STRONG VOICE FOR BROKERS ESSENTIAL
September 2016
WHEN DOES THE CLOCK STOP FOR CLASS ACTION PLAINTIFFS? Broker changes revealed Are you ready for changes to the retentions regime? 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 Design/Production: Craig Burkett, 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.
Gary Young CEO, IBANZ
Welcome to
A VOICE FOR BROKERS
T
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
here are big changes around the corner for insurance brokers. The new version of the Financial Advisers Act is due to come into force early next year, after more than two years of consultation and discussion within the industry. It will mean more compliance and higher competence and disclosure standards for those who are currently operating as registered financial advisers.We have full details of what has been revealed so far later in this issue. It has been a challenge for the Ministry of Business, Innovation and Employment to balance the needs of the various sectors that fall within “financial advice”. While general insurance brokers and investment advisers will now be dealt with under the same classification of “financial adviser”, what they offer and the risks they potentially pose to their clients are quite different. The key tool to differentiate the requirements on different types of advisers will be a new Code of Conduct. At the moment, this only applies to authorised financial advisers but it will be extended to the whole industry, with more flexibility to cater for different forms of advice. More details of what this might look like are expected within the next few weeks. If you’re worried about how your business might have to change under the new rules, this will be a key thing to watch for because it will offer something of a day-today guide to what the new law will mean in practice. Of course, those who are members of IBANZ already must meet a much higher bar than their legal requirements, and so will be well-positioned to adjust to any changes. But industry associations, including IBANZ, will be lobbying over the coming months to ensure that the new rules are workable. It is important that they aid the financial services sector in reaching the goal of better consumer access to advice, rather than hindering it, as the existing regulations have done. Gary Young, CEO, IBANZ
Features 10. Statutory time limits for Canterbury earthquake claims 14. Trustees' insurers face exposure to contribution claims The Supreme Court has opened the door to
'contribution' claims against trustees for directors' liabilities.
16. Keep Truckin'
The NZI Heavy Commercial Motor Vehicle team is constantly coming up with new initiatives to keep drivers safer on the roads.
22. Businesses turn to telematics 31. IAG must balance affordability with regulatory cost
18. Where to next for data-driven decision-making in insurance?
Regulars 32. The myth of the natural-born salesperson 40. Industry responds to meth problem 42. Going rural
1. Welcome to CoverNote 4. News 35. Ask an Expert
50. Professional Development: Professional IQ College 52. IBANZ Contacts STRONG
44. Risk takes many forms
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VOICE FOR
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September 2016
WHEN D O CLOCK ST ES THE ACTION OP FOR CLASS P LAINTIFF Broker cha nges revealed S? Are you read y for cha nges to the
retentions
regime? www.ibanz .co.nz
Professional
College
Spring challenge
The end of winter is nearly upon us as we head toward spring and daylight saving. This is wonderful news for those who are considering spring-cleaning their professional development and learning goals. You may already be on a learning programme or you may be considering one. Whatever your situation, here are some ideas to get you started: • Typically it is time to pack away your winter wardrobe, woolly jumpers and jackets to make room for the sunshine and warmer weather ahead. Similarly, you can do the same with your learning by revisiting your learning goals and study techniques to check which ones are not working for you and reviewing them. • Spring planting starts now - whether you're planning to produce fresh fruit or flowers, the choice is yours. Making sure you have the correct soil preparation for planting is key to their success. Similarly, making sure you have the foundations for learning at your fingertips is equally important. Deciding how much time to set aside each week for study is your choice, as is making sure you have a balanced and healthy life to help maintain concentration levels. • Cultivate a love of learning. Learning expands our viewpoint and gives us new knowledge, which we can use to improve
our life and those around us. Use the freshness of spring to embed new life into your learning to produce a fresh set of goals. Spring is a great time to reset your learning clock, reignite and refocus on your learning goals for success.
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?
If you have an existing business do you • Want to level the playing field? • Need a new quality web based broking system? • Need access to more markets for your clients? • Want to increase the value of your business?
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NEWS
Your guide to good conduct
Framework there for autonomous cars Some of the insurance industry’s concerns about autonomous vehicles could prove unfounded, it has been claimed. Scott Reeves from Munich Re is to address the Insurance Council’s conference, looking at what effect driverless cars will have on the industry into the future. He said while much of the industry seemed in agreement that it would become a public liability issue, where owners of autonomous cars that crashed would seek redress from their manufacturer, many of the existing insurance products in the market would be able to be adapted to fit the new landscape. “Existing insurance arrangements for bodily injury should be adapted and easily can be. There will be some injuries still, and I don’t think governments will allow the market to have a situation where they have to line up with all the other people around the world to lodge a claim against Google and get in line behind others who might or might not win the fight. Under the current framework you’d first make sure you get the care you needed and insurance products would be there to fund it,” he said. “ACC would still be there. I don’t believe ACC would say ‘don’t talk to us, talk to Google.'” Insurance and the ACC system could adapt by asking who was in control of the vehicle or who should have had control. “In the end, if you own the vehicle you could be deemed to be responsible.” He said insurers were worried that their business model would be wiped out by a large reduction in vehicles because of an increase in autonomous vehicles. “Even if the rate of accidents was reduced enormously, you could also guess that the cost of any one accident in an autonomous vehicle is quite high. The vehicles have so much technology, to repair them would be no simple move. Would you bother repairing, or would you buy a new one?” He said people who owned an autonomous car that was programmed at some level to choose to crash rather than opt for a worse alternative would still want to be insured to cover that possibility. Reeves said it was unclear how long it would take before driverless cars became the norm on the roads. “If you look back to the 1960s the best minds said everyone would have personal jet cars by 1990. Something happened with their projections.”. 4
September 2016
The Financial Markets Authority wants feedback on a guide it has issued to inform financial markets' participants and service providers of how they should meet their conduct requirements. While authorised financial advisers have had conduct requirements for many years, many participants are encountering conduct obligations for the first time through the Financial Markets Conduct Act. The revised Financial Advisers Act is also set to introduce a requirement for all financial advisers, including insurance brokers, to put a client’s interests first. FMA chief executive Rob Everett said that requirement would mean different things for different advisers. An AFA who was presenting themselves as non-aligned and independent would have different standards to meet than someone who was working for a product provider, he said. Advisers would not have to look at every product available in the market to make a recommendation to their clients, but would have to be able to prove that what they recommended was suitable. If they did not have a product in their suite that was a good fit, they should not make a recommendation at all. Everett said the mandate to focus on conduct shifted the FMA’s emphasis from compliance with regulations, including disclosure – both of which remain necessary, but not sufficient for good conduct – to assessing whether providers could show they consistently and purposely delivered good outcomes to their customers. Everett said: “The guide is not a checklist or a manual. It is principlesbased guidance about how we view conduct. It will inform how we license, supervise, monitor and enforce. It will affect, for example, how we consider incentive structures and customer complaints. “We draw a strong link between good conduct and good business. So we hope senior leadership of providers will find this guide useful when considering what they do, how they do it, and whether they need to change anything so that they can show us how they demonstrate good conduct,” Everett said. The guide says good conduct would include things such as the purpose of products and services being clear, consumers being able to understand how performance was measured, staff incentives and remuneration being disclosed, fees being made obvious and customers being communicated with regularly. Financial services providers are told they could ask themselves things such as: How do you know that the performance of your products and services is consistent with good outcomes for customers? How do you know that customers will have the same or better outcome with your services and products as they would have with similar services and products offered elsewhere? And how do you communicate all of that? How do you demonstrate that the way leaders and staff are paid is aligned to customer outcomes? Submissions are open until the end of October.
NEWS
Careful regulatory balance required New Zealand's insurance sector has been through significant regulatory change over the past six years, but may only be at the half-way point. That's according to Geof Mortlock, a New Zealand-based financial sector regulation specialist who has worked with the IMF, the World Bank, Financial Stability Institute and KPMG. He is to speak at this year's Insurance Council conference. He said New Zealand's insurers had been working through many years of upheaval, since the Reserve Bank initiated the insurance prudential regulation framework in 2010. The Insurance Prudential Supervision Act applies to life and general insurers and brought in new capital requirements and an increased focus on risk management. But Mortlock said if the industry looked ahead another five years, it
could expect to see further change driven by global developments, including an increasing focus on stress testing, the role of the boards of directors and the quality of insurers' risk management. He said regulation would also be increasingly interested in how insurance failure could be resolved in a way that avoided taxpayer risk but kept the sector stable and protected policy-holders. "There is a need for a careful balancing act here," he said. "Regulatory change should help, and I think already is helping, to strengthen the financial resilience of the insurance sector and its ability to withstand major claims shocks or a fall in asset values." The influence of regulation had been seen after the Canterbury earthquakes, when there was an insurance company failure and other insurers took significant losses. "That reinforced the need for robust capital and solvency arrangements, so they can withstand a major claim shock or asset price shock and come through that. Regulation has helped focus attention there." A major decline in asset prices was one of the sector's biggest risks, he said. "Those resilience arrangements are really crucial. But the balancing act comes in, in making sure the regulators don't go too far in terms of regulation." He said there needed to be steps in place to ensure that the efficiency of the insurance sector was not adversely affected by regulation.
That would include cost efficiency, dynamic efficiency, its ability to respond flexibly and innovatively to customer demand and its ability to allocate resources in the least-cost way, he said. "There is a real need for balance there and part of that is to ensure the regulators, the Reserve Bank and the Financial Markets Authority, are subject to strengthened oversight by Treasury. There is a need for key performance indicators to be applied to both regulators so they are held to account." Mortlock said there needed to be strong cost-benefit analysis of new regulations. But he said New Zealand was internationally at the lighter end of the regulation spectrum, compared to countries such as Australia where insurers were subject to on-site monitoring checks annually. "They have much more comprehensive requirements applying to risk management, corporate governance, reinsurance arrangements, business continuity arrangements." New Zealand's regulatory environment could be affected by the next review of the country's financial system by IMF. The IBANZ was consulted as part of this review of the financial system to provide a general insurance perspective. The reviews are usually done every seven or eight years but the last one was carried out in 2003. "It wouldn't surprise me if that leads to a number of recommendations to the government that then have to be looked at more closely," Mortlock said. "We might be in for an increase in regulation in certain areas, more comprehensive regulation of risk management, reinsurance, governance, recovery resolution arrangements... But I think the government will want to keep it at the lighter end of the scale. I don't think we are facing a huge increase in regulation." Mortlock said it would be important for the industry to strike a good balance between regulation and market discipline, on one hand, and self-governance on the other. "The stronger the international governance of insurers can be, the less need there is gor a heavyhanded approach to regulation. I would favour putting more emphasis on stronger risk culture within organisations in terms of the ethics of dealing with customers than I would on a heavy-handed approach to regulation." He said it would be important to keep an eye on global regulation because New Zealand tended to be affected by those trends, but regulators also had to make sure it was fit-for-purpose at a local level. "We shouldn't robotically respond to international pressures in a way that doesn't take into account local circumstances. There needs to be very robust scruntiny by MBIE and by Treasury fo the international regulatory drivers to make sure that we are aligned with international best practice but not in a way that is excessive for what is needed in this country." www.covernote.co.nz
5
NEWS
$18b settled but EQC claims still coming in Private insurers have now paid out more than $18 billion to settle commercial and residential claims resulting from the Canterbury earthquakes of 2010 and 2011. Of that, $8.6 billion was for domestic claims. Chief executive Tim Grafton said private insurers expected to have the vast majority of claims settled by the end of the year. “Insurers have now fully settled 93% of all Canterbury earthquake residential properties. This represents 21,005 overcap and 63,545 out-of-scope properties. We have also settled 94% of commercial claims worth $9.75 billion as at June 30, 2016.” The number of customers who are still to receive offers from their private insurer is down to 340 and there are 453 properties where people have yet to make decisions on the offers they’ve received. “Customers who have queries or concerns should seek help from the Residential Advisory Service (RAS),” Grafton said. “RAS is cost-free, totally independent and can help provide advice and assistance that may help people progress their claim. This service won’t be around forever and so we are urging people to make contact with the RAS or their insurer if they are unsure about the offer they’ve received.” Based on data jointly collected by ICNZ and the Ministry of Business, Innovation and Employment (MBIE), 85% (22,317) of all over-cap residential claims are resolved or have been fully settled. Resolved means the repair/rebuild is under construction, in consenting or a building contract has been signed. A further 11% (2,712) of the 26,147 over-cap properties are in resolution, meaning the rebuild/repair is in the pricing and design process or cash settlement is pending. Insurers have completed 6114 major repairs and rebuilds and cash settled 14,891 properties to the end of June 2016. “Insurers have had an additional 394 properties transferred from the Earthquake Commission (EQC) in the last quarter, taking the total to 1620 for the last 12 months. It is extremely frustrating for homeowners and insurers to be receiving so many new property claims nearly six years after the events, which stresses the need for changes in the future,” Grafton said. “Insurers should do all assessments for future natural disasters so that the most damaged properties can be rebuilt or repaired much sooner.”
Sum Sure could take guess work out of house policies A new tool may make it easier for clients to work out how much to insure their houses for. Most insurers now require houses to be covered on a sum insured basis – where the insured and insurer agree on an amount that would be paid out in the event of a total loss. But there have been concerns that many homeowners do not have enough cover. Treasury estimated between 40% and 85% of houses are underinsured, in some cases by up to 50%. They have to rely on insurers’ calculators to give them a rough idea 6
September 2016
of what it might cost to rebuild a house, pay a quantity surveyor to estimate the cost of rebuilding or accept the insurer’s default sum. Property data firm CoreLogic is offering new technology to help offer another way. It has developed “Sum Sure”. If homeowners put their address into the system, they receive an estimate for rebuild costs based on CoreLogic’s stores of data. CoreLogic is in negotiations with insurers about making the tool available to homeowners and could be live by the end of the year.
NEWS
No-commission option a hit An insurance broker who has started a new firm offering zerocommission insurance to clients says it feels like a good fit. Dan Donaldson runs InsuranceBroker.kiwi, which he started in 2014. It offers general insurance advice to clients based on a set fee. Commissions are credited back to each client. “I just felt there was an opportunity or desire by clients for brokers to be more transparent about costs,” he said. “They want to be able to measure the service they receive but in order to be able to measure the value you need to know what you are paying.” Donaldon’s firm would start with a discussion about client expectations and requirements, and then set a fee that was realistic based on that. “It could be more or less than the cost of commission, it’s individually tailored to suit their requirements.” Donaldson said the fee was not based on an hourly rate because he did not think time-based charging created the right incentive for the customer or the broker.
With annual policies and a rapidly changing market environment, he said the fire and general space was well-suited to a different remuneration model. It was not necessarily fair for brokers to be remunerated based on the cost of policies, he said, because market cycles could change the cost of premiums a lot. After Christchurch’s earthquakes, many policies became significantly more expensive. It did not make sense that brokers would earn more just because insurance was going through a more expensive period, he said. “We found that commission creates a conflict of interest around those cycles. I would rather remove that from the discussion.” But he said it was important not to create the impression that there was anything untoward about brokers being paid commission. “There are a lot of good people in the industry,” he said. InsuranceBroker.kiwi partners with life insurance advisers who charge commissions. Donaldson said that was a significantly different industry with other dynamics at play and did not suit the no-commission model.
www.covernote.co.nz
7
NEWS
Internet of things brings opportunities for insurance
Rapid growth of the “internet of things” is likely to mean big changes ahead for insurers, it has been claimed. Efma, an international firm that facilitates networking between insurance and bank decision-makers, has released a new report looking at the possibilities for the industry. It is estimated that 20.8 billion “things” will be connected to the internet by 2020. By 2035, it could hit one trillion, with 100 million supporting apps. "For insurers, the steady advance of the internet of things presents a huge number of opportunities," said Vincent Bastid, Efma chief executive. "We're already experiencing a rise in connected homes, connected cars and huge uptake in the use of health and fitness tracking technology - all of which change the nature of insurable risk. With this in mind, insurers have the chance to create a new, more profitable business model that leverages data to create a more personalised offering and, in turn, facilitates better customer relationships." Efma cited examples such as Samsung, which is moving towards having its entire product line IoT-ready in the next five years. And GE has invested US$1 billion in putting sensors and developing software systems on its power turbines, jet engines, locomotives, medical equipment and other machines, connecting them to the cloud;
and analyzing the resulting flow of data to improve machine productivity and reliability. The connected home market is expected to be worth US$235 billion this year. A connected home or smart residence can provide real-time risk information, which will alert and educate homeowners and policyholders to adopt necessary risk management initiatives to assess and reduce potential loss events from various inhome perils. Perilous events such as water damage, theft, fire, explosion and mould account for the largest share of in-home losses and homeowner’s claims. These can be controlled and mitigated by connected sensors that measure operating conditions like humidity, occupancy, temperature, and smoke. For cars, the report pointed to the increasing use of telematics to provide insurers with more data. Bastid said there were opportunities for insurers who knew how to take them. “[It changes] the nature of insurable risk. With this in mind, insurers have the chance to create a new, more profitable business model that leverages data to create a more personalized offering and, in turn, facilitates better customer relationships.” But there would also be hurdles to overcome, including a reduction in premiums and implications in terms of data management, privacy and security. Internet of things technologies would redefine the notion of insurable risk and as the world became safer and more connected, the fundamentals of assessing and underwriting risk could completely change, Bastid said “Insurers will have to act fast in order to avoid the very real danger of being disintermediated.” Retail giants such as Google and Amazon are expected to make advances into insurance based on the large amounts of highly personal data they have available to them. “Insurers must thoroughly rethink their value proposition to take account of the unprecedented disruption of the industry that IoT will cause,” the Efma report said. “The value proposition, which covers not only products and services but also the customer experience, must be fundamentally changed to migrate to more personalised, on-demand service while improving the core business of the insurer.”
Online offer makes setting up a trust easier A New Zealand firm has launched the world’s first online family trust set-up service. The new TrustUs website, launched by Perpetual Guardian managing director and Complectus founder Andrew Barnes, allows clients to establish their trust via the internet. The documentation is then printed at home and the process is completed within minutes. A TrustUs spokesperson said trusts were useful for business owners who wanted to 8
September 2016
separate their personal assets from the risk of the business. “When you set up a trust, the items you place in it are no longer your property. They belong to the trustees until such a time you have stipulated that they should be passed along to named beneficiaries. If you create a family home trust, for example, as a means of passing your primary residence to family members, business creditors cannot lay claim
to it for repayment because it is no longer your personal asset – it is held by the trustees. “For people bringing significant assets into a relationship, a family trust can separate and protect those assets in the case of a relationship breakdown.” Barnes also developed online will writer Kowhiri. It offers Kinly, a mobile will-writing app. It is targeted to people aged under 35.
NEWS
Local broker attracts international investment Australia’s Steadfast Group has taken a strategic shareholding in Abbott Group, a Christchurch-based commercial insurance brokerage with offices in Wellington, Nelson and Dunedin. Steadfast is the largest general insurance broker network in Australasia, with an annual premium pool in excess of A$6 billion ($6.3b) and more than 1000 broker offices throughout Australia, New Zealand and Singapore. The investment will enable the Abbott broker principals to focus exclusively on client servicing and growing the business nationwide. Steadfast takes a 45% stake, with existing shareholders retaining an interest in the business. Abbott Group general manager Mark Reid said the investment was testament to the quality of the Abbott team. “We know we’ve got a proven business model and the right team to take it forward, and now we have the investment partners to make it happen.” The Abbott group of companies provides risk management and selected financial services to commercial and personal clients throughout New Zealand.
Suncorp earnings ‘solid’ Suncorp’s Kiwi operations have reported an increase in profit. The group reported net profit after tax of A$1.038 billion for the year to June 30. Suncorp New Zealand’s operations, across general and life insurance, delivered a solid earnings result, with an after-tax contribution of NZ$198 million.
The general insurance business, which consists of Vero Insurance and AA Insurance, delivered an insurance trading result of NZ$178 million for the full year – an 11.9% increase on the prior year. Gross written premium increased 3.2% for the period due to growth in personal lines through both the direct and intermediated channels. Chief executive of Suncorp New Zealand Paul Smeaton said with the new operating model now fully operational, the business is well positioned to deliver on its strategy to build resilience, capacity and a marketplace that will meet New Zealanders’ needs. “Our vision is to be the number one choice for New Zealanders because we give our customers the freedom and flexibility to look after their financial wellbeing in a way that best suits them,” he said. “Key to our continued success is the strong relationship with brokers, advisers and business partners.” Vero has now settled over NZ$4.9 billion of claims relating to the Canterbury earthquakes, representing 92% of expected claims costs.
Rural manager appointed for Vero
New regional South Island manager
Vero has announced the appointment of Chris Brophy to the role of manager – rural New Zealand. Brophy is based in Christchurch and has 30 years’ experience in insurance. He managed Vero’s Nelson office for 15 years before taking up a role in Christchurch as rural facility relationship manager for the South Island. For the past five years he held the position of sales manager for Vero’s South Island regional offices. “The rural sector is extremely important to New Zealand and Chris will work closely with brokers and our intermediary partners to offer rural customers solutions for today, and the future,” said Adam Heath, executive general manager of portfolio and products at Suncorp New Zealand. “Vero has supported farmers for more than 150 years, and I’m confident that under Chris, our relationship will grow even stronger.”
Vero has appointed Justine McMeeking to the new role of regional manager broker distribution, South Island. McMeeking joined Vero in 1989 and has held a number of senior roles, most recently as Vero’s sales manager in Christchurch. Her new role will span a wide range of customer groups, from servicing the needs of Vero’s personal insurance business intermediaries through to major commercial and international risks. “Justine is a highly experienced, capable leader with extensive customer experience and a deep understanding of the changing market dynamics in New Zealand,” said Cris Knell, executive general manager of distribution at Vero. “Her appointment will build on our presence in the South Island, as she works with our key broker partners to provide market leading products and services that deliver significant value to our general insurance customers.” www.covernote.co.nz
9
FEATURE
Statutory time limits for Canterbury claims Andrew Horne,
Minter Ellison Rudd Watts
Nick Frith,
Minter Ellison Rudd Watts 10
September 2016
FEATURE
T
he sixth anniversary of the September 2010 Canterbury earthquake is upon us and the sixth anniversary of the February 2011 event will occur soon after. With many hundreds of claims still unresolved, new court proceedings continue to be filed, albeit only at the rate of about one per week in the first quarter of 2016. The Limitation Acts of 1950 and 2010 impose statutory time limits on the issue of court proceedings. Unless there are special circumstances such as concealment, which do not normally arise in earthquake claims, proceedings based on insurance claims must normally be issued within six years of the date on which the cause of action arose or the relevant act or omission occurred, depending on which statutory regime applies. Concerns have been expressed about whether earthquake claimants may lose the right to sue their insurers if they do not issue proceedings before the sixth anniversary of the relevant earthquakes. Claimants who anticipate issuing proceedings will not wish to run the risk that their claim may become time-barred. This may lead to uncertainty if proceedings are not issued; or to proceedings being issued prematurely and unnecessarily where an insured wishes to preserve its position. WHEN DOES THE SIX-YEAR PERIOD BEGIN TO RUN? The date of an earthquake is the earliest date upon which time may begin to run, but the start date may be later. The position is complicated by the fact that a new limitation regime came into effect on 1 January 2011, so the two most significant earthquakes occurred under different statutory regimes. Under the 1950 Act, in most claims based on contract or tort, time began to run when the cause of action arose. Under the 2010 Act, time begins to run at the time of the act or omission on which the claim is based. This is a potentially significant difference. Insurers and claimants have expressed a range of views as to when time begins to run for an earthquake claim under an insurance policy for limitation purposes. The Earthquake Commission has indicated that it considers that time begins to run on the date that a claim is denied, which will be later than the date of the relevant earthquake. The English law approach is to deem insurers to be in breach of their obligations under the policy as soon as an insured event occurs. This results from a legal fiction that treats insurers as having promised to hold the insured harmless. This approach was initially adopted by the New Zealand courts in two High Court decisions in 2009, Arnold v AIG Life and Sovereign Assurance v Scott (a decision on a strike-out
application brought by the insurer). However, in Sovereign the Court of Appeal overturned the High Court decision, holding that the cause of action arose when all of the necessary events had occurred that would entitle the insured to sue. The court held that time would begin to run once a claim on the policy had arisen and the insurer had declined to meet it. On appeal, the Supreme Court declined to strike out the claim, holding that it was necessary to explore the factual position at trial to identify when the relevant events had occurred. While Sovereign was not an earthquake claim the same principles are likely to apply. Time for limitation purposes may therefore begin to run on different dates for different earthquake claims, depending upon their particular circumstances. It is possible that time will not begin to run for some claims until the insurer breaches a duty, which may occur months or years after the earthquake. Furthermore, insurers’ breaches may occur in a number of ways, from denial of cover to unreasonable delay. It is possible that an insured may have several claims for different breaches, some of which become time-barred while others do not. ICNZ’S RESPONSE TO LIMITATION CONCERNS In December 2015, the Insurance Council of New Zealand (ICNZ) reported that its members, who are AA Insurance, FMG, the IAG brands, MAS, Tower and Vero, wished to reassure their customers that they would not rely upon limitation defences for residential claims arising out of the Canterbury earthquakes provided that proceedings were filed before 4 September 2017. This means that customers of those insurers may be confident that they will not need to issue proceedings before 4 September 2017, irrespective of when their own limitation dates may have expired. This allows them a further year to negotiate with their insurer or proceed with their repair or rebuild, without being concerned that time to issue proceedings (if
THE POSITION IS COMPLICATED BY THE FACT THAT A NEW LIMITATION REGIME CAME INTO EFFECT ON 1 JANUARY 2011, SO THE TWO MOST SIGNIFICANT EARTHQUAKES OCCURRED UNDER DIFFERENT STATUTORY REGIMES. required) will expire. The ICNZ insurers’ agreement not to rely upon limitation in proceedings filed before 4 September 2017 only affects claims that would otherwise have become time-barred before that date. It does not extend time for other claims. For instance, a claim that would become timebarred in December 2017 will not be extended under the current ICNZ offer. The benefit of this approach is that it avoids the need to identify when time begins to run for individual claims, as any claim may be issued before 4 September 2017 irrespective of when it arose. HOW INSUREDS SHOULD DEAL WITH POSSIBLE TIME BARS Insureds who are concerned that their claims may become time-barred should approach their insurers for confirmation that they will adopt the ICNZ approach and agree not to rely upon limitations for proceedings filed before 4 September 2017 or another appropriate date. Extensions may be requested if necessary. If insurers will not agree, it may be prudent to issue proceedings to protect claims. www.covernote.co.nz
11
FEATURE
AIG TAKES KIDS IN NEED OF CURES ON A ONCE IN A LIFETIME EXPERIENCE WITH THE ALL BLACKS. Auckland, New Zealand, 2016 – On Thursday 11th August American International Group, Inc. (AIG) took a group of its New Zealand employees and six All Blacks, including Captain Kieran Read, on a thrill seeking jet boat ride across the Auckland harbour, joined by two ambassador families from its charity partner Cure Kids. AIG’s sponsorship of the six All Blacks teams is a great way to engage employees, business partners, and the community. The value of the sponsorship extends well beyond the commercial aspect of strengthening relationships and enhancing brand value. It also provides a platform to reward and acknowledge employees and community partners. Mike Raines, CEO of AIG New Zealand said “We understand the commitment and value that our employees deliver to our customers and business partners every day. We pride ourselves on our team spirit and believe in creating unique opportunities to celebrate our achievements and foster a strong internal culture.”
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September 2016
The two Cure Kids Ambassadors invited along were both delighted to be part of the ride. Connor, who suffers from ADHD, Asperger’s syndrome and Oppositional Defiant Disorder was extremely excited. His dad later wrote in a thank you note to AIG; “Kids like Connor living with Aspergers face many challenges day to day and because you can't see these physically it is often not understood by peers or other people. To have this time out doing a fun activity with people he looks up to was a great distraction as well as creating memories for Connor to hold on to when times are tough. Thank you.” Every day AIG works together to make a difference in people’s lives. As well as our New Zealand Rugby partnership, we proudly support local charities such as Cure Kids. Cure Kids is a New Zealand charity that funds vital medical research that helps save and improve the lives of kiwi kids living with serious illnesses and conditions. They are also the official charity for New Zealand Rugby.
COVER STORY
PREPARATION IS THE STRONGEST DEFENCE. At AIG we’re building strong partnerships, learning more about our customers, and helping them prepare for the future. aig.com | @AIGRugby
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13
FEATURE
Trustees’ insurers face exposure to contribution claims The Supreme Court has opened the door to ‘contribution’ claims against trustees for directors’ liabilities. While significant barriers remain, trustees and their insurers face defence costs and possible liabilities for claims that previously could have been struck out without a trial.
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n Hotchin v Guardian Trust [2016] NZSC 24, former Hanover Finance principal Mark Hotchin brought a claim against Guardian Trust, arguing that if he had breached duties to investors, then so too had Guardian Trust. Hotchin had agreed to pay $18 million to settle claims brought on behalf of investors. He sought a contribution to this payment from Guardian Trust. Originally, the Financial Markets Authority brought an action against Hotchin claiming that he had negligently approved an investment prospectus containing misleading statements. The claim was settled for a payment by Hotchin of $18 million made on the basis that he did not admit liability. Having settled the FMA’s claims, Hotchin then claimed against Guardian Trust on the basis that, as trustee for Hanover Finance, Guardian Trust was obliged to contribute to his $18 million settlement payment. He argued that the trustee was also liable because it should have identified his breach of duty and should have prevented him from causing further loss to investors. He claimed that, as Guardian Trust was also liable to the same investors, he was entitled to a contribution from them to the payment he had made to settle his own liabilities. THE HIGH COURT AND COURT OF APPEAL DECIDED THE CLAIM MUST FAIL The High Court and subsequently the Court
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September 2016
of Appeal decided that Hotchin’s claim failed to disclose an arguable case. It was therefore bound to fail and should be struck out. At the core of their decision is the meaning of the words ‘the same damage’. A right of contribution between defendants arises only where the defendants’ wrongful conduct causes the same damage to the plaintiffs. The claims against Hotchin and Guardian Trust relied on different breaches of duty. The Courts held that Guardian Trust had merely provided an opportunity for the loss to arise, and that, unlike Hotchin, the Trust owed no direct duty to investors.This meant that Hotchin and Guardian Trust were not alleged to have caused ‘the same damage’ to investors. Therefore Hotchin’s claim for a contribution could not succeed. THE SUPREME COURT HAS DECIDED THAT THE CLAIM COULD SUCCEED The Supreme Court overturned the Court of Appeal decision and held, by a majority of three to two, that Hotchin’s claim should not be struck out. In short, the Supreme Court took the view that both claims arose in respect of the same loss, i.e. that suffered by Hanover’s investors. The Court held that it would be artificial to prevent Hotchin from seeking a contribution from Guardian Trust merely because the nature of its alleged liability was not identical to that of Hotchin.
WHAT DOES THIS MEAN FOR TRUSTEES AND THEIR INSURERS? The Supreme Court’s decision broadens the circumstances in which directors (and other defendants) may seek a contribution from trustees and their insurers on the basis that the trustees were at fault in failing to identify the directors’ own breaches. It will be easier for directors to join trustees to proceeding and compel them and their insurers to incur defence costs and account for potential liabilities. Defence costs may be incurred even where claims against the trustees may have no real merit, because it is more difficult to strike them out on the basis that they cannot succeed. The Supreme Court offered a glimmer of hope for trustees and their insurers, however. Justice Glazebrook observed that it was “highly arguable” that a director’s claim for contribution from a trustee would be contrary to the statutory
FEATURE
Andrew Horne,
Minter Ellison Rudd Watts
THE DECISION OPENS THE DOOR TO CONTRIBUTION CLAIMS AGAINST TRUSTEES AND THEIR INSURERS, BUT SIGNIFICANT CHALLENGES REMAIN FOR DIRECTORS WISHING TO DO SO.
scheme, which places emphasis upon directors’ liabilities. As approving the prospectus was Hotchin’s responsibility as a director, it was arguable that compelling Guardian Trust to contribute to a settlement was contrary to the statutory scheme, in that it allowed directors to avoid some of the liability resulting from their conduct. The difficulty with that argument is that it would arguably apply by analogy in other cases of joint and several liability. So it remains to be seen whether and, if so, how other Courts will take up Justice Glazebrook’s approach. The Court also observed that, if Hotchin was to take his claim to trial, it was not obvious how it could be just and equitable to compel Guardian Trust to contribute, particularly where the trustees relied on the director’s own statements. Furthermore, in order to succeed at trial, Hotchin would have to
Emma Wilkins,
Minter Ellison Rudd Watts
prove his own liability for negligence which he had steadfastly refused to acknowledge. The claim was not so weak, however, that it could be struck out as having no prospects of success at all. The decision highlights a problem for defendants who wish to settle a claim against them without admitting liability and also wish to seek contribution from a trustee or other alleged tortfeasor. In order to avoid being in the invidious position – like Hotchin - of having settled and then having to prove their own breach of duty in order to obtain a contribution, it will often be prudent, where possible, for defendants to bring any other tortfeasors into the frame before settling with the plaintiff. The decision opens the door to contribution claims against trustees and their insurers, but significant challenges remain for directors wishing to do so. www.covernote.co.nz
15
FEATURE
KEEP TRUCKIN' The NZI Heavy Commercial Motor Vehicle team is constantly coming up with new initiatives to keep drivers safer on the roads.
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ast month, they held a Fleet Risk Management Seminar at the Ellerslie Event Centre and invited brokers to come and learn more about their Traction Plus programme. Auckland brokers got to hear from resident experts on road safety and the NZI programmes that are being run to support truck drivers to be safer on the roads. The new Health and Safety Regulations means that now more than ever transport operators need to be thinking about managing risk and taking a proactive approach to driver safety. NZI’s team of experts can help them put in place the initiatives to make this happen. So what’s next? Ian Taylor, National Manager Commercial Motor for NZI and Lumley says that there’s lot’s happening in this space. “Our most recent collaboration has been with technology innovator Seeing Machines. We’ve teamed up with them to help put a stop to what we believe is the silent killer on our roads – driver fatigue! To find out more visit nzifleetfit.co.nz or contact FRM@nzi.co.nz
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September 2016
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.
Call a human on 09 250 6009 or email humans@sual.co.nz
www.sual.co.nz
www.covernote.co.nz
17
OPINION
WHERE TO NEXT FOR DATA-DRIVEN DECISION-MAKING IN INSURANCE? By Karl Deutschle
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nsurance has always been a data-driven industry. There’s no denying that the level of statistical analysis required to offer insurance products goes back well before the current trend for big data. Given this pedigree, it’s unsurprising that there has been such massive interest from the sector in using data to drive the decision-making process. PwC’s recent Global Data and Analytics Survey 2016, for example, found that insurance is the most data-driven out of any of the industries surveyed and well ahead of banking and capital markets. Insurance is clearly in a leadership position when it comes to using data, however other industries have caught on to this benefit and will be catching up with insurers in coming years. Staying ahead will require insurers to invest in new data and analytical tools that can continually improve their decision-making processes. NOT ALL ANALYSIS IS MADE EQUAL While insurance is ahead of other sectors when it comes to data analysis, the sector is
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still focused on less complicated forms of data analysis. Even among the most data-driven insurers, analytical tools are mostly descriptive and diagnostic – they analyse what is happening and what happens when something goes wrong. Where the sector is yet to move into is higher levels of analysis. Predictive and prescriptive forms of analysis, which forecast future trends and make recommendations, are still in their infancy. In fact, none of the global data leaders we surveyed described their organisation’s data analysis as mostly prescriptive – the most advanced of these four methods of analysis. The lack of this prescriptive diagnosis does mean there is huge potential for the sector to increase the use of prescriptive analysis when making big decisions. While this is still a few years off, it will start with a major investment in new analytical tools that we expect to grow rapidly in the next three years. RISE OF THE (INSURANCE) MACHINES While prescriptive analysis is still in its infancy, it won’t be long before it is deeply embedded
in the decisions insurers are making. Parallel to this development will also be a new generation of Artificial Intelligence (AI) and machine learning tools that will contribute to this data-driven change in the industry. Key here will be the automation of many smaller tasks that currently require human decision-makers to be involved – from actuarial analysis to customer service and claims processing. This has enormous potential to streamline day-today activities, and implications for every element of an insurer’s business. However, where these new technologies will have the greatest impact for insurers is around big decisions – those that leaders have to make infrequently, but which can fundamentally alter the direction a company is taking.These decisions are going to become more common and more complex in coming years, further compounding the need for advanced analytical tools. In the insurance industry, these complex decisions certainly aren’t going anywhere. PwC’s recent Annual Global CEO Survey this year
OPINION
found that insurance CEOs were the secondmost concerned about their growth prospects, ranking only slightly behind entertainment and media. While over-regulation was the main risk to growth, the speed of technological change, shifts in consumer spending and new market entrants all ranked highly as well. These increasingly diverse forces are all changing the industry and complicating the decision-making process for leaders. As market conditions become more uncertain, relying on gut instinct becomes a much weaker strategy for making big decisions. CUSTOMERS, DATA AND EXPECTATIONS While shifts in consumer spending are clearly a major concern for insurers, they hint at a much larger concern: the increasingly complex challenge of meeting customer needs. The good news is that new data tools, particularly prescriptive analysis, hold the promise of being able to eliminate or streamline many of the transactional costs involved in extending insurance products to customers.
Imagine if an artificial intelligence program could advise a home owner to choose a home insurance product, drawing on their personal information and data from the insurer’s entire pool of policyholders. This level of prescriptive analysis would not only help the customer to make their own big decision, it also streamlines the customer journey. It’s this level of prescriptive analysis and use of artificial intelligence that will be central to an insurer’s competitive advantage in the future. MAINTAINING A COMPETITIVE ADVANTAGE IN A CHANGING WORLD For insurers, this rapid change will separate those organisations that are making the most of new technologies from those that are still making decisions from the gut. Data is now a competitive advantage, and that’s only going to increase in the future. In 2020, those organisations that are able to effectively integrate data into their decision-making will also be those that can stay ahead of their competitors. The amount of data that business leaders have access to will increase exponentially in the coming years, and insurers that can harness this will be the ones that are able to respond quickly to changing market conditions and find new growth avenues. Of course, the growth of data is also creating a new generation of insurance start-ups – ones that are building a competitive advantage on the back of their increasingly sophisticated use of data. THE FUTURE FOR DATA-ENABLED FINTECHS Even though the insurance sector in general is making good use of its data, the potential for start-ups to harness this technology better than incumbents is still a real threat. The challenge here isn’t just that FinTechs might be better positioned to gather new customer data – it’s also that their internal processes will be designed with the sole purpose of using data to improve their decision-making. It’s easy to think that data-driven decisionmaking is simply about using data. However, this line of thinking misses the point. Successful
data leaders are those who are rethinking their decision-making process and developing a systematic, scientific approach. What’s more, they are then feeding the results back into their high-level planning so the process is cyclical and constantly improving. For new FinTechs, designing this approach from the ground up is much easier than for established firms that are accustomed to making choices from the gut. The challenge for insurers is to rethink their decision-making processes in the same way that a FinTech would, and then target their investment in data and analytics to support these efforts. While rethinking the decision-making process is clearly important, there’s another side to the use of data that is demanding attention from both FinTechs and established firms; protecting the data they are coming to rely on in their decision-making. RISK IN A WORLD OF DATA Cyber security is certainly one of the most important topics for insurers as they look to develop new products that offset the risks posed by cyber criminals. However, this conversation about data and decision-making also has an important cyber security element for insurers themselves. As data, and the analytical tools needed to cleanse and organise it, becomes more central to the way insurance CEOs think and make decisions, the danger of a cyber attack that compromises these systems will also increase. Leaders in converting the huge amounts of data they have access to into concrete value for the company will also be those that can recognise the value of data and take measures to protect it. PUTTING DATA AT THE CENTRE OF THE INSURANCE INDUSTRY Clearly, the potential that data has for the insurance sector is only beginning to be realised. While the sector is currently a leader, there is still more to be done, especially by bringing in new tools like artificial intelligence. As these tools evolve, they will offer new forms of customer interaction, as well as new ways to make big decisions that alter the direction of a business. At the same time, the growth of FinTechs, and the increasing value that is attached to data will both be major risks for insurers, ones that will have to be considered when it comes to how the industry approaches data in coming years. While data is clearly a multifaceted challenge for insurers, there’s no alternative but to dive head-first into this new reality. The potential loss in competitive advantage, both to data-enabled competitors and new FinTech start-ups, leaves very little room for complacency among insurers. Karl Deutschle is a partner at PwC and the Insurance Sector Leader. www.covernote.co.nz
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FEATURE
Businesses turn to telematics Technology provides businesses with information to help them better manage their vehicle fleets.
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usinesses wanting to run their fleets more efficiently, and to know where their vehicles are, are driving increasing interest in telematics technology, a telematics firm says. Telematics works like the black box of an aircraft, as an on-board information system that captures data from vehicles and feeds it back – allowing the company and its drivers to make decisions to help improve safety, reduce fuel consumption and lower maintenance costs. It helps track potentially dangerous driving habits and provides data on vehicle locations. Vero and telematics experts Coretex have announced a new partnership to offer their customers benefits on telematics packages and insurance. Customers who insure with Vero and have Coretex installed in their commercial vehicles will get a free upgrade upon renewal or inception of their Coretex telematics package and are able to access discounts on their insurance premiums or excesses. Vero heavy fleet customers with Coretex on board will have their excesses capped and their single vehicle accident (SVA) excess halved. Commercial customers with lighter vehicles can talk to Vero about getting a discount on their premiums. “It’s all about prevention, and with Coretex on board our commercial motor customers can
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be safer and more efficient on the road,” said Adam Heath, Vero executive general manager, portfolio and products. “That should lead to fewer accidents and fewer claims, which means reduced premiums over time, but through this partnership we’re offering customers those cost savings upfront on their premiums or excesses.” Heath said changes in the legislative environment meant commercial vehicles were now considered a workplace and customers needed more tools to manage their employees’ safety. “Telematics are a really powerful way to help improve driver safety. Coretex packages provide useable data that helps our customers to make decisions about their businesses in real time that lead to improved efficiency and better road safety - which will ultimately lead to fewer claims.” He said customers could also access discounts on driver training. Coretex products include a compliance function that includes road user charging and driver logs, which help commercial vehicle operators lower administration costs for road user charges. They also offer fleet efficiency functions that help fleet optimisation, asset utilisation, fuel usage, waiting time, product wastage and maintenance. The company said customers had reported 10% savings in fuel and maintenance
costs when they implemented changes based on telematics. “With emerging technology trends like Big Data and the Internet of Things, customers are being swamped with data and are seeking ways to use it to benefit their business and create efficiencies,” said Selwyn Pellett, chief executive of Coretex. “Our product can contextualise large volumes of data and deliver it to our customers in real time, enabling them to take real time action and giving them better control of their assets and people. We are truly excited about about our partnership with Vero as we will not only help reduce costs for both Coretex and Vero customers, but we will also be able to work together to bring solutions to customers that vastly improve their efficiency, incident management and safety standards.” Coretex chief marketing officer James Kyd said there was growing interest from businesses in telematics. Small and medium-sized businesses were starting to become more interested, he said. “Fuel and maintenance is a big part of their operational cost.” Kyd said those who saw the biggest benefits were the companies that were able to use the data they received from their telematics systems effectively, to encourage good driving and help change habits.
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23
COVER STORY
ARE YOU READY FOR CHANGES TO THE RETENTIONS REGIME? The retention provisions of the Construction Contracts Amendment Act 2015 (CCAA) will soon come into full effect and there are concerns about the unintended consequences of aspects of the new regime. Lara Bennett explains some of the potential impacts for the insurance sector.
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he failure of Mainzeal Property and Construction Limited in February 2013 resulted in unsecured creditor claims of more than $150 million, including $18.3 million in retentions held at the date of the collapse. This major failure led to increased focus and public debate about the issue of payment security in the construction sector. In October last year, the CCAA was passed into law with the aim of clarifying and expanding the provisions of the original Act. The most material change, which was added following the collapse of Mainzeal, is subpart 2A, which introduces a statutory trust regime for retentions. The new regime takes effect on March 31, 2017 and the associated regulations are still pending, but nonetheless the practical impacts of this new legislation will be significant - and will ripple across the entire supply chain. Retentions are amounts withheld from a contractor or subcontractor to ensure agreed works, including correction of any defects, under a construction contract are completed before final payment is made. Importantly, CCAA-2A
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requires those holding retentions to also hold sufficient cash or other “liquid assets” (expected to be defined in the pending regulations) on trust to support the amounts owed. In the event of a collapse, the “trust” assets would then be ring-fenced to meet retention obligations. As such, they would not be available to any other type of creditor. KEY CONSIDERATIONS FOR INSURERS Insurers should look carefully at the retentions aspect of the CCAA, especially with respect to clients where they currently provide, or plan to start providing, bonding facilities. Bonds are commonly used in the construction industry as a means of securing compensation in the event that a party fails to fulfil its contractual obligations. Most mid-size and larger contractors and some subcontractors will have a bonding facility provided by their bank and/or an insurance company. Bond providers are essentially a contingent creditor of their client. If a bond is validly called the issuer of the bond (such as an insurance company) will be entitled to claim the amount
they have paid out under the bond from their client. A provider may or may not hold other associated security for the bonding facilities. Key impacts of CCAA-2A for bond providers include the following: • There will be fewer assets available to meet obligations to secured and unsecured creditors, which in turn will impact the collateral available to support bonding facilities; and • Conflicting claims on assets could arise in the event of a failure. There has been some discussion about companies utilising, or obtaining, bonding facilities in order to meet their trust obligations, which arise under CCAA-2A. It is yet to be determined whether this will be permissible under the Act but, if it is, some entities may seek expanded facilities and there may also be opportunities for the insurance sector to widen its product offering to the property and construction sectors. A further consideration is that the CCAA2A imposes additional duties on directors who
COVER STORY
will now be acting for a company which is a trustee in respect of retention monies. Insurers will therefore need to consider whether breaches of the Act could lead to claims under statutory or directors and officers’ liability policies. Another section of the CCAA, coming into effect in September 2016, is the inclusion of professionals. This means that the rights and obligations of parties to a construction contract under the original Act will now apply to quantity surveyors, engineers and design consultants (e.g. architects). This regime imposes very structured, and often short, timeframes in respect of claims for, and responses to, disputes. Insurers may need to consider whether guidelines are needed for relevant clients with professional indemnity insurance to ensure that the insurers’ interests are not prejudiced by the statutory requirement to act or respond within a specific time period. GENERAL IMPACTS Increased equity levels in the property and construction sector and further measures to reduce the risk of loss in the event of corporate failure are welcome. However, CCAA-2A in its current form may not achieve the desired outcomes and could potentially have adverse consequences for the sector, contrary to the intent behind this new regime. We outline some of the key issues below. Are there sufficient available assets to comply? Based on 2015 construction activity levels, a minimum of almost $600 million of liquid assets will be required when the new regime
takes effect on 31 March 2017. These assets cannot be subject to any form of existing security or encumbrance. Many industry incumbents will be unable to comply with the initial requirements and will therefore be in breach of the legislation. A transitional approach, such as requiring only new retentions withheld after 31 March 2017 to be supported by liquid assets held in trust, would ease the financial impact of moving into the new regime. Will trust assets be fully recoverable in the event of a failure? There has been discussion on the use of accounts receivable or upstream retentions for the purposes of CCAA-2A. These assets are not liquid in nature, particularly in a failure scenario where the principal or contractor that has failed will typically be unable to meet its obligations to complete works, settle sales, provide necessary warranties or remedy defects. As a consequence, retention monies will not be released and customers will withhold payment of progress claims, resulting in inadequate recoveries to meet retention obligations. To illustrate this, in the Mainzeal collapse, only 11% of accounts receivable and upstream retentions owing at the date of receivership have been recovered. What will this really cost and will it exceed the benefit? Applying a net funding cost of 5% pa means that $600 million of retention trust assets would cost the industry $30 million each year.
It is important to consider these costs with reference to the magnitude of the retention loss risk CCAA-2A seeks to protect against, such as the $18.3 million of retentions in Mainzeal. Compounding this issue, construction is a highly competitive sector, with single digit profit margins prevalent. Any funding cost is likely to be spread across the supply chain through a combination of lower margins for subcontractors, contractors and principals and will inevitably result in higher costs for the ultimate purchaser or end user of the property constructed. How easy will it be to administer the new regime? In its current form there are a number of areas in the new regime which may result in legal disputes and practical difficulties, including the risk of conflicting claims on specific assets, the effect of existing registered security interests, impacts on statutory priorities such as employee entitlements and the cost of realising trust assets in the event of a failure. Positive steps to bolster the capital base of both principals and contractors across the construction sector are essential for its stability and success, and this is the intended outcome of the new regime. However, these issues with CCAA-2A need to be addressed to avoid further financial strain on the sector at a time when increased capacity is needed to meet market demand and to minimise scope for confusion and cost. The way forward Irrespective of any potential clarification or amendments to this new legislation, all stakeholders in the sector, including those not specifically party to a construction contract (such as insurers, materials suppliers, financiers, employees, tenants, purchasers, directors and auditors) need to understand the impacts of CCAA-2A. Knowing your rights and obligations and appreciating the risks that will arise under the new regime is essential for achieving positive outcomes.
Lara Bennett is an executive director in the PwC Restructuring team and has worked in the construction sector prior to joining PwC www.covernote.co.nz
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COVER STORY
WHEN DOES THE CLOCK STOP FOR CLASS ACTION PLAINTIFFS? When is it unfair to stop a claim in its tracks due to its age, and when is it unfair to allow it to proceed? This often vexed question can be crucial in litigating difficult claims. Class actions are an example. Toby Gee and Molly Powers, of Minter Ellison Rudd Watts, explain.
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t the start of any litigation, among the first questions any defendant will ask is whether the claims have been brought within the limitation period, or whether the plaintiff is out of time. Often, this is a relatively straightforward calculation. But not always. Limitation periods are designed to strike a balance between, on the one hand, giving plaintiffs to access to justice, and, on the other hand, protecting defendants from the unfairness of defending stale claims. Defendants should have sufficient information about a claim to be able to investigate and obtain the necessary evidence before the age of the claim makes it too difficult for them to do so, rendering a trial unfair. Complexities in calculating the limitation period can arise in a number of respects. For example, the date on which the cause of action accrued may be unclear. Or it may be uncertain when the plaintiff first knew enough about the cause of action to start the clock ticking. Outside the class action context, however, it is generally clear when a plaintiff has brought their claim, for the purposes of assessing when the limitation clock stopped: a proceeding is commenced by the filing of a statement of claim. It’s as simple as that. But the stakes get higher and the calculus gets fuzzier when the claims are brought by a representative plaintiff who purports to represent a class of persons with the same interest in the subject matter of the proceeding under High Court Rule 4.24. For insurers of defendants facing a class action, this can lead to difficulty in
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evaluating what a claim is worth and the potential liability the claimant faces – and therefore the resources that it is reasonable to expend on investigating the merits of the claim when it is first brought. At first blush, it appears unclear when the limitation clock has been stopped for members of the class. High Court Rule 4.24 requires a representative to have either the consent of those persons he purports to represent or a representative order from the Court before the representative plaintiff can be said to represent the class. So if an erstwhile representative plaintiff files a statement of claim before obtaining consent or a court order, ie before they can be said to represent anyone else, on whose behalf have they brought the claims, thereby stopping the limitation clock for those claims? Does it vary for each member of the class according to when they elected to opt-in to the claim? Is it determined by the date of the court’s representative order? Or is it sufficient that a representative plaintiff asserts to represent a class of plaintiffs on the date of filing the statement of claim? The Supreme Court unpicked this Gordian knot in the Feltex litigation and determined that the representative plaintiff stopped the limitation clock for all plaintiffs in the class, irrespective of consent or court order, on the date the statement of claim was filed. The judgment was made in the context of a discernible and measurable plaintiff class – the representative plaintiff brought a claim on behalf of all purchasers of Feltex shares in the initial public offering. As a result, the Supreme Court reasoned the policy
COVER STORY
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underpinning limitation periods was upheld, ie, the defendants were “fully informed of the nature and potential extent of the claims at the time the proceedings were filed”. However, in other contexts, the class of plaintiffs or the extent of the claim will not be as readily identifiable, and the approach may lead to an unwieldy and ill-defined class of potential plaintiffs, each with specific and unique circumstances surrounding their claim to relief despite a common interest in the subject matter of the claim. For example, in the leaky homes class actions, representative actions brought on behalf of owners of buildings with allegedly defective cladding products could extend the limitation period for an indeterminate class of plaintiffs who own a variety of buildings that potentially contain a variety of products used in a variety of applications. The Supreme Court in Feltex emphasised that the class action mechanism furthers the objectives of securing the just, speedy and inexpensive determination of a proceeding. Yet allowing plaintiffs to opt in and take advantage of the limitation clock stopped by the representative plaintiff may be unjust. It effectively extends the limitation period for those plaintiffs at a time when the defendants may not have enough information to fully investigate the potential claims; either because the issues are inadequately defined for unknown plaintiffs, or because the potential value of the action is so unclear that the defendants cannot ascertain what resources they should reasonably apply to their investigations. For insurers of defendants facing a class action, this means that the insurers’ exposure may change over time as plaintiffs opt in or, as is often the case, as the plaintiffs refine their case and the classes they purport to represent. We are currently waiting for the Supreme Court to make its decision on whether the 10-year long-stop limitation period applies to actions relating to defective products incorporated into buildings. It seems clear that limitation issues in class actions are not going to go away. As the Courts and others have previously commented, the introduction of a clearly defined class action regime would benefit all involved in this complex area.
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27
COVER STORY
STRONG VOICE FOR BROKERS ESSENTIAL By Gary Young
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uring the last year IBANZ has seen a significant increase in the need for representation of members’ interests. Our role as the voice of insurance brokers is vital, carrying considerable weight given the vast majority of brokers in New Zealand belong to the association. In a recent survey of member views a common theme was that representing member interests through activities such as lobbying was our most important function and the one thing only a professional body such as IBANZ can do successfully. We are regularly engaging with government, Financial Markets Authority (FMA) regulators and others to ensure the views of our members are heard by those making decisions on the future working environment. REVIEW OF FINANCIAL ADVISERS ACT This is the key piece of legislation for all insurance brokers. Introduced five years ago, it has been under review for the last 12 months by the Ministry of Business, Innovation and 28
September 2016
Employment (MBIE). This has been a very extensive exercise with a considerable amount of consultation. IBANZ was very involved throughout the process. In mid-July the outcome of the review was announced by Commerce Minister Paul Goldsmith. IBANZ has since attended several meetings involving MBIE, the regulators (FMA) and others to represent members' interests as the changes are formulated. A key area for us is the Code of Conduct which will apply to all advisers in future. Through our involvement with the Code Committee we hope our perspective on the need to have a relevant Code for each sector is understood. This is important because the Code determines not only ethical and behaviour standards but also competency which includes requirements for professional development and qualifications. We have to ensure that a pragmatic approach is taken to assessing brokers' competency. Our concern is to avoid experienced brokers having to complete an entry level qualification as was
imposed on Authorised Financial Advisers. IBANZ has been actively discussing the options with MBIE and FMA, working with them to develop a solution that is both cost and time efficient. There are other issues from the review requiring our input, notably around advisers versus agent proposals and entity licensing. The announcements so far from the Minister are at a high level; IBANZ is working to ensure when the detail is produced it does not impose excessive compliance costs. FIRE AND EMERGENCY NZ The rewriting of the Fire Service Act has been discussed for years. After endless consultation and submissions we are finally seeing new legislation. This will have a direct and significant impact on members. IBANZ has been focussed on levy funding, particularly because it affects brokers’ clients and with the amalgamation of the rural and urban fire services the imposition of higher levies on insurance is inevitable. During the last year we have had a number
COVER STORY
NOW THERE IS A REAL DANGER WE ARE ABOUT TO START FROM SCRATCH BECAUSE OF A DISCONNECT BETWEEN THE LEGISLATORS AND THE INSURANCE INDUSTRY.
of discussions with the Department of Internal Affairs (DIA) on how the levy regime can be cost effective and easily interpreted. A Bill has been introduced to Parliament along with a discussion paper on levy exemptions. It would be fair to say these do not reflect how insurance works. The suggested regime is unworkable in the proposed format. IBANZ has presented submissions to the Select Committee and DIA on the significant problems in the proposed Bill and regulations that will accompany it. Unfortunately, unless we can get changes, the new regime will be a backward step. The existing regime has had its issues, even the courts could not agree on how it should operate. However at least experience over many years has resulted in a reasonable understanding of what is required under the current regime. Now there is a real danger we are about to start from scratch because of a disconnect between the legislators and the insurance industry. IBANZ through its submissions and
consultation continues to work hard to prevent such a disastrous outcome. FINANCIAL MARKET AUTHORITY FUNDING A consultation document has been produced by the FMA on their future funding which includes levies on insurance brokers. Our members currently pay a levy through the annual financial adviser registration process. FMA are seeking to increase funding from levies by $10M. This will lead to an increase in the levy for advisers; in the case of our members that could be an increase of over 50% each individual broker (adviser) plus a 46% for the company levy. IBANZ questions why such significant increases are considered necessary for a part of financial services that has produced few, if any, issues for the regulator. Those who create the problems should be paying the FMA costs. In addition we argue that the proposed changes to the adviser regime resulting from the Financial Advisers Act review mean the future
structure has yet to be determined. It is therefore unreasonable to be debating a revised levy structure at this time. We believe government should provide transitional funding until the new adviser regime has been finalised. OTHER MATTERS IBANZ continues to keep a watching brief on other matters likely to impact on members including the long running EQC review which is still to be concluded. A recent “guide” on FMA's view of conduct is also of interest and has certainly attracted the attention of some commentators who see it as “fuzzy law”. Meanwhile legislation on incorporated societies such as IBANZ is under review; however we do not see any major issues with the rewriting of this 1908 legislation to make it relevant in today’s world. In the UK a significant change to insurance contract law has finally been implemented. This also updates legislation from early last century and is an update New Zealand legislation might well benefit from. We will keep a close eye on how it performs.
Gary Young is chief executive of IBANZ www.covernote.co.nz
29
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FEATURE
IAG MUST BALANCE AFFORDABILITY WITH REGULATORY COST N
ew Zealand’s commercial insurance market is highly-competitive, IAG’s New Zealand chief executive said as he announced the business’ annual result for 2016. The Australian IAG group reported an insurance profit for the year to June 30 of $1.18 billion, 6.8% up on the 2015 year.
IAG’s New Zealand business contributed 19% of the group’s total gross written premium and an insurance profit of A$135 million. Factors that affected the result include a NZ$150 million increase to its risk margin for the February 2011 Canterbury earthquakes, more commercial competition, benefits of the Lumley integration, disciplined cost management and focus on cost savings. New Zealand boss Craig Olsen said the Kiwi business’ underlying margin was strong as it balanced customer affordability issues against regulatory costs. In local currency terms, IAG’s New Zealand GWP of NZ$2.37
billion was down 2.6% compared to the 2015 financial year. This was a consequence of increased industry capacity leading to downward pressure on commercial premiums and some volume loss as IAG’s business division kept its attention on maintaining pricing and underwriting discipline, Olsen said. “The business division remains focused on providing certainty for its customers and being able to respond quickly to meet their changing needs in an extremely dynamic market. One example is NZI’s recent launch of a cyber insurance product, which helps customers navigate the risks of an increasingly digital environment,” Olsen said. The contraction in local currency gross written premiums reduced to 1.2% in the second half of the financial year owing to an improvement in new business volumes in key commercial lines, while solid volume and premium growth was maintained in private motor cover. At the end of June, the New Zealand business had completed over NZ$5.7b of claim settlements in respect of the Canterbury earthquakes. About 93% of all claims by number had been fully settled at that date. “It is expected that the rebuild component will be largely complete by the end of calendar 2016. Certain shared properties, newly received over-cap claims from the EQC and claims subject to dispute or litigation may take longer to settle,” Olsen said. He said said that confidence in the New Zealand economy remained strong with opportunities available to the business though population growth, and the continuation of an active construction sector. “The New Zealand business’ strategy remains focused on maintaining its market-leading position by delivering affordable, customer-centric offerings while achieving strong underlying profitability by focusing on pricing and underwriting disciplines.” www.covernote.co.nz
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FEATURE
THE MYTH OF THE NATURAL-BORN SALESPERSON
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September 2016
FEATURE
Why almost anyone is capable of improving their selling skills. By Clifton Warren
E
verybody is a salesperson. Don’t believe me? Consider this: we must all persuade others of the idea that the products or services we can provide will lead to a better life. This goes for anyone who earns money: from carpenters, doctors and teachers to engineers. Selling for a living is an honourable and respectful occupation that plays a significant role in the economy and our daily lives; without it, we would not enjoy many of the luxuries that we often take for granted. The art of selling has been practised for centuries and was used by the Phoenicians and Greeks as they sailed the Mediterranean in search of buyers for their oils and perfumes. I often see leaders of insurance and financial services firms who want to improve their sales performance make the mistake of trying to find a “born” salesperson. Over time, most discover that searching for a “born” salesperson is a fruitless exercise, as no such person exists. The simple fact is that effective salespeople are made, developed and moulded, not born, and they come from a variety of backgrounds. They may have educational qualifications, or they may have no qualifications at all. Selling is an acquired skill and one that can be developed, at least to some degree, by anyone. When a professional develops their capabilities in the art of selling, they are often said to be a “born salesperson” with natural talent.They have so thoroughly mastered the sales process and are having so much fun that they seem to have a natural talent. But such skilled sales professionals are no more born to their profession than are top athletes, doctors or lawyers. Top professionals acquire their skills through study, reading books and attending seminars conducted by professional sales trainers. They learn the tools and techniques of selling
from coaching, learning aides and observing other selling professionals. Of course, the best teacher is on-the-job training, performing sales tasks under the guidance of an experienced, trained professional who provides constructive help to replace fear with confidence and inaction with action. Top professionals reach the top by consistently practising the five basic fundamentals of selling: • Finding prospects • Qualifying and obtaining appointments • Identifying needs and providing solutions • Persuading prospects to buy • Generating referrals from clients I'm often asked to conduct training and development programs to quickly develop top professionals. While the idea sounds good, in reality, training cannot be accomplished quickly, any more than one can become a doctor, lawyer or dentist quickly. Selling is a learned skill like any other; your abilities will improve by constantly practising the fundamentals of selling techniques. Of course, some professionals will develop into better salespeople than others, and skill levels will vary, as they do in all other professions. If you understand and accept the fact that no one is born to sell and that it can take several years to become a top professional, then almost anyone is capable of improving their sales skills. Even if you never considered yourself a salesperson, you can sharpen your selling skills, and over time you may just become a top performer—one of those so-called “born” salespeople. Clifton Warren is a speaker, performance coach and author of Financial Services Handbook: A Professionals Guide to Becoming a Top Producer. He helps leaders and professionals in banking, insurance and financial services to develop to grow and improve their business success. www.covernote.co.nz
33
ASK AN EXPERT
34
September 2016
ASK AN EXPERT
Canterbury earthquake claims obligations QUESTION… We have looming deadlines for Canterbury earthquake claims under the Limitation Act, the first of which is September 4 under the Limitation Act 1950. The next deadline will be February 22, 2017, however to complicate things further we understand that this will fall under the Limitation Act 2010. We currently still have a number of unsettled domestic and commercial insurance claims through various underwriters. Can you please advise our obligations as the insurance broker of clients with outstanding domestic and commercial claims?
REPLY… STEVE WARDLEY, OF IBANZ New Zealand legislation includes the Limitation Act 1950 with an update, the Limitation Act 2010, which came into effect on January 1, 2011. The significance of these Acts is that they can be used by insurers as a defence against a claim.There is the additional complexity in that the new Act came into effect during the series of Canterbury earthquakes and the interpretation of the new Act has yet to be fully tested in court. Under the Acts an insurer can invoke a complete defence to a claim when the court proceedings are not brought within six years of the event that caused the loss. The reason why this has become a hot topic is that the sixth anniversary of the first Canterbury earthquake occurs on 4 September this year. In response many insurers have advised they will not invoke this defence before September 4, 2017, seven years after the first quake. The Insurance Council put out a press release on December 18, 2015 advising a number of insurance companies’ clients of their intent to extend the deadline for use of defence by one year. Members have raised a concern about what happens if a claim is still not finalised at that point. Will insurers then invoke the defence and leave an insured stranded? The prudent approach advocated by some lawyers is that proceedings should be lodged with the courts prior to the six-year deadline to preserve the insured’s position. IBANZ has been asked if this is necessary. To clarify the position we put two scenarios to our legal advisers. These involved a claim where the insurer offered an extension to the six year limit.Their advice is as follows: SCENARIO ONE If the parties (insured and insurer) cannot agree and go to court say after six and a half years can the court agree to a hearing or are they barred from doing so because of the six-year limit? In other words, even though the two parties accepted an extension, the court will reject hearing the case? ANSWER This is incorrect. The court is neutral; the limitation period (the number of years allowed to bring proceedings) does not apply to the court but rather to the parties that come before it. The statute creates a defence when proceedings are brought beyond the limitation period; however, it does not extinguish the underlying cause of action. Therefore, when one of the parties contracts out of the defence for a limited period that would otherwise start to apply, this doesn’t extinguish the cause of action itself. Rather, it continues during the period the defence is contracted out of, allowing the party to still bring proceedings if
it wishes. Of course, once the contracted out of period ends, the defence becomes effective again. SCENARIO TWO The insurer says they will not use the limit for another year, however at the end of that time the parties have still not reached agreement. Sould it then go to court, the insurer says they will use the Act and the insured is left stranded because it is now outside the limit. In other words, even though the insurer offered an “extension”, should the insured still have secured their future position by at least applying to the court before the six-year limit expires? ANSWER Once the end of six-year period approaches, if the insured wishes to keep its options open it must either issue proceedings before the period expires or procure an extension from the insurer. As explained above, the extension does not (as the word implies) extend the six-year period; rather is suspends the ability of the insurer to use the limitation defence. Therefore, if the insurer extends it for one year from the date the limitation would otherwise have applied, the insured is safe to not issue proceedings until the further one-year period expires. DURING THAT TIME: The cause of action has survived, and the limitation period has expired and the limitation defence is available to the insurer, but the insurer has agreed to suspend the application of it over that period. LIMITATION PERIOD There is also some uncertainty regarding the exact starting point for the limitation period. The six-year limitation period relates to the right to sue. It is not specific to insurance. Once you know of a loss you have suffered, you have six years to sue a liable party. Once the six years is up, the right is lost and any potentially liable party is off the hook. For insurance claims, the “loss” is usually the denial of the claim – in other words, breach of contract. It is not clear in NZ whether the six years starts running from the date of the damage, which the claim relates to, or the date when a reasonable insurer ought to have accepted and paid the claim. Someone noted that next September 2016 is six years after the first earthquake in September 2010 and this started the publicity. It may be that for damage done in that earthquake, the limitation doesn’t run out exactly six years afterwards. However, the safest position is to assume this is the case and file court proceedings before September 2016 if a person wishes to retain the right to sue his or her insurer in relation to September 2010 damage.The same position arises again in February 2017 in relation to the February 2011 damage. Please note that although there is no New Zealand authority on the point, there is a clear pedigree of English authority that says the cause of action accrues in relation to a contract of insurance over property on the date the insured peril occurs and not sometime later, such as when the claim is declined.This means that the six-year limitation period runs from the date of each earthquake, not when the claim is subsequently declined in relation to that earthquake. WHAT NEXT? At this point members should ensure their clients have received confirmation of the insurer's extension specific to their claim. If there is any uncertainty about the position of a particular client IBANZ members should recommend clients seek independent legal advice. www.covernote.co.nz
35
ASK AN EXPERT
Partial set replacement
Decline to cover
QUESTION… My client has suffered some damage to the blinds in his shop. The insurance company has replaced the damaged blinds, leaving a clear mismatch in colour and texture with the other remaining blinds. The insurance company refuses to change the colour. Matching blinds are important part of the decor of the shop and this is causing the client a lot of distress. Can the insurer replace only a part of a set?
REPLY… CROSSLEY GATES, DLA PIPER This is a difficult one.The policy usually responds to accidental property damage. I imagine the blinds replaced suffered such damage and they have been replaced as the policy promised. Obviously an exact match to the remaining blinds was not possible. Assuming the remaining blinds did not suffer accidental property damage, the policy does not cover the cost of replacing them; the insuring clause is not enlivened. Therefore, unless there is some other obligation in the policy to also replace undamaged property for matching purposes only (sometimes seen in domestic contents policies in relation to carpet and blinds in the same room), the insurer is within its rights to pay nothing further. This is not a very satisfactory outcome, I agree. Perhaps when décor is important, brokers should try to negotiate a matching clause like that found in domestic contents policies?. REPLY… PAUL LIGHTFOOT, LUMLEY INSURANCE You could try and push for a contribution based on the fact that the spirit of the policy has not been satisfied, i.e. the insured has not been placed in the same position they were in before the loss - some insurers may respond to that.
QUESTION… Policy contains the following exclusion. You are not covered for loss to contents caused by; Insects, rodents or vermin (other than opossums). However this exclusion applies only to the contents first affected. it does not apply to any resultant accidental loss to other parts of the contents The policy provides a definition for both: Accidental loss and for contents. The policy does not define parts. A repair report has been supplied to the insurer re damage to a dishwasher. The repair report states mouse damage to outlet hose causing water leak. Mouse has also gone across incoming mains terminals, blowing electronics and heater tracks. The unit is not economical to repair. The insurer is declining to cover the dishwasher. Our view is that the contents first affected are the electrical terminals of the dishwasher Other parts of the dishwasher have suffered from resultant accidental loss and the dishwasher itself should therefore be covered. In the absence of a policy definition of parts, we have relied on the dictionary definition for parts. Can anyone comment?
REPLY… CROSSLEY GATES, DLA PIPER I imagine the definition of “loss” refers to physical damage. For the proviso to the exclusion to apply there must firstly be physical damage caused by the excluded peril and secondly there must be further physical damage that results from the initial physical damage (“resultant accidental loss”). The claim relates to the dishwasher. Part of it is physically damaged by the mouse (the pipes and wires). But is there any further physical damage to the other parts of the dishwasher or any other contents resulting from this? The dishwasher presumably no longer works, but this is not physical damage in its ordinary sense (otherwise you would have to argue it is physically damaged when you forget to plug it in and it doesn't go). Contrast this with the water from the pipe escaping or fire starting and spreading causing damage to contents nearby. This would be classic resultant physical damage insured by the proviso. The parts argument has some merit but I think you will struggle to establish any resultant physical damage has occurred. 36
September 2016
ASK AN EXPERT
Liable for damage QUESTION… A client of ours is being held liable for damage which occurred to a customer's property during building work which he was contracted to do. A claim was lodged with the insurer, who confirmed that there was indemnity under the policy, and that they would resist the claim and deny liability on behalf of our client. The file was then held pending an approach from the TP solicitor who had been corresponding with our client's solicitor and had indicated that proceedings were to be issued. Nothing happened for two years, and when proceedings were finally issued, the costs had escalated considerably, and involved other costs which were not covered by our client's policy. The insurer’s solicitor has confirmed that there is still indemnity under the policy for the costs which had previously been claimed, but they say that because the insured costs are now only a small proportion of the overall claim, they cannot be involved in the defence of the claim. They have offered a wop settlement for what they believe the court may order if the case is found in favour of the TP, and basically are just washing their hands of our client. Is it correct that they (legally) cannot be involved in the defence for this reason? Would acceptance of this wop offer affect his defence? - presumably it would have to be disclosed.
REPLY… CROSSLEY GATES, DLA PIPER It is always a dilemma for a liability insurer when the alleged liability will be covered under the policy, if proven, but a large part of the quantum claimed will not because of the nature of it and the application of some limitation in the policy. As you know, when all of the damages claimed are covered, there is usually no difficulty - the liability insurer elects to take over the running of the defence and appoints its own lawyer to defend the insured. The law is that in this situation the lawyer is acting for both the insured (who is the party to the proceeding) and the insurer and owes a duty of care to both. This is possible because there is no conflict between them - the coverage is agreed and the interests of the two parties are aligned in either successfully defending the claim or settling it for a little as possible. Often, some part of the damages claimed is not insured e.g. the excess. Insurers usually have no problem with this when it comes to meeting all the defence costs. However, you can have situations where this becomes lop-sided and the amount not insured becomes substantial or even more than half. This raises the issue of whether the liability insurer should meet 100% of the defence costs when only say 50% of the claim against the insured is covered. Often the policy does not directly address this issue (although it is usually addressed in a D&O policy where sometimes the director is sued (covered) and the company is sued (not covered)). There are three practical possibilities: 1. The insurer accepts that it will continue to pay 100% of the defence costs. 2. The insurer seeks a defence costs sharing agreement
with the insured usually based on the percentage of the total damages claimed being insured vs. uninsured. 3. The insurer makes an offer of cash settlement to the insured, based on its assessment of the likely future defence costs and likely judgment amount (if any). This is done by agreement and cannot be imposed by either party. There are advantages and disadvantages to such an arrangement for both parties. Some may like this sort of arrangement, others may not. It obviously involves an element of taking a punt by both sides. It sounds to me that this is what the insurer is raising with your client here. I suggest you explain this to your client and see whether he or she would be interested in such a deal, and if so, what sort of figure he or she would be happy with. Acceptance of such a deal will not prejudice your client's defence. If the deal is agreed to, he or she will obviously have to appoint new lawyers (or the insurer's lawyer may be happy to carry on with your client now being his or her only client on the basis that all future legal fees are paid by your client.). All defences previously available still remain available to your client.
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.
www.covernote.co.nz
37
COVER STORY
Broker changes revealed The Ministry of Business, Innovation and Employment has released its proposed changes to the Financial Advisers Act. Things look set to change quickly for some insurance advisers.
B
y this time next year, many of the country’s insurance brokers will be operating under quite different regulations to those that have governed the industry over the past six years. The Financial Advisers Act first came into force in 2010, introducing legislation for all advisers dealing with financial products. It divided them into three camps: authorised financial advisers: who were allowed to deal with “category one” products such as investments, registered financial advisers: who mainly deal with insurance products, and qualifying financial entity advisers: who worked for product providers such as banks. MBIE and the FMA have said that the Financial Advisers Act in its first form helped improve the professional standards of the industry by requiring financial advisers to be accountable for their advice and to meet some minimum conduct obligations. It also improved consumer access to dispute resolution schemes. But the array of different designations, acronyms, categories of products and classes of advice caused headaches for consumers, advisers and regulators.Amid concerns that the regulatory regime was reducing consumers’ access to advice, rather than facilitating it, a review started in 2014, with initial stakeholder engagement and research. It was a statutory requirement that a review be completed within five years of the initial legislation. The review was set down to take about 18 months. The Ministry of Business, Innovation and Employment put out an issues paper, outlining the concerns it had about regulation in its current form, then an options paper detailing how it might tackle those. That was followed in July this year with its recommendations for reform. Many of the changes were well-signalled but there were still some late additions that took the industry by surprise.
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September 2016
“The changes come after a comprehensive review, which will simplify regulation, enable advisers to have sensible conversations and encourage more people to seek high quality advice tailored to their needs,” Commerce Minister Paul Goldsmith said. “A lot has happened since these Acts were originally passed, including the introduction of the Financial Markets Conduct Act. The time was right to reconsider the regime to ensure it meets the needs of both consumers and industry.” WHAT CHANGES FOR INSURANCE BROKERS? The biggest changes will be felt by brokers who are operating as registered financial advisers or in a qualifying financial entity. At the moment, these advisers do not have any qualification or competence requirements and only have to meet limited disclosure rules to tell clients who they are, what they could advise on and how the client can complain, should they need to. RFAs are not obliged to actively disclose any qualifications or how they are remunerated, including whether they receive commissions or other incentives from financial product providers. QFE advisers have to offer extra details of remuneration only if they deal in category one products such as investment products. When the new rules kick in, all advisers will be held to the same standard. MBIE said this was a shift away from the current regime that professionalized a subset of advisers, towards broader regulation of the conduct of anyone who was offering advice. All advisers and brokers will be required to work in a way that puts the clients first and will have to operate under a code of conduct. At the moment, the code of conduct only applies to authorized financial advisers. The current AFA code includes requirements such as the need for a level five certificate to practice as an AFA and continuing professional development obligations. It is not yet clear
which of those rules will apply to advisers who are newly under its remit in the new Financial Adviser Act landscape. It has been suggested that the new code of conduct will be more flexible to allow it to apply to advisers in different parts of the industry. “All providers of financial advice are now required to be more transparent about limitations on their advice and disclose information regarding conflicts of interest, such as commissions,” Goldsmith said. “Focusing on consumer interest and improved transparency will improve confidence in the regulation of the financial advice industry.” He acknowledged the rules would be a step up for people who were operating as RFAs but said it was to be expected given the way regulation was changing in the rest of the world. The Financial Markets Authority would be charged with monitoring whether clients were being put first and breaches could be penalised. MBIE says the new changes should remove the regulatory boundaries that stop some sorts of advice being offered. It clears the way for roboadvice by removing the requirement that personalized advice be offered by a human adviser. Instead, all advice providers will be held to the same standards of client care and regulatory oversight, regardless of whether they are a person or a software platform. It also hopes to remove unclear terminology and introduce more simplified disclosure requirements to help consumers access the right information to make informed decisions. All advisers will have to provide more details of their remuneration and any conflicts of interest that could affect their advice. Tim Grafton, chief executive of the Insurance Council, said his organisation was generally supportive of the proposed changes. He said heightened disclosure requirements for brokers was a necessary move for consumers to make informed choices. “We have been strong proponents of the
COVER STORY need for insurance brokers, who sell products on behalf of insurers, to be transparent about their remuneration, including soft commissions like overseas trips, and any conflicts of interest they have. So, we are pleased to see moves to do just that because it provides consumers with informed choice and importantly supports greater trust and confidence in insurance and other financial products.” He said it was also positive that there was a focus on adviser and broker competence levels and ongoing professional development, so that consumers could have faith that those who were
were not one and the same thing. “The issue we’ve been talking about all along is that qualifications don’t make you competent. Competency implies that you can use your knowledge. A qualification just indicates you have a certain amount of knowledge.” He said IBANZ had talked to MBIE and FMA about how it might go about assessing the competence of advisers who were already in the industry. “Our approach is that level five is a good starting point and entry qualification for the industry. For new people coming in, level five is logical.What isn’t logical is making people
giving them advice were appropriately skilled to do so. “That’s another matter that relates to consumer trust and confidence in the industry.” Gary Young, chief executive of the Insurance Brokers Association, said the move to entity licensing might take some advisers by surprise. MBIE has recommended that FMA start licensing advice businesses rather than individual advisers. It said licensing at the company level had worked well for QFEs. “We are recommending that anyone (or any roboadvice platform) providing financial advice services should be covered by a licence,” it said. “To ensure this does not impose undue costs on firms or government, licensing would be required at the firm level - for the avoidance of doubt, a sole-trader is considered a firm. This approach replicates the success of the QFE model and applies it to currently compliance-burdened AFAs and unlicensed RFAs. In recognising that a one size fits all approach to licensing and reporting would not work, and to ensure that requirements are proportionate, there would be flexibility, depending on the size and nature of the firm, in how prospective licensees would be expected to meet those requirements.” Young said there needed to be some more clarification offered about how that would work. He said IBANZ welcomed the move to introduce qualification and competence standards for all advisers. It already requires minimum standards of its own members. But he said it would be important to recognize that they
with 20 or 30 years’ experience do entry-level qualifications. There are other ways of doing it.” It might work better to ask them to attend a workshop or do a test to prove they were up to the standard required, he said. ADVISERS VERSUS AGENTS Some brokers could find themselves operating under the new FAA as an agent of a financial advice firm. The recommendations include three types of advisers: financial advisers, financial advice firms – which can offer advice – and agents of the firms. While financial advisers would be individually accountable in complying with their legislative and code obligations, financial advice firms would be accountable for their agents. “There would be no legislative difference in the services financial advisers or agents could provide but in practice, agents would be limited to the types of advice where the financial advice firm could demonstrate it is appropriate for the firm to hold accountability – for example, advice that is subject to clear processes and controls,” MBIE said. “The advice that could be provided by agents and the controls around this would be made explicit in the firm’s licensing documentation and licensing conditions.” This would primarily be the situation for large product providers, such as insurance firms that have staff offering advice to customers, and would need to make clear to their clients any
limitations on their advice. These agents would still have a requirement to put the customer first. If they were operating in a situation where they could only offer advice on their employer’s products, they would be required to make that clear. If they could not offer a product that fit the needs of the client, they would be obligated not to sell them anything. Grafton said he welcomed the move away from AFAs and RFAs to “financial advisers” and to recognize that offering information such as what a policy premium might be was not advice. But he said the agent delineation was still concerning. He said organisations should be able to identify whether they were providing advice to their customers or not. “If they are, the FMA should have jurisdiction over that. If they are providing simple sales then there are legal protections in place, with the Fair Trading Act and the Financial Markets Conduct Act, that prohibit misleading or deceptive behaviour. There are consumer protections already in place around the sales aspect. If there were instances of sales that strayed into the advice area, it’s easy enough for the FMA to pick that up.” Young said he did not yet understand what the agent classification was hoping to achieve. “Our initial reaction was that if an agent can be virtually the same as an adviser, why wouldn’t all of our member companies say they will make everyone an agent of the company, there’s less compliance. It seems to be totally contrary to the idea of raising the professionalism of advisers and making advice available to the public. Suddenly there won’t be so many independent advisers, everyone will be running around saying they are agents working on behalf of a company. They don’t seem to have thought that through.” The new regime will be refined further through an exposure draft of the proposed legislation. The bill is expected to be introduced to Parliament this year. MBIE will report to Cabinet on a small number of other matters including membership and proceedings of the Code Committee, compliance and enforcement tools, and arrangements for transitioning to the new regime. “I recognise that changes will have an impact on existing financial advisers. MBIE will work with advisers on possible transitional arrangements, to ensure they are reasonable in light of practicalities such as the need to meet higher competency standards,” Goldsmith said. “I am confident these changes will ensure New Zealanders can access quality financial advice to help them plan and prepare for their savings and investment goals.” Much of the detail is yet to be revealed but more is due to be made clear during September. www.covernote.co.nz
39
FEATURE
INDUSTRY RESPONDS TO METH PROBLEM
More claims coming in for P contamination but a lack of clear standards causes confusion.
G
rowing awareness about methamphetamine contamination, and increasing availability of testing, is prompting a rising number of claims to insurance companies. Terry Jordan, Insurance Council operations manager, said it was hard to quantify the cost to the industry as a result of meth claims but it was a growing problem, costing millions of dollars. Now there are calls for more certainty around the industry’s definitions of a methamphetamine contamination event to better enable insurers to respond appropriately. Ministry of Health guidelines do not explicitly confirm what is a safe level meth contamination but establish an acceptable level post-remediation of 0.5 micrograms per 100 sq cm. “At the moment some people approach insurers saying ‘I’ve for 0.2 or 0.3 micrograms, the whole house is contaminated. But science tells us at that level there is no danger to health at all,” Jordan said. Insurers' coverage of losses from methamphetamine-contaminated properties ranges from total exclusion, to coverage but with sub-limits, to full cover but with requirements for checking tenants and undertaking regular property inspections. Some insurers are reviewing their policy wording to clarify contamination levels that relate to losses. Vero now limits cover to a maximum of $30,000 for residential landlords, excluding its Flexicover option. It pays for testing, repair and decontamination of homes where the contamination exceeds the Ministry of Health guidelines. Some have tried to limit the contamination
40
September 2016
they will cover to that caused by a meth lab and manufacturing as opposed to smoking in the property, which is seen as gradual deterioration. Jordan said it was often seen as a residential property problem but could be an issue for owners of commercial properties, too. Jordan said Vero, AA and IAG were now all coding for meth claims so there would be clearer information available about the scale of the problem by the end of the year. Brokers should be aware of the need for their clients to disclose methamphetamine contamination problems with a property to their insurer, he said. “If there is methamphetamine contamination, broker should be aware that heightens the moral risk of the property.” Paul Geden, the national manager of broker personal sales at NZI, said there had been an increased number of claims over the past 18 months to two years. “It’s more about public awareness and access to testing than more prevalent methamphetamine use,” he said. “There is more awareness that the issue exists and where there’s awareness, more investigation and reporting, more opportunity for people to seek support and help to test, the more you will find.” He said substance contamination was excluded in normal residential cover but was offered for landlord insurance. “We recognize it’s part of their business risk.” Geden said NZI was using the Ministry of Health guidelines but there was work going on within the industry to come up with a reliable standard. “There is a range in which contamination exists and it could be anywhere on that range that would be a claimable event.
There is no particular level, it depends on the home, they type of contamination and the type of methamphetamine.” A standards committee is developing a standard that will set best practice guidelines for dealing with methamphetamine-contaminated properties. The standard is primarily focusing on the procedures for sampling, testing and remediation of contaminated properties and the requirement for all parties involved in the process to be trained or qualified to a high standard. Jordan said sampling and testing had the potential to produce false positives or negatives if not undertaken in a controlled and scientific manner. “There is some anecdotal evidence of cowboy operators who prey on the fears of tenants and property owners when testing for contamination. The objective of the standard is to identify methods of testing properties that provide reliable results and identify decontamination and remediation processes that are effective and enable properties to be safely reoccupied in a cost-effective manner.” Jordan said there was not a good understanding of the science behind methamphetamine contamination, which was adding to the problem. Geden said now that there was significant public awareness of the possibility for methamphetamine contamination, it was likely to be an ongoing issue. “The industry will find ways of helping customers protect themselves. For landlords, it’s their biggest asset, the property they are renting out.That’s what we are trying to help them protect.”
FEATURE
THIS WILL MEAN LESS TIME AT BRANCHES WAITING TO GET THE VEHICLE BACK AND IT IS ANOTHER TECHNICAL STEP FORWARD FOR SMITH&SMITH®
LAUNCHES FAST-DRYING ADHESIVE Glass repairer Smith&Smith® has launched a new product that cuts the waiting time for people who need their vehicle glass replaced.
The adhesive, used for most vehicles, cuts the curing time required before a vehicle is safe to drive, to around 30 minutes or less. Smith&Smith® customers previously had to wait an hour, which was still one of the faster times available in the market for urethane. Technical and training manager Tony Kinnaird said it would be welcomed by commercial operators with large fleets of vehicles, tradespeople or taxi drivers. If your client’s vehicle is fully covered by insurance for vehicle glass damage, the windscreen replacement will usually be free to the customer. The new adhesive will be in use by September.
Applies to glass replacement. Excludes heavy motor vehicles
0800 80 90 80
smithandsmith.co.nz www.covernote.co.nz
41
FEATURE
going rural N
ZI’s new National Manager for Rural, Jon Watson is a country boy at heart. With over 35 years’ rural insurance experience under his belt, he’s very much at home in the country and even owns his own farm.
Q. HOW DID YOU GET INTO RURAL INSURANCE? A: I come from a family who have farmed for generations so it was probably inevitable that I’d gravitate to rural insurance. After a start in underwriting, I worked as a broker and later got a job with stock and station company PGG, selling farm insurance. Then I had a rather long stint as a chartered loss adjuster, dealing with many rural claims. It was during those times of significant risk, loss and crisis that I developed a real appreciation of farmers’ and rural communities’ passion and resilience. Farmers are generally great to work with and helping them use insurance to restore homes, farms, production and lives is very satisfying. Q. SO HOW'S THE ROLE GOING? A: I’m really enjoying it. There’s been a large amount of information to digest but I’m beginning to get a real feel for how things work and interrelate. Everyone at NZI has been very welcoming and it’s been great to catch up with all the people I worked with during my loss adjusting days. Q. WHAT DO YOU THINK ARE SOME OF THE CHALLENGES AND OPPORTUNITIES IN RURAL INSURANCE? A: One of the biggest challenges and opportunities is the need to tailor our insurance proposition to our rural customers’ needs. As an organisation, we have some strong relationships with rural brokers, partners and customers. It’s incredibly important to me that I work to continue to enhance these relationships by delivering the best proposition for rural customers across service, product and claims. Q. DO YOU SEE ANY CHANGES AHEAD FOR RURAL INSURANCE? A: I think we need to review and simplify the process by which rural insurance is transacted so we can reduce the time and complexity of arranging and renewing 42
September 2016
cover. This will make transacting rural insurance easier and ultimately reduce costs.
empower our staff to make decisions. This will be a big part of my focus over the next year.
Q. WHAT SHOULD BROKERS GET THEIR CUSTOMERS TO THINK ABOUT WHEN BUYING RURAL INSURANCE? One of the most important A: considerations for customers should be the insurer’s ability to pay and meet claims when a major loss event occurs. The financial strength rating and solvency margin of an insurer is a good indicator of their ability to pay.
Q. WHAT ARE THE MOST VALUABLE THINGS YOU CAN THROW INTO THE MIX FOR BROKERS? A: It’s important for brokers to ensure they understand the increased legal duties and liabilities farmers are facing. Brokers really need to make sure their customers are aware of their duties and have the appropriate liability insurance covers in place to protect themselves.
Q. HOW WILL YOU SUPPORT BROKERS AND THEIR CUSTOMERS? A: I’ll be working on building more rural insurance awareness and knowledge here at NZI. Developing our rural expertise in distribution and claims is a priority for me, as is understanding our rural customers and broker partners better. We need to have the confidence to think big and shape the future, make quicker more informed decisions and
Q. SO WHAT’S NEXT ON YOUR AGENDA? A: I feel as if I’ve been in a deep dive trying to get a full appreciation and understanding of NZI’s rural business and now it’s time for me to get out there in the field. I’ve been flattered by messages of support from brokers and now I’m looking forward to getting out in the regions and catching up with everyone.
COVER STORY
I am a traveller. Protect me. I travel far and wide. I have new things to experience. New places to visit. New people to meet. I want an unforgettable holiday, without any untimely disruptions that may ruin it. I want a particular kind of protection and level of service that comes from decades of experience insuring those who travel the world, 24/7. Anytime, anywhere. Not just coverage. Craftsmanship.SM Not just insured.
www.chubb.com/nz
Š 2016 Chubb. ChubbŽ, its logo, Not just coverage. Craftsmanship.SM and Chubb.Insured.SM are protected trademarks of Chubb.
www.covernote.co.nz
43
FEATURE
EMPLOYERS MUST TAKE ALL PRACTICAL STEPS TO ADDRESS HEALTH AND SAFETY RISKS IN ALL AREAS OF THE BUSINESS.
Risk takes many forms Brokers should highlight to employers that their health and safety obligations don’t stop when their employees walk out the door By Karen Knight
T
he Health and Safety at Work Act is now well known and understood, and most responsible companies have ensured compliance - in most areas of the business. Vehicle fleet operations are often the exception and unfortunately driving risk is underestimated or completely overlooked. Company cars are clearly a place of work and driving is obviously a hazard, so employers must assess the risk based on their environment and vehicle use profile. Employers must take all practical steps to address health and safety risks in all areas of the business. As trusted advisers in the broader risk field, brokers are the professional sector best placed to highlight the issue to clients in order to protect them from the substantial penalties for failure to comply with their responsibilities. There are more than 4.7 million registered vehicles on New Zealand roads, roughly equal to our tiny population of humans. Over 70% of those vehicles are company-owned or operated. Traffic accidents make up the largest category of work-related fatalities in New Zealand - around 30% of workplace deaths. In addition 13% of workplace injuries are driving related.
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Many small-to-medium businesses running 10 or 20 vehicles do not even consider themselves a fleet operator. But this is a fallacy, and regrettably it means that these companies may have no driver support services in place when breakdowns or accidents occur. The business owner's default position that “the driver can call me” or “the Police will come” is no longer acceptable. Robust 24/7 response is now required to support drivers, particularly injury accidents and other emergencies. There is no excuse for the lack of awareness and uptake, as formal accident management and other driver support services are readily available in the market and cost effective. The potential penalties for non-compliance are severe. Large and small fleet operators can protect themselves from this risk very cheaply – all for as little as a few dollars a month. This is a conversation that brokers should want to have with their clients, the “do-nothing” alternative could result in both a tragic outcome, and substantial financial penalties. Karen Knight is managing director of Crash Management Services, an accident management service provider for car and light commercial fleets.
FEATURE
FIRE SAFETY T
he ignition of cooking materials, fats and oils, account for almost half of all commercial kitchen fires and most of these migrate into the kitchen exhaust system. This catastrophic event now has an easy, cost effective and safe solution. Shepherd Filters provide the ultimate protection in disposable oil and grease filters, where current cleaning methods continue to fail in keeping the hood and ducting free of grease, resulting in ongoing kitchen fires. The Shepherd filter system serves as a fire prevention mechanism. Not only do the wool fibres trap grease that can cause a fire, but the fibres can also prevent the spread of fire. Wool smoulders and chars in flames and is naturally self-extinguishing. When tested in flames, the filter panel prevented the flames from spreading and self-extinguished when the flame was removed. Reducing the grease content in the exhaust system starves any potential fire of fuel and the ability to ignite adjoining premises. Conforming to AS1668 and UL Standard 1046. EASY INSTALLATION AND MAINTENANCE The Shepherd Filter system can be installed into any existing hood and replacing the wool filters take a fraction of the time that it takes to clean standard metal filters of grease. Using the Shepherd Filter system prevents 98% or airborne grease reaching the ducting system, greatly reducing the amount of grease build-up and slashing cleaning cost. ENVIRONMENT The wool fibres are biodegradable, enabling to be thrown away with other kitchen waste. This prevents grease and chemicals from entering local waterways when washed in commercial dishwashers. Capturing grease effluent on the Shepherd filter will provide a cleaner extractor motor resulting in more efficient airflow and consuming less energy.
The Ultimate Protection in Disposable Oil and Grease Filters. Capture up to 98% of airborne grease before it enters the kitchen exhaust system.
Shepherd Filters are currently used around the world. Australia, USA, Mexico, South America, Asia, Europe and New Zealand.
20% discount ON FRAMES
to commercial clients of IBANZ members
I
Ph: 0279 021 716 info@shepherdfilters.co.nz www.shepherdfilters.com www.covernote.co.nz
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IFSO
Wear and tear or one-off event? I
n March 2004, the insured arranged insurance for his boat. In May 2015, he made a claim to his insurer for damage to the screen of the visual display unit – glue between the layers of glass had melted and run down to the function keys, rendering it inoperable. His broker arranged for a loss adjuster to inspect the damage. The loss adjuster wrote a report, advising that the insured first noticed the issue in 2010 but, as the unit continued to function correctly, he did not address the issue at that time. The insured advised the loss adjuster that the situation became worse in 2012. The loss adjuster stated that the unit continued to deteriorate to the stage where the screen glue affected the functionality of the visual display unit. The insurer was concerned about the length of time that had elapsed since the loss occurred. It noted that the damage had been apparent since 2010, and referred to the policy obligation to take all reasonable steps to safeguard the boat against loss, and the insured’s obligation to tell the insurer if he was aware of any event that might result in a claim. The insurer also expressed concerns that there was no other damage from the purported
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cause of loss, being an “excessive temperature” event. Given no other items in the cabin were affected, the insurer believed the issue was with the glue itself and, therefore, a manufacturing defect – which was not covered under the policy. Consequently, the insurer declined the claim. THE CASE MANAGER’S ASSESSMENT When making a claim under an insurance policy, the insured is obliged to prove that he/ she has suffered a loss, which is covered by the policy. This is known as a prima facie claim. If a prima facie claim is established, the insurer is entitled to raise an objection to meeting the claim. However, if the insurer wishes to rely on an exclusion in the policy, it is then obliged to prove that the exclusion applies. The policy covered accidental loss or damage caused by an unforeseen or unintended happening or event. The policy excluded wear and tear and deterioration. The insured needed to prove that it was more likely than not that the damage was caused by an unforeseen or unintended happening or event. The insured and the manufacturer of the head unit believed the loss was caused by high temperatures during a given period. The case
WHEN MAKING A CLAIM UNDER AN INSURANCE POLICY, THE INSURED IS OBLIGED TO PROVE THAT HE/SHE HAS SUFFERED A LOSS, WHICH IS COVERED BY THE POLICY. manager did not believe this was the same as a “happening” or “event”. In the absence of any particular happening or event, or any heat damage to other items inside the boat, the case manager believed it was difficult to accept, on the balance of probabilities, that a single happening or event had occurred. Rather, the case manager believed the damage occurred as a result of wear and tear or deterioration. Therefore, the case manager did not believe the insured was able to establish a prima facie claim, and the insurer was entitled to decline the claim. Complaint not upheld.
IFSO
What is material non-disclosure? I
n September 2013, the insured, as trustee of a trust, arranged house insurance through a broker for the trust’s house. The online application was completed by the broker. In February 2014, a large kitchen window was stolen from the house (“the first burglary”). The trust did not make a claim for the first burglary at this time. In June 2014, a number of exterior doors and windows were stolen from the house (collectively with the first burglary, “the loss”). The insured made a claim to the insurer for the loss. The insurer declined the claim, on the basis that the insured failed to disclose material information to it when the application was completed. The insurer also advised that it had avoided the policy from the date the policy was arranged. THE CASE MANAGER’S ASSESSMENT An applicant for insurance has a common law duty to disclose to an insurer all information, which a prudent insurer 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. This duty may not be limited to information solely related to the trust, and could include information relating to individuals that have important roles within the trust itself, such as trustees. This is because the common law duty of disclosure requires the insured to disclose any facts which might be material. The insured confirmed he was the executor, trustee, and beneficiary of the trust. The case manager was satisfied that the application questions were also being asked of him in his individual capacity. This is what the insurer intended. Importantly, this was also his broker’s understanding. Consequently, as the questions were being asked of both the trust, and the applicant in his individual capacity, the case manager believed he was required to disclose information under the application questions where applicable to the trust, or to himself, as
an individual. The insurer believed he breached the nondisclosure condition by failing to correctly answer the following questions on the application: • “In the last 5 years ever had insurance declined, cancelled, refused renewal or had any special conditions imposed including excesses?” • “Had any losses or damage to any home in the last 5 years – whether a claim was made or not?” • “Is there any other information likely to affect this insurance[?]” (“the application questions”) The insured said he “correctly answered all the questions put to [him] prior to the insurance beginning” and, therefore, the insurer was not entitled to avoid the policy and decline to consider the claim. In the course of the case manager’s investigation, it was revealed that his broker did not ask him the application questions. It was not in dispute that, had he been asked these questions, he would have disclosed that: • he had a house policy cancelled with the insurer in 2009; • he made a claim for malicious damage to another house three or four years ago; and • the house suffered a burglary in 2012. His broker was his representative and the insurer was not prevented from relying on the condition to avoid the policy and decline to consider the claim, because he was not asked
the application questions by his broker when the policy was arranged. MATERIALITY In order to determine whether or not the information not disclosed was material, the case manager presented the fact situation (with identifying details omitted) to two senior independent underwriters and asked how this would have influenced their decisions to insure the trust. Both underwriters indicated that the information would have affected their decisions to accept the risk. Taking the views into consideration and, after reviewing all of the information provided, the case manager concluded that the information was material. INDUCEMENT If the trust had disclosed the information, the insurer confirmed it would have affected the terms on which it offered cover. Therefore, the case manager believed the failure to disclose the information induced the insurer to enter the contract on the terms provided. Having considered all of the information provided to this office, the case manager was satisfied that the insurer had correctly and reasonably applied the terms and conditions of the policy. As such, the case manager believed the insurer was entitled to rely on the non-disclosure condition to avoid the policy from commencement and decline to consider the claim. Complaint not upheld. www.covernote.co.nz
47
OPINION
Change ahead for fire funding New bill launches new levy regime By Crossley Gates, DLA Piper
G
et ready for a new acronym: FENZ. In late June 2016 the Government introduced into Parliament a new bill called the Fire and Emergency New Zealand Bill. This bill replaces the Fire Service Commission with a new entity called Fire and Emergency New Zealand. The bill heralds the much-discussed new insurance levy regime to fund the fire service after the Government rejected the insurance industry's call to broaden the funding beyond insurance policies. For decades the Fire Service Commission has been fighting avoidance measures taken by the insurance industry to minimise the levies paid by insureds. The existing levy arrangement is set out primarily in section 48 of the Fire Service Act 1975. For any of you who have read it you will, no doubt, agree with me that it is hard to follow. The linking of the levy to the peril of fire and the indemnity value of the property has led to many contrivances to reduce the amount of it. This culminated in the Supreme Court of New Zealand decision last year in a test case taken by IBANZ. Unsurprisingly, the Government has taken the opportunity to change the levy formula in order to overcome the previous difficulties. It has done this primarily in two ways: 1 The levy will be payable on all Material Damage Policies and will no longer be linked to the peril of fire. The Government has justified this by saying that the Fire Service now responds to many non-fire related incidents. 48
September 2016
2 The levy will be calculated on the express maximum amount payable under the policy. Basing it on the indemnity value when the policy pays replacement value will be a thing of the past. If there is no sum insured, then the levy will be calculated by reference to the maximum amount for which the property is technically insured. It appears this means, in practice, that if the policy pays replacement value (cost) then the levy will be based on a valuation obtained of that cost.
For good measure, the Bill contains antiavoidance provisions. If the insurer and the insured enter into an arrangement that has the effect of artificially reducing the levy otherwise payable, the arrangement will be void and FENZ will determine the levy as it considers appropriate. The penalties regime is beefed-up as well. There are three escalating provisions allowed for with escalating consequences: • An unacceptable levy position - a penalty of 20% of the shortfall owing. • A high level of disregard levy position a penalty of 40% of the shortfall owing. • An abusive levy position - a penalty of 100% of the shortfall owing. There are a number of other important changes in the Bill: • The recovery of the cost of fighting rural fires will be abolished. • There are new provisions for managing hazardous substances. • The urban and rural fire organisations will be merged. The Bill has been referred to a Select Committee for consideration. Now is your opportunity to make submissions to the Select Committee if you wish to.
Crossley Gates is a partner at law firm DLA Piper. crossley.gates@dlapiper.co.nz
FSCL CASE STUDY
Proximate cause can be difficult to interpret By Susan Taylor
A
number of complaints that come to FSCL for investigation and resolution after a declined insurance claim involve us looking at the doctrine of “proximate cause”. This is a legal concept which is often difficult for the client to understand. Causation is typically analysed on a “but for” basis at law.That is, an event which is the cause of another event if but for the first event, the second would not have happened. A great many but for causes may contribute to any particular event. However, in the insurance law context it has been held that for the purposes of cover under a policy and for the purposes of ascertaining the application of exclusions, the cause that counts is not every “but for” cause, but is the “proximate cause”. The proximate cause of an event is the dominant or efficient cause. Causes which do no more than set the scene, or events/causes which are simply an expected result of an event/cause which has gone before, are not the proximate cause (see Groves v AMP Fire & General Insurance Co (NZ) Ltd [1990] 2 NZLR 408). For insurance law purposes, a claim will be treated as caused by its proximate cause, not by every one of its but for causes. However, the doctrine of proximate cause only applies if the policy wording allows. Examples of the types of wording effective to rule out the application of proximate cause are “ arising directly or indirectly from…”. This type of wording has been held to be effective to widen exclusion clauses beyond losses proximately caused by the excluded peril. Brokers can assist their clients at claim time by: • explaining the doctrine to the client in simple terms (perhaps by giving a case example). • checking that the insurer has correctly declined a claim and that the cause relied on by the insurer for declining the claim was the proximate cause. • checking the client’s policy wording carefully to see whether or not the exclusion wording has ruled out the doctrine of proximate cause.
Here is an example of a marine insurance case where we found that the proximate cause of the damage to the client’s boat was likely a power surge, and therefore covered under the policy, and not the wear and tear exclusion the insurer had wanted to rely upon. THE STORY In November 2105, the insured found that the fridge on his boat, the Dolphin, wasn’t working. After changing over the batteries, he called in an electrician to inspect the Dolphin. The electrician found that not only was the fridge not working but all the electrical components on the Dolphin had been “fried”.
The electrician noted that, to cause the damage, the inverter must have failed and suspected that the likely cause of the failure was a power surge while the Dolphin was plugged into the mains supply. The electrician contacted an electrical inspector to check the Dolphin and the mains supply. The electrical inspector found that the plinth at the marina where the Dolphin was connected had a damaged RCD. The inspector concluded it was more likely than not there had been a power surge which had damaged the plinth and in turn damaged the inverter and all the electrical components on board the Dolphin. The insured contacted his insurer to claim for the cost of repairing the damage. DISPUTE The insurer said the damage was not covered under the policy. The policy said it would not cover the cost of repairing or replacing any part of the boat due to “electrical breakdown or failure”. The insurer considered that the inverter’s failure was the cause of the damage and if the inverter had not failed, there would not have been any damage to the rest of the electrical components.The insurer said the inverter may have failed because of fair wear and tear. The insured did not think the insurer had reasonably assessed his claim and he complained to FSCL. FSCL’S REVIEW We found that the insurer had applied a very strict and literal interpretation of the policy wording. We asked it what would have happened if there was an external event, such as a lightning strike, that caused the inverter to fail? It said that if an external event was found to be the proximate cause of the damage then the cost of the damage would likely have been covered under the policy. We asked the insured if he had any further evidence that it was a power surge that had caused the inverter to fail. He contacted the power company that operated the plinth, but it could not identify that there had been any power surge at the time the Dolphin was connected. The power company did however say that surges happen from time to time and not all of them are recorded. We discussed with the insurer that, on all the evidence available, it was more likely than not that the proximate cause of the damage to the Dolphin’s electrical components was the power surge rather than the failure of the inverter.This was based on the expert evidence of the electrician, the electrical inspector and the power company’s acknowledgment that not all power spikes are recorded. OUTCOME The insurer accepted that it was more likely than not that there had been a power surge that had caused the damage. Even though the inverter failed, it was only a contributing cause, and not the proximate cause of the damage to the other electrical components. Because the damage was caused by an accidental external event, the insurer accepted the claim under the policy and paid for the $10,000 repair cost.
www.covernotemag.co.nz
49
Professional
Professional Development: Professional IQ College
College
Qualifications without attending class P
rofessional IQ College allows you to gain a New Zealand Qualification Authority (NZQA) certificate in financial services while staying in control of work and family commitments. You plan your time to study, just like you plan your workload or be with family. The college has a set of planning tools to help you achieve your goals. To find out more contact Sylvia Heywood on 09 306 1737 or email Sylvia@professionaliq.co.nz WHAT IS DISTANCE LEARNING? Distance learning is sometimes referred to as self-directed study. Either way it allows you the convenience of study without attending a course in a location out of your area. As a learner at the college you will have access to learning material through a personal dashboard on the college website and support will be available to you from the student liaison team at the college by phone, online chat or email. Your passion for learning, motivation and perseverance makes you an excellent candidate for distance learning. All of our NZQA certificate programmes have been written by industry experts and are delivered using online study guides and assessment material. All our assessors are industry experts who will mark your work and give you feedback on your assessment answers.
The college also offers a range of topical workshops and webinars. It is possible to complete a qualification without visiting us from anywhere in the country. Similarly our assessors have access to work uploaded for assessment from wherever they are. Professional IQ College’s approach to distance learning provides you with: • Flexibility to choose where to study • Convenience to decide when to study • Learning material available online • Individual learning plans with set time lines for completion • Student handbook with draft weekly plan to timetable learning • One-to-one student liaison contact via phone or email
Success tips for distance learning: 1. Set your study goals – use the college’s learning tools to set study completion goals for yourself, or talk to us about setting goals if it helps. Schedule time in your calendar by using your expected date of completion and work backwards to allocate time each week to study. Place your timetable somewhere you will see it often. 2. Maintain motivation – Push yourself because no one else is going to do it for you. The key to maintaining motivation is to remind yourself of your long-term goals. If it is important to you, you will find a way. If not, you will find an excuse. 3. Persevere – Sometimes studying can be challenging, you might need to take a break for a while and then get back into it. Work through study problems logically, and take breaks regularly. Set yourself a little treat for completing what you planned. 4. Ask questions – We have student liaison staff and tutors who are happy to help you. If you do not understand a question or not sure if you are on the right path, give us a call. 5. Don’t procrastinate – It may be easier than you think. Start by recognising when you are procrastinating, then find strategies to refocus. Turn your phone to silent, make sure you are in a quiet space.
KWT Scholarship - NZ Certificate in Financial Services level 5
T
he valued sponsorship from the Kerry Wilson Insurance Education Charitable Trust allows Professional IQ College to offer an annual scholarships to the insurance broking industry. The KWT Scholarship is now open. The Kerry Wilson Education Trust recognises the importance of education when you forming an insurance broking career, or working elsewhere in the insurance profession. This year the KWT scholarship supports one student to complete their NZ Certificate in Financial Services level 5 (Insurance). The scholarship covers all course costs and is available now for the 2016/2017 year. The KWT Scholarship covers Enrolment fees to undertake a Professional IQ College NZQA-accredited New Zealand Certificate in Financial Services (Level 5).
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September 2016
Eligibility • Applicants who are currently employed by an IBANZ member company, both at the time of application and at the time of taking up the scholarship. • Applicants should have a years’ experience in a risk adviser/broker support(insurance broker) role • Applicants must be able to take up the scholarship in the next 12 months. The programme is a 12-18 month programme to completion of the NZ Certificate in Financial Services Level 5 • Applicants must be citizens or permanent residents of New Zealand. Applications close 5pm on 14th October 2016. An application form is available on our website under Qualifications -> Scholarships -> KWT
DATE
TITLE
PRESENTER
WHERE
TIME
COURSE DESCRIPTION
5
Complaints about brokers - learning from complaints about other brokers
Virginia Douglas
Auckland & webinar
10.0011.00
Whilst there are very few complaints about Financial Advices investigated by the IFSO Scheme, these few complaints can assist all brokers to improve their businesses and avoid any similar issues in the future.
6
Personal Productivity
Ngaire Newland
Auckland & webinar
10.0011.00
How do we do more for our clients in less time? How do we have more time for fun? How do we spend our time on worthwhile activities and not get distracted by the modern world?
7
What do you bring to the negotiation table? Self awareness when dealing with customers
Trevor Slater
Auckland & webinar
10.3011.30
This session aims to increase attendees’ self-awareness of what triggers their own negative behaviour and the early physical warning signs, and then installing controls to minimise the likelihood of the negative triggers happening.
8
The art of selling financial services: How to catapult your career and business to the next level
Clifton Warren
Auckland & webinar
10.0010.40
There are many insurance firms and professionals who consistently produce superior organic growth regardless of the market and economy, what is their secret?
15
Contract works insurance - residential and small commercial
Russell Gill
Auckland & webinar
9.3011.00
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.
10
Common exclusions clients don’t understand: house, contents and vehicle insurance
Virginia Douglas
Auckland & webinar
10.0011.00
Many times clients will be surprised when a claim is declined. Clients often only turn their attention to the exclusions in their insurance policies at claim time, or later when the claim is declined on the basis of that exclusion.
11
Ethical dilemmas conflict of interest and more
Ngaire Newland
Auckland & webinar
10.0011.30
Where do we draw the ethical line? It can be like finding a needle in a hay stack or drawing a line in the sand. What is ethics? What are the ethical challenges in the insurance and financial services industry? Conflicts of interest arise daily in some instances, so how do we identify the difference between morals and ethics?
13
Gross profit: Don’t get it wrong: (Calculating business interruption sums insured)
Mark Anderson
Auckland & webinar
9.3010.30
This session will cover the importance of gross profit when putting a business interruption programme together.
26
Commercial motor
Kevin Allen
Auckland & webinar
9.3011.00
Learn how to evaluate, and discuss common aspects of commercial and fleet motor vehicle policies.
September
October
26
Principles of risk management
Kevin Allen
Auckland & webinar
13.00 -15.00
Clients rely on their Insurance coverage to support recovery in the unlikely event of a loss. Losses fall into many different categories, some of which are difficult to manage, an obvious example is the Christchurch Earthquakes. This session will explore the principles further and suggest ways in which Brokers may assist their clients in this “value add” area.
27
Changes to credit laws
Susan Taylor
Auckland & webinar
11.3012.30
In June 2015, New Zealand’s credit laws underwent significant change. Find out the key changes.
November 1
Business interruption natural disaster claims and issues
Mark Anderson
Auckland & webinar
9.3010.30
In one hour we share some of the actual issues we experience and how we resolve differences to get to a fair claim settlement.
2
Dealing with emotions in negotiations
Trevor Slater
Auckland & webinar
10.3011.30
Creating an environment for a good negotiation can be difficult in normal circumstances, but when you add emotional people to the equation it becomes very difficult.
14
Causation – is the loss covered?
Virginia Douglas
Auckland & webinar
10.0011.00
As with all insurance policies, an insurer is only liable for losses that are covered by the policy. In some instances the loss will not be caused by the risk insured against. This webinar will focus on situations where causation is at issue in a claim.
15
Case law wrap-up for 2016
Andrew Hooker
Auckland & webinar
9.3010.30
This webinar takes you through several legal cases involving financial advisers.
28
The insurance process and policy construction
Kevin Allen
Auckland & webinar
9.3011.00
The purpose of this course is to provide an understanding of the basic parts of an insurance policy, and the implications of those parts on the application of cover – and what they mean for a client.
30
Travel insurance complaints
Susan Taylor
Auckland & webinar
11.3012.30
Travel insurance complaints make up the largest category of complaint investigated by FSCL. Clients are disappointed when their claim is declined. www.covernotemag.co.nz
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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 craig.buckle@ willistowerswatson.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 Senior Commercial Broker Mob: 021 445 864
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 Jeremy Andrew Relationship Manager Mob: 021 883 626 jeremy@professionaliq.co.nz
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
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 STRONG VOIC
E FOR BROKER
TO ADVERTISE... Contact Robert Johnson on: e-Mail: robert@benefitz.co.nz Phone: 09-477 4702 Mobile: 0274-970-712 CoverNote is published quarterly by IBANZ, the Insurance Brokers Association of New Zealand. All correspondence should be addressed to: CoverNote, PO Box 33-1630 Takapuna, North Shore City, Auckland.
Next issue is due out: DECEMBER 2016 52
Auckland Tel: 09 926 2062 davidc@insuranceadvisernet.co.nz
September 2016
S ESSENTIAL
September 2016
WHEN DOES TH CLOCK STOP E FO ACTION PLAIN R CLASS TIFFS? Broker changes revealed
Are you ready for
changes to the
retentions regime? www.ibanz.co.nz
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 Emerre & Hathaway Insurances Limited Frank Risk Management FundAGroup Insurance Brokers Limited Future Insurance Mortgage Glenn Stone Insurance Limited 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 Gisborne Cambridge Auckland Auckland Waitakere Auckland Papakura Auckland Christchurch Auckland Morrinsville Hastings Auckland Auckland Auckland Auckland North Shore City Auckland Wellington Auckland Invercargill Auckland
JLT Holdings (NZ) Limited JRI Ltd Ken McNee Family Trust Lifetime Insurance Brokers Ltd Lloyd East & Associates Insurance Brokers Ltd Lowe Schollum & Jones Ltd Luxor Insurance Brokers Ltd MA Risk Solutions NZ Limited Mainprice King Chartered Brokers Ltd Malcolm Flowers Insurances Ltd Marsh Ltd Matt Jensen Insurance Brokers Ltd McDonald Everest Insurance Brokers Ltd Mike Henry Insurance Brokers Montage General Insurance Ltd MIG Fire and General Ltd Multisure Ltd Nauman Insurance Brokers Ltd Nelson Bays Insurance Brokers Ltd (NIB) Neville Newcomb Insurance Brokers Ltd North Harbour Ins Services (1985) Ltd incl Northsure Group Limited Northco Insurance Brokers Ltd Northcrest Insurance Brokers Ltd Oamaru Insurance Brokers O’Connor Warren Insurance Brokers OFS Insurance Brokers Ltd Omni Fire & General Ltd One 50 Group Insurance Limited Paramount Insurance Agencies Ltd Paterson & Co NZ Ltd Penberthy Insurance Ltd Peter C Cranshaw Insurance Broker Ltd PIC Insurance Brokers Ltd Primesure Brokers Ltd Property and Commercial Insurance Brokers Protekt Insurance Brokers 2008 Ltd Provincial Insurance Brokers Limited PSC Connect NZ Limited River City Insurance Brokers 2000 Ltd RMA General Ltd Rothbury Group Ltd Runacres & Asssociates Limited Seneca Insurance Brokers Ltd Sit & Blake Limited South Pacific Insurance Brokers Ltd Sweeney Townsend & Associates Ltd Thames Valley Insurance Ltd The Advisers 1 Limited Thorner General Insurances Ltd Towes Insurance Brokers Ltd Trevor Strong Ins Ltd Vision Insurance (S.I.) Ltd Waikato Insurance Brokers Limited Wallace McLean Ltd Wanganui Insurance Brokers Ltd Willis Towers Watson Yesberg Insurance Services Ltd
Auckland New Plymouth Christchurch Christchurch Auckland Hamilton Auckland Auckland Auckland Taupo Auckland Taupo New Plymouth Auckland Auckland Hamilton Auckland Dargaville Nelson Auckland Orewa Masterton Auckland Oamaru Tauranga Dunedin Auckland Auckland Auckland Auckland Auckland Levin Manukau Auckland Feilding Auckland Masterton Auckland Wanganui Warkworth Auckland Christchurch Auckland Auckland Auckland Rotorua Thames New Plymouth Upper Hutt Te Aroha Auckland Ashburton Hamilton Auckland Wanganui Auckland Christchurch
www.covernote.co.nz
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New Zealand’s leading liability insurer Level 32, ANZ Centre Albert Street, Auckland veroliability.co.nz