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NOTE FROM THE PUBLISHER

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NOTE FROM THE PUBLISHER

This is the final weekly edition of insuranceNEWS.com.au for 2017. We will return on Monday, January 29. During the break major issues and events will be covered by our Breaking News service.

insuranceNEWS.com.au has more than 25,000 subscribers and continues to be the leading source of news and information for the industry in Australia and New Zealand. With the articles in today’s bulletin included, we have published 2366 news articles this year – 48 of them Breaking News.

If you’re one of the 332,649 unique visitors we’ve welcomed to our free service this year, we encourage you to support the companies that support us – because without our sponsors we couldn’t do what we do.

The editorial and support teams at insuranceNEWS.com.au join me in wishing you a happy and relaxed festive season. Stay safe.

Terry McMullan
Publisher

icare changes hit more than 400 jobs: union

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Workers’ compensation scheme reforms in NSW have affected about 430 general insurance industry jobs so far, according to the Finance Sector Union.

The union’s National Industrial Officer Angela Budai told insuranceNEWS.com.au figures are still being assessed and the final number may not be known until all data is available.

The government-owned administrator, Insurance and Care NSW (icare), has appointed EML as the sole agent for new claims from January 1. Ms Budai says this will mean the hiring of staff by EML even as CGU, QBE, GIO and Allianz prepare to end their involvement.

GIO and Allianz will continue providing services as transition agents, but CGU and QBE will cease their services this year.

EML did not respond to an enquiry from insuranceNEWS.com.au about the number of employees it will hire.

La Nina is here, weatherman says

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Australia is officially in a La Nina phase, albeit a weak one, according to the Bureau of Meteorology.

The bureau does not expect to see the above-average rainfall that normally accompanies a La Nina event, but there is an increased chance of prolonged warm spells for south-east Australia.

The El Nino-Southern Oscillation outlook was raised to a La Nina level last Wednesday and climate models suggest it will persist until early autumn.

Signs of La Nina increased through spring, with the central and eastern tropical Pacific Ocean cooling steadily since winter. Ocean temperatures are now at La Nina thresholds of 0.8 degrees below average.

Atmospheric indicators, including the Southern Oscillation Index, trade winds and cloud patterns, also signal a La Nina.

The event must last three months for 2017/18 to be classified a La Nina year.

Brokers join forces on multi-peril crop cover

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MGA Insurance Brokers, Country Wide Insurance Brokers and Adroit Insurance Group have joined forces to bring new forms of crop cover to farmers.

The syndicate will access multi-peril crop insurance products, which provide significantly greater cover than the fire and hail cover widely used in the farming sector.

“In the past, [multi-peril crop insurance] has faced slow uptake in Australia, with one possible reason being that premiums are not significantly subsidised by the Government, a situation which is common overseas,” MGA MD Paul George said.

“The combined regional distribution of Adroit, Country Wide and MGA in the major primary production areas of Victoria, WA and SA is significant.

“This broad geographical spread will give us the backing and weight required to approach insurers to source better products for our respective customers.”

Multi-peril crop insurance provides farmers with more flexibility than the standard single policy. For example, a farmer can choose to insure 70% of average yield value.

“Multi-peril insurance allows farmers to protect themselves against a broader range of risks that may be more relevant to them,” Country Wide MD Paul Wilkes said.

“This kind of cover could help farmers ride through the natural disasters and downturns associated with farming in Australia and reduce the need for government assistance in the event of major events such as droughts or floods.”

See other story.

Melbourne block ordered to remove cladding

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Owners of the Anstey Square building in the inner-northern Melbourne suburb of Brunswick have been ordered to remove flammable cladding around fire hydrants and hoses within two months.

Moreland City Council also wants additional sprinklers installed on every balcony within three months. The building has 105 apartments, plus commercial and retail space.

The safety works order follows an inspection of buildings by the Victorian Cladding Taskforce following the Grenfell Tower fire in London. Around 1400 buildings were found to have the cladding.

“The Anstey Square building is the first building to produce a risk rating that merits an immediate building order,” the council says. “It has been assessed in conjunction with experts from the Victorian Building Authority, the Metropolitan Fire Brigade and fire safety engineers from the Victorian Cladding Taskforce.”

Choice hails RACV Insurance, AIG on travel cover

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RACV Insurance Total Travel Care offers the best single-trip travel cover, according to research by consumer group Choice.

Choice’s December magazine gives the product, provided by Tokio Marine, a score of 73%.

AIG offerings Good2Go the Works and World2Cover Top, also through Tokio Marine, share second place with 71%. All three products, recommended by Choice, feature unlimited medical and cancellation expenses and $15,000 for baggage claims.

Choice’s scores for performance across claims, price and seniors categories are based on quotes for 144 single-trip policies from 62 insurers.

RACV Insurance Extra Travel Care ranks fourth on 69%, followed by Lloyd’s Go Insurance’s Go Plus on 68%.

Choice says consumers should shop around and declare medical conditions where applicable, even if they intend to buy from the same insurer as on previous trips.

“Not only could your needs have changed, but the cover may have changed too,” it says.

“Insurance providers regularly update their policies and limits and sometimes even change their underwriters.”

ICNZ code review to study technology’s impact

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Data handling and technological change will be a focus of an industry code of practice review by the Insurance Council of New Zealand (ICNZ).

The council has called for submissions on the Fair Insurance Code, which introduced timeframes for handling claims and complaints and tougher penalties for breaches under a previous review.

“For us, it is always a question of setting high standards and getting ahead of the regulatory curve, and all of that comes down to targeting trust and confidence in insurance,” ICNZ CEO Tim Grafton told insuranceNEWS.com.au.

“This time around we are flagging issues that we are inviting people to take an interest in, particularly around new technologies and some of the implications that might arise there.”

Areas that have gained heightened attention since the last review include data collection, use and storage, privacy concerns, and artificial intelligence and robo-advice.

ICNZ has written to about 60 organisations seeking input and is advertising through traditional and social media to obtain a wide response.

Other review areas include customer and insurer experience with the code standards, complaints procedures and gaps experienced by New Zealand customers compared with expectations in other countries.

The Fair Insurance Code sets standards for ICNZ member insurers, covering more than 95% of the nation’s market.

Significant breaches carry a maximum fine of $NZ100,000 ($90,269) and expulsion.

Submissions are due by March 2 and the new code is expected to take effect in 2019.

The last review was completed about three years ago and the current code took effect at the start of last year.

NZ weather losses set annual record

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New Zealand weather-related insurance losses have reached a record $NZ242.7 million ($218.9 million) this year after a series of extreme storms.

The remnants of Cyclone Debbie caused the most expensive event in early April, leading to 5470 claims totalling $NZ91.5 million ($82.5 million), the Insurance Council of New Zealand (ICNZ) says.

Upper North Island flooding in March generated losses of $NZ61.7 million ($55.7 million) and South Island floods in July totalled $NZ31.2 million ($28.1 million).

Other significant events included damage from the tail end of Cyclone Cook, which followed closely behind Debbie, the Port Hills fires in February and snow, wind and rain in July.

“These figures are a clear sign of the impact climate change is having on our country,” ICNZ CEO Tim Grafton said. “As time goes on, we expect to see more of these sorts of extreme weather events occurring.”

ICNZ data shows house and contents claims comprised more than half of all insured losses, with $NZ154.2 million ($139.1 million) paid out by insurers. Commercial accounted for $NZ71.1 million ($64.1 million) in losses from 3917 claims.

Some 25,564 claims were received across home and contents, commercial, marine, motor and other areas.

Mr Grafton says insurers are working with central and local governments to help address areas of future risk.

In Insurance News (the magazine)

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When your products are so similar to your competitors’, how do you “sell” insurance in a TV ad? The December/January edition of Insurance News (the magazine) assesses the best insurance ads of 2017 and finds a winner.

The Australian insurance industry’s most-read print publication also features our Top 20 list of the most influential people, and introduces a son who is taking over a booming global business from his dad.

Insurance News is all about interviewing people who are dealing with emerging concepts, and this month we’ve spoken in depth to Suncorp’s new CEO Insurance, an actuary who says Big Data is no big deal, QBE’s first Chief Customer Officer and the man bringing together the insurtech sector.

We also investigate the practice of Facebook “catfishing” to build evidence against claimants and explain why one leading Australian insurer is “different” from the rest.

Insurance News (the magazine) should hit subscribers’ post boxes in the next week. It’s free, and its articles are not available online.

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Corporate

Quota share deals temper business risk: IAG

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IAG’s new quota share agreements will remove nearly one-third of the group’s downside earnings risk, CEO Peter Harmer says.

The separate deals with Munich Re, Swiss Re and Hannover Re will see the three reinsurers assume a combined 12.5% of IAG’s claims and expenses, in exchange for the same percentage of its consolidated gross earned premium from January 1.

Munich Re Australasia MD Ralph Ronnenberg told insuranceNEWS.com.au the deal “positively adds to the economic value to Munich Re shareholders, providing an additional revenue stream from Australian insurance risk”.

The arrangements build on the 10-year quota share deal IAG announced in 2015 with Berkshire Hathaway, in which the Warren Buffett-owned investment conglomerate receives 20% of consolidated gross written premium and pays the same percentage of claims.

“In tandem with the Berkshire Hathaway quota share, we have removed downside earnings risk from 32.5% of our business while retaining significant exposure to earnings upside via the profit share arrangements,” Mr Harmer said.

“We believe this is a good outcome for IAG shareholders. While our strategic priorities of customer, simplification and agility go to the heart of maximising the value of our customer platform, it is important we continue to pursue initiatives that optimise the mix of the supporting capital platform.

“These transactions are a clear step forward on that front.”

The agreements, first reported in a Breaking News bulletin last Friday, have an average initial period of more than five years and apply to IAG’s consolidated business in the domestic market, New Zealand and Thailand.

They are expected to improve IAG’s reported insurance margin for this financial year, which has been revised to 13.75-15.75% from previous guidance of 12.5-14.5%.

IAG has also lowered its financial-year natural perils allowance to $627 million from $680 million to reflect the new quota deals, and has reduced placement of gross cover for next calendar year’s catastrophe reinsurance, down to 67.5% from 80%.

The insurer will receive an exchange commission, mostly in the form of a fixed fee calculated as a percentage of premium.

Cunningham Lindsey eyes enhanced service after takeover

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US-based Sedgwick Claims Management’s acquisition of global loss adjusting group Cunningham Lindsey is good news for Australian clients, Cunningham Lindsey CEO Asia-Pacific Damon Bennett says.

He told insuranceNEWS.com.au the deal will “significantly enhance” services in Australia thanks to a larger platform and the “different nuances of the services we provide”.

“Sedgwick does tend to invest in and provide technologically innovative services,” he said. “Together with the geographic footprint, there will be big benefits coming to our clients, particularly in [third party] claims administration.

Mr Bennett says it is yet to be determined if Cunningham Lindsey will rebrand.

The acquisition will bring the Sedgwick group’s headcount to more than 20,000 employees worldwide.

Cunningham Lindsey has about 6000 staff in 60 countries, while Sedgwick has about 15,000 in the US, Canada, the UK and Ireland.

There are about 700 Cunningham Lindsey staff in Australia.

Sedgwick Group President Michael Arbour says the deal puts his company in an “optimal position” to meet clients’ increasingly complex needs.

“Bringing the incomparable talent, expertise and robust global capabilities of Sedgwick, Vericlaim and Cunningham Lindsey under one umbrella is among the greatest stories to emerge from the claims industry in many years,” he said.

The transaction is subject to conditions and regulatory approvals.

Steadfast raises $100 million through share placement

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Steadfast has raised $100 million through a share placement to institutions, providing funds for its purchase of Whitbread Insurance Group.

The company placed about 35.3 million shares at an issue price of $2.83, representing a 3.4% discount to the December 1 closing price.

“The placement was oversubscribed and very well supported by our existing institutional shareholders, with strong demand also coming from new institutional shareholders,” CEO Robert Kelly said.

“The acquisition of Whitbread represents an exciting opportunity. We are very pleased to see such strong support from our shareholders, which is an endorsement of the success of our well-proven strategic direction.”

Steadfast last week said it will also raise up to $25 million through a share purchase plan open to all eligible shareholders, including retail stock owners.

The offer opens on Wednesday and closes on January 22.

The company will also issue about 6 million shares to Whitbread Insurance Group vendors as part of the acquisition announced last Monday.

Steadfast is paying $95 million for the group, which comprises Whitbread Insurance Brokers and Axis Underwriting Services.

QBE unveils second insurtech venture

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QBE has announced an investment in UK-based start-up Cytora – its second commitment from a $US50 million ($65.55 million) insurtech fund.

Cytora uses artificial intelligence and open-source data to help commercial insurers lower loss ratios, grow premiums and improve expense ratios.

Next year the Cytora Risk Engine will be deployed across QBE property and casualty lines.

The risk engine, driven by machine learning algorithms, combines an insurer’s internal data on a specific cover with external information. This generates a risk score, which provides insight into expected claims activity on the whole portfolio and at an individual risk level.

“Combining external information with our own internal intelligence gives a more complete view of a risk, which in turn enables QBE to provide protection to our customers at a fairer price that reflects the true level of exposure,” CEO European Operations Richard Pryce said.

“The partnership with Cytora enables us to accelerate the adoption of advanced analytics in our business and complements the expertise we have been developing in-house.

“Cytora’s technology has broader application beyond risk scoring and will enable us to identify attractive areas that match our risk appetite and expertise, but where we are currently underrepresented.

“This will assist us to focus our efforts on the customer relationships where we can add greatest value.”

QBE’s first insurtech partnership, announced at the end of October, was with RiskGenius, a machine learning platform for analysing policy wordings.

Youi joins NSW CTP market

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Youi Insurance has announced its entry into the NSW compulsory third party (CTP) market, effective immediately.

Under a new state scheme introduced this month, anyone injured in a road accident will receive benefits regardless of fault.

“We’re receiving more than 1000 CTP enquiries a month and, combining this with the introduction of the new scheme, we saw this as a great opportunity to better service the needs of NSW customers,” CEO Frank Costigan said.

Youi does not have its own licence but will act as a referrer for QBE, which issues the insurance.

AAMI pulls online quote system over security scare

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Suncorp has removed a trial online quote system for home and contents cover amid fears it could double as a burglar’s roadmap.

The group’s AAMI brand was warned via Twitter that the system exposed details about individual premises, such as whether or not they have deadlocks, key-operated locks on windows, burglar alarms and smoke detectors.

This was available to anyone who entered the address of a property already on AAMI’s records.

Melbourne-based computer expert Pratik Khasnabis flagged the issue, tweeting: “You have a potential privacy issue. If you do a home insurance quote… with an address that is in DB it spits out details of the home including security details like alarms, locks etc.”

AAMI responded: “Thanks for bringing this to our attention. We’ve escalated this issue as critical priority.”

A spokesman told insuranceNEWS.com.au Suncorp has suspended the quoting system.

“The trial recently began on the AAMI and Suncorp Insurance websites to make it easy for customers to obtain a quote. Some of the questions had been pre-populated based on building records, or on a suburb or area, to remove customer confusion.”

The spokesman says answers provided related to a building and did not contain personally identifiable information, but the system is under review.

IT security expert Troy Hunt – a Microsoft Regional Director – told insuranceNEWS.com.au AAMI’s quick response was “good”, but the system perhaps should not have been live.

“They really need to think about how much information they should be disclosing to unidentified parties,” he said. “Clearly in this case, telling people who don’t own a property detailed information was too much.”

AUB secures $150 million facility for acquisitions

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AUB Group has entered into a $150 million syndicated loan facility with ANZ and St George Bank to fund acquisitions.

It follows the refinancing of AUB’s debt facility, which was due to mature in November next year. AUB says the multi-currency facility has a term of three years, with a mechanism for extension of up to two years by agreement of all parties.

Assetinsure axes crop cover as take-up underwhelms

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Assetinsure has dropped its crop insurance product, blaming a slow farming sector and lack of government subsidies.

However, CEO Gregory Pfitzer has left the door open to a return if awareness of the cover’s value improves “among farmers and governments”.

He told insuranceNEWS.com.au Assetinsure committed significant resources to developing and underwriting a multi-peril crop insurance he described as “outstanding”.

“Regrettably, the take-up within the farming sector has been low, an experience shared by other insurers offering a similar product,” Mr Pfitzer said.

“Unlike many countries… there has been no relevant support or subsidisation of this insurance cover from Australian states or the Federal Government, which has underpinned the approach of other countries in avoiding ‘picking up the pieces’ of natural disaster and crop failure for farmers.”

Customers who bought policies this year will be covered through next year as per policy terms and conditions.

Allied names Australia manager

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Swiss-based Allied World has appointed Iain MacLeod as Country Manager, Australia, reporting to Asia-Pacific President Michael Garrison.

Mr MacLeod joined Allied World in 2012 after 23 years at Marsh, where he held senior positions in London, Bermuda and New York, with responsibilities across a range of business lines, plus product and business development.

“Australia is a key market in the region and Iain’s appointment will help us to execute our growth plans for the country,” Mr Garrison said.

“He is responsible for managing our day-to-day operations in Australia and his arrival will help us strengthen our relationships with buyers and brokers.”

Canada’s Fairfax Financial Holdings acquired Allied World this year.

Claim Central opens Darwin office

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Digital claims management business Claim Central is stepping up its NT presence with a new office in Darwin.

“The opening of the Darwin office means we can better provide easy access to our end-to-end digital claims management and loss adjusting services for all lines of business in the region,” GM Loss Adjusting Services Wade Eilersen said.

The Darwin team will serve the surrounding areas of Katherine, Alice Springs, Jabiru and Tennant Creek, and will also support certain WA and northern Queensland areas.

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Regulatory & Government

One-stop dispute resolution scheme moves closer

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Legislation to establish a new one-stop dispute resolution body has passed the Senate.

The Australian Financial Complaints Authority (AFCA) will start operating in the second half of next year, replacing the Financial Ombudsman Service, Credit and Investments Ombudsman and Superannuation Complaints Tribunal.

“AFCA is a landmark reform that will overhaul how financial disputes are dealt with in Australia,” Revenue and Financial Services Minister Kelly O’Dwyer said.

“It will operate under significantly higher monetary limits and compensation caps. This will provide considerably greater access to redress for consumers and small businesses.”

The legislation now moves to the House of Representatives for final passage.

ICA seeks brake on proposed ASIC directions power

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Stronger powers proposed for the Australian Securities and Investments Commission (ASIC) should not be introduced unless accompanied by checks and balances, the Insurance Council of Australia (ICA) has warned.

“We are concerned that the proposed directions powers will be the catalyst for a diminution in due process and procedural fairness, both of which are essential components of a fair, transparent and judicious regulatory regime,” ICA CEO Rob Whelan says in a letter to the Enforcement Review Taskforce.

Changes outlined in a taskforce positions paper would allow ASIC to respond to compliance failures more quickly by issuing directions notices, and could also see the regulator taking action when a licensee is proposing to engage in misconduct.

ICA says the taskforce should take into account new product intervention powers that are also being finalised. If moving ahead beforehand, new measures should be tightly defined and used for serious contraventions, not minor or technical issues.

ASIC should conduct a proper investigation, inform licensees with preliminary notices of alleged breaches and give them a chance to respond, the submission says.

Under ICA’s proposed process, ASIC would then provide a 28-day notice of intention to issue a direction, giving the licensee the chance to seek an injunction or dismissal in the Administrative Appeals Tribunal (AAT).

“The ability of a licensee to challenge an ASIC decision to issue a notice prior to the notice being issued is critical,” ICA says.

“Reputational harm to the licensee would be difficult to avoid once an ASIC direction has been issued, even if subsequently overturned by a court or (AAT).”

It says enhanced ASIC directions powers should apply only to “actual” contraventions, rather than proposed misconduct that has not yet happened.

Regulator looks at boosting telematics uptake

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The National Transport Commission will review telematics use for regulatory purposes, to find ways of encouraging further take-up.

It will consult with transport operators, telematics service providers, road agencies and government certification agencies to identify opportunities to harness benefits of emerging technology.

“Telematics can boost productivity and safety by making it easier to share more accurate data between vehicles, drivers, operators and third parties,” CEO Paul Retter said.

“We are already seeing telematics technology being used by operators for commercial and internal compliance purposes in the freight sector.

“While telematics technology is also being used for regulatory purposes, such as allowing vehicles with higher mass limits to gain additional network access, the level of uptake is not as strong as it could be.

“This review will help us to better understand why this is and how we may improve uptake using current systems at a minimum cost to operators.”

A report will be published in March.

Draft sandbox rules ‘need more flexibility’

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Proposed fintech “sandbox” regulations will help insurers test innovations but should be further refined so market benefits can be better assessed, according to the Insurance Council of Australia (ICA).

The draft regulations would allow testing of products and services, without a licence, on no more than 100 retail clients with a total exposure of $5 million. The rules do not include issuance of new classes of financial products.

“Given the mass-marketed nature of many types of insurance, this limit on the number of clients is a problem for general insurers wishing to test a significantly larger client base to determine whether a new service is indeed business and market viable,” ICA CEO Rob Whelan says in a submission on the draft.

“Where a participant in the sandbox could demonstrate that consumer protections are strong, there may be benefit in allowing some flexibility, at Australian Securities and Investments Commission discretion, to adjust these limits on a case-by-case basis.”

The sandbox offers Australian financial services licence exemptions so products can be assessed on a small scale with retail and wholesale clients.

ICA supports proposed regulatory changes that extend the sandbox’s scope and allow current licensees to participate in new areas, giving the process more relevance for general insurance.

“The current eligibility restrictions have constrained potential partnerships with start-up businesses, because a relationship with an established insurer would prevent them from accessing the sandbox,” Mr Whelan says.

ICA says technological advances are providing great opportunities for the industry to better meet consumer needs, but the potential remains largely untapped.

Gallagher Bassett wins icare contract

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Gallagher Bassett has won a contract to be the new general claims management services provider for Insurance & Care NSW (icare).

The third-party claims administrator will manage all new claims across icare’s self-insurance portfolios including liability, motor and property from March 1.

Existing general lines claims will continue to be handled by GIO until June 30, when the transition is due to be completed.

icare Group Executive Self-Insurance, Community and Innovation Tim Plant says Gallagher Bassett “demonstrated an innovative and tailored approach to managing relationships and achieving outcomes”.

“It was chosen through a robust tender process after showing how it could deliver a service with ease of access, choice and transparency at its core, in a true partnership approach with a modern technology platform underpinning the operational model,” he said.

icare self-insurance provides government agencies and related businesses with comprehensive protection across a range of lines.

ASIC bans ‘unfit’ director over contract referrals

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The Australian Securities and Investments Commission (ASIC) has permanently banned Landlord Protection Group director Tracey Joanne Burnell after investigating her role arranging insurance contracts.

The regulator says Ms Burnell, of Victoria, is not a fit and proper person to provide financial services and is not of good fame or character.

It says Ms Burnell and Landlord Protection & Collection (LP&C) were permitted to refer clients to brokers to obtain landlord insurance.

But she went beyond being a “mere referrer” and invoiced clients for premiums using LP&C stationery, and in some cases inflated the payment amount.

Payments were made to an LP&C bank account and Ms Burnell “on occasions” failed to pass on the premiums to brokers. The investigation considered conduct from 2014 to this year.

In May 2011 ASIC banned Ms Burnell for three years for providing financial services on behalf of Protection & Collection when unauthorised. In August 2014 she was convicted for falsely pretending to be a lawyer during debt collection activities.

“When people engage in financial services when unlicensed or engage in misleading and deceptive conduct, ASIC will ensure they are excluded from providing such services in the future,” ASIC Acting Chairman Peter Kell said.

Ms Burnell can seek a review of the decision by the Administrative Appeals Tribunal.

“ASIC’s investigation concerning Ms Burnell is ongoing,” the regulator says.

Canberra moves to protect corporate whistleblowers

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The Federal Government has introduced a bill to create stronger protections for whistleblowers who expose corporate misconduct.

Revenue and Financial Services Minister Kelly O’Dwyer says it is a significant milestone, creating “a single, enhanced whistleblower protection regime” for the corporate and financial sectors.

“The reforms mean whistleblowers will be able to come forward with the confidence that they will be protected under a comprehensive and robust legal framework,” she said.

“Breaking ranks and reporting wrongdoing can be a harrowing experience, so it is important people know they will have access to redress if they are victimised as a result.”

The new protection regime applies to disclosures received from July 1 next year. These disclosures can be about misconduct from before that date.

APRA recruits Deutsche Bank exec for strategy role

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Therese McCarthy Hockey has been appointed to the new role of EGM Strategy/Chief Risk Officer for the Australian Prudential Regulation Authority, effective from February 1.

She will be responsible for the supervision framework and the enterprise strategy and risk functions, covering the design and maintenance of processes used by supervisors to assess risk in regulated institutions and the framework the regulator uses to oversee its own risks.

She will also oversee strategic and business planning, accountability and performance reporting processes.

Ms McCarthy Hockey is currently Deutsche Bank Global Bank Treasurer and COO. She has held senior treasury roles at the bank in Sydney and London since 2002.

IAIS seeks feedback on systemic risk approach

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The International Association of Insurance Supervisors (IAIS) has produced an interim public consultation paper on an activities-based approach to systemic risk in the sector.

It says the paper “is intended to provide an opportunity for stakeholders to give input into the development of an activities-based approach and feedback on the proposed steps the IAIS will follow in its work on deriving activities-based policy measures”.

The IAIS is developing an activities-based approach to systemic risk under its three-year cycle for reviewing policy, which is scheduled to be complete in 2019.

A second public consultation on its final proposals will follow by the end of next year.

Submissions for the interim consultation must be made by February 15. For more information, click here.

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Life Insurance

Group life awareness on the rise: MetLife

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Research for MetLife Australia shows superannuation fund members know about life insurance within their funds and levels of default cover.

However, many are unsure how the cover works and what benefits they can claim.

The research by Little Triggers in August featured 12 in-depth interviews and a quantitative survey of 1500 working Australians.

While 74% were aware of life insurance within super, only 54% believed they were covered.

About 72% had limited knowledge of accident and illness cover terms, and half were unaware they could change their level of cover.

While people are encouraged to change coverage levels when buying a home or getting married, they need a prompt from either an adviser or their fund, MetLife says.

When asked what prompted them to modify cover, 29% – the highest proportion of respondents – cited recommendations from their financial adviser. About 20% reviewed their cover after receiving communication from their super fund.

MetLife Australia CEO Deanne Stewart says the industry has worked hard to raise awareness of insurance in super.

“It’s rewarding to see people are taking notice and awareness is on the rise,” she said.

“But at the same time it’s concerning that more people aren’t taking action, despite 55% of those with default cover suspecting they don’t have enough.”

About 73% of respondents had consolidated their super into one account.

“This shows that simple, clear messaging regularly reinforced does work, and is something we need to embrace when it comes to insurance inside super,” Ms Stewart said.

“We need to focus on engagement, ensuring more working Australians are making the most of their insurance inside super. As industry professionals we have a key role to play in supporting people with simple steps to take control of their cover.”

Industry urged to account for mental illness care advances

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Life insurers must change their thinking on mental health as treatments advance, a doctor has told a parliamentary joint committee hearing on the industry.

Royal Australian College of General Practitioners President Bastian Seidel told the committee mental health is now the most prevalent condition in Australia, overtaking cardiovascular disease and, more recently, dementia.

“So, of course, I’m not surprised there are quite significant claims based on mental health conditions,” he said.

“I also would like the insurance industry to be a bit more sophisticated in their thinking.

“Just because you have a diagnosis of a medical condition, it doesn’t mean your prognosis is poor. Science and medicine advance.”

He says 50 years ago a heart condition was seen as a death sentence, but now life expectancy is almost the same as in a healthy person.

“I have patients who’ve been diagnosed with bipolar disorder,” he said.

“I would say 30 years ago the prognosis of bipolar disorder probably wasn’t as good as it is now, but we have more modern medication available, better support networks, [and] we have psychologists out there.”

Because such patients see their doctors on a more regular basis, other medical issues are picked up and treated.

“[If a person was] to be penalised because of a diagnosis of bipolar disorder, this would be entirely inappropriate, because we know their life expectancy is probably much better compared to what we expected when they were first diagnosed decades ago.”

Dr Seidel says insurers must consider advances in care and treatment.

“We are inviting the insurance company to ask for that particular context, to take it into consideration and to ask for knowledge, and the knowledge should be provided by the treating doctor, and it should not just be a line on a piece of paper that’s a diagnosis.

“Patients with depression function perfectly well when they are supported [with] access to treatment and support.”

Customer satisfaction dips

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Overall satisfaction with life insurers has declined marginally to 66.2% from 67.5% last year, according to the annual Roy Morgan Single Source survey of more than 50,000 consumers.

The survey found 219,000 people changed their life insurance policies in the past year, while at least 751,000 were looking to do so.

For policyholders who were “extremely likely” to renew with their current insurer, the satisfaction rating was 74%. Among policyholders unlikely to renew, only 30% were satisfied with their current insurer.

By individual insurer, the biggest improvers were AIA Australia (up 6.6 points to 73.2% satisfaction), Insuranceline (up 5.4 to 79.2%) and Allianz (up two to 75.2%).

Major brands that showed declines were Asteron (down 12.2 points to 65.9%), Zurich (down 9.9 to 60.9%), CommInsure (down 4.2 to 64.2%) and OnePath (down 3.7 to 63.4%).

AMP recorded 65.1% customer satisfaction – down one point and below the market average of 66.2%. MLC scored 66.9%, down 0.6 points.

Roy Morgan Industry Communications Director Norman Morris says the channel used to buy cover is a factor in satisfaction levels.

“The most frequent method… is directly from an insurance company, which has been steady at about 40% for the past five years,” he said.

“At this stage, purchasing online is relatively small and has shown only a marginal upward trend during recent years. The other major purchasing channel is the use of financial advisers, which now account for about 20% of the market.”

Mr Morris says the use of third parties to buy life cover can take the customer relationship away from the insurer, giving it less control over satisfaction and retention levels.

Advisers secure win on SOA commission disclosure

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The Australian Securities and Investments Commission accepts commission payments should not feature on the first page of new life insurance statements of advice (SOA).   

In consumer testing, the regulator found participants want this information on the first page, but submissions from the industry argue this will distract from the advice given.

“The main arguments against this mode of disclosure were it placed too much focus on adviser remuneration, rather than on the client’s needs,” the regulator says.

“And it communicated information about commissions out of context.”

In the new 23-page statements, commissions now appear in an executive summary towards the front. The detailed report on commissions remains at the back.

“Prominent, upfront disclosure does not necessarily mean commissions need to appear on the front page,” the regulator says.

“While front-page disclosure ensures clients will notice the information, it may not lead them to understand it in the context of the advice or to critically engage with the advice itself.”

Regulatory Guideline 90 says the SOA is about providing important information clients have received from their advisers.

“The example SOA in RG90 is designed to assist advisers to produce an SOA that is compliant, concise, easy to understand and written in plain English.”

Kaplan calls for shake-up of CPD system

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Kaplan Professional says advisers should embrace “lifelong learning” rather than the current process-driven approach to professional education.

It has called for advisers to implement a new continuing professional development (CPD) framework to utilise innovations in education methodology and technology.

The training organisation has published a white paper – Lifelong Learning: the Future for Professional Financial Advisers – that offers a practical framework for adviser CPD requirements, assessment and accreditation.

It recommends a points-based system to determine an individual’s CPD requirements.

Points are based on learning outcomes, rather than time spent or number of words produced.

Kaplan Head of CPD Jennifer Hornsey says a points-based system allows learning to be acknowledged on a quality and thinking basis.

“This enables a scale of differentiation between learning activities,” she said.

“Allocating CPD points based on learning outcomes allows and encourages all levels of learning because advisers choose the learning that best suits their needs.”

Ms Hornsey says the white paper aims to improve on the status quo and lift the standard of CPD training across the industry.

“We want to change the value of CPD beyond compliance and standardise recognition and accreditation models while recognising innovative CPD delivery methods,” she said.

AIA fee offer aims to lift adviser business

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AIA Australia will waive policy and Vitality scheme fees for the first two years for new applicants to it Priority Protection product.

The offer is open until March 31 and will exclude applications for Priority Protection Express, policy alterations and cancel-and-replacement applications.

The insurer says clients will save at least $82.53 a year for two years on life policies, plus $120 a year for two years on AIA Vitality if they add the wellness program.

“We’re seeing improved lapse rates on our Priority Protection policies when clients engage with their insurance daily through the AIA Vitality program,” AIA Australia Chief Retail Insurance Officer Pina Sciarrone said.

“Our statistics show they are up to 40% less likely to lapse on their life insurance policies when they engage in AIA Vitality.”

Ms Sciarrone says the offer supports the adviser network, allowing them to “offer more value to their clients”.

Meanwhile, AIA Australia Head of Independent Financial Adviser (IFA) Distribution Sam Tremethick will be seconded to the Hong Kong head office as Regional Head of IFA.

He will be responsible for the IFA growth strategy across Asia, New Zealand and Australia.

Mr Tremethick joined AIA Australia in August 2012 as national manager of strategic partnerships, becoming Head of IFA Distribution in November 2014.

He will be temporarily replaced in Australia by Kristen Lennis-Harvey, currently Head of Strategic Partnerships. She joined AIA Australia in May 2015.

ASIC updates payment guidelines as framework looms

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The Australian Securities and Investments Commission has updated Regulatory Guide 246 on conflicted remuneration.

It includes guidance on life insurance remuneration reforms, including those due to start next year under the Life Insurance Framework.

The changes from January 1 mean remuneration arrangements used in some life insurance distribution channels, including direct sales, will need to alter.

Conflicted remunerations include benefits for information given to an adviser or licensee and any volume payments.

Another conflicted remuneration is a benefit provided to someone who mails consumers factual information on how to apply for life products, without providing advice.

This will apply if a payment is made for the volume of information sent out.

The regulator says it will monitor the industry’s implementation of life insurance remuneration reforms, and will consider developing additional guidance to address specific issues or concerns.

The guideline also details monetary and non-monetary benefits, including free or subsidised business equipment services and hospitality benefits.

Conference fees paid by providers will be treated as conflicted remuneration, it says.

MBS teams with Honan on advisory JV

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Honan Insurance Group and MBS Insurance have created a joint venture, to be called Honan Life Insurance Group.

“The alliance with MBS Insurance gives us the ability to enhance our marketplace and client offering with a more inclusive integrated insurance service,” Honan CEO Damien Honan said. “Honan Life Insurance Group is on a growth journey, and this new alliance will provide a valuable point of difference for us as an organisation.”

Sydney-based MBS was established in 2006 and has grown to become a national life insurance advice specialist.

“Through specialisation, MBS has been very successful in this environment during a long time,” CEO Drew Burden said.

“The joint venture with Honan positions our brand as an industry leader with distinctive strengths.”

Honan Insurance Group has more than 180 employees across offices in Melbourne, Sydney, Brisbane, Perth, New Zealand, Singapore and the US.

TAL names new claims manager

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TAL has announced the appointment of Loraine van Eeden as GM Claims.

Ms van Eeden will move from her current role as GM International Life Solutions, and will be responsible for overseeing claims management across all distribution channels.

COO Justin Delaney says the company is “investing more in the claims experience than any other part of our business”.

Before joining TAL last year, Ms van Eeden was head of Swiss Re’s life and health claims proposition, working at its London and Zurich offices.

She starts her new role in January, based in Sydney.

Austock Life rebrands, splits CEO role

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Austock Life has changed its name to Generation Life and appointed Catherine van der Veen and Lucy Foster to replace Ross Higgins and act as joint CEOs.

Ms van der Veen was previously GM of strategic projects for the wealth management arm of Commonwealth Bank and held a number of senior roles at Westpac.

Ms Foster has worked at global financial services companies including Commonwealth Bank, Standard Life and KPMG Financial Services Consulting in the UK.

“Attracting two highly qualified, senior executives with complementary skills to embrace a job-shared leadership role is… emblematic of our progressive intentions as a company and financial brand,” Group Executive Chairman Rob Coombes said.

He says the new name reflects a vision to talk directly with Australians and their financial advisers across different generations.

New product features such as tiered pricing, additional investment options and a range of index funds have been added to the group’s investment bonds.

ASIC bans pair over false insurance applications

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Found Financial Services principals Matthew Wallis and Rochelle Manoharan have been permanently banned from providing financial services after making false life cover applications.

The Australian Securities and Investments Commission found the pair – authorised representatives of RI Advice Group – submitted applications to Zurich Australia between June and December 2015 that were not requested by clients and contained false information. The pair made the false applications to maximise upfront commission.

Found Financial Services paid the monthly premiums for a short time to give the appearance the policies were genuine, the regulator says.

In each case the policies lapsed because of non-payment.

Infocus CEO steps down

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Rod Bristow has left Infocus Wealth Management after six years as CEO.

Chairman Roy McKelvie says Mr Bristow has expanded the dealer group organically and through acquisitions.

“Mr Bristow has grown our national network of financial advisory practices providing financial advice solutions to clients all around Australia,” he said.

“This has been a period of substantial change in the financial services industry and Mr Bristow has ensured the company is well placed to capitalise on the opportunities these changes will represent.”

Mr Bristow says he is proud of his spell as CEO.

“Not only has the company grown to become a stronger national organisation delivering wealth management to Australians from all walks of life, but it is now seen as a leader in terms of compliance, use of technology, breadth of service and efficiency of the delivery of financial advice solutions,” he said.

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The Professional

NRMA Insurance ad sends Christmas safety message

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A new advertisement focusing on road safety at Christmas marks a shift in direction for NRMA Insurance and other IAG brands, according to Chief Marketing Officer Brent Smart.

The two-minute ad, called Long Way, is the insurer’s first with creative agency The Monkeys.

It tells the story of a young girl named Indy who is sad when her grandparents cannot be with her for Christmas. The grandparents decide to drive through the night to be with Indy and her family.

“This is a return to the type of storytelling and tone of voice that has made the NRMA Insurance brand loved, and signals the new direction we are taking the brand in,” Mr Smart said.

NRMA Insurance’s claims data shows car collisions increase over the holiday period. It is piloting a new app called Safer Journeys, to motivate drivers to switch off their mobile phones.

Long Way went live yesterday across various channels. It can be seen here.

McLardy McShane fundraiser passes $1 million mark

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Broker McLardy McShane’s annual Reach Christmas Lunch raised almost $125,000 last week, bringing total funds raised for the charity to more than $1 million.

Reach helps about 40,000 Australian youths each year.

Organiser Rachel Sozzi told insuranceNEWS.com.au it was an “awesome” day, with 73 organisations pledging $1250 each, about $25,000 made in raffle tickets, plus further donations. Last year the lunch raised $105,000.

The event at Melbourne’s Docklands featured appearances from football figures Tim Watson and Neale Daniher, and comedian Jimeoin.

Australian to chair Norton Rose Fulbright worldwide

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Tricia Hobson, the Australian Chairman and Global Vice-Chairman of international law firm Norton Rose Fulbright, has been appointed Global Chairman, effective January 1.

She is the first woman to take on the one-year ambassadorial role.

Ms Hobson is a partner and Head of Insurance in Australia and Asia. In the new role she will focus on fostering cross-border collaboration, innovation and client relationships.

She will also be responsible for promoting global diversity and inclusion initiatives.

Global Chief Executive Peter Martyr says the appointment demonstrates the importance of the Asia-Pacific region to the global business.

Marsh consultant wins TurksLegal scholarship

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Fiona Fong, a Senior Claims Consultant with Marsh, has won this year’s Australian and New Zealand Institute of Insurance and Finance (ANZIIF) TurksLegal Claims Scholarship.

Her winning paper examined whether insurers are ready to handle cyber claims.

The runner-up prize went to Richard Oliver Underwriting Managers Account Executive Krishna Venkata, who submitted an essay on automation.

“It is very pleasing to see continued interest in the discussion of ideas around the ever-changing issues facing claims professionals in Australia,” TurksLegal General Insurance Partner and scholarship judge Paul Angus said.

“The winning paper and the runner-up tackled topics in the form of cyber claims and automation that weren’t really even on the radar when we started the scholarship in 2008, but are [now] key issues facing the industry.”

Ms Fong wins a trip to the Claims Conference and Insurance Services Expo in the US next year, valued at up to $8000. Or she can choose $5000 cash and registration for next year’s ANZIIF Claims Convention in Australia.

Pen underwriter moves into Mansions

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Jo Flaskas has joined Steadfast-owned Mansions of Australia as Underwriting Manager, according to her LinkedIn profile.

She moved to the specialist property cover agency last month from Pen Underwriting, where she was underwriting manager for Summit Prestige home insurance.

Mo money: Gallagher raises $15k for men’s health

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Gallagher’s “Mo Bros and Sistas” raised $10,308 for men’s health charity campaign Movember, which was topped up to $15,000 by the company.

Since 2008 the broker has raised $115,000 for Movember, which involves men being sponsored to grow moustaches each November.

Gallagher Australia partnered with Pen Underwriting’s Sydney and Melbourne offices and Crombie Lockwood New Zealand, which raised more than $11,500 and nearly $5000 respectively.

The money will contribute to 12,000 projects including research into prostate cancer, testicular cancer, mental health awareness and suicide prevention.

Movember Foundation founder Travis Garone says Gallagher’s efforts are “mind-blowing”.

AILA names SA lawyer as life member

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Sparke Helmore Adelaide partner Julie Kinnear has been granted life membership of the Australian Insurance Law Association.

She is the immediate past chairman of the association’s SA chapter and its longest-serving committee member. Last year she chaired the national conference organising committee.

SA board member Anthony Hillary presented Ms Kinnear with the honour last Wednesday.

As a professional indemnity lawyer Ms Kinnear helps professionals and organisations defend negligence claims, and works with insurers on policy coverage and dispute resolution.

She also advises businesses on insurance and indemnity clauses in contracts, and acts for Lloyd’s syndicates, overseas and Australian insurers, claims managers and insured organisations.

Cover-More appoints new account manager

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Nathan Burke has been appointed National Account Manager at travel insurer Cover-More.

He is responsible for supporting the agency sales channel, working on product development, incentive and reward activity, and improving conversion and aggregate insurance revenue.

Mr Burke previously held senior sales roles at airlines Etihad and Qantas over nearly 14 years.

Atradius appoints NZ head

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Trade credit insurer Atradius has appointed Farook Mohammed as Country Manager in New Zealand following the retirement of Martin Jones.

Mr Mohammed has 15 years’ experience in trade credit insurance as an underwriter and broker, and was recruited from Aon Australia, where he was a client manager.

Atradius’ New Zealand office is to relocate from Wellington to Auckland.

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International

‘Lucrative’ SME market awaits insurers

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Insurers are not fully exploiting the SME market’s huge potential, with customers hungry for improved online offerings, according to a PWC survey.

About 24% of SMEs make business insurance purchases online, and the low figure may be due to a lack of product variety, the global research shows. Nearly half of SME respondents prefer to buy online and 65% are quite or very likely to do so in the future.

“Our survey confirms there is an unmet demand for digital insurance services, but it’s a complicated story,” the global consultant says.

“Insurers will need to take into account a complex array of needs and preferences. For those that are well prepared, a lucrative new market awaits.”

Merely providing a digital “shop window” is not enough, PWC says. Insurers need to create a fully digitised service, with end-to-end processes and a genuine online operating model.

SMEs want a “consistent and connected digital offering”.

About 36% want to buy a policy online, as well as make claims. More than half want to track their claims digitally and 38% want the online platform to allow policy changes.

Brokers and agents are expected to be part of the online service.

“Insurers should review their overall channel strategy to look at how they can provide a digital offering across each stage of the customer journey, while retaining other channels such as helplines and face-to-face appointments,” PWC says.

“Rapid advances in artificial intelligence and machine learning mean that, in the future, human advisers could be replaced by intelligent communication technology.”

The Global Digital Small Business Insurance Survey is based on responses from more than 2100 companies with up to 50 staff in the UK, Netherlands, Hong Kong, Germany, Italy, India, the US, Sweden, South Africa, Brazil, Poland, France, Spain and Switzerland.

Fitch forecasts stable year for US broking

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The US broking industry’s credit fundamentals will remain solid next year, according to Fitch Ratings.

Publicly traded brokers’ aggregate run-rate profitability and balance sheet credit profile are expected to remain consistent with investment-grade ratings guidelines.

“The fundamental sector outlook is stable because profitability levels remain favourable in the sector,” the ratings agency says.

“Modest near-term insurance premium rate improvement is expected in some reinsurance and commercial insurance segments following a year of large natural catastrophe losses.”

Brokers will continue to supplement organic revenue growth through acquisitions, including diversification efforts in employee benefits, data analytics and emerging markets such as political and cyber risks.

Organic revenue growth will stay positive over the next 12-18 months, Fitch says.

Reinsurance pricing to ‘split along regional lines’

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Asia-Pacific reinsurance buyers face a lower likelihood of significant price rises in next year’s renewal season than their catastrophe-hit US counterparts, according to Guy Carpenter.

The reinsurance broker bases its analysis on price movements after 2005 and 2011, which – like this year – suffered catastrophe losses above $US100 billion ($131 billion).

“In 2005, the year of [hurricanes] Katrina, Rita and Wilma, price increases were significant for US buyers, but not so for buyers in the Asia-Pacific region,” Guy Carpenter says.

“The differential can be explained by the fact 84% of 2005 losses stemmed from events in the US, whereas less than 2% came from the Asia-Pacific region.

“For [this year], the split is more likely to resemble 2005 than 2011.”

Guy Carpenter says price movements in both years indicate the market “was able to distinguish between loss-generating and non-loss-generating geographies”.

More than half of 2011 insured losses were in Asia-Pacific, Guy Carpenter says. Other research shows the earthquake and tsunami in Japan and New Zealand’s Christchurch earthquake accounted for two-thirds of overall losses that year.

Most reinsured losses in the Asia-Pacific region this year arose in Australia, which suffered about $1.5 billion in insured losses from Cyclone Debbie.

Canadian fund invests in Hyperion

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Hyperion Insurance Group has welcomed Caisse de depot et placement du Quebec’s (CDPQ) investment of more than $US400 million ($530 million) for a minority stake in the company.

The institutional investor will be a growth partner as UK-based Hyperion, the parent of underwriting agency Dual, seeks to grow.

“CDPQ is a fantastic partner to support us on the next leg of our journey,” CEO David Howden said.

“Its strategy to invest based on long-term fundamentals, combined with its deep understanding of insurance markets… means it will deliver valuable insight to help direct our future plans.”

CDPQ holds $C286.5 billion ($296 billion) in net assets.

Zurich outlook improves after ‘strong corrective actions’

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AM Best has revised its outlook for Zurich Group to stable from negative and affirmed its long-term issuer credit rating (ICR) at “a”, citing a “very strong” balance sheet.

The outlook for Zurich Insurance Group’s main non-life insurance subsidiaries has also been upgraded to stable from negative and their financial strength rating (FSR) of A+ (Superior) affirmed. The long-term ICR has been revised to aa-.

Zurich American Life Insurance Company’s (ZALICO) FSR is upgraded to A+ (Superior) from A (Excellent), while the long-term ICR moves to aa- from “a” and the outlook is stable.

AM Best says the group’s rating change reflects its balance sheet, strong operating performance and “very favourable business profile and appropriate enterprise risk management.”

“The revised outlooks reflect the strong corrective actions management has taken on the group’s property and casualty (P&C) operations,” the agency says.

AM Best believes this will lead to sustained improvement in P&C profitability ratios.

Its rating action on ZALICO reflects “its strategic importance and integration with the Zurich group”.

AM Best says the group maintains a highly diversified business profile with sustained competitive advantages in Europe and the US, strong presence in Latin America and selective positions in Asia-Pacific.

Balance sheet strength comes from the “strongest level of risk-adjusted capitalisation, excellent financial flexibility and liquidity”.

The group’s combined operating ratio has improved to 97% from 102% in 2015.

However, North American hurricane losses in the third quarter mean it will probably deliver a P&C combined operating ratio in excess of 100% for this year.

Zurich Group has implemented an expense-cutting initiative to counter its high expense ratio relative to peers that should reap benefits over the next few years, AM Best says.

ILS to drive reinsurance rates: Fitch

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Future rate increases in reinsurance depend on the insurance-linked securities market’s appetite for investment, according to Fitch.

The amount of capital “trapped” by lengthy claims settlements or protracted litigation will also influence the degree to which rates rise, the ratings agency says.

Fitch expects rates to rise next year in light of catastrophe losses this year, particularly on US catastrophe-exposed lines and in the retrocessional market.

However, excess capital and the absence of an even costlier event means Fitch is less confident about widespread rate rises.

Fitch recently updated its global reinsurance rating outlook for next year to stable after catastrophe losses this year approached $US100 billion ($133.16 billion), mainly from hurricanes Harvey, Irma and Maria, Mexican earthquakes and Californian wildfires.

Any significant development in loss estimates or additional large loss events before the new year could change the outlook to negative.

Despite the losses, the industry’s “very strong capital levels” limit solvency risks.

Fitch says its “fundamental outlook” for the reinsurance sector remains negative due to intense market competition and the endurance of alternative capital depressing prices in recent years. Persistent low investment yields put further strain on reinsurer profitability.

This year’s combined operating ratio is forecast to be 109.7%, the highest since 2011, when the industry incurred losses from multiple catastrophes including the earthquake and tsunami in Japan, New Zealand quakes and Thailand floods.

Earnings from investments and operations outside non-life reinsurance will likely enable the reinsurance sector to be in profit for the full year, with a net income return on equity projected at 2.1%, down from 8.5% last year.

Next year Fitch forecasts a combined operating ratio of 95.8%, reflecting an average catastrophe loss.

California wildfires force more evacuations

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Authorities in Santa Barbara County have issued an evacuation order as the wildfires in southern California continue into a second week.

More than 800 buildings have been destroyed and thousands more are at risk.

Catastrophe modellers have yet to estimate losses, which will cap a busy year for US insurers still managing claims from hurricanes Harvey, Irma and Maria.

“The US wildfire season is not over yet,” RMS Senior Product Manager and wildfire expert Kevin Van Leer said.

“It’s important to note that special climate conditions… are significant drivers for increased wildfire risk. The combination of winds along with long-term dry conditions and low humidity can result in an ignition that can quickly turn into a catastrophic wildfire event.”

Insurers to accelerate insurtech investments: Deloitte

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Insurers will allocate more resources to investing in and acquiring insurtechs next year, forced by digitalisation’s impact on the industry, according to Deloitte.

Almost half of all recently surveyed global insurers plan to acquire new technologies over the next three years, including 14% who expect to make more than one acquisition, it says.

“One potential merger and acquisition growth area is being spurred
by digitalisation, with insurers seeking to enhance distribution, customer experience, data collection, advanced analytics and operational efficiency by homing in on insurtech… targets.”

Robotics and artificial intelligence should be high on insurers’ agenda over the next year to 18 months, it says. Such technologies are already changing the way the industry operates, providing more computing power and reducing data storage costs.

Many industry players have started using advanced automation such as bots and machine learning algorithms.

“These options give insurers an opportunity not just to reduce expenses, but also to possibly reinvent how they conduct business,” Deloitte says.

“As insurers continue to be challenged by rapidly evolving customer needs and expectations amid heightened competition, many have resorted to belt-tightening and ‘doing more with less’ to shore up returns.”

Insurers must be ready for the many challenges that lie ahead, including those beyond their control such as natural catastrophes and global economic conditions, Deloitte warns.

“In short, insurers can take advantage of growth opportunities, operational improvement and expense reduction [next year] if they can overcome a host of internal and external obstacles standing in their way.”

Munich Re, Swiss Re secure AM Best upgrades

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AM Best has upgraded the long-term issuer credit ratings of Munich Re, Swiss Re and their affiliates to aa from aa-.

The ratings agency has also affirmed the reinsurers’ financial strength ratings, both at A+, and removed them from “under review with positive implications”.

Swiss Re’s rating reflects “balance sheet strength… as well as its strong operating performance, very favourable business profile and very strong enterprise risk management”, AM Best says.

It cites similar reasons for Munich Re’s upgrades, noting strength in the German reinsurer’s balance sheet, strong operations and its business profile.

Vietnam suffers rare billion-dollar cat loss

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Typhoon Damrey caused $US1 billion ($1.33 billion) of damage in Vietnam after it made landfall last month, according to Aon Benfield subsidiary Impact Forecasting.

It marked a “rare billion-dollar economic loss event” in the country, the catastrophe modeller says.

At least 108 people died and more than 3560 homes were destroyed when the storm hit southern Vietnam on November 4.

Elsewhere last month, thunderstorms in the US midwest and northeast cost private insurers almost $US200 million ($266.4 million), with economic losses at $US275 million ($366 million).

A 7.3-magnitude earthquake near the border between Iran and Iraq caused up to $US740 million ($986 million) of damage in Iran.

Australia had no significant natural disasters last month.

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Analysis

The lessons of history

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Henry Ford observed that “history is bunk”, which may be correct – who are we to argue with dead American billionaires? – ­but it nevertheless throws up lessons that are as true today as they were long ago.

Looking back at 2017 through the weekly reports of insuranceNEWS.com.au – more than 2300 articles over 45 weeks – confirms the industry is following a well-trodden path even as it sidles cautiously into 2018.

As with any history lesson, there are trends that stand out – trends that have been with us for as long as business has existed. Here are a few to ponder:

1 – Governments don’t govern so much as lurch from one crisis to another:

There is no better 2017 example of this than the NSW Government of Premier Gladys Berejiklian, which in June – having decided to get into line with the rest of the mainland by funding its emergency services via a levy on all property owners rather than just those who insure – had a bad case of last-minute stage fright and performed a remarkably contorted backflip.

The insurance industry, having spent millions reconfiguring its systems, has been left with the backwash, and expects home premiums to rise by up to 24% and commercial premiums by up to 40%.

And while NSW says it’s searching for a more refined answer to the inefficiency and unfairness of its insurance levy quandary, don’t expect to see that answer emerge any time this century.

New Zealand – whose politicians we have become accustomed to regarding as more progressive than our own – has cooked up an even greater disaster.

Having amalgamated all the country’s fire services, the Government now expects people who insure to pay for the lot. So the premiums on property (and a confusingly large array of other insurance classes no one understands) are rising by 40%. Clever.

2 – Progress isn’t gradual, it’s more like a tsunami:

We’ve been dealing with computer technology for 40 years or more, but in the past year we’ve reached the top of the opportunity wave. From here on in, the ride is going to be very fast and even a bit violent.

In 2017 fintechs (under which the so-called insurtechs are grouped) attracted investment of more than $855 million, KPMG said last month. 

Every insurer is trying to reach the holy grail of greater efficiency, more simplicity and customer retention, and next year we will (or should) see things happening to meet that ideal.

Over the past year Australia’s largest insurers, IAG and Suncorp, have undergone massive restructures to tie their operations into the opportunities presented by aligning customer data with responsive and innovative systems. Every other company is following suit, and 2018 is when the changes will start to be really felt.

Just as the industrial revolution of the mid-1800s changed the lives of millions as they moved from farms to cities, we’re going to see big changes in the way people work.

Insurers will be opening new channels to reach customers, and we’ve published plenty of reports in the past year that say brokers will feel the first competitive draught from the winds of change. It will be up to intermediaries to see such change as an opportunity or a threat.

3 – Evidence beats ignorance every time: 

Let’s lay aside the debate on what’s causing the planet to heat up and accept that it is. Because it is.

insuranceNEWS.com.au has published dozens of expert reports through the year pointing out that temperature records are being broken month on month, and the hazards associated with that should be obvious to anyone. More intense bushfires, floods and cyclones, for example.

The implications for insurance are equally obvious, and insurers in Australia and around the world are taking a more prominent role in pointing these out to politicians and the public.

In Australia it’s not an easy task, especially with a cash-strapped government that’s resisting industry calls to spend more on strengthening infrastructure so it can withstand the nasty inevitables to come.

4 – The squeaky wheel gets the grease:

A clamorous and complaining consumer voice, a Liberal Party pursuing a remarkably un-Liberal populist line, inquiries galore and now a royal commission into everything…

The point is, we live in a very connected world, and in an age of political uncertainty governments react most to the loudest noises. As we’ve tracked throughout the year, general insurance is always in danger of being sucked into the vortex formed by life insurance issues and banking rorts.

Regulators are also being encouraged to be tougher, more transparent and interventionist, which is a global trend that unsettles local insurers who are already tightly controlled.

As our reports over the past year have shown, the general insurance industry’s peak bodies have started to push back against the less clever ideas of politicians and regulators.

We just have to get used to the fact that in a swiftly changing world, outside pressures will become more common and will have to be countered where they limit the insurance industry’s ability to operate effectively.

Insurers and brokers and their peak bodies will therefore have to develop a more meaningful profile if they hope to aggressively defend industry values.

5 – Change is challenging, but the future is exciting: 

Industries come and go, and during 2017 the insurance industry geared up to ensure it’s a survivor. As insuranceNEWS.com.au has reported throughout the year, insurance is increasingly being recognised as the best remedy to a wide range of ills that plague the world.

The past year has been a time of great change for so many people in the general insurance industry. As the brave new business world sets an even faster pace over the next 12 months, the challenge for everyone will be keeping up with what’s happening.

We’ll do our best to help you meet that challenge.

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