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Add-ons dominate complaints, consumer advocate says

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Add-on insurance is becoming a significant issue being investigated by the royal commission on financial services misconduct.

Last week the Financial Rights Legal Centre told the commission it received about 7500 calls last financial year from consumers querying their insurance policies.

Most issues related to add-on cover and sales practices by car loan intermediaries, banks and other third-party distributors, the legal centre’s Co-ordinator Karen Cox says in a witness statement.

Common problems include consumers not realising they have consented to purchases, high-pressure sales tactics, unsuitable sales and add-on products that provide little benefit.

“A practice Financial Rights comes across frequently, and which compounds the effect of poor lending practices, is the sale of poor-value insurance products,” she says.

Such products include consumer credit insurance, guaranteed asset protection insurance, tyre and rim insurance and extended warranties.

“Probably the biggest thing consumers report is that, it’s kind of the opposite,” Ms Cox told the commission last week. “They don’t report it at all. They don’t even know they have a product.

“So we’re seeing a lot of people who actually don’t even realise they have an add-on product, which is a concern in itself.”

Meanwhile, Slater & Gordon is considering class actions against banks that sold credit card insurance to consumers who were likely to gain little or no benefit from the cover.

Class Actions Senior Associate Andrew Paull says cardholders may have paid tens of millions of dollars for seemingly worthless insurance, sold to provide cover if they become unable to meet repayments.

“The banks should know when this insurance is likely to be of no or limited value to their customers,” he said. “However, the evidence suggests they have continued to push these products widely and have collected millions in premiums while doing so.”

Those unlikely to benefit include people whose only income is from Centrelink, the self-employed, casual and contract workers, people with pre-existing medical conditions, retirees and holders of income protection insurance.

Some policyholders are unaware they have the insurance or incorrectly believe it is a requirement for obtaining a credit card.

Slater & Gordon says Australian Prudential Regulation Authority figures show 25% of consumer credit insurance premiums was returned through claims payouts last year, compared with an average of 74% for other types of insurance.

“The courts have previously found the sale of consumer credit insurance to those who are unlikely to be able to claim may constitute unconscionable conduct,” Mr Paull said.

A breach of the Australian Securities and Investments Commission Act may allow affected people to recover premiums paid in the past six years, he says.

ICA declares fires a catastrophe as cyclone hits NT

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The Insurance Council of Australia (ICA) has declared a catastrophe in southern NSW and southwest Victoria after weekend fires devastated property, while claims are being lodged after Cyclone Marcus hit Darwin on Saturday.

In NSW fire broke out near the coastal town of Tathra yesterday, destroying at least 70 properties, according to the Rural Fire Service.

Blazes in Victoria were fuelled by hot and windy conditions, particularly around Terang, Garvoc and Camperdown. Local media reported up to 12 homes destroyed, with livestock, sheds and machinery also lost.

ICA CEO Rob Whelan says the extent of property losses may take several days or more to be determined in NSW and Victoria, and it is too early to estimate the cost.

“Insurance companies are standing by to help their customers through this traumatising time,” he said.

The Financial Ombudsman Service has activated its “significant event” response plan for the fires, which provides a more streamlined process for disputes.

ICA is also monitoring events in the NT after Category 2 Cyclone Marcus struck Darwin and Palmerston.

Insurers have received about 600 claims so far, a spokesman told Claims are mostly for light property damage, including broken windows, fences struck by trees and vehicle damage, although several large claims have been reported.

Large trees were uprooted as the cyclone hit the city on Saturday morning, bringing wind gusts of more than 130kph.

Residents were warned it could take time to restore power to nearly 26,000 homes, and were advised to boil water after the cyclone damaged supply pipes.

FOS has also activated its significant event response plan to handle disputes over claims from north Queensland storms earlier this month.

“The… plan is activated for events such as natural disasters that can potentially result in significant numbers of related disputes coming to FOS,” the service says.

ICA spokesman Campbell Fuller told insurers have received about 250 claims so far and most involve low-level property damage and contents.

It is too early to quantify the losses, he says.

Bushfire research reveals underinsurance on farms

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Many NSW farmers are badly underinsured, according to a Bushfire and Natural Hazards Co-operative Research Centre study.

The centre was asked to research community preparedness following fires across NSW at the start of last year.

The fires destroyed houses, outbuildings, livestock, machinery and fences in Currandooley, Carwoola and Sir Ivan, but no lives were lost.

The study found about half of survey respondents threatened or affected by bushfire left or were away from their property during the fires.

The half who stayed usually did so to protect property and livestock.

“Many agricultural landholders were significantly underinsured or uninsured for some assets,” the report says.

“While most had full home and contents insurance, many could not afford to fully insure livestock, fences and other assets.”

Survey respondents were clear that cost was the main driver of underinsurance.

“It would be nice to say we’ll insure every building and every bit of machinery, every head of stock and all your fencing,” one said.

“But you’d spend your life to pay your insurance policy. You’ve got to work out what you can save, what you can insure and what you can’t.”

Another noted fences are too expensive to cover.

“Basically I never insure them,” he said. “I have inquired a few times, but when you look at the price you think, ‘Well, if I have dodged the bullet for two years, I’ve saved that much anyway.’ It is that ridiculously priced, I just cannot afford it.”

The survey also found people tend to underestimate risks on days where the fire danger level is not catastrophic, and most wait until they can see a fire before deciding whether to leave.

La Nina ends as neutral conditions return

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A weak and short-lived La Nina has ended after possibly keeping temperatures higher than average in southern regions recently.

“The end of the La Nina is clear in oceanic and atmospheric indices,” the Bureau of Meteorology said. “Sea surface temperatures have warmed steadily since December and are now in the neutral range.”

The combined ocean and atmosphere phenomenon, which is typically associated with wetter weather in eastern and northern regions, had relatively little effect on Australian rainfall patterns over the summer.

Neutral conditions indicate a reduced chance of prolonged very wet or dry conditions, with other climate drivers possibly having greater influence in coming months, the bureau says.

Collaboration on tech crucial to industry: Allianz

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Technology and disruption are the keys to staying relevant in the evolving insurance industry, according to Allianz Australia COO David Krawitz.

Insurers must adapt to ensure they remain competitive against smaller organisations with lower operating costs, he says.

Blockchain represents an incredible opportunity for the industry to transform how it works together in reinsurance, recoveries, quota share and claims.

Mr Krawitz says companies must be prepared to collaborate with third parties to lift efficiency, improve business structures to help employees be more innovative and nimble, and develop data strategies to address customer experience.

“Before diving in head first, we should always look at how it stacks up in terms of value for customers, service for customers and operating costs,” he said. ‘It’s critical that we continue to ask ourselves how we can use industry technology to make things easier for all of us.”

Edgecumbe flood payouts near completion

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Nearly all claims from the Edgecumbe flood have been partially or fully settled, according to the Insurance Council of New Zealand (ICNZ).

More than $NZ54.3 million ($50.41 million) has been paid out for 1059 claims, with 98% of claims fully or partially settled at March 1.

About 74% of claims were for house and contents insurance, followed by marine, then motor.

Widespread flooding occurred when the Rangitaiki River burst its banks during cyclones Debbie and Cook last year, causing severe damage to Edgecumbe on the North Island.

ICNZ CEO Tim Grafton says the near-complete settlement of claims shows insurers’ commitment to helping people get back on their feet.

New Zealand is on the way to recording its most expensive year for weather events, he says.

Wollongong sets out climate change risks, management plan

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Wollongong has adopted a coastal zone management plan to mitigate climate change-induced hazards.

The NSW Government gazetted the plan this month.

It says beach erosion, shoreline recession, coastal inundation, cliff instability and geotechnical hazards, coastal entrance instability, erosion of beaches at stormwater outlets and drainage lines, and sand drift are the main hazards affecting the city’s coast.

Risks were established for 2010, 2050 and 2100 timeframes, highlighting a shift in risk profiles as sea levels rise and other climate change impacts begin to manifest.

“Climate change induced by anthropogenic forces, particularly the burning of fossil fuels for energy, is now widely accepted,” the management plan says.

“In relation to coastal processes, climate change may increase sea levels and change rainfall and the frequency and intensity of extreme events.”

Many private properties along the Wollongong coast face current and future coastal risks, the plan says. Two homes, one at Thirroul Beach and the other at McCauleys Beach, face significant risk in the future from storm erosion.

“It is impractical to protect these individual properties without having significant impact on the overall beach amenity,” the plan says.

“These properties should therefore be returned to public ownership and abandoned/sacrificed in the future as the beaches slowly recede.”

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QBE revamps Australia and NZ division roles

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QBE’s Australian and New Zealand Operations division will bring its technology and transformation teams together within what’s to be called a “chief operations office” and will also create a new strategy team.

Steve Raynor will act as interim Chief Operations Officer, effective today, while a search is conducted for the expanded role, and a new chief information officer will move into the team.

Current CIO Tony Forward has accepted a redundancy and Val Matthews has been appointed in an acting capacity from March 29 while a recruitment process is conducted for the redefined position.

Australia and New Zealand Operations CEO Vivek Bhatia, who joined QBE at the start of last month, says the new arrangement brings the division into line with other parts of the group.

“Given technology’s intrinsic role in delivering on our business transformation, it also makes sense to have these functions aligned under the one business unit to drive greater focus and efficiencies,” Mr Bhatia said.

A dedicated strategy team to develop the longer-term vision will be established, reporting to division CFO Inder Singh, with a new GM to be appointed.

Mr Bhatia says the company has made greater progress around insurtech, establishing QBE Ventures globally and locally becoming a founding partner of Insurtech Australia and working with start-ups.

“The GM Strategy role will help drive that agenda in this market, as well as align with global counterparts to ensure we leverage our global footprint and expertise,” he said.

New Zealand will be repositioned as a separate business unit, with GM Bill Donavan reporting to Mr Singh.

Cover-more expands in Latin America

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Zurich-owned travel insurer Cover-More has expanded in Latin America with the acquisition of businesses operating under the Travel Ace and Universal Assistance brands.

The deal involves 19 legal entities that provide traveller assistance in countries including Argentina, Brazil, Chile, Colombia, Mexico and Uruguay.

“This transaction gives us immediate access to new customers and scale across Latin America, which is among the fastest-growing travel insurance and assistance markets worldwide,” Cover-More CEO Mike Emmett said.

Sydney-based Cover-More, acquired by Zurich last April, already operates in 14 countries.

The Latin American purchase is expected to close in the second quarter.

Rate rises driving profit in Australia: Swiss Re

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Australian non-life insurers’ profitability improved last year despite higher losses from Cyclone Debbie and other natural catastrophes, according to Swiss Re.

“This reflects higher premium rates, reserve releases and higher reinsurance protection,” the reinsurer says in its financial report for the year.

Premium grew 2% thanks to solid growth in personal lines, and commercial premium returned to growth, underpinned by better economic conditions and rising rates.

Swiss Re’s net earned premium and fee income from Australia increased to nearly $US2.1 billion ($2.83 billion) last year from $US1.92 billion ($2.59 billion) in 2016.

The group is to propose a share buyback of up to 1 billion Swiss francs ($1.35 billion) at its annual general meeting next month.

Ansvar returns to profit as new business rises

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Church and heritage insurer Ansvar has reported a $1.2 million underwriting profit for last year following a rise in new business and reserve releases.

The result reversed a 2016 loss of $2.2 million and took the combined operating ratio to 96.9% from 106.7%.

New business jumped 73%, contributing to gross written premium rising 26% to $96.3 million.

Liability strength was partly offset by property losses due to Cyclone Debbie and a NSW hailstorm, but catastrophe event releases from prior years and reinsurance reduced the impact.

UK-based parent Ecclesiastical Insurance Office says group profit before tax gained 32% to £82.2 million ($146.3 million) amid significant growth across all its territories.

“We continued to explore new opportunities, including entering new markets in the UK, Ireland and Australia, and launched… new products to meet our customers’ needs,” CEO Mark Hews said.

The group released cyber products in Australia, while new markets included “selected health professionals” and property owners.

Investment returns grew to £72.3 million ($128.7 million) from £54.4 million ($96.8 million), underpinned by the strong performance of global equity markets.

CHU creates customer role

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Strata and community title insurer CHU has appointed Anne-Maree Paull to the newly created role of Chief Customer Officer.

Ms Paull has been with CHU for six years as state manager for NSW and ACT, and has more than 30 years’ experience in financial services.

She previously held senior strategy, marketing and product roles with Royal & Sun Alliance, NRMA and ING-ANZ Wealth.

“CHU is proud of its long-standing relationships, however, we recognise the need to constantly improve,” CEO Bobby Lehane said. “We need to understand, meet and sometimes pre-empt the emerging needs of our customers.”

360 Underwriting appoints CFO

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Recently established 360 Underwriting Solutions has appointed Catherine Whitaker as CFO.

Ms Whitaker started her own accounting and business analytics company in Newcastle in 2016 following a 13-year stint with Insurance Advisernet. As CFO at Insurance Advisernet she oversaw substantial growth while increasing governance and regulatory controls.

“Catherine is the ideal person to drive the transition of the finance and accounting functions from Sura to 360 Underwriting Solutions,” 360 co-director Chris Lynch said.

Mr Lynch and co-director Denis Morrissey – both former Allianz executives – acquired 360 from major underwriting agency group Sura in July last year.

Aon rings changes at One Underwriting

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Aon has appointed Adam Cox as director of One Underwriting, to lead the company’s growing managing general agency business.

Mr Cox will head a national, specialist team of 30 underwriters, growing Aon’s distribution in Australia through expansion of the third-party broker network.

He was most recently at Swiss Re, responsible for leading Australia and New Zealand business strategy as country manager, corporate solutions.

The former head of One Underwriting, Alison Smith, will become Regional Director Southern and Western – Commercial. She will be responsible for Aon’s client engagement in mid-market and SME across Victoria, Tasmania, SA and WA.

iSelect names new CFO

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Comparator iSelect has appointed Nadine Lennie as CFO, effective from July.

Ms Lennie, who will move from listed payments company Afterpay Touch Group, has more than 20 years’ experience as a CFO, investment manager and financial adviser.

She was previously Australian Pacific Airports Corporation CFO, a Future Fund investment director and a PricewaterhouseCoopers director.

iSelect says Interim CFO Vicki Pafumi will return to her position as Group Executive of Business Operations when Ms Lennie joins.

Former CFO Darryl Inns resigned last November for personal health reasons.

Forensic investigator wins lab certification

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Fire forensic analysis company GKA Investigations Group, which works with insurers, has received globally recognised testing authority certification for a new specialist laboratory.

The group, which has been appointed to examine fire scenes and evidence for police, coroners and defence lawyers, uses gas chromatography and mass spectral detection to determine if ignitable liquids or other suspicious materials are present in samples.

GKA says the National Association of Testing Authorities Australia certification provides an assurance of technical competence and expertise for the in-house lab.

IAG celebrates its roots in new ad campaign

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NRMA Insurance introduced a marketing campaign around the theme “help is who we are” on Friday.

A 60-second film features the role of the insurer and partners such as the State Emergency Service in helping people rebuild after major weather events.

“For almost 100 years, NRMA Insurance has been by our customers’ side helping them get back on their feet when things go wrong,” IAG Chief Marketing Officer Brent Smart said.

“This campaign celebrates our brand roots and sets the tone for the type of human storytelling we are returning to.”

To see the film, click here.

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Regulatory & Government

ASIC to gain competition mandate, second deputy

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The Australian Securities and Investments Commission (ASIC) will have a competition mandate added to its role and appoint a second deputy chairman, Revenue and Financial Services Minister Kelly O’Dwyer said today.

“It is my belief that, ultimately, it is competition – not regulation – that is the best means of ensuring consumers get value for money in financial services,” she told the ASIC Annual Forum in Sydney.

“This new mandate will require ASIC to consider the effect its work and the exercise of its power will have on competition in the financial system.”

Ms O’Dwyer says ASIC will gain stronger directions powers to deal with misconduct cases, and consultations are continuing on proposed product intervention powers where risks to consumers are identified.

“A second deputy chairman will give… greater flexibility to manage the breadth of ASIC’s new powers and increased responsibilities resulting from recent and upcoming law changes,” Ms O’Dwyer said.

The changed structure brings ASIC into line with the Australian Competition and Consumer Commission, which has two deputies, and will require a legislative change.

Ms O’Dwyer says she has reappointed current Deputy Chairman Peter Kell for a further one-year period from May 6. Commissioner John Price has been retained for a further two-year period.

ASIC Chairman James Shipton told the forum it is important to rebuild the public’s trust in finance and to heighten professionalism.

“We need to recognise that it will need whole and undivided commitment across the entire financial ecosystem to address this challenge,” he said.

“Industry and the people within it need to do more, and need to take more of a leadership role.”

ASIC zeroes in on cyber resilience

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Companies are still not spending enough to protect their assets from cyber threats, according to the Australian Securities and Investments Commission (ASIC).

The regulator’s half-year market integrity report – citing findings from a study released last November – shows a disparity across businesses and insufficient investment in cyber resilience.

“Cyber resilience is widely regarded as one of the most significant concerns for the financial markets sector and the economy at large,” ASIC says.

“We will continue to review the technology and operational risk of our stakeholders and focus on malicious cyber crime in the context of rapid technological developments.”

Technology and cyber resilience are among risks ASIC will focus on in the next few months.

The market integrity report covers the six months to December 31.

NSW a step closer to raising dam wall

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WaterNSW has awarded a $14.5 million contract to engineering consultant GHD and joint venture partner Stantec to create a design for raising the Warragamba Dam.

Raising the dam about 14 metres would reduce the risk of massive damage in the densely populated and flood-prone northeastern region of Sydney by about 75% on average, according to the State Government’s Hawkesbury-Nepean Valley Flood Management Strategy, released last year.

It says the dam wall project is the infrastructure option with the greatest benefit.

 GHD and Stantec expect to have a design concept completed by early next year.

ICA targets new SA Government on stamp duties

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The Insurance Council of Australia (ICA) has called on the newly elected SA Government to axe state insurance taxes, calling them “inefficient, unfair and inequitable”.

The 11% charge to house, contents and motor insurance discourages homeowners and drivers from taking out the right level of cover, ICA says.

Some households may forgo insurance due to stamp duties, it warns.

ICA says the incoming Marshall Government has a clear mandate for reforming SA’s economy, and tax reform should be a priority.

It calculates removing stamp duties will improve the state’s economic performance by several-hundred million dollars.

CEO Rob Whelan says ICA looks forward to working with the new Government on reforms and reducing flood risk through mitigation.

Asbestos removers back incentives to act

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Asbestos remediation companies favour a government incentive to encourage short-term methods of dealing with the material before it is removed, according to a report.

“As Australia grapples with the legacy of in-situ asbestos in our built environment, we need many solutions,” Asbestos Safety and Eradication Agency CEO Peter Tighe said.

“A lot of asbestos has been removed from Australian buildings, but there’s a long way to go.”

The report, which reviews asbestos stabilisation and containment practices, says high costs limit demand for complete removal of asbestos, while support is not given for short-term alternatives such as encapsulation.

“There is a feeling among the industry that there is a need for incentive or government support to encourage the use of stabilisation practices as an interim measure,” it says.

Asbestos roofing remains a particular problem, both in commercial and residential buildings.

“In an ideal world, we would have all the resources we need to remove asbestos completely from all buildings,” Mr Tighe said.

“But in the short term, methods such as encapsulation are vastly preferable to doing nothing.”

FMA investigation draws guilty plea

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New Zealand’s Financial Markets Authority (FMA) says Garry James Patterson has pleaded guilty to two charges related to providing insurance policies.

Mr Patterson admitted “holding out as being in the business of providing financial services” when he was not registered or a member of an approved dispute resolution scheme.

He also obstructed the FMA’s investigation by failing to comply with a notice to attend an interview.

The FMA says sentencing is scheduled for April 17 and it will provide further comment then.

The charges were brought at the Christchurch District Court.

ARPC works on risk mitigation guidebook

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The Australian Reinsurance Pool Corporation plans to produce an anti-terrorism guide for businesses.

It has submitted a proposal to Standards Australia for the Physical Protective Security Treatment for Buildings Handbook.

The book features guidelines and other relevant information, and aims to show ways to mitigate against physical damage from terrorism and other malicious acts.

Newly appointed Senior Adviser Risk Mitigation Leia Homer will oversee development of the guide.

She was previously a risk consultant for civil liability in the public sector with JLT.

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Life Insurance

PwC plots way forward for life insurers

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Life insurance companies must refocus on their strategic strengths amid technological disruption, regulatory changes and eroding public trust, according to PwC.

Customer profiles are changing as older generations retire and Millennials come to dominate the workforce, it says in a report on the future of life insurance in Australia.

Millennials expect a smooth digital experience and are accustomed to online transactions.

They are highly educated and care about a company’s social impact, PwC says.

Life insurers that want to focus on the Millennial market must consider significant infrastructure investment and a rethink of the customer experience. A focus on digital experience may lead to lower operating costs long term.

New technologies and increasing penetration of wearable health-tracking devices will shift insurers’ focus from managing risks and processes towards digital capabilities, data and analysis, according to the report.

Non-traditional players are already looking to use technological advances to create more valuable customer propositions and efficiency.

Incorporating digital customer-focused solutions, based on analytical models, will be key to building sustainable businesses with a Millennial-dominated customer base, PwC says.

The report says trust has been eroded significantly: 78% of Australians believe insurance is important, yet only 42% believe their insurer will be there for them in a time of need.

Rebuilding trust is critical to encourage people to take up life insurance.

Regulatory oversight will intensify as governments focus on conduct in addition to financial risk. This will lead to increasing compliance costs for insurance companies, PwC says.

Upfront sales commissions for life insurance, which have already been capped, are being progressively lowered until 2020.

Industry bodies such as the Financial Planning Association and the National Insurance Brokers Association have suggested changing standard product definitions and eliminating exclusions from fair contract provisions.

Insurers must have clarity about where they sit in the market, and build the capabilities necessary to attract clients in their segment, the report says.

TAL dominates AFA awards

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TAL has won the Association of Financial Advisers and Strategic Insight life company of the year award.

BT Financial Group, winner in the past two years, and MLC Insurance were runners-up.

TAL also took the service quality award, beating Zurich Financial Services and BT.

And it edged out OnePath and MLC for the trauma prize. Zurich won the total and permanent disability category, and CommInsure the income protection award.

CommInsure also won the investment bond and annuity and income stream innovation awards.

Challenger was annuity provider of the year, and also topped the long-term income stream category.

The awards are based on independent studies by Strategic Insights, actuaries and researchers.

NobleOak, Virgin take Canstar income protection awards

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NobleOak Life has topped a Canstar review of the direct income protection market for the third year running.

Its Premium Life Direct Income Protection product achieved the maximum five-star rating to win the “outstanding value” award. Virgin Money’s Income Protection Tailored also secured this award, for a second consecutive year.

Canstar rated 16 products from 14 providers of direct income protection, assessing cost and features. It says NobleOak stood out for its customer-friendly claims terms, and policy benefits and options.

“This shows the consistency and dedication of the NobleOak team to continually provide outstanding value to customers,” Canstar GM Wealth Josh Callaghan said.

Vision Super joins group cover code

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Vision Super has signed up to the Insurance in Superannuation Voluntary Code of Practice – the latest fund to commit to the guidelines on group cover.

In recent weeks ANZ, AustralianSuper and MTAA Super have announced they are joining the code, which starts on July 1.

“If the industry as a whole signs up to the code, it will give people the ability to compare insurance products easily,” Vision Super Head of Fund Administration Mark Newman said.

“That can only be a good thing for our members, and for the community more broadly.”

Momentum wins NZ licence to underwrite

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Momentum Life will underwrite its own policies after obtaining a life insurance licence from New Zealand regulatory authorities.

The Auckland-based company was established in April 2016 and accounted for more than 60% of new guaranteed-acceptance life insurance business issued last year in the country.

Cigna NZ welcomes back former CEO

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Cigna New Zealand’s former CEO Gail Costa is to return to her old job.

She will start next month, taking over from Lance Walker, who was her replacement in 2014.

Ms Costa has served on the board since 2012 and is CEO of Cigna’s joint venture with QNB Finansbank in Turkey.

Advisory firm expands into insurance

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Business advisory firm Ecovis Clark Jacobs has formed a new insurance joint venture, allowing it to expand its accounting, taxation and audit service offering.

Ecovis Clark Jacobs Insurance is jointly owned by MBS Insurance and its offering includes personal cover, business continuity, income protection, trauma, life and total and permanent disability cover, both at an individual level and as group protection.

“We strongly believe that an insurance advice capability is needed to provide robust holistic advice to our clients,” Ecovis Clark Jacobs director Heath Stewart said.

“We didn’t have the specialist insurance capacity in house, so we chose a partner that already excels in this area.”

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The Professional

UAC sets challenge after record-setting Sydney expo

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The Underwriting Agencies Council has hailed its most successful Sydney expo, with almost 400 brokers attending and 98 exhibitors.

“I have not heard so many satisfied comments from both exhibitors and brokers, and from third parties who came along to see what the fuss is all about and left really impressed,” GM William Legge said.

“Our challenge now is create an equal or better event [next year] to celebrate the Sydney Underwriting Expo’s 20th year.”

Ink Insurance Services director Ilona Kalima won $5000 of travel vouchers in a competition at the March 9 event, Insurance NSW GM Meisam Salimabadi won a Microsoft Surface tablet and Brooklyn’s Jeremy O’Connor a Google Home device.

Zurich makes broker liaison appointments

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Zurich has appointed Darren Jones and Thomas Barker as Broker Relationship Leaders in its Victorian and Tasmanian general insurance team.

Mr Jones joins from CGU, where he was national relationships manager for CGU Business Partner Solutions. He will help manage Zurich’s distribution strategy in Victoria and Tasmania, and manage relationships nationwide with Austbrokers & IBNA Member Services.

Mr Barker moves from Sydney, where he was the leader of Zurich’s Broker Edge team.

“These are crucial markets for us and their importance is reflected in the investments we’re making,” Chief Distribution Officer Steve Ord said.

Actuaries examine catastrophe risk

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The Actuaries Institute will host a catastrophe risk seminar in Sydney tomorrow, featuring climate change and infrastructure experts and insurance industry leaders.

Delegates will hear from David Karoly, a climate scientist and adviser to the Government, US insurer FBAlliance’s CEO Rade Musulin and Holger Maier, whose work focuses on managing infrastructure in a changing environment.

They will discuss “managing the uncertainty of the future”, including the impact of catastrophes on communities and challenges in funding high-risk areas.

Aon Benfield opens applications for scholarships

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Submissions have opened for the annual Aon Benfield Scholarship, organised in conjunction with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF).

The winner will travel to London for Aon Benfield’s 53rd annual Global Clients Reinsurance Seminar in September.

The scholarship aims to strengthen links between Australian and New Zealand insurance professionals and their international counterparts.

Applications are open to Australian and New Zealand permanent residents or citizens with at least two years’ experience in insurance or reinsurance. Entrants must write a 2500-word essay discussing growth opportunities in the “non-insurance gap”.

ANZIIF CEO Prue Willsford says the scholarship is a chance to build business networks, continue professional development and increase industry knowledge.

Applications close on June 26. For more information, click here.

IAG appoints two directors

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IAG has appointed Michelle Tredenick and Sheila McGregor as independent non-executive directors.

Ms Tredenick is a non-executive director of Bank of Queensland, where she chairs the information technology committee. She is also a director of business management consultant Urbis and Cricket Australia, and a member of the senate of the University of Queensland.

IAG says she is experienced in the introduction of digital technology to insurance and financial services.

Ms McGregor is a partner at law firm Gilbert + Tobin, where she heads the national technology and digital group, providing advice on “business-critical technology”.

She is a director of wealth management company Crestone Holdings and a member of the Australian Indigenous Chamber of Commerce.

IAG Chairman Elizabeth Bryan says the pair have extensive experience in the application of technology to business.

Strata Community Insurance backs research hub

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Strata Community Insurance has become a founding sponsor of an online facility launched to share research on the growing multi-owned properties sector.

The Multi-Owned Properties Research Hub was established at a forum hosted by Deakin University. It will house papers from academics, researchers and other sector professionals, to improve access to information from a range of sources.

“With more people living in multi-owned property than ever, governments, practitioners and residents need access to reliable research and opportunities to engage with experts across multiple disciplines,” Deakin academic and group Chairman Nicole Johnston said.

The hub can be found here.

Gallagher Bassett promotes property head

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Claims management group Gallagher Bassett New Zealand has promoted Tim Allan to the role of Operations Manager – Property Assessing.

Mr Allan has worked at Gallagher Bassett since 2011, holding a number of project management and leadership roles.

He will provide management and technical support to the property assessing team.

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London faces major hit from ‘no-deal’ Brexit

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Financial services businesses face the largest cost impact by sector from Brexit, according to a report from Marsh & McLennan consultancy Oliver Wyman and law firm Clifford Chance.

It says about 70% of costs from new trade barriers will be felt across five sectors, also including automotive, agriculture and food and drink, consumer goods, and chemicals and plastics.

“The largest absolute impact will come from financial services due to London’s role as Europe’s financial centre and the fact it will be hard to mitigate impacts in this sector.”

The effect on London may be equivalent to about 2.5% of the city’s gross value added, accounting for about 40% of the national impact.

A wide range of trading relationships between the EU and UK are still possible, making Brexit outcomes uncertain. The report looks at impacts from tariff and non-tariff barriers if the two sides revert to a World Trade Organisation relationship – a “no-deal” Brexit.

Annual direct costs are estimated at about £27 billion ($47.6 billion) for UK businesses and £31 billion ($54.7 billion) for EU companies after initial mitigation steps.

Execs optimistic despite challenges

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The outlook among insurance chiefs is increasingly positive, according to PwC’s latest CEO Survey.

This is despite an acceptance that the industry faces serious disruption, and a series of upcoming technology-related challenges.

Key survey findings include:

  • More than 90% of respondents are confident about their organisation’s revenue prospects over the next three years
  • Half believe global economic growth will improve over the next year, compared with about one-fifth last year
  • The three biggest worries are over-regulation, cyber threats and speed of technological change.

PwC Global Insurance Leader Stephen O’Hearn says the lack of impact from insurtechs is a key reason for insurer optimism. But he warns there is no room for complacency.

“Having perhaps overestimated the impact of outside threats and short-term disruption in the past, could insurers now be underestimating the urgent need to become digitally enabled, customer-focused organisations with flexible business and operating models?”


M&A activity drops amid Europe, China uncertainty

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The number of mergers and acquisitions (M&A) in the global insurance sector dipped slightly last year, according to law firm Clyde & Co’s annual insurance growth report.

There were 350 completed deals last year, compared with 387 in 2016.

This is largely attributed to the fallout from Brexit. European M&As fell 22% to 118 as companies focused more on setting up subsidiaries and branches to ensure they can continue operating across Europe. Insurers outside Europe have also been freezing activity until the Brexit situation becomes clearer.

The Chinese Government’s plans to reduce investment limits for foreign insurers remain on hold, creating further uncertainty for M&A activity.

However, there was a rise in deals in the second half of the year – the first time M&A activity has risen in the second half since 2015. The Americas were the most active region, with 96 deals completed in the second half, and 80 in the first half.

Insurtech became a driver for growth in the insurance sector last year, the report says.

Clyde & Co notes Google and Amazon are well positioned to take advantage of the insurance market this year, reducing established insurance companies to white-label providers of licensed capacity.

Amazon has established a new insurance division in London and has plans to penetrate German, French, Italian and Spanish insurance markets.

Munich Re raises profit guidance

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Munich Re has raised its profit target compared with last year, and expects to generate €2.1-€2.5 billion ($3.3-$3.9 billion) this year.

The company recorded a third-quarter loss last year due to hurricanes Harvey and Irma.

Those storms and Hurricane Maria caused a total loss of €2.7 billion ($4.3 billion) last year.

Net profit was down 24.7% to €733 million ($1.09 billion), partly due to the Grenfell Tower fire in London.

Total natural catastrophe losses last year were €3.7 billion ($5.8 billion).

The reinsurer will buy back another €1 billion ($1.57 billion) of shares before next year’s annual general meeting. A buyback of the same scale is currently under way.

FCA seeks input on bid to improve culture

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The UK’s Financial Conduct Authority has called for a broad discussion on how a healthy culture can be driven by companies, regulators, employees and customers, as the sector continues to battle misconduct.

“We as a regulator have long gone beyond having a mindset that simply complying with rules is enough,” Executive Director of Supervision – Retail and Authorisations Jonathan Davidson said.

“However, we don’t believe a one-size-fits-all culture is the right way to go.”

The authority has released a discussion paper, Transforming Culture in Financial Services, that includes 28 essays from academics and industry thought leaders.

The paper says misconduct has continued in the decade since the global financial crisis, despite record fines, investigations and an expanding compliance industry. Examples include rate rigging, rogue trading and mis-selling of products.

“There is consensus among essayists that regulation can only go so far and can even have unintended consequences,” the report summary says.

The regulator will examine how to raise the management of culture as a leadership discipline that is given the same level of rigour and importance as strategic planning and risk management.

“Culture may not be easily measurable, but it is manageable,” Mr Davidson said. “Firms can and should take responsibility for ensuring their culture is healthy for both their employees and customers, which can complement and support their business strategy.”

Cat losses hit Hannover Re profit

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Hannover Re’s property and casualty (P&C) business recorded an 11.8% decline in net income to €837.3 million ($1.31 billion) last year as losses from Cyclone Debbie and other major catastrophes exceeded its provisions.

Overall net income fell to €958.6 million ($1.51 billion) from a record €1.17 billion ($1.84 billion) in 2016, but last year’s figure was better than the reinsurer’s guidance of €800 million ($1.26 billion).

P&C underwriting profit fell 96.9% to €15.5 million ($24.33 million) due to the biggest large-loss burden in Hannover’s history.

Gross written premium (GWP) increased 16.4% to €10.71 billion ($16.81 billion).

Debbie, the US hurricanes, California wildfires and other catastrophes pushed net major loss expenditure to €1.13 billion ($1.77 billion), way above the budgeted €825 million ($1.3 billion). Debbie cost about €63 million ($98.9 million).

The combined operating ratio worsened to 99.8% from 93.7%

Australia contributed about 2.7% of Hannover Re’s GWP from P&C reinsurance last year.

Hannover says Debbie brought stability to reinsurance prices in Australia.

“In Australia and New Zealand the market players expect to see clear improvements in conditions in the run-up to the July 1 renewals,” its annual report says.

“With demand for natural catastrophe capacity sharply higher, a global hardening of the reinsurance market will undoubtedly have clear implications for pricing in Australia and New Zealand too.”

JLT reveals 44% gender pay gap

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JLT’s female employees are paid on average 44.1% less than their male counterparts, according to the broker’s gender pay gap report.

On a median basis the gap is about 35%. The average bonus gap is 75.8% and the median gap is 64.4%.

“As with most organisations, JLT’s gender pay gap highlights the proportion of male employees versus female employees in senior roles,” Group CEO Dominic Burke said.

Men hold about 71.7% of the senior management roles at JLT, but overall about 50.8% of employees are women.

JLT and other UK companies with more than 250 personnel have to report their gender pay gaps to the Government Equalities Office by April 4.

Lloyd’s has reported its figures, which show women are paid 27.7% less on average and 32.1% less on a median basis.

Fraud and ‘regressive’ tax drive up UK motor premiums

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UK car and van insurance premiums increased 10.7% and 9.1% respectively in the final quarter of last year, according to the British Insurance Brokers’ Association (BIBA).

Fraudulent whiplash claims and a change to the discount rate used to calculate compensation for catastrophic injuries are to blame, it says.

The industry lost £780 million ($1.39 billion) to fraudulent claims last year. Drivers have also been penalised after the insurance premium tax (IPT) increased to 12% last June.

BIBA is pushing for a cap on the IPT and says it is working on all other fronts to moderate the rise in premiums.

“We believe insurance premium tax is a tax on protection, and is now at a level that impacts the uptake of insurance,” Executive Director Graeme Trudgill said. “We want the Chancellor of the Exchequer to commit to no further increases in this regressive tax.”

Meanwhile, the Association of British Insurers says the average cost of a motor claim grew to a record £2936 ($5220) last year, driven by higher costs for theft claims and vehicle repairs. The industry paid about £8.1 billion ($14.4 billion) in motor claims last year.

“Putting a lid on excessive costs, which end up being paid for by motorists, remains a priority for insurers,” Assistant Director, Head of Motor and Liability Rob Cummings said.

“This makes it all the more important for the Government to play its part, by pushing ahead with its reforms to personal injury compensation without further delay.”

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CEOs look on the bright side

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The insurance industry may be one of the most disrupted in the world, but CEOs are not letting the pressure get to them.

PwC’s latest CEO Survey seeks the views of 100 insurance chiefs, and their outlook is increasingly positive.

More than 90% of respondents are confident about their organisation’s revenue prospects over the next three years, and half believe global economic growth will improve over the next year, compared with just 19% last year.

CEOs are also taking confidence from the fact the anticipated impact from insurtech competitors has yet to materialise, at least to the extent previously feared.

In fact, technology is opening new opportunities, such as rising demand for cyber insurance.

Of course, CEOs are well aware there are major challenges to overcome.

According to the survey, the three biggest worries are over-regulation (with 95% of respondents extremely or somewhat concerned), cyber threats (93%) and speed of technological change (85%).

Populism concerns 85%, with geopolitical uncertainty a worry for 83%.

More than 80% are concerned about a shortage of digital skills within the industry and their workforce, while 78% see changes in consumer behaviour as a threat to growth.

Some 66% report increasing pressure to deliver business results under shorter timelines.

PwC’s Global Insurance Leader Stephen O’Hearn says the lack of impact from insurtechs is a key reason for insurer optimism.

“Indeed, partnership with new entrants rather than rivalry is the order of the day.”

Nearly half (49%) of insurance CEOs are planning a new strategic alliance or joint venture to drive profitability and growth over the next year.

And insurtechs are responsive to offers of partnership or even acquisition.

However, Mr O’Hearn warns against complacency.

“Having perhaps overestimated the impact of outside threats and short-term disruption in the past, could insurers now be underestimating the urgent need to become digitally enabled, customer-focused organisations with flexible business and operating models?”

He says there are many obstacles facing insurers.

“They must learn to compete and achieve savings on a scale they have never attempted. Yet reducing costs alone won’t be enough to stay competitive.

“At the same time, they must develop a seamless end-to-end digital business model, which runs from advice and origination all the way to claims, and combines the best of humans and machines in a ‘bionic’ organisation.

“Related benefits include more personalised and effective life and non-life coverage, and a shift to delivering outcomes (for example, wellness or mobility) and using data to head off an emergency, not just providing compensation after an emergency has occurred.”

Technology alone won’t enable insurers to capitalise on unfolding opportunities – a cultural change is also required.

“Investments will go to waste unless there’s a genuine readiness to embrace change and bring innovation into the heart of the business,” PwC says. “In our experience innovation is all too often consigned to the fringes or operates in siloes within different divisions.

“It’s also proving difficult to get many of the pilots or proofs of concept out of the lab and into production.”

Swift and nimble decision-making is required from insurance companies more used to making big decisions in their own time.

“By the time traditional decision-making and implementation cycles have run their course, the market will have moved on,” PwC says.

“Innovation requires lots of little decisions and a willingness to learn from them. It also demands an entrepreneurial readiness to experiment and even fail, but fail fast and move on.”

Insurance CEOs may have reasons to be cheerful, but the pressure for urgent and fundamental change is mounting.

PwC says in this environment fortune will favour the bold – and persistent.

“Acting half-heartedly risks allowing other, more proactive companies to harness opportunities and lead the industry.”

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