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ICA urges NSW Premier Perrottet to make reforms

The Insurance Council of Australia (ICA) has called on the new NSW Premier Dominic Perrottet to extend proposed stamp duty reforms to insurance and for the state to take a fresh look at abolishing the emergency services levy.

Mr Perrottet, who took over the top role from Gladys Berejiklian on October 5, pushed as Treasurer for the replacement of stamp duty on home sales with an annual land tax.

NSW is the only mainland state to still fund its emergency services through a levy on insurance, after the Government backflipped on the issue in 2017, while Tasmania is consulting on the potential removal of its levy on policyholders.

“We welcome Tasmania’s review into its Fire Services Levy and have called on the new NSW Premier Dominic Perrottet to follow other states and use his plan to abolish stamp duty on housing to also get rid of stamp duty on insurance as well as the emergency services levy,” ICA President Sue Houghton said last week.

ICA says abolishing insurance taxes and duties in all jurisdictions would immediately deliver affordability benefits and would lead to a 13% increase in annual household expenditure on home and contents cover across Australia.

“The Federal Government should consider incentivising states and territories to undertake this important reform, as the Howard Government did for the removal of various state taxes and charges with the introduction of the GST,” Ms Houghton said.

The ICA forum last week highlighted measures the industry is taking to address affordability and availability following the release of a review completed by John Trowbridge.

Ms Houghton says it has not been an easy issue but insurers have approached the problem in an open-minded way.

“While it might have been easy for us to look at this issue solely from the perspective of our own businesses, instead it’s been the broader community and economic impact of these problems and the strategic opportunities they provide which has driven our approach,” she said.

A new Business Advisory Council is set to begin work, with the review process identifying that adventure tourism and carnival businesses and areas impacted by potential abuse claims are among sectors facing acute pressures.

Mr Trowbridge, asked at the forum about the level of broker commissions, said his report recommended being open and transparent on payments.

“There is a lot to be said for just ensuring full disclosure,” he said. “Once that is done, if there are other problems they can be dealt with.”

Warragamba wall issue points to planning failures

Raising the height of the Warragamba Dam wall would not resolve issues created by land use failings that have increased flood risks in the Hawkesbury-Nepean Valley, Insurance Council of Australia CEO Andrew Hall says.

“The reality is the money that we would spend on raising the Warragamba Dam wall, we probably should think about spending on claiming back some areas that never should have been developed in western Sydney,” he told the ICA Annual Industry Forum last week.

Mr Hall says there are no simple answers to legacy planning issues, many of which date back decades and others only a few years, and communities face difficult conversations.

“Even if we do raise the dam wall, that should never give false comfort because dam walls overtop no matter how big you build a dam,” he said.

Commissioner of Resilience NSW Shane Fitzsimmons said a survey last catastrophe season found many people in the region were unaware they were in a flood plain, while often residents in disaster prone areas in the state don’t personalise risks, particularly if an event hasn’t recently occurred.

“You still have this massive legacy of decisions on development that if you could turn back time, you would seriously re-evaluate,” he said.

Mr Fitzsimmons says the insurance industry has a responsibility to ensure people are not inadvertently underinsured, given changes to building codes and standards that have increased rebuilding costs.

Resilience NSW is supporting the ICA in pushing for agreements to facilitate cross border movement of insurance personnel to assist with recoveries after any disasters this summer.

Mr Fitzsimmons says work has been undertaken to allow the movement of first responders across borders and the issue regarding insurance assessors and repairers has been raised with federal counterparts.

“It is front of mind,” he said. “The other dimension around relief and recovery and support in response to those disasters is also being worked on at the moment.”

Severe weather hits as La Nina alert declared

The Bureau of Meteorology issued a La Nina alert last week as the type of rainfall and severe weather typically associated with the seasonal event and other climate drivers affected much of eastern Australia.

The bureau moved to a La Nina alert, from a watch, due to continued cooling in the tropical Pacific Ocean and an increase in the number of climate models showing sustained conditions linked with the event over summer.

La Nina events, which increase the chances of above-average rainfall for parts of Australia during spring and summer, typically develop around 70% of the time after alert criteria are met, which is about triple the normal likelihood, the bureau says in a Climate Driver update.

“With an already wet landscape and above average rainfall likely, there is an increased risk of widespread flooding for eastern and northern Australia,” Senior Climatologist Greg Browning said.

Australia has recently been affected by a weak negative Indian Ocean Dipole, which is also associated with above-average spring rainfall, while the Southern Annual Mode is also expected to return to positive rain-inducing territory.

A tornado was last week reported in the NSW regional city of Armidale, heavy rainfall and hail affected parts of western Sydney, while severe thunderstorm warnings have been issued in Queensland.

Insurers say the storms were not significant from a loss perspective, but they have generated a number of calls from policyholders. IAG on Friday said it had received around 1300 claims.

What’s in the latest edition of Insurance News magazine

While the pandemic and its many challenges have been front and centre of all insurance professionals’ thoughts, there’s been a lot happening in the industry that will continue to throw up challenges.

The latest issue of Insurance News magazine provides a detailed overview of the regulatory changes that impact across the industry. If you want to understand exactly what it all means to you, this article will help.

The magazine also features the first interview with Sue Houghton after she arrived at QBE as CEO Australia Pacific. We also interviewed new Axa XL Country Manager Catherine Carlyon, who explains why the insurer is moving forward to banish uncertainty and deliver enhanced products.

Arguments over Covid working conditions and vaccine debates in the construction industry may be dominating the headlines, but builders face a bewildering range of problems that have led insurers to withdraw capacity and raise their premiums. This edition of Insurance News magazine examines the issues and gathers expert views to explain the background.

Our inaugural Insurance News Wellness Survey was an opportunity for locked-down professionals to detail their trials and triumphs as the industry went home and kept right on working. Locked-down and locked-out states are slowly returning to some semblance of normal, but the negative pandemic-related effects we unearthed need to be taken into account as offices reopen.

Most companies get a pat on the back for their support, and employees who want a hybrid working regime (that’s most of them) provide plenty of reasons why.

All this and so much more in Insurance News magazine, the industry’s most popular and trusted publication. The October edition is being mailed to subscribers this week, and will also be available online.

Actuaries set out board recruitment criteria

Insurance companies need to appoint board directors with the “right qualifications” to prevent similar misconduct to that uncovered by the Hayne royal commission, according to the Actuaries Institute.

Board recruitment models should recognise the special needs of insurance companies and chairs should have CEO experience.

Former Actuaries Institute President Barry Rafe and ex-Australian Prudential Regulation Authority deputy chairman Ian Laughlin have prepared a toolkit containing a checklist of key criteria to consider when scouting for board directors and chairmen.

Using the checklist would likely lead to a board with at least three directors with deep operational experience earned working in the financial services sector.

Appointees with “golden” or unblemished careers may not be as valuable to the board as those who have survived an insolvency or major crisis.

“Boards are obliged to act in the best interests of the company but in financial services there are other legal and moral obligations to protect the interests of customers,” Mr Laughlin said.

“The skills and capabilities of the board and individual directors can have profound implications for conduct and culture.”

Click here for the checklist.

Liability market still hardening on loss severity: WTW

The liability market is continuing to harden driven by factors including increasing loss severity and a greater percentage of claims that are litigated, Willis Towers Watson says (WTW).

“Deteriorating loss trends are still negatively impacting underwriting profitability,” WTW says in an October update.

“This is driving insurers to require ongoing rating increases while narrowing their underwriting appetites, re-evaluating coverage and mandating changes to program structures.”

Excess layer general liability renewals continue to experience year-on-year rate increases but renewals are suggesting a more moderate range of increases.

Primary liability is seeing rate gains of 0-20% while excess layers are rising 10-50%, with gains higher when incumbent insurers don’t renew, forcing the risk back into the market.

“There is a significant reduction in global capacity from insurer consolidation through recent mergers and acquisitions, market exits, withdrawal of capacity by some insurers and underwriting restrictions,” the report says.

In property, loss affected or challenging risks are seeing rate rises of 25%, catastrophe exposed risks are seeing gains of 10-20% while rises elsewhere are around 5-10%.

Australia has experienced catastrophes including east coast flooding and WA’s Cyclone Seroja this year, while globally the impact of Hurricane Ida in the US and July flooding across Europe will also affect the insurance market.

“We expect rate increases to ease for the remainder of 2021, but we are very mindful of what impact recent catastrophe events can have on the market in 2022,” WTW says.

A “two-speed market” is evident in professional indemnity (PI), with the construction and property sector bearing the brunt of coverage reductions and increases in premiums.

'Living with COVID' likely to lead to workers' comp claims surge: Finity

Finity has warned in a new report that workers’ compensation claims are set to rise as the country looks to reopen, moving away from its tough virus elimination strategy to “living with COVID-19”.

The actuarial firm says its projections show there will be just over 100,000 infections in workers leading to around 10,000 hospitalisations, of which 700 are admitted to intensive care units.

Up to 7000 or an even higher number of long COVID cases may develop, with sufferers fully off work, and twice as many again will still be on reduced work seven months later. Long COVID refers to ongoing symptoms after the resolution of the initial infection.

In an environment where ongoing weekly benefits are available for those with workplace-based infections, long COVID cases have the potential to be financially significant.

“This raises the possibility of there being a significant surge in claims that could overwhelm insurer claims acceptance processes,” the report said.

“Assuming such a scenario actually plays out, the cost of paying for respiratory ward and [intensive care unit] stays, plus longer term weekly compensation, means the increased claims cost could be material,” the report said.

Finity says using $1400 as an amount of weekly compensation, the national lost income bill lies somewhere between $1 million and $8 million per week depending on how high the numbers of long COVID get.

“We don’t know exactly the number [that will be compensated],” Principal and Director Aaron Cutter told insuranceNEWS.com.au. “What we’ve tried to put a shining light on is the long COVID group.”

Finity says for an infection to be considered compensable, it will need to meet the prescribed statutory test to be regarded as having occurred “out of or in the course of employment”.

Click here for the report.

ICA runs Code of Practice ad awareness campaign

The Insurance Council of Australia (ICA) today launched an advertisement campaign aimed at raising consumers’ awareness of their rights under the new Code of Practice that commenced in July.

ICA says it is the first time the industry has run a paid communications campaign on the code, demonstrating the sector’s commitment to openness and fair dealings.

The campaign will run on key social channels as well as on Sky News.

“The General Insurance Code of Practice sets the standards that insurers agree to meet when interacting with their customers and is insurers’ commitment to openness, fairness and honesty in their dealings with customers,” CEO Andrew Hall said.

“The new code contains many new and updated commitments which put customers at the centre of dealings with insurers.

“Insurers are committed to providing customers with information about their rights under the new code, which is why for the first time we are undertaking a campaign of this scope.

The new code includes sanctions for significant breaches of up to $100,000 in the form of community benefit payments, cost comparisons between new and previous policies on renewal notices, responsibility for quality of repair work undertaken on behalf of insurers, a streamlined complaints process and mandatory standards for claims investigators.

It also includes commitments to providing customers with useful information to navigate key aspects of the claims handling process, such as understanding a scope of works and a cash settlement for a home building policy.

Click here to view the ads.

Perils shaves cyclone Seroja losses to $394 million

Catastrophe data company Perils has lowered its estimate for insured losses from April’s Tropical Cyclone Seroja to $394 million while saying it “serves as a warning” for the northwest of WA of the potential for devastation from tropical cyclones.

The Zurich-based firm’s second estimate for the event, which crossed the WA coastline unusually far south in April, compares with an initial figure of $434 million. Most of the damage resulted from the strong winds with only moderate rainfall.

The estimate is primarily composed of property losses, with motor losses representing just 1.4%.

Perils Asia-Pacific Head Darryl Pidcock says the loss impact of Cyclone Seroja would have been far greater had the storm crossed further south and made a direct hit on the town of Geraldton.

“As such Seroja serves as a warning that devastating tropical cyclones can happen in the northwest of the state of Western Australia,” he said.

WA hasn’t experienced a comparable loss since the 2010 Perth hailstorms, and a number of damaging cyclones in the 1970s, including Cyclone Joan in 1975, Alby in 1978, and Hazel in 1979.

Seroja made landfall just south of the town of Kalbarri at 8pm on April 11 and affected around 800km of the mid-west region coastline with strong gusts extending inland as the cyclone continued a south-south-easterly track into the morning of April 12. The town of Kalbarri was most affected by the winds with reported gusts up to 170km an hour.

Many other locations in the region, where properties are not built to withstand cyclones, experienced gusts above 125km an hour.

Perils’ loss number covers the property and motor hull lines of business. It usually has a $500 million reporting threshold but monitored claims activity for Seroja due to a high level of interest in the cyclone, which was unusual from a meteorological and insurance perspective.

A phenomenon known as the Fujiwhara effect caused Seroja to interact with nearby Cyclone Odette, pushing it south so it made landfall at an unusually strong intensity for the latitude.

“The prominence of the event in local and international media led Perils to make an exception to the standard reporting criteria,” it said.

This is the last Perils report for this event.

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Corporate

IAG could face financial penalties after ASIC action

The Australian Securities and Investments Commission (ASIC) has asked the Federal Court to impose monetary penalties against IAG over alleged breaches of financial laws.

ASIC says subsidiary Insurance Australia Ltd (IAL) engaged in misleading or deceptive conduct and made false or misleading representations by stating some NRMA Insurance customers were eligible for certain discounts on home and motor policy renewals, but then not applying the savings.

A process of inflating some renewal gross insurance premiums led to affected customers failing to receive promised discounts totalling around $60 million, the regulator says.

The practice impacted renewals between March 2014 and November 2019 and affected at least 596,000 customers, in respect of 705,000 separate policies, according to ASIC.

New penalty provisions introduced after the Hayne royal commission allow ASIC to pursue harsher penalties for breaches of the Corporations Act and the ASIC Act.

The regulator is seeking pecuniary penalties “as the court deems to be appropriate” and requests that IAG has to publish a notice stating that it has been ordered to pay a penalty because it has made false or misleading representations.

The insurer says it self-reported the issue to the regulator in 2019 and has been providing refunds through a remediation program, with more than 80% of affected customers now compensated.

“IAG apologises for this failure, recognises the significance and that this was unacceptable, and is putting this right for its customers as soon as possible,” the company said.

“Since late 2019, IAG has enhanced its systems and processes for the delivery of discounts, as part of its significantly improved risk culture and control environment.”

ASIC says a number of insurers have been required to remediate customers for breaches in recent years and firms must ensure IT systems are updated and make improvements across compliance, governance and culture.

“Where there are failures, or empty promises about price discounts, ASIC will use the full range of regulatory tools available to protect consumers - including enforcement action,” ASIC Deputy Chairman Sarah Court said.

JLT in court as NSW councils class action trial continues

Both sides are confident of victory as a class action trial over JLT-arranged local government insurance mutuals continues in the NSW Supreme Court.

The Richmond Valley Council began the action on behalf of 12 NSW councils in 2018, alleging JLT breached its broker duties and arranged cover “at less advantageous rates than were available”, and that group members suffered loss and damage.

JLT says it didn’t act as an insurance broker for the group as its role and obligations were determined by the Deed under which the Statewide NSW local government liability scheme was established in 1994.

“When fairly looked at” cover arranged was not less advantageous and councils suffered no loss or damage, it says in court documents filed before the trial.

Justice Kate Williams last week heard opening submissions from the plaintiff and JLT. The trial has been allocated 25 days, but there is still the possibility that the matter will settle.

Law firm Quinn Emanuel Urquhart & Sullivan, which is acting for the municipalities, says a similar class action on behalf of Victorian councils is set to proceed to trial following the conclusion of the NSW case.

The Victorian matter had been listed for trial in August, but was delayed. A spokeswoman for the Supreme Court of Victoria says no new dates have yet been listed.

JLT is now part of Marsh & McLennan. A spokeswoman told insuranceNEWS.com.au it believes the NSW plaintiff’s allegations are “unfounded”.

“JLT will be putting to the court that councils decide to become members of JLT-supported mutuals because of the many benefits these mutuals provide.

“JLT is putting a strong defence to the claims being made by Richmond Valley Council and expects to be successful in defending the claim. However, as the issue is before the court, it is not appropriate to make any further comment.”

A spokeswoman for the plaintiff told insuranceNEWS.com.au that as the matter is before the court, a detailed comment could not be provided.

“As the plaintiff understands it, JLT’s defence is that it was not acting as the retail broker to local councils in relation to their two largest lines of insurance, which for NSW councils cost millions of dollars each year,” the spokeswoman said.

“That is, JLT contends that councils have been spending significant public funds without the benefit of appropriate broking advice about the best insurance arrangements for it.

“The plaintiff maintains that JLT was its trusted retail broker and gave it yearly recommendations to remain a member of Statewide, when the plaintiff says there were cheaper insurance options that were available.

“Rather than providing a broking service, the plaintiff says that JLT sought to dissuade alternative insurers from competing with Statewide. The plaintiff remains confident in its case.”

A live stream of the NSW proceedings and court documents can be accessed here.

Suncorp names EGM Commercial & Intermediated

Suncorp has appointed Michael Miller EGM Commercial & Intermediated after Darren O’Connell vacated the role in August.

Mr Miller most recently held the role of EGM Personal Injury Claims at Suncorp and was formerly CFO Commercial, CFO Insurance and EGM Motor, Property & Speciality Claims during more than a decade at the insurer.

CEO Insurance Product & Portfolio Lisa Harrison announced a merger of the Commercial and Intermediary Distribution teams in August 2020. She says Vero’s ongoing investment in initiatives like the Insightful Broker series and NIBA Warren Tickle Memorial Award Program, as well as recent acknowledgement for claims excellence through the Mansfield Awards, demonstrates Suncorp’s commitment to supporting its broker partners and commercial customers throughout their insurance experience.

“Michael is a highly regarded leader in the team and brings not only expertise, but the right energy and passion to the role as we continue to focus on delivering on our ambitions within the Commercial and Intermediated portfolio,” she said.

Tower names new CFO

New Zealand insurer Tower has appointed Paul Johnston as CFO, who is set to start in January, pending the completion of approvals from regulators.

He replaces Jeff Wright, who will leave at the end of the year.

Mr Johnston joins from Chubb, where he is presently CFO and Director of the insurer’s Far East region and previously financial controller for Europe.

Before Chubb, he worked for four years at AIG, including as global finance director of personal insurance based in the UK.

“[He] is an internationally experienced finance professional with more than 15 years’ senior experience in the insurance and financial services sectors,” CEO Blair Turnbull said.

“He has extensive experience and operational finance experience, and we are delighted that he is joining the Tower team.”

Fusion hires Gallagher's Simmonds as Managing Partner

Former Gallagher head of corporate Katherine Simmonds has joined Fusion as Managing Partner, a newly created role with global responsibilities at the SME-focused specialist underwriting agency.

Ms Simmonds, who is based in Sydney, will oversee the business in the mergers and acquisitions (M&A) insurance space across Australia, Asia Pacific, the US and Europe.

Fusion co-founder and Executive Partner Killian McDermott says her extensive M&A background and experience growing underwriting and broking businesses will be a boost to the agency.

“She brings highly valued expertise to the company as we prepare to launch new insurtech products and services internationally,” Mr McDermott said.

Before joining Gallagher last year, Ms Simmonds was GM head of corporate, risk & broking at Willis Towers Watson and had previously led Ironshore Australia.

Fusion is a part of Sydney-based Pop Insurance Holdings. The agency launched its M&A business, in partnership with Allianz Global Corporate and Specialty a few years ago, for warranty & indemnity, tax and contingent across the Asia Pacific region.

Mr McDermott says the business is now “very well established” in the regional M&A space, having underwritten about 210 policies in less than three years.

“We believe our success is largely due to the fact we are very focused on highly responsive service levels to meet the demands of M&A transactions,” he told insuranceNEWS.com.au.

For next year, he says the business is looking at a number of SME-related launches including an M&A online marketplace and products.

The business will also press on with expanding its presence in the US, UK and Europe, he said.

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Regulatory & Government

Pressure builds on insurers to stop reimbursing ransomware payments

Two major reports last week criticised the payment of ransoms to cyber criminals, putting pressure on the insurance industry for reimbursing clients under attack.

A study from the Cyber Security Cooperative Research Centre (CSCRC) says coverage for extortion and ransom payments in many cyber policies is problematic, “serving to feed the criminal enterprise of ransomware gangs, especially those that prey on insured organisations”.

“While ransomware payment should not be criminalised, there is merit in moves to ban the payment of ransoms by insurance providers,” the report says.

“While this may be an area where government regulatory intervention is required, individual insurers could choose to exclude these payments from insurance policies and provide greater focus on remediation and business continuity expenses.”

The report also warns that insurance is “not a cyber security silver bullet” and should be part of a package of measures.

“When it comes to cyber insurance, while there are positives, there are also pitfalls and perils,” it says.

“There is potential for organisations holding cyber insurance to be lax in their approach to managing cyber security.”

The CSCRC is a collaboration between industry, government and academia and in 2018 was awarded $50 million in Commonwealth funding over seven years.

The report makes four recommendations: ban insurers from making ransom payments; have the prudential regulator outline expectations on the management of cyber insurance underwriting risks; have insurers develop a best practice checklist for SMEs; and require insurers to work with telecommunications providers, cloud services and software providers to offer bundled cyber security packages.

Also published last week was the Federal Government’s Ransomware Action Plan, which outlines the powers Australia will use to combat ransomware after the nation experienced a 15% rise in attacks reported to the Australian Cyber Security Centre in the past 12 months.

“The Ransomware Action Plan takes a decisive stance – the Australian Government does not condone ransom payments being made to cybercriminals,” Minister for Home Affairs Karen Andrews said.

The Department of Home Affairs says cyber security incidents cost the Australian economy $29 billion annually, or 1.9% of gross domestic product. The threat is increasing in scale, frequency and sophistication and likely to rise as the number of connected devices grows.

Paying ransoms is no guarantee of access to locked systems or sensitive data, Ms Andrews says, and may open the victim up to repeat attacks.

“Any ransom payment, small or large, fuels the ransomware business model, putting other Australians at risk. We need to ensure that Australia remains an unattractive target for criminals and a hostile place for them to operate.”

The plan outlines legislative reform aimed at further criminalising ransomware and ensuring law enforcement can track, seize or freeze ransomware crime proceeds to keep Australia a “hard target” for cybercrime gangs.

The reforms include introducing mandatory ransomware incident reporting to the Australian Government, an offence for all forms of cyber extortion, an aggravated offence for cybercriminals seeking to target critical infrastructure, and modernising legislation to ensure that cybercriminals are held to account for their actions, and law enforcement is able to track and seize or freeze their ill-gotten gains.

See Analysis.

BI uncertainties remain for 'way too long': ASIC

Uncertainty around business interruption cover during the pandemic has persisted for too long and has stemmed from insurers’ inadequate systems and risk management processes, Australian Securities and Investments Commission (ASIC) Deputy Chairman Karen Chester said.

“Policy wording was not updated to refer to current legislation, and it resulted in unnecessary uncertainty for insurers about their risk exposure, and for policyholders about their coverage,” Ms Chester said. “And it has been uncertain for way too long.”

Ms Chester says investment in getting data, systems and internal controls right is essential and overdue amid concern about other problems.

“Put simply, ongoing systems and process under-investment is exponentially increasing your exposure,” she told the Insurance Council of Australia (ICA) Annual Industry Forum.

ASIC has requested that insurers communicate regularly, simply and transparently with policyholders and their brokers throughout the business interruption test case process, with an appeal on the second case now expected next month.

Ms Chester also told the forum that international research on “sludge” metrics has shown the difficulties in comparing products that may be unnecessarily complex, while data offers insurers the potential to make improvements.

“There are lots of bells and whistles that are attached to insurance products that then make comparability next to impossible,” she said.

Ms Chester highlighted a recent Financial Rights Legal Centre (FRLC) paper proposing automatic pre-filling of driving and claims histories in insurance applications.

A pre-filling system exists in the UK and FRLC has urged governments and insurers to look at similar options, potentially facilitated by Consumer Data Right reforms

Ms Chester says in the UK unwitting non-disclosure had affected one in six people, meaning their motor policy then doesn’t apply.

“It has actually become junk insurance, because they have failed to disclose, so that is one really good example of an innovation, a very simple one, that has been suggested by the Financial Rights Legal Centre,” she said.

Less volatility needed in premium cycle: APRA

Insurers should seek to limit pricing cycle volatility and look beyond significant premium increases and withdrawal of cover in responding to market issues, Australian Prudential Regulation Authority (APRA) Deputy Chairman Helen Rowell says.

“Some variation in profitability is to be expected over time, but not the extreme cycles we have seen in some product classes that seem to continually repeat,” she told the Insurance Council of Australia (ICA) Annual Industry Forum.

“There is a need for a different, more innovative approach by insurers to how they design and distribute products, manage claims, and communicate with consumers to help lessen such volatility in the pricing cycle and improve accessibility and affordability for policyholders.”

Ms Rowell, who welcomed ICA’s affordability and availability review, says the insurance sector is in the box-seat to see problems emerging and should be able to respond proactively and at an earlier stage.

Insurers should look to better structure and design products to match cover to consumer expectations and requirements, she said, while noting balances between tailored products and issues of complexity and comparability.

“There are some real tensions and trade-offs that are going to be quite challenging to work through,” she said.

Ms Rowell told the forum that there can also be no repeat of the business interruption (BI) policy wording issues that have arisen during the COVID-19 pandemic.

APRA in July wrote to the 10 most exposed general insurers asking them to review risk management practices in light of the wording issues, and to also identify potential silent cyber exposures.

“BI has been both a setback and a wake-up call for the insurance sector,” Ms Rowell said.

APRA in March and April asked 10 general insurers to pilot a risk culture survey, which contained questions such as “Do people feel safe to speak up?” and “Do their leaders model good risk management behaviours?”.

The regulator said last week it planned to roll out the survey to up to 60 banking, insurance and superannuation entities over the next 12 months, with insurance scheduled for the first quarter.

Treasury hammering out final cyclone pool details

A consultation process is settling the final details for a cyclone reinsurance pool that is on track to take effect next July, Assistant Treasurer Michael Sukkar says.

Mr Sukkar says the Treasury-led process has “landed on a model” that is sustainable and that will deliver significant premium reductions as discussions with key stakeholders continue on a number of decisions.

A Federal election is due to be held by May, but Mr Sukkar says he is focused on making sure, regardless of the election timetable, that the pool will be “in the shape it needs to be” to reduce premiums for decades to come.

“It was always a very ambitious timeframe but my very strong view was that the issue was so acute that it needed to be fast-tracked,” he told the Insurance Council of Australia forum last week. “We have done that, and we will seek to introduce a bill establishing the pool early next year for commencement on 1 July.”

The reinsurance pool, backed by a $10 billion Government guarantee, was announced by Prime Minister Scott Morrison during a trip to northern Queensland ahead of the May budget. Increased spending on mitigation and resilience measures was also included in the budget.

The Northern Australia Insurance Lobby (NAIL) has raised concerns over whether the final design will provide relief for holiday destination properties under arrangements such as “accommodation module” strata.

The policyholder representative group is also concerned cover for businesses may be too restrictive, that marine businesses may miss out and has pointed out that the actual saving generated by the pool will be a key test of it its success.

“We have market failure and it has to be properly addressed,” NAIL Co-Chairman Margaret Shaw said.

Victoria accepts 15 bushfire inquiry recommendations

The Victorian government has accepted all 15 recommendations from the final phase of an independent inquiry into 2019/20 bushfires that devasted large parts of the state’s North East, Gippsland and Alpine regions.

The “Progress and effectiveness of Victoria’s immediate relief and recovery arrangements” report was tabled in Parliament on Thursday after a two-phase inquiry by the Inspector-General for Emergency Management (IGEM).

The Government had already accepted all 17 recommendations from IGEM's Phase One Report, which was released in 2020 and focused on emergency preparedness and response.

The latest recommendations aim to improve system-level aspects of Victoria’s relief and recovery arrangements and generate changes that will result in better outcomes. At the Government’s request, IGEM will report annually on implementation of all agreed recommendations from this inquiry and a 10-year review.

“The Victorian Government supports all 15 recommendations outlined in the Phase Two Report, that will collectively ensure the emergency management sector, local governments and communities are better placed to manage relief and recovery from bushfires and other emergencies,” it said.

Community experiences, highlighted throughout IGEM’s report, show there is further work all response agencies can do to better support locals during and after emergencies.

The Government says it will build on work already underway including making relief a greater priority within the emergency management system.

Creating a strengthened, dedicated recovery entity to work with government departments, agencies and councils to develop a state-wide, all-emergencies response will ensure the sector is well equipped to drive improvements and tackle enduring challenges.

See the report here.

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Life Insurance

FSC white paper sets out way forward for advisers

The Financial Services Council’s (FSC) plan to reform the advice sector, which it says will deliver cost savings of $91 billion over 20 years if implemented, have the backing of other peak bodies.

FSC released its proposed measures last week in a white paper, after launching a consultation in April to explore ways to address the many challenges facing advisers such as increased red tape, a rising cost burden and affordability issues that are driving consumers away from seeking professional guidance.

“Our recommendations will improve the economics of the advice industry, lower the cost of delivering advice to clients and increase the number of Australians who can access advice,” CEO Sally Loane said.

“Current regulations prescribe compliance obligations at every step of the advice process.

“They are an unprecedented driver of cost for financial advisers and consumers, and are past their use-by date.”

A key recommendation in the white paper calls for raising the threshold under which consumers are identified as “retail clients” to those with assets of less than $5 million, up from $2.5 million, and to introduce an inflation-linked index to the threshold.

The white paper also proposes axing the so-called Safe Harbour steps for complying with the Best Interest Duty rule and replacing the “complex” statement of advice (SOA) regime with a “simpler, consumer-focused” letter of advice.

Additionally, the Government should reform or remove the definition of “financial product advice” in section 766B of the Corporations Act and legislate definitions of “personal advice” and “general information”.

Analysis by KPMG shows that if the key reforms in relation to Safe Harbour, letter of advice and simplification of advice categories are carried out, the cost of providing advice would be reduced by almost $2000 per client or 37%.

“Financial advisers are experts at helping consumers make complex financial decisions, and too much of their time is spent completing ‘back office’ compliance requirements,” Ms Loane said.

“Addressing the compliance burden will reduce the time required to complete the advice process from 23.9 hours to under 16.8 hours per client.

“We call on the Government to commit to our plan.”

The Financial Planning Association (FPA) and Association of Financial Advisers (AFA) say they support the white paper’s proposals for the industry.

FPA CEO Dante De Gori says the white paper closely aligns with the peak body’s five-year policy platform roadmap that was launched last year.

“The release of this white paper has demonstrated the FSC’s commitment to joining with us in the discussion of how to put advice delivery back in the hands of professional financial planners and in the reach of all Australian consumers,” he said.

“The financial planning profession will now benefit from a stronger and unified representative voice on the issues most critical to them.”

AFA GM Policy and Professionalism Phil Anderson says the white paper is an important contribution to the ongoing debate about the need to fix the financial advice regulatory regime.

“We particularly welcome the recommendation on the removal of the Safe Harbour steps, the change of an SOA to a letter of advice, and the recommendation that financial advice be tax deductible,” he said.

The Advisers Association also backs the FSC’s recommendations, with CEO Neil Macdonald saying the proposal calling for the separation of product and advice, if adopted, would “represent a giant leap forward” for the industry.

“This would help consumers better understand when they are being given financial advice and when they are merely being supplied with general information by a product provider, for example,” he said.

Synchron Director Don Trapnell says many of the FSC proposals make sense but he is disappointed the white paper did not recognise the need to separate risk advisers from financial planners, especially in relation to education and training.

“Specialist risk advisers provide different services to financial planners,” he said. “It doesn’t make sense for them to hold the same qualifications or have to commit to the same educational program.”

Click here to access the FSC white paper.

Life industry's resilience comes through during pandemic: KPMG

The life industry is showing signs of recovery, demonstrating its resilience in managing the economic upheavals of the pandemic, KPMG said today in a review based on analysis of statistics from the prudential regulator.

The data released in August by the Australian Prudential Regulation Authority (APRA) shows the industry made an overall net profit of $1 billion in the year to June 30, compared with a $1.7 billion loss in the preceding period.

“The past year has seen a period of continued disruption, with the impact and uncertainty of COVID-19 magnifying the challenges of a dynamic and evolving regulatory environment,” KPMG said.

“Despite this, financial results show signs of recovery compared to recent years.”

KPMG says the improved results have been achieved while the industry has had to prepare for an array of regulatory changes that commenced this year, including a few key reforms this month such as the design and distribution obligations regime and new breach reporting rules.

Other changes that insurers have had to cope with include the industry revamp of the individual disability income insurance (DII) product.

“The 2020/21 year was the first full year of the pandemic for the life sector, and while the long-term impacts are still uncertain, the immediate results were not as bad as some had feared,” KPMG Insurance Sector Lead David Kells said.

“There was an expectation that death claims would initially increase and then begin to fall as the pandemic extended and restrictions continued, due to reduced levels of accidents and respiratory related deaths.

“However lump sum claims experience appears to have been relatively stable… The unprecedented actions by government to maintain jobs and support companies potentially mitigated the cost to the insurance industry.”

KPMG says despite the improved financial results observed, the recent period of change and disruption in the market is expected to continue over the coming year.

The long-term claims impact of COVID on individual DII and other risk products is still highly uncertain, the consultancy said.

“Historically impacts on employment can take up to 18 months to translate into increased claims,” KPMG said.

“The impact on mental health in the community continues to be high, but it is unclear whether it also [is] high in the insured population.”

Click here for more from the KPMG review.

Life insurers seek to ease policyholders' COVID jab concerns

Seven life insurance providers with more than 14 million customers have launched an initiative in support of the national COVID-19 vaccination program.

The “We Have You Covered” program aims to reassure Australians that getting jabbed will not affect their existing cover, access to getting a policy in future or making a claim.

It also says that any rare serious side effects from approved COVID vaccines that meet the terms and benefits provided under a customer’s policy will be covered.

“Through this initiative, [insurers] are cooperating to provide confidence to customers and the community around approved COVID-19 vaccines and their life insurance products,” the insurers say in a joint statement.

The insurers behind the initiative are AIA Australia, ClearView, MetLife, MLC Life Insurance, Resolution Life, TAL and Zurich.

A website, www.wehaveyoucovered.com.au, is available as an educational resource for the community.

“Collectively we felt it was important to provide anyone who was unsure about the impact of being vaccinated on their life insurance cover or ability to access cover in the future, confidence that as an industry, we have them covered,” TAL Group CEO and MD Brett Clark said.

The insurers are also co-funding a multi-channel media campaign to reach out to as many Australians as possible.

“Where customers have questions about the impact COVID vaccinations could have on their policy, we feel now is an important time to set the record straight, particularly as we want to encourage as many Australians to get vaccinated as possible,” MLC Life Insurance CEO Rodney Cook said.

ASIC continues with COVID support for advisers

Advisers can continue to provide clients with a record of advice instead of a statement of advice until April 15 next year, the Australian Securities and Investments Commission (ASIC) says.

ASIC announced last week that the temporary measure, first introduced in April last year to help the industry during the pandemic, will be extended again. It was to have ended on Friday.

“ASIC decided to extend this relief after industry consultation identified that the extension would be helpful for financial advisers in the current circumstances,” the corporate regulator said.

The regulator says it has also reintroduced the relief measure that allows advisers additional time to give clients a statement of advice. Advisers now have up to 20 business days instead of five to provide the documents. The original measure expired in April this year.

ASIC says the move is in response to industry feedback that there is an increased need for time-critical advice due to the ongoing COVID-19 restrictions.

It says it will continue to monitor the appropriateness of these temporary relief measures as circumstances change and may consider ending the relief before the six-month period if appropriate.

Sufficient notice will be given to the industry before any early repeal is implemented, ASIC said.

FSC bans occupational exclusions in default group life policies

The Financial Services Council (FSC) says it aims to introduce an enforceable standard banning occupational exclusions in default group life insurance in superannuation by January 2023.

The standard will apply to both FSC superannuation and life insurance members.

FSC announced the move last week, following consultation it launched in August amid concerns that recently passed superannuation reforms would leave workers in high-risk jobs without critical insurance protections.

A key thrust of the Your Future Your Super involves “stapling” workers to a single superannuation account, a move the Government says will save Australians from paying unnecessary fees and group premiums.

But consumer groups and actuaries say the change will affect vital insurance coverage for super members in hazardous lines of work.

FSC says it will soon finalise the standard with the target date of requiring trustees to remove their occupational exclusions and restrictive disability definitions for members in high-risk occupations by January 1 2023.

The standard is subject to further consultation with regulators, including the Australian Competition and Consumer Commission.

FSC says the twelve-month transition period is designed to enable trustees and life insurers to re-negotiate existing group life policies that are currently in place, and for trustees to engage with members.

The enforceable standard will apply to all default cover for life insurance, total and permanent disability and income protection insurance in MySuper and Choice products.

It will also prohibit the use of exclusions and restrictive disability definitions because a member is employed in a high-risk occupation.

“The FSC and its members recognise that Australians must be able to claim on the default cover that they have been paying for through their superannuation,” the peak body said.

“The FSC will not, however, prevent trustees from choosing not to offer cover to a new member based on their occupation when the member joins the fund. In these circumstances a member will not be charged insurance premiums.

“The standard will also not apply to individually underwritten life insurance in superannuation.”

Treasury is currently undertaking a review of occupational exclusions in default group insurance offered by MySuper products.

Click here for submissions to the FSC consultation.

FPA names contenders for annual awards

The Financial Planning Association (FPA) has shortlisted the finalists in the running for its annual awards recognising outstanding performance across six categories.

FPA says the awards, now in their ninth year, also celebrate the individuals and businesses who go above and beyond to deliver outstanding results for clients.

“The 20 finalists have been chosen because they have demonstrated an exceptional commitment to professional standards and made a positive difference to the lives of clients and their local community,” FPA CEO Dante De Gori said.

“The judges have been very impressed by the high calibre of award entries this year and look forward to announcing the award winners in November.”

Here are the finalists in six categories:

FPA Certified Financial Planner Professional of the Year - Kathryn Creasy (Capital Partners Private Wealth Advisers, WA), Matthew Meehan (Lifesolver Financial, NSW), Naomi Mee-Martino (Bastion Financial Group, WA), Mark O’Flynn (Tupicoffs, Queensland)

FPA Professional Practice of the Year - Alman Partners (Queensland), APT Wealth (NSW), Enlightened Financial Solutions (Queensland)

FPA Financial Planner AFP of the Year - Leanne Bielik (Wealth Pty Ltd, Victoria), Michelle Maguire (MLC Advise, NSW), Craig Phillips (Phillips Wealth Partners, ACT)

FPA Advice Innovation - Josh Pennell (Prosper Advisory Financial Services, Victoria), Daniel Thompson (Finnacle, NSW)

FPA Paraplanner of the Year - Andrew Mann (Tupicoffs, Queensland), Elora Shine (Cooper Wealth Management, NSW)

FPA University Student of the Year - Nicole Gardner (Kaplan Professional, Victoria), Martin Jack (Griffith University, Queensland), Matthew Kanizay (Deakin University, Victoria), Melina Pisani (Deakin University, Victoria), Renae Poole (Griffith University, Queensland), Aaron Skow (Kaplan Professional, NSW)

Challenger affirms earnings outlook on strong life sales

Investment management firm Challenger says the business has started this financial year on a strong note, boosted by a double-digit growth in life sales.

Total life sales for the three months to September rose 32% to $2.1 billion from a year earlier, demonstrating the success of its diversification strategy, the business says in a first quarter update.

Other life sales, which represents the Challenger Index Plus product, performed particularly strongly and increased by 149% to $856 million, benefiting from new clients and retention of maturities.

“The life business performed well, with book growth of 3.4%,” MD and CEO Richard Howes said.

“Strong quarterly sales growth highlights the success of our diversification strategy and reflects our focus on building relationships with institutional clients.

“Continuing to innovate has been a priority and we recently launched our new market-linked annuity for customers who seek the benefits of lifetime income, while maintaining exposure to investment markets.

“Benefiting from rigorous market testing, this option will form an attractive complement to our existing lifetime annuity offering.”

Challenger says it expects to achieve strong profit growth this financial year, reaffirming the business will deliver $430-480 million in normalised net profit before tax for the 12 months to June 30.

In the previous 2020/21 financial year, the business achieved $396 million in overall normalised pre-tax profit.

Victorian financial planner joins ASVW network

Financial planning practice Sofcorp Wealth Financial Advisors has joined Melbourne-based adviser group ASVW Financial Services.

ASVW says the financial planning practice, headquartered in regional Victoria, transferred licensees and will operate under its Australian Financial Services licence.

Sofcorp Partner Tracey Sofra says ASVW has the framework, resources and leadership team to support Sofcorp’s growth objectives.

“We wanted a true industry partner with innovation, passion, vision and sense of purpose at its core supported by a leadership team of experienced industry professionals and ASVW ticked all these boxes,” she said.

“I look forward to working with [them] to grasp and capitalise on the many opportunities that the group and new era will provide,” she said.

Ms Sofra is also the founder and CEO of WOW Women, an organisation dedicated to women’s economic empowerment.

“Since its inception, Sofcorp has been a tremendous advisory business and we’re both excited and proud to have them as a valued member of our national network,” ASVW Executive Director Joe Botte said.

“Our objective is to assist and coach Sofcorp achieve its long-term strategic objectives and support [their] extraordinary endeavours to assist women fulfil their personal, professional and financial aspirations.”

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The Professional

Aon Insights seminar talks cyber, climate challenges

Broker Aon’s annual Insights Series Pacific starts tomorrow, featuring more than 25 speakers who will discuss key challenges facing businesses such as cyber security and climate change.

Like last year, the two-day event will take place in a virtual format.

Aon Australia CEO Jennifer Richards will open the conference, alongside CEO Greg Case and Chief Commercial Officer for Enterprise Clients Jason Disborough.

“The challenges facing businesses are complex and continue to evolve, and when overlaid in the context of the ongoing COVID-19 pandemic, this means businesses need analysis and insight now more than ever,” Ms Richards said.

“Our Aon Insights Series’ expert panellists will provide new strategies and real life case studies to help leaders navigate through this increasingly complex and interconnected environment.”

Click here to register.

Registration opens for ARPC terrorism risk webinar

The Australian Reinsurance Pool Corporation (ARPC) will hold its annual Terrorism Risk and Insurance webinar on November 10.

Systemic risks of terrorism and biosecurity will be discussed during the two-hour event, which runs from 3-5pm (AEDT).

University of Queensland Business School’s Paula Jarzabkowski, an expert in insurance and reinsurance markets, will touch on terrorism protection gap entities (PGEs) and why they differ from extreme weather and earthquake PGEs.

She will discuss why the knowledge and modelling challenges that continue to beset terrorism risk present different challenges to other forms of disaster.

Derek Bopping, a former deputy counter-terrorism coordinator for the Australian government, will talk about the Australian terrorism landscape.

Other speakers include ARPC CEO Christopher Wallace and specialist risk consultancy Control Risks Partner Cory Davie.

Click here for registration details.

Turks celebrates 40th birthday, launches new look

Law firm Turks is celebrating 40 years of business, marking the milestone with a new-look brand and logo which now abbreviates TurksLegal to Turks.

Turks specialises in delivering practical, commercial and cost-effective solutions in the insurance, commercial and banking sectors.

“As we continue to look to the future and evolve as a firm, we have also taken the opportunity to revisit our brand and with that, we are proud to launch our new look and feel,” Turks said.

The firm has offices in Sydney, Melbourne, Brisbane and Newcastle and employs more than 190 staff, with a diverse team of lawyers, partners, special counsel and support staff. Its clients include Australia’s leading insurance and financial institutions, workers’ compensation scheme agents, employers and government departments.

Manheim names national account manager

Vehicle auctioneer Manheim has appointed Jess Sherlock as National Account Manager in its Australia and New Zealand Salvage division.

She will work with key insurance and industry clients across the country.

Manheim says Ms Sherlock, who has more than 20 years’ experience in various roles with Suncorp Group and its AAMI brand, will be a boost to the business.

“The level of professionalism and industry knowledge Jess brings to our organisation will help support us as we continue to elevate our performance and customer experience across the business,” Head of Salvage Jonothan Ellerton said.

Liberty's Linh Nguyen wins Young Insurance Marketer award

Liberty Specialty Markets‘ Linh Nguyen has been named this year’s Young Insurance Marketer of the Year.

The award, from The Insurance Marketers Group, recognises marketing talent working in the insurance industry and individuals who demonstrated stand-out marketing flair in the past year.

Dual Asset Underwriting Marketing Manager Kate Rutherford was Highly Commended by the judges and received a training bursary provided by the Chartered Insurance Institute.

The shortlisted candidates – which included CFC Marketing executive Cyber Evie Beentjes, Markel UK Digital Marketing Executive Jessica Williams and Beazley Marketing Campaign Manager Sarah Griffiths – congregated with dozens of insurance industry supporters in the Old Library at Lloyd's of London to celebrate the best in the business.

"Our five finalists were incredibly proud and supportive of each other, all acknowledging each other's achievements during what was such a challenging year to be working in marketing and communications,” IMG co-founder Michelle Leach said.

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Insurtech

Australian tech budget shortfall 'most pronounced'

Australian firms have a backlog of digital transformation projects which unsustainably dwarf IT budgets, new research finds.

IT spending across all industry sectors in Australia will grow 3.6% to more than $95.8 billion this year, following a 2.8% decline in 2020, the report from The Economist Intelligence Unit, sponsored by Appian, says.

“The discrepancy between budget and demand is much more pronounced in Australia than in the rest of the world,” the report, based on a survey of more than 1000 executives at major corporations, including insurers, said.

IAG COO Neil Morgan says the successful work of IT teams during the past year has created a new expectation about the role technology can play in business transformation. Boards have been impressed by how CIOs have used cloud and collaborative technologies to keep businesses operational in extreme circumstances – and now they want more.

“The behavioural change we’ve seen, and the speed of those behavioural changes, has created this additional level of demand. We’ve definitely seen uptake of digital services accelerate and that has created this momentum around change,” Mr Morgan said.

Four in five Australian business leaders believed their organisation needs to improve IT infrastructure and applications in order to better adapt to external change. Data accessibility, however, was a major hurdle, with 71% of Australian business leaders reporting cancelling a digital business project due to lack of the right data, compared with the global average of 54%.

Mr Morgan says data has to be maintained, nurtured and invested in and this needs to be a cross-business endeavour. IAG has a data and IP governance group which ensures everyone makes balanced and ethical decisions on the sourcing and sharing of data.

He says having technology leaders as part of leadership teams means ideas become more executable.

“Some of the delivery norms get pushed, [and] cycle times on figuring out feasibility and decision-making get crushed and become much faster.”

IAG’s collaborative approach makes it easier to explore data-led initiatives, from artificial intelligence (AI) to robotic process automation and machine learning, he says, pointing to predictive total-loss technologies, which combine AI and data to speed-up insurance claims for customers.

“We can take two and a half weeks out of the end-to-end process when a car’s been written off in an accident,” he said. “It’s about trying to find those opportunities to combine process automation excellence with AI and data that turn up in material outcomes for customers.”

The survey found cloud computing, data science and analytics, and the Internet of Things (IoT) are seen as the technologies that will be most important during the next 12 months.

Cover-More CIO Nicki Doble says the travel insurer uses global development teams in the US, India, Australia and the Republic of Ireland, and this – along with remote working – makes it much easier to source global technical talent.

“It might mean going to a different area of the business that might not necessarily use data, showing them the tools and getting them to see the pulling power,” Ms Doble said.

Blue Zebra, Precision Autonomy tie-up targets growing drone market

Insurtechs Blue Zebra and Precision Autonomy have joined forces to provide commercial drone insurance through the broking channel, in response to growing demand as usage of the remotely piloted devices soars.

Under the partnership announced last week, Blue Zebra will provide its broking partners with access to Precision Autonomy’s quoting and binding platform for drone offerings.

The access is available on the Zebra Lounge portal, which is only available to brokers who have a business agreement with the underwriting agency.

“We are always on the lookout for ways to expand the options for our intermediaries available via our platform and this new partnership with Precision Autonomy is another exciting step for us and our broker partners in what is a quickly expanding market,” MD Colin Fagen said.

Precision Autonomy focuses on solutions for commercial drones through real-time risk pricing and has developed an algorithm-driven insurance platform for drones.

CEO and co-founder Mark Halverson says the business seeks to increase brokers’ understanding of drone insurance and how to arrange appropriate covers for clients.

“We know that better understanding and risk management will accelerate the adoption of drones across all industries, and [Blue Zebra’s] deep relationships in the broker community allow that to happen rapidly,” he told insuranceNEWS.com.au.

Head of Underwriting Simon Hooper says the partnership with Blue Zebra will help the business drive distribution of commercial drone insurance products into the broader broker market in Australia.

He told insuranceNEWS.com.au Precision Autonomy’s drone underwriting business has grown by 89% and 119% in Australia and New Zealand respectively this year.

“With a stabilisation of regulations for drone operators, we would expect to see significantly more investment in drone operations over the next five years with the technology moving from an innovative solution to be more ingrained in day-to-day operations,” Mr Hooper said.

“The three primary industries [we are] seeing significant growth in are agriculture, construction and energy.

“Each one of these industries has a unique use case for drones.”

He says the pandemic has accelerated the adoption of drones, particularly for construction sites.

HDI Global Specialty is the capacity provider for Precision Autonomy’s drone products.

Insurtech Open takes out 2021 Finnie award

Hollard-backed Open Insurance has won this year’s Excellence in Insurtech category, which is sponsored by IAG Firemark Ventures, at the FinTech Australia Finnie Awards.

Co-founder and CEO Jonathan Buck says the Open team is excited and grateful to be recognised among some “stellar” insurtech contenders.

The past year has been significant for the business as it has grown the team in Australia, expanded into New Zealand and it is now “extremely excited” about opening in the UK next year.

“Everyone has worked incredibly hard this year, across the entire team, and this award is fantastic recognition for all of us,” Mr Buck said. “Thank you for awarding us and for believing in our mission to provide the fastest insurance, at the best price, for the world.”

Sydney-based Open was founded in 2016 by Open CEO Jason Wilby and Mr Buck, who started Huddle Insurance together. It administers two general insurance products for health insurer ahm which are underwritten by Hollard.

FinTech Australia is a national association for the Australian FinTech Startup community and works with government, industry and the local fintech community to create a supportive environment and partner ecosystem in Australia and abroad.

There were more than 288 entries for a total of 23 awards, including two People’s Choice categories.

“The results of this year's awards demonstrate the growth over the last 12 months and show just how far we have come as an industry,” FinTech Australia CEO Rebecca Schot-Guppy said.

“This year has been more competitive than ever before, reflecting again the maturity of the industry. This sets the scene for the sector reaching new heights in 2022, as we find new normal in a post-COVID world.”

Click here for a full list of winners.

Fraud-prevention regtech FrankieOne raises $20 million

Melbourne-based FrankieOne, a regtech platform that connects insurers and banks to hundreds of global identity and fraud-monitoring providers, has successfully closed an oversubscribed $20 million round to fund its offshore expansion.

FrankieOne says it can save insurers millions in regulatory fines and IT costs and protects customers from fraud. Afterpay and Westpac are among its customers.

The company has offices in Melbourne, Sydney and Seattle and the funds raised will further its international footprint, which already connects more than 350 third-party providers and data-sources across 46 countries. FrankieOne will also offer transaction monitoring for both fiat and cryptocurrencies later this year.

“Our aim is to connect every third-party identity and fraud-prevention provider from across the world into our single platform,” it says.

CEO Simon Costello and Aaron Chipper co-founded the startup in 2017 after finding the customer onboarding process “disjointed” globally. International sales now make up around half of revenue after adding 80 new clients in 18 months, and FrankieOne has doubled its headcount in three months and appointed former McKinsey & Co associate partner Warren Oakes as COO. It plans to hire a sales and marketing team.

Mr Costello says the focus of financial services providers on compliance has been at the detriment of the customer experience.

“Our mission is to create a platform that provides fintechs with the convenience of consuming the world’s identity verification and fraud-prevention services via a single unified API. This allows fintechs to “switch on” geographies and services as they need, enabling them to focus on innovation and their core business,” he said.

The funding round was led by venture capital firms AirTree Ventures and Greycroft.

AirTree Partner John Henderson says digital identity verification is a board-level issue for insurers and banks and current manual systems are “both bespoke and broken” and the “world needs a better solution”.

Greycroft Partner Will Szczerbiak says identity verification and anti-fraud checks can force companies to turn away potentially great customers because of a reliance on inadequate systems.

“FrankieOne’s APIs extracts the complexity away, allowing its clients to onboard more great customers while delivering a delightful end user experience,” he said.

Landlord cover specialist PIP partners with Insurx

Landlord insurance specialist Property Insurance Plus (PIP) has partnered with Insurx as its claims third party administrator.

Insurx, the third-party administration division of global claims solutions provider Claim Central Consolidated, was granted an Australian Financial Services Licence to provide claims handling and settling services in July. Insurx, underpinned by Wilbur’s technology, provides modular products in Australia and New Zealand.

PIP CEO Nathan Jameson says the Insurx platform will give customers access to an end-to-end claims service, with full visibility over the process and progress. PIP embraces new technology to speed up claims processing and ensure transparency, he says.

Demand for landlord insurance is increasing, and more competitors are entering the market, after a jump in housing activity and values. Insurx says by using its technology, customers can lodge claims, complete the assessment process and review the status of their claim at any time online.

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International

Reinsurers cushioned even as cat losses try budgets: S&P

Very strong capital adequacy at global reinsurers continues to provide a cushion even as 2021 is likely to be the fifth year in a row of natural catastrophe losses at or above budget expectations, S&P Global Ratings says, including more than $US20 billion ($26.94 billion) of COVID-related insured losses in the past 18 months.

S&P says if a never-seen 1-in-100-year event hits, causing losses in excess of $US250 billion ($337 billion) across the entire insurance industry, 13 of the Top 21 global reinsurers would maintain a buffer at their current S&P Global Ratings capital adequacy level.

“The sector remains resilient to extreme events because of its robust capital,” the ratings agency says, though earnings volatility could be higher as alternative capital to retrocede peak perils has increased in cost.

Improved pricing has led to a divergence in reinsurer strategies, with some increasing their property catastrophe risk appetite and others maintaining a defensive stance.

S&P expects property catastrophe reinsurance pricing during the 2022 renewals to rise in reaction to the 2021 elevated losses.

“Overall, reinsurance pricing has been hardening over the past couple of years, but at a decelerating rate,” it said. “While some reinsurers are increasing their market shares, taking on increased catastrophe risk and leveraging their alternative capital vehicles, others are reducing their risk appetite for natural catastrophe, given the inherent volatility of this line of business. We expect this divide will likely widen in the upcoming renewals in 2022.”

The top 21 reinsurers budgeted about $US13 billion ($16.84 billion) for natural catastrophe losses in 2021 and S&P expects further rate hardening going forward and has seen “no sign” global reinsurers are ceding less of their exposure.

Last year, the top 21 budgeted losses of about $US12.5 billion ($16.84 billion), representing about 6 percentage points of the combined ratio, and picked up about 15% of the industry's total insured catastrophe losses, which stood at a high $US81 billion ($109 billion).

Secondary perils like convective storms or wildfires, which were exceptionally frequent in 2020, generally produce small to midsize losses and are typically retained by the primary insurance market. Aggregate losses were therefore broadly in line with their budgeted catastrophe losses for 2020.

“This marked the fourth consecutive year in which the top 21 global reinsurers' annual budget has been consumed,” S&P said. “It has become more complicated to assess what a normal natural catastrophe year would look like.

“Reinsurers can hope that losses would normalise at some point, but for now, they are seeing unrewarded earnings and balance sheet volatility. It is not yet clear how long they will accept such an unpropitious situation.”

US windstorm continues to represent the biggest peak peril, though the relative contribution of this peril fell by 3 percentage points on average over the past two years.

UK business interruption COVID payments climbing

Final settlements for business interruption claims related to the COVID-19 pandemic in the UK have reached £766.6 million ($1.4 billion), the Financial Conduct Authority (FCA) says in its monthly update.

The total value of interim/initial payments made in the case of 4403 claims that are yet to be finalised is £329.4 million ($609.4 million).

The update shows that 28,866 policyholders out of the 42,222 who have had claims accepted, have received at least an interim payment.

FCA is monitoring the payments in the wake of the Supreme Court test case appeal decision handed down on January 15 that went significantly in favour of policyholders.

The regulator has previously urged insurers to pay valid claims in full as soon as possible to support customers.

September a reminder to insurers of geologic, seismic risks: Aon

A volcano in Spain and earthquakes in Australia and Greece in September are reminders to the insurance industry of geologic and seismic risks, Aon’s latest Global Catastrophe Recap report says.

The Cumbre Vieja volcano on La Palma Island in the Canary Islands will likely result in hundreds of millions of euros in economic losses after lava flows destroyed nearly 1000 homes and large areas of infrastructure and roads. Thousands of residents were evacuated.

Aon also noted a magnitude-5.9 earthquake rattled Victoria on September 22, causing minor but widespread damage to homes and businesses, and another strong earthquake hit the Greek island of Crete on September 27 and rendered more than 3000 homes uninhabitable.

“Weather and climate perils often generate most headlines but geologic or seismic risks remain worthy of heightened focus,” senior catastrophe analyst Michal Lörinc said.

The ongoing eruption of the Cumbre Vieja volcano “reminds the insurance industry of the challenges posed by non-modelled perils,” he said.

In the US, Hurricane Nicholas caused flooding across parts of Texas and Louisiana and clocked up more than $US1 billion ($1.35 billion) in losses, though less than half was expected to be covered by insurance. It made landfall on September 14 as a Category 1 storm and days of heavy rainfall associated with the slow-moving cyclone prompted notable flooding.

Also in the US, the Fawn Fire was ignited on September 22 and burned thousands of hectares in Shasta County, California. At least 185 structures were destroyed. For the season, California wildfires have left more than 3600 structures damaged or destroyed with a multi-billion-dollar economic cost expected.

Severe weather left damage across areas of Wisconsin, Illinois, Indiana and Michigan. Large hail and straight-line winds caused most of the damage. Total economic losses were estimated at $US315 million ($424.2 million) and most was insured.

In China, the seasonal death toll from flood-related incidents neared 400, with a combined economic cost approaching $US30 billion ($40.4 billion).

RIMS CEO to retire after convention next year

Risk and Insurance Management Society (RIMS) CEO Mary Roth will retire after the US-based not-for-profit body holds its annual conference and exhibition in April next year in San Francisco.

RIMS board of directors and a specially formed search committee will work with executive search firm Reynolds Associates to recruit the successor to Ms Roth, who has held the role for the last 17 years.

The process for making this announcement began in 2019 but was held off due to the pandemic.

“The best way RIMS Board can thank [Ms Roth] for all that she has given to this society is to ensure that this transition process is carried out flawlessly and that we position RIMS for continued success for years to come,” RIMS 2021 President Ellen Dunkin said.

“On a personal note, I would like to congratulate [her] and wish her all the best in this next chapter of her life.”

New guide showcases insurer role in net zero

A new UK publication highlights how insurance is crucial to achieving net zero carbon emissions as the industry supports green innovation across multiple sectors and geographies.

This includes insurance coverages across the hydrogen supply chain, solar energy, wind power, and carbon capture, together with parametric and microinsurance schemes protecting coffee farmers in Nicaragua and cyclones in Australia.

The Lloyd’s-chaired Sustainable Markets Initiative (SMI) Insurance Taskforce, launched in July with Prince Charles, published the Sustainable Products and Services Showcase to demonstrate the breadth and depth of support insurance provides across many industries as they transition to a sustainable future.

The Taskforce has committed to expanding coverage to support growth of the greener energy sector, such as facilitating new insurance products for electric vehicles.

“From providing solutions that support the scaling up of hydrogen production and supply, through to the critical risk management solutions needed for offshore wind and carbon capture, the SMI Taskforce is committed to supporting the urgent changes needed to achieve net zero by 2050,” Lloyd’s Chair Bruce Carnegie-Brown said.

With substantial financial resources, the global insurance industry is at the forefront of climate and transition risk mitigation and adaptation. Its ability to both insure and invest will help unlock and overcome barriers, and the Taskforce has developed a set of proposals being put before governments and regulators to further enable those activities.

AIG President and CEO Peter Zaffino says the insurance industry has been a catalyst for progress as it relates to sustainability advancements, renewable energy expansion and responsible economic growth.

“With our scale, deep knowledge and risk mitigation expertise, our shared commitment helps future-proof communities by addressing societal and environmental factors while enabling economic progress and supporting our clients as they develop transition plans to operate more sustainably.”

Taskforce members will soon be launching two new products for an even greater breadth of protection across climate-positive activities and initiatives.

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Analysis

To pay or not to pay? Ransomware blame game ramps up

Insurers can be an easy target when things go wrong – and responses to the current ransomware epidemic illustrate the point perfectly.

Ransomware attacks have swelled, in number and size, and last week pressure was building on insurers for reimbursing ransomware payments.

Having insurance cover makes it easier for attacked businesses to pay up, and paying ransoms feeds the problem – so the logic goes. Giving money to criminal gangs is never a good thing, so insurers should stop doing it.

Is it really that simple? Industry experts suggest not – for a variety of reasons which we’ll detail later.

But last week a report from the government-funded Cyber Security Cooperative Research Centre (CSCRC) called for a ban on insurers “making ransom or extortion payments”.

The report cited “evidence from overseas” showing that cyber crooks will find a list of insured businesses and work through them one-by-one, demanding the exact amount covered by the insurance.

Whether this has ever happened in Australia is not made clear.

“Many cyber insurance policies offer explicit coverage for extortion and ransom payments,” the report says.

“This is problematic, serving to feed the criminal enterprise of ransomware gangs, especially those that prey on insured organisations.

“While ransomware payment should not be criminalised, there is merit in moves to ban the payment of ransoms by insurance providers.”

The report also recommends that a cyber checklist be provided to SMEs, and suggests that holding cyber insurance can lead to complacency on security.

The CSCRC’s report was followed a day later by the Commonwealth Government’s Ransomware Action Plan, which flags a 15% increase in attacks in the last year.

“The Australian Government does not condone ransom payments being made to cybercriminals,” Home Affairs Minister Karen Andrews says in the plan’s introduction.

“Any ransom payment, small or large, fuels the ransomware business model, putting other Australians at risk.”

The plan doesn’t mention insurers – but it does pledge to introduce mandatory ransomware incident reporting, and a stand-alone offence for all forms of cyber extortion.

The Insurance Council of Australia says it supports measures which help businesses improve cyber security, such as cyber-risk health checks, and also backs the reporting of ransomware payments.

It says coverage provided by insurers for ransomware “varies across industry in line with each insurer’s risk appetite”, but leaves the door open for change.

“Such products will continue to evolve in line with community expectations and commercial considerations,” a spokeswoman told insuranceNEWS.com.au.

Brokers and underwriting agencies which specialise in cyber cover have been more forthright.

Marsh points out only 15-20% of businesses globally purchase cyber cover, so to say insurance fuels ransomware is “not accurate”.

There’s also a subtle but important point to make that it isn’t insurers that pay ransoms, or decide to pay ransoms – it’s clients.

“Ransomware attacks occur because hackers are very successful at what they do and enough businesses pay them to make it profitable for the criminals to continue,” Marsh Head of Cyber, Pacific, Kelly Butler told insuranceNEWS.com.au.

Rather than instilling complacency or a willingness to pay, having insurance “gives the client the best possible chance of not [paying] the ransom demand”.

Troy Filipcevic, CEO and Founder of cyber specialist underwriting agency Emergence, agrees that ransomware attacks are spiralling but says “the notion that cyber insurance and the coverage of ransom payments has exacerbated this type of attack is untrue”.

“The narrow focus purely on ransomware payments, in my opinion is a simple view to a complex problem,” he tells insuranceNEWS.com.au.

“The payment of ransoms only looks at part of the problem and doesn’t consider the broader context of what the impact of a cyberattack has on a business.

“Cyber insurance policies typically cover more than ransoms, including cyber event response costs that include digital forensics, legal help, notification costs and PR costs to name but a few. Business interruption, and reputational damage and potential third party claims are all aspects of a cyberattack that could stem from a ransomware event.”

Mr Filipcevic says in reality only a small percentage of ransom demands are paid.

“If the business has good backups, strong incident response plans and responds swiftly the business can often deal with the cyber threat without paying the ransom.

“My view is that cyber insurance and, where required, the payment of ransoms, is a critical piece of the response and resilience of the business to pick themselves up and get back to business in a timely manner.”

Lawyers are also sceptical of efforts to solve a complex problem with overly simple solutions.

Wotton + Kearney Partner Kieran Doyle argues that banning insurers from covering ransom payments is not the answer to “an ever growing threat”.

“It does not follow that the existence of an insurance policy itself will cause an insured to pay a ransom,” Mr Doyle says.

“In our experience many businesses, particularly SMEs, are simply focused on making decisions that will keep them afloat – regardless of who is picking up the bill.”

Insurers need to be sensitive to an insured’s needs in a crisis, he says.

“The path is open to insurers to exclude ransom payments cover from cyber insurance policies. However, such terms are unlikely to be very attractive to brokers and insureds in the current climate and [are] unlikely to have the desired effect of curbing the rise in ransomware attacks.

“Instead, future reform can be focused on two priorities – identifying and prosecuting cybercriminals, and incentivising businesses to be better prepared for ransomware and other cyber incidents.”

Solving the problem won’t just come down to what cover insurers are, or are not, offering.

That would be too easy.

Tackling ransomware will also require hard work from businesses, governments and law enforcement agencies to mitigate the risk and drive down the number of attacks.