19 April 2021
Australian general insurers, like their peers in the Asia Pacific region, will be looking to strengthen their underwriting earnings to make up for dwindling investment returns caused by the persistent low-interest rate environment, according to Fitch Ratings.
In a new report, the ratings agency outlined the implications for Asia Pacific insurers from what it says are “lower-for-longer” rates.
It says non-life insurers with short-tail classes, such as motor, are likely to be the least affected while the impact on non-life insurers and reinsurers with long-tail business will hinge on their ability to reprice over time, subject to competitive pressure.
With earnings under pressure from a weaker investment outlook, underwriting profits will become more important across all lines.
Insurers will focus on lowering loss ratios through price increases and cutting expense ratios by streamlining operations.
However, the extent of premium hikes will be subject to affordability constraints as the region’s economies have yet to return to their pre-pandemic state.
Associate Director Insurance Kanishka de Silva says in Australia rates continue to harden at varying degrees across the different lines.
“For some classes it will be more gradual as affordability is a key consideration,” he told insuranceNEWS.com.au.
“What you are looking at is whether rates are sufficient to meet the claims inflation so that will be what they are aiming for but I guess insurers will be mindful of competitive pressures as well so maintaining unit count would also be a consideration.”
The report says non-life insurers with long-tail businesses are likely to strengthen reserves as investment income will be insufficient to fund future claim payments.
“Insurers typically invest in long-dated bonds to back long-tail insurance liabilities,” the report says. “However, inappropriate reserve releases to boost short-term performance amid falling investment income remains a risk.
“Ensuring premiums are sufficient to meet future claims is key to maintaining profitability.”
Click here for the report.
Insurers have received some 2149 claims for losses from Cyclone Seroja, the Insurance Council of Australia (ICA) says.
No loss estimates are available yet as the recovery and clean-up operations continue more than a week after the category 3 storm made landfall between the townships of Kalbarri and Northampton in WA.
ICA declared the cyclone an insurance catastrophe for parts of WA that bore the brunt of the storm. At least 70% of buildings in Kalbarri have been flattened, according to national broadcaster ABC News.
James Cook University Professor of Physical Geography Jonathan Nott has warned Seroja “may be a timely wake-up call” for Australia and its approach to mitigating the impact of future cyclones.
“It appears to be one of the more intense tropical cyclones to make landfall that far south on the western Australian coast,” Professor Nott told insuranceNEWS.com.au. “It’s just highlighting that these things can occur.
“We can’t say specifically climate change is responsible for this cyclone. All that we can say is that with climate change, we can expect to see more of these sorts of events in the future.
“It may be the case that we are going to see more of this sort of damage in the future so obviously that has big implications for insurance.
“It also has implications for the engineering of dwellings too and whether we might start talking about the possibility of extending the wind zones, the wind areas further south.”
According to Professor Nott, who specialises in reconstructing long-term natural records of extreme events, cyclones with intensity similar to that of Seroja rarely make it so far south in WA.
Records show this has only happened 26 times in the past 5000 years.
“Unfortunately, climate change is likely to mean disasters such as Cyclone Seroja will become more intense, and will be seen further south in Australia more often,” Professor Nott said. “In this regard, Seroja may be a timely wake-up call.”
The saying slow as a wet week took on a whole new gravitas last month as the NSW coast experienced its wettest seven-day period since national daily records began in 1900.
Rainfall over the area of NSW which drains into the Tasman Sea averaged a record-breaking 252.9 millimetres in the seven days to March 24. Five consecutive days of between 30 and 50 millimetres was exceptional and resulted in the record weekly total.
“Events in which the full length of the NSW coast experiences significant heavy rain are rare, reflected by the fact that the week ending 24 March 2021 was the wettest on record averaged over coastal NSW,” a Special Climate Statement issued by the Bureau of Meteorology today says.
The weekly average total for the whole of NSW, including coast and inland areas, was 102.2 millimetres, the third highest on record after larger weekly averages in 1974 and 2012.
During the last half of March, heavy rainfall extended from central Australia to northern inland NSW, resulting in significant flooding on some inland rivers and most coastal catchments in NSW and some parts of south-east Queensland and eastern Victoria.
“The stand-out difference in March 2021 is the heavy rainfall in inland NSW, where many areas received three to four times their average monthly total during March 18-24,” the Bureau says.
Flooding reached record heights on the Hastings and Manning Rivers while the Hawkesbury–Nepean catchment in Sydney experienced its most significant flooding for more than 30 years as extreme rainfall struck many parts of eastern and central Australia in the second half of last month.
A high-pressure system in the Tasman Sea and a low-pressure system off north-west Australia fed a large volume of moist tropical air into eastern Australia.
“As the climate warms, Australia's heavy rainfall events are expected to become more intense as moisture in the atmosphere increases by about 7% per degree of warming,” the Bureau says.
“Rainfall changes in specific locations, especially areas with complex topography such as coastal NSW, will have a higher level of uncertainty due to changes in the occurrence, strength and position of synoptic weather systems.
“For the Australian continent, there is evidence that a higher proportion of total annual rainfall has come from heavy rainfall days in recent decades,” it says.
March rainfall totals broke records in many locations, according to the special report which crunches the numbers in full detail on the extraordinary event, which the Insurance Council of Australia (ICA) declared a catastrophe and is expected to result in about $1 billion in insured losses.
It was the wettest March on record for parts of the NSW mid north coast, Sydney and the north west slopes regions. March rainfall overall for the state was 136.3 millimetres – 153% above the 1961−1990 average and marking the second-wettest NSW March on record after 1956, and the wettest month since January 1995.
Daily totals exceeded 150 millimetres somewhere in NSW on each day from 18 to 24 March, for example Moree which received more rain than it had in all of the severe drought years in what was its wettest day since 1888.
A number of NSW coast sites had four-day totals exceeding 600 millimetres.
“One of the most significant aspects of this event in coastal NSW was its persistence, which resulted in many very high multi-day rainfall totals,” the Bureau says.
Almost the entire NSW coast experienced heavy rain, contrasting with typical rainfall patterns associated with either coastal lows or East Coast Lows which normally bring heavy rain in a relatively small area near the southern flank of the low but are relatively dry to the north.
“The most exceptional aspect of the event was the spatial extent of the heavy rainfall, both in coastal and inland areas,” the report notes.
Averaged over all of NSW, March 23 recorded 38 millimetres to be the second-wettest day on record. Two- and three-day totals were also the second highest ever.
Australia’s decision makers must not ignore the warnings of unprecedented bushfires, droughts, and floods which have ravaged the country in recent years, says a new report entitled Aim High, Go Fast: Why Emissions Need to Plummet this Decade.
Given Australia’s huge renewable energy resources, the nation should aim to reduce emissions to 75% below 2005 levels by 2030 and reach net zero emissions by 2035, the Climate Council report says.
This is “a fair and achievable contribution to the global task and an imperative given our high vulnerability to escalating extreme weather,” it says, warning that the world achieving net zero by 2050 is “at least a decade too late” and carries a strong risk of irreversible global climate disruption at levels “inconsistent with maintaining well-functioning human societies”.
Australian governments, businesses, industries and communities “can and must” cut emissions deeply, the publication urges. Protecting Australians from the worsening effects of climate change requires action to deeply reduce emissions during the 2020s.
“All efforts must now focus on steps that can be taken this decade,” the report says.
The lengthy report warns far stronger and quicker global climate action is needed to avoid the catastrophic consequences of a two-degree warmer planet.
Evidence is mounting that it is now no longer possible to limit global temperature rise to 1.5 degrees above pre-industrial levels without significantly reducing greenhouse gas emissions. The world has now "reached the endgame" and dramatic action is needed to avoid devastating consequences.
Australia “should be a leader not a laggard, and reduce its emissions even faster than the required global average,” it says.
“Australia, as a major emitter in its own right and a giant of the global fossil fuel economy, has a major role to play in the global effort to stabilise the climate. Bold and decisive climate action ultimately protects us and is in our national interest.”
Already, at a global average temperature rise of 1.1 degrees Celsius, more powerful storms, destructive marine and land heatwaves and a new age of megafires is being experienced, the Climate Council says. Evidence strongly suggests the global average temperature rise will exceed 1.5 degrees during the 2030s.
Should temperatures spike above 1.5 degrees for a significant period of time, critical ecosystems will be even more severely damaged, or destroyed, with every fraction of a degree measured in lives, species and ecosystems lost or saved.
“There’s little time left to limit global warming below catastrophic temperature rises,” the Council says, adding that breaching 1.5 degrees of warming significantly increases the risk of triggering abrupt, dangerous and irreversible changes to the climate system.
“Australia has unrivalled potential for renewable energy, new clean industries, and clean jobs. We need to rapidly scale up the energy transition and advance solutions in other sectors including transport and agriculture,” the report says.
It says climate leadership from states and territories has shown what works, and the benefits that decarbonising the economy can bring, such as regional jobs, cleaner cities and cheaper power.
“Despite our natural advantages, we are being left behind in the new, clean economy race,” the report says.
Suncorp has partnered with CSIRO, James Cook University and architects to test a prototype disaster-resilient house as they seek to persuade homeowners to spend on features that help properties withstand cyclones, floods and bushfires.
The “One House” prototype, designed by Room 11 Architects, has been tested at the Cyclone Testing Station at James Cook University and at the CSIRO-operated Bushfire Burnover Facility in southern NSW.
“We know not everyone can replicate our prototype,” Suncorp Insurance Product & Portfolio CEO Lisa Harrison said. “We hope that Australians – whether building a new house, planning a reno or thinking about ways to add value to their existing home, can take away practical ideas from our research.”
The three-bedroom family home, inspired by a typical “Queenslander” design, includes electrical wiring in the roof, elevated power points, waterproof internal wall linings and mesh screens that can protect from bushfires and wind-driven debris.
The home also has cyclone-rated roof fixings, “sacrificial” pvc plastic gutters that can melt and fall away from the house to reduce ember risks and a dual tank system for both firefighting and a back-up drinking water supply.
Suncorp says almost half of homeowners think Australia will see more natural disasters in the next 12 months but 80% of respondents in a survey admit to having little interest in spending money on resilience improvements.
Some 62% of homeowners opt for interior updates, 54% for kitchen upgrades, 53% for bathroom renovations and 49% for landscaping.
“We’re a country ravaged by cyclones, bushfires and floods, but the property market places greater value on luxury upgrades ahead of a strong resilient home,” Ms Harrison said.
Suncorp says the development of the prototype home and its research also aims to generate conversation about reviewing building standards as the severity and frequency of weather events increases.
“Government subsidies and recognising the value of resilient homes with the property market would incentivise investing in these upgrades,” Ms Harrison says, “It will take governments, insurers and communities working together to encourage homeowners to invest in a more resilient home.”
Details of a defamation settlement between former GSA Insurance Brokers Chairman John Hewson and A Current Affair remain confidential after agreements were reached ahead of a Federal Court hearing set for last week.
Dr Hewson, a former Federal Liberal Opposition leader, took action against the Nine network alleging a May 18 A Current Affair report on a flooding claim refusal was defamatory and inaccurate.
Federal Court Justice Michael Wigney scheduled a case management hearing for Monday next week after the parties reported the settlement had been reached, and there was no need for a judgment.
“The matter has been settled and details are confidential,” a Nine spokesman told insuranceNEWS.com.au. “We won’t be making any further comment.”
The program focused on a claim refusal related to possessions damaged when the Parramatta Storage King facility was inundated.
Dr Hewson’s statement of claim says an email had been sent to the program explaining that GSA was the broker, not the insurer, and the Storage King units were inundated when “a nearby water course overflowed” during extreme February weather.
The email explained that claims handlers, loss adjusters, and a hydrologist all confirmed that the loss was caused by flood, which was not covered under the policy.
But the program, which named Dr Hewson, aired statements “clearly suggesting that GSA Insurance knew the damage was in fact caused by a storm and was itself dishonestly relying on the flood exclusion”, the court documents said.
Steadfast last August bought a controlling shareholding in GSA Insurance Brokers. Following the changes Paul Hines became Executive Chairman, while Dr Hewson has continued as an adviser to the board.
Dr Hewson’s lawyers said he would not be commenting on the outcome due to confidentiality requirements.
As hundreds of passengers enjoy international flights today for the first time since the start of the pandemic, travel insurance will need to be more flexible and offer clear and transparent coverage that minimises misunderstandings, Gallagher Bassett says.
Insurance will need to adjust to meet consumer expectations and explain easily what the customer is protected for, the claims management company says.
The first travel “bubble” between Australia and New Zealand opened this morning, allowing citizens international travel without requiring hotel quarantine when they return home.
“As we begin to see borders open and both domestic and international travel become accessible again, the demand for travel insurance will certainly ramp up,” Gallagher Bassett Partnership Manager John White says.
“This will mean more people in the air, away from their homes, who need reassurance and protection from their insurer.
"We know there are additional risks of travel in a post- COVID world, and policyholders will need to clearly understand how the policy will respond with COVID-related scenarios”.
Gallagher Bassett reveals it maintained a “core capability” of skilled travel insurance claims managers and worked to adapt to the changing needs of clients. With regulatory changes on the horizon, 2021 will be another challenging year for insurers, Mr White says.
“This ability to adapt and scale rapidly will be critical for insurers as overseas travel activity increases,” he says.
Jason Allison, Gallagher Bassett’s Senior Business Development Manager, says it is important for brokers to have exhaustive conversations with their clients about business travel and to consider how to best support clients to make a well-thought decision on the necessity of business travel.
“They should be having clear, open conversations with their clients around their internal business travel processes, requirements and adaptability,” Mr Allison says.
“Intermediaries need to ensure their clients understand what they’re covered for and have thoroughly worked through the myriad of challenges that may impact business travel and how they would be protected by their policy.
“As we start to explore the New Zealand travel bubble, brokers should be ensuring their clients understand how these additional risks may or may not be covered.”
Brokers will also need to consider that travel wordings may only cover claimants for additional and/or curtailment costs even in scenarios that could not have been reasonably foreseen.
In the current environment, insurers may deem that COVID-related lockdowns would not be considered unforeseen. Additional costs incurred due to this will be out of pocket expenses for the insured, he says.
Last month, the Insurance Council of New Zealand CEO Tim Grafton said border closures imposed by a government are not covered by any insurer.
"It is simply not possible to develop a product that accounts for the uncertainty and the level of risk this presents,” Mr Grafton said. “Insurers and customers need certainty of the exact dates and times borders open or close so that they know when cover is available and when it is not.”
At present, policies won’t cover cancellations to travel caused by government-imposed lockdown, costs if the government imposes a blanket quarantine, travel delay caused by COVID, border closures due to COVID and travel to any other countries where there is still a ‘do not travel’ alert in place.
Mr Grafton said the sector had responded to the “significant uncertainty and limitations” COVID-19 presents, introducing tailored policies that cover a range of COVID-19 related claims such as cancellation costs if you contract COVID-19, costs to return home if a relative gets sick with COVID-19 or costs if you have to quarantine while overseas.
Mr Allison says insurance brokers need to be “ahead of the game” when it comes to border closures, travel restrictions and regional COVID responses to ensure they can notify clients of risks early on before they become an issue.
“They need to have a clear understanding of each nation and state’s hotspot or travel restriction system, as well as stay abreast of COVID alerts in relevant regions for their clients,” Mr Allison says.
Corporate insureds will demand flexibility from their broker as they begin to navigate a world they “no longer have as much control over”.
“The risks have now changed from an employee or insured missing their flight due to a delayed meeting or traffic to employees being caught in mandated hotel quarantine – or worse, unwell with COVID-19 due to travelling for work,” he says.
“You will maintain and retain their business by demonstrating a thorough understanding of their organisation, their unique risks and what their insureds require when it comes to business travel.”
Medical insurers have reached out to the Federal Government seeking an “iron clad” assurance that there is an indemnity plan to cover for potential claims and other fallout that may arise from the COVID vaccination program.
Reports of blood clotting in a small number of patients globally who have taken the AstraZeneca jab have triggered concerns within the local GP community and medical insurance providers.
“The COVID-19 mass vaccination program is a large and complex undertaking in a rapidly evolving environment,” an Insurance Council of Australia spokesman told insuranceNEWS.com.au today.
“The pace and breadth of the roll out of the COVID-19 vaccines and the Government’s evolving advice in relation to program scope and administration have caused some concern among general insurers providing medical indemnity coverage.
“We are working with the Commonwealth and other stakeholders to better understand aspects of the program and to develop strategies to address these concerns.
“The provision of medical indemnity insurance is a critical component of the vaccine roll out, as it provides support and confidence to medical professionals administering vaccines to patients in this socially important process.”
Verbal assurance is not enough to allay the medical community’s concerns, according to MDA National, an Australia-wide Medical Defence Organisation that provides professional indemnity insurance.
“Never before in history have we attempt to vaccinate 25 million people against a novel virus,” MDA National President Michael Gannon told insuranceNEWS.com.au.
“So the reality is that a lot of individual doctors are concerned that they are not protected and we as an industry are very concerned that we are not protected.
“Although we have been given further verbal reassurance by [Federal Health Minister Greg Hunt]… we as an industry don’t believe that gives us sufficient comfort especially as we’re operating in an international reinsurance market competing to place insurance in an environment where organisations in other parts of the world have been indemnified by governments.”
A statement from the office of the Health Minister to insuranceNEWS.com.au says the Government “will continue to work constructively with insurers and the sector and thanks them for their input”.
“The Government provides significant support to underpin medical indemnity arrangements to ensure there is appropriate indemnity support for all health professionals including doctors, nurses, midwives and pharmacists, as well as patients,” the statement says.
“The Government has already entered into indemnity arrangements with vaccine suppliers designed to operate if there are problems which flow from the vaccine itself.”
Lloyd’s underwriters Tokio Marine Kiln and ERS Insurance have signalled they will not have anything to do with the Adani Carmichael coal mine in Queensland, according to shareholder activist group Market Forces.
The group says it has received commitments from the two underwriters ruling out future involvement with the controversial project, reproducing their policy positions in a media release last week.
Tokio Marine Kiln in its statement says “we regularly review our portfolios and risk appetite in line with our broader organisational goals and can confirm that [we] would not participate in any future underwriting contracts on this project”.
The statement from ERS Insurance says the underwriter “is pleased to confirm that ERS will not be involved in any way” with the coal mine.
Market Forces and climate activists have been waging a pressure campaign to stop insurers from providing insurance for the controversial project owned by India’s Adani Group.
Earlier this month leading Lloyd’s insurer and reinsurer MS Amlin said it is not involved and has no intentions to participate in the underwriting of the project.
Australia’s three biggest insurers – IAG, QBE and Suncorp – have all previously said they are not involved with the open pit mine in central Queensland.
AUB Group says the launch of non-equity network, The Insurance Alliance, provides a new business opportunity and complements its existing offerings for brokers.
“We have built a strong and valuable list of services that are of benefit to both brokers and their clients,” Chief Broking Officer Ben Bessell told insuranceNEWS.com.au.
“We’ve therefore decided to offer a sub-set of these services to a broader cross section of brokerages in a non-equity network and believe there will be strong demand for this alternative offering.”
CEO Mike Emmett says the alliance is a “natural next step” for the group and will enable a broader cross-section of Australian brokerages to benefit from the group’s services, which have been boosted by recent enhancements.
“AUB Group now has a full suite of services to assist a broking business to increase revenue, improve client service and enhance broker profitability,” he said. “We’ll work with each interested party to identify the specific benefits they’ll achieve by joining The Insurance Alliance”.
The company earlier this year established Austplacements, a dedicated unit to assist with complex risk placements in local and overseas markets. It has also introduced the ExpressCover technology platform and launched data and analytics services last year.
Membership of the alliance will allow brokers to access those offerings, insurance programs and other shared services including risk and compliance, IT, finance, training, and assistance with complex claims.
Mr Bessell says the equity model in Austbrokers and Austagencies networks remains a core part of the group’s DNA, but a number of inquiries have been received over the past few years for the type of alternative offered through the alliance.
“Establishing The Insurance Alliance is an additional business opportunity that will leverage some of the services we already deliver, and for Australia complements the NZBrokers non-equity network we already own and operate in New Zealand,” he said.
Suncorp says it “intends to defend” an add-on insurance class action that has been launched against it by Maurice Blackburn.
The insurer declined to provide additional comments about the legal action beyond those made in a brief statement last week to the Australian Securities Exchange, where it confirmed receiving a representative proceeding filed in the Supreme Court of Victoria.
Suncorp says the litigation action against its AAI subsidiary relates to the sale of add-on insurance through MTA Insurance.
AAI acquired the MTA Insurance business on August 29 2014 and on July 1 2015 it was formally transferred to AAI Limited under the Insurance Act 1973.
Maurice Blackburn commenced the class action on March 30, according to details on its website. The law firm, through a spokesman, says it is not commenting further on the lawsuit, which follows a similar action it launched against Allianz in November.
The legal action against AAI and Asteron Life & Superannuation Limited - formerly Suncorp Life & Superannuation Limited - concerns insurance that was sold with, or added onto, loans for the purchase or lease of vehicles at car dealerships.
“AAI is responsible for the add-on insurance contracts issued by [MTA Insurance] prior to around July 1 2015,” the Maurice Blackburn website says. “The class action therefore alleges that AAI is liable for [MTA Insurance’s] contraventions [as] outlined.”
The class action alleges that AAI, MTA Insurance and Suncorp Life & Superannuation Limited gave “personal advice” to consumers and breached various obligations in relation to the giving of that advice.
It also claims they “engaged in misleading or deceptive conduct and made false or misleading representations”.
Their conduct had “wrongly induced consumers to buy the add-on insurance” or they “knew or should have known that consumers who purchased add-on insurance did so under a mistaken belief,” Maurice Blackburn says.
Suncorp was ordered to refund $17.2 million, with interest, to 41,428 customers who bought add-on products from MTA Insurance under a remediation plan overseen by the Australian Securities and Investments Commission (ASIC).
The ASIC remediation plan was announced in 2018 after the corporate regulator found that MTA Guaranteed Asset Protection products sold between 2009 and 2017 provided little or no value to customers.
For MTA Consumer Credit Insurance add-ons, ASIC found the cover was sold to young people who were unlikely to need it if they had no dependents.
PSC Insurance Group says the appointment of former Allianz executive David Hosking to the new role of CEO Australia and New Zealand will help drive further expansion.
The company says Mr Hosking is well known in the insurance industry and also within PSC, having worked with the business for more than a decade in his previous roles with Allianz.
“David brings a long history and deep understanding of the insurance industry and particularly the insurance broking and intermediary markets,” PSC said last week.
“We believe the addition of David to the PSC team continues our efforts to be constantly growing our capabilities and will help us as we strive to double the size of the business again over the next four years.”
Mr Hosking’s responsibilities will include the Australian specialty and agency business, which remains under Adam Burgess and the Connect and Reliance network businesses, which will remain under Tony Walker.
The Australian broking business, led by Pat Miller, and areas such as IT, workers’ compensation and life broking will also fall within his mandate.
Mr Hosking left Allianz Australia in December, after most recently holding the role of Chief GM Broker and Agency, as a new operating model was introduced. Previously he was Allianz CFO, while he has also worked at IAG.
Zurich has named Marsh executive Tim Scott-Young as Chief Claims Officer for general insurance in Australia and New Zealand, with the appointment effective from May 17.
Mr Scott-Young will take over from Hilary Bates, who is moving into the role of Chief Operations Officer for Zurich’s Australian Life and Investments business.
Zurich Australia and New Zealand general insurance CEO Tim Plant says Mr Scott-Young brings extensive international experience in managing large complex claims.
“We are delighted to have someone of Tim’s calibre join our general insurance business, reinforcing our ongoing commitment to delivering a world-class claims experience for customers,” Mr Plant said last week.
Mr Scott-Young started his insurance career at AIG, becoming Senior Vice President and Chief Claims Officer for the Middle East, Africa, Russia, Turkey and India, based in Dubai.
Later he held senior regional roles at Chubb, including Senior Vice President and Claims Director for Asia-Pacific and Claims Director for Continental Europe. Most recently he has been Marsh Senior Vice President and Australian Claims Operations Manager.
Allianz Australia has completed its executive search after introducing a new operating model at the start of the year focused on three key customer segments.
Phuong Ly will take the role of Chief GM Commercial from October, complementing Michael Winter who heads the consumer division and Julie Mitchell, who heads the workers’ compensation division.
The three new divisions were created as part of what Allianz says was a larger organisational realignment around core customer areas.
“Having worked in insurance his whole career, including in underwriting and claims, Phuong clearly understands the customer perspective and frontline challenges,” local Allianz MD Richard Feledy said.
The new commercial division focuses on small to medium enterprises, mid-corp markets and specialist areas such as underwriting agencies and Hunter Premium Funding.
Sydney-based Mr Ly was most recently Chief Underwriting Officer at QBE for a year and brings almost two decades of experience in insurance in Australia after holding executive leadership roles at CGU as well as IAG, where he was EGM Business Distribution and EM Broker & Agency.
The Australian Financial Complaints Authority (AFCA) has supported consideration of a UK-style legal test case model for issues with wide-ranging impacts, amid scrutiny over the insurance industry’s approach to business interruption matters.
AFCA says it has considered the test case procedure used by the UK Financial Conduct Authority to resolve business interruption issues, and proposes the model could be explored in Australia.
“In some cases, regulators are more appropriately placed to institute a test case in the public interest, rather than AFCA’s test case procedure being used,” it says in a submission to a Treasury review.
If the UK model was considered for adoption, it would require significant consultations with the government, regulators and other stakeholders, it says.
The Government is completing a first scheduled review of AFCA, which began operating in November 2018 and which has used its test case procedure for the first time in relation to business interruption disputes.
Under the procedure, insurers can request that a dispute that goes to AFCA be decided instead by the courts as a test case. AFCA is not a party to the case, but monitors the outcome and applies the decision to similar complaints.
Australian Securities and Investments Commission (ASIC) Deputy Chairman Karen Chester told a parliamentary committee last month that the regulator was not able to facilitate test cases in the same way as in the UK, where the FCA test case has been finalised, and was monitoring local progress.
“We have been frustrated with the time that it has taken for the first test case, which perhaps was not as broad as it could have been, such that we find ourselves in a world of a second test case,” she said.
Ms Chester said there was a “noodle bowl of insurance policies and clauses” and tens of thousands of businesses may be eligible to make a claim.
ASIC in the second half of last year reviewed 392 policy wordings. Its data collection shows that as of December 31 80% of lodged claims had been declined, about 4% had progressed to external dispute resolution and 1.2% had been accepted or settled.
Insurers have agreed not to apply claim time limits or seek to avoid liability where a policyholder is insolvent, given the passage of time associated with waiting for an outcome of the two test cases.
ASIC has encouraged small business to contact their broker or insurer and ask whether their policy may cover COVID-19-related losses, depending on the outcomes.
The corporate regulator says nine cases of enforcement litigation regarding misconduct in insurance were underway at the start of the year as part of its push to pursue more court action.
One criminal case and eight civil cases of insurance misconduct are in progress, the Australian Securities and Investments Commission (ASIC) says in its latest enforcement update.
Across all financial service types, there were 16 criminal and 61 civil litigation matters in progress. In the last half of 2020, enforcement results by ASIC included 37 cases of financial services misconduct, two of which related to insurance.
Last year, ASIC recorded a 64% increase in civil penalty proceedings and a 36% increase in the number of criminal proceedings commenced, when compared to 2018. There were five court proceedings in pursuit of COVID-19 interim enforcement priorities.
“When it came to our enforcement work, we focused on conduct that looked to exploit the economic environment which resulted from the pandemic,” ASIC Commissioner Sean Hughes said, pointing to miss-selling as a key area.
ASIC says it used increased resourcing to fast-track Hayne royal commission referrals. Of 45 of these investigations, only 11 remained at the end of last year. Seven resulted in litigation that has been completed, resulting in total penalties of $77.65 million being imposed and $159.8 million in civil penalties imposed by the courts.
The latest report shows 27 individuals were charged in criminal proceedings and 194 criminal charges laid. Four people were imprisoned, while 22 individuals were removed or restricted from providing financial services or credit, and 28 were disqualified or removed from directing companies.
Some 107 investigations commenced and 211 investigations are ongoing.
In the largest punitive action in ASIC history, penalties totalling $75 million were imposed on derivatives provider AGM Markets and two of its authorised representatives for systemic unconscionable conduct targeting retail investors.
In September 2020, the Federal Court ordered two entities in NAB’s wealth management division to pay a total of $57.5 million in penalties for making false and misleading representations to superannuation members about plan service fees.
That was the largest penalty imposed in a matter referred to ASIC by the royal commission.
“We think this was another significant win for ASIC as it sends a strong message to the industry for the need for transparency and openness when they are charging fees,” Mr Hughes said. “The consumer needs to come first.”
Earlier this month, ASIC announced it has started Federal Court action against Westpac, alleging it sold add-on consumer credit insurance (CCI) to customers who had not agreed to buy the policies. The action relates to credit card repayment and flexi-loan repayment protection policies sold to about 384 customers in 2015.
ASIC says new priorities for its enforcement work are currently being developed for the 2021/22 financial year.
The Australian Law Reform Commission (ALRC) will host two webinars next month related to its work around simplifying corporate and financial services regulation.
The ALRC will discuss preliminary findings from a three-year inquiry into the legislative framework at the first event on May 17.
“The webinar will invite reflection on the current regulatory architecture, as well as consideration of alternative legislative designs for the regulation of corporations and financial services in Australia,” the ALRC says.
A second webinar on May 24 will look at approaches taken overseas, with an international panel of experts to provide perspectives on frameworks operating in other jurisdictions.
The webinars will be presented in partnership with Wolters Kluwer CCH Learning.
The Federal Government asked the ALRC to carry out the three-year review after the Hayne royal commission found financial services law is overly complex and should be simplified.
A first report, looking at the use of definitions, is due on November 30, with following reports on specific areas expected by September 25 next year and August 25 2023. A consolidated final report is due by November 30 2023.
Details on the webinars are available here.
The third in a series of Building Stronger Homes roundtables will be held in Sydney tomorrow, exploring the role of construction standards in national natural disaster resilience.
The Insurance Council of Australia (ICA) and Master Builders Australia (MBA) will host the latest instalment at NSW Parliament House on Macquarie Street, with the aim of identifying initiatives to better protect homes.
The organisations want the insurance and construction industries to lead discussions on policy changes they say will make Australian homes stronger and better prepared for catastrophes.
The third roundtable, to focus on ways to build new homes to better withstand extreme weather, will be attended by representatives from the property, real estate and architecture industries.
Guest speakers and panellists will appear from IAG, the NSW Government, Standards Australia, Australian Building Codes Board and Sherridon Homes.
ICA CEO Andrew Hall says the National Construction Code needs to make resilience an objective and “adopt a position of improving the durability”.
“Reducing the risk from the outset by ensuring the Codes and Standards take into account the resilience of homes, mitigation, infrastructure improvements and other measures will help to enhance national disaster resilience and recovery,” Mr Hall says.
MBA CEO Denita Wawn says it is also important that reforms to land planning are made.
Local and state governments need to work together to reform planning frameworks so there is better guidance for home owners about local natural hazard risks and what they can do to mitigate these, Ms Wawn said.
The fourth and final Building Stronger Homes roundtable will be held in June.
Four-wheel-drive vehicle hire business Smart Corporation, which previously traded as Australian 4WD Hire and is now in liquidation, has been fined $1.2 million after making false and misleading representations to consumers about insurance cover.
Smart Corporation must pay a $870,000 penalty and former directors Vitali Roesch and Maryna Kosukhina, both disqualified from managing a company for three years, were each ordered to pay more than $170,000 as well as around $9500 in redress to five consumers.
The Australian Competition and Consumer Commission (ACCC) instigated court action a year ago after receiving more than 60 complaints about the four-wheel drive vehicle rental company, which was based on the Gold Coast and operated from 10 locations in Queensland, NSW, NT, WA, SA and Victoria.
Its primary target market was holiday makers seeking four-wheel drive rental vehicles suitable for off-road travel.
“Australian 4WD Hire’s treatment of some of its customers was particularly egregious,” ACCC Chair Rod Sims said.
“The misrepresentations made about insurance cover gave customers a false sense of security that they would have the benefit of being covered by insurance, in particular for the off-road use of the vehicles, when this was not the case.”
The firm’s website said its rental vehicles had comprehensive off-road insurance, using statements such as “All Vehicles Off-Road Insured”, and “All Australian 4WD Hire Vehicles are insured for Off-Road use subject to our terms and conditions, allowing you to travel worry-free".
The Federal Court found that was false and misleading because at times many of the vehicles did not have comprehensive insurance coverage.
Australian 4WD Hire also obscured that its hire contract gave the company discretion to decide whether to submit an insurance claim or hold the customer liable for damage.
Contract terms allowed it to charge customers up to $500 each time they drove at night outside of built-up areas, above the speed limit or in fog or heavy rain. These terms, allowing deduction of a consumer’s security bond for “trivial breaches,” were found to be unfair and therefore void.
“The company sent “intimidatory correspondence to deter the consumer from disputing the claim or raising any other legitimate issues” and “harsh and unjustified” threats of legal action and other adverse consequences for customers which were “out of all proportion to any prejudice which Australian 4WD Hire had suffered”.
Australian 4WD Hire’s conduct was found to lack honesty and fairness, and involve bad faith, deception, unfair pressure and sharp practice.
The NSW State Insurance Regulatory Authority (SIRA) has extended the role of psychologists and physiotherapists in certifying an injured person’s fitness for work after the change was introduced last year due to the COVID-19 pandemic.
A doctor must issue the initial certificate, but treating physios and psychologists have been allowed to issue second and following certificates if the injury falls within their area of expertise under a change made to relieve pressure on medical practitioners and the healthcare system during the pandemic.
SIRA says it has extended the rule change for the workers’ compensation and motor accidents schemes for another 12 months.
“These arrangements support the NSW Government’s ongoing response to the COVID-19 pandemic,” SIRA said.
Plans by the owner of Compare the Market to raise its stake in iSelect look set to go ahead after the competition watchdog says it “will not oppose” the move.
The Australian Competition and Consumer Commission (ACCC) announced its decision last week, after wrapping up a review into the matter.
The review was launched last November from an enforcement perspective after Innovation Holdings Australia said it was considering increasing its existing 29% holding in iSelect by up to 6%.
The regulator says the proposed investment would be unlikely to substantially lessen competition in any potential market for comparison services, including in any specific product category.
“We examined the acquisitions carefully, because iSelect is a major competitor to Compare the Market for comparison services,” ACCC Commissioner Stephen Ridgeway said.
“In some cases, even minority shareholdings in a competitor can lead to muted competition between the parties.
“We consider that [Innovation Holdings Australia] owning the stake in iSelect will not substantially affect competition in the market.”
Innovation Holdings Australia is a subsidiary of the IHA Group, which also owns Auto & General Insurance.
Rates for compulsory workers’ compensation insurance in WA are set for an overall increase of 4% for the next financial year.
WorkCover WA says the average recommended premium rates will be 1.704% of total wages, up from 1.638% in the current financial year.
The increase will come into effect from 4pm on June 30.
“Western Australian recommended premium rates vary from year to year depending on a range of factors, and in the context of the COVID-19 pandemic there was a small decrease in the recommended rates last year,” CEO Chris White said.
“Key drivers of the 2021/22 rate include longer claim durations and associated costs, offset by wage increases and declining claim numbers.
“The increase will ensure sufficient reserves to cover the cost of workers’ compensation claims over the coming year.”
The rates are based on independent assessment by the scheme actuary, PricewaterhouseCoopers, and take into account the number and cost of workers’ compensation claims, together with external impacts such as movements in interest rates and wages.
Click here for the full schedule of recommended premium rates.
Advisers have called for “bold and fundamental changes” to the legislative and regulatory framework governing the sector, including the classification of advice into either general information or personal advice.
A consultation paper launched today by the Financial Services Council (FSC) says the current setup has far too many “unnecessary layers of regulation and red tape” that is driving advisers out of the industry and making it prohibitive for average Australians who want financial advice.
“The current model of advice is misaligned from the consumer protection framework,” the paper says. “Financial advice needs to be appealing and simple.
“Simple low risk advice is currently subject to the same level of regulation as high-risk advice, that now sits within a regulatory framework that was established when advice was conflicted.”
The FSC says the proposals in the Green Paper on Financial Advice have been developed with its advice licensee members and are underpinned by research from Rice Warner and consumer testing.
The paper says the Government should consider doing away with the “safe harbour” steps that are unnecessary and administratively complex, while giving financial advisers a false sense of protection.
The Statement of Advice (SOA), which costs between $2400 and $3000, should be replaced with a Letter of Advice. SOAs can run to as many as 80 pages and are often costly to prepare. The proposed Letter of Advice would be short, concise and consumer-oriented, according to the paper.
All financial advice should also be tax deductible irrespective of whether it generates taxable income. At present only certain advice such as those relating to tax or assets are deductible. The paper says the tax incentive should extend also to financial advice on income protection life insurance and superannuation.
“The majority of consumers support reducing unnecessary red tape across the financial advice industry if it lowers the cost of financial advice without weakening consumer protections,” FSC CEO Sally Loane said.
“Our aim with these proposals is to lower the cost of providing financial advice to make it simpler for consumers to understand and access, all without undermining the quality of advice or eroding important consumer protections.”
The FSC intends to publish a white paper on financial advice later this year, taking into considerations the feedback to the consultation launched today.
Closing date for submissions to the consultation is July 1.
Click here for the paper.
The corporate regulator has flagged possible changes to the way its guidance is “structured and set” for the provision of advice to consumers, following a consultation with advisers, academics and other industry stakeholders.
Australian Securities and Investments Commission (ASIC) Commissioner Danielle Press says the consultation seeking feedback on ways to promote access to affordable advice for consumers drew an “extraordinary response” from the industry.
She says the regulator has since given the industry associations a high-level briefing on what it has found in the consultation and “some of the things [it] is considering and hoping they can give us feedback on”.
“We've identified a number of problems, particularly in the way our guidance is structured and set,” Ms Press says in an answer to a question that she took on notice during a Parliamentary Joint Committee on Corporations and Financial Services hearing last month.
“We think there are some solutions to them, but we would like to talk to the industry about whether that is helpful or not.
“There is a lot of guidance that is quite complex, long and turgid in this industry.
“I think there are better ways to do some of that: shorter examples, shorter guidance and potentially using podcasts and video-type guidance, not compliance teams, to talk to the advisers.
“We think that's a really important shift in the way we're thinking about the way we're regulating the industry.”
She says the high-level briefing has also been provided to Treasury and that “a number of things around law reform” have come up in the consultation.
ASIC says many respondents listed issues with the provision of a statement of advice (SOA), which is a mandatory set of documents that must be given to retail clients who have received personal financial advice.
“Respondents have raised that Government should reconsider the SOA requirements and expand the situations when a [record of advice] is permissible instead of an SOA,” the regulator said.
“Respondents want more guidance on providing ROAs and have generally submitted they would like to see ASIC promote its use.
“We are considering possible guidance on ROAs and plan to raise ROAs as a key topic for discussion in the roundtables for exploring issues raised in [the consultation].”
A ROA is similar to a SOA except that it is shorter and less formal. It is often given to existing clients to confirm changes to, or implementation of, advice provided in a previous SOA.
ASIC says an initiative is already underway to improve its regulatory guide on Giving Information, General Advice and Scaled Advice after many respondents describe the guide as difficult for users to understand.
A majority of the submissions preferred the term “limited advice” in response to a question in the consultation that asked what was their preference for describing limited advice. Limited advice is often described as “scaled”, “single-issue”, “piece-by-piece”, “transactional” or “episodic” advice.
Financial advisers have “serious concern” with the new breach reporting regime that will be introduced in October, warning the legislation in its present form could lead to increased operating costs that may have to be passed on to consumers.
The Government should consider deferring the commencement of the regime and undertake a “further analysis” of the potential ramifications, the Association of Financial Advisers (AFA) says in a submission to Treasury.
AFA says the new breach reporting regulations are likely to lead to an exponential increase in the number of matters that need to be reported and that many of these will be of a largely administrative nature.
“In the context of what has been rapidly rising costs for financial advisers and their licensees over recent years, we are motivated to ensure that the cost impact of this reform is not excessive,” AFA says.
“It is important to note that licensees will need to carefully review each potential breach and for licensees that lack in-house lawyers or compliance resources, they will need to seek external guidance before deciding to report a breach.
“It is this cost, along with the extra management time and oversight that will be necessary, that will have a very material impact on the cost of financial advice. Ultimately clients will end up paying for this.”
The breach reporting regime, a reform proposal made by the Hayne royal commission, requires financial services licensees and credit licensees to report serious compliance concerns about financial advisers, according to Treasury.
AFA says the industry supports the self-reporting of significant breaches but the changes that come with the new regime represent “a substantial increase in the scale and complexity” of compliance obligations that many small financial advice licensees will have difficulty understanding.
The peak body says its experience preparing the submission highlights the potential struggles facing advisers should the Government go ahead with the proposed new regime.
“This is very complex legislation and it has very deep and broad implications,” AFA says.
“We have completed the analysis below to the best of our understanding, however we acknowledge that it is quite possible that we have misunderstood key issues and the implications.
“It is, however, perhaps very relevant that if we have misunderstood key issues, then there will be many others who will either be oblivious to these issues or will equally misunderstand their application.”
Click here for more on the AFA submission.
Industry reservations over machine-generated advice still run deep, with many pointing out humans retain an edge over algorithms when it comes to financial planning, according to submissions received by the corporate regulator.
The Australian Securities and Investments Commission (ASIC) says many respondents to its consultation on promoting access to affordable advice do not provide digital advice services.
Of the 183 respondents who answered questions about digital personal advice, 134 say they did not want to offer it in future. Several of them cited development costs, lack of demand and consumer preference for a human adviser as key factors.
“Respondents were of the view that human advisers are required for complex advice needs,” ASIC says. “Many respondents also considered that digital advice is not conducive to building long-term relationships with clients.”
ASIC says respondents also expressed concerns over the “quality” of digital advice and that clients can receive poor advice if input information is provided incorrectly.
“Algorithms are not advanced enough to address the interaction of multiple advice needs and take a limited view of a client’s solution,” the regulator says.
“Respondents also noted that existing technologies often ‘promise a lot’ but in practice do not integrate data well and do not allow for adequately tailored advice and strategies.”
ASIC provided the answers to questions it took on notice during a Parliamentary Joint Committee on Corporations and Financial Services hearing last month.
Despite the reservations, respondents see a role for digital advice support services such as better document management systems and fact finding. Many say digital advice is only suited for simple planning needs and younger people.
Catherine Walter has been reappointed part-time Chairman of the Financial Adviser Standards and Ethics Authority (FASEA).
She will continue to continue to work with the Board consulting on and refining the standards for financial advisers that remain under FASEA’s responsibility until the organisation is wound up, Minister for Financial Services Jane Hume said in a statement.
Last December the Morrison Government announced plans to wind up FASEA, responding to industry concerns over rising operating costs such as increased regulatory compliance.
The standard-making functions of FASEA will be moved to Treasury and the remaining elements of its role, including administering the adviser examination, will be incorporated into the Financial Services and Credit Panel. The panel sits within the Australian Securities and Investments Commission.
The Australian Securities and Investments Commission (ASIC) will extend one of three COVID temporary relief measures aimed at helping advisers provide affordable services to consumers during the pandemic.
Advisers can continue providing existing clients with a record of advice instead of a statement of advice until October 15.
The extension applies to ongoing clients who need financial guidance due to the impact of the pandemic, ASIC says.
“ASIC decided to extend the relief measure after consulting with industry and identifying that some financial advice practices have found this measure helpful,” the corporate regulator said.
The other two measures, including one that allowed super trustees to temporarily expand the scope of personal advice that may be provided, are no longer needed, ASIC says.
New Zealand’s Financial Markets Authority (FMA) has provided a breakdown of financial advice providers since new laws governing the sector came into effect last month.
There are more than 3000 financial advice businesses made up of 1807 financial advice providers and 1200 authorised bodies that are engaging 10,743 financial advisers and 12,287 nominated representatives.
About 70% of financial product advice relates to personal risk insurance such as life insurance.
“These statistics provide a snapshot of the financial advice sector and highlight the continuing presence of small advice businesses, with 82% of financial advice providers being businesses with fewer than 10 financial advisers spread right across New Zealand,” Director of Market Engagement John Botica said.
Under the new advice regime, advisers servicing retail clients must hold or operate under a Financial Advice Provider licence and to comply with a new Code of Conduct.
MLC Life Insurance has made two senior additions to its finance team in newly-created management roles.
Lesley Mamelok, who has been acting CEO at Integrity Life for a year, has been appointed GM Finance and Deputy CFO while Robert Baillie takes the role of GM Capital Management & Corporate Finance. Both are based in Sydney and report to CFO Kent Griffin.
“Our sector is undergoing significant change. We are bringing in the right expertise to help us navigate these challenges,” Mr Griffin said.
Ms Mamelok, who was formerly CFO at Integrity Life, spent 14 years at AMP, including as CFO for AMP Bank, and remains a non-executive committee member of AMP Capital. She will oversee financial control of MLC Insurance, including expense management, investment control, tax, financial accounting and reporting.
Mr Baillie has more than 30 years’ life insurance experience and comes from TAL, where he has been Head of Actuarial (Capital & Investment) for almost six years. He formerly spent four years at AMP and 15 years at Axa and in his new role will be responsible for capital management, including treasury, corporate finance, business planning and reinsurance strategy.
The Actuaries Institute is holding its month-long annual summit from Tuesday next week until May 21.
All sessions will be virtual and topics include insurance, retirement savings and climate change.
Head of ESG Risk at QBE Sharanjit Paddam will speak on the topic “super funds investing in the time of climate change,” and there will also be an update on the Actuaries Institute’s work on reform in the income disability insurance sector.
General insurance topics scheduled are:
Life insurance topics scheduled include:
Register for the summit here.
Some of the insurance industry’s top business figures will take part in a CEO Skydive for Mental Health fundraising drive organised by the Black Dog Institute.
Aon CEO James Baum, HDI Global Regional Head ASEAN and Australasia MD Stefan Feldmann and Dual Asia Pacific CEO Damien Coates have signed up for the skydiving event on April 30.
David Kearney, CEO of insurance law firm Wotton + Kearney, is also taking part in the fundraiser.
Mr Coates says he is “petrified” as heights is one of his biggest fears but he is motivated to support the work of the Black Dog Institute.
“It's great to see the insurance industry getting behind mental health,” he told insuranceNEWS.com.au.
Mr Baum says he is “proud” to take part in the event as it offers an important opportunity to keep the conversation around mental health going year-round.
For Mr Feldmann, he says developing a culture where employees feel comfortable to talk openly about their mental health is a top priority for HDI Global.
The Black Dog Institute has so far raised more than $101,000 – funds that will be used to support its mental health research and education programs.
Click here to support Mr Baum, here for Mr Feldmann, here for Mr Coates and here for Mr Kearney.
The Risk Management Institute of Australasia (RMIA) has appointed Simon Levy CEO.
Mr Levy has 25 years’ risk industry experience in Australasia and the UK, including with Marsh, Australian Unity and Westfield. He has also been involved with RMIA as Victorian Chapter President and as a board director.
“Building on what we have already accomplished, under his leadership we hope to hone our strategic direction, grow and develop our organisation, strengthen our partnerships, and build new relationships and opportunities,” RMIA President and Chairman Anthony Ventura said.
Mr Levy takes over, effective immediately, from interim CEO Jason Smith, who will continue to serve as a director to facilitate the transition.
RMIA supports the professional development of risk managers across private and public enterprise and has chapters around Australia as well as in New Zealand and South East Asia.
Hundreds of the brightest and most experienced earthquake engineers from both academia and practice gathered in Christchurch last week to share knowledge and help make New Zealand more “seismically resilient”.
This year’s annual conference, supported by the Earthquake Commission (EQC), was held at the University of Canterbury and themed Turning Challenges into Positive Legacies.
President of the New Zealand Society for Earthquake Engineering (NZSEE) Helen Ferner says the conference is an opportunity to review lessons from the devastating Canterbury earthquake sequence a decade ago and consider what more is needed.
“There are still plenty of challenges and new solutions ahead,” she said.
The conference came as scientists dig pits along the south Wairarapa Coast to better understand future risks to the greater Wellington region, which in 1855 was hit by a tsunami up to 11 metres high after the 8.2 magnitude Wairarapa earthquake.
The pits are aimed at unearthing shellfish that can be carbon-dated to determine when earthquakes occurred. The research is part of the It’s Our Fault project, which is funded by the EQC, Wellington City Council and Wellington Region Emergency Management Office.
Previously, the project identified that water pipes crossed the Wellington Fault at seven locations and authorities have since stored spare parts near those sites for quick repairs even in the event of transport interruptions. Wellington City Council is also now subsidising household water tanks.
“We will always be living with earthquake risk, but engineering advances in how we build and where we build can do a lot to reduce the impact of future earthquakes on people and property,” EQC’s Chief Resilience and Research Officer Jo Horrocks said.
The distinct natural terraces along the rugged Cape Palliser coastline tellingly reflect enormous forces pushing the seafloor to the surface. Scientists have done a lot of similar work along the North Island’s East Coast and the top of the South Island to find out more about the Hikurangi Subduction zone and other smaller faults.
“Once we can date the quakes on the south Wairarapa coast, we compare the data with those from other sites around Cook Strait which will tell us what fault caused the land movement,” research consultancy GNS Science’s earthquake geologist Nicola Litchfield says.
QBE hosted its annual charity event at Saturday’s AFL clash between the Sydney Swans and GWS Giants where the QBE Foundation’s Goals for Good initiative pledged a $20,000 donation.
The insurer donated $1000 for each of the 10 goals scored by the Swans and then doubled the final amount. QBE’s contributions to its charity partners and community causes in Australia have reached almost $300,000 so far this year.
QBE Foundation Co-Chair Jason Clarke says Goals for Good is a fun way to support key charities. Saturday’s funds will go towards the Australian Red Cross, Orange Sky, Foodbank Australia and R U OK?, as well as the Sydney Swans Foundation.
“Throughout our 35-year long relationship with the Sydney Swans, we’ve often been able to join forces to support the communities and causes closest to us,” he said.
QBE hosted the volunteers and families of its charity partners at the game, as well as many QBE employees who support the work of the Foundation. Volunteers from Orange Sky and The Kids’ Cancer Project were also given the opportunity to do the coin toss and ball run out.
“We were thrilled to invite our charity partners to the clubroom on Saturday to enjoy the game and an afternoon of entertainment as a small thank-you for the incredible work they do,” Mr Clarke said.
Australia could lead the world’s insurtech charge, thanks to its innovative and collaborative industry and conducive regulatory environment, a company founder says.
Former local Zurich CEO Daniel Fogarty launched Evari in 2017, aiming to simplify the insurance process for SMEs.
Four years on, Evari has evolved into primarily an end-to-end technology business, with clients in Australia, the US and UK, while also running a successful direct insurance offering for tradies and professionals through partnerships with Bunnings and RAC. It has about 35 staff globally and is continuing to grow.
“I’m bullish about Australia’s role in the global insurtech push,” Mr Fogarty told insuranceNEWS.com.au.
“We have a great insurance industry and a high standard of regulator. We can try different things and then export know-how from Down Under to the rest of the world.
“Most Australian insurtechs have an international outlook and are operating internationally.”
Mr Fogarty, who is on the board of Insurtech Australia, says the culture of the Australian industry is also key. He says while competitive, it’s also “collegial”.
“Our industry wants to work together,” he says. “We all compete but we know we need to work together and that is a strength of ours in Australia.”
He believes the increased focus on compliance since the Hayne royal commission has been a distraction for some, but that those companies are missing an opportunity.
“Compliance can tie people in knots, and improving things for the customer can get forgotten.
“So many people are focused on compliance, but we need to look at it more broadly because innovation can solve those problems too.”
Mr Fogarty says insurance companies are increasingly outsourcing technology “because the cost differentiation is enormous”.
“We need to help insurers get off their old tech,” he says.
“We do a lot of work with underwriting agencies as they can be more nimble, but insurers are awake to this as well.
“Having led one of the incumbents I’ve seen both sides of the fence. Insurtechs expect things to happen in weeks or months, but for incumbents it’s quarters and years.
“We need to adopt digital more aggressively, for the benefit of our industry and our customers”.
The COVID-19 pandemic has accelerated insurers’ efforts to engage more effectively with customers, opening up ideal opportunities for insurtechs, EY says.
The consultant’s Asia-Pacific and Oceania Insurance Leader, Grant Peters, told insuranceNEWS.com.au that COVID has sped up changes in consumer demand and buying behaviour in insurance, “just like any other industry”.
Customers want easier ways to interface with insurers, which are digital and more flexible, Mr Peters says.
“They also want more flexible and bespoke products and solutions that are more fit-for-purpose and in the moment. Things like usage-based or needs-based insurance and on-demand insurance.”
Mr Peters says the trend was there before COVID, but it’s accelerating and will continue to do so.
“The industry will look for new ways to engage customers. It needs to understand the customer base more, with more customer segmentation and more customer research.
“In many ways that’s a perfect opportunity for insurtechs to either go to market directly themselves or pair up with existing incumbents.
“Insurtechs have shown their ability to focus on a particular customer segment and go deep to understand the needs of that segment, and then help design value propositions that line up.
“A lot of the examples have been targeted at young people or certain industry sectors that need insurance support.”
Technological advancement is key, Mr Peters says.
“The industry will need to think about new ways of using that technology to engage with customers and provide new insurance offerings.
“It’s a prime example where insurtechs already contribute, but can look for ways to embrace that new technology and bring it to the insurance industry. That’s where the insurtech pedigree can really help.”
It’s a process with no end date, as technology is continually improving and developing and nobody knows for sure what the next five or ten years will bring.
“We will never get to the end,” Mr Peters says. “It’s a continuous exercise for the insurance industry to think through what technology can mean for consumers.
“But it is important, and I think insurers would agree with this, to also get that external lense and input from outside the industry on a continuous basis and that’s what insurtechs or bigger tech platform owners can bring to the insurance industry.
“Some incumbent insurers are providing more capacity – human capacity and capital – within their organisations to focus on this.
“But there is a broader open mind and acknowledgement that they do need to bring some insight from outside the industry.”
Data from connected devices will help modernise the underwriting process and sync dynamic risk with dynamic insurance, an insurtech leader says.
“Connected devices allow the capture, processing and delivery of data that informs risk profiles, unlocking the ability to underwrite more deliberately,” Insurtech Gateway Australia MD Simon O’Dell says, writing for insuranceNEWS.com.au.
Mr O’Dell says connected devices are driving innovation in a number of areas including identifying more profitable customers, creating a risk profile for previously uninsurable assets, and creating objective claims triggers to enable parametric products.
And he believes that the industry is phasing out “blind acquisition”, or “growth, for growth’s sake”.
“The new age insurtech deploying a managing agent business model has an ethos of controlled growth, sustainable growth, growth driven by key risk metrics of frequency and severity for the benefit of the insurers’ P&L and the insurtechs’ P&L.”
Rising regulatory pressure on financial firms including insurers has led Gadens Lawyers to develop a platform to simplify and improve processes for the handling and reporting of potential breaches.
The cloud-based Gadens Breach Manager application is powered and hosted externally by Australian legal technology company Lawcadia.
Gadens Director Liam Hennessy says the mandatory reporting of potential regulatory issues has become a key concern for organisations, given the volume of information involved, time and resourcing required and legal complexities, and it is particularly a concern for the insurance sector.
“There is just such a lot of regulation hitting them at the moment, far more to my mind than the banking sector or the super sector,” he tells insuranceNEWS.com.au.
The app steps the user through a process that clarifies the issues under the various regulatory areas, with options for the information to be further assessed internally, or for details to be sent to Gadens for fixed-fee advice.
Mr Hennessy says the reporting platform assists firms in identifying issues including Australian Financial Services Licences breaches and in managing cyber and privacy breach reporting responsibilities.
Insurers also have Australian Prudential Regulation Authority obligations, while regulatory pressures will further step up from October when new product design and distribution obligations take effect.
“Regulatory reporting regimes in the Australian financial services industry are rapidly becoming more onerous in an attempt to regulate and improve culture, with liability for getting it wrong judgmentally or timing-wise,” he said
Mr Hennessy says some clients have also requested changes to the app to include requirements under the new General Insurance Code of Practice.
“The goal is to leverage our expertise and capability to de-risk major clients when it comes to potential regulatory breaches,” he says. “The system is protected from a cyber and legal privilege perspective, and has in-depth monitoring and audit functionality.”
Eleven successful insurtech teams have been selected to make up the sixth cohort of the Lloyd’s Lab innovation 10-week accelerator programme, which begins on Wednesday.
The latest start-ups have been selected based on solutions geared towards the themes of climate change and decarbonisation, geopolitics, data and models, and claims support services. The initiative received 177 applications.
The lab will start virtually and progress to Lloyd’s Lab workspace in London from June 21, subject to social distancing rules.
Lloyd’s Lab Senior Manager Ed Gaze says product simplification is a critical issue for the industry following the COVID-19 pandemic.
“Lloyd’s is committed to providing our customers with clarity in their policies so that valid claims are paid,” Mr Gaze says. “We look forward to collaborating on these critical market issues.”
More than 900 applications have been made to join the Lab in its first two years. Successful companies work with insurers in the Lloyd’s market to develop and test their ideas, using mentor guidance to add value to the Lloyd’s market.
Several have created products that are now being used in the market, for example Parsyl which launched products with Lloyd’s in December to support the deployment of a COVID-19 vaccine to emerging countries.
The Lloyd’s Lab recently also launched a new initiative called Office Hours which is aimed at supporting early stage start-ups by providing guidance and tips from Lloyd’s market experts.
The successful teams in the latest cohort are:
Local start-up Koba has signed an exclusive licence and partnership deal with London-based technology platform By Bits for the Australian and New Zealand markets as it readies to offer pay-per-kilometre car insurance to local drivers.
Securing access to By Bits technology will be a “huge accelerator,” Koba says, and enable it to bring its usage-based insurance to Australia’s 10 million low mileage drivers for the first time.
Founder Andrew Wong says partnering with By Bits gives the “first mover advantage, without the pain of product development”.
“By Bits puts us in the fast lane,” Mr Wong says. “The partnership means we’ll be able to scale at speed and drive change in the Australian market much faster.”
The flexible, pay-per-kilometre car insurance offer is aimed at low-usage drivers who can connect directly through their driving app, an on-board device or smart phone.
Koba’s website, which says the insurance company is on-track to launch in July, estimates lower mileage drivers can save as much as 40% on comprehensive cover. It says it will offer transparent pricing and in-app services, like a car locator function and hail alerts.
Mr Wong returned to Melbourne last year after some time in Silicon Valley and says the idea for Koba arrived with the COVID-19 pandemic and a desire to disrupt and “change up” the car insurance industry.
“COVID brought the world to a stand-still and while we were all indoors, our cars were too – sitting idle in the garage,” the website says. “Why were we paying the same expensive premiums, even though we were driving far less? And so, Koba was born.”
During COVID, Koba says Australian car insurance companies made around $800 million in additional profit due to lower claims.
Koba is a “fairer” solution, Mr Wong says, which offers low-usage drivers transparency in pricing, satisfies a desire for cheaper insurance and also maintains stable margins for insurers.
By Bits, founded in December, is a software as a service (SaaS) technology provider headed by Callum Rimmer, who says the platform “future-proofs insurers in an unpredictable market”.
In 2016, Mr Rimmer co-founded By Miles which says it was the UK’s first pay-by-mile insurance offer and the world’s first “connected” car policy using data directly from car manufacturers.
In December, Koba was supported by Insurtech Gateway Australia and the Hunter Equity Group in a successful $250,000 round of pre-seed funding. It is now working towards a launch date as it gathers interest for its insurance via registrations at its website.
“Once we hit our early growth and risk milestones, we will open a funding round to enable rapid scaling throughout Australia,” Mr Wong says.
Insurtech Gateway Australia CEO Simon O’Dell says he backed Koba after a third of Australian drivers surveyed during the design phase of the product said they would strongly consider switching to a per-kilometre offer.
Mr O’Dell says telematic motor insurance “got off to a rough start” in Australia and the UK, as insurer-centric solutions focused on “policing” driver behaviour – a Big Brother approach that “unsurprisingly” failed to win support from consumers.
“Koba is an exciting opportunity to bring a customer centric usage-based insurance solution to market in Australia,” he says.
Aon’s proposed US$30 billion ($39 billion) merger with Willis Towers Watson is still awaiting regulatory clearances as the European Commission considers commitments lodged this month to address competition concerns, while authorities in other countries are also completing reviews.
The European Commission, which opened an in-depth investigation in December, has extended its provisional deadline on a decision to July 27 after receiving submissions filed by Aon.
The commission has highlighted concerns about reduced competition in commercial risk brokerage services, re-insurance broking and provision of retirement and health and welfare services to commercial customers.
Media reports have flagged possible divestments of Willis Re, and various broking activities in France, Spain and the Netherlands.
Singapore’s Competition and Consumer Commission this month called for public feedback on the deal, with its review focused on retirement benefit and human capital consulting services. Submissions closed on Friday.
The Australian Competition and Consumer Commission is due to release a decision on May 27, while the New Zealand Commerce Commission is scheduled to make its decision by May 25.
Aon declined to comment on the regulatory approvals process when contacted by insuranceNEWS.com.au.
The company said during a February results briefing that it was confident of completing the transaction in the first half of this year. First quarter earnings will be released on Friday next week.
UK insurers have paid out £352.1 million ($634.8 million) in business interruption claim final settlements following the test case judgment earlier this year, the Financial Conduct Authority (FCA) says.
The figure, up from £279.8 million ($504.4 million) in March, is included in the second of a series of monthly data releases the FCA is publishing in the wake of a Supreme Court appeal decision largely in favour of policyholders.
Insurers have also paid out £247.7 million ($446.6 million) in initial or interim payments for unsettled claims, the latest figures show.
Final settlements have been made for 10,722 claims while part payments have been made for 2898 claims.
A break-down for individual insurers shows QBE’s European and UK businesses have accepted 2521 claims. They have received all the information needed to calculate the total value of the claim on 591 of those and have made full or partial payments on 399.
More than 40 insurers have provided figures to the FCA, which is gathering data on policies in principle capable of responding to the COVID-19 pandemic, which don’t represent large risk contracts and where more than five claims have been made.
Lloyd’s has outlined plans for a “once-in-a-generation” revamp of its underwriting room, building on technology changes and insights driven by the COVID-19 pandemic.
The marketplace conducted more than 60 interviews with senior leaders and held dozens of focus groups during consultations in the first quarter and is seeking further input before releasing redesign plans later this year.
“We have experienced a tremendous feeling of goodwill for the role and purpose of the underwriting room, as well as a unanimous ambition for its ongoing future success,” CEO John Neal said.
A consultation report says remote working during the pandemic shows it’s possible to function in a solely digital environment but there is a strong sense the market is surviving rather than thriving on current technology.
Market participants agree lessons learned should be built upon rather than discarded, while they are unified on the value of the underwriting room, citing benefits such as serendipitous encounters and benefits for commercial interactions.
“The room thrives on achieving a critical mass and high density of market participants engaged in commercial activity,” it says. “The whole of the underwriting room is greater than the sum of its parts.”
Many firms and participants are expected to adopt hybrid work models, with on-site experience expectations much higher, the report says.
A redesign could also include spaces for more seamless face-to-face and virtual trading, state-of the-art events suits, break-out areas and different sized spaces for collaboration and innovation, quiet working areas and enhanced box design, layout and usage to maximise comfort and efficiency.
Proposals also included creating a more “destination” style venue to deliver a superior experience, with suggestions including a high-end restaurant, accommodation, bars, enhanced coffee shop facilities and conferences.
Lloyd’s plans to re-open the underwriting room from May 17 for those that need to be in, with capacity to be managed according to COVID requirements.
The marketplace will look to further relax restrictions and increase footfall in line with expected updated UK government guidance from June 21.
Aon has collaborated with a group of leading insurers and technology experts to underwrite COVID-19 cargo insurance risk with the help of sensors to track sensitive vaccine shipments as they make their journey from “factory to syringe”.
The offer is available to pharmaceutical firms, government bodies, transportation and logistics companies, distributors, health systems, pharmacy chains, inoculation centres and other qualified parties in the vaccine supply chain.
Aon, which will donate all 2021 revenues from the new solution to charity, says timely payment will be ensured for doses that fall outside an agreed-upon temperature range while being transported or stored. Real-time reporting of any temperature deviation will also help mitigate losses and maximize the number of doses administered to the public.
CEO Global Marine, Commercial Risk Solutions Lee Meyrick says Aon has been working on client solutions utilising sensors in the supply chain for several years.
"Recognising the concerns faced with the global distribution of COVID-19 vaccines, we explored the development of a new solution to provide financial protection to the companies involved in the distribution process,” Mr Meyrick says.
The offer is a collaboration with insurtech firm Parsyl and lead underwriter Ascot Group, binding insurers Chubb European Group and AIG, with support from Munich Re.
Other insurers include Axa, AEGIS London, Antares Managing Agency, Axis Insurance, Beazley, Fidelis, MS Amlin and Talbot.
“Working with leaders in the industry, we were quickly able to build out a group of like-minded insurers that are willing to underwrite the risks using verifiable and effective sensor technologies,” Mr Meyrick said.
Andrew Brooks, CEO of Ascot Group, says the collaboration will make more capacity available and bring to market additional products that will enable effective vaccine distribution at a global scale.
ChronosCloud, Intel, Mastercard and Sensitech have agreed to permit access to certain platforms, blockchain technology or devices as part of the risk management solution. ChronosCloud’s platform actively responds to any temperature fluctuations, so shippers can ensure continuous quality.
Modern supply chains are becoming increasingly complex and end-to-end visibility is essential, Carlos Menendez, President, Enterprise Partnerships at Mastercard says. Mastercard Provenance Solution tracks using blockchain and promises to minimise disputes through a “trusted, shared” record of shipments.
Sensitech's real-time temperature and location data will help to reduce problem escalations and enable nimble decision making with facts, GM Mike Hurton said.
“We look forward to supporting Aon in its efforts to address the challenges that COVID-19 vaccine distribution presents,” Intel's Industrial Solutions Division GM Christine Boles said.
The value of cat insurance claims rose 10% to an all-time high of £148 million ($264.6 million) in the UK last year as a record 1.06 million cat owners secured pet insurance.
Across all animals, UK pet insurers processed claims worth £799 million ($1.43 billion) in 2020, the Association of British Insurers (ABI) reveals, the second highest since records began in 2007.
There were 978,000 notified claims. These included 212,000 involving cats and 734,000 for dogs, valued at £598 million ($1.07 billion). Other claims were for rabbits, birds and hamsters.
The average claim value across all pet policies was £817 ($1461), up 2% on 2019.
Examples of expensive pet treatments that cost many thousands of pounds were a French Bulldog with a fractured leg, reattaching toes to a cat after they had been crushed, treating a dog’s dislocated kneecap, repairing ligament damage in a Jack Russell terrier and treating a cat’s fractured thigh bone.
By Simon O’Dell
Like the prolonged soft insurance market cycle, the macro-economic cycle was an extended one and it took the largest recession since the Great Depression, triggered by a global pandemic, to bring the economy down.
Such events filter out the vulnerable; “survival of the fittest” for the corporate world.
The global “COVID recession” was the first macro downturn since the term insurtech was coined, and the data shows that insurtech is fit, with the sector bouncing back in late 2020 to register an annual all-time high of $US7.1 billion ($9.2 billion) in funding volume, across 377 deals – a 12% increase in funding volume and 20% increase in deals from 2019.
The funding of insurtech innovation is proving important and timely. We face real threats that pose varying degrees of risk across all five collectively exhaustive macro areas of life; society, environmental, technology, geopolitical, and economic.
With a broad remit, new founders from non-insurance backgrounds – world leading climate scientists, AI engineers and neuro-scientists – are increasingly stepping up to solve important and pressing problems.
There is now enough insurtech value and traction to identify trends, one of which we will explore in a little detail.
Utilising data to synchronise dynamic risk with dynamic insurance
The progressively dynamic nature of risk is exposing the flaws of the traditional, static approach to underwriting.
In an ideal world, the data inputs that inform underwriting would move in sync with shifts in the risk profile.
Connected devices are increasingly being deployed by insurtechs and insurers alike to pull these two – often determinants of performance – into harmony.
Google is the single largest cost of sale in the world’s insurance market, though connected devices are likely the fastest growing cost of sale.
Insurtechs are paying anywhere from $50-$150 per device/policy, for the value of new and sometimes dynamic data insights on customers.
Connected devices allow the capture, processing and delivery of data that informs risk profiles, unlocking the ability to underwrite more deliberately. Connected devices are driving innovation in various areas, including:
We are seeing a phasing out of “blind acquisition”, growth, for growth’s sake.
The new age insurtech deploying a managing agent business model has an ethos of controlled growth, sustainable growth, growth driven by key risk metrics of frequency and severity for the benefit of the insurers’ P&L and the insurtechs’ P&L.
This is impacting insurance in a number of ways:
Given the increasing number of connected devices in the community and increased computing power, we will eventually see the gap close between reality and the reality reference layer.
The insurance industry has an interest in consuming such reference layers to optimise profitability, unlock new products and services, and augment the premium pool.