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Vero, Chubb voted NIBA insurers of the year

Vero and Chubb have been voted the National Insurance Brokers Association (NIBA) general insurers of the year, while Insurance House director Gary Gribbin has received the association’s lifetime achievement award.

NIBA’s annual awards were announced today at its convention on the Gold Coast.

The insurer award was split in two this year, with Vero winning Large General Insurer of the Year and Chubb taking out the Small/Medium General Insurer of the Year category.

The awards are based on feedback from the annual NIBA Broker Market Survey, which sees up to 4000 brokers rate insurers’ products and services.

Mr Gribbin was presented with the Lex McKeown Trophy for lifetime achievement and services to broking, with NIBA President Eric Harris saying “there is no one more deserving”.

“Gary is the embodiment of everything the trophy stands for – professionalism, integrity and generosity,” Mr Harris said.

Mr Gribbin retired recently after a long career as an underwriter, academic and broker. He was the cover story subject in the August-September edition of Insurance News, which focused on his role as chairman of broker group IBNA and its move from the AIMS joint venture to Steadfast.

Mr Harris also noted Mr Gribbin’s former role as head of insurance and risk management at Deakin University, which saw him become “incredibly influential in raising the professional standard of generations of insurance managers”.

Lisa Carter, of Clear Insurance in Queensland, won this year’s QBE-sponsored Stephen Ball Memorial Award for Insurance Broker of the Year.

Caitlin Carson of Marsh, also based in Queensland at the time of nomination, was awarded the Vero-sponsored Warren Tickle Memorial Award for Young Professional Broker of the Year.

NIBA CEO Dallas Booth said all the finalists are “exceptional brokers” who have “set a benchmark for the rest of the profession”.

Two dead, 45 houses lost in northern NSW bushfires

Northern NSW bushfires destroyed at least 45 homes and about twice as many rural outbuildings last week as hot weather and dry conditions fuelled the flames.

The Insurance Council of Australia (ICA) declared its second bushfire catastrophe for the region in five weeks.

“It may take several weeks before insurers are able to quantify the extent of insurance losses,” ICA CEO Rob Whelan said.

NSW Rural Fire Services said on Friday that 37 homes were destroyed by the Busbys Flat Road fire and eight by the Long Gully Road fire. Cooler weather and rain reached some areas before the weekend.

Two people died in the Long Gully fire, which has been burning for more than a month after it was ignited by a lightning strike. Arson investigations are under way for another of the fires.

The Bureau of Meteorology says there is an increased risk of heatwaves and bushfires in coming months due to climate influences such as the strong Indian Ocean Dipole.

“The increased odds of warmer than average days, coupled with a very dry landscape and a likely late start to the northern wet season, give a clear indication that we’re likely to see more heatwaves than normal,” Head of Long-range Forecasts Andrew Watkins said today.

“It also adds to the potential bushfire risk, particularly when you consider how dry many parts of southern and eastern Australia are at the moment.”

Australia’s January-September rainfall was the fourth lowest on record and the lowest since 1965, while daytime temperatures so far this year are tracking towards the highest on record.

The NSW Department of Primary Industries says about 97% of the state is already affected by one of three drought categories.

A total of 89 NSW homes have been destroyed in the bushfire season to date, while Queensland has also been affected by early bushfires.

Fewer than normal cyclones expected this season

The Bureau of Meteorology says there is a 65% chance of fewer than normal cyclones across northern Australia this year.

Australia experiences about 11 cyclones each season on average, with four crossing the coast, but climate drivers mean the chances of reaching those numbers are slightly reduced, Head of Long-Range Forecasts Andrew Watkins says.

The outlook reflects the neutral state of the El Nino-Southern Oscillation Index and a positive Indian Ocean Dipole but doesn’t include indications of the likely size or intensity of any events.

Dr Watkins says that even if the number of cyclones is reduced the chance for a damaging event remains high.

“We’ve never had a tropical cyclone season without at least one cyclone crossing the coast,” he says. “This means that despite a reduced risk this season, all communities in northern Australia must be ready.”

The eastern region, which covers Queensland, has a 57% chance of fewer cyclones, while the northern region, which includes Darwin, has a 65% chance of a more benign season.

Broker report reveals deficiencies in dispute handling

The independent Insurance Brokers Code Compliance Committee has described as “disappointing” its findings into the internal complaint handling process of subscribing members.

Only 63% of disputes last year were resolved within 21 days and another 12% took more than 45 days to settle, according to the findings released on Friday.

The code requires subscribing brokers to immediately acknowledge receipt of disputes and to work out a solution within 21 days. They have another 21 days to resolve it if clients are not satisfied with the initial offer made.

More than a quarter failed to record the 1049 complaints received last year – a statistic the committee has described as “most disappointing”. While large brokerages record detailed data for 63% of all disputes, the best of any group, the committee says this still falls short of what it expects from good industry practice.

“Clearly, there is room for improvement in the way that code subscribers manage timeframes for handling complaints,” the committee says in the report.

“An improvement in the timely resolution of disputes will benefit subscribers and their clients and aid the achievement of the code’s objectives.”

The committee’s “own motion inquiry report” builds on last year’s review on whether brokers are addressing disputes with clients effectively.

It cautions brokers against complacency, even if the Hayne royal commission found no severe misconduct issues affecting brokers.

“The hearings [of the royal commission] added intensity to what was already serious scrutiny of the financial services sector,” the report says.

“All financial services organisations are on notice of significant community dissatisfaction. All have much to learn and change urgently.”

The National Insurance Brokers Association (NIBA), which operates the code, has welcomed the report’s findings and suggestions for improvements.

“Clearly these matters need to be addressed and resolved as quickly as possible,” CEO Dallas Booth told insuranceNEWS.com.au.

“NIBA is committed to high standards of professionalism.”

‘Tectonic shift’ reshaping insurance: Capgemini

Insurers must embrace new business models to stay relevant as the industry undergoes a “tectonic shift” triggered by rising consumer expectations and shifting dynamics, Capgemini says in a new report.

Findings from the consultant’s annual World Insurtech Report suggest 41% of customers would consider usage-based insurance and 37% are open to on-demand coverage.

“There’s no looking back for today’s digitally empowered consumers,” the report says.

“With new business models picking up steam and new players entering the value chain, insurers must decide which of their key differentiators will help them to garner a compelling position in the new ecosystem.

“Moreover, as customers grow comfortable purchasing policies digitally, traditional channels such as agents [and] brokers may lose relevance, although these channels currently play a significant role in product-demand generation.

“As conventional channels lose impact, the fate of established demand-generation methods remains to be seen.”

Capgemini Australia Insurance Director Easwaran PR says the local market is “seeing varied levels of progress by the established insurers transforming to new business models using digital products and services, for instance with bots, operational process redesign, etc.”

“The report determines that success in the future marketplace is heavily dependent on insurers’ ability to evolve into inventive insurers,” he told insuranceNEWS.com.au.

“A successful inventive insurer will use open platforms to better develop innovative ways to make sure the customer remains at the centre of their business.”

The report flags a “bouquet of offerings” approach that insurers should consider.

Such a strategy allows an insurer to serve a broad spectrum of customers’ financial and non-financial needs by collaborating with insurtechs and other partners.

“A bouquet of offerings is likely to garner higher perceived value compared with single offerings,” the report says.

The report is based on surveys and interviews with executives from incumbent providers and insurtechs in 20 markets including Australia, the US, the UK, Singapore, Japan, France and Germany.

Chubb report uncovers cyber complacency

Almost half of Australian SMEs don't understand their regulatory obligations under data breach rules and many more are ignorant of cyber threats, research by Chubb has found.

The insurer’s SME cyber preparedness report reveals that 47% of respondents are unaware of obligations under the Notifiable Data Breaches scheme introduced in February last year.

Data breaches which are likely to result in serious harm must be reported by companies with at least $3 million in annual turnover.

Affected individuals must be notified, along with the Office of the Australian Information Commissioner, which oversees the scheme. Failure to comply can result in significant financial penalties.

The Chubb report also finds 32% of senior leaders expect their business to be immune from cyber attack, 49% of SMEs have no data breach response plan in place, and only 27% have cyber insurance.

See Analysis.

Wrong Choice: pet insurance attack ‘doesn’t match the facts’

Pet insurers pay more than 85% of the 500,000 pet insurance claims made each year, illustrating customers do receive value from their policies.

While pet insurance policies make up only about 1% of total customers each year for common insurances like car, motor and home, they account for 12% of claims processed, the Insurance Council of Australia (ICA) says.

Pet insurance hit the spotlight last week after it was named on Choice’s annual “shonky” list of the worst products and services for 2019, with the consumer group criticising it as “riddled with exclusions and technicalities” and calling it one of the country’s worst-value insurance products.

Choice also says insurers should not be exempt from laws against unfair contract terms, arguing that this is a “special loophole for insurers” that must be closed.

Industry members hit back, saying the criticisms are overly simplistic and don’t match the facts.

ICA President Richard Enthoven, who is also CEO of major pet insurer Hollard Insurance Company, says Choice’s assessment “is not supported by the experiences of most customers, animal care experts or veterinary surgeons”.

“Choice failed to consider financial data, the history of the product and recent product developments,” Mr Enthoven said.

Hollard says more than 40% of its PetSure customers claim each year, submitting an average 5.6 claims a year. Over the past 12 months PetSure has paid about $140 million in claims benefits, and has grown from 40,000 policies in 2009 to more than 468,000 today.

About two-thirds of Australian households have pets. Choice estimates 16% of cat and dog owners have pet insurance.

ICA says all exclusions in pet insurance policies are clearly disclosed, as required by law, and annual limits are explained to customers.

After reviewing 86 pet policies, Choice said it does not recommend any pet insurance products due to their “many restrictions and the lack of competition”. Choice says it is much harder to shop around for a better pet insurance deal compared to shopping for travel or health insurance.

However, Choice did concede that the cost of pet insurance “may well be worth it if you consider the vet bills you may be liable for due to the breed of your pet, as long as the specific conditions are not excluded by the policy you select”.

Pressure growing on governments for cladding action

Pressure is growing on state governments to help fund building defect rectification as problems such as the Mascot Towers evacuation in Sydney add urgency to the issue, a Sedgwick executive says.

Victoria has announced a $600 million plan to assist with fixing combustible problems in some circumstances, but other states have rejected similar action as they continue to look at alternative ways to address the issues.

“There is enormous pressure in the other states at the moment to do something, but they seem to be holding firm,” Bruce McKenzie, National Manager Commercial Services and Major Projects at Sedgwick, told insuranceNEWS.com.au.

“My view is that it is inevitable it is going to happen and there is going to be some support.

“We are in a situation at the moment where we have buildings that are high-risk and should have work undertaken but, from a financial perspective, owners simply can’t afford to do it.”

Mr McKenzie says it is also important that timelines for fixing problems are not allowed to slip.

“The problem is that property values plummet for the ones that do have combustible cladding, the owners can’t sell, their insurance premiums are high and there is not a lot they can do until cladding [removal] work starts.”

Building owners seeking to reduce the cost of fixing cladding problems are finding enhanced fire prevention systems and other “performance solutions” are not satisfying insurers, he says.

Lower-cost alternatives to removing the cladding include partial removal, spray-on fireproofing and mitigation measures such as sprinklers.

Mr McKenzie says owners need to be aware that they might, at best, receive only a small premium reduction from alternatives to removal, even if measures have been ticked off through building rectification approval processes.

“The problem…is that insurers generally are not responsive to performance solutions.”

He says progress has been made in the past couple of months on understanding which replacement products are acceptable, and there is increasing discussion on improving the independence of the certification system to reduce potential conflicts of interest.

“This is getting back to a system where the certification becomes independent to the builder and there is more accountability shown,” Mr McKenzie said. “That is where we need to get to.”

Suncorp warns NSW, Queensland to prepare for storm season

Suncorp is urging residents of NSW and Queensland to trim overhanging trees, clean gutters and check their roofs in preparation for storms.

After an unprecedented start to the bushfire season, the insurer is warning Australians not to be complacent about storm preparation.

“Queensland is known for its extreme weather events,” Suncorp spokesman Joshua Cooney said. “While parts of the state are experiencing severe drought and bushfires, it’s important not to forget about the looming storm season.”

The worst affected Queensland region for storm-related claims in the year to June 30 was Townsville and surrounding suburbs, with Suncorp receiving more than 6000 storm claims --eight times more than a year earlier.

The Sunshine Coast and Gold Coast took second and third place for the state, with just over 3000 claims each. That was followed by Brisbane South with 1449 and Brisbane North with 1368.

In NSW, analysis of more than 14,000 storm-related insurance claims for the year to June 30 revealed Berowra Heights, in Sydney’s north, to be the worst affected suburb across the state.

Castle Hill, Wamberal, Paddington and Umina Beach made up the top five NSW storm hotspots.

Suncorp is urging Australians to store important documents in watertight containers, take photos of receipts or precious items, know where community meeting points are and have adequate insurance.

Most insurers ‘optimistic about investment outlook’

About 66% of insurers in Australia and the broader Asia-Pacific region are positive in their current investment outlook, a survey by global asset management firm BlackRock has found.

Some 32% are negative and 2% are unsure, according to the 110 executives who took part in the annual global insurance survey.

Australian insurers are the most optimistic in the region, BlackRock says, and many are looking to diversify their portfolios including placing more investment in the private market.

“Overall sentiment remains positive among Asia-Pacific insurers, suggesting they are positioned appropriately despite increasingly lower rates and higher volatility,” Head of Financial Institutions Group for Asia-Pacific Kimberly Kim said.

Globally, 360 senior executives participated in the BlackRock survey this year.

About 78% are upbeat on the short-term prospects and slightly over half do not expect a recession before 2022.

Canberra ‘scaling back’ support for medical indemnity schemes

Planned changes to medical indemnity legislation could eventually lead to a “gradual reduction” in support from the Federal Government, according to law firm Colin Biggers & Paisley.

The Medical and Midwife Indemnity Legislation Amendment Bill 2019 was introduced and read a second time in Parliament last month by Health Minister Greg Hunt.

One of the key changes involves removing the existing contract requirements for the premium subsidy support scheme. The scheme is presently administered via contracts with four insurance providers. The new arrangement essentially extends the scheme to more insurers who must provide universal cover to the medical practitioners they take on.

Insurers would be able to raise the risk loading based on the risk posed by a practitioner by up to 200% of the standard premium price. It is currently set at 100%.

The bill also introduces a separate allied health practitioner high cost claims scheme. It will mirror the existing high cost claims and exceptional claims schemes.

“It is apparent that the proposed amendments in the bill give effect to a gradual reduction in the level of Commonwealth support for the medical indemnity industry given that structural reforms have strengthened the sector,” Partner Michael Bracken says in a post on the law firm’s website.

He says the reforms have “strengthened the sector and reduced the uncertainty surrounding medical indemnity viability and evidence that medical indemnity insurers have in recent years consistently exceeded minimum regulatory capital requirements”.

“It is anticipated that monitoring of the support schemes will continue and that the Federal Government is likely to further consider scaling back support to reduce the cost.”

The Government stepped in to subsidise the medical indemnity market in May 2002 after United Medical Protection, then the country’s largest medical indemnity provider, was placed in provisional liquidation.

The collapse came at a time when the industry was facing huge increases in claims, costs and premiums.

Since then the Government has been funding seven professional indemnity schemes to ensure access to affordable cover for private sector medical practitioners.

“The Government remains committed to guaranteeing that these schemes continue to operate,” Mr Hunt said.

“In the 2018/19 financial year alone, the Government provided $83 million in support of practitioners and to the continual operation of these schemes. This bill continues and extends that support but places it on a sustainable and competitive basis, going forward.”

The legislative changes are set to take effect in July next year.

ICNZ blasts Wellington EQC taskforce’s plan

The Insurance Council of New Zealand (ICNZ) says a proposal to more than double the Earthquake Commission (EQC) cap to deal with quake-prone Wellington’s problems could lead to “perverse outcomes” and would be inequitable.

ICNZ says the proposal flagged by the Wellington Insurance Taskforce to raise the cap to $NZ400,000 ($374,348) is disproportionate to the issue, is based on a lack of evidence, and would cut private insurance competition and the benefits that brings.

“The taskforce has met just three times and undertaken very limited deep or broad analysis,” CEO Tim Grafton said.

“ICNZ and insurers have separately engaged with the Treasury to provide as much information as possible to inform decision-making and have discussed a wide range of options to address the as-yet unquantified unaffordability issue.”

The taskforce, chaired by Wellington Mayor Justin Lester, will submit recommendations to Finance Minister Grant Robertson by the end of the month.

Other proposals include building reforms, more transparency from insurers on premiums, an investigation into the role brokers play in setting premium levels and a portal to make property risk information available to the public.

The taskforce includes representatives of GNS Science, Engineering NZ, body corporates, property developers and ICNZ.

Mr Grafton says raising the residential cap from $NZ150,000 ($140,381) would mute pricing risk, leading to outcomes such as poorer building quality or converting commercial space to residential to benefit from subsidies.

The state-owned EQC insures residential buildings up to the cap level, with damage above that level covered by the private companies.

Insurance Brokers of New Zealand CEO Gary Young says his group has not been invited to participate in taskforce meetings and it is “ironic that they have just realised brokers play an important role” in the marketplace.

“The reality of the situation has to be faced up to,” he told insuranceNEWS.com.au. “There needs to be a greater understanding of what role insurance can play.

“Better information on risk and hazards would certainly help the public in this respect.”

NZ drone technology put to the test at remote volcano

Drone technology developed at the Victoria University of Wellington has helped analyse volcanic gases from PNG’s remote Bagana volcano, one of the most active in the world.

Volcanologist Dr Ian Schipper joined an expedition of international scientists where his modified drones were mounted with instruments and hardened to cope with toxic gases, allowing them to get closer to volcanic craters than ever before to capture samples.

The drones were developed with the Earthquake Commission’s (EQC) Biennial Grant in 2018. The EQC funds NZ$16 million ($15 million) of research and data annually to reduce the impact of natural disasters on people and property.

“From satellite observation, we expected Bagana to be one of the top 10 gas emitters in the world. What the team actually found was that instead of the thousands of tonnes per day of sulphur dioxide they anticipated, Bagana was emitting much less while they were there,” Dr Schipper said.

Dr Schipper was asked to join the team from Deep Carbon Observatory, led by Brendan McCormick Kilbride from the University of Manchester and comprising colleagues from Bristol, Cambridge and Sheffield, because his drones were highly portable yet robust.

The expedition took three flights, a boat ride and two days’ walking to get to their village base of Wakovi.

“I could operate the drones myself and carry them in my backpack,” Dr Schipper said. “My drones are highly agile, light, easily modifiable.”

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Corporate

AIG announces new CFO Australia

AIG has promoted Tibor Nagy to the position of CFO, Australia.

Mr Nagy has worked at AIG for almost 23 years, including stints in Budapest, Warsaw, New York and Bangalore, where he was AIG’s Global Finance Centre Controller until his promotion to the Sydney-based CFO role.

Mr Nagy reports to CEO Australia Noel Condon and CFO International General Insurance David Junius. He graduated as an economist from the Budapest Business School.

Mr Nagy replaces Debbie Wilson, who held the Sydney-based CFO role for three years before moving to Swiss Re as CFO ANZ in July.

PSC appoints Paragon founder Falk to board

PSC Insurance has appointed Paragon International co-founder and CEO Tara Falk as a board member following its acquisition of the Lloyd’s broker.

Ms Falk’s extensive experience in building a London broking business with clients in the UK and US will make a significant contribution to the board as PSC pursues growth organically and by acquisition, the company says.

“Tara is well known within the insurance marketplace, working with leading insurers in Lloyd’s, Europe, Bermuda and the US,” PSC says in a statement. “Tara’s experience is focused on the financial and professional liability market, serving many of the world’s leading professional service firms.”

Ms Falk has worked in the insurance industry for more than 30 years, starting her career at Willis before co-founding Paragon in 1996.

Paragon generates more than 60% of its revenue from the US wholesale market and will remain an autonomous unit of PSC in the wake of the acquisition, which was completed at the start of the month.

IAG trials vehicle repair initiative in NZ

IAG will trial a motor vehicle repair facility, Repairhub, in Auckland next month as customers demand faster high-quality repairs and improved communication during the process.

Repairhub will trial enhanced technologies and techniques in its equipment, repair processes and paint.

“Repairhub will use cutting-edge technologies and streamlined processes to provide greater customer experience, further improve quality and get our customers’ cars back on the road quicker,” IAG’s EM Claims Services Dean MacGregor said.

Customers will continue to have choice over who repairs their vehicle.

But New Zealand's Collision Repair Association (CRA) GM Neil Pritchard says the initiative is anti-competitive. He argues it is important that motorists have a resolution structure in place which provides a degree of independence in the event of any issues.

The NZ trial may be expanded into other markets via IAG Australia, Mr Pritchard says. The CRA would instead like to see the insurer work more closely with existing repairers to help reduce repair times and improve communication with customers.

IAG says the customer remains free to choose a member of IAG’s approved repairer network, Repairhub, or otherwise.

“We continue to have a very strong relationship with the industry and industry bodies, and we look forward to a continuation of that,” Mr MacGregor says.

The IAG Trade Scholarship Program has paid tuition for 515 people since 2002.

Suncorp selects start-ups for round two of incubator

Fintech start-ups Athenix and My Business Manager have been selected for the second round of Suncorp’s Digital Incubator Program, which aims to bring innovative ideas to life in a well-resourced environment.

Athenix brings potential to support B2B investment activities while accounting start-up My Business Manager will leverage the expertise of Suncorp’s small business banking team.

Based in Brisbane, the 90-day program allows participants to access mentors, designers, data and experts across security, business and technical. App-based businesses Eggy and Paypa Plane were selected for round one.

Steamatic heads west

Restoration company Steamatic Australia will start operating in WA this week.

The expansion follows the acquisition of Perth-based WA Restoration, a family-owned business that has been offering recovery services since 1997.

WA Restoration will tomorrow formally become part of Steamatic Australia, which has more than 25 service response centres nationally. The business works with insurance companies and loss adjusters providing critical post-disaster restoration services.

Based in Victoria, Steamatic Australia uses the brand under a licence agreement with US-headquartered Steamatic.

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Regulatory & Government

Insurance not ‘quasi-regulator’ of building standards: NIBA

Sub-par building quality is the culprit behind the construction industry’s professional indemnity (PI) crisis, and governments must focus on the issue.

“It is unfortunate that the insurance process is being used as a quasi-regulator of building standards,” National Insurance Brokers Association CEO Dallas Booth says.

Writing in an association publication, he says such an approach “really does not work, as insurance works well only when the underlying risks are being well managed, and insurance is needed only in the case of rare and unexpected losses”.

“When losses are occurring on a regular basis insurance does not work well as the cost of claims very quickly becomes unbearable for those who have to pay the premiums.”

Building surveyors and other industry groups say the PI situation has worsened in the past few months despite moves by governments to step up reform actions.

The measures announced so far have failed to restore the confidence of insurers, who will no longer provide exclusion-free PI covers to building practitioners.

“The crisis seems to be continuing,” Mr Booth told insuranceNEWS.com.au.

“The matter is being overseen by the Building Ministers’ Forum but it’s not clear to me that significant steps are being taken to remove the core problem or fix the core problem – which is defects in building standards and bad buildings basically.

“I’m not an expert in what is best in the area, but certainly it’s not much use from my point of view looking for an insurance solution. You have to find a solution which directly addresses building standards and building quality.

“Once you’ve done that, the insurance process will then come back and play its role.”

icare pledges to listen after appointing customer advocate

NSW state insurer icare has appointed an independent customer advocate to engage with customers and stakeholders to understand workers’ compensation scheme concerns.

The State Insurance Regulatory Authority (SIRA) is reviewing the scheme and many submissions have criticised poor claims management and communication through key agent EML.

Understanding customer needs will be “integral” to icare’s response to the review, and it has appointed former Return to Work SA director Darrin Wright as a “dedicated customer advocate”.

“I’ve seen how impactful it can be to really listen and respond to customers through driving reform in SA and I look forward to working with icare,” Mr Wright said.

CEO and MD John Nagle has pledged to listen to “constructive feedback” as icare continues to develop “a fairer system for both employers and their injured workers”.

“We acknowledge that in driving a fundamental change to fairness in the workers’ compensation system we have not always explained the issues and impacts broadly enough, and in a number of cases this has caused unnecessary confusion and uncertainty,” he said.

“We welcome the review of the Nominal Insurer and look forward to understanding the findings as we remain committed to delivering a neutral scheme that works for everyone.”

As reported by insuranceNEWS.com.au, a submission by Port Macquarie-based Oxley Insurance Brokers says the scheme is “failing terribly” and is in its worst state for more than 30 years.

The National Insurance Brokers Association has declined to publicly release its submission, but says the views of Oxley are representative of the NSW broker community.

Mr Nagle says he is disappointed by Oxley’s submission and says icare has “strong engagement and support across the broker community”.

But he says “some organisations have struggled with the level of change”.

Mr Wright will report directly to Mr Nagle and work with icare’s customer experience team. He will begin arranging meetings with customers and stakeholders.

SIRA expects the review’s final report before the end of the year.

Senator pushes for action on premium woes

Queensland Senator Nita Green has called on the Federal Government to act on the long-running insurance problem besetting northern Australia by adopting controversial measures proposed by the Australian Competition and Consumer Commission (ACCC).

Senator Green, from the Australian Labor Party, is the leading voice behind an online petition organised by the party’s Queensland branch pushing for implementation of the proposals.

They include a national home insurance comparator, standardising definitions of prescribed events and a ban on broker commissions.

The proposals have been widely criticised for failing to address the underlying cause of high premiums in the region – the Federal Government’s continuing refusal to engage on the need for mitigation projects.

“Insurance is becoming increasingly unaffordable for North Queenslanders,” Senator Green says in a recent Facebook post. “Everywhere I go I hear stories about premiums rising and some homeowners and businesses not being able to get insurance at all.

“I’m calling on the Federal Government to implement the ACCC recommendations without delay.”

Last month Senator Green also called in the Senate for the ACCC’s proposals to be taken up without delay.

For more on the online petition, click here.

Insurers welcome quad bike safety move

QBE and IAG have welcomed moves by the Federal Government to require quad bikes to meet minimum safety standards.

The two insurers respectively own Elders Insurance and CGU, two major providers of rural insurance for farm equipment including quad bikes.

About 75% of agricultural fatalities between 2010 and 2014 involved farm vehicles, with the latest available figures showing quad bikes accounted for the highest number of deaths and injuries.

Deaths and injuries from quad bike accidents cost the economy at least $200 million annually, according to the Australian Competition and Consumer Commission.

An IAG spokesman says the group “welcomes the introduction of the new standards by the Australian Government, which will help improve safety for quad bike users”.

“Quad bike accidents, including from rollovers, are a major safety issue for farming and rural communities,” he told insuranceNEWS.com.au.

“These changes are an important step to help protect farmers and their families who use quad bikes as part of their daily farming activities.”

In the measures announced last week, manufacturers must ensure their products meet US or European standards for components like brakes, suspension, throttle and clutch within 12 months. The bikes must also undergo stability tests, with the results displayed at the sale premises.

Every vehicle will also require a warning label advising buyers of the risk of rollover.

Importantly, another set of rules which must be complied with before the end of 2021 including fitting or integrating into the quad bike design an “operator protection device”. The bikes will also have to meet minimum stability requirements.

Elders Insurance says its agents have been working with clients from the farming community to mitigate the risks of quad bikes.

“In line with this, Elders Insurance welcomes the new quad bike safety standard and looks forward to seeing our farming customers and their communities better protected,” a spokesman told insuranceNEWS.com.au.

The spokesman says Elders’ Farm insurance products have no exclusions for quad bikes.

ICA urges rethink of add-on sales deferment model

The Insurance Council of Australia (ICA) has voiced concerns “beneficial insurance products” could be forced to observe the four-day pause period Treasury intends to apply to all add-ons available to consumers.

In Treasury’s planned three-tier deferred sales model, the second tier would by default cover all add-ons that do not fall in tiers 1 and 3.

A mandatory four-day delay is one of the conditions attached to tier 2 products whereby the intermediary or insurer can only make contact once with the consumer by writing after the primary product sale.

“Given the range of beneficial insurance products potentially caught by tier 2… it is crucial that there be a realistic and meaningful process for inclusion in tier 3,” ICA says in a submission to Treasury.

“Many of these products would be suitable for exclusion from the application of a [deferred sales model] through primary legislation and [ICA] looks forward to working through, with Treasury, the factual evidence to justify exemption.”

In the first tier, the Australian Securities and Investments Commission (ASIC) would use its new product intervention powers for the most “egregious” products.

The third tier captures products that ASIC deems appropriate for exemption from deferred sales conditions. Comprehensive car insurance and other add-ons required under law as a condition of primary product purchase would fall into this category.

ICA says it understands the proposed approach “represents a hard policy decision” by the Government that is “not open for debate” but it still hopes Canberra will reconsider its position.

ICA is keen to swap the proposed approach to tiers 2 and 3.

“Tier 3 could be the default treatment for all add-on insurance not deemed appropriate for tier 1 treatment,” it says. “ASIC could then use its [product intervention powers] to require products of proven risks of serious consumer detriment to be sold with the [deferred sales model] under tier 2.”

Consumer advocates say in a joint submission that the three-tier sales model is “overly complex” and subject to limitations of ASIC’s product intervention powers.

ASIC has an ongoing consultation over plans for a deferred sales model to apply to add-ons sold through car dealers.

SA orders cladding repairs for risky buildings

A SA Government cladding audit of buildings has identified 28 private residential blocks in urgent need of remediation works.

Seven of the buildings are deemed “extreme risk” and require immediate action. For the 21 buildings deemed “high risk”, repair works must be carried out within 12 months.

The statewide probe was ordered following the 2017 Grenfell Tower fire and the Lacrosse building blaze in Melbourne in 2014.

But Infrastructure Minister Stephan Knoll has indicated taxpayers won’t be stepping in to fund the repairs.

“For privately owned buildings, councils are responsible for ensuring that owners of private buildings in their jurisdictions take the necessary actions to reduce the risk to an acceptable level,” he said.

“It is our expectation that building owners will notify occupants of their respective buildings and keep them informed throughout the remediation process as appropriate.”

The locations of the buildings are being withheld “for safety reasons”.

The findings from the SA Building Cladding Audit Interim Report were released last week. Click here for the report.

Christchurch service resolves 608 claims in first year

The Greater Christchurch Claims Resolution Service (GCCRS) has resolved 608 claims in its first year of operation.

The New Zealand Government established the free service in October 2018 to help fast-track outstanding Christchurch quake-related claims. It is funded by the Ministry of Business, Innovation and Employment (MBIE), the Earthquake Commission (EQC) and government-owned Southern Response.

“Nine years on from the earthquakes there are still too many Cantabrians who aren’t able to move on with their lives because of unresolved insurance and EQC claims,” NZ Minister of Energy and Resources Megan Woods said.

The one-stop service provides free legal, engineering and mental health support to people to help them get their claims resolved.

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Life Insurance

Industry hits out at Canberra over new disciplinary body

The Government’s decision to set up a disciplinary system for financial advisers appears to have blindsided the industry, which had been preparing for the launch of its own monitoring scheme on January 1.

Plans by the industry to register Code Monitoring Australia (CMA) to oversee financial advisers’ compliance with the code of ethics published by the Financial Adviser Standards and Ethics Authority (FASEA) have subsequently been withdrawn.

The CMA was expected to monitor industry compliance with the code.

A statement on Friday from the office of Treasurer Josh Frydenberg says the new setup will replace “the role of code monitoring bodies” that were due to be established as part of professional standards reforms.

The proposed disciplinary system and single disciplinary body is one of the recommendations made by the Hayne royal commission into financial sector misconduct.

Treasury will immediately consult on the move and aims to have the new system ready in early 2021, subject to legislative approval.

It says financial advisers must still observe the code of ethics. In addition, the Australian Securities and Investments Commission is considering the steps needed to ensure licensees do not breach the law by not registering with a code monitoring body.

The industry has criticised the timing of the Government’s move, which comes just a month before financial advisers had to register with the now ditched CMA. The move has left it with no choice but to ditch the CMA.

“[The] announcement by the Government makes it unreasonable for us to proceed with CMA,” a joint letter by the six financial adviser bodies says. “We need to avoid adding complexity, further duplication and cost to the regulation of financial advice.”

“We are committed to ensuring that appropriate disciplinary procedures and consumer protections are in place but are disappointed that the announcement is so late in the development process.”

The six financial adviser groups in the joint letter are the Financial Planning Association of Australia, the Association of Financial Advisers, the Boutique Financial Planners, the Financial Services Institute of Australasia, the Self-Managed Super Fund Association and the Stockbrokers and Financial Advisers Association of Australia.

ASIC expects to release TPD findings this month

The Australian Securities and Investments Commission (ASIC) expects to release this month its findings on the industry’s handling of total and permanent disability (TPD) claims, a spokesman told insuranceNEWS.com.au today.

In August ASIC Chairman James Shipton mentioned that the regulator would be undertaking a review of concerning product features and practices as part of an increased oversight of the financial services sector.

More than 13 million Australians have TPD cover and nearly 90% are insured through their super funds.

“We will take enforcement and other regulatory action against mis-selling of insurance products, particularly to vulnerable consumers, and review concerning product features and practices,” Mr Shipton told the Financial Services Council Summit in August.

“We will also support and implement insurance law reforms that will enhance our ability to act in relation to poor conduct and poor consumer outcomes in insurance – especially coverage of claims-handling.

“As these legislative reforms are implemented, we will look to take action on the consequences of unfair contract terms and concerns in claims-handling.”

ASIC bans adviser for 7 years

The Australian Securities and Investments Commission (ASIC) has banned a Queensland-based financial adviser for seven years for inappropriate insurance advice.

ASIC found Ian Victor Haisman was in some circumstances recommending very high levels of insurance cover compared to his clients’ income, and recommending life insurance policies to clients with no dependents and no reasonable basis for the policies.

ASIC’s investigation looked at advice provided to clients from early 2016 to early 2018 when Mr Haisman was an authorised representative of Bristol Street Financial Services in Beenleigh.

The regulator says Mr Haisman didn’t investigate his clients’ existing super and insurance arrangements or provide cost and risk comparisons when investigating product switching, and was using templated strategies and giving recommendations regardless of his clients’ personal circumstances.

He also failed to provide clear, concise, effective statements of advice to clients.

Mr Haisman can appeal the decision to the Administrative Appeals Tribunal.

AMP unites banking and wealth businesses

AMP Limited has merged its banking and wealth management businesses under a new banner, AMP Australia.

There is no change to AMP Life, which AMP has agreed to sell, or the role of the insurance unit’s leader Megan Beer.

The new AMP Australia business will be headed by Alex Wade, currently CEO of Australian Wealth Management. Rod Finch, currently MD Wealth Products and Platforms, becomes MD AMP Bank when current banking CEO Sally Bruce vacates her role in November.

“With Sally’s decision to step down we have been able to accelerate our internal re-organisation,” AMP Ltd CEO Francesco De Ferrari said.

New Zealand’s central bank blocked an agreed sale of AMP Life to Resolution Life in July when it refused to stamp the deal unless the buyer agreed to “ringfence” AMP’s New Zealand assets.

AMP said in August that a revised deal with Resolution Life has been agreed, and it will work with regulators in Australia and New Zealand to address concerns.

AMP expects the deal to complete in the first half of next year.

Super sector scrutiny coming soon

The superannuation sector is set to come under political scrutiny yet again with a series of hearings to be held next month.

The Federal Parliamentary Standing Committee on Economics will grill super industry representatives and umbrella organisations on progress in implementing the recommendations of the Hayne royal commission.

AustralianSuper, IOOF, Suncorp, QSuper, REST, Hostplus, Industry Super Australia, the Association of Superannuation Funds of Australia, and AMP Super will be questioned.

Committee chair Tim Wilson says the hearings are an important part of the committee’s scrutiny of the financial sector.

“As the superannuation system is a significant mechanism enabling Australians to support themselves in retirement, it is crucial that the superannuation sector is operating effectively, fairly and to the benefit of fund members,” he said.

Commissioner Hayne recommended banning financial advice fees from MySuper accounts, and said advice fees should only be allowed with clients’ express approval. The prudential regulator is also working through proposed amendments to ensure group insurance arrangements are in the best interests of members.

Federal Treasury is also consulting with the life industry on the impact of adopting universal definitions, terms and exclusions for default life insurance in super to determine how it will affect premiums.

The Government believes standardisation will push funds to compete more heavily on price, benefits and the claims handling process. But some funds are arguing that standardising total and permanent disability definitions will result in higher premiums.

The hearings will be held on November 21 and 22 at Parliament House, and will be broadcast live.

AMP singled out in Choice Shonky Awards

AMP Superannuation has more “zombie accounts” being eaten away by insurance and fees than any other super fund, Choice says.

The bank was included in the consumer group’s Shonky Awards for “ruined retirements”. AMP’s life insurance has some of the longest delays in processing claims, and consumers may be waiting months for a payout, Choice says.

Many of the company’s super funds are performing poorly, it adds.

Choice CEO Alan Kirkland says AMP is getting “money for doing nothing”.

“Managing people’s retirement funds isn’t your average business – there’s a higher moral standard to meet when it comes to people’s security and comfort in older age, and AMP have failed this standard,” he says.

AMP’s criticism from the Hayne royal commission was deserved, he says. AMP’s financial advice division was savaged during the commission hearings for charging fees-for-no-service, and it may cost up to $1 billion to remediate customers.

“If your superannuation is with AMP, chances are you’ve had your retirement leeched off to fund its executives’ lifestyles,” the Choice report said.

AMP says it can be difficult to draw accurate comparisons in relation to inactive accounts “due to the varied characteristics of products within trusts and across superannuation providers”.

“For example, a large proportion of the AMP accounts classified in APRA’s data as inactive receive a capital guarantee,” a spokeswoman said. “It is often in members’ best interests to maintain these accounts given the future benefit they will provide.”

AMP says it supports legislative measures that aim to reduce duplicate or inactive accounts.

“In 2018, we helped more than 85,000 AMP members identify duplicate accounts, with many of these members choosing to consolidate multiple superannuation funds where it was in their best interest to do so. This work to reduce duplicate or unused accounts is continuing.”

AMP says its life insurance business has one of the highest claims acceptance rates in the industry and pays more than 95% of claims.

“In 2018, we paid $1.21 billion in Australian insurance claims,” the spokeswoman said. “AMP continues to invest in improving its claims-handling generally.”

Raising the standards: working group takes off

The Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and a working group of life insurers are establishing a framework to help lift professional standards across the life insurance industry.

The Life Insurers Professional Standards Working Group includes AIA, AMP Life, BT Life, ClearView, MLC Life, TAL and Zurich. They hold 95% of the GWP in the life industry.

The Australasian Life Underwriting and Claims Association is also involved.

The framework will determine the different “job families” and competencies needed to fulfil job roles at every level of experience. It will also help insurance CEOs to understand what investment is required to build professional skills within the company. ANZIIF has been working with insurers on the framework over the last two years.

To aid the establishment of better standards, ANZIIF is planning a demographic survey to understand what level of background and skills industry employees possess, followed by another to develop a knowledge-based assessment within the framework.

AIA CEO Damien Mu told insuranceNEWS.com.au the framework will involve taking a closer look at the capabilities they needed across claims, underwriting, product and distribution, which “require a high level of engagement with customers”.

“The framework will present a great opportunity for our people to continue expanding their professional capabilities and we will continue to assist them in meeting and maintaining professional standards, so we’re able to deliver the best outcomes for our customers,” he said.

According to ANZIIF, the program will improve the professionalism of the life insurance industry, build community confidence in life insurance and create a better experience for customers. It will also improve strategies to attract and retain career employees.

It says the Hayne royal commission exposed a need to “place emphasis and investment into building the professional skills of people in life insurance”.

Taking control: MetLife and SuperFriend in claims pilot

MetLife and SuperFriend are trialling a program to help claims managers provide intensified support to customers.

The program aims to equip claims managers with a broader range of interpersonal skills to improve their engagement with policyholders, including using motivational interviewing.

Techniques are devised to help claims managers and customers develop ideal personalised goals to improve the customer’s quality of life. The program also aims to help claims managers understand customers’ unique situations.

SuperFriend developed the tailored program for claims managers after incorporating in-depth research from its industry partnerships. The pilot will conclude in early 2020, after which SuperFriend plans to roll it out to other insurers.

SuperFriend CEO Margo Lydon says the approach is designed to make the process” a lot more human” by empowering the customer and equipping the claims manager with improved skills.

NZ financial advice disclosure requirements released

Financial Advice New Zealand (FANZ) has welcomed draft regulations around new disclosure requirements for financial advisers, but says they need fine-tuning.

As part of the changes under the new financial advice regime, advisers must meet certain disclosure obligations when providing advice to ensure they are making informed decisions, as well as keep a record of each disclosure made.

The Ministry of Business, Innovation and Employment released an exposure draft of regulations governing these obligations for industry feedback last week.

CEO Katrina Shanks says FANZ “generally supports the proposed requirements around record-keeping regarding disclosure made to clients”.

“In our view some of them need further consideration and development, and we will be providing feedback on them,” she said.

Under the changes, advisers have to disclose their licence and duties, the advice and products they can advise on, fees and costs, commissions and incentives, how they handle complaints, and their previous disciplinary history including certain convictions, before giving the advice.

The disclosure records will make it easier for the Financial Markets Authority to police advisers.

The new regime will come into effect in June next year.

MLC Life recruits ex-NSW Treasury director

MLC Life has appointed Andrea Forbes as Executive Lead – Relationship Management in its group insurance team.

Ms Forbes previously worked for the NSW Treasury as director of the Commercial Policy and Risk team. She was also formerly executive GM, strategy, education and external relations at Sunsuper. She will be responsible for improving MLC’s relationship with existing and potential clients.

She will report to Chief of Group and Retail Partners Sean McCormack.

Integrity launches group insurance for tiny business

Integrity Life is launching a new combined group insurance product for small to medium businesses.

The Five+ product provides both life and income insurance to businesses with as few as five employees, up to as many as 50. It also offers an income benefit to employers and can be bought online.

Integrity says it is using a simple product design, unique administration structures and a technology platform to solve the problem of traditionally high cost structures. Group insurance has historically been unavailable to businesses with fewer than 20 workers, it says.

Integrity MD Chris Powell says start-ups and small companies can’t attract and retain talent as they struggle to offer the same perks and benefits that their larger competitors do.

Integrity is trialling the solution with the national insurance broker networks that it worked with to develop the product. It is planning to extend it gradually to the wider market over coming months.

Five+ is “off the shelf” and has no minimum premium, instant quoting and a straight through application process, death and TPD benefits of $200,000, and group salary continuance. It will cost between 1-2% of salary.

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The Professional

Gallagher fills two new national roles

Gallagher has appointed two executives to new national roles within its Australia Workplace Risk practice.

Christian Lombardo has been named National Manager, Business Development and Strategic Partnerships and Brianna Cattanach becomes Principal Consultant for a new national education and training division.

Ms Cattanach will be responsible for strategic planning, development of content and event co-ordination and facilitation across the training program.

The role draws on existing training available which includes mental health and wellbeing, injury management, people management, team dynamics, communication and customer interactions, the ageing workforce and safety.

Both positions report to National Head of Workplace Risk Vivienne Toll.

Vale ‘great bloke’ and former SUA underwriter

Brisbane-based Specialist Underwriting Agencies (SUA) has advised of the passing of retired colleague Denis John Morrissey. He was 74.

A service celebrating Mr Morrissey’s life was held on Friday at St Mary’s Church, Gatton.

“Denis was a great bloke, a fantastic and solid friend, a fun work companion and someone who contributed greatly to the insurance industry and his community. He will be greatly missed,” SUA director John Iles said.

Mr Morrissey’s insurance career began in 1960 at Mercantile Mutual, followed by stints at General Accident, United Insurance, South British Insurance, NZI and IUA. He worked at SUA for eight years until his retirement in June 2012.

Mr Iles says Mr Morrissey was passionate about business interruption and would spend hours with brokers discussing the best way for them to manage their clients’ exposure.

Aon risk conference looks at managing volatility

Aon’s annual risk management conference begins in Melbourne tomorrow with the theme Maximising Performance, Managing Volatility.

The event is part of the company’s Insights series and follows conferences in Singapore and London in the past month.

Aon Australia CEO James Baum says the conference aims to provide information, techniques and tools for harnessing the opportunities that come with volatility.

“Global risks are at an all-time high, and risk readiness has fallen to its lowest point in over a decade, according to the Aon 2019 Global Risk Management Survey,” he says in a statement.

The survey found the top five risks in Australia are damage to reputation or brand, economic slowdown, business interruption, increasing competition and cyber attacks or data breaches.

Aon is expecting about 300 people to attend the two-day event at the Sofitel on Collins.

Marsh principal joins claims investigator

Huxley Hill Group, which provides risk and compliance services, has appointed Nick Zomer as Victorian State Manager.

Mr Zomer was most recently Marsh managing principal.

Huxley Hill works with the insurance industry offering a range of services, including workers compensation claims investigation and property surveys.

Clyde & Co five move to Wotton + Kearney

A team of five insurance lawyers with expertise in financial lines, property and energy has joined Wotton + Kearney’s Perth operations.

The team, led by Partner Tim Searle, joins from Clyde & Co and comprises three senior associates – Jade Macukat, Alex Gregg and Gemma Cooper – as well as associate Alex Ward-Noonan.

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International

Insurers brace for losses after Hagibis hits Japan

Typhoon Hagibis brought torrential rainfall and flooding to Japan at the weekend, killing more than 30 people, washing away roads and flooding thousands of homes and businesses.

Loss adjusting firm Sedgwick says the event is expected to trigger a large volume of commercial insurance claims and the impact will be felt beyond Japan as overseas-based multinationals are affected by supply disruptions.

The main industries in the worst affected areas include electronics and component manufacturers that supply the motor vehicle and telecommunications sectors.

“In addition to the property and subsequent business interruption losses, we expect contingent business interruption losses as well due to the impact on supply chains,” Sedgwick says.

The typhoon made landfall on Saturday evening south of Tokyo near the Izu Peninsula and moved north across the main island of Honshu, bringing torrential rains to the prefectures of Kanagawa, Chiba, Nagano, Gunma and Fukushima.

Levees along 21 rivers collapsed, a cargo ship sank in waters near Tokyo and more than 200,000 homes were without power on Sunday, local media reports said.

Hagibis follows last month’s Typhoon Faxai, which risk modelling firm RMS estimates caused insurance losses of $US5-9 billion ($7.4-13.2 billion).

S&P Global Ratings said in August that last year’s Typhoon Jebi had become the costliest storm on record for Japan, with insured losses continuing to climb well after the event to reach $US15 billion ($22 billion).

September ‘worst month’ for natural disasters

Last month was the costliest for natural disasters, thanks to Hurricane Dorian and Typhoon Faxai, says Aon’s latest Global Catastrophe Recap report.

Hurricane Dorian made landfalls in the Bahamas, US, and Canada, with 297kmh winds making it the joint strongest Atlantic landfalling hurricane on record.

Total economic and insured losses in the Bahamas alone are expected to reach well into the billions of dollars, and it is likely to become the country’s most expensive disaster on record.

Further economic damage in the US and Canada is poised to hit a combined $US1.5 billion ($2.21 billion).

Typhoon Faxai made landfall in Japan’s Chiba Prefecture and later affected many populated areas, including Tokyo.

The storm damaged at least 40,000 homes, with the General Insurance Association of Japan reporting 185,000 claims. Total insured losses are expected to approach $US5 billion ($7.36 billion), with overall economic costs even higher.

“September is typically one of the most active from a meteorological perspective as it represents the historical peak of tropical cyclone activity in the northern hemisphere,”

said Steve Bowen, Director and Meteorologist within Aon’s Impact Forecasting team.

“Unsurprisingly, this also translates into being one of the costlier months for the insurance industry. The events of 2019 will mark, thus far, the most expensive month for disasters.”

Mr Bowen says despite September’s losses, this year is still quieter overall compared with the previous two years.

US enjoys reprieve with fewer wildfires

The US wildfire season experienced below-average fire activity this year after abundant spring moisture and below-average temperatures across western states, although large fire potential is expected to persist in California until December.

A report from reinsurance broker Guy Carpenter says the number of fires so far this year is less than any other year in the past decade excluding 2013, and the area burned is “on par with the average”.

That is a significant change from the past two years when wildfires ravaged California, sparked by long-running drought and conditions caused by climate change.

Wildfire season peaks in August and ends in September for the majority of North America, although in California seasonal Santa Ana winds can influence fire into autumn.

California’s Camp wildfire in November 2018 was the single largest insurance loss event last year at $US12 billion ($17.8 billion), according to Swiss Re. It burned more than 62,000 hectares and destroyed at least 18,700 structures, and smoke caused widespread air pollution throughout the San Francisco Bay Area.

Most weather models agree there will be average to slightly above-average Santa Ana wind activity this season. August and September were abnormally dry in California.

“Despite the wet spring and early summer, finer fuels have dried out in late summer and are quite receptive to fire across most of the state,” Guy Carpenter says. “It should be stressed that significant wildfires may still occur in regions forecast for normal or below normal potential.”

The combined precipitation and temperature outlook moving into October indicates an increasing, although not extreme, risk for fall season wildfire for California, it says.

There are three large uncontained fires burning in the US, although none are immediately threatening structures. Lightning fires across the Great Basin in Nevada and in the northern Rockies, which struck in mid-September, are still burning.

Supply chain risks face ‘extreme protection gap’

Risk assessment methods need to be overhauled to protect companies from global supply chain disruptions as virtual and physical interconnection increases, Lloyd’s and modelling firm Air Worldwide say.

In a new report outlining a new modelling approach, they say that business interruption (BI) policies for a company’s own assets, and contingent business interruption (CBI) policies for issues within wider supply networks, are failing to address the problems.

They say “an extreme protection gap exists in the supply chain insurance space, and the take-up rate for CBI insurance is minimal”.

“For this emerging risk, the insurance industry cannot rely on old techniques of taking historical data and projecting it forward.”

Advances in data-mining and machine learning offer an “alternative paradigm” to develop predictive, quantitative models to assess disruption costs, according to the report, Hidden Vulnerabilities in Supply Chain Risk: A Quantitative Risk Modelling Framework.

It suggests insurers, corporations and modelling companies should consider working together in developing data and analytics products for emerging interconnected risks.

Supply chain disruption impacts for global companies were highlighted by Japan’s 2011 earthquake and tsunami, and flooding in Thailand in the same year.

An increase in global trade has also been accompanied recently by the wider adoption of cloud technologies by corporations. A Lloyd’s report last year estimated a three- to five-day outage in the US could generate losses of $US8.6 billion ($12.8 billion) for manufacturing alone.

The Lloyd’s report has been published alongside a guide by UK risk management group Airmic titled Complex Supply Chains in a Complex World.

Fewer insurance M&A deals reported

Global insurance industry mergers and acquisition (M&A) deals worth $US4.04 billion ($5.94 billion) were announced in August, according to analyst GlobalData.

The value marked a decrease of 15.7% on the previous month, and a drop of 13.6% compared with the last 12-month average.

In terms of volume, North America was the top region for deals, followed by Europe and Asia-Pacific. The top country for activity was the US with 27 deals, followed by Canada with six and the UK with five.

So far this year, up to the end of August, insurance M&A deals worth $US18.84 billion ($27.72 billion) have been announced, marking a decrease of 68.6% year-on-year.

US personal lines rates keep on climbing

Personal lines insurance in the US continued to record rate increases in the third quarter of 4.5%, insurance exchange MarketScout says.

This comes after a 3.5% rise in the second quarter.

Average rates for home insurance increased the most at 6.5%, driven by rate increases in catastrophe-prone areas in Florida and California. Auto and personal articles increased by 1% over the third quarter to 4.5% and 3.5% respectively.

MarketScout CEO Richard Kerr says catastrophe-exposed homes are suffering significant increases even without being struck by catastrophes like Hurricane Dorian.

Property and casualty insurers saw rate increases in almost every industry and line, with a composite rate increase of 4%. Commercial property was up 4.5%, and business interruption increased by 4%.

Auto underwriters increased prices by 6.5% in the third quarter. Surety is the only line that showed any moderation, with a price decrease from 1.5% to 1%. Workers’ compensation rates held steady with a reduction of minus 1.5%.

The third quarter was “relatively benign” for property insurers, Mr Kerr says. “This helped slow the rapid pace of increases; however, property rates continue to trend upward.”

Munich Re raises stake in US digital specialist

Munich Re has spent $US250 million ($370 million) to take its stake in Californian start-up Next Insurance to 27.5%.

Next Insurance offers tailored digital insurance solutions for American SMEs, a market with an annual premium volume of $US139 billion ($205 billion).

Munich Re-owned Digital Partners has been working with the Californian business since 2016.

“Next’s data- and technology-driven business model offers outstanding growth opportunities, which we will harness together,” Board of Management Chairman Joachim Wenning said.

“This investment emphasises Munich Re’s commitment to be the leading provider of digital insurance solutions. It also helps Munich Re expand its footprint in the promising insurance market for SME customers in the US.”

The transaction is subject to regulatory approval.

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Analysis

Heads in the sand: SMEs take cyber gamble

It’s routinely flagged as one of the top business threats across the globe, but many Australian SMEs think they’ve got cyber risk covered. The trouble is they almost certainly haven’t.

A new survey from Chubb shows ostrich syndrome is in full effect as small business owners and managers display a confidence that’s clearly at odds with reality.

The insurer’s second annual SME cyber preparedness report draws worrying conclusions about levels of ignorance and the possible consequences.

Almost half of respondents (47%) are not aware of their regulatory obligations under the Notifiable Data Breaches (NDB) scheme.

This is hard to believe. Those failing to comply with the rules, introduced with fanfare more than a year ago, face significant financial penalties.

“Do SMEs think they are above the law?” Chubb’s Cyber Underwriting Manager Asia Pacific Andrew Taylor asks.

While larger companies seem to understand their obligations, Mr Taylor says SMEs are less clear.

“The report found that many SMEs do not understand precisely what type of data breaches require notification,” he says.

“This is a huge cause for concern. A cyber incident can be catastrophic for a smaller organisation, and this lack of understanding around reporting obligations raises the stakes further.

“While the NDB scheme is receiving more notifications, it is highly likely that many more breaches have gone – and continue to go – unreported.”

Chubb says SME leaders’ misplaced confidence has risen since the previous survey, even as cyber warnings intensify.

Almost one in three (32%) senior leaders expect their business to be immune from attack, 49% of SMEs have no data breach response plan in place, just 43% invest in cyber training for staff, and only 27% have cyber insurance.

Only 33% of respondents thought a cyber incident would have a significant impact on reputation, with 40% believing it would affect revenue and/or sales.

Perhaps most disturbing of all, 79% of SMEs are confident they can overcome a breach by sophisticated hackers within 24 hours.

As insuranceNEWS.com.au has previously reported, national brokerage Insurance House took a month to fully recover from a ransomware attack earlier this year.

The delay occurred despite Insurance House losing no data, and having disaster recovery plans, back-up environments and cyber insurance in place.

Chubb’s Cyber and Technology Industry Practice Manager Australia and New Zealand John DePeters says the insurance industry must work together to improve client understanding.

“There is a collective opportunity for the insurance industry to help clients tackle this and brokers are very keen to help,” he told insuranceNEWS.com.au.

Mr DePeters says there may be a case of “breach fatigue”, where SME leaders read almost constant reports of large business breaches but think it won’t happen to them.

“There is a perception that this is a large business exposure, but actually small- to mid-sized businesses are the low-hanging fruit and [are] more vulnerable.

“The reality is it takes a really strong incident response, and we have seen many cases where the recovery runs into weeks and months.”

The NDB scheme received 967 breach notifications for the 12 months from July 1 last year.

The Office of the Australian Information Commissioner confirmed to insuranceNEWS.com.au that as yet there have been no financial penalties issued for failing to comply with the scheme.

The Chubb report says the most common incidents faced by SMEs in the past 12 months were phishing compromises (21%), data loss (15%) and business interruption as a result of system malfunctions or technical faults (13%).

Mr DePeters urges Australian SMEs to “review their preparations closely”.

“In the coming years, the global economic cost of cyber risk is forecast to increase substantially,” he said.

“With SMEs making up 96% of all businesses in Australia, they will be hardest hit.”