YEAR IN REVIEW: ROSSER UNDERWRITING & NZI
November/December 2016
INSURANCE DISRUPTION: IT’S TIME TO TALK ABOUT THE CUSTOMER
Big change ahead for insurance Not so fast, Dr Naylor…
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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
hange has been a dominant subject in Covernote this year. Looking back at my introductory comments for each edition, in March it was the potential for disruption in the insurance sector. June talked about the changes regulators were proposing to our business environment, while in September the comments focussed on having a strong voice with those who were proposing change. Looking back at the year and forward to the New Year, it is clear that we will not get a chance to take a breather. It might seem attractive, but it won’t happen. As Christmas approaches so does draft legislation for the revised Financial Advisers Act, a key piece of legislation for insurance brokers. This revised legislation is timetabled to go through before next year’s election. We know from the extensive consultation IBANZ has been engaged in that there will be important changes for brokers. Meanwhile the restructure of the Fire Service is in full flight, and accompanying this is a two stage restructure of the levy system. The first stage will focus on a rate change, the second on the basis for the calculation. The second is going to have a significant impact on brokers. On another front, the recent earthquakes in the upper South Island will apply real pressure to solve the impasse on the EQC review. Finally the big long-term issue is disruption. This year has seen this transform from potential to reality. Whether it is called Insurtech or Fintech, it is now fully under way and as is the nature of these disruptions, the pace picks up rapidly. Among all this change your professional association also has to adapt. We have been talking with members throughout the year to ensure our efforts are focussed on what is most relevant for them. The message has been consistent - represent our sector’s needs. To be heard, a profession needs a single delivering a clear, consistent message. That is the key role for IBANZ. We have also responded to the changing market structure with a change to our membership structure. This acknowledges where our profession is at and where it is headed. I trust 2016 has been a successful year for you all and that next year will continue to prove the real value of having a professional insurance adviser.
Gary Young, CEO, IBANZ
Features 8. Insurers aim for reputation boost How can the industry get customers excited
about what is often a grudge purchase?
10. Paul Smeaton interview 14. Financial adviser reforms Impact for general insurance advisers.
18. NZI helps lift the bar on health and safety 23. ‘It’s given me so much’ Southland broker rewarded for decades of
industry service, but he says his career has been good to him too.
24. Truck crashes need experts 34. Flourishing insurance sector benefits NZ 40. Insurers told to check complacency 50. EQC pays out half-a-billion for Canterbury
30. Not so fast, Dr Naylor...
Regulars 1. Welcome to CoverNote 4. News 35. Ask an Expert
50. Professional Development: Professional IQ College 52. IBANZ Contacts YEAR IN
REVIEW
: ROSSER
UNDERW
RITING &
NZI
November/Decem ber 2016
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INSURA IT’S TIM NCE DISRUPTIO E TO TALK N: THE CUST Big change OMER ABOUT ahead for Not so fast insurance , Dr Naylor…
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NATIONAL CONFERENCE The PSC Connect National conference was held at the Langham Hotel, Auckland on the 7th to the 9th August. PSC Connect NZ national manager Dave Penfold said: "Over 170 brokers and suppliers from Australia and New Zealand attended the event, which included the opening dinner and welcoming powhiri at the Auckland War Memorial Museum, America’s Cup sailing, bungee and harbour cruises and the final Gala Dinner on the Monday evening. Stephen Doecke from Asset Insurance Brokers in Blenheim won the inaugural NZ member Broker of the year Award and $7,000 was raised for Camp Quality."
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? • Wanting 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?
For confidential enquiries: call: Dave Penfold 09 358 1186 email: dpenfold@pscconnect.co.nz Proud to be members of IBANZ and Steadfast
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3
NEWS
Renters' insurance confusion may be clarified More clarity around tenants' insurance liabilities is likely, after Housing Minister Nick Smith confirmed he was considering changes to the Residential Tenancy Act. He said recent rulings that sided with tenants who caused damage had sparked confusion over how the RTA worked with the Property Law Act. In one, the tribunal backed a tenant who let her dogs urinate inside her home, even though she was not allowed pets in the property at all. Her landlord wanted her to pay to replace the carpets. In another case, the Court of Appeal backed tenants who were pursued by their landlord's insurer for a house fire claim. The fire was caused by a pot left unattended on the stove. Smith is considering a proposal that would make tenants liable for damage caused by carelessness or negligence up to the value of their landlord's insurance excess, but not more than the equivalent of four weeks' rent. A different amount could be agreed on if specifically provided for in the tenancy agreement and would enable the tenant to
take out their own insurance. The NZ Property Investors Federation had raised concerns about the recent rulings. It said there were better ways to protect tenants than absolving them from blame and holding rental property owners financially responsible. "We presented some potential options," it said in a statement. "Require landlords to advise tenants of their responsibility for damage they cause and that insurance policies are available to financially protect them, allow tenants to use their landlord’s insurance policy for damage they cause which is higher than, say, $10,000, plus they would be responsible for the excess, or require landlords to take out insurance on behalf of their tenants to protect themselves from damage they cause and make this payable by the tenant." The NZPIF said no one wanted tenants to be financially ruined by an accident, but it was unjust to hold landlords responsible for their tenants' actions. The federation said the average claim made by landlords for damage to the Tenancy Tribunal was $3079. There were about 7000 claims from landlords each year.
"This figure doesn't include all the informal instances where landlords agree to use their insurance cover and the tenant agrees to cover the excess. It also doesn't cover all the smaller instances of damage that tenants previously just sorted out themselves and paid for. Likewise, it doesn't include the cases of tenants using their own contents insurance to cover the cost of damage they have caused. It is highly likely that the real cost of damage that rental property owners will have to cover will be considerably higher than $21 million." Smith has asked for further consultation and information.
EQC review drags on A review of the Earthquake Commission’s funding and policy structure is to continue into next year. Treasury made proposals in July last year, suggesting EQC’s payout amount be doubled and claims should be processed through private insurers. Submissions were received from the public and stakeholders last year, and it had been expected that the legislative change would happen this year, but Treasury has said it needs more time. Submissions will be released and an EQC bill introduced next year. The review has been running since 2012 to assess the future of EQC after it struggled to keep up with the aftermath of the Christchurch earthquakes.
More rules for water damaged cars The Insurance Council of New Zealand has welcomed the announcement from NZTA that water-damaged light vehicles will now need electrical and pyrotechnic safety components replaced. It is common for damaged vehicles to be imported from Australia. Only some are flagged as water damaged and if they are not, there are often no obvious signs to alert border security officials to refer the vehicle for a compliance check. Water damage is a concern for the longer term operation of the safety components and electrical systems. 4
November/December 2016
ICNZ chief executive Tim Grafton said insurers supported the change. “The importation of water damaged vehicles increases the risk of serious accidents, particularly due to failures in advanced vehicle safety systems.” He said with advanced vehicle systems, such as collision avoidance, becoming common place on newer vehicles, an electrical failure could risk a serious accident involving multiple parties.
NEWS
40pc levy hike proposal stuns Insurance holders will next year start paying more for the fire service – and the increase could be as much as 40%. As of next July, the New Zealand Fire Service, National Rural Fire Authority and multiple other rural fire authorities will be combined into one organisation – Fire and Emergency New Zealand. Stakeholders are now being asked for their input on how much the insurance levy should be increased to cover the costs of that new organisation in the 2017/2018 financial year. Paul Swain, chair of the board of the New Zealand Fire Service Commission, said the service did more than just fight fires. “As our fire services have evolved, the public now calls on us to respond to a variety of incidents, such as motor vehicle accidents, spills of hazardous materials, and natural disasters,” he said. The new structure would allow for a more co-ordinated response, he said. The commission wants the levy on property, car and contents insurance to increase by 39% to fund the new organisation. Swain said that would equate to about $36 a year for the average homeowner. It would like to see a 2017/2018 levy of 10.60c per $100 insured on residential policies, up from 7.6c at present. That would be capped at $100,000 for residential buildings and $20,000 for contents. The maximum levy payable per house would be $106, up from $76 now. For non-residential, the same increase would apply, but the amount would be uncapped. Motor vehicles’ levy would rise to $8.45 per year from $6.08 at present. “In return the public will see the establishment of a modern, fit-for-purpose fire and emergency organisation that is strongly connected to its communities. Among other things, this will enable the establishment of local committees to advise the Board on risks in
RBNZ surveys catastrophe planning The Reserve Bank wants to know about insurers’ processes on their catastrophe exposures. Manager of insurance oversight Peter Brady said it had decided to conduct a survey of licensed insurers. “Catastrophe exposures may arise in various ways, for example through natural or man-made disasters, pandemics, other events, accumulation of risks across multiple policies,” he said. “This survey will assist the bank to better understand how insurers are prudently managing their exposures to catastrophe risks and to consider whether there is value in regular reporting of catastrophe exposures beyond the limited data currently collected. The bank may conduct a follow-up survey in 2017.” He said the survey was in respect of the assessment of exposure to catastrophe losses in the New Zealand entity for any financial year that includes dates during 2016. The analysis could have been performed for the purpose of informing decisions for reinsurance for that financial year, calculating solvency as at the end of the previous financial year, or for other reasons. The Reserve Bank was to issue a section 121 notice to request the information from insurers. “We encourage insurers to be proactive in discussing with the Bank any questions or issues they have in completing the survey,” Brady said.
their area and the level of response required,” Swain said. IBANZ chief executive Gary Young said the increase was much higher than brokers had expected and was a concern. He said it was an inefficient way to tax some New Zealanders to provide a service that everyone used. Young said it seemed unfair that levy-payers were being asked to fund the bulk of the merger process itself too. “It seems crazy that it’s going to cost $300 million and levy-payers are going to fund most of that. The Government has offered to contribute $112m, but there is a catch. They want it all back. So those who choose to purchase insurance protection not only get to make their own contribution of $151m but also reimburse the Government’s contribution.” He said once the rate was set for the next financial year, that would not be the end of it the discussion. “And this rate is just for next year. The following year there will be another rate based on a whole new approach to calculate the levy, and they’re suggesting they want all sorts of information from the insurance industry in terms of what that rate should be. “The industry will have to put in a huge amount of effort to supply that for no return at all for the industry and just more work and money their clients will have to pay.” Young said many people could not afford to pay more for their insurance and would end up with less cover because of the higher tax.
Crombie Lockwood expands in south Crombie Lockwood acquired Oamaru Insurance Brokers (OIB). The company said OIB had been owned and managed by Bruce Sewell for 20 years and had become the leading insurance brokerage in North Otago. Terms of the transaction were not disclosed. Crombie Lockwood chief executive Carl O’Shea said the South Island was important to the company. “We have a well-established regional base in Christchurch, as well as Nelson, Marlborough, Otago, Southland and the West Coast, so the inclusion of Bruce Sewell’s Oamaru Insurance
Broking team goes a long way to completing our southern footprint. “OIB has a strong reputation among its clients and the industry, and we are delighted their team members are remaining with us to maintain the high level of service their clients currently enjoy.” Sewell said he had positive expectations from the new arrangement. “We have always worked hard to bring the best the market has to offer to our North Otago clients,” he said. The acquisition became effective on September 1. www.covernote.co.nz
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NEWS
Suncorp signs Turners deal Suncorp New Zealand has sold the majority of its Autosure motor insurance business to car auction firm Turners, and will start a new corporate partnership with the company. Turners has been branching out into financial services and offers finance to its buyers. Autosure offers car, mechanical breakdown and payment protection insurance. Turners will acquire the Autosure brand, and Autosure's mechanical breakdown insurance and credit-related payment protection insurance portfolios. Turners will pay $34 million for the insurer, taking ownership on December 1, but Suncorp, which owns the Vero and AA Insurance brands, will underwrite the policies issued by Autosure.
Suncorp chief executive Paul Smeaton said he was excited about the opportunity to partner with Turners. “Turners is New Zealand’s largest seller of cars, trucks, and machinery, so it makes perfect sense for Suncorp New Zealand, a leading general and life insurance provider, to go into partnership with them,” he said. Turners chief executive Todd Hunter said: “We’re very pleased to be partnering with Suncorp New Zealand. Turners has enjoyed a great working relationship with Suncorp New Zealand over many years and they have a vision and guiding principles that are closely aligned to our own.”
New boss of property at Chubb Chubb has appointed Jason Keen as Head of Property and Casualty for Asia Pacific, succeeding Paul McNamee, who will become regional president for Asia Pacific. Keen will report to McNamee and will have overall management responsibility for Chubb's commercial property
and casualty business across the region. That includes property and terrorism, energy, construction, casualty, financial lines, surety, environmental, SME, marine and custom industry solutions. Keen joined ACE in 2010 as regional property underwriter.
Lloyd’s wants to turn challenges into opportunities Brokers are having to work ever harder to prove their value proposition in a changing insurance world, Lloyd’s of London chief executive Inga Beale has told the New Zealand industry. She was at this year’s Insurance Council conference in Auckland. She said a low interest rate environment had prompted a flood of new capital into the insurance market, which kept profits down and pressure on margins. “Increasingly brokers are having to justify their value proposition as margins are squeezed right through the chain of insurance,” she said. “If anyone is relying on a market-changing event to jolt pricing back to sustainable levels, I wouldn’t bet on it. “It feels as though there’s a strong possibility that this highlycapitalised, low interest rate competitive market is here to stay until people really start losing money.” Both insurers and brokers were also up against a significant technology challenge, she said. Clients’ assets and infrastructure were shifting from things that were physical to intangible items and company structures were changing. “We have to look at new ways of doing business, not only for Lloyd’s but right across the insurance sector. “Demographic changes are fueling demand for new products, and as businesses go into new markets and change themselves, they are facing new and evolving risks. “Insurance is now providing protection for less than 10% of the risks businesses are facing. Insurers are not keeping pace with the development of digital-based platforms and are not providing the solutions that customers are demanding.” Cyber risk was one of the biggest threats in the world, she said, and was one of the most complex critical risks insurance customers were facing, but there was still a coverage gap for insurers and brokers to navigate. 6
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“It really represents the dark side of the digital revolution. A threat with no geographical borders is really tough for the insurance industry to get around.” Beale said some brokers were using technology and digitisation well and were tapping into the huge amounts of data now available to help them commoditise risk in a way that had not been seen before. But technological advances were also helping customers go direct to insurers, threatening intermediaries, she said. Lloyd’s own research showed as many as half of small businesses might go to a carrier instead of a broker. “These challenges are undoubtedly a bit daunting,” she said, “But we are certainly trying to turn the challenges into opportunities. We have a clear strategy about trying to modernise ourselves and make Lloyd’s easier to do business with. We have to embrace the technology that’s out there.”
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.
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FEATURE
INSURERS AIM FOR REPUTATION BOOST
How can the industry get customers excited about what is often a grudge purchase?
W
hen the product you are selling is something most people hope they never have to use, it can be hard to get customers excited. But the insurance industry is tackling ways to improve customer perceptions of the industry, battle negative stereotypes and boost its reputation. Data shows that New Zealanders have a fair, but not great, impression of the insurance industry. Insurance Council (ICNZ) research indicates 64% of New Zealanders have a favourable view of insurance companies generally – on par with power companies and slightly behind banks. They are more positive about their own insurance company – at 81%. New Zealanders are significantly more positive towards insurance companies than Australians. ICNZ chief executive Tim Grafton said, while there was room for improvement, 64% favourability was “not awful”. “Two-thirds of people have a favourable opinion. We want to make it higher, but the current situation is not that bad.” He said people were more positive about their own insurance companies because they reflected on their own experience. “About 85% of claims are paid out, and one of the key drivers of favourability is claims experience.” But he said there were a number of stereotypes that persisted about the industry as a whole that it would do well to shake off. New Zealanders had a generally poor view of big business, Grafton said, which could be flowing through into their perceptions of insurers. “There are also some urban myths out there that can influence things. People say, 'Oh, you're an insurer.You always look at the small print.You find some way to avoid having to pay out.'" He said even in Christchurch, where insurers are on track to pay out more than $20 billion in claims arising from the region’s earthquakes, people were more prone to talk about the cases where money was not delivered as expected, rather than the claims that had gone smoothly. “It’s more an urban myth than reality, and it’s something we are trying to work on by providing more transparent data on the percentage of 8
November/December 2016
claims settled.” There were also potential problems when people did not read their policy documents and had unrealistic expectations of what they were covered for, leading to a negative experience, even if the insurer was acting precisely as it should, he said. “They feel they’ve been paying money and not getting anything for it. People talk more
below emergency services, health professionals, banks, supermarkets and airlines. Interestingly, we sit fairly close to charities and non-profit organisations, car manufacturers and power companies,” he said. “We know insurers are assessed at lower levels of favourability for ‘fronting up when mistakes are made’, ‘charging a fair price’, ‘supporting communities in need’, ‘recognising customers
about that than run around saying, 'Aren't insurers great for putting me back to the position I was?' They focus on the relatively few cases where there hasn’t been a resolution as quickly as everyone would have liked.” IAG head of corporate affairs Craig Dowling said it was something the industry was aware of and was always looking to improve. “Everyone in the sector feels the slings and arrows directly and quite painfully, so much so, in fact, that we sometimes tend to forget about all the good things done and the views of those who are extremely positive about their insurance experiences,” he said. IAG has a trust and reputation monitor that it uses to keep an eye on the public perception of the company and the industry more broadly. Its latest survey found general insurance sat at the middle of a list of industries. “The specifics seem to differ a little from the ICNZ UMR insights. The substance doesn’t differ so much, in that general insurance (home, car and contents) sits mid-table, ahead of finance/ investment companies, local councils, central government, media companies and telcos but
have different needs’ and ‘helping customers manage risk’. “That’s a challenge, as we know some of these things are core to our business and/or just expectations. We must front up to as part of our responsibilities as good corporate citizens. It can be frustrating too, as many things are done specifically in these areas.” He said IAG tried to take an approach of proactively accepting blame for mistakes after the Canterbury earthquakes. “It would be fair to say that recognition of that is scant, but it hasn’t dimmed our intent, as we believe it is the right thing to do and will respected over time.” He said the company was also aware that price was a potential problem for some consumers and tried to tackle it where it could. “[We recognise it is a] pain point for some – particularly the more financially vulnerable whom we don’t wish to exclude from the benefits of insurance,” he said. “An example of recognising this and acting on it is AMI’s young drivers campaign, which turned the pricing of vehicle insurance for
FEATURE young drivers on its head earlier this year by treating them first as good drivers, offering them an immediate no-claims bonus to reduce their premium. As a result we have moved more young drivers into insurance and moved more from third-party cover on to comprehensive cover, which is good from them and good for the communities they drive in.” Meeting everyone’s expectations all the time could be a challenge at both a customer and community level, as the promise of insurance could sometimes be interpreted as a social service instead of a contract with inclusions and exclusions, Dowling said. “At IAG we are taking a focused approach to working with communities and communities of interest- close to our business. One step is seeking to understand the challenges of our vulnerable customers better through our relationship with the Red Cross. At a sector level we are supporting the sector through working with ICNZ on insurance capability and literacy.” He said research done by IAG last year showed consumers viewed established providers and the wider insurance industry in the same way they always had: stagnant, opaque, impersonal and viewed with mistrust. “People are reluctant to get involved, and when they do, knowledge of the category is limited, which impacts decision-making. There are very few moments when insurance is visible in people’s lives,” he said. IAG was trying to tackle that with more communication with customers, education in schools and interaction with the public more generally. “We operate in a noisy world with organisations and industries clambering over each other to be heard. Channels of influence and influencers of trust are also changing,” he said. “There is a growing customer expectation that businesses will know and understand their customers better via data, offering tailored channels and solutions. It is driven by emerging population groups who have grown up ‘digitally native’ - millennials. There have also been new category disruptions such as in travel - Expedia, Uber, Airbnb - and retail - Amazon, ASOS which are showing people what is possible. “All of this continues to reset the bar on what is expected from the insurance category and how we interact with customers, but it is also what makes the category so fascinating and dynamic to work in.” Grafton agreed work was constantly happening to improve perceptions of insurance and to help New Zealanders have trust and confidence in the industry. “We have made a substantial revision to our self-regulatory Fair Insurance Code, significantly increased the penalties for significant breaches of our rules and reviewed our objectives to focus
strongly on reputational matters. We try to be as transparent as possible in terms of our responses to the media and looking to identify what the claims experience is.” He said ICNZ also planned to make public the number of complaints about insurers to external disputes resolution schemes, compared to the number of interactions with the public that insurers have. “We provide a promise, and do we deliver on that? We can demonstrate that through the percentage of claims paid and the number of complaints. That’s a way to provide people with the facts.” Grafton said there was an inherent issue to tackle for insurers because people buying insurance were doing so with the hope that they would never need to use it. Even when a claim was paid out, it would only be intended to return customers to the position they were in beforehand. “You’re purchasing something that’s very different from any other purchase I can think of.” Michael Naylor, a senior lecturer in the School of Finance at Massey University and a commentator on the insurance industry, said even if insurers managed to tackle the reputational issues they currently faced, more were on the horizon. He said younger generations had different expectations to which insurance companies would have to adapt. “Digital natives are correctly labelled as the ‘no-wait generation’. The essence of this is that consumer expectations around level of customer service are raising rapidly with declining patience for any delays in response or administrative errors,” he said. “Phone centres or text messaging which takes 30 seconds to answer is regarded as archaic. Satisfactory customer feedback and response to complaints and issues is expected in terms of hours, rather than days. “A question must be asked only once and then be available to all other staff, regardless of platform. These extreme response attitudes are rapidly migrating to other generations. Only a keyword-software-based response system can respond with this degree of rapidity and sale to demand. Call centres will always struggle.” Naylor said social media was also becoming a much more important driver of insurer reputation. He said, among Generation Y, more than 70% would discuss their possible purchases with friends online and three-quarters would look for other customer feedback. “The main forums are social networks, especially video outlets, as fewer than 25% watch more than 10 hours of TV a week and very few read print newspapers. Insurer reputations can be irretrievable damaged within a week, meaning that insurers will not have time to fully discuss response strategy and instead must have protocols
pre-arranged.” Naylor said those changing expectations and the tendency to communally review experiences meant that social capital was the key currency for companies. “In a faster-paced world where bad experiences are immediately uploaded, insurers will either evolve excellent customer service or die. Mistakes in customer response are accepted, but the company response must be excellent. Because of changing generations, firms which do not engage the way digital natives expect will be out of business by 2025.” He said insurance companies could not expect to be judged only against other insurers but should have to stack up against other big players in consumers’ lives, such as Amazon. “In terms of a quality real-time omni-channel interface and a quality customer experience, insurers, in general, perform so poorly that they are seen as ‘in a different world’ from the digital leaders and therefore vulnerable. This means that being the ‘best insurer’ in an area is meaningless as a metric for long-term survival.” He said because of changing expectations and generations, insurance customers were becoming disconnected from the insurer’s value-proposition, confused and tended not to show understanding of any aspects of the valueproposition apart from price. “They are becoming hard to sell to, with only a limited proportion actively seeking cover. Profit margins are dropping as insurers compete on price, yet find that customer stickiness is dropping so that expenses on client acquisition are not recovered. What modern customers want is simplicity, accessibility, platform neutrality, social connectedness and a clear explanation of a product’s value.” He pointed to PWC research that argues that insurers’ focus on risk, ratings and products meant their understanding of customers lagged substantially behind that of other industries and left them vulnerable to disruptive entry by techno-literate firms with high social capital. “Insurance laggards fail to recognise that in today’s world online communities will engage in discussion and reviews of their products regardless of what they company does. The only question is - is this discussion happening with the company proactively involved or is it happening with the company excluded?” Insurers needed to be prepared to interact with their customers more often, not just at the point of sale, renewal and when a claim was made, Naylor said. Limiting their interactions to those occasions did insurance firms a disservice. “These give customers a very shallow and negative impression of the product, as their experience is restricted to the insurer demanding money or asking tough questions. This naturally leads to most consumers having a negative impression of insurers.” www.covernote.co.nz
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FEATURE
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FEATURE
Paul Smeaton S
ince taking the reins as chief executive of Vero Insurance just over a year ago, Paul Smeaton has overseen a complete overhaul of operations. Smeaton has worked to create Suncorp New Zealand, which he is now chief executive of, and which includes the intermediated brands Vero and Asteron Life. Asked why the need to change a company that wasn't broken, Smeaton’s response was that the world was changing and there were new challenges to face and opportunities to explore. “Those challenges include fierce competition, volatile financial markets, regulatory reform and digital disruption, so it’s our job to navigate our way through these things. “But there’s also a great deal of opportunity – through our partnerships with our corporate partners, brokers and advisers, and with our customers to better meet their needs. The changes Smeaton has presided over in New Zealand are part of an increased customer focus that the ASX-listed Suncorp Group is undertaking. Suncorp has nine million customers in Australia and New Zealand, says Smeaton, so the opportunity for them to benefit by using more Suncorp products and services is enormous. “We want to deepen our relationships with customers, and we’ve identified four specific areas of financial needs that we can meet – home, mobility, self and money. “Now, if we can meet two or more of those needs, we create what we call a ‘connected customer’, providing more value for them and for us too because they stay customers for longer. AN INTERMEDIATED, DIGITAL MARKETPLACE. Part of Suncorp New Zealand’s strategy is to deliver a customer marketplace – a digital platform and experience Smeaton says will be designed and built with Suncorp’s intermediated business partners in mind. "Our brokers and advisers are critical to our success. We
know their customers like and trust the products offered by Vero and Asteron Life. And we already offer benefits, but right now we’re not making it easy to access them. “Our marketplace will put all our products and services in one place so that a broker or adviser can sit down with a customer to discuss their needs with the entire range of services we offer together on one screen.” People’s thirst for digital convenience is incredible, says Smeaton. “More than a billion mobile phones hit the market last year. People are looking for ways to manage their life from their phone. But when it comes to financial services, we know people are also looking for advice. “Our marketplace will mean customers can work with a broker or adviser to find products and services that suit them, and then manage them online through a one-stop shop. But they’ll still know who to turn to when their life changes and they need expert advice to help them find solutions to their needs.” But will Suncorp look to take its marketplace direct to customers? Smeaton makes the point that Suncorp already provides a direct offering for personal insurance lines, with AA Insurance and AA Life (both joint venture partnerships with the AA), but that it's important the focus for the Vero and Asteron brands remains firmly with key partners in the intermediated market. “Having said that, there is already a growing direct commercial insurance market in New Zealand, where our competitors currently operate and where we have virtually no penetration. Extending our products and services to this market is something that we are considering and will evolve over time.” And what other services might Suncorp New Zealand add to their offering? “One of the questions I’m often asked is whether we’ll establish a banking presence here in New Zealand. It’s a big part of our offering in Australia, and money is one of the four needs we’ve identified. It’s not a priority for me right now. We’ve got enough to do in designing our customer marketplace and working with our intermediated partners to bring it to life.” YEAR IN REVIEW As 2016 comes to an end, we asked Paul Smeaton to sum up his first year as a chief executive (he’s been at Suncorp for 22 years), and his first stint living in New Zealand. “It’s been a big year for me personally. My
wife and I have moved from Brisbane and left our kids - all grown-ups, I might say - to look after the family home. “I love New Zealand. It’s a great country, and being a boatie means I’m trying to spend as much of my spare time as possible on the water. “It’s been an interesting year for the business too. There are highs and lows in the insurance industry right now that we’re working through. For example, in a few general insurance lines we’re experiencing challenges. We’re also seeing rising claims costs in some areas, and we need to think about the best way to respond to that. In life insurance, it’s still tough to win new customers, but our retention rates are high.” And while he’s taken the business through a period of major change, Smeaton says he’s proud of the way Suncorp’s people have forged ahead and embraced it. And how does he think the market is responding to the creation of Suncorp New Zealand? “There’s recognition that it’s a sensible way to organise ourselves. All our employees are Suncorp New Zealand employees, which means we can all strive for the same goals and celebrate success together when we achieve them. It also reflects that we’re setting up Suncorp in a way that will help us build what we need for the future.” And can we expect to see a Suncorp-branded product enter the New Zealand insurance market? “It’s something to consider but not at the expense of our existing brands. What you will absolutely see is Suncorp New Zealand playing its part in the New Zealand community through our corporate responsibility programme, and we’ll be taking a strong leadership position on issues that affect New Zealand businesses, where we think we can add value.” Listening to Paul Smeaton talk, it sounds like 2017 is going to be another big year for Suncorp New Zealand as he executes on a new strategy, including building the new digital marketplace. “You bet it’s going to be big. One thing we know for sure is that we can’t stand still. For me 2016 was about making a promise to our customers and business partners to do things differently and getting ourselves ready for how we see the future. 2017 is all about delivering on our promises. I’m looking forward to doing that with our people at Suncorp and our partners.”
www.covernote.co.nz
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FEATURE
AIG EXTENDS SUCCESSFUL NEW ZEALAND RUGBY SPONSORSHIP. Since the start of the partnership, AIG has supported all the teams wherever they play. Sponsorship-related events and campaigns enable AIG to connect with fans, clients and business partners across 64 markets. The company has also created and supported many community and safety focused initiatives. The extension of this partnership will allow AIG to continue to build these opportunities well into the future.
Mike Raines, Chief Executive Officer at AIG Insurance New Zealand
AIG has extended its successful sponsorship agreement with New Zealand Rugby (NZR). The six-year extension maintains their position as the Major Global Sponsor and Official Insurance Partner of the All Blacks, Maori All Blacks, All Blacks Sevens, Blacks Ferns, Black Ferns Sevens and the New Zealand Under 20 teams until 2024. Announced in the U.S. during the successful Rugby Weekend in Chicago on November 4-5, the agreement demonstrates both organisations’ continued commitment to building and enhancing their brands around the world. “Customers often only deal with brands that they trust. As a global company that services a diverse range of competitive markets, this partnership has provided AIG with a unique international platform to connect with key audiences in targeted and engaging ways.” said Mike Raines, Chief Executive Officer at AIG Insurance New Zealand. “The early extension allows long term planning and builds confidence in the programme, allowing AIG to maximise the investment.” “We’re a long term partner keeping long term promises for our clients, and this extends to our partnership with NZR,” Raines said.
AN AWARD WINNING PARTNERSHIP AIG is committed to growing the game of rugby and promoting the shared values of both organisations around the world.
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Within its first four years, the partnership has benefited from some prestigious awards: • New Zealand Sports and Recreation Award for Commercial Partnership. • Rugby Sponsor of the Year. • Rugby Sponsor of the Decade. The award-winning partnership has gone from strength to strength over this time, and delivered outstanding and very tangible business results. “New Zealand’s favourite sport continues to grow in markets around the world,” said Amy McNicol, Global Sponsorship Director at AIG. “Since we first started our relationship in 2012 with New Zealand Rugby and USA Rugby, participation in rugby has grown 52% in the United States, making it the fastest growing team sport in America. “We work with New Zealand Rugby on a daily basis to maximise and leverage our partnership to align with our shared values and goals as a business.” The All Blacks are the current rugby world champions, winning back-to-back titles in 2011 and 2015 and set a new world record on 22 October with their 18th consecutive win in tier one nations. “Given the strategic impact of the partnership to date, we are very positive about what it can deliver in the future and how the partnership will support our ambitions and strategy for rugby both at home and around the globe,” said Steve Hansen, head coach of the All Blacks. The partnership extension locks in several significant events on the international rugby calendar, including the Rugby World Cup Sevens 2018 in San Francisco, the Rugby World Cup 2019 in Japan and the 2020 Summer Olympics in Japan. In addition to New Zealand Rugby, AIG continues to grow its commitment to the game through relationships with USA Rugby and the Japanese Rugby Football Union.
COVER STORY
PROUD TO EXTEND OUR PARTNERSHIP WITH NEW ZEALAND RUGBY AND THE ALL BLACKS
www.covernote.co.nz
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FEATURE
FINANCIAL ADVISER REFORMS IMPACT FOR GENERAL INSURANCE ADVISERS By Bradley Kidd, Chapman Tripp
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n July, the Ministry of Business, Innovation and Employment (MBIE) released its report reviewing the Financial Advisers Act. Responses to the recommended changes have generally been positive across the financial services industry. The changes should produce a simpler system which is easier for the public to understand and more modern (for example, by permitting roboadvice). While greater simplicity is welcome, like other industry participants, general insurance advisers will not be immune from the potentially significant implications of the reform. General insurance products are usually
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“category 2” (simple) products under the FAA. The current compliance requirements for financial advice on those products are less onerous than financial advice on “category 1” (complex) products. Most notably, to give personalised advice on a simple product to a retail client, an individual adviser must be registered on the Financial Service Providers Register but need not be an authorised financial adviser (AFA). As a result, a registered financial adviser is not subject to the Code of Professional Conduct for AFAs, nor can they be sanctioned by the Financial Advisers Disciplinary Committee. Disclosure requirements are also less onerous
for registered financial advisers. In particular, commission rates do not need to be disclosed (although it is common industry practice to do so). This is all going to change. FIRMS, ADVISERS, AGENTS MBIE has proposed that any person (or any robo-advice platform) providing financial adviser services must have a licence from the Financial Markets Authority (FMA). These will be issued to “Financial Advice Firms” (FAFs) only, rather than to individuals. There will be flexibility on how prospective licensees will be expected to meet the licensing requirements, depending on their size, nature and services.
FEATURE
Financial advice firms will be able to engage financial advisers and/or agents and will be accountable for their agents (as with the current QFE model). They will need to have processes to enable their financial advisers to meet their obligations (but a financial adviser would remain accountable for any advice given) and ensure they do not incentivise agents to sell products without regard to the customer’s interests. Financial advisers will be engaged by a licensed FAF but importantly will be personally accountable for compliance with their regulatory obligations. They will hold a restricted ‘financial adviser’ title and be registered on the FSPR. Agents will be engaged by a licensed financial advice firm and be titled as ‘agent’. They will
be able to provide advice only where the FAF is permitted to do so. PUTTING THE CUSTOMER FIRST MBIE has recommended a new obligation that will require any person providing a financial adviser service to place the interests of the consumer first. This obligation will not require consideration of the full range of products on offer in the market. Instead, it will require the adviser to consider the best product for the consumer from their suite and if no product is genuinely suitable, to advise the consumer on that basis. Financial advisers and agents must put consumer interests ahead of their own despite the financial incentives that may be offered to them by providers. CODE OF CONDUCT WILL APPLY TO ALL ADVISERS An expanded Code of Conduct will apply to all advisers and will prescribe conduct and CPD standards, as well as requirements specific to particular parts of the industry or products or services (for example, different standards will apply to general insurance advice than apply to investment advice). COMMISSIONS RETAINED BUT MORE MEANINGFUL DISCLOSURE MBIE has not recommended banning adviser commissions because, in an environment where people are already reluctant to pay for financial advice, doing so would have increased costs and further limit access to financial advice. MBIE has targeted "conflict of interest" concerns arising from commissions via the new obligation to place the consumer’s interests first by requiring better adviser disclosure and by enhancing the FMA’s reporting and enforcement powers. Reporting requirements could include details of complaints, dates of replacement and new business, and details of any commissions received, including soft commissions. All providers of financial advice will be required to disclose information on their remuneration, the nature of the service they can provide, and the products and product providers they consider when advising. Disclosure regarding conflicts of interest and conflicted remuneration (e.g. soft commissions) will also be required. WHAT DOES THIS MEAN? The most immediate impact is licensing. A general insurance adviser firm will need a licence to operate - a shift away from individual registration of advisers. Sole traders will be treated as FAFs and will also need a licence. Licensing aside, general insurance advisers face a number of key questions. Firstly, but importantly, the firm and its current
adviser network will need to decide whether individual advisers will be “financial advisers” or “agents”. This is a key decision, which will govern the duties and liability profile for the firm and the individual (with financial advisers having personal liability). This decision will involve a balancing of factors. Some individual advisers may wish to be agents so that they do not have personal liability (similar to the existing QFE model). Others may
FINANCIAL ADVISERS AND AGENTS MUST PUT CONSUMER INTERESTS AHEAD OF THEIR OWN, DESPITE THE FINANCIAL INCENTIVES THAT MAY BE OFFERED TO THEM BY PROVIDERS. see value in retaining the endorsement value of the “financial adviser” badge. Secondly, while the requirement to put consumer interest first has generally received widespread support, implementing it will not be without its challenges. Tied agents will need to consider how this will work in practice. FAFs will have to consider their remuneration structures, given the requirement to not incentivise agents to sell products without regard to customer interest. In addition, FAFS will have to consider their capacity to meet the licensee obligations and the operational changes that may be required. This may drive some compliance “centralisation”, where advisers look to link up with a central body that manages compliance (similar to some of the models that emerged under the FAA). Although there will be some challenges, there are also some potential opportunities. For example, larger scale operators may be able to tap into “robo-advice” platforms to complement a more traditional face-to-face offering, and advisers will no doubt be happy to farewell the current personalised/class advice distinction.
www.covernote.co.nz
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OPINION
GET YOUR CLIENTS FLEET FIT 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.
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ZI’s Fleet Risk Management Programme has been designed with this in mind. They can help transport operators improve driver performance, business efficiency and manage crash scenes and complex situations in the event of an accident. NZI’s National Manager Commercial Motor, Ian Taylor says “We’ve got a lot happening in this space at the moment and brokers can find out more about our programmes on our website nzifleetfit.co.nz. If brokers are interested in signing their clients up to take a test drive in our simulator and have their driving skills assessed they can contact one of the team at FRM@nzi.co.nz To find out more visit nzifleetfit.co.nz or contact FRM@nzi.co.nz
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www.covernote.co.nz
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FEATURE
NZI HELPS LIFT THE BAR ON HEALTH AND SAFETY
NZI’s Fleet Risk Management Programme provides transport operators with innovative tools and training to lift their health and safety culture and bring it up to standard.
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t’s only a matter of time until a trucking company is prosecuted under the new Health and Safety at Work Act,” says Ian Taylor, national manager commercial motor for New Zealand’s largest insurer NZI. “Road transport is one of our most competitive industries and until this year New Zealand’s health and safety regulations were light. Transport operators are being asked to change the habits of a lifetime - and that’s not easy. The road transport industry keeps our economy moving so it’s in all of our best interests
policies and practice. This means adequate training, education, reporting and reviewing and making sure it is embedded at all levels of the organisation. For transport businesses, where success is built on lean operations and efficiencies, knowing where to start can be daunting. Taylor says that’s where NZI’s Fleet Risk Management Programme comes in. “We call it Fleet Fit,” he says. “It’s a value-add service that offers our transport customers tools and training in driver safety and performance,
that we help them meet their health and safety obligations and keep them in business,” he says. The regulation of the 1980s and 1990s arguably led to some issues across New Zealand industries over the past decade. From retirees’ life savings being wiped out in the finance company collapses caused by poor financial regulation, to the 29 coal miners’ lives lost at Pike River in 2010 due to poor health and safety regulations, this country has learned lessons about the importance of setting rules to protect our workers. The new Health and Safety at Work Act came into effect in April this year. It spreads risk and responsibility across multiple levels of an organisation with hefty fines and jail time as possible consequences of not meeting individuals’ responsibilities when it comes to health and safety. Every organisation is now required to implement robust health and safety
business efficiency and crash management.” Under the new Act, businesses must engage with, and have effective, ongoing systems that ensure workers actively promote good health and safety practice in the workplace. Fleet Fit offers NZI customers driver training tools, seminars and culture change programmes and these are either heavily discounted or free for NZI and Lumley customers. Fleet Fit’s most popular health and safety culture change programme is Traction Plus, which assesses risk and safety initially through a business-wide survey, followed by problem solving sessions and coaching. Participants report that involving staff in this programme has had many benefits beyond immediate health and safety improvements. Grant Bray-Taylor, superviser at Earthtec, an Auckland-based bulk excavation and civil works contractor, saw a huge shift in attitudes
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after his staff participated in the Traction Online Assessment. “Staff who had hardly said anything to me in years suddenly opened up to discuss and share ideas about our business,” he says. Taylor rates the programme highly, having seen it change many transport customers’ business operations. “Traction Plus takes the business on a journey, moving them from health and safety metrics and processes for mere compliance to a culture of changing thinking, behaviours and actions. Once a customer learns to evolve like this, it can be applied to other areas of their business to drive further operational excellence.” Taylor says another area where Fleet Fit is helping with health and safety is the war against driver fatigue. The Ministry of Transport’s 2015 fatigue report estimates that driver fatigue is a factor in 13 percent of fatal crashes, 6 percent of serious injury crashes and 6 percent of minor injury crashes. In the trucking industry, the more serious the accident, the greater the chance that fatigue has played a role. Another of NZI’s offerings through Fleet Fit is Guardian from Seeing Machines – this in-cab technology uses facial recognition software to combat driver fatigue. Cameras are installed in a truck’s cab and track the movement of a driver’s face - monitoring their eyelids, facial expressions and which direction the driver is looking. The system detects when a driver becomes drowsy or is distracted and sets off an alarm. In cases where multiple incidents are detected, a notification is sent to Seeing Machine’s call centre that a driver is in danger on the road and the transport operator is then contacted so they can take the appropriate action. NZI currently has 10 Guardian systems available for customers to trial for free for six weeks at a time. Taylor says he’s keen to hear from any company interested in trialling a unit. “NZI is all about creating safer drivers and keeping our customers’ trucks on the road. It’s good for their business and it’s good for the country.”
OPINION
MAKE COMPLAINTS WORK FOR YOU
By Karen Stevens, Insurance Ombudsman
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ustomer complaints can be bad for business. They can take up time, resources, money and harm reputation. But the flipside is that we can learn a lot from them; customer complaints are a helpful measure of what can, and does, go wrong. Of the 300 complaints and 3,000 complaint enquiries the Insurance and Financial Services Ombudsman Scheme responds to on average each year, very few are about financial advisers (which include insurance brokers). Last year, only eight IFSO Scheme complaints related to financial advisers. Two were settled and six were not upheld. However, 83 complaint enquiries last year were about financial advisers. Complaint enquiries are mostly resolved before they become formal complaints. Lessons from complaints are a valuable way to help brokers to improve the way they do business and keep their complaint slate clear. Complaints about brokers tend to be about miscommunication, misunderstandings, fees and charges. People complain about being given the wrong advice, sold the wrong policy, or about their broker not fulfilling their duties or obligations to them. CASE STUDY – NON-DISCLOSURE AND COMPLETING APPLICATION FORMS FOR CLIENTS (2015) Leon*, as trustee of a trust, arranged house insurance for the trust’s house with his broker, Dave*, using an online application. The application included questions about insurance history and losses. Later, Leon made a claim for damage to the trust’s house. The insurer avoided the policy and declined to consider the claim, as Leon had failed to disclose that he had previously had a house policy cancelled; he’d made a claim for malicious damage to another house; and the house was burgled. Leon said Dave had not asked him those questions when Dave completed the on-line application. Dave said, because Leon was a personal client and they had a relationship, he did not ask all the questions on the application and Leon had not told him about the burglary. Leon made a complaint about his insurer to the IFSO Scheme. IFSO SCHEME Although Leon was the executor, trustee, and beneficiary of the trust, the application questions applied to Leon personally. Two independent underwriters said the information would have affected their decisions to accept the risk. The information which was not disclosed was material. Even though Dave did not ask Leon the questions, as Leon’s broker, Dave was Leon’s representative not an agent of the insurer. Therefore, the insurer could avoid the policy and decline to consider the claim. While the complaint was not about Dave, Leon could have made a complaint about him. If the IFSO Scheme had investigated a complaint about Dave, we would have considered whether Dave met his obligations to Leon under the Financial Advisers Act and the Consumer Guarantees Act. DUTY OF CARE TO CLIENTS Legally, you owe a duty of care to your clients. Under the Financial Advisers Act 2008, when you are providing a financial service, you are required to exercise the care, diligence, and skill that a reasonable financial adviser would exercise in the same circumstances. However, under the Consumer Guarantees Act, you have the duty to use reasonable care for all your services. The extent of your duty of care to a client depends on the particular circumstances.
WHAT WE CAN LEARN: • You have a key role in educating your clients about their disclosure obligations and the consequences of failing to disclose material information. • If you complete application forms for clients, there is more risk they could complain about you in the future. • Good records are essential. In the event of a complaint, they can help show what happened and resolve the complaint before it escalates. • If you do not askyour client all the application questions, or summarise or edit answers, you may be at risk of a complaint being made about you in the future. CASE STUDY – ASSISTING CLIENTS WITH CLAIMS (2016) Following the Canterbury earthquake in 2011, Sam* bought a business in Canterbury and arranged business interruption insurance through his broker Bill*. The insurer agreed to provide cover, with an exclusion relating to earthquakes. A year later, Sam told Bill the building might be cordoned off as the neighbouring building was earthquake-prone. Bill told Sam he could claim $2000 for prevention of access to the area and Bill said he was happy to make a claim to the insurer if Sam wanted him to. Bill invited Sam to discuss this with him and entered a reminder in his system to follow up with Sam in a few weeks. Bill phoned and wrote to Sam, asking if he wanted to make a claim. In his final letter, Bill said if he did not hear from Sam, he would close his file. A week after that letter, Bill closed his file. Three years later, Sam complained that Bill had not made a claim to the insurer. Sam said, as a result of the claim not being paid, he lost the business, had to cash-in his KiwiSaver, borrow money, and sell his house. Sam said that Bill owed him a duty of care and he had been negligent in not making the claim. Sam said he answered all of the broker’s calls and emails and had several conversations about the claim. However, Sam had no record of these conversations. Bill said he did not have enough information to make a claim, he asked Sam for further information and, when he did not hear from Sam, he closed his file. IFSO SCHEME Bill was not responsible for Sam’s losses. The evidence indicated that Bill did not have enough information to make a claim and that Sam had not asked him to make a claim. The insurer confirmed that, even if a claim had been made, it would not have been accepted as the business premises had not suffered any physical loss or damage. Also, if the prevention of access had been caused by earthquake damage, it was excluded under the policy. WHAT WE CAN LEARN • Make sure you are clear on what your role is, if you are assisting a client with a claim. • Make it clear when you are providing advice and when you are providing information. • Clients may expect you to manage the claim/ make the claim f or them. • Document all discussions with clients regarding claims. www.covernote.co.nz
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OPINION
Data is the oil of the 21st century G
enerally speaking, customers will only give up personal information under two conditions: if it’s easy to do and if they get something of value back in return. This is particularly true when it comes to big data, where everything from our purchasing and browsing habits to our physical movements are tracked and analysed by companies for commercial gain. For the insurance industry, this poses a unique problem. Many people think we already know too much about their lives. They want us to be responsive when they need us but also want to keep a healthy distance between us. So should we as an industry be embracing big data more fully? I would argue we need to go further than that and become drivers of the big data revolution. The value inherent in big data is, well, big. Research from the Innovation Partnership shows New Zealand consumers and businesses shared $2.4 billion in value in 2014 as a result of using big data to innovate and develop new products and services. Big data is becoming a key factor in competition, productivity growth and innovation. Kiwis have been relatively slow to utilise big data, with just 10 to 15% of businesses adopting it as a tool to help them make smarter decisions. And while the insurance industry has taken some great first steps, my view is that we need to be leading the race, not just keeping up with the pack.
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by Travis Atkinson,
Executive General Manager, NZI
The insurance industry needs to be a leader because we’ve got so much to gain from big data. We’re an industry built on the principles of risk, and big data allows us to assess risk much more accurately. Setting policy premiums and adjusting them according to an individual’s behaviour is one area where our sector is a real innovator in the big data space. A great example of this is the NZI Safe Driving Rewards Programme and the use of telematics. By opting into the programme, NZI and Lumley customers who have EROAD invehicle hardware devices installed in their truck fleets agree to share their vehicles’ data with us, allowing us to gain a better understanding of motor vehicle insurance risk. We launched our big data programme to help make our roads safer and allow transport operators to support their drivers’ behaviour and take any necessary steps to help them be safer on the road. With our new programme we’re leading the way in the transport industry. Our customers’ vehicle data provides us with an accurate picture of behaviours that influence risk and contribute to road accidents - everything from speeding and harsh braking right through to the distance driven over a given period of time. Although it’s still early days, the benefits provided by big data are already apparent for both our customers and our business.
Telematics has enabled us to offer some tangible financial incentives for safe driving too. NZI and Lumley customers who opt into the Safe Driving Rewards Programme and are in the top quarter of EROAD’s driving population are eligible to have their excesses waived in the event of an accident. In fact, so far we’ve waived over $136,000 in excesses for customers who have taken part. Many transport operators are also using the data generated by EROAD in-vehicle hardware to reward drivers for safe and improved driving behaviour in the form of bonuses or performance based pay. The more data we gather, the more value we expect to generate for our customers. While some customers had reservations about sharing their data with NZI in the beginning, we were very upfront with them about what we were intending to use the information for. It was not about using this data to refuse future claims or raise premiums. This data is being used to create, enhance and provide better user based insurance products for the future. Big data is undoubtedly a tool that can transform our industry. But as with most things, it brings with it a unique set of challenges. If we’re genuine about making the most of big data, we need to be transparent about the way we handle it, use it and give some real value back to our customers in return for it.
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
YEAR IN REVIEW - ROSSER UNDERWRITING
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he foundation was laid early 2016 by Hamilton based firm Rosser Underwriting, for an ambitious growth plan to treble its business within the next five years. During the past year, the company restructured its business model by selling off its former wholesale and direct broking activities to become a “specialist underwriting agency” focussed on supporting provincial brokers throughout New Zealand. Rosser has expanded its underwriting and support teams, implemented a regional broker support structure, became a coverholder at Lloyds, established an alternative SME property and liability facility and commenced transitioning its underwriting systems to a new technology platform. In addition, a new company website is under construction and is scheduled for launch early 2017.
“2016 has been an intensive year of planning, investment and transformation in the business,” said Rosser’s managing director, Andrew McFetridge. “We have written an ambitious five-year business plan committing ourselves to achieving a long term goal of trebling gross written premiums by 2021. Developing all the new initiatives in the plan has put additional pressure on our team, but they coped magnificently well while continuing to service the needs of our wide range of broker clients,” he said.
In addition to their own self-imposed pressures, 2016 presented other challenges for Rosser too. Much more underwriting work ensued as many accounts were remarketed by brokers in the current soft and competitive market. An unexpected and unwelcome event occurred in August due to the failure of their hosting hardware from their current UK-based software provider. This left the Rosser team completely unable to process policy transactions for almost one month until the overseas problem was remedied. “The uncertainly of the situation caused us more grief than we anticipated, but I’m proud of the way our team stood up to this crisis and everyone did their utmost to minimise the impact on our brokers and insurers,” McFetridge said. From humble beginnings, the Rosser team have grown significantly since starting out in 2000. The business now employs 15 staff located in Hamilton, Hawke’s Bay and Wellington, including four regional broker relationship managers each with their own support staff. Looking ahead to 2017, McFetridge is confident that their new technology platform will greatly enhance Rosser’s internal efficiency and bring operational benefits for its brokers. He also expects the company’s new website, wider product range and high levels of personal service will attract even more brokers to do business with his firm. McFetridge says his company’s tag line is “Rosser Underwriting – the brokers’ champion” and everyone in his team is committed to ensuring they live up to this claim. “We already deal with and support hundreds of broker clients across New Zealand from large national firms and cluster groups, through to smaller independent brokers,” McFetridge said. “Our independence, friendly experienced underwriting team, unique product offerings and willingness to go the extra mile set us apart from other insurers and gives brokers multiple reasons to obtain comprehensive and cost-effective solutions for their clients. Whatever challenges 2017 presents to us, I’m confident it’s going to be another successful year for the Rosser team and our broker network.”
YEAR IN REVIEW - NZI
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ZI's staff have shone in a challenging but rewarding year, the insurer's executive general manager, Travis Atkinson, says. He said the company had been able to put the integration work of the past behind it and move forward with a strong resolve. NZI's parent company, IAG acquired competitor firm Lumley in 2014, and the business went through a long period of combining the operations of the two. Atkinson said he was proud of how his team of staff had performed in the market conditions of the past year. "The competition has been pretty intense, and that's normal. The New Zealand market has always been competitive. But when it is, the challenge is to retain and grow customers while keeping your underwriting focus and discipline. That's what I think we have done well this year." Claims processes were performing as they should, he said. NZI had also made a lot of progress in finalising the claims arising from the Canterbury earthquakes. Those remaining were the more complex and challenging, he said. "Working with brokers and customers to finalise commercial claims has been a standout." NZI had made a number of changes to its business over the year, he said, including introducing a new claims platform, which had helped brokers' experience on behalf of their clients. NZI had also continued to evolve its offering in liability and motor cover, had launched a cyber product and NZI Fleet Fit for fleets. "There's been a lot of work on education and thought leadership." NZI had focused on changing technology, he said, and how it could keep pace with that. But Atkinson said the company still tended to be too reactive when
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conditions changed. "There is a lot happening in the claims space and with new technology, health and safety rules and so on. I would like us to be more proactive and educate brokers rather than wait until after it happens. I would prefer to get more on the front foot." He said the competitive conditions of 2016 were likely to continue through 2017. Small businesses in particular would continue to seek broker guidance to understand how they should manage their risks, he said. But he said the types of risk they wanted help with could become more diverse. "SMEs have talked a lot about their perception of risk changing from a physical risk to more online risk, connectivity risk and health and safetyrelated risk. We will see some of those businesses facing into those new risks." The insurer would also be giving more thought to the use of data and how it could be used for customer insights. Value was coming to mean more than just price to customers, he said. There was extra capacity in the insurance market globally because there had not been a major catastrophe for some time, he said, but it was impossible to predict how long that situation would last. "That's the uncertain business of insurance." Atkinson said he expected the economy to remain strong through 2017, which could mean increased costs and claims for the insurance industry. But he said there would be opportunities through an increased number of business start-ups and more vehicle sales. Insurers would need to think about how they capitalised on those, he said. "You've got to keep a pretty strong eye on the future, but you can't take your eyes off what is happening today."
FEATURE
‘IT’S GIVEN ME SO MUCH’
Southland broker rewarded for decades of industry service, but he says his career has been good to him too.
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eing able to help people put their lives back together after major disruption is one of the things that Richard Russell likes best about his job. Russell is branch director of Crombie Lockwood in Southland and was handed a life membership of IBANZ in December. Life memberships are awarded to past and present members of the association who are considered worthy because of their position, experience and contribution to the industry. Russell started in insurance straight out of secondary school, having given up on a dream of being a doctor or surgeon. “Being a bit uninterested in high school, my parents thought it was time I got a job,” he remembers. “I was taken on as a junior with Royal Insurance Group in Invercargill.” From there, he joined NZI in 1971 as a representative and eventually moved to the head office in Auckland in 1979 and took on a number of marketing roles. But a merger with South British left him disgruntled and he went back to Invercargill, where he bought a shoe shop and started a short-lived foray into retail. “I was talked into it a bit. I had a cousin in the retail business who said,‘Get out of the corporate world and away from all that stress, come back to Invercargill and enjoy life a bit more.’ It worked to a certain extent, but it didn’t have the cut and thrust of the business environment.” Russell decided there was not enough to do managing retail and applied for a job at AGC Finance as its Southland manager. He had some experience of that industry through NZI Finance, but the AGC role offered him more of a hands-on opportunity to learn how it worked. But again, it was not long before he was back in insurance. He received a call from Bowring Burgess Marsh & McLennan asking him to come and take on a role as its manager in Invercargill. “I said, ‘Not really. I’d made the decision to leave and carry on doing what I’m doing and see where it takes me.’ But I weakened after a few phone calls and ended up branch manager in Invercargill.” Eventually, a restructure of Marsh’s operations through the South Pacific gave Russell the opportunity to buy the branch himself. “I’ve still got the aircraft sick bag from the way back from Christchurch, pen in hand, thinking what am I going to do about this? I had a meeting with staff and told them I was
thinking about buying the business and would they continue working there? And of course the answer was yes.” After a few calls to existing clients, Russell decided to pursue the chance the restructure offered him and drew up a sale and purchase agreement with Marsh. He and Robin McCall set up business as Russell McCall and operated independently for several years. But they kept being approached by people
who wanted to buy the firm. Although it never officially went on the market, they eventually decided to look at two approaches, from Aon and Crombie Lockwood. They eventually chose the Aon option and worked for the firm for five years. But then Colin Crombie got in touch, and in 2005 Russell accepted his firm’s offer. “I’ve been here ever since and have no intention of going anywhere else at all.” He said he enjoyed the pace of the business environment and working between insurance companies and those who have policies with them. But what he likes most is helping put people’s lives back together after they have suffered some disruption. “It’s a good industry to be in.You can’t really get bored,” he said. “Something happens every day, whether that’s earthquakes, fires, disruption in people’s lives. We’re doing deals, negotiating all sorts of things from new business to renewals, claims. It just goes on and on. It’s a key industry to the whole economy of the country.” Russell has also played a big role with the industry’s associations through his career. He
started on the CIBNZ board in 1992 before helping with the merger with IIBA to create IBANZ, before being elected on to the IBANZ board. By 2006, he was president of the IBANZ board, a role he held for several years until he stood down to help set up IBANZ’s training provider, now known as Professional IQ College. Russell said the role of the association had remained largely unchanged since he first became involved. “It’s the glue that holds the broking fraternity together. It goes into bat a lot more than it used to around governmental things like lobbying, because individual companies aren’t really able to do that. “It’s one voice that promotes broking, not just to consumers but more so in recent times to Government.” Russell still finds time for some interests outside work, including running. He plans to run the Motutapu marathon again this year for at least the 13th year in a row, has served as a rugby referee and is involved with Rotary. But he says he loves work and has no plan to move on yet. “I have no intention of doing anything else, no intention of retiring. As long as I am fit and healthy I suspect I will continue to do this. I have had so much out of this industry. It’s given me so much.” He says he’s lived by the philosophy of working to create the future rather than letting the future create itself. “It hasn’t been without its problems and issues, but at the end of the day someone has to keep their eye on the bigger picture and forget about all the things around the edge.They don’t matter in the scheme of things.” IBANZ president Gary Young said it was first suggested that Russell be given a life membership when he stepped down from the role of chairman of Professional IQ College. “This was the end of years of voluntary service not only to the college from the time it was formed. He played a key role in the negotiations to merge previous associations CIBNZ and IIBA to form IBANZ, having been on the CIBNZ Board for many years and served on the IBANZ Board until moving across to PIQ. “Richard put in a huge amount of time and effort to ensuring the success of the organisations. The feeling of the current board was that this long history of service to the industry and its professional bodies deserved recognition, hence the awarding of a life membership.” www.covernote.co.nz
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FEATURE
TRUCK CRASHES NEED EXPERTS I
an Taylor is standing in front of grisly scene – a tanker truck and a flat deck lie have rolled in a paddock south of Christchurch. A badly crushed car is pinned beneath the tanker, the body of the deceased driver trapped inside. Hazardous chemicals are leaking from the tanker and the fire service is on the scene assessing how to get the tanker off the car. “The worst thing you can do after a truck crash is have the salvage managed by a nonspecialist,” says Taylor, NZI’s national manager of Commercial Motor Vehicle Insurance. Taylor is talking to a crowd of insurance brokers at a truck crash scene simulation staged by NZI in Christchurch to show the company’s crash scene management expertise in action. “We see too much damage done during the salvage process that keeps valuable trucks off the road for weeks longer than they have to be,” he says. NZI’s Crash Scene Assistance manager takes charge of the salvage. He brings in a specialist heavy motor vehicle salvage expert and gently turns the truck right side up using the latest air bag technology. It’s an elegant demonstration of how a complex truck crash can be seamlessly handled by experts and how it could turn to disaster for truck owners if inexperienced operators are allowed to run a salvage operation. Taylor says that if a non-specialist was to roll the truck back upright, there would be a real risk of costly further damage. “If you roll a truck back upright too suddenly without the right technology you risk damaging suspension componentry and finding that a perfectly good part needs total replacement. If the parts have to be imported, then that can add weeks to the time until it’s back on the road and earning a living for its owner,” he says. Following the righting of the truck, a specialist “suck truck” was immediately on hand to remove the contents of the tanker and mitigate the environmental damage of the spill. Taylor says close coordination of the different specialists is required to ensure the scene can be cleared quickly, whether the issue is an environmental hazard or the truck’s freight scattered around the scene. “Coordination is vital to clear a scene quickly. Waiting hours on the side of the road waiting for a specialist to arrive just delays the start of the repair process,” he says. NZI’s Crash Scene Assistance service is a specialist crash scene management service offered free to everyone who holds an NZI
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or Lumley Heavy Commercial Motor Vehicle policy. Following a crash, after calling emergency services the truck owner makes one call to NZI on 0800 11 11 08, and the NZI crash scene management team swings into action, mobilising a local team of experts to handle the scene in the best interests of the truck owner. NZI has also set up a nationwide team of commercial motor repair managers who can start the repair process at the accident scene. The repair managers, who have mechanical expertise, are sent photographs of the damaged vehicles from their crash scene team so they’re able to phone ahead to clear capacity at the nearest specialist repair shop and order parts needed for the repair process.
“The alternative is towing a wreck to a repair shop and doing an initial assessment there, but delays can compound each other if you leave it to chance like that. If a truck is towed blind to a repair yard, it might wait two days before a claim is processed and an initial assessment is undertaken by repairers. Then parts need to be ordered, and if they come from overseas it all adds to the time your asset is not on the road earning,” he says. Taylor says NZI is promoting the free Crash Scene Assistance service as part of its current Fleet Fit campaign and is expecting a strong uptake over the next 12 months. Crombie Lockwood broker Jamie Simpson said the demonstration was great reminder of how important it is not to get the crash scene managed by someone simply because they are closest to the site. “Occasionally you might get someone from down the road who thinks they know what they are doing, but they will probably do more damage, so it really is important to have the people with the right equipment and the right knowledge,” he said.
MEET CRASH SCENE ASSISTANCE A reliable part of the NZI Fleet Fit team, Crash Scene Assistance has your client’s back when the worst happens. We have the right people with the right equipment at the right time ensuring that things happen quicker to get vehicles back on the road. Just one call and we’ll take care of the rest.
NZI_COVERNOTE_NOV16_FLEETFIT_CSA
Whether it’s Te Puke or Te Anau, by calling 0800 11 11 08; we’ll salvage your client’s vehicle, take care of road cleanup, deal with environmental issues and provide driver support. To keep your client’s fleet performing, ask that they use NZI Crash Scene Assistance.
GET FLEET FIT. NZIFLEETFIT.CO.NZ Crash Scene Assistance is available, for free, to any customer with an NZI or Lumley commercial motor vehicle insurance policy.
Advisernet Conference raises nearly $40,000 for charity Insurance Advisernet raised nearly $40,000 from registrations, donations and fines during their two day 10th Anniversary Conference in Queenstown recently. The main benefactor was Women’s Refuge, who said in response to the donation of $25,000: “You are wonderful. You have given a gift that will help women and children across New Zealand get the support when they need it most. Your gift will go a long way to make sure we can provide vital services like our safe houses, crisis line, advocacy and legal support. Words cannot truly express how grateful we are to you for your support. You are our last hope, we are theirs. Thank you for giving hope with your donation.” Other recipients of donations were: Special Childrens’ Christmas Party - $5,000 Mental Health Foundation of NZ - $2,500 Sustainable Oceans Society - $2,500 S.T.A.R.T. Taranaki - $2,500 David Crawford of Insurance Advisernet said to Cover Note, “It is really wonderful to be able to support a range of charities that do not receive a lot of funding and who do such a great job. It was particularly pleasing to see everyone get in behind supporting Women’s Refuge at the gala dinner, raising $10,000 more than our target. Our thanks go to our sponsors and delegates for making it happen.”
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November/December 2016
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27
COVER STORY
BIG CHANGE AHEAD FOR INSURANCE New Zealand academic says there is a perfect storm looming that will permanently transform the industry.
A
New Zealand insurance industry commentator says technological change is coming that will force many insurers out of business. Michael Naylor, of Massey University’s School of Finance, has released a report looking at the impact of an IT revolution on insurance. He said the industry would be shaken up by a range of factors over the next few years, including telemetrics, big data, automatic underwriting and claims, robo-advice and dynamic insurance. Many of the insurance companies operating in the market would not be able to respond to the changes required and would become bankrupt, he said. “No commentator has realised that when added together, the small impacts of each technology will combine to create utter disruption in the insurance industry - a perfect storm,” he said. Insurance was more likely to face more disruption than other industries because it was so focussed on data and analytics, he said. “Fundamentally, insurance is about the pricing and selection of risk. The internet of things, WiFi mobility and big data, will fundamentally change the type of data insurers use and how they assess risk and how they price risk and how they deal with customers.” Self-drive cars would be one big disruptor for general insurance that would reduce premiums and cash flow drastically and lead to the virtual elimination of car insurance as a viable standalone
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industry within 20 years, he said. Consumers would probably be incentivised into autonomous cars, which could cause at least an 80% drop in crash rates. Theft would disappear, leaving insurers to pick up the tab only for incidents such as things crashing into the car while it was parked or weather. “The result of this is that car insurance premiums will fall drastically. Allstate’s 2015 annual report admitted that automated cars could destroy their auto-insurance business. Those want to drive manually will pay a hefty surcharge, probably 10 or 20 times the automated premium, so drivers will choose to forego selfdriving if possible,” he said. “Car insurance in an era of very few accidents is a terminal industry. Activities like supporting sales branches could become unviable.” The turning point for insurance companies could be coming sooner than they expected, he said. While most of the industry was under the impression that autonomous cars would not be a big factor for another 15 years or so, full automation was not necessary for major disruption. “The turning point for car insurance as a profitable product does not occur when fully autonomous cars become common but instead occurs when 80% autonomous cars become common and premium cash flow starts to decline,” he said. “The future of cash flow for car insurers
will be from the provision of web/telemetricbased car services, rather than from risk-based premiums.” He said conservative estimates suggested that by 2040 car insurance premium cash flow would be less than 40% of its current size. But Naylor said there could be a much bigger impact and premium income could drop by more than 90% by 2030. Insurers who could not lower their costs would not survive, he said. “Before this, the turning point where intense and probably destructive completion starts, is likely to occur before 2025, conceivably from around 2022. Given that crashes caused by the autonomous cars will likely be the fault of software or the telemetrics, product providers may well have to cover costs under normal product guarantee laws or will provide very cheap life-of-the-car insurance at purchase time. Once 50% or more of cars are autonomous and networked, then car crashes will only occur due to software bugs or hacking, or roadside objects, or cars driven manually.” He said there were also changes to come for house policies. The use of big data and analytical techniques meant that house insurance would be priced to individual houses, using data such as house building materials, distance to neighbours, proximity to schools or transport routes, soil conditions and the risk of flooding. Telemetrics within houses could be linked to
COVER STORY insurers’ systems to report intruders or fire risk. “Houses will have fingerprint or voiceactivated security linked to doors or windows. Sensors linked to electrical wiring can shut down electricity flow if overheating and a potential fire is detected. This will lead to fewer claims and thus lower premiums,” Naylor said. “Estimates in general predict at least a 60% drop in risk for a connected house. Of course, house upgrades occur at a far slower rate than car renewal, but as insurers fight over an increasingly smaller premium flow, profit margins will fall faster than risk levels. The overall impact on premiums cash flow will be less than that of car insurance, as the risks like flood or earthquakes will remain mostly unchanged. However, given that general insurers tend to obtain 40% to 60% of their income from car insurance rather than house and contents, as car insurance becomes a shrinking overall income pool, competition can be expected to increase for house customers, thus reducing profit margins in all products to near zero.” Young customers would have increasingly high expectations of their insurance companies, he said. That would put increasing pressure on them to come up with new and innovative ways to engage. “There is no question that the insurance industry is far behind technologically. Millennials find that frustrating. We live in a world where if you want something, you go on your phone and get it instantly. The insurance industry just isn’t like that.” Millennials would represent more than 50% of the global workforce by 2015 and 75% by 2025. Their spending power would surpass Baby Boomers’, and those consumers would expect to be able to access the information and products they wanted via the internet. “Insurers which display continued passivity to technology will no longer be able to survive, as the cost advantages of technological leaders or external disruptors will destroy the cost base of laggards,” he said. New Zealand insurers could also expect to face competition from international operators who would come into the country online, he said. Some start-ups would find they had better technology and systems available to them than insurers did and could adapt to what was required in the industry faster than the insurers themselves could. Naylor said that by 2025 a substantial proportion of insurance administration staff were likely to find the activities they carried out in their jobs drastically changed or gone. He said the best estimate was that about 70% of all current job activities in insurance administration would undergo profound disruption. “Note that this is best examined in terms of ‘activities’ rather than ‘jobs’, with employees seen
as performing a range of activities which will each be disrupted at differing times to differing degrees. Thus software will not replace jobs but will replace some activities. Insurers will have to continually rearrange employee roles to expand newer activities and reduce shrinking activities. The ability of employees to interact with and oversee software processes will be vital, as will the ability to interact with big data and social media.” His report said that international estimates predicted automated administrative processes would cut insurer costs and premiums by a quarter within the next three years, while speeding up the response time for clients. “Impact is likely to be closer to 60% by 2025. Note that this doesn’t mean eliminating human response, as most digital natives expect the availability of humans or advisers as one of the many channels available.” But he said some insurers faced a struggle to get their systems up to scratch to deal with what would be expected from them in the new environment. “Because their business is data-based, insurance companies have always seen the advantages of computers and were early adaptors, investing heavily in the 1970s and 1980s,” he said. “At that stage packaged software was in its infancy, so insurers developed most of their systems inhouse to cover specific functions. “ But he said those in-house systems had become obsolete in many cases and were hard to adapt to the new environment. “While most industries have these issues, the early adaption of IT by insurers perversely makes their issues more acute. Most insurers also struggle with multiple incompatible legacy systems from mergers as well as myriad sources of input data which are non-standardised and incompatible with IT systems.” Insurance companies that survived through an IT revolution would be those that could work out how to make good use of big data alongside telemetrics, he said. For the first time, insurers will have access to the kind of data that will enable them to personalise policies to a highly specialised level. “There will be a number of issues which will involve complex managerial or ethics decisions, and these will need to be pro-actively dealt with. An example here is how to deal with elderly drivers whose telemetrics indicate they are a risk to other road users, or how to deal with families who have an inherited cancer risk gene.” He said telemetrics offered insurance a qualitatively different way to handle claims and their relationship with clients. The impact on insurance claims could be immense. Claims would be easier and faster. “The current claims process is antique – slow and excruciating to customers. It has no place
in a modern world. The use of networking will allow the creation of real-time dynamic risk-rating, which will transform the insurer relationship with clients,” he said. “A client who changes from a pattern of limited driving to intensive commuting for a short while may find their premiums jump for that period, whereas a client who drives more safely will find their premiums drop. Thus premiums may be set weekly or even shorter, based on usage. Since insurers will get realtime feedback on when cars are used, it will be possible to offer innovative products. For example, several insurers have started using these telemetrics to trial asking car owners to pay a ‘driving premium’ when they actually drive, with a ‘residual premium’ if the car is parked in the garage. Given that cars are parked for an average of 95% of their lives, it would have a huge impact on the distribution of premiums, with heavy users of cars paying multiples of the premiums which light users pay.” Up to 90% of all underwriting by insurers could be handed over to software, he said, dramatically cutting costs. “The use of telemetrics and intensive administrative software will mean that most activities in the claims process will be automated, with little direct human involvement. For example, if two network-linked cars crash; the telemetrics will provide a detailed history of each car’s actions prior to the crash, and the two insurers’ computers will thus be able to determine who is at fault and agree on a sequence of actions and then contact bank computers to arrange payments, all within micro-seconds. They can also inform emergency services, tow-trucks, crash repair firms, friends of the car drivers, change appointments, arrange auto-taxis before the dust has settled.” Claims staff would be left overseeing the systems and making sure things were happening as they should. Naylor said insurers would need to reorganise themselves and learn how to launch new products and services while testing and obtaining feedback and responding to it in a continuous process. The time it took to bring a new product to market would need to be shortened and products would need to be simplified while also providing more customisation. He said insurance had been a laggard in terms of its adoption of technology and the extent it had been affected by disruptive innovators, but it had reached a tipping point where there was no choice but to take action. “Insurance customers do not want an insurance product; they want an insurance service. Insurers need to reimagine their entire business model. In today’s world it is more important to be wrong fast than to be right too slowly.” www.covernote.co.nz
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COVER STORY
NOT SO FAST, DR NAYLOR… By Melville Jessup Weaver
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r Michael Naylor of Massey University recently released a report A Perfect Storm in Insurance: How to survive the looming waves of disruptive technology. The report considers a range of new technologies that Naylor believes will combine to disrupt up to 80% of insurance job activities and see motor insurance premiums drop by over 90% by 2030. Whilst one should embrace new technology and enjoy the excitement of new developments, one should also be realistic about the timeframes involved to effect such major changes. DRIVERLESS CARS Driverless cars are often touted as a soon-to-be major disruptor for the insurance market. How much risk needs to be insured when the driving decisions are carried out by an algorithm? Developments in automated driving are fascinating and make for great headlines, but the reality is that it takes many years to replace a nation’s vehicle fleet. In New Zealand the average light vehicle is over 14 years old and ageing. Trucks and buses are even older. Even if one were to flick a magic switch such that every new car sold from tomorrow was autonomous, it would still be decades before our vehicle fleet was comprised of mostly autonomous vehicles. VEHICLE SAFETY DEVELOPMENTS So how long does it take for new technologies to make their way into our vehicle fleet? Electronic Stability Control (ESC) is one of the most significant vehicle safety developments of the last few decades. ESC was developed in the early 1990s and became available in US vehicles from around 1995. By 2012 ESC was standard in 97% of new registered US vehicles. Yet by that point still only 38% of the vehicles on US roads had ESC. The average age of a US light vehicle is around 11.5 years, so is comparatively newer than the average NZ vehicle. The NZ Transport Agency is mandating ESC for vehicles entering the country over a period 30
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from 2015 to 2020. We can probably expect to see extensive use of this early 1990s technology at some point after 2020. INSURANCE TELEMATICS Another disruptor which Naylor discusses is telematics, devices that feed information to insurers or other stakeholders on an individual’s driving habits. The concept extends further (for example to monitoring devices in the home) but has been little utilised beyond motor insurance. PREMIUM VOLUMES Telematics insurance policies are popular in the US and UK where motor insurance premiums are high, particularly for young males.The main reason for this is the third-party bodily injury component. In New Zealand, ACC provides no-fault bodily injury cover regardless of how an accident happens. This includes cover for injuries on New Zealand roads, regardless of the fault of the respective drivers. The impact of this for New Zealand insurers is that premiums do not need to cover bodily injury. By contrast, the cost of cover for third-party bodily injury in the US and UK is immense. Claims management companies and “ambulance-chasing lawyers” served to increase insurance settlements for bodily injury claims to ludicrous levels (although recent reforms have countered some of this). Analysis has been done which shows the breakdown of California’s private motor insurance premium between that to cover physical damage and that for liability (of which the largest component is bodily injury). Similar analysis of UK motor premiums reveals that around half of the claims costs are for bodily injury. Motor insurance premiums in New Zealand are comparatively cheap, thanks to ACC, but this means that the cost/benefit case for insurers to invest in telematics technology is weakened. DEVICE COSTS The cost of vehicle telematics devices is reducing, but there is some way to go before the numbers stack up for New Zealand.
COVER STORY In the UK, professionally installed hardwired “black boxes” are the device of choice for telematics policies. The costs are significant (generally a few hundred pounds), not least because they require installation by an expert. But motor premiums for young males can be a few thousand pounds per year. Small percentage savings on claims costs can quickly justify the added expense. In the US, detachable devices which utilise a vehicle’s OBD-II port are more common.The devices are cheaper (some are now available under $100) but come with limitations (for example, the policyholder is able to remove the device at will). US insurers have also made progress in working with vehicle manufacturers to utilise the information already captured by vehicle computers. In New Zealand there have been attempts to enter the telematics market using the cheaper smartphone option (for example Tower’s SmartDriver product). But the reliability of smartphone data is questionable and the cost of investing in more sophisticated devices simply isn’t justified with our low margin, low volume premiums.
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WHILST ONE SHOULD EMBRACE NEW TECHNOLOGY AND ENJOY THE EXCITEMENT OF NEW DEVELOPMENTS, ONE SHOULD ALSO BE REALISTIC ABOUT THE TIMEFRAMES INVOLVED TO EFFECT SUCH MAJOR CHANGES. BIG BROTHER COSTS Device costs will come down and the argument for insurers to invest will be strengthened, but consumers are becoming more aware of privacy issues and more wary of Big Brother monitoring. Do young males in the UK like being monitored by their insurer? Definitely not. But when the alternative is an annual premium some multiple of the value of their car, then compromises must be made. Consumers will accept some monitoring by Big Brother, but only if the price is right. For New Zealand insurers, the price is unlikely to be right any time soon. So does this mean that New Zealand insurers needn’t worry about disruptive technologies? No. The market is changing and insurers, like any other industry, will need to adapt or die. But don’t fire the underwriters just yet. The conditions overseas that have spurred the development of telematics in the insurance industry simply don’t exist in New Zealand, at least not yet. And whilst new technology will undoubtedly make its way into the sector (and is already), our comparatively cheap motor premiums and ageing vehicle fleet mean that this isn’t going to destroy the industry tomorrow.The wise insurer will follow new technology closely and take a considered and measured approach to technology investment. Insurance is about spreading risk, sometimes human risk, such as car crashes, and sometimes natural risk, such as earthquakes. Perhaps in time (lots of time) driverless cars will see small motor vehicle claims replaced by massive product liability claims. And technology also brings new risks to be insured, for example OBD car theft. In the medium to long-term, a varied mix of autonomous, semi-autonomous and non-autonomous vehicles will make for an interesting pool of risks to insure. As long as the future is uncertain there will be a need for insurance, whatever form that takes. We look forward with measured anticipation to new technology in the insurance sector.
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31
OPINION
Cyber security: How do you tackle it? Cyber security is not just an IT issue. It requires a systematic risk management approach, leadership and increased general awareness.
O
f course, IT remains a key part of any cyber risk management strategy. It creates firewalls, passwords and up to date viruscheckers that are all central to your business’ protection, but experts warn IT solutions alone are ineffective in guarding against cyber risks. CYBER THREATS ARE GROWING IN SCALE AND SERIOUSNESS Cyber threats have grown exponentially in recent years. In November 2015 Symantec detected 19.4 million new pieces of malware globally in one month, and the World Economic Forum lists cyber-attacks in its top five risks due to the probability and impact of such attacks. Cyber threats are also becoming more sophisticated, meaning they are likely to go undetected for longer and cause greater harm. Incidents range in severity from targeting individuals and small businesses and demanding a ransom for resumed access to their systems, to corporate espionage of large organisations, putting valuable intellectual property at risk. Recent cyber-attacks on organisations such as Sony, eBay and Microsoft, as well as Australian retailers David Jones and Kmart highlight the significant reputational risks these attacks present. It is unsurprising then that many cyber-attacks go unreported, especially when data is breached. So the prevalent “it won’t happen to me” attitude needs to change for two reasons. One, it probably will, and two, you cannot afford to ignore the impact it could have on your business. A serious cyber-attack can cripple a business as effectively – perhaps 32
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more so – than a fire burning down its headquarters. However, the low risk of a fire is protected by numerous measures such as fire extinguishers, sprinklers, evacuation plans and insurance. Similarly, cyber risks require a systemic risk management approach. WHAT DOES THIS MEAN FOR BUSINESSES? In the past year, 56% of New Zealand businesses have reported at least one attack, yet only 65% are confident that their information technology systems are effective. In this environment, basic IT literacy is essential and as cyber risks evolve, this knowledge needs to grow.Terms like ‘cyber security’ (safeguards protecting against a cyber-attack) and ‘cyber resilience’ (an organisation’s ability to cope with a cyber-event) should be understood, with strategies in place to boost both. Cyber security and cyber resilience require active engagement by owners and managers and should not be restricted to the IT department. Despite this, many New Zealand businesses are neither confident in their information security or nor have cyber strategies in place. The Government is taking steps to protect and guide businesses, including security and resilience guidelines and beefing up national systems to address cybercrime. Following its highly successful National Cyber Security Summit earlier this year, the National Cyber Policy Office is liaising with the private sector to develop cyber credentials for businesses and a national Computer
OPINION
Toby Gee
Special Counsel, MinterEllisonRuddWatts, toby.gee@minterellison.co.nz
Emergency Response Team (CERT). The Australian Government is also planning a mandatory data breach notification scheme. The bill would require government agencies and businesses subject to the Privacy Act to notify the regulator and affected individuals (or the public generally) following a serious data breach. The New Zealand Government has proposed a similar response. WHAT BUSINESSES SHOULD FOCUS ON Informing yourself about how to respond to cyber risks (both before and after a cyber-event) is vital. A business' cyber security is no longer the domain of IT teams and professionals. Businesses should develop a data breach response plan, provide regular training to their employees, actively consider or address supply chain risk and make suitable insurance arrangements. As well as a suitable and tested crisis management plan, cyber risks insurance can be an important cyber resilience tool offering assistance to contain a crisis when it happens. It can provide protection against both first-party losses (such as business interruption, the cost of recovering data), and third-party losses (such as claims by others for breaches of contract or data loss due to the information breach). Expertise and guidance is available to help businesses prepare systematic and practical cyber risk management plans, appropriate to the organisation's size and complexity. By acting now you can improve your business' sustainability.
Effectively managing data risks and protecting personal information during the stages of its lifecycle involves the following steps: • Consider whether to collect information – is it really necessary to collect and hold personal information? • Privacy by design – how are personal information protection and handling procedures embedded in practices and policies? • Assess the risks associated with collecting personal information for a new process or change to an existing process and as 'business as usual'. • Take appropriate steps to protect personal information. • Destroy or de-identify personal information when it is no longer required. • Train staff to be vigilant with passwords, confidentiality of data and scam emails. • Reduce the quantity of any marketable data held by the business and how long it’s held. Run cyber security checks and check terms in contracts with suppliers. www.covernote.co.nz
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FEATURE
FLOURISHING INSURANCE SECTOR BENEFITS NZ I
t is in New Zealand’s interests that insurance companies adapt and thrive in a changing environment, an industry commentator says. PwC recently released a report examining the future impact of fintech. It found that half of insurers expected their industry to be the most disrupted by technology. They expected self-directed services to be the biggest looming change for insurance and the one to which they were most likely to respond. The report said insurance companies were investing in the design and implementation of more self-directed services, both for customer acquisition and ongoing servicing of those customers. “This allows companies to improve their operational efficiency while enabling online and mobile channels demanded by emerging market segments such as millennials.” That was followed by the increasing availability of usage-based insurance, remote access and data capture, and connected and smart car technology. The report noted that there was increasing interest in finding new underwriting approaches that were based on the generation of deep risk insights. Usage-based models were emerging in response to customer demand for personalised insurance solutions and insurers’ increasing ability to access and capture remote risk data that would help them to develop a granular view of risk and enable personalisation. “The driving force behind innovation in insurance can largely be attributed to technological advances outside the insurance sector that will bring new opportunities to understand and manage the risk but will also have a direct impact on some of the foundations,” the report said. PwC financial services sector leader Andy Symons said it was clear that insurance was one of the prime candidates for fintech disruption. He said one of the challenges for insurance companies was that they were mostly operating with older technology systems that had been developed with a focus on systems for administering policies, rather than catering for
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changing customer culture. They would need to be updated to allow organisations to easily provide the experience customers had come to expect from a broad range of online and physical companies, he said. “Legacy technology may affect their ability to generate data-driven, well-designed real-time transparent experiences customers have come
be strong in future. It’s not in the country’s best interests to see these big institutions weakened. We do want to see them evolving and start thinking and acting differently.” In some cases that would take a big culture shift, in a time when cost and resources were already under pressure, he said. Insurers would need to keep their existing
to expect and want,” he said. “That’s one of the challenges.” Smaller start-up companies, particularly those with good tech systems already operating, could view the sector as an attractive market to get into and take a different and faster approach to insurance, he said. “Rather than thinking they’re going to set up an insurance company that looks and feels like the incumbents, they take an approach that is more focussed on pricing or on one or two customer problems and trends and work hard to solve that problem elegantly.” Some incumbents might choose to merge with or acquire those operators. He said insurance companies’ boards, shareholders and executive needed to be willing to look at where the market was heading and respond quickly. “They have to want to evolve. We need these big companies to survive and
businesses running but carve out time for people to develop new approaches and thinking. They would need to be willing to quickly try things and not be afraid to “fast fail” those that did not work out as expected. “They need to develop more agility. That’s a bit foreign for these large, traditional institutions. I certainly think they are going to go through tough times but we will also see a lot respond quickly and develop new behaviours that will ultimately be good for customers.” Customers could expect products that were not only cheaper but more transparent, he said, easier to understand and relevant and tailored to the customer. “Organisations that succeed will do that in a non-spooky way.” Insurers would need to develop ways to be relevant to their customers more often than just when they took out a policy or made a claim, he said.
ASK AN EXPERT
Oil sprayed on kiwifruit QUESTION… My client was a picking contractor who had a contract with a pack house to pick the third party's kiwifruit orchard. The fruit was picked and in the bins and was being transported to the load out bay on the orchard where it was to be picked up by a transport company and delivered to the pack house for packing. While being moved to the load out bay a hydraulic hose (permanent fixture of tractor) came off and oil was sprayed over the fruit in the kiwifruit bins. This was not noticed until the fruit was put across the grader at the pack house and has resulted in my client being held liable. We have lodged the claim under a commercial motor vehicle policy, but the insurer wants to decline under a public liability policy. The insurer has declined the claim on the basis that the fruit was owned by my client as follows: Exclusion: Reinstatement, repair or replacement of your products You are not insured for liability for damage to your product arising out of such product or any part of such product. Your thoughts would be appreciated.
REPLY… CROSSLEY GATES, DLA PIPER While a CMV Policy covers legal liability in connection with the use of the insured vehicle, it does not cover legal liability arising solely from the use of any mechanical plant carried on the vehicle.That liability is covered under a public liability policy. As I understand it, the difference arises because of the distinction between the risk of mobility (CMV Policy) and the static risk of machinery (PL Policy). Whether it is under one or the other can be a fine line. Presumably the machinery on the tractor was being used when the hydraulic hose burst. That would tend to suggest it is a machinery risk rather than a mobility risk, particularly if the tractor was stationary at the time. The insured was working on the fruit at the time in the sense the fruit was being transported from A to B. Therefore, under the PL policy, the fruit will be a 'product'. Generally, there is limited cover for liability for damage to the product. A PL policy is designed to cover liability for resultant damage the product does to other property. Your client would need a products guarantee policy (not generally available from local insurers) to have cover for liability for damage to the product. REPLY… DAVID CHOW If the incident occurred from working risk of the tractor, then I agree the PL Policy should respond. I assume the claim lodged under property in care and custody and control of insured but declined under damage to products. Without knowing the full facts, I’m assuming that the dislodgement of hydraulic hose was an event unintended and unforeseen. The damage to kiwifruit was caused by the oil spill from the dislodgement of hydraulic hose (independent event) and not damaged by a "process", so I am not sure if the claim can be declined using this exclusion. Perhaps to illustrate where I am coming from, say if kiwifruit need to be cleaned/washed (cleaning being the process) before it goes to the packing house and was damaged from contaminated water, then the declinature/ exclusion applies. www.covernote.co.nz
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ASK AN EXPERT
Spring cleaning goes wrong
More than one dwelling
QUESTION…
QUESTION…
A client had cleaned her home and her mother turned up with a steam mop and said she would love to polish the wooden floor. Unfortunately, it stained the floor and the client rang for a claim form, and it was sudden, accidental damage. The assessor agreed. The insurer has declined the claim, saying it is a cleaning issue, which is not covered. I believe this is unfair and unreasonable, as it was sudden, accidental damage. Can you confirm or deny, please?
We have a scenario where a client had internal damage due to the Valentine's Day quake to one of their three units, and EQC has applied three excesses of $200 because it’s a building containing three units. Even though only one of the units was damaged, they applied a $600 excess. EQC has amended their guidelines as of September 2012 which says that the excess to apply for properties containing more than one dwelling is $200 multiplied by the number of dwellings in the building or 1% of the amount payable, whichever is greater. Prior to this the guidelines had a distinction between internal and external damage, where it stated that for internal damage to units, the excess for a single dwelling applies to each unit damaged. For external damage the excess multiplied by the number of dwellings in the building would apply or 1% of the amount payable. Logically, it doesn't make sense to apply multiple excesses to the number of units regardless of whether they are all damaged or not, especially when they pay separate EQC levies on each unit. I am not sure how EQC can change their guidelines between March 2012 and September 2012 when we are unaware of any changes to the EQC Act. This will have an effect on our body corporate policy-holders as well as the multiple dwellings properties insured under one policy. We would like to know if this is an incorrect policy from EQC and did the Act change to back this up? Your expert advice on this would be most appreciated .
REPLY… CROSSLEY GATES, DLA PIPER It probably was sudden accidental damage, but I doubt the insurers are saying otherwise. The exclusions must be considered also. It is common in a house policy to exclude from cover damage to an item while it is being cleaned. Cleaning is a hazardous activity, and this is why damage arising from it is often excluded. I suspect this is the reason the claim has been declined.
Meth hits landlords QUESTION… We have a claim where the insurer is declining the P contamination claim because the landlords’ obligations were not met by the insured. The policy wording says that: You are not covered for any loss, expense or liability in connection with the manufacture, storage or distribution at the home of any controlled drug... However, the lab reports says the contamination was due to smoking meth in the house, not manufacture, storage or distribution. Have we got a case here where we could argue that, firstly, if the landlord met its obligation, it wouldn't have made any difference because they would have found no manufacture, distribution and storage, so it shouldn't be declined because of that? Secondly, the contamination was due to smoking, so landlords’ obligations aren't required here?
REPLY… CROSSLEY GATES, DLA PIPER The landlord's obligations are a limitation on cover and so are subject to section 11 ILRA 1977.The onus is on your client to prove, on the balance of probabilities, that the non-compliance did not cause or contribute towards the loss. If he or she can, section 11 applies. If the contamination was not caused by manufacture, storage or distribution, the exclusion does not apply. 36
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REPLY… CAMERON TAYLOR EQC have asked me to post on their behalf as they don't use this forum. EQC advise: The regulations which govern excesses came into force on January1, 1994. The representative advises to his knowledge they have not been revised or amended. For a residential building the excess is $200 multiplied by the number of dwellings in the building or 1% of the amount payable under section 29 of their act, whichever is greater. EQC are happy to help further at eqcover@eqc.govt.nz. Further guidance and the most up-to-date guidelines are on their website.
ASK AN EXPERT
Damage by tenants
Limitations on tenant fire
QUESTION…
QUESTION…
We have commercial clients who lease a building belonging to Housing NZ. There was water damage to the property as a tap had been left on inadvertently. Housing NZ were seeking recovery of costs, and we lodged a claim on behalf of our clients with their insurer. The insurer was in agreement with our opinion that under the Property Law Act, HNZ are not able to recover from our clients. HNZ are now advising that because they have no insurance themselves, this gives them the right to recover regardless of the Act. Is this correct?
My client had a policy that was lapsed in December 2009. In September 2008 his tenant had a machine fire, and the tenant's insurer paid for his claim. The tenant “made good” the apparent damage to the building, thought to be largely cosmetic. Whilst undertaking R&M work to the roof, my client has very recently discovered there was other damage in the roof cavity that was apparently not noticed in 2008, and he now wants the insurance company to appoint a loss adjuster to discuss with him the repair work needed. The insurance company have rejected this request, quoting the statute of limitations. Are they correct, and if so, is there any relief available under the previous legislation?
REPLY… CROSSLEY GATES, DLA PIPER The exoneration of lessees under the Property Law Act for negligent damage only applies if the premises are insured or if the damage is caused by certain named natural disaster perils. A leaking tap will not come within any of the named perils. Therefore the exoneration will not apply if there is no insurance (odd?).
REPLY… CROSSLEY GATES, DLA PIPER As I understand it, during the currency of a policy over your house in September 2008, a tenant damaged it and the tenant’s liability insurer met the cost of repairing it. Your client has now discovered for the first time that not all the damage was repaired.Your client now wishes to claim under the policy your client had in 2008 for that unrepaired damage. House policies respond to damage occurring during the period of insurance. It sounds like this damage did occur during the currency of the 2008 policy. Therefore there may be cover. Claiming now will be a very late notification of a claim on a 2008 policy, but the statutory limitation period is not an issue for your client's claim. If I have understood the position correctly, I recommend your insurer relooks at the claim.
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.
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OUT AND ABOUT
FOCUS ON FUTURE More than 300 people gathered for this year’s Insurance Council conference, where the future trends and possible disruptive influences on the industry were discussed. KEY PEOPLE
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OUT AND ABOUT
www.covernote.co.nz
39
FEATURE
INSURERS TOLD TO CHECK COMPLACENCY New Zealand insurers are being told they must not become complacent about their customers' loyalty ahead of an influx of new, convenient competition into the market.
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Applies to glass replacement. Excludes heavy motor vehicles
0800 80 90 80
smithandsmith.co.nz FEATURE
T
arget Group, a provider of software and business process outsourcing solutions, has released a new white paper that shows 89% of New Zealand consumers will only consider between one and three insurers when choosing their next policy, while 81% say they like and trust their current provider. But the report said that brand loyalty could be a "double-edged sword". New Zealand insurers who had been able to carve out a large market share had more to lose. It said insurers would have work to do to convince the next generation of insurance customers that they were best-placed to meet their needs, as more competition came into the market focusing on price and convenience. "In order to continue to meet customer needs, insurers must embrace new models of technology and make them work for them," the white paper said. "A strong social media presence, a comprehensive web experience, telephony, as well as any device – a true omni-channel offering combined with an innovative range of value added policies will help give them the edge over the emerging competition."
“If insurers can match new entrants in terms of usability, cost and cover, they are likely to stay at the top of the industry for a long time to come," Richard Holling, insurance director, of the Target Group, said.
IT SAID 70% OF NEW ZEALAND RESPONDENTS VISITED INSURERS' WEBSITES AND 52% SPOKE TO SOMEONE IN A CALL CENTRE WHEN THEY WERE MAKING A PURCHASE.
"The Australia/New Zealand market is in a fortunate position at the moment. However, it should learn from what has happened in other markets and realise that change is inevitable. In order to meet increasing customer expectations, insurers have to embrace disruption, introduce innovative new product offerings and simplify the end-to-end customer experience. In such a competitive industry, no one can afford to stand still," he said. “The overwhelming support for major high street and technology brands, such as Apple, Amazon and Google, threatens to rival the market leading position traditionally enjoyed by Australia and New Zealand insurers. Even though they are not closely associated with the insurance industry, their familiarity has laid the groundwork for a future foray into this field. Insurers need to embrace new technology platforms and offer customers the same reassurance and ease of use that they have come to expect from sites such as Amazon. They need to be prepared to take the initiative and disrupt themselves, or new entrants will happily do it for them.”
www.covernote.co.nz
41
COVER STORY
INSURANCE DISRUPTION: IT’S TIME TO TALK ABOUT THE CUSTOMER
By Andy Symons
T
he average person has a great deal of power. No longer do they have to be unempowered consumers; today everything from television to shopping is designed to work around them. In many ways, customers have been trained by brands such as Google, Sky, Apple and Amazon to have this type of thinking. If they need something, they can get it when they want and how they want, and thanks to technology, businesses can give it to them. With the swipe of a finger, people can record a television show back home from their mobile phones; they can stop streaming music in the house and start where they left off as they get in their car; they can find their nearest restaurant online and call to make a booking in seconds. This is certainly no less impactful than in the insurance sector. Commercial and individual policyholders demand that insurance services revolve around them, not the other way around. They can go online and buy event-based insurance or coverage for a specific item in real
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time to solve their particular cover issues. If a business is responding to an event by taking out cybersecurity insurance, they can see what products are on offer, compare prices and protect their company with less effort than ever before. It’s the new norm but one that requires insurers and brokers to rid themselves of old ideas.They simply have to if they’re going to stay relevant in a customer-centric world. Individual clients may now be less likely to opt for an off-the-shelf insurance product, instead preferring to choose the cover options that suit them at that point in time. Many will also have a say in where their insurance comes from, whether they prefer traditional players or a peer-to-peer model, for instance. And on top of that, they want instant answers to their specific problems. People are demanding speed, transparency and convenience, which is also disrupting the insurance broker segment. Indeed, as a clientfacing side of the industry, insurance brokers
will want to be at the forefront of technical disruption and changing consumer tastes, or find themselves behind the times. FINTECH NOT A FAD The term “game-changing” is thrown around more than the ball at Eden Park, usually as a piece of marketing jargon. It’s important that the growth in financial technology (fintech) companies is not treated in the same way. Just take it from insurers themselves. In PwC’s Global Fintech Survey from June 2016, almost three in four insurance companies (74%) said there will be disruption of their business over the next five years. On top of that, 43% have placed fintech at the heart of their corporate strategy. This response is an easy one to understand. fintech companies have tailored their services for speed, convenience and flexibility to the customer, teaching financial service players as a whole a valuable lesson – and one that many didn’t know they needed. As one senior executive at a global banking
COVER STORY
Andy Symons is a Partner at PwC
organisation explained, “We thought we knew our customers, but fintechs really know our customers”. THE PERSONALISED TOUCH Big businesses tend to respond slowly to change, and as this year has proven, change happens fast.That’s one reason why fintechs have been able to jump into the market and cause mass disruption. They’re small and likely to take risks, so when it works out, they can grow quickly. In the US, insurance company Oscar has used technology to get closer to the customer, providing a ‘concierge service’ to answer any question a policyholder might have. After 18 months in business, the New York Times says the company is valued at more than NZ$2 billion. Another example of meeting individual consumer needs is Metromile, similarly a US fintech, which sells pay-per-mile car insurance to appeal to the 70% of Americans who overpay for car insurance by travelling less than 10,000 miles per year. These are just a couple of instances of
emerging businesses that have spotted a lack of response among the traditional insurance players. In truth, there was a substantial gap for them to fill. Across all industries, PwC’s research shows that around 18% of companies rate their delivery as “fully customer-centric”. In the financial services sector as a whole, 53% of financial institutions claim this level of consumer focus, while for fintechs, the figure exceeds 80%. For those in the insurance industry, we’re at less than 5%. It’s no surprise that the trend of enhanced customer-centricity has taken off, and fintechs can clearly take a lot of credit. What’s more, it’s left many in the insurance industry trying desperately to catch up. BRIDGING THE CUSTOMER DIVIDE Financial services firms know many of the challenges they face, and it’s good to see that they place the trend of changing consumer tastes right at the top of their agendas. As the PwC Blurred Lines: Global fintech Report for 2016 shows, the biggest challenge for companies is meeting the new needs of customers with new offerings, with 75% of firms identifying it. Meanwhile, enhancing interactions and building trusted relationships was brought up by 42%, and improving the business with more sophisticated operational capabilities has had the same response. Insurance brokers can clearly step in here, helping to bridge the gap between what consumers want and what they get from their providers. Communication is key, and technology is playing a huge part in opening up new channels, enhancing current means and developing better, customer-focused solutions. Instead of that business client going online to find cybersecurity insurance, they can reach out to their broker through an app, or a broker can be proactive and approach their client with new products depending on risks they perceive in their business. COMMUNICATION IN 2020 Over the next five years, the ways of communicating between brokers/insurers and their clients will evolve. Call centres are currently the most popular form, though their popularity will almost halve by 2020. Email will see the same drop in usage, while branch visits and physical mail will make up a very small proportion of the channels. At the same time, the popularity of mobile applications as a form of communication will grow almost sevenfold, while website and webbased platforms will double to become the most preferred means of conversing with clients. This won’t be entirely new information for many brokers and insurance companies; the next
step is making sure their firms are set up to get the most value by communicating in the ways that customers want. They will need to provide answers to very specific client questions in a short amount of time.They will need to act on what the customer wants, not just what they perceive that they want, and they’ll have to balance this by being a trusted adviser, not just a provider of cover. They’ll also have to balance these new expectations placed upon them against the fact that insurers and brokers have not traditionally had frequent contact with customers – at least not to the extent that consumers now demand. It’s interesting to note that digital initiatives among banking firms have been to improve datayielding interactions with clients, learning more about the people and increasing the stickiness of their relationships. In many ways, a change in direction such as this will play to the strengths of insurance brokerage firms, though there’s some way left to go. Respondents to the Risk Buyer Survey by PwC showed that many brokers already have the level of trust that builds closer client relationships. In fact, 67% of insurance customers said they would characterise their relationship with their brokerage firm as that of a client and trusted adviser, ahead of labels like service provider (63%), solution provider (48%) and placer of coverage (46%). By providing the elements of customercentricity that many fintechs are already mastering, this proportion can go up, for the benefit of both brokers and their clients. A BROKER’S NEW YEAR’S RESOLUTIONS As we step into 2017, it could be a great time for brokers and insurance companies alike to make some New Year’s resolutions. The first could be investing in the technologies and communications platforms that clients want to see and use. Emerging tech megatrends like virtual reality, drones and artificial intelligence might also be worth experimenting with to see where the potential lies. To meet the challenge of fintech disruption head on, brokers might also like to explore partnerships with these upcoming companies. Only 28% of insurers are doing so in 2016. By embracing disruption and turning it on their own businesses, insurance brokers and providers can transform one of their biggest commercial risks into a wide window of opportunity. Finally, only 14% of insurance players are actively investing or supporting fintech incubation, which could be another way for firms to get on board with the revolution of new consumer power. Clients are changing; are you? www.covernote.co.nz
43
OPINION
Emerging environmental issues in New Zealand T
he environment is central to our perception of New Zealand, and we trade on our 100% pure image. Yes, historically, environmental insurance has not formed a core part of a company’s insurance programme. As demonstrated by the recent water contamination crisis in Havelock North, widespread pollution can have an enormous impact on a community, from individual health to financial loss due to business closure, decreased tourism, decreased manufacturing output and other knock-on effects. How many businesses were prepared with insurance and a risk management plan to protect them? Policymakers are actively legislating to address pollution issues as evidenced by the enactment of the Environmental Reporting Act 2015. Litigation is increasing whereby there has been an upward trend in legal action in the Environmental Court, with the number
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of filed appeals increasing by 24% over the past year. Stricter enforcement of the Resource Management Act 1991 and penalties imposed on guilty parties have in some cases amounted to hundreds of thousands of dollars. Clean-up costs for serious pollution events can run into millions of dollars. This changing landscape has increased demand for specialist environmental insurance policies that provide an all-encompassing ‘environmental shield’ with coverage for all pollution events that may affect a business. Yet the industry has been slow to meet this demand. CURRENT NEW ZEALAND LANDSCAPE The liability environment in New Zealand is one that "polluter pays" and there exists a hierarchy of responsibility in the event the original polluter cannot be found. For example, an innocent landowner retains an element of liability for remediation or clean-up costs in the event their tenant is unable to remediate a
premises from pollution caused by their actions/ operations. For example, we have seen numerous instances recently of property owners inheriting clean-up costs from the use of premises for methamphetamine production or use. The environmental insurance industry has for some time been insuring these risks either on a direct or contingent basis. And while cover for pollution is available under other insurance policies, it is typically limited in the protection it provides. General liability policies only provide cover for sudden and accidental pollution incidents. This means ongoing or gradual pollution that later results in a claim would not necessarily be covered under a general liability policy. Even in the case of sudden and accidental events, there will be no cover for the actual cost of cleaning up or for other associated costs such as emergency response or business interruption to the operations.
OPINION
Statutory liability policies will in many cases respond to statutory prosecutions arising from a pollution incident and will cover fines and reparation awarded. However, they will not cover third party damages claims, emergency response services or the costs of actually cleaning up the event. Most good directors and officers' liability insurance policies will include some protection for senior management of companies for their personal liability. However they will typically only respond to defence costs arising from civil claims or investigations only and will not provide cover for damages awarded, clean-up costs, remedial costs, fines or reparation awards. One key peril which is not covered under traditional liability insurance is asbestos, which is typically fully excluded. Environmental liability insurance will provide a critical protection for those handling asbestos that will not generally be otherwise covered.
BRAVE NEW WORLD Environmental liability insurance is increasingly becoming a necessary practice in the corporate world, as many companies consider their environmental exposures for the first time. The fact that every business is at threat is driving them to reach new levels of preparedness in the fast-changing world. Environmental legislation is continually evolving and becoming more stringent, as is the regulators’ enforcement of the legislation. To reflect this, policy forms continue to evolve to offering extensive coverage. However, businesses have the option to enhance their policies to cover claims and losses arising from various environmental factors. An example of this would be pollution liability insurance. Pollution liability insurance provides coverage for a variety of potential pollution conditions that could occur and result in legal liability and expense. The insurance is designed to respond to claims for clean-up costs and bodily injury and property damage that can occur as a result of both pre-existing and new pollution conditions. • Pre-existing pollution conditions are those that pre-exist the inception date of the policy, regardless of when they are discovered or when a claim takes place. These conditions are of special concern to parties acquiring a business for which they are unaware or uncomfortable with the past practices. • “New” pollution conditions are those conditions that take place after policy inception. Various amendments and enhancements to policy wordings recently have included bodily injury to include mental anguish. Property damage is defined to include natural resource damages, as well as diminution in value of third party property regardless of actual physical injury to that property. Pollution liability policies also provide the insured with coverage for legal defence costs and expenses incurred as a result of pollution-related claims or for those legal fees necessitated as a result of the discovery of contamination. THE IMPORTANCE OF RISK MANAGEMENT Insurance in itself is only a tool that complements the overall risk management approach an organisations adopts. A proactive risk management approach is paramount, and as a minimum this needs to include an awareness of the environmental risks associated with the business; enforcement of sufficient controls to address these risks, emergency response plans in the event of a pollution incident and an assessment of the likely financial impact on your
THE LIABILITY ENVIRONMENT IN NEW ZEALAND IS ONE THAT ‘POLLUTER’ PAYS AND THERE EXISTS A HIERARCHY OF RESPONSIBILITY IN THE EVENT THE ORIGINAL POLLUTER CANNOT BE FOUND. business of any environmental incident. Even with the most robust risk management system it is impossible to entirely remove inherent risks from a business’ operation.The consequences of a pollution event can be catastrophic for the environment but also financially for the polluter. It is here that the understanding and incorporation of comprehensive Environmental liability insurance can protect your business in the wake of a pollution incident. It is critical that any environmental coverage is tailored to fit the needs of the business and it should be incorporated into a broader liability programme. ENDLESS AND TRANSFERABLE BENEFITS Environmental insurance provides a financial backstop against potential catastrophic events associated with both historic and daily operations. It also enhances financing prospects by allowing creditor protections. It is a transferable asset to future investors or buyers. The Environmental Liability policy mitigates the uncertainty of environmental liabilities. Environmental insurance is very flexible in nature and continues to evolve by monitoring emerging risks. It provides protection against environmental threats and offers solutions to regulatory and contractual requirements, lender requirements, mergers and acquisitions and landlord requirements. The recent enhancement of legislation is expected to continue and that will result in more scrutiny of environmental issues for businesses and the regulators becoming ever more stringent in the enforcement of environmental law.
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45
OPINION
EQC Act reforms need a rethink By Crossley Gates, DLA Piper
I
n the light of private insurers with exposure to the Canterbury earthquake claims receiving a flood of new earthquake claims in recent months, there can’t be one of them that thinks the proposed retention of the status quo arrangement with EQC is a good idea. Before the Canterbury earthquakes occurred, it was always my understanding that if a large natural disaster occurred, the EQC would rely on private insurers and their loss adjusters to assess and adjust the claims on the EQC’s behalf. This has the following advantages: • The customer only deals with one insurer and one loss adjuster. • The thorny issue of whether the likely quantum of the claim will exceed the EQC cap does not concern the customer or delay the claim. • The whole process is seamless for the customer even when the claim goes over cap and two insurers are involved. • EQC does not have to gear up to insurance company size in a very short space of time. Of course, there will need to be a very transparent process between EQC and the private insurers once the claims are adjusted and paid. EQC will want to be able to: • Satisfy itself that under-cap claims were adjusted correctly with no claims’‘leakage’,
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• Ensure that payments are made on an interim basis and are subject to later review and challenge as between EQC and the private insurer. A cost-effective dispute resolution process should be put in place. • Private insurers will want to be: Reimbursed for the cost of adjusting under-cap claims that do not reach their layer. They may also wish to have some contribution towards the cost of adjusting over-cap claims, Reimbursed quickly by EQC to avoid cash flow issues and loss of investment return. No doubt, EQC’s reinsurers are anxious to ensure their reinsured (EQC) is in control of its (under-cap) claims so that the reinsurers’ exposure is protected as well. However, a regime along the lines of the one above could be agreed to on a pan-industry basis and incorporated in regulations under the EQC Act. This should provide a sufficient safeguard for EQC, its reinsurers and the private insurers. Maybe all this has already been discussed and rejected; I do not know. However, one matter is clear – it is very unsatisfactory for private insurers to receive over-cap claim notifications approximately six years after the insured losses. No doubt customers are also dismayed to be told the original assessment is incorrect and be told they must now lodge a claim for the first time with their private insurer. There must
surely be a better way. I have a claim file on my desk that was originally assessed as being undercap, but is now estimated to be a $1.4M claim. I understand the proposed EQC reforms are on hold. Given this latest experience, now seems to be the time to lobby the government to take another hard look at a workable solution for all parties in adjusting natural disaster damage claims subject to the EQC Act.
Crossley Gates is a partner at law firm DLA Piper. crossley.gates@dlapiper.co.nz
IFSO CASE STUDY
Who’s to blame for non-disclosure? T
he insured bought a car through a motor vehicle dealer, with finance from a finance company. The finance company helped him arrange vehicle insurance. A year later, his vehicle was stolen and he made a claim to the insurer. The insurer found that he had a number of criminal convictions, which he had not told it about. The insurer avoided the policy from the beginning and declined to consider the claim. The insured argued that the finance company had not asked him any questions about his criminal convictions. He wanted his vehicle replaced and compensation. THE CASE MANAGER’S ASSESSMENT Under section 28 of the Consumer Guarantees Act 1993, “services ... supplied to a consumer” must be “carried out with reasonable care and skill”. The case manager believed that if the finance company had failed to ask the insured the disclosure questions, this would mean it did not provide the service of arranging the insurance with “reasonable care and skill”. He said the finance company had not asked him any questions about his criminal history. The finance company said its usual process was to ask the customer the disclosure questions. The insured asked the case manager to talk to the motor vehicle dealer to verify his version of events. However, the motor vehicle dealer’s recollection of the events did not support his position. Because the IFSO Scheme does not hear evidence on oath, it prefers documentary evidence. The only documentary evidence was the policy schedule, which indicated the insured had answered no to
the question about criminal convictions. There was no evidence that the finance company had failed to provide its service with “reasonable care and skill” and, therefore, it was not required to replace the vehicle or pay any compensation. Complaint not upheld.
Did broker’s advice overstep the line? I
n November 2014, a couple arranged a contract works insurance policy with the insurer through the broker for renovation work they were undertaking on a house that they were relocating. In January 2015, the house was relocated. However, the foundations were not correctly built and as a result damage occurred to the floors, walls and roof framing. In March 2015, they asked the broker whether they could claim for the damage under the policy. The broker advised them the damage was outside the policy, as it occurred during relocation, rather than renovation of the house and they would need to pursue a claim against the builders. The broker did not refer the claim to the insurer. In April 2015, they made a claim directly to the insurer, which appointed a loss adjuster to assess the damage. In June 2015, the insured and the insurer agreed to a settlement of the claim. They complained that they had taken unnecessary legal action against the builders on the basis of the broker’s advice, which had caused a delay of 11 months in the renovation of the house.The insured stated that if he had been aware the insurer would consider the claim, he would not have taken the legal action. He believed that the broker should compensate him approximately $65,000 for his legal fees of $5,000, extra rent payments over 11 months, and stress. The broker believed that the advice was correct and there was no cover under the policy for the damage to the house. However, in an effort to settle the complaint, the broker offered a payment of $5000. THE CASE MANAGER’S ASSESSMENT The case manager considered whether the broker had carried out the service to the insured with “reasonable care and skill” under section 28 of the Consumer Guarantees Act 1993. The case manager also discussed the matter with the insurer. The insurer advised that the claim was settled
outside the terms and conditions of the policy, but the insurer stated that it would expect all claims to be referred to it for consideration, regardless of the broker’s opinion. Although the broker’s advice was not actually incorrect, the case manager believed that the broker had failed to carry out the service with reasonable care and skill by not referring the complaint to the insurer.The case manager advised the insured that the broker could not be held responsible for the delay of 11 months or the majority of the legal action. The evidence provided showed that they had obtained legal advice at approximately the same time as making the claim to the insurer. If their decision about whether or not to pursue legal action was reliant on the insurer considering the claim, then they could have waited for the insurer’s decision before proceeding with further legal action. The broker offered a payment of $5000 and confirmed the settlement offer was still available. The case manager recommended that the insured accept it, which they did. Complaint settled. www.covernote.co.nz
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FSCL CASE STUDY
Seat belt vital in claim By Susan Taylor
A
h Lam and her brother Shen and mother, Juan, arrived in New Zealand at 5am for a holiday. Ah Lam, Shen and Juan hired a car at the airport and purchased car and travel insurance. Later that day, while driving the rental car, Shen fell asleep at the wheel. The car crossed the centre line, colliding with a car travelling in the opposite direction. Ah Lam, Shen and the driver of the other car were wearing seat belts and were not seriously injured. Juan was asleep in the backseat, unrestrained. Juan suffered fatal injuries and died at the scene. Ah Lam made an insurance claim for her mother’s death. After reviewing the post-mortem report, the police investigation and a doctor’s report, the insurer declined the claim. The insurer explained to Ah Lam that although Juan’s death was accidental, it was caused by Juan’s failure to wear a seat belt, as required by law. The policy does not cover loss if the event giving rise to the claim is directly or indirectly related to an illegal act by the insured person Ah Lam did not accept the insurer’s decision and referred the complaint to us. Under the insurance policy the insurer agreed to pay $75,000 on the death of an insured person, provided no exclusions applied. Cover was excluded if the event giving rise to the loss arose from an illegal act of the insured.
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November/December 2016
From all the available information it was accepted Juan was not wearing a seat belt when the accident happened. Expert medical opinion provided to the insurer was that if Juan had been wearing a seat belt, she would have survived the accident. We were satisfied that Juan’s death and the loss flowed from the failure to wear a seat belt. Section 10 of the Land Transport Act 1998 requires all road users to follow rules. Clause 7.10 of the Land Transport (Road User) Amendment Rules 2009 requires everyone over 15 to correctly wear a seat belt while they are in a moving vehicle if the vehicle is fitted with a seat belt. OUTCOME We explained to Ah Lam that the policy did not cover situations where the loss was caused by failing to follow the law and in our view the insurer was entitled to decline the claim. Ah Lam did not reply to us, and we assumed she did not wish to take the complaint further. We discontinued our investigation. Even if the loss is accidental, an insurer may exclude cover where the loss is caused by a failure to follow the law and, in this case, driving rules and regulations.
FSCL CASE STUDY
Subdivision and the landslip By Susan Taylor
A
husband-and-wife team had been property developers for a number of years and in 2001 they subdivided a piece of land. Part of this process included the laying of drains, which was signed off by engineers and certificates of title were issued. In August 2010 heavy rain caused a landslip on a section sold to a couple, leaving it unfit for use as a construction site without extensive remedial work. It was alleged that the cause of the landslip was the failure of the drainage and piping systems in the subdivision. In February 2012 the developers were sued by the purchasing couple, who sought damages in relation to the problem with the land. They defended the claim, incurring legal fees of around $30,000. They also paid a settlement amount of $5000 without any acceptance of liability. The developers submitted a claim to their insurer to cover the $35,000. The insurance company declined the claim because they were sued in their personal capacity and they were not named in their personal capacity as insured parties at the time of the landslip event. Instead their company was the insured. The insurance company also said that even if it could be proved that the developers were covered in their personal capacity, an exclusion clause excluding cover for damage caused by faulty products sold by the insured applied. The drains sold by the developers were faulty. THE COMPLAINT The developers then asked their insurance broking firm to pay the $35,000. They complained their broker led them to believe there would be cover under the policy for the costs they had incurred. They said if their broker told them there was no cover, they would have taken other action and decided not to involve their lawyers. They were also of the view their broker had a duty to ensure they were covered under the insurance policy for public liability claims in their personal capacities, as well as in their capacities as company directors. JURISDICTIONAL ISSUES They became clients of their broker in 2004. However, any complaint about financial loss which may result from advice provided in 2004 could not be considered by FSCL because we cannot investigate complaints about advice provided prior to April 2010. However, it was the policy applicable to the 2010/2011 insurance year which was the relevant policy in relation to the claim. This was because it was a "losses occurring policy". Colinvaux’s Law of Insurance in New Zealand states: “A 'losses occurring' policy is one that responds to injuries inflicted upon the third party during the currency of the policy even though the negligent act giving rise to the negligence predated the policy and the assured’s liability for those injuries is not established until a later date”. Even though the alleged negligent drain-laying took place in 2001, because the damage occurred in 2010, the 2010/2011 policy wording was
relevant to the claim. We therefore looked at whether there was a duty on the broker in the years after it became the developers' broker to have been aware they may need cover in the event they were sued in their personal capacity. There was no evidence they had ever instructed their broker to include them in the personal capacity as insureds until after the landslip. Our inquiries showed there may not have been any policy available to cover the developers for their losses, in any event. Moreover, the insurance company said the exclusion clause would have applied to exclude cover, meaning any insurance claim would never have been paid. We said that even if there was a policy that would have covered them, the issue was whether the broker needed to do more to know that they may need a policy to cover them for being sued in their personal capacity. The broker would have been aware the couple were the directors of a property development company. If they routinely sold properties in their personal capacity in the way they did with this property, this might be something the broker should have known about. However, that did not appear to be the case. They had found themselves in a very difficult position. We noted they did not physically lay or manufacture the faulty drains. It appeared the fault for the damage lay with one of the contractors who carried out the physical work on the property. We said they may have a claim against the contractor(s) in question. They also complained the broker misled them following the landslip, that they would be covered under the policy for the costs of being sued. There was a file note documenting their lawyer’s contact with the broker on June 1, 2012, being when the claim was first notified to the insurer.The file note recorded that the broker said she would need to ascertain what policy was in place and put the insurer on notice. The broker did not say there would definitely be cover but would look into it. Without any documentary evidence to support their view they contacted their broker prior to June 1, 2012 and were told they would be covered, we found they had not been misled. We thought it would have been prudent for them or their lawyer to contact the broker and insurer at the time proceedings were served (February 2012) to seek confirmation in writing whether there would be cover for legal costs likely to be incurred. Unfortunately, there are some events which may not be insurable. However, it is best for people to discuss their insurance needs and requirements regularly with their broker or adviser. www.covernotemag.co.nz
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FEATURE
EQC pays out half-a-billion for Canterbury T
he Earthquake Commission paid out nearly half a billion dollars to settle claims in Canterbury in the financial year to 30 June 2016, its annual report shows. In the 2015/16 financial year, EQC paid out $495 million in claims for the 2010-2011 Canterbury earthquakes. This total was made up of $441 million for residential building claims, both for cash settlements and managed repairs, $46 million
claims expense has remained relatively steady, increasing by $30 million to $11.279 billion. In addition to this there is a risk margin of $278 million relating to the 2010-2011 Canterbury earthquake sequence,” Simpson said. “In the year to June 30, 2016, EQC also paid out $25 million for claims other than those arising from the 2010-2011 Canterbury earthquake sequence. This figure includes $4.7 million for claims arising from the February
year. This income is treated as a liability because technically if we had ceased to trade on June 30, 2016, we would have had to pay it back.” The report shows that EQC received about $280 million in premiums and spent $210 million on expenses, excluding claims payments and claims handling expenses for the 2010-2011 Canterbury earthquake sequence. “Our largest expense was the $150 million in premiums for reinsurance, which currently
for residential land claims and $8 million for contents claims. Chief executive Ian Simpson said EQC recovered about $444 million of the cost of Canterbury claims, largely from international reinsurers in 2015/16. “In Canterbury as at June 30, 2016, we had completed repairs on more than 67,000 homes, settled 187,000 contents claims and completed claims for land damage to 66,000 properties,” he said. EQC has now spent $9.4 billion in its response to the 2010-2011 Canterbury earthquake sequence. This sum has been financed from the Natural Disaster Fund and by the reinsurance cover EQC had negotiated prior to the earthquakes. “The overall estimate for the Canterbury
2016 earthquakes in Canterbury. “Our aim is to have cash settled the more than 14,000 claims from the February 2016 earthquakes by the end of the year.” While EQC had assets of $2.1 billion and liabilities of $2.5 billion at the end of the financial year, EQC had adequate funds to continue to operate and to meet its financial obligations, he said. “The Crown has confirmed in writing that it will meet its obligations under section 16 of the Earthquake Commission Act to ensure that EQC can meet all its liabilities as they fall due. “The liabilities figure is a snapshot of what EQC potentially owes as at June 30, 2016. It includes a risk margin of $297 million and $146 million in premium income EQC has received but can only account for in the next financial
provides New Zealand with access to $4.69 billion in cover for natural disasters, once the cost of these events exceeds the deductible,” Mr Simpson says. EQC provided $11.5 million in funding to GeoNet, New Zealand’s natural hazard monitoring system. This included an increase of $1.5 million to upgrade and develop GeoNet’s systems for monitoring earthquakes, volcanoes and other geological hazards. “In the upcoming year, EQC will continue to be present in Canterbury resolving remedial requests on properties where we have managed a repair, and resolving claims for drains damaged by the earthquakes. There is also a range of administrative and financial tasks to be completed,” Mr Simpson says.
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November/December 2016
Professional
Professional Development: Professional IQ College
College
Crash Management sponsorship I
BANZ members have been great supporters of Crash Management and their unique value-add service has proved very popular with clients. Crash Management has often reciprocated with support and sponsorship for the broking sector, including the current programme of monthly draws for free IQ College courses. Crash Management recognises the constant changes affecting the insurance market and the critical contribution that continuing education makes to successful careers in the sector. Crash Management generously offered a programme of monthly draws to assist IBANZ members to achieve much needed CPD points. The current sponsorship is almost concluded for the year and has been well received by brokers and other insurance professionals.
RECENT WINNERS INCLUDE: September: Christine Osbaldiston, Insurance & Lending Group, Auckland October: Debbie Fraser, Insurance Broker Kiwi, Auckland Winners have been notified directly, and industry-wide monthly announcements have been made including omn the IBANZ website which will continue to profile winners for the remainder of the year. Famously clever people throughout history have appreciated the value of continually upskilling, learning and building knowledge particularly in their chosen career. "An investment in knowledge pays the best interest" - Benjamin Franklin. Crash Management understands that the Professional IQ College
contributes significantly to the success of brokers and is proud to support the sector. Many IBANZ members work closely to Crash Management and promote the independent vehicle accident management solution to their clients, both fleets and private motorists. Crash Management has continued to build capability to better serve commercial fleets and can now offer fully tailored programmes to help company compliance with fleet health and driver safety. Crash Management's services continue to evolve to meet market demand and has pledged ongoing support for Professional IQ College educational programmes to enable brokers to compete in the ever changing insurance market.
KWT Insurance Scholarship
K
erry Wilson Insurance Education Charitable Trust is proud to award Ashley Lowther of Paramount Insurance Agencies Auckland the 2016/2017 scholarship for the New Zealand Certificate in Financial Services Level 5. Lowther has been in a fire and general insurance support role for the last four years. She has a Bachelor of Business degree majoring in Commercial Law, Human Resource Management and Employment Relations. During her internship she was able to relate her commercial law major with fire and general insurance. Lowther says that the New Zealand Certificate in Financial Services will provide her with the core knowledge of the wider financial services sector, best practice and professionalism required for the sector, information of the regulatory environment and research skills for insurance solutions. The general risk insurance module will reinforce what she has learnt in her broker support role as well as deepen her understanding of facets of insurance such as risk concepts, relevant legislation regulations and codes of practice, helping her to identify clients’ needs and policy products. Acknowledging that she stumbled her way into insurance, Lowther recognises that the insurance industry needs more young skilled people within the sector. Lowther aims to continue to grow and develop her skills and experience further within insurance and to contribute to the insurance industry as a whole. www.covernotemag.co.nz
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CONTACTS: IBANZ CORPORATE COMPANY LIST IBANZ BOARD Roger Abel Rothbury Group Limited PO Box 1596 Shortland St, Auckland 1140 Mob: 021 952 230 roger.abel@rothbury.co.nz 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 National Manager, Corporate Risk Solutions Willis New Zealand Ltd PO Box 369 Auckland 1140 Tel: 09 356 9347 Fax: 03 358 3343 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
PIQ BOARD 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: 09 362 9000 angus.mccullough@aon.com Duane Duggan (President) Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West Auckland Tel: 09 3574805 Mob: 021 833 286 duane.duggan@crombielock wood.co.nz
Stuart Speirs Director Abbott Group PO Box 3086 Christchurch 8011 Tel: 03 366 7536 Mob: 021 358341 stuart@abbott.co.nz Jason Smith Managing Director Property & Commercial Insurance Brokers PO Box 4 Feilding 4740 Tel: 06 323 8820 Mob: 027 293 8724 jase@pcinsurance.co.nz Ruth Steele (Vice President) Trevor Strong Ins (2013) Ltd PO Box 302635 North Harbour Auckland 0751 Tel: 09 4142563 Mob: ruth@tsibrokers.co.nz
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 Gary Young Chief Executive, 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 CEO, PAA
Auckland Ph: 09 600 5171 rod.severn@paa.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
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 Rochelle Irving Administration Support DDI: 09 306 1739 rochelle@professionaliq.co.nz
Sylvia Heywood Academic Manager Professional IQ College DDI: 09 306 1737 sylvia@professionaliq.co.nz
COVERNOTE? Each issue of CoverNote is packed with vital information, news, commentry and advise for the insurance industry from experts within the industry. To keep abreast with all the issues affecting New Zealand’s insurance broking industry just email robyn@ibanz.co.nz YEAR IN REV
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David Crawford - Chairman
November/December 2016
UNDERWRITI
NG & NZI
November/Decemb er 2016
INSURANCE IT’S TIME TO DISRUPTION: THE CUSTOMTALK ABOUT ER Big
change ahead for insurance Not so fast, Dr Naylor…
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 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 JLT Holdings (NZ) Limited JRI Limited Ken McNee Family Trust
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 Hastings Auckland Auckland Auckland Auckland North Shore City Auckland Wellington Auckland Invercargill Auckland Auckland New Plymouth Christchurch
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