13 September 2021
The Insurance Council of Australia (ICA) second business interruption test case is set to conclude this week after hearing arguments relating to disease and prevention of access wordings and how any losses should be calculated if a policy is triggered.
Issues raised during the hearing have included a discussion of “trends” issues and the relevance of the UK Financial Conduct Authority (FCA) test case result, where the Supreme Court rejected a landmark Orient Express Hotels decision.
Senior Counsel Bret Walker, appearing for Chubb, told the Federal Court that the original decision on the Orient Express case should be preferred to the FCA result, while noting the UK case did not amount to a precedent.
“There has been in our submission an over-egging of the significance of that recent Supreme Court decision,” he said.
The landmark Orient Express Hotels decision, which was rejected by the UK Supreme Court, found a hotel damaged by a hurricane wouldn’t have experienced major losses under a business interruption claim as its business would have been impacted anyway from the surrounding devastation.
The second test case consists of nine small business claims from a range of business sectors and locations lodged with Australian Financial Complaints Authority as part of its dispute resolution process.
Another test case involving QBE and a travel company has also been heard at the same time, looking at whether Section 61A of the Victorian Property Law Act has the effect of substituting in the Biosecurity Act for the repealed Quarantine Act.
The section of the law says that where an Act is “repealed and re-enacted” references in contracts will be taken as referring to the new Act.
The hearing, before Justice Jayne Jagot, has been scheduled for eight days ending Wednesday, with time already set aside for a potential appeal hearing in November.
Theatres that rank amongst Melbourne’s most iconic venues have filed Victorian Supreme Court action against Ansvar Insurance seeking cover for pandemic business interruption losses totalling more than $20 million.
The venues include The Princess Theatre, where Harry Potter and the Cursed Child was playing when COVID-19 hit. Other locations are the Regent Theatre, the Comedy Theatre, the Forum, Regent Theatre and the Plaza Ballroom.
Court documents seen by insuranceNEWS.com.au seek cover for an amount of $20.4 million under the infectious diseases extension of the policy.
The writ, filed by Elit Lawyers, says COVID-19 was a notifiable human infectious or contagious disease, there was an outbreak within 25 kilometres of the venues and they were forced to shut due to a government authority order.
The relevant policy periods were from March 31 2019 to March 31 2020 and from March 31 2020 to March 31 2021.
Ansvar Insurance, a subsidiary of UK-based Ecclesiastical Insurance Office, told insuranceNEWS.com.au it is "always committed to working with its customers and brokers when claims arise".
A spokesman said it would be "inappropriate to discuss specific policies, individual claims circumstances or any matters that are before the courts".
Independent cluster group Broker Co-op has completed its registration and named its first board of directors.
As insuranceNEWS.com.au has reported, Broker Co-op was formed to give a voice to independent Australian brokers.
MD of CRE Insurance Broking David Harrison, Director of Barrack Broking Charles Gow-Gates and Executive at Broker Co-op Jess Craig were appointed to the board.
“Since the acquisition of IBNA in 2019, independent brokers have been represented by large corporate groups and publicly listed companies,” the group said.
“Broker Co-op members, however, are different and the co-op’s formation is a significant milestone to ensure that independent brokers are inspired, not acquired.”
Broker Co-op says it is owned by its members and run for the benefit of its members.
“In a market where the interests of major broking groups become increasingly conflicted with non-member shareholders, particularly as a result of their interests in brokers or related services, Broker Co-op’s mandate and its supporting value proposition is an important point of differentiation that will resonate with independent brokers”, Mr Gow-Gates said.
The first round of membership was restricted to five brokers and limited to brokers that did not already have an affiliation with a cluster group.
The group will now focus on setting up supplier agreements, building up operations and rolling out its service offering to members.
Visit www.broker.coop for more information.
More than a quarter of strata premiums went to government taxes such as GST and stamp duties, according to a report commissioned by peak body Strata Community Association (SCA).
SCA says the report is an “eye opener” as it again pushes for the removal of taxes on insurance products to ease the premium affordability pressure, especially for those living in catastrophe-prone northern Australia.
National President Andrew Chambers says the SCA hopes that with this report, it can “implore governments” to reconsider the insurance tax regime.
“It’s not an equitable base,” Mr Chambers told insuranceNEWS.com.au. “Some of the premiums you are talking in the millions of dollars because of the location.
“It is a penalty because of where they are living. They are being penalised.”
According to the report, there are several duties, levies and taxes that significantly impact the total cost of insurance for strata schemes. All jurisdictions impose GST and most states impose stamp duty.
The report found 165,554 owners corporations – defined as a body corporate, strata company, or community association – paid more than $830 million in strata insurance premiums and nearly $230 million in duties, levies and taxes last year.
Some 27.45% of strata premiums on average were for taxes and levies charged by state, territory and federal governments.
“Breaking down the total costs of insurance, premiums and the amount of duties, levies and taxes charged was a real eye-opener to just how much the consumer is paying in taxes just to take out a policy that is compulsory,” Mr Chambers said.
“If you’re taking out a strata insurance policy in Australia as a strata community then more than a quarter of what you pay on average goes to government taxes, stamp duties and levies.”
He says in NSW the figure is closer to 40%.
SCA says the report aims to provide a comprehensive data-driven view of strata insurance in Australia.
The report prepared by Deakin University in Victoria surveyed 454 strata managers and 280 strata lot owners, analysed 58 versions of state and territory strata management agreements, investigated 38 pieces of legislation and regulation and gathered complex data from insurers.
Click here for the report.
Australia’s governments need to put arrangements in place ahead of summer to allow the insurance sector to respond to natural disasters around the country, with current border restrictions hindering movement, the industry has warned.
The Insurance Council of Australia (ICA) has called on National Cabinet to facilitate processes to allow the movement of claims assessors, disaster recovery specialists, builders and tradies in a COVID-safe way between and within states and territories.
CEO Andrew Hall says agreements reached last year have not remained in place for the current round of border restrictions triggered by the Delta variant.
“The worst-case scenario would be for an event to happen and then we spend weeks and weeks trying to work out whether people can travel in to help those communities,” he told ABC Radio Canberra.
The National Insurance Brokers Association (NIBA) says it strongly supports ICA’s call for a national approach that would lessen restriction impacts, with brokers among those facing challenges being on the ground and supporting clients.
“Insurance brokers are essential in helping their clients navigate preparations for, and recovery from, natural disasters and major weather events,” CEO Dallas Booth said.
“They are on the front line and have seen first-hand the challenges presented by state border restrictions, as they help their clients navigate the recovery from natural disasters.”
ICA included the call for action on borders in an Insurance Catastrophe Resilience Report released last week, which highlighted the industry’s role in responding to disasters.
Other actions sought include improvements in disaster waste and debris clean-up, more investment in resilience, particularly at a state level, improved building quality and standards, better land use planning and the removal of state taxes on insurance.
National Cabinet is due to meet next on Friday.
Insured losses from storms that left a raft of damage across much of New Zealand in July have reached at least $NZ122 million ($117 million).
The severe weather caused flooding at Westport, land slips in the upper South Island, and damage in Wellington and the North Island.
The Insurance Council of New Zealand (ICNZ) says 5207 claims have been made to date, including 3790 for home and contents, 590 for motor vehicles and 795 for commercial and business policies.
Westport, a town of about 4000 people, was particularly hard hit by the storms, which crossed the country from July 16-19, with losses of more than $NZ85 million ($82 million).
ICNZ says a very active pre-lockdown building market and ongoing COVID-19 impacts have caused some difficulties in securing specific trades or sub-contractors, while delays or longer lead times have also been reported for certain building materials or household items.
In Westport the recovery is also affected by a shortage of accommodation for tradies coming into the region to carry out work.
“These aspects are completely out of insurers hands, but they are doing all they can to support their customers affected by delays or the impacts of COVID on supply chains that may mean a longer recovery for some,” ICNZ CEO Tim Grafton said.
In other parts of the country, Upper South Island losses have reached $NZ14.7 million ($14.1 million), Wellington losses have reached $NZ15.4 million ($14.8 million) and North Island losses $NZ6.7 million ($6.5 million).
IAG says its IAL brand will no longer accept new business from November 1 and renewals from December 1 as it prepares to revamp the way personal lines products are sold through intermediaries.
Last week the business announced the IAL brand will be withdrawn, following a “comprehensive” review of its Broker Personal Lines business. The review examined the most effective way for IAG to provide products and services to that part of the market.
IAL distributes motor, home and landlord products exclusively via the Steadfast Client Trading Platform (SCTP).
As part of the changes, IAG will consolidate its offerings of personal lines products in the broking space under its CGU label instead. CGU will join the SCTP marketplace by the end of this financial year, selling personal lines products through Steadfast brokers.
insuranceNEWS.com.au understands the IAL team of about 20 employees will be offered redeployment opportunities in other IAG brands.
IAG CEO and MD Nick Hawkins says the business is dedicated to continuing to provide its brokers and partners with the best possible products and services.
“On my first day as CEO I established a dedicated Intermediated Insurance business to focus on the needs of our brokers and partners who play such an important advisory role for their clients to ensure their assets and businesses are protected,” Mr Hawkins said.
“We believe consolidating our product offering for the Broker Personal Lines market under the CGU brand is an important step in simplifying our business and ensuring we can provide the best possible products and experiences for our valued brokers and partners.
“Through CGU we’re well placed to succeed in this market, and we intend to support more brokers in harnessing our established brand, trusted relationships and strong core insurance capabilities.”
He says the immediate priority is to work with Steadfast and its broker network to ensure a smooth transition for its customers and their clients.
Steadfast CEO and MD Robert Kelly says the broker network will work closely with IAG to add the CGU personal lines offerings onto the SCTP marketplace as soon as possible.
“We have a longstanding and strong relationship with IAG and we understand its desire to have a one brand strategy through CGU to provide personal lines insurance products to the broker market,” he said.
PSC Insurance Group has completed its $24.5 million purchase of the broking business of Alliance Insurance Broking Services.
The Melbourne-based group announced the completion of the acquisition last week in a brief investor update.
PSC had announced the acquisition last month, saying the addition of the insurance broking portfolio and other key assets trading as Alliance Insurance will generate more than $3 million in incremental pre-tax earnings to the business.
Alliance Insurance Broking Services is selling the operations as part of undertakings it gave to the Federal Court after the Australian Securities and Investments Commission obtained urgent interim freezing orders against it and its director Renato De Maria.
The undertakings include appointing an independent agent to sell the business.
Honan has produced a timely guide to help businesses understand their risk exposures amid Australia’s COVID vaccination drive.
Honan’s Employee Benefits and Workplace Risk teams produced the “Managing your Business COVID vaccination risk exposures” article which explores the latest guidelines on mandating vaccinations, the government’s no fault COVID indemnity scheme, vaccines & workers’ compensation, and impacts to premium if a worker makes a COVID-related claim.
Google, Facebook, Qantas and SPC have introduced a compulsory vaccination policy for staff and more companies are expected to follow suit.
The Fair Work Ombudsman (FWO) has set out four tiers of employee to help assess where it might be “lawful and reasonable” to mandate COVID vaccinations: Tier 1— employees interacting with high-risk people (for example border control, hotel quarantine); Tier 2— employees interacting with vulnerable people (health care or aged care workers); Tier 3— employees interacting with the public (retail workers at essential stores) and Tier 4— employees with minimal face-to-face interaction with others.
Honan says with no test cases available to show the tier system in action, the FWO guidelines “raise the question of what steps are considered reasonably practicable for employers to help keep staff safe,” and says for now this decision sits with employers.
No fault COVID indemnity scheme
The Federal Government’s national no fault COVID Vaccine Claim Scheme compensates claims related to the administration of a Therapeutic Goods Administration (TGA)-approved COVID vaccine via an approved program.
Australians who suffer injury and loss of income due to receiving the COVID vaccine can claims for the cost of injuries exceeding $5,000 caused by a proven adverse reaction. Independent experts will assess the claims and compensation fully funded by the Commonwealth.
COVID vaccines and workers’ compensation
Honan says several issues may increase the likelihood that a vaccine injury is covered under workers’ compensation, including whether an employer: took steps to arrange for its employees to receive a COVID vaccine, encouraged or induced its employees to receive the vaccination to obtain benefits for its business, permitted or directed employees to have a COVID vaccination during ordinary working hours; or provided instructions to employees relating to the administration of the vaccine.
“The link between a vaccine injury and the worker’s employment is easier to establish where a worker is influenced by their employer’s requirement to receive the vaccine or is subject to a Government Public Health Order,” Honan says.
The worker may also need to provide evidence they opted for a particular vaccine brand due to their employment, it says.
Impacts to premium if a worker makes a COVID-related claim
In NSW, icare has confirmed it will exclude COVID claims and COVID vaccination claims from the individual claims experience without passing on premium impact to the policyholder.
“Whether the remaining State regulators follow icare’s lead is yet to be seen, however, Honan is liaising with our regulatory contacts to understand their position,” the guide says.
Businesses are encouraged to report any COVID outbreaks directly to WorkSafe in Victoria and SIRA and consider an employee who has tested positive to COVID as having a “reportable injury”.
Communicating with employees
Honan says employers should familiarise themselves with TGA guidance on communications regarding COVID vaccinations, which includes conditions around offering incentives to people who are fully vaccinated.
NRMA Insurance and RACV will together contribute $2 million to donation platform GIVIT to provide urgently needed items due to COVID lockdowns such as groceries, technology and resources for home learning.
GIVIT will run a COVID-19 Relief Program appeal for two years, serving as a ‘virtual warehouse’ where organisations can request specific items and services.
GIVIT has a proven track record of mobilising quickly and working with an extensive network of charities and community groups across the country, RACV GM Social Impact and Corporate Communications Louise Steinfort says.
“We know we can identify emerging requirements and adapt the program to ensure people get what they need, when they need it most,” she said.
NRMA and RACV have now made joint contributions to the value of $4 million to help Australian communities after partnering with Lifeline last year to fund critical tele-health suicide prevention services for communities impacted by the Black Summer bushfires and COVID.
GIVIT CEO Sarah Tennant says many families were at “breaking point” and struggling to afford essential everyday items such as food and household supplies and requests via GIVIT have almost doubled since early last year.
“Communities are dealing with the pandemic on top of ongoing challenges, including recovering from natural disasters, domestic and family violence, and economic hardship,” she said.
Visit the appeal here.
Arch Insurance has launched a management liability product that is available for SMEs through its CoverHub online platform.
ML+ offers options for private and unlisted public companies, sole traders, partnerships and not-for-profit organisations, with liability covers including directors’ and officers’, company, employment practices, statutory and crime protection.
Aggregate limits range from $1-10 million, with the product available through CoverHub for Australian and New Zealand SMEs with an annual turnover below $25 million. Companies with a larger turnover can be quoted via referral to an underwriter.
Underwriting Manager – Executive Assurance Paula Ritchie says the product provides protection that can be tailored to the insured’s specific needs.
“Private and unlisted public companies face the same corporate and statutory risks as larger public companies yet can struggle to meet the costs associated with investigations and legal actions,” she said.
The Australian Securities and Investments Commission (ASIC) has released finalised guidance for breach reporting obligations after making some changes resulting from industry feedback.
ASIC says it has incorporated some 15 more working examples into the guidance and has also provided for “batch uploading” of reports that derive from a single cause to reduce the reporting burden for licensees.
“The Government’s new reporting obligations put strong guard rails in place that will benefit firms and consumers alike,” Deputy Chairman Karen Chester said.
“The new obligations will help firms identify and act swiftly on the breaches that matter, making sure they get the attention they deserve.”
The breach reporting requirements, which come into effect on October 1, were made law last December after the Hayne royal commission and findings of a Treasury Enforcement Review Taskforce.
Licensees and boards will have greater confidence they are doing the right thing by consumers, and ultimately their firm and shareholders under the new regime, Ms Chester says.
ASIC says it will take a “reasonable” enforcement approach in the initial stages of the new obligations, provided industry participants are using their best efforts to comply.
The guidance is available here.
The Federal Court has ordered Allianz Australia and its subsidiary AWP to pay $1.5 million in penalties for mis-selling travel insurance policies through Expedia websites.
Chief Justice James Allsop made the order last week, ruling the businesses engaged in misleading and deceptive conduct to sell the products between February 2015 and September 2018.
Allianz and AWP say they welcome the finalisation of the matter, which arose from proceedings taken by the Australian Securities and Investments Commission (ASIC).
“Allianz and AWP cooperated fully with ASIC to resolve these proceedings expeditiously, including by making admissions and not contesting the penalty sought by ASIC,” they said in a statement to insuranceNEWS.com.au.
“In 2018, Allianz and AWP self-reported the matters [that are] the subject of these proceedings to ASIC.
“Allianz and AWP worked with ASIC on a remediation package and previously paid 15,965 customers an amount totalling approximately $1.14 million in remediation.”
A spokesman for Allianz confirmed the business no longer has contracts with Expedia in Australia.
AWP was ordered to pay $1.14 million and Allianz $360,000. They have also been ordered to pay ASIC’s costs.
“The court imposed the penalties after finding Allianz and AWP engaged in misleading and deceptive conduct when selling travel insurance by failing to correctly state how premiums were calculated and by allowing insurance to be sold to ineligible customers,” ASIC said.
According to ASIC, the court also found the businesses breached their financial services licence obligations by failing to prevent the sale of the products on Expedia to consumers who were ineligible to make claims under the policies.
They also failed to stop Expedia websites from misusing a quote from the Department of Foreign Affairs and Trade about the importance of purchasing travel insurance.
Consumer Action Law Centre backs the court’s ruling.
“We welcome enforcement action that holds insurers to account for engaging in misleading and deceptive selling of insurance products,” Policy Officer Tom Abourizk said.
“That a major insurer sold insurance products to people who were ineligible to claim under them for over three years is particularly shocking.”
He says the case demonstrates travel insurance is the kind of product that should not be sold using “pressure tactics”.
“It is crucial that the ban on the unsolicited selling of insurance products be interpreted to apply to travel insurance,” Mr Abourizk told insuranceNEWS.com.au.
Click here for the court ruling.
The corporate regulator has provided a half-year update of its enforcement work, including about $29.6 million in civil penalties imposed by the courts as a result of actions it has taken on compliance failures.
In the January-June period the Australian Securities and Investments Commission (ASIC) also commenced 12 civil penalty proceedings, targeting misconduct in insurance, superannuation, markets, auditing and credit.
One of the actions it took was against Westpac, alleging the lender allegedly mis-sold consumer credit insurance with credit cards and other credit facilities.
During the period ASIC commenced 52 investigations and there are now 204 such cases that are ongoing.
Additionally 19 individuals were charged in criminal proceedings and 143 criminal charges have been laid during the period.
“ASIC regulates the conduct of financial services and credit providers,” the regulator said in the update. “Our work in financial services is focused on improving consumer outcomes.
“We do this by addressing practices that result in consumer harm or create a risk of harm, particularly for vulnerable consumers.”
Click here for the enforcement update.
The Australian Prudential Regulation Authority’s (APRA’s) 2021 Stakeholder Survey reveals measures brought in to address risks from COVID have been given the thumbs up by insurers and other regulated financial service entities.
The latest survey, the seventh APRA has conducted, polled almost 300 regulated organisations online in May.
“It’s pleasing to see that, overwhelmingly, entities are supportive of the work that we are doing and the actions we have taken during COVID-19,” APRA Chairman Wayne Byres said.
However, the survey indicates a quarter of regulated entities feel the burden of APRA’s regulation is too high for the benefit gained by their entity, and that almost one-third of respondents believe that APRA collects too much statistical data.
APRA’s updated corporate plan promises to modernise the prudential framework so that “it’s less burdensome and more adaptable to the rapidly evolving financial sector,” Mr Byres said.
The survey found 95% of regulated entities believed APRA effectively communicated its changing expectations during COVID, while 87% agreed APRA’s policy responses were appropriate and helpful to their organisation during the pandemic.
“Perceptions of APRAs response to regulating the industry during COVID were also strong, especially with respect to communicating changing expectations, appropriate and helpful policy responses, and reducing regulatory burden during the pandemic,” the regulator said.
SIRA and icare have jointly granted $9.6 million over five years to the John Walsh Centre for Rehabilitation Research (JWCRR) to help improve life for people living with injury-related disability.
The NSW workers’ compensation agencies, which have partnered with the JWCRR for two decades, say the renewed agreement will fund senior academic positions undertaking work in rehabilitation research and evaluation.
SIRA CEO Adam Dent says the research outcomes directly benefit people in both SIRA’s personal injury schemes, informing policy and legislative changes.
“We are delighted to continue this successful partnership to make personal injury schemes in NSW sustainable and improve the outcomes of people who make claims,” Mr Dent said.
The JWCRR, which is named after new icare board member and Chairman of the Dust Diseases Board John Walsh, is part of the University of Sydney.
It aims to generate new knowledge to improve health outcomes; link the research community with organisations and patient advocacy groups; and translate research outcomes into clinical practice.
icare CEO and MD Richard Harding said its research represented a “knowledge repository” used in more than 140 countries.
“Getting the right care and support for injured people is paramount and this investment will continue to ensure NSW stays at the forefront on treatments and recovery pathways for severely injured people,” he said.
Samantha Barrass has been appointed CEO at New Zealand’s Financial Markets Authority (FMA), effective in January.
Current Chief Rob Everett will depart at the end of October and General Counsel Liam Mason will be Acting CEO during the months prior to Ms Barrass’ arrival in Wellington from the UK.
Ms Barrass has worked in a range of regulatory and executive roles in Europe. She recently led the establishment of the UK’s Business Banking Resolution Service and has also held senior roles at the UK Solicitors Regulatory Authority and the London Investment Banking Association.
She held the role of CEO for five years at the Gibraltar Financial Services Commission until 2019 and formerly spent nine years at the UK’s Financial Conduct Authority after beginning her career as an economist at the Reserve Bank of New Zealand.
“It’s great to see a New Zealand citizen returning home to take on this important role,” FMA Chairman Mark Todd said. “She is a proven leader and has impressive, directly relevant, regulatory experience in the UK and Europe.
“Her experience as a consensus-building leader will stand the FMA in good stead as it continues its current activities and readies itself for a wider mandate in regulating banks and insurers, as well as climate change reporting.”
Ms Barrass says the FMA is at an important juncture in its journey to support and enhance the economy and financial health of New Zealand.
“I’m very excited to be returning home to lead the FMA in this next phase and working with all to safeguard and foster a financial sector that everyone has a stake in.”
The Federal Government has appointed the inaugural members of the Financial Regulator Assessment Authority (FRAA), which is tasked with reviewing and reporting on Australia’s twin watchdogs.
FRAA will be chaired by former Macquarie Group CEO Nicholas Moore, who currently holds multiple directorships in the private and non-profit sectors, while Gina Cass-Gottlieb and Craig Drummond were also appointed.
Ms Cass-Gottlieb is a partner with the competition and regulation group of law firm Gilbert + Tobin and in 2018 was reappointed to the Reserve Bank of Australia Payments System Board.
Mr Drummond most recently served as Medibank CEO and was previously Group Executive Finance and Strategy at National Australia Bank and CEO and Country Head of Bank of America Merrill Lynch (Australia).
FRAA, established in response to Hayne royal commission recommendations, will review the capabilities of the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
“Together, the inaugural members have an in-depth understanding of Australia’s regulatory framework and first-hand experience working with ASIC and APRA over many years,” a statement from Treasurer Josh Frydenberg says.
“They also have strong organisational experience which will assist in their assessment of the operational performance of both ASIC and APRA.”
The Financial Planning Association (FPA) has outlined its concerns about the incoming design and distribution obligations (DDO) regime in a submission to Treasury.
The DDO regime is set to commence on October 5.
FPA says it supports the DDO Interim Measures Instrument 2021 that is currently out for stakeholder consultation but is disappointed that it does not address the unnecessary and unworkable record keeping and reporting obligations the DDO Act places on financial planners.
The peak body says applying the DDOs to planners ignores the higher standards of the financial advice regime and brings into question whether some elements of the regime are fit-for-purpose.
According to the FPA, the reporting and record keeping requirements in the DDO regime look at product regulation from the product perspective and the potential risk/harm posed to retail clients, as identified under the target market determination, as a whole.
In contrast, when providing personal advice, financial planners consider the appropriateness of each product recommendation in relation to the individual client’s circumstances and as one part of that client’s broader financial plan.
“The product must be suitable for the role it will play in the financial plan to achieve the client’s immediate and longer-term goals and meet likely future interests and needs,” the FPA submission said.
“These obligations also require planners to clearly demonstrate that the client would be in a better financial position and that it would improve the client’s financial wellbeing if the advice were followed.
“This will be different for each client of the financial planner.”
FPA says financial planners currently have stringent disclosure, record keeping and reporting requirements under the financial advice provisions in the Corporations Act.
“Imposing additional reporting and record keeping requirements that do not naturally ‘fit’ in existing advice processes and reporting, would create an additional onerous administrative burden for planners as the conclusions a planner draws about the risks and appropriateness of a product will differ based on each client’s circumstances,” FPA said.
“Given financial planners are permitted to provide personal financial advice that is inconsistent with the product issuer’s [target market determination], the FPA questions whether any additional consumer protections would be gained by imposing the DDO reporting and record keeping obligations on planners.”
Click here for the submission.
The Australian Financial Complaints Authority (AFCA) has ruled an AIA customer who has rheumatoid arthritis does not qualify for a benefit payment as her condition does not meet the definition of “severe” as was spelled out in her trauma insurance policy.
An AFCA case manager had initially looked into the dispute and issued a recommendation in favour of the insurer but the customer rejected it, insisting she should be paid the benefit as she was suffering from a “severe” form of the chronic inflammatory disorder.
But AFCA dismissed her complaint, ruling the policy does not cover all rheumatoid arthritis and that to qualify for a benefit, the customer must meet the definition of “severe rheumatoid arthritis” as described by AIA.
In the woman’s case, the rheumatologist who was treating her says her condition is severe but he has not explained what criteria he has applied to make that assessment.
“There is no evidence before AFCA of a widely accepted method for assessing the severity of rheumatoid arthritis,” AFCA said in the ruling.
“The words ‘severe rheumatoid arthritis’ do not provide a clear dividing line between rheumatoid arthritis which leads to a benefit and rheumatoid arthritis which does not.
“Rather, a judgement about what ‘severe’ means has to be made. The definition in the policy is directed to that problem.”
AFCA says trauma insurance policies do not pay for any condition a person might suffer. Instead, they pay benefits when a person suffered from a condition listed and defined in the policy.
“Having definitions of medical conditions in the policy can give more certainty about what is covered when buying insurance,” AFCA said.
“It also provides more certainty when a claim is made, because it will be clear in most cases whether a person meets the definition or not.
“Using definitions to precisely describe what is covered and what is not is standard practice in the insurance industry. All trauma policies use definitions in this way.
“The complainant could not reasonably expect to be paid a benefit outside the terms of the policy.”
AFCA says it is fair for the insurer to apply the definitions and reject the claim.
AIA had assessed the claim under the policy’s old definition and upgraded 2016 definition of the illness, and on both occasions, the decision was made to reject the claim.
The 2016 definition requires a failure to respond to modern treatments.
“That requirement is a feature of current [severe rheumatoid arthritis] definitions across the insurance industry,” AFCA said. “I am satisfied it is consistent with good industry practice.”
Click here for the ruling.
About 58% of self-licensed financial advice practices are more profitable than two years ago despite increased compliance costs, according to a survey by My Dealer Services, which offers support services to advisers.
In other findings, survey respondents say rising staff costs and higher professional indemnity insurance premiums are expenses that could negatively impact profitability.
They say the current compliance regime and exit of experienced practitioners are the key challenges facing the industry going forward.
“The rising cost of compliance is unsustainable in the long run and needs to be addressed as an industry priority,” My Dealer Services Director Alex Euvrard said.
About 98% of respondents say technology will play a bigger role, helping the industry reduce cost and improve operational efficiency.
“Technology will definitely assist in reducing costs, improving client engagement and facilitate and encourage growth through acquisition opportunities,” Mr Euvrard said.
“However, of the challenges ahead, the most crucial is the impact of compliance and regulators need to heed the calls of advice professionals for a more workable and practical framework going forward.”
My Dealer Services says the survey is one of its many programs used to connect with its network of 70 Australian financial services licensees and more than over 240 advisers.
Financial Services Minister Jane Hume will deliver the opening address at the Association of Financial Advisers (AFA) conference next Tuesday.
Australian Securities and Investments Commission (ASIC) Chairman Joseph Longo will also speak at the two-day Evolve conference, AFA said.
AFA says it will be Mr Longo’s first address to the financial advice community since his appointment in June.
Other key speakers at the September 21-22 event, which will be held in a hybrid format, include Shadow Assistant Treasurer and Shadow Minister for Financial Services Stephen Jones and Zurich Group Chief Customer Officer Conny Kalcher.
AFA GM Policy and Professionalism Phil Anderson will host a session on the regulatory landscape and there is also a Life Insurance CEO panel session.
Click here for registration details and the program.
MetLife Australia is a finalist in the Best Diversity, Equity and Inclusion Initiative category of the inaugural SEEK Talent Acquisition Recognition (STAR) awards, which acknowledge excellence in talent acquisition.
MetLife says it has made significant progress on its Diversity and Inclusion agenda, entirely overhauling its talent acquisition procedure and introducing gender inclusive bathrooms and learning events.
“We’re really proud of the progress we have made in creating a diverse and inclusive workplace and we’ve seen this reflected in our retention rates and feedback from staff surveys,” MetLife Head of People & Culture Allyson Carlile said.
“There is always more to do and we remain focused on excelling in this space.”
The 2021 winners of the new SEEK Talent Acquisition Recognition Awards will be announced in February.
The Insurance News Wellness Survey 2021 has already attracted about 800 responses detailing the experience of remote working and how the insurance industry has managed the mental health impacts of COVID and related restrictions.
Emailed to subscribers last week to coincide with R U OK? Day, the survey invites readers to anonymously share feedback about workloads, work-life balance, hours and productivity, flexibility, childcare and home-schooling, equipment and ergonomics and mood and feelings.
Full survey results will be shared in the next Insurance News magazine with the intention of identifying any issues that employers could address.
“We hope you’ll participate in the Insurance News Wellness Survey 2021. It will only take a few minutes to complete,” Publisher Terry McMullan said.
He notes the COVID pandemic has dramatically altered the lives of Australians with associated lockdowns, working from home, vaccination uncertainty, closed borders, mask orders and a range of new rules that severely limit freedoms.
“The impact on individuals’ personal and professional lives – past, present and even future – has been immense,” Mr McMullan said.
The initiative is intended to reveal information about different aspects of mental health and wellbeing within the industry, and to identify issues employees are experiencing that need to be resolved.
Studies show a considerable increase in mental health issues, with a fifth of Australians suffering high or very high levels of psychological distress related to COVID-19.
Lifeline Australia experienced its four busiest days in its 57-year history last month, with more than 694,000 calls for help in 2021 so far, which is a record.
Almost half of Australians (45%) will experience a mental illness in their lifetime.
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The online presentation of the annual Mansfield Awards for Claims Excellence will take place on Thursday (Sept 16).
The awards, which are in their fifth year, are named after the English Lord Chief Justice who introduced the concept of utmost good faith to insurance – a concept that is written into Australian law.
Winners will be announced in personal lines, SME property and casualty, corporate property and casualty, and specialty. The company with the highest aggregate score will win the coveted Gold Mansfield.
Last year’s Gold Mansfield was presented to Vero, over finalists Allianz, Hollard/HCi and Zurich.
Companies’ claims performances are collated from feedback provided in a survey via LMI Group’s Claims Comparison website. The results are “graded” to allow for differences in the size of client portfolios.
Steadfast and icare are event sponsors, and bookings to attend the online awards can be made at www.mansfieldawards.com.au.
Employee benefits consultancy and broker Mercer Marsh Benefits (MMB) has made a number of senior leadership appointments across several business areas, all reporting to MMB’s Head of Pacific Sarah Brown.
Ms Brown says the spate of appointments at MMB, part of Marsh McLennan, is in preparation for a “significantly altered register for people-related risks” after COVID.
“When we emerge from the pandemic, businesses will face new challenges to attract and retain top talent,” Ms Brown said.
Melbourne-based Katherine Gobbi has been appointed Head of Recovre, MMB’s occupational rehabilitation provider. Ms Gobbi was most recently CEO at life insurance and personal injury claims management business EMLife.
Perth-based Blake Gleeson takes the newly-created role of Chief Client Officer, MMB, Pacific. Mr. Gleeson joined MMB in 2019 as Leader, WA and will now develop strategic solutions across the organisation.
Melbourne-based Geoff Grace, most recently Aon’s Chief Broking Officer, Health Solutions, Asia Pacific for five years, becomes MMB’s Head of Placement, Asia and Pacific and will oversee placement strategy and develop insurer relationships.
Sydney-based Ross Pavlis, who has held senior management positions at NRMA, CGU and Allianz, takes the role of Workers’ Compensation Leader, Australia, addressing issues including an ageing workforce and legal and regulatory changes.
Mark Puskaric returns to MMB in the role of Workers’ Compensation Placement Leader, Australia after several months at Howden Australia.
In October, Aon’s People Risk Practice Client Director Steven Cakaric will join MMB as National Client Solutions Director.
Suncorp New Zealand has provided $150,000 to five community support groups working to relieve increased hardship caused by COVID lockdowns.
The five organisations are meeting a significant jump in demand in the Auckland and Northland regions, and a four-fold rise in uptake of food packages and other welfare support since the nation’s lockdown began.
The Suncorp donation will help Cause Collective, Fair Food, The Salvation Army, Sikh Aware and the insurer’s community partner Shine assist people with food security, income loss, mental health, family violence and in-home educational needs.
“More than at any time in recent history, there is a need to support community groups that have direct access and can provide benefit for communities badly affected by the lockdowns,” CEO Jimmy Higgins said.
“We know the impact of these lockdowns falls very firmly on those already struggling the most and many, particularly in our Pasifika, South Auckland and Northland communities are badly affected.”
Recent severe flooding in West Auckland would also create hardship for some residents, and some community organisations would be focusing support in that area.
Hardship relief, premium reductions and excess waivers were also available to support customers, Mr Higgins said.
Catastrophe loss modeller Risk Frontiers will hold a webinar series next month on resilience and the role of science to support decision-making in a warming world.
The series kicks off on October 13, focusing on the implications of the latest Intergovernmental Panel on Climate Change report for Australia.
The next webinar on October 20 explores the physical climate risk of not meeting the Paris 1.5-degree target in Australia.
In the final session on October 27, the role of building codes and how it can help mitigate cyclone risk will be discussed.
Click here for registration details.
Accenture has identified five critical insurance industry technology trends for 2021 after COVID quickly elevated customer expectations beyond the traditional offer to products and services enabled by the cloud.
COVID exposed inflexible work arrangements and operations, fragile supply chains, untrustworthy information, new customer needs and “the limitations of longstanding norms for how companies operate and how people live”.
Now, insurers need to move beyond risk indemnification and reimagine insurance as “continuous customer engagement” that helps mitigate and manage risk, Accenture says.
“The revenue landscape is shifting. Going big in the cloud now may also help insurers gain first-mover advantage on emerging revenue opportunities,” it says.
The Accenture Insurance Technology Vision 2021 report says cloud-based technology is becoming imperative for new products. Cloud investment topped a list of eight digital areas for insurers in a global survey of 553 Insurance business and IT executives.
“The year 2020 was a catalyst for rapid change,” it said. “We have a blank slate, waiting for the next vision of the future to be defined. We have an opportunity we may never see again in this generation – to actively shape our future almost from the ground up.
“Leading in an uncertain future will require insurance companies to become skilled at change and reinvention.”
Following are Accenture’s “five critical trends for insurers for 2021”.
Simone Dossetor, COO at Munich Re in Australia, will take over as CEO at Insurtech Australia in October when current chief Rita Yates departs to pursue new challenges.
In 2017, Ms Yates co-founded Insurtech Australia, which now supports 80 insurtech start-up and scale-up members and 30 corporate partners across the local insurance industry.
“I am incredibly proud of our wonderful Insurtech Australia community. It’s been a pleasure and a privilege to serve,” Ms Yates said. “With Simone at the helm, I know Insurtech Australia’s future achievements will be inspirational.”
Ms Dossetor has more than 20 years’ experience in the insurance industry and has served on the Insurtech Australia board since February last year, been a director of the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) for three years, and previously held roles at Calliden, Deloitte and the Trowbridge Group, now part of Finity.
She pledged to “bring my passion for innovation, transformation and diversity to the next phase of growth and development of the insurtech ecosystem in Australia”.
Auckland-based insurance platform JAVLN has acquired JRNY’s AI-driven software, allowing brokers, insurers and their customers a more intuitive experience with dynamic conversations, smart recommendations and data driven insights.
Founded in 2011, JAVLN’s platform supports brokers, underwriting agencies and insurers across the Asia Pacific. It says the equity-based deal with JRNY furthers its use of data and AI to streamline insurance processes.
“Acquiring the IP (intellectual property) of JRNY which is market tested and respected, will accelerate our own development so we can scale faster,” JAVLN CEO Dale Smith said.
JAVLN's SaaS cloud-based platform is designed specifically for insurers, agents, underwriters and brokers, providing end-to-end policy visibility in real-time. The company has doubled in size in the last year to almost 50 people.
“JAVLN is the perfect business to take the JRNY technology to the insurance industry with their expanding reach and a common goal to improve the customer experience,” JRNY founder Michael Lovegrove said.
Dublin-based RentalMatics, which provides telematics to the car hire sector, has entered a three-year agreement with Queensland-based East Coast Car Rentals as it launches its connected car platform in the Australian market.
The Irish start-up says it will help East Coast Car Rentals, which was established in 1979, reduce its operating and insurance costs, and optimise vehicle utilisation and revenue opportunities.
“This marks a milestone moment in the growth of RentalMatics as we introduce our telematics and fleet management solution to the Australian market,” CEO and Co-Founder Colm Menton said.
East Coast Car Rentals MD Rohan Marx says the platform will help his business explore new marketing angles and mobility solutions. The RentalMatics offer “far exceeded” competing telematics solutions, he says.
“Telematics is part of our future, enabling us to manage our fleet far more precisely, reward customers for great driving and assist with damage claims.”
Connected insurance, also known as real-time, organic or on-demand insurance, is the key to shaping the future of the industry, says a Kanopi Round Table panel.
Kanopi CEO and Founder Nigel Fellowes-Freeman was joined last week by QBE Head of Ventures James Orchard and Insurtech Gateway Australia MD Simon O’Dell in a session moderated by Insurtech Australia CEO Rita Yates.
Connected insurance works with internet connected devices or other platforms that hold data. It changes dynamically with the policyholder’s needs as the platform detects changes.
QBE’s Mr Orchard says connected insurance is a “real driver of business model innovation into the future”.
“It really is the lynchpin, we think, of how insurance is going to change – and the whole value chain, so from distribution, to pricing and underwriting, to claims management,” he said.
“It's a massive interest for us. It's a real part of what we're looking at, and something that as the industry starts to understand and scale, is really going to change how an incumbent insurer like us does business – not just for personal lines but right up to the complex lines as well.”
Mr Fellowes-Freeman says Kanopi’s data-driven platform provides insurers with the modular technology needed to transform legacy infrastructure to deliver a “connected ecosystem” approach, and to build, launch and scale that new approach in a very fast and adaptable way.
Hollard invested in Melbourne-based Kanopi during a $4 million fund raising in May. The data-driven insurtech connects insurers and digital platforms to best tailor insurance to individual customers.
Founded in 2016, Kanopi says its platform intelligently anticipates consumer needs and its mission is to transform the industry by working with insurance and marketplaces to create one common ecosystem that simplifies insurance.
“Connected insurance, for us, really sits fundamentally the core of what we do,” Mr Fellowes-Freeman said.
By 2030, there is potential for a quarter of all services in the economy to be via a connected approach, he says, versus just 1-2% now.
“That fundamental change is happening. We’ve seen it in a really small microcosm during the pandemic. It’s really starting to accelerate that process,” he said.
Kanopi says insurance is fundamentally a data business and it therefore makes sense that insurance is a “primary-use case for this connected world”.
Mr O’Dell revealed Insurtech Gateway sees hundreds of pitches each year and says connected insurance is fundamental for an insurtech start-up to stand out.
“Usually, a compelling and exciting insurtech start-up has connected insurance at their core,” he said.
Youi has entered a multi-year agreement under which Digicall Assist will provide case management and roadside assistance services to all its comprehensive car insurance policyholders across Australia.
Motorists with Youi car insurance will be able to get assistance right across Australia for vehicle roadside repairs, lock-outs, flat tyres, flat batteries, emergency fuel and towing. Woolworths recently agreed a similar deal.
Youi automatically includes roadside assistance in its car insurance policies and Digicall CEO Michael Curtin says the agreement demonstrates the increasing role of technology in enabling customer experience at the roadside.
“Our leading-edge dispatch system and roadside IQ technology mean getting roadside assistance has never been easier,” he said, adding that Youi will benefit from detailed data across customer demographics and trends, providing actionable insights for the insurer.
Key features of the 24/7 service include the Digicall Assist roadside assist app, live-tracking and roadside intelligence geo-location.
Digicall, which also operates in New Zealand, South Africa and the UK, has created a new app called ‘InQ-IQ’ which begins support for a motorist from the time they enter a call queue, and integrates geolocation and auto photo uploads with its contact centre.
The cloud-based contact centre system and integrated roadside intelligence technology offers a drop-down list of common vehicle issues, and has photo capture capability to identify the vehicle and show the issue.
Swiss Re says non-life insurance premiums will be 10% above pre-COVID-19 levels by the end of this year and will continue to rise due to increased exposures and risk awareness, as well as evolving cover requirements.
Premiums are expected to reach $US6.9 trillion ($9.4 trillion) this year and surpass $US7 trillion ($9.5 trillion) for the first time next year.
The reinsurer says heightened risk trends will increase the need for insurance protection, but also require a greater focus on evaluating and modelling, and ensuring pricing is adequate for the risks taken.
“There is a clear recognition that claims frequency and severity is rising as demonstrated by recent natural catastrophes or cyber incidents,” CEO Reinsurance Moses Ojeisekhoba said at a presentation ahead of the annual Rendez-Vous de Septembre.
“This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap.”
Swiss Re Institute says climate change poses the biggest long-term threat to the global economy, and up to 18% of gross domestic product could be lost by 2050 if no mitigating actions are taken.
Risks from secondary perils, such as floods or wildfires, are growing as urbanisation increases community and asset exposures, while digitalisation and interconnectedness are adding to the risk landscape and driving demand in areas such as cyber protection.
Swiss Re says pricing must reflect inflationary trends as well as anticipated higher claims activity.
Consumer price inflation pressure is expected to remain high in the near term, medical and wage inflationary pressures are expected to build up in the medium term, and social inflation trends in the US are likely to continue in a litigious environment.
Chief Underwriting Officer Thierry Leger says a focus on contract clarity is among key themes for the industry in the short to medium term, with COVID leading to court battles and revealing some “not-so-well drafted clauses” in policy wordings.
“This is very unsatisfactory, because we are here as an industry to pay for what is due and not to pay for what is not due,” he said last week
“We view it as absolutely crucial for the entire industry to have a strong focus on wordings. Be very clear about what is covered and what is not covered. Phrase it in simple terms, and I am sure it is going to help the image of the industry as a whole, but also it will help our relationships with our clients.”
Global reinsurance capital rose to $US688 billion ($934 billion) in the first half of this year, a 4% increase from the end of December, a Willis Re report says.
Growth from a re-stated base reflects strong results reported by a majority of reinsurers, with improved capital positions backed up by rising equity markets and retained profitability.
Average premium growth of 15.2% for a subset of 17 companies is also the strongest pace seen at the half year stage since Willis Re began producing the analysis in 2014.
“This was aided by price increases at both the original and reinsurance levels,” the report says. “The rebounding global economy has also led to exposure and thus premium growth.”
Combined operating ratios improved to pre-COVID levels, averaging 94.1%, as reserve releases provided a benefit and despite natural catastrophe activity reaching the highest level for a first half since the analysis reports began.
“The consensus view is that the large reserve redundancies that have been produced by older accident years are now coming to an end and recent accident years are more challenging from a reserve adequacy standpoint,” Willis Re says.
Reported return on equity (ROE) improved from 0.7% to an average 13.9%, due mainly to a “near-absence” of COVID losses. Investment gains, which were close to zero last year, added 5.1 percentage points.
The underlying ROE is calculated at 6.3%, up from 2.7% last year, but still below the industry’s weighted average cost of capital, which Standard & Poor’s puts in the 7% range.
Willis Re says the insurance linked securities (ILS) market continued to develop well in the half, with catastrophe bonds maintaining the momentum established in the fourth quarter of last year.
Reinsurers globally are expected to perform better this year and also over the next 12 months, supported by a rebound in economic activity and lower virus-related losses, Fitch says in a new report.
The rating agency made the projections as it revised its fundamental outlook for the sector to “improving” from “stable”.
“This reflects the expected significant improvement in the sector’s financial performance in 2021 and 2022 on the back of higher prices in a hardening market environment, a strong rebound in economic activity, and lower pandemic-related losses,” Fitch said.
“These positive drivers will only partially be offset by declining investment returns, a higher frequency and severity of natural catastrophe claims, and a temporary pick-up in inflation rates.”
Pandemic loss uncertainty is diminishing, due partly to infectious disease exclusions in renewed contingency and business-interruption treaties, eliminating the risk of new claims, Fitch says.
It says the industry is in line for better underwriting margins and estimates reinsurers’ combined ratios should be able to improve 2-3 points this year and another 1-2 points next year.
The global reinsurance sector had significant risk-adjusted price increases in property and casualty reinsurance over the past 24 months for both excess-of-loss and quota share treaties.
Reinsurers have also benefitted from price hikes and tighter policy terms and conditions pushed through by cedants, especially in commercial lines.
The Fitch report says terms and conditions have also tightened for the reinsurance industry, including the notable exclusion of infectious disease and silent cyber coverage from a large number of renewed treaties.
“Environmental, social and governance-related considerations have not yet affected renewals, with the exception of facultative reinsurance covers related to coal or fossil fuels, which have had reductions or outright withdrawals,” Fitch said.
“This trend is likely to expand over time.”
Fitch says cyber risk coverage will remain a niche product for reinsurers even as take-up increases in the coming years.
“As this type of risk is constantly evolving, historical data cannot be used to price it correctly,” Fitch said. “Cyber risk is systemic in nature as successful attacks can affect companies or administrative bodies all around the world at the same time.
“Therefore, reinsurers are likely to accept only a limited amount of net exposure in their books.”
Guy Carpenter Global Head of Distribution Lara Mowery has given a peek at what to expect ahead of the January renewals season.
She told a virtual media briefing last week that primary rates are stabilising and ample traditional as well as alternative capital are bolstering the sector.
“Some drivers of uncertainty are dissipating,” Ms Mowery said. “Reinsurers’ risk appetites and product offerings continue to evolve in response to emerging market realities, and differentiation remains valuable.”
She says mid-year placements indicate moderating increases in average pricing due to the strong capital position of the sector and general economic rebound.
“The market will continue to monitor how COVID-19 claims are resolved and how the losses of 2021 develop while also turning attention to evolving risks including cyber and climate change,” Ms Mowery said.
The briefing hosted by Guy Carpenter also included the views of other industry participants.
Guy Carpenter MD and Head of London Europe Sebastian Cook says the US Property Catastrophe Rate-on-Line Index increased by 6% for renewals from January through July, approximately half of the increase experienced over the same period last year.
In Asia the increase was about 5%.
“Overall [Rate-on-Line] levels were impacted by several factors, including some upward shifts in retentions, particularly on loss-impacted programs, additional limits purchased on the top end of programs and increased pricing,” Mr Cook said.
“More broadly, the concerns about exposure from secondary perils and climate change were offset by abundant capacity, the effect of compounding rate increases and strong appetite for growth.”
Munich Re says data analytics and use of algorithms offer huge potential for the insurance industry, creating new risk protection solutions and improving customer outcomes.
The reinsurer is looking to step up its knowhow in these areas, collaborating with leading research institutions such as the German Research Centre for Artificial Intelligence to complement its work in complex topics like quantum computing.
It has also recently set up the Quantum Technology & Application Consortium together with nine leading German companies.
The goal is to tap the tremendous potential of quantum computing for the insurance industry.
“The digitalisation megatrend will radically change traditional insurance,” Munich Re Board Member Torsten Jeworrek said. “It will give rise to new fields of risk in need of insurance solutions.
“With its numerous digital and innovation projects, Munich Re has laid the foundations for profitable growth going forward.”
Munich Re says data-based algorithms help to optimise many processes such as customer interaction, claims settlement and underwriting.
The reinsurer says it also is aiming to increase its 10% share of the cyber market. It intends to achieve the goal by expanding its network and partnerships and tap the use of technologies to improve its expertise in modelling digital risks.
“In collaboration with clients, solutions are being drafted that go far beyond traditional approaches and comprise not only customised cyber coverage but also services to prevent and cope with attacks (also referred to as pre- and post-incident services),” Munich Re said.
“The inclusion in insurance covers of such consulting services geared to limiting losses is becoming increasingly important, particularly given the growing number of ransomware attacks.
“This will raise cyber security standards and make risks more insurable.”
Hurricane Ida onshore and offshore insured losses could reach $US25-35 billion ($34-47 billion), catastrophe modelling firm RMS estimates.
The estimate includes National Flood Insurance Program losses in Alabama, Florida, Louisiana and Mississippi of $US2.3-4 billion ($3.1-5.4 billion) and offshore platform, rig and pipeline losses of $US700 million to $US1.5 billion ($950 million to $2 billion).
“Ida was truly a multi-faceted event in terms of hazard and loss impacts,” RMS North Atlantic Hurricane Models Senior Product Manager Jeff Waters said.
“From a wind perspective, this storm was a design level event, where observed wind speeds often exceeded speeds that buildings have been designed to withstand, particularly in the hardest hit areas in southern Louisiana.”
Ida made landfall near Port Fourchon on Sunday, August 29 as a category 4 hurricane, producing sustained winds of 150 miles per hour (241 km/h), according to the National Hurricane Centre.
The hurricane caused extensive damage in Gulf of Mexico states before bringing torrential rain and flooding to other parts of the country as it travelled to the northeast.
The RMS initial figure excludes wind and inland flooding impacts in the Ohio Valley, Mid-Atlantic and Northeast US, with estimates for those regions still being assessed.
Significant specialty line impacts are expected given Louisiana electricity grid damage and the high concentration of petrochemical plants, refineries, marine cargo and port exposures, power plants and other industrial facilities in the state’s south.
“With prolonged anticipated recovery times, we expect material business interruption losses to these lines on top of varying degrees of infrastructure damage they sustained,” Chief Risk Modeling Officer Mohsen Rahnama said.
Aon says Ida is expected to be among the costliest hurricanes to impact the US mainland with total direct economic losses expected to reach will into the tens of billions of dollars, and with public and private insurance entities facing significant exposures despite a sizeable amount of coastal and inland flooding damage not insured.
Larger-scale disasters occurring with more intensity and resulting in greater impacts are putting a spotlight on areas where gaps lie in humanitarian and insurance protection, whether countries are identified as developed or emerging, Aon Impact Forecasting team Catastrophe Insight Head Steve Bowen says.
“Hurricane Ida’s catastrophic impacts in the US highlighted how much work is yet to be done to better insure around inland and coastal flooding,” he said.
Aon says other catastrophe events last month included major wildfires in Greece, which began in late July, wildfires in Algeria, flooding and landslides in Turkey’s Black Sea region and a continuation of the worst drought in 91 years in Brazil.
Swiss Re has taken a look to the end of the year, and two decades further ahead, as current trends herald changes that will transform the industry into the future.
The shorter-term outlook comes as the annual Rendez-Vous de Septembre, normally held in Monte Carlo, moves online for a second year in a row with COVID-19 impacts continuing, economic recovery still a dominant issue and the US cleaning up after Hurricane Ida.
Swiss Re says non-life premiums will be 10% above pre COVID-19 levels by the end of this year, reaching $US6.9 trillion ($9.4 trillion), and that they will surpass $US7 trillion ($9.5 trillion) for the first time next year.
Real premium growth is forecast to accelerate from 1.5% last year to 2.8% this year and increase to 3.7% next year, while insurance demand is reflecting a recognition that claims frequency and severity is rising, as demonstrated by recent natural catastrophes and cyber incidents.
Swiss Re says experience this year is illustrative of a rising losses trend from secondary perils, which include wildfires, hail, and certain storms and floods.
Large global losses have resulted from Winter Storm Uri, which hit the US in February, floods in China and the storms and floods that swept Europe in June and July.
Climate change poses the single biggest long-term threat to the global economy with such events set to increase, the insurer says, while also driving a major change in the nature of the property and casualty market.
A Swiss Re Institute Sigma global property and casualty (P&C) market study looking ahead to 2040 finds technology and climate change influences will shift the premium pool balance, leading to motor’s share declining while property is on the rise.
Global P&C premiums are expected to more than double to $US4.3 trillion ($5.8 trillion) in the next two decades, and property will triple to $US1.3 trillion ($1.8 trillion) driven by economic growth and climate impacts, while urbanisation also plays a role.
The share of weather-related catastrophe impacts on the property risk pool is expected to increase around 50%, generating up to $US183 billion ($249 billion) in additional premium by 2040.
Swiss Re Chief Economist Jerome Haegeli says a shift away from motor and toward catastrophe-influenced property risk means more risk in the system and greater complexity.
“It will be much more complex, because motor is much easier to price,” he tells insuranceNEWS.com.au. “On the other hand, handling the complexity with how to price the climate risk affecting property will be much more challenging, especially with all we know about the tipping points of climate.”
Swiss Re’s report includes a call for action, stressing that the insurance industry and governments need to work together, with both sides playing critical roles reflective of their capabilities.
“Our contribution here with this Swiss Re report is to quantify the risk so that we can anticipate and better understand the risk, and anticipating and understanding risk is really at the core of the insurance value proposition,” Dr Haegeli says.
Economic development remains the key driver of premium growth when looking across all lines of business over the next 20 years, but climate change risks could slow the expansion, as well as having a direct impact on property insurance.
Swiss Re calls for more policy action on carbon pricing, promotion of pre-disaster loss mitigation and increased investment in infrastructure that will reduce emissions, in addition to projects that boost resilience at the time of catastrophes.
Dr Haegeli also warns the economic rebound following COVID-driven recessions over the past 18 months should not be mistaken for a more fundamental structural recovery.
“It is super important that today’s economic rebound is accompanied by a sustainable recovery and also a sustainable insurance system,” he says. “A real recovery definitely remains a marathon and not a sprint.”
The second online Reinsurance Rendezvous comes after year-ago expectations that the event would return this September to its traditional format in Monaco. Instead, many countries are battling the impacts of ongoing Delta variant outbreaks as the pandemic remains far from over and vaccines are rolled out.
“Declaring victory too early against COVID-19 is the biggest short-term risk,” Dr Haegeli says.
“However, the number one risk longer-term, is not being ready in terms of the underlying risks that are in the system, and the number one risk in the system is climate change.”
Swiss Re points to the positives in the outlooks for the near-term and further ahead. Insurance is more important than ever and skills assessing risk will be increasingly valued as complexity is expected to rise.