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Local

Allianz first up as Hayne turns to general insurance

Allianz this afternoon became the first general insurer to face the Hayne royal commission as Chief GM Retail Distribution Michael Winter was questioned about “incorrect and misleading statements” regarding travel insurance on its website.

Mr Winter agreed the website should have been properly reviewed in the form it would be seen by consumers and the company had failed to quickly rectify disclosure issues raised shortly before a revised version went live.

The royal commission will later turn to add-on insurance sold through car dealerships, with IAG EGM Business Distribution and Group Executive Ben Bessell scheduled to take the stand.

The remainder of the case studies relate to natural disasters. Suncorp CEO Insurance Gary Dransfield will be questioned on AAMI’s handling of claims from the Wye River bushfires of Christmas 2015 and on the insurer’s response to floods in the Hunter Valley in 2015.

Youi will face scrutiny on claims-handling after Cyclone Debbie last year and the Broken Hill hailstorms of 2016.

The royal commission has also sought witness statements from QBE, Commonwealth Bank, ANZ and Westpac.

Counsel Assisting, Rowena Orr, said of 8977 public submissions to the commission, 620 were related to general insurance. The three most common areas were home and contents, motor and travel.

Ms Orr emphasised that prohibitions on conflicted remuneration contained in the Corporations Act don’t apply to general insurance.

“This means that there is no limit on the amount that general insurance companies can pay in commissions in relation to the sale of general insurance products,” she said.

In the financial years from 2013-15 ASIC found insurers paid more than $600 million in upfront commissions to car yard intermediaries for add-on products, while insurers collected $1.6 billion in premiums and paid out only $144 million in claims, she told the hearing.

On claim denials, Ms Orr said more than one in every 10 travel claims is denied, compared to a rate of 0.27% for motor claims declined in full and 5.77 for home and contents.

Motor claims average about 64 days to be closed, while for home and contents it is about 65 days. Travel claims average about 41.18 days.

PDS and key facts sheets? Useless, say researchers

Product disclosure statements and key fact sheets are not helping consumers choose the best insurance cover, according to a study commissioned by the Financial Rights Legal Centre.

Calling for a new approach, the centre says up to 42% of the 406 survey participants selected the worst home contents cover when given a choice between an “okay” and a “bad” product.

This was despite the participants being given time to review the disclosure information.

When the choice was expanded to include a “good” product, 34.9% still picked one of the inferior offerings.

The study was undertaken by Monash University law professors Justin Malbon and Harmen Oppewal.

Professor Malbon says the shipping industry has simplified cargo insurance to a choice between three standard term policies, and it may be time for a set of gold, silver and bronze standard coverages to be introduced in the consumer home insurance sector.

“That way the market can compete on price, and not confound consumers about what is covered and not covered when they make claims under their policy,” he said.

“The Government has standardised the terminology for flood cover. It should go further and standardise all terms such as for robbery, fire, earthquakes and so on.”

The Financial Rights Legal Centre says further efforts to improve disclosure in insurance contracts are misplaced if the policy goal is for people to buy cover that best suits their needs.

“Instead, policy-makers should look to minimum standards for policies, or star rating systems that people actually understand,” Co-ordinator Karen Cox said.

The research was funded through Victorian fire services levy over-collections, which were required to be distributed to projects benefiting insurance consumers.

Insurers hit back at brokers over claims criticism

Insurers have labelled as “scattergun” and “extremely disappointing” brokers’ allegations that poor claims experience is becoming more common in the industry.

As reported in insuranceNEWS.com.au last week, National Insurance Brokers Association (NIBA) CEO Dallas Booth says he has had “regular complaints” from brokers of claims going unpaid “for no apparent reason”, and alleging that obtaining explanations from insurers as to why claims are being mishandled is difficult.

(See earlier story).

He suggested this may be caused by “turmoil within the industry” that has seen insurers remove entire layers of management.

Insurers have fired back over the past week, with high-level executives telling insuranceNEWS.com.au the “generalised statements” from NIBA have caused them huge concern because the Hayne royal commission will turn its attention to general insurance this week.

“The timing could not have been worse,” according to one source who spoke on the understanding that his name would not be used.

“Presumably there is something behind the comments, but this scattergun approach seeks to tar the whole industry and could exacerbate unfounded stereotypes.

“When that sort of commentary comes from within the industry it is very disappointing. These are people with a responsibility to enhance the community perception of insurance, not undermine it.”

However, Insurance Brokers Network of Australia Chairman Gary Gribbin has joined the debate, supporting Mr Booth’s comments.

“Dallas is simply reflecting the sentiment of the vast majority of the general insurance broking community,” he told insuranceNEWS.com.au.

“It is undoubtedly the case that insurers are palpably mismanaging claims.

“There is a clear pattern of spurious, very technical denial, on top of which their administration of claims is nowadays abysmal.”

The Insurance Council of Australia (ICA) declined to discuss the allegations with insuranceNEWS.com.au, saying NIBA has not formally raised the issue with it.

See Analysis.

Australian cyber market growth to outpace global expansion

Growth in Australia’s cyber insurance market is expected to surge over the next few years, outpacing the expected trajectory for almost all developed countries, Aon says in a quarterly update.

The local cyber insurance market grew nearly 100% last year compared to 2016 and is estimated at about $60 million.

“Whilst the market is still relatively small, similar growth is expected in Australia for the coming two to three years,” the global broker says.

The US market grew 37% last year, while worldwide cyber premiums are forecast to be worth $7 billion by 2022, representing a compound annual growth rate of 15%.

Ransomeware attacks such as WannaCry and NotPetya have driven a “noticeable move” by companies to take out cyber cover, while organisations are also looking to protect traditional insurance lines from cyber impacts.

Australia introduced a notifiable data breaches scheme in February, requiring organisations and agencies to alert individuals and the Office of the Australian Information Commissioner of incidents likely to cause serious harm.

Europe’s General Data Protection Regulation took effect in May and Canada is set to implement information protection laws in November.

In the US, every state has its own data breach legislation, operating independently of each other and without a federal equivalent.

Industry ‘not ready’ for new accounting standards

Australian insurers and their overseas peers are running out of time to prepare for the transition to two new global accounting standards that will come into effect in 2021, KMPG says.

The accounting giant says in a new global report that only 7% of 160 insurance executives surveyed, including 16 from Australia, expect to be ready in time for two years of parallel running before International Financial Reporting Standard (IFRS) 17 and 9 come into operation.

IFRS 9 is an extensive review of accounting for financial instruments,with major changes involving recognition and measurement, impairment and hedge accounting. 

IFRS 17 was launched in May 2017 by the International Accounting Standards Board, and will have major implications for insurers. It makes extensive changes to the ways insurance contract liabilities are calculated, introduces a revised definition of revenue and imposes additional disclosure requirements.

IFRS 9 came into effect this year but insurers have the option to implement it in tandem with IFRS 17 in three years.

About 90% of the executives interviewed by KPMG foresee difficulties in hiring enough skilled staff to carry out the implementation, and 45% are concerned about budget funding.

 “As the full scale of the operational challenge becomes more apparent, many insurers are focusing on parallel running before IFRS 17 and IFRS 9 go live,” KPMG says.

“Many insurers are between a rock and hard place. They want to maximise the opportunities to dry-run the new bases of reporting, but are finding it challenging to have designed, configured and tested the systems that they need in order to achieve this.”

Major agencies involved in tsunami exercise

A massive exercise simulating a tsunami hitting the coasts of Queensland, NSW, Victoria and Tasmania has illustrated the potential damage that low-lying areas could suffer.

The Joint Australian Tsunami Warning Centre co-ordinated a major tsunami preparedness exercise last week that involved federal and state agencies and emergency responders.

The exercise simulated a tsunami hitting the three states’ coasts following a theoretical earthquake off the Solomon Islands.

The Joint Australian Tsunami Warning Centre uses the resources of the Bureau of Meteorology and Geoscience Australia to monitor for tsunami threats.

Fifty potential tsunami-generating earthquakes are detected every year, and Geoscience Australia senior seismologist Dr Jonathan Bathgate says the impact of a tsunami hitting the low-lying areas on the Australian coast “could be significant”.

The agencies involved in the exercise included the Australian Defence Force, Airservices Australia, Airservices Australia, Australian Antarctic Division, Australian Maritime Safety Authority, Bureau of Meteorology, Department of Home Affairs, Emergency Management Norfolk Island, Geoscience Australia, NSW State Emergency Service, Queensland Fire and Emergency Services, Surf Life Saving New South Wales, Surf Life Saving Queensland, Surf Life Saving Tasmania, Tasmania State Emergency Service, and Victoria State Emergency Service.

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Corporate

AAMI launches pet insurance

Suncorp has teamed up with Hollard to provide AAMI customers with pet insurance.

Suncorp says Petinsurance.com.au – a wholly owned subsidiary of PetSure, which is a member of the Hollard Group – has developed a “customised co-branded solution to distribute market-leading products to customers on the AAMI website”.

Neither company was able to provide insuranceNEWS.com.au with any further details at this stage.

See other story

Zurich distribution head leaves

Zurich Head of Distribution General Insurance Scott Luxford has left the company.

A company spokesman declined to confirm any details, but insuranceNEWS.com.au understands the role has been made redundant following a review.

National Underwriting Manager PI James Stringer has also left the company after his role was made redundant.

CHU prepares for strata disruption

Strata insurance will undergo “enormous change” over the next three to five years, CHU CEO Bobby Lehane says.

The strata insurer celebrated its 40th anniversary this month, but Mr Lehane says he is looking ahead to a very different future, with increased automation.

He says strata will increasingly be sold through brokers, thanks to the complexity of schemes and changing legislation requiring strata managers to obtain multiple insurance quotes.

CHU now sells 60% of its policies through brokers, and Mr Lehane believes 80% of strata will go through brokers within three years.

However, smaller schemes that don’t have a strata manager or broker involved will increasingly look to purchase insurance online.

CHU’s 40-year history reflects the changes that have taken place in the niche’s insurance business and the management of strata schemes.

The company was established in 1978 as Corporate Home Unit Underwriting. It remained the market’s only strata insurer until 1999, and in 2005 was acquired by QBE. In 2015 it was acquired by Steadfast.

The 40th anniversary was marked with a celebration involving staff and invited guests at Pier One in Sydney.

Liberty Mutual targets M&A solutions market

Ironshore parent Liberty Mutual has formed a standalone unit to provide mergers and acquisitions (M&As) insurance solutions.

Global Transaction Solutions (GTS) presents a central platform for brokers and buyers to access the range of products available.

“The M&A insurance market is growing quickly as brokers and buyers increasingly turn to insurance solutions to better manage a range of transactional risks and to effectively take deal-blocking issues off the table,” GTS Global M&A Rowan Bamford said.

“We brought our M&A experts from across our Ironshore and Pembroke platforms together to create a single integrated unit providing innovative solutions backed by unparalleled service and financial strength.”

Ironshore Australia MD William Lewis will take on the additional role of GTS Head of Asia Pacific, a spokesman told insuranceNEWS.com.au.

“While the creation of GTS will not impact Ironshore Australia’s operations, it provides the dedicated transactional risk expertise that may help meet the needs of select Ironshore Australia’s customers,” the spokesman said.

BMS Group rebrand

Insurance broker BMS Group has rebranded its wholesale broking division as Lions Gate Placement Services.

The new name mirrors that of its underwriting agency, also named Lions Gate.

MD Brett Field says Lions Gate’s core business of liability and property placements in the construction, sport and hospitality areas will remain the same, supported by Lloyd’s.

The company has ambitious growth plans in its chosen market sectors.

Tower picks leaders for digital makeover

New Zealand insurer Tower has brought in two experienced executives to help drive change as it overhauls its digital operations.

Peter Muggleston will become CIO in December and Michelle McBride, who has been appointed GM People and Culture, will start in November.

Mr Muggleston is at present the CIO at Foodstuffs North Island. He has more than 25 year’s experience in technology, financial services and strategy. Ms McBride is Head of Human Resources at Westpac NZ.

CEO Richard Harding says Mr Muggleston will help drive improvement across all areas of the business as Tower replaces its core IT systems.

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Regulatory & Government

Comcare selects Allianz and GB for claims services

Commonwealth workers’ compensation scheme Comcare has selected Allianz and Gallagher Basset as third-party claims services providers for the non-corporate federal agencies covered by the scheme.

This will give federal agencies greater control in managing their workers’ compensation claims.

Comcare put a tender to market in April this year.

Gallagher Basset has also been the claims management provider for the Northern Territory government self-insurance scheme and icare NSW claims management provider for self-insurance general lines claims.

Trials of similar models were held over the past two years in the Department of Human Services and the Australian Taxation Office.

ASIC vetoes review of class action funders

The corporate regulator has dismissed “anonymous and anecdotal” stories of companies considering moving offshore because of the rising cost of directors’ and officers’ insurance, saying class action lawsuits blamed for the situation are “critical to protecting shareholders and promoting market integrity”.

In a submission to the Australian Law Reform Commission (ALRC) discussion paper on class actions and third party litigation funders and the call for a review of the continuous disclosure obligations and misleading or deceptive conduct provisions within the Corporations Act, the Australian Securities and Investments Commission (ASIC) says it sees no need for such a review.

“We do not consider anonymous and anecdotal suggestions from companies considering moving offshore as sufficient evidence to reconsider continuous disclosure and misleading or deceptive conduct regimes.”

It says that the laws are critical to protecting shareholders and promoting market integrity, and “the economic significance of fair and efficient capital markets dwarfs any exposure to class action damages”.

ASIC also criticises the Productivity Commission’s recommendation that funders should by licensed to ensure they hold enough capital to meet their financial obligations.

This would not address the risk that funders couldn’t meet their liabilities, ASIC says.

“The Australian Financial Services licensing regime is focused on the conduct of financial services, and litigation funders do not sit neatly within the regime.

“AFSL requirements are not focused on ensuring that licensees meet their financial obligations to clients, and they are not intended to address the risk of an adverse costs order in court.”

ASIC believes litigation funders should be regulated as a legal service, consistent with other jurisdictions.

The regulator is also critical of the ALRC’s comment in the discussion paper that Australia’s disclosure obligations have “peculiar characteristics”, which suggest that the regime compares unfavourably to other comparable ones overseas.

Independent international research consistently ranks Australia’s “market cleanliness” favourably compared to others, ASIC says.

“The continuous disclosure obligations are there because not every company will have the incentive to voluntarily disclose price sensitive information, especially with regards to information that may negatively impact on the company’s share price.”

ASIC hasn’t seen any evidence that directors are being inappropriately held to account in class actions, the submission says.

An increase in the frequency of class actions doesn’t in and of itself indicate a problem with the regime, and there are many factors that may drive an increase, including misconduct, the regulator says.

“The fact that a case settles before the final court hearing does not suggest that the claim is without merit or that there are problems with existing law.

“Any call for a review should demonstrate that there are significant deficiencies with the regime that require scrutiny by government,” ASIC says.

“Any adjustment of these regulations would need to consider the broader impact of our overall regulatory architecture.”

Draft law doesn’t protect underwriters’ data: ICA

Proposed laws giving Australians greater control over their own data don’t sufficiently exempt the data accessed by insurers to underwrite risks.

The potential loophole could compromise insurers’ underwriting models, the Insurance Council of Australia (ICA) says in a submission to Treasury.

It says the legislation does not provide enough direction about the scope of data subject to the legislation.

While Treasury has stated the Consumer Data Right regime isn’t intended to apply to high-value data used by commercial interests, the council says this intent isn’t reflected in the draft legislation.

The detailed and sophisticated data used by insurers to underwrite a wide range of risks is their commercial asset, and the basis on which insurers compete against each other, ICA says.

“Any requirement to release data must not compromise the underwriting model used by insurers to assess and price risk.”

The submission says the legislation should be consistent with the Productivity Commission’s recommendation of an industry-led data policy.

Queensland boosts aerial fleet for high-risk fire season

Queensland has more than doubled its aerial firefighting fleet as it prepares for more high-risk days after an active start to the season.

Eight waterbombing planes and helicopters will be based at regional centres under an 84-day contract with the National Aerial Firefighting Centre.

The state has already responded to more than 1400 bushfires since the season officially began on August 1.

“The aircraft may be called on to protect people and property or used to map fires burning in difficult terrain that firefighters may otherwise be unable to access and monitor,” Queensland Fire and Emergency Services Commissioner Katarina Carroll said.

About 300 crew from the Fire and Rescue Service, Rural Fire Service and State Emergency Service will support the air operations.

The contract is due to finish in December, subject to a review of bushfire conditions and weather outlooks.

AFCA complaints process rules clears ASIC hurdle

The Australian Securities and Investments Commission (ASIC) has approved the Australian Financial Complaints Authority (AFCA) complaint resolution scheme rules and independent assessor terms of reference.

ASIC approval for material changes to the scheme, which will commence in November, is required under the Corporations Act.

“AFCA will provide consumers and small business with access to fair, free and independent complaint resolution,” AFCA Board Chairman Helen Coonan said.

“ASIC’s approval… is an important milestone prior to AFCA starting its service from 1 November.”

ASIC deadline looms for business info submission

Insurers have less than two weeks to provide the Australian Securities and Investments Commission (ASIC) with details of their operations as part of new industry funding laws.

The information must be submitted by next Thursday via the ASIC regulatory portal.

ASIC-regulated entities are required to provide their business activity metrics so that the regulator is able to calculate each company’s share of regulatory costs.

For more information, click here.

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Life Insurance

AMP charged dead clients life premiums

AMP continued to charge clients who had died for life insurance premiums despite having been informed of their deaths, the Hayne royal commission into financial misconduct heard today.

An internal investigation in April found deductions were still being made from the dead clients’ accounts, Group Executive of Wealth Solutions and Chief Customer Officer Paul Sainsbury told the hearing.

The under-fire wealth manager collected $1.3 million from the superannuation accounts of more than 4600 dead clients.

Counsel Assisting, Mark Costello, provided evidence AMP was aware of the practice as far back as 2016, when an internal complaint was made and received by management.

“There was a better way to do it, which was to stop premiums on death rather than refunding them. It seems a rather obvious step doesn’t it?” Mr Costello asked Mr Sainsbury.

Mr Sainsbury replied, “Yes, it does”.

In an earlier round of the royal commission hearings, AMP admitted clients were charged fees for services they never received and said senior management deliberately misled regulators for years.

Freedom cuts phone sales after royal commission flak

Freedom Insurance Group, under fire at the Hayne royal commission for its sales tactics, has dumped direct telephone calling for several products and appointed Deloitte to conduct a review of its strategy and operations.

COO Craig Orton says the company will cease outbound sales calls for term life (death and terminal illness) and trauma insurance later this month. Freedom stopped making telephone calls on accidental death and accidental injury cover on August 6.

The products represent about 13% of Freedom’s sales for last financial year, but the company says the impact of the changes is uncertain ahead of an expected overhaul under the scrutiny of the Australian Securities and Investments Commission.

The company came under considerable media and community criticism for the high-pressure sales tactics examined by the royal commission. These included selling cover to a 26-year-old man with Down’s syndrome who failed to understand the products he was persuaded to buy during a phone call. The man and his father endured a lengthy process in cancelling the cover.

Freedom customers were often questioned at length when they tried to cancel policies, with staff reluctant to “take no for an answer”, the royal commission heard last week.

Mr Orton says Freedom’s retention approach was “too strong” and the company is looking “very closely at what the regulator expects of us and how we can improve processes”.

“We’re trying to work and move to the situation where we’ve got customers understanding and being happy with the products that they have, and when they need to leave them or they don’t want them any more, the cancellation process is not onerous,” he said.

Products sold by the company include life insurance and accidental death cover offered by Swiss Re Life & Health Australia.

A Swiss Re spokeswoman told insuranceNEWS.com.au the company does not comment on individual client and partner relationships.

AMP slowest to decide life claims

AMP was the slowest insurer to resolve life claims last financial year, but also had the lowest rejection rate, data provided by 10 insurers to the royal commission shows.

The ASX-listed group’s average resolution time was 78 days compared to 10 days for TAL, which recorded the fastest average.

AMP declined only 0.3% of claims while at the other end of the scale Suncorp Life declined 4.4%.

For total and permanent disability policies, the average decision time ranged from less than 40 days for Zurich to 184 days for Westpac.

“Although Westpac and AMP had the longest decision times, they also had the lowest rates of declined TPD claims,” Counsel Assisting Rowena Orr said.

The documents showed that overall TPD claims averaged more than 92 days to resolve compared to 27.5 days for life cover.

The rate of declined claims for income protection was broadly consistent across the 10 insurers, ranging from less than 3% for AMP, Westpac and AIA to about 6.5% in the case of Suncorp Life.

For trauma insurance, which provides cover for a specified illness of injury, the rate of declined claims ranged from about 6-8% for MLC and Zurich to more than 28% for MetLife.

TAL, AIA, MLC, Westpac, MetLife, Zurich, CommInsure, OnePath, Suncorp and AMP were asked to provide data after they were identified as the largest of 15 life insurers examined in a 2016 Australian Securities and Investments Commission (ASIC) report on claims handling.

The commission also highlighted ASIC concerns over the limited value to consumers of accidental death cover, a guaranteed acceptance product not requiring a medical underwriting process.

TAL breaches standards, CommInsure medical definitions fail

TAL breached professional standards and its actions fell below community expectations when it tried to halt income protection policy payments for a nurse who was suffering depression and anxiety, the Hayne royal commission heard last week.

The woman faced scrutiny from TAL over concerns she had not disclosed previous stress-related issues before taking out the policy, but the issue was decided in her favour by the Financial Ombudsman Service (FOS).

The commission heard TAL, which had an estimated liability for the case of $792,000, later asked a private investigator to become involved.

Surveillance included desktop social media searches, photos and videos and “very personal and highly intrusive” descriptions of her attending libraries, shopping, swimming and being affectionate “with a male person who was in a very close relationship with the claimant”.

The woman was also asked to keep a daily diary, despite her concerns that this would cause her extreme distress, as TAL sought to disprove the entitlement.

A decision to end the policy, based on the surveillance, and concerns over the diary, again went to FOS. TAL ultimately accepted a recommendation that it keep paying the claim and agreed at the royal commission that its behaviour over the activity diary constituted misconduct.

TAL Claims GM Karen van Eeden agreed TAL had “deployed bullying tactics and offensive communications with the insured and others acting on her behalf”.

The insurer also came under fire for its handling of a case where it sought to avoid income protection policy payments for a woman diagnosed with cervical cancer who had accidentally omitted to mention previous problems with depression when taking out the policy.

Earlier in the hearings, CommInsure was criticised for declining a claim related to cancer as the procedure did not involve removal of the entire breast and as a result didn’t meet its definition of radical surgery.

Counsel Assisting Rowena Orr said CommInsure was relying on a definition that was about 18 years old, and when it was later changed it was not backdated.

Life insurer Clearview was scrutinised for pressure-selling tactics that targeted poorer people, while the company also agreed it had breached anti-hawking laws against unsolicited calls more than 300,000 times over a three-year period.

“We didn’t understand that we were breaching the anti-hawking rules,” ClearView Chief Actuary and Risk Officer Gregory Martin said. “We made a mistake.”

ASIC starts civil action against Dover, McMaster

The Australian Securities and Investments Commission (ASIC) has taken Dover Financial Advisers and its former director Terry McMaster to court.

ASIC alleges Mr McMaster and Dover deceived clients between September 2015 and March 2018 with a now-withdrawn client protection policy.

The regulator says the policy was designed to burden clients with potential liability for losses resulting from advice that was negligent, inappropriate or not in a client’s best interests.

It contained false and misleading information about the rights and protections available to clients, ASIC says.

Mr McMaster collapsed while appearing at the Hayne royal commission in April and was excused from further attendance.

He agreed in June to permanently remove himself from the industry, and Dover’s financial services license was cancelled under an enforceable undertaking.

ASIC is seeking a declaration that Mr McMaster and Dover contravened financial services law, and wants both fined.

FPA releases FASEA consultation papers

The Financial Planning Association (FPA) has released the seven submissions it has made to the Financial Adviser Standards and Ethics Authority (FASEA) during the year.

They include recent submissions covering professional development, training supervision requirements, foreign qualifications and the proposed title granted to advisers in training.

The seven FASEA consultation papers resulted in more than 7000 responses from members, the FPA says.

In its submission on professional development, the association calls on FASEA to restrict continuous professional development requirements to 30 hours, rather than the proposed 50 hours.

Some 60% of the financial advisers who responded to an FPA survey said 50 hours was not appropriate.

Thirty hours would be an increase for many in the industry, and the figure is in line with the minimum requirement that generally applies in other industry associations.

The FPA also encourages FASEA to take a practical approach to training and supervision for new advisers, so as not to increase costs for small adviser practices and create disincentives to hiring new advisers.

It also rejected a proposal that the year of training and supervision should include 800 hours of formal education, saying it completely ignores the fact that advisers have already completed a degree as part of FASEA’s minimum education standards.

In its submission regarding the proposed title granted to advisers in training, the FPA noted that its members thought the term “provisional financial adviser” implies a lack of training, competency and education, making a misleading association with P plate drivers.

It suggested instead the terms “supervised financial adviser/planner” or “professional year financial adviser”.

The FPA will launch a suite of tools and information later this year to guide members through the education pathway, understanding study credits, and exam preparation.

PPS Mutual appoints state manager

Specialist life insurer PPS Mutual has appointed Richard Hopwood to the new role of State Manager Queensland.

Mr Hopwood was previously ANZ Wealth Business development Manager for Life Risk. He will report to Director of Distribution Brian Pillemer and will be responsible for managing financial adviser relationships.

Mr Pillemer says Mr Hopwood’s knowledge and experience within the retail life insurance industry will have a beneficial impact as PPS continues to grow its exclusive relationships with high calibre advisers”.

The South African-based company is also searching for a Victorian state manager.

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The Professional

QBE takes icare innovation award

QBE won the innovation award at last week’s Insurance & Care NSW (icare) Conference and Awards event in Sydney.

The insurer’s exercise rehabilitation therapy for mental health program, a partnership project with NSW Ambulance, won in the general claims risk innovation category.

The program also won the People’s Choice award.

“These are fantastic results and we are thrilled to be recognised alongside our partners on this ground-breaking initiative,” QBE CEO Australia and New Zealand Vivek Bhatia said.

“Although the team are still in early stages of the program and analysis, the program has had an immediate impact and improved physical, psychological and psychosocial health markers.”

The icare awards handed out last week recognise standout performers in government risk management and work, health and safety.

Northern Sydney Local Health District with Royal North Shore Hospital triumphed in the risk reporting and intelligence category and NSW Health Pathology’s Forensic and Analytical Science Service took the Steve Hunt Award for excellence in prevention.

South Western Sydney Local Health District’s acting GM Linda Campbell took top honours in the risk leadership section.

The Museum of Applied Arts and Sciences and South Western Sydney Local Health District and partners are the joint winners in the risk frameworks, systems and processes category.

NSW manager takes Valerie Baker award

James Dunk from regional NSW brokerage Dunk Insurance has won this year’s Valerie Baker Memorial Award.

He received his trophy last week at a special event hosted by Lloyd’s in Sydney.

The eponymous award celebrates the achievements of Gold Seal founder Valerie Baker and is sponsored by her company, Austbrokers & IBNA Member Services and the Steadfast Group, with additional support from Lloyd’s.

Mr Dunk will go on an expenses-paid educational trip to London where he will meet with key underwriters and brokers. He will also be given a familiarisation tour of Lloyd’s.

GSA Insurance Brokers’ Rocco Pirrello, one of the five award finalists, will also be flying to the British capital to attend an emerging risk program run by Lloyd’s Global Development Centre.

“I know [they] will be standard bearers for our industry in London,” Gold Seal MD Sheila Baker said.

“I can’t wait to see what they will bring back to help their businesses and community.”

UK marine specialist MD takes up Sydney posting

Topsail Insurance MD Rob Stevens has moved to Sydney to oversee the UK pleasurecraft specialist’s growing business in this country.

The insurer recently opened an office in Sydney, its second in the country after Perth.

“We set up the Perth office in 2014 and have built a strong presence in Australia,” Mr Stevens said. “Opening the Sydney office is a natural progression.

“I will continue to work closely with the UK [business] and will be looking to make contact with regional and international brokers in providing Topsail products to a wider audience.”

Topsail provides specialist yacht and motorboat insurance globally.

FSAA seeks new CEO

The Financial Services Accountants Association is looking for a successor to from CEO Stephen Curley, who is retiring at the end of the year.

It is seeking someone with at least 20 years’ experience in the insurance services industry, a sound understanding of the challenges of the business landscape and an ability to maintain relationships with senior financial sector leaders.

The responsibilities include refreshing all general insurance course material and developing a health insurance course.

For more information on the role, click here.

icare opens a door to small charities

Insurance & Care NSW (icare) has invited small charities to apply for a share of $100,000 to be allocated at crowdfunding events run by the group’s foundation in November.

The Pitch In process is aimed at local-level not-for-profits operating in prevention and post-injury care that typically face a tough task competing against larger organisations for financial support.

“We run Pitch In twice a year and have had remarkable results to date,” icare Group Executive Care and Community Don Ferguson said.

Successful finalists will attend a coaching workshop, with the final three able to pitch to icare staff to secure a share of the funding at events at Sydney on November 26 and in Gosford on November 29.

WheelEasy, Limbs 4 Life and Waves of Wellness shared the proceeds from the previous Pitch In events.

Organisations that have less than $5 million annual income have until October 1 to submit an entry.

Applications and more information can be found here.  

 

https://www.cognitoforms.com/TFN/IcareFoundationPitchinApplication

AILA conference to discuss parametric insurance

Parametric insurance will be one element of the insurance industry to come under the microscope in an evolution-themed Australian Insurance Law Association annual conference.

The niche insurance product doesn’t indemnify insurance, but pays an insurance claim after a trigger event occurs. It can be used to cover flight delays, natural disasters, and crop losses.

Typical triggers for insured agriculture are lack of rainfall over a specified time period, or storms with pre-determined wind speeds.

Swiss Re Claims Expert, Property and Casualty Business Management David North will give the presentation. 

The conference will take place from October 31 to November 2 in Perth.

JLT launches mental health month

JLT has launched a mental health awareness month among its workers and stakeholders, sharing educational resources, insights, services and programs to improve emotional and mental health and social connectivity.

The program was launched last week and will last until October 10.  It coincides with World Mental Health Day and the general insurance industry’s Diversity and Inclusion festival.

The initiative has been sponsored by JLT’s corporate social responsibility committee.

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International

Industry can handle Florence losses: S&P

US insurers and the global reinsurance sector are strong enough financially to manage the losses from Hurricane Florence, S&P Global Ratings says.

Florence made landfall on Saturday as a Category 1 storm in North Carolina but has been downgraded to a tropical depression as it unleashes extremely heavy rain on North Carolina and South Carolina.

“Wind-related damage and the associated storm surge are likely to be major causes of insured losses emanating from property lines, business interruption, and auto damage among others,” S&P says.

“As well, there’s an increased risk of inland flooding from the slow-moving storm. Primary insurers will likely take the brunt of losses, but it’s not a complete washout.”

While initial loss estimates are still being tabulated, S&P believes the eventual figure is more likely to be an “earnings event” with limited impact on the industry’s capital position.

“Although the individual impact will vary among (re)insurers, we expect the credit risk profile will be largely unchanged after this event,” the ratings agency says.

“We expect Florence to have minimal ratings impact on reinsurers. We expect the combined losses from Florence and other year-to-date natural catastrophe events to be fully contained within the sector’s annualised earnings.”

Super-typhoon Mangkhut batters Asia

Parts of Asia face a massive rebuilding effort after the year’s most powerful tropical storm swept through the region on Saturday, leaving a trail of destruction in its wake.

Super-typhoon Mangkhut has moved west into southern China after battering the northern Philippines on Saturday.

“All of the areas that will potentially be impacted by Mangkhut will be at risk from very strong winds, heavy rainfall and flooding, with coastal areas at risk of storm surges,” said Tom Sabbatelli, the Event Response Manager at catastrophe risk modeller RMS.

Risk modellers are still assessing the extent of the damage from Mangkhut, which is the ninth typhoon of the annual typhoon season.

The storm has forced the relocation of more than 2.45 million people in China’s Guandong province and more than 48,000 boats returned to ports before the typhoon arrived.

In Hong Kong, roads are blocked and low-lying areas flooded, but the city managed to avoid serious casualties.

The storm caused at least 64 deaths in the Philippines, which bore the brunt of Mangkhut’s category-5 winds.

Reinsurer consolidation continuing: Fitch

Consolidation of the global reinsurance industry will continue as intense competition and high levels of capital drive mergers and acquisitions, says Fitch.

The ratings agency says smaller players lacking scale and diversification will see further pressure on growth and profitability.

“Marginalised companies are increasingly incentivised to explore M&A, as they face the challenges of operating in a difficult market environment,” it says.

“The potential benefits of consolidation for reinsurers include revenue diversification, economies of scale, improved return on capital and an enhanced competitive position.”

However, buyers should think carefully before committing to a purchase.

“Acquirers in a competitive bid situation run the increased risk of dilutive rather than accretive acquisitions, particularly when assessing the reserve adequacy of a target company and the potential complications in execution and efficient integration.”

Recent large deals include Axa’s acquisition of XL Group and AIG’s purchase of Bermuda-based Validus.

“Both deals provide access to established alternative capital platforms that neither company has currently,” Fitch says.

Axa seals XL takeover

French insurer Axa has completed its US$15.3 billion ($21.3 billion) acquisition of Bermuda-based XL Group.

The acquisition shifts Axa’s business from predominantly life cover and savings to mainly property and casualty.

“This transaction accelerates our transformation,” Axa CEO Thomas Buberl said.

Global fund buys majority stake in Sedgwick

Sedgwick, the US-based company that took over major loss adjuster Cunningham Lindsey in December, will now be controlled by private equity fund Carlyle Group under a $US6.7 billion ($9.3 billion) deal announced last week.

The transaction will close sometime this year.

“We are humbled by the confidence they have shown in our business model, and we look forward to partnering with Carlyle on developing and delivering innovative solutions for our clients around the world,” Sedgwick CEO Dave North said.

Sedgwick handles more than 3.6 million claims annually and has fiduciary responsibility for claim payments of more than $US19.5 billion ($27.3 billion).

Cunningham Lindsey’s operations in Australia and New Zealand have recently been rebranded to operate under the Sedgwick name.

Huge protection gap offers growth prospect

Addressing the large “protection gap” – more commonly referred to as non-insurance – could net insurers about $US800 billion ($1.12 trillion) in potential premium revenue, Swiss Re says.

The gap is one that offers promising growth for the industry as it struggles under the weight of excess capital and weak prices.

Swiss Re says last year’s destructive natural catastrophes are a stark reminder of the huge protection gap that still exists globally – including in developed economies.

About 70% of the US$2 trillion ($2.81 trillion) in natural catastrophe losses sustained over the last decade was uninsured, Swiss Re says.

“Such statistics are sobering,” the report says. “Roughly 2 billion people worldwide have no access to insurance, resulting in a very large protection gap.

“Therefore, a real potential for the (re)insurance industry exists to support the global population.”

Emerging risks offer PPE opportunities, Aon says

Terrorism pools are providing an example for how private-public enterprises (PPEs) could boost cover for emerging risks and intangible assets, Aon says.

The broker says global terrorism pools set up after the September 11 2001 attacks in the US have broadened their approach to potential catastrophes as the risks and environment have changed.

It highlights the example of the UK’s Pool Re, which has recently introduced cyber cover, the Australian Reinsurance Pool Corporation including pandemic impacts and France’s scheme extending its mandate to “small risks”.

“PPEs need to look to the evolution of the terror pools as an example, and re-examine their own relationships and consequent effectiveness in covering the protection gaps in the areas in which they are involved,” Aon Reinsurance Solutions PPE specialty practice leader Emma Karhan says.

The increase in bushfires North America and Europe has provided an example of a rising risk combined with under-insurance, while the market also grapples with cover for intangible assets that are difficult to value.

“Lines of business that tackle new insurable risks are a challenge for any insurance market,” Ms Karhan says.

“PPEs could consider taking on the role of an incubator for new coverages of new risks that are emerging from our intangible asset-based economies.”

Aon suggests PPEs could pass the risk to the private sector in its entirety once there is a more complete understanding of the exposures and the lines are established

The report also highlights the potential for insurance to be sidelined if it is expected governments and philanthropic groups will provide post-event funding.

Fears of trade wars drive demand for credit covers

Demand for trade credit and political risk covers are on the rise, fuelled by fears the ongoing US-China trade spat will worsen with repercussions for the global economy, a leading industry researcher says.

Growing political risk, amplified by Brexit and rising populist sentiments in developed economies, are also spurring more businesses to invest in these policies.

“Protectionism, unrest, currency volatility and economic interventionism are prompting a corresponding increase in demand for political risk and trade credit insurance,” Axco Insurance Information Services says.

“The current global political environment is defined by heightened instability in emerging markets as well as the return of political risks in developed economies, where frustrated electorates are newly receptive to the appeals of nationalism, populism and protectionism.”

Axco says the number of political risk insurers has doubled to more than 60 over the past eight years.

Private market capacity in London is about $US3.25 billion ($4.5 billion) for project and trade risks.

Revenue up, profits down as Charles Taylor expands

Specialist loss adjuster Charles Taylor’s total revenue increased at a faster rate than its profits in the six months to June as the company expanded to service new customers.

The UK-based company’s half-year results show revenue increased to £123.4 million ($225.56 million) in the six months to June, compared to £102.3 million ($187 million) in the previous corresponding period. It recorded an adjusted profit before tax of £8.5 million ($15.54 million), up from only £7.8 million ($14.26 million) in 2017.

Charles Taylor’s Australian offices are in Brisbane, Sydney, Melbourne and Perth.

The Insurance Support business recorded reduced operating profit alongside strong revenue growth, because of the strategic investments made to grow the business, the company says.

CEGA, Charles Taylor’s provider of travel claims management services, won a new contract to provide medical assistance services to a major UK insurer, well as new business in New Zealand.

It InsureTech business won a three-year contract with Lloyd’s, and was also appointed by major South American insurer Seguros to implement a core operating platform.

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Analysis

Brokers vs insurers: how the war of words erupted

When it comes to internecine disagreements, the insurance industry is usually pretty placid. Differences of opinion among the various industry tribes are rare, which made the breakout of hostilities between insurers and brokers over the past week unusual, to say the least.

The first shot was fired last Monday when insuranceNEWS.com.au reported on a speech to be given by National Insurance Brokers Association (NIBA) CEO Dallas Booth at the upcoming Australian Insurance Law Association (AILA) national conference, in which he will accuse insurers of mismanaging claims.

Such comments from disgruntled brokers are not all that unusual, but when they’re made by the CEO of the broker’s representative group they can’t be ignored. Nor can the timing.

Perhaps Mr Booth didn’t know excerpts from a speech he won’t be delivering until October 31 in Perth would be handed to insuranceNEWS.com.au in advance of the conference, because what has really got insurers peeved is the fact that his comments were published a week before the industry is grilled by the royal commission into financial services misbehaviour. That’s this week.

Senior sources from the insurers’ side of the fence have been harshly critical of Mr Booth’s comments, labelling them “an unpleasant surprise” and suggesting brokers might be better off keeping their heads down in the current environment.

In the AILA media release given to insuranceNEWS.com.au, Mr Booth says he will talk on a range of issues, including “turmoil” within insurance companies as they look to reduce costs, and an increasing reluctance to pay claims.

“I get regular complaints of claims not being paid for no apparent reason and an inability to get reasons, which reflects on the entire industry,” he says, before reminding insurers that they have a duty to “honour the promise” because “that’s what the concept of trust is all about”.

Fighting words, but who is he specifically referring to? The insurers are unhappy that by not naming names, Mr Booth’s comments have tarred them all with the same brush.

But then again, had he named the company, or more likely companies, that brokers believe are performing badly, he would only have created bigger headlines and even more insurer irritation.

Having poked the bear, Mr Booth has now been supported by some powerful figures in Insurance Brokers Network of Australia Chairman Gary Gribbin and AIMS GM Glenn Schultz.

In an email from Europe, Mr Gribbin tells insuranceNEWS.com.au “it is undoubtedly the case” that insurers are “palpably mismanaging claims”.

“Dallas is simply reflecting the sentiment of the vast majority of the general insurance broking community,” he says.

“There is a clear pattern of spurious, very technical denial (i.e. a lack of willingness to admit claims) on top of which their administration of claims is nowadays abysmal.

“Lack of experience, an absence of expertise, (seemingly) no understanding of the [Insurance] Contracts Act in relation to utmost good faith.

“The claims position is the worst I have seen… so dire is the environment.”

Mr Gribbin does name an individual insurance company, but they’ll be happy about it. He says Chubb – which won last year’s Mansfield Award for Claims Excellence and was a finalist in this year’s award – sets the standard.

 “[Chubb] remains the market leader in terms of attitude to, and management of, claims,” he says.

Mr Schultz says Mr Booth’s comments “are very representative of what the broking industry is encountering”.

 “Insurers are tightening expenses and taking a much harder look at claims,” he told insuranceNEWS.com.au. “This is a time of change in the industry and there is a reduction in the skill level of claims people.”

He says insurers increasingly want to cash-settle claims, which is often not appropriate for the client.

Mr Schultz accepts the vast majority of claims are still being paid without difficulty, but the change in insurers’ approach on a small percentage of claims risks “tarnishing the industry”.

The insurers’ own peak organisation, the Insurance Council of Australia (ICA), has declined to discuss the allegations, but the tone from its official spokesman reveals a degree of irritation that this issue should have been raised at this sensitive time.

“The Insurance Council will consider any concerns that NIBA raises with it,” Campbell Fuller said. “No issues of this nature have been formally identified.”

So there. But senior managers within insurance companies have been a bit more forthcoming, telling insuranceNEWS.com.au Mr Booth’s published comments have caused huge concern. They take particular issue with the fact that all companies are being caught up in the criticism.

“This scattergun approach seeks to tar the whole industry and could exacerbate unfounded stereotypes,” one source said.

“When that sort of commentary comes from within the industry it is very disappointing. [Brokers] are people with a responsibility to enhance the community perception of insurance, not undermine it.

“These comments are a really unpleasant surprise and could not have come at a worse time.”

And while brokers haven’t been identified by the royal commission as a prime target, one senior manager suggested that now might be a good time for them to keep their heads down.

“We hear the words ‘fees for no service’ a lot,” he said. “They need to be really careful. I would have thought in the current environment brokers’ representatives shouldn’t be throwing mud at their partners in this business.

“People who live in glasshouses shouldn’t throw stones.”