx&r says.

Overall new sales comprising individual lump sum, disability and group risk declined 22% to $2.04 billion in the 12 months to September.

Disability business fell 7.4% to $453 million and group risk decreased 37.6% to $562 million.

ASIC finds ‘inconsistencies’ in group cover code adoption

Adoption by super trustees of a voluntary code of practice that was introduced more than a year ago is not universal, a report by the Australian Securities and Investments Commission (ASIC) has found.

Just 70% of regulated trustees have signed up fully or partially to the Insurance in Superannuation Voluntary Code of Practice, the report says.

The majority say they expect to be fully compliant with the code by the final cut-off date of June 30 2021.

The 30% yet to sign up include several trustees who have decided not to implement the code at all as they believe their current strategy already aligns with it. They also feel the code is too onerous for their fund and may not be in the best interests of members.

But ASIC says the code, which was designed to improve outcomes for consumers who buy group life cover, has produced progress for trustees who have adopted it.

“Adoption of the code is contributing to a significant uplift in, and standardisation of, processes and services,” ASIC said.

“But adoption is not universal or entirely consistent. We have identified a number of inconsistencies in implementation, some relating to fundamental aspects of the code.

“These inconsistencies relate to which members are covered by the code, the controls around balance erosion, and the calculation of claim timeframes.”

Looking ahead, ASIC plans further work in super-linked group life cover this financial year. In particular, the regulator plans to work with the industry in its development of more practical guidance on how trustees can better meet the needs of vulnerable consumers.

It also remains engaged with relevant government law reform initiatives impacting on insurance in superannuation.

Gallagher acquires Sydney income protection adviser

Leading broker Gallagher has paid an undisclosed amount for North Sydney-based Blueleaf Consulting, a financial adviser for life insurance planning, wealth management and estate planning.

The acquisition is expected to boost Gallagher’s other business offerings in employee benefits and HR consulting.

“Gallagher offers more than insurance,” a spokesman told “Our financial advisers provide more traditional wealth management services for individuals, as well as offering wealth management services as part of greater employee benefits packages.

“Our advisers also play a crucial role in developing financial literacy programs, which are adopted as part of our employee benefits offering.

The Blueleaf business will be part of the Gallagher team in the US-owned broking group’s Sydney head office and will be overseen by Leslie Lemenager, the Head of International Employee Benefits, Consulting and Brokerage operations.

NZ moves closer to enforcing financial conduct

A bill that would pave the way for a new financial conduct regime in New Zealand has been introduced into Parliament.

The Financial Markets (Conduct of Institutions) Amendment Bill aims to ensure that financial services providers such as life insurers and their intermediaries comply with a principle of fair conduct.

Incentives for staff and intermediaries who meet sales targets will also be regulated under the new regime.

Financial Advice New Zealand CEO Katrina Shanks has welcomed the bill, saying it will “improve the services and products” provided to consumers.

“I’m confident the new regulatory regime that will flow from this legislation will provide additional focus for institutions on the principles of fair conduct and how to apply them, by introducing systems to identify, manage, and remedy conduct issues,” Ms Shanks said.

“The move to bring institutions under a fair conduct regime that ensures consumers are treated fairly, starting from the early design of products and services right through to the claims process, is very timely because the end user must always be at the centre of product design and suitability.”

While calling the move to regulate sales incentives for some products a “good idea” in principle, Ms Shanks says this should not compromise consumers’ access to financial advice.

She says there must be “processes and controls” in place for consumers to seek advice.

Zurich wins Qantas contract

Zurich-owned OnePath Life has been appointed insurance partner for Qantas Super and will take over from MLC in July next year.

Qantas says members will have access to default insurance cover insuring them for death, total and permanent disablement, and income protection, as well as additional voluntary cover.

Emma Brodie, Qantas Super Senior Manager, Product and Insurance, says OnePath Life’s appointment followed a competitive tender process involving several leading insurers.

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The Professional

Kurt Nilsen elected as UAC chair

The Underwriting Agencies Council (UAC) has elected Lion Underwriting MD Kurt Nilsen as its new Chairman.

Canopius Head of Coverholder & Delegated Authority Asia Pacific Jeanene Hill and AFA National Development Manager Anthony Porter have joined the board as new directors.

Mr Nilsen and Tego Insurance CEO Eric Lowenstein were both re-elected for two-year terms at the council’s AGM in Sydney on Friday.

Axis Underwriting National Development Manager Emily Walker takes the role of Deputy Chair while Allstate Director of Distribution Trent Brown is Treasurer, Millennium MD and former president Heath Amber is the Company Secretary and Public Officer.

The outgoing chairman, NM Insurance MD Lyndon Turner, told the AGM that 2019 was an “exceptional year” for UAC and he is confident the new board will continue the council’s positive trajectory.

Mr Turner and long-serving board member Peter Fryer of Axa XL subsidiary Brooklyn chose not to re-contest their board positions.

QBE backs mentor programs for Indigenous students

QBE Foundation has entered a multi-year partnership with the Stars Foundation, which helps young Indigenous women realise their full potential through mentoring at a critical points in their schooling.

Stars Foundation operates programs for Aboriginal and Torres Strait Islander girls in secondary schools in the Northern Territory, Queensland and Victoria. QBE will help identify development opportunities for mentors and students, backing the team with resources and offering time, skills and people networks.

“QBE Foundation’s support us pursue our ambition to expand, allowing us to reach more young women in need of support,” Stars Foundation CEO Andrea Goddard says.

In 2018, 97% of senior Stars students completed year 12.

“Our partnership reflects our shared commitment to gender equality, diversity and inclusion, and sustainability more broadly” QBE Australia Pacific Foundation Co-chair Jason Clarke said.

The QBE Foundation will partner with Stars until at least 2022. It also supports R U OK?, The Kids’ Cancer Project, Foodbank, Mission Australia, KidsCan New Zealand and the McGrath Foundation next year.

Multiyear partnerships with Red Cross and Save The Children will also continue in the new year.

Steadfast renews Kelly Racing partnership

Steadfast has agreed a new multi-year deal with Supercars team Kelly Racing, continuing its long-time role as the team’s official general insurance broker network partner.

The upcoming 2020 season will mark eight years of continuous support to Kelly Racing, Steadfast MD and CEO Robert Kelly (no relation) says.

“We’re thrilled to continue to bolster our partnership with Kelly Racing and to promote the Steadfast brand throughout Australia and New Zealand,” Mr Kelly said last week,

“The 2020 season is sure to be a hit with the Kelly Racing team driving the new Ford Mustangs in the Supercars Championship for the first time.”

The team previously raced Nissan-sourced vehicles. Steadfast’s branding will move from the front and rear bumpers next season to feature on the windscreen and rear windows of the Ford supercars driven by Rick Kelly and André Heimgartner.

Ryno appoints underwriting manager

Brisbane-based Ryno Underwriting has appointed Suzie O’Hagan as Underwriting Manager.

Ms O’Hagan, who was previously business systems manager joined the company two years ago as a senior underwriter.

She has 14 years’ insurance industry experience, working at underwriting agencies, general insurers, brokerages and Lloyd’s.

MD Greg Rynenberg says Ms O’Hagan’s “strategic thinking and management skills” will allow Ryno Underwriting to continue to develop and streamline its services to intermediaries.

Academics to unite for cyber defence conference

Research papers are being sought for a first-of-its-kind conference discussing defending cyber attacks.

The papers being sought must be focused on science and technology.

To be held in Brisbane in March, the Cyber Defence Next Generation (CDNG) Technology and Science Conference will bring together scientists and researchers to present cutting-edge innovations to tackle cyber crime.

The conference will address systems security, cyber AI and autonomy, cryptography, secure software engineering, autonomous decision-making, software systems and database security.

It is a collaboration between CSIRO, the Department for Science and Technology (DST), Data61 and universities.

“Design of secure, trustworthy and resilient systems remains a continual challenge given an ever-increasing attack surface,” the conference guidelines say.

“We seek submissions which focus on new research into design, modelling and evaluation of secure systems that can detect attacks, work resiliently under attacks, [and] take counter-measures to prevent or ameliorate potential attacks.”

Papers can be submitted until January 7 and the full program will be announced on February 11. The conference will be held at Customs House in Brisbane on March 24 and 25.

Aon expands Cyber Solutions Group with key appointment

Aon has appointed Lucas Roe to its recently established Cyber Solutions Group in the role of Security Architecture and Risk Quantification Leader.

Sydney-based Mr Roe, who started his new role in in November, was most recently Principal Security Architect at Commonwealth Bank, where he developed security services protecting digital channels and customer data.

Mr Roe will be responsible for helping build Aon’s technical cyber consulting capabilities such as security architecture and engineering, cyber risk quantification, cloud security and security operation centre optimisation.

Aon says the Cyber Solutions Group offers risk management services to help clients uncover and quantify cyber risks, protect critical assets and recover from cyber incidents.

The risk services giant says it has witnessed significant cyber claims in Australia and around the globe as organisations rely more on digital technology to improve operational efficiency and manage supply chains, making them more vulnerable to cyber-attacks.

Insurance consultancy expands team

Sydney-based specialist (re)insurance consultancy ConsultRe has expanded its team with the appointment of Andrew Allison as Senior Consultant.

Mr Allison has 40 years’ industry experience and will lead the company’s regulatory and compliance sector.

ConsultRe services include reinsurance intermediary reviews, underwriting and claims audits, project management, arbitration/mediation and key employee mentoring. The consultancy now has a team of eight.

Claim Central hires Domain’s technology chief

Claims manager Claim Central Consolidated (CCC) has appointed Mark Cohen as the divisional head of its software business Intelligent Thought, which offers property and motor platforms ClaimLogik, LiveLogik and Hello Claims.

Mr Cohen was formerly chief technology officer and chief information officer at ASX-listed Domain, and also worked at Fairfax Media as GM of product solutions.

He will begin in his new role on January 28.

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Catastrophes 'put $847 billion in jeopardy'

Catastrophic events could wipe more than half a trillion dollars from world economic growth in 2020, according to the Cambridge Centre for Risk Studies’ latest Global Risk Index.

The index, which quantifies the GDP impact of unpredictable shocks on 279 of the world’s largest cities, also finds that social unrest is the risk event that has advanced most in the past year.

Compiling the impact from 22 threat categories into a single measure of economic loss, it estimates the global economy could see $US584 billion ($847.2 billion), or 1.6% of global gross domestic product (GDP), axed by catastrophic events net year.

The estimate is 3% higher than its previous annual report.

The top three classes of threats are natural catastrophes at $US179 billion ($259.67 billion); financial, economic and trade risk at $US149 billion ($216.15 billion); and geopolitical and security risks at $US141 billion ($204.55 billion).

The 22 categories in order of highest risk to 2020 GDP are: a market crash, interstate conflict, tropical windstorm, human pandemic, flood, cyber attack, civil conflict, earthquake, commodity price shock, sovereign default, drought, terrorism, power outage, social unrest, plant epidemic, volcano, solar storm, temperate windstorm, freeze, heatwave, nuclear accident, tsunami.

The top single threat to GDP overall, a market crash, puts $US106.5 billion ($154.5 billion) at risk, though environmental risks pose the greatest danger as a combination of tropical windstorms (third place, $US68.3 billion ($99.08 billion), floods (fifth place, $US47.6 billion ($69.05 billion), and earthquakes (eighth place, $US36 billion ($52.22 billion).

Social unrest jumped three places in the 22 category rankings to a GDP risk of $8.3 billion ($12.04 billion) for 2020.

Protest action by groups like Extinction Rebellion have made disruption and global days of action commonplace in the West again, the Index notes. It says the target of these protests “is governments and the major polluting and climate-changing corporations they have failed to penalise”.

“Does 2020 signal the re-emergence of a global protest movement, akin to the Arab Spring and Occupy movements?

“With a summer of demonstrations and rioting among young people in Hong Kong, affecting tourism, business continuity, and air travel, a new era of unrest does appear to be in the making.”

Excluding cities in Japan and Iraq, all Asian cities in the top 20 ranking have a natural catastrophe risk as the top threat.

Tokyo and Istanbul are the top two cities for GDP risk, with interstate conflict putting $US24.72 billion ($35.86 billion) and $US18.8 billion ($27.27 billion) respectively in jeopardy.

New York ranks third, with risk of market crash putting $US 16.06 billion ($23.3 billion) in GDP in jeopardy. Market crash is also the event to pose most risk to the economies of Mexico City, London, Sao Paulo and Paris.

More competition and change predicted for US insurers

Property and casualty (P&C) insurers need to evaluate their distribution, underwriting, pricing and risk mitigation business models to break away from their competitors, a new report from Guy Carpenter says.

US P&C insurers are being forced to reassess risk by higher loss trends in several long-tail lines and extreme weather events, says Guy Carpenter’s Risk Benchmarks Research report.

Increased exposure to catastrophes, competition in personal auto, system and technological costs and medical and social inflation are creating challenges but also opportunities, Guy Carpenter says.

“An abundance of capital from a wide range of sources, coupled with evolving catastrophe risks and an extended period of low interest rates, are increasing the pressure on the P&C industry to continue to increase its focus on underwriting.”

The report says the pace of information and technology innovation has influenced how risk is analysed, distributed and mitigated against insurance exposure.

Over the past three years, pockets of volatility and profitability in specific segments have created opportunity for US P&C insurers.

“Each segment has had to wrestle with specific challenges in managing the capital needed to support risk,” the report says.

Large mutuals have experienced catastrophe influences on homeowners and significant competition in personal auto, resulting in an uptake of advanced analytics strategies following four years of poor results.

Regional insurers in the west of the US felt the pain of wildfires, a” once-underestimated catastrophe peril”.

Large commercial insurers have also had to manage volatile liability covers, which are under pressure from rising social inflation and a surge in large property losses.

“The research results by segment and business model emphasise the pressure companies are under to generate profitable returns,” Guy Carpenter says.

Lloyd’s creates technology and transformation group

Lloyd’s has created a new Technology and Transformation Committee to oversee its Blueprint One plan to improve performance, and has also raised £300 million ($581 million) in debt to fund the program.

Deputy Chairman Andy Haste will lead the new committee, while COO Jennifer Rigby will be responsible for program delivery.

Lloyd’s says it has taken advantage of the low interest rate environment to secure the senior debt and avoid increasing market levies.

The Blueprint One plan was released as part of the Future at Lloyd’s project to modernise the market, streamline processes and introduce efficiencies.

More than 80 corporation and market employees are now engaged across various workstreams. Strategic partners will come on board in the first quarter of 2020 to support phased implementation.

“With robust governance and oversight now in place and the funds for delivery secured, we have every confidence in the successful delivery of the Future at Lloyd’s strategy,” CEO John Neal said.

The market will publish Blueprint 1a in February, setting out detailed plans and milestones for the first phase of the implementation.

Global insurance deal value tops $22 billion in Q3

Insurance industry deals around the globe reached a value of $US15.17 billion ($22.17 billion) in the third quarter, GlobalData says.

Deal value was up by half in the third quarter but lower by 27% than the average of the last four-quarters, when the number of deals rose 13% to 302.

North America led third-quarter activity by value, with deals worth $US9.27 billion ($13.55 billion), and the top five insurance deals accounted for 66% of the overall value.

The top deals were:

  • Prudential Financial’s $US3.5 billion ($5.12 billion) acquisition of Assurance IQ
  • The $US3.01 billion ($4.4 billion) acquisition of SCB Life Assurance Public by FWD Group Financial Services
  • Brookfield Business Partners’ $US1.93 billion ($2.82 billion) acquisition of Genworth MI Canada
  • The $US753.3 million ($1.1 billion) acquisition of Frank Cowan and The Guarantee of North America by Intact Financial
  • Allianz’s asset deal with Sul America for $US741.72 million ($1.08 billion)

‘Tell a better story’: talent drought challenges insurers

Insurance leaders should update job descriptions to attract more tech-savvy workers and also consider how their corporate missions relate to younger generations looking for a sense of purpose from work.

That’s the finding of a new EY report which warns that as insurers become more digital in their operations they will need technical talent to design and support specific disruptive technologies like AI and blockchain.

Analytics and experience design are other high-priority skillsets.

But insurers have not been able to find the right homegrown talent fast enough to keep up, creating an unprecedented challenge in the global insurance industry, EY says.

“To attract top talent, insurers need to tell a better story and clearly articulate the industry’s societal purpose and value,” the consulting giant says, warning that even when insurers do find the right people they may lose them quickly “if the culture feels inflexible”.

EY says this “talent war” will intensify as more foreign insurers enter the market as deregulation continues. Yet hiring expatriate talent in key areas such as data science will be prohibitively expensive due to less competitive salaries, especially when compared with technology companies.

The focus will continue to be on training and upskilling existing staff, EY says, noting that as more administrative tasks are automated the remaining talent will need to be focused on higher-value analytical work.

It says the way in which traditional insurers position their brands is important to attract younger workers unsure of a career in the industry.

Some insurers are exploring new greenfield brands, while others are forming partnerships with established tech firms to access the necessary skills.

“The ability of the largest Chinese insurer, Ping An Insurance, to rebrand itself as a technology firm has helped it attract top talent in these areas, not only from the insurance industry but also from other tech firms,” EY says.

It will be difficult for traditional firms to evolve their “brand perceptions”, yet the pressure to retool or even transform the workforce is critical for firms actively seeking to diversify beyond “plain vanilla” products and launch new business models.

“Tomorrow’s market leaders will be technology-enabled, data-driven and operationally efficient – but also people-powered and purpose-led, with strong cultures that are adaptive, engaged and capable of rapid change.”

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Ten insurance trends in 2020

As part of its annual General Insurance Industry Review, KPMG outlined 10 emerging trends for Australian insurance companies. Here’s our summary of the findings:


The first wave of digital transformation is over – and now it’s time to get ready for the next one.

C-level executives of general insurers have made digital transformation part of their strategies and accelerated investments in foundational capabilities such as seamless interaction between channels, data and analytics, mobile apps, cloud and more agile ways of working.

This has set their organisations up for easier interactions, more personalised products and experiences, and greater operating efficiencies.

To become truly customer-centric, general insurers need to take a more holistic view on transforming their business to become a connected enterprise through joining their front, middle and back offices digitally.


New start-up ventures targeting various aspects of the insurance industry have rapidly emerged. They take advantage of a range of trends including new technologies and changing customer needs, the slow response by incumbents, availability of plentiful investment funds, supportive regulators, and accelerators/incubators/hackathon innovation hubs that are all transforming the industry.

Most began with ambitions to disrupt, but their enthusiasm has been tempered by the reality of investment, regulation, capital requirements and the risks and challenges of offering something new to cautious customers.

Insurtechs have largely recast themselves as enablers of innovation – collaborating and partnering with incumbents to bring their ideas to market.


Over the past few years Blockchain projects in the financial services and insurance sectors have delivered numerous proof of concepts and pilots across the whole value chain.

KPMG expects blockchain developments in the insurance sector to evolve along the following three trajectories:

  • Moving beyond the proof of concept – 2020 will see numerous projects across claims management, reinsurance, know your customer and marketplaces move into production and start to extract benefits from blockchain.
  • Internet of Things-enabled automation – With IoT-enabled sensors and new real-time monitoring technologies maturing we will see greater use of blockchain-based automation to update, validate, trigger and alert when insurance-related events may occur.
  • Insurers as blockchain ecosystem participants – trade finance and supply chain traceability using blockchain ahead of the curve, we will see greater opportunity for insurance providers to join those ecosystems and derive value from real-time trusted data.

Artificial Intelligence and robotics

Today, AI and robotics allow for technology to perceive environments, mimic human cognition to make decisions and replicate human actions at scale and with precision.

This is enabling insurtech disruptors to operate with less than 20% of the workforce of traditional insurers.

An element of AI is machine learning which has provided a massive increase in abilities to analyse data and forecast outcomes. This has allowed insurers to get ahead of insured risks to help actively prevent and manage.

The ability for AI to ingest and interpret all the source data that can be generated is transforming the industry. Previously, insurers used historical data and self-declared information to price risk.

Now, customers’ individual behaviour and situations can be considered in real time, providing insurance as a service. Your behaviour will be rewarded – or penalised.

The challenge now is for insurance leadership to stretch its thinking to encompass all that today’s AI and robotics capabilities offer.


Many companies want to be more customer-focused but struggle to create a culture and supporting infrastructure to realise this ambition. Being customer-centric is not just about market research and smart marketing. Every function and interaction is required to be tailored towards the customer experience, and these interactions cut across a multitude of channels.

Today insurers are fighting for relevance with customers who have high demands. Customers now expect insurers to understand their values, preferences, situation and lifestyle. They demand immediate, global, one-click, 24/7 access to a personalised, contextualised, empathetic experience. They want a rapid, seamless journey integrated into their overall engagement with the insurer through purchasing a policy and throughout the claims experience.

Generic insurance products that renew each year are losing their appeal. Insurers need to continue to enhance the customer experience because customers will continue to be even more informed and in control of the relationship with their insurer.

Climate change

Climate-related insurance losses across the world in 2018 were the fourth-highest on record at $US76 billion ($110 billion), according to Munich Re’s annual natural catastrophe report.

While 2018 was a far cry from the highest-ever losses from 2017, it acts as a clear signal to the insurance industry – this is the new normal.

In previous years, climate-related insurance losses were tied to a small number of large natural events which caused massive destruction, such as Hurricanes Harvey, Irma and Maria in 2017.

A higher frequency of severe localised events causing high levels of damage was observed in 2018, with 29 events each resulting in an economic loss of $US1 billion ($1.45 billion) or more.

While insurers continue to play a critical role in helping communities recover from catastrophic events, there will be increasing economic and social pressure on the industry to work with communities and customers to improve climate resilience from increasingly severe events.

Cyber security

The ever-evolving cyber threat landscape continues to present challenges in all industries with the introduction of Australia’s Mandatory Data Breach legislation in February 2018, closely followed by the EU’s broad General Data Protection Regulation (GDPR) in May 2018.

The penalties for serious or repeated non-compliance with Australian mandatory notification requirements include fines up to $360,000 for individuals and $1.8 million for organisations.

The GDPR states that serious infringements of its requirements may be punished by a fine of whichever is greater – 4% of annual worldwide turnover, or €20 million ($32 million).

Regulatory fines are only one of many costs associated with a data breach. Other costs are often far-reaching and include legal and litigation fees, business interruption, remediation, public relations, customer compensation and notification costs – each of which can be risk transferred through the use of an appropriate cyber insurance policy.


The road to implementation of IFRS 17 Insurance Contracts continues to extend as proposed changes to the Standard have been exposed and subsequently commented on. Further deliberations by the International Accounting Standards Board (IASB) over certain areas are expected over the next few months.

This brings both opportunities and potential costs which insurers should seize and manage.

The proposed extra year before the standard becomes effective gives insurers the opportunity to further develop and strengthen implementation plans.

It’s critical that momentum is maintained and that insurers don’t lose sight of the ultimate goal of having a global standard that aids comparability and transparency of reporting for insurers.

Regulatory agenda

The final report on the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry included 15 recommendations that are relevant to core areas of insurance.

Soon after the final report was released, the Government announced its commitment to implement each of the royal commission’s recommendations, setting up an ambitious regulatory agenda for the industry.

With a heavy focus on addressing consumer harms, this regulatory agenda affects nearly every aspect of the relationship between consumers and their insurers, including selling and distribution practices, pre-contractual disclosures, the handling of claims and the fairness of insurance contract terms.

In this changing environment, there are clear competitive advantages for those industry players that can embrace change, and in particular re-imagine the practices that guide their interactions with consumers.

Investment returns – low interest rates

Interest rates in Australia have fallen by more than 80% since 2011. The official cash rate has fallen from a high of 4.75% to a low of 0.75% in 2019. Similar reductions have been observed across the yield curve.

Investment income for the insurance industry includes capital gains and income on all asset classes and so has not followed the downward trend in the official cash rate.

Specifically, interest income on interest-bearing assets has also experienced more stable reductions over time (currently at approximately 3.5% but not to the levels observed through reductions in the official cash rate and yield curve).

This is because it takes time for assets to mature and then be reinvested, leading to a lower interest income once new money is reinvested.

Given this, KPMG expects income from fixed interest securities to continue to reduce over the next two to three years to below 2% if this low yield world continues.

Click here to see the full report.