CoverNote March/April 2017

KIWI TECH FIRMS GET INSURANCE WARNING

March/April 2017

HOW TO STOP A PRODUCT RECALL BECOMING A BUSINESS DISASTER

Non-disclosure can ruin your life Financial Advisers Act scrapped Insurance, AI and disruption

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Welcome to

So close, but so far…

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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.

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t seems as though legislation changes have come to dominate our activities at IBANZ in recent times. The common theme of my introductions to Covernote has been a focus on how the actions of government will affect insurance brokers in the future.

With the new year has come even more activity on law changes, and the impact is becoming more significant with every announcement.

In this issue we look at the draft legislation to amend the financial advisers’ regime, which has finally been released. After what can only be described as an exhaustive consultation period, the proposed changes have been brought together into a piece of legislation.

Regrettably, as happened with the original Financial Advisers Act, this new version has developed some last-minute flaws in its make-up. All along it has been the objective to provide consumers with an easily understood framework, providing ample access to quality advice.

Unfortunately, despite all the consultation, the outcome is off target. While a number of confusing definitions have been removed, they have in the end only been replaced by new confusion. The admirable goal of differentiating sales from advice has been totally missed; in fact, it could be argued that the waters have been muddied even more.

The hope now is that the final round of consultation before this bill goes before Parliament will bring clarity; history suggests this may be somewhat optimistic.

In regard to another piece of new legislation, there is no reason to be even the slightest bit optimistic. The slowly developing train wreck that is the new Fire Service (FENZ) legislation heads toward inevitable disaster. Perhaps for this new emergency service that is a rather appropriate destination.

For what has been touted as a fairer way to fund FENZ the likely levy (tax) payable by those who insure their assets will be anything but fair. There simply isn’t the necessary information available to determine a rate.

At IBANZ, one of our key roles is to reduce negative effects of regulatory bodies on our members and their clients. Never has this task been more challenging than it is right now. The imposition of legislation and regulation continues to grow. Helping those driving these changes to understand the impact of their decisions is a vital and ongoing task.

Gary Young, CEO, IBANZ

Features 8. Spotlight on BILL DONOVAN QBE boss says he wouldn’t change his

accidental insurance career for anything

14. First a combined fire service - next civil defence?

15. Courts increase insurer risk for statutory liability 18. Non-disclosure can ruin your life 20. IAG moves on meth 20. Kiwi tech firms get insurance warning 23. NZI cyber calculator takes off 24. Moving the goal post?

Under the Canterbury Property Boundary and

Related Matters Act 2016, boundaries will move with the land if the land moves in an earthquake.

26. How to stop a product recall turning into a business disaster Businesses must ensure that the goods they

sell are safe. The need to recall a product can have devastating consequences for a business’ reputation as well as creating massive costs.

28. Financial Advisers Act scrapped

32. Insurance, AI and disruption In recent years insurance has lagged behind other

sectors in terms of adoption of IT. This technological lagging means that insurance as an industry is currently ripe for technological disruption.

Regulars 1. Welcome to CoverNote 3.

News 35. Ask an Expert

44. Professional Development: Professional IQ College 46. IBANZ Contacts

30. What does the Hawke’s Bay water-caused epidemic tell us?

KIWI TEC

H FIRMS

GET INSU

RANCE WAR

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March/April 2017

34. New approach pays off WANT YOUR VERY OWN COPY OF

COVERNOTE?

See page 46 for details on how you can have your very own copy delivered directly to your door... HOT OFF THE PRESS!

HOW TO RECALL STOP A PRODU CT BECOMIN BUSINESS G Non-disclos DISASTE A ure can ruin Financial R your life Advisers Act Insu scra rance, AI

and disrupt

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NEWS

Drone cover launched A new insurance product has been launched to cater for the growing popularity of drones, or unmanned aerial vehicles (UAVs).

There is currently no legal requirement for UAV operators to hold insurance.

But Delta Insurance said, given the increasing number of things drones are being used for - everything from real estate

solution in one complete package.”

The policy would cover things such as damage to the drone itself, damage to its payload, damage to the launch station or any thirdparty damage. It also offers cover for statutory liability for health and safety issues, and any claims associated with breach of privacy legislation.

photography to police and law enforcement operations - there was an opportunity to enter the market with a comprehensive drones solutions.

“Most aviation and liability insurers exclude risks that are very specific to the UAV industry, such as breaches of privacy and statutory liability under current legislation. In addition, there are few products that provide a composite hull and liability insurance

“We knew there was clients, having been approached by a number of existing clients, who were seeking to obtain more comprehensive cover for commercial UAV use,” a Delta spokesman said.

The global commercial drone market is currently estimated at US$2 billion and is expected to grow to US$127 billion by the end of 2020.

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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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NEWS

Cyber risk a growing concern New Zealand directors of business are worried about cyber risks but not sure what to do about them, a survey shows.

Marsh’s latest Directors’ Risk Survey shows cyber attacks are seen as the biggest threat to New Zealand businesses this year.

Almost 80% of those surveyed said the impact of a cyber attack on their organisation’s strategic growth, operational efficiency and legal or contractual compliance would be medium or high.

A major IT incident was considered the internal risk with the greatest potential impact to businesses. Three-quarters of directors surveyed considered IT disruption to be a high or medium internal risk.

Marsh head of country for New Zealand Marcus Pearson said cyber attacks did not rank in the top five risks in the 2013 survey.

He said that showed the speed at which the dynamic emerging risk is changing.

“It comes as no surprise there is frustration at the perceived slow progress of affordable, practical insurance protection for cyberrelated risks as insurance companies struggle to adapt to the pace of change,” he said.

“There are deep concerns about the potential for losses that hyper-connectivity brings as cyber threats move from defending against website defacements, denial of service attacks and data breaches to more serious attacks on cyber-physical systems controlling physical assets and critical infrastructure.”

He said it was now possible to buy cover for subsequent risks such as the PR costs of a hack, or covering the forensics and legal ramifications, at affordable rates.

There were cyber risk products available for $1000 to $2000 a year for a couple of million dollars’ protection. He said the biggest placement by Marsh in this country was $15 million of cyber protection insurance. About

250 cyber policies had been written since 2013.

Pearson said insurers were now regularly offering cover to “mum and dad” businesses and it was no longer the domain of the big end of town.

Marsh found companies were taking some action to mitigate cyber risk but were slow to make changes. Almost a third of directors did

to stay current is emphasised by this report. Technology is an integral part of business capability, and boards need to take responsibility to be able to lead in this new era,” she said.

“Digital leadership is critical in a disruptive world. Technology continues to be a strong theme when it comes to internal risks,

not have a framework in place to manage the risk of a cyber attack, the same proportion as last year.

Data shows that, in New Zealand, a cyber threat is most likely to come from staff or an authorised third-party provider. But DDOS, malware and ransomware attacks have become more common.

IoD Manager Governance Leadership Centre Felicity Caird said the management of risk was critical to a board providing strategic leadership and creating value.

“Risks change and evolve and the need

so developing board and organisational capability must be areas of focus for directors to ensure organisations are resilient.”

Just over 60% of respondents expect the increasing influence of social media will have an impact on their business over the next year, ahead of talent attraction and retention (59%), and increased corporate governance requirements (55%).

Almost two-thirds of respondents believed the risk environment would increase during 2017. In the public sector that perception is shared by 83% of directors.

Competition for Tower Two bidders are vying to buy insurer Tower.

Vero and Canadian-owned Fairfax Financial Holdings both want to buy out 100% of the firm. Vero has offered 10% more for the company. Suncorp announced in February that Vero had bought 11.14% of the company and submitted a proposal to Tower's board to acquire the rest at $1.30 a share, or $219.3 million.

It is also approaching shareholders, looking to increase its stake to 19.99% in the meantime.

It was revealed earlier in the month that Canadian Fairfax Financial Holdings has offered $1.17 per share, which represents a 4

March/April 2017

47% premium on Tower's three-month volume-weighted average price. That put the purchase price at $197m.

Chairman Michael Stiassny said the board's advice to shareholders was to not to sell their shares until the board had fully reviewed the offer and made a further announcement.

"The board's primary focus remains to optimise value for our shareholders. In order to do so, we need to review and evaluate all options. We will update the market on any further material developments as the circumstances require."

Vero's bid requires Commerce Commission approval.

NEWS

Chubb launches refreshed Group Personal Accident cover Chubb has announced substantial updates to its group personal accident (GPA) coverage. Employers in all types of industries can now offer extended cover to employees, protecting them against a loss by death or injury.

The refreshed GPA product now features a visitors benefit, return to work assistance, cover for tuition or advice expenses and unexpired memberships, funeral expenses and a superannuation scheme contribution benefit. The policy also offers an optional extension to cover genitourinary losses.

The removal of an age exclusion means a level of cover is now offered to people of all ages.

All policy-holders will benefit from the new features, which provide a wide level of coverage to protect organisations and their employees in the event of an accident.

Andrew Brooks, Chubb country president for New Zealand, said, "This product refresh is a response to both broker and client feedback and the ever-increasing complexity of claims in the New Zealand market."

Kaikoura homeowners left short Some homeowners hit by November’s earthquake in Kaikoura are finding their sum insured policies are not enough to cover the rebuild required, the Insurance and Financial Services Ombudsman has warned.

Karen Stevens said it created more stress.

“Finding you are underinsured is very traumatic. It is timely to remind everyone to make sure you have enough cover.

The big question you need to get right is whether the “sum insured” amount is enough to rebuild your home in the event of a disaster.”

The move to sum insured house insurance policies happened after the Canterbury earthquakes.

Stevens said those taking out insurance policies needed to understand what it meant.

Few customers complain The Insurance Council has released its first Fair Insurance Code annual report of the number of claims received, the number of complaints made to internal and external dispute resolution schemes, and the number of significant breaches.

Chief executive Tim Grafton said: “Fourteen upheld complaints out of over 1.12 million claims certainly puts in perspective that insurers are meeting high standards of service and resolving almost all claims.

“The Fair Insurance Code set a high benchmark for self-regulation, so this data makes evident that the public can have trust and confidence in their dealings with our members and their commitment to resolving claims. By reporting the facts, we can hopefully change misconceptions in the community so people can have confidence that insurance is there for you when you need it."

Through 2016, insurers received 1.12 million claims. Of that only 3858 complaints were made to insurers’ internal dispute resolution services. “It is pleasing that insurers’ internal dispute resolution processes were able to resolve 95% of all of the complaints made,” Grafton said.

Of the very small number of complaints that were then lodged with the external dispute resolution schemes (204), only 14 complaints were upheld by the external dispute resolution services. The balance was either settled, partially upheld or withdrawn.

There were no significant or unresolved significant breaches. A significant breach of the code is a material breach of any provision in the code – or a series of breaches of the code that, taken together, are material – with the potential to bring the insurance industry into disrepute.

Key facts for the period January 1 2016 to December 31 2016 No. of Claims

No. of complaints to internal DR process

No. of complaints to external DRS

No. of complaints upheld by external DRS

No. of significant breaches

No. of unresolved significant breaches

1,122,201

3,858 (0.34% of claims)

204 (5.3% of complaints to internal DR process)

14 (6.9% of complaints to DRS)

0

0

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NEWS

Vero gets S.M.A.R.T with motor repairs Michael Burke, EM of Motor Claims at Suncorp New Zealand, talks about the pressures of motor insurance claims and how Suncorp is leading the way with innovative new technology.

What’s been happening in the motor claims space?

Right now the motor repair industry is struggling to keep up with demand for repairs, particularly for panelbeating and collision repairs.

There’s a huge increase in the number of cars on our roads, more congestion on our highways and we’re seeing the impact with higher levels of motor claims.

There’s no one solution, but one of the options we’ve been successfully trialling is the introduction of S.M.A.R.T repair.

What is S.M.A.R.T repair?

S.M.A.R.T stands for Small to Medium Accident Repair Technology.

S.M.A.R.T shops are essentially panelbeating workshops, but they use efficient workflow systems and advanced repair technology to perform high quality, fast repairs.

So how does it work?

S.M.A.R.T have invested in a range of innovative technologies and processes to dramatically reduce standard repair turnaround times, such as infrared paint drying technology. It means a customer’s car can be ready in approximately a day or two, rather than a week.

We want to ensure that our customers receive a high quality, quick and effective service. S.M.A.R.T is a truly innovative way to turn motor repairs around faster for our customers while maintaining high quality workmanship.

Is S.M.A.R.T going to take business away from your existing repairer network?

S.M.A.R.T workshops can only take in small to medium repair job.

There are specific criteria that repair jobs need to meet to be eligible for a S.M.A.R.T. repair. For example, there can’t be mechanical or significant structural damage to the car.

If a customer’s car is eligible for a S.M.A.R.T repair, our team will usually try and refer them to S.M.A.R.T or another industry-leading repairer, depending on location. That’s partly because it’s often fastest way for that customer to get their car repaired and back on the road.

Being able to send those low-impact repairs to S.M.A.R.T also frees up the rest of our collision repair network for more substantial jobs, so it benefits all our customers.

How is the partnership going so far?

One of the challenges has been educating people about this new way of doing things, in what is after all quite a traditional industry. And it’s difficult for people to believe that we could really turn around panelbeating repairs in a few days!

But the benefit for customers is huge, both in terms of the speed they get their car back, the quality of the repairs and – because S.M.A.R.T relieves a lot of administrative pressure - the level of service our team can give them when their cars go through that system.

We’re lucky that unlike many motor customers, our customers are dealing with brokers who will have seen the benefits first-hand with other customers, and we expect uptake will grow over time in line with high customer satisfaction.

When did discussions of partnering come about?

About eight years ago Jim Vais, the founder/director of Capital S.M.A.R.T approached Suncorp Group with a proposal to partner.

There are now 37 S.M.A.R.T shops over there in Australia, repairing on average 100 cars per week at each site. AA Insurance partnered with Capital S.M.A.R.T in 2015, opening the first New Zealand site in South Auckland. For Suncorp NZ, the natural next step was to offer S.M.A.R.T repairs to Vero Insurance customers in New Zealand. In late 2016, we opened our pilot shops in Albany, Auckland and Hornby, Christchurch.

Are there plans to develop this partnership further?

Once our pilot (Auckland and Christchurch stores) starts humming along we could look into opening stores in other key spots across the country. We have a strong relationship with the team at S.M.A.R.T and will continue to work alongside them to find new ways to provide an outstanding customer experience

Willis Towers Watson acquisition Willis Towers Watson has agreed to acquire Russell Investments' Australian actuarial practice.The deal is expected to be done in March.

The stand-alone actuarial practice has provided services to Australian and New Zealand clients for more than 30 years, across the corporate,

government, master trust and industry fund sectors.

“Providing a broad range of superannuation and actuarial services is the core purpose of our retirement team in Australia,” said Andrew Boal, regional head of Australasia for Willis Towers Watson.

New chairman for Lloyd’s Bruce Carnegie-Brown has been voted in as Lloyd’s chairman from June, replacing John Nelson, who is retiring after six years in the role.

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March/April 2017

Carnegie-Brown joins the Lloyd's Board with 35 years’ financial services experience. He is currently chairman of Moneysupermarket Group and vice-chairman of Banco Santander.

SPOTLIGHT ON

BILL DONOVAN QBE boss says he wouldn’t change his accidental insurance career for anything

Q

BE’s general manager of New Zealand operations says he knows the challenges of being an insurance broker better than most in his position.

Bill Donovan has been in the role since February last year. He previously worked as general manager of QBE’s distribution, and before that was chief executive of Willis Australasia.

But he said having spent the majority of his time in the insurance industry before arriving at QBE as a broker, he knew well what the insurer’s third-party distribution network was dealing with.

“I understand the issues that they face probably better than most. I also know that this is a tripartite relationship, so working closely with the broker and the end client to achieve a positive outcome for all is paramount,” he said.

Donovan said he enjoyed working with a group of professionals at QBE who worked to deliver the highest quality service to broker partners, under a strong and respected brand.

He said he fell into the industry after St Peter's College, in Auckland. “I had intended going to university to complete a law degree but wanted a year off before doing so. Unfortunately, my father felt that rather than doing nothing, I should earn my keep. I joined the State Insurance office in Auckland and never looked back.”

He became managing director of Willis New Zealand in 2005.

Donovan said QBE’s major thrust was in the

intermediated commercial space, but it was also expanding into intermediated personal lines.

“Our two major competitors are significantly bigger than us in terms of GWP, so obviously they are in our sights. But we just need to continue to provide a quality service to our broker partners whilst also continuing to partner with them around product development and innovation. This is not a complicated business; we simply have to deliver,” he said.

He said Kaikoura and Christchurch’s earthquakes had affected the industry’s profitability, so there was pressure on prices. “But the key is not to overreact. We must consider the end client in all that we do.We are also going through a re-engineering of our business in New Zealand so as to allow our people more time to provide the quality service that we all want. We hope to see that bear fruit in quarter three and four this year.”

Finding and keeping key people was the most challenging part of his role, he said.

“I don’t just mean people who want a pay cheque but people who want to buy in to the vision of what we are trying to do and who understand what our brand means to us. Passion for the business is number one for me.”

He said the industry did not sell its benefits well enough to young people and more needed to be done to bring them in, as a broker or working with an insurer.

“I wouldn’t change my decision to stay in the industry all those years ago for anything.”

WHO IS QBE? QBE Insurance began life as the North Queensland Insurance Company in 1886.

It has been in the New Zealand market since 1890.

It is Australasia’s largest international insurance and reinsurance group. In 2008, it acquired PMI Australia, a lenders mortgage insurer operating on both sides of the Ditch and in 2009 it took over Elders Insurance.

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March/April 2017

In New Zealand, it offers a range of business insurance products, including cover for liability, property, contract works and engineering, marine, motor, trade credit, travel and accident and health.

QBE says its service delivery depends on its relationships with intermediary broker partners.

WE ARE ALSO GOING THROUGH A RE-ENGINEERING OF OUR BUSINESS IN NEW ZEALAND SO AS TO ALLOW OUR PEOPLE MORE TIME TO PROVIDE THE QUALITY SERVICE THAT WE ALL WANT.

www.covernote.co.nz

9

FEATURE

THE LIABILITIES AND FINANCIAL LINES TEAM AT AIG.

AIG recently announced a new client service structure for its Financial Lines and Casualty teams in New Zealand, now called Liabilities and Financial Lines (LFL). Katie Young and Ron Curin lead LFL with three experienced regional underwriting teams servicing brokers throughout the country.

Each underwriter has been assigned a broker as their first point of contact within their region and now has the ability to underwrite across AIG’s broad range of Liability and Financial Lines products. This change is a demonstration of AIG’s commitment to providing greater capability and a more consistent approach to the market.

The northern team, led by Paul Atherton, is servicing brokers north of Hamilton. The central team, led by

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March/April 2017

Blair Quested, is servicing brokers from Wellington to Hamilton, and the southern team, led by Dennis Styles, is servicing the South Island.

Katie Young, head of Liability and Financial Lines said, “This is an exciting time for the team, and we look forward to talking to brokers about the many opportunities that lie ahead in 2017, including our plans to launch a new design and construct product, and enhanced packaged management liability, cyber, and technology liability products.”

This announcement follows the recent strategic change to a modular reporting structure at AIG, designed to empower business leaders and increase efficiency.

NOTHING BEATS THE STRENGTH OF A TEAM. The All Blacks are back-to-back world champions because of their ability to support each other as a team. At AIG,we offer our customers a team of local experts with the backing of a world-class global network so they can tackle their future with confidence. aig.co.nz | @AIGRugby

OPINION

CLASSIC KIWI COLLABORATION BRINGS A BRIGHT FUTURE IN INSURANCE

By Karl Deutschle

P

erhaps it’s our relatively small population, our position at the bottom of the world or the fact we’re big on team sports from an early age, but New Zealanders have always worked well together. Even so, the extent at which we’re planning to collaborate in the business world this year will be surprising to many.

In 2017, 72% of NZ CEOs see growth coming from joint ventures or a strategic alliance, according to PwC’s new 2017 CEO Survey – the 20th edition of the flagship report.

Compare this figure to the mere 48% of global CEOs who said the same, not to mention the much lower 57% of New Zealand CEOs who felt this way in 2016, and we see a distinct 12

March/April 2017

difference in the plans of our country’s business leaders this year.

That’s quite understandable: our economy is one that relies closely on collaboration – whether that’s to reach new markets overseas or grow our capabilities at home. Joint ventures also provide an interesting avenue for growth within the financial services sector.

As PwC and Strategy& in Australia pointed out in The Future of Banking through a Kiwi Lens report (another cross-border collaboration), this is a more feasible – and more cost-friendly – idea than it was even in the recent past.

Thanks to the great number of innovative ideas, products and services being experimented with at the moment, the time is right for financial

services to work together, share resources, grow and use this new era of collaboration to manage their individual risks. Kiwi insurers have a real opportunity in this collaborative arena.

BECOMING FINTECH-FRIENDLY The word ‘FinTech’ has dominated headlines in financial services for some time. From customer-friendly apps to in-depth data and analytics tools, small companies have grown quickly and proven more revolutionary than many incumbents in the sector. They’re exciting, agile and provide fresh ideas.

Insurers have, in turn, felt the pressure, with InsurTechs contriving new and better ways to service the sector. Peer-to-peer insurance (from the likes of Friendsurance), pay-as-you-

OPINION go cover (Trov) and the use of AI in customer service (Flamingo) are just three innovative and disruptive ways that insurance start-ups are shaking up the industry.

So much so, in fact, that just shy of threequarters (74%) of insurance companies believe they are the most likely part of the financial services sector to be disrupted by FinTech before the end of the decade – a finding from PwC’s latest FinTech Survey.

More and more, the established insurance providers are not just seeing this as a risk, but an opportunity. By partnering with InsurTechs they can leverage the elements that are making these start-ups so successful. In return, these great ideas get serious backing by established firms, meaning they have a better chance of flourishing.

The potential of this partnership has proven so interesting that annual investments in InsurTech start-ups have increased fivefold over the past three years.

That makes sense: InsurTechs are more capable of taking risks, so established insurance firms have the chance to see what works in the market before they jump on an idea themselves.

They can live vicariously through their FinTech partners until they are ready to make a move and back the ideas that work.

The industry is at a pivotal juncture as it grapples with various trend changes that could affect their day-to-day business. Fortunately, our openness to collaborate is a real strength for New Zealand firms.

WORK TOGETHER HOW? There are many reasons why insurers might work closely with other areas of financial services or even with their competitors – to share the use of technology, to better understand and service customer needs, or to improve their pool of valuable data and analytics.

Collaboration in these ways is like a group of fishermen banding together. One has the best net (technology), another has information on the best places to fish (data), and the final one knows the best bait to use (customer knowledge).

Insurance companies working together can share resources and capabilities to fully utilise the three biggest trends affecting their businesses today: 1. CUSTOMERS People are having a huge effect on insurance, and many InsurTechs are giving them what they want. Usage-based risk models are one example, which affects the insurer’s risk exposure and their pricing options.

However, the FinTech Survey found that the top priority for established insurers is selfdirected services (those that the customer provides to themselves, at least in some part).

Policyholders can, for instance, take a picture of their driver’s licence and their car’s vehicle identification number, send it to their insurer

and get an insurance quote.

Insurers are now investing in the online and mobile channels to put consumers at the centre of their business operations, which could be particularly beneficial for shaving down costs in the long term and increasing their customer base too.

By partnering with InsurTechs – who know their customers intimately – they can be closer to understanding consumer behaviour and what works when delivering insurance products and services.

2. TECHNOLOGY The list of emerging technologies likely to impact the insurance industry is exhaustive, though there are some notable mentions.

The Internet of Things (IoT) is making waves in the sector. IoT devices can detect conditions and provide an accurate report to speed up claims. They can also affect pricing. For instance, network devices that can alert users should, say, a cyber attack be detected could result in lowerrisk insurance policies, which can be reflected in consumer premiums.

At the same time, insurers wrestle with how to insure artificial intelligence, such as autonomous vehicles, drones that are used to survey destroyed property and speed up claims responses, and wearables that link policyholders’ biometric information to their insurance policies.

Blockchain remains an interesting if not challenging technology for the coming years.

Our FinTech Survey showed that although the majority of respondents recognise its importance, 83% say they are at best “moderately” familiar with the technology, and only very few consider themselves to be experts.

A distributed ledger that not only provides accurate reporting from the back office but between businesses would be a godsend for transparent, operationally efficient partnerships.

It also has the potential of unlocking ‘smart contracts’, documents that are translated into computer programs and, as such, have the ability to be self-executing and self-maintaining among policyholders.

This area is just starting to be explored, but its potential for automating and speeding up manual and costly processes is huge.

3. DATA AND ANALYTICS Responding to the new CEO Survey, insurance companies said that how they manage people’s data will differentiate them from their competitors. While that’s a fairly innocuous finding on its own, insurers are far ahead of other financial services firms in this belief.

When asked whether managing people’s data would provide a competitive advantage, insurance companies said it would to a greater extent than any other part of the financial services sector.

When we consider that insurers use

information to look at risk, more data can only help them make better decisions. Insurers are now looking at how deep their insights can go, with advanced analytics and modelling coming to the fore.

Respondents to the FinTech Survey ranked remote access and data capture as the third most important focus area for their businesses. The second stage is analysing this information to draw out the best insights.

Deep risk (and loss) insights can be generated from new data sources that can be accessed remotely and in real-time if needed – location and time are no longer issues.

This also goes hand in hand with new technologies. The information gathered by potentially billions of IoT devices will help to spot risks based on huge amounts of data. After a short amount of time, insurers will be able to see, for instance, which IoT devices provide the most valuable information for mitigating incidents in the home.

The data collected by drones in remote areas will also be incredibly useful and businesses will begin to archive data for future scenarios. Should a farm be hit by a natural disaster, and a claim made on some outdoor property (let’s say a shed), historic aerial data can now be used to see if it existed before the incident. More data means more accuracy and speed when handling claims or creating insurance policies and products.

Telematics, wearables, blockchain records – all of these are providing more and more information that is near invaluable to insurers.

Sharing data between financial services firms and even the wider economy will only deepen the pool of insights.

THE KEY TO INSURANCE ENDURANCE By being agile and flexible to changes in the industry, insurance companies can adapt quickly when they need to. Fortunately, their partnerships with other areas of financial services are allowing them to do this with less risk than if they were to push ahead themselves.

From collaboration with FinTechs to sharing resources with other areas of financial services, there’s plenty of work to do, but we also have plenty of opportunities should we work well together.

Karl Deutschle is a Partner at PwC and the Insurance Sector Leader. www.covernote.co.nz

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FEATURE

FIRST A COMBINED FIRE SERVICE - NEXT CIVIL DEFENCE? A

suggestion that the soon-to-be merged Fire Service could expand its operations to include civil defence and ambulance services is sparking questions about its budget.

The Fire and Emergency New Zealand Bill, which establishes a single, unified fire services organisation, Fire and Emergency New Zealand (FENZ) is awaiting its second reading.

But Internal Affairs Minister Peter Dunne has suggested the changes will not stop there.

He says it could be possible for FENZ to eventually have responsibility for Civil Defence and the country's ambulance services, too.

That has prompted the Insurance Council to ask how such a move might be funded.

Dunne's suggestion that FENZ could take over civil defence is to be reviewed by Civil Defence Minister Gerry Brownlee.

“Dunne is currently proposing a 40% increase on July 1 in the tax that people who insure their properties pay to fund the merger of New Zealand’s fire services under one organisation. That will come at a heavy cost for some and discourage people from protecting themselves with insurance,” chief executive Tim Grafton said.

“Now, Dunne is proposing that the newly merged body, FENZ, take over all civil defence and ambulance operations around the country. Unless there is a commitment to fund FENZ from general taxation for the public good it will provide, it is monstrously unfair to load the burden for running a mega emergency service by taxing those who insure their own property,” he said.

“This is election year and we challenge all political parties to commit funding our emergency services fairly and sustainably. Unless this happens, the direction the Minister is proposing will see people not insuring. If anything has been learned since the Canterbury and Kaikoura earthquakes, it is that New Zealand is one of the riskiest countries in the world for natural disaster losses and that insurance is essential to manage that risk.”

14

March/April 2017

Dunne said the quality of Civil Defence depended too much on the resourcing, funding and ability of individual councils.

“Civil Defence has been the poor relation for too long. Even though there has been a national Ministry of Emergency Management, it has been pitched uncomfortably for too long between central and local government, with no one too sure where responsibility really lies, as a consequence.

There are some notable exceptions – Wellington’s Emergency Management Office, which does a fantastic job promoting community resilience and safety, comes to mind – but for too many, the image of men with clipboards is still too prevalent.”

He said over the longer term, FENZ could take over ambulance services as well.

The issue has been a contentious one for insurers, who argue that it is unfair that the service is so heavily funded from insurance levies when a large proportion of its work is not fire-related. They had called for it to be funded from general taxation.

Gary Young, IBANZ chief executive, said the industry was set to suffer a perception problem.

He said many members of the public would see their premiums go up this year and not realise it was a result of a government levy. “They will see this increase and think it’s the insurance industry taking more of their money. If they’ve only got so much to spend, more will end up for this tax and less will end up as cover. People don’t understand it’s a government tax.”

Next year premiums could go up again when the levy is calculated on the sum insured, not indemnity value.

“We’re opposed to the whole change to the funding. We don’t see why people who are responsible should be funding the fire service, and we don’t see why they should be funding the merger of rural and urban fire services.

A huge part of this increase is due to the merger, and that’s a government decision and the Government should pay for it,” Young said.

FEATURE

COURTS INCREASE INSURER RISK FOR STATUTORY LIABILITY

By Garth Gallaway, Chapman Tripp

I

n health and safety prosecutions, statutory liability insurance policies usually cover defence costs and reparation payments. Any fines imposed are uninsurable.

Under the Sentencing Act, the courts may impose reparation where an offender has caused loss or harm to property or to a person emotionally “through or by means of an offence”. But if there is a dispute in relation to this aspect, the Crown must prove causation beyond reasonable doubt.

WHEN IS REPARATION PAYABLE? In determining whether a causative link to the breach of the health and safety legislation exists, the key phrase in the Sentencing Act is “through or by means of an offence”.

• “Through” connotes a direct connection between the offence and

the damage.

• “By means of ” contemplates a less direct association.

Over the last few years, these words have been given a wider interpretation. An “operative and not insignificant cause” will suffice. This means that it must be a contributing cause, but it does not need to be the dominant cause.

R v Donaldson In R v Donaldson CA227/06, 2 October 2006, the Court of Appeal held that reparation should be approached in a broad common-sense way by asking whether a reasonable person could have reasonably foreseen the kind of damage which occurred as a result of their actions. The Court held that refined causation arguments are not to be encouraged.

In particular, the Court found that ‘by means of ’ captured damage or harm closely associated with the offending, although not necessarily arising from the acts which constituted the definition of the offence.

So, although the offenders were only convicted of burglary and not arson, the fire damage was found to be in such close connection to the burglary as to be caused by it and reparation was ordered.

WorkSafe v Rentokil Initial Ltd [2016] NZDC 21294 In this case, a worker was not offered any screening or vaccination against

Hepatitis B at his workplace, despite it being company policy. Subsequently, he contracted the virus.

The District Court affirmed the findings in Donaldson and held that though it was uncertain how the victim contracted Hepatitis B and it could not be proven that he had contracted it at work, causation was still established.

It was also highly likely that he would not have caught Hepatitis B had he been vaccinated.

The harm had therefore occurred through the offence and reparation was payable.

WorkSafe v Department of Corrections [2016] NZDC 18502 Here, the Department of Corrections placed an offender under the supervision of a church minister to complete his community work sentence.

The work involved outdoor labouring, including cutting up logs. One day, when left unsupervised, the man was pinned under a 400 kilogram log and subsequently died.

The District Court held that Corrections’ failures were a cause of his death. This followed the same reasoning as in Wilmot v Police HC DUN AP25/96 15 July 1996, where the Court found it was sufficient that the offender’s conduct materially contributed to the loss.

The defence argued that the minister’s failings amounted to a break in the chain of causation. But the Court rejected this argument, stating that if further steps had been taken by Corrections, those steps would have altered the Reverend’s conduct.

WHAT DOES THIS MEAN FOR INSURERS? Causation may be established even if the insured’s actions are not the sole, or even the main, cause of harm. It is sufficient that his or her actions were a substantial or "not insignificant" cause of that harm.

This lesser test means that insurers should be prepared to pay reparation under their policies more frequently. It also means that lawyers involved in acting for defendants need to be very alert to the potential arguments open to their clients in relation to whether or not reparation is payable. www.covernote.co.nz

15

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17

COVER STORY

NON-DISCLOSURE CAN RUIN YOUR LIFE

By Karen Stevens

Insurance & Financial Services Ombudsman

W

hen things go wrong and you think, “At least I’m covered by insurance”, what if you then find out you’re not covered because you forgot to tell the insurer something? Greta* had that experience when she signed up for vehicle insurance, she was asked on her application form whether she’d had any previous claims declined. Greta didn’t disclose that she’d had a previous contents claim declined by another insurer.

When Greta’s car was later stolen, her claim was not only declined but the policy “avoided” (i.e. treated like it never existed).

So what does that mean for you?

About 10% of complaints to the Insurance & Financial Services Ombudsman Scheme involve non-disclosure. For the 22 years we have provided a dispute resolution service. A constant stream of people have contacted us because their 18

March/April 2017

insurance claim has been declined or their entire policy avoided because they left out information on the insurance application. While some cases are clear and people have deliberately failed to provide information they were asked for, in many cases people unintentionally leave out information because they have forgotten or they do not realise it is so important. The most common things people don’t disclose are their pre-existing medical conditions, convictions and claims history.

The current law requires a consumer to disclose to their insurer all information a prudent underwriter would consider “material” to the risk of providing insurance. This means information that would change the terms (e.g. higher premiums or exclusions) or could affect whether the insurer wanted to provide insurance at all. Many consumers do not understand

exactly what information must be provided to an insurer and what information is considered “material” to the risk. While policy wordings are quite explicit and say certain information is required, our concern is that consumers still don’t appreciate that they need to tell the insurer about everything – not just what they think is relevant.

We have lots of cases where health insurance claims for surgery are declined, e.g. when Mary* originally applied for the health insurance, she had not disclosed that she had suffered from depression years before. Although it didn’t relate to her claim, the insurer was still entitled to avoid the policy because the information about depression would have changed the terms on which the policy was issued, i.e there would have been an exclusion for depression.

The IFSO Scheme is often in a position

COVER STORY

where we cannot help the parties reach an agreed outcome, because it is the insurer’s legal right to decline a claim and/or avoid a policy.

Brokers have a key role to play in educating clients about their duty of disclosure and the consequences if they fail to disclose. Why this is so important is that if an insurance policy is avoided, it could result in the broker’s client not being able to obtain any insurance cover in future.

After a policy has been avoided, the consumer will have to disclose that fact to any other insurer.

This is likely to make it difficult or sometimes impossible, to get any insurance cover. For example, Anne* applied for vehicle insurance and didn’t mention her partner’s traffic and criminal convictions. Her claim for an unrelated vehicle theft was declined and her policy avoided.

The same insurer could cancel Anne’s house and

contents policies on notice and no other insurer might want to provide cover.

As Insurance & Financial Services Ombudsman, I would like to see the law on non-disclosure changed to assist consumers who unintentionally leave out information when they apply for insurance. A review of the law on “non-disclosure” is long overdue. We need legislation to bring us more in line with the law in Australia and the UK – preferably an Insurance Contracts Act to bring all insurance law together.

This would help prevent many consumers from finding themselves in the difficult situation of being uninsured or potentially uninsurable.

The Fair Insurance Code applies to those insurers which provide fire and general cover and belong to the Insurance Council of New Zealand (ICNZ). Since January 2016, it applies a “reasonableness” test, i.e the insurer’s response to any non-disclosure must be reasonable in relation to what the insured did not disclose.

However, industry self-regulation is not enough on its own. Life, health and disability insurers are not part of the ICNZ and are not covered by the code. Developing legislation in New Zealand to reflect the law in Australia or the UK would mean that all insurance policies could only be avoided when the non-disclosure was deliberate.

In New Zealand, the only way we can make changes without legislation is to keep telling consumers about disclosure and the consequences of not disclosing, which is not enough. Insurers and brokers need to constantly remind customers to tell their insurer everything when applying for insurance; if in doubt, disclose. They need to understand what information should be disclosed, why it is important to disclose and what will happen if they don’t disclose – at law, there is likely to be no cover. * Names have been changed to preserve anonymity.

KEY POINTS FOR BROKERS 1. Remember, most clients will not understand

a) their duty of disclosure

b) what information is material

c) the consequences of failing

to disclose material information 2. You have a key role in educating your clients about their non-disclosure

obligations and the consequences of

failing to disclose.

3. If you complete application forms for

your clients, there is a risk they could

complain about you in the future.

4. Always make it clear to your clients what

your role is.

5. Always keep good records.

KEY POINTS FOR CONSUMERS 1. Answer all of the questions on your

insurance application, even if you don’t

think they are relevant.

2. Contact your insurance company if you

forgot to include something on your application.

3. If your broker fills in your insurance

application for you, read through it

carefully before you sign it.

4. When you renew your house, contents

or vehicle insurance, tell your insurer

bout any events (convictions, speeding,

accidents, losses, etc) that have happened

since the last renewal.

5. If you can’t remember your full medical

history, ask your doctor for a copy of your

medical notes, and double-check your

insurance application.

RECENT NON-DISCLOSURE CASES SEEN BY THE IFSO SCHEME VEHICLE INSURANCE Ben bought a car with finance from a finance company, and the finance company arranged Ben’s insurance. When the car was later stolen, Ben’s claim was declined and his policy avoided because Ben hadn’t mentioned his previous criminal convictions. Ben said he wasn’t asked. The only documentary evidence available was the policy schedule, which showed that Ben had answered “no” to the question about whether he had any convictions.

HOUSE INSURANCE When the Browns’ house was damaged by a fire, Mrs Brown phoned her insurer to make a claim. She mentioned during the phone call, that a previous contents insurance claim had been declined by another insurer.The insurer then discovered that the Browns’ previous policies had been cancelled. On their insurance application, Mrs Brown had answered “no” to the question of whether they had any previous declined claims or policies cancelled in the past five years. Their claim was declined and policy avoided.

TRAUMA INSURANCE After John suffered a stroke, he made a claim under the critical illness benefit of the policy. His claim was declined and policy avoided, as John had not disclosed information about renal function tests and drug and alcohol use when he applied for insurance.

HOUSE INSURANCE After Denise’s house burned down, her claim for the loss was declined and her policy avoided; Denise had not disclosed her ex-husband’s past criminal convictions and they were important because he was living at the house. www.covernote.co.nz

19

FEATURE

IAG moves on meth

I

AG is making policy changes that it hopes will provide clarity around methamphetamine contamination.

The insurer’s head of corporate affairs, Craig Dowling, said insurance for contamination could be complex because of a number of different views and expectations within the industry.

He said IAG received about 50 claims a month relating to methamphetamine.

“Because meth contamination of homes is a relatively new phenomenon, different policy wordings can lead to different outcomes at claims time, and that is generally not a good experience for anyone,” he said.

“As a result, we are aligning terms across our brands over time and seeking to communicate clearly what expectations customers can have of us and what we have of them as homeowners.

IAG policy changes being implemented across brands through this year will extend cover to all homeowners’ insurance policies, with conditions, not just landlord policies.

Claims will be accepted based on the presence of contamination. Payouts will no longer be reliant on methamphetamine having been manufactured at the property. Damage caused by methamphetamine use will be covered, although

an exclusion will apply if family members of the insured were involved.

The maximum claimable amount will be $30,000. Dowling said that was a slight reduction for some broker-distr ibuted policies. Excesses will rise from $400 to $2500.

“This is to ensure homeowners are incentivised to make efforts to minimise losses by doing what they can to protect their homes,” he said.

“As the majority of contamination claims to date involve rental properties and claim numbers and overall claims costs involving methamphetamine contamination have increased in recent years, premiums across landlord policies will see some increases directly related to the cost of these claims and the changes to levels of cover.

Premium increases, depending on policies, will range from between $40 to $130 per annum.”

Claims will not be accepted for contamination to contents in homes.

Landlords must inspect their rental properties at least every three months to be eligible for the cover.

“Across our brands, we see increasing claims related to contamination of homes. At the same time an unregulated industry has developed around testing for contamination and subsequent cleaning of properties and that has contributed in some situations to misinformation about risks. We are in the process of establishing a list of preferred partners who can provide our customers and ourselves confidence in the work they do,” Dowling said.

KIWI TECH FIRMS GET INSURANCE WARNING

N

ew Zealand technology businesses are being encouraged to check they have enough tech liability insurance in place.

Delta Insurance co-founder Craig Kirk said the sector had developed an outstanding global reputation for innovation, but that could also be a weakness.

“It’s likely that we will see the technology sector continue to boom and grow for years to come,” Kirk said.

“Yet in an increasingly globalised world, an industry which often relies on multi-regional interconnectivity faces a host of potential problems that can endanger businesses both large and small.

“As New Zealand technology businesses continue to expand their operations in a more globalised world, their exposure to liability risks increase in turn.

“Operating in a more globally interconnected business world not only increases risks to more litigious overseas jurisdictions but can leave businesses vulnerable to a greater amount of cyber risk.”

He said cybersecurity threats were the key issue for the industry and 20

March/April 2017

each wave of cyber risk was more sophisticated and dangerous than its predecessor.

“How technology companies tackle and manage this issue will in some cases determine whether or not they have a viable and sustainable future.

The risk of getting it wrong could be catastrophic.

“Delta Insurance believes that sound risk management strategies which address new and evolving forms of risk should be at the forefront of protecting businesses.

“Dovetailing into these risk management strategies should be insurance coverage that is also constantly evolving to address new and varied exposures that technology companies face. Even with the most robust risk management procedures, litigation and disputes can still arise.”

He said no matter how good companies’ risk mitigation efforts were, an incident that triggered a technology liability could still arise.

Technology insurance policies should fill the gaps of traditional coverage and protect firms from financial and reputational losses, he said.

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

OPINION

THE EVOLUTION HAS BEGUN

by Travis Atkinson,

Executive General Manager, NZI

W

e’re ushering in a new era. The innovation of autonomous vehicles will one day profoundly change the world as we know it. As an insurer, I believe we have a key role to play in the adoption of these driverless vehicles to ensure customer trust, protection and safety on our roads.

Supporting the safe introduction of autonomous vehicles as a new way to help solve transport and safety problems for our customers is critical for the future. NZI is focused on understanding how autonomous vehicles can impact safety and risk, and how we can evolve our products and services to better meet the future needs of our customers.

That’s one of the reasons why we saw insuring the new 15-seater electric shuttle bus at Christchurch Airport as an amazing opportunity to get behind innovation that will eventually become mainstream.

The shuttle bus is powered by electricity and has no driving controls whatsoever. It is expected to operate at around 25kph, although it can travel at speeds up to 45kph. HMI Technologies purchased the vehicle from Navya in France for 22

March/April 2017

the purpose of conducting trials here in New Zealand. It’s part of a trial which could lead to more of these vehicles transporting passengers around in the future. The trial will be confined to the airport grounds behind fences and won’t be operating within the restricted area, and there will also be no exposure to other vehicles at this stage.

In the future we anticipate a mix of autonomous, semi-autonomous and traditional vehicles on the roads, and we’ll be evolving our insurance model to make sure our customers are protected, regardless of the type of vehicle they choose to travel in.

The thing with high-tech equipment, though, is always the cost of replacement if something goes wrong. So it required some critical thinking on our part from the NZI underwriting team.

In the end, though, minimal changes to our standard policy wording were required, and the vehicle doesn’t actually have to be driven in order to be insured.

We all know that cars are increasingly being designed with advanced driver assistance systems (ADAS) to help make the driving experience

safer and more enjoyable. It’s inevitable that there’s a natural progression to fully autonomous where the driver becomes a passenger and the vehicle the driver!

It will lead to some significant changes in our industry and the way we insure vehicles for unexpected events in the future.

Through our research centre in Australia, we’ve been exploring and testing the impact certain vehicle technologies have on safety and risk. We’re encouraging the uptake of new autonomous technology to improve the safety of our customers by offering price discounts on things like autonomous emergency braking. By partnering with external industry and research groups we’re also working to deepen our understanding of the impact this new technology will have on our roads and customers.

There’s no denying the advantage of these connected vehicles. They’re able to generate data that has a range of potential applications, from helping drivers better navigate their journeys, to vehicle servicing alerts and trip-based products, not to mentioned increased safety.

It really is a new world, and I for one embrace it.

FEATURE

NZI CYBER CALCULATOR TAKES OFF S

ecuring cyber insurance just got a lot less complicated with the release of the NZI Cyber Calculator. In the first six days of going live, more than 2000 users logged on to nzicyber.co.nz to get an estimate.

The NZI Cyber Calculator makes it easy for customers to get a handle on purchasing cyber insurance and helps them see it’s not as prohibitive as they might think. One of the first of its kind on the New Zealand market, the NZI Cyber Calculator allows users to generate an instant online estimate for NZI Cyber Ultra, based on NZI standard pricing for Cyber Ultra.

The customer is asked a few basic questions in order to receive an estimate. They can then proceed to the next step to purchase a policy by filling in an online application form and sending it to their broker to bind the business.

Over the last six months, NZI’s Cyber Risk Survey has reported 18% of users are presenting at high risk and 29% at medium risk, so it’s critical that businesses have the right protection in place.

The NZI Cyber Calculator tool provides brokers with all the customer details needed to bind the business with NZI. Brokers just need to contact their NZI Liability Representative with this information.

The 2016 NZI Cyber Campaign has received a lot of attention in the marketplace since it was launched 12 months ago, resulting in NZI being nominated for a NZDM Award by the Marketing Association at the end of last year.

Customers can visit nzicyber.co.nz to get an instant estimate for NZI Cyber Ultra.

www.covernote.co.nz

23

FEATURE

MOVING THE GOAL POSTS?

By Andrew Horne and John Fowler MinterEllisonRuddWatts

Under the Canterbury Property Boundary and Related Matters Act 2016, boundaries will move with the land if the land moves in an earthquake.

W

hat happens to boundaries and boundary walls when the land moves in an earthquake?

In the Canterbury earthquakes, some areas of land moved relative to surveying boundary datum points. This meant that structures that were originally astride property boundaries may have moved to become wholly within one property. In extreme cases, boundary structures that were on one property may have moved to another. This raises questions as to which landowner has suffered loss and which insurer should pay for repairs.

Insurance policies usually insure only structures that are within the legal boundary of the insured’s land, even though structures on neighbouring properties may be important to protect the integrity of adjoining land.

Disputes can arise where an owner or insurer of a property does not repair or replace a wall that a neighbouring property relies upon for its integrity.

Landowners have a common law obligation to take reasonable steps to prevent damage to neighbouring properties below if they know or ought to know that their land could subside. For instance, if cracks appear in the ground which may signal a potential landslide onto a neighbouring property, the landowner has an obligation to carry out preventative or remedial works. Failing this, he or she may be liable for damage caused by a landslide on or on to the neighbouring property. Similarly, owners of land below a slip have a duty to take steps to ensure the land above remains 24

March/April 2017

supported if further erosion could cause damage to that property. There may also be relevant covenants registered on land titles which clarify the legal obligations between parties in respect of retaining walls. But property insurance policies do not normally cover the costs of enforcing property rights, such as the costs of compelling a neighbour to repair damaged retaining walls and other such structures.

The issue of land movement relative to datum points caused by the Canterbury earthquakes is largely resolved by the Canterbury roperty Boundary and Related Matters Act 2016. The Act deems boundaries in Canterbury to have moved with the movement of land, excluding landslips, caused by the earthquakes and any future earthquakes until 2022.

This means that in most cases, the legal location of a boundary wall can be determined by its position relative to other nearby structures, rather than by reference to survey datum points that have not moved with the earthquake-induced movements of land. This reduces the need to survey the positions of structures by reference to boundaries and addresses issues where the earthquakes caused structures to move from one property to another. However, the Act will not assist in resolving disputes between owners of neighbouring properties as to who must repair boundary structures or structures that affect neighbouring properties.

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COVER STORY

HOW TO STOP A PRODUCT RECALL TURNING INTO A BUSINESS DISASTER

By Oliver Meech and Toby Gee MinterEllisonRuddWatts

G

lobally, there is an increased focus on product recalls, and there have been various very high-profile examples. The recent global recall of Samsung’s Galaxy Note 7, for example, is a major issue for Samsung as it competes in the fiercely competitive smartphone market. In New Zealand, at the time of writing this article, 188 products had been recalled this year.

Costs related to product recalls extend further than the recall itself. Unsafe products can open the door to potential liability for property damage or other harm that the unsafe product may cause, both in New Zealand and overseas.

Damage caused by recalled products includes houses burning down because of defective coffee machines, severe accidents due to faulty cars, and even deaths caused by laced pharmaceuticals.

A product recall is defined as a corrective action taken after a product has been supplied to address health or safety issues with a product.

“Corrective actions” are broad – they are actions necessary to remove the potential for harm.

Risk management is central to product recalls when developing product recall plans, assessing whether insurance policies provide the right protection and deciding whether to recall a product.

THE REGULATORY FRAMEWORK FOR PRODUCT RECALLS Product recalls in New Zealand are governed either by an industry-specific scheme (food, medicine and vehicles have separate recall

26

March/April 2017

frameworks) or by the general catch-all scheme under the Fair Trading Act 1986 (FTA). General product recalls are covered by the FTA if goods have been supplied that will or may cause injury, or if they contravene a product safety standard.

A recall can be voluntary or compulsory. Since the scheme came into force in 2013, most recalls have been voluntary.

Trading Standards is a unit of the Ministry of Business, Innovation and Employment (MBIE). It is responsible for regulating and monitoring general product recalls. If Trading Standards considers a supplier is not taking satisfactory action to mitigate hazards, it can request the Minister of Consumer Affairs to issue a compulsory recall order compelling a business to undertake specific action. Trading Standards provides information on and guidance for a satisfactory recall1. This involves tracking affected products, clearly publicising the recall, undertaking follow-up actions and regularly reporting on progress to Trading Standards.

A supplier must notify Trading Standards within two working days after a recall is made public. This notification must contain specific information such as the type of risk and what to do about it, as well as identifying the affected units. It is not entirely clear what “made public” means – whether, for example, an announcement in another country or on a foreign website would trigger the need to notify. Trading Standards says it prefers to be notified as early as possible, preferably well before a recall is made public.

However, this may be easier in theory than in practice, as once a decision has been taken to conduct a recall, there are usually reasons to make it public as quickly as is consistent with sufficient planning.

One month after notification, the supplier must update Trading Standards by submitting a progress report, then submit further progress reports every two months until the recall is complete, ending with a final report. The government recently launched a Product Recall website, providing a mechanism for notifying Trading Standards about recalls and for reporting progress2. The three steps (notification, progress reports, final report) can be submitted through the website, by the recalling party or its representative.

PRACTICAL STEPS TO REDUCE RECALL RISKS The obligations imposed by the regulatory scheme are fairly straightforward, but implementing a recall can be complex.

Consumer NZ reports that on average, fewer than half of faulty products are returned when a recall is issued. This can leave a substantial number of defective products in the market, with an associated risk of injury or property damage, and residual legal and commercial risks if an adverse event occurs. Poor handling of a recall can exacerbate an already expensive and reputation damaging process, for example, when General Motors sent recall notices to people who had already been killed by a faulty car, or when

COVER STORY

Businesses must ensure that the goods they sell are safe.

The need to recall a product can have devastating consequences for a business’ reputation as well as creating massive costs. more than 100 million cars made between 2002 and 2015 had to be recalled because of an airbag issue that went unresolved for over a decade.

Businesses can minimise their risks by: • Ensuring good traceability within their

supply chain: this assists identification of what has caused a problem, which

products/serial numbers are affected and

where the affected products are. Any recall

is then likely to be much narrower, cheaper,

more effective and less damaging3 to

reputation. The upcoming Food Safety

Reform Bill in its current form can require

some entities to have tracing and recall

processes in place.

• Good quality control and testing: this will

bring any issues to the fore promptly, perhaps even before the products

are supplied.

• Retaining records (including of tests

conducted) will also assist in tracing

products and the possible causes of a

problem. They can also be used as proof of

actions to provide to authorities and to

reduce risk of exposure to a legal action.

• Having a product recall plan in place

before any need to conduct a recall occurs

and coordinating it with supply chain

partners, will improve any necessary

recall action.

Once a problem has been detected, effective communication is crucial. This will require prompt communication with parties such as

distributors and retailers to stop the supply of a product and to contain the scope of the recall. It also requires ongoing communication with many different parties potentially across countries), a local point of contact, parties through the supply chain and with legal experts. Good communication with affected consumers is also important (Trading Standards focuses on this in its practical guidance). Different communication channels will be necessary and/or possible with different products. For Samsung’s recall of Galaxy Note 7, for example, the manufacturer can communicate with users by text messages to the affected mobile phones themselves.

INSURANCE FOR PRODUCT RECALLS Internationally, specific product recall insurance is a growing area. In the last several years there have been a number of new entrants in the London insurance product recall market and a significant increase in capacity. In Australia, there is an increasing trend for contaminated products insurance.

Product recalls prompt several considerations for insurance policies, including the variety of costs that might (or might not) be incurred during a product recall and the circumstances when a product recall will (or will not) trigger cover.

There is a risk of incurring numerous direct and indirect costs during a product recall. These can include administrative costs, lost profit, business interruption, third party recall costs, rehabilitation expenses, costs for refunding and

repairing, consultant costs, replacement costs and costs associated with reputational harm.

Different triggers for cover under different policies may also cause issues for businesses which undertake a recall. In one case in the United States, food was recalled because it contained bacteria. Subsequent testing showed it was a non-harmful strand of bacteria. Because there was no risk of personal injury, insurance under the particular policy was excluded. However, the business still suffered substantial direct and reputational damage.

The high potential costs of a product recall mean clarity around specific triggers for recall clauses is vital – are precautionary recalls covered where subsequent analysis shows no physical risk? Are third party initiated recalls covered? Are precautionary recalls (where there may not be actual damage) covered?

Both insurers and insured should consider what steps to take to prepare for a product recall, as this will reduce the potential costs a business (and its insurer) will incur in the event of a recall.

It’s also important for insurers and brokers to be clear about which losses insurance will – and won’t – cover if the business recalls a product.

1. Trading Standards Guidelines for Product recalls. Also see the international standard ISO10393:2013 Consumer product recall – Guidelines for suppliers for detailed guidance.

2. recalls.govt.nz 3. See for example Time’s list “10 worst product recalls” http://content.time.com/time/specials/packages/ completelist/0,29569,1908719,00.html

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27

COVER STORY

FINANCIAL ADVISERS ACT SCRAPPED N

ew legislation to cover financial advisers – including general insurance brokers – has been revealed, but there are concerns that it may create problems as well as solve them.

The draft version of the Financial Services Legislation Amendment Bill was revealed in February.

It replaces the Financial Advisers Act by amending the Financial Markets Conduct Act (FMCA) to include advice provisions. The move to drop the FAA completely surprised some, but gives the Financial Markets Authority the ability tap into its existing FMCA toolbox when it regulates advice.The FAA had been due for a review, and there were concerns that it was not working as it should and could have been making it harder for consumers to access good financial advice.

“Some types of financial advice aren’t being provided. Very few consumers are getting advice that takes into account their particular situation or goals, and there are barriers to the provision of roboadvice,” the Ministry of Business, Innovation and Employment said.

“The quality of financial advice may be suboptimal. Commissions and remuneration structures are incentivising advisers to push particular products which may not be appropriate for the consumer, different types of advisers are held to different standards of competence despite providing some of the same types of advice, and some advisers and firms are held to account and subject to active regulatory oversight while others are not.

“Compliance costs are unbalanced and there are inefficiencies.

Some businesses are licensed at a firm level, while some individual advisers are required to be individually authorised, which means some industry participants are subject to significantly greater compliance costs.

Unnecessary complexity is preventing adequate consumer confidence and understanding. Terminology and definitions are confusing and disclosure documents are unwield, and do not contain the information consumers need to make informed decisions.”

As had been expected, the new bill – in theory - requires all financial advisers to operate on a level playing field.

There will be a code of conduct for all financial advisers, with uniform disclosure requirements. Concepts such as category one and two products

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March/April 2017

have been dropped.

The requirement for advice to be tailored for a consumer, provided by a natural person, will be removed to allow for robaodvice. All financial advisers and financial advice providers will be required to place the consumer’s interests first.

The bill introduces entity licensing, which MBIE said should reduce compliance costs for advice firms. “This approach replicates the efficiencies of the current QFE model and applies it to all. There will be flexibility, depending on the size and nature of a firm, in how prospective licensees will be expected to meet those requirements as a ‘one size fits all’ approach to licensing and reporting will not be appropriate.”

Under the new regime, firms will be subject to the FMCA’s compliance and enforcement tools, bringing them in line with other licensed financial services.

The Financial Advisers Disciplinary Committee is being retained for breaches by individual financial advisers, including those operating in general insurance.

MBIE is still to consult on the disclosure requirements on advisers, and a code working group will determine what the new code of conduct will contain. Once that is revealed, it will be clearer whether advisers working as RFAs will need to attain a qualification.

It is currently expected that the new code will be approved by August 2018 and the new regime will take effect six months after that.

Advisers who are already in the industry will have an additional two years to meet any new competence, knowledge and skill standards that are set in the code.

There are suggested provisions to cater for experienced advisers who need to prove they meet new competency requirements imposed by the code, without sitting an entry-level qualification. This could include assessments based on tests, interviews and reviews of client records for advisers who had been in the industry a minimum of 10 years.

The bill proposes that all existing industry participants would need to be engaged by a firm with a transitional licence by February 2019. Two years later, they will need to have a full licence.

But where confusion arises is in the adviser designations.

COVER STORY

WHAT HAPPENS NEXT? March 31: Submissions close on the draft bill. MBIE analyses the feedback and makes any necessary changes to the bill before it is introduced to parliament.

This year: MBIE consults with the indsutry to develop disclosure rules and appoints a Code Working Group to develop a new code of conduct for all advisers.

August 2018: New code of conduct approved.

February 28, 2019: The new regime begins. All participants must be engaged with a firm that has a transitional licence. (A safe harbour will be available for advisers who do not yet meet the competency requirements of the new code.)

February 28, 2021: Everyone must have a full licence.

The new competency requirements take effect. Safe harbour rules expire.

Instead of authorised financial advisers (AFAs), registered financial advisers (RFAs) and qualifying financial entity (QFE) advisers, there will be financial advisers, financial advice representatives and the financial advice providers they work for. Representatives replace an earlier suggestion of agents.

A financial advice provider could potentially have both representatives and advisers distributing its products.

Both advisers and representatives have to make clear any limitations on their advice, but representatives will work on behalf of advice providers and will not be individually accountable for compliance with conduct and disclosure. The FMA may impose conditions on the provider’s licence to limit the types of advice a representative can give. Representatives must not be given inappropriate payments or incentives that might encourage inappropriate conduct.

The representative category has caused concern among some in the industry, who say the bill replaces confusing terminology with more of the same. They worry that consumers may see the word "advice" in the representative designation and think they are dealing with someone offering an independent service.

Representatives will also be able to dodge the competence requirements enacted by the new code.

It is proposed that all existing RFAs and AFAs who wish to continue providing advice services during the transitional licensing period are required to be financial advisers. Existing QFE advisers who remain engaged by a firm which was previously a QFE will be able to operate as financial advice representatives.

IBANZ chief executive Gary Young said it seemed to indicate an inability to separate out sales and advice, and showed confusion around what financial advice really was.

“I don’t know why they need to have the word 'advice' in that representative title,” he said. “It implies they are an adviser, which is the very thing they are trying to differentiate them from.”

He said it made him wonder how many advisers would be left in the industry. A large number could take flight to become representatives, believing there would be less compliance costs and no personal

accountability for their advice or conduct, he said. That would raise more questions about competence and muddy the waters when it came to raising public confidence in the industry.

“Rather than having a set standard, you have financial advice providers who are able to set up their own standards if they can convince the FMA.” PAA chief executive Rod Severn agreed there was a problem.

"The line between 'sales' and 'advice' has not been drawn,” he said.

“The new designations FA ‘financial adviser' and FAR ‘financial advice representative' do not communicate to the public the essential difference between sole-provider advisers and those with access to multiple providers. It also does very little to differentiate between someone providing advice for which they take individual responsibility and those who don’t," he said.

"The exposure draft states that financial advice representatives will not be individually accountable for compliance with conduct and disclosure. In our view, to increase public trust and confidence and to place the interests of the public first, all advisers must be individually accountable for their advice.”

Insurance Council chief executive Tim Grafton agreed that the definition of financial advice still seemed too broad. He said there had been a demand for more distinction between sales and advice than the draft had delivered.

He said it should be expected that brokers would soon be required to disclose the commissions they received – something that was common in other industries already. He said any move towards lifting standards and improving consumer confidence, was important.

But Young said IBANZ members should not be too affected by the changes, because all were expected to work under the existing AFA code anyway.

“It will come down to is there going to be a qualification or not? Is that going to apply to everyone or just people who are new to the industry? It’s been suggested they draw the line at 10 years’ experience – what will be the test for those who have done more than 10 years to prove competence?”

Grafton said he hoped the move would build trust in consumers as it raised the bar on conduct.

www.covernote.co.nz

29

FEATURE

WHAT DOES THE HAWKE’S BAY WATER-CAUSED EPIDEMIC TELL US?

By David Shewan

MinterEllisonRuddWatts

Some 5000 people became ill as a result of Havelock North’s recent campylobacter contamination. Local businesses also suffered losses.

There are reports that holders of business interruption insurance policies have been forced to absorb tens of thousands of dollars themselves due to exclusions of cover for infectious diseases in their policies.

EXCLUSIONS FOR INFECTIOUS DISEASES Exclusions for infectious diseases have not always been a feature of business interruption insurance policies. The exclusions became common after the 2006 avian flu outbreak created fears of a worldwide pandemic, which might be financially ruinous for insurers and reinsurers. The classes of diseases which are excluded (or all of them) vary from one insurer to another and from one country to another. The terms of such exclusions appear to be influenced heavily by the cover provided by other insurers in the market and the cost of reinsurance of the risk.

In Australia, some policies only exclude cover for “quarantinable diseases”, a short list of severe diseases like avian flu, cholera and rabies. In New Zealand there has been a move towards exclusions in standard policies for “notifiable diseases” as defined in the Health Act 1956. The “notifiable diseases” list is more extensive than the “quarantinable diseases” list and – 30

March/April 2017

unfortunately for the affected businesses in Havelock North – includes acute gastroenteritis and campylobacteriosis.

PUBLIC AUTHORITY ‘LOCK DOWN’ A business with a “quarantinable diseases” exclusion in its policy could perhaps have had its claim for losses arising from the Havelock North event accepted. However, because the Hastings District Council did not impose a ’lock-down’, the policy still may not have responded to the loss.

This is because the relevant extension in most business interruption policies only provides cover for losses that are not due to property damage where a public authority has required the insured’s premises to be closed.

The common triggers for cover in situations where a public authority has required closure of premises include defects in drains or other sanitary issues; vermin or pests; risk of bodily harm; and escape of fumes. Clearly

FEATURE whether cover is triggered in these situations depends on prompt decisions from public authorities.

But a public authority’s decision on whether to force a lockdown should not be influenced by whether businesses can claim on their insurance policies. In some situations, a decision to force a lock-down in an affected area could lead to businesses sustaining greater losses. Most policies include (at least) a 24-hour stand-down period for claims made under the relevant extension, meaning that financial losses during the first day of closure are not covered. A lockdown for one day would therefore increase the losses even to insured businesses. An unnecessarily lengthy lockdown would have a heavy impact on businesses without business interruption insurance.

GOVERNMENT COMPENSATION There has been debate over whether, in the absence of insurance, local and central government should step in to provide compensation to businesses affected by the contamination. It has been reported that Hastings District Council will pay over $400,000 in compensation through a business recovery fund and rates relief. An opinion piece in the

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BUT A PUBLIC AUTHORITY’S DECISION ON WHETHER TO FORCE A LOCKDOWN SHOULD NOT BE INFLUENCED

BY WHETHER BUSINESSES CAN CLAIM ON THEIR INSURANCE POLICIES. New Zealand Herald took the stance that it should not be left to ratepayers and taxpayers to compensate businesses for lost profits. Of course, the political question of whether the Government should voluntarily provide compensation is separate from the legal question of whether the Hastings District Council could be liable in tort for the losses caused to businesses.

RISING AWARENESS OF WATER CONTAMINATION RISKS It remains to be seen whether the Havelock North event is an isolated incident. Since Havelock North’s water contamination, there have been calls for Christchurch to review its policy in relation to chlorinating water. Media reports suggest Christchurch’s untreated drinking water has contained E.coli 125 times in the past four years. The increased risk of contamination of water supplies and the generally higher incidence of enteric diseases in certain areas where there is intensified dairy farming have also come into the media spotlight, so Havelock North has raised awareness of what may be a more widespread issue.

POTENTIAL EFFECTS ON THE BUSINESS INTERRUPTION INSURANCE MARKET The publicity around the Havelock North event may lead to some businesses seeking narrower exclusions for infectious diseases in business interruption policies. As the market standard exclusion in off-the-shelf policies in New Zealand is for “notifiable diseases”, the event highlights the need for brokers to consider policy extensions for infectious disease cover with their clients.

Whether this leads to more extensions for infectious disease cover will presumably depend on the perception of risk by businesses and whether the cover can be offered by insurers at a low enough price point to be deemed worthwhile. If not, the burden of loss of business profits resulting from water contamination events like that in Havelock North will continue to be shared by businesses and Government.

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31

COVER STORY

INSURANCE, AI AND DISRUPTION Dr. Michael Naylor Massey University

I

n recent years insurance has lagged behind other sectors in terms of adoption of IT.This technological lagging means that insurance as an industry is currently ripe for technological disruption. This disruption is occurring in three main areas, (i) the understanding and pricing of risk, (ii) internal operations, and (iii) customer relationships. These changes mean that the industry is currently on the crest of a combination of technological advances which will utterly disrupt the current industry - a perfect storm. The industry is well aware of this, though few understand the scale of the looming disruption.

BIG DATA AND TELEMETRICS Traditionally, insurance actuaries have estimated risk ratings from a limited sample of data, with clients forced into risk pools. Actual information on any particular client has been shallow and restricted. The new sources of data derived from areas like telemetrics, social media or loyalty schemes will give insurers substantially larger amounts of higher quality data about their clients. Combining this with automated administrative, customer contact, underwriting and claims systems, will enable insurers to assess each client individually in real-time and thus offer customised and dynamic policies.

Insurers will be able to use algorithms to automatically analyse the database for trends which can then be used to predict adverse patterns. For example, patterns of data which predict house fires or link types of food purchase to types of sickness can be discovered. The size of these data sets will also provide training sets for software algorithms to learn to handle non-routine cognitive tasks, hence starting the process of creating the AI software

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required for complex tasks.

This change to big data analytics will be one of the most important sources of future insurer competitive advantage. It will change the way insurers interact with their clients, the way they underwrite and the way they structure their administration.

Insurers will gain a greater depth of understanding of personality profiles, buying trends and behaviour. This will allow insurers to move away from simply descriptive (what happened) analysis and diagnostic (why it happened) analysis towards predictive (what is likely to happen next) and prescriptive (determining how to ensure the right outcome) analysis. Multiple scenarios can be run and likely outcomes role-played. Insurers will gain an indepth understanding of why customers insure or don’t insure and be able to individualise customer approaches so as to maximise sales.

DYNAMIC INSURANCE Once real-time data feedback from telemetrics is added, the consequences for rate-making are revolutionary. The feedback from embedded devices will enable premiums to be set on an individual basis by software and adjusted in realtime – ‘dynamic insurance’. This is insurance underwritten individually, with premiums dynamically set based on feedback from the telemetric devices, e.g. car insurance which only activates when your car is on the road and increases or decreases based on driving behaviour.

Data analytics will reveal that a particular activity is risky for that kind of customer, and rather than excluding it, the insurer could offer a higher rate during that time.

House telemetrics can be linked to insurance

company computers to report intruders or fires, etc, to accurate track risks in real-time. Houses will have fingerprint or voice-activated security linked to doors or windows. Sensors linked to electrical wiring can shut down electricity flow if overheating and a potential fire is detected.

Chips embedded in all house contents will allow their location to be tracked, even if stolen.

This will lead to fewer claims and thus lower premiums.

Life or health insurance can be sold which is linked to wearable bionics which track blood contents and fitness levels, scan for signs of sickness and alert clients to potential problems.

Discounts can be given for health-related activities; warnings given if clients engage in unhealthy activities. Health specialists can decide which metrics need collecting, and data analysts can then start to analyse the flow of data to both feed alerts to doctors and to ascertain if trends can be found which predict adverse changes before they occur. If a client falls sick, the health bracelet will tell the insurer that a medical emergency has occurred, and the insurer’s computer can arrange emergency assistance, analyse scans and make payment of health bills without any need for patient involvement.

It will also allow detailed data analysis so that deep understanding can be gained around the relationship between client activities and well-being and sickness. The analysis of data from patients should discover trends which predetermine sickness and enable doctors to call in and treat patients before they get sick.

For example, UK insurer Aviva has combined data from a range of non-health sources, like shopping or online behaviour and has found that

COVER STORY these can predict future health outcomes nearly as accurately as blood or urine tests.

Currently, insurers use actuarial-based statistical algorithms based on compiling past data and event occurrences to forecast annual event probabilities.

The new approach will be based on the structural drivers behind events as well as any conceivably related data. By being able to examine real-time structural data on casual factors, insurers will be able to price risk very finely. They will be able to offer clients attractive premiums if they meet certain behavioural conditions.

INTERNAL ADMINISTRATIVE SYSTEMS Increasingly, all insurance customers will be underwritten and dynamically, rather than just at policy inception or renewal. This is only possible cost-wise if customer interaction and internal administration is computerised, so the marginal cost of reacting to data is near to zero.

The looming transformation is thus as much about internal software and management systems as data. Current versions of automated analytical underwriting and claims systems have been shown to have the ability to both increase operations speed, often reducing claims processing times from months to minutes, and to cut the cost of underwriting and claims processing by up to 100 times.

Big data is also starting to revolutionise risk assessment, because its intensive nature means that patterns can be found which are not visible when assessing a sample data set. For example, in health care, the digitalisation of millions of client medical records has allowed software to compare each client’s individual symptoms with aspects like their genetics, their family background, their gut bacteria or environmental factors to create optimal and personalised treatment plans and individualised medicines, all with minimal human oversight.

Similar techniques can be applied to customer relations or to sales data, pinpointing which marketing styles are important for each segment of the market. How, for example, do higher risk members of the white, female, suburban, SUV-driving group differ from higher risk members of the white, female, city-centre, non-car-owning group?

Client groups will no longer have to be made based on gross characteristics like gender or age but on actual causal factors. Individuals from groups who currently face underwriting issues, like young drivers, will be able to prove that they do not individually possess the behaviour patterns which make that group high risk.

Analytics will also allow customised client contacts. For example, it may reveal if a customer belongs to a group likely to lapse, at what point in time this lapse is most likely to occur and then allow the insurer to create a personalised insurance policy contact structured in a way most likely to retain that customer.

DATA-FOCUSED The current focus of insurance management is on strict cost control so that premiums can be kept competitive. These costs, however, are difficult to control and estimate, as underwriting estimates are created prior to policy issue and are only updated at renewal time. Even then, there can be legal issues around substantial premium increases or policy refusal.

The new era of real-time big data via telemetrics means that insurers will have a qualitatively different quality of data on clients.

They will be able to offer basic initial premium and then dynamically as client behaviour reveals itself. Insurance needs to move from a simple closed analytical underwriting model, which has a set of equations, towards a more forwardlooking model which uses scenarios and structured cause-effect chains to give a deeper understanding of loss possibilities.

The main aim of data analysis will be the ability to extract useful customer insights. There are two main reasons for negative outcomes, (i) unreliable or unsuitable data, often provided by external sources and not properly incorporated into the organisation’s own environment, and (ii) the analytics team missing an important component of data because they didn’t fully understand the business situation. Managers are needed who both understand data analytical methods and who understand the business.

The availability of big data is exploding, yet the possibilities of its use have been little explored in the insurance industry so far. While some insurers have invested in some areas, none have a vision of an integrated system based on near zero marginal cost admin systems.

DATA SOURCES Current insurer client data is historical, shallow and based on very few interactions, whereas new data will be deep, rich and real-time. Complexity will arise because underwriting data will need to be combined from as wide a range of sources as possible, many of which can be quite different, for example, minute-by-minute purchase data, retail data from loyalty cards, location data, text, online comments, blogs and call centre communications.

Combining these diverse sources can yield unsuspected insights. For example, Woolworths Australia discovered that customers who drank lots of milk and ate lots of red meat had a significantly lower auto-insurance risk than customers who drank spirits, ate lots of pasta and filled their petrol tanks at night.

The size and complexity of this data means that analysts cannot visually preview data but will build AI systems to mine it for useful insights.

Key skills will be big data analytic skills and data presentation skills, as well as deep knowledge of customer behaviour. Existing data software suppliers may not survive the transition if they do not have skills in AI mining of large and

disparate data volumes. Instead social media firms or consumer internet players, who do have experience in AI mining, will probably take over supply of data software to insurers.

One issue is that in large insurers, data is normally trapped into silos and locked behind access controls so it is virtually impossible to gain an integrated overview of reality. Data governance and ownership is also normally spread across an organisation so that there is no centralised view of what data they have and how it is used therefore it is impossible for any creative new uses of the data to be envisioned.

All these challenges mean that existing insurers will have to create entirely new IT, data flow, data visualisation and decision systems based on new management processes.

BIG DATA AND ARTIFICIAL INTELLIGENCE A vital part of the response by insurance survivors has to be the creation of effective AI systems using adaptable learning algorithms. The use of superior AI systems will allow insurers to mine big data derived from telemetrics and business-ecosystems to discover activity-risk correlations which are not obvious to actuaries and to cut marginal cost substantially. AI will thus be a key component of internal administrative systems, including their ability to respond to customers via auto-generation of emails or phone calls or social media posts, (using text and vocal recognition skills) as well as responding actively to telemetrics feedback.

A key aspect is that insurers will work as part of a wider ‘business ecosystem’ of related firms. Expertise in AI will allow insurers to integrate their products into the telemetricbased products used by other firms in their ecosystem, enhancing these products and extracting vital data. One of the keys for insurers to become a customer-centric company is a focus on the integration of big data into client-facing activities, delivered via a radical reduction in perservice administrative costs.

INSURANCE AS A SERVICE Linking insurer systems to telemetrics offers a range of exciting revenue sources for insurers.

Feedback from telemetrics and accurate predictive indicators from big data will allow insurers to move from compensation after an event to advice and warnings on how to prevent an event. The aim of these can be marketed initially as being focused on reducing client risk, but the real aim would be to integrate the company into customer lives. An insurer could then brand itself as handling a customer’s lifecycle management.

Insurers will change their business model from being one of providing insurance products to being one where they are data companies with real-time links to customers, specialising in databased personal risk products and services.

www.covernote.co.nz

33

FEATURE

NEW APPROACH PAYS OFF

I

nsurers and brokers say a new method of handling claims trialled for the first time in the wake of November’s Kaikoura earthquake has worked well.

The Earthquake Commission (EQC) signed an agreement with the eight Insurance Council members that provide house and contents insurance, which meant customers with claims for earthquake damage to their homes and/or contents would only need to work with their private insurer.

Insurance companies would act as agents for EQC to deal with claims even under the EQC cap.

After the Christchurch earthquakes, homeowners had to deal with claims assessors from both EQC and private insurance companies.

EQC said the Kaikoura deal should create a more streamlined experience for claimants, with less double-handling.

The insurer would assess and settle the building and contents claim. EQC would then pay back insurers within five days for their under-cap share of settlements – up to $20,000 for contents and $100,000 for homes. It will also pay the insurers for their handling expenses.

Homeowners’ entitlements under the Earthquake Commission Act remained the same, and EQC would continue to deal with land claims.

EQC chief executive Ian Simpson said the simplified approach for home and contents claims was an example of how insurers and EQC could work together to improve the claims process for customers.

“This approach draws on the experience we have gained from settling hundreds of thousands of claims following the Canterbury, Eketahuna, Cook Strait and February 2016 earthquakes.The new approach will be more efficient and will mean we can make the best use of the country’s loss adjusting expertise to deliver a better result for customers,” he said.

Insurance Council chief executive Tim Grafton said the deal had come about due to a lot of work.

The intention was to develop a process that was better for homeowners and took advantage of some of the lessons learned in the Canterbury earthquakes, he said.

Eight different bilateral contracts had to be drawn up to bring the deal into effect, with IT integration to allow insurers and EQC to share data. In some cases, information had to be shared three ways.

A deal also had to be struck to cover how complaints would be dealt with. Private insurers

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March/April 2017

are all represented by external disputes resolution systems, but complaints about EQC are dealt with by bodies such as the Ombudsman or Privacy Commissioner.

Grafton said it had also involved bringing together eight different call centres and the EQC

claims service is still significantly better this way than the previous model. As a consequence, this is benefiting our clients with property assessments and claim updates. It can also assist with property covered either via the EQC wording or the insurers; we can manage both situations.”

communications team, so that homeowners were given a consistent message.

“It’s better for homeowners because they deal with an insurer they know well and have maybe been a customer of for many years.”

Jimmy Higgins, executive general manager of claims at Vero, said insurers were experienced in disaster management. He said Vero had a team on the ground in Kaikoura immediately to manage the response.

“We’ve had choppers going into remote areas to assess damage and set up temporary offices in Kaikoura and in Blenheim that have ensured customers can come in and ask any questions,” he said.

“The agreement with EQC is an outcome of our learnings from Canterbury, and the new process is allowing us to provide a streamlined, end-to-end claims service to our customers.

Especially when major events happen and there are high volumes of claims, it’s helpful for customers to know that they only need to deal with us and we’ll look after them.

“The move to sum insured is also enabling us to make claims payments much quicker so that customers can get on with repairing and rebuilding their lives as soon as possible. We’ve already paid several million dollars’ worth of settlements in the past three months and customers and brokers have been pleased that they’ve been able to make the repairs they need to get on with things quickly.”

Jo Mason, chief executive of NZBrokers, agreed the new system was better. “Whilst the change in claims handling from EQC to the insurers has created some additional workload for insurers, our belief is that in general the

Insurance commentator Michael Naylor of Massey University, said there was still room for improvement.

“Feedback indicates that communication is still below claimants' expectations. However, expectations are different, in that because it’s a small event, people expect a fast response, which they got with other recent local quakes like the one at Seddon. In Canterbury, people recognise it was huge, so gave insurers a lot of leeway.”

Myles Noble, head of insurer relationships and broker claims at Crombie Lockwood, said it was too early to be sure how the claims process was running, although he was confident it would be better for policyholders in the long term.

“The announcement coming right before the traditional Christmas shut-down period has meant that it was only late January when insurers started actually dealing with these claims in any real effective capacity, but we have seen very promising responses in the last few weeks.”

Grafton said while the Kaikoura memorandum of understanding was a good step forward and allowed the industry to demonstrate how it believed the process should work, the EQC Act still needed to change.

Grafton said EQC should have a role similar to a reinsurer. “Reinsurers rely on the insurer to carry out the management and settlement of claims it is ultimately paying for. Globally, that is what everyone is doing. EQC should take on a similar role with respect to its claims. We deal with 1.2 million claims per year.We are very well equipped 24/7 to be responding. You wouldn’t want to have a standing army of EQC waiting on the next event.”

ASK AN EXPERT

Earthquake-prone building QUESTION… My client is the tenant of an earthquake-prone building.

Earthquake strengthening was to take place over a period of time; client was adamant he was still able to occupy and stay open for business. Once work had started, asbestos was discovered and the construction company advised this would need to be removed by a licensed company. Work Safe NZ legislation meant that client could no longer occupy the building until such time as a clear test was returned. Client had to close business for 10 weeks.

A business interruption claim was lodged under extension BI02 – Acts of Civil Authorities: This policy covers loss resulting from any action of any lawfully constituted civil authority consequent upon: (d) The escape of fumes or any hazardous material: or the threat or fear of any of them. QBE declined the claim based on proviso BI02 (a): Such loss shall be deemed to be resulting from damage to property used by the insured at the premises for the purposes of the business.

Provided always that: (a) any indemnity excludes such acts of destruction as may be ordered or exercised by the Canterbury Earthquake Recovery Authority (or any equivalent or replacement regulatory body) pursuant to the Canterbury Earthquake Recovery Act 2011, relevant regulations, or any similar or substituted legislation,except to the extent that the Insured is otherwise indemnified under this policy or this clause.

Our understanding is that the asbestos was not related to the strengthening work and was a secondary event. Do you agree?

REPLY… CROSSLEY GATES, DLA PIPER Proviso (a) appears to be limited to acts of destruction of the property.

From what you say the property wasn't being destroyed; it was being strengthened. Therefore, proviso (a) doesn't apply.

Do you have a question for our experts?

If so, visit iNavigator, www.inavigator.co.nz, or the IBANZ website, www.ibanz.co.nz - and let us know.

www.covernote.co.nz

35

ASK AN EXPERT

Insuring business interruption

Hydraulic system contamination

QUESTION…

QUESTION…

I insure a client who owns a local franchise for a popular New Zealand car brand. He owns the buildings under the family trust for which we insure the loss of rents components. He operates his car sales and servicing business under a separate legal entity who are the “tenant”. He only sells new vehicles and these are insured as stock under a motor policy. He also services used vehicles. The recent earthquakes (in another part of New Zealand) have him thinking about the impact to his business should he suffer damage at his place of work and/or people are prevented from accessing his sales yard.

He has limited plant and non-vehicle stock, and most of the value is in the vehicle stock. How do we best go about insuring the business interruption that could be caused to his business, the “tenant” i.e. full GP, AICOW and how would it respond/trigger given the nature of his business?

My client operates a specialised tracked bulldozer.

It operates in forestry in sandy, dusty conditions.

They had a hydraulic hose company carry out repairs to the motor.

The technician decided to do this work on site rather than take the machine to a more sterile environment. As a result a closed hydraulic system was contaminated, and on being started the machine travelled 5m and then stopped. The subsequent cleaning/ removal of contamination/repairs and transport cost $40,000.

We lodged a claim with the client motor insurer, who have declined the claim citing breakdown.

In my opinion the policy should respond as the “breakdown” was caused by the introduction of contamination into the closed hydraulic system, which should not have been opened on site but in a cleaner environment. We have third-party evidence which blames the technician. There appears to be a clear path of subrogation against the technician. They initially accepted responsibility, but since then their insurers have denied responsibility, blaming my client. Hence I want my client’s motor insurer to accept the claim and then subrogate against the hose company.

Am I right to expect my client to be indemnified by his motor insurer?

REPLY… DAVID CHOW Amend the MD proviso clause in the BI policy.Where risks are insured or perils covered under the motor vehicle that are also insured under the MD, it will trigger the BI losses. Insurers will struggle nowadays with this concept which was commonly used in the old days. Alternatively, insure the stock vehicles again under MD policy, and the insurers will charge a token premium for it but will be charged again. Worth paying additional premium if you want the cover.

REPLY… CROSSLEY GATES, DLA PIPER Perhaps not. Firstly, whether there is cover in the first place is not determined by whether there are goods grounds of recovery. Secondly, vehicle policies nearly all have the limitation on cover quoted above.

Essentially, pure mechanical breakdown is not covered except for a limited number of named perils.This is irrespective of the fact that the breakdown was accidental from the insured's point of view. It is simply a limitation on what the policy covers in the first place. If pure mechanical breakdown was covered, I imagine the premium would have to be significantly higher.

36

March/April 2017

ASK AN EXPERT

Tenant arranges own insurance QUESTION… My client has purchased a building with a sole tenant. The tenant wants to arrange their own insurance over the building. However, it has high deductibles. My client would prefer full control over the insurance and to arrange his own covers. What problems are foreseeable if he agrees to the tenant's wishes? Who is liable for excesses or ensuring conditions of the policy are met?

Burglary impact QUESTION… I have a client who owns a property occupied by a number of commercial tenants with a variety of office and retail trading occupations. The building has been burgled five times in the past seven months, with the villains targeting one particular tenant.

The landlord is having to pay a separate excess applicable to each burglary along with other costs. Can the landlord recover any of the costs from the particular tenant they have incurred to date (being the excess, security call-outs and physical security improvements to the site)? Does the Property Law Act have any provision for this?

REPLY… CROSSLEY GATES, DLA PIPER The landlord is insured against the burglary damage to his building, so the provisions of the Property Law Act do apply and the landlord's insurance is for the benefit of the tenant.That means no recovery from the tenant even if the tenant has been negligent (query: have the burglaries occurred because of any negligence by the tenant?). It is my view that properly interpreted, the PLA does not allow recovery of the excess (or multiple excesses) from the tenant. However, there are differing views and there is no case law on the point. I remind you of section 270 (1) (b). If at the next renewal, the premium goes up or the excess goes up because of the burglary claims (caused or contributed to by the tenant's negligence), 8280 SMT ADAS Covernote advertisement.qxp_Layout 1 23/02/2017 3:48 PMthen Page the1amount of the increased premium and/or the application of the increased excess can be recovered from the tenant.

REPLY… CROSSLEY GATES, DLA PIPER Only your client suffers loss if the building is damaged, not the tenant, so if the tenant arranges the MD cover over the building it must be on your client's behalf, payable to your client. In other words, it is still effectively your client's insurance policy, even although the tenant arranges it.

I imagine many owners would prefer to arrange their own insurance so they can be satisfied it is insured for the correct level of cover, with a reputable insurer with an acceptable deductible and the premium is paid.

If an owner lets the tenant arrange the insurance on the owner's behalf, the owner will want evidence to satisfy itself about all these matters.

Advanced Driver Assistance Systems

(ADAS)

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37

DATA RECOVERY LTD

HARD DRIVE FAILURE Data recovery is a technical procedure of retrieving inaccessible, lost, four years. They can deliver data at incredible speeds, and the cost has corrupted, damaged or formatted data from any storage device, computer drastically reduced. However, the downfall is the amount of “writes” is HDD (hard drive), external portable HDD, USB flash drives, SD cards, finite. You cannot write a single bit of information without first erasing servers and phones (Android and iPhones) when the data stored in them and then rewriting very large blocks of data at one time, and over time this reduces the capabilities of this SSD, which eventually will lead to failure. cannot be accessed in a normal way.

All HDDs will eventually fail at some point. The main issues we Think of it as a rechargeable battery. Due to constant use of charging and discharging, eventually over time they fail. encounter: PHONE RECOVERY with the increased popular usage of Android BAD SECTORS, which is an accumulation of unreadable data on the internal platter that the heads simply cannot read, and over time the and iPhone (Apple), which they in effect are now mini computers, we have the resources to retrieve data from dead phones, password-locked HDD eventually fails.

FIRMWARE ISSUES If the internal software that runs the HDD phones and retrieve deleted data. I am always surprised the with all the gets corrupted or damaged, we need to update or fix the firmware to advancements you can get from the latest and greatest phones. There is no recycle bin on these products. enable the HDD to function.

A true backup of data is when you have “two of something”, be it files, BAD HEADS The heads read the data that is on the spinning platter (5400rpm/7200rpm) Should they fail, quite often from a drop, they will photos, documents, emails, etc. The cloud provides some assurance, where need to be replaced with heads from an identical HDD. This complex data is stored at giant servers, normally overseas, at a minimal cost. However, process should always be conducted in a clean room environment , as if the we have noticed recently data storage providers have been increasing their prices or compromising your security unless you are prepared to pay a platter gets exposed to dust or foreign matter, this can destroy the heads.

STUCK HEADS this normally happens when the HDD is dropped premium for the encrypted secure service.

Business and personal permanent data storage, i.e. servers, mirror drives, and the heads are shunted to a different area over the platter, where we is not expensive, and data should always be programmed to back up. Lost calibrate them to the correct position.

FAILED BOARD all HDDs have a mini motherboard. Some internal data can cost businesses many thousands and what price for personal users parts may eventually fail, quite often due to power spike, wrong cable and emotional distress for losing their precious data? Not to mention the damn inconvenience of it all. inserted, a short circuit and excessive heat.

We at Digital Recovery can provide a comprehensive data recovery HUMAN ACCIDENT this can be when the data is lost due to service for the above issues, but really we are the “ambulance at the bottom physical damage, i.e. dropped, water damaged.

HUMAN ERROR often accidental and malicious deletion of files, of the cliff ”. And like going to the dentist or the panelbeater, no one really overwritten data, transferring data incorrectly. Even some computer enjoys paying for data recovery.

Please do not hesitate email me darren@digitalrecovery.co.nz should software upgrades will assume that your data is backed up.

CYBER SECURITY a recent and more devastating threat. Most you require further information on our services. viruses have minimal impact due to trusted antivirus software from your internal computer system and your internet provider removing them.

However, malware is the now the main culprit, where Data Recovery the computer user inadvertently lets in a nasty piece of software that can corrupt and damage files. Cryptolock and Repair Corrupt & Physical ransomware have become more prevalent, often disguised as Problems on HDDS an attachment, being a false receipt, delivery document, even Repair Flash/Memory a CV attachment from a spurious job applicant. Most harmful Drives, SD Cards & Malware is emailed from East Europe and Russia where they Smart Phones use spoofed (hoax) email addresses to unsuspecting computer RAIDs users. The motivation is to extort money by encrypting your Bad Sectors data, subjecting you to ransom until payment is received. Sadly, Password Locked Drives Ph: 0800 777 722 the cyber criminals see this as a legitimate business opportunity.

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38

March/April 2017

THE EVOLUTION OF VEHICLE TECHNOLOGY

What you need to know about driver assist systems Technology is changing just about every aspect of our lives and driving is no different. And it’s happening closer to home than you might think.

University of Canterbury researchers, developers, the Ministry of Transport and the NZ Transport Agency are involved in a trial of a 15-person autonomous shuttle that will be tested on Christchurch airport’s private roads early this year and if successful, the electricpowered vehicle will shift to public roads around the airport1. Another trial of autonomous vehicles, involving Volvo, is scheduled for Tauranga in November. Last year a NZ transport conference was told driverless buses which use navigation tools such as GPS and hazard detectors like radar to navigate their way could be on the roads within four years2.

But it is not only our public transport system that is set to be revolutionised by autonomous driver technology. Already many standard new model vehicles sold within New Zealand are equipped with Advanced Driver Assistance Systems (ADAS). For instance, 95% of all new car models tested by European car safety assessor Euro NCap in 2015 were already fitted with autonomous emergency braking, and organisations such as Thatcham and Euro NCap have called for it to be made mandatory in every new vehicle.

This technology, once limited to high-end luxury automobiles, is now standard in common models seen on our roads such as Madza CX5 and Ford Kuga and is set to become as common as current safety features like the seat belts and airbags. ADAS is the collective term for this new technology of safety cameras, sensors and radars designed to assist the driver. The technology is used to alert drivers to specific dangers and provide assistance to the driver like providing warning when the vehicle starts drifting into another lane of traffic or automatic emergency breaking in extreme situations.

The majority of the ADAS camera systems used are either attached to the inside of the windscreen or are mounted on the roof and look through the windscreen. Specific examples include: • Windscreen embedded sensors as part of the lane departure alert system • Collision avoidance systems with a camera and radar located on the windscreen • Sensors to help moderate the vehicle’s cruise control, defroster, and lights • Night vision with infrared camera mounted on the windscreen These safety features are a welcome addition to our roads provided they are maintained as per manufacturers’ instructions. Within NZ and globally there is a worrying lack of comprehension among drivers about the implications of not recalibrating after common events such as windscreen replacements,

wheel alignments or tyre changes. And what is of a deeper concern is the lack of understanding from those repairing and maintaining these vehicles, particularly when repairs and maintenance involve a windscreen with an ADAS camera.

The introduction and recent escalation of ADAS technology within the market represents new challenges that must be addressed to ensure driver, passenger and pedestrian safety.

For example, because ADAS sensors often include front facing camera mounted on the windscreen, replacement of that glass requires cameras to be removed and remounted on the new glass. Nearly all vehicle manufacturers require that the driver assist systems be carefully recalibrated following this type of repair to ensure the ADAS system is operating as it should.

customers driving to another location, such as the car dealer, for recalibration when the ADAS technology may not be operating at an optimal level.

Where Smith&Smith® branches are not able to complete the recalibration onsite vehicles are taken to the relevant dealerships on behalf of the customer to eliminate the inconvenience of making an extra stop to recalibrate ADAS technology following vehicle glass replacement.

At Smith&Smith®, ensuring safety on the road is of paramount importance, meaning that the vehicle manufacturers’ assertion that a calibration is mandatory cannot be ignored. But this should not come at an inconvenience to customers.

Recognising the growing need within the New Zealand market and the importance of safety when replacing an ADAS enabled windscreens’ Smith&Smith® has partnered with Bosch, a leader in the automotive industry and a manufacturer of calibration tools, to offer ADAS recalibration services. This is a result of a twoyear effort across several continents and a multi-million-dollar investment to implement the solution with software specific for the New Zealand market.

In branch recalibration is now available at 13 Smith&Smith® branches nationwide and are performed by highly trained Smith&Smith® technicians. The technicians use specialist equipment and can recalibrate up to 75% of all windscreen replacements that require ADAS recalibration. This eliminates concerns around

Sources: 1 See ChristchurchAirport.co.nz 2016 media release titled ‘New Zealand's First Trial of Autonomous Vehicle Announced’ 2 See RadioNZ.co.nz article titled ‘Driverless buses: ‘It is going to be big’

0800 80 90 80 www.covernote.co.nz

39

OPINION

NEW DEVELOPMENT - NEW ZEALAND LAW NOW IMPOSES A DUTY OF GOOD FAITH ON INSURERS

By Crossley Gates, DLA Piper

I

n an earthquake related judgement issued in late December 2016, the High Court1 (Court) found a mutual duty of good faith applied to parties to an insurance contract, including during the claims handling process.

A breach of that duty may result in an award of damages.

This is a new development in insurance law in New Zealand, and it will have implications in the way insurers deal with their customers.

BACKGROUND The insureds' residential house on the Port Hills in Christchurch was damaged in the Canterbury earthquake sequence. The main issue was whether, in accordance with the insurer's obligations under the policy, the house could be repaired or whether it had to be replaced. The insureds also alleged that the insurer had breached its duty of good faith to the insureds and sought general and exemplary damages against the insurer.

GENERAL AND EXEMPLARY DAMAGES The Court confirmed that exemplary damages for a breach of contract are not permitted in New Zealand. In any event, it found there was no evidence that the insurer's behaviour approached the standard required for an award of exemplary damages in tort or otherwise.

In relation to general damages, the Court found they could be awarded in a case such as this: 1. where the loss incurred is a foreseeable

loss as a result of the insurer’s breach

of contract; or 2. where the loss is incurred as a result

of a breach of a term of good faith

between the parties.

In this case, the insurer did not unjustifiably decline the insureds' claim. The alleged breach occurred when the insurer chose a repair strategy which the insureds considered to be contrary to the terms of the policy. The Court found that the non-pecuniary losses claimed by the insureds did not fairly arise from that breach, or both parties would not have contemplated them during the formation of the insurance contract.

DUTY OF GOOD FAITH However, the Court noted that it has never been settled in New Zealand law whether an insurer owes a duty of utmost good faith to 40

March/April 2017

insureds beyond the initial duty of disclosure, i.e. extending to the handling of the claim.

After a review of recent cases, which had left this point open, the Court found that:

insureds in a timely manner. However, the Court refused to award any general damages based on the insureds' argument that settlement of the claim had been unreasonably delayed.

A DUTY OF GOOD FAITH ON THE PART OF THE INSURER IS IMPLIED IN EVERY INSURANCE CONTRACT.

The full scope and limits of the duty were 'left for another day', but as a bare minimum, the Court stated that the duty requires the insurer to: (a) disclose all material information that

the insurer knows or ought to have

known, including, but not limited to, the

initial formation of the contract and

during and after the lodgement

of a claim; (b) act reasonably, fairly and transparently,

including, but not limited to, the initial

formation of the contract and during

and after the lodgement of a claim; and (c) process the claim in a reasonable time.

What is reasonable will depend on all the circumstances of the claim. The Court also pointed out that if the insurer shows that reasonable grounds exist for disputing the claim (whether as to the amount payable or whether anything is payable), an insurer does not breach the implied term merely by failing to pay the claim while the dispute is continuing.

In this case, the insurer did not initially disclose to the insured an early and brief report from a contractor that did not support the insurer's position that the house was capable of repair. The Court found that the failure to provide the report was a breach of the insurer's obligation of good faith. The Court awarded nominal damages of $5,000 to the insureds for the failure to disclose this document to the

DISCUSSION This is the first decision of a New Zealand court implying a mutual duty of good faith by both parties to an insurance contract during the term of the contract.

As this decision demonstrates, one of the practical implications of this is that insurers must now disclose to insureds all reports commissioned by the insurer about the insured damage, even if they are adverse to the insurer's view of the claim. This obligation arises despite no proceedings being on foot requiring discovery of documents.

This change in the law will require a change in the way some insurers deal with reports they commission from contractors and experts.

The insured is entitled to complete transparency now.

Although the court did not address this issue, the obligation does not, presumably, cut across the law relating to litigation privilege.

We may have to wait for a future case before this is clarified.

Crossley Gates is a partner at law firm DLA Piper. crossley.gates@dlapiper.co.nz 1. Young v Tower Insurance Limited [2016] NZHC 2956

IFSO CASE STUDY

Coming unstuck I

n March 2004, the insured arranged insurance for his boat.

In May 2015, he made a claim to his insurer for damage to the screen of the visual display unit – glue between the layers of glass had melted and run down to the function keys, rendering it inoperable.

His broker arranged for a loss adjuster to inspect the damage. The loss adjuster wrote a report, advising that the insured first noticed the issue in 2010 but, as the unit continued to function correctly, he did not address the issue at that time.

The insured advised the loss adjuster that the situation became worse in 2012. The loss adjuster stated that the unit continued to deteriorate to the stage where the screen glue affected the functionality of the visual display unit.

The insurer was concerned about the length of time that had elapsed since the loss occurred. It noted that the damage had been apparent since 2010 and referred to the policy obligation to take all reasonable steps to safeguard the boat against loss, and the insured’s obligation to tell the insurer if he was aware of any event that might result in a claim.

The insurer also expressed concerns that there was no other damage from the purported cause of loss, being an “excessive temperature” event.

Given no other items in the cabin were affected, the insurer believed the issue was with the glue itself and, therefore, a manufacturing defect, which was not covered under the policy.

Consequently, the insurer declined the claim.

THE CASE MANAGER’S ASSESSMENT When making a claim under an insurance policy, the insured is obliged to prove that he/she has suffered a loss, which is covered by the policy.

This is known as a prima facie claim.

If a prima facie claim is established, the insurer is entitled to raise an objection to meeting the claim.

However, if the insurer wishes to rely on an exclusion in the policy, it is then obliged to prove that the exclusion applies.

The policy covered accidental loss or damage caused by an unforeseen or unintended happening or event. The policy excluded wear and tear and deterioration.

The insured needed to prove that it was more likely than not that the damage was caused by an unforeseen or unintended happening or event.

He and the manufacturer of the head unit believed the loss was caused by high temperatures during a given period. The case manager did not believe this was the same as a “happening” or “event”. In the absence of any particular happening or event, or any heat damage to other items inside the boat, the case manager believed it was difficult to accept, on the balance of probabilities, that a single happening or event had occurred.

Rather, the case manager believed the damage occurred as a result of wear and tear or deterioration. Therefore, the case manager did not believe the insured was able to establish a prima facie claim, and the insurer was entitled to decline the claim.

Complaint not upheld.

Lengthy repairs I

n January 2007, the insured arranged cover for his commercial property. The property was not in use.

In October 2011, the property was extensively damaged following a fire starting at the main power box.

The insured made a claim to his insurer for the damage. In March 2012, the claim was accepted and the process to reinstate the property began.

However, due to a number of delays, the reinstatement was only completed when the Certificate of Code Compliance was issued on in February 2015.

The insured raised concerns about the length of time taken to reinstate the property and requested compensation, in the form of interest on the

sale value of the property and incidental expenses.

The insurer made a number of settlement offers, which he rejected. The last settlement offer, prior to referring the complaint to this Office, was $36,550.24.

THE CASE MANAGER’S ASSESSMENT The case manager was concerned that the repairs had taken nearly three years. Taking a very conservative approach to what could be considered a reasonable time to complete the repairs, the case manager believed that they should have been completed at least 18 months before they were.

There was no evidence that the insured had substantially contributed to the delays.

He had purchased the property as an investment and had received a number of offers to purchase the property before the damage occurred.

In addition, he had received offers to purchase the property before the compliance certificate was issued. When he was able to sell the property, he invested the proceeds in accordance with his usual investment process.

Therefore, the case manager believed that he had suffered a loss of investment opportunity due to the unreasonable delays in repairing the damage. However, following the case manager’s discussions with the insurer, it offered to settle the claim on the basis of without prejudice payment of $71,550.24, including an interest component of $55,000. This was calculated using the rate specified in Judicature (Prescribed Rate of Interest) Order 2011. The insured agreed to accept this amount in full and final settlement of the claim.

Complaint settled. www.covernote.co.nz

41

FSCL CASE STUDY

COMMUNICATION BREAKDOWNS THE CAUSE OF MANY COMPLAINTS

M

any of the complaints FSCL investigates stem from poor communication or a breakdown in communication between a financial service provider and their client.

Many complainants say that they were not given important information, which can then lead to a complaint. Other times the complainant simply hasn’t understood the information provided.

Poor communication can come in many forms: • A communication breakdown where important information has

not been passed on • a difference in expectations between the financial service provider

and their client • miscommunication, including ambiguity in communications and a

lack of plain English use • poor or inadequate disclosure A recent example of a case where less than effective communication between a broker and his client led to a misunderstanding and, ultimately, compensation being paid by the broker is set out below.

TIPS TO AVOID COMPLAINTS Here are some tips to help you avoid complaints. In short, improving communication is one way you can demonstrate the value you add for your clients, while also protecting yourself from potential complaints.

FSCL’S TIPS: • Have processes in place for good communication, including using

plain English in your communications and avoiding use of jargon

wherever possible.

• Make sure that your client has effectively communicated their

personal circumstances to you. It is important that you understand

and know your client so that you can then provide them with the

best advice and service possible, tailored to that particular

client’s needs.

•

•

•

•

•

Document your advice in writing – where advice has been given verbally, follow that up with written confirmation.

Keep good file notes. Contemporaneous file notes about the advice given to the client can be invaluable evidence if a complaint arises further down the track. As a professional, you will be expected to have maintained good records, and if there is a lack of file notes, this could cast doubt on your credibility in a dispute.

Understand any risks and explain those risks to your client, for example, the scope of cover, and check to see that your client has understood your explanation.

Remind clients to read policies before proceeding to purchase so that they understand their obligations.

Finally, develop good listening skills so that you understand what your client wants from you, rather than simply “hearing” what your client says. This is also especially important in the event that a complaint is ever made, as often it is not always about money or compensation. Often the client simply wants to vent to somebody, to have their position acknowledged or an apology made.

UNFAIR CONTRACTS STILL A PROBLEM A

complaint to dispute resolution service FSCL has resulted in an insurer changing unfair contract terms – but not for the reason complained about.

FSCL recently investigated a case where a woman bought a car from a second-hand dealer and took out mechanical breakdown insurance at the same time. The policy required an upfront lump sum premium payment of $1500 for three years’ cover.

A year later the woman decided to move to Australia and sold her car. She contacted the insurer to cancel the policy and get a premium refund but was declined on the basis that a refund was only available during the cooling-off period – 15 days after the policy’s start date.

She complained to FSCL that this was unfair, particularly when she had never claimed under the policy.

FSCL chief executive Susan Taylor said her office’s investigation found 42

March/April 2017

that the insurer’s terms were unfair. “The insurer could cancel the policy, in which case the unused premiums would be refunded, but if the insured person cancelled, the premiums would not be refunded unless it was within the cooling-off period.”

As a result of the investigation, the insurer agreed to make changes to the cancellation section of its contracts to ensure it was fair to both the insurer and insured. This included a change so that the insured could cancel the insurance policy and receive a refund of the unused premiums if the vehicle was stolen, badly damaged or repossessed.

“Terms and conditions set out the rights and responsibilities of each party to the contract. In this case, the young woman assumed she’d be able to get a refund if she went overseas, but this wasn’t set out as a term in the contract. If the contract does not meet your needs, you can negotiate or shop around,” Taylor said.

The insurer refunded the premiums as a goodwill gesture.

FSCL CASE STUDY

THE INSURED COMPLAINS TO FSCL THAT HER INSURANCE POLICIES WERE CANCELLED WHEN SHE THOUGHT HER PREMIUM PAYMENTS WERE ‘IN CREDIT’.

UNDERPAYMENTS AND OVERPAYMENTS OF PREMIUMS LEAD TO INSURANCE POLICIES BEING CANCELLED.

I

n July 2015, the insured complained that her business’s material damage and public liability insurance policies were cancelled in 2014, although she had been making regular payments of $115 per week toward her premiums for some time and thought she was ‘in credit’.

The insured was premium funded, meaning she paid in instalments to her insurance broker and incurred interest and fees. The insured began paying the $115 per week some time ago, after she and her broker agreed this amount would cover current premiums, and arrears.

Thinking she was in credit the insured stopped making payments in May 2014.The insured resumed payments from October 2014 to February 2015 (paying a total of $2,185).

Also in May 2014, the insured contacted her broker about overpayments she considered she had made over the years. On 9 June 2014, the broker refunded the insured $2,367.20, that amount being its calculation of her overpayments. The insured asked her broker several times over several months to provide a breakdown of how it calculated that amount.

In July 2014, the broker sent the insured a tax invoice for the 2014/2015 insurance year.The insured did not pay the invoice.The broker warned the insured in November 2014 her policies would be cancelled if payment was not received. The policies were then cancelled in December 2014 due to non-payment. In May 2015, the broker refunded the amount the insured had paid in premiums from October 2014 to February 2015 ($2,185).

THE INSURED'S VIEW The insured complained to FSCL about the cancellation of her policies.

The insured was of the view that: a) She had remained in credit and the policies should never have

been cancelled. b) The broker should have put the refund amount ($2,367.20) towards

the 2014/2015 premium. c) It was only when she raised the overpayment issue with the broker

that he investigated the issue.The insured questioned what her broker

intended to with the overpayment had she not raised the issue.

THE BROKER’S VIEW The broker said the insured caused the problem because she wanted to make payments by automatic payment, and not by direct debit. By making automatic payments, the broker was unable to amend the amount to pay each year to reflect changes in premium. This resulted in the insured both overpaying and underpaying premiums.

FSCL’S INVESTIGATION

WHAT HAD INSURED PAID? The insured provided us with bank records of her payments, and the broker also provided us with his record of the insured’s payments. We reviewed the records and found, by our calculations, the broker actually ‘over-refunded’ Sheena by $190.51 in June 2014.

DID THE BROKER CONTRIBUTE TO POLICY CANCELLATION? It was clear the insured was confused about how her instalments were applied to pay her premiums over the years. The insured had stopped her payments in May 2014, thinking she was in credit, and then restarted her payments in October 2014, thinking the credit would have been exhausted. However, when the insured received

the invoice for the 2014/2015 year and made no payments, she was in arrears again, and the policies were cancelled.

Ultimately, it was the insured’s responsibility to ensure her payments were up to date, particularly as she had received a $2,367.20 refund in June 2014. Also, the broker had adequately warned the insured in November 2014 that her policies were going to be cancelled for non-payment, and the insured should have urgently addressed this.

COULD THE BROKER HAVE DONE MORE? At the same time, the broker could have done more to assist the insured’s understanding of her premium payment arrangement. The cancellation of the insurance caused the insured stress and inconvenience, and the broker contributed to this. Our reasons were that: a) The broker emailed the insured in May 2014, telling her to cancel her

automatic payment,which she did.The insured thought this meant she

was in credit and did not need to make payments.The broker meant

to say that the insured needed to cancel the automatic payment and set

up a direct debit for the next insurance year’s premium payments

but did not make this clear. b) Moreover, there was no evidence of any discussion between the

broker and the insured about direct debit being the preferred

payment method. c) Although, ultimately, the insured needed to put the $2,367.20 refund

towards the next year’s premium, the insured was confused about which

insurance years the refund applied to.This was why the insured asked

for a breakdown of how that amount was calculated, but the broker

did not provide this information. d) The broker said he tried to explain the refund amount to the insured

over the phone, which was difficult. However, the broker could

have done more and broken down the refund amount in writing. e) The broker could also have advised the insured when he gave the

refund in June 2014 that she would shortly be receiving an invoice

for the next insurance year, and if she wished, the refund amount

could be put towards the next year’s premium. f) Emails between the insured and the broker in September 2014 made

it clear that the insured remained confused about being in credit.

Statements made by the broker in the emails indicated the insured was

up to date with her payments. g) We agreed with the insured that it was unclear what the broker intended

to do with the overpayments if the insured had not raised the issue.

For these reasons, we suggested the broker compensate the insured $250 for the inconvenience it caused. This was in addition to the benefit the insured had already received from the $190.51 ‘over-refund’. The insured and the broker accepted our view, and the complaint was resolved.

OUR INSIGHT This complaint could have been avoided if the broker had taken more time to assist the insured when she first raised the issue of the overpayment in May 2014, and communicated with her more effectively. In particular, by giving the insured a breakdown of its calculations of the June 2014 refund and explaining to the insured that she needed pay the 2014/2015 insurance year premium.

Some clients are difficult to communicate with, but businesses need, to a certain extent, to ‘take clients as they find them’ and provide more assistance to these clients to ensure they are not confused. www.covernotemag.co.nz

43

Professional

Professional Development: Professional IQ College

College

Change is coming for advisers

I

n February an exposure draft of the new legislation regulating financial advisers was released. This will change the way insurance brokers, as part of the financial adviser population, will be regulated in the future.

There are some key changes to the current regime being proposed.

• The existing categories of AFA, RFA

and QFE adviser will be replaced by

financial adviser and financial advice representatives • Distinctions between categories of

financial products will be removed • All advisers will come under a code of

conduct and have new disclosure requirements CODE OF CONDUCT All advisers, but not representatives, will be subject to a new code which is expected to be finalised within 18 months. There will be common standards such as putting the client’s interests first, while other requirements on competency, knowledge and skill are to be specific to separate parts of financial services e.g. insurance brokers.

Government has recognised the need to urgently progress this aspect of the regime and so before the legislation is passed a code

working group is to be formed to prepare a new code. This code is significant for current RFAs, including insurance brokers, in that it will formalise standards of competency, knowledge and skill.

Currently AFAs are required to have an NZQA qualification and do at least 15 hours of structured CPD per year. The new Code will set out requirements in these areas for RFAs. Transition provisions are to be finalised with a couple of options proposed for consultation.

In future the FMA will be able to refer providers and advisers (but not representatives) to the Disciplinary Committee for action on breaches of the Code.

TRANSITION TIMETABLE The following is a summary of the proposed timetable.

2017/18 - Bill passed and regulations made Aug 2018 - Code of Professional Conduct approved Feb 2019 - Existing industry participants must have transitional licence Feb 2021- All industry participants must have full licence TRANSITION OPTIONS The transitional licence can be applied for from August 2018 ready for implementation

in Feb 2019. All elements of the new regime commence in Feb 2019 other than the new code competence, knowledge and skill requirements for existing advisers. These advisers can continue to provide the same advice as currently until transitional licences expire in Feb 2021.

New staff will be taken on as financial advisers and must meet the new code competence, knowledge and skill requirements.

A possible option has been proposed for existing RFAs who could demonstrate competence through an assessment process.

This would allow experienced advisers, who do not have a qualification recognised under the code a way of proving competence.

The process would be voluntary and available to AFAs and RFAs who have at least 10 years’ experience in giving advice and may involve: • Using appropriately qualified and

experienced assessors to review evidence

of competence e.g. client files, tests and interviews • Systems to support advisers respond to

gaps in standards through training or

additional assessments If this assessment approach is accepted Professional IQ College would look to offer this service.

Professional IQ College Graduate Survey

A

s a quality NZQA provider of education for the financial services industry Professional IQ College regularly undertakes surveys to obtain feedback from our graduates. By measuring the satisfaction levels of our students and graduate outcomes, we are able to inform the quality of our programme delivery, in terms of relevance for the sector and the individual.

The online Financial Services Industry Programme at Level 5 leads to the New Zealand Certificate in Financial Services. This programme allows regional delivery while being cost effective which means many of our students reside throughout the country. Students are supported in their learning programmes by the student liaison team who set up individual support programmes to ensure that all students are kept on track and provide ongoing technical and education support when and where required.

KEY RESULTS The recent graduate survey recognise the value students gain in the workplace, providing a positive effect on their work practices and increased confidence to speak with clients to improving their future job prospects.

Ninety-eight per cent of students reported that they would recommend Professional IQ College and any of its courses to a friend or a colleague.

About half of the graduates who undertook the survey were new to the industry while the other half recognised the value of additional professional development.

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March/April 2017

All students were satisfied with the learning support and valued the study guides provided by the college: • All students found the feedback from assessors was beneficial • 98% of students reported that they received satisfactory

support from college staff • Over 80% reported that the assessment instructions were clear

and assessors were approachable • More than 80% of the students were satisfied with the online

student learning portal.

MORE INFORMATION If you have any questions about graduate surveys conducted

by Professional IQ College, please send us an email at info@professionaliq.co.nz

DATE

TITLE

PRESENTER

WHERE

TIME

COURSE DESCRIPTION

10

Scope of cover - client’s expectations and claims

Virginia Douglas

Auckland & webinar

10.3011.30

Clients’ expectations of what is covered under their policy and what the policy actually covers do not always align. This webinar will cover common limitations on the scope of cover under policies and client’s misunderstanding of these.

11

Business Interruption Common problems, pre-loss & post loss & how to minimise or eliminate these

Mark Anderson

Auckland & webinar

10.0011.00

It is often only when a loss occurs that a broker finds out how good their clients BI policy is. It is too late after a loss to retrospectively change the cover. You may not have seen your client’s financial accounts.

April

12

Connecting with Your Customer

Trevor Slater

Auckland & webinar

10.3011.30

This webinar is webinar 1 which is part of a negotiation course that consists of six webinars each around 60 minutes long. At the end of each webinar there will be a short assignment. Upon completion of the full course attendees will be issued with a completion certificate. There is also the option of undertaking any of the webinars individually and not as part of the certificate course as each is ‘self-contained’. There is also an additional complaint handling webinar for those interested.

27

Law Essentials

Andrew Hooker

Auckland

10.3011.30

Whether you have been in the industry for 30 years or 30 months, it is always useful to refresh on basic principles. If you have a good understanding of the fundamental principles or insurance law then the rest is easy.

May

10

Interest Based Negotiation

Trevor Slater

Auckland & webinar

10.3011.30

This webinar is webinar 2 which is part of a negotiation course that consists of six webinars each around 60 minutes long. At the end of each webinar there will be a short assignment. Upon completion of the full course attendees will be issued with a completion certificate. There is also the option of undertaking any of the webinars individually and not as part of the certificate course as each is ‘self-contained’. There is also an additional complaint handling webinar for those interested.

11

Lead Generation –How to Warm up Cold Calls

Clinton Warren

Auckland & webinar

11.0012.00

Further details to come

11

How to generate high quality leads, referrals and introduction using LinkedIn

Clinton Warren

Auckland & webinar

1.002.00

Further details to come

1.002.00

About 10% of complaints to the IFSO Scheme involve non-disclosure. For the 22 years the IFSO Scheme has provided a dispute resolution service, nondisclosure has been one of the main issues for consumers. While some cases are clear, and people have deliberately failed to provide information they were asked for, in many cases people unintentionally leave out information, because they have forgotten, or they do not realise it is so important.

16

Non-disclosure - the problems and possible solutions

Karen Stevens

Auckland & webinar

June

14

Detecting Deception

Trevor Slater

Auckland & webinar

10.3011.30

This webinar is webinar 3 which is part of a negotiation course that consists of six webinars each around 60 minutes long. At the end of each webinar there will be a short assignment. Upon completion of the full course attendees will be issued with a completion certificate. There is also the option of undertaking any of the webinars individually and not as part of the certificate course as each is ‘self-contained’. There is also an additional complaint handling webinar for those interested.

20

A round-up of recent FSCL cases

Susan Taylor

Auckland & webinar

11.3012.30

Complaints to FSCL are on the rise, including complaints about financial advisers, insurance and mortgage brokers.

27

Emerging issues – methamphetamine damage claims and problems with earthquake repairs

Karen Stevens

Auckland & webinar

10.3011.30

In the last year, the IFSO Scheme has seen an increase in issues in relation to claims for methamphetamine damage and with earthquake repairs. These emerging issues have meant that insurers have had to look closely at their policy wordings and the IFSO Scheme has worked with insurers to assist them resolve issues with their clients. www.covernotemag.co.nz

45

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

STAFF

IBANZ

Gary Young Chief Executive DDI: 09 306 1734 Mob: 027 543 0650 gary@ibanz.co.nz

Physical address: Level Five, 280 Queen Street, Auckland 1010 Mailing address: PO Box 7053, Wellesley Street, Auckland 1141 Toll free: 0800 306 173 Website: www.ibanz.co.nz

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 Sylvia Heywood Academic Manager Professional IQ College DDI: 09 306 1737 sylvia@professionaliq.co.nz 46

March/April 2017

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

David Crawford - Chairman 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 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

WANT YOUR VERY OWN COPY OF

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 KIWI TECH FIRM

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TO ADVERTISE...

Contact Robert Johnson on: e-Mail: robert@benefitz.co.nz Phone: 09-477 4702 Mobile: 0274-970-712 CoverNote is published quarterly

by IBANZ, the Insurance Brokers Association of New Zealand.

All correspondence should be addressed to: CoverNote, PO Box 33-1630 Takapuna, North Shore City, Auckland.

Next issue is due out: JUNE 2017

CE WARNING

March/April 2017

HOW TO STO RECALL BECP A PRODUCT OMING A BUSINESS DIS ASTER Non-disclosure can ruin your life Fina

ncial Advisers Act scrapped Insurance, AI and disruption

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 Cambridge Insurance Brokers Ltd 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

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 Cambridge 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

Ken McNee Family Trust Lifetime Insurance Brokers Ltd Lloyd East & Associates Insurance Brokers Ltd Lowe Schollum & Jones Ltd Luxor Insurance Brokers Ltd MA Risk Solutions NZ Limited Mainprice King Chartered Brokers Ltd Malcolm Flowers Insurances Ltd Marsh Ltd Matt Jensen Insurance Brokers Ltd McDonald Everest Insurance Brokers Ltd Mike Henry Insurance Brokers Montage General Insurance Ltd MIG Fire and General Ltd Multisure Ltd Nauman Insurance Brokers Ltd Nelson Marlborough Insurance Brokers Ltd (NIB) Neville Newcomb Insurance Brokers Ltd North Harbour Ins Services (1985) Ltd incl Northsure Group Limited Northco Insurance Brokers Ltd Northcrest Insurance Brokers Ltd O'Connor Warren Insurance Brokers OFS Insurance Brokers Ltd Omni Fire & General Ltd One 50 Group Insurance Limited Paramount Insurance Agencies Ltd Paterson & Co NZ Ltd Penberthy Insurance Ltd Peter C Cranshaw Insurance Broker Ltd PIC Insurance Brokers Ltd Primesure Brokers Ltd Property and Commercial Insurance Brokers Protekt Insurance Brokers 2008 Ltd Provincial Insurance Brokers Limited PSC Connect NZ Limited River City Insurance Brokers 2000 Ltd RMA General Ltd Rothbury Group Ltd Runacres & Asssociates Limited Seneca Insurance Brokers Ltd Sit & Blake Limited South Pacific Insurance Brokers Ltd Sweeney Townsend & Associates Ltd Thames Valley Insurance Ltd The Advisers 1 Limited Thorner General Insurances Ltd Towes Insurance Brokers Ltd Trevor Strong Ins Ltd Vercoe Insurance Brokers Ltd Vision Insurance (S.I.) Ltd Waikato Insurance Brokers Limited Wallace McLean Ltd Wanganui Insurance Brokers Ltd Willis Towers Watson Yesberg Insurance Services Ltd

Christchurch Christchurch Auckland Hamilton Auckland Auckland Auckland Taupo Auckland Taupo New Plymouth Auckland Auckland Hamilton Auckland Dargaville Nelson Auckland Orewa Masterton Auckland Tauranga Dunedin Auckland Auckland Auckland Auckland Auckland Levin Manukau Auckland Feilding Auckland Masterton Auckland Wanganui Warkworth Auckland Christchurch Auckland Auckland Auckland Rotorua Thames New Plymouth Upper Hutt Te Aroha Auckland Morrinsville Ashburton Hamilton Auckland Wanganui Auckland Christchurch

www.covernote.co.nz

47

New Zealand’s leading liability insurer Level 32, ANZ Centre Albert Street, Auckland veroliability.co.nz