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Melbourne lockdown: industry fears claims impact

The industry is pressing the Victorian Government to include in its business guidance a definition of critical insurance services that can still be provided during the current stage four lockdown.

The Insurance Council of Australia (ICA) has been engaged in talks with the Andrews Government since last week to ensure essential insurance-related work can still go on during the six-week lockdown.

It wants the definition in the government guidance to refer to the provision of insurance, claims handling and repair services, claims settlements and payments, customer support services, operational, reporting, communications, monitoring, maintenance, corporate, support, ancillary and other functions, and support for vulnerable customers and staff.

ICA spokesman Campbell Fuller says having the definition will mean “essential insurance-related work can be undertaken in the best interests of Victorian households and businesses”.

ICA said last week key services such as complaints handling, customer assistance and claims payments would continue to be provided as it held talks with the Government to “clarify some aspects” of restrictions on business activities.

The government addendum of an approved list of financial products and services includes services to customers in hardship, vulnerable customers, call centres for customer transaction handling, enquiries and complaints. These operations, if provided onsite, must be conducted according to a COVID-safe plan.

Mr Fuller says the lack of clarity has given rise to fears claims would not be assessed, potentially exposing insurers to breaches of their disclosure requirements.

“It doesn’t provide them enough certainty about a much broader range of insurance activities that the industry regards as essential and has been able to provide nationally up to this point,” Mr Fuller told insuranceNEWS.com.au.

These include things like sending insurance assessors out to examine damage so that repair and rebuilding can proceed.

“The other concern expressed by insurers is a risk of breaching disclosure requirements and the Insurance Contracts Act if they’re unable to provide these services,” he said. “If something is in the product disclosure statement and the insurer is unable to fulfil the contract they risk a legal breach.”

Melbourne-based Claims service provider Proclaim’s MD Jon Broome says his loss adjusters are attending to urgent claim situations with permits from employers.

“There is also provision to attend if a business is operating as essential and repairs are required, so we are comfortable we can navigate around the claims in the next few weeks,” he told insuranceNEWS.com.au today.

Severe rainfall, flooding hits NSW coast

NSW coastal regions have been hit by torrential rainfall, flooding similar to levels three decades ago and power outages as a severe weather system has moved northward.

The NSW State Emergency Service says it has received 1600 calls for help since Friday, including 800 overnight and involving 37 flood rescues. About 700 of the calls were on the South Coast and 550 in Greater Sydney.

Flooding similar to an event in June 1991 occurred along the Shoalhaven River at Nowra and Terara, the SES says. Levels are falling again this afternoon.

Bureau of Meteorology figures show rain totals over the South Coast and Illawarra in the past few days include falls of 373mm at Nowra.

A severe weather warning is in place today for a region extending from Ulladulla to Port Macquarie.

“A trough along the NSW coast, together with multiple low centres within the trough, [is] bringing increased winds and surf,” the bureau says.

The Insurance Council of Australia says insurers have received only a small number of claims and are standing by to assist customers.

SME Ombudsman’s inquiry response ‘overwhelming’

The Small Business and Family Enterprise Ombudsman Kate Carnell says the public response to an insurance inquiry announced by her office two weeks ago has been “overwhelming”.

The inquiry has received 264 business responses to an online survey as of this morning.

“While we are only in the early stages of the inquiry, it is clear the small business community supports the work we are doing in this area,” Ms Carnell said.

She called the inquiry in response to complaints about policy denials and soaring prices, and will look at issues including exclusions and the fitness for purpose of market offerings.

“I’m particularly concerned about a number of cases where small businesses with current insurance policies have been subjected to major changes that have reduced their coverage without their consent, and with no refund of premiums,” Ms Carnell says.

“Our inquiry will look at this in more detail and consider if these practices amount to unfair contract terms.”

The inquiry has called for businesses to complete an online survey by August 30 and says industry stakeholders are welcome to send submissions to inquiries@asbfeo.gov.au by the end of next week.

A final report is expected to be released in December.

NZ premiums to grow 6% next year: S&P

Property & Casualty (P&C) insurance premiums in New Zealand are likely to bounce back to grow 6% next year and in 2022, S&P says.

The ratings agency says the market is likely to achieve 2-3% premium growth this year despite the COVID-19 pandemic, with a return on equity (ROE) of about 8% and a net combined operating ratio of around 90%-95%, with rate increases supporting modest growth.

“We expect New Zealand's P&C insurance segment will continue to post solid underlying results over the next couple of years, although results in 2020 will likely be subdued due to the COVID-19 lockdown and resultant economic slowdown.”

Gross written premium has grown by an average of 8.5% annually over the past three years, and S&P expects similar growth over the medium term.

S&P rates New Zealand's insurance sector risk as “intermediate”, the third lowest on its scale and matching Japan, Korean, Taiwan, the UK and US.

“We expect the impacts of the COVID-19 pandemic and the economic downturn to be relatively minor for New Zealand's P&C insurers, who have limited exposures to the most impacted lines of business,” S&P says.

Any increase in claims as a result of the pandemic should be largely offset by a reduction in claims in the large lines of home and motor. New Zealand insurers enjoyed a significant decrease in motor claims frequency during the national lockdown.

Investment losses will have the largest impact on New Zealand P&C insurers' earnings this year, S&P says, though some of these unrealised losses should be wound back before the end of the year.

Measures taken by insurers to assist customers, such as premium deferrals or rebates, will impact the sector's combined ratio for 2020 but also increase customer sentiment and aid retentions.

The ratings agency assumes a 5% contraction in New Zealand’s real GDP in 2020, with unemployment to increase to 5.8%, recovering to GDP growth of 6% in 2021.

S&P has a 'AA' sovereign rating on New Zealand with a positive outlook.

Businesses face growing data extortion threats

Data extortion is on the rise in Australia and globally, according to cyber specialist CFC Underwriting.

Ransomware perpetrators are using the tactic to demand payments from businesses, threatening to make public stolen information that may contain confidential details of clients.

“Virtually non-existent [last year], attacks where data is downloaded from victims and threatened to be released publicly have become the prevalent tactic being leveraged by most of the common ransomware variants,” Cyber Claims Director Roger Francis told insuranceNEWS.com.au.

CFC estimates cyber victims in Australia this year were hit with an average ransom demand of $130,902.

He says cyber insurers are responding to the evolving threat by bringing their incident response capabilities in-house to expedite client recovery.

“Modern cyber insurance policies are increasingly more about offering a proactive service to help prevent incidents than after-the-event cover,” Mr Francis said.

“They’re also using advances in technology to enhance their risk analysis processes as well as identify claims patterns, using this intelligence to inform businesses about rising threats and provide advice on security measures they can put in place.”

Montoux, People Diagnostix win insurtech contest

Actuarial science start-up Montoux and health technology firm People Diagnostix have won this year’s DXC Invitational insurtech competition.

The two winners submitted the best entries out of 30 applications received from Australia and New Zealand contestants.

“The disruptions of 2020 have forced the insurance industry to operate in a very different way than before,” DXC Technology Australia and New Zealand Industry GM Michael Neary said.

“We look forward to sharing the solutions from this year’s winners with the industry to help alleviate the pressing challenges we face.”

Montoux says it combines data science actuarial science to develop solutions for life insurers.

The annual insurtech contest has been a stepping stone for Australian insurtechs, with a number of them going on to collaborate with DXC Technology and gaining access to new markets and resources. These include Mapcite, GUROOS, Daisee, Springday, 1WordFlow and Perx Health.

NZ insurers pay out almost $30m for flood

New Zealand insurers have paid $NZ29.6 million ($27.35 million) to meet losses from the February floods in Southland, Fiordland and Clutha.

The Insurance Council of New Zealand (ICNZ) says fallout from another flood to hit Northland in July is still being calculated, with several thousand claims expected.

"These events are becoming ever more frequent and severe for our communities,” CEO Tim Grafton said.

"We know that with climate change events like these will only increase. We must adapt to these changes and take steps to reduce risks where possible to minimise the social impact and cost."

With extreme weather events such as storms, heatwaves and heavy rainfall likely to be more common and intense, Mr Grafton says more resilient communities need to be built.

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Corporate

IAG confident on BI policies, stresses government role

IAG is confident it will not be exposed to a wave of business interruption claims flowing from COVID-19 shutdowns but has backed the role of test cases in removing any doubts.

The Insurance Council of Australia is already bringing a test court case over legislation referred to in policies, while IAG last week also flagged the potential for a case to clarify that certain prevention of access extensions don’t apply for pandemics.

“There is in the minds of some a bit of confusion as to whether or not cover is afforded under that extension,” CEO Peter Harmer told a media briefing on Friday.

“Our view in relation to our policies – and I understand this is the position of the industry – is that the pandemic exclusion applies broadly across the entire cover and is not able to be selected as to which part of the cover that it applies to.”

Mr Harmer says terrorism pool arrangements, which are more focussed on impacts in a particular location, are also less suited for a global pandemic.

“I know there are people in different parts of the world looking at these kinds of pools as mechanisms to provide some kind of protection into the future [but] I am not sure how successful they are going to be,” he said.

“The best post-loss funder of an event of course is the Government and that is what is happening essentially in this pandemic.”

On Friday IAG reported a full-year net profit of $435 million, down from $1.08 billion, confirming the preliminary figures provided late last month.

The insurance margin declined to 10.1% from 16.9%, while the combined operating ratio deteriorated to 91.8% from 87.5%.

Gross written premium increased 1.1% to $12.14 billion, with Australian commercial lines seeing an average rate increase of around 5.5%, varying considerably by segment.

IAG has set aside a $100 million provision for COVID-19 repercussions, which includes potential claim cost pressures in areas such as landlords’ insurance, workers’ compensation and business interruption, and which also reflects risks to the trading environment.

IAG directors’ next challenge: see ANALYSIS.

QBE’s Bhatia moves to run Link Group

Vivek Bhatia is leaving QBE, and the insurance industry, to lead listed information solutions company Link Group.

As reported in a Breaking News bulletin last week, Mr Bhatia will depart his position as CEO Australia Pacific this month.

Frank Costigan, currently Australia Pacific Chief Customer Officer Personal Lines, has been appointed to the interim role of MD Australia.

Mr Costigan and CEO and Chief Customer Officer New Zealand & Pacific Declan Moore will assume interim responsibility for the AUSPAC division, reporting to Group CEO Pat Regan.

“Mr Regan will take on greater oversight of operations in QBE’s home market, working closely with Frank Costigan and Declan Moore while an internal and external succession process is underway,” the insurer says in a statement.

Mr Bhatia rejoined QBE two-and-a-half years ago after setting up NSW state insurer icare.

Prior to that he held senior roles with McKinsey & Company and Wesfarmers Insurance, while from 2003-2007 he was QBE’s local head of IT, strategy, governance and program delivery.

A statement from Link Group says he has been appointed MD and CEO, succeeding John McMurtrie, who will retire early next year.

“We identified a number of quality candidates and the board concluded that Vivek had the right leadership experience and expertise to lead the next era of growth at Link Group,” Chairman Michael Carapiet – who is also icare Chairman – said.

In an interview with Insurance News magazine in December 2018, Mr Bhatia spelled out his “2021 ambition” for QBE to be number one in commercial lines, build strength in personal lines, and be innovative in SME.

Mr Regan says Mr Bhatia has “continued to strengthen our operations in Australia Pacific and driven strong financial performance”.

Oracle Group expands into NSW

Perth-based Oracle Group Australia says NSW-based Affinity Insurance Services has agreed to merge with it, ending months of talks that began last October.

MD Matthew Denehy says a heads of agreement was signed on May 25 and the merger will formally take effect on September 1, with Affinity Director Jacob Ross joining as Director of Technology and State Director NSW. Mr Ross and his team of eight will support the NSW business from its Central Coast office.

“We need to have a NSW presence,” Mr Denehy told insuranceNEWS.com.au today. “The COVID virus hasn’t worried us in any way. We have been growing all the way through that.

“We’ve been in high growth mode for some time.”

Mr Denehy, who works from the brokerage’s Gold Coast office, says Oracle is looking at two potential acquisitions at the moment.

With the Affinity merger, Oracle now has offices in Victoria, East Gosford, the Sunshine Coast, Gold Coast and in Perth. It also has authorised representatives in all the states and territories.

NTI buys NZ work safety consultancy

NTI has acquired Success Formula, a New Zealand consultancy that specialises in advising companies on ways to implement work safety policies and procedures.

The transport and logistics insurer revealed no details about the acquisition in its announcement of the acquisition today, and did not respond to queries from insuranceNEWS.com.au for details about the purchase.

NTI says that with the acquisition it has launched a safety culture and leadership coaching program called Traction for transport companies.

The program assesses how a company is performing across 15 different areas, including safety culture, risk management and operational processes, and provides strategies for improvement.

“Our customers engaged strongly with the opportunities and areas for improvement across leadership, communication and safety processes identified by Traction,” Chief Sustainability Officer Christopher Hogarty said.

“It is widely acknowledged that strong cultures deliver strong results…to the bottom line, employee engagement, customer satisfaction, and safety.”

Emergence acts as personal cyber risks rise

Cyber insurer Emergence has introduced a product aimed at families and individuals, while warning that the COVID-19 pandemic has accelerated a trend toward increasing risks as more people study and work from home.

“Our dependence on the internet, and exponential growth of web-enabled devices and social media has made us much more interconnected, which opens up vulnerability to cyber crime at an ever-increasing, alarming rate,” Emergence Founder and CEO Troy Filipcevic said.

“Furthermore, the COVID-19 pandemic has also brought about a new wave of heightened criminal activity.”

The company, which launched more than five years ago with a focus on SMEs, says it has extended its range to offer Australia’s first stand-along personal cyber product

Emergence Personal Cyber Insurance includes cover for hacking, malware, viruses, espionage, denial of service attacks, financial theft and identity theft.

It also addresses anti-social behaviour with assistance in the case of cyber bullying, staking and harassment.

“Families rely on insurance protection against other everyday risks that we face, such as fire, and nowadays everyone is susceptible to falling victim to cybercrime,” Mr Filipcevic said.

The personal cyber product is underwritten by Lloyd’s and distributed through brokers.

Vero extends Risk Profiler tool to New Zealand

Vero has launched an expanded version of its SME Risk Profiler tool in New Zealand as firms look for assistance in reducing potential exposures.

Recent research shows 71% of SMEs in the market want their broker to help with assessing and mitigating risks within their businesses.

The tool assists brokers by providing data and insights into a range of industries and includes downloadable resources and checklists to give to customers.

Vero says the new version is more extensive than the Australian Risk Profiler tool it launched last October, and is specifically targeted for New Zealand.

Data from 2018 to 2020 is included by business category as an Industry Risk Report, outlining the most common New Zealand claims by business.

“SMEs don’t always have the time to fully consider every risk while they are busy running a business, so they need their brokers’ support and guidance in this area,” Executive Manager Business Chris Brophy said.

“We’ve made it easier by creating a tool that brokers can use to guide their SME customers through a thorough risk conversation.”

Kerrie Lalich to head Lawcover Insurance

Lawcover has named Kerri Lalich as its new CEO, promoting her to the top role after more than seven years on the leadership team.

A subsidiary of the Law Society of NSW, Lawcover provides professional indemnity insurance to 19,000 lawyers at practices throughout NSW, the ACT and the NT.

Ms Lalich, who has been Lawcover’s COO since 2013, formerly spent almost nine years at QBE.

She started in law before moving into the general insurance industry in 2001 as team leader of the major claims unit at QBE. Prior to joining Lawcover she spent three years as manager of professional services at medical indemnity insurer MDA National.

She takes over from Michael Halliday, who has decided to stand down after eight years. The changeover is effective September 4.

Aon nurtures IT experts with career coaching

Aon says more than 250 of its technology experts in Australian and New Zealand have completed in-house training programs offering career guidance and skill development.

The coaching and training program was created by Sydney-based firm Expertunity, which says engaging the “most intelligent individuals” in an organisation promotes a higher level of strategic input and job satisfaction as well as reduced burnout.

Most experts in a specialised subject do not aspire to traditional people leadership roles, Expertunity says, and can often be bypassed by typical training and development programs.

It says valuable experts can feel undervalued and disengaged, and businesses miss out on their knowledgeable input to the bigger strategic picture.

“Our talent management program is now broadening to nurture and provide defined career path support for technical specialists who do not necessarily want to be the leader of their department and who can be overlooked,” Aon Head of Organisation Development – Pacific Kim Johnson said.

Aon says today’s emerging skills are related to relationship building, collaboration, influence and learning agility.

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Regulatory & Government

NSW workers’ comp review ‘an important step’

The State Insurance Regulatory Authority (SIRA) says a review of icare by retired Supreme Court judge Robert McDougall will be an important opportunity to consider the performance of the scheme.

The NSW Government announced last week that a scheduled five-year review of workers’ compensation has been brought forward and expanded to include a “root and branch” examination of the state-owned insurer.

“The review will be an important step to determine whether the workers’ compensation scheme is delivering on its policy objectives to support workers who are injured, provide affordable policies and scheme sustainability,” SIRA CEO Carmel Donnelly said.

icare CEO John Nagle resigned last Monday after questioning by a NSW Parliamentary Committee inquiry on governance matters and the performance of the workers’ compensation schemes.

Ms Donnelly was critical of Mr Nagle and icare during the hearing and has called for changes that she says will strengthen SIRA’s ability to oversee the insurer.

Matters within the scope of Mr McDougall’s review include the structure and sustainability of the Treasury Managed Fund and the Nominal Insurer schemes and the relationship between icare and the regulator.

It will also examine the operations, culture and governance of icare, including the effectiveness and accountability of the icare board.

“SIRA will work transparently and constructively to assist the review and to enable the independent consideration of its funding, powers, regulatory approach and statutory independence,” Ms Donnelly said.

APRA to resume consultations and issue new insurance licences

Public consultations on key policy areas such as insurance capital reforms, suspended since late March because of the pandemic, will resume, the Australian Prudential Regulation Authority (APRA) announced today.

The prudential regulator will also begin a two-stage resumption of assessing and issuing of insurance licenses, with the first phase to start next month followed by the second one in March next year. APRA temporarily stopped issuing licenses in April, citing the difficulties new entrants would face in the current business climate.

New licences issued during the first phase will be focused on applicants that are branches or subsidiaries of foreign entities with significant financial resources and a strong operational track record in a similar business. In the second phase, APRA will accept new licence applications from any entity, starting next month.

Other areas where APRA will restart public consultations include a cross-industry prudential standard for remuneration and the prudential standard for insurance in superannuation.

The consultation on insurance capital reforms relates to changes that will be needed when the new accounting standard AASB17 starts in January 2022.

APRA says the resumption of consultations in these areas will provide stakeholders with greater certainty about critical elements of prudential policy and the provision of new licences.

“The onset of COVID-19 necessitated the suspension of many of APRA’s policy and supervision priorities until end-September,” Chairman Wayne Byres said. “We now believe we can restart both policy consultations and licensing activity.

“However, it is neither possible nor desirable to pursue our full policy agenda for the time being. APRA therefore intends to narrow its policy activities in the remainder of this year to a small number of high-priority prudential policy reforms.”

APRA watching for 'severe stress' as crisis drags on

Australian Prudential Regulation Authority (APRA) Chairman Wayne Byres has warned the worst from the pandemic is not over, revealing it remains on the alert for potential “severe stress” on the insurance and broader financial services sector.

Ensuring the industry is prudentially sound to handle the economic fallout from the COVID-19 crisis is the top priority right now for APRA, Mr Byres told the House Economics Committee last week at a public hearing via video link.

“As a result, APRA has had to completely overhaul its plans,” he said in his opening statement. “We have significantly adjusted our operations to give primacy to managing the impact of the economic and social crisis created by COVID-19.

“Experience in Australia and elsewhere tells us that when the broader economy encounters severe stress, so does the financial system.

“We have therefore deployed resources to increase the intensity of our stress testing, and have been refining and improving our contingency planning. We need to be prepared, and agile, to manage pressure points as they inevitably arise.”

He says APRA has examined the impact of the crisis on insurer’s investment portfolios and specific product classes such as business interruption and trade credit insurance.

While insurers and other financial services providers have weathered the crisis well, he cautioned against complacency.

“So far, the finance sector has been able to act as an important shock absorber to the broader economy, and able to support households and businesses navigate a period of severe stress,” Mr Byres said.

“But I also need to emphasise that diligence will be needed to ensure it remains that way, given the extremely difficult times ahead.”

Australian Securities and Investments Commission (ASIC) Chairman James Shipton, who also appeared before the committee, says actions have been taken to ensure consumers are treated fairly even as the financial system comes under strain from the pandemic crisis.

He says ASIC is actively engaged with the insurance industry, pressing on the need for claims to be processed “efficiently and in good faith”.

ASIC product intervention submissions window closing

Stakeholders have been invited to provide feedback on proposed product intervention measures relating to add-on insurance sold with motor vehicles by August 19.

The Australian Securities and Investments Commission (ASIC) has amended changes it drafted after earlier consultation in October as part of the response to the Hayne royal commission.

The regulator says the latest feedback will help ASIC consider whether, and if so how, to exercise the product intervention power.

A planned deferred sales model addresses what ASIC says are unique risks that consumers experience when offered add-on products in relation to the sale of motor vehicles.

ASIC first released its “Taking consumers for a ride” report on the matter in 2016 and has already secured remediation with 11 insurers, one underwriting agency and one warranty provider and refunded more than $130 million to more than 245,000 consumers.

The amendments made by ASIC to the previous draft order can be seen here.

Submissions should be sent by August 19 to product.regulation@asic.gov.au.

NSW to set up new injury scheme complaints body

Dispute resolution for the NSW workers’ compensation and compulsory third party (CTP) schemes will be handled by a single tribunal in a change to simplify the system.

The Personal Injury Commission will start operating in March, with specialist motor accident and worker’s compensation divisions, after legislation passed the NSW Parliament last week.

“The purpose of the commission is to simplify the dispute resolution process and deal with disputes justly, quickly and as cost-efficiently as possible,” Customer Service Minister Victor Dominello said.

The change was made after a parliamentary committee review found the multiple bodies involved in the existing system could be confusing for people navigating disputes.

Last year around 7000 dispute applications were lodged in the Workers Compensation Commission, while 10,000 CTP claim disputes were considered by three other bodies.

The legislation also introduces an Independent Review Office that can deal with claims complaints about insurers in both the CTP and workers’ compensation schemes.

AFCA appoints head of membership services

The Australian Financial Complaints Authority (AFCA) has appointed Campbell Daff to the newly created position of Head of Membership Services.

AFCA CEO David Locke says Mr Daff has a strong background in managing and tailoring the membership experience and is an experienced leader who will ensure AFCA’s member engagement meets the needs of its 30,000-plus members.

Mr Daff brings a wealth of industry experience in relationship management, governance and operational transformation, Mr Locke said.

“More than ever our members want additional support and guidance on how they can effectively resolve complaints and minimise the issues that give rise to complaints in the first place,” he said. “AFCA is passionate about using our data and intelligence to assist our members and consumers.”

Mr Daff comes from RACV, where he headed membership operations. He has also held roles at NAB, leading a customer transformation program in the Business Servicing Centre and specialising in customer advocacy within the customer strategy team.

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Life Insurance

$3.6 million ‘smoker’ premiums to be refunded

At least 5000 superannuation fund members will collectively receive more than $3.6 million in compensation after they were wrongfully charged higher “smoker” premiums for life insurance, the Australian Securities and Investments Commission (ASIC) says.

Over three years, ASIC has engaged with seven superannuation businesses that had at some time assigned members to “smoker” status unless they took active steps to opt out.

ASIC says the seven businesses – AMP, Colonial First State, Equity Trustees, IOOF (including OnePath), Intrust, Netwealth, and Suncorp – have all stopped charging new members life insurance premiums at smoker rates by default.

All have moved, or are in the process of moving, existing members paying premiums at “smoker” rates by default on to non-smoker or blended rates and four refunded or agreed to refund members for the extra premiums paid because of the default classification.

ASIC Commissioner Danielle Press says that the low prevalence of smoking among Australian adults means classifying members as ‘smokers’ for insurance offered through superannuation unless the member took active steps to confirm non-smoking status is “contrary to community expectations”.

New life insurer powers a ‘dangerous Trojan horse’: law firm

A move to allow greater involvement in worker rehabilitation by life insurers is a “dangerous Trojan horse” and part of a push to expand powers so fewer claims will need to be paid out, law firm Maurice Blackburn Lawyers alleges.

The law firm says the Financial Services Council (FSC) has revived a campaign to change the law so insurers pay the medical bills of a worker instead of paying out the insurance claim.

The proposal was rejected by a parliamentary joint committee in 2018. But the law firm says renewed FSC lobbying comes after indications the door to legislative reform may be more open than in the past.

Last month, tentative support appeared to come from Superannuation and Financial Services Assistant Minister Jane Hume, who said the Government is open to the idea of Total and Permanent Disability (TPD) insurers paying for claimants’ treatment.

She said both Treasurer Josh Frydenberg and Health Minister Greg Hunt are open to the idea of changing the way TPD is paid.

“Maybe there’s a way that life insurers could pay out for treatment rather than as a lump sum,” Ms Hume said.

Maurice Blackburn Principal Josh Mennen says it is “irresponsible” to suggest that an insurer should be “calling the shots” on medical treatment plans in an attempt to get workers back into a job market severely diminished by COVID-19.

“Any calls for an expansion of a life insurer’s rights in the medical decisions of claimants is premature and unwarranted,” Mr Mennen said.

“While it appears to be altruistic, the FSC’s campaign to change the law has always been a Trojan horse to push past the privacy and other legal rights of their disabled claimants and gain greater control over their medical treatment.”

NZ Life sector to grow 1-2% a year

New Zealand’s life insurance sector is poised to grow premiums by around 1-2% over each of the next three years, according to S&P.

Premiums grew by 2.8% over the year to March, with declining volumes in some classes such as consumer credit insurance offset by modest growth in term and trauma products.

“We expect growth in written premiums for the sector to be in the low single digits as a result of softer economic conditions,” the ratings agency says. “Broad government stimulus measures and the earlier than expected reopening of the economy is likely to moderate claims inflation for income protection lines of business.”

The ratings agency says New Zealand’s exposure to pandemics is low and its mortality risk “highly predictable and well understood” and managed by the life insurance sector.

“Our view is unchanged by the COVID-19 pandemic, given the very low exposure in New Zealand and backstop of reinsurance protection,” it said.

Life insurers in New Zealand have limited exposure to the effects of COVID-19. The industry's overall product portfolio mostly consists of traditional individual risk protection, which is largely unaffected due to the low mortality rate of COVID-19 in New Zealand.

But S&P says claims pressure may persist in income protection as a result of economic and social pressures. However, this is a small proportion of the overall portfolio.

The ratings agency forecasts life industry return on equity of around 12-13% over the next three years and says while top-line premium volumes may decline further through 2020, claims are expected to remain stable.

AMP Australia’s CEO Alex Wade departs

AMP Australia CEO Alex Wade has departed the company with immediate effect.

AMP, which sold its Life business for $3 billion last month, says in a statement to the Australian Stock Exchange it has accepted the resignation of Mr Wade.

Blair Vernon, the CEO of New Zealand Wealth Management (NZWM), will act as CEO of AMP Australia while a permanent replacement is found. Mr Vernon’s role will be temporarily held by Chief Client Officer Jeff Ruscoe.

Mr Wade joined AMP in January last year after 12 years at Credit Suisse.

He began as AMP’s Group Executive Advice, overseeing the group’s large network of financial advisers, before taking on an expanded remit to include AMP’s wealth management business and AMP Bank.

AMP will release its first-half earnings results on Thursday, and will also detail how it will use the proceeds of the Life business sale.

It has already noted that underlying profit will more than halve to between $140 million and $150 million, down from $309 million a year earlier when the Life business contributed $31 million.

RBNZ clarifies ‘unique operating model’ after AMP Life sale

The Reserve Bank of New Zealand’s (RBNZ) insurance supervision team has published a detailed outline of the complicated new operating model structure it wants put in place to permit AMP’s sale of its Life business.

AMP cleared a final regulatory hurdle with the central bank in June by agreeing to the formation of a trust to hold local capital and assets to give additional protection in the event of insolvency, as well as other benefits.

The $3 billion sale to Bermuda-based Resolution Life was finalised last month.

The RBNZ imposed a new structure, exemptions and conditions for the New Zealand operations which it says will secure equity across all policyholders.

Under the operating model, the AMP Life NZ Trust provides for capital and assets in New Zealand, with AMP Life is the beneficiary. Assets are held in trust by Resolution Life New Zealand, and units are issued back to AMP Life and held as part of a statutory fund.

The trustee is Resolution Life New Zealand while AMP Life has been appointed manager of the fund.

A deed poll provides for the enforceability in Australia by the trustee and the Reserve Bank of AMP Life’s key obligations under the trust deed.

Resolution Life New Zealand is a locally incorporated insurer with two executive directors and three directors independent of both management and the shareholder.

Resolution Life New Zealand provides life insurance under a group scheme to employees of Resolution Life Services NZ, a wholly owned subsidiary of Resolution Life New Zealand, and a reinsurance treaty under which Resolution Life New Zealand will pay AMP Life a benefit in the event that AMP Life is unable to meet its obligations to a New Zealand policyholder.

“The model strengthens the governance and oversight of the interests of New Zealand policyholders and provides for appropriate “Influence of relevant officers,” the central bank says.

Licence conditions require a minimum solvency margin for Resolution Life New Zealand.

NZ advisers welcome changes to conduct bill

Advisers in New Zealand will be excluded from fair conduct programs under amendments made last week to a bill designed to improve culture and practices in the financial services industry.

Financial Advice New Zealand, which has pressed for the changes to the Financial Markets (Conduct of Institutions) Amendment Bill, has welcomed the move.

The peak body has said in its submission that advisers will have their own conduct regulations to abide by when the Financial Services Legislation Amendment Act comes into effect in March next year.

“The focus of [our] submission was to exclude financial advisers and financial advice providers from the Fair Conduct Program in the first instance,” CEO Katrina Shanks said.

“We are pleased to see financial advisers have been removed from the duties of the bill which means they do not have to abide by the Fair Conduct Program as they have their own conduct regime.”

She says the peak body is also pleased that the claims process has been excluded from the bill and that its concerns over the lack of a definition of “fair” has been addressed.

But the industry is still concerned that financial institutions have to consider training and supervision for advisers under section 446M of the bill.

“This is an area we will be seeking further consideration,” she said.

The bill has been referred back to Parliament for a second reading after the September 19 general election.

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The Professional

Survey launched to gauge diversity progress, COVID impacts

The industry has launched an online survey to assess the progress in advancing diversity and inclusion in the workplace ahead of next month’s Dive In Festival, an annual event pushing for changes in corporate culture and practices in insurance.

Survey participants will also be asked about the impacts of the pandemic on their wellbeing.

The project is backed by Liberty Specialty Markets, Sura, Wotton + Kearney and the Australian and New Zealand Institute of Insurance and Finance (ANZIIF).

The findings will be shared on September 23 at a Dive In event sponsored by the survey’s backers.

“The survey is about trying to find out some of the common things out there that are happening,” ANZIIF GM Industry Engagement Damian Falkingham told insuranceNEWS.com.au today.

“It’s to get a consensus across industry of what is working, what is not working and what [employers] are doing to make sure staff are supported and have the right infrastructure to work from home.”

He urged everyone within the industry, including non-ANZIIF members, to take part in the survey.

Sura MD Angie Zissis says the survey is an important initiative that will help the industry understand better the challenges facing employees.

Click here to take part in the survey.

Steadfast cancels 2021 event as disruptions roll forward

Steadfast has cancelled its convention for a second year as the coronavirus outbreak continues to disrupt industry event schedules.

The broker group had planned to host the next convention in Adelaide in March, but CEO Robert Kelly says in a note to brokers that it will not proceed.

“With the COVID19 outbreak remaining a major health concern across Australia, and mass gathering restrictions in place for the foreseeable future, we have made the difficult decision to cancel the upcoming Steadfast Convention,” he says.

“This was a tough call to make. It’s an incredibly important event for Steadfast and it’s a highlight of the year for so many brokers in the network.”

Steadfast earlier in the year cancelled the convention scheduled for last March as companies began limiting travel and gatherings even before Governments mandated lockdowns.

The Underwriting Agencies Council (UAC) has seen a continuing impact on its program of expos in capital cities.

The Melbourne Underwriting expo scheduled for October 28 has been cancelled and it has rescheduled its Norwest Sydney Expo to November 25.

The Adelaide expo has been postponed to October 28, while the Perth expo is due to take place on November 12.

The Australian Insurance Law Association has postponed this year’s national conference in Sydney, due to be held in late October.

The event is now set for October 20-22 next year, with the venue remaining Doltone House at Jones Bay Wharf.

Finity’s principal wins award for claims work

Finity Principal Paul Beinat has gained recognition for his work in third-party claims processing from University of Technology Sydney (UTS).

The university named him a recipient of the 2020 UTS Alumni Award, calling him an artificial intelligence and analytics industry pioneer who has “revolutionised” the way third-party claims are managed.

Dr Beinat, who is an adjunct professor at UTS, heads the artificial intelligence team at Finity.

Suncorp matches $1 million staff donations

Suncorp has matched more than $1 million raised by its employees for charity, bringing the total donated to more than $2 million.

Of the total, $226,000 went to charities supporting the bushfire relief effort.

Suncorp’s Brighter Futures employee giving program, in which employees select local charities to partner with, donated to more than 350 Australian and New Zealand organisations.

Some brave WA Suncorp employees abseiled down the 220-metre façade of Perth’s Central Park building, raising more than $37,000 for the Ronald McDonald Foundation.

Suncorp says almost $600,000 of the donations were made via staff salaries, with the rest raised via fundraising and personal volunteering.

“The support shown through payroll giving, fundraising and volunteering is inspirational and highlights the genuine drive to support those less fortunate within our communities,” Suncorp Market Leader Stores Jordan Walsh said.

Suncorp will partner for the next two years with 14 charities spanning mental health, family violence, children and young people, and drought.

Aon teams up to address mental health

Aon has teamed with a specialist company to provide an e-learning platform focussed on helping businesses and their workforces address mental health concerns.

The WeCARE platform developed by mental health services company FactorC is being offered to Aon clients and covers issues including how to identify when someone is in distress and how to follow up and provide support.

“Mental health continues to be a significant issue across all employers and industries, and it does not discriminate,” Aon Australia WHS National Practice Leader Mario Machado said.

“The current situation affecting all of us through COVID-19 has merely exacerbated and underlined the need for employers to focus on broader and more inclusive ways to support their staff members and colleagues who may need help with their mental wellbeing.”

The platform was developed by mental health advocate and R U OK Director Graeme Cowan with The Learning Hook founder Brenden Carter.

NZ regulator gives nod to ANZIIF broker certification plan

The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) says its proposed compliance certification for general insurance brokers has been approved by the industry regulator.

The Financial Markets Authority (FMA) assessed the proposed certification and found it to be equivalent to the New Zealand Certificate in Financial Services (Level 5) Version 2 and meeting the new Code of Professional Conduct for Financial Advice Services, which comes into effect in March next year.

“We are committed to supporting New Zealand general insurance brokers by delivering high quality, relevant learning that meet code outcomes for general insurance brokers,” ANZIIF CEO Prue Willsford said.

She says recognition of prior learning will also be available, limiting formal studies to the new components required under the code. These will be covered in a specially tailored bridging unit.

The ANZIIF Learning pathways also include an option for skilled brokers to receive accreditation based on recognition of prior learning. This provides expereinced brokers with an alternative to “back to the classroom” learning.

ANZIIF is offering a free webinar with more information about the new code and its professional development offer on August 18.

Resilience Project founder to speak at AICLA event

Resilience Project founder Hugh Van Cuylenburg will speak at an Australasian Institute of Chartered Loss Adjusters event this week.

The online session is part of the iAdjust 2020 program, which is being run over five weeks via Zoom due to the coronavirus pandemic.

Mr Van Cuylenburg has worked with groups including the National Rugby League, the Australian cricket team, businesses and schools as part of The Resilience Project, which focuses on practical strategies to improve wellbeing.

The event will be held on Wednesday at 11:30am. More details are available here.

Genworth board sees changing of the guards

Genworth Mortgage Insurance has appointed Graham Mirabitoas to its board as director Christine Patton departs after two years.

Mr Mirabitoas is also on the board of Cipherpoint, Harcourts International, Auscred Services and Archistar.

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International

Asia’s July monsoon flood bill in tens of billions

July monsoon flood damage in Asia topped $US20 billion ($27.93 billion), with China, Japan and India hardest hit, while in the US record heat fuelled thunderstorms and a minimal billion-dollar insurance bill, Aon’s latest Global Catastrophe Recap says.

Record-breaking rains described as a 1-in-500-year event triggered flash flooding and landslides in northern and western New Zealand on July 17-18, inundating thousands of homes and agricultural land in Northland. A multi-million-dollar level of direct damage and economic loss is expected.

Aon catastrophe analyst Michal Lörinc, says despite a record early start to the Atlantic Hurricane Season, the most significant natural peril events were noted in Asia during July.

“Much of the physical damage to property, infrastructure and agriculture was anticipated to be uninsured, only reinforcing the importance of finding ways to help lower the protection gap across the region,” he said. “Utilizing tools such as catastrophe models can help aid in identifying areas of highest risk”.

Hurricane Hanna became the earliest eighth-named “H” storm on record in the Atlantic Basin, and the first hurricane of the 2020 Atlantic Season. Losses in the hundreds of millions of dollars were estimated.

Tropical Storm Fay, the earliest sixth-named “F” storm on record in the Atlantic Ocean, made landfall along the New Jersey coast on July 10. Losses were estimated at $US350 million ($488.78 million) , with public and private insurers covering roughly one-third.

Hail, straight-line winds and isolated tornadoes on July 10-12 from the US Rocky Mountains into the Midwest created losses estimated to reach above $US900 million ($1.26 billion), with a majority being insured.

In southern Japan, flash flooding and landslides from July 3-10 prompted a nearly $US4 billion ($5.6 billion) recovery effort.

Munich Re books 42% dive in Q2 as pandemic losses mount

Munich Re has posted a steep 42% plunge in second-quarter net income to €579 million ($939 million) from a year earlier, as virus-related claims took a toll on the business.

COVID-19 losses cost the business about €700 million ($1.1 billion) in the June quarter, taking the reinsurer’s first-half bill from the pandemic to €1.5 billion ($2.4 billion).

Its property and casualty (P&C) reinsurance arm bore the brunt of the COVID losses, with about €600 million ($973 million) for the quarter and €1.4 billion ($2.3 billion) for the June half. Most of the claims were related to cancellation or postponement of major events.

P&C reinsurance net income in the second quarter fell by 50% to €348 million ($564 million) while the combined ratio worsened to 99.9% from 86.9%. Gross written premium rose to €5.5 billion ($8.9 billion) from €4.8 billion ($7.8 billion) a year earlier.

Major losses, defined as above €10 million ($16.2 million) each, increased nearly four times to €799 million ($1.3 billion) including €632 million ($1.02 billion) from man-made events. Natural catastrophes accounted for the remaining €167 million ($271 million) losses.

Despite the weak quarter, Munich Re remains upbeat its business will benefit from the hardening market. At the July renewals, prices rose by 2.8% across its portfolio.

“The world is far from defeating the coronavirus,” Board Chairman Joachim Wenning said. “We are growing profitably, while taking steps to benefit from the significantly improved market conditions for reinsurers.

“Prices have risen in nine consecutive renewal rounds, and premium income has grown correspondingly.”

Munich Re is projecting about €54 billion ($88 billion) in overall premium volume for the current financial year, which would be a record if achieved.

But the business says it will not be providing a profit guidance, citing the high level of economic uncertainty caused by the pandemic disruption.

Allianz first-half profit declines 29%

Allianz first-half earnings fell 28.8% to €2.9 billion ($4.8 billion) as the COVID-19 pandemic hit its property and casualty businesses.

CEO Oliver Bate says the pandemic continues to be a challenge for all industries but the company has achieved robust results and shown “a remarkable resilience” in the first six months.

“It makes us confident that we will see a solid financial performance also in the second half,” he said.

Property and casualty operating profit deteriorated 23.4% to €2.2 billion ($3.6 billion), reflecting higher claims from natural catastrophes and a severe impact from COVID-19 amounting to €800 million ($1.3 billion).

The negative factors were partly offset by an improvement in the expense ratio, but the overall, combined operating ratio for the first half deteriorated by 2.7 percentage points to 96.7%.

“Adjusting for the impacts of COVID-19, the underlying performance remains strong with a normalised combined ratio of less than 94% as our focus on technical excellence and productivity gains pays off,” CFO Giulio Terzariol said.

The life and health operating earnings declined to €1.8 billion ($3 billion) from €2.3 billion ($3.8 billion), mainly due to a favourable one-off profit in the US during 2018/19.

Financial markets rallied in the second quarter, but Allianz says the economic recovery remains fragile and it would not be giving an updated operating profit outlook due to continuing uncertainties.

AIG in the red as pandemic, US unrest rock earnings

AIG says the impacts from COVID-19 “remain manageable” despite estimated losses of $US458 million ($633 million) from the pandemic in the second quarter.

The virus health crisis, along with $US126 million ($174 million) in US civil unrest-related losses and $US90 million ($124 million) in natural catastrophe claims, combined to push the general insurance arm to an underwriting loss of $US343 million ($474 million) during the period. The division made an underwriting profit of $US147 million ($203 million) in the corresponding period last ear.

Adjusted pre-tax income for the division shrank 82% to $US175 million ($242 million).

“We are effectively navigating the current complex environment due to the strong foundation we built over the past three years,” CEO Brian Duperreault said. “While unprecedented and ongoing, COVID-19 remains an earnings, not a capital, event for AIG.”

At the group level, AIG recorded a net loss of $US7.9 billion ($10.9 billion) in the June quarter, against a net income of $US1.1 billion ($1.52 billion) from a year earlier.

The insurer says the results partly reflect an after-tax loss of $US6.7 billion ($9.3 billion) from the sale and deconsolidation of its majority 76.6% stake in reinsurer Fortitude Re for $US2.2 billion ($3.04 billion). .

In the general insurance arm, gross written premium fell 2% to $US8.5 billion ($11.8 billion) while the combined ratio blew out by 8.2 points to 106%.

The division’s underwriting losses in North America worsened sharply to $US419 million ($579 million) from $US5 million ($6.9 million) a year earlier, as commercial lines and personal insurance produced deficits of $US385 million ($532 million) and $US34 million ($47 million) respectively.

In the international market, underwriting profit declined 50% to $US76 million, dragged down by a $US13 million ($18 million) loss in commercial lines and 12% fall in earnings to $US89 million ($123 million) in personal insurance.

Berkshire makes huge COVID provisions for commercial, reinsurance arms

US conglomerate Berkshire Hathaway has made huge provisions for potential losses and claims from the pandemic, denting the underwriting results of its commercial insurance and reinsurance business for the second quarter.

The Berkshire Hathaway Primary Group, which provides commercial solutions, recorded a fall in pre-tax underwriting earnings to $US96 million ($96 million) in the June quarter from $US167 million ($232 million) a year earlier.

Losses and loss adjustment expenses cost the division about $US1.58 billion ($2.2 billion) during the period while premiums written fell 9.3% to $US2.15 billion ($3 billion).

For Berkshire Hathaway Reinsurance Group’s property and casualty unit, the business made a pre-tax underwriting loss of $US643 million ($892 million) compared with a $US198 million ($274 million) profit a year earlier. Premiums written rose 28.7% to nearly $US3 billion ($4.2 billion).

The results were impacted by a 77.1% rise in losses and loss adjustment expenses increased to $US2.58 billion ($3.6 billion). Berkshire Hathaway says the losses and loss adjustment expenses reflect estimated COVID-19 related claims of around $US350 million ($486 million) in the second quarter and $US575 million ($798 million) in the first six months of 2020.

“Underwriting results in 2020 of our commercial insurance and reinsurance businesses were negatively affected by estimated losses and costs associated with the COVID-19 pandemic,” the group said. “These include estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels at certain underwriting units.”

The business warns the potential effects of the pandemic “may be further affected by future judicial rulings and regulatory and legislative actions pertaining to insurance coverage and claims that we cannot reasonably estimate at this time”.

Geico, its motor insurance arm, increased its pre-tax underwriting profit to $US2.06 billion from $US393 million. The results reflected significant declines in losses and loss adjustment expenses attributable to lower claims frequencies from the effects of less driving by policyholders during the pandemic.

The insurance businesses made $US806 million ($1.2 billion) in overall underwriting earnings for the June quarter, up from $US353 million ($489 million) a year earlier.

Intangibles a ‘major blind spot’ in risk models

Reputation, human capital, intellectual property and other “intangible” assets are becoming the dominant driver of value in most industries and are a major blind spot for firms not factoring this into their risk models, Lloyd’s says.

In a report prepared in collaboration with KPMG, Lloyd’s says its is developing products to help organisations mitigate their exposure.

“The key drivers of corporate value are completely different now to in the past and this shift has only been amplified by COVID-19,” KPMG Partner Paul Merrey said. “As we move swiftly into the new reality, it’s apparent that many businesses aren’t adequately prepared for it.”

The report outlines a range of products available in the market responding to the risks posed to intangible assets, which are estimated to account for as much as 85% of the total business value across industries.

The report also highlights the vital role the insurance community has to play in helping organisations manage these challenges to protect their assets.

Lloyd‘s Head of Innovation Trevor Maynard says COVID-19 has exposed companies to new risks and encouraged them to think about how they now operate.

“As an industry we need to recognise that the world has changed and adapt to how it looks now,” Mr Maynard said. “It is important that at Lloyd’s we work together with the market to innovate and create new products to help customers mitigate risks and protect themselves from future threats.”

While physical assets are still a focus, recognition of what intangible assets are and how much they represent a firm’s value may “come as a hard awakening for some organisations”.

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Analysis

IAG’s next big challenge: succession

With the results for IAG’s financial year behind them, the group’s directors now have another major matter to settle – who will lead the group into what MD Peter Harmer has described as “an increasingly complex and dynamic environment”.

The scale and force of that environment became clear on Friday, with the group reporting a 59.6% fall in net profit after tax for the year to $435 million, and Mr Harmer outlining a substantial list of causes.

Add to the pandemic impacts the issues surrounding regulation, changing market dynamics and increasingly volatile catastrophe risks, and the environment that will greet whoever succeeds Mr Harmer is monumental.

With CFO Nick Hawkins being named Deputy Group CEO in April, many have assumed that CEO Australia Mark Milliner starts the push for the top job from further back. However, sources close to the group’s inner politics say this is certainly not the case.

Mr Hawkins has strong credentials for the job. A former partner at KPMG, he has been the CFO for 12 years, He held a number of roles within finance and asset management and gained operational experience from a stint as CEO of IAG New Zealand.

A leading management consultant familiar with the group’s operations – who commented on the proviso that he was not named – told insuranceNEWS.com.au the decision to elevate Mr Hawkins while leaving Mr Milliner to oversee the division’s operational response to the group’s development activities and pandemic response “makes a lot of sense”.

The consultant says he doubts the IAG board under Chair Elizabeth Bryan will fall into what he says is a common trap in such situations: “Disregarding operational leaders and going for bright and shiny objects.”

He points to the example of Woolworths, which is still recovering from a succession decision its board made in 2011. Greg Foran, then the diversified retailer’s highly regarded Head of Supermarkets, was expected to succeed Michael Luscombe as CEO. The other candidate was COO Food and Petrol Grant O’Brien.

With market share under threat from a resurgent Coles, Foran presented to the board a plan to take on Coles through a program of store transformation and hefty price competition.

Instead the board went with O’Brien and his plan to establish the Masters chain of home improvement stores. Foran quit shortly after.

Four years later Masters was losing $600 million a year, had eaten up $2 billion of Woolworths capital and O’Brien was out of a job.

Foran was by then running the entire US operation of retailing giant Walmart, seeing off challenges from new market entrants and increasing sales by improving stores and logistics and cutting prices – a strategy that O’Brien’s successor, Greg Banducci, has adopted to recover market share.

There’s a similar example in the recent history of Suncorp. In 2015 Mr Milliner – now a candidate to replace Mr Harmer – was Suncorp’s CEO Personal Insurance and a strong contender for the top job. But the role went to an unlikely outsider, board member Michael Cameron, who had scanty insurance experience but an intriguing marketing idea.

Mr Milliner, who had spent 21 years at the group and was the driver of its “one company, many brands” strategy, resigned. He moved to IAG as COO and was made CEO of a united Australia division in July 2017.

At Suncorp, disappointing returns and the failure of the costly Marketplace strategy saw Mr Cameron leave after four years.

His replacement, Steve Johnston, has already moved to install two high-performance managers to bring more efficiency into the process. Expect more changes as they grapple with the complexities of a rapidly changing market.

We will leave alone the question whether Suncorp could have avoided its traumas had the board selected Mr Milliner. Today he is responsible for most of IAG’s strategic development priorities, which last week’s report defines as “simplify[ing] and optimis[ing] our core insurance business while creating future growth opportunities”.

Much of what he has achieved so far has been internal – building new teams, unravelling different cultures and systems, building technology and introducing responsive new products, managing some significant headcount reductions and forming a diverse group of managers.

Growing IAG’s core business will be vital because its dominant position in the local insurance market means its future growth – at least in personal lines – will be organic rather than acquisition-based.

No matter who takes IAG forward, it will have to be a very different sort of company from the insurer of today, relying on innovative products and an ability to understand and seize opportunities in a rapidly changing market.

That’s why the choice facing the IAG board is so weighty. It is blessed with two strong candidates who have clear-cut differences in experience and (possibly) vision – one finance, one operations.

But the directors must also consider how to cover the potential loss of one of IAG’s two key executives.