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Ministers agree to act on PI impasse

A consultation on professional indemnity (PI) insurance is expected in coming weeks after the Building Ministers’ Forum in Sydney last week agreed on a co-ordinated response to the impasse in the troubled construction industry.

Federal Industry Minister Karen Andrews and her state counterparts also agreed to take up all 24 suggestions in the Shergold-Weir report on improving compliance and enforcement of building codes.

NSW and Queensland will oversee the action plan, which will involve a PI options paper on alternative insurance options and a pathway for professional standards.

Outcomes from the consultation will be submitted by September to the forum, which will next meet in December.

The near-collapse of the PI market for certifiers and surveyors, triggered by the withdrawal of exemption-free covers, was among key issues discussed at the meeting in Sydney.

Insurance Council of Australia CEO Rob Whelan, who attended the meeting, has called for swift action to restore confidence in the building sector.

He has also proposed a formal role for the insurance industry as a permanent member of the Australian Building Codes Board (ABCB), which has been tasked with overseeing implementation of the Shergold-Weir report.

Representation on the board will ensure insurance perspectives are heard, he says.

“Though [last week’s] agreement is generally positive, insurers remain concerned any delays in implementing the Shergold-Weir recommendations and action being taken by the ABCB will further undermine public and industry confidence in the construction sector,” he said.

“ICA is willing to engage with governments and regulatory authorities to ensure the restoration of confidence and stability in the construction industry is achieved as soon as possible.”

See ANALYSIS.

No ‘windfall’ for insurers under cladding fix: ICA

The Insurance Council of Australia (ICA) has rejected suggestions that insurers will enjoy a “significant windfall gain” from Victoria’s cladding rectification plan and should therefore help fund the repairs.

The state last week announced a $600 million program to remove the dangerous material from private high-rise buildings, following a proposal in the Victorian Cladding Taskforce’s final report to the Government.

Obtaining financial contributions from insurers is also on the taskforce’s list.

“If [the] Government funds and co-ordinates rectification as we have recommended, the liability of insurers for existing buildings is likely to be reduced,” the taskforce’s report says.

“Accordingly, it is reasonable for government to negotiate with insurers with a view to their remaining in the market.

“Further, to the extent that government provides funds for rectification, insurers receive a significant windfall gain. It is therefore reasonable for them to make a substantial contribution towards the costs of rectification.”

Insurers have stopped providing exclusion-free professional indemnity (PI) cover to building surveyors and certifiers as problems mount for the construction industry over cladding and defects issues. The move follows huge PI claims losses for insurers.

“Insurers are at the end of the risk management process,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.

“The taskforce may not be aware that insurers have been losing $3.40 for every $1 collected in premiums this decade for professional indemnity insurance for building professionals."

Rejecting the assertion that insurers would receive a significant windfall gain if the proposed plan to fund cladding rectification is implemented, he says the cost of rectification and compensation “should be borne by the sector responsible for the issues in circumstances where property owners no longer have an insurance-derived solution”.

Strata Community Association NSW has urged the state to follow Victoria’s lead and introduce a similar cladding rectification program.

“The Victorian Government has put $600 million on the table to address this issue and the NSW Government – supported by the Commonwealth – needs to look at matching this figure,” the association’s State President Chris Duggan said.

The cladding problem in NSW could cost $1 billion, the association predicts.

NSW funds $2 million drought insurance study

The NSW Government will spend $2 million investigating a national insurance scheme to protect the drought-hit farming sector from future dry spells.

“The best drought assistance measure a government can deliver is to help the agricultural industry to self-insure,” Minister for Agriculture Adam Marshall said. “As this drought rolls on, it’s obvious we need to be looking at ways to roll out a product that would cover all producers against the devastating loss of income that comes with drought and other natural events.

“This is something that has been called for by the agricultural sector for a very long time, but so far insurance products have largely been constrained to individual production sectors within the industry.”

The plan was unveiled last week at a bush summit in Dubbo, NSW.

Risk mitigation tools and comparable models used in other countries will be explored as part of the study.

The National Farmers’ Federation, which has long pushed for a national drought resilience plan, will be involved with the research.

“This investment by the NSW Government is a major contribution to developing innovative ways to manage drought and the radical swings in income that accompany it,” federation President Fiona Simson said.

The NSW Farmers group wants other states to support the project.

“NSW Farmers encourages other state and national farming organisations to call for each of the states and the Commonwealth to invest in this research and to progress a truly national risk insurance market for Australian agriculture,” grains committee chairman Matthew Madden said.

Ex-Allianz manager wins $1.3 million bullying payout

Allianz has lost a lawsuit over workplace bullying charges filed by a former manager, and must pay him $1.39 million in compensation.

The District Court of NSW ruled the insurer “is liable to pay” Craig Ward for economic damages plus interest and costs because abuse from his supervisor left him medically unfit to return to the workforce.

A psychiatrist reported Mr Ward suffers “severe residual” post-traumatic stress disorder and depressive symptoms.

The bullying took place over 14 months and began shortly after a new state manager, a former army commander identified only as Mr Smith, joined the insurer in 2003.

Mr Ward alleged he was shouted at and told he “was hopeless at his job” several times.

On one occasion, he was slapped so hard on his head that he nearly hit his computer keyboard. He says he was hit on the shoulder at other times.

Evidence from other employees corroborated Mr Ward’s account. The state manager was removed from his post in April 2004 and given a national role. He later left the insurer.

Allianz argued it could not be held liable for the physical aspects of Mr Smith’s behaviour, but the judge disagreed.

“He embarked on one course of conduct aimed at achieving what he saw as his single goal, the improvement of the business,” Judge Justin Smith said.

“That course of conduct included physical abuse that was, on any view, improper. However, it was intimately connected with Mr Smith’s task because it was done in the apparent execution of the authority Allianz had given him as state manager.”

Mr Ward went on leave in December 2010 and never returned to work. His psychiatrist says he is unlikely to be able to work before his eligible retirement date, which is 15 years away.

“He has been unable to work since December 2010 and has no capacity to return to work,” Judge Smith said.

“That incapacity was materially caused by the conduct of Mr Smith. The defendant is liable to pay the plaintiff damages for his economic loss, both past and future.”

Property capacity contracting, premiums rising

Australian property market capacity is contracting, while premiums are increasing for catastrophe-exposed and undesirable risks, Willis Towers Watson’s July update says.

“High exposed accounts are needing larger deductibles and a sound risk management strategy to attract capacity,” the report says.

Premiums are up 10-20% for catastrophe exposed risks, at least 15% for those considered undesirable or loss affected while other areas are seeing gains of up to 10%.

Willis Towers Watson says Australian insurers are putting underwriting submissions under increased scrutiny and seeking more granular data than in previous years.

Overall submission volumes have increased around two to three times prior years due to the premium and capacity moves, further straining insurers' resources and creating a congested market.

In general liability, primary rates are flat to up 10%, while stronger gains are reported for additional layers of risk.

“After years of depressed rates on excess liability, minimum premium levels have increased with finely priced layers seeing increases of up to 25%,” the report says.

Insurers have become more considered in deploying liability capacity, especially in cases where they have in the past been willing to take on higher levels of risk.

Fair play more important than letter of the law: AFCA

The Australian Financial Complaints Authority (AFCA) has warned insurers against relying on “legally sound” black-letter arguments for actions that create poor consumer outcomes.

AFCA’s latest newsletter reveals it recently ruled against an insurer that acted unjustly against a client.

The client lodged a complaint after the unidentified insurer removed his name from a joint home and contents policy without his approval, thereby denying him his share of a payout when the house was destroyed in a fire.

The payout for the policy, in place from April 2015 to September 2017, went to his sister, who had his name removed. She had arranged the cover after they inherited the property because the complainant is illiterate.

“The insurer argued the complainant’s sister had the responsibility to inform him that his name was no longer on the policy, and because she didn’t it was not required to pay the complainant, based on the general principles relating to joint policies,” AFCA says.

“We found that while the policy may allow for one party to make changes, we do not accept that this extends to removing policy cover from one of the parties without their knowledge and consent. The insurer’s action in this case was against basic contract principles.”

AFCA raised its concerns with the insurer, which accepted it did not act in accordance with community expectations and has agreed to compensate the complainant.

“This is a prime example of AFCA carrying out our role of doing what is fair in all the circumstances, applying relevant legal principles, good industry practice and codes of practice,” it says. “If a strict black-letter law application leads to an unfair outcome, we will step in… black-letter law arguments that are legally sound and well-articulated will not succeed if they deliver fundamentally unfair outcomes for consumers.”

Industry settles most NSW hailstorm claims

About 72% of home building claims from last December’s NSW hailstorm have closed, according to the latest update from the Insurance Council of Australia (ICA).

The industry has settled about 71% of contents and 65% of motor claims.

Insured losses from the storm are estimated at nearly $1.24 billion including $986 million for domestic claims.

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Corporate

Finity acquires AI firm

Actuarial consultancy Finity has purchased Sydney-based artificial intelligence (AI) analytics firm Deep Logic for an undisclosed sum.

Finity says the acquisition will strengthen its product offerings and expertise in the AI and machine learning space, which is an area of growing interest to insurers.

A number of Deep Logic-developed products are used by insurers in the UK and the US.

“This is an exciting acquisition for Finity that brings an impressive array of the highest-level skills available in data science, analytics and software product development to our business,” MD Scott Collings said.

“Deep Logic’s team strengthens our ability to further add value to our clients’ businesses.”

Legal dispute settles out of court

A confidential out of court settlement has ended a lengthy legal dispute between six former owners of the SRS underwriting agency and major broker Gallagher.

The SRS partners mounted the action in 2017 in the Queensland Supreme Court, claiming $3.6 million plus interest from Gallagher in a dispute over a final payment.

SRS was Australia’s largest Lloyd’s underwriting agency when it was acquired by Gallagher in November 2012. The sale agreement included a final “earnout” payment to be calculated on the amount of commissions earned over a three-year period ending in December 2015.

Documents filed by the six SRS partners in the Queensland Supreme Court alleged the calculation used by Gallagher in late 2015 was applied in a way that had not been agreed, and resulted in a zero earnout.

SRS – later rebranded as part of Gallagher’s Pen Underwriting operation – lost much of its established business with international brokers when Gallagher bought the national OAMPS brokerage for $1.01 billion 17 months after buying SRS.

360 takes stake in construction underwriter

360 Underwriting Solutions has acquired a 50% stake in online underwriting agency eSentry.

The acquisition adds construction capability to a rapidly expanding portfolio at 360, which was set up by former senior Allianz executives Denis Morrissey and Chris Lynch in 2017.

The business, backed by QBE, will continue to trade as eSentry and offer annual and single construction project products, and residential owner builders products. A new business partner for eSentry’s mobile plant and equipment products is to be announced soon.

eSentry’s online solution for small and medium construction risks is “particularly attractive” and “immediately delivers a foundation to build this business into the future”, Mr Morrissey says.

Last month, 360 expanded into agriculture with a majority stake in specialist rural agency Insure That.

It was already active in commercial, aviation, accident and health and commercial motor lines, and added cyber in November.

eSentry says its technology solutions are “broker-centric” and will be enhanced by 360’s distribution reach and market expertise. The joint venture will accept new business and renewals from August 1.

QBE claim liabilities rise after rate ruling

QBE has increased its claims liabilities estimate after a change in the interest rate used in UK personal injury calculations fell short of company expectations.

The UK Ministry of Justice has changed the key figure, known as the Ogden rate, from minus 0.75% to minus 0.25%, but QBE said it had been factoring in a rate of 0.25%.

The decision will result in a $US60 million ($85 million) one-off increase in QBE’s estimate of claims liabilities, the insurer said in a statement to the Australian Securities Exchange last week.

The discount rate reflects the return that personal injury claimants can expect to receive when they invest compensation funds. A lower rate means a higher payout by insurers.

Ratings agency AM Best says some insurers in the UK have been reserving conservatively, while others have been taking a more speculative approach and assuming a rate of 0-1%.

“The alteration is likely to have a minor one-off earnings impact on some companies through strengthening or release of reserves,” Director of Analytics Timothy Prince said.

QBE says the new rate was not allowed for in its targeted combined operating ratio range of 94.5-96.5% for this year, outlined in the February results presentation.

The impact will be reported as an adjustment in its first-half and full-year results.

See other story.

Emergence heads west

Cyber insurer Emergence has opened an office in WA, further extending its national network.

James Lee will run the business from the Perth office as Business Development Underwriter. He was most recently senior account manager with Allianz Australia, according to his LinkedIn profile.

“Having expertise on the ground is the best way to support our WA broker partners,” MD Troy Filipcevic said, adding the business aims to deliver “innovative, market-leading solutions” to the market.

Emergence’s other offices are in Sydney, Newcastle, Melbourne and Brisbane.

Agricultural underwriting agency debuts fire and hail cover

Rural specialist Ag Guard is to launch a fire and hail broadacre insurance product on the Sunrise Exchange platform.

It will be the new agricultural underwriting agency’s first offering since it signed an agency and claims services agreement with Munich Re subsidiary Great Lakes Australia.

The partnership with Great Lakes paves the way for NSW-based Ag Guard to underwrite products in the rural space. Ag Guard was established in 2013 as a brokerage, servicing farmers and the wider agricultural sector.

MD Alex Cohn, who founded the business, will oversee crop underwriting, insurer and broker relationships and strategy to grow the business, the Ag Guard website says.

In a separate announcement, PSC-linked UK private equity investor BP Marsh & Partners has invested $1.47 million in Australian holding company Agri Services, which in turn is acquiring Ag Guard for an undisclosed price.

BP Marsh, which now holds a 36% stake in Agri Services, has agreed to pay a further consideration of up to $1.13 million under the investment agreement.

The UK investor has previously flagged plans to grow its business in Australia.

PSC last year invested £18.5 million ($32.7 million) in the London-listed investor, taking a 19.8% stake in the business.

IAG eyes emerging trends with Carbar investment

IAG has acquired a majority stake in car subscription and trading platform Carbar as it examines the impact of vehicle usage changes on motor insurance.

The insurer has combined with other investors in a $16.8 million capital raising that will fund the expansion of Carbar, which launched in Melbourne in 2016.

“The focus of our investment and the partnership moving forward will look at emerging mobility trends and providing new sources of value to our customers,” IAG EGM Innovation James Orchard told insuranceNEWS.com.au.

Carbar has tapped into demand for alternative forms of vehicle ownership and usage arrangements, reflected in the rise of car-sharing schemes. The service entered Sydney last month and plans to expand to new regions next year.

Motor insurance is provided through IAG’s CGU business.

Carbar CEO and co-founder Desmond Hang says IAG’s support will be instrumental in growing and developing the business and the investment is a good fit for both parties.

“We believe there is a change in mobility and traditional vehicle ownership and, being one of the biggest insurers within Australia, IAG wants to be at the cutting edge of the mobility sector and how best to create insurance products around it,” he told insuranceNEWS.com.au.

Subscribers to the service can pay an initial upfront $1000 for a reduced weekly rate, or pay regular weekly rates. The company also provides a platform for buying and selling cars.

Payments cover insurance, registration, roadside assistance and maintenance. Unlike vehicle leasing, there is no lock-in contract.

Agile targets SMEs through cyber partnership

Agile Underwriting has entered a partnership with Cynch Security to offer cyber insurance to SMEs.

Businesses that sign up for Cynch Security’s cyber-fitness program can obtain cyber insurance from Agile at no additional cost using their member credits.

Agile says it has created a product specifically for SMEs, including a round-the-clock emergency response team and cover for crisis management and data breach notification costs.

It expects to introduce another three products in the coming months that will be offered to existing partners.

“Prevention is better than the cure or claim for both customers and Agile, and we have listened closely to small businesses and designed an insurance product to meet their unique and diverse needs,” Agile GM Cyber James Crowler said.

“Small business owners are already busy and we understand the confusion about digital and information security risks. Cyber insurance just adds to their to-do list.”

IAG wins innovative design accolade

IAG has won an outstanding design and innovation award for its Human-Centred Design (HCD) Community.

The Good Design Awards were held on July 11 at The Star in Sydney, with about 700 project submissions judged across 10 categories.

IAG won in the “design strategy” category, which evaluates how organisations use design as a strategic tool to be more competitive.

HCD Community is a system of staff training, events and support. The jury noted it is “a good example of ensuring strategic design and HCD remains relevant to the business.

“It has had a positive impact on staff and is a good example of the sustainability of strategy design in a large organisation.”

Allianz secures HCF travel cover contract

Allianz has been appointed travel insurance provider of choice for members of HCF, Australia’s largest non-profit health insurer.

The partnership was formed in January but a full public announcement was not made until this month.

HCF previously partnered with QBE on member travel insurance.

Nib Holdings bought QBE Travel in May, rebranding the business Nib Travel, with Axa XL underwriting new policies.

HCF, which is purely a health insurer and underwrites no general insurance, acts as an agent for Allianz and Hollard pet insurance, administered by PetSure.

Allianz, which offers 24/7 call-centre emergency assistance, says it has been offering HCF members a 20% travel insurance discount that continues until September 30.

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Regulatory & Government

ASIC weighs wider clampdown on cold calling

The Australian Securities and Investments Commission (ASIC) is seeking feedback on whether its proposed ban on unsolicited phone sales for consumer credit insurance and life insurance should apply more widely.

A consultation paper released last week asks if the prohibition should be extended to financial products such as other types of insurance and superannuation, and if so on what basis.

ASIC has released the paper before expected wider anti-hawking action by the Federal Government in response to a Hayne royal commission recommendation.

The paper hones in on consumer credit insurance and life cover as priority areas, and says the ban would provide interim protections for consumers before broader reforms.

“Without such a ban, we are concerned that consumers will continue to be preyed upon by peddlers of inappropriate insurance products, using pressure sales tactics,” Commissioner Sean Hughes said.

“It is only fair that consumers have a proper opportunity to consider which insurance product best meets their needs and then compare alternative products, without feeling pressured to make a purchase.”

The Corporations Act currently contains anti-hawking prohibitions but loopholes can leave consumers vulnerable to unsolicited sales.

The implications of wider government action on hawking are unclear, with actuarial consultant Finity warning earlier this year that careful consideration is needed to ensure there is no adverse effect on general insurance.

The Insurance Council of Australia (ICA) says it recognises the need to prevent the consumer harm from unsolicited sales highlighted by the royal commission. It will consult with members on whether ASIC’s proposed ban is the most effective way of improving consumer outcomes, spokesman Campbell Fuller told insuranceNEWS.com.au.

The proposal outlined last week would apply to unsolicited phone sales on life and consumer credit insurance when general or no advice is given, and would include sales by financial advisers and encompass funeral cover.

Consumer Action Law Centre CEO Gerard Brody says consumer credit insurance and direct life insurance have become “exploitative cash cows”.

“A ban on cold calling of insurance was a much-needed recommendation of the royal commission and we welcome the swift action by ASIC,” he said.

Unsolicited selling can occur when contact details are obtained through surveys and competitions, clicking on sponsored content, telemarketing, or an existing relationship with a lender or insurer.

Comments on the ASIC paper are due by August 29, with ASIC planning to consult further on draft proposals in December and finalise changes in March.

The paper is available here.

Insurance ‘loyalty tax’ rises to 34%, says Fels

NSW Emergency Services Levy Insurance Monitor Allan Fels says recent research shows that, on average, customers renewing their insurance policy pay 34% more than new customers.

Writing on The Conversation website, Professor Fels says discounts are unfair if the cost is not passed on to loyal customers.

“It discriminates against people who do not or cannot easily switch to another supplier,” he says.

“Vulnerable consumers – elderly consumers, those on low incomes, low education, or those with a disability – are disproportionately affected.”

Professor Fels has also warned insurers against over-collection of the Emergency Services Levy (ESL), and sent guidelines to the industry.

He says in the event of over-collection, refunds to policyholders will be required, or if this is not practicable funds should be returned to the Chief Commissioner of State Revenue.

“While over-collection may be inadvertent, this does not relieve insurers of the requirement to make good on any over-collection amount,” he said.

The Insurance Council of Australia denies that new customer discounts are a tax on loyalty, and believes Professor Fels regularly steps outside his remit and fails to listen to industry concerns.

Last year it made an official complaint to the NSW Government, asking Treasurer Dominic Perrottet to pull Professor Fels into line.

The Monitor was appointed to ensure savings were passed on to customers under a scheme to replace the NSW levy with a broad-based property tax. After the reform program was suddenly ditched two years ago, Professor Fels retained his position to oversee the return to the old system.

APRA challenged over ‘culture of conformity’

The Australian Prudential Regulation Authority (APRA) has been told to end its “culture of conformity” and tackle risks including cultural issues and cyber threats, and to restructure to create insurance, banking and superannuation divisions.

An independent review highlights the need for a sharper focus on these sectors and criticises a lack of flexibility to respond to rising threats from a complex range of issues.

The capability review, set up after a Hayne royal commission recommendation, found APRA is impressive and forceful on traditional financial risk, but “slow to respond and tentative in addressing issues” elsewhere.

The review report says the creation of three supervisory divisions would reinforce a new culture, and ensure a more efficient structure for overseeing sectors including insurance.

“This will increase senior management’s focus and accountability for dealing with industry-specific issues,” the report says. “It will also strengthen the development of industry skills.”

Supervision is currently split between the Diversified Institutions Division and Specialised Institutions Division.

The report says company inquiries, similar to the Commonwealth Bank investigation triggered by financial advice scandals, should be held more widely under a stronger focus on governance, culture and accountability.

Self-assessments and issues identified during APRA supervision would determine which insurance, superannuation and deposit-taking institutions are targeted for inquiries.

On cyber, the regulator should seek to build strong allegiances with public and private sector experts, other regulators and financial businesses to boost resilience, it says.

The review is critical of APRA’s preference to “do things behind the scenes” and says it should “shift the dial” towards a more strategic and forceful use of communication.

“Some things need to be kept confidential, but APRA should consider what is appropriate to be communicated to the public,” it says.

The review panel was chaired by former Australian Competition and Consumer Commission chairman Graeme Samuel and included Diane Smith-Gander and Grant Spencer. They have made 24 recommendations.

The Federal Government says it will introduce or further examine five recommendations directed its way, including around APRA workplace bargaining and remuneration structures.

It will also consider the need for more funding in next financial year’s budget.

APRA says it supports the 19 recommendations within its mandate, but some will depend on the Government’s response.

SA government probes motor insurance sector

The SA Parliament has launched an inquiry into the state motor insurance and car repair industry.

It will examine whether dispute resolution mechanisms are effective in settling issues between repairers and insurers and in protecting consumers interests, and whether vertical integration is reducing consumer choice and market competition.

It will also investigate whether consumers are knowledgeable about contracts and repairs under insurance policies, particularly concerning repairer choice, cash settlements, fairness in assessing non-partnered repair estimates, and the effectiveness of web-based assessments.

The inquiry, chaired by MP Sam Duluk, will also check if motor insurers and repairers are complying with relevant laws and authorising and carrying out repairs to restore the safety, structural integrity, presentation and utility of vehicles.

“This inquiry will examine the effectiveness of the voluntary Motor Vehicle Insurance and Repair Industry Code of Conduct in regulating the relationship between repairers and insurers and in protecting the interests of SA consumers,” Mr Duluk said.

“Following recent changes to the SA compulsory third party insurance scheme and closure of the Motor Accident Commission, it is timely… to examine these important issues.”

Submissions to the inquiry end on September 6.

Climate change group ‘needs to be independent’: ICNZ

The Insurance Council of New Zealand (ICNZ) wants the Ardern Government to change its “zero carbon” bill to safeguard the independence and expert advice of the proposed climate change commission.

In a submission to the bill, ICNZ says the Environment Minister – who will be responsible for appointing commission members – should be required to gain the support of 75% of MPs before finalising appointments.

This would help guarantee bipartisanship in the long term.

The bill also proposes that the minister can direct the commission to be mindful of government policy when preparing reports.

But ICNZ says it “must be fearless and feel unconstrained in its ability to make independent and expert recommendations to successive governments”.

“If it is not seen as independent or is politically tainted, confidence in its recommendations will be undermined and so too will New Zealand’s framework to address the most significant challenges it will likely face this century.”

ICNZ is also urging the Government to alter how it identifies the different types of national wellbeing that must be assessed in a climate change risk assessment, so it can better capture the financial stability of the insurance and banking sector in the transition to a low carbon economy.

The Climate Change Response (Zero Carbon) Amendment Bill requires all greenhouse gases except methane from animals to be reduced to net zero by 2050. Methane emissions would be reduced by 10% by 2030 and as much as 50% by 2050.

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Life Insurance

Group cover reform a catch-all, Rice Warner warns

Rice Warner has joined industry in warning too many account-holders will be caught up in renewed government attempts to pass insurance-in-superannuation legislation.

The legislation will make life insurance an opt-in for under-25s or people with less than $6000 in super. A previous bill – passed with amendments brought by the Greens – removed insurance for accounts that are inactive for 13 months.

Rice Warner argues many super members aged under 25 will not have built up account balances above $6000 due to low salaries and intermittent work patterns.

Those on lower salaries require insurance most because they include those returning to work or working part-time, migrants and people waiting for old accounts to roll over to new ones.

It is urging the Government to remove the $6000-balance aspect of the legislation. It also wants the Government to defer implementation of the changes until the start of the next financial year.

New fund members will be caught in the legislation because their accounts won’t have reached the required cut-off, Rice Warner says.

It says while its research suggests younger super members are paying an unreasonable share of overall group insurance costs, this can be fixed by funds continuing to reshape premium rates to reduce significant cross-subsidies.

Account erosion is a legitimate concern, but that should not lead to the conclusion that insurance should be removed for under-25s, it says.

ClearView writes down financial advice book, goodwill

ClearView is reporting an expected profit of $4 million for this financial year, after a significant writedown in the value of its financial advice client book and a loss of goodwill.

Structural changes to the industry led the insurer to undergo a review of its financial advice business strategy and dealer group pricing model, resulting in a $14.1 million hit to its underlying profit.

A review of its IT strategy cost $6 million, while $3.8 million was spent on implementing a cost-reduction program. Its remediation program has cost it $2.4 million this year.

ClearView is repositioning its life insurance business to capitalise on the big four banks selling off their financial advice businesses.

Its financial advice segment will no longer be included in its embedded value calculations, it says.

Changes in claims assumptions in income protection cost $1.8 million. ClearView also terminated poor-performing life insurance distribution relationships.

It also terminated its information-sharing deal with Sony Life 16 months after it was established, after deciding that it was not in its best interests to continue with the co-operation agreement.

The company says the 2019 financial year has been a “difficult year” for the financial services industry with the impact of the Hayne royal commission, progressively difficult emerging economic conditions, and an increasing consumer and regulator focus on prices.

“ClearView has not been immune to this. All of these have involved substantial costs and management distraction.”

FPA overhauls planner matching service

The Financial Planning Association (FPA) has launched an online matching service to help people find Certified Financial Planners (CFPs).

Match My Planner asks users about financial goals, demographic information and the number of planners from whom they want to hear. It then sends notifications to CFP members of the FPA, who respond if they think their services are a good fit.

FPA research shows people searching for planners rely on trust, comfort, tailored recommendations, rapport, impartiality and reputation to find the right adviser.

The association is adapting its old directory to create the new service.

“The previous Find A Planner tool is heavily focused on geographic location,” CEO Dante De Gori said. “Research confirmed our hypothesis that it’s an important decision criterion, but not the primary one.

“The new… service ticks more of people’s boxes, and also focuses more exclusively on connecting consumers with the highest level of qualification currently available in Australia.”

The old directory averages 6900 searches, 14,500 profile views and 40 direct messages a month.

ASIC cancels adviser group licence

The corporate regulator has cancelled a financial advice company’s licence.

Golden Financial Group’s licence had been suspended since March 18 after it failed to lodge annual financial reports and join an external dispute resolution system.

It then advised the Australian Securities and Investments Commission it had ceased its financial services business and requested its licence be cancelled.

Golden Financial had held its licence since April 3 2008, and previously traded as NSG Services under the same licence.

The Federal Court levelled a $1 million fine, plus costs, against NSG nearly two years ago over dodgy financial advice provided on eight occasions between July 2013 and August 2015.

In that case, clients were commonly sold insurance and advised to move to superannuation accounts that committed them to costly, unsuitable and unnecessary financial arrangements.

The court found compliance failures were systemic and it had breached the best-interests duty under Future of Financial Advice reforms.

MetLife offering wins regional award

MetLife’s Protect retail product has been recognised at the Insurance Asia Awards, less than a year after its launch.

The product aims to overcome consumer apathy towards insurance, and takes into account low wages growth, high debt levels and a “gig economy” that is changing the country’s social and economic fabric. Advisers can adjust the product in response to clients’ changing insurance needs.

NEOS expands sales team in SA

NEOS Life has appointed Andrew Bridgland as Business Development Manager for SA, in response to growing demand.

Mr Bridgland has worked in many areas of life insurance and financial advice, making him an experienced partner for financial planners, staff and referral partners, the insurer says.

NEOS has also appointed Karim Yamen as a fourth Business Development Manager for Victoria and Tasmania. He was previously a client development manager at AIA, and is a former financial adviser.

“We are delighted to now have on-the-ground support in SA ahead of schedule and a growing presence in Victoria,” Head of Sales Charl du Plooy said.

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The Professional

NIBA names top Queensland, WA brokers

The National Insurance Brokers Association has revealed its award winners for Queensland and WA.

In Queensland, Lisa Carter from Clear Insurance is broker of the year, while the young professional broker award goes to Caitlin Carson of JLT.

In WA, John O’Leary of Zenith Insurance Services took out broker of the year, while the young professional broker award goes to Jordyn Gilbert, also of Zenith Insurance Services.

The winners, announced at two gala lunches last week, will now contend for national honours to be announced at the NIBA Convention on the Gold Coast in mid October.

Marty Owen: Ceremony planned

A celebration of the life of broker Marty Owen, who died last week following a long illness, is being organised in Melbourne.

Details have not been confirmed, but the ceremony is understood to be planned for next Monday, July 29.

Mr Owen established Malvern East brokerage Philp, Newby & Owen, which now trades as PNOinsurance, in 1977. He was MD prior to his retirement in 2016.

He also served on the Insurance Brokers Network Australia (IBNA) board for many years.

“Marty was extremely well respected by both underwriters and brokers, and clients really appreciated his technical knowledge,” PNO Director Peter Conquest told insuranceNEWS.com.au.

Mr Owen is survived by his wife Susan.

Johns Lyng names national loss adjusting manager

Building services provider Johns Lyng Group has appointed Anita Wilson as Account Manager and Head of National Loss Adjusting.

Brisbane-based Ms Wilson brings more than 11 years’ industry experience.

She was previously national loss adjusting manager at Cunningham Lindsey (now Sedgwick) and state manager for Bay Building Services.

NTI makes ‘best employers’ list

Diversified underwriting agency NTI and specialist medical and professional indemnity insurer MIGA are among the best companies to work for in Australia, according to an Aon survey of employees.

The two companies are the only insurance representatives on the list of the 12 best workplaces in the country and New Zealand.

Companies on the list scored highly in employee engagement, agility, engaging leadership and talent focus.

Staff shake-up for Advanced Buildings

Associate partner Peter Thomas has resigned from Advanced Buildings Queensland after seven years, to pursue interests outside the industry.

Hylton Conradie, appointed GM in July last year, has been leading the team since joining the business, and will continue to provide strategic direction.

Bruce Battersby will continue to manage the major loss team, according to the buildings and restoration insurance specialist, which is also a commercial builder.

Meanwhile, Peter Demchenko, who has been at the company six years, has taken the role of Construction Manager.

Advanced Buildings moved to new North Lakes premises in March and has regional offices in Townsville, Cannonvale and the Gold Coast.

ANZIIF reaches out to Asian audience

Australian and New Zealand Institute of Insurance and Finance (ANZIIF) Senior Associate John Peberdy presented at a south-east Asian insurance seminar this month.

The seminar examined insurance products and risk management in the infrastructure and construction industry, covering Indonesia, Thailand, Myanmar and Vietnam. It was supported by ANZIIF’s regional partners, and more than 400 insurance professionals attended.

Mr Peberdy discussed the importance of risk management processes.

Aon prepares for fresh graduate program intake

Aon will soon accept applications for its graduate program, marking the fourth intake for the career-boosting initiative.

The broker began the two-year program with eight graduates in 2017. Six of those participants secured permanent positions.

It welcomed seven graduates last year and another nine in February this year.

Aon says 2020 graduate program applications will open in late August or early September.

Graduates work across four business units, moving teams every six months.

Participants need a relevant degree and a credit average or above. Previous successful applicants have demonstrated leadership qualities and experience in work and extracurricular activities.

“The graduate program has really strengthened our employment brand in the market and enabled us to take a structured approach to refreshing our talent pool,” Aon Australia CEO James Baum said.

“The generation of a diverse talent pipeline is critical. By bringing people into our business fresh from university we have the opportunity to … bring their new experiences and blend them with the experiences that already exist for the benefit of our clients.”

Ex-Allianz senior exec joins McCabe Curwood

Insurance law firm McCabe Curwood is hiring Allianz’s former general counsel and company secretary Mathew Kaley to build a specialist corporate and regulatory advisory practice group.

The practice group will specialise in insurance advisory and cover a broad range of regulatory and commercial law that applies to financial services firms.

Managing Principal Andrew Lacey says the appointment of Mr Kaley will help further align the firm with its strategic vision.

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International

Loyalty penalties dent trust in UK insurers

UK consumers are more harshly marking down insurers for their treatment of loyal customers, despite the industry tackling concerns about high renewal prices.

The Chartered Insurance Institute (CII) Trust Index shows the failure to reward customer loyalty represents the biggest gap between expectations and performance, and the gulf widened in the latest survey to a rating of 9.1 from 7.64 last year.

The Association of British Insurers and the British Insurance Brokers’ Association last year released “guiding principles and action points” to address criticism over pricing gaps between new customers and those that renew.

CII Policy and Public Affairs Director Matthew Connell says insurers are more aware of the issue of rewarding loyalty but perceptions around performance have not changed yet.

“We expect that as the actions taken by insurers to reward existing customers for their loyalty take effect, the rating around this crucial aspect of trust will begin to rise,” Mr Connell said.

“This experience underlines that fact that once trust falls, it takes a long time to rebuild it.”

The Trust Index research surveyed 1000 consumers and 1000 small businesses.

ABI slams injury payout change

A key interest rate used to calculate personal injury compensation remains at unrealistic negative levels following a reset last week, the Association of British Insurers (ABI) says.

The discount rate has been raised to minus 0.25% by the UK Government following a review, compared to minus 0.75% previously.

“This is a bad outcome for insurance customers and taxpayers that will add costs rather than save customers money,” ABI Director-General Huw Evans said.

“A negative rate maintains the fiction that a claimant and their representatives will knowingly choose to invest their damages in a way that would guarantee losing them money.”

The discount rate reflects the return that personal injury claimants can expect to receive when they invest lump-sum compensation. A lower rate means a higher payout.

The rate was last set two years ago when it was cut from 2.5% to negative levels, prompting an outcry from the insurance industry and concerns claimants would be overcompensated.

The ABI says last week’s revision still leaves the rate out of step with international levels.

“This will remain the lowest discount rate in the Western world, leaving England and Wales an international outlier at a time when we need to boost our attraction to international capital,” Mr Evans said.

Ratings agency AM Best says the decision may lead to insurer reserve releases or strengthening, depending on their rate assumptions, but some were expecting a shift towards 0-1%.

“Overall, insurers will be disappointed that the change did not meet industry expectations and policyholders are unlikely to see meaningful motor or liability premium reductions in the near future,” Director of Analytics Timothy Prince said.

The new rate, which takes effect on August 5, was set after discussions with personal injury lawyers, insurers, investment experts and public bodies. It will be reviewed again within five years.

“I am certain this is the most balanced and fair approach following an extensive consultation,” Lord Chancellor and Justice Secretary David Gauke said.

UK regulator cracks down on travel insurance exclusions

The UK’s Financial Conduct Authority (FCA) has proposed new rules to help consumers with pre-existing medical conditions access travel insurance.

Up to 14.1 million UK consumers with pre-existing medical conditions look to buy travel insurance each year, the FCA estimates. Of these, about 0.7% are declined cover and 11% are hit with exclusions around their conditions.

FCA Executive Director of Strategy and Competition Christopher Woolard says the proposed changes would reduce the number of customers who are “overpaying significantly” for travel cover.

But the Association of British Insurers says a “more targeted approach” should be the FCA’s aim. Its Director of Regulation Hugh Savill warns the proposals would “sweep up every single medical condition, however slight its impact on a premium”.

“Travellers need a more proportionate approach, which avoids confusion and disruption to the customer journey,“ Mr Savill said.

The FCA, which is consulting on draft plans until September 15, proposes a new “signposting” rule under which insurers must alert consumers when cover is declined or cancelled mid-term due to a pre-existing condition, or when cover is offered with an exclusion that cannot be removed or where a consumer is offered cover with an additional loading due to their condition.

The changes would provide consumers access to a directory, offering them alternative travel insurance companies willing to provide cover, the FCA says.

Security spending grows as cyber losses mount

Financial services companies worldwide expect to increase cyber-security investment by as much as 40% next year, Willis Towers Watson says.

A survey by the insurance group and think thank ESI ThoughtLab found 71% of all global companies have been significantly affected by cyber attacks in the past year, up 14 points on the previous year, and annual losses per company averaged $US4.7 million ($6.69 million).

More than one in 10 businesses lost more than $US10 million ($14.22 million). Cyber-security investments increased 17% last year on average.

About 43% of financial services businesses suffered large impacts from abuse of legitimate IT access. Email servers, mobile connectivity and web-facing applications were the most vulnerable to cyber attacks in the industry.

Businesses in the sector lost an average of $US7.17 million ($10.20 million) to cyber attacks, or 0.084% of their revenue.

The study covered 467 businesses across 17 countries, in multiple industries.

Companies in China, India and Japan suffer more attacks and higher average losses than in other regions. India is the least cyber-secure country.

Losses are soaring due to cyber attacks by state-sponsored hackers, cyber criminals and malicious insiders, plus companies exposing themselves to threats through the use of interconnected devices and cloud computing.

Willis Towers Watson Cyber Leader for Asia Jessica Wright says it may take companies more than five years to feel the full financial impact of a cyber attack, through lost opportunities, reputational damage and loss of customers, particularly if their competitive advantage is damaged.

Munich Re flags positive Q2, affirms full-year guidance

Munich Re expects its second-quarter net profit to rise to €1 billion ($1.6 billion) from €728 million ($1.16 billion) a year earlier, boosted by low major-loss expenditure and high reserve releases for basic losses in reinsurance from prior years.

A final result will be announced in coming weeks.

Munich Re has also affirmed its forecast for a full-year net profit of €2.5 billion ($4 billion), up €200 million ($320 million). It has said previously it expects the combined operating ratio for the property and casualty (P&C) arm to improve 1.4 percentage points to 98% in the full year.

In the first quarter, the reinsurer recorded a decline in net profit to €633 million ($1.01billion) as major loss expenditure increased sharply to €479 million ($766.4 million) from €62 million ($99.12 million) on losses from Typhoon Jebi.

The P&C combined operating ratio deteriorated to 97.9% from 88.6%.

Recent renewals were encouraging, though, with India and Japan making up one-third of business renewed in April.

Last year Munich Re’s second-quarter earnings suffered from higher-than-expected man-made losses and the P&C combined operating ratio blew out to 102%.

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Analysis

Building ignorance: politicians fail to grasp insurance (again)

Politicians love pointing the finger at insurers when the proverbial hits the fan – and the current construction industry crisis is no exception.

Several years after the threat posed by combustible cladding and other building defects first became obvious, state governments have finally reacted – not to the root cause of the problem, but because insurers have walked away from, or have introduced exclusions to, professional indemnity cover for surveyors and certifiers.

Fears that the construction industry could grind to a shuddering halt have sparked promises of a long-called-for national approach.

But rather than acknowledging the insurance industry’s injection of some urgency into a potentially life-or-death situation, politicians have reverted to their tedious standard attitude – making insurers the bad guys.

By the thinking of Federal Industry Minister Karen Andrews, for example, the construction industry crisis should be allowed to continue, with funding provided by the insurance industry.

As she put it so colourfully last week: “They've pocketed the premiums while they thought it was low risk. But when the risk profile changes they’ve walked away – it’s inexcusable.”

It’s definitely inexcusable for a minister overseeing an important portfolio to spout such ill-informed nonsense. insuranceNEWS.com.au understands that following “discussions” with the Insurance Council of Australia (ICA), the minister has since backed away from using such language again.

But in terms of reinforcing lazy stereotypes, the damage was done.

The truth? The professional indemnity insurance market for building surveyors and certifiers has been losing money for a decade, with more than $3.40 paid in claims for every dollar collected in premium.

So why should commercial insurance companies continue to write loss-making business? And instead of spouting populist rubbish, why wasn’t Ms Andrews better informed by her staff before speaking?

It makes no sense to blame insurers at the end of the risk management chain – the “canaries in the coalmine” whose commercially driven decisions have revealed an ugly sore that has been left to fester for far too long.

As ICA has said, “insurers didn't build those buildings, insurers didn’t certify them”.

But they are still being roped into the “blame game”, and there are other examples.

The Victorian Cladding Taskforce’s final report says the state government should seek to offset the costs of the recently announced rectification program from “wrongdoers” – and insurers should also contribute.

In a fulsome display of scrambled logic and a knowledge vacuum on the basic workings of insurance, the report argues that if a government pays for rectification, insurers receive a “significant windfall gain”.

“It is therefore reasonable for them to make a substantial contribution towards the costs of rectification.”

What “significant windfall” is that exactly?

ICA reminds us that insurers pay claims when policies respond – but any other forced “contributions” would simply push premiums up.

The cost of rectification and compensation “should be borne by the sector responsible for the issues”, it says.

There is no doubt the insurance industry was encouraged by promises of a national approach coming out of last Thursday’s Building Ministers’ Forum.

But politicians have been sniping at the insurance industry for so long the ministers still couldn’t resist once again raising that old prejudiced and undermining belief that insurers spend most of their time avoiding difficult risks and claims.

One pointed sentence within the communique that followed the meeting says: “The building ministers called on insurers to meet their existing obligations and lift their exclusions on professional indemnity insurance following this strong action by states and territories.”

Well, two points from that little barb, ministers. Firstly, insurers have met and are continuing to meet all their “existing obligations” – why would you think otherwise?

Secondly, you talk about taking “strong action”, but so far “talk” is all you’ve done.

“Insurers can’t change risk assessments purely based on promises – that would be irresponsible,” ICA spokesman Campbell Fuller told insuranceNEWS.com.au.

“Insurers need to see action, and see it having a real impact, before they can properly reassess risk and return to the market.”

In all likelihood the current situation will remain for some time – probably years – while insurers wait for government promises to eventuate, and then assess the results.

So once they move on from futile sniping, the ministers’ action plan is clear: Tackle the root causes of the problem – which have nothing to do with insurance.

And do it quickly.