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Bushfire royal commission targets mitigation

Prime Minister Scott Morrison has launched a royal commission into this summer’s bushfire catastrophe, which is estimated to involve insured losses of at least $1.91 billion.

The inquiry will look into ways to prepare Australia for future natural disasters, taking into account the impact of climate change on extreme weather events.

The terms of reference released late last week charge the royal commission with examining proposals to improve existing resilience and mitigation measures. It will also consider the legal framework for the Commonwealth’s involvement in responding to natural disasters.

Retired air chief marshal Mark Binskin, former federal court judge Annabelle Bennett and climate risk specialist Andrew Macintosh will head the inquiry. They are to submit the final report by August 31.

The industry has generally welcomed the royal commission, despite the omission of insurance from the terms of reference.

The Actuaries Institute calls the inquiry a “positive step” in allowing discussion on the mitigation action Australia will need to confront the climate challenge.

“The institute certainly welcomes initiatives that are going to investigate the losses that Australians have suffered and how those can be mitigated or prevented in the future,” the institute’s Australian Actuaries Climate Index Lead Actuary Rade Musulin told insuranceNEWS.com.au.

“Reducing the underlying risk is something which is critical. Certainly the degree to which this inquiry will investigate underlying drivers, how much should be spent on mitigation and what should be done to reduce losses in the future, is really what we need to be focused on.”

See ANALYSIS.

10 million policies pinpoint 15 ways to cut catastrophe risk

The Insurance Council of Australia is preparing to publish 15 proposals quantifying for the first time just how much insurance premiums could decline under recommended measures to counter risks from cyclone, flood and bushfire.

During this week ICA will unveil the mitigation projects identified to be the most pressing, based on analysis of 10 million insurance policy records collected from insurers at the end of November. The data has revealed the real premiums paid in every town and suburb in Australia.

The analysis is the council’s latest move to demonstrate to governments the substantial amount of risk reduction that could be achieved by making homes more resilient.

The industry pooled claims data from historic events to create what ICA says is robust evidence about the vulnerability of homes, and likely future exposures. It has also identified another 12 areas requiring further examination.

ICA Head of Risk & Operations Karl Sullivan told insuranceNEWS.com.au the industry is asking governments to fund mitigation efforts, and “we’ve been able to use real data rather than speculation”.

“Left unmitigated, premiums will grow higher, becoming unaffordable for many more households,” Mr Sullivan said.

For example, insurers want the Federal and Queensland governments to team up in a $20 million household resilience program for older homes in low-income areas to make them cyclone-compliant. Particularly important is the need to ensure roofs are attached to the house foundations.

Mr Sullivan says that project would reduce insurance premiums by 10%.

The 15 proposals include a call for flood levees in high-risk areas that would result in some insurers dropping their premiums by 25%.

“We are identifying where the risks are, calling out the practical actions that will help, then we will lower premiums once the risk is mitigated,” Mr Sullivan said.

He says a “stark” correlation between higher risks and premiums has been singled out in areas where initial mitigation activities would deliver premium reductions, and many of the projects identified are not expensive in national terms.

“There are also many quick-win opportunities where better information about existing mitigation could deliver practical, almost immediate, opportunities for premium compression,” Mr Sullivan said.

‘Tick-box’ risk management won’t fly post-Hayne: WTW

Widespread misconduct in financial services uncovered by the Hayne royal commission means a broader range of stakeholders than ever before will carefully examine organisations and judge whether risk frameworks are adequate.

That’s the conclusion of a new report from Willis Towers Watson (WTW), which points out the royal commission’s final report recommended a heightened focus on culture and governance among its 76 recommendations.

“What has typically been held as sufficient in this domain in the past, a tick-box exercise, will no longer be sufficient as stakeholders and regulators will seek real written and practical evidence of the proactive management of the broadest range of risk,” WTW’s Directors’ Liability Report says.

Global conditions for directors’ and officers’ (D&O) insurance, where prices have increased 250% in seven years, are “as challenging as they have been for many years,” the report says.

Attention being paid to the availability of D&O insurance and the related question of indemnities are likely to increase, “given the ever-growing list of personal liabilities that directors now find themselves exposed to”.

WTW says D&O premiums have seen significant increases across virtually all sectors and industries, including those which have previously enjoyed benign and stable prices over many years.

While overall capacity in the global market was still theoretically in excess of $US1 billion ($1.5 billion), WTW said insurers are often reducing their participation on a particular risk, with significant reductions in ‘usable’ capacity, especially in relation to companies with large US securities exposure.

“We are also seeing the imposition of more restrictive conditions and a generally less flexible approach to amending coverage terms. Insurers are increasingly using sub-limits and tailored exclusions and/or higher deductibles to curb their exposure.”

Asked how important it is to understand how disputes with insurers will be resolved, 73% of Australian directors surveyed in the report said they regarded this as very or extremely important, suggesting a high “perceived risk of such disputes arising in the first place,” the report says.

Cyclone Esther crosses NT coastline

Tropical Cyclone Esther is set to bring heavy rain to remote NT and Queensland communities after crossing the coastline in the Gulf of Carpentaria earlier today.

The category 1 cyclone was bringing gusts up to 100kmh to Mornington Island this morning and was starting to slowly cross the coast between the island and the state border.

“Esther is expected to move westwards into the NT tonight while weakening,” the Bureau of Meteorology said.

Forecasters are also keeping an eye on Tropical Cyclone Ferdinand, which strengthened today into a Category 1 system off the coast of WA.

The bureau says it is likely to reach category three strength tomorrow but is forecast to remain well to the north of the WA mainland.

Exclusions will limit coronavirus BI impacts

Exclusions and policy trigger rules are expected to curb potential insurance losses from business interruption claims related to the coronavirus epidemic.

Outbreaks of SARS in 2003 and the Middle East respiratory syndrome epidemic that followed have contributed to policy changes that will make it difficult for firms to make claims, Leon Briggs, Head of Forensic Advisory Services New Zealand at major loss adjuster Sedgwick, says.

“You struggle to see a wide volume and value of claims, certainly in Australasia,” he said.

Some business interruption policy wordings may provide a degree of cover, but more generic policies in the marketplace suggest it would be difficult to make a claim.

Exclusions include any infectious animal or human disease, while limitations based on notifiable diseases should now be in effect for the coronavirus, now officially known as COVID-19.

Triggers for business interruption typically require property damage or contingent impacts such as lack of access, loss of utilities or other circumstances that insurers view as reasonable to cover.

“The extent of how this event could cause loss to so many customers at once gives an aggregation risk or exposure risk to insurers that is not like an earthquake risk, or even bushfire,” Mr Briggs said.

“Logically you can see why [insurers] wouldn’t want to pay for something that in the worst case scenario is going to affect every business.”

Mr Briggs says large multinationals could have bespoke arrangements to cover virus impacts on supply chains to some extent, but similar restrictions and trigger issues may apply.

AM Best says in a report on Southeast Asian insurers that potential direct impacts include medical, personal accident, mortality, travel and business interruption claims.

“The low number of COVID-19 cases in Southeast Asia, epidemic policy exclusions and governments’ undertaking of diagnosis and treatment costs are some of the factors likely to limit the potential loss outcome for the insurance industry,” it says.

Property owner not covered for Melbourne inferno

Swiss Re International has won a court case over establishing insurance cover was not in place when a large industrial fire broke out in western Melbourne in 2018.

The owner of the property in inner-suburban West Footscray, Danbol Pty Ltd, maintained in the Supreme Court of Victoria that it was covered for the fire on August 30 2018, but Swiss Re said the policy had expired six days earlier.

The case centred on whether a 14-day extension had been added to a policy expiring on August 24, as discussions continued about a renewal.

Emails were exchanged between Danbol’s broker, Griffiths Goodall Insurance Brokers, and Swiss Re representative Pen Underwriting before the expiration date. But the renewal was not straightforward as the usage of the site had changed to include storage of decommissioned gas bottles.

Swiss Re highlighted the issues and offered a 14-day extension to assist with placement for a premium of $3506.06.

After receiving more information about the gas bottles a renewal quotation for $106,708 was sent on August 29 at 12:33pm, and the 14-day extension was again offered if the terms were not accepted.

Fire broke out at the property at about 5am the next day, after which the renewal premium of $106,708 was returned to the company.

Justice Peter Riordan says in his judgment that none of the emails “on any reading” purported to accept the offer of a 14-day extension.

“The quid pro quo for the defendants’ 14-day extension of the policy was not the plaintiff’s consideration of the renewal of the policy or even refraining from entering into another insurer’s policy,” Justice Riordan says.

“The defendant’s offer was expressly to provide a 14-day extension in consideration of the promise to pay the extra premium. The plaintiff did not make that promise.”

Lander & Rogers Lawyers, who acted for Swiss Re, say the case illustrates the importance of expressly accepting offers.

“It is difficult to prove implied acceptance in the absence of clear language,” they say in an online post about the case.

The court decision is available here.

Tower wins indemnity dispute

A New Zealand court has confirmed a claimant can only make one claim for the maximum sum insured in a policy, rejecting a bid to have Tower Insurance pay for property damage caused by three separate quakes.

The plaintiffs took the dispute to the Canterbury Earthquakes Insurance Tribunal, which subsequently referred the matter to the High Court - the equivalent of an Australian state supreme court – for its opinion on the case.

They had submitted claims under one policy for damage their 100-year-old property suffered in each of the three major quakes that struck the area between September 2010 and June 2011.

Tower declined their claims on the basis that it is only required to make one payment up to the cap set by the policy, which it has done.

Justice Rachel Dunningham agreed with Tower’s argument that the maximum sum insured value of $NZ455,000 ($434,588) contained in the home policy “is not a per event cap”.

The plaintiffs were paid the statutory cap of $NZ100,000 ($95,489) by the Earthquake Commission for separate damage caused by the three quakes.

Independent experts hired by the plaintiffs assessed repairs to the house would cost about $NZ3.03 million ($2.89 million) at August 2017. The house has not been repaired.

“The primary issue in dispute is whether the maximum sum insured, $NZ455,000, can be claimed once or in each earthquake event,” the ruling made by Justice Dunningham says.

“There is nothing to suggest that the sum of $NZ455,000 is a per event limit. Rather, it is the limit on the sum insured, which is clearly expressed to be indemnity value only.

“The market value is not a cap per event. Therefore, in practical terms, Tower has succeeded in its argument that the $NZ455,000 is not claimable per earthquake event.”

AFCA member forums to kick off in April

The Australian Financial Complaints Authority (AFCA) will host eight member forums across five capital cities this year, giving the financial services sector an opportunity to hear from its decision makers.

The first three forums will be held in April, starting in Sydney on April 9 before heading to Melbourne on April 15 and Brisbane on April 20.

June forums will be held in Adelaide and Perth before a return to the three east-coast capitals in October.

AFCA says its member forums, which are free of charge, are an opportunity for the financial services sector to come together and hear the latest complaint statistics and trends, as well as updates on AFCA initiatives and case studies highlighting its approach to certain issues.

Webcast details for some of the events are to be released shortly.

Click here to register.

EQC recovery manager resigns

Earthquake Commission (EQC) Deputy CEO Readiness & Recovery Renée Walker has resigned and will depart in May after a three-month transition period.

Ms Walker has worked in the Canterbury insurance industry since earthquakes struck the area almost a decade ago.

She implemented an “on-sold” policy to help homeowners who felt stuck, consolidated government claims functions through the transition of Southern Response claims and people to EQC, and built an insurer and future claims operating model.

CEO Sid Miller says Ms Walker had made an outstanding contribution to the EQC and was instrumental in the transformation the commission has achieved.

Suncorp CEO wants faster resolution to gender imbalance

Suncorp Insurance CEO Gary Dransfield has called on people across the industry to push for more rapid change to end the gender imbalance.

Mr Dransfield was the keynote speaker at the inaugural Women in Insurance Leadership Summit in Sydney earlier this month. He is a founding member of the Male Champions of Change insurance group, which works with business leaders to redefine men’s roles in acting on gender inequality.

“Gender equality sits with all of us, and we must work together to push for faster change,” he told the summit. “I strongly believe that we will be our best when our workforce is as diverse, talented and passionate as the communities in which we live and operate.”

He says insurers must represent the customers they serve at all levels “from call centre worker right through to the board of directors”.

The Male Champions of Change group has conducted a series of employee forums to develop a deeper level of insight into the issues that need to be tackled to end inequality.

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Corporate

Strong first-half results buoy expansive PSC

PSC Insurance Group MD Tony Robinson is “absolutely delighted” with how the business has performed in the December half, fuelled partly by acquisitions made over the past few months.

The Melbourne-based listed broker announced last week a 13% improvement in statutory after-tax net profit to $8.8 million in the six months to December 31. On an underlying basis it grew 18.5% to $11.2 million.

Recent additions to the business, such as the £42 million ($81.6 million) acquisition of London-based Paragon International, contributed about $20.1 million in incremental revenue during the period.

Underlying revenue increased 37% to $74.8 million, including $13.9 million from Paragon, and $4.7 million from Griffiths Goodall, the Victorian brokerage acquired last July for $48 million.

“We’re absolutely delighted with the performance and pleased with the way each of the parts of the business performed,” Mr Robinson told insuranceNEWS.com.au. “It’s a tribute to the calibre of the people in the business and the services they provide.”

PSC says the business remains on the lookout for potential acquisitions including in Australia, the UK and Hong Kong, where it already has a stake in insurance brokerage Charter Gilman through a $1.01 million investment made last July.

The brokerage sees the “possibility of taking a holding in a small business in Hong Kong to test the opportunities in that region”.

The wave of political unrest that rocked the self-governing Chinese territory last year has not dented PSC’s plans, Mr Robinson says.

“Commerce goes on, businesses still need to access insurance and brokers play an important role in the marketplace in providing that,” he told insuranceNEWS.com.au.

“So, would you like it to be more stable? In some ways yes, but sometimes these sorts of moments create the best opportunities to get a foothold. It encourages people to seek the safety of larger organisations.”

Merger creates AUB’s largest Queensland brokerage

Austbrokers Comsure will become AUB’s largest Queensland brokerage after an acquisition and three-way merger is completed.

As insuranceNEWS.com.au reported last week, AUB has bought Steadfast Network member Bestmark Insurance Brokers from Principal Ian Garbutt and will merge the firm with existing majority-owned businesses Comsure and Citycover.

Steve Hamill and Richard Rentoul from Comsure and Mark Sandow and Stewart Harker from Citycover will form a new management team, with Mr Garbutt taking the role of CEO.

“The newly acquired Bestmark Insurance Brokers significantly enhances the Austbrokers’ network and will form a core pillar of our strength in Queensland,” AUB CEO Mike Emmett said.

“The combined business will increase the scale and breadth of skills that our clients are looking for and will allow us to better service and grow in the Brisbane and broader Queensland markets.”

AUB says the Bestmark deal is a scrip-for-scrip merger and the combined businesses will manage up to 9000 clients and in excess of $50 million in premium.

Mr Garbutt has more than two decades’ experience in the insurance industry. Previously he was CGU’s Queensland state manager.

Comsure, which has a strong market position in the motor dealer sector, has offices in the Brisbane suburb of Spring Hill. Citycover is based in Fortitude Valley while Bestmark is located in Redbank Plains on the western outskirts of Brisbane.

The three-way merger is set to be take effect from July 1.

Climate activist lines up new shareholder resolution at QBE AGM

QBE will face another shareholder resolution aimed at forcing the insurer to step up its fossil fuel reduction efforts when its AGM takes place in Sydney on May 7.

Climate activist group Market Forces announced the planned action after QBE unveiled its full-year results last week, replicating a similar pressure tactic last year that saw a similar resolution taken up at the AGM. On that occasion it failed to secure broad support from shareholders.

QBE has declined to respond to the latest campaign from Market Forces, with a spokesman telling insuranceNEWS.com.au the insurer has already outlined its climate approach through the Group Energy Policy that was announced last year.

As part of the policy, QBE began to withdraw from coal-related business last July, and expects to have phased out all underwriting business with thermal coal customers, except for statutory or compulsory insurance, by January 1 2030.

But Market Forces says the measures do not go far enough, with campaigner Pablo Brait telling insuranceNEWS.com.au that “QBE is still open to underwriting and insuring oil and gas including tar sands, unconventional gas and industries that have a similar emissions profile to thermal coal”.

Last week QBE said the business will continue to “adjust its catastrophe models” this year as part of ongoing efforts to assess the expected impact of climate change until 2100.

“The obvious link between [the recent bushfires and other extreme weather events this summer] brings into sharp focus how climate-related risks are now the new normal for our industry,” Group CEO Pat Regan said.

“We must take action to address these risks in our own operations, at the same time as supporting our customers to mitigate their exposure to climate risks and support the transition to a lower-carbon economy.”

QBE achieved a 41% rise in net profit to $US550 million ($822 million) last year. However its Australia Pacific business suffered a rise in catastrophe claims, caused in large part by the months-long bushfire disaster that began last spring and the Townsville floods.

Net cost of catastrophe claims rose to $US193 million ($288 million) or 5.4% of net earned premium last year from $US106 million ($158.4 million) or 2.8% in 2018.

On a group-wide basis, the figures declined with net cost of catastrophe claims falling to $US426 million ($637 million) or 3.7% of net earned premium from $US523 million ($782 million) or 4.4% a year earlier.

Former KPMG partner joins Genworth board

Genworth Mortgage Insurance Australia has named Andrea Waters as a non-executive board director, with her appointment to take effect on March 16.

Ms Waters has more than 35 years’ experience in financial services, including as a KPMG partner specialising in financial services audit until 2012. She is presently a director of Hobart-based financial group MyState, Grant Thornton Australia, Bennelong Funds Management Group, Citywide Service Solutions and the Colonial Foundation.

Her appointment follows the retirement from the board of Gayle Tollifson, who will step down next month after eight years as a director.

Arch takes majority stake in Australian data provider

Arch Reinsurance, a subsidiary of Bermuda-based Arch Capital Group, will take a majority stake in Precision Marketing Asia Pacific, an Australian data marketing solutions provider to many industries including insurance.

The reinsurer believes the investment will bolster its offerings of accident and health and life products locally and in the Asia Pacific, where the privately owned business has a presence in Indonesia, Hong Kong, South Korea and Japan.

“Acquiring [Precision Marketing] aligns with our strategy of selectively pursuing diverse specialty markets where we can apply our knowledge and expertise,” Arch Worldwide Reinsurance Group Chairman and CEO Maamoun Rajeh said.

“Precision Marketing is well known for its highly analytical approach to multichannel distribution and product design, and I believe that Arch Re will benefit from its platform as we look to increase our life and accident and health presence in Japan and other Asia Pacific markets.”

The value of the deal, which is subject to regulatory approval, has not been disclosed.

EML gives $100,000 to aid bushfire communities

Personal injury specialist EML has pledged $100,000 to support health providers in bushfire-affected areas in providing care to the community.

The mutual, which celebrates its 110th anniversary this year, is partnering with not-for-profit trauma specialist Phoenix Australia to provide mental health support.

CEO Mark Coyne says EML employees raised more than $15,000 in January through cake stalls, donations and other activities.

Phoenix Director David Forbes says the funds will be critical in helping Phoenix to assist health providers, emergency service workers and community members affected by the bushfires. He says “informed support” is essential in the coming months to prevent mental health repercussions.

Cover-More picks up Webjet

Zurich-owned travel insurer Cover-More has agreed to be the exclusive provider of travel insurance and assistance for leading travel group Webjet across Australia and New Zealand.

The new partnership will make use of Cover-More’s Impulse online sales and optimisation technology.

“To lead the travel insurance sector in any market, you need to get the product, coverage and technology right and Cover-More’s technology can deliver Webjet customers the greatest variety of offers and the most appropriate cover available,” Cover-More CEO for Asia Pacific Judith Crompton said.

Established in 1998, Melbourne-based Webjet claims to be the largest travel agency in Australia and New Zealand, with offices in North America, Singapore and Hong Kong.

Earlier this month, Cover-More entered a three-year preferred travel insurance provider deal with TravelManagers .

Reask recognised on global insurtechs list

Sydney-based natural catastrophe modelling startup Reask has earned a place in a UK management consultancy’s annual list of insurtechs that are well placed to serve the insurance industry globally.

London-based Oxbow Partners’ 2020 Insurtech Impact 25 list was compiled after a review of more than 100 companies “to find those that have “traction and potential for incumbents but are not household names”.

“We selected Reask – a relatively early-stage company – because of its highly experienced team, rapid progress and proposition,” Oxbow Partners says.

It says the natural catastrophe exposure modelling market is dominated by two players, and insurers and brokers would welcome more competition.

Sydney-based Reask is the first Australian company to be selected for the list.

Among its global successes is a project validating Axa’s internal models to provide greater transparency, and its probabilistic event response tool ForeCyc was used to assess the likelihood that Typhoon Faxai could hit Tokyo in September 2019.

“Reask’s founding team has deep domain expertise in nat cat modelling and high-performance computing,” the Impact 25 report for 2020 says. “Their hypothesis is that there are limitations in many existing models that can be strengthened with pattern recognition and simulation techniques from the field of machine learning.”

Reask initially focused on tropical cyclones and used Australia’s two largest research supercomputers to build its high-resolution model. Plans for this year include finding capital to support expansion into other atmospheric and oceanic perils such as drought and wildfire.

Oxbow says property and casualty insurers, reinsurers, intermediaries, securitised insurance funds and disaster risk financing sponsors should talk with Reask. “Large insurers regularly license several risk models to get different opinions on scenarios and this has allowed Reask to get some clients quickly and will allow them to fine-tune their proposition further.”

Another insurtech to make the list was San Francisco-based Socotra which has opened an office in Sydney and has a client list including Axa, Nationwide and IAG.

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Regulatory & Government

Insurers back NSW's engineer registration scheme

A NSW bill that would require practising engineers to be registered is being supported by the Insurance Council of Australia (ICA).

It says the Professional Engineers Registration Bill 2019 is “consistent with similar schemes” in Queensland and Victoria, and would mean the industry is “appropriately regulated and monitored”.

“Insurance Council members strongly endorse initiatives to achieve and maintain rigorous construction standards in Australian buildings in order to minimise if not eliminate the risk of building failure,” ICA says in a submission to a NSW Parliamentary inquiry into the bill.

“Given this, we support appropriate regulation of engineers and other building professionals in order to lift standards and so minimise the possibility of a recurrence of the current problems in the building industry.”

The Legislative Assembly Committee on Environment and Planning launched an inquiry last December, calling for submissions on how best to regulate engineers and other related matters.

“An effective and reliable registration scheme will help improve integrity and confidence in the sector, which is what the community is calling,” Committee Chairman Alex Greenwich said.

“Looking at what kind of registration scheme is most effective in this context is an important step in that process.”

The bill was introduced in the NSW Parliament in October.

icare flags 'fee for outcome' system

NSW state insurer icare wants to introduce a “fee for outcome” system that would remunerate service-providers on the rehabilitation or return to work outcomes of injured workers.

The system would be established to improve the workers’ compensation scheme, icare says in a submission to the State Insurance Regulatory Authority (SIRA).

It says implementing a new definition that supports value-based care for assessing and approving medical treatment is also of vital importance.

“Such a system helps encourage injured workers to recover at work and/or return to work as soon as it is safe to do so, in order to protect their financial, emotional, physical and social well-being,” the submission says.

“This approach also helps prevent injuries deteriorating into chronic conditions where possible.”

The current approach, the “reasonably necessary” test, is not appropriate, icare says.

“It allows all types of treatments to be approved, including those considered as being of low value or potentially harmful. This has contributed to an increased medical spend, and persistent non-improvement in injured worker outcomes.”

icare tabled the suggestions and a raft of other recommendations, ranked according to importance.

The submission is in response to a discussion paper released by SIRA last September which sought feedback on ways to improve the workers’ compensation and compulsory third party schemes amid escalating healthcare costs.

Medical spend accounts for more than 30% of the cost of both schemes, with the sustainability of the workers’ compensation system seen as particularly at risk if the trends persist, the discussion paper says.

The icare submission addresses the workers’ compensation setting and contains six recommendations around fee schedules and indexation, setting up a robust clinical governance framework and improving healthcare data and coding.

According to icare, medical costs in the workers’ compensation scheme rose an average 12% annually from 2015 to 2018.

SIRA says the discussion paper has received 53 submissions.

“The review is not about reducing expenditure or the treatment available to injured people,” CEO Carmel Donnelly said.

“SIRA’s objective is to make sure that every dollar spent delivers quality and value and optimises recovery.”

Click here for the icare submission.

Access fee waived for bushfire building standards

The Federal Government has made access to the national bushfire construction standard free of charge until June 30 next year.

The manual costs $256.45 and is available through Australian Standards distributer SAI Global. The initiative is part of the Federal Government’s response to the recovery efforts of bushfire-affected communities.

The standard specifies requirements for the construction of buildings in bushfire-prone areas in order to improve their resistance to bushfire attack from burning embers, radiant heat, flame contact and combinations of all three.

NZ sets rules for quake-strengthening assistance

New Zealand has released eligibility criteria for financial assistance to help apartment and unit owners meet earthquake-prone building remediation costs.

Last year’s Government Budget provided $NZ23.3 million ($22.3 million) over four years to help property owners complete building improvements required by laws introduced in 2017.

Eligibility criteria for low interest loans up to $NZ250,000 ($239,309) include that a person is the owner-occupier of a unit bought before July 1 2017 and is otherwise unable to obtain suitable finance.

Building and Construction Minister Jenny Salesa says fixing buildings where there are many unit owners can be complex, and getting finance for the work can be difficult “if not impossible” for some people.

“Without the support of low-interest loans like these, some unit owners may be forced to sell if they’re not able to earthquake-strengthen their home,” she said.

Finance Minister Grant Robertson says changes to the insurance market and significant premium increases following the Canterbury and Kaikoura earthquakes have pushed up costs for unit owners.

Eligible residents have been invited to register their interest in applying for assistance, with the program expected to start from the middle of this year.

QBE workers' comp claims role set for May start

QBE will start offering NSW workers’ compensation claims management services to the scheme’s largest customers from May 1 under reforms to improve choice.

Allianz and GIO began offering the services this month, in line with plans outlined last year by state insurer icare to provide larger clients with flexibility to select an authorised provider.

EML was appointed as the sole agent for new claims in 2017, but a two-stage approach based on premium levels is giving larger customers the option of transferring to the three additional providers.

“The move was a natural progression in ensuring icare continued to deliver consistent and sustainable claims services, while also responding to customers’ desire for choice,” icare says in a statement.

Phase two-eligible customers will be able to transfer to Allianz, GIO or QBE from policy renewal dates starting on or after June 30.

Insurers wary of changes to corporate criminal responsibility

Proposed changes to the corporate criminal responsibility regime could “add complexity to individual liability” in areas where the Banking Executive Accountability Regime (BEAR) applies, the Insurance Council of Australia (ICA) has warned in a submission.

BEAR has been in place since July 2018, with large banks required to comply with higher conduct and accountability requirements.

The Australian Law Reform Commission (ALRC) has proposed a “functional approach” to define who a corporation’s “associates” are to determine whether a company should be liable for the acts of its directors and employees.

Accordingly, the term “associates” would replace “officers, employees and agents”.

“The two key ways in which ALRC proposals differ from BEAR and raise concerns for our members are the concept of influence and reversal of the onus of proof,” ICA says.

It says the ALRC suggestions “would undermine the fundamental principles of natural justice.”

“In addition, an individual faces a practical difficulty in bearing this reversal of onus of proof where they may no longer be an employee of the company and therefore find it difficult to obtain the evidence to satisfy the burden.”

The ALRC released its discussion paper in November and will provide its report by April 30 to Attorney-General Christian Porter, who announced the review into the criminal responsibility regime last year.

Click here for the discussion paper.

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Life Insurance

Accountability rules may hit recruitment: FSC

The Financial Services Council (FSC) says civil penalties proposed for individuals under an extension of the Banking Executive Accountability Regime (BEAR) may hit industry recruitment.

Designated “accountable persons” could face maximum penalties of $1.05 million for breaching obligations under proposals for the new Financial Accountability Regime (FAR).

The FSC says that while entities would be prohibited from paying the cost of insuring accountable people, it’s unclear whether individuals would be able to gain cover for civil penalties under the regime.

It proposes Treasury work closely with the insurance industry to ensure penalties are framed in a way to allow for cover, to prevent unintended consequences.

“We are concerned that the individual civil penalty regime may operate as a disincentive to recruitment and adversely impact on talent retention strategies in the financial services sector,” it says in a submission to a Treasury consultation paper.

The FSC also says the impact of the regime on foreign firms is unclear, and it should not sweep up overseas-based executives.

Some 80% of Australian life insurers are foreign-owned and it is common for international firms to have various reporting lines to managers based overseas.

“It seems to us that these executives would be subject to regulation in a home jurisdiction, and there are practical difficulties in seeking to apply the provisions of the FAR” it says.

The submission questions how the new regime will interact with other laws and statutory rules, including product design and distribution obligations.

“The FAR regime has the potential to be complex and to compound complexity in an already crowded regulatory landscape,” the FSC says.

The Federal Government is expected to released draft legislation for further consultation before introducing a Bill into Parliament in the spring session.

Zurich appoints new team after OnePath acquisition

Zurich has a new distribution team to help it execute its dual-brand proposition after the acquisition of OnePath Life from ANZ in June.

Zurich is now Australia’s largest retail life insurer, and says the OneCare life insurance product complements Zurich Wealth Protection, Active and Sumo ranges.

The new Zurich Life & Investments distribution team, which reports to Chief Distribution Officer Kristine Brooks, has Phil Gould as Head of Distribution Analytics & Governance and Mel Ware leading Marketing & Brand.

Tim Atley was appointed Head of Strategic Account Management, Life Risk, responsible for managing key dealer group partnerships across the Zurich and OnePath life insurance portfolios.

Nathan Taggart is Head of Sales with a new team of state managers: Rob McNeill in NSW/ACT, Reece Foster in Queensland, Vilma Attanasio in SA/WA and Matthew Backman – who has joined from MLC – in Victoria/Tasmania.

Freedom shareholders vote to liquidate business

The majority of shareholders of Freedom Insurance have voted to liquidate the business.

Joseph Hayes and Andrew McCabe of Wexted Advisors have been appointed to oversee the process.

About 92.6% of the votes cast in last week’s extraordinary general meeting supported the motion to place the company in solvent voluntary members liquidation, and nearly 83% of proxy votes backed the measure.

Shareholders also backed three other resolutions related to assets distribution, liquidators’ remuneration and handling of the company’s books and records.

Freedom has been in trouble after it was exposed during the Hayne royal commission hearings in 2018 to have engaged in deceptive sales tactics. Almost all its operations have subsequently been wound down.

Sequoia buys YBR's wealth division

Yellow Brick Road (YBR) has sold its Wealth Division, which includes life insurance, to Sequoia Financial Group.

The transaction, agreed in December, involves the sale of YBR Wealth’s share of recurring revenue from its wealth advice and life insurance distribution business. It includes an offer to YBR’s wealth advisers to become authorised under Sequoia subsidiary InterPrac Financial Planning.

“The transaction will simultaneously enhance Sequoia’s wealth management business and YBR’s mortgage distribution business,” Sequoia says in a statement.

The purchase price was $2.5 million cash in four instalments over 18 months.

Sequoia will act as the preferred referral partner of wealth advice and services for the YBR Group’s 1400-strong mortgage broker network.

YBR announced in May last year that it would offload, outsource or restructure its wealth division, including life insurance, with Group CEO Frank Ganis leaving as a result.

Executive Chairman Mark Bouris has said the wealth business lacked scale in an increasingly regulated environment and the company will now focus on the mortgage market.

AFA donations hit $2 million

Donations to Australian charities by the Association of Financial Advisers (AFA) Foundation have reached $2 million.

Established in 2007, the AFA Foundation supports a range of charities including MS Research Australia, Little Heroes and the Make A Wish Foundation. It also helped Rural Aid support farmers hit by drought and floods and donated $10,000 to Lifeline, which is playing a crucial role in helping Australians affected by bushfires.

“The AFA Foundation works hard to make a meaningful difference to individuals and families in need,” AFA CEO Philip Kewin said. “This creates opportunities which foster community spirit and connection within the financial advice profession.”

The foundation raises contributions from members through national events such as the AFA Roadshow and the annual AFA Conference, as well education seminars and networking events. The largest fund-raising event to date was the 2018 Kokoda Trail project, which raised more than $117,000.

Nominations for a 2020 grants program are being accepted until April 30.

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The Professional

Insurance customers are 'demanding different'

Customers are demanding different products and services from the evolving insurance industry, US-based insurtech expert and author Rob Galbraith says.

Mr Galbraith was a keynote speaker at the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Insurtech Conference in Sydney last week, which was held in conjunction with Insurtech Australia and Insurtech NZ.

Mr Galbraith told delegates customers want “a whole host” of new exposures and digital experiences,

But the human element must not be forgotten. “[Customers] are also going to want human interaction at a time of loss, so it’s really a mixed model that I think will push our industry forward in the future,” he said.

Insurtech Australia CEO Rita Yates says the conference is an example of the collaboration which is vital to the insurtech sector.

“I really think our ecosystem comes down to collaboration,” she said.

“At the end of the day, any opportunity where insurtechs can meet up with incumbents and discuss and explore how a potential collaboration could benefit each other’s businesses is incredibly important to the continued growth and success of our community.

“In the past 12 months we have seen our entire ecosystem start to evolve and mature. We have also seen a lot of growth in our ecosystem – we now have 61 insurtech organisations as members here in Australia, which is a huge increase from two years ago.”

ANZIIF CEO Prue Willsford says the conference has thrived since its inception, and serves to bring together leading industry innovators.

“Since we began the conference four years ago, we have seen significant collaboration and maturity from insurtech start-ups and incumbents,” she said.

“Our audience understands both insurance and insurtech ecosystems, which has allowed us to showcase a more advanced and sophisticated program than ever before.”

Insurance salaries on the rise while job ads fall

Insurance and superannuation advertised salaries rose 6.5% last month compared with a year earlier, but the number of jobs declined, according to data from online employment site Seek.

The salary level gains outpaced an increase of 4% in hospitality and tourism, 3.7% in banking and financial services and 3.7% in trades and services. The advertised salary for all sectors across Australia rose 1.7% to $88,746.

The average advertised salary for insurance and superannuation last month was $90,766, while a breakdown of salary distribution for the past 12 months shows 32% are in the $60,000-$79,000 range.

Seek says the pace of insurance and superannuation salary growth increased from 6.1% in December.

But the number of jobs advertised for insurance and superannuation declined 8% last month compared to a year earlier, following a 7.3% decline in December.

Seek job ads overall were down 6.5% last month, with only community services development and education and training showing significant improvements on a year earlier.

Marsh appoints Kane Sim to lead new tax practice

Marsh has appointed PwC mergers and acquisitions specialist Kane Sim to lead its new tax liability practice.

Mr Sim worked with PwC in its Sydney and Boston offices. He is also a former practicing solicitor and has strong experience in M&A, strategic tax planning and related governance and operational affairs.

The new tax liability practice is an expansion of Marsh’s private equity and mergers and acquisitions (PEMA) insurance services and has been established to meet a growing need from clients in a more complex regulatory environment.

Marsh JLT Specialty Head of PEMA Chris McDermott says there are perceptions the Australian Tax Office is ramping up enforcement efforts, while buyers and sellers can also receive different tax law interpretations related to proposed deals and business structuring.

“The allocation of liability on the M&A front is becoming an occasional impediment to getting a deal done, so this is one method of removing that impediment,” he told insuranceNEWS.com.au.

Mr Sim will be based in Sydney, and Marsh expects to expand the practice to New Zealand as well, reflecting the geographic spread of its current M&A business.

The PEMA team worked on more than 150 transactions last year in Australia and New Zealand and rising demand for insurance products has defied a flat or slightly weaker overall deals market, Mr McDermott says.

The global PEMA business practice works with clients through an investment cycle that includes capital-raising, M&A, portfolio management and exit strategies. Tax liability offerings have already been introduced in recent years in Europe and North America.

WA insurer tops Roy Morgan’s satisfaction survey

Perth-based RAC Insurance has won survey company Roy Morgan’s Major General Insurer of the Year award for customer satisfaction in an annual survey of 50,000 Australians.

The company topped all but one of 12 monthly surveys last year, putting it “far out of reach of their competitors”, Roy Morgan CEO Michele Levine says.

The awards, spanning 32 categories, were presented in Melbourne on Tuesday.

Tasmania’s RACT Insurance won General Insurer of the Year for the fifth year running, with CEO Trent Sayers saying it is a privilege for a Tasmanian company to be recognised for excellence among such a strong field of Australian insurers.

“It is an honour that so many Tasmanians trust us to protect their prized possessions,” he said.

MLC won Major Risk & Life Insurer of the Year and TAL’s Insuranceline took out Risk & Life Insurer of the Year for the second straight year.

“Knowing that a large number of real Insuranceline customers were surveyed to arrive at this result validates the work and dedication the team has towards satisfying our customers,” TAL’s Chief Commercial Officer of Individual Life, Tim Thorne, said.

Ms Levine says the four insurers “demonstrate a determination to understand what their customers need and deliver it”.

“That’s what has earned each of them coveted recognition as best in their field, judged by their customers, over the year just ended,” Ms Levine said. “Each of the winners understands that dissatisfied customers have an enormous impact on the bottom line and they work hard to avoid that.”

Applications open for Aon scholarship

Applications are now open for the annual Aon Scholarship, in partnership with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF).

This year applicants must submit a 2500-word essay on climate change and how it could affect the industry in 2050.

The winner will attend the annual Aon Global Clients Reinsurance Seminar in London from June 22 to July 2.

The scholarship is open to citizens or residents in Australia, New Zealand and Papua New Guinea with up to 10 years’ industry experience in insurance or reinsurance.

The winner will be announced on August 27 at the Australian Insurance Industry Awards in Sydney.

For more information, click here.

Insurers invited to cladding webinar

An educational webinar explaining how to mitigate the risk of fire spreading through building cladding is to be held next month.

Kingspan Insulated Panels is hosting the webinar, which has been developed specifically for insurance professionals.

Kingspan says its insurer-approved panels mitigate the risk of fire spread and have the same impact on maximum foreseeable loss and premiums as non-combustible solutions.

The company says it wants insurers “to join industry experts in understanding common misconceptions about insulated panels, and insurance industry requirements”.

The webinar will be held at 11am Sydney time on March 5 followed by a Q&A session.

Click here to register.

Summit offers injury management insights

A two-day injury management summit takes place this week in Melbourne.

The Toward 2030 event runs on Wednesday and Thursday at Crown Promenade, and is described as a “not-for-profit, professional forum specifically for injury management professionals”.

“This unique event offers tailored sessions including engaging expert presenters, interactive workshops, panels, roundtable discussions, networking opportunities and our welcome dinner,” the event website says.

The event partners are EML, Allianz, CGU, Gallagher Bassett, eReports and Safety People Australia.

Click here for more information.

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International

Swiss Re takes further action on emissions

Swiss Re has toughened up its response to the climate change threat by announcing a series of measures to cut carbon emissions.

The reinsurer unveiled a thermal coal policy in 2018, but has now gone further.

It says it will “gradually cut business support” in underwriting and asset management to the world’s 10% most carbon-intensive oil and gas producers, stopping support entirely for these companies by 2023.

“The group will stop providing (re)insurance to, and investing in, the most carbon-intensive oil and gas companies,” it says.

“For its own operations, Swiss Re has committed to achieving the goal of net-zero emissions by 2030.”

CEO Christian Mumenthaler says “it is every company’s obligation” to contribute to the transition to a low-carbon economy.

“For the past 40 years Swiss Re has been warning about the effects of climate change and implementing progressive measures to reduce emissions,” he said.

“Today we are announcing our next steps on this journey to decarbonise our entire business model and live up to our net-zero emissions commitments.”

Allianz P&C arm suffers earnings fall

The property and casualty (P&C) arm of Allianz suffered an 11.9% decline in operating profit to €5 billion ($8.2 billion) last year, despite producing increased revenues of €59.2 billion ($97 billion), up 6.8% from 2018.

Allianz says earnings were affected by a “strengthening of reserves” at Allianz Global Corporate & Specialty (AGCS).

“Our P&C business segment performed below expectations in 2019, following a disappointing reserve strengthening at AGCS that overcompensated for a solid accident year, underwriting and productivity gains,” CFO Giulio Terzario said.

The P&C combined ratio deteriorated 1.5 percentage points to 95.5% last year.

For the fourth quarter, P&C revenues increased 7.5% to €13.1 billion ($21.5 billion) but operating profit fell 42.3% to €861 million ($1.41 billion) due to the same reason that affected full-year earnings. The combined ratio worsened 5.5 percentage points to 99.6%.

Allianz made an overall net income of €8.3 billion ($13.59 billion) last year, up 7.8%, with the fourth quarter reporting an 11.2% rise to nearly €2 billion ($3.3 billion).

Axa XL takes steps to shore up earnings, appoints new CEO

Paris-based insurer Axa has warned its bottom line will take a hit this year from costs aimed at shoring up earnings at Axa XL and announced it has appointed a new CEO to run the unit.

The subsidiary Axa XL business was hit by higher than normal levels of natural catastrophe charges in 2019.

The company says it has taken steps to reduce earnings volatility, spending €200 million ($301.56 million) to reduce exposure to catastrophes and increase reinsurance.

Management forecasts the XL unit, which posted a combined ratio of 101.5% last year, will achieve underlying earnings of €1.2 billion ($1.81 billion) this year, compared with €507 million ($764.45 million) in 2019.

Axa acquired Bermuda-based XL Group in September 2018 in a deal that shifted Axa’s business from predominantly life cover and savings to mainly property and casualty. Axa XL accounted for about a fifth of group revenue in 2019.

The new Axa XL CEO is Scott Gunter, who was previously a senior VP at Chubb. He replaces Greg Hendrick, who oversaw the integration of the unit. Axa, the second-largest European insurer after Allianz, reported a 4% rise in 2019 underlying earnings. Revenue rose to €103.5 billion ($156.06 billon).

Property & Casualty underlying earnings increased by 12% to €3.3 billion ($4.98 billion).

Axa’s property and casualty (P&C) combined ratio was 96.4%, an improvement of 0.6%, while its protection combined ratio improved by 0.7% to 93.2%. Health combined ratio widened by 0.1% to 94.1%.

At Axa XL, total revenues were up 10% at €18.7 billion ($28.2 billion).

Axa XL’s P&C revenue rose 18% to €9.1 billion ($13.72 billion) while specialty insurance revenues increased 6% to €4.9 billion ($7.39 billion). Reinsurance revenues were 2% higher at €4.5 billion ($6.79 billion).

Swiss Re profits up despite catastrophe impact

Swiss Re’s full-year net income has soared 73% to $US727 million ($1.09 billion), despite the group suffering a $US2.7 billion ($4.04 billion) hit from natural and man-made catastrophes.

There were also increased claims in US casualty and Swiss Re Corporate Solutions made a net loss of $US647 million ($968 million) following action to address underperformance.

However, Life and Health Reinsurance (L&H Re) net income rose 18% to $US899 million ($1.34 billion).

“Our 2019 results were impacted by heavy natural catastrophe losses, our decisive management actions to reposition Corporate Solutions and increased claims in US casualty,” CEO Christian Mumenthaler said.

“We are taking proactive measures to put us at the forefront of adverse trends.

“On the other hand, we delivered an excellent investment result and strong performance in L&H Re, demonstrating the power of our diversified business model.

“And we are starting 2020 with an improved quality of our portfolio, underpinned by strong January renewals and pricing momentum.“

Beale joins Crawford board

Former Lloyd’s CEO Inga Beale has been appointed an independent director of global claims management group Crawford & Company.

She took up her position earlier this month, the US-based company says.

“[Ms Beale] brings an array of international insurance carrier experience that will positively impact Crawford strategy going forward,” CEO and President Harsha V. Agadi said.

“She will provide insights, counsel and perspectives that will complement those of the existing board members and from which Crawford will benefit.”

Ms Beale was the first female CEO to lead Lloyd’s, a role she held for five years until 2018. Before Lloyd’s, she was Group CEO of reinsurer Canopius. She has also held senior positions at Zurich Insurance and French reinsurer Scor during more than three decades in the industry.

Merger and acquisition deals climb to four-year high

The number of mergers and acquisitions (M&A) globally in the insurance industry rose 10% to 419 deals last year, the highest in four years, international law group Clyde & Company says.

“Activity was driven by an exceptionally strong first-half of the year, led by a spike in deals in Europe that had been put on hold during Brexit preparations,” it says in a new report.

“Although M&A dropped back in the second-half of the year, activity globally remained buoyant compared to the levels of recent years.”

The Americas region led the way with 182 deals, followed by Europe on 155 and Asia Pacific on 69.

While M&A activity is expected to remain steady this year, the law firm warns the coronavirus outbreak, the US presidential election in November and trade talks between the UK and European Union could affect investor appetite.

“M&A in the US could be impacted [this year] by the upcoming presidential election,” the report says. “Some deal-makers may look to complete transactions ahead of a possible change in administration, while others will opt to put plans on hold until uncertainty over the result is resolved.

“A similar situation exists in Europe, which should see a return to business as usual now Brexit preparations are mainly completed. However, as the details of the future trading relationship between the UK and the EU remain unclear, this may spur transactions during the transition period.”

Renewables predicted to alter reliance on oil, mining

The oil and mining industries make up around a third of demand for credit and political risk (CPRI) insurance, but that is set to change as interest in renewables rises, according to broker BPL Global.

The company, which specialises in CPRI for multinational corporations, banks and financial institutions, says that last year 2474 of its enquiries, or 35%, related to the oil, mining, metals and extractive industries.

That reflected industry/sector “concentration risk” for CPRI insurers, the London-based broker says.

“We can expect the CPRI market to continue to diversify away from its traditional bedrock,” MD Sian Aspinall says in the company’s latest market report.

It predicts increased demand over the medium-to-longer term for insurance products which support renewable energy and related infrastructure projects.

With many insurers now “closed” to coal-related risk, trends in CPRI are poised to develop in new ways over the next few years.

Risks faced by insurers continue to evolve, BPL says, with civil unrest in Hong Kong and Chile being examples. Regulatory risk persists and the firm has added a dedicated legal resource to its team to help it address this challenge.

General insurance is witnessing hardening conditions and the market “cannot rest on its laurels”, Ms Aspinall says.

Lloyd's set to update market on performance progress

Lloyd’s says improvements to the way the market operates will become tangible this year as it moves ahead with a blueprint to cut costs and overhaul its performance.

The London-based marketplace has highlighted priorities for this year, ahead of a Wednesday update on its Blueprint One plans for transforming the way it does business.

COO Jennifer Rigby says the setting of priorities has taken into account feedback since Blueprint One was launched last year and ahead of phase one activities which are due to start by the end of March.

Areas of focus include work on a complex risks platform, improvements for bringing coverholders onboard and changing the way claims are processed.

“These will really start to bring a difference to the market in 2020 and those are the things the market has told us they really want us to focus on,” Ms Rigby said.

Lloyd’s earlier this year said marine hull and international casualty binders will be pilot classes for a modernised syndication pilot as it works through various testing and proofs of concepts.

The Financial Conduct Authority has challenged Lloyd’s and the London Market to improve performance as they face increased competition.

The UK regulator said last week in an annual review of financial services that London remains the leading global insurance hub, but client perceptions that it is relatively expensive have been reinforced by the slow adoption of technology and complex distribution chains.

“Maintaining London’s competitiveness is not one of our objectives, but ensuring a well-functioning market is, and a well-functioning market is characterised by a competitive and sustainable business model,” the report says.

It notes Lloyd’s is developing two electronic risk placement platforms as part of moves to modernise the market and improve performance.

“There are efforts to improve expense ratios both in Lloyd’s and the wider London market, but questions remain about whether enough is being done to address the issue,” it says.

The FCA also says poor culture remains a concern in the wholesale insurance sector and threatens to undermine its broader standing.

Airbnb, Uber 'blurring product lines'

Analytics company GlobalData says the rise of sharing economy companies such as Airbnb and Uber pose both challenges and opportunities to insurance, blurring the lines for an industry which typically distinguishes between personal and commercial products.

The London-based analytics specialist says platforms that enable consumers to share belongings or services for commercial activities has led to a wave of flexible and innovative insurance products. These have also forced insurers to adopt new delivery methods to provide fast transactions.

The sharing economy poses challenges when establishing liability, and gaps in coverage exist even as the trend grows strongly, GlobalData says in a new report.

While insurers that do not adapt to emerging sharing models risk losing ground, “the potential of the sharing economy in insurance is still untapped and new shared mobility models will bring further lucrative opportunities to insurers”.

Some insurers have responded with add-on solutions to complement existing policies, while others have developed products that can be switched on and off as required from an app.

But GlobalData analyst Beatriz Benito says there is still ambiguity, including questions as to when coverage starts.

“While legislation is bringing some clarity into this, there is still some way to go,” she says in the report. “Consumers are bound to continue using sharing economy platforms, incentivised by greater accessibility and more attractive prices.

“There will be new opportunities for insurers in other emerging models – for instance, the sharing of e-scooters as a transportation method is gaining traction in several countries.”

Some US and European insurers have developed products for the sharing economy, while insurtech start-ups such as Metromile and Pikl have added to insurance coverage.

The report says partnerships between insurers, insurtechs and/or marketplace platforms are enabling cover to start when customers enter sharing economy activities, minimising any delays or friction, the report says.

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Analysis

The bushfire royal commission: what's at stake for the industry

Okay, so the stage is set for a bushfires royal commission, one that Prime Minister Scott Morrison says he “thought very deeply about” before deciding to make good on his words and go ahead with it.

Mr Morrison wants the final report by August 31, at the very latest. Over the next six months the inquiry will be looking at, among other things, how best to prepare Australians for what he has grudgingly accepted as a grave national threat: climate change.

Ways to better mitigate the impacts of natural perils and improve disaster resilience measures will be examined as part of the royal commission’s mandate.

The lessons from this summer’s deadly bushfires will be considered too. Mr Morrison wants to have the inquiry’s recommendations adopted before the next fire season, which is now just mere months away.

“The inquiry acknowledges climate change, the broader impact of our summers getting longer, drier and hotter and is focused on practical action that has a direct link to making Australians safer,” he said in his announcement of the royal commission.

“That’s why we need to look at what actions should be taken to enhance our preparedness, resilience and recovery through the actions of all levels of government and the community, for the environment we are living in.”

So will the royal commission turn out to be another talk shop, one for the prime minister to score political points and regain the narrative after copping heavy flak over his cack-handed response to the worst bushfire disaster since Black Saturday in 2009?

Or will there finally be meaningful action to address not only the unmistakable threats posed by climate change, but also associated requirements like the need for mitigation projects? And then, of course, there’s the well-documented problems related to taxes on insurance.

For now, at least publicly, the industry is hopeful – despite the omission of insurance from the inquiry’s terms of reference.

Insurance Council of Australia (ICA) spokesman Campbell Fuller says the royal commission will facilitate, among other things, an “analysis of insurance cover, including the causes of non-insurance and underinsurance in each state, and measures to improve the insurability of natural disaster-exposed communities.”

He told insuranceNEWS.com.au ICA and its member companies “are ready to provide expertise, insights and evidence to assist the royal commissioners in their inquiries and deliberations”.

“The terms of reference give scope to raise the adverse impact of the NSW Emergency Services Levy and state stamp duties on the take-up of adequate insurance. This not only impacts individual households but also the resilience of the broader community, because government has to make a greater contribution to recovery.”

IAG and Suncorp, the two leading personal lines insurers and therefore the insurers most impacted by the bushfires, have expressed similar sentiments.

Suncorp Insurance CEO Gary Dransfield, who is also ICA President and Chairman, says he hopes the inquiry “will lead to more positive outcomes” as the threat of growing natural disaster risk increases.

“As an insurer, we know from previous natural disasters what it will take to rebuild, and the importance of being aware of the emotional, physical and financial toll this process takes on those affected,” he said.

“We need practical solutions, initiatives and measures to help our communities and individuals to be better prepare for what lies ahead.”

IAG says the inquest provides an opportunity to develop a national, long-term approach to managing natural disasters, through a co-ordinated and collaborative response.

“Importantly, the policy response to building our nation’s resilience to natural disasters must focus on prevention,” a spokesman told insuranceNEWS.com.au.

“While IAG supports disaster recovery efforts and does not underestimate the positive impacts of recovery funding in helping our communities to rebuild after a natural disaster, a more balanced approach to spending on disaster mitigation and resilience measures and recovery and reconstruction is required.”

But the National Insurance Brokers Association (NIBA) remains sceptical about the whole thing. NIBA has previously said insurance issues surrounding natural disasters like the bushfires must be addressed.

“We will draw our concerns in regard to the NSW Emergency Services Levy to their attention and we will certainly make sure the royal commission is aware of the impact of taxes, charges and levies on property owners in NSW,” CEO Dallas Booth told insuranceNEWS.com.au.

For the insurance industry, the stakes are high as the royal commission gets underway.

This summer has been a very costly one for insurers. Since September, insurers have received more than $1.91 billion in bushfire-related claims and a further $904 million in storm and flood claims. The bushfire losses have surpassed Black Saturday’s, which were about $1.76 billion dollars in normalised value.

The insurance industry has long pressed for at least $200 million a year in Commonwealth-funded spending on mitigation works (matched by state and territory governments) to deal with increasingly expensive and costly natural disasters.

Will the royal commission consider it and submit it to the prime minister? Will the royal commission also push for the scrapping of insurance taxes, just as the 2009 Victorian bushfires royal commission successfully forced the change from a premium-based fire services funding system to one that spread the load across the whole community?

We will know after August 31, and the answer can’t come soon enough for the industry.