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Suncorp warns against north Queensland mutual model

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Suncorp has warned the Federal Government against introducing a mutual insurer for cyclone-prone north Queensland, saying it would be ineffective and unfair to Australian taxpayers.

“A government mutual would merely paper over the cracks and not address the heart of the problem in the north – the high risk of cyclones devastating whole communities, flattening homes and neighbourhoods,” CEO Insurance Anthony Day said.

He says the only way to protect communities and ensure they remain vibrant and viable is by investing in mitigation, constructing stronger homes and properties and improving building codes in cyclone-prone areas.

Northern Queensland MP Warren Entsch is campaigning for the Federal Government to support an insurance mutual, arguing it would make insurance cover more available and affordable.

The Government is yet to respond to the Northern Australia Insurance Premiums Taskforce report, released in March last year.

But the Australian Financial Review reports the Department of Finance and Treasury is assessing a model submitted by Mr Entsch along with Regis Mutual Management and Willis Re, which was covered in the taskforce’s review.

The taskforce report was strongly against government intervention and recommended mitigation as the only way to reduce premiums on a sustainable basis.

“The Government should be willing to listen and act on the strong advice of its own inquiries,” Mr Day said.

The taskforce report says there would be no reduction in premiums if either a mutual or reinsurance pool were run along commercial lines, and any decline would come at a cost to the Government.

“The mutual could result in a complex claims experience,” the report says.

Debbie losses ‘may hit $1.7 billion’ as claims pour in

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Insured losses from Cyclone Debbie have topped $750 million, amid forecasts the final bill could exceed that for Cyclone Yasi in Queensland six years ago.

The Insurance Council of Australia (ICA) says losses from the cyclone and related flooding have reached $756 million from 50,056 claims.

Swiss Re estimates total insured market losses for wind, flood and storm surge damage could be about $US1.3 billion ($1.7 billion).

“We are a lead reinsurer in this market and estimate that Cyclone Debbie has caused higher commercial and corporate losses compared to similar events in the past,” Group Chief Underwriting Officer Matthias Weber said.

Swiss Re estimates its claims burden at about $US350 million ($463 million), net of retrocession and before tax.

Debbie struck the coast near Airlie Beach in Queensland, with the main disaster zone stretching more than 990km into northern NSW.

The storm caused damage further south than Yasi, which led to estimated losses of $1.4 billion in 2011 after hitting between Townsville and Cairns, and then traversing less populated regions.

Recreational boat insurer Club Marine says it is processing more than 300 claims covering everything from total loss to comprehensive hull and structural damage. Airlie Beach and Hamilton Island – both centres for large numbers of pleasurecraft – were hardest hit.

“In terms of the number of boats damaged, claims lodged and the sheer devastation on the ground, Cyclone Debbie is the largest catastrophic weather event I’ve seen,” National Claims Technical Manager Phil Johnson said.

“Virtually all the boats at the marinas we visited were damaged in one way or another.”

Much of the damage was from vessels colliding and hitting marina structures, while high winds caused damage likened to “ultra-high-powered sand-blasting”, according to an assessor.

ICA is holding forums this week and next for householders and businesses that have lodged claims.

Insurance companies, Legal Aid and the Financial Ombudsman Service will attend the meetings, which will cover key aspects of the recovery process, including claims management, rebuilding and dispute resolution.

Forums will be held in Lismore on Thursday, Tweed Heads on Friday, Mackay next Monday and Proserpine on Tuesday May 2.

The events start at 6pm and registration is required by noon on the day.

Insurers see artificial intelligence transforming industry

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Artificial intelligence (AI) will profoundly change the industry in the next three years, according to 57% of Australian insurance executives polled in Accenture’s latest Technology Vision for Insurance report.

About 78.4% believe AI will revolutionise ways of interacting with and gaining information from customers, and 57% expect better data analysis and insight from AI-embedded user interfaces.

More than 80% of Australian insurers have already deployed AI-powered virtual assistants in their business or in specific areas to improve customer interactions.

“The adoption of artificial intelligence is gaining momentum within insurance, with executives pointing to AI’s potential to revolutionise the customer experience and empower agents, brokers and employees,” Accenture Asia-Pacific MD of Insurance Practice Ravi Malhotra said.

“Our research shows insurers are investing in AI technologies to, among other things, improve customer interactions based on written and spoken interactions, gestures, interactive touch displays and hybrid mixed-reality platforms that merge the virtual and the real world, with each customer exchange becoming increasingly personalised.”

The global survey shows digital technology is reshaping the sector at a growing pace.

AI and other digital technologies have allowed insurers to redefine their roles and help drive the next wave of evolution in society.

“Insurers are not just creating new products and services, they’re shaping new digital industries,” Accenture said.

“From technology standards, to ethical norms, to government mandates, in an ecosystem-driven digital economy, one thing is clear: a wide scope of rules still needs to be defined.

“To fulfil their digital ambitions, insurers must help shape the new rules of the game.”

Businesses ‘face daily cyber attacks’

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A government survey has revealed that many Australian organisations are attacked daily by cyber criminals.

The research, published by the Australian Cyber Security Centre, questioned 113 organisations including major businesses and government departments.

A staggering 90% faced some form of attempted or successful cyber-security compromise last financial year.

“The cyber threat remains ever-present,” the report says.

“Organisations faced numerous malicious cyber threats on a daily basis – through spear-phishing emails alone, organisations are affected up to hundreds of times a day.

“Findings suggest the current level of cyber-threat activity is disruptive for organisations regardless of whether an attempt to compromise a network is successful or not.”

The survey found most organisations display a high level of resilience.

However, more than half (51%) tend to be alerted to possible breaches by external parties.

“Despite the overall resilience, there are still a number of significant challenges that suggest organisations could do more to prepare for and adapt to continually changing cyber threats.”

Improvements are being made. Some 71% of organisations report having a cyber-security incident response plan in place, compared with 60% in the 2015 survey.

NSW taskforce lays first CTP fraud charges

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A 31-year-old Sydney man is the first person charged under a crackdown on fraud against the NSW compulsory third party (CTP) scheme.

He was arrested in Liverpool by the Strike Force Ravens police team, set up last August to investigate syndicates targeting the CTP program. He faces 40 fraud-related charges.

“Every NSW motorist is being stung by this illegal and unethical behaviour,” Finance, Services and Property Minister Victor Dominello said. “[The] arrest is a powerful reminder of the NSW Government’s determination to bring these fraudsters to justice.”

Fraudulent claims by crime syndicates cost the CTP scheme millions of dollars each year, and the NSW Government has rolled out reforms to tackle the issue.

Christchurch fires cost insurers $16 million

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Fires that caused more than 1000 people to be evacuated near Christchurch earlier this year have cost insurers $NZ17.7 million ($16.4 million) from 175 claims.

Provisional data shows $NZ10.2 million ($9.5 million) was paid for 130 house and contents claims, the Insurance Council of New Zealand (ICNZ) says.

Commercial material damage, business interruption and loss of profit claims cost $NZ7.3 million ($6.8 million), and $NZ165,000 ($153,245) was paid for vehicle losses.

The February bushfires swept over the Port Hills, between Christchurch city centre and nearby Lyttelton port, destroying a number of homes and more than 1800 hectares.

Two separate fires started several kilometres apart before combining, with a state of emergency declared.

“Events like this just underline the importance of insurance when disaster strikes,” ICNZ CEO Tim Grafton said.

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Corporate

AUB acquires share in Queensland IBNA broker

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AUB Group has announced a 50% acquisition of Queensland-based LEA Insurance Brokers, with the transaction expected to complete on May 1.

LEA, a founding Insurance Brokers Network Australia member, is based on the Gold Coast and in Brisbane, but has 4000 clients across Australia.

It has more than 25 employees, with a number of authorised representatives and a strong life insurance business.

Long-time shareholders and directors Eric Gardner and Colin Irvine will formally retire on May 1 but remain in a consulting capacity until at least April 30 next year. Troy Jennings, who has been with LEA for 17 years, will take over as MD from Mr Gardner.

AUB Divisional CEO National Partners and Group Acquisition Fabian Pasquini told insuranceNEWS.com.au LEA has the structure of a typical Austbrokers business.

“The culture is fantastic,” he said. “We were happy to provide a solution to the succession plan, and there is the added attraction of having a key person in the business take on the MD role.

“[Mr Gardner] is hungry to make his mark and grow the business further.”

Mr Pasquini says more acquisitions are on the cards, and AUB has a target list of businesses it wants to speak to.

“The market is changing a little bit,” he said. “During the soft market, principals have been focused on internal matters. But now their heads are starting to come up and they are able to consider other things.”

LEA will operate as a standalone partner business of AUB, which now has 51 businesses across its broking network.

QBE goes green with $400 million issue

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QBE is issuing $US300 million ($399 million) in debt securities as part of a green investment program that aims to generate environmental benefits.

The fundraising is the first under the company’s Green Bond Framework, released last month. QBE says it is also a first for global insurers.

It has not detailed specific investments for the money raised, but green bonds provide finance in areas such as renewable energy, low-carbon transportation, sustainable forestry, water efficiency, waste management and pollution control.

The fixed-rate senior notes have an issue price of $US200,000 ($265,866) each, mature on October 21 2022 and carry a 3%-per-annum interest rate.

QBE says its Green Bond Framework “represents a further step in supporting investors to meet their objectives, while supporting insurance clients to realise opportunities in the fast-developing low-carbon economy”.

Areas excluded for investment under the framework include manufacture of alcoholic drinks and tobacco products, gambling enterprises and various fossil fuel-related activities.

Last year QBE established a program in which customers can choose to have a percentage of their premium invested in securities with social or environmental benefits.

Zurich joins travel elite with Cover-More purchase

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Zurich is now one of the world’s top three global travel insurance providers with the completion of the acquisition of Sydney-based Cover-More.

The Swiss insurer acquired the 100% stake through its subsidiary Zurich Travel Solutions, for about $741 million.

Zurich Chief Strategy, Innovation and Business Development Officer Giovanni Giuliani says the deal is about Cover-More’s innovation and capabilities as much as its products and services. 

“All Cover-More’s strengths will be leveraged throughout our business and across our footprint,” he said. “They will increase our global competitiveness, enhancing our ability to target new customer groups and strengthening our capacity to meet and exceed the needs and expectations of our customers around the world.”

Cover-More will operate as a standalone entity and retain its brand.

Zurich CEO Asia Pacific Jack Howell says the acquisition provides an opportunity to pursue global growth ambitions.

“Cover-More is an excellent business and an excellent fit,” he said. “It represents a unique opportunity for Zurich to acquire a globally expanding platform and offer capital-light products with low volatility.”

QBE named most valuable Australian insurance brand

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QBE is the most valuable Australian insurance brand, according to rankings from London-based consultancy Brand Finance.

The insurer has a brand value of $US1.95 billion ($2.58 billion) and ranks 45th globally – one of two Australian insurers in the top 100.

AMP places 100th with a brand valuation of $US581 million ($769 million).

China’s Ping An is the world’s most valuable insurance brand at $US16.32 billion ($21.61 billion).

Allianz ranks second at $US15.2 billion ($20.12 billion), followed by China Life with $US10.3 billion ($13.64 billion).

Achmea appoints new CEO

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Emma Thomas, a former executive at New Zealand rural insurer Farmers Mutual Group, has been appointed CEO of agricultural insurer Achmea Australia.

She replaces Timo van Voorden, who returns to the Netherlands after spending the past five years establishing the Dutch company in Australia.

Ms Thomas’ roles at Farmer’s Mutual included head of advice and sales, national sales manager and financial controller.

Before that she was finance manager at IT and services company Fronde and a senior auditor at Deloitte.

Tower’s Debbie claims may top $11 million

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New Zealand insurer Tower says claims costs for storm damage caused by the latter stages of ex-Tropical Cyclone Debbie will reach $NZ10-12 million ($9.3-11.2 million).

Tower staff recently gained access to the flooded North Island town of Edgecumbe, where residents were evacuated and a state of emergency was declared after the nearby river burst a levee.

Tower is working with its customers to assess the damage to their property but a full understanding of the impacts is not yet fully known, CEO Richard Harding says.

Aggregate reinsurance will absorb the first $NZ5 million ($4.7 million) of losses and catastrophe reinsurance will pay for claims above $NZ10 million ($9.3 million).

As a result, the maximum financial impact from the storms will be $NZ3.6 million ($3.4 million) after tax, the company says.

Heavy rain hit much of the country earlier this month as the remains of Cyclone Debbie swept across the Tasman. The wet weather continued when Cyclone Cook formed in Vanuatu and churned southward through New Zealand.

“Cyclone Cook’s impact was not as significant as expected, with about 120 claims received from customers to date,” Tower said.

“While still very early, we do not expect this to be a significant event loss.”

New Zealand has experienced a high number of catastrophes this fiscal year. Tower, which is the takeover target of Suncorp and Canada’s Fairfax, has already reported after-tax profit impacts of $NZ7.2 million ($6.7 million) plus the cost of reinsurance reinstatement for the Kaikoura earthquake, $NZ1 million ($933,600) for the Port Hills fires and $NZ2.6 million ($2.4 million) for the Tasman Tempest storm.

Chubb unveils NZ high-net-worth product

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Chubb has introduced a cover for high-value homes, art and jewellery in New Zealand.

The Masterpiece product is aimed at individuals with significant personal assets to protect, and provides “exceptional levels of cover”.

Country President for New Zealand Andrew Brooks says the country “is a sizable high-net-worth market and Auckland ranks in the top 40 high-net-worth cities worldwide”.

“There is currently no product available for New Zealand homeowners with the broad cover offered via Chubb Masterpiece.”

LIU rolls out accident and health products

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US-owned Liberty International Underwriters (LIU) has brought its accident and health (A&H) insurance products and services to Australia.

The suite is designed to inform, assist and protect people and their companies in Australia and abroad.

“The new LIU A&H offering is very much an extension of what we already do well – look after our customers,” Asia-Pacific President and MD Mike Abdallah said.

The product offers corporate travel and group personal accident and sickness covers to a wide range of industries. It also provides full medical benefits for Australian employees on overseas assignments or overseas foreign workers for Australian companies.

Around-the-clock integrated emergency and claims assistance is available under Liberty’s partnership with Sydney-based Fullerton Health Corporate Services.

LIU provides a range of specialty products distributed via the independent broker network, and is part of Liberty Mutual, based in Boston.

Tokio Marine backs Bonded Global Australia

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Surety guarantee provider Bonded Global Australia has been appointed an exclusive licensed intermediary with Tokio Marine & Nichido Fire Insurance.

The Japanese insurer is authorised by the Australian Prudential Regulation Authority to conduct insurance business.

Bonded Global, which formed in 2012 to assist construction companies with surety guarantees, plans to expand its business offerings.

“The business opportunity will assist small to medium-sized construction industry businesses with access to non-bank surety guarantees without the need for cash collateral,” Bonded Global CEO John Earwaker said.

 “The effect of this launch will create huge opportunities for the construction industry to use its capital more wisely and not have cash tied up in performance or retention guarantees.”

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Regulatory & Government

Consumer law review recommends insurance contract reform

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A review of consumer law has recommended applying unfair contract terms to insurance contracts – a move the insurance industry has consistently argued against.

Consumer Affairs Australia and New Zealand (CAANZ) has submitted its final report for the review, commissioned in March last year.

It says “a range of stakeholders” expressed concern that consumers who are party to standard-form insurance contracts are not covered by the unfair contract terms protections.

“While the Insurance Contracts Act contains its own protections for consumers (such as the duty to act in the ‘utmost good faith’ and specific disclosure requirements), they are not the same as the [Australian Consumer Law] protections and have not been shown to provide equal or greater consumer protection,” the report says.

“CAANZ proposes that the unfair contract terms protections be applied to insurance contracts to strengthen, clarify and harmonise the rights and remedies available to consumers and increase options for redress.”

The Insurance Council of Australia told insuranceNEWS.com.au it believes such a change would bring no benefits to consumers, while increasing compliance costs.

“Equal or greater protections are already available to consumers through the Insurance Contracts Act,” spokesman Campbell Fuller said.

“The general insurance sector is tightly regulated by the Australian Securities and Investments Commission and the Australian Prudential Regulatory Authority, while relevant ICA members are also bound by the General Insurance Code of Practice, which commits insurers to mandatory standards of service above and beyond their statutory obligations.

“Further, policyholders may lodge disputes with the free and independent Financial Ombudsman Service, which is able to make decisions that are binding on insurers.”

Ministers will consider the CAANZ recommendations later this year.

ESL monitor to hold emergency levy removal inquiry

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NSW Emergency Services Levy Insurance Monitor Allan Fels has called a public inquiry requiring companies to explain how they calculate property premiums and outline their plans for removing the levy.

Insurers including IAG, Allianz Australia, QBE and Suncorp are expected to present at the one-day hearing on May 16.

“I have called the inquiry to help increase transparency over the pricing of premiums,” Professor Fels said. “It’s only reasonable consumers know how their policies are priced and what affects this cost, so they are able to make informed decisions.”

The emergency services levy (ESL) will be removed from NSW property insurance policies from July 1, with the monitor appointed to ensure savings are passed on to consumers.

An inquiry discussion paper notes industry forecasts of premium rises next financial year after a period of relatively flat growth, with possible drivers including less competitive pressure, profitability, cost gains – particularly due to recent natural perils – and low interest rates.

“Many hardworking NSW families are struggling and they are entitled to the full costs associated with the levy’s removal from their insurers,” Professor Fels said. “The removal of the ESL should not be used to restore or increase insurer profit margins.

“The effects on policies due to recent catastrophic weather events will also be investigated.”

The monitor says insurers should drop residential property insurance prices by about 20% due to the levy’s removal, while commercial policy reductions are expected to be about 30%.

Professor Fels last month criticised the industry for wide differences in prices across locations and argued insurers do not make it easy for consumers to make comparisons.

Matters of interest for the inquiry include how insurers have charged the levy, plans for communicating its removal, reasons for past premium changes, reinsurance arrangements and expectations for property insurance pricing and profits next fiscal year.

“The public inquiry is further assurance to NSW consumers that insurance companies are on notice,” Professor Fels said. “We are watching and monitoring a range of different factors to ensure consumers are protected during this transition.”

The inquiry will be at the Parliament House Theatrette in Macquarie Street and will be led by Professor Fels and deputy monitor David Cousins.

Submissions are due by May 9 to publicinquiry@eslinsurancemonitor.nsw.gov.au.

Owners’ corporations ‘ultimate winners’ under ESL reform

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The move to a property-based emergency services funding regime in NSW on July 1 will level the playing field for owners’ corporations, according to Strata Community Insurance MD Paul Keating.

State fire and emergency services are currently funded via a levy on residential and commercial property insurance.

Mr Keating says owners’ corporations are unfairly burdened because they are legally required to insure buildings under a damage policy with approved insurers for full repair and replacement costs.

“Other forms of property insurance are voluntary, with owners choosing whether to insure and to what level,” he said.

“The compulsory nature of strata insurance therefore results in owners’ corporations paying a disproportionate share under the old system.

“Owners’ corporations will be the ultimate winners with these changes, as a broader property-based levy will extend the funding base and lower costs for strata owners.”

State Treasurer Dominic Perrottet says the new system will cut the cost of insurance by $938 million next financial year, and help address high levels of underinsurance.

Industry attacked at Senate hearings

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General insurance was described as “a stitch-up” during two days of public hearings in the ongoing Senate inquiry into the industry.

News Corp journalist John Rolfe told senators that consumers are not getting value for money and it is almost impossible for them to effectively compare general insurance policies.

He called for the introduction of a government-run comparison site, such as the one used to compare private health policies.

But major insurers and industry bodies once again spelled out their concerns.

The Insurance Council of Australia told the hearing an industry-led solution, rather than one imposed from the outside, would be more likely to solve any problems.

See ANALYSIS.

ASIC seeks feedback on peer disciplinary panel

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The Australian Securities and Investments Commission (ASIC) is seeking feedback on a proposed financial services panel responsible for determining if errant individuals should be banned from the industry.

Financial services and credit industry participants and/or non-industry participants with relevant expertise, plus at least one ASIC staff member, will sit on the panel.

“We would delegate to the panel our power to ban a person from providing financial services and/or engaging in credit activities by making a banning order,” a consultation paper says.

“We would refer a matter to the panel where it is appropriate for peer review because of its significance, complexity or novelty.

“Whether a matter is appropriate will depend on the facts of each matter.”

The consultation paper says the panel will enhance the impact of the regulator’s administrative decisions, by way of peer review.

“The significance of being judged by peers cannot be underestimated,” ASIC Chairman Greg Medcraft said. “Peer review panels are a form of co-regulation in Australia and overseas.

“The panel will also bring broader experiences and perspectives into ASIC’s decision-making and ensure decisions reflect current industry practices and standards.”

Examples of peer review bodies in Australia include the Takeovers Panel and Markets Disciplinary Panel.

ASIC says the panel may improve regulatory outcomes by ensuring the regulator’s administrative decisions are based on a thorough understanding of current industry practice and standards, and could bring a broader range of experiences and perspectives into the decision-making process.

Submissions on the consultation paper close on May 23. For more information, click here.

NTC seeks to define ‘control’ in automated cars

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The National Transport Commission wants help defining the terms “control” and “proper control” in road rules relating to automated vehicles.

Road laws are currently based on the principle a human is in control of a vehicle.

The commission wants submissions on developing national enforcement guidelines to clarify whether a human driver or automated system is in control at various levels of automation.

CEO Paul Retter says agreement on the definition of “proper control” is a fundamental step in preparing Australia for the safe deployment of automated vehicles.

“Vehicles with an automated driving system that can perform parts of the driving task challenge these concepts of control,” he said. “We need to arrive at an agreed position early to provide certainty for police and enforcement agencies.”

Mr Retter says a national consensus will provide certainty for consumers, manufacturers and insurers around the question of crash liability.

One proposal allows a driver to supervise automated driving without needing a hand on the wheel at certain levels of automation.

This would involve introducing indicators related to alertness and readiness to intervene.

Feedback will inform the development of national enforcement guidelines, which will be presented to transport ministers in November.

Submissions are open until 4pm on Friday June 2. Click here.

ASIC co-operates on fintech with Indonesian regulator

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The Australian Securities and Investments Commission (ASIC) has signed a co-operation deal with Indonesian financial services regulator Otoritas Jasa Keuangan to promote financial services innovation.

The agreement covers information-sharing on emerging market trends and regulatory issues arising from growth in innovation.

“Many fintechs are not constrained by national borders and it is fundamental that we leverage this to share views, exchange information and to discuss some of the challenges this can create for fintech businesses and the community,” ASIC Commissioner John Price said.

Indonesia is the largest economy in southeast Asia and hosts a fast-growing financial technology sector, offering services including insurance, investment, financing, peer-to-peer lending and crowdfunding.

ASIC has already signed fintech agreements with regulators such as the Monetary Authority of Singapore, the UK’s Financial Conduct Authority, the Ontario Securities Commission and the Capital Markets Authority in Kenya.

RBNZ to consult on insurance legislation reform

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The Reserve Bank of New Zealand (RBNZ) will hold forums in Auckland and Wellington next month to discuss its review of the Insurance Prudential Supervision Act 2010.

RBNZ representatives will give a brief introduction to an issues paper, followed by a question and answer session and further discussion.

Consultations will pave the way for release of potential options, but any new law will not be enacted until next year at the earliest.

The review follows an International Monetary Fund examination of New Zealand’s financial system, including an assessment of the insurance sector’s regulatory and supervisory framework compared with global guidance.

The central bank says the IMF findings are due to be published in the second quarter this year and RBNZ will factor them into its analysis “to the extent they are appropriate” for New Zealand.

The first forum will be held at Rydges Auckland in Federal Street on May 22, while the Wellington event is at the Reserve Bank Museum on May 24.

Submissions on the issues paper are due by June 30.

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Life Insurance

Sluggish growth predicted for ‘mature’ Asia

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Life insurance premiums in mature Asia-Pacific markets including Australia are expected to rise only 1.4% in the next eight years, according to a new report from Munich Re.

But emerging markets in the region are predicted to grow 8.3%.

Predicted growth for mature Asia is only slightly above western Europe, at 1.3%.

Latin America and the Middle East and North Africa are among the top performers – at 7.1% and 6.8% respectively.

“Given their strong growth rates, the emerging markets are gaining more and more weight in the international insurance industry,” the report says.

“The emerging markets’ share of the anticipated additional premium volume is expected to rise from 20% [last year] to 47% by 2025.”

Last year life insurance premium for mature Asia-Pacific totalled €595 billion ($856 billion), while emerging Asia totalled €335 billion ($482 billion).

Despite a poor prediction for the Middle East, the United Arab Emirates is tipped to record the strongest premium growth by nation, with 10% over the next eight years.

Indonesia, Philippines and China are the next hotspots, at 9.2%, 9.1% and 8.8% respectively.

The report attributes this growth to rising living standards and insurance needs.

“Interest rate increases and demographic trends could revitalise the life insurance segment in the industrialised countries, as well,” it says.

Munich Re predicts the global life insurance market share for emerging Asia – currently at 21.4% – will match Europe (24.5%) by 2025.

North America will remain the largest market, with 27.8%.

‘Weak’ FSC product list standard cops criticism

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The Financial Services Council’s (FSC) new Life Insurance Approved Product List (APL) standard will not apply to platforms and non-institutionally owned dealer groups, because they are not part of the organisation.

But it will apply to Australian financial services licence-holders who are members of the FSC.

Obviously, dealer groups and advisers who are members of advice associations are not members of the FSC, so it will not apply to them.

There is also a growing trend for advisers to use platforms to process life insurance applications, but most institutionally owned platforms are very restrictive on the number of life insurers on the approved list.

Only the independent platforms have added more life insurers, but at last count even these had a maximum of three.

The standard says advisers should be able to use insurance products that are not on an APL.

But it then adds this doesn’t apply if all retail life insurers are on an APL.

ClearView CEO Simon Swanson has criticised the standard’s vague wording and exclusions, calling it “ineffectual”.

“Everything in the standard is ‘should’ rather than ‘must’,” he told insuranceNEWS.com.au.

“That is the weakness in this standard, and it has not tackled the issue of approved lists.”

A list showing which retail life insurers should be considered for an APL is another omission.

The standard mentions a “range” of insurers, which Mr Swanson says will allow the institutions to continue including one or at most two insurers on their APLs.

“The draft does not provide guidance on how broad that ‘range’ should be, mirroring the current situation where large institutionally owned licensees can use their discretion to enforce extremely narrow and restrictive APLs,” he said.

Another curious statement in the draft standard concerns best-practice principles when researching insurers to add to an APL.

The standard says while the requirements “are not mandatory”, “the [licensee] member should have regard to the best-practice principles outlined in the standard and determine what is reasonable given their own circumstances”.

Mr Swanson says such statements are indications of a “Yes, Minister” approach and will do nothing in terms of increasing competition, choice and customer best interest.

“Despite being charged by the Government 18 months ago to develop a new APL standard for the delivery of greater product choice and accessibility for advisers, the FSC has produced a superficial document that will fail to stamp out anti-competitive practices by the large vertically integrated institutions,” he said.

“Therefore, it won’t lead to profound, lasting change and a better deal for consumers.”

Life framework ‘poses threat to independence’

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The loss of independent life advisers to help clients during claims will be devastating, and new legislation is to blame, according to MBS Insurance partner Trevor Shipton.

“Claims are a terrible process to have to go through at the worst time in our clients’ lives,” he says in a submission to the Parliamentary inquiry into the life industry.

“The reassurance, support and expertise of an adviser at claim time can make all the difference in making the process bearable.

“As advisers, we take part of the burden our clients are experiencing, to help our clients focus on recuperating or mourning the loss of a loved one.”

Mr Shipton says MBS has made $18.8 million of claims for clients and none have been refused.

“In our experience, the insurers we deal with have been honourable, and we could only complain about minor parts of the claims process,” he said. “We believe that claim time is the most important time for us to be available for our clients.”

Mr Shipton believes having an independent adviser involved in the claims process keeps insurers honest.

“I have seen the conflict involved in bank/insurer-owned advisers at claim time with their clients and have had to step in during such events to do pro-bono work just to force the insurer to come to a resolution. The power of independence should not be underestimated and definitely not ignored as it has been so far.”

Mr Shipton says the Life Insurance Framework will destroy the independent adviser, and he is calling for a reassessment of the legislation.

“An inquiry into the behaviour of all parties involved in the reforms needs to be completed because there are numerous indications that these parties have acted outside of their remit. In addition, a study into the impact of small business needs to be conducted.

“I believe the reforms in their current and planned states will destroy the only independence the industry has, which all happens to be small businesses.”

Move now or risk sinking, business sales broker warns

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Older advisers are continuing to delay selling their practices in the belief higher offers will emerge, according to Connect Financial Service Brokers founder Paul Tynan.  

“Financial advisers are confronting the ‘exit and succession perfect storm’, and staying out at sea in a rapidly deflating life raft is not the answer,” he said.

“If now is not the time to sell, then when?”

Mr Tynan says mature-age advisers face a number of gloomy scenarios that will affect their practices’ values.

“They could sell in the current market, where there are more buyers, and negotiate the best valuation-multiple outcome,” he said.

“Or hold on, continuing to receive the income stream of the current business.”

However, the latter option risks relying on diminishing income streams from reduced commissions. And it is unknown how valuations will stand up as the advice industry moves towards a fee-for-service model.

There are also new professional standards requirements, which could result in an adviser losing their licence and trail commissions.

Any potential buyer would acquire a business with no income, and that will deter younger advisers from owning their own practices, Mr Tynan says.

“Mature advisers’ exit goals have been dealt a significant body blow as the new entrants to the financial planning industry will struggle in their all-important start up years. Buying an existing business under a new financial services licence will mean no trail brokerage can be transferred, thus deterring the next generation of advisers to enter the market.”

Mr Tynan says new entrants will probably have to start their careers in institutions, because the costs of licencing, compliance and professional indemnity cover will be uneconomic in their early years.

Banking sales bonus report calls for adviser reform

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A report recommending changes to sales-driven remuneration packages for bank staff says the new model should extend to financial advisers employed by the institutions.

Stephen Sedgwick’s review for the Australian Bankers’ Association (ABA) recommends bans on incentives for additional product sales or cross-selling.

The retired public servant’s report also calls for changes to banks’ workplace culture, aligning it with good customer outcomes.

The review of bank staff remuneration was limited to basic banking products, mortgages, general insurance and credit products. But he has called on the banks to extend his recommendations to staff selling wealth products, including life insurance.

His review finds most banks use high-risk pay practices.

“These high-risk elements include practices that deliver significantly increased incentive payments as certain sales or other financial thresholds are achieved. Also practices that provide incentives based on cross-sales such as add-on insurance products.”

The report acknowledges some sales-based volume payments have been banned under the Future of Financial Advice legislation, but it says a number of practices are not in consumers’ best interests.

ABA CEO Anna Bligh says the banking industry supports Mr Sedgwick’s recommendations and will implement them in full as quickly as possible.

“This represents a transformational change in the way banks go about their business,” she said. “It is a clear demonstration all banks are serious about making a better banking industry.

“The industry wants to ensure [staff] are rewarded for the right things and getting the best results for customers.”

Commonwealth CEO Ian Narev says his bank will implement “many of the recommendations by July 1 and will have all changes in place by the following financial year”.

Challenger annuity sales continue to soar

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Challenger annuity sales grew 53% to $880 million in the March quarter.

The figure breaks down into fixed-term product sales of $662 million and lifetime annuity sales of $218 million.

Fixed-term annuity sales were up 49% on the corresponding period last year, driven by the new MS Primary annuity deal and a strong close to the Japanese financial year.

Lifetime annuity sales were up 68% and demand for the Liquid Lifetime product continues to grow amid increased adviser recommendations.

The life business’ investment assets at March 31 were $14.9 billion, up by $300 million.

“Two things stand out in this result – the 53% increase in sales on last year and more than half of our sales were long term annuities,” Challenger CEO Brian Benari said.

“The significant increase in lifetime annuity sales reflects the strong and growing demand from retirees for products that provide income and protection against the risk of outliving their savings.”

Mr Benari says Challenger has continued to reweight its annuities book towards longer-term business, and this has been boosted by the contribution from long-dated fixed-term sales through MS Primary in Japan.

The company expects operating earnings for this financial year to be about halfway between its $620-$640 million guidance range.

It remains committed to its 18% pre-tax normalised return on equity target.

AFA opens education award nominations

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Nominations are open for the Association of Financial Advisers’ (AFA) 10th excellence in education award.

GM Member Services, Partnerships and Campus AFA Nick Hakes says the award recognises “passionate advisers who see education as a catalyst for adapting to a changing and complex financial advice environment”.

He says this “drive and commitment to the practical application of knowledge… can inspire the increase in professionalism we see across the financial advice spectrum”.

The award is sponsored by Asteron Life and nominations are open until June 16, with the winner to be announced at the AFA’s Gold Coast conference in October.

Nominations for the adviser of the year, best practice, female excellence in advice and rising star awards will run from May 15 until July 28.

“The [award] evaluation process, carried out in conjunction with partners Zurich, TAL, ANZ Wealth and Asteron Life, is a comprehensive and stringent judging exercise,” association CEO Phil Kewin said.

“Not only does it serve to further enhance those who participate, but also enables the profession to learn and share from the best of the best.”

Asteron offers discounts for healthy lifestyles

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Asteron Life will give premium discounts of up to 25% to customers with healthy lifestyles, while its application process for healthier clients has been simplified for advisers.

Clients can qualify for the Healthy Life Option by answering a few lifestyle questions.

The option saves new customers 10% on stepped life and total and permanent disability (TPD) cover. If bundled with income protection or business expenses cover, an additional 5% applies to all lump sum policies.

Asteron Life Head of Wealth and Life Intermediaries Steve Degetto says the insurer is responding to a growing focus on eating well, keeping fit and living healthier.

“We believe these choices should be recognised and rewarded, and that’s just what our healthy life discounts are all about,” he said.

“Combined with other product features, such as the two-year terminal illness benefit, the healthy lifestyle discounts are designed to make Asteron a more competitive, attractive and affordable alternative.”

Zurich upgrades life app

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Zurich Financial Services Australia is replacing its LifeXpress mobile app.

The new ZLife Mobile tool provides advisers with quick, secure access to clients’ life insurance information, according to Head of Digital Mark Fabris.

It includes “market-leading functionality, developed after extensive beta testing with a panel of advisers”, he says. “In addition to push notifications, advisers can also tag VIP clients and view upcoming renewals, pending lapses and cancellations, and changes in client details.”

Mr Fabris says the app will show when life applications become inforce, and it can be used to trigger conversations with clients on their life insurance needs.

ZLife Mobile is available now for iPhones and Android devices.

Synchron expands into SA and NT

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Synchron has become a national dealer group with the appointment of a manager for SA and NT. 

Former BT regional manager for SA Sheridan Wright has taken the role.

The dealer group’s Director Don Trapnell says Synchron is one of the few non-institutional licensees with manager representation in every state. 

“Our expansion clearly illustrates our commitment to the long-term growth of Synchron as a successful, ongoing business providing quality financial advice to Australian consumers,” he said.

“We are now on a mission to increase our footprint and to bring to our SA and NT advisers the full range of support experienced by other Synchron advisers.”

Mr Trapnell says by expanding into SA, the dealer group hopes to replicate its adviser recruitment success.

“With her highly developed professional skills and her passion for the profession, we believe Ms Wright is the person to make that happen,” he said.

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The Professional

Steadfast joins icare to sponsor claims awards

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Steadfast has joined Insurance & Care NSW (icare) in sponsoring the inaugural Mansfield Awards, held to recognise and promote excellence in claims handling.

icare, the NSW Government-backed public financial corporation that delivers statutory insurance and care services in the state, was the first organisation to offer financial assistance for the awards, which will be announced in Sydney on July 13.

MD and CEO Vivek Bhatia says the awards organisers, Insurance News and LMI Group, “share icare’s belief that excellence is achieved by dedicated professionals who go above and beyond to achieve positive outcomes”.

“While technology can assist in so many ways, it is the human element that makes every difference to our customers’ outcomes,” he said.

“We believe passionately in the purpose behind the Mansfield Awards. The way claims are managed impacts directly on people’s quality of life outcomes.”

Steadfast MD and CEO Robert Kelly says his company stepped up to co-sponsor the awards “because we understand our customers need confidence that when things go wrong their claims will be paid quickly and smoothly”.

“Claims professionals around Australia deserve to have their ingenuity, their efficiency and their willingness to go the extra yard for the customer recognised, and the Mansfield Awards will provide that recognition,” he said.

Mr Kelly says the awards will also help raise industry claims management standards.

Funding from the sponsoring companies will pay for expenses incurred in holding the July 13 event. Any funds remaining after the event will be donated to Amal Mulia Orphanage in Sumatra, Indonesia, which cares for children orphaned by the September 2007 earthquake and tsunami.

Find out more here.

Aon MD calls for Kokoda trek donations

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Aon Risk Solutions MD Broking and Chief Broking Officer Pacific James Baum is seeking donations for his Kokoda trek, aiming to raise $50,000 for mental health programs in rural schools and community groups.

Mr Baum, who is walking the 96km track in Papua New Guinea, has so far raised $10,207.

The money will go to the Black Dog Institute, which works on diagnosis, treatment and prevention of illnesses such as depression and bipolar disorder.

It will help the institute send volunteers into rural schools and community groups to share their experiences of mental health issues.

“Mental health touches all our families – one in five Australians are affected by mental illness each year,” Mr Baum said.

He has worked with various mental health organisations as part of his insurance work, “tackling the issue of discrimination that people routinely suffer from when buying insurance products that most of us take for granted”.

To donate, click here.

Suncorp gives $150,000 to Red Cross cyclone fund

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Suncorp has donated $150,000 to the Australian Red Cross, to help residents in Queensland and NSW affected by flooding and property damage following Cyclone Debbie.

“There is still a lot of work ahead to get these communities back on their feet,” CEO Michael Cameron said. “The disaster relief and recovery effort will ensure that this support can continue in the long term.”

The insurer says it has also donated $50,000 to the Lismore Flood Appeal.

“Suncorp is committed to helping these communities recover, whether by assisting our customers through the claims process or by donating to disaster relief programs,” Mr Cameron said.

XL Catlin names regional casualty chief

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XL Catlin has promoted Rory Morison to Head of International Casualty Asia-Pacific, based in Melbourne. 

Mr Morison will also continue in his role as Underwriting Manager, Casualty, for Australia.

He has more than 15 years’ experience in the Australian and London markets as a primary and excess underwriter for international casualty clients. 

“We’re seeing risk getting more complex in an increasingly challenging liability environment and emerging technologies are impacting how businesses are conducted in Asia-Pacific,” Chief Underwriting Officer International Casualty Daniel Maurer said. 

“Given Rory’s broad market knowledge, as well as proven underwriting skills and technical expertise, I’m confident he will lead his team to provide outstanding service and solutions to meet the evolving needs of our brokers and clients in the region.”

Allianz donation helps refugee students

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Allianz has donated $50,000 to a NSW scholarship fund that helps refugees.

The Settlement Services International (SSI) and Allianz Australia Refugee Scholarships scheme has given more than $90,000, including the insurer’s donation, to 48 recipients studying at various levels in the state’s education system.

“Insurers are tied by the nature of their business to healthy and sustainable developments in society,” Allianz Diversity and Sustainability Manager Charis Martin-Ross told insuranceNEWS.com.au. “The insurance industry can and must be a force for good.

“The SSI Allianz scholarship focuses on educational scholarships, given the criticality of education in developing long-term prosperity for the successful applicants and their families.

“Allianz is proud to support diverse communities in Australia and to give an opportunity to some of those people who have come to this country as a result of misfortune and instability in their homeland.”

Recipients must be on permanent humanitarian visas, have been in Australia for five years or less, and demonstrate socioeconomic disadvantage or family challenges.

Willis Towers Watson names regional director

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Willis Towers Watson has appointed James Leung as Regional Director, Business Development and Proposition, Health and Benefits, Asia and Australasia.

He will develop regional client relationships, formulate health and benefits solutions, provide benefits management services and oversee health risk management and broking placement needs.

Mr Leung is based in Hong Kong and reports to Asia and Australasia Head of Health and Benefits Cedric Luah.

“[Mr Leung’s] diverse background, and his strength in assisting clients across the broad spectrum of corporate risk, will enable him to deliver genuine added value to our clients and support them with all of their risk management needs,” Mr Luah said.

Mr Leung has more than 20 years’ experience in health risk management, corporate wellness and employee benefits insurance placement.

Allianz recruits Asia development head

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Allianz has appointed Julia Zheng Kuik as Head of Corporate Development, Asia-Pacific.

She has been recruited from IAG, where she was head of business development for Asia.

Allianz says Ms Kuik will have responsibility for the business development agenda in the growth region, “with a focus on mergers and acquisitions, joint ventures and new partnerships”.

Based in Singapore, she will report to regional CEO George Sartorel and join the company’s regional executive board.

Insurance Advisernet comes of age

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Major brokerage Insurance Advisernet has turned 21.

Ian Carr founded the company in 1996. It now has more than 180 practices, handling 63,000 clients, 115,000 policies and $500 million of premium. 

MD Shaun Standfield says when the business arrived on the scene, the authorised representative (AR) model was frowned upon by many in the industry.

“But now it is clearly the insurance industry’s fastest-growing and most dynamic distribution channel,” he said.

Mr Standfield says the model allows insurance professionals to create and control their own destinies, while balancing and complementing their individual lifestyles.

“I am so proud of our people and culture and what we have achieved,” he said.

“We are also proud to support our insurance practices, and it is very gratifying to give back to charities in their local communities.”

Insurance Advisernet ARs, management and staff have also donated more than $1.5 million to charities over the past decade, including $287,500 to 21 charities last year.

The business is 50% owned by the AUB Group.

Chubb appoints environmental underwriter

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Chubb has appointed Dean Osmond as Environmental Risk Underwriter in Australia.

Mr Osmond is an environmental consultant with more than 10 years’ experience in site and risk assessment and environmental planning.

Chubb says he will work with brokers to help them understand environmental risks and advise on environmental impairment liability (EIL) insurance solutions. 

The insurer offers a broad range of EIL policies, including premises pollution liability and contractors’ pollution liability.

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International

Improved US economy aids industry uptick

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The global insurance industry is expected to produce above-average growth, aided by improved economies in the US and other developed markets, Munich Re says.

Sturdy growth in “emerging” economies including Brazil and Russia is also lifting the industry’s prospects.

In the primary insurance market, premium growth of 4.5% is projected for this year and next year, outpacing the almost 2% average rise of the past decade.

“In most of the industrialised world – in the eurozone, the US and Japan – demand has been bolstered by a solid economic environment,” Chief Economist Michael Menhart said.

“The economies of many emerging markets, such as Brazil, but even Russia, are experiencing a significant recovery. This is leading to increased growth in property and casualty insurance.

“Growth prospects for insurers are therefore looking a little brighter worldwide.”

Premium volume in property and casualty business is tipped to grow an average of 4% this year and next year.

Emerging markets’ share of additional premium volume is set to reach 47% by 2025, up from 20% last year.

UK regulator investigates aviation brokers

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The UK’s Financial Conduct Authority (FCA) is investigating participants in the aviation insurance broking industry.

Marsh & McLennan, Willis Towers Watson, JLT, Aon and UIB have issued statements saying they are co-operating with the inquiry.

Marsh says the FCA has visited its London office and the company is completing its own review with assistance from outside counsel.

“The FCA indicated it had reasonable grounds for suspecting Marsh and others have been sharing competitively sensitive information within the aviation (re)insurance sector,” the US-based group said in a Securities and Exchange Commission filing on Friday.

Willis Towers Watson says the FCA informed its UK brokerage subsidiary earlier this month that it has opened a formal investigation into “possible agreements/concerted practices” in the sector.

Given the status of the inquiry, it is unable to assess the terms on which the investigation will be resolved, it says.

Both Willis Towers Watson and Aon say aviation broking represents less than $US100 million ($132 million) of their group revenues.

“We cannot comment on the details of this investigation because it is ongoing, other than to say Aon takes compliance and regulatory issues extremely seriously and has a strong and respectful relationship with the regulator,” Aon said.

March sets records for non-El Nino period

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The world has experienced its hottest March outside an El Nino event, according to the US National Oceanic and Atmospheric Administration (NOAA).

The average global temperature last month was 1.05 degrees above the 20th-century average of 12.72 degrees.

This was just 0.18 degrees behind last year’s record temperature, which happened during an El Nino period, when temperatures tend to spike.

“March 2017 marks the first time since April 2016 that the global land and ocean temperature departure from average was greater than 1 degree,” the NOAA said.

It was the first time the monthly departure from average surpassed 1 degree in the absence of an El Nino in the tropical Pacific Ocean.

The NOAA expects the global warm trend to last well into the year, with increasing chances of El Nino arriving later this year.

Last month’s global average sea surface temperature was 16.65 degrees, 0.17 degrees above the 20th-century monthly average, and the second-highest on record.

The global average land surface temperature was 1.98 degrees above the 20th-century average of 4.89 degrees.

The year-to-date average temperature is 0.97 degrees above the 20th-century average of 12.28 degrees, the second-highest in 138 years of record-keeping.

Europe and Oceania had their second-warmest March on record, Asia its fourth, Africa its seventh, South America its 12th and North America its 30th.

“The most notable warm temperature departures from the 1981-2010 average were recorded across the contiguous US, Europe, Russia, Mongolia and Australia, where temperature departures were plus 3 degrees or greater,” the NOAA said.

Reinsurer capital rising: Aon Benfield

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Global reinsurer capital increased 5% to $US595 billion ($787.88 billion) last year, according to reinsurance broker Aon Benfield’s latest report.

Traditional capital grew 4% to $US514 billion ($680.62 billion), while alternative capital increased 13% to $US81 billion ($107.26 billion).

“While expected returns have declined, insurance risk remains attractive to capital markets investors relative to other available opportunities, and low correlation with other asset classes remains a key consideration,” the report says.

Reinsurers are gaining significant benefits from their ability to leverage alternative capital, and are achieving premium growth despite difficult market conditions.

Major losses remained within allocated budgets and, while interest rates are finally rising in the US, investment returns will remain under pressure in the medium term.

Reinsurers’ profitability has declined and growing pressure on earnings “is expected to result in further sector consolidation”.

UK election casts doubt on whiplash reforms

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Reforms to the UK whiplash laws which have led to sharp rises in motor premiums are in doubt after Prime Minister Theresa May called a snap election for June 8.

Her announcement, which caught the political world off guard, means the proposed overhaul contained in the Prison and Courts Bill will not proceed during the “wash-up” period.

The wash-up refers to the time between announcement of a general election and the dissolution of Parliament.

Insurers overwhelmingly back the reforms, which would reduce car cover premiums and help tackle fraudulent claims.

“Whatever the outcome, the new government must push ahead with reforms to tackle low-value whiplash-related claims and introduce urgent reforms to change the framework for setting the discount rate,” Association of British Insurers Assistant Director Head of Motor and Liability Rob Cummings said.

“The industry can only do so much, and it is important that whichever party is in government after the election, they commit to measures to help lower the cost of car insurance.”

Allianz invests in Lemonade

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Allianz has made a “strategic investment” in Lemonade, the US-based insurtech that uses an artificial intelligence platform called Maya to craft policies for clients online.

“The company is looking to improve the insurance value chain and it is seeking to use technology-driven efficiencies to redefine an insurer’s role in its community,” Allianz Chief Digital Officer Solmaz Altin said.

“We will look for ways to collaborate, respecting the fact Lemonade is a small company confronting a large, challenging market in the US.

“There are potential synergies and our partnership will allow us to explore our joint potential over time.”

Lemonade has attracted significant investor interest, including from XL Catlin-backed venture capital fund XL Innovate, which invested an undisclosed amount last year.

The insurtech’s CEO Daniel Schreiber says the partnership with Allianz “is a strong statement of faith and it goes a long way in aligning interests. I believe we will find many ways to build on that foundation over the coming months and years.”

Apple invests in driverless technology, secures test licence

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Tech giant Apple has won a permit to test driverless cars in California, and has revealed it is investing in automated vehicle research.

“Apple uses machine learning to make its products and services smarter, more intuitive and more personal,” Director of Product Integrity Steve Kenner says in a letter to the National Highway Traffic Safety Administration (NHTSA).

“The company is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation.”

Industry analysts have long speculated that Apple is investing in self-driving car technology.

It is one of many groups issued autonomous vehicle testing permits in California as of April 14, according to the state’s Department of Motor Vehicles.

Others include Volkswagen, Google, Bosch, BMW, China-based IT company Baidu, and Ford.

The NHTSA says the motor industry is “on the cusp of a technological transformation” that could improve safety on US roads, where 94% of crashes are due to human error.

“The development of advanced automated vehicle safety technologies, including fully self-driving cars, may prove to be the greatest personal transportation revolution since the popularisation of the personal automobile nearly a century ago,” it says.

WR Berkley celebrates 50 years

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US-based insurer WR Berkley last week marked the 50th anniversary of its founding.

Chairman Bill Berkley started an investment management business with $US2500 in 1967 before entering property and casualty insurance in 1972 with the purchase of two Texas companies.

The insurer went public in 1973 and now has 54 operating units spanning the US and 15 countries.

WR Berkley is among the largest commercial lines insurers in the US, and last year reported gross written premium of $US7.54 billion ($10 billion).

The company will celebrate its milestone with events at various locations worldwide, including Australia, where it is also marking its 10th anniversary.

Reinsurers maintain performance in tough market

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Reinsurers have produced “robust” results despite enduring persistently poor conditions, according to Willis Re’s latest market report.

The total reinsurance capital pool increased to $US449 billion ($596.26 billion) last year from $US427 billion ($567.05 billion) in 2015.

Aggregate shareholders’ funds for companies on the Willis Re Index grew 4.4% to $US344.1 billion ($456.96 billion), but aggregate net income fell to $US26.6 billion ($35.32 billion) from $US30.3 billion ($40.24 billion).

Return on equity worsened to 8% from 9.3%.

“The continued challenging conditions of the market further impacts pressure on margins,” Willis Re Global CEO John Cavanagh said.

“However, buyers can take comfort from the fact the market balance sheet and headline figures remain robust in the face of persistent market softening due to continued reasonable net income and measured capital management strategies.”

The index includes 37 companies worldwide.

North America risk costs fall further

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Risk costs in North America have fallen for a third straight year despite rising uncertainty and increasing complexities, according to the annual Risk and Insurance Management Society Benchmark Survey.

Insurers ended last year with average capital and surplus at its highest level in 10 years, but the impact of excess capacity was highlighted by falling net income and return on average equity.

The survey, conducted with data company Advisen, calculates a total cost of risk based on insurance expenses, retained losses and administrative costs.

“This year’s edition highlights how risk managers have effectively managed costs in a time of evolving risks and demands, enabling them to do more with less,” Advisen EVP of Client Solutions Jim Blinn said.

The total cost of risk fell to $US10.07 ($13.40) per $US1000 ($1330) of revenue last year, after easing 2% in 2015 and 1% the previous year.

Predicted rate increases for cyber, errors and omissions and workers’ compensation failed to materialise across the board.

“Projections for [this year] are more moderate, with property and most liability lines flat to down 10%,” the survey report says.

“Emerging trends in the… risk landscape include the tech revolution, security issues, natural catastrophes and political upheaval.”

Technological advances have caused a seismic shift, according to the survey, creating new types of claims, forcing insurers to consider new products and solutions for customers, and driving a consumer-centric revolution in personal insurance.

“Although commercial insurance is somewhat behind this curve, there is an expectation that this customer-centric focus will flow into commercial insurance and transform the way business is transacted,” the report says.

The pace of innovation is expected to pick up, with more than 1000 insurtech start-ups in operation, and many of those well funded.

Advisen estimates the cyber-insurance market grew to about $US2.7 billion ($3.6 billion) in gross written premium last year, with the potential to pass $US5 billion ($6.7 billion) by 2020.

Crawford promotes ex-GAB Robins chief to international role

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Kieran Rigby has been promoted to President of International Operations at risk and claims management provider Crawford & Company, based in London.

He replaces Ian Muress, who has resigned after almost 16 years in the role.

Mr Rigby was CEO of insurance assessor and loss adjuster GAB Robins UK for nine years, until Crawford acquired the company in 2014.

Since then he has served as CEO Europe and CEO Europe and Latin America.

In his new role he will oversee the UK and Asia-Pacific region, plus Europe and Latin America. He also joins Crawford’s global executive management team.

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Analysis

Industry stands its ground amid hail of fire

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Critics were lining up to take shots at the insurance industry during two days of Senate inquiry public hearings last week.

The inquiry is examining transparency, competition and rising prices in the general insurance industry, along with the possibility of setting up a government-run home and motor comparison website.

As insuranceNEWS.com.au has reported, the inquiry has received 22 submissions, and the hearings in Sydney and Melbourne enabled senators to question some of the protagonists.

Insurers were accused of making excessive profits, deliberately misleading consumers and engaging in bizarre underwriting tactics such as giving lower premiums to motorists with white cars and those who arrange their insurance in the morning.

The industry was described as “broken” in the north, and the issue of “kickbacks” to strata managers reared its head time and again.

But insurers stood firm and explained, once again, the way insurance pricing works and their ongoing reluctance to take part in aggregator websites.

News Corp journalist John Rolfe, whose campaigning arguably led to the Senate inquiry, was first out of the traps, firing one highly polished cliche after another.

General insurance is “the biggest stitch-up since the Great Hall Tapestry” and “about as transparent as The Yarra”,” he said.

And he says he’s not alone in his opinions.

“It is the view of the original – and some would say the best – consumer cop, Allan Fels,” he told the hearing.

“It is also what Choice says. In its submission it says that ‘home and car insurance remain two of the biggest cost-of-living concerns for Australian consumers’ and that it is a problem exacerbated by the lack of publicly available comparison data.”

The answer, he says, is an independent, comprehensive comparison website run or overseen by the Commonwealth.

“So there is a clear problem and a doable solution. What is needed is action.”

The National Insurance Brokers Association (NIBA) and the Insurance Council of Australia (ICA) were quick to hit back.

NIBA President Tim Wedlock told the hearing competition is healthy and insurance prices don’t always go up. In fact, over the past three years total premium collected by insurance brokers has dropped.

CEO Dallas Booth accepted that a comparator could work – but only if it focused on much more than just price.

“Critical for us have been the three core elements: what is the nature of the individual’s risk, what are the policies that respond to that risk and what is the cost-benefit analysis in terms of price?” he said.

“If an independent aggregator site works out a way of presenting that information to the client and to the community in an effective and easily understood manner, that has to be a positive for the community, but it is only when they do those three things that it would receive our support.”

ICA CEO Rob Whelan is adamant comparison websites “will lead to adverse consumer outcomes” and a focus on price.

Such sites may work for simple products such as petrol, interest rates or groceries, he says, but insurance products are not the same.

“They vary widely in product features, inclusions, exclusions and claim limits,” he told the hearing. “Each insurer has different underwriting criteria and different risk appetites. Each insurer assesses a risk to a property in much different ways.

“Data enables an insurer to [update] its risk analysis frequently. This is a necessary feature of the market and it makes the delivery of an up-to-date, accurate comparison site extremely difficult and complicated to deliver.”

Senators pressed Mr Whelan on whether more action should be taken by ICA over commissions paid to strata managers by insurers.

“They are kickbacks, aren’t they?” Senator Nick Xenophon said.

“You might call it that, Senator,” Mr Whelan said, before adding it was a longstanding practice.

“And you have decided not to address the issue because it is a longstanding practice?” asked Senator Chris Ketter.

“No, we see there is not necessarily anything wrong with the practice,” Mr Whelan replied. “As I said, it is not illegal, as such, to have intermediaries involved in the placement of business.”

Mr Whelan took the opportunity to repeat his call for increased government spending on mitigation.

“The insurance council was disappointed the Government’s response to the Productivity Commission’s report on natural disaster funding did not take up the recommendations to increase mitigation funding to $200 million a year, matched by states and territories,” he said.

“This is one form of nation-building that would have a lasting positive impact.”

That was a bit off the subject, but a range of consumer organisations kept the focus on the perceived difficulty consumers have in effectively comparing insurance policies.

The industry’s point is that it is well aware of this issue – and as a result of its own enquiries is a long way down the road to solving the problem.

Professor Fels could not resist having his say – in a private capacity, not as the NSW Emergency Services Levy Insurance Monitor.

“We believe that competition is not fully effective in this industry,” he said. “There is the issue of the lack of transparency, which is tied up with that, and I am sure you know the limits on the value of product disclosure statements.”

He highlighted the omission of the previous year’s premium on renewal notices.

“The one we are emphasising – but there is an array of things to do – is that the consumer should always be told what they paid last year as part of their renewal notice,” he said.

“They are not at the moment. Of course, you can go to the trouble as a consumer to look it up, but many people will not, and some people find it quite difficult.

“We do not consider that it is difficult for the industry to do that.”

However, there is some movement on this issue, with IAG already including the previous year’s premium and others set to follow suit.

As ICA has said before, many of the issues raised in the hearings are not new to the industry, and it is already making moves to solve them.

Far better that informed solutions come from within, rather than ineffective measures imposed from outside.

For example, Mr Rolfe may have a good turn of phrase, but he clearly is not across all the key issues. At the end of his evidence, he was asked for his views on disaster mitigation.

“Sorry, I am not sure what you mean by mitigation,” he said.

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