19 October 2020
A Deloitte Access Economics report on broker value has found that intermediaries provide huge value to clients, insurers and the economy – and clients don’t necessarily pay more for it.
The report, commissioned by the National Insurance Brokers Association (NIBA), found the benefits to clients are many, with brokers helping access a broad range of offerings, understanding risk, and dealing with claims.
But 54% of clients pay the same or less on their insurance after engaging a broker.
“The prevalence of broker use throughout the economy and across all types and sizes of businesses speaks to the value that organisations place in them,” NIBA CEO Dallas Booth said.
Deloitte Access Economics Partner and report author John O'Mahony says insurance broking is a complex business.
“Insurance broking is not as simple or transactional as walking into a store and buying a good,” he said. “It is a relationship-based business that involves up to 10 pre-sales and post-sales services and creates many sources of value.”
The current La Nina weather event could match the strength of the last one, which caused devastating flooding in parts of Australia.
A La Nina typically increases the chance of above-average rainfall across much of Australia during spring. Above-average summer rainfall is also typical across eastern Australia.
The Bureau of Meteorology previously believed the current event was unlikely to equal the La Nina of 2010–12, which was one of the four strongest on record.
But its latest predictions are more severe.
“All surveyed international climate models indicate this La Nina will persist through the southern hemisphere summer 2020–21,” the Bureau said.
“Most models suggest the La Nina will strengthen, peaking in December.
“Around half the models anticipate a strong event, meaning there is a possibility it could reach similar strength to the La Nina of 2010–12.
“The strength of La Nina impacts on Australia are often related to the strength of the event.”
However, models also forecast this event will be shorter than 2010-12, possibly ending in the first quarter of 2021.
As Australians await promised new government investment in natural disaster resilience, insurers say bushfire mitigation efforts may help them “fine-tune” premiums.
Treasurer Josh Frydenberg said in his Budget speech earlier this month that further investment in mitigation projects will be announced in the Government’s response to the Royal Commission into National Natural Disaster Arrangements, which is due to deliver its findings on October 28.
The commitment has been well received by the industry, with the Insurance Council of Australia (ICA) saying it supports the adoption of comprehensive bushfire mitigation strategies which can include targeted hazard reduction burns.
“Where hazards have been reduced for an area, the release of updated bushfire risk mapping that shows the reduction in exposure may assist the insurance industry to fine-tune premiums,” spokesman Campbell Fuller told insuranceNEWS.com.au.
ICA says hazard reduction burns can be an effective way of reducing the exposure of properties that are near or on bushfire-prone land.
ICA CEO Andrew Hall says the Federal Government “must take a lead on building a more resilient Australia. A significant investment is required.”
Bushfire and Natural Hazards Co-operative Research Centre CEO Richard Thornton says the centre’s Prescribed Burning Atlas – a new tool to support fire and land management agencies with options for prescribed burning strategies – makes clear there is no ‘one size fits all’ solution to prescribed burning.
“What is suitable for the ACT will not necessarily be best around Hobart,” Mr Thornton told insuranceNEWS.com.au. “There is no universal ‘right’ level of prescribed fire because there are competing objectives to be considered, vastly differing ecosystems to be covered, and constantly shifting variables in demographics and land use.”
He says strategies must be tailored to different environments, and the cost-effectiveness of these different strategies can vary considerably between regions.
The windows for undertaking prescribed burning have also shrunk due to drought and climate change, and Australia’s “fickle” weather system means that periods that are too dry can make it too dangerous to burn, while during periods that are too wet little will burn.
“The complexities around prescribed burning are large and growing,” Mr Thornton says. “The number of people and businesses continues to increase in previously empty forested regions, the impact of smoke on communities causes concerns [and] the management of water catchments is important.”
While fuel reduction burns can decrease bushfire intensity, flame height and the forward rate of spread, Mr Thornton says that on extreme high-temperature and high-wind days the effectiveness of most prescribed burning on stopping runs of large fires is minimal, because medium and long-range spotting will see these areas over-run.
“No amount of prescribed burning can reduce the risk to zero. We will always need to accept some risk.”
IAG has launched a “First Saturday” campaign encouraging Australians to complete small tasks to make their homes safer on at least one weekend a month. It says bushfire risk is complex and there are many factors that affect people’s risk.
“Hazard reduction burns can help to mitigate this risk,” an IAG spokesperson told insuranceNEWS.com.au.”However, other factors should also be considered around how to protect our communities, including where we choose to build homes and the standards to which we build them, as well as how we prepare our homes to reduce risk.”
A Senate committee inquiry into last summer’s bushfires recommends the Commonwealth Government allocate funding from the Emergency Response Fund to each state and territory for the establishment of a dedicated hazard reduction workforce.
It says funding should be sufficient to ensure both hazard reduction and ongoing research activities can be conducted on an annual basis, it said.
The SA Government has already moved to increase prescribed burns by 50%, allocating nearly $100 million for the task.
A $42.5 million commitment by the Queensland Government to build the East Bundaberg Flood Levee will likely reduce local property premiums by 10-27%.
Insurance Council of Australia (ICA) CEO Andrew Hall says the levee is “long overdue”.
“Bundaberg is notorious for its floods,” he said last week. “Insurers will reassess the risk and lower their premiums for property owners protected by the completed levee.”
Floods in the city in 2013 caused more than $1.1 billion in insured property losses in today’s dollars, and industry data shows more than 10,300 buildings are exposed to flood risks.
Investments in permanent mitigation are vital to ensure the long-term economic and social viability of communities, Mr Hall says.
“Governments should focus on measures that will provide long-lasting change by addressing the underlying cause of insurance affordability issues.”
Suncorp CEO Steve Johnston, who visited Bundaberg earlier this month and met with the local council to discuss the project, says the levee is a critical part of the community’s flood mitigation action plan.
“This project is a win-win,” Mr Johnston said. “We’ve seen how effective investment in economic infrastructure such as flood levees reduces the impact of natural disasters, helps build stronger economies, safer communities and reduces cost of living pressures through lower insurance premiums.”
In 2014 Suncorp lowered premiums in the Queensland town of Roma by an average 45% and by up to 90% when a flood levee was built.
“The equation is simple – when you lower the risk, insurers can lower the premiums,” Mr Johnston said.
ICA says Bundaberg is just one of dozens of Queensland towns and cities where well- designed flood mitigation would reduce flood risk for generations. It says mitigation should be treated as nation-building infrastructure and must take the impact of climate change into account.
Sydney-based start-up risk modeller Reask has released a new unified tropical cyclone model which it says is the “next phase” of catastrophe risk assessment and offers insurers natural hazard risk solutions without geographic limitations.
Reask’s model is created specifically for the needs of insurance and reinsurance carriers, intermediaries and securitised insurance funds.
This new climate-connected view of tropical cyclone risk, with global coverage, utilises Reask’s proprietary machine-learning methodology, which is trained to recognize the impact of terrain features and provides a highly accurate, probabilistic, global-scale view of tropical cyclone risk.
CEO and co-founder Thomas Loridan says the innovation leverages a recent leap in the volume of accessible global climate data as well as the high-performance computing tools required to process it.
“They represent the next phase of catastrophe risk assessment for climate-related perils, with insurance organisations now wanting natural hazard risk solutions without geographic limitations and fully aware of the role played by climate variability,” Dr Loridan said.
The new model incorporates a 100,000-year simulation event set, capturing the variability in climate drivers of tropical cyclone frequency and severity. It can distinguish between the complexity of wind field shapes around the world, from hurricanes in the deep tropics to typhoons.
TravelCard today announced “the difficult decision” to put the business into hibernation and pause operations.
The broker-focused business, which launched in 2018 and is underwritten by Hollard, says it has made the call as there is “no return to international travel in sight”.
Brokers have been advised that new policies are no longer available effective immediately, with renewals ceasing December 1 2020.
All current policies continue to be in force and will continue to be serviced. All claims will be processed, subject to policy terms and conditions, and commissions will be paid. The 24/7 on-trip assistance team will continue to be provided for all valid current policies.
A reduced TravelCard team will remain for approximately 15 months to manage claims, partner support and trip assistance.
“We are so proud of our team at TravelCard, who have achieved so much over the last two and half years,” CEO Peter Klemt said.
“Our staff have remained dedicated and professional through a challenging time and our partners have provided us with support and belief in our aspirations.
“This has not been an easy decision for TravelCard and we have spent the last eight months making a way forward. But until significant international travel returns the business will be put into hibernation and operations paused.
“When TravelCard sees a material return to international travel we intend to resume the business.”
Hollard Head of Agency Partner Management and Development Orion Riggs says TravelCard has “raised the bar” in Australian travel insurance.
“Hollard supports the difficult decision TravelCard has made,” he said. “We look forward to TravelCard’s speedy return to the market when conditions improve.”
PSC Insurance Group announced today it has acquired another London brokerage for £8.51 million ($15.5 million), further expanding its reach in the UK market.
The acquisition of Absolute Insurance Brokers follows a recent move by the Melbourne-based listed group to buy up the remaining 30% share in Turner Financial Services to take full ownership of the UK business. PSC bought a 70% stake in the Leicester-based retail brokerage in 2018 for £3.96 million ($7.2 million), with an option to purchase the other 30% at a later date.
PSC says the purchase of Croydon-based Absolute, which specialises in commercial insurance, reflects the importance of the UK market to its growth strategy.
Its addition will give PSC an immediate increase in scale and boost its ability to improve margins as well as offer opportunities for its Carroll wholesale broking operations.
“The UK market provides us with terrific growth opportunities,” PSC MD Tony Robinson told insuranceNEWS.com.au today. “We have a great group of people working with us in the UK, and leveraging that skillset and ability via acquisitions is a tremendous way to drive shareholder value.”
Mr Robinson says the UK “is an incredibly important global insurance market, underwriting risks from around the globe as well as being a large domestic business insurance market”.
“We believe the combination of those two makes it a fantastic place to trade as an insurance broking and intermediary business,” he said.
PSC says the acquisition of Absolute is expected to add initial annualised incremental pre-tax earnings of £1 million ($1.83 million) to the group.
It will pay 75% of the total consideration upon completion of the deal, made up of £5.11 million ($9.3 million) in cash and the balance through PSC shares.
The outstanding balance will be payable in cash on the first and second anniversaries of the completion date of the acquisition.
IAG has defended a proposed enterprise pay and conditions agreement, saying the company is “not immune” from the impacts of COVID-19 and the offer achieves the right balance between the needs of employees and the business.
“We have proposed a solid package of benefits that is competitive, provides us with flexibility and stability and is reflective of our current business performance and the challenging operating environment,” a spokesman told insuranceNEWS.com.au.
“Importantly, we believe this agreement will see IAG better placed to be able to maintain high levels of employment as we manage through the recession.”
The Financial Services Union (FSU) says the company agreed in March to a 2% salary increase over three years, with the deal about to be finalised as Australia was placed into lockdown. IAG is now offering 1% for the first two years and 1.5% for a third.
FSU National Assistant Secretary Nathan Rees told insuranceNEWS.com.au the dispute could lead to industrial action, with union members advising that the deal “is simply not good enough”.
Mr Rees says about 8000 employees at IAG are covered by the agreement and a “substantial proportion” of those are union members.
The FSU says the proposed agreement also fails to include “job security” and “working from home” clauses, and pay increases will be related to performance and targets that are considered unreasonable given changed circumstances.
IAG has provided financial assistance for employees setting up at home, including a $400 initial payment. A further $40 a month has been provided as an additional allowance, as well as safety and wellbeing support.
The new enterprise agreement also includes enhanced entitlements around supporting diversity, equity and inclusion.
The FSU warned last month of industrial action against IAG competitor Suncorp due to a lack of consultation on job cuts, with members not given enough information to make decisions.
FSU Queensland Local Executive Secretary Wendy Streets says the company has since provided the information the union was seeking, and industrial action has been averted.
Coverforce has moved to dispel doubts on a new professional indemnity (PI) insurance product after a surveyors’ group warned the cover may not meet Australian regulations.
The broker has put up what it says is “accurate information” about the product, which comes with no cladding exclusion and was developed in collaboration with the Royal Institution of Chartered Surveyors (RICS). Coverforce is a preferred broker of RICS.
“We have received a high volume of enquiries regarding this product and we believe it’s important to have accurate information available for stakeholders to allow them to make informed decisions,” a spokesman for Coverforce told insuranceNEWS.com.au.
"For more than 18 months we have been working hard with insurers to be in this position where we are now able to offer professional indemnity insurance including cladding cover. It’s a great news story for the industry.”
The Australian Institute of Building Surveyors said last week it has been “advised of concerns” about the product. It says it has seen the product’s policy wording and believes it is “inconsistent and some clauses relating to cladding, finishing systems and wall panelling are contradictory in terms of what is covered”.
Coverforce says the product information, which is provided in a “frequently asked questions” format on its website, seeks to provide “a source of clarity around the security, coverage features and intended market”.
The product is 100% backed by Lloyd’s, offering limits of $1 million and $2 million.
For limit requirements over $2 million, an "excess-layer" policy will need to be arranged above the primary $2 million cover. The "excess-layer" policy will likely have an industry cladding exclusion.
It is designed for building certifiers with a turnover of less than $5 million and does not include a “cladding” or “non-compliant/non-conforming building materials” exclusion.
Coverforce says the policy has been designed to be compliant with relevant Australian legislation for certifiers.
Insurers globally have introduced cladding restrictions in PI policies since last year to mitigate exposure to the controversial building material, which has been linked to many fire incidents including the Lacrosse building in Melbourne and London’s Grenfell Tower.
However, Coverforce says it and RICS have worked to address key issues impacting insurer confidence as part of the development of the PI product.
There are two conditions that must be met before a policy is issued. A minimum 50% of the professional staff of the insured must become a chartered surveyor or associate member of RICS within the period of insurance, and the insured must become a firm regulated by RICS within the period of insurance.
“Without RICS involvement, insurers would not have introduced new insurance capacity into a distressed sector,” Coverforce says. “The confidence of insurers has been built upon the assurance capabilities of RICS as a means to buttress the co-regulatory environment for individuals and firms.”
Click here for details about the product’s terms and conditions.
Steadfast has boosted its education and training capabilities with the acquisition of Gold Seal Practice Management and Gold Seal Intellectual Property.
Gold Seal MD Sheila Baker will join Steadfast as EGM Compliance and Customer Experience, reporting directly to CEO Robert Kelly.
Terms of the deal reported by insuranceNEWS.com.au in a Breaking News last week were not disclosed, but as part of the transaction the Gold Seal brand and logo will be owned by Steadfast. A total of eight staff, including Ms Baker, will move across.
“They are a high-quality organisation underpinned by talented staff who we have worked alongside closely for many years, and have always admired the professional training they deliver to enhance the standards, reputation and success of the insurance industry,” Mr Kelly said.
“I am confident this merger will help to enhance the compliance, human resources, training and education practices within the Steadfast broker network for the benefit of their clients.”
The acquisition does not include Gold Seal International (GSI), which will continue to provide compliance, audit and other professional services, including Lloyd’s coverholder audits.
Gold Seal International, to be led by former Director David Mills, will change its name to GSI Professional Services in the near future.
“We are excited to be able to continue to take the Gold Seal philosophy, some of its people and valued services forward,” Mr Mills said.
“Additionally, we will be broadening our reach to the wider Asia-Pacific region to support Lloyd’s coverholders, managing agents, brokers and underwriting agencies.”
Johns Lyng Group has signed a contract with Westpac General Insurance to provide building and restoration services for insurance claims across the insurer’s national client base for an initial period of three years.
The agreement takes effect today and will cover the full scope of Johns Lyng’s insurance building services such as assessment, makesafe, restoration and repairs.
“[Westpac General Insurance] is one of Australia’s most well-known brands for home and contents insurance, and so to partner with them for the first time is another big win for us,” CEO Scott Didier said.
Media reports last week said Allianz is in “advanced discussions” to buy the Westpac-owned general insurance business. Allianz has declined to comment on the report, which valued the deal at $500 million.
Westpac said in May it was reviewing its non-banking operations, with options under consideration including a potential sale of the general and life insurance businesses.
Former claims manager Stream says the Qusol insurance software business will no longer be a key part of its operations as it moves out of insurance to become an electrical products and services company.
Stream, which in June entered into an agreement to acquire the capital of Mayfield Group Investments for $25 million, will become Mayfield Group Holdings. Last week it issued a share offer prospectus to raise $1.2 million as part of its proposal.
The company has been suspended from trading on the Australian Securities Exchange since June 22 while the deal is finalised. It intends to change its name and stock market code as it moves out of insurance.
“The company’s focus will become that of Mayfield’s, being the provision of electrical products and services to electrical infrastructure operators throughout Australia,” it says in the prospectus.
Stream is looking to sell Qusol NZ, but says that there are no current negotiations with potential purchasers and it is unlikely it will be sold by November 28. That will mean an additional cash payment of $250,000 will likely be made to the Mayfield vendors.
Qusol provides insurance claims management and workflow management software to the insurance and construction industries and has been the key business for Stream as it has exited other areas.
Stream pursued expansion plans in Australia, the UK and New Zealand, including the acquisition of loss adjuster Cerno in 2015, before running into financial trouble.
The Australian unit went into voluntary administration and was subsequently liquidated, the UK business was sold and NZ claims service provider Symetri was also divested.
Chairman Lawrence Case says in the annual report that the board has been investigating acquisitions over the past three years with the aim of finding a profitable, stable business of sufficient size to justify the costs of being a listed company, and that could be bought at a reasonable price.
“If the Mayfield transaction proceeds, the Qusol software business will no longer be a core activity, but it is clearly the case that the Qusol business has kept Stream alive during this period,” he said.
QBE has partnered with workplace inspection company SafetyCulture to provide risk mitigation assistance and tailored cover for SMEs through new joint venture insurer Mitti.
The brand will sit within the QBE Ventures division, which facilitates partnerships and investments in new technologies and provides an avenue to work with start-ups.
QBE Ventures CEO James Orchard says Mitti will provide flexible packages based around risks identified through an initial assessment conducted by experts using video.
Businesses will be provided with recommendations for immediate action as well as access to SafetyCulture’s iAuditor platform, which includes inspection and checklist tools for on-going management.
The small business insurance package includes up to nine products, with QBE seeing the potential to include other lines in future enhancements.
“With Mitti, we believe we’ve created a product that will service a broad range of SMEs that are looking to get in front of their risks, identify what these are and then use technology to manage and reduce their exposure to these risks,” Mr Orchard told insuranceNEWS.com.au.
SafetyCulture, which started in Townsville in 2004, also has offices in Sydney, Kansas City, Manchester and Manila, and says its iAuditor tool is used in more than 80 countries.
Mitti will be led by Danial Cummins, who has 15 years’ experience within QBE’s commercial lines division. The product will be available through brokers and direct.
The Bank of Queensland (BOQ) says the sale of its insurance arm will translate into an after-tax loss of $27-30 million, which will be reflected in its current financial year results.
BOQ announced last week it has signed an agreement to sell St Andrews Insurance for $23 million to private investment vehicle Farmcove.
The sale is subject to regulatory approvals and BOQ expects to complete the transaction before the end of this financial year.
CEO and MD George Frazis says the sale reflects the bank’s five-year policy goals made in February to deliver long-term shareholder value and profitable growth as well as improve customer experience.
“The sale of St Andrew’s represents an important strategic milestone for BOQ,” Mr Frazis said. “We are delighted to have secured a buyer that has a long-term vision for the business which includes meeting the continued obligations of policyholders.
“The divestment enables us to focus on our niche customer segments while simplifying our business model.”
A BOQ spokesman told insuranceNEWS.com.au the business is not entering into new policy agreements at this time and is focused on supporting existing policyholders.
The bank bought St Andrews Insurance (Australia) and St Andrews Life Insurance in 2010 from the Commonwealth Bank for $45 million.
The non-life insurance product range includes consumer credit protection, home and contents, landlord, motor and travel.
Zurich wants to introduce an enhanced business travel product locally next year after the global company last week said it had improved its commercial offering to reflect challenges highlighted by the COVID-19 pandemic.
The insurer says companies have a greater obligation to ensure the health and safety of their workforces as employees are exposed to more complex risks when travelling.
“Although the pandemic has significantly reduced business travel for now, it is slowly re-starting as companies in some industries have to look after their assets, equipment and customers abroad and deliver on projects,” Global Head of Accident & Health (A&H) Drazen Jaksic said.
“Implementing a multinational business travel solution is now more important than ever as it can help prevent employees from being harmed and protect the business from the financial consequences.”
Australia currently has a ban on all overseas travel, unless an exemption is granted, while domestic flights between states and territories are also affected by border closures.
The Federal Government has indicated international travel may first be allowed with New Zealand and other countries with low levels of COVID-19 transmission.
“In Australia, Zurich is monitoring the local travel restrictions closely and is looking forward to bringing the benefits of the enhanced global commercial A&H travel solution to our customers in 2021,” Head of Accident & Health – Commercial Nicole Yates told insuranceNEWS.com.au.
Zurich says its Business Travel Solution includes alerts, three-way communication between the traveller, employer and Cover-More’s World Travel Protection, and one-touch “emergency button” capability to request immediate assistance.
A Travel Assist portal also allows risk managers to receive updates on emerging issues, information on COVID-19 spread, and advice on travel and safety procedures.
Comparison website iSelect has promoted Chief Marketing and Commercial Officer Warren Hebard to CEO, while warning that revenue will be hampered by changes to life insurance and this year’s COVID-19 restrictions.
In a trading update to the Australian Stock Exchange, iSelect said that “as a result of the nature of the changes in life insurance and COVID-19’s restrictive impact on recruitment and onboarding of new team members, we expect a small reduction in revenue in fiscal 2021”.
Mr Hebard will take up the CEO role in November from board member Brodie Arnhold, who was appointed interim CEO in April 2018.
iSelect says Mr Arnhold – who had played a key role in the turnaround of the business –
will remain on the board and will mentor Mr Hebard to ensure a smooth transition.
Mr Hebard says the business is on track to deliver significantly improved profitability in fiscal 2021 and is well placed to return to growth in 2022.
iSelect received $3.4 million of JobKeeper payments during the June quarter, but from this month no further payments will be received.
Technology company Cover Genius, which facilitates ecommerce insurance, has raised $15 million as it extends its product suite and partner network globally amid opportunities from rising online purchasing.
The Sydney-based group says the funding round, led by King River Capital and supplemented by a loan from Leap Capital, is aimed at supporting integrations in the technology and ecommerce arena in international markets.
The company has recently entered a partnership with Shopee Thailand and says within the past month it has integrated commercial, shipping and product insurance for six global ecommerce platforms.
“Our global partner network is rapidly growing, and this recent raise will support the ongoing development of high volumes of strategic partnership deals,” CEO and co-founder Angus McDonald said.
Cover Genius says the market for insurance products embedded into points of sale or signup is significant and has accelerated with the COVID-19 outbreak.
“Customers want to protect their purchases, big or small, and given the option many will take insurance cover at the point of sale from their favourite online brands,” Mr McDonald said.
Insurance affordability and availability risks are set to rise with more intense and frequent natural disasters, strengthening the economic case for greater investment in mitigation, Australian Prudential Regulation Authority (APRA) Executive Board Member Geoff Summerhayes says.
“Countries with larger insurance protection gaps typically suffer more severe economic consequences after disasters, such as reduced productivity and higher debt levels,” he told the Australian Business Roundtable for Disaster Resilience and Safer Communities webinar last week.
“With its mandate to protect the soundness of financial institutions and broader financial stability, APRA is understandably keen to avoid such a scenario coming to pass.”
Insurers facing the prospect of higher claims costs have the advantages of contracts that are renewed annually and an increasingly sophisticated ability to measure the risk faced by individual policyholders, he said.
“This might be good for insurers, at least in the short term, but it’s bad news for policyholders and economic activity more broadly,” he said.
“APRA’s biggest concern when it comes to the impact of climate-related risks on insurance is therefore not the prospect of an insurer becoming insolvent, it’s the possibility that general insurance might become unaffordable or even unavailable in parts of Australia.”
Mitigation is the best way to tackle the issue, APRA says in a submission to the Australian Competition and Consumer Commission’s Northern Australia Insurance Inquiry, and Mr Summerhayes warned the webinar audience that the issue may affect more regions as the climate changes.
“Other approaches, such as subsidising the cost of insurance, will ultimately be less effective because they don’t lower the risk and may reduce the incentive to mitigate it,” he said.
Mr Summerhayes says responsibilities lie with governments, households and businesses, while insurers can also do more to incentivise mitigation.
“If insurers want their argument that lowering the risk lowers the premium to be taken seriously, they must do more to recognise mitigation by home and business owners and reward it accordingly,” he said.
The Australian Business Roundtable predicts the total economic cost of natural disasters to the country will reach $39 billion a year by 2050, while in the US it is estimated that every dollar spent on resilience saves up to $11 in response and recovery costs.
The NSW State Insurance Regulatory Authority (SIRA) has taken action to ensure employers are not operating without workers’ compensation cover.
SIRA says 1627 businesses purchased cover following investigations last quarter, reflecting almost $3.2 million in additional premium raised and 5236 more employees being covered.
It issued four penalty notices for non-insurance, with each business fined a total of $750 and made referrals to Revenue NSW to start recovery action for $86,306 of avoided premiums.
The latest workers’ compensation regulation bulletin says 39 visits were made to employers with injured staff at risk of not returning to work, and 30 improvement notices were issued.
Some 29 annual reviews of self-insurers were also completed, while SIRA continued monitoring of icare’s performance and that of its scheme agents.
SIRA issued 15 notices to insurers, claimants and providers to request information related to allegations of fraud and potential legislation breaches.
The regulator also says in its latest bulletin that, following a high level of interest, it has extended its consultation on a new standard for managing claims for psychological injury.
Feedback can now be provided until November 6.
The Australian Prudential Regulation Authority (APRA) has stepped up its focus on general insurers in response to the economic fallout from COVID-19 and last summer’s natural disasters, the regulator says in its 2019/20 annual report.
APRA says it has paid particular attention to the “potential for significant downside risks across impacted lines of business”.
It flags business interruption (BI) as a “prominent area” of focus, citing significant uncertainty regarding the extent of the industry’s exposure as a result of legal challenges to policy wordings. A test case hearing on BI exclusions is currently being heard in the NSW Court of Appeal, which has adjourned to consider its decision.
The regulator says it intensified its engagement with peer domestic and international regulators and actively participated in a cross-agency working group on BI insurance.
Despite the dire economic environment, APRA says general insurers continue to maintain strong balance sheets and report robust capital positions.
“APRA’s risk-based supervision of the general insurance industry needed to step up in intensity at the beginning of 2020 given the significant impacts of natural catastrophe events, the COVID-19 pandemic and increased market volatility,” the regulator says.
“The prudential strength of general insurers remains an important focus for APRA.”
APRA says its focus shifted in the second-half of the financial year to analysing the usability of insurers’ recovery plans in the COVID-19 environment, to support the monitoring of risk indicators, assessment of resilience and the credibility of recovery options.
Its draft standard for heightened requirements on executive remuneration remains at the consultation phase because of COVID-19. APRA is currently reassessing its timetable for introduction of the standard and has flagged it will recommence consultation towards the end of this year.
COVID-19 regulatory relief measures saw 31 general insurers make requests towards the end of the last financial year. APRA approved 23, declined one and is looking at the other seven applications.
In the last financial year APRA collected about $188.1 million in levies from the financial services industry, including $31.5 million from general insurers.
Click here for the APRA report.
The Australian Financial Complaints Authority (AFCA) has warned that a temporary time extension for handling complaints during the COVID-19 pandemic is set to come to an end.
Under changes due to expire at the end of this month, companies have had an extra nine days to respond to complaints that have already been through an internal dispute resolution process.
“AFCA has been working closely with key stakeholders since April to monitor and review the response timeframe change and it is appropriate that the extension ceases as intended at the six-month point,” Chief Ombudsman and CEO David Locke said.
“We are appreciative of the way our members have dealt proactively with the challenges of COVID-19 and the resolution of complaints during this extended response timeframe.”
AFCA says it will continue to consider extensions where they are needed on a case-by-case situation as part of its normal process.
“We understand that the damaging impacts of COVID-19 continue to be felt by some financial firms, as well as consumers and small businesses, and our approach is flexible and agile to meet these individual needs,” Mr Locke said.
The timeframe will revert to 21 days from next month, with initial responses to complaints that have reached the case management stage also required within requested seven, 14 or 21-day timeframes as appropriate.
The International Association of Insurance Supervisors (IAIS) is consulting on a paper that will provide guidance on managing the challenges and opportunities arising from climate-related risks.
Climate change and sustainability is a key theme in the IAIS strategic plan for 2020-24, with the group warning the issue may have wide-ranging impacts on the structure and functioning of the global economy and financial system.
The draft “application paper” was developed in conjunction with the Sustainable Insurance Forum group of supervisors convened by the UN Environment Program.
Application papers don’t establish specific standards, but provide guidance and examples of good practice on issues such as supervisory review and reporting, corporate governance, risk management, investments and disclosures.
Comments on the paper are due by January 12, while a webinar to provide more details will be held next Monday at 10:30pm AEDT.
More details are available here.
The Australian Prudential Regulation Authority (APRA) says QBE will come under a supervisory framework for internationally active insurance groups (IAIG) under reforms introduced to enhance global co-ordination.
The International Association of Insurance Supervisors (IAIS) adopted a common framework last November which is now being introduced across national jurisdictions.
APRA says it is taking a measured approach, aligning standards and consulting as part of its usual policy process. It has assessed local insurers and found QBE meets the new IAIG classification.
QBE writes insurance across 25 jurisdictions and in most of those the supervisor is a member of the IAIS, Executive Board Member Geoff Summerhayes says in a letter to the company.
“Classification of QBE as an IAIG is therefore expected to promote the co-ordination of supervisory activities efficiently and effectively between the group-wide supervisor (APRA) and other international supervisors,” he says.
Further losses are likely in store for the life industry after it made an aggregate loss of $1.3 billion in the last financial year, compared with an $800 million profit in the previous year.
KPMG says in an annual review of the industry that insurers have struggled to turn around unprofitable risk products and contain the claims fallout from COVID-19.
Overall direct premium income, a measure of industry revenue, fell 6.1% to $17.3 billion in 2019/20, while losses from risk products blew out by another $1 billion to $1.4 billion.
The profitability of risk products – group lump sum, group disability income, retail disability income and retail lump sum – was strained by increasing policy liabilities and claim expenses.
Claims as a proportion of premium across all risk products continued to worsen, rising by 4.3% to $15.3 billion. In 2017/18 and 2018/19, claims cost grew by 1% and 4.1% respectively.
“Trending experience may be further impacted by the uncertainty generated by the COVID-19 pandemic,” KPMG says in the review.
Retail disability income insurance was the worst-performing product, losing $1.2 billion during the period. Group lump sum lost $352 million and group disability income lost $249 million, while retail lump sum – the only profitable product – made $422 million.
KPMG says operating conditions are not expected to improve, citing challenges from the pandemic and insurers’ struggle to improve the sustainability of risk products, particularly for retail disability income.
“The life insurance industry faces significant challenges in responding to the impacts of COVID-19 while attempting to make genuine progress in addressing profitability issues that are acknowledged by all participants as not being sustainable,” the report says.
“Progress towards a more sustainable position requires action on multiple fronts. Work in addressing the future product design is critical.
“However, this needs to be accompanied by a coherent strategy that takes into account the pricing of in-force books, effective and efficient claims management, overall expense management and targeted distribution strategies.”
The Australian Prudential Regulation Authority (APRA) this month informed the industry it has resumed its work requiring insurers to address flaws in the design and pricing of retail disability income products.
It warned that insurers who fail to take adequate actions will face additional upfront capital penalties.
KPMG Insurance Lead Partner David Kells says it will take time for insurers to market new retail disability income insurance products. At the same time they still have a book of existing contracts with the old features that need to be managed.
“The main tool that insurers have to address the profitability issues is repricing,” Mr Kells told insuranceNEWS.com.au. “There is an opportunity to reprice each year.
“However, insurers need to balance repricing with customer retention if you want people to continue to hold the product. It’s a slow process to do that.
“It’s therefore likely the issues that have generated the losses for the last couple of years will continue for a time.”
Mr Kells says that despite the losses the industry is in a strong capital position, “which means they are well placed to make the necessary changes to return to profitability.”
Click here to access the annual review.
The Australian Labor Party has reiterated its stance against the commission model – indicating that major changes could be on the cards for advisers if the party wins the next federal election, which may be held as early as August next year.
Shadow Minister for Financial Services Stephen Jones says the ALP wants to see a “better advice industry”.
“We want to engage with industry and with regulators on how we can address the current advice gap,” Mr Jones said in a speech last week at the Association of Financial Advisers (AFA) virtual conference.
“We want to see all Australians able to access high-quality financial advice about their retirements, about their investment needs, about their insurance.
“The provision of advice must be decoupled from the sales process, which means the prohibition of commissions, however so described, from product manufacturers to advisers.”
Mr Jones says the ALP’s position will hinge on the findings of a government review next year into the life insurance sector.
However, he says he starts “with a bias against” the remuneration model. “The burden lies on the industry at large to prove that a commission-based sales model that’s attached to an advising sector is able to provide a service to consumers that is not conflicted.”
At last year’s AFA conference the ALP’s then-shadow assistant minister for finance, Matt Thistlethwaite, said the industry must justify why commissions should not be axed.
AFA GM Policy and Professionalism Phil Anderson says life advisers must work to convince the ALP on the merits of the current remuneration arrangement.
“It is critical that we retain commissions for life insurance, because Australians are not prepared to pay what it costs to provide life insurance advice,” Mr Anderson told insuranceNEWS.com.au.
“The job is in front of us to convince the ALP of the importance of retaining commissions…to understand the importance of the implications of removal of commissions.”
The Federal Government says it is aware of advisers’ concerns over the cost impact of regulatory reforms and is considering ways to ease the burden to support the provision of affordable financial advice.
“I want you to know that I am listening and I am taking on board what you’re saying,” Assistant Superannuation, Financial Services and Financial Technology Minister Jane Hume said last week in an address to the Association of Financial Advisers’ (AFA) virtual conference.
“I am working to address your biggest concerns,” Ms Hume said, adding she is “also constantly looking for opportunities for red tape reduction, identifying obstacles to productivity and profitability, and reducing the burden on your industry and its participants”.
She says the Government has a “vested interest” in ensuring advisers can provide professional advice to as many Australians as possible “without being tied up in red tape”.
Many peak bodies such as the AFA have in recent months warned advisers are struggling under the weight of rising compliance costs, forcing them to raise fees. This has in turn made it more expensive for Australians seek professional guidance.
AFA GM Policy and Professionalism Phil Anderson says it is “fantastic” that the Government is thinking about red tape reduction.
“We’ve got a sense there is an increasing awareness of the issue,” Mr Anderson told insuranceNEWS.com.au. “The challenge is what is the best way to solve it.
“We are of the view that the issues are quite substantial. What needs to be done to achieve an outcome where the cost of financial advice is more accessible to everyday Australians will require more substantial re-egineering of the advice process.”
In her speech Ms Hume said the Government is also committed to raising the standards of the industry through new professional requirements and implementing proposals made by the Hayne royal commission.
The Government intends to introduce legislation by the middle of next year for a new single disciplinary body for financial advisers. The disciplinary system is one of the Hayne royal commission’s recommendations.
“It’s a significant step,” Ms Hume said of the measure. “The Government agreed with the recommendation and we believe the body will streamline and encourage greater professional discipline in the industry.”
Legislation for a forward-looking compensation scheme of last resort – another proposal made by the Hayne royal commission – is expected to be introduced by the middle of next year.
The Australian Securities and Investments Commission (ASIC) has suspended the financial services licence of Ballast Financial Management for 10 weeks after it was unable to obtain professional indemnity (PI) insurance.
In January ASIC banned Ballast director Wayne Blazejczyk from providing financial services for five years after failing to meet the best-interest obligations when providing advice on self-managed super funds.
The regulator accused Mr Blazejczyk of placing customers with low-value superannuation balances into SMSFs and advising them to invest in the Bateau Opportunities Fund, which he owned.
Last week ASIC suspended Ballast’s licence until December 18 because the Perth-based financial adviser was unable to obtain PI insurance to comply with its obligation to have adequate compensation arrangements.
The 10-week suspension is intended to give Ballast sufficient time to put adequate compensation arrangements in place, and provides an “opportunity to identify and appoint an appropriately qualified and experienced responsible manager following the resignation of its previous responsible manager”.
In 2015, ASIC banned Mr Blazejczyk’s colleague at Ballast, Marion Joan Pearson, for life. It said she deposited client money into an account controlled by her, created false documents and told her clients the funds were invested in assets when they were not.
Ballast must demonstrate it is in a position to recommence its financial services business by the end of the 10-week suspension or ASIC will consider cancelling the licence, which Ballast has held for 17 years.
Zurich-owned OnePath will provide total and permanent disability and death cover for the AFL Players Association after the group completed a review process.
OnePath will take over from Resolution Life in providing insurance, with the new arrangements, including improved cover for concussion, taking effect from December 1.
Zurich says concussion is a growing area of concern in all “tackle-oriented” sports and more research on the long-term impacts is coming to the fore.
“Core to our promise as an insurer is to provide coverage that’s appropriate to the needs of our customer segments and to provide support in any way possible at claim time,” a spokeswoman told insuranceNEWS.com.au.
“Cover for concussion is important for this group and we are proud to offer in this case.”
The OnePath cover is available through players’ superannuation, with individuals able to adjust cover levels, or opt out.
Zurich is already involved with the AFL Players Association and the AFL Coaches Association through the Tackle Your Feelings program which offers mental health training to community football clubs.
That program is in its second year of operation and has trained more than 750 coaches at 250 football clubs.
ClearView has reported a 35% rise in underlying net profit to $6.9 million for the first quarter, underpinned by solid contributions from its life insurance division.
The life insurance unit, its biggest income generator, made a profit of $6.69 million in the three months to September, up from $4.9 million a year earlier, the business said in an update last week.
Wealth management and financial advice, its other divisions, made $405,000 and $232,000 respectively during the quarter.
Overall operating earnings after-tax increased to $7.1 million from $5.2 million a year earlier.
ClearView has maintained its earnings guidance of $20-24 million in underlying net profit for this financial year in light of the strong trading results from the first quarter.
The business says the first-quarter results reflected the 8% rise in in-force life premiums to $276 million and material improvement in profitability driven by strong performance in the division.
Looking ahead, ClearView reiterated its expectation that the economic impact of the pandemic will drive further increases in individual income protection claims across the industry.
Investment group Challenger says its life annuity sales in the first quarter grew 46% to $1.23 billion from a year earlier.
The increase was driven by strong Australian sales and robust contributions from its partnership with MS Primary in Japan, Challenger said last week in an investor update for the September quarter.
Australian annuity sales increased 35% to $842 million, underpinned by strong growth in both term and lifetime products. Sales through the MS Primary partnership surged 79% to $391 million.
However, overall life sales fell to $1.58 billion from $1.78 billion a year, dragged down by lower institutional volumes.
The business reaffirmed its normalised earnings guidance for this financial year, with pre-tax profit projected in the range of $390-440 million.
“Challenger’s performance in the first quarter demonstrates the success of our strategy to diversify our business geographically and across customer segments,” CEO and MD Richard Howes said.
“Our record annuity sales reflect strong growth in the contribution from Japan as well as domestic institutional and retail annuity sales.”
Challenger says the Life division made significant progress during the quarter redeploying about $800 million of cash and liquids into higher-yielding investments that will generate returns in excess of 20%.
MLC Life Insurance says the number of customers using its Mental Health Navigator service has almost doubled since the onset of COVID-19.
More than 200 MLC Life Insurance customers have now used the Best Doctors’ Mental Health Navigator, a confidential, specialist mental health service that is available online to MLC customers and their families at no cost.
The partnership between Best Doctors and MLC is in its 11th year. Customers receive assessments conducted by mental health specialists, such as a clinical psychologist or psychiatrist.
Sean Williamson, Chief Group Insurance Officer, MLC Life Insurance, said many Australians were struggling to cope with emotional and financial pressures. He says 54% of people with mental illness do not access any treatment, an issue exacerbated by “serious problems” in detection and accurate diagnosis.
“We want to help customers better manage and treat their condition … and offer them a tangible solution to help them improve their mental health. This is what Mental Health Navigator provides,” Mr Williamson said.
MLC says 76% of customers who had severe or extremely severe symptoms of depression at their first appointment experienced a reduction after just three months of using the service and most had a modification in their treatment.
The service is helping to prevent employee absences, with 40% returning to full time or part time work by their three-month follow up.
Mr Williamson says there is a strong likelihood that a recessionary environment will trigger an increase in claims, particularly mental health, and services like the Navigator may ultimately reduce the extent of this.
In 2019, the life insurance industry paid out more than $750 million to around 6,800 people experiencing mental ill-health.
The Financial Services Council (FSC) has announced the appointment of AMP Australia acting CEO Blair Vernon as a board director.
Chairman Geoff Lloyd says Mr Vernon, who has more than 25 years’ experience in the industry, will provide valuable inputs to the FSC.
“[He] has demonstrated strong governance experience across a range of companies and circumstances and these skills are highly regarded by the board,” he said.
Mr Vernon was appointed in August to his current role, with responsibility for the Australian retail business including its wealth management and banking divisions. He joined AMP in 2009 and was previously AMP New Zealand CEO.
Third-party group insurance administrator Australian Group Insurances (AGI) is introducing a new “brand aesthetic” with the launch of two refreshed websites.
AGI’s website for self-managed super fund trustees, www.agismsf.com.au, now allows members to obtain an insurance quote more easily.
The group’s main website has also been overhauled as AGI strives to make group insurance administration easier and more secure.
“We have listened to the needs of our clients and have devoted our time and energy in developing the best possible user experience,” said CEO Dan Ebzery.
The SMSF Master Insurance Plan was developed with AIA Australia and was recently announced the winner of the 2020 SMSF Adviser Awards for “best SMSF Insurance Provider”.
The Financial Services Council (FSC) is holding its 2020 Future of Advice Summit tomorrow, featuring industry, regulatory and academic leaders discussing Australia’s financial advice landscape in detail.
The Summit will explore how to build a simpler and less costly financial advice system and coincides with the launch of the FSC’s Future of Advice Report.
“Affordable and accessible financial advice for all Australians is a critical component of our economic recovery from the impact of COVID-19,” the FSC says.
“Now, more than ever before, is the time for the industry to come together to unpack and analyse the most immediate challenges and opportunities on the horizon.”
Speakers include Danielle Press, commissioner at the Australian Securities and Investments Commission (ASIC), Senator Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology, Geoff Rogers, acting Group Executive Advice at MLC, Blair Vernon, acting CEO at AMP Australia and Jason Andriessen, MD at Coredata.
The summit will be held online from 9am tomorrow.
The number of insurance professionals reporting their mental health & wellbeing as “positive” or “neutral” has slumped by 19% since COVID-19 struck, compared with a fall of just 5% in banking, according to a survey from recruiter Hays.
The Hays Barometer Report survey asked financial services employers and staff in Australia and New Zealand about changes in the workplace as a result of the pandemic, specifically around mental health and wellbeing, as well as equality, diversity and inclusion.
Before the pandemic, 95% of insurance professionals had rated their mental health and wellbeing as either positive or neutral. That fell to 76% in the latest survey, which was conducted in August and completed by 4,105 people.
“As the crisis drags on, business leaders have become more concerned with their employees’ mental health & wellbeing than perhaps any other time in recent history,” Hays says.
“Employees have certainly been pushed to their emotional limits and faced many challenges to their mental health and wellbeing, including financial worries, concerns about their physical health, apprehension about returning to the workplace and isolation and loneliness for those working from home.”
Across financial services organisations more broadly, half of employees surveyed felt less positive about their careers while 12% described their organisation’s current phase as “crisis,” half as “defensive,” and around a third as “growth”. The “rapid growth” phase option was ticked by 3%.
The top three priorities for financial services organisations were supporting the mental health and wellbeing of staff, continued support of remote working and protecting the jobs of staff.
The top three long-term planned changes due to COVID-19 were regular flexible working, retention of new communication and collaboration tools and retention of some virtual recruitment processes.
Financial services employees said the top three aspects of a job that had become more important since lockdown were access to online collaboration and communication tools, job security and regular remote working.
Allianz and life insurer AIA have joined forces with some of Australia’s biggest employers to tackle mental health issues in the workplace and get beyond a token “yoga and fruit bowl” approach to drive real change.
Fifteen businesses have formed the Corporate Mental Health Alliance Australia, which is dedicated to improving mental health for all Australian workers.
National Mental Health Commission Chair Lucy Brogden says the alliance is “effectively an extensive network of mental health champions across the Australian business community who are each saying in unison, ‘This is really important to us; we are committed to this; we are here to be a part of the change’.”
The two insurance heavyweights join Woolworths, Coles, Johnson & Johnson, Clayton Utz, King & Wood Mallesons, MinterEllison, DLA Piper, Bunnings, Commonwealth Bank, Deloitte, KPMG, Microsoft and PwC as founding members.
Allianz Australia Chief GM Corporate, Governance & Conduct Helen Silver says it is critical to intervene early before wellbeing issues become entrenched.
“If we are to get people to seek help early we need to reduce the stigma associated with asking for that help,” she said. “If leaders open up about mental health, it quickly becomes a part of our everyday and overall health conversations.”
One in five working Australians reported experiencing a mental illness in the past year and the cost to the Australian economy of mental illness and suicide is about $43-$51 billion each year.
There is a cost of around $130 billion associated with diminished health and reduced life expectancy for those living with mental ill-health, the alliance says.
The workplace can promote opportunities for social inclusion and support.
According to Safe Work Australia, most claims can be attributed to work-related mental stress including work pressure, harassment or bullying, exposure to workplace violence and sexual or racial harassment.
The COVID-19 pandemic has further exacerbated mental health issues, with increased anxiety and uncertainty, self-isolation, family stress and financial hardship.
QBE has appointed former NRMA Investments CEO Melanie Willis and former Westpac CIO David Curran as non-executive directors of its Australia Pacific board.
Ms Willis has more 30 years’ experience in IT and financial services. She has held executive and non-executive roles across several other sectors, including infrastructure, property, investment management and retail.
Prior to joining Westpac, Mr Curran spent a decade in senior technology roles at the Commonwealth Bank.
Australia Pacific board Chairman Mark Joiner says both bring extensive insights to further bolster QBE’s strategy to become a more digitally led and customer-focused organisation.
Berkley Insurance Australia launched its new website today after working on the revamp in the last few months.
The specialist insurer says it has added features to make it easier for brokers and policyholders to navigate the site.
Claims can now be lodged directly through the website in a straightforward process and the approach to access documents has been simplified, Berkley said.
Berkley says information sessions will now be streamed on the website, covering important policy-related topics for brokers to watch at their convenience.
Click here for more on the new website.
IAG has appointed former Qantas Loyalty CIO Alastair Robertson as EGM Customer Technology as consumer appetite for digital continues to grow.
He will “lead the development of richer digital experiences for our insurance customers”, the insurer told insuranceNEWS.com.au.
“Alastair’s appointment coincides with the accelerated adoption of digital channels by our customers and in our communities, and aligns with IAG’s commitment to invest in the digital capabilities that will fuel future growth,” a spokesman said.
Prior to working for Qantas Mr Robertson was chief technology officer at Fox Sports Australia from 2016 to 2018 and head of group strategy at Seven West Media from 2013 to 2016.
Motor claims handling specialist Hello Claims has appointed Con Rallis as National Business Development Manager.
Mr Rallis has previously worked with IAG and Suncorp in the motor, home and contents assessing area. He will report to CEO Nick Herford.
His role will include working with the national repair and tow truck networks, parts suppliers, and structuring and negotiating strategic deals and alliances with key clients in Australia and New Zealand.
The value of global insurance premium stood at an all-time high of $US5.6 trillion ($7.91 trillion) at the end of last year after annual growth of 3.2%, Aon’s latest Insurance Risk Study says.
The Study, which evaluates areas of growth and profitability globally, says property and casualty (P&C) premiums rose 4% worldwide, for an underwriting profit globally with a combined ratio of 97.4%.
Australia outperformed that with 94.3% and New Zealand scored 86.7%.
Australia’s P&C gross written premium (GWP) came to $US30.08 million last year and its five-year cumulative net combined ratio was 94.1%, outperforming the global figure of 97.8%.
Annualised premium growth was 7.1% in Australia last year, almost double Australia’s five-year average rate of 3.8%.
Globally, motor insurance was shown to be the fastest growing line of business, with 6% annual growth over the past five years, driven by strong growth in China, South Korea, and the U.S.
Life & health premium rose 2% and reinsurance premiums 13% worldwide last year, Aon says.
For the fourth consecutive year Malaysia and Indonesia ranked within the top 10 positions in Aon’s Country Opportunity Index. These countries have shown low combined ratios, healthy premium and GDP growth, and a stable political environment.
“To achieve strong insurance growth, it is best for insurers to look beyond the developed economies,” the report says.
See the full study here.
Proposed public-private partnerships are warranted for the “disastrous effects” on businesses of COVID-19, given the systemic risks posed by the pandemic, ratings company AM Best says.
US proposals including the Pandemic Risk Insurance Act – modelled on the Government terrorism backstop – have been put forward as insurers point out that the industry doesn’t have sufficient capital to cover global virus outbreaks.
In a new report, Retroactive Legislation, Social Inflation: Credit Negatives for Insurers, AM Best highlights uncertainty from lawsuits aimed at insurers and legislative policy measures being contemplated that would nullify business interruption exclusions.
Social inflation, combined with lawsuits addressing liability policies, will drive defence containment costs higher, while court decisions will influence actual claims payouts, creating challenges in determining prudent reserve estimates and payout patterns, the report says.
AM Best Chief Rating Officer Stefan Holzberger says pandemics don’t offer risk diversification by geography or line of business, as shown by the number of areas affected in the current outbreak.
“Insurers may be able to offer limited protection against pandemic risks, however these limits would be insufficient for a full recovery,” he says.
“Only a governmental program, or perhaps a public-private partnership, could provide the backstop sufficient to compensate for lost revenue to businesses.”
AM Best says it will continue to monitor regulatory developments and adjust ratings and outlooks as needed, with the US election set to create delays and “proposal resents” related to backstop plans.
Hurricane Delta insured losses may reach $US1-3 billion ($1.4-4.2 billion) after it made landfall in an area still recovering from Hurricane Laura six weeks earlier, catastrophe risk modelling firm AIR Worldwide says.
Delta crossed the Louisiana coastline on October 9 as a Category 2 hurricane with sustained wind speeds of 161 kph. Rainfall totals reached up to 43 cm in some parts of the state’s south-west corner.
The two recent hurricanes made landfall roughly 19km apart, although Delta’s maximum winds were significantly weaker than Laura’s.
AIR says two hurricanes close together can exacerbate impacts to structures already damaged or weakened, although it is also possible buildings that had the potential to be damaged suffered little additional impact from the weaker Delta.
Other examples of tropical storms hitting an area in quick succession include Hurricanes Frances and Jeanne, which affected virtually the same place on the east coast of Florida within six weeks in 2004.
“There were reports of loss amplification at the time, particularly in Florida,” AIR worldwide says. “Given these back-to-back events, the same cannot be ruled out in Louisiana, despite the fact that they are different events and fall under different insurance conditions.”
Property information company CoreLogic estimates total US onshore losses at up to $US1.2 billion ($1.7 billion). It also estimated damage to Gulf of Mexico offshore petroleum platforms at $US800,000-$1.5 billion ($1.1-$2.1 billion).
“Damage from Hurricane Laura extended inland and concentrated on roofs and exterior building cladding, and Delta’s impact could have a double-jeapardy impact,” Principal of Insurance Solutions Tom Larsen said.
Insurers have no choice but to upgrade their public digital experience or undermine customer loyalty as the COVID-19 pandemic presents a watershed moment for the industry, new research from consultancy Bain & Company says.
Bain says the slow pace of customer-centred innovation in insurance has turned into a major setback since COVID-19 accelerated consumers’ migration to digital channels.
Digital adoption jumped by a fifth globally over the past year, almost four times the compound annual growth rate of the prior four years, according to Bain’s new survey, which covered 135,000 consumers in 17 countries
This indicates a “do or die” moment for insurers.
“To view the pandemic’s challenges as affording an opportunity for insurers would be too charitable,” the report says. “Realistically, they have no choice but to substantially upgrade the digital experience.”
The pandemic accentuates a gap in digital capabilities “that lagging companies must close in order to maintain or grow market share when the economy eventually recovers”.
Bain says incumbents do have valuable assets to rely in on the form of data generated from huge customer bases, ample capital and well-known brands.
However, consumers demand more and better digital interactions, and web searches and aggregator sites make it far easier to switch providers.
Customers experience the most problems with digital claims interactions, where they need personal help or found the process difficult. Seamless digital interactions earn greater loyalty from consumers in most countries, the survey found.
Brokers’ adoption of digital tools also remains low in most countries, which “tends to annoy customers”.
Bain says gathering and analysing customer data to understand behavioural changes will set up insurers to accelerate digital investments that improve the customer experience.
Tradition and legacy systems are “no excuse,” as a few incumbents have managed to set the pace for reliable digital channels and tools.
Lloyd’s wants the industry to make insurance products less complex and provide customers with greater certainty.
In a report published last week the market says COVID-19 has highlighted the urgent need for insurers to develop “simpler insurance products” in response to the challenges thrown up by the pandemic.
Product complexity, a long-running problem made worse in part by lengthy policy wordings, is currently in the spotlight because of disputes over whether pandemics are covered by business interruption policies.
“The more complex a product is, the less likely it is to provide peace of mind to customers,” Lloyd’s says in the report. “Worse, it may be the case that if customers do not fully understand the terms of their product, they either breach those terms or believe they have cover when they do not.
“COVID-19 provides an inflection point for the insurance industry to take stock and reconsider how it can better serve its customers, and in doing so reinforce its critical societal role.”
Prepared in collaboration with Lloyd’s Global and UK Advisories, the report outlines ways in which insurers can reduce complexity and provide customers with greater certainty over their cover.
Lloyd’s says the challenges must be addressed as a survey it conducted earlier this year found attitudes to insurance have deteriorated because of COVID-19, with “the perception that some policies have not performed as expected”.
The organisation will begin work next year on providing “clearer and simpler” product documents to improve clients’ understanding of policies. This will be complemented with the introduction of a standardised Lloyd’s upfront contract summary document that will initially be available for retail and SME policyholders.
The work is part of Lloyd’s own affirmative action to address the “distinct complications” that have arisen from pandemic insurance coverage uncertainty and resulting court disputes between insurers and clients.
Click here to access the report.
Swiss Re has teamed up with Daimler Insurance Services – which is owned by German auto giant Daimler Group – to set up an automotive and mobility insurance joint venture.
Daimler owns a number of major motor brands, including Mercedes-Benz.
The partners will have equal ownership in Movinx, which will be based in Berlin. It is expected to roll out its first insurance products and services in France some time next year before expanding to other European markets, the Americas and Asia.
Swiss Re says Movinx will leverage on the strengths of its owners as the global auto and insurance industries undergo a significant transformation.
“We believe that partnering with Daimler Insurance Services and establishing Movinx will take us to the next level in innovating mobility insurance,” Digital Transformation Officer Pravina Ladva said.
“Our joint long-term ambition is to unlock an ecosystem interplay where insurance supports the introduction of new technologies such as advanced driving assistance systems and autonomous cars as well as new business models in the mobility area.”
Movinx will act as a managing general agent, offering an embedded mobility and insurance journey for consumers. There are plans for the joint venture to co-create and co-own an insurance platform that will provide convenient insurance purchases.
“Instead of today’s rather short-term oriented partnerships between car manufacturers and various insurers, the focus is on a joint development journey to offer flexible and fully digital products,” the two partners say in a statement.
“Movinx enables the introduction of new insurance propositions efficiently across a range of markets – for example, with the underlying technology platform.”
Lloyd’s says it has donated £12 million ($21.88 million) to 197 charities worldwide since March.
The London-based market has also provided 20,000 face masks and more than 10,000 meals to 17 front-line charities and hospitals in the UK, as well as encouraging employees to volunteer.
In March Lloyd’s committed to a £15 million ($27.34 million) package of support for charitable organisations responding to the COVID-19 pandemic.
CEO John Neal says Lloyd’s was “humbled” to support charities as they face extreme financial constraints during a time where demand for their services continue to rise.
“If you ask a charity what they need right now, it is unrestricted emergency funding to ensure their organisation can not only survive, but crucially continue to provide vital services to communities around the world,” he said.
The charities are:
With a review of broker commissions looming, the National Insurance Brokers Association (NIBA) wanted hard evidence of the service that intermediaries provide.
So it commissioned Deloitte Access Economics to produce a report on broker value – and the much-anticipated study was published last week.
NIBA says it is delighted with the comprehensive 66-page report, which is intended to provide a foundation for brokers to go into battle against those pushing for a ban on commissions.
The report – which consulted brokers, insurers and SMEs – shows that broker value goes way beyond the client. So why change a system that works for everyone?
Or as NIBA CEO Dallas Booth put it to insuranceNEWS.com.au: “Where is the detriment that they are trying to remedy?”
In 2018/19, insurance broking contributed nearly $2.6 billion in gross value-added to the Australian economy, and directly employed 15,000 full-time equivalent workers.
“As a point of reference, these direct economic contributions are roughly equivalent to the economic activity in each of the gas supply, and creative arts industries in Australia,” Mr Booth said.
“The industry also indirectly supports economic activity in other businesses, worth almost $900 million in 2018/19, supporting over 5000 extra jobs.”
Following are some highlights from the report:
Value to the client
Some 40% of clients are underinsured or not insured at all before engaging a broker, the report finds – proving that brokers perform a key function in tackling underinsurance and closing the protection gap.
Intermediaries also play a vital role in helping clients understand and manage risk, with brokers identifying that 62% of their clients had limited understanding of their risks.
Brokers also promote choice and competition, with the average NIBA broker offering products across more than 10 different insurers.
The report finds that brokers save each client an average of 11 hours, equating to more than $230 million in time savings for business customers.
And claims support is crucial. Brokers save each client an average of two-and-a-half hours in the claims process. More than 40% of SME clients agree that claims would otherwise have been “much harder” to process.
Value to insurers
Brokers provide a valuable service to insurers, as well as clients, the report shows.
There is a huge time saving for insurers thanks to the efforts of intermediaries, equating to 1380 fulltime staff each year.
Brokers also help insurers expand their reach, with 38% of broker premiums written for clients outside Australia’s capital cities.
Some 13% of a broker’s policies sold represent new market opportunities, promoting innovation, with cyber risk commonly identified.
Value to the economy
Brokerage businesses employed 15,000 full time equivalent workers, and contributed $2.6 billion directly to the Australian economy in 2018/19.
The report says brokers enable market efficiency by reducing uncertainties for insurers and closing information gaps – thereby allowing for more appropriate pricing and product matching, and encouraging greater competition.
They contribute to economic stability through enabling better risk management, providing broader risk advice, better product-matching and faster claims receipts.
Value to government and broader society
Brokers provide disaster relief, advocacy and policy advice by supporting clients with claims preparation, assessment, lodgement and negotiation processes, the report says
They also help obtain insurance for difficult-to-insure clients – a critical service in the current hard market.
And brokers support their local communities. Surveyed brokerage businesses donated more than $25,000 each year to charitable and other social causes, and volunteered on average more than 550 staff hours to charities and other organisations.
Click here to read the full report.