HOW TO HANG ON TO YOUR CLIENTS
June 2016
NO TIME FOR CYBER SECURITY COMPLACENCY Industry weighs in on regulatory change www.ibanz.co.nz
WHO’S AWESOME? YOU’RE AWESOME. Sometimes things happen outside of your control. It’s why we’re in this business. When something unforeseen happens at your doorstep you react. But when the dust settles you realise you’re still on solid ground and all is well in the world. It’s business as usual. To all our broker clients, thank you for your continued support. We know and respect that you have a choice when it comes to where you place your clients’ business. The fact you choose us for their specialist vehicle needs makes us feel special and means we’re doing something right. Not that we take that or you for granted. We’re always looking at ways to add value and exceed your expectations with the best policies at the best comparative prices. So it’s business as usual, where we continue to offer personal service and be here when you need us. Love, Star Underwriting Agents.
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Advertising/Editorial: Robert Johnson, Benefitz Telephone 09 477 4702, Mobile 027 4970 712, Email: robert@benefitz.co.nz Gary Young
Design/Production: Anne Vindriis, Benefitz Imaging: CTP by Benefitz Produced for IBANZ by: Benefitz, Cnr Constellation Drive & Parkway Drive, Mairangi Bay, North Shore City. PO Box 33-1630 Takapuna. Telephone 09 477 4700, Fax 09 477 4799 Advertising Deadlines: Bookings 10th of the month prior to publication, Material 15th of the month prior to publication.
CoverNote is the official publication of IBANZ and is distributed FREE on a quarterly basis (March, June, September, December) to members throughout New Zealand and associated companies. Additional copies are available at a cost of $7.50 per copy, or 12 month (4 issue) subscriptions at $30.00, inclusive of postage and packaging. The articles or opinions featured within this magazine are not necessarily the opinions of the publishers or IBANZ, and they do not accept responsibility for the content of articles featured within the publication. No part of this publication may be reproduced without the written permission of the publisher. The publishers do not accept responsibility for loss or damage to unsolicited photographs or manuscripts. IBANZ enquiries should be made to: Gary Young, Chief Executive, IBANZ. Email: gary@ibanz.co.nz IBANZ National Office located at: Level 5, 280 Queen Street, Auckland (P.O. Box 7053, Wellesley Street) Telephone 09-306-1732. Website: www.ibanz.co.nz
CEO, IBANZ
Busy time for regulators The last couple of months have seen a number of matters finalised around reviews of legislation. In particular the Fire Service review outcomes have been announced and the Financial Advisers Act review is close to settling on a recommendation to the Minister. Meanwhile the EQC review remains unresolved, although there have been meetings going on in the background to deal with outstanding issues. These matters are all of significance to our members in that they have the potential to significantly impact on the business environment of insurance brokers. IBANZ has been working closely with the various government agencies to ensure our members’ interests are properly represented throughout these lengthy review processes. It is positive that Government is open to, and in fact encourages, stakeholder involvement. Developing good relationships is vital and in general we have found this can be achieved in the current environment. Of course ideal outcomes cannot always be achieved and the Fire Service levy collection based on insurance is a good example. It is however pleasing that we appear to have succeeded in at least persuading Government that some of the suggested levy collection models were simply unworkable. Had we not done so members would have been saddled with excessive compliance costs and in some cases, an impossible task in determining the levy quantum. On the other hand, the Financial Advisers Act review appears, from our involvement in numerous consultations, to be headed down a pragmatic route. There will be some aspects that create additional compliance; this is almost inevitable in a regulated environment. But if we are reading the signals from the Ministry team correctly, their recommendations are likely to be pragmatic and make for a simpler, more easily understood regime. There is also a strong indication that changes will aim to enhance professionalism, competence and transparency. These are qualities which IBANZ promotes as key to being a member of our association. We have been fortunate to date in having a principles-based regime which has touched only lightly on our sector. Rightly so we argue as no evidence of problems needing to be fixed. When the recommendations, are made, to the Minister we will be keen to see that there is no unnecessary compliance. We want to see a proper balance is achieved between setting professional standards and minimising compliance costs. Gary Young, CEO, IBANZ
Features 10. Big claims & small timeframes 14. How to have difficult conversations with unhappy clients Complaints do not always have to be negative.
16. Kiwis left exposed by sum insured policies 18. Insurer ratings have limited benefit
22. No time for cyber security complacency Action needed on growing threat.
30. The cost of cyber crime in New Zealand 32. Holding directors to account 38. Regulatory update 42. Changes at top at Vero
28. Hold onto your clients What do brokers need to do to improve client retention?
Regulars 1. View from the CEO’s chair 4. News 36. Ask an Expert
50. Professional Development: Professional IQ College 52. IBANZ Contacts HOW TO
HANG ON
TO YOUR
CLIENTS
June 2016
Correction: In the last issue of Covernote, we described Susan Taylor, chief executive of Financial Services Complaints Ltd, as being from the ISO. We apologise for the error. WANT YOUR VERY OWN COPY OF
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NO TIME SECURIT FOR CYBER Y COMPL ACENCY ghs in on regula
Industry wei
tory change
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NEWS
PSC Connect has made a key appointment for a newly created role of Sales Development Manager. Paul Stainton, who has been a broker with Aon for the last 7 years, has been appointed to this significant new position. Paul’s focus will be on assisting member brokers by developing specialist products and scheme opportunities, as well as marketing and market placement support. National Manager Dave Penfold says. “We’re delighted to welcome Paul to the PSC Connect team here in NZ. He brings some very
extensive business development skills to the group which will allow us to improve the benefits and servce we provide to our rapidly growing network of brokers". “I’m excited to be part of the PSC Connect Team. The PSC Connect business model is something that I believe strongly in, enabling member brokers to develop long standing relationships with their clients. I look forward to working closely with member brokers to assist with the growth of their businesses” says Paul.
PSC Connect now has 25 member brokers within their group three years after launching into NZ, however, they aim to grow to 40 brokers over the next 12 months. PSC Connect remains committed to appointing qualified professional brokers who have the commitment and drive to build their own business and will continue to inprove their business model by adding real value add services to support the expanding network. Dave Penfold advises “We are finding that our existing member
The PSC Insurance Group, is also rapidly expanding with several recent purchases in Australia and the UK. The group successfully listed on the ASX in December last year, only nine
brokers are spreading the word to the market about how much value they are getting from being part of the PSC Connect network. This is generating a lot of interest for new brokers to join our group.
years after the company was first established. “The Group generates over $750million in premium and is certainly gaining a lot of respect within the industry". “Being part of an international broking company and leveraging our group capabilities has been of real benefit for us here in NZ”, states Dave Penfold. “While still operating at a grass roots level, we can offer clients better deals and service and are also able to attract talent from the multi-nationals to help our team succeed'.
Build your own broking business supported by a global insurance broking company Are you • Frustrated working for someone else? • Ready for an exciting new challenge? • Want 100% ownership of your business? • A quality insurance broker?
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Board chair says college in good stead Retiring Professional IQ College chairman Richard Russell says the organisation he is leaving is primed for a bright future. Russell has been at the helm of the college board since it was first launched in 2009. But he has decided to step down to focus on other business and community interests. IBANZ formed the college when regulation for financial advisers was first on the horizon. At that point, the Government looked set to introduce competence requirements for all
Industry told to prepare for driverless cars The multi-billion-dollar vehicle insurance industry will face radical decline due to the introduction of self-driving cars, with the number of crashes set to drop 80% by 2035 and insurance premiums to plummet, a car-maker says. Research in the United States shows autonomous driving (AD) technologies could wipe US$20 billion ($29.5 billion) off insurance premiums globally by 2020 alone. At present, motor insurance generates 42% of all non-life gross premiums, the largest single slice of global premiums. Coby Duggan, Volvo NZ national manager, said the insurance industry would have no choice but to react to these challenges to its existing business model. “The medium to long-term impact on the insurance industry is likely to be significant,” he said. “Autonomous driving technology is the single most important advance in automotive safety to be seen in recent years. It will mean fewer accidents, fewer injuries, fewer fatalities and fewer costs for vehicle owners.” Peter Shaw, chief executive at Thatcham Research, said vehicle manufacturers were predicting that highly autonomous vehicles, capable of allowing the driver to drop “out of the loop” for certain sections of their journey, would be available from around 2021. “Without doubt, crash frequency will also dramatically reduce. We’ve already seen this with the adoption of Autonomous Emergency Braking (AEB) on many new cars. “Research predicts that by 2035, as a result of autonomous and connected cars, crashes will be reduced by 80%. Additionally, if a crash unfortunately can’t be avoided, then the impact speed will also drop as a result of the system’s performance reducing the severity of the crash,” he said. Volvo will start the UK’s most extensive AD trial, called Drive Me UK, in 2017, with up to 100 AD cars being driven on real roads, part of its global push to develop AD cars with similar programmes to be run in Sweden and China. “The introduction of autonomous driving represents a revolution for automotive safety. Volvo has a vision that no one will be killed or seriously injured in a new Volvo by 2020. Autonomous drive technology is a key tool in helping us achieve this aim,” Duggan said. 4
June 2016
financial advisers. Russell and IBANZ chief executive Gary Young had attended an insurance forum in Singapore. Already interested in developing their own education platform for insurance brokers in New Zealand, the pair looked at what advisers in Singapore were doing with their college. Russell said the move to launch the college was a bold one by IBANZ, but it had been worthwhile. The journey so far has not been without disappointments. The first was when the Government changed tack on the regulations just as they were being brought in. "It looked like they were going to go down the track of everyone at some stage needing qualifications and continuing professional development, but that all fell away and that took away a wee bit of the work done from the college. If the regulation had come in at that time, the college would be larger and stronger than it is now,” Russell said. The first round of regulation introduced qualification requirements only for authorised financial advisers. Registered financial advisers and QFE advisers – the vast majority of insurance brokers – were exempt. A review in 2013 led to a rebrand of the college to become known as Professional IQ. That was a move designed to open the college to the whole financial services sector including mortgage brokers, financial advisers and banks. "That was a much bigger market to work with,” Russell said. The college is NZQA accredited, which Russell said gave it a point of difference to help attract students. "It's another string to the bow and qualifications should then be portable. It's more meaningful if younger people are wanting to do a qualification because some papers will be recognized in other professions." Russell signalled last December that he would step down. "I had spent pretty much 25 years working at the industry level and felt able to let someone else take over." With a review of the Financial Advisers Act under way, Russell said the college looked set to benefit. This time, it seems likely that all advisers will be required to meet a competence and qualification standard. Russell said he believed the college would be well placed to meet the growing need for education for insurance brokers. But while he is standing down from the board, Russell will not be getting any time off. He is responsible for the Crombie Lockwood offices in Queenstown and Invercargill and is to become a Rotary president in the coming year.
NEWS
Road to rewards for safer driving Safe driving behaviour by transport operators has resulted in excess waivers of $136,850 since NZI set up its Safe Driving Rewards Programme. The Safe Driving Rewards Programme was created by NZI and transport technology company EROAD to support transport operators and their drivers to be safer on the roads and reward those carriers whose employees are rated as driving safely. By meeting certain benchmarks, the operators may qualify for having their insurance excess waived when claiming after a crash. Since Safe Driving Rewards launched in September 2015, NZI has: • signed up 42 customers to
the programme • registered 1732 fleet vehicles • waived a total value of $136,850 in excesses over 15 claims. “We’ve had a tremendous response from our heavy motor vehicle customers, so much so, that we’re thinking of extending the programme.” said Ian Taylor, national manager of commercial motor for NZI and Lumley. “The programme’s all about helping transport operators keep their vehicles on the road by creating safe driving awareness and helping to reduce instances of dangerous driving. As it currently stands, anyone wanting to sign up has until August 30, 2016 to do so, and excess on claims will be waived until
January 30, 2017.” Customers can register at www. safedrivingrewards.co.nz to take part in the programme. NZI and Lumley customers with EROAD hardware installed in their heavy commercial vehicles, and whose service plan includes vehicle tracking, could be eligible for the waiver, if their driving record is rated in the top 25% of all companies using the system. The rating is based on factors such as braking, rapid acceleration and speeding events to determine a safety rating for each driver. With NZI and EROAD customers agreeing to share their data, NZI is looking to develop usage-based insurance products for heavy motor vehicles.
Action needed for changing world Insurers need to act quickly to ensure their products meet the needs of a rapidly evolving world, one industry commentator says. Craig Kirk, general manager of Delta Insurance, addressed a recent insurance industry conference about the digital revolution. He said the world was changing at a faster pace than had ever been seen before and that was posing a major challenge for the industry. Structural changes that were happening were going to affect the insurance industry as a whole, he said. “It’s not going to affect one player, not just insurers or just insurance brokers, but it will be everyone. That’s the message I am trying to deliver. We know there is going to be a huge amount of change, how do we tackle that as an industry?” Kirk said insurers were not reacting quickly enough to the changing world. “Innovation is always highlighted as a priority for most insurance companies, we think we are good at innovation but I don’t think we are. Insurance is reactive not proactive. Before we had the luxury of time, not now.” He said insurance companies needed to quickly get their heads around issues such as how to insure a taxi company that did not own any taxis, a hotel chain without hotels, or a lender that did not lend any money. “These new business models present huge challenges to insurers. Historically businesses have been based on tangible assets but these days they are deriving value from intangible assets, their intellectual property, or the data they hold. They are conducting business online.”
The increasingly-connected world also created new opportunities for loss, he said. With more and more devices connected to the internet, there was more opportunity for malicious or accidental disruptions to systems. That would no longer just affect company’s PCs but instead their industrial machinery or the infrastructure of a city. “There is a great opportunity here but there is significant risk associated with it,” Kirk said. “If someone is able to hack in and it gets into the wrong hands they could wreak havoc. Criminal gangs make much more money more quickly in the cyber space than they could in traditional criminal activity. “This is one of the fastest-growing segments and biggest challenges for the insurance sector globally, and may even surpass natural disasters like hurricanes, cyclones and earthquakes with its loss potential. Cyber risk is not localised, it is global by nature.” Kirk said New Zealand had some work to do to catch up to the rest of the world. “We are certainly behind many other developed countries in relation to the legislation that we have in place and I understand that this is one of the key areas that the government is reviewing as a part of the Cyber Security Strategy launched last year.” He said the industry could not afford to sit back and see what happened. “If there is a wide-reaching cyber attack, which has the potential to be global or systemic in nature, are we in a position to respond to that effectively at the moment? I would argue no.”
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NEWS
Fire funding a missed opportunity The Government is being accused of having missed an opportunity to more fairly fund the fire service. Internal Affairs Minister Peter Dunne has announced $303 million of funding over five years to combine the urban and rural fire services into one organisation, called Fire and Emergency New Zealand, from mid2017. The package will be funded through a proposed increase in the fire levy of approximately $161 million over three years from 2017/18; $30 million of Crown funding over three years from 2017/2018 towards the cost of public good non-fire activities, such as responding to medical emergencies, floods or other natural emergencies; and a $112 million capital injection which will be repaid over the next decade. Dunne said the new arrangements would be "much fairer" and would ensure that both large and small property owners and most motorists would pay their fair share towards the cost of fire and emergency services. He said an operational and performance review of the NZ Fire Service Commission would start this year to better predict the costs involved. But the Insurance Council said continuing to tax only those people who paid for insurance was an unfair way to fund the fire service and out of step with best practice internationally. Insured people will pay about $300 million in tax above what they do now to fund the changes. “This is not good for hard-working Kiwis who do the right thing by taking out insurance to protect their property,” chief
executive Tim Grafton said. “We’re naturally disappointed the Government only wants to tax people who take out insurance and allow those who don’t insure to be free-loaders,” said Grafton. “There had been an option that was supported by officials to remove the tax from insured drivers and apply it to the annual licensing fee or ‘rego’, so all road users paid. Instead, the Government has expanded the tax on motor insurance to third-party insurance on the misguided basis that this will reduce avoidance.” He said the Government had missed the point. “The real problem that is not tackled is that it still leaves the 10% of drivers who do not insure themselves not paying to fund the fire service. Had they been serious about reducing avoidance completely, then the rego provided the solution. On top of that, as we advised Ministers last month, the motor insurance sector faces significant change due to technological and disruptive influences. This will likely lead to insurance product changes that will almost certainly have significant impacts on funding available
to fund the fire service.” He said registration was the better way to collect tax because the system would be around for as long as ACC payments to fund the cost of road accidents continued. “There are no plans to disband this system, yet motor insurance disruption will occur much sooner.” IBANZ chief executive Gary Young said he too was disappointed that people who bought insurance were being penalised. “They are going to pay an even greater penalty in future as previous sources of funding for the rural service are dropped in favour of an insurance levy, he said. This hardly supports the statement that this will be a fairer regime.” But he said the simplification of the application of the levy was positive and the acceptance that a proper risk management approach involved more than buying insurance was a step forward. Grafton agreed some changes were beneficial. “We welcome the greater clarity provided by applying the tax to all insurance policies for damage to property. This will simplify the administration and limit avoidance. “This should also mean that contributions are made by central and local government authorities who take out insurance cover. That will make the system fairer as will the decision for the Crown to contribute $10 million toward non-fire activities. We also welcome the move to align the tax payments with the GST cycle which should also reduce compliance costs.”
Marsh celebrates accreditation Xavier Marguinaud and Chris Beh, of Marsh, have become the first two New Zealanders to receive accreditation on cyber resilience by the AXELOS Global Best Practice Institute. The training and certification provides a management system and framework for organisations to adopt cyber resilience best practice and for individuals to learn how to effectively prevent, respond to and recover from cyber-attacks. Cyber crime is estimated to cost the New Zealand economy as much as $625 million per annum. As companies have become more reliant on technology, they are further exposed to increasingly prevalent and sophisticated cyber-attacks. All types of Kiwi businesses from SMEs to large corporates and government departments have felt the wrath of cyber attacks. 6
June 2016
Over the last 18 months, Marsh has been holding seminars and developed a series of videos to help educate clients about the impacts of cyber risks to their organisations. Fred Boles, general manager financial and professional liability, said: “We are thrilled that Xavier and Chris have received this accreditation, which provides another level of expertise to our clients. Data breach, cyber extortion and crime have increased very significantly in the last 12 months, prompting companies to seek more and more guidance in order to identify and mitigate cyber risks." "The accreditation also truly cements our position as the leading advisor in cyber risk and insurance in New Zealand.” The cyber resilience training is run in 150 countries.
NEWS
Changes at top for NZbrokers Jo Mason has been appointed chief executive of NZbrokers, the country’s largest broking partner group. She takes over from Jim Harris from July 1. Mason has worked in various senior leadership positions at Allianz Australia, NZI and IAG over an extensive career in the insurance industry. Most recently she was national manager, agencies and cluster groups at Allianz Australia. AUB Group NZ, owners of NZbrokers, managing director Keith McIvor said: "Jim and I are pleased to have secured someone of Jo’s calibre, experience and leadership ability for the CEO position.
"Her expertise, developed over an impressive career in insurance, will be an invaluable asset to NZbrokers as we embark on an exciting period of growth and focus on delivering value for our partners." He said NZbrokers and its 54 member businesses were well-placed to succeed in the coming years. He said that was based on the group’s partnership philosophy, commitment to collaboration,
aim to provide a total risk solution to clients, ongoing commitment to technological enhancements and clear focus on the group’s role as a leader in the sector. Harris has led NZbrokers since inception, and its planned the succession. He will also m a i n t a i n his role on the board as founding director. He will work with Mason to help with the ongoing development of the group.
Harris said: “Jo has exceptional credibility in the market and has been a supporter of insurance broking groups. Her leadership, knowledge and capability is a strong fit for our high performing group and our ongoing growth ambitions.” McIvor praised Harris for his achievements, passion and service to NZbrokers. "Jim Harris has led NZbrokers through a period of genuine transformational change. "I and the Board would like to thank Jim for his outstanding contribution to date. We are excited that we have the skills of both Jim and Jo to lead us going forward.”
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NEWS
Luxury vehicle cover launched Co-Op Insurance and Provident are launching a motor vehicle product for the luxury market. Provident Luxury Motor Vehicle Insurance has been specifically designed to provide a distinctive offer for the premium and luxury end of the motor vehicle market. It is also a product that has specific appeal to all franchise dealers with its unique “new for old” policy, providing added benefits to dealerships for parts supply and vehicle replacement. This latest launch builds on the successful collaboration that started in April last year when Co-op Insurance NZ provided a white label comprehensive motor vehicle insurance for distribution via Provident’s national network of dealers. That collaboration was quickly followed in July with the launch of an innovation that allowed customers to purchase motor vehicle insurance policies for up to three years at a time. “The partnership between Provident and Co-op Insurance NZ is a valuable and highly successful strategic
alliance that has grown from strength-to-strength. The launch of Luxury Motor Vehicle Insurance builds on the robust foundations of our collaboration and allows Provident to cater to the needs of a discerning market segment that requires more from their vehicle insurance than standard market products provide,” Henry Lynch, chief executive of CoOp Insurance, said. Steve Owens, Provident chief executive, said: “For the market we are targeting, it is important for customers to have an insurance product that provides more to complement their investment decision in their vehicle. Luxury Motor Vehicle Insurance has been designed with this in mind and includes three-year replacement cover for new vehicles or 12-month agreed value for used vehicles, and use of genuine manufacturer’s parts via an approved repairer network.” Luxury Motor Vehicle Insurance will be provided under Provident branding but will continue to be underwritten by Co-op Insurance NZ.
Outside the box insurance with NAC NAC specialises in insuring modified and high performance cars and motorbikes, younger drivers and drivers with convictions. It also provides short-term vehicle insurance for tourists or customers who only need insurance for a limited time. NAC has been protecting a wide range of high-performance vehicles and their owners for more than 18 years so customers are in safe hands with people who really understand their ride and all its modifications. So, if your client’s vehicle and insurance needs are a little outside the box, NAC could be right for them. NAC is a loyal supporter of the New Zealand motorsport and car community, sponsoring events and drivers across various classes of motorsport, and helping grow motorsport through the NAC Grants Programme. The NAC Grants Programme gives up-and-coming motorsport drivers and NAC customers the opportunity to get a small helping hand from NAC so they can go on to pursue their dreams. Applications for 2016 have now closed, but the programme will open again in October 2016. More information is available at www.nac. co.nz Easy online quotes NAC also has an online quote and bind facility “qbix” which allows brokers to place business easily and can be accessed through NAC’s website or qbix.co.nz To register all you have to do is call the NAC Broker Team on 0800 502 508 or email sales@nac.co.nz and they’ll arrange a login for you.
Suncorp executive judges disruptors Suncorp New Zealand executive Dan Wilkinson will take part as a judge in the inaugural Disrupt 100, a bi-annual index of the world’s most disruptive businesses. Wilkinson will join some of the world’s leading entrepreneurs, investors and business people, including representatives from companies like Facebook, KPMG and Microsoft Accelerator, to 8
June 2016
consider which businesses have the most potential to influence, change or create new global markets. He is executive manager of customer technologies at Suncorp New Zealand. “Disrupt 100’s focus on customer and customer behaviour gets to the heart of what is deeply fundamental to successful disruption,” Wilkinson said.
“It aligns closely with the work we’re doing at Suncorp New Zealand to identify new opportunities to meet our customers’ needs. “All companies, old and new, are at risk from disruption. Disrupt 100 provides its readers more than just a list of interesting businesses; it’s an in-depth analysis of who’s tapping into our changing world, understanding
our changing needs and reevaluating outdated models.” Disrupt 100 aims to provide businesses with early insights of market disrupters, and provide greater public understanding of disruption caused by companies worldwide. The judges will select from a short-list of disruptive ventures sourced from over 500 influencers across the world.
NEWS
Cover for boaties IAG is warning that boat accidents can be just as expensive on the road or at home as they are on the water. A spokeswoman said many off-the-water accidents happened when boats were being towed. “Remember the reduced speed limit for towing trailers and what your car can safely tow. The weight of your boat, the type of trailer and the strength of your towing vehicle impact how easily you can brake and turn – crucial manoeuvres to help you stay out of trouble on the road.” IAG NZ data shows that 58% of boat claims across all IAG brands last year related to accidents and the average claim cost was more than $4000. Boat owners also faced burglary (14% of claims), storms (4%) and fire (2%). IAG’s claims expert Chris Kiddey said boat owners should not assume that their contents policies would provide cover to any kind of boat. “AMI’s Advanced contents policy covers ‘watercraft’ only if they’re worth less than $500; State’s Comprehensive policy allows $2000 and most seafarers will know that $2000 isn’t much when talking about boats. Both policies are designed to give some piece of mind for lightweight and more common water toys such as the kids’ kayaks, but both brands also offer specialised boat insurance to their customers.” How much boat insurance costs depends on your experience and other variables. If you are living around Auckland city, aged over 55 and own a 2005 Haines Hunter SS700 Hardtop, worth $84,000, with a Yamaha engine 200HP, and Voyager tandem braked trailer with Trojan tow ball lock, an AMI boat insurance premium will be around $1000 annually with an excess fee of $100. Boaties who have a New Zealand boat master/skipper certificate,
or are willing to increase their excess, or have multiple insurance policies with one insurer, might be able to reduce their boat insurance premium from this insurer. Although boat insurance can cover some risks, IAG said it was important to note owners needed to take reasonable care of their boat. “The most common type of claim not covered in 2015 was for the breakdown or failure of equipment, often due to maintenance or wear and tear issues.” Kiddey said. “This sort of claim is almost never covered by insurance companies because boat owners are expected to take reasonable care of their boat, just like you need to take good care of your home and car.” Maritime New Zealand indicated that one in five households owned at least one boat.
Suncorp takes Trov stake Suncorp says it is interested in exploring opportunities to develop a new digital platform for customers in New Zealand. The group announced it had taken a US$5 million equity stake in US-based technology developer Trov, in line with its strategy to create innovative platforms for customers. Suncorp was the first insurer globally to work with Trov in 2014 and helped establish Australia as a test market for the Trov app, which enables customers to create a digital inventory of their items on their mobile phones. The two companies will take their relationship to a new level
and will launch a world-first on-demand insurance platform called Trov Protection that is integrated into the current Trov app. This platform is designed to offer customers, particularly those in the millennial generation, instant access to insurance for single items that are important to them such as cameras, tablets and laptops. Suncorp chief executive and managing director Michael Cameron said: “Suncorp is proud to partner with Trov to launch Trov Protection. This world-leading platform provides customers flexibility in how they insure their individual items – meaning they can switch their
insurance ‘on and off ’ as required from their mobile phones. “Trov Protection is a significant step forward in making insurance easier and simpler for our customers, and is a great example of how Suncorp is creating value for customers. “The two companies identified strong customer demand for a seamless experience and have worked together to create this new platform. We are excited to be investing in Trov and look forward to building on these types of opportunities together.” Trov Founder and CEO Scott Walchek added: "Suncorp is one of the world's most innovative
insurers and this was a primary reason we selected Australia as the first market in which to launch. “Trov is redefining the way people protect the things they care about, and in Suncorp we've found a partner with the vision and expertise to help introduce ‘on-demand’ insurance to the mobile consumer." Trov Protection will initially provide insurance for technology items, with a broader range of options becoming available over the coming months. A spokeswoman in New Zealand said the local division was looking forward to building a similar relationship here. www.covernote.co.nz
9
FEATURE
BIG CLAIMS & SMALL TIMEFRAMES
Jared Holt,
Senior Solicitor, Chapman Tripp
10
June 2016
FEATURE
D
esign, engineering and quantity surveying consultants may soon be susceptible to adjudication claims under the Construction Contracts Act 2002 (CCA). The change is among a series of recent amendments to the CCA and may create risks for consultants’ professional indemnity insurers due to the “quick and dirty” nature of the CCA adjudication regime. We look at some of the issues brokers should consider in relation to these consultants’ professional indemnity policies. BACKGROUND TO THE CCA Insolvency risk is a long-standing problem in the construction industry where traditional methods of construction procurement mean that payment disputes at the top of the chain can impact on multiple parties further the down the chain. A famous English Judge summed it up that cash flow was “the very lifeblood of the enterprise”. In 2002, the Government passed the CCA. An overall goal was to facilitate regular and timely payments by giving parties to a “construction contract” (as defined in the CCA) the tools to detect an inability to pay early, and a speedy dispute resolution process to help try and minimise loss. ADJUDICATION UNDER THE CCA Adjudication is the backbone of dispute resolution under the CCA and appears to have been generally well-received by the industry. —Tight timeframes The timeframes are very short. A respondent can have as little as five working days to respond to a claim. A notice of adjudication will have preceded the claim but at times only a day or two before the claim is served. Adjudicators can grant an extension of the
THERE IS NO OBLIGATION FOR A PARTY TO DISCLOSE ALL RELEVANT DOCUMENTS SO THE PARTIES CAN BE MORE SELECTIVE ABOUT THE DOCUMENTS THAT THEY PRODUCE time for a response but, given the CCA’s emphasis on a fast dispute resolution process, an extension could be relatively short. The appropriate length of an extension might be a difficult question in cases where it is apparent that a claim has been many months in the making, and is supported by detailed factual witness statements, volumes of supporting documents, and expert reports. —Fast result over procedural rigour Adjudication dispenses with aspects of more formal dispute resolution procedures, presumably in order to get to a faster result. For example, the process is essentially conducted “on-the-papers”, which means there is no requirement for a formal hearing or opportunity to test witness evidence through cross-examination. —Determination enforceable in the courts Most adjudicator’s determinations can be enforced through the courts with very few grounds for opposing enforcement. The CCA amendments further strengthen the enforcement provisions, as referred to below. —No contracting out There is no contracting out of the CCA. Subject to limited exceptions, any party to a “construction contract” has a statutory right to www.covernote.co.nz
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FEATURE
refer a dispute to adjudication. CCA NOW INCLUDES CONSULTANTS The Construction Contracts Amendment Act 2015 was passed in late October 2015, with certain sections coming into force on specified dates. Among the amendments are that design, engineering and quantity surveying agreements may fall within the CCA’s scope, subject to meeting certain requirements, including in relation to when the agreement was entered into (or renewed), the nature of the services under the agreement, and where the services are carried out. A further important amendment is that adjudication determinations about each party’s rights and obligations could now be enforceable in court. While consultants will enjoy the benefits that the CCA offers, the potential burdens will be of concern. For example, there is a risk that consultants could face adjudication claims arising from an alleged breach of a contractual term requiring the consultant to exercise reasonable care and skill in carrying out their services. Consultants would naturally look to their professional indemnity cover to respond to such claims. Defending adjudication claims is, therefore, an issue that should be considered by consultants and their professional indemnity insurers alike. POTENTIAL ISSUES FOR PROFESSIONAL INDEMNITY INSURANCE It is difficult to predict the nature or extent of issues that may emerge in the insurance context. It’s possible that it will be business as usual. Insurers may consider that adjudications are sufficiently unlikely that they do not present any greater risk than other claims against a consultant, and that existing policy wordings already deal with adjudication adequately. However, some examples of consultant professional indemnity policy wordings from England (where consultants have been subject to a similar adjudication regime for a number 12
June 2016
THESE MATTERS SHOULD BE GIVEN CAREFUL CONSIDERATION IN RELATION TO CONSULTANTS’ PROFESSIONAL INDEMNITY POLICIES. of years) suggest that insurers may well want to specifically address adjudication claims. Based on English policy examples, the following issues may need particular attention. —Will cover be available at all? Professional indemnity insurers in the New Zealand market will need to consider in what circumstances they will pay out on an adjudicator’s determination. One New Zealand broker has previously raised the possibility that adjudication determinations may not be covered. Claims against consultants are often complex. For example, determining whether a consultant has failed to carry out its services with reasonable skill and care can be a highly technical issue, often requiring the opinion of independent experts, potentially from overseas. These enquiries could well take longer than the adjudication response timeframe allows (unless a realistic extension of time is granted). The quality of a consultant’s response could be reduced as a consequence, with increased risk of a determination going against a consultant.We would be surprised if insurers excluded cover for adjudication claims. But increased premia and/or policy sub-limits may be considered. —Will the wording work? English policy wording examples tend to specifically address cover for adjudication claims
in the insuring clause, which may suggest a concern that the status of adjudication claims is not clear in standard civil liability wordings. It would be prudent for consultants to seek confirmation that adjudication is intended to be covered by existing wordings – or to seek additional coverage if not. —Short notice period Consultants could be required to notify insurers of an adjudication claim within very tight timeframes, possibly within as little as two working days. Insurers may also seek to make compliance with notice timeframes a condition precedent to indemnity. But, in New Zealand, insurers will need to be mindful of section 9 of the Law Reform Act 1977, which could override such a time-bar if an insurer does not suffer prejudice as a result of the delay. Some insurers also require consultants to notify them direct in the event of an adjudication claim, rather than through the consultant’s broker – presumably to reduce the risk of delayed notification. If the insurance broker is to be responsible for passing notifications through, the broker will need to have robust systems in place to make sure it does so within the necessary timeframes. CONCLUSION This is still an emerging area and the precise nature and extent of the issues that consultants and their insurers will face remains unclear. What is clear is that these matters should be given careful consideration in relation to consultants’ professional indemnity policies. Brokers will play an important role in this regard and will need to equip themselves with the knowledge and strategies to best assist their clients in achieving appropriate and workable insurance cover. Disclaimer: This article is general in nature and does not constitute legal advice. It is not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
COVER STORY
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FEATURE
How to have difficult conversations with unhappy clients By Karen Stevens, Insurance and Financial Services Ombudsman.
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omplaints are not something all insurance brokers have to deal with, but it always pays to prepare for difficult conversations with unhappy clients. How to manage difficult conversations with clients is a well-received topic in the IFSO Scheme’s 2016 training and professional development programme. Our training webinars focus on how financial advisers can improve their business processes and client relationships, with an emphasis on avoiding future issues. Although many financial advisers won’t have to deal with complaints, the IFSO Scheme does receive a number of inquiries about advisers, mostly about misunderstandings or miscommunication. Many clients say they weren’t given critical information, while advisers say they haven’t understood the information provided. Improving communication will help to prevent issues from escalating, which is good for both advisers and their clients. Over 18 years as Insurance and Financial Services Ombudsman, I have had to have a number of difficult conversations. Like all businesses, we are always looking to improve the way we communicate, and we are passing on our knowledge and experience to the industry. Learning skills to successfully manage difficult conversations is ultimately good for business, as it is all about preserving key relationships.
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Difficult or challenging conversations are defined as those in which you have to manage emotions and information. This can include when you: • address a client’s expectations about the policy scope/cover • address a client’s expectations about your role • explain limitations on cover/scope • explain why a claim has been declined • deal with personal problems. For many reasons, people often struggle with these conversations - they put them off, or avoid them altogether. But learning from all of the disputes we have helped resolve over the years, we would say it is far better to nip problems in the bud as early as possible. Have the conversation at the first sign that something is wrong - rather than wait for the problem to become more entrenched or complicated. These difficult conversations are ultimately in the best interests of the client. Keeping this in the back of your mind may help. Take the common situation where a consumer changes a health policy from a long-standing one, to one with lower premiums and “more benefits”. When a claim is made, they may not be covered, if it involves a pre-existing condition. The time to have the conversation is as soon as possible. No one wants to disappoint clients, but ultimately they need to know what their policy
does and doesn’t cover them for. It’s important to start the conversation with a direct approach. You don't want to ambush people by surprising them about the nature of the chat. To manage a difficult conversation, you need to prepare and think about the information you need. Planning the conversation in advance helps to ensure that it remains focused and the client benefits from the information given, and can then look at the next steps they need to take. The other side of the difficult conversation is the unhappy client. Have a think about your client’s situation. One of the biggest challenges is to always separate the person from the problem. When clients get angry and upset, it’s important to focus on the issue, rather than the behaviour. Most unhappy clients want: • To be heard/listened to
FEATURE
LEARNING SKILLS TO SUCCESSFULLY MANAGE DIFFICULT CONVERSATIONS IS ULTIMATELY GOOD FOR BUSINESS, AS IT IS ALL ABOUT PRESERVING KEY RELATIONSHIPS.
• To be understood • To be respected • An explanation • An apology • Action. It is important to avoid being defensive by blaming someone else, or trying to find an excuse for what’s happened. Clients want action. Their focus should be on what needs to happen next, not on why you are not responsible for their situation. While you can acknowledge the client’s perception of the problem, it’s important to manage expectations by explaining your role and the limits on what you may be able to do. The best value you can add for a client is to explain how a product or process works. Most clients’ unmet expectations are based on
a misunderstanding of their policy or the claim process.You can provide an explanation and help them to adjust their expectations. This goes a long way to preserving the relationship. The best outcomes from difficult conversations are clearly expressed actions. Agree what actions need to be taken and record this. The conversation should end with what is going to happen next. Difficult conversations will always be hard to have but, with practice, they can be the most effective means of dealing with dissatisfaction. With a background in law and alternative dispute resolution, this is Karen Stevens' 18th year as Insurance & Financial Services Ombudsman. She is a qualified arbitrator and mediator, and majored in conflict resolution for her Masters in Law from La Trobe University in Melbourne. www.covernote.co.nz
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FEATURE
KIWIS LEFT EXPOSED BY SUM INSURED POLICIES A
new report showing the extent of New Zealand’s underinsurance problem will not come as a surprise to insurance brokers, it has been claimed. Treasury has released a new report showing that households may be underinsured by as much as $184 billion, because they have underestimated the sum they need to insure their houses for. Since 2013, most New Zealand insurance companies have offered house insurance on a "sum insured" basis. This means that home owners and insurers agree on the amount that the insurer will pay out in a disaster, rather than the insurer paying whatever it takes to rebuild the house. But there have been concerns ever since that households have underestimated how much they need to be covered for. Few have wanted to pay for the professional reports that would give them an accurate idea of the cost of a rebuild and the home insurance calculators that insurers offer only work well for standard homes without any unique features or tricky landscaping. Treasury has released a new report by senior analyst James Sergeant which looks at the risks the change presented and whether the Government could end up exposed. Sergeant said it was easy to see the benefits to insurers of the sum insured model. But he said the new arrangements gave all the responsibility for assessing the rebuild costs to the homeowners. Evidence showed they were not willing or able to calculate an accurate rebuild cost for their houses. "This can be a difficult calculation as, in the worst cases, the costs may involve total demolition, removal of the rubble and rebuilding a new home that is compliant with the current building code. Therefore rebuilding costs often exceed the market value of the existing dwelling."
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He said if people found they did not have enough money to rebuild their homes, and the problem was widespread because of a natural disaster, there could be political pressure to provide assistance. With information from insurers, brokers and valuation consultants, the report concluded that up to 85 per cent of homes could be underinsured by an average 28 per cent, or about $184 billion. Sergeant said there was no sign that insurers were going to move away from sum insured policies. He said the industry needed to work to help
homeowners make informed decisions. Gary Young, chief executive of the Insurance Brokers Association, said the figures were not a surprise and members of his association had provided feedback to the report. But he said how to fix the problem was not clear. "Insurance is a voluntary thing, people can decide how much to insure for. The issue is that most people have no idea how much it would cost to replace their home." Insurance and Financial Services Ombudsman Karen Stevens said her organisation received a number of complaints from people who did not understand the system.
“In one complaint, out of Christchurch, a homeowner was underinsured by about $900,000. He unfortunately didn’t understand that the sum insured would only cover him in the event of a total loss up to the maximum amount set out in the policy.” Suncorp New Zealand EGM of portfolio and products Adam Heath said it was a concern. “At Vero we know it’s important for our customers to set the right sum insured for their home insurance, not only to ensure they have the right level of cover at the time of loss, but also to ensure they only pay for the cover they actually need. We appreciate that even with the help of online tools like the Cordell Calculator, setting an accurate sum insured for more unique houses may not be a very straightforward process. We also acknowledge that our customers are individuals and it’s very rare that any two homes are completely identical.” Sergeant said it was likely the $184 billion headline figure overstated the risk. “Even a major event like an earthquake would be limited to one location, and most houses in that area would not suffer so much damage as to reach the limits of their cover,” he said. “To investigate the effect of a realistic major event, we used modelling from the Earthquake Commission to calculate what the under-insurance shortfall might be after a magnitude MW 7.5 event on the main Wellington fault, using the underinsurance assumptions previously identified. This produced a shortfall of around $135 million, which is far smaller than the national figure. Most homeowners would not experience a shortfall at all, but the impact on some households would be severe, with several thousand households facing an average shortfall of around $40,000.” Sergeant said insurers and others in the industry had a role to play to help consumers better understand what they needed to do.
FEATURE
A UNIQUE PERSON IS BEHIND EVERY POLICY. WHICH IS WHY PEOPLE, NOT ROBOTS, ANALYSE EACH APPLICATION. In an automated world, it’s easy to forget that we deal with unique people and not a law of averages. Neat little categories unnecessarily penalises people who aren’t ‘neat’. A computer can’t be flexible and make a human judgment call. So the individual ends up paying more or missing out on a key policy feature. This is the reason why we don’t automate our policy terms and conditions. By offering you personal service for our niche insurance products, we’re able to provide you the best policies at the best prices; with super-human turnaround times. Most brokers love our approach because it’s fair and it works. Let us know how we can work for you.
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17
OPINION
INSURER RATINGS HAVE LIMITED BENEFIT By David Whyte
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he Reserve Bank of New Zealand has recently announced a review of the Insurance Prudential Supervision Act 2010 (IPSA). In this review, RBNZ is calling for submissions on improving the legislative and regulatory environment for licensed insurers and interested stakeholders. In this regard there is one particular issue that should be re-considered – the mandatory rating of licensed insurance companies in NZ by an approved rating agency. From research elsewhere, NZ is the only territory in Asia-Pacific region that makes obtaining a rating compulsory. While there is no fundamental issue with rating as an exercise, should rating be mandated as part of the Act? Licensed insurers should be free to choose
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whether a rating is obtained from Standard & Poor’s and/or A M Best & Co. At present, there are hundreds of thousands of New Zealand dollars flowing overseas, in return for an indication of financial strength, and/or claims paying ability that are of little relevance to the end-user of insurance products. However, as part of a company’s general operating expense, it is ultimately the end-user who pays for the rating via insurance companies’ premium pricing structure. But the benefit to the consumer is marginal at best, illusory at worst, and has no real relevance in the post-IPSA environment. In addition, it should be pointed out that when the US government were being made aware that AIG would need US$180b bail-out, the organisation still carried a AAI rating from Standard & Poor’s.
Furthermore, in early 2015, the same rating agency paid a $77m fine to settle charges relating to its role in the GFC and received a one-year ban from rating certain commercial-backed mortgage securities. The charges laid were not based on incompetence or error, but were based on "fraudulent misconduct." This is hardly the behaviour that instils confidence in consumers in NZ and should set off warnings within RBNZ with regard to the real benefit provided by such costly rating exercises. However, to put the NZ situation into context, it is necessary to appreciate the background to the present situation. The introduction of the Insurance Companies (Ratings and Inspections) Act 1994, took place in an environment when NZ was beginning the journey to achieve a more global alignment in the regulation of financial services.
OPINION
THE CAPITAL MANAGEMENT AND FINANCIAL REQUIREMENTS OF LICENSED INSURERS HAS BROUGHT NZ INTO LINE WITH INTERNATIONAL STANDARDS...
In particular, events overseas required more stringent supervision of insurance companies in many jurisdictions, and the NZ response was entirely prudent, sensible, and appropriate. Since then, the evolution of the NZ regulatory regime has been significant. The estalishment of a more effective regulatory infrastructure with the establishment of the Financial Markets Authority has been supported by the introduction of the Insurance (Prudential Supervision) Act 2010. The capital management and financial requirements of licensed insurers has brought NZ into line with international standards, and created supervisory parameters reflective of the consensus of all stakeholders. The safety margins and financial security measures lend considerable credibility to the licensees, and that failure to meet policyholder
obligations is rendered unlikely. The robust nature of the provisions, combined with the efficient oversight exercised by the RBNZ, make the domestic and international perspective of the NZ regulatory environment widely acceptable. Any such framework is rightly subject to review and, where possible, improvement, but NZ has made significant strides in meeting the international standards in the IPSA legislation. With the provisions of the 2010 Act firmly in place and further reporting requirements in course of development, the need and the relevance of a compulsory financial strength rating by external agencies is surplus to requirements, and represents an unnecessary cost. There are no secrets surrounding an insurance companies revenue streams – some income is received from investments, but by far the major source of regular income is the consumers’ premiums. In effect, the consumer pays for everything – salaries, buildings, staff, bonuses, heat, light, and other operating expenses – including the annual cost of obtaining a rating. The expense incurred by licensees in meeting this obligation is considerable and to all intents and purposes is perceived by many as providing a less stringent and less rigorous examination of financial standing. It seems inappropriate to consider that the investigation by the rating agencies provide a more stringent test of financial strength than does the IPSA legislation. This implies that the IPSA solvency requirements may be insufficiently robust. If, however, the rating agency research provides as stringent a test of financial strength, this surely raises the question why there is additional
expense incurred in creating a report that adds nothing to the comfort already provided by the IPSA legislation. Indeed, the view held by some observers that the rating agency research methodology is based on less stringent parameters, which suggests an inevitable conclusion that such activity is superfluous and creates no added value, but merely incurs unnecessary expense. Finally, there is no evidence from licensees that consumers and policyholders have any real understanding of the implications of the varying rating standards applied by the approved agencies. It is therefore reasonable to conclude that little store is placed by the end-user on rating agency measurement of financial strength. There is no doubt that many licensed insurers would opt to continue the annual rating exercise for commercial purposes and the suggestion made here is that this should be left to the discretion of those commercial entities. One of the main reasons for pursuing more stringent demands on capital management and solvency standards in the NZ insurance market was presented as the need to align more closely with international best practice. The industry has responded positively to the new regime as has been reported elsewhere by the regulator. Licensees are indeed aligning with international standards. RBNZ should therefore adopt the same approach to the rating exercise, mirror the regulatory attitude presented by other territories, and remove the mandatory nature of the rating exercise. David Whyte is an industry commentator who is a director of Southern Response Earthquake Services and former managing director of AIG Life Australia. www.covernote.co.nz
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CYBER ATTACKS AND DATA BREACHES ARE HURTING MORE BUSINESSES THAN EVER BEFORE. From loss of data and privacy breaches, to extortion and business interruption, the impact of a cyber event can be devastating to a business. Simply being online puts businesses at risk. Help to protect your customers with NZI Cyber insurance. We offer two levels of cyber cover, Cyber Base and Cyber Ultra. Both products provide access to a cyber expert panel who will work with your customer to resolve the cyber threat as soon as it occurs. Find out more at nzicyber.co.nz or contact your NZI Liability Underwriter today and we’ll help to find a cyber solution for your customer.
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*Statistic taken from the New Zealand Cyber Security Strategy December 2015.
FEATURE
WHO IS THE CUSTOMER? A simple question for a complex insurance world By Karl Deutschle
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he customer is king. That’s the simple truth that is reshaping the insurance industry. Established insurers now have to ask themselves some simple questions about who their customers actually are, what they want from their insurer and whether or not their needs are being met. There’s no one trend that is causing this, instead a number of different developments are reshaping the market. However, all of these changes come down to the customer. Success and failure comes down to how well you know what the customer wants and how well you deliver it. AN INDUSTRY READY FOR DISRUPTION We’re certainly seeing a lot of concern within the industry about how vulnerable established players are to disruption. In our recent Annual Global CEO Survey, insurance CEOs were the second-most likely to describe their industry as facing major risks to growth, behind only entertainment and media and ahead of a range of industries like banking and capital markets, healthcare and asset management. What is really interesting here is that entertainment and media has already been through a period of incredible instability – it was one of the first to feel the influence of new digital distribution models that have dislodged many industry heavyweights. In insurance, this hasn’t happened yet, but CEOs are clearly aware of this possibility and are preparing for an uncertain future. So where are these risks going to come from? According to our findings, the speed of technological change, shifts in consumer spending and new market entrants were all highranking risks to growth that CEOs are concerned about. In New Zealand, each of these risks will continue to play out in the market and are areas where insurers will have to respond accordingly.
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THE GENERATIONAL SEA CHANGE Thanks to the growing availability of connected technology, the younger generation of insurance buyers are more selective, more comfortable researching products for themselves and making their own decisions about the level of cover they require. Of course, these same tools are available to every generation with an internet connection, they aren’t unique to younger people. What’s different with younger customers is that they don’t have an established relationship with a major provider or broker who has provided them with cover in the past. This lack of loyalty, coupled with the easy access to information on different insurance products, presents a significant challenge to existing business models. It isn’t just this new generation of insurance customers that companies have to manage in coming years, they will also have to manage a new generation of technologies that consumers are enthusiastically investing in. Driverless cars, for example, for example, are the subject of widespread public interest, but they will also have important insurance implications that could easily challenge the industry’s existing business models. TECHNOLOGY WITH A HUMAN FACE One of the trickiest developments for insurers to navigate is meeting the need customers have for more personalised service, at a time when insurers are putting more resources into automating their processes and relationships with clients. There’s a paradox here: insurers have to become both more digital and more human. Resolving this means putting more resources into customer-facing technology and a greater investment into services that are engaging, personalised and exceed customer expectations.
The good news is that CEOs are already aware of what they need to do to deliver a better experience for their customers. When we asked what technologies CEOs are investing in to engage with stakeholders, the two most popular responses were data and analytics and customer relationship management (CRM) systems, both of which are necessary to deliver a more personalised experience to clients. At the same time, talent has come to the fore as a major area of investment. The "war for talent" is certainly something on the minds of insurers, with 53% focussing on their leadership pipeline and 50% investing in their internal culture and behaviours in order to become more competitive. These very human investments are necessary to complement the increasingly datadriven reality for modern insurers and build a compelling value proposition that truly resonates with customers. INSURING IN THE AGE OF THE CONNECTED CUSTOMER If we look past the current state of the market and towards the future, one of the key trends we are seeing is that insurance customers will be producing more information than ever. This presents a very clear opportunity for insurers to provide a truly personalised experience that
FEATURE
harnesses this new wealth of consumer data. To capitalise on these emerging trends, insurers will have to invest now in areas like analytics and CRM systems that can handle this volume of data and convert them into improvements in customer service. In the coming years, products like wearables and connected cars will also increase the amount of data that is relevant for insurers and can be used to develop more personalised cover. It isn’t enough to simply gather data though, and the next step for insurers will be to apply this knowledge to the policies they offer and the way they develop the risk profiles of their customers. In 2016, many insurers will already be collecting more data than they know what to do with, so while the future holds a lot of promise, it also requires a major investment in new capabilities. Insurers will also face a range of privacy issues that come with using personalised information – concerns that the industry hasn’t had to deal with to the same extent in previous years. Clearly the notion of the connected customer will dominate over the coming years and will demand a significant investment in infrastructure. However, companies that don’t make these investments will run a much greater risk: disruption from new FinTech companies.
THE FINTECHS ARE COMING Within financial services, insurance is currently not as exposed to the FinTech revolution as other areas such as banking and capital markets. In fact, our recent Global FinTech Report found that only 26% of our respondents feel property and casualty insurance/life insurance will be disrupted by 2020, compared to 80% in consumer banking. However, this doesn’t mean there aren’t hungry smaller companies within the sector who will position themselves to offer a better customer experience than current market leaders. Even if this disruption doesn’t occur by 2020, new FinTechs still pose a major challenge to established insurers, especially those that don’t invest in understanding their customers. When we look at where this disruption comes in, it’s no surprise that we return to the customer. The two areas where FinTechs are making the biggest difference in insurance will be around self-directed services and granular risk and/or loss quantification. In other words, the customer will be in control, and they will be receiving services that are carefully tailored to their needs. FinTechs will be looking to exploit these weaknesses in the current market, which is why they also have to be a point of focus for established players in the market.
BECOMING A CUSTOMER-CENTRIC INSURER Clearly the insurance sector is facing a period of significant change, driven by evolving customer demands, new technologies and the threat of the disruption from new FinTechs. We’ve also started to see how insurers are responding, as insurance CEOs place even more importance on data and analytics, CRM systems and social media. However, the change that the industry demands is more than just becoming more technologically driven, it also requires a more fundamental shift in the culture of the insurer to put the customer at the centre of the business. New technologies have great potential to help achieve this shift, but they are just one part of the equation. The leaders of New Zealand’s insurance companies have to start with a strategy that is truly customer-centric. From there, they can begin to implement the technology and develop the internal expertise that is required to turn this strategy into a market-leading position. Karl Deutschle is a Partner at PwC with over 21 years of experience in financial services. Karl’s focus is on insurance, banking and investment management, with an emphasis on risk management and compliance. www.covernote.co.nz
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COVER STORY
NO TIME FOR CYBER SECURITY COMPLACENCY By Toby Gee and Oliver Tapper, Minter Ellison Rudd Watts
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June 2016
COVER STORY
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usinesses are increasingly recognising that cyber security and cyber resilience require active engagement by the board and senior executive team, and should not be restricted to the IT department. As the Institute of Directors pithily recommends in a useful practice guide to directors, “Put cybersecurity on the agenda before it becomes the agenda.” Cyber security can be summarised as referring to safeguards to protect against cyber attack. Cyber resilience relates to an organisation’s ability to withstand a cyber event. Both are important. So where are cyber security and resilience heading, and how does the insurance industry fit into the picture? CYBER THREATS ARE GETTING BIGGER AND MORE SOPHISTICATED Cyber threats have seen exponential growth in the last few years. Symantec detected 19.4 million new pieces of malware globally in the month of November 2015 alone, and 317 million new pieces of malware in 2014 – that’s nearly a million new cyber threats every day. Cyber threats are also becoming more sophisticated. They are likely to operate undetected for longer and potentially cause greater harm: Mandiant found that in 2015 the mean number of days between infection and detection was 205. Incidents range in severity from the targeting of individuals and small businesses, such as demanding a ransom to permit the business resumed access to its own system, to significant corporate espionage of large New Zealand organisations, putting valuable intellectual property, business plans, pricing and acquisition strategies at risk. Such cyber threats are taking a serious toll on business. Research from Grant Thornton reveals that the total cost of attacks globally is estimated to have been more than US$315 billion in 2015. And regionally, cyber attacks are estimated to have cost businesses in the Asia Pacific US$81 billion in 2015. The same report shows that the average “successful” cyber attack costs businesses the equivalent of 1.2% of annual revenues. In addition, there are also extensive indirect costs, such as a reduction in a business’ ability to trade, or reputational damage – which can be particularly severe where customer loyalty relies heavily on trust It is therefore perhaps not surprising that the World Economic Forum lists cyber attacks as among the top five risks in terms of a combination of probability and impact (along with interstate conflict; water crises; failure of climate change adaptation; and under-/un-employment). It is tempting, in a small and geographically isolated country like New Zealand, to regard these as someone else’s problem, unlikely to occur here. However, this would be a mistake:As cyber crime can be conducted from anywhere in the world, New Zealand’s apparently low risk environment means, experts say, that it generally has a lower level of cyber security and awareness than in comparable developed countries. This makes New Zealand businesses a soft target for cyber criminals.
In addition to detection problems, a further difficulty in measuring the incidence of cyber crime is that due to the sensitive reputational issues surrounding a data breach or cyber attack, many cyber attacks go unreported: As Una Jagose, acting head of the GCSB, recently said, it is concerning that in a recent survey of major businesses in Australia, 43% of respondents said they did not report cyber incidents as they saw no benefit in doing so. It can be inferred that published data are probably a significant underestimate of the true prevalence and cost of cyber events. The statistics demonstrate that cyber security incidents continue to be common and recurrent for New Zealand businesses. However, despite these risks, many New Zealanders and New Zealand businesses are neither confident in their information securities nor have cyber security strategies in place. Amy Adams, Minister for Communications, reported recently that more than 80% of New Zealanders have experienced a cyber-security breach, yet only 39% have changed their online behaviour as a result. More than half of businesses have been attacked at least once in the past year.Yet only 65% of New Zealand businesses are confident that their information technology systems are effective. NEW ZEALAND’S CYBER SECURITY STRATEGY AND ACTION PLAN 2015 In the face of such threats, in December last year, Adams launched New Zealand’s Cyber Security Strategy. This, she says, “signals the government’s commitment to ensuring New Zealand is safe, resilient and prosperous online.” The strategy provides a unifying framework for government-led action to address cyber security, in partnership with the private sector. Underpinning the strategy are the principles of collaborating with the private sector; enabling economic growth; upholding national security and protecting human rights online. To deliver the strategy, the Government has put together an action plan which will be reviewed and updated annually. The National Cyber Policy Office will work with government agencies and private partners to produce a public annual report on the action plan. The action plan has four primary goals, the first of which is cyber
IT IS TEMPTING, IN A SMALL AND GEOGRAPHICALLY ISOLATED COUNTRY LIKE NEW ZEALAND, TO REGARD THESE AS SOMEONE ELSE’S PROBLEM, UNLIKELY TO OCCUR HERE
www.covernote.co.nz
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COVER STORY
resilience; enabling New Zealand’s information infrastructures to resist cyber threats and developing cyber tools to protect our national interests. A key feature of this goal is establishing a national Computer Emergency Readiness Team (CERT), a central organisation responsible for receiving and providing advice on computer security incident reports and activity. Other goals of the action plan include cyber capability, concerned with promoting cyber security awareness to arm New Zealanders with the necessary skills to protect themselves online; addressing cybercrime (which is also addressed in the National Plan to Address Cybercrime); and international co-operation, aimed at ‘ensuring the continuation of an open and secure internet’. WHAT NEW ZEALAND BUSINESSES SHOULD BE FOCUSSING ON Part of the response from Government and professional organisations to cyber threats is to help educate boards, executives and others about how to respond to cyber risks (both before and after a cyber event). The Institute of Directors’ Cyber Risk Practice Guide provides boards with high-level principles to help them understand and monitor cyber risk, develop strategies for seeking assurance, and oversee management: • Take a holistic approach.This involves approaching cyber security as an enterprise-wide issue, not just an IT issue. • Understand the legislative environment. This involves assessing legal risks by reference to the company’s specific circumstances. • Access cyber security expertise and put cyber security on the board agenda. • Establish a framework. Set expectations to management to establish an enterprise-wide cyber risk management framework. • Categorise and manage the risks, including risk mitigation or transfer through insurance. The Australian government recommends four key mitigations for businesses, which it says may reduce vulnerability to cyber attack by up to 80%: • Application "white listing": Allow only a defined list of applications to run on a network. • Patching system vulnerabilities: Computer system vendors constantly release operating system versions containing new patches to address vulnerabilities as they are discovered. • Patching application vulnerabilities: Similarly, applications like Java, PDF viewers, Microsoft Office release patches which should be installed. • Restricting administrative privileges to operating systems in accordance with the user’s duties. 26
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ONLY 25% OF SURVEY RESPONDENTS CONFIRMED THEIR ORGANISATION HELD SPECIALIST CYBER RISK INSURANCE... Steps to improve cyber security include improving IT-related steps as above. But they also include addressing employee risks such as the need for employees to be vigilant in relation to passwords, confidentiality of data and scam emails; procurement issues such as checking trading partners’ cyber security processes and requiring suitable cyber security measures on the part of such partners; and reducing the quantity of any marketable data held by the business, and the period for which it is held, to reduce the attractiveness of the business as a target. Steps to improve cyber resilience include devising and testing an emergency response plan, ensuring that appropriate immediate advisory services are in place to manage the situation and contain any damage in the event of a serious cyber event, and arranging suitable insurance to cover both first-party and third-party losses, together with event containment measures if appropriate. WHAT CAN THE INSURANCE INDUSTRY DO TO ASSIST NEW ZEALAND BUSINESSES? Insurers play a key role in cyber resilience, which should enable them to participate actively, not merely after cyber events, but also in helping to increase cyber security in the New Zealand business community. Once a CERT has been established, insurance companies can assist by sharing information and threat analysis with the CERT in order to examine existing threat patterns and techniques, and by participating in regular cyber security exercises to test preparedness for major cyber incidents. Aside from assisting a CERT and partnering with the government as part of its Cyber Security Strategy, insurers can play a key role in assisting businesses by providing specialist cyber risk policies which effectively manage the risks related to data breach and reduce the significant costs that can result from them. The scope of such policies, if well explained, is in itself a useful educational tool in assisting businesses to understand and manage cyber risks.
COVER STORY
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However, results from Minter Ellison Australia’s 2015 cyber security survey, which assessed results from over 150 organisations across Australia, show that cyber insurance has not yet been widely embraced. Only 25% of survey respondents confirmed their organisation held specialist cyber risk insurance, and a further 35% were unsure whether their current insurance arrangements adequately covered cyber risk. The Minter Ellison survey suggests that organisations may not realise that many traditional insurance policies do not provide adequate protection in the event of a cyber attack, because, for example, their definition of “property” is limited to tangible physical property such that risk resulting from data breach will not be covered; and because other types of risk associated with a significant cyber attack or regulatory costs are also not typically covered. Specialist cyber risk insurance is still a relatively new product. The majority of such products in the market provide hybrid policies, which include cover for: • First party losses, such as the cost of hiring IT and/or forensic accounting experts to identify and address the cause of the breach, or engaging public relations specialists to assist in limiting reputational damage; • Regulatory costs, including fines or penalties, and notification and monitoring expenses; as well as • Third party cover for any claims arising from a data breach. However, insurers may be able go further, to help to minimise the overall impact of cyber events to New Zealand Inc, by providing proactive risk management and mitigation services such as: • lists of approved emergency response teams (IT experts, legal advisors, public relations services, etc • premium reductions for businesses which can demonstrate they are adopting responsible cyber security policies such as implementing the key mitigations recommended by the Australian government and potentially other suitable risk mitigation steps. We expect to see an ongoing increase in the take up of specialist cyber risk policies as organisations increasingly turn their mind to their cyber risk profile on an enterprise-wide basis. Forward-looking insurers will use their insurance policies and associated documents to assist in minimising claims, should they occur, and enabling themselves to provide lower premiums to businesses which can demonstrate lower risk by adopting appropriate safeguards. Whatever steps insurers and businesses do or do not take, cyber risks are set to loom large in the coming years. Smart approaches in addressing them are likely to lead to market advantage and great business sustainability.
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COVER STORY
HOLD ON TO YOUR CLIENTS
You’ve spent years building your client base. Here is how you can hold on to them.
Y
ou put many hours into securing each new client. There are meetings, phone calls, dealings with insurers and piles of paperwork to complete. But once the client is signed up and on the books, the real work begins. In an increasingly competitive business environment, it is becoming ever more important that brokers do not “set and forget” their clients. It can take several new clients to cancel out the pain of losing just one good existing one. Studies have shown that retaining a client costs five times less than finding a new one. A small increase in your retention statistics will boost your long-term profitability and your business value. Here is how to make sure your client base sticks with you, no matter what technological advance rears its head or new broking competition sets up in the marketplace. KNOW YOUR OWN VALUE If you can’t accurately communicate your
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own value proposition, you can’t hope that your clients will understand it. What is it that you offer your clients? What do you do that no one else does quite the same way? You should be able to sum this up in one or two sentences, even if it is something as simple as: “I understand the insurance protection local businesses need.” The better you know your clients, the easier it will be to nail your value proposition. Adviser coach Tony Vidler said the key to keeping clients long-term was to create a sense of being irreplaceable. “We are not truly irreplaceable of course, but creating the sense that we are is the magic ingredient. Doing that consists of knowing more about the customer than any competitor ever could - and using that knowledge to deepen the relationship and create presence of mind. If we can maintain sufficient presence then we are half way there. The other half is about creating relevance in their minds,” he said. Think about retention in the same way you
do sales. Communicate your value to your existing clients in much the same way as you might pitch for new business.You can do this in regular newsletters, mailed letters, social media or when you talk in person. Be clear and confident so your clients have the same confidence in you. This makes it much harder for a competitor to swoop in and steal them. They’ll ask: But can you do X,Y and Z as well as my existing broker? It is vital that your value proposition is about more than just price. Anyone can beat you on price and a website will give customers all the tools they need to find the cheapest policy in the market. But if your clients understand what you deliver and the extra benefits you have found for them, they will be less likely to be tempted by a cheaper headline rate from someone else. REGULARLY CHECK IN WITH YOUR CLIENTS There is nothing worse than feeling forgotten about once you sign your business over to a new
COVER STORY
IN AN INCREASINGLY COMPETITIVE BUSINESS ENVIRONMENT, IT IS BECOMING EVER MORE IMPORTANT THAT BROKERS DO NOT “SET AND FORGET” THEIR CLIENTS. Write good notes in your system so that next time you get in touch you can follow up on a new product they were developing or new key staff that were being hired. As well as your more formal catch-ups, you can remind them of what you are doing for them with electronic communications or posts on social media. Contact all your clients before each premium increase to explain what is happening and talk through the options with them. A big premium hike is one of the things that is likely to punish clients elsewhere. But if you are upfront and talk to them about it you can reduce the chance of a switch before it even crosses the client’s mind.
broker. The more times a year you check in with your clients, the less they will think about going elsewhere. Do you have a good customer relationship management system? This is vital to help you keep track of your clients’ needs. Get in touch with them at least once or twice a year to make sure they are still adequately covered. Their businesses may have changed significantly over the year and they may now be exposed to more risks. Similarly, new products may have entered the market that could be well suited to them. If you invest time in developing deeper relationships with your clients, it should pay off in spades. This will help you identify future opportunities, even if there is not an opportunity to sell now. What are your clients’ business plans, now and in the future? Are they expanding into new markets or product lines? Are they buying new machinery and equipment?
SIT DOWN FACE-TO-FACE Regular written communication is great but if you really want to be memorable and impossible to ditch, you will need to put in some face time. Face-to-face contact is a great way to hold on to clients. Someone who does not see you often is much more likely to be tempted to drop your services. “Much of our marketing effort must be about maintaining a constant presence, and creating that top-of-mind-awareness with our potential and existing customers,”Vidler said. “More importantly though, we have to educate and patiently explain, and remind, and remind again, of the types of problems we can help resolve and the sorts of outcomes we can help them achieve. We have to work diligently and patiently at creating the sense of being there if we want them to turn to us when significant changes happen in their lives. “The primary reason why brokers struggle to keep clients long term is because we have failed to create presence of mind, or relevance in their mind. If we achieve one of those, we may keep clients for a fair time. If we fail to achieve either, then they are sure to leave - it is just a matter of when. If we can achieve both we are near on irreplaceable.” Marketing expert Mike Moore said younger people were more likely to see insurance as a commodity product. Engaging these clients in a personal relationship is even more important.
“The personal relationship is the beginning and end of it. [Brokers’] biggest competition is online but the reality is that hardly and clients who are looked after well by a personable and qualified broker will move.” BRANCH OUT The wider the range of products you have with a client, the more likely you are to hold on to them. If they come to you as a business client, try to take on their personal cover as well. This gives less of an opportunity for competitors to get a foothold with the client and also makes you seem more indispensable. What life events are coming up? Are they buying personal property or new cars? Do they have a wealth management plan? REFER BUSINESS TO YOUR CLIENTS Many insurance brokers become a sort of business hub in their communities. You have many businesses on your books, understand what they do and have good relationships with them. It makes sense, then, that you could refer your client businesses to others among your network. Let them know that you are doing this and a network of loyalty will develop that should pay off. You can formalise this sort of networking in a groups such as BNI or your local chamber of commerce. Conversely, if you have a client who refers another to you, offer some sort of reward system to show them that you recognize and appreciate the referral. It could be a free lunch at a restaurant nearby – another one of your clients. TAKE COMPLAINTS SERIOUSLY If your clients complain, listen. Have a system in place to deal with it properly. If you blame things outside the business and take no responsibility for what has happened, they will have no reason to stay with your business. If you take the blame for what went wrong at your end, do what you can to fix it and communicate what will happen differently in future you could turn an unhappy client into a proponent of your business. www.covernote.co.nz
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FEATURE
The cost of cyber crime in New Zealand C
yber crime costs New Zealand an estimated $250 million to $400 million each year and affects 56% of businesses. Andrew Beven, NZI’s regional sales manager for liability, said; “We often refer to a quote that goes like this: ‘There are only three kinds of companies in the world - those who have been hacked, those who are going to be hacked and those who don't know they've already been hacked’. “Doing business online exposes companies to risks they may have not even considered. When these risks become a reality, the damage can be devastating to their business. Cyber protection is now a critical, must have, insurance for any business.” In March this year, NZI launched Cyber Base and Cyber Ultra. Parcelled up with these two products, NZI included the services of a Cyber Emergency Helpline and a team of specialists on call 24/7, anytime, anywhere. The protection provides businesses suffering from a cyber breach or attack access to a team instantly able to leap into action and quickly mitigate the damage. This cutting edge model is part of the reason that Cyber Base and Cyber Ultra products have been so highly sought-after since their launch. It was NZI’s national liability manager, Ryan Clark’s vision to create a unique helpline that could take the stress away from a business experiencing a cyber breach or attack and ensure they didn’t have to go it alone. Beven said: “The New Zealand Herald cited
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THERE ARE ONLY THREE KINDS OF COMPANIES IN THE WORLD - THOSE WHO HAVE BEEN HACKED, THOSE WHO ARE GOING TO BE HACKED AND THOSE WHO DON'T KNOW THEY'VE ALREADY BEEN HACKED’.
58,000 Kiwi companies as having been hit by cyber criminals over the last two years. Cyber breaches are scary enough, and if you’re not an IT expert it’s even worse. An attack is like a battle vortex – where do you begin? The way we’ve set this up ensures that the business can hand over the reins to the experts and be guided through the breach or attack to safety.” Once the cyber hotline number has been activated, the first thing the team will do is assess the situation and manage it end to end. The coach will deploy the necessary cyber experts to tackle the problem, with experts including
IT, legal, and forensics.The coach will then help the business to resolve the issue as quickly as possible. When a cyber breach or attack does occur, Cyber Base and Cyber Ultra can help businesses deal with the event in real time, and provide a fix to the issues arising from the cyber event itself, and the resulting legal liability. The protection can even extend to cover businesses for loss of revenue and help minimise any damage to professional reputation through the Public Relations arm of Cyber Ultra as well. Globally, 43 companies reported cyber crime losses exceeding US$7.5 million. The single biggest hit to a New Zealand company was $2.1 million in 2015. Cyber threats are a risk of doing business in today’s digital world. They include more than you might imagine. From rogue tweets made by employees that cause reputational damage, to hardware or infrastructure failure resulting in data loss, and malicious malware and viruses that can leave digital systems crippled. “NZ’s geographic location is of no benefit when it comes to cybercrime, as the internet knows no boundaries,” Beven said. “NZ business owners need to expand their risk-management considerations from the traditional perils of fire, flood, theft and health and safety, to now include topics such as cyber security, crisis response and reputational damage control.” Today, 45% of New Zealand companies do not have a cyber response plan. Sobering?
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FEATURE
HOLDING DIRECTORS TO ACCOUNT It was enough to make Sir Peter Jackson quit his directorship of Weta Workshop. So how risky does the Middle Earth boardroom look for those directors who remain at the top tables when the new Health and Safety at Work Act comes into play?
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FEATURE
T
he take-home message of one of New Zealand’s newest law changes is that everyone in the workplace is responsible for health and safety. The new Health and Safety at Work Act 2015 came into effect on April 4. According to the Ministry of Business, Innovation and Employment (MBIE), it focuses the effort of business, workers and the Government on what matters. And what matters, among other things, is a shift from monitoring and recording health and safety incidents to proactively identifying and managing risks. It is hoped the country’s new health and safety system will help New Zealanders reduce their workplace injury and death toll by 25% by 2020. The website business.govt.nz, part of MBIE, explains the new legal concept introduced – a PCBU, or a Person Conducting a Business or Undertaking. The PCBU, which is usually a company rather than an individual, has primary duty to ensure the health and safety of its workers. A PCBU – this definition includes directors and other people making significant governance decisions – has a duty of due diligence to ensure compliance with health and safety obligations. According to the New Zealand Law Society, this positive duty on officers is a key change from the Health and Safety in Employment Act. Under the old Act, company directors could only be held liable where they directly participated in, contributed to, or acquiesced in their company’s failure. Due diligence includes taking reasonable steps to: • acquire knowledge of work health and safety matters, and keep up-to-date • understand the nature of the business’s operations, and associated hazards and risks • ensure the business has and uses appropriate resources and processes to eliminate or minimise health and safety risks • ensure appropriate processes for receiving and considering information about incidents, hazards and risks, and for responding in a timely way. WorkSafe New Zealand can charge an officer of a company personally with breaching their obligations, or in conjunction with other charges being laid against the PCBU or a worker. The consequences range from a fine of up to $100,000 for an officer who has failed to comply with their duty to a fine of up to $600,000, and up to five years’ imprisonment, if the officer’s conduct exposed any individual to a risk of death, serious injury or serious illness, and was reckless as to whether one of those risks eventuated. The Institute of Directors (IoD) and
WorkSafe teamed up this month to launch Health and Safety Guide: Good Governance for Directors, updated to support directors through the changes. IoD CEO Simon Arcus said: “The principles underpinning safety governance are no different than any other aspect of a governance role. Directors must have the knowledge of and commitment to health and safety. Contrary to some beliefs, directors are not expected to be experts to meeting the expectations of the Act.” He said the Pike River Mine and Easy Rider cases provided sobering examples of how ineffective governance could contribute to catastrophic results. “It’s the role of the director to provide leadership. Directors create expectations and exercise due diligence by holding management to account for meeting them.” ACCOUNTABILITIES ADD UP Health and safety are not the only increased accountabilities added to directors’ agendas in recent times. Following high-profile company meltdowns, the finance sector was the first to be tightened up, with the Government moving to make directors’ responsibilities more explicit in various areas, including disclosures to mum-and-dad investors. Directors’ obligations also changed under the Companies Amendment Act 2014. New requirements have been phased in, most recently in October 2015 when all companies were required to have a director who lived in New Zealand or Australia. Next up is likely to be privacy legislation. New Zealand’s Privacy Act was world-leading when it came into force in 1993, but that was before the internet permeated every corner of our lives and our personal data became so valuable. The proposals include: • a mandatory reporting regime for data breaches • new privacy offences and higher penalties for existing offences • enhanced powers for the Privacy Commissioner • technical amendments to provide greater clarity and guidance. Ryan Clark, NZI national manager of liability, said the cumulative effect of the legislative reform represents a significant seachange in Kiwi corporate culture. “Compared with a decade ago, there’s a greater expectation that company directors and managers will be professional and personally accountable for the decisions they oversee,” he said. “It means directors and managers have a
WORKSAFE NEW ZEALAND CAN CHARGE AN OFFICER OF A COMPANY PERSONALLY WITH BREACHING THEIR OBLIGATIONS, OR IN CONJUNCTION WITH OTHER CHARGES BEING LAID AGAINST THE PCBU OR A WORKER. greater duty to be more engaged in the dayto-day activities of their company, and that they have a responsibility to upskill themselves on their liabilities. “It also means they would be prudent to contact their insurance broker and ask for a personal liability assessment and audit of the cover that they hold.” GUIDANCE ON RISK ISSUES A Director’s Guide, produced by the Financial Markets Authority (FMA) and IoD in 2013, helps directors identify the issues they face around risk. It advises gaining a good understanding of the responsibilities involved in a directorship and doing more than tick the boxes. The guide sums up a director’s essential duties as: • being honest • acting with integrity • acting in the best interests of the company at all times • having the right mix of skills and experience • understanding risk and being responsive to risks and conflicts • asking the hard questions until you are satisfied you can make a decision.
USEFUL WEBSITES - The Institute of Directors at www.iod.org.nz - WorkSafe New Zealand at www.business.govt.nz/worksafe - The Financial Markets Authority at www.fma.govt.nz - The Companies Office at www.companies.govt.nz www.covernote.co.nz
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FEATURE
www.covernote.co.nz
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ASK AN EXPERT
Liability for volunteers
Credit card fraud
QUESTION… An incorporated society has a board of directors who are all volunteers. The organisation employs eight paid staff and are accountable to the board through the paid manager. It has been suggested that under the Health and Safety in the Workplace Act the board of directors cannot be sued or charged for any wrong doing in respect of failing to keep the staff safe within the terms of the Health and Safety Act. Is this in fact correct? It has always been our understanding that directors can be held liable whether they are volunteers or paid directors in respect of their responsibility to paid employees. If such directors are unable to be held liable for breaches of the Health and Safety Act – does this exclusion also apply to other failings of the volunteer directors?
REPLY… CROSSLEY GATES, DLA PIPER Strictly speaking, only companies registered under the Companies Act 1993 have directors. Incorporated societies usually have committee members. In summary, if the committee members are unpaid, the position is that although they are obliged to meet their responsibilities under the H&SW Act, they cannot be prosecuted for breaching it. I note the incorporated society employs people. Incorporated societies are separate legal entities like companies.The employing of people will make the incorporated society a PCBU, with responsibilities under the Act and liable for prosecution if it breaches them (separate from the committee members).
Pool damage QUESTION… Our client had emptied a customer's 16 or 17-year-old fibreglass pool and was almost finished prepping it for repainting when they had to stop due to poor weather conditions. They left site and when they returned approximately five days later the pool liner had cracked. Our client believes it was his staff members’ inaction to wet the pool liner twice a day that caused the crack. Vero have declined the claim under the Defective Work Exclusion. The client did not have the Faulty Workmanship Extension in place at the time of loss, however I don't believe this would have covered the claim as the cause according to our client was an error or omission, not accidental damage. Are you able to give some advice as to whether you believe the Vero declinature is correct, however if not why do you think Vero should accept the claim?
REPLY… CROSSLEY GATES, DLA PIPER I assume the Vero policy is a liability policy. The concept of workmanship covers both action and inaction. The failure to do something that you should have done is still faulty workmanship. I can't comment on whether the extension would have covered the client without seeing it. Based on what you have said, if the employee was meant to wet the pool liner twice daily and didn't and this was causative of the damage, then the declinature is probably correct. As a general rule, liability policies do not insure liability for the damage caused by the faulty workmanship but do cover liability for any resultant damage.
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QUESTION… Does anybody know of a cover available to the retailer in these circumstances: - the retailer ships goods to an online purchaser who has paid by credit card - the credit card transaction turns out to be fraudulent - the bank refuses to honour the credit card payment - the retailer cannot get the goods back, therefore have lost the value of the goods "sold" Most crime policies seem to contain either a "credit arrangement" exclusion or a "voluntary exchange" type exclusion which seems to remove any cover available in this scenario and a traditional MD policy would not seem to respond. Has anybody come across this and is there a solution?
REPLY… STEVE KEALL, BARRISTER Hi, all I can offer is some practical experience in the commercial litigation context, and not in an insurance context specifically. The kind of situation you describe is, unfortunately, not rare. The net effect of the interlocking agreements between the merchant, the bank and/ or the online payment gateway provider, and the actual owner of the credit card is that the risk sits with the merchant. The possibility of this happening is the cost of doing business in the online retail environment. That is very clearly legally, and it is not a case of the bank refusing to honour the payment but rather a case of it simply applying the terms of its agreement. Personally I have not come across any products that offer insurance cover to the merchant in this situation, but I am happy to be corrected about that. If there is such a product, so much the better!
ASK AN EXPERT
GST included
Tenant damage
QUESTION…
QUESTION…
A commercial client has a PL claim and is asked to pay their $500 excess to the insurer. We appreciate that this is GST Inclusive in this case, effectively $434.78 + GST, but the insurer won't provide a GST invoice to enable our client to actually (and legally) claim back the GST. Is this normal practice?
I have a client who has accidentally damaged his landlord’s contents in a furnished apartment. In this case the landlord’s contents, due to the complex's insurance policy, are not insured. However, with basic insurance principles in mind regardless of this I have lodged a claim with the contents insurer of the tenant, under the section “tenants’ liability” where the policy wording states there is cover for accidental loss to landlord’s contents. where legally liable. The insurer, in this case has declined the claim based on the following; "The tenant cannot be held legally liable for the loss of landlord contents/property due to the ruling from Holler v Osaki. In a nutshell, this has established that a landlord (or insurer of landlord) cannot seek recovery against tenants due to an act of negligence or accidental damage. There are a couple of exceptions to this, however none of them are relevant to this situation." Is this court case now a new precedent that is making the insurance section of tenants’ liability void?
REPLY… STEVE KEALL, BARRISTER GST treatment for insurance payments can be a little tricky. There is no relevant taxable supply for the purposes of GST legislation in relation to the payment of the excess to the insurer specifically, and therefore your client will not have the ability to claim an input credit in relation to the payment of the excess, but I think in any event you may be putting attention on the wrong place. What were the circumstances of the loss and the way it was settled? Subject to this, the answer may be that if there was a repair (for argument sake) which included GST, this GST may have been paid by the insurer to the repairer - and then reclaimed from IRD as an input credit- by the insurer. That being the case there is no GST to reclaim on your client's part. The same would apply if the relevant GST on the repair was payable by your client - it would then claim an input credit in the same way. But either way there is no GST on the excess specifically.
Lower alcohol limits QUESTION… We have received a claim notification where a client has had an accident (single vehicle rollover following over-correcting when being followed closely at night). The driver was found by police to have a breath alcohol reading of 320, so received an infringement but no criminal conviction. The insurer has advised no cover due to the exclusion in regards to being over the legal limit for alcohol. I wonder whether there is any information in regards to how insurers should apply this exclusion - as the level of 250-400 is an infringement only and not a conviction. Some insurers have previously advised that the infringement is a disclosure issue and would affect underwriting but not claim acceptance, however the way the wording is written indicates that the insurer could decline and therefore makes it difficult to contest this. This is our first claim of this nature so we have not been in a position to review previously.
REPLY… CROSSLEY GATES, DLA PIPER No, but the case extended the exoneration of tenants for negligent damage to the landlord's premises found in the Property Law Act to the Residential Tenancies Act.This was contrary to what everyone thought the position was. However, the Property Law Act relates to the landlord's premises. I don't believe it extends to the landlord's contents. Therefore, if your client has negligently damaged the landlord's contents, I believe the normal common law of tort applies.
Do you have a question for our experts? If so, visit iNavigator, www.inavigator.co.nz, or the IBANZ website, www.ibanz.co.nz - and let us know.
REPLY… CROSSLEY GATES, DLA PIPER The legal limit is now 240. The fact that the offence is punished differently at different levels of impairment doesn't change that. www.covernote.co.nz
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Regulatory update T
he law covering financial advisers, including general insurance brokers, is in for an overhaul. The Ministry of Business, Innovation and Employment has released the submissions it received on its recent Financial Advisers Act review Options Paper, which outlined potential changes to the law. Many of the submissions received came from life insurers and advisers working in that sector, as well as financial planners. But some general insurance players also made submissions, often citing concerns that many of the issues that relate to other parts of the financial advice industry do not apply to the general insurance market. Here are some of their positions on the key themes of the options paper. MBIE will make recommendations to the Commerce Ministry by July 1. DOES THERE NEED TO BE A DELINEATION BETWEEN WHAT IS “SALES” AND WHAT IS “FINANCIAL ADVICE”? AAI : A clear distinction between advice and sales would simplify the regime. Many insurers, including AAI, became QFEs not because we sought to actively provide personalised financial advice to customers, but because there was a
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legal risk that a staff member may accidentally make a personalised recommendation or give an opinion to assist a customer, and inadvertently put the organisation at risk. AAI deals with its own brand of general insurance, such as basic motor, home and contents insurance. Consumers contacting AAI know what insurance is and are seeking to find out information about AAI’s product suite to determine if they want to purchase insurance from AAI. As a QFE AAI provides adequate training to sales staff to ensure they are equipped to deal with consumer requests including asking set questions around the appropriate cover for their asset and there is not a requirement to take into account all elements of a consumer’s personal circumstances. AAI utilises the NZAA centre network who sell our general insurance products exclusively on our behalf as our “face-to-face” sales channel. They are a QFE in their own right, however apply the same sales process and competency standards that AAI imposes on its own staff. We believe “financial advice” should be limited to situations where an appropriately qualified adviser is providing a consumer with choice driven advice requiring an objective assessment of the comparative benefits of financial products, for example different providers’ insurance
products. Sales activity should be permitted by employees and be limited to products manufactured by their employer. However, in selling insurance products there should be the ability to discuss and answer consumer queries without falling into the category of providing advice. The majority of consumers who contact AAI require information and want specific questions answered about AAI products, cover levels and price to help guide them in selecting the product they want. This is not significantly different to a salesperson promoting the benefits of their product. They are aware that when they contact AAI, they will be offered AAI branded products only. Allianz: Because of the non-investment profile of general insurance products there is no need to move from the current advice and product distinctions. We would disagree with the “sales” versus “advice” distinction in the Options Paper. Even a salesperson representing one employer may have the remit to sell a number of products underwritten by that employer. While the salesperson might offer products on an execution-only basis in certain circumstances, that salesperson may also provide tailored advice to the consumer depending on the products he or she has been employed and trained to sell.
COVER STORY
At the same time that salesperson could be just as motivated by sales returns as the adviser who is authorised to sell the products of two or more providers. In either case the consumer could be presented with a number of product options at varying costs and that would be the case whether that sales interface has been enabled by one or more organisations to act as a distribution channel. IBANZ: It is the consumer’s view of what they receive which is important. As we have seen with the existing legislation, a definition imposed through legislation does not connect with the average consumer. At the moment financial products can be sold as incidental services and not subject to the FAA. In those situations, customers would generally understand that it is purely a sales transaction and financial advice is not being given. An example of that is the sale of travel insurance by a travel agent. Customers understand that the insurance is being sold as part of the travel services and that the product being sold to them while suitable for their purposes is not being personalised for their needs or that there is a choice of provider. However when a customer is dealing with a financial service provider the lines between
sales and advice can become blurred and the expectation of the consumer is likely to be different. Because the definition of financial advice is so wide it captures the sales process for financial products and as a result consumers may believe that their best interests are being taken into account. While we recognise there is a distinction between sales and advice, if such a distinction is to be recognised under the FAA, consumers need to be made aware not only that it is a sales transaction but the implications and limitation of that for them, in particular that the specific needs of the client have not been taken into account and that other products from other providers maybe available. Appropriate warnings to be provided to customers as part of the sales process. Most importantly if a distinction is to be drawn between sales and advice, a clear exclusion would need to be applied to the definition of “financial advice”. More importantly sales need to be subject to an obligation for the product to be suitable for the consumer. IAG: Too much low-level advice is caught by the “financial advice” definition and because of this breadth of advice an overly complex and somewhat burdensome regime has been created. Much of this low-risk activity can sit outside the regime without any material loss of consumer
WHEN A CUSTOMER IS DEALING WITH A FINANCIAL SERVICE PROVIDER THE LINES BETWEEN SALES AND ADVICE CAN BECOME BLURRED AND THE EXPECTATION OF THE CONSUMER IS LIKELY TO BE DIFFERENT. protections, due to existing consumer and financial services law. We believe that a far simpler and less burdensome regime can be established by using a tighter definition of “financial adviser”. This regime would establish a regulated profession of Licensed Financial Advisers and not seek to regulate all financial advice. We contend that the difference between someone being an adviser or not lies in the www.covernote.co.nz
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COVER STORY
nature of their relationship with their clients and the providers of the products and services they are advising on. A person is an adviser if they are not tied to a single provider and act on behalf of their client. Conversely, if they are tied to and act on the behalf of a single provider then they are not an adviser. ICNZ: “Sales” is an inaccurate term to describe the service that some insurers provide to their customers. It is more than an “execution only” service. FSPs who are not financial advisers should be able to have free and frank conversations with their customers about the financial products they offer. Many consumers value this assistance from insurers without needing to go further to seek personalised financial advice from an independent financial adviser. Further, the financial advisers regime should not hinder this consumer demand by forcing these “salespeople” to become some kind of regulated financial adviser. Some members, particularly those that are QFEs, already have ethical and client care standards, training standards, put the client’s interests first, and would continue to do so, irrespective of the minimum level of client care set out in relevant legislation. FSPs’ desire to develop strong brands and consumer goodwill will incentivise higher service standards in the industry without the need for government regulation. A “salesperson” should not have to disclose to a consumer that they are not acting in the consumers’ best interests. This is not only inaccurate, but it is also an extremely negative statement. We think it will harm consumer trust and confidence in insurers and financial service providers, and damage the use of a service that consumers find valuable – that service being the provision of information about a product directly from the product provider. Instead, if any kind of mandated disclosure about the difference between sales and advice is required, then we submit the disclosure should focus on encouraging consumers to consider the positive, value-adding aspects of an adviser’s service – i.e., that an adviser is an independent professional who can advise on a range of products, not just the insurer’s products. Professional IQ College One option could be to say that a financial services salesperson is a giver of information only. Np product comparison is provided and only one product for the type of service is offered. Advice comes in when the consumer asks 40
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THE DIFFERENCE BETWEEN SOMEONE BEING AN ADVISER OR NOT LIES IN THE NATURE OF THEIR RELATIONSHIP WITH THEIR CLIENTS... a question or wants a comparison. This would then need to be referred on to the appropriate adviser. Clear delineation in terms of titles would be needed and this should help the public differentiate between an adviser for financial services and a financial services salesperson of finical services. If there is clear delineation between sales and advice this may mean that the financial services salespeople are not covered under the Financial Advisers Act and would revert to being covered under the Financial Markets Conduct Act instead SHOULD ALL ADVISERS BE REQUIRED TO HOLD A MINIMUM QUALIFICATION? ICNZ: All advisers should have to meet minimum upfront and continuing standards of competency. However, those standards should not be homogenous for all advisers. Instead, they should be agreed to by the regulator and tailored for the specific service(s) the adviser seeks to provide and the specific products that the adviser seeks to advise on. AAI: AAI considers that competency requirements should be matched to the complexity of products being sold and the level of information or advice being provided to consumers. Product and advice service providers are in the best position to assess and document how appropriate competency requirements are being complied with, whether this is part of entity licencing or internal compliance. AAI considers that for its own staff, who should be viewed as salespeople, competency standards already exist through internally-designed training courses. It is in the best interest of the provider to ensure their staff have a full understanding of the products they sell. IBANZ: Currently there is a significant number of RFAs involved in insurance broking providing advice to clients on their insurance arrangements.
While we realise a balance needs to be struck between increasing the competency standard and costs being appropriate to the benefits for consumers, the requirement to have a minimum qualification as a measure of competence would be a significant burden and cost to RFAs and employer organisations. The likely consequence is the reduction in the number of advisers and or the increased cost of advice to consumers.The issue with competency of RFAs is how to measure it; setting a minimum qualification does not prove competency. Ongoing competency, as distinct from having a minimum entry level requirement, is best addressed through continuing professional development. Through having a code the standard for ongoing development can be addressed. The current AFA requirements for continuing professional development seem reasonable although we would advocate having an annual requirement with some flexibility is better than a requirement over two years. In the insurance sector, the lack of having a defined competency standard for RFA insurance advisers has not meant clients receive inadequate or inappropriate advice. Allianz: We expect all carriers to provide some kind of training to their staff. We would support a minimum level of competency for those marketfacing staff who do not provide advice for category two products. If nothing else, a distinction should be made about communicating those instances where a staff member cannot provide category one or detailed advice. Consumer NZ: All advisers should be subject to minimum entry requirements. They should also be subject to continuing professional development requirements and be required to be competent to give the advice they provide. Raising the standards for the industry will be beneficial for consumers. Professional IQ College: Advisers should be qualified before entry to the industry. The level 5 New Zealand Certificate in Financial Services (NZCFS L5) (or the equivalent) should be the minimum standard for all advisers. For all new entrants to the sector they must have a specified qualification prior to being able to give advice and should be supervised (i.e. can’t sign up investments or policies) for the first six months. Supervisor could be defined as: an experience adviser with more than two years’ experience in the sector for the scope required and should have the NZ Certificate in Financial Services Level 5 or equivalent or be an AFA.
COVER STORY
The CPD obligations would apply to new entrants also. Transfer all current advisers across to new regime at designated date. Ensure they have to do structured CPD in the first year (could even specify what that must be) and then monitor and enforce CPD obligation - after that at 30 hours over two years. When they leave the sector they can only reenter under the new entry level requirements. However the NZCFS L5 is structured in such a way that there could be different components of the qualification required for different sectors For those people who could potentially be classified as ‘financial services salespeople’ there is a NZ Certificate in Financial Services Level 4 which is a good introductory qualification and supports an understanding at entry level for both the banking and/or the insurance sector and includes applicable legislation. WHAT SORT OF DISCLOSURE SHOULD ADVISERS BE REQUIRED TO GIVE? Allianz: We would cite the Australian practice as a useful template to refer to. The Australian model requires that remuneration be disclosed whenever financial service, not just financial advice, are provided, unless an exemption applies. It will be important to work through the most practical and useful disclosure in much more detail and we would suggest a joint insurer and broker dialogue, perhaps involving workshops facilitated by MBIE in order to settle on the correct form. IBANZ: Disclosure statements need to be short and cover only information that is relevant to a consumer and delivered in a way that they can understand. Disclosure should be provided prior to the engagement of the adviser and updated if the details of the adviser change. ICNZ: In principle we support proposals to harmonise disclosure among advisers and thereby reduce consumer confusion and make compliance and enforcing compliance more efficient for the regulated and the regulator respectively. However, further research into consumer behaviours needs to be conducted before it is possible to arrive at an informed opinion about the most effective form and content of disclosure for consumers, and the most efficient way to deliver it. Our members’ experience suggests verbal disclosure to consumers should be permitted and encouraged. It gives the consumer an initial interaction with the subject matter of the disclosure, whereas a consumer may choose
not to read a written disclosure and therefore not engage with the subject matter at all. Verbal disclosure could accompany written disclosure, or be an alternative to written disclosure. We prefer the latter approach, provided a FSP can retain a record that disclosure has been made to the consumer and provide the information to the consumer again in future on request. Many of our members (including QFEs) already provide telephone or pre-recorded disclosures (including QFE disclosure) as they consider it to be an effective way of conveying this information to consumers. SHOULD ALL FINANCIAL ADVISERS HAVE AN OBLIGATION TO PUT THE CLIENT FIRST? AAI: We agree that all financial advice services should come with an ethical obligation. The difficulty is what is meant by putting consumer’s interests first? How is this different from present obligations? We believe the key is that the advice meets the customer’s expectations – a customer may not necessarily want or be able to afford “the best” product for them and this must be provided for. Allianz: Insurers owe a duty of utmost good faith to the customer once the contract is in place. But neither they or their agents can be obliged to put the consumer’s interests first before the contract is incepted: that conflict could result in an unbearable and unsustainable capital and commercial position. It would be redundant to impose a primacy obligation into broker contracts of engagement as the whole point of such engagement is for the broker tor represent the customer in negotiation the insurance market. IBANZ: While insurance advisers are usually remunerated by way of commission from the provider, insurance intermediaries already have
THE DIFFERENCE BETWEEN SOMEONE BEING AN ADVISER OR NOT LIES IN THE NATURE OF THEIR RELATIONSHIP WITH THEIR CLIENTS...
obligations to act in the best interests of their clients. In the fire and general insurance the nature of the insurance covers (usually annual renewable covers) and consistent commission structures across insurers and products means changes to different insurers is motivated by the needs and interests of the client rather than the interests of the adviser in promoting a change. The client-first obligation reflects the current position for insurance brokers who are acting as the agent of the client and not the agent of the product issuer. IBANZ already has a code which resembles the AFA Code. In situations where the adviser is not acting in that role, it needs to be made clear that the adviser is not acting as an ‘independent” adviser. This maybe in a situation where the adviser is acting as tied agent and only providing a product of a particular provider. In effect the adviser is acting as a distributor of product as part of a sales process rather than as a financial adviser IAG: We believe it is right and proper for there to be a minimum standard of conduct and accountability for those who sell financial products and services and for those who provide advice on them but are not required to be a Licensed Financial Adviser. Consumers should receive products and services appropriate for their needs and that accord with what they thought they were getting with an easy means of redress should things go wrong. However, we are not convinced that obligations are needed within the Act to achieve this. Professional IQ College: Ethical obligations need to apply to everyone within their scope of service. Currently this obligation is blurred between sectors. PIQ believes that a Code of Practice that applies to all advisers with specific sections applicable to each sector is required. There could be an overall ethical standard of due care, skill and diligence (putting the needs of the client first) with the “how” this is applied to each sector of financial advice specified. This could include differing disclosure requirements to suit a particular scope of service. All financial advisers do not need the same disclosure requirements (in particular) imposed on them as those for current AFA as the cost of compliance would outweigh the value to the consumer. Rather a tailored approach is more practical and would ensure increased compliance and keep cost for advice contained. Remuneration disclosure as part of the ethical obligations should be at banded levels rather than actual for the likes of the current RFAs. www.covernote.co.nz
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FEATURE
CHANGES AT TOP AT VERO with Paul Smeaton and the executive team to help drive the New Zealand business. Q: DOES THAT GIVE YOU CERTAIN ADVANTAGES? DO YOU THINK THAT BECAUSE YOU HAVEN’T ALWAYS WORKED IN FINANCE, IT GIVES YOU A BROADER OUTLOOK? A: I think I bring something different to the role. I’ve got a very broad experience base across both industry and function. I haven’t been in general insurance or life insurance for 25 years. I’ve been in financial services, so I’ve got a diverse background in terms industry experience and function. I’ve worked in every role from distribution, t's been a busy few months for the ASX- product management, strategy, and marketing, listed Suncorp Group and its New Zealand and now a CFO role. So I’ve got a very good brands Vero Insurance and Asteron Life. After understanding of how a business works from announcing its half year results in February, an operational point of view and can bring Suncorp introduced a new operating model a strategic approach to the New Zealand which it says will deliver on its customer business. strategy and drive future profitability and Q: SUNCORP GROUP IS GOING THROUGH growth. For New Zealand, it means Vero’s CEO Paul A LOT OF CHANGE. CAN YOU EXPLAIN Smeaton has the added responsibility of Asteron WHAT’S AT THE HEART OF THIS? A: Essentially what’s been announced is Life, and both brands will sit under the new appropriately named company, Suncorp New aimed at building a better business and enabling us to better respond to our customers. We live in Zealand. Mr Smeaton has also announced that CFO a world of rapid change and if we’re not changing Peter Brown is to retire after 35 years with the ourselves then we’re going to be left behind. And business, and Tim Buckett will replace him from it’s important that we continue to evolve so that we’re best positioned to meet the needs of our 1 July. CoverNote caught up with Tim recently, to customers. All of this will enable us to respond see how he's preparing for the move from across better to the needs of our stakeholders, including brokers, business partners, and the end customer. the Tasman. I think one way to look at it is that until Q: CONGRATULATIONS ON YOUR recently the insurance industry looked at risks APPOINTMENT. TELL US A BIT ABOUT not customers. And by that I mean industry looked at homes as a risk, motor as a risk, YOUR BACKGROUND? A: Thank you. I’m looking forward to business as a risk, indemnity as a risk. Now you’re the new role. As incumbent CFO you won’t be starting to see a move towards the customer, and surprised to hear that I studied accounting at their needs. At Suncorp we’re certainly starting university, here in Australia. I then moved into to look at this in a very different way. broader business roles – mainly in the retail banking space through product management, Q: YOU MENTION THE BROKER – WHAT strategy, marketing, and most recently heading up OBSERVATIONS DO YOU HAVE ABOUT strategy and corporate development for Suncorp THE RELATIONSHIP WITH THE BROKER Group. So while I haven’t been in pure finance INDUSTRY IN NEW ZEALAND? A: Obviously our relationship with the broker roles for quite a long time I’ve worked across a lot of businesses in P&L roles, and now I’m heading industry in New Zealand is significant and to New Zealand to take on the CFO role at very important to us. We face some interesting Suncorp New Zealand, where I’ll be working challenges together – like how we adapt in a
I
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world where our ability to assess risk changes with richer sources of data. Both insurance companies and brokers have a role to play in how we do a better job of meeting the needs of our customers in this changing environment. There’s also the constant threat of disruption from innovators that both brokers and insurers are exposed to and we’ve got to work together and remain focused on creating value for policyholders. If we do this then I believe the outlook for insurance companies and brokers is a good one. But if we drop the ball, that’s when the disruptors can come along and take the advantage. Q: HOW’S THE INDUSTRY CHANGED SINCE YOU JOINED? A: I think data and digital distribution are two drivers of the most significant change over the last decade or two. For example in personal insurance we now have the ability to personalise risk. In Australia, we have risk address pricing, and by that I mean rather than pricing a suburb or a postcode, we can now price an individual address. We weren’t able to do that a decade ago. And that’s now possible with meta-data. And what this means is that we’re able to peronsalise our offer to individual customers, whether they are a business or an individual. And that is a great outcome for customers.We need to embrace this sort of change, and adapt our business models accordingly. Q: FINALLY, TELL US A BIT ABOUT YOURSELF? A: I grew up in the country, in northern New South Wales. I studied in Brisbane at the University of Queensland where I did a Bachelor of Commerce before moving to Sydney in my early career. Then I went to the UK for a couple of years. I went over to play cricket and spent a few years there professionally. I came back to Sydney and worked at CitiBank and Westpac, which included a two-year stint in Auckland, so New Zealand is a familiar place for our family. In fact our eldest daughter was born in Auckland. I have three daughters - who are all very much looking forward to the adventure of moving to New Zealand. I enjoy sport and am looking forward to finding a good golf club in Auckland and reengaging with the beautiful country that New Zealand is.
COVER STORY
ACE and Chubb are now one. ACE Limited has acquired The Chubb Corporation, creating a global insurance leader operating in 54 countries under the renowned Chubb name. On 1 July 2016, ACE Insurance Limited in New Zealand will become Chubb Insurance New Zealand Limited. The new company combines Chubb’s 130 years of underwriting insights and devotion to customer service with ACE’s three decades of technical underwriting excellence, broad risk appetite and global presence. Our goal is to provide the very best insurance coverage and service to individuals and families and businesses of all sizes — from small and medium sized companies to the largest multinational corporations — all across the globe. As craftsmen of insurance, we are devoted to meticulously conceiving, crafting and delivering extraordinary coverage to meet the needs of the modern world — a world that is epic in scale but by nature both personal and connected. To find out more, go to new.chubb.com.
© 2016 Chubb. Coverages underwritten by one or more subsidiary companies. Not all coverages available in all jurisdictions. ACE®, Chubb®, their respective logos, and Chubb. Insured.SM are protected marks of Chubb.
www.covernote.co.nz
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FEATURE
Theft of trade tools a growing problem By John Lucas, ICNZ Insurance Manager
T
heft from trade vehicles is becoming a common problem but very few trade tools in vehicles and on worksites are adequately secured. The Insurance Council (ICNZ) and NZ Police are urging brokers to educate their clients on how to reduce the risks of tool theft. NZ Police report that about $200,000 worth of hand and power tools were stolen from the Waitemata/North Shore area in just a onemonth period. During January while people were on leave and work sites were closed, approximately $57,000 worth of power tools were stolen from residential garden sheds and 18 builders’ vehicles were broken into with $85,000 worth of tools stolen. Police believe that the perpetrators were well organised and were actively targeting worksites, trade vehicles and residential properties that were not well secured. Some of the vehicles had tools stolen from them on worksites, while others were broken into on the street and up residential driveways. Of the thefts on construction sites, 40% had no security. Construction site containers are normally considered ideal for site tool and equipment lock ups however these containers are only as good as their locks and any surrounding security. A number of the shipping containers that were broken into had padlocks smashed and evidence that heat was used.
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It’s also possible that thefts from construction sites are the result of inside knowledge from other workers on site and that the whereabouts of valuable tools is being communicated to organised criminals. It is certainly worth talking to tradie clients about investing in extra security for vehicles. Most trade vehicles have factory immobilisers preventing the vehicle being stolen but not enough is being done to protect the vehicle contents. Insurance claim deductibles for commercial tool thefts are about $1000 so many thefts are simply not claimed for. Very few trade vehicles are equipped with alarms including motion and glass break detectors or secured tool lock boxes. Power tools will often have serial numbers that should be recorded and better still is a covert form of id like SelectaDNA. The installation of unique identifiers on power tools is more robust as serial numbers can be removed. SelectaDNA is a covert marking system, similar to data dots. Police are equipped with the special lights that can identify if property is marked. Being able to positively identify stolen property in the possession of someone else then allows Police to track down the owner and charge the suspect.Without any form of property identification makes the Polices job that much harder and often the offender cannot be charged.
LOSS PREVENTION INITIATIVES FOR WORKSITES • Record serial numbers of all power tools and equipment • Purchase a covert identification kit that will mark all tools – these cost about $50 • Keep photographs of tools – Record on your smart phone • Keep garages and garden/tool sheds securely locked • Consider employing security on construction sites • Consider installing security cameras on construction sites • Install better quality locks on construction site container lock ups, and consider monitoring FOR TRADE VEHICLES WITH EQUIPMENT INSIDE • Many trade vehicles have locks forced and rear canopies broken into. Install lockable purpose built tool lock boxes and securely fix to the vehicle • Install audible intrusion and motion sensor alarms • Connect tool lock boxes to the alarm system • Remove tools from trade vehicles during the evenings and on weekends • Lock vehicles on worksites when unattended • Consider installing dark tinted window film to keep tools out of site. • Avoid parking trade vehicles on the street at night, if at all possible.
FEATURE
INSURANCE ADVISERNET: NZ’S 10-YEAR OVERNIGHT SUCCESS I
nsurance Advisernet celebrates its 10th anniversary in New Zealand this year. To mark the occasion CoverNote asked its founding NZ Director, David Crawford, about the past decade. “It’s been a fascinating journey. To be part of a business that started with just one broker and see it grow to where it is today – it’s been quite a ride. When we began in 2006, our business model was very different to anything else in NZ. The idea of having a group of independent brokers operating on the same system, with a centralised client premium trust account, common procedures and compliance programme was virtually unheard of. We were very fortunate Insurance Advisernet had already been operating succesfully in Australia for 10 years, as we were able to translate what they were doing into a NZ environment. Mind you, convincing NZ brokers to change to a common system and a centralised trust account wasn’t always easy. Many established brokers were reluctant to let go of the client premium account, while the idea of changing systems didn’t inspire them either. But for those forward thinking brokers who wanted to focus on their client and insurer relationships and were quite happy to let Advisernet do a lot of the back office work, it’s proven to be a great decision. Today, we continue to offer our brokers’ clients security of their premiums, held in trust on their behalf for insurers. We’ve paid insurers on time, every time, for over eight years now and even though it isn’t mandatory in NZ we operate a proper trust account, audited annually and reviewed
“Being part of a network means you are not alone. There is a group of like-minded people who share ideas and problems to achieve an outcome acceptable to all parties. iBroker really helps with this as it provides a platform amongst members around the country for discussion around best placement for awkward and hard to place risks.” Amicus –Christchurch
every six months by external auditors. Our proprietary IT continues to be world class and it really is a leap ahead of other systems. In fact, when new brokers join us they consistently say ‘iBroker’ is vastly better than what they have been using elsewhere. It’s constantly getting better too as, in conjunction with our Australian business, we continue to invest in the development of iBroker as the cornerstone of our technology platform. While clearly technology plays a central role for us, we remain very conscious our business is ultimately built upon relationships and personal interaction. The moment you lose sight of this you become transactional and price focused. This signficantly increases the risk of being overtaken by smart technology and insurers going direct. Since day one our model has tended to attract younger brokers and businesses; profesionals who want to take on the big brokers and build their own future in insurance broking. As you'd expect after 10 years we have a lot of success stories, many of which are still developing.The future is very bright for the group, especially as the market changes and becomes more consolidated. It’s also worth noting we’re now part of one of the largest insurance broking groups in Australasia, AUB Group. This relationship has brought a whole new dimesion to what was already a very successful model. It’s provided added scale and leverage to match even the largest brokers in NZ. It’s been a great journey over the past 10 years, and the best part is we’ve only just begun.
“Insurance Advisernet has provided us with the core platform that has enabled us focus on growing a productive business, from compliance, education and data management through to accessing to new markets and a wide range of expertise.” Financial Independence – Tauranga
“Insurance Advisernet provides us with an independent support structure while allowing our company to maintain its own identity. The IT platform is second-to-none. And, of course, there are regular opportunities to meet with others who want to provide the levels of service that an independent broking firm can achieve.” Meridian - Wellington www.covernote.co.nz
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IFSO
Convictions void claim I
n October 2012, the insured arranged insurance through a broker on her house. At the time, she was separated from her husband and he was living in a different city. When the first policy was arranged, she was required to complete and sign a proposal. The proposal asked whether any of her family members had ever “engaged in any criminal activity or had any criminal convictions”, to which she answered “No”. Her estranged husband had a number of criminal convictions. She did not disclose these, because she was separated from him at the time she completed the proposal. In or about November 2012, he moved into the house, to help her to renovate it in exchange for free board. He was serving home detention at the time, which he had transferred to the house. She advised that this was the beginning of a slow process of reconciliation between the pair. In early May 2013, her broker wrote to her, advising her of a “revised insurance renewal” on the house, to take effect from the renewal date of the first policy, May 25, 2013. On that date, the first policy was cancelled, and a new policy was issued. She did not advise the insurer of her husband’s criminal convictions. In December 2013, a fire completely destroyed the house. She made a claim to the insurer for the loss. The insurer avoided the first policy and the second policy and declined to consider the claim, on the basis that she had failed to disclose her husband’s criminal convictions when the policies were arranged. THE CASE MANAGER’S ASSESSMENT Non-disclosure: An applicant for insurance has a common law duty to disclose to an insurer all information, which a prudent insurer
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would consider material. If the applicant fails to provide material information, the insurer is able to avoid the policy, even if the non-disclosure was unintentional. The current law does not distinguish between innocent and deliberate non-disclosure. The period of cover on the first policy was from October 2012 until May 2013. Therefore, the first policy was due to be renewed in May 2013. The insurer advised the case manager that the fact the policy was cancelled, and a new policy issued, was merely a procedural anomaly initiated by the broker.The insurer provided the case manager with an email from the insured to the broker, dated September 2012, prior to the inception of the first policy, which stated that the house would only be tenanted for a month and then she would move in. The insurer also provided an email from the broker to the insurer, dated November 2012, which stated that the insured had advised she was living at the house. Therefore, the house was no longer tenanted, and the insurer had been advised of this, almost six months prior to the inception of the second
policy. The insurer said the situation should be treated as though it was a standard renewal. Following the case manager’s discussions with the insurer and his consideration of the emails of September and November 2012, the case manager agreed with this analysis, on the basis of the evidence.The duty of disclosure also applies at the renewal of an insurance policy. The insurer is not required to have an insured complete a new proposal, as the parties to the contract and the risk to be insured have not changed. However, an insured is required to advise the insurer of any changes in circumstances which have occurred since the inception date, or last renewal, of the policy. This common law duty was also repeated in the disclosure condition of the policy. Between the inception of the first policy in October 2012, and the effective renewal in May 2013, her husband had moved into the house, and was serving his home detention there. The insured was advised in a letter from the broker, in May 2013, of the “revised ... renewal” of the first policy.
IFSO
At this point, her duty of disclosure was triggered; however, she did not advise the broker or the insurer of her husband’s criminal convictions. Materiality and Inducement: The case manager also had to determine whether the information not disclosed was material. He asked three senior independent underwriters (on an anonymous basis) how the information not disclosed would have affected their decisions to insure the couple. The majority of the underwriters indicated that the information would have affected their decisions to accept renewal of the risk. Taking these views into consideration and, after reviewing all of the information provided, the case manager came to the conclusion that the information not disclosed was material. The insurer also needed to prove the nondisclosure of the information induced it to enter the contract on the terms provided. Consequently, prior to avoiding the policies, the insurer referred the case to the actual underwriter of the policies for review. The underwriter advised that, had the
criminal convictions been disclosed, she would not have continued to offer cover. On this basis, the case manager was satisfied that the non-disclosure of the criminal convictions caused the insurer to renew the policy on the terms provided. Therefore, the insurer was entitled to avoid the second policy from commencement, or effective renewal, and decline to consider the claim. Complaint not upheld POWER FAULT OR WEAR AND TEAR? In July 2012, the insured’s broker arranged for the renewal of insurance for a house with an insurer under its house policy. On August 15, 2012, the induction hob at the house stopped working. The insured arranged for the hob to be inspected by his electrician. The electrician arranged for a specialist repairer to repair the hob. The electrician informed the homeowner that the damage was “caused by the power outage” at the house. On October 6, 2012, the insured completed the broker’s claim form and made a claim to his insurer for the damage. On or about October 15, 2012, the insurance
company called the broker advising that it would decline the claim. On November 13, 2012, the broker sent the insurer a copy of an email from the repairer regarding the cause of the damage. The homeowner also provided the insurer with a letter from the electrician confirming the cause of the damage and confirmation from his power supplier that there was a power outage in his area on August 15, 2012. On November 19, 2012, the insurer emailed the broker advising that it would decline the claim, on the basis that the damage was “due to wear and tear, not a power surge”. On April 17, 2013, the insurer emailed the homeowner after reviewing the decision, advising that it did not believe the power outage caused the damage and that it would continue to decline the claim. ASSESSMENT When making a claim under an insurance policy, the initial onus is on the insured to establish that he/she a prima facie claim. The insurer stated that the insured had not established a prima facie claim, as he had not shown evidence of a “sudden and unforeseen event causing physical loss or damage...”. The case manager considered the evidence provided by the homeowner in relation to the damage. Both the repairer’s report and the electrician’s report supported the claim that a power outage had caused the damage. The power supplier confirmed there was a power outage in that area that day. In addition, the case manager contacted the repairer, who confirmed that the damage was sudden and unforeseen and likely to have been caused by a power outage. On this basis, the case manager believed that the homeowner had established a prima facie claim. As a prima facie claim had been established, the insurer was entitled to raise an objection to meeting the claim. However, if it wished to rely on an exclusion in the policy, the onus was on it to establish the application of the exclusion. When relying on the exclusion for “wear and tear” under the policy, the insurer relied on a review of the claim details by its in-house expert. The case manager did not believe that the insurer had enough evidence to establish the application of the exclusion under the policy. On this basis, the case manager asked the insurer to reconsider its position. It agreed to meet the claim in full. Complaint settled www.covernote.co.nz
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OPINION
Do you know the difference between a dwelling and a residential building under the EQC Act? By Crossley Gates, DLA Piper
E
veryone knows that residential buildings insured under a fire policy are automatically insured under section 18 the Earthquake Commission Act 1993 (EQC Act) for natural disaster damage. But are you aware of the importance of determining the number of dwellings in a particular residential building and, if there is more than one, what you have to do to maximise cover under the EQC Act? This is an issue that came across my desk recently and the outcome surprised me so I thought it was worth sharing with others in the industry. Section 18 of the EQC Act insures residential buildings (as defined). There are several alternatives to the definition, but the one that usually applies is a building in New Zealand that comprises one or more dwellings, where those dwellings comprise at least 50% of the total area of the building. The word "dwelling" is also defined under the EQC Act as any selfcontained premises which are the home or holiday home, or are intended by the owner of the premises to be the home or holiday home of one or more persons. Therefore, the usual key to cover under section 18 is whether a building contains a dwelling or dwellings, and if it does, whether the dwelling or dwellings comprise at least 50% of the area of the building. If the building qualifies, there is cover under section 18 - but how much cover? Everyone knows the maximum cover is $100,000 plus GST, but do you know what that applies to? It isn’t payable per residential building, rather it is payable per dwelling. A residential building may contain more than one dwelling. For example, a retirement village may consist of five accommodation buildings, but each building will have the same number of dwellings as there are sleeping quarters for residents. This may mean each of the five residential buildings contains 10 or 20 dwellings, 48
June 2016
for example. Section 18 says the Commission pays a maximum of $100,000 plus GST per dwelling. So for example the cover available for one building containing 10 sleeping quarters is $1M not $100,000. But there is a catch. The default position under section 18 is that each residential building contains only one dwelling. Section 18 (3) says: (3) For the purposes of subsection (1) (c) [providing cover of $100,000 per dwelling], a residential building is deemed to comprise one dwelling unless the existence of a higher number of dwellings in the building is disclosed to the insurance company at the time that the contract of fire insurance is entered into. This means that if you are arranging insurance for a residential building containing three dwellings, the cover under section 18 will be limited to $100,000 plus GST unless you have disclosed, on behalf of your client, to the insurer that there are three dwellings. The Commission is taking this point on a file I am considering. There are two residential buildings but one has been converted to 20 dwellings and the other to 2 dwellings. The Commission alleges that this was not disclosed to the insurer and so they will only pay $200,000 plus GST on the basis of the default position
that each of the two residential buildings contained only one dwelling each. It gets more complicated than this. Most private insurers' policies top-up the EQC entitlement. If no disclosure was made to EQC it seems clear that EQC's legal obligation is limited to the default position. That will likely mean the private insurers' policy will drop down to meet the shortfall. I suspect most insurer will be unhappy about that situation because, of course, that is not how their cover is intended to work. So the lesson is clear. Don't blindly assume your client's residential building consists of only one dwelling. If your client takes in lodgers or the property is a boarding house, alarm bells should be ringing. If there is any doubt, check with your client. If there is more than one dwelling, make sure you disclose it to the insurer and keep a record of that disclosure. You may need it later if there are any questions about how much cover exists under section 18.
FSCL CASE STUDY
Delay tactics BACKGROUND The insured ran a small specialty shop. He had a number of insurance policies for his shop placed by his broker. In 2015, he decided to cancel a few of the policies and sought a refund for the premiums (about $1400). In April 2015, his broker sent him a statement outlining his policies, payments and the refunds due. He noticed the statement showed he owed the broker $3600 for a commercial motor fleet policy he did not know he had taken out. He did not have a commercial motor fleet for his shop. Because of the outstanding amount of $3600, the broker said that he would not be refunded any premiums. He also had another business importing motorcycles from overseas. He said he discussed getting commercial motor fleet insurance with the broker for the motorcycle business, but not for his shop. However, he said this was only an informal discussion and he never: • received any documentation for the commercial motor fleet policy, or • confirmed he wanted to take out a commercial motor fleet policy. THE COMPLAINT He complained to the broker that he was unaware of the commercial motor fleet policy and was unwilling to pay the outstanding premium of $3600. He wanted the commercial motor fleet policy cancelled and the premium refund of $1400 paid to him. The broker did not agree to cancel the policy and continued to seek the $3600 from him. THE BROKER SPEAKS UP We asked the broker for a report on the complaint, but despite consistent prompting, it did not provide a report. We issued a preliminary view that the complaint should be upheld because the broker had not provided any evidence that the insured knew about the commercial fleet policy being placed. We were also of the view that the broker should pay him an extra $250 for the inconvenience caused by its lack of communication. THE INSURANCE BROKER SPEAKS UP After some delay the broker responded to the preliminary view and said the insured did arrange the commercial motor fleet policy. We asked for evidence of this policy being taken out but again received nothing back. Finally after more delay, we issued a formal recommendation. THE FINAL SAY We found that the broker had not proved the insured took out the commercial motor fleet policy.Without any evidence to rebut the insured’s position, we found the broker placed the commercial motor fleet policy without his knowledge or consent. We said that the broker had to cancel the commercial motor fleet policy and pay the insured a refund of $1400 and $250 for the inconvenience caused (a total of $1650).
He accepted our decision, and, after further delay, the broker paid out. THE LESSON It is best to acknowledge a complaint and take action as soon as possible. Ignoring a complaint will not make it go away, and can often aggravate the situation. If the broker had not paid the recommended sum, it ran the risk of being de-registered from the Financial Service Providers Register, meaning it would no longer have been able to provide financial services in New Zealand. It is important for financial service providers to respond promptly and professionally to complaints. SUM INSURED PROMPTS ARGUMENT THE STORY The insured arranged car insurance through her insurance broker believing that if the car was written off in an accident the insurer would pay her the agreed value of $10,000. Following an accident she was shocked to discover the insurer was only prepared to pay the car’s market value - $6000. DISPUTE She complained her broker had not told her the insurer would only pay market value. She considered she had been over-insured, paying premiums based on a car value of $10,000. She wanted her broker to pay her either: • $4000, being the difference between the amount she expected her insurer would pay and the actual amount paid by the insurer or • the additional premiums she had paid to insure a car for $10,000. OUR REVIEW Although she genuinely believed her policy provided agreed value cover, all the letters and documentation referred to market value. The most recent insurance renewal letter reminded her to review the sum insured to make sure it reflected the current market value of her vehicle, and attached a summary from the insurer stating that the most the insurer would pay was either the repair costs or the market value if the vehicle was a total loss. We did not think the broker had contributed to her mistaken belief and recommended she discontinue her complaint. During our investigation we asked the broker to calculate the difference between insuring a car for $10,000 as opposed to $6000. The difference was only $46 a year. LESSON It is important to check your insurance provides the cover you are expecting. Although your broker will help you through the process you still need to read the documentation to make sure your broker has arranged the cover you believed to be in place. If you insure your car for market value, and do not want to pay more than you need to, we suggest you review the value of your car annually and adjust your cover accordingly.
www.covernotemag.co.nz
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Professional
Professional Development: Professional IQ College
College
PIQ College Update D
avid Crawford, director of Insurance Advisernet, has been appointed as the new chairperson of Professional IQ College. The retirement of long-serving Professional IQ chair Richard Russell and recent departure of principal Lesley Southwick has provided an opportunity for the Board to review how the college can best meet the increasing learning and development needs of the industry in the coming two to three years. “In preparation for the likely outcomes of the Financial Advisers Act (FAA) review, the college has undertaken a review of our focus, structure and how we best deliver to the needs of advisers and the insurance industry,” Crawford said. “One outcome of the FAA review is certain, and that is change. “Ensuring that we anticipate what the insurance industry needs as new requirements are introduced, will be key. “It is our role as a leading learning and development partner to provide resources that not only help businesses adjust to new requirements, but which also support their
service to consumers,” he said. Crawford brings with him extensive knowledge of financial services and the advice industry, having worked as a corporate broker in New Zealand, London and the Middle East, before joining Insurance Advisernet as CEO in 2006, and latterly as a director. He has also served on the IBANZ Board since 2007. “We look forward to working with our industry partners as the college enters into a new phase of development and growth,” Crawford said. Gary Young will take on a CEO role for the college. The existing team are focused on ensuring the College is ready to provide you full support for the challenges likely to come out of the current review of the Financial Advisers Act. Gary Young - CEO Sylvia Heywood - Academic Manager Steve Wardley - Operations Manager Karen Scard - Administration Manager Robyn Gosden - Finance and Office Manager Rochelle Irving - Administration Support
Our focus in the last few years has seen the development of the New Zealand Certificates of Financial Services along with a strong offering of CPD short courses, webinars and qualifications. For the coming months our shift in focus will be towards improving the quality of our market offering, including an improved online presence, as well as more functional and accessible online learning tools. Some companies are looking to provide education to their staff using in-house models to manage and deliver learning material, and it is important for the college to continue to develop its learning material and methods to meet these needs. The college is currently scoping work to provide this kind of functionality to its customers. We look forward to constant improvement in our business to maintain our mission of being the most trusted, accredited provider of top-quality financial services education in New Zealand.
Ongoing professional development and the FMA – what’s cominge
T
he insurance and financial services fields are changing constantly. To maintain credibility and professionalism with clients and suppliers, it is vital that we keep up with those changes and continually develop our financial competency. For some advisers the CPD requirements are set out in regulation. Continuing professional development (CPD) has a critical role to play in developing and maintaining your financial competency and in encouraging credibility and public confidence in your professionalism as a trained financial adviser. The focus in this area for financial advisers, and more specifically insurance brokers, may change. The current review of the Financial Advisers Act 2008 and Financial Service Providers (Registration and Dispute Resolution) Act 2008 is well under way and is intended to promote more confidence and inform consumers and investors. With a push towards more clarity for the consumer and more understandable terminology the FMA will likely see education as a method of ensuring that advisors have an appropriate level of knowledge to carry out their roles. There has been and is likely to continue to be some discussion around what the right level is, however it seems that all financial advisers including mortgage advisers, investment advisers and insurance brokers will as a minimum be required to continue with professional development
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June 2016
programmes. There is also a possibility that all advisers will need to meet a specific level of qualification, or be recognised as qualified via some form of industry experience. All of the qualifications and online learning courses provided by Professional IQ College are recognised with CPD points, including the recent additional of online recorded webinars. The current Professional IQ College dashboards also includes a straightforward facility for staff to record their intended learning outcomes for the coming year, and it is our intent to develop these tools further in the future. It is also the college’s intent to develop some additional functionality to allow HR personal of member companies to tap into the Professional IQ College learning management system to view additional learning information for staff. It makes sense if there is a commitment within an organisation, or even the industry, to CPD that staff can be working towards a qualification if possible, provided of course the learning meets the needs of the staff. The challenge within the insurance industry is to form a cohesive qualification framework that caters in a common manner to the parts of the industry that routinely work together. Professional IQ College is committed to that challenge.
DATE
TITLE
PRESENTER
WHERE
TIME
COURSE DESCRIPTION
2
Professional & Effective Broker
Kevin Allen
Auckland & webinar
1.00-3.00
Learn about how to improve your skills as a broker.
8
Initital complaint responses getting the message through early
Trevor Slater
Auckland & webinar
It is widely recognised that the chances of resolving a complaint are much higher early in the stages of a complaint handling process. However, one of the major 9.30-10.30 challenges of doing so is getting your messages through to your client in those early stages. This session will give you skills that will increase the likelihood of successful early resolution and increased client satisfaction and loyalty.
14
Be Cautious in Referrals
Richard Hern
Auckland & webinar
9.30-10.30
Referring clients is part and parcel of the environment in which you operate but your client's will often fail to appreciate where your job ends and another's begins.
15
When an insurer cannot rely on non-disclosure
Virginia Douglas
Auckland & webinar
10.3011.30
This webinar looks at the limited instances when an insurer is unable to rely on the customer’s failure to disclose information in order to decline the claim or avoid the policy.
27
Build me an Insurance Programme in the Rural Sector
Kevin Allen
Auckland
1.00-3.00
Come along and in a team environment construct a suitable insurance programme for your rural sector client.
29
How to recognise and manage a complaint
Susan Taylor
Auckland & webinar
11.3012.30
Many complaints that escalate to a dispute resolution scheme, the regulator or a court come about because the person or organisation complained about failed to recognise or respond well to the complaint. It’s easy to “get on the defensive” when replying to a complaint.
12
Business Writing Minutes, Reports and Executive Summaries
Ngaire Newland
Auckland
Report writing can be made easier than you ever thought it could be - all you need are the skills to develop the ability that you already possess (but maybe don't 9.30-12.30 know about). If you have to write reports, minutes and executive summaries, this workshop will give you hints and tips that inspire the confidence you need.
13
Commercial Contracts – Terms of Trade and Insurance Issues
Crossley Gates
Auckland & webinar
This session will look at how a contract is formed; when standard terms of trade 9.30-10.30 can be implied into a commercial contract; when exclusion and limitation clauses apply; what a broker needs to look out for in a commercial contract
June
July
14
Cyber Insurance: Legal issues
Steve Keall
Auckland & webinar
Cyber insurance is a growth area. People in business are increasingly concerned with data security (think: Mossack Fonseca, Wikileaks), network security, extortion, and other risks linked to doing business using networked information 9.30-10.30 technology. Cyber insurance is intended to address these risks. In this seminar Steve Keall barrister provides a beginner's guide to the key concepts. The talk will involve considering what cyber insurance products are available in the marketplace and some of the potential legal issues.
26
Interest Based Negotiation the best way to bargain
Trevor Slater
Auckland & webinar
10.3011.30
In this workshop attendees will learn the basics of interest based negotiation. This style of negotiation moves away from bargaining and aims to find the underlying need of all parties, generating options and finding solutions all parties can live with.
28
Material Damage Insurance
Kevin Allen
Auckland & webinar
10.0012.30
From the Insuring clauses to the policy extensions, special provisions, terms, conditions and exclusions the session will cover all aspects of a Material Damage wording, its benefits and how the coverage is best applied to your client’s needs.
August
3
Detecting deception knowing your client is not telling you everything you need to know
Trevor Slater
Auckland & webinar
Have you ever felt that during a conversation or interview the person speaking to you is not telling you everything? If a potential client is not telling you the 9.30-10.30 complete story, how can you provide them with the best service or right advice? In this fascinating and fun session Trevor Slater will show you how to recognise, by using some easy to learn techniques, if someone is being deceptive.
10
Business Interruption – Insurance of Wages
Mark Anderson
Auckland & webinar
Different ways to insure wages (including Dual Wages) – and what is best for your clients? If wages are to be fully insured as part of Gross Profit, then nothing further 9.30-10.30 is required. Wages will be treated like any other expense and if there is a reduction after a loss, this will be deducted as a “Saving”.
11
How FSCL goes about investigating a complaint and making a decision
Susan Taylor
Auckland & webinar
11.3012.30
30
Law: Essentials
Andrew Hooker
Auckland & webinar
Whether you have been in the industry for 30 years or 30 months, it is always 9.30-10.30 useful to refresh on basic principles. If you have a good understanding of the fundamental principles or insurance law then the rest is easy.
For businesses that consider that it is inevitable that its wages would reduce, under various loss scenarios, current BI policies offer a number of alternative methods of insuring wages, separate from the Gross Profit item.
www.covernotemag.co.nz
51
CONTACTS: IBANZ CORPORATE COMPANY LIST
IBANZ BOARD
PIQ BOARD
Roger Abel Rothbury Group Limited PO Box 1596 Shortland St, Auckland 1140 Mob: 021 952 230 roger.abel@rothbury.co.nz
Chief Executive Officer Insurance Advisernet NZ Ltd
David Crawford -Chairman
Tony Bridgman (Vice President) Executive Director Marsh Ltd PO Box 2221 Auckland 1140 Tel: 09 928 3015 Mob: 021 873 399 tony.j.bridgman@marsh.com Craig Buckle Willis New Zealand PO Box 369 Auckland 1140 Tel: 09 356 9347 bucklec@willis.com David Crawford Chief Executive Officer Insurance Advisernet NZ Ltd PO Box 74557 Market Road Auckland 1051 Tel: 09 926 2062 Mob: 021 905 537 davidc@insuranceadvisernet. co.nz
Allan Daly Managing Director Avon Insurance Brokers PO Box 3923 Christchurch Mail Centre Christchurch 8140 Tel: 03 3710301 Mob: 0275 358128 allan@avoninsurance.co.nz Angus McCullough Chief Broking Officer / Marketing Manager Aon New Zealand PO Box 1184 Shortland Street Auckland 1140 Tel: 09 3629000 angus.mccullough@aon.com Duane Duggan (President) Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West Auckland Tel: 09 3574805 Mob: 021 833 286 duane.duggan@crombielock wood.co.nz
Stuart Speirs Director Abbott Group PO Box 3086 Christchurch 8011 Tel: 03 366 7536 Mob: 021 358341 stuart@abbott.co.nz Jason Smith Managing Director Property & Commercial Insurance Brokers PO Box 4 Feilding 4740 Tel: 06 323 8820 Mob: 027 293 8724 jase@pcinsurance.co.nz Ruth Steele (Vice President) Brokerage Manager Seneca Group Ltd PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Mob: 021 590 698 ruth@senecagroup.co.nz
Gary Young CEO IBANZ
Auckland DDI: 09 306 1734 gary@ibanz.co.nz Andrew Gunn Consultant CIFA Training Manager
Wellington Ph: 04 815 8007 andrew@ifa.org.nz Bruce Howat CEO World Skills NZ
Auckland Ph: 021 671 566 bruce@thethinkingcompany.co.nz Rod Severn PAA CEO
Auckland Ph: 09 600 5171 rod.severn@paa.co.nz Jason Smith Managing Director, Property & Commercial Insurance Brokers
Feilding Tel: 06 323 8820 jase@pcinsurance.co.nz
STAFF
WANT YOUR VERY OWN COPY OF
Gary Young Chief Executive DDI: 09 306 1734 Mob: 027 543 0650 gary@ibanz.co.nz Robyn Gosden Finance & Office Manager DDI: 09 306 1733 Mob: 027 275 2477 robyn@ibanz.co.nz Karen Scard Administration Manager DDI: 09 306 1738 karen@ibanz.co.nz Steve Wardley Operations Manager DDI: 09 306 1736 steve@professionaliq.co.nz Rochelle Irving Administration Support DDI: 09 306 1739 rochelle@professionaliq.co.nz
Sylvia Heywood Academic Manager Professional IQ College DDI: 09 306 1737 Mob: 021 152 7174 sylvia@professionaliq.co.nz
COVERNOTE? Each issue of CoverNote is packed with vital information, news, commentry and advise for the insurance industry from experts within the industry. To keep abreast with all the issues affecting New Zealand’s insurance broking industry just email robyn@ibanz.co.nz HOW TO HAN
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IBANZ Physical address: Level Five, 280 Queen Street, Auckland 1010 Mailing address: PO Box 7053, Wellesley Street, Auckland 1141 Toll free: 0800 306 173 Website: www.ibanz.co.nz
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Next issue is due out: SEPTEMBER 2016 52
Auckland Tel: 09 926 2062 davidc@insuranceadvisernet.co.nz
June 2016
R CLIENTS
June 2016
NO TIME FOR SECURITY CO CYBER MPLACENCY Industry weighs in on regulatory
change
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CONTACTS: IBANZ CORPORATE COMPANY LIST
IBANZ CORPORATE COMPANY LIST Abbott Group Adams Trimmer Insurance 1992 Ltd Addex Ltd Advice First Limited Affiliated Insurance Brokers Ltd AIB Group Insurance Ltd AJIB Insurance Brokers Ltd Albany Insurance Services Ltd Andrew Scragg & Associates AMP Services (NZ) Ltd Aon New Zealand Apex General Ltd API Insurance Ascot Insurance Brokers Ltd Atlas Insurance Brokers Ltd Austinsure Ltd Avon Insurance Brokers Baileys Insurance Brokers Ltd Barley Insurances Limited Bay Insurance Brokers Ltd Benson Insurance Brokers Ltd Bill Boyd & Associates Ltd Boston Marks Group Ltd Brave Day General Ltd Bridges Insurance Services Limited Broker Direct Services Ltd BrokerWeb Risk Services Limited Card Marketing International Ltd Cartwright General Insurance Limited CBA Insurances Limited Certus Insurance Brokers NZ Ltd Commercial & Rural Insurance Brokers Ltd Crombie Lockwood (NZ) Ltd Dawson Ins. Brokers (Whakatane) Ltd Dawson Insurance Brokers (Rotorua) Ltd Edward Ruys & Co Ltd Elders Insurance Limited Emerre & Hathaway Insurances Limited Frank Risk Management FundAGroup Insurance Brokers Limited Future Insurance Mortgage Glenn Stone Insurance Limited Graeme England Insurance Services Ltd Grayson & Associates Ltd Gregan & Company Ltd Harden & Hart Insurances Ltd Hazlett Insurance Brokers Ltd Hood Insurance Brokers NZ Ltd Hugh Vercoe and Associates Ltd Hurford Parker Insurance Brokers Ltd Hutchison Rodway Ltd I C Frith (NZ) Ltd Ian K Everett Ltd ICIB Limited ILG Insurance Brokers Inbroke Ltd Ingerson Insurances Ltd Insurance Advisernet NZ Ltd Insurance Brokers Alliance Ltd Insurance People (Fire & General) Limited
Christchurch Whangarei North Shore City Wellington Wellington Lower Hutt Lower Hutt Albany Village Manukau Auckland Auckland Auckland Manukau Whangarei Christchurch North Shore City Christchurch Auckland Waitakere Tauranga Christchurch Palmerston North Auckland Auckland Hamilton Christchurch Auckland Wellington Ashburton Tauranga Auckland Alexandra Auckland Whakatane Rotorua Hamilton Auckland Gisborne Cambridge Auckland Auckland Waitakere Auckland Auckland Papakura Auckland Christchurch Auckland Morrinsville Hastings Auckland Auckland Auckland Auckland North Shore City Auckland Wellington Auckland Invercargill Auckland
Insurance Plus Limited Thames JLT Holdings (NZ) Limited Auckland JRI Ltd New Plymouth Ken McNee Family Trust Christchurch Lifetime Insurance Brokers Ltd Christchurch Lloyd East & Associates Insurance Brokers Ltd Auckland Lowe Schollum & Jones Ltd Hamilton Luxor Insurance Brokers Ltd Auckland MA Risk Solutions NZ Limited Auckland Mainprice King Chartered Brokers Ltd Auckland Malcolm Flowers Insurances Ltd Taupo Marsh Ltd Auckland Matt Jensen Insurance Brokers Ltd Taupo McDonald Everest Insurance Brokers Ltd New Plymouth Mike Henry Insurance Brokers Auckland Montage General Insurance Ltd Auckland Multisure Ltd Auckland Nauman Insurance Brokers Ltd Dargaville Nelson Bays Insurance Brokers Ltd (NIB) Nelson Neville Newcomb Insurance Brokers Ltd Auckland North Harbour Ins Services (1985) Ltd incl Northsure Group Limited Orewa Northco Insurance Brokers Ltd Masterton Northcrest Insurance Brokers Ltd Auckland Oamaru Insurance Brokers Oamaru O'Connor Warren Insurance Brokers Tauranga OFS Insurance Brokers Ltd Dunedin Omni Fire & General Ltd Auckland One 50 Group Insurance Limited Auckland Paramount Insurance Agencies Ltd Auckland Paterson & Co NZ Ltd Auckland Penberthy Insurance Ltd Auckland Peter C Cranshaw Insurance Broker Ltd Levin PIC Insurance Brokers Ltd Manukau Primesure Brokers Ltd Auckland Property and Commercial Insurance Brokers Feilding Protekt Insurance Brokers 2008 Ltd Auckland Provincial Insurance Brokers Limited Masterton PSC Connect NZ Limited Auckland River City Insurance Brokers 2000 Ltd Wanganui RMA General Ltd Warkworth Rothbury Group Ltd Auckland Runacres & Asssociates Limited Christchurch Seneca Insurance Brokers Ltd Auckland Sit & Blake Limited Auckland South Pacific Insurance Brokers Ltd Auckland Sweeney Townsend & Associates Ltd Rotorua Thames Valley Insurance Ltd Thames The Advisers 1 Limited New Plymouth The Stoneman Group Wanganui Thorner General Insurances Ltd Upper Hutt Towes Insurance Brokers Ltd Te Aroha Trevor Strong Ins Ltd Auckland Vision Insurance (S.I.) Ltd Ashburton Waikato Insurance Brokers Limited Hamilton Wallace McLean Ltd Auckland Wanganui Insurance Brokers Ltd Wanganui Willis Towers Watson Auckland Yesberg Insurance Services Ltd Christchurch
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