CoverNote - September 2021 issue

September 2021

Climate change prompts risk-based pricing revolution

www.ibanz.co.nz

Here’s to 20 years of helping kiwi businesses find their feet again.

Back in 2001, we opened our doors with a vision to become New Zealand’s leading liability insurance provider. We achieved that goal, and two decades on, we’re still proud and privileged to help protect New Zealand businesses from the unexpected. Cheers to that!

Get in touch at our website below, or talk to your broker.

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New Zealand’s leading liability insurer

Welcome

Welcome to the spring edition W

elcome back.

Whilst not the circumstances I wished to be writing to you all in, I hope everyone is adjusting to the return of restrictions. All being well, between writing this and the magazine being published, there has been a return to a more normal life for at least some.

A large amount of our time over the last quarter has been taken up with the Fire and Emergency New Zealand (FENZ) funding review and consultation. In the 2020 Colmar Brunton Public Sector Reputation Index, FENZ was voted the most trusted public sector organisation.

Everyone within New Zealand stands to benefit from the critical support provided by FENZ and, as I am sure you will agree, payment for that support should be shared across the widest possible representative group to ensure fair distribution of direct and indirect costs.

Currently, Internal Affairs (IA) and FENZ are consulting on the review with two industry groups; Insurance and Property. Fairness and equity are key drivers for both groups, with simplicity and efficiency also front and centre for our sector.

Moving the method of funding collection away from insurance has been ruled out by the Government, limiting the levy payer pool to those who buy insurance.

This has historically been the basis of collection and harks back to when building fires would only be attended to by brigades paid for by the insurers of the burning building.

Continuing to fund FENZ in this way has been considered out dated and problematic for many reasons, including:

•

the wide range of incidents attended by FENZ

•

creating an unfair burden on a smaller pool of contributors

•

diverting industry resources away from client care and advice

• •

increasing the perceived cost of insurance; and encouraging under insurance and increasing the incidence of no insurance.

In the FENZ annual report for the year ended 30 June 2020, of the 83,359 incidents attended by FENZ, 13,728 were recorded as medical emergencies. A staggering 72% (60,101) were not related to fire at all. Of the 23,258 that were, just 5,588 were structures, with the remainder recorded as other or vegetation. Despite this, $596M or 95% of $626M of total FENZ revenue that year was collected as levies from those who buy insurance.

Given the statistics, there is an inherent unfairness that the responsibility for payment of the FENZ levy and the cost of collection rests solely with insurance purchasers. However, in view of the dependency we all have on the benefit that FENZ provides, we must set aside the unjustness of the decision and work with the Government to improve equity where possible, and drive greater efficiency within the insurance collection model to reduce costs.

We will continue to promote improving support of FENZ by moving the levy out of insurance. Equitably sharing funding costs across all who stand to benefit from the crucial service they provide is the right approach. In the meantime, greater efficiency and fairness for those paying and collecting the levy remains our priority.

Stay safe.

Melanie Gorham CEO, IBANZ

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: Melanie Gorham, Chief Executive, IBANZ. Email: mel@ibanz.co.nz IBANZ National Office located at: Unit 4D, 2B William Pickering Drive, Rosedale, Auckland 0632 PO Box 302504, North Harbour, Auckland 0751 Telephone 09-306-1732.

Website: www.ibanz.co.nz

Advertising/Editorial: Robert Johnson, Benefitz Telephone 09 477 4702, Mobile 027 4970 712, Email: robert@benefitz.co.nz Design/Production: Craig Burkett, Benefitz Imaging: CTP by Benefitz Produced for IBANZ by: Benefitz, 5-11 Parkway Drive, Mairangi Bay, Auckland 0632.

PO Box 33-1630 Takapuna.

Telephone 09 477 4700, Fax 09 477 4799 Advertising Deadlines: Bookings 10th of the month prior to publication, material 15th of the month prior to publication.

Features 3. Suncorp appoints Andrew

MacFarlane as CFO 4. Cyber threats, insurance

and the legal response 7. New-look Natural Disaster

Response agreement 8. Vero Q&A on the National

Disaster Response Model 14. Aon-Willis Towers Watson

merger called off 16. COVID-19 insurance

issues from around

the world 22. Vero urges Canterbury

farmers to use mental

health benefit on insurance 24. Claims teams - the human

face of insurance 30. Marine cargo surveying –

how times have changed 32. IAG profits fall

32. Strong performance

sees Tower pay dividend 37. Suncorp supports

vulnerable customers

Advertorial 18. Insurance Advisernet

celebrates milestone anniversary

10. COVER STORY Climate change prompts

risk-based pricing revolution

Opinion 28. When does an exclusion for

a ‘deliberate act’ apply?

Regulars 41. Professional Development: Professional IQ 20. Humans of NZI College 38. Ask an Expert 44. IBANZ Contacts 1. Welcome to CoverNote

WANT YOUR VERY OWN COPY OF

COVENOTE?

Septemb er 2021

See page 44 for details on how you can have your very own copy delivered directly to your door...

HOT OFF THE PRESS!

Climat prompts e change riskpricing re based volution www.iban z.co.nz

Feature

Suncorp appoints Andrew MacFarlane as CFO S

uncorp New Zealand has appointed Andrew MacFarlane as its new chief financial officer.

MacFarlane joins in September from ANZ, where he has spent the last 25 years in finance roles including in its institutional division, retail bank and tax, as well as in product management and strategy roles.

Most recently he held the role of CFO Group Functions for ANZ New Zealand.

Suncorp New Zealand CEO Jimmy Higgins said MacFarlane’s experience would be invaluable.

“I’m delighted to welcome Andrew to the Suncorp New Zealand leadership team,” said Higgins. “His experience of the financial services markets in New Zealand and Australia, coupled with his leadership within high performing businesses will be invaluable for Suncorp New Zealand as it continues to transform its business, while delivering great customer outcomes.”

MacFarlane will provide strategic oversight and monitoring of financial, actuarial, investment, capital and reinsurance aspects of the Suncorp New Zealand business, including go to market brands Vero and Asteron Life and supporting joint venture partnerships with the New Zealand Automobile Association, AA Insurance and AA Money.

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www.covernote.co.nz

3

Feature

Cyber threats, insurance and the legal response

Andrew Horne and Hannah Jaques, Minter Ellison Rudd Watts

C

yber-attacks on businesses and other organisations are both increasingly common and increasingly damaging. It is no longer a surprise to read a news or business website and learn of a cyber-attack that has caused significant disruption and loss.

In May of this year, the public health system in Waikato was thrown into disarray by a largescale cyber-attack upon the Waikato District Health Board which left it unable to manage and carry out routine medical procedures.

The DHB was compelled to cancel many patient procedures and had to resort to manual record-keeping and workarounds. A number of patients were transferred to Tauranga or Wellington along with their Waikato clinicians. By midJune, while some services and systems had been restored, many had not and the DHB reported that there was still a long way to go.

This incident illustrates the risks

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September 2021

that New Zealand organisations face from cyber criminals and the disruption and damage their actions may cause. The very nature of cyber-attacks mean that national borders are meaningless; New Zealand organisations are as likely to be targeted as those in larger countries.

In June this year, we hosted a Cyber Risk breakfast jointly with global brokerage firm Aon, with the title: “The changing risk landscape: corporate resilience for the rise of technology”. Four speakers provided different perspectives on cyber risk and the place of cyber insurance: • Datacom provided a perspective from an IT security provider.

• AIG provided a perspective from a cyber insurer.

• Aon provided a customer’s risk perspective.

• MinterEllisonRuddWatts discussed the legal risks raised by cyber events and how to respond.

In this article we summarise these perspectives.

Cyber-attacks – a technical perspective

Cyber crime is low-risk profiteering because of offenders’ ability to maintain anonymity. It is thought to have surpassed all other types of crime combined.

Cyber criminals usually take or lock up commercial or customer information and issue ransoms with the threat of deleting the information or releasing it to media and other global platforms if not paid.

Some key points: •

New Zealand is a soft target for cyber criminals because we think too locally. Although we tend to view ourselves as tucked away at the bottom of the world with clear borders, which has benefited us in our response to a real-world virus in COVID-19, cyber criminals exist in a borderless universe and New

Zealand is as exposed as anywhere. Our naivety makes us an easy target.

• Most cyber crime is committed for profit - and it is very profitable and relatively low risk.

•

Good hygiene is important. Up to date software patches, dentity verification and device security are all key. CERT NZ’s top 11 suggestions for cyber security are a good place to start.

•

Do the basics well first. Email security and multi-factor authentication are critical. Train and test your staff often.

Deploy a managed EDR (endpoint detection and response) solution to protect your devices, as this is the most likely way into your network.

•

When an attack happens, timeliness of response is critical.

If you do not have sufficient visibility of your environment, that will hamper your response, as will not having tools like EDR

already deployed. In any event, get professional help as early as possible. You can make things worse!

An insurer’s observations of trends

AIG, which has offered cyber solutions for two decades, observed the following key trends in cyberattacks and their effects: •

A significant increase in insurance claims due to the increasing prevalence of ransomware - a form of software that infects a cyber system and encrypts files, which cannot be accessed until a ransom is paid in exchange for a decryption key.

Ransomware typically infiltrates systems through phishing emails with attachments containing the ransomware. A study by AIG found that ransomware and extortion claims under cyber insurance policies increased by 150 per cent between 2018 and 2020, by which time they

accounted for one in every five claims.

•

Cyber criminals often now take their time and conduct data reviews prior to encryption to make their attacks more effective. They work through networks and identify the best, most valuable data and critical systems, right to the top of the IT architecture. Attacks that are more targeted are more harmful.

When this approach is taken, ransom and extortion claims are typically for amounts twice as high less-targeted attacks: hackers demand a higher price for the most valuable data.

• Typically, businesses are unable to operate properly for between 7 and 10 days following a cyber breach.

Losses caused by cyber-attacks usually impact multiple aspects of insurance cover: • Extortion and the cost of ransoms. www.covernote.co.nz

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Feature

•

Event management costs – IT forensics and legal counsel are required to respond to technical and legal issues.

• Network interruption losses – traditional business interruption losses of profit.

• Security and privacy – regulatory actions, defence costs and fines, potential customer claims.

Cyber-attacks are increasingly expensive for the insurance industry. To ensure that the risk profile does not continue to rise, insurers are now looking carefully at the following factors: • Understanding the similarities in deficiencies and controls of victims’ businesses to gauge when other insureds may be vulnerable.

• Tailoring cyber insurance cover to how well or poorly cyber risk is managed by an organisation.

Addressing cyber risk requires a two-pronged approach

Aon report that from an insured’s perspective, there are two key ways to address cyber risk: increased cyber security and risk transfer through cyber insurance. Both are necessary for risk mitigation.

All organisations are now more exposed than ever because of the changing ways in which we work.

Remote working is widely accepted and commonly employed, which results in the ‘perimeter’ of organisations disappearing or changing. Often, organisations include customers in their business processes through shared portals, online logins and other means which create further points of entry to data.

Many organisations, particularly SMEs, did not “bake” security into their systems early on in the process and now have minimally protected legacy systems running core processes with multiple updates and services added in ways that create gaps in existing security.

The key “at-risk” organisations are those who hold customer data, have access to other parties’ systems or data as part 6

September 2021

of the service they provide or are information conduits for service providers.

Insurers are asking increasingly detailed questions of insureds and they will not generally offer cyber risk insurance to organisations that do not have adequate cyber security systems. Even if insurers are prepared to offer cover, the price will depend on the security environment. One advantage of cyber insurance is that it helps organisations to identify weaknesses in their systems and it encourages them to increase investment in security to reduce premiums. From a business perspective, the fact that an organisation has obtained cyber insurance may become a mark of quality of its existing security measures which may be a selling point for customers.

Cyber insurance is therefore an overall value proposition - it minimises the risk and allows organisations to operate and interact more effectively.

The legal impact of cyber-attacks MinterEllisonRuddWatts commented that a cyber-attack or security breach will inevitably require a legal response as well as an IT response.

The following legal claims and issues often arise: •

The target organisation suffers its own losses – money is stolen through payment diversion schemes or data is stolen or locked up so that it cannot be accessed and

normal operations are affected.

This causes financial loss to the organisation. These losses can potentially lead to actions by shareholders against directors if they have not put effective cyber security in place.

•

The target organisation incurs liability to customers or other third parties such as those whose personal information is released.

Customers’ money may be lost or their data locked up or released to the public.

• Regulatory action, such as by the Privacy Commissioner or the Financial Markets Authority, can result in defence costs, fines and penalties.

Organisations can take steps to protect themselves from legal risks during and immediately following a cyber-attack. These include: •

Make no admissions about the adequacy or otherwise of cyber security arrangements or any other matter. Expressions of regret that an incident has occurred may be appropriate but take professional advice first.

• Take prompt steps to respond with appropriate IT assistance to mitigate any loss.

• Involve insurers at the outset.

•

Take advice. Many cyber insurance policies will identify IT experts and a panel of specialist lawyers who will assist.

Andrew Horne is a partner and Hannah Jaques is a senior associate at Minter Ellison Rudd Watts

Feature

New-look Natural Disaster Response agreement A

new National Disaster Response scheme has been created which will see insurers become a single point of contact for disaster-related claims.

Insurers and the EQC have confirmed a deal which will see all claims handled by private insurers.

It follows the commencement of the Natural Disaster Response Model between the EQC and eight insurers, announced in November last year.

As of June 30 Kiwis will go through their insurer only. Previously, customers needed to go through the EQC as well as their insurer.

The new process will only include insurers involved in the original agreement with the EQC; AA Insurance, Ando (Hollard), Chubb, FMG, IAG, MAS, Vero and Tower.

Insurers will assess and settle both the EQC and insurers’ portions of claims.

“The improved model gives customers simplicity and clarity at a time they need it most,” Sid Miller, EQC chief executive said.

Vero described the new model as a “collaborative” approach, and the culmination of several years’ work with the EQC following the Christchurch and Kaikoura earthquakes.

Campbell Mitchell, Vero’s executive general manager for claims, said: “The Canterbury earthquakes demonstrated that New Zealand’s dual insurance model resulted in double-handling of claims for customers.

“Vero has continued to advocate for a new approach and we are proud of the role that our business has played in this new model, which will significantly improve the claim experience for New Zealanders who are affected by a disaster.”

Vero and EQC piloted a joint response model following the 2015

Valentine’s Day earthquake. The approach was adopted by other insurers following the Kaikoura earthquake.

Mitchell added: “The new model will better leverage Vero’s expertise and capacity, and fundamentally improve the way we can support New Zealanders affected by a natural disaster.”

“It’s a huge step in the right direction to enable us to respond faster, more efficiently and deliver more certainty for our customers.”

Mitchell described the agreement as a “major milestone” for the insurance sector.

“In their moment of truth, New Zealanders need their insurer to help them get their lives back to normal as quickly as possible and I believe that this new model will empower us to be there for our customers when they need us most.” www.covernote.co.nz

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Feature

Vero on the National Disaster Response Model Covernote asks Vero executive manager for specialty claims Matt Williams about the National Disaster Response Model, a new NZ approach to natural disaster claims.

How long have insurers and the EQC been in discussions to create this scheme?

The new Natural Disaster Response model is something that has been evolving over a number of years.

Since 2016 Vero Insurance has been working in partnership with EQC to trial new approaches to managing natural disaster claims.

This was to address what we learned about the impact of New Zealand’s dual insurance model during the Canterbury earthquakes, and investigate whether having both insurance companies and EQC managing claims was the right approach.

In 2016 Vero Insurance and EQC worked together on small pilot following the 14 February 2016

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September 2021

Earthquake. Under this model Vero undertook the assessment and management of these claims. This was the basis for the successful model that was used by the main New Zealand insurers for the Kaikoura Earthquake.

Following the review of the model used for the Kaikoura Earthquake discussions commenced on how a similar model would support customers and how to permanently embed it into New Zealand’s insurance system. The final agreement was signed in October 2020 and the Natural Disaster Response Agreement is now live.

This has been a significant piece of work over many years to ensure that our customers get good experiences and outcomes in what can be difficult times as a result of a natural disaster.

What problems will it solve for brokers and clients?

This new model means that insurers will be a single point of contact for all claims. Customers who suffer

damage due to a natural disaster will no longer need to lodge two separate claims, one with EQC and one with their insurer.

This approach also means that there will no longer be the need for multiple assessors and the associated delays as was seen in the Christchurch earthquakes.

How can brokers process disaster claims for clients? How will it be different?

Under the new model insurers are acting as EQC’s agent for claims that are covered by EQCover.

As a result of being EQC’s agent insurers will be working directly with customers in the same way that the EQC did prior to the model. However as an intermediated business, we expect that brokers will continue to have ongoing dialogue with their customers on the progress on the claims.

We believe that the implementation of the agreement will provide brokers’ customers with a much simpler process for the lodgement,

assessment, and settlement of their claims for damage from natural disasters.

Are all Kiwi insurers on board?

Eight major insurers in New Zealand are part of this agreement - Vero, AA Insurance, IAG, Tower, MAS, FMG, Ando and Chubb.

But there are other insurers operating in New Zealand who aren’t part of the model.

When does the scheme begin?

This agreement commenced 30 June 2021, which means all events from 30 June 2021 will be managed by the insurers without the need for the customers to lodge separate claims with both their insurer and EQC. What benefit will clients see from this?

The key benefit to our customers is that insurers will be a single point for all claims for natural disaster events.

This reduces confusion for

customers over who to contact, and it also removes some of the double-handling that our dual insurance model creates.

For example, instead of claims requiring multiple assessments, under this model insurers will be able to arrange an assessment against its own and EQC’s claims guidelines.

It will also mean that customers won’t need to wait for EQC to assess and agree their claim is over its cap (or lodge a separate claim) before they get any additional support their insurer can provide.

Will the claims process be quicker?

Yes, the agreement is intended to make the claims process both easier and faster for customers.

How can brokers find out more about this scheme?

We’d encourage brokers to get in touch with their usual Vero contact if they have any questions - our team will be able assist them. www.covernote.co.nz

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Cover Story

Climate change prompts risk-based pricing revolution

More than ever, underwriters are moving towards riskbased pricing. Brokers need to gain a greater understanding of climate risks facing their region, writes Angela Cuming

I

nsurers in New Zealand are under increasing pressure to avoid over-exposure to natural catastrophes in high risk regions and coast lines up and down the country. As a result, risk-based pricing has come to the fore as underwriters look to place greater emphasis on individual exposures.

Once just a trend in the sector, taking a more granular and individualised approach to pricing is fast becoming the new normal for an industry that, like the rest of the world, is grappling with the ongoing and increasing effects of climate change.

Risk-based pricing means customers are offered different prices based on the level of risk they present. It allows insurers to set prices based on the assumed risk and to tailor policies accordingly.

Insurers use risk-based pricing to be competitive. The more accurate

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September 2021

underwriters are, the lower the premiums they can offer to low-risk customers. Insurers don’t want to overcharge or undercharge; they want the premium to reflect the actual level of risk.

Risk-based pricing is significant in New Zealand as the local economy faces a range of climatic and geological risks such as earthquakes and floods, which could see insurers charge more or restrict cover over the long term.

Insurers can price individual properties using sources of data that assess the level of risk each address faces. They look at factors such as soil type, how close a home is to an earthquake fault, or how exposed it may become to coastal erosion. They then combine the data with information on the building itself, such as its age, number of storeys, or construction materials.

Those data sets allow underwriters to build a comprehensive profile of every property. Global catastrophe modelling firms like RMS, used

by Tower Insurance, can drill down even further, using RMS earthquake models using data based on historical events, geologic information, ongoing global research, and damage statistics.

It isn’t a new idea. New Zealand has been relatively slow on the uptake of risk-based pricing when compared with other nations.

Following an increase in wildfires in the United States and Australia over the past decade, underwriters have moved towards risk-based pricing structures, superseding the traditional pooling structures used by insurers.

A host of insurers have made the move towards risk-based pricing in recent years. Tower introduced

it for domestic property in mid2018. AA Insurance announced it would use granular pricing, citing climate change as the catalyst.

The country’s largest home insurer, IAG, also changed its home and contents insurance, raising premiums for those in disasterprone areas. AAMI also made the switch.

The changes were expected.

Data show that New Zealand has been hammered by more than 150 natural disasters and extreme weather events in recent years.

Aotearoa is rated as the second riskiest country in the world for natural disasters.

Crombie Lockwood’s Brett Down cites climate change as the main driver behind risk-based pricing.

He says it represents the biggest shift in the insurance industry the country has ever seen.

“For generations, Kiwis have

valued the ownership of coastal property,” he says. “But with current scientific modelling predicting a rise in sea levels of between 50cm and 100cm this century, the ability for many properties to get adequate insurance cover could become much more complex.”

Massey University's Dr Michael Naylor says granular pricing is here to stay. He says insurers that don’t make the switch will end up with higher risk clients, to their financial detriment.

“If you accept global warming, then you accept sea levels will rise, and you accept there will be more severe storms, all of that affects coastal properties,” he says.

What does the shift mean for brokers?

Dr Naylor says insurance brokers need to play catch-up on the vast body of research and knowledge available regarding climate www.covernote.co.nz

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Cover Story

change, flood and earthquake risks in New Zealand.

“Brokers are going to need to be able to know their catchment areas and their flood lines and land heights and factor all that in when talking to customers,” he says.

Jeremy Holmes, a principal of actuarial firm Melville Jessup Weaver, says the concept of riskbased pricing isn’t new; it is simply about charging a premium that reflects the inherent risk. ‘“Insurers have been doing that for a long time,” he says. “However, insurers’ understanding of risk can change over time, and that is what we’ve seen with some of the localised premium increases in recent years.”

The PML will still be driven by earthquake risk rather than flood for most insurers, says Weaver.

“The Reserve Bank requires insurers to hold capital or reinsurance to cover a 1 in 1000year earthquake. For flood, insurers are only required to cover a 1 in 250-year event. For all the insurers that I work with, the top layers of the reinsurance programme are dominated very much by earthquake rather than flood.”

modelling improving over time, this should be less of an issue.

“What is more of an issue is developed land that is later found to be a significant flood risk. If a property subsequently becomes uninsurable, this will seriously affect its market value.”

Properties that sit in high-flood risk areas could remain insurable but “at a price”. Others could be ‘red-zoned’, says Dr Naylor.

“We can ignore this, and we'll get

and say, well, we're going to move the houses,” he adds. “But if the government comes in, people will demand that compensation. My prediction is the government will be very reluctant to do that. So, I suspect they'll stand back and leave it to the insurer.”

The most significant changes to the insurance market are set to unfold over the next decades as insurers develop a greater understanding of climate risks.

With premiums set to increase for

For generations, Kiwis have valued the ownership of coastal property,” but with current scientific modelling predicting a rise in sea levels of between 50cm and 100cm this century, the ability for many properties to get adequate insurance cover could become much more complex.

Crombie Lockwood’s Brett Down

Weaver expects to see a more collaborative approach to risk between local government, insurers, and banks.

“You can’t build a house without permission from the council, and you can’t get a mortgage without insurance. Just because the council deems a piece of land as suitable for development, it doesn’t mean that the insurance market will deem it insurable. But with flood risk 12

September 2021

more and more frequent floods, and the houses will rot. And we can rebuild them, then there are more floods, and there's more rot as we rebuild. The insurers won't stand for that.”

Naylor says the increasing understanding of flood risks could prompt government intervention in some regions.

“The government could come in

many, multinational insurers will be watching New Zealand consumer reactions as their costs rise.

Naylor adds: “Risk-based pricing is going to become the new normal worldwide, and New Zealand is a very good country for multinationals to experiment in.

All of the big overseas companies want to find out how customers are going to react.”

COVER STORY Cover Story Cover Story

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13 13

Feature

Aon-Willis Towers Watson merger called off

B

roking giants Aon and Willis Towers Watson have called off their $US30 billion merger, blaming US regulators for blocking the mega-deal.

The two international broking and advisory groups scrapped plans to combine after running into opposition from US President Joe Biden’s Department of Justice, which had sued to block the transaction.

U.S. Attorney General Merrick Garland described the deal’s termination as a “victory”. The DOJ had argued the M&A deal would reduce competition and lead to higher prices.

Regulators had looked at whether the merger would have impacted large US companies buying property, casualty, or financial risk coverage.

The DOJ said the combination would reduce competition in reinsurance broking, retirement and pension planning and private retiree multi-carrier healthcare exchanges.

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September 2021

European regulators had approved the deal on the condition the two companies sold assets to smaller rivals. Those sales, to Arthur J Gallagher, have been halted.

The decision to call off the deal will impact the New Zealand market, with Aon and WTW set to continue as independent businesses.

It halts a trend of mega-mergers in the broking sector. Marsh acquired JLT for US$5.6 billion last year, while NZ broker Crombie Lockwood was acquired by New York-listed Gallagher in 2014, bringing a wellknown Kiwi name under the umbrella of a US giant.

Following the collapse of the deal, Aon will pay Willis a $1 billion termination fee.

At the time of the announcement, Aon shares rose by 9.6% in US trading, while Willis Towers’ stock fell by 9%. Aon's shares were up 9.6% at $254.72, while Willis Towers' stock fell 9% to $205.93 in New York trading.

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Feature

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15

COVID-19 insurance issues from around the world Nick Frith and Thomas Leggat, Minter Ellison Rudd Watts

T

he scale of the COVID-19 crisis made it obvious that the pandemic, and the public health measures it prompted from governments, would have major implications for the insurance world. Responding to an unprecedented disruption in trading, firms naturally turned to their business interruption (BI) policies for protection. Given the number of claims and the distinctiveness of the COVID-19 circumstances, it was unsurprising that many of these claims demanded referral to the courts for resolution.

In this article, we briefly summarise the status of COVID-19 BI cases around the world.

United Kingdom

In the United Kingdom, the industry and courts moved quickly to clarify how typical BI policies would respond to COVID-19. In the last edition of Cover to Cover, we discussed Financial Conduct Authority v Arch Insurance (UK) Ltd in which the Supreme Court of England and Wales, hearing the case under the “leap-frog” appeal procedure straight from the High Court, made a number of significant findings in relation to key issues affecting the interpretation and application of BI policies to 16

September 2021

COVID-19, including disease and prevention of access clauses, causation, trends clauses and overruling the Orient-Express decision.

FCA v Arch, as envisaged, appears to have significantly quelled COVID-19 BI disputes in the United Kingdom. Following the Supreme Court’s decision, the FCA wrote to affected insurers clarifying its effect and urging insurers to settle claims expeditiously and to resolve any legal proceedings as quickly and cost-effectively as possible. It is also publishing a regularly updated set of COVID-19 BI claims data (obtained from insurers). The data indicates that FCA v Arch is having the intended effect. As at the end of June 2021, it recorded that over 40,000 claims had been accepted by insurers with over £500 million paid out for settled claims and a further £300 million in interim payments made for unsettled claims.

The FCA’s letter acknowledged that FCA v Arch would not be a complete answer to any COVID-19 BI uncertainty. It is not unexpected, then, that other cases have subsequently reached the UK courts. In Rockcliffe Hall Ltd v Travelers Insurance Company Ltd, the High Court granted the insurer’s application for summary

judgment in an insured’s BI claim where the relevant policy contained a closed list of diseases for which cover was available, which did not include COVID-19. The FCA also conceded that BI policies covering loss as a consequence of only physical damage were unlikely to respond to COVID-19 economic losses. However, given that most BI policies are structured in this way and the fact that FCA v Arch did not address such policies, it would not be surprising if insureds tried their luck in legal proceedings in the future.

Australia Like the United Kingdom, the insurance industry in Australia has sensibly sought to resolve COVID-19 BI issues through test cases. In the first test case, HDI Global Specialty SE v Wonkana No. 3 Pty Ltd, the New South Wales Supreme Court found that references to the repealed Australian Quarantine Act 1908 (Cth)—the “quarantinable diseases” listed in which were commonly excluded in BI policies— could not be construed to include the Biosecurity Act 2015, which had replaced the Quarantine Act. The High Court of Australia recently refused the insurers’ application for special leave to appeal this decision.

Feature The second test case is more general in nature. The Insurance Council of Australia (the body representing insurers) has identified nine representative claims to be heard together, which are collectively expected to raise many of the same issues as in FCA v Arch. By the time this goes to print, this test case ought to have been heard by the Federal Court, and any appeal to the full Federal Court is due to be heard, expeditiously, in November 2021.

Separately, the Federal Court recently dismissed Star Entertainment Group’s claim under its BI policy. Since COVID-19 does not cause physical damage, the casino operator could only claim under an extension for “loss resulting from or caused by any lawfully constituted authority in connection with or for the purpose of retarding any conflagration or other catastrophe”. The Court held that the term “other catastrophe”, in context, was limited to insured perils capable of causing physical damage (as covered by the policy).

USA

The COVID-19 BI litigation scene in the USA has been, perhaps predicably, lively. Cases have reached the courts involving claims by hotel chains, movie theatres, spas, restaurants and even the Philadelphia Eagles NFL team.

The most significant—the first to make it to the Courts of Appeals—featured an Iowa-based dental surgeon claiming for lost income as a result of the state’s suspension of non-emergency procedures between March and May 2020. In Oral Surgeons, P.C. v The Cincinnati Insurance Company, the insurer had declined covered on the basis that the policy required the financial loss to have been caused by “direct loss to property”, with “loss” defined as “accidental physical loss or accidental physical damage”.

The Court of Appeals for the Eighth Circuit resoundingly rejected the insured’s suggestion that “physical loss” could include “lost operations or inability to use the business”.

It was clear that some kind of

physical alteration to the property for the policy was required and, in this case, none was pleaded.

Perhaps reflecting the balkanized nature of the US judicial system, not every court has taken such a strict view of what constitutes physical loss or damage. In Schleicher and Stebbins Hotels LLC v Starr Surplus Lines Insurance Co, the Superior Court for the State of New Hampshire accepted the insured’s argument that their had been a “distinct and demonstrable alteration” to the insured’s hotels, following precedent extending the definition of physical loss beyond tangible changes to property in certain cases. Even though the COVID-19 virus could not be seen or touched, it was known to survive on certain surfaces and was widespread in the geographic locations of the hotels, thereby constituting, in the Court’s view, physical damage to the insured’s property.

New Zealand

The New Zealand courts have not issued any decisions regarding COVID-19 and insurance (save for issuing a restraining order protecting a broker from an insured who was dissatisfied that his income protection policy did not respond). While some claims have been paid, we suspect the lack of jurisprudence reflects the more restrictive nature of most New Zealand BI policies, together with the relatively minor impact of COVID-19 on New Zealand and the extensive support provided by the Government. If a case were to arise, the courts are likely to take guidance from the experience in other common law countries.

Looking forward – insuring the new normal

While courts around the world remain occupied, to varying degrees, with the task of determining how existing BI policies ought to respond to COVID-19, governments have shifted their attention to the task of reopening economies. While COVID-19 risk remains, this project necessarily includes working with the industry

to empower insurers to provide cover so that firms—especially those in high-risk sectors—are emboldened to resume trading activity with adequate protection against the risks of future disruption.

The UK Government recently unveiled its “Live Events Reinsurance Scheme”, which will provide up to £750 million in reinsurance for insurers writing policies covering live event organisers against the risk of event cancellation from the possible reimposition of COVID-19 restrictions. While full details have not yet been released, the scheme broadly resembles the Pool Re public-private partnership established in 1993 to provide terrorism reinsurance in response to a series of IRA bombings and that remains in place today. One notable difference is that Pool Re protects against third party damage whereas this scheme effectively amounts to the Government providing reinsurance for losses suffered as a result of its own action (namely, COVID-19 restrictions). It is unclear what effect, if any, will materialise from the Government having hands on both sides of the (re)insurance equation.

To date, New Zealand’s successful implementation of an elimination strategy has largely enabled live events to go ahead while much of the rest of the world remained in lockdown; since March 2020, we have hosted full-capacity All Blacks games, concerts and festivals.

Consequently, the need for an equivalent reinsurance scheme has not been so pronounced. However, as the Government unfurls the road to reopening and with a growing acceptance that the COVID-19 threat (especially the Delta variant) will linger, New Zealand may need to consider something along the lines of the UK model to create a suitable apparatus for sharing business risks associated with live events and other activities similarly vulnerable to COVID-19.

Nick Frith is a partner and Thomas Leggat is a solicitor (litigation team) at Minter Ellison Rudd Watts

www.covernote.co.nz

17

INSURANCE ADVISERNET celebrates milestone anniversary

This month marks 15 years since Insurance Advisernet entered the New Zealand general insurance broker market. Founder David Crawford takes us back to those early days and general manager Travis Atkinson, who joined the business in 2019, shares his observations.

18

September 2021

David, take us back to 2006, bringing the IA business to NZ. What were those early days like?

David Crawford (DC): Starting Insurance Advisernet was both exciting and terrifying. We were fortunate in that we had a working model from Australia, but we had no systems, no clients apart from one and no staff – just me with a laptop, a phone and a car !

Back then my primary job was to recruit brokers, negotiate wordings and commissions with insurers and get the back office set up. When I think back, it’s a bit like starting any new business, you just work all hours to make it a success.

It took us two years to get the broking software for NZ operational and another two years before we made a profit, so it was quite stressful. We finally paid back our shareholder loans after seven years and we haven’t looked back.

Travis, what was it like coming in at year 12?

Travis Atkinson (TA): While I’d worked with IANZ and knew David and Sue well, I was really impressed by the incredible depth of capability that the company had. The technology, compliance processes and market leading innovation such as our trust fund management was so impressive.

I could also see how well the company had come over the 12 years but equally how much potential still existed.

What’s been some of the highlights of the last 15 years?

DC: A lot of it is the people – amazing brokers that have joined over the years, many of whom have become personal friends during that time. Loyal and hard-working staff both here in NZ and in Australia – such a great team of talented people.

Our first year of profit in 2010 was pretty special, as was breaking $100m premium in 2019 and now $150m in 2021 – it’s unbelievable. The events are also always memorable – the first 2012 IANZ broker awards with Bernie Kane our inaugural ‘Broker of the Year’ winner, the 10 year celebration in Queenstown in 2016 and winning the Insurance Business Awards “Broking Network of the Year” in 2020.

TA: It was extremely rewarding to meet the brokers in our network and get to know them better. There was a real theme of brokers who had the passion, vision and bravery to set up their own business. Meeting them and hearing their stories has been my standout experience.

Having said that, it took me a while to get my head around working on the broker side of the business, and some would say that is still work in process! I was a long time on the underwriter side so it takes a while to be more focused on clients outcomes in particular .

What have been some of the big challenges you and the industry have faced?

DC: The Canterbury earthquakes were a significant challenge for the industry which affected brokers and insurers alike.

One broker alone had 1600 claims, so everyone helped out.

Subsequent years’ premium hikes were also a challenge for clients that had already been hard hit. We had two insurers go bust, one had to be bailed out by the Government and claims are still being resolved today.

The legislative landscape has recently changed for the financial services industry affecting both intermediaries and insurers. It’s probably the most dramatic change since 1994 and we are still yet to see the full effects of these changes, most of which are for the better.

For Insurance Advisernet our main challenges have been with managing our growth which is directly influenced by the growth of our brokers. We’ve had two foundation members leave over the years for different reasons and each of those had its challenges, but each time it caused us to refocus our efforts and the value we provide to our brokers.

Technology continues to be a challenge, mainly because we are dealing with insurers with legacy systems. We’re fortunate to have our own broking system and a team of dedicated people who continue to develop and upgrade our technology, often under a lot of time pressure.

What are you most proud of – what gives you the most satisfaction?

DC: Three things. Firstly, seeing brokers who have never run a business before, start from nothing and grow and develop a successful business, that’s pretty incredible. To do so they need to develop themselves and it’s this personal development which gives me the most pleasure.

Secondly, we’ve developed a network of independent broking businesses throughout NZ that have no fear of the big companies and endorse our motto of personalised local service backed up by national strength. So, the next generation of broking firms is alive and well and thriving.

Finally, we’ve maintained a culture of inclusivity, and the camaraderie in the network is fantastic. Our conferences are regarded by the industry as the most fun and we work hard to ensure that we take the time out to celebrate our successes when we can.

What lies ahead for IANZ? TA: The groundwork is well in place with an amazing group of brokers. We’ve quickly moved to being advice driven and being the risk management advocates for our clients.

Our brokers have embraced transparency of earnings and thinking about great compliance as a competitive advantage.

Our growth has been strong but we’ll focus on quality of systems, processes and people. We have very good learning and development capability and I think supporting talented brokers in this area will be a key advantage for us.

I hear feedback where clients have not received the best outcomes of dealing with other brokers. We have to aspire to best practice in the advice space – that means having talented and well-educated people in our network backed up by great systems.

I’d also like to support an increasingly diverse group, for example I’d love to see more female brokers launch their own businesses.

DC: The intermediated insurance landscape is changing rapidly and we anticipate there’ll be more opportunity for us as good people become further disenfranchised with the larger corporate brokers. There’ll also be heightened regulatory oversight from the FMA, and we’re already seeing evidence of this with their review of insurers.

The future is all about advice which is a big focus for us.

We’ll continue investing in smart technology to keep us at the leading edge of change. Insurance is a resilient industry and I can’t see this changing while risks in NZ and the world continues to grow. www.covernote.co.nz

19

HUMANS of

Playing the long game Murray James talks about his cricketing days and how he got his first runs in the insurance world “Once I returned to New Zealand, I decided to get a proper job because I was getting a bit older and I couldn’t play anymore. I had mates in the industry, so I got into the insurance game.”

Murray says his years at the crease have held him in good stead for the insurance industry.

“You’ve got to stay focused and be persistent, but also a good team player.”

Our capital city

W

ellington born and bred NZI Corporate Manager Murray James has been in the insurance industry for almost 30 years, and he’s proud to say he’s in it for the long term.

What started with a ‘foot in the door’ in 1992 by getting his first role at NZI’s parent company IAG, turned into a life-time career that has seen Murray work across the full insurance spectrum, including claims and sales.

In 2016, he joined NZI in his current role of Corporate Manager, where he is responsible for managing commercial and corporate insurance relationships from everywhere between Hamilton and the bottom of the South Island.

Good things take time

Building and maintaining relationships can take time, and Murray has learned the traits of patience, teamwork and focus first-hand through another of his passions, cricket.

“In the late ‘80s, I started doing an engineering degree, but it wasn’t for me. Cricket was my passion since I was in school, so I spent three years in the UK playing cricket. I was a top-order batsman and off spin bowler. It was good fun.

20

September 2021

Murray is passionate about his home city and the role insurance plays.

“Insuring in Wellington has its challenges, mainly due to its geography. And our challenge is to do the best we can to keep insurance available and affordable.

moments in his career was being involved in the Christchurch rebuild work, to help the city to recover from the 2011 Canterbury earthquakes.

“I spent three years in Christchurch as I was involved in the residential rebuild. That was quite a challenging time, but very fulfilling. Working directly with customers and being able to help them get back into their homes was very rewarding.”

Swapping sports

While Murray’s cricketing days may be over, his passion for sport remains.

“It’s important to understand the Wellington market to be able to help customers by providing the cover they need. As an industry, we are committed to continuing to educate people on this.”

Being there when we’re needed most Murray enjoys building connections and being there for customers.

“Interacting with people and helping them is my motivation and the reward at the end of the day.

Getting to know customers and brokers gives me energy, especially when it comes to listening and learning about their business.

“By understanding how they operate and learning more about their particular industry, I get the opportunity to come up with the best solution for them. I get inspiration from this aspect of my role, and I’m very passionate about it.”

One of the most memorable

Murray playing golf at St Andrew’s Old Course in Scotland

“I play golf at least once a fortnight. I really enjoy it and while 18 holes can’t be done in an hour, I enjoy it because it tests my focus.

So far, I’ve played over 100 golf courses in New Zealand and would like to do more.

“I also try and go away at least once a month with my partner on the road. We pack our caravan, our border collie dog, my golf gear and we travel around the North Island.”

After almost 30 years in the insurance industry, Murray is not planning on leaving any time soon.

“I’ve enjoyed it all the way. I don’t think I’ll ever leave the industry. The longer you stay, the better it gets.”

Have the

right team behind you

Business is constantly evolving, and recently many Kiwi businesses have been adapting to new ways of working.

Despite the changes, one thing remains true: having the right team behind you matters.

NZI has been insuring Kiwi businesses for over 160 years. Today, nearly 300,000 New Zealanders choose NZI to have their back and protect what matters most to them.

Your success matters to us.

Talk to your broker about insuring with NZI.

Feature

Vero urges Canterbury farmers to use mental health benefit on insurance

V

ero Insurance urged customers affected by flooding in Canterbury to use the mental health benefit on their rural insurance policies.

“The flooding in Canterbury is having a significant impact on our rural insurance customers, with inundation and damage to farming infrastructure like fences, pump, and other farm assets and buildings,” said Chris Brophy, executive manager for SME and rural insurance, amid the weather event in June.

Brophy said that a large 22

September 2021

number of claims were from rural customers.

“Vero is on the ground to help our customers with assessing and settling claims quickly, but we know it is still a tough time for farmers.”

As farmers deal with the fallout from the major event, Vero called on rural insurance policy holders to use their extra benefit called Best Doctors.

Best Doctors includes a worldleading service called Mental Health Navigator, designed to help farmers to navigate the stress and

anxiety created by the damage.

“We know that for our rural customers, this is their livelihood and that causes a lot of uncertainty and stress, and the potential depression, anxiety and burnout.”

“Mental Health Navigator provides our rural customers with direct virtual access to some of New Zealand’s leading registered psychologists and psychiatrists.

We’re urging our rural customers to use the service if they need support to stay resilient as they deal with this period of uncertainty.”

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Feature

Claims teams - the human face of insurance Claims is a people business, writes Dr. Dexter Morse, former Director Global Insurance & Risk Management at the International Air Transport Association (IATA).

There are so many lessons to be learned from the claims department.

T

he cost of claims is a major concern for insurers and reinsurers in all markets.

Claims departments are faced with increasing demands and expectations from all stakeholders within their organization as insurers and reinsurers are being accused of failing to manage claims effectively and efficiently.

Claims managers are constantly questioned about the accuracy of loss reserves. How does this headline loss impact our balance sheet? Are we paying too much?

Are we properly supervising our claims management agents, loss adjusters and outside counsel?

Are we compliant with local laws and regulations? As a result great emphasis is being placed on claims and claims practices. So how should a good claims operation look?

It involves the following:

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September 2021

C – ommunication with the insured should be clear and open.

The insured should be fully informed of the stages of the claims process and any investigations being made (such as instruction of loss adjusters or lawyers).

L – iability. The claim should be investigated swiftly and thoroughly and a decision taken on liability early on.

A – ctive and attentive. The claims team should respond swiftly to all correspondence received and verbal communication should be followed up with written confirmation to avoid misunderstandings.

I – nvestigation. If there are policy issues or liability matters, the claims manager should deal with these promptly and professionally and have a definite action plan in mind.

M – oney. Payments should be made promptly (after all this is why insurance policies are incepted – to pay claims). In the event that the claim is not covered by the policy then the claims manager should advise the insured as soon as reasonably possible in writing.

S – ubrogation. If there is the possibility to recover from a third party such actions should be pursued swiftly and zealously to ensure success and to avoid any time bar issues.

Claims departments are a mine of valuable information that is frequently overlooked by the wider organization. The claims department is perfectly placed to see if the insurance policy responds in the way the underwriter actually intended (assuming the underwriter knew what he intended in the first place) or if the wording was too wide or obscure.

Feature

Managing claims effectively Claims is a people business.

Most insureds have more contact with the claims department than any other department. The claims team can inform underwriting if the insured is satisfied with the product or how it can be tailored to the client’s needs thus permitting the organization to retain or even increase its business. It can also provide risk management advice to help reduce similar claims in the future for the insured. For the claims department this can increase its visibility.

The claims manager should encourage the wider organization to listen to the “lessons that can be learned” from claims. For example, large losses can be presented to representatives from underwriting, actuarial, accounting, finance and top-tier management in a “learning session” so that weaknesses can be exposed and hopefully improvements made for the next time around.

Claims success stories should be celebrated! This could be a claim that was declined because it was not covered, a fraudulent claim that was uncovered, or a large loss that was reduced because of proactive claims management or a successful subrogation action.

These lessons should be published in internal communications to heighten awareness.

It is surprising how many subrogation and other recovery opportunities are overlooked. A systematic approach to pursue negligent third parties or their insurers needs to be adopted and files closely diarized to ensure recoveries are aggressively pursued. Outside counsel are often instructed to assist with recoveries – while they can achieve excellent results, the benefits need to be carefully weighed against the likely recoveries achieved and they need to be monitored closely to assess their effectiveness.

The claims manager and internal audit should conduct

regular reviews of the claims files handled in the department to ensure consistency of approach, accuracy of reserving, proactivity of claims management, compliance with claims-handling guidelines, to ensure recoveries opportunities have not been missed and to identify any future training needs for the claims-handler. Such reviews should be well documented for compliance purposes.

Actuaries are heavily involved in the pricing and reserving practices of insurers but the claims department can add words and meaning to these figures. For example, a sudden negative loss development for a client might raise alarm bells with underwriting – but this may be explainable as a significant isolated litigated claim in a specific quarter but that the account will return to profitability in subsequent quarters.

Underwriters cannot know their accounts if they do not know their insured’s claims. Underwriters must work closely with their claims colleagues to understand the problem areas and where significant exposures may lie. If underwriters are the mouth of an insurer then claims are its eyes and ears.

Renewal Meetings / New Business Where possible claims and underwriting should work hand in hand to project a united front to the client. To facilitate this underwriters should do their claims homework prior to renewal meetings to appear professional and knowledgeable and make the client feel valued. Underwriters should include their claims counterparts in such meetings.

Claims departments also have a valuable role to play in relation to the business the insurer has on its books by way of pre-underwriting reviews. A brief analysis of the claims of an insured prior to writing the business and interviews of key personnel (risk managers/claims handlers etc.) can be enlightening in determining whether to write the

risk in the first place and, if so, that it is correctly priced.

The claims function is legally oriented and therefore claims handlers are perfectly placed to know what trends and developments are likely to happen in the legal world which might impact the business in the future – such information should be regularly shared with underwriting and actuarial.

Outsourcing Insurers and Reinsurers constantly debate whether to centralize or outsource their claims activities. Centralization ensures claims are serviced by nominated staff who know their customers, attuned to their wishes and thus behave in a manner which consolidates and compliments the insurer’s brand and makes the client feel of stable and secure.

The benefits of outsourcing are flexibility and value. It enables you to tap into an established knowledge and skills pool. A company that outsources its claims does not have to deal with the employment problems associated with fluctuations in claims workloads. When workloads fluctuate, the company does not have to train claims-handlers quickly or make them redundant; it simply passes this on to the outsource provider, who as a result of their scale are better able to deal with them.

An additional cost of outsourcing is the regular audits required by the claims department to monitor the standard of the service provided by the outsource provider. By outsourcing the insurer is passing control to a third party and entrusting them with the company’s money and reputation.

Claims Automation Certain types of claim, especially non-injury motor and household are becoming increasingly automated. www.covernote.co.nz

25

Feature

Research indicates a fundamental positive shift in attitudes toward claims automation as insurers are increasingly open to automation. Currently the focus is on how artificial intelligence and machine learning can assist with decisions around damage assessments, segmentation and payouts. They are also starting to experiment with more innovative technologies as they develop trust and competency in virtual processes.

Prior to the COVID-19 shutdown, less than 15% of claims were handled virtually. Based on research by LexisNexis, after the first shutdown was implemented, virtual claims handling increased to nearly 100%. Almost a year later, virtual claims handling has settled to a level of just over 60%. The public is actually embracing this movement online since 62% of people surveyed viewed the convenience of being able to submit a claim anytime/ anywhere as a perceived benefit of automated claims handling. Other perceived advantages included the faster settlement of claims (55%), increased transparency (45%), and increased accuracy (34%).

Customer ages have a role to play - Millennials and GenXers tend to be more comfortable with technology, are especially receptive to automated claims processing and the many benefits it affords. Two-thirds of Millennials and just over half of GenXers say that COVID-19 has had at least some influence on their being more open to filing a claim online. Research in 2021 indicates that 79% of Millennials and 64% GenXers are now comfortable with automated claims processes, which is a significant increase on 2019 figures. Convenience, faster claim cycles, greater peace of mind, and increased accuracy and transparency are all cited as benefits of an online claims process. For these two groups in particular, appreciation of these benefits has increased by as much as 11% over the past two years.

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September 2021

For Baby Boomers their focus tends to be on ease-of-use of an insurer’s website or apps, rather than on having the option to use online tools to file a claim and they remain quite uncomfortable with technology in the claims process.

Although most consumers embrace virtual claims processing, they are dissatisfied with some of the tools. Generally, the more questions they have to answer through a self-service process, the less happy they are with it. While they like the idea of self-service, the reality is leading to some disappointments, especially for more complex claims.

Worries also exist in relation to security with more than 60% of the consumers surveyed raising concerns around the security of their personal identifying information (PII) when submitting claims virtually. This is consistent across all age groups. Research

by LexisNexis Risk Solutions indicates eight out of 10 claims executives see identity verification as a primary concern with virtual processing. They understand the importance of cybersecurity but are struggling with how to ensure it in their claims processes.

Training & Ongoing Education Training and ongoing education are vital to success. It is imperative that claims staff are informed of the latest laws and regulations and changes in public attitudes (since the public compose the juries which make awards, especially in the US) to ensure reserves are accurate, contracts are interpreted appropriately and sound decisions are made regarding whether to settle or fight a litigated or arbitrated claim.

Control of training is important to ensure claims staff have a consistently high skills level, access to detailed, comprehensive, upto-date reference material and are able to contribute to and draw from an extensive pool of expertise.

Naturally a large central claims department provides economies

of scale and the opportunities to cross-train and produce multiskilled staff who are able to meet changes in the portfolio and market place. It facilitates the development of an extensive knowledge pool, avoiding the unnecessary duplication of expertise. Staff are the most valuable resource any claims department has – large centralized claims departments can provide interesting and varied career paths - leading to increased job satisfaction and better staff retention rates. Obviously this is better for the organization and the customer since the best claims service is offered by happy and experienced staff.

Clear, measurable performance goals should be established which reflect the organization’s goals and aims and are fully supported by the claims team. Senior management should be open and involve the claims team in the setting of the goals and objectives to ensure a complete “buy in.”

The claims team must handle claims in good faith, especially if operating in the US. The human touch Most consumers prefer a mixture of self-service and claims handler interaction and desire the opportunity to opt out of self-service and access a representative whenever they wish to. Whilst online self-service and virtual processes are valued for their convenience nothing can replace the human touch of speaking to a real person which increases the consumer’s comfort levels and proves at the end of the day - claims is and always will be a people business.

Dr. Dexter Morse has worked as a legal, claims and risk consultant at various leading global insurers/ reinsurers and has conducted claims audits and reviews in many different jurisdictions. www.dextermorse.com

15 YEARS IN

New Zealand 65

BROKERS NATIONWIDE

27,329

+64

CLIENTS

IANZ NET PROMOTER SCORE (NPS)

OVERALL SATISFACTION WITH IANZ BROKER

BROKER NETWORK OF THE YEAR

2020

We couldn’t be more proud of the achievements of our network of local brokers, supporting local businesses.

With great advice and exceptional personal service, they’ve seen their clients through the good times and the bad.

To all our brokers: thank you for helping us reach this milestone.

Here’s to the next 15 years – we are here to back you all the way.

If you’d like to join us on the journey, we would love to hear from you.

David, Travis, Sue

94%

Opinion

When does an exclusion for a ‘deliberate act’ apply?

I

t is fundamental to all insurance that it only covers a fortuity – that is, a loss that is accidental from the insured’s point of view.

So, how are the courts to interpret a liability policy that excludes: Liability arising out of deliberate acts …?

Deliberate acts cannot, by definition, be accidental. However, deliberate acts can still result in a loss that is accidental from the insured’s point of view; there is still a fortuity. For example, I deliberately burn some rubbish in an incinerator in my back yard, but the embers cause an accidental fire next door.

If the courts interpreted the above exclusion literally, the exclusion would apply to this example. Only accidental acts causing accidental loss would be covered. This diminishes the benefit of the cover considerably.

Recently, this issue went all the way to the United Kingdom’s Supreme Court. Although the facts of the case relate to liability for personal injury rather than property damage, the principles that apply are the same.

28

September 2021

Background A bouncer at a bar in Scotland ejected a customer from the bar who was intoxicated with both alcohol and cocaine; he had fallen asleep. Once outside, an altercation occurred. The customer was restrained by the bouncer around the neck. The police were called.

In the meantime, the bouncer continued to apply his neck restraint for up to 3 minutes. The customer continued to resist for a short period, but then turned blue in the face and started to cough.

Once the police arrived the customer was motionless. He was pronounced dead shortly afterwards. The cause of the death was mechanical asphyxia caused by the bouncer’s neck hold.

The bouncer was charged with murder. The jury acquitted him of murder but found him guilty of assault. When sentencing the bouncer, the trial judge accepted the bouncer’s actions were ‘badly executed, not badly motivated’.

The customer’s widow sued the bouncer for damages. He was insured under a liability policy

containing the exclusion quoted above.

Policy interpretation The Supreme Court restated the established law about interpreting an insurance policy. The Court said the policy must be: “… interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean”.

This allows the court to have regard to the commercial realities underpinning a liability policy issued to a door security company that employs bouncers.

Insurer’s position The insurer accepted that the exclusion could not be interpreted literally – it could not apply simply because an action by a person was deliberate.

Rather the insurer argued that the word ‘deliberate’ is referring

to the injury. In other words, the exclusion only applies if the bouncer intended his actions to cause injury. Of course, this interpretation achieves the same outcome as a policy with an insuring clause limiting the liability cover to accidental injury (and not deliberate injury).

of intention and held that the exclusion did not apply because there was no evidence the bouncer intended to cause an injury.

The Supreme Court accepted this was the only logical interpretation available when applying the established principles of interpretation referred to above to the words used in the policy.

This decision is likely to be followed by the New Zealand Courts. It makes it clear that excluding cover for liability arising from deliberate acts:

While the insurer was successful on this point, it was ultimately unsuccessful when it came to applying the exclusion to the unusual outcome of the murder trial. The bouncer had only been convicted of assault. There was not finding by the jury of an intention to cause injury.

The Supreme Court noted the trial judge’s statement when sentencing the bouncer that his actions were: ‘badly executed, not badly motivated’. In the light of this the Supreme Court was not prepared to imply any inference

It seems the outcome may have been different if the sentencing notes had found some intention.

Comment

1. Cannot be applied literally, and 2.

Will be interpreted as only applying when the person has an intention to bring about the injury or damage that resulted.

New Zealand insurance marketplace.

Indeed, we note that stating the need for a fortuity in the insuring clause has the advantage of placing the initial onus on the insured to prove this, rather than placing the onus on the insurer to prove it was not a fortuity by way of an exclusion.

Please feel free to contact us if you require any further information.

Crossley Gates cgates@keegan.co.nz

This, of course, maintains the need for a fortuity.

Given this outcome, there seems little point having this type of exclusion in a policy with an insuring clause that limits cover to accidental injury or accidental damage. That type of insuring clause is common in the

Frank Rose frose@keegan.co.nz

www.covernote.co.nz

29

Feature

Marine cargo surveying – how times have changed

S

helley Beasley, head of marine NZ at Sedgwick, started her career as a surveyor in the New Zealand marine industry in 1986, and provides an update on the cargo market.

Go back 30 years Exponential growth in shipping, together with technological innovations and more stringent health and safety legislation, has driven huge changes in the way the industry operates. Go back 30 years, and things were completely different. In the 1990s, the marine insurance and surveying industry was male-dominated. Today, we have many female marine surveyors – now most staff and managers across the marine insurance sector are women.

Much of a marine surveyors’ time used to be spent on the wharves.

30

September 2021

The Ports of Auckland had several cargo sheds, and they were the only party that unloaded the containers, which meant it could take weeks for importers to receive their cargo. Claims for missing shipments were common. This was due to packages being damaged or poorly marked, so they were put aside, often found months later in a corner of one of the sheds.

Most cargo was inspected at the wharf before delivery and regularly included imported new cars, pipes and cases of car parts.

Slow progress Marine surveyors used to be able to wander around the wharves with just a clipboard and a business card. Now they must be accompanied by a port staff member at all times. A full induction process is mandatory,

photo ID is required at sign-in, and minimum PPE of high-viz jackets and safety boots must be worn.

Surveyors driving onto the wharf must have their vehicles inspected inside and out and then be escorted to the survey destination by port security staff.

Thirty years ago, things didn’t happen that quickly, and there were numerous downtimes when you had to wait during smoko, meal breaks and shift changeovers.

Today, many ports run 24/7, and almost all containers are devanned off the wharf by a range of companies, within a day or two of arrival – COVID-19 issues aside. So, most surveys are now held at the insured’s premises or third-party logistics firms.

Digital sensors Reefer containers used to

have Partlow charts, which were often difficult to read due to the recorders running out of ink, or the paper discs not being replaced in time. Who knows how many temperature-sensitive goods, such as pharmaceuticals, ultimately arrived heat-affected?

Today, reefers are digital, with sensors fitted to smart containers offering real-time data on cargo temperatures during the voyage.

Shippers also send inexpensive digital data loggers with their cargo that can be downloaded instantly on arrival – surveyors also have access to a range of temperature probes and thermal imaging cameras.

Roof access When inspecting containers, it wasn’t uncommon for a surveyor to climb onto the roof via the door hinges. The other option was to be lifted via a fork hoist on a pallet, more often than not accompanied by a shipping company surveyor.

With clipboard and camera clutched in one hand, you had to hold on to the fork hoist mast tightly with the other while carefully avoiding the grease and moving parts. Now, if you need to inspect the roof, you are placed inside a fully fenced cage and secured with a safety tether.

New technology Computers and digital developments have moved things on at a pace in all aspects of marine surveying work. Before digitalisation, reports had to be hand-typed with carbon copies and then put in the post. Original documents had to be obtained, and photographic films sent out to be developed. What a difference computers, scanners, the internet, emails and digital photos have made, vastly reducing the time and effort involved in preparing and submitting client reports.

Smartphones now allow us to take and transfer high-quality images and videos and carry out virtual inspections. Drones are also increasingly deployed to view

damage to ships and containers at sea remotely. Ports also have live online data available, and vessels can be tracked throughout their voyages.

Today, there are a large range of shock and tiltmeters that can be attached to cargo and, if activated, will alert everyone to the potential of the contents of a package being damaged.

Pandemic effect More recently, COVID-19 has had a significant impact on the marine industry. A huge increase in exports out of Asia has created a trade imbalance and a shortage of shipping containers. Some exporters are using containers that would usually be rejected, but they have few options. This is driving an overall increase of around 500% in shipping rates.

In New Zealand, we have ongoing problems with port congestion, leading to long delays in cargo arriving, putting perishable goods at particular risk. To increase capacity, over the past year, Ports of Auckland has been testing automated straddle carriers to load and unload trucks and operate the container yard.

However, for the time being, shipping companies are choosing not to call at many of our ports, or they are held at anchor awaiting berths or changing the discharge port due to congestion at the main terminals. As a result, importers are being billed for the additional expenses, including numerous congestion levies, detention charges and costs to relocate containers. Exporters are also paying inland freight costs to get their cargo to alternative ports when the schedules change.

Our top exporters of dairy, meat and produce are looking at chartering vessels to get their cargo out to customers, and other companies are using what limited airfreight is available to ship urgently needed goods. And this all culminates in increased costs for importers, exporters and insurers

when a claim occurs. When or whether we will ever return to prepandemic shipping patterns is as yet unknown.

The future In 2019 alone, 226 million containers were shipped, with total cargo estimated at $4 trillion. The World Shipping Council estimates that there are 6,000 ships carrying containers around the world at any point in time. Bigger ships, carrying in excess of 30,000 TEUs are being developed, but this creates other problems. Not every port has the infrastructure to cope with vessels of this size or the volume of cargo that has to be managed on arrival.

Blockchain technology will bring even greater changes for the industry in the future, and crewless ships are expected to be regulated by 2025.

Remains the same What hasn’t changed is the damage we see to cargo.

Container ships still have fires, they sink or flood and cargo is still lost, truck incidents occur, containers get damaged, refrigerated containers malfunction, or shipments are badly handled or incorrectly packed. This means the role of the marine surveyor remains exactly the same. Thirty years on, following a myriad of developments and improvements – even a global pandemic – we are still required to:

• Investigate the nature and extent of damage or loss and establish the possible cause

• Assist claimants, without prejudice, on methods necessary to mitigate the loss

• Issue a factual survey reportz to enable any liability to be determined by the client

• Make recommendations to prevent the same type of damage or loss occurring in the future

• Ensure recovery rights are protected And the general view is that this will never change. www.covernote.co.nz

31

Features

IAG profits fall I

AG, the owner of State, NZI, and AMI, recorded a drop in New Zealand profit in the year to June as claims volumes increased.

The New Zealand business remained highly profitable, however, with strong customer retention and premium increases boosting revenue.

The firm made a A$305 million profit over the past year in New Zealand, slightly down from A$330 million the year before.

The insurance giant, listed on the ASX, reported an overall group loss of A$427 million, amid a higher number of Covid-related business interruption claims, refunds to Australian customers, and payroll issues.

The loss was a sharp decline on the A$435 million profit recorded the year before.

IAG avoided a large increase in weather claims in New Zealand. Aussie events took more of a toll on the business, with the Queensland and New South Wales floods leading to claims worth more than A$135 million.

Chief executive Nick Hawkins noted a trend towards risk-based pricing on home policies, with those living in natural disaster-prone areas more likely to pay higher premiums than those in lower risk zones.

IAG called the performance of its New Zealand business “sound”, and said it would work to monitor the impact of climate change on the insurance market.

Strong performance sees Tower pay dividend K

iwi insurer Tower has paid a dividend to investors after posting a strong set of financial results.

The group paid an interim dividend with its half-year results in May. Blair Turnbull, Tower CEO, said there an ongoing focus to create “a more agile and digital business model”

helped the company weather a number of large events in the first four months of the financial year.

“In the four months to 31 January 2021, we achieved $129m Gross Written Premium (GWP), representing growth of 6% on the same period last year thanks to our ongoing focus on delivering for our customers.

Along with the addition of the Youi NZ portfolio, this growth has seen our market share increase to 9.2% in December 2020, up from 8.4% at the same time last year,” says Turnbull.

Tower did not change its full year profit guidance, and noted a 5% improvement on the 2020 full year.

Over the 12 months, Tower’s biggest expenses included the Lake Ōhau fire and Napier floods, which resulted in a $10m large events expense year to date.

Tower said the event would impact underlying net profit in 2021. Tower’s aggregate reinsurance cover is triggered at $14m.

The group also made headway with its data platform over the past year. Migration of all Tower Direct customers to its new digital and data platform is nearly complete. Over 270,000 Tower customer policies now on its leading, cloud-based digital and data platform.

32

September 2021

IFSO Case Study

Warning for landlords after animal mess

A

warning has been issued for landlords whose tenants keep animals – or in this case, a covert pet refuge centre.

The Insurance & Financial Services Ombudsman, Karen Stevens, issued the warning after a landlord was shocked to find her tenants had caused thousands of dollars worth of damage after keeping at least 20 cats and 4 dogs inside the house, as well as multiple ducks and rabbits.

“The tenants had set up an animal rescue operation at the house”, says Stevens.

Unbeknown to the landlord, the tenants were caring for stray kittens and cats until they could find permanent homes for them.

The house was uninhabitable

from the urine stench and the ruined vinyl floor, which had been chewed by dogs. The damage included a hole in the bathroom floor, found to be caused by a “wild” cat the tenant had kept in the bathroom.

The landlord made an insurance claim for the damage. Carpets, vinyl flooring and curtains were damaged, and the floors had to be professionally cleaned, treated with odour treatment and sealed with a specialised paint to contain the stench of urine.

The insurer declined the claim based on a policy exclusion for loss caused by scratching, chewing, tearing or soiling by household pets.

IFSO, in its findings, agreed with the insurer.

Stevens says it’s vital that landlords know what’s in their insurance policies and that your property managers are doing regular checks.

“Landlords, check what you are covered for”, she cautioned. “Make sure your tenants abide by the conditions of the rental. Your lovely tenant could be hiding a menagerie of secrets that, in the end, you might well have to pay for.”

Stevens also recommends regular checks on properties.

“Make sure your (or your property manager’s) visits are regular.

Maintain good communication and a good relationship with your tenants. Most tenants are happy to look after your property, but you can’t just assume that." www.covernote.co.nz

33

FSCL Case Study

ACC cover but no insurance A

s a single mother, Person A decided she needed to get income protection insurance in case she had an incident leaving her unable to work and pay her expenses.

She went to an adviser who recommended she also get mortgage repayment, trauma and a small amount of life insurance for better protection.

Person A accepted the adviser’s advice and proceeded with the recommended insurance after completing an insurance application. She disclosed some previous medical issues on the application.

A year later, Person A suffered a back injury and had to take months off work. When she contacted the adviser about making a claim, he reminded her that they had put a 13-week waiting period in the policy before she could make a claim.

The waiting period had helped to reduce her premium cost.

Person A received ACC support, so she could manage her expenses during the wait period.

However, when she did finally submit an insurance claim, the insurer declined the claim due to non-disclosure of a number of medical conditions, including rheumatoid arthritis, which can contribute to muscular injuries.

Person A complained to FSCL about the adviser.

Dispute Person A said the insurance that the adviser recommended her was not fit for purpose because: • As a teacher, she actually

received 100% of her income

from ACC, rather than

the usual 80%, reducing the

need for income protection insurance.

• The adviser told her any ACC

34

September 2021

cover would only last 6 months, which wasn’t correct.

• She couldn’t really afford the income protection policy, especially given the limited benefit it actually provided and the fact that she had to wait 13 weeks to make a claim.

She also complained the adviser didn’t adequately advise her on the risks of non-disclosure. She said she was clearly guessing dates and conditions in the medical section of her application form, and the adviser should have recommended she obtain her medical records in order to make full disclosure.

The adviser said the insurance was tailored to the client’s needs, which they discussed prior to her application. The adviser said although the income protection benefit would be offset by any ACC cover, it would still apply in the event of illness, unlike ACC. The adviser denied he told the client any ACC cover would only last 6 months. Rather, he said he likely discussed his own back injury and experience with ACC, which he often does with clients. The adviser was only covered by ACC for 9 months at which point ACC told him he could be re-employed in another occupation.

The adviser said he and the client agreed to use the 13-week waiting period to bring the premiums within her strict fortnightly budget of $100.

Finally, the adviser said he advised the client on the risks of non-disclosure, as is his usual practice.

meeting where Person A filled in her application form.

Therefore, FSCL had to work out what advice the adviser gave, using his correspondence with Person A, and the needs analysis notes he filled out when advising her.

Financial advisers have an obligation to act with the same skill, care and diligence a reasonable adviser would exercise in the same circumstances. FSCL had to keep this in mind when reviewing the adviser’s advice.

FSCL thought Person A’s insurance was fit for purpose because it protected her ability to pay her expenses long-term in the event of either illness or injury, while meeting her fortnightly budget of $100 for premiums.

FSCL agreed that, although income protection benefit would be offset by any ACC cover, Person A would not be covered by ACC in the event of illness.

As for the waiting period, correspondence between Person A and the adviser showed he altered her proposed cover in this way to bring premiums down, and explained the effect of doing so.

The needs analysis notes showed Person A said she had sufficient annual and sick leave to help cover this period.

The needs analysis notes also showed the adviser told Person A that her income protection benefit would be offset by any ACC cover.

FSCL reviewed the complaint and the related documentation provided by the adviser.

The adviser didn’t tell Person A she would receive 100% of her income from ACC on account of being a teacher, but FSCL didn’t think a reasonable adviser in the same circumstances would necessarily have known that.

Unfortunately, the adviser had not kept a written statement of advice or made notes at the

There was no evidence the adviser told Person A ACC cover would only last 6 months.

Review

FSCL thought it was more likely the adviser talked to her about his own ACC experience (as his back injury was mentioned in his disclosure statement) and highlighted the risk that ACC could rehabilitate her into another occupation earlier than desired, meaning income protection cover would be beneficial.

Finally, FSCL thought it was likely the adviser adequately advised Person A on the risks of non-disclosure. Person A had disclosed a number of medical conditions in her application, and when the insurer sent their offer of terms, the adviser noted exclusions for these had been applied ‘as expected’.

This showed the adviser had at least explained the risk that disclosed conditions could lead to exclusions from cover. FSCL couldn’t see why the adviser would not have explained the further risks of non-disclosure, as was his usual practice.

Furthermore, given Person A had already disclosed a number of conditions in the application, the adviser wouldn’t have expected her not to mention other medical issues.

Resolution FSCL recommended Person A discontinue her complaint, because they didn’t think the adviser had fallen below the standards of a reasonable adviser. As this was the final step in its process, FSCL closed its investigation.

INSIGHTS This complaint may have been decided differently under the new financial advice regime which came into effect on 15 March 2021 (and only applies to advice given after that date).

Advisers now have a number of additional obligations, including making sure their clients understand their advice. Advisers also have to keep adequate records to show how they met their obligations in their dealings with the client. The record-keeping in this case was sub-standard.

FSCL Case Study

Pregnancy and childbirth costs not covered by insurance P

erson B was an overseas student studying in New Zealand. She arranged travel insurance to cover her medical costs while in NZ. When she became pregnant, while in New Zealand, her medical expenses were covered by government funding.

However, after her baby was born her GP referred her to the physiotherapy clinic for treatment of a muscle strain she suffered during labour.

She believed the physio appointment would be covered by government funding and was surprised when she received an invoice from the hospital.

When she queried the invoice, she was advised that government funding only covered medical treatment up to six weeks after the birth. Her physio appointment was in the seventh week and so not covered by government funding.

She submitted the invoice to her insurer. The insurer declined the claim because a statement from the physiotherapist referred to a muscle strain during labour 36

September 2021

and the policy excluded cover for any loss arising directly or indirectly from pregnancy or childbirth.

the description of her medical treatment referred to an injury occurring during childbirth.

Person B felt this decision was unfair and complained to FSCL.

However, her GP had referred her to the hospital physio four weeks after birth. It appeared to FSCL that it was the delay in receiving an appointment that pushed her medical expenses outside the six weeks following birth.

Dispute Person B understood that her travel insurance would cover her for any medical treatment in New Zealand that was not covered by the New Zealand government. She had an invoice from the hospital and believed it was covered by the policy.

The client’s insurer maintained their view that they were entitled to decline the claim relying on the policy exclusion for loss arising directly or indirectly from pregnancy or childbirth.

Review After reviewing the policy, FSCL explained to Person B that the insurer was entitled to decline the claim.

Although the policy covered her medical expenses, before accepting the claim, the insurer was entitled to consider whether any policy exclusions applied. The policy wording was clear, and

FSCL suggested to the client that she contact the hospital administrator again and ask them to reconsider the invoice on this basis.

Resolution Person B accepted FSCL’s view and discontinued her complaint about the insurer.

Insights for consumers Although insurance policies usually state that the insurer will cover necessary and reasonable medical expenses, before accepting the claim, the insurer is entitled to consider whether any policy exclusions apply. An exclusion for loss arising directly or indirectly from pregnancy and childbirth is a standard policy exclusion.

Feature

Suncorp supports vulnerable customers I

nsurer Suncorp has established a customer vulnerability framework and training programme to support customers in vulnerable circumstances.

The group has increased its number of community support service partners, including Lifeline Aotearoa, Good Shepherd NZ, Shine, MoneyTalks and Age Concern New Zealand.

Suncorp New Zealand Customer Advocacy Manager, Ryan Perica, said the training and insights from the partnerships were a vital part of the insurer’s vulnerability framework.

“We know that any customer may experience what we define as vulnerability at any time in their life. This could be due to factors such as their life stage, physical or psychological wellbeing, trauma, abuse or financial stress.

“The work that we’re doing with community partners has helped us better equip our frontline employees to understand customers’ circumstances and potential vulnerabilities. That means we are able to put more support around our customers.”

Suncorp’s customer vulnerability framework and training programme focuses on ensuring staff can identify those living in vulnerable circumstances, understand and listen to them, and have the ability to refer them to support agencies.

Shine and Lifeline Aotearoa, have provided specialist training to customer-facing employees.

Perica said vulnerability was challenging, widespread and far broader than many realise.

“When working with a customer who may need special support, care or protection, our teams are

trained to listen for clues. It could be more about what is not being said or reading between the lines.

“We always consider the customer’s concerns and potential vulnerability before tailoring a response based on the customer’s individual situation.

“Furthermore, we know when and how to refer the customer for any additional support the person may require and benefit from.”

He said the business is building understanding of customer vulnerability right throughout the business from design and product

development to claims and customer solutions.

“We are extremely grateful for the contributions of our community partners in helping us understand how we can better support all of our customers, but particularly those who may be experiencing vulnerability of some kind.

“Vulnerabilities can be caused by complex issues and circumstances that need specialist skill and expertise to manage, so our ability to learn, work with and refer customers to these specialist community support services is extremely beneficial.” www.covernote.co.nz

37

Ask an Expert

Tree trouble

QUESTION

A tree in a car park owned by a commercial landlord breaks in a weather event and damages a trailer parked in the car park and owned by the tenant to the building.

The landlord wishes to make a claim for the damaged trailer under their Public Liability policy that insures their liability as a 'property owner' at the insured location, as they feel morally obliged to fix the damage.

Is the landlord liable? Would it depend on whether the landlord had been 'negligent' by not keeping the tree regularly pruned? Can a tenant and/or their insurer recover off a landlord in this regard given the Property Law Act? Would the circumstances differ if the trailer was owned by another party i.e. not owned by the tenant?

CROSSLEY GATES The landlord is probably not liable at law. If it was caused by bad weather the landlord has not been negligent. See Helson v Dear HC Wellington CP 536-86, 25 October 1988.

Supply of goods inclusion in PL We have a client who was engaged to renovate a home. This involved replacing some flooring with secondhand tawa flooring to match existing. The flooring was purchased from a dealer but once laid and sanded back was found to be treated and tinted green, quite distinct from the natural golden tone of the existing tawa floor (of a similar age).

The homeowner is holding our client liable for this and we have lodged a PI claim on the basis of our client's error in selecting this flooring that fails to

QUESTION

match the existing.

The insurer has accepted the policy is triggered but declined the claim under the Supply of Goods exclusion: "Arising from your sale, supply, installation or manufacture of goods". Our argument is that the insured has supplied a service, being the renovation, and has not supplied or installed goods as intended to be covered by this exclusion. Is the Supply of Goods exclusion being wrongly applied here?

CROSSLEY GATES Assuming your client supplied the second hand Tawa and installed it, your client provided both goods (the Tawa) and services (installing it).

It looks like the error relates to supplying the wrong goods. Therefore the exclusion above would appear to apply.

Supplying incorrect goods is potentially a PL claim, but if there is no resultant damage beyond the mismatched flooring, there is unlikely to be cover under that policy either because of the products exclusion.

Your client would need a Products Guarantee Policy to cover it for its liability for the incorrectly selected flooring. I understand that type of policy is not commonly available in NZ and is expensive.

38

September 2021

Ask an Expert

Damage on location We have a client who rented a home for a commercial shoot. The shoot was over two days, after the shoot the owner noticed several areas of damage after the shoot.

The Insurer wants to apply a separate excess to each item of damage located. We have reviewed the wording to see if this as per the policy and note the following definitions: "Excess" - means the sum shown in the Policy Schedule, this Policy or an endorsement to this Policy which You must pay in respect of each Occurrence or event giving rise to a claim.

QUESTION "Occurrence" - means an event, including continuous or repeated exposure to substantially the same general conditions, which results in Personal Injury and/or Property Damage neither expected nor intended.

Given the definition of "Occurrence" includes continuous or repeated exposure to substantially the same general conditions, could it be interpreted that the “Event” is the filming at the home and general movement of equipment during filming which resulted in the unexpected property damage and only one excess be applied?

CROSSLEY GATES Assuming there is a connection between the events, then the definition of "occurrence" probably applies meaning only one excess applies.

However, the excess clause applies "in respect of each occurrence or event giving rise to a claim". the alternative "or event" is a problem as each separate incidence of damage is an event. You could argue this is a drafting error because adding "or event" renders the benefit of the aggregation contained in the definition of "occurrence" redundant.

What is ‘gradual change’?

A client had a bird nest under some roof tiles which caused water to get into a lounge ceiling.

The property is the insured's weekend home and the water damage to the ceiling was not found until the following weekend. the insurer is stating it

CROSSLEY GATES The word 'gradual' is an adjective and is describing the nature of the damage.

The definition of the word is: 'taking place, changing, moving, etc., by small degrees or little by little.

The item damaged is a ceiling, so if the water

QUESTION is gradual damage, and because the damage is not from an internal water or waste disposal pipe they are refusing to accept the claim. My question is ... what is damage gradual in nature, especially in a circumstance such as this?

damage progressed little by little across the ceiling, I suggest the adjective is probably apt - the ceiling was damaged gradually.

It looks like it wouldn't have been covered anyway because the water was external rain water (presumably). www.covernote.co.nz

39

Ask an Expert

Driver-only quandary

QUESTION

Our client had taken out PMV policy and it was named driver only comprehensive policy. Named driver is under 25.

Driver's uncle was driving the car who caused the accident. He is over 25 and has no previous claims history. He has full NZ driver license since 2003 and also hold class-2 license since 2006.TP vehicle is also involved.

Insurer declined claim on the basis it is named driver only policy.

Is insurer position correct in declining a claim?

STEVE KEALL Hello, the correct answer depends on the insurance contract documents including the policy wording.

The insurer has in mind that the insured being the driver is a condition precedent to liability. Were this requirement to be a condition precedent to liability then this stance would be correct.

There is a conceptual difficulty with this requirement being a condition precedent to liability, even if it is stated to be one. What it really means is that there is no cover while someone else is driving the vehicle. Who is driving the vehicle is a state of affairs at the time of the incident about which the insured is making a promise ("only I will drive the car"). This is closer to warranty.

If it is a warranty, then law reform legislation provides that there is no cover only if the breach of the warranty caused the loss.

More information would be needed in this case to understand the issue of the cause of the loss (causation). The issue is straightforward if the TP is responsible. In that case, if there is no condition precedent and it is a warranty, the breach of warranty cannot have caused the loss because the TP caused the loss. So, there should be cover. This issue is less clear-cut where the uncle is, apparently, responsible. Given his good history, I suggest the fact that his being the driver was not the real and efficient cause of the loss, but rather his (apparent) carelessness on this particular occasion. In that kind of situation, assuming there is no condition precedent then there should be cover.

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.

40

September 2021

Professional

College

Professional Development

Distance Learning tips and Student Liaison Level 5 on the to-do-list?

Top tips for distance learning and getting the most out of PIQ College Student Liaison support.

T

he prospect of setting time aside from an already busy schedule to complete a qualification is, understandably, a bit daunting. But help is at hand.

Read on for some tips for Distance Learning, and accessing dedicated support services offered by the Professional IQ College Student Liaison team.

First of all, what is Distance Learning?

In a nutshell, Distance Learning means you can learn at your pace and in your own environment. With a good plan in place, it can be a highly efficient way to progress and complete your qualification. And importantly, the College Distance Learning package provides support for students; it’s not like online learning, in which students essentially go it alone.

What is Student Liaison Support?

At Professional IQ College, every adviser is supported by a Learning Plan and is assigned a dedicated Student Liaison Coordinator who is available five days a week for questions, and conducts a comprehensive one-on-one session every month. What’s more, each student’s Level 5 Assessor is readily available to help with queries and feedback on assessments, once submitted. The benefits? There are many, including: • Real people at hand to for students’ needs and challenges • •

Quick access to practical and technical support Support to keep learning progress on track, to completion

• And of course, positive reinforcement and motivation.

Utilising your Student Liaison team effectively can make a huge difference to your qualification experience. So, how to make the most of it? It’s simple really: call or email with any questions or challenges, or to simply talk through your thinking. If you’re unsure what a question is asking; if you’re finding it hard to get motivated; if you’re finding the prospect of assessments daunting, just reach out. That’s what the Student Liaison team is here for. www.covernote.co.nz

41

Professional

College

Professional Development

DISTANCE LEARNING TIP 1:

DISTANCE LEARNING TIP 3:

Keep your business capacity top-of-mind

Find some learning partners

You’re already busy and will likely be time-poor, so planning when it’s best for you to set time aside for your Level 5 learning is crucial.

Self-motivation is a great soft skill to have. But if you feel a bit ‘isolated’ and need extra support, don’t forget that ‘unity is strength’.

Think about your professional life and the busy times; when might you have some additional time to give Level 5 your focused attention? To get a good balance between your professional responsibilities and your Level 5 requirements, it makes good sense to first think about timing, and what will work for you.

In addition to making the most of your Student Liaison team, we encourage you to build your own support team with other financial advisers who are going through the same learning process. You can motivate each other and act as a sounding board for questions and challenges.

DISTANCE LEARNING TIP 2:

DISTANCE LEARNING TIP 4:

Make a plan

Make the most of your PIQ Student Liaison team

Identify your capacity needs and set aside time to study each week against the expected completion dates on your learning plan. No matter how long it has been since you crossed the classroom threshold, setting realistic goals and timeframes can help you keep moving forward, steadily, and at a pace that works for you.

As we said above, your Student Liaison Coordinator and, once assessments are submitted, your Assessor, are at hand to help. Don’t hesitate to reach out in need and make the most of the tools and support they offer.

Distance Learning is a lot about discipline and selfmotivation – especially if there are no set timeframes, except for a final deadline. So set some goals and reward yourself when you achieve them.

Like to find out more or apply for enrolment?

Contact the PIQ Student Liaison Team on 09 306 1731, or email us at info@professionaliq.co.nz

How to tackle your Level 5 qualification Subsidised Level 5 Qualification: a great fit for general insurance advisers working in the financial services sector.

Level 5 on the to-do list?

Try this on for size. Professional IQ College in partnership with Skills Organisation, offers advisers working in the financial services sector a subsidised special price for Core plus one specialist strand.

Enrol in your Level 5 Core plus General Insurance speciality stand for just $1,379 + gst.

To qualify for this subsidised programme, you must:

1. currently be working in the financial services sector;

2. have not previously completed any versions or strands of the NZCFS Level 5 or National Certificate in Financial Services (Financial Advice) (Level 5) qualifications; 3. enrol in Level 5 Version 2 Core and one speciality strand;

4. have a work visa that is valid for at least 12 months (if you are an international student); and 5. be enrolled in and complete the qualification in eight months.

Like to find out more or to apply for enrolment?

Contact the PIQ Student Liaison Team on 09 306 1731, or email us at info@professionaliq.co.nz 42

September 2021

DATE

TITLE

PRESENTER

WHERE

TIME

COURSE DESCRIPTION

September

1

Microsoft Excel Mastery

Debbie Mayo-Smith

Webinar & Auckland

10.3011.30

A top tip and tricks walk around Excel covering the very top tips on how to get much more done in less time. You’ll learn marvellous shortcuts working with your lists, as well as quick tips for summerising, graphing, tabulating, merging. You’ll kick yourself for not knowing them before.

2

Expanding client relationships

Clifton Warren

Webinar & Auckland

2.003.00

During this webinar you will learn how to stop leaving money on the table and instead start driving consistent organic growth for your business.

15

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

Mark Anderson

Webinar & Auckland

10.3011.30

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.

16

Commercial Motor

Craig Langstone

Webinar & Auckland

10.3011.30

Craig Langstone will present on a number of common and topical issues in the commercial motor space.

23

Statutory Liability Policies

Sophie Curlett

Webinar & Auckland

10.3011.30

How they work, what is a statutory liability claim and what to expect.

October

5

Develop and implement a marketing action plan

Clifton Warren

Webinar & Auckland

2.003.00

During this webinar you will learn how to outthink, out plan and out execute your competitors to accelerate the growth of your business.

6

How To Improve Profits.

Promotion. Productivity

Debbie Mayo-Smith

Webinar & Auckland

10.3011.30

Want to earn more and stress less? You will with these free, easy, clever and resourceful ideas and strategies for client acquisition, retention and productivity.

13

Business Interruption – Claim example – and how well would your client’s cover have performed?

Mark Anderson

Webinar & Auckland

10.3011.30

We will discuss a Business Interruption calculation of loss as a worked example.

20

Insurance issues for multi-unit buildings

Emma Gabor

Webinar & Auckland

10.3011.30

Insurance issues for multi-unit buildings, drawing on lessons from the Canterbury and the Kaikoura earthquakes.

28

Section 9 Law Reform Act

Helen Twomey

Webinar & Auckland

10.3011.30

This webinar will focus on the operation of section 9 of the Law Reform Act 1936, and how it operates to place a ‘charge’ on insurance moneys which are payable as indemnity for liability to pay damages and compensation.

November

2

Time management for the busy professional

Clifton Warren

Webinar & Auckland

2.003.00

During this webinar you will discover the right activities top professionals focus on and the techniques to get things done to grow your business.

3

Understanding Technology Disruption

Steven Mayo-Smith

Webinar & Auckland

10.3011.30

What impact with the rapidly evolving and changing technology have on the way you work and play in the near future?

16

Business Interruption – Insurance of Wages

Mark Anderson

Webinar & Auckland

10.3011.30

Different ways to insure wages (including Dual Wages) – and what is best for your clients?

26

How To Be More Memorable and Persuasive

Debbie Mayo-Smith

Webinar & Auckland

10.3011.30

Become Powerfully Persuasive with your conversations, proposals and presentations. How to’s, insights and tips to getting your message across.

www.covernote.co.nz

43

IBANZ Board Roger Abel

Tony Bridgman

Rothbury Group Limited PO Box 1596 Shortland Street Auckland 1140 Mob: 021 952 230 roger.abel@rothbury.co.nz

(Vice President)

Craig Buckle

Neil Cousins

Executive Director Marsh Ltd PO Box 2221 Auckland 1140 Tel: 09 928 3015 Mob: 021 873 399 tony.j.bridgman@marsh.com

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

Duane Duggan

Samuel Kerr

(President)

Jill Comley-Forbes

Chief Broking Officer BrokerWeb Risk Services Limited PO Box 7264 Sydenham Christchurch 8240 Tel: 03 348 9802 Mob: 027 451 8098 jill.comley-forbes@bwrs.co.nz

Director NZ Insurance Advisernet NZ Ltd PO Box 37670 Market Road Auckland 1151 Tel: 09 926 2062 Mob: 021 905 537 dcrawford@ianz.co.nz

Jo Mason

Ramesh Mavani

(Vice President)

CEO NZ Brokers Management Ltd PO Box 334012 Sunnynook, North Shore City Auckland 0743 Tel: 09 869 2785 jom@nzbrokers.co.nz

Manager Insurance People (Fire & General) Ltd PO Box 47218 Ponsonby, Auckland 1144 Tel: 09 360 5616 Mob: 021 078 3465 ramesh.mavani@ insurancepeople.co.nz

(Immediate Past President)

Head of Insurance Legal Crombie Lockwood (NZ) Ltd PO Box 91747 Victoria Street West, Auckland Tel: 09 357 4805 Mob: 021 833 286 duane.duggan@crombielockwood.co.nz

Broker Services Manager Steadfast NZ Ltd PO Box 180 Shortland Street Auckland 1140 Tel: 09 309 7942 Mob: 021 377 942 neilc@steadfastnz.nz

Insurance Broker SHARE PO Box 305415 Triton Plaza Auckland 0757 Tel: 09 476 1670 Mob: 021 980 435 sam.kerr@sharenz.com

Angus McCullough

General Manager Marketing & Chief Officer Aon New Zealand PO Box 1184 Shortland Street, Auckland 1140 Tel: 09 362 9059 angus.mccullough@aon.com

PIQ Board Neil Cousins

Broker Services Manager Steadfast NZ Ltd PO Box 180 Shortland Street Auckland 1140 Tel: 09 309 7942 Mob: 021 377 942

David Crawford (Chair) Director NZ Insurance Advisernet NZ Ltd PO Box 37670 Market Road Auckland 1151 Tel: 09 926 2062 Mob: 021 905 537 dcrawford@ianz.co.nz

Andrew Gunn

Strategic Partnerships Manager Insurance & Financial Services Ombudsman Scheme PO Box 10-845 Wellington 6143 Mob: 021 684 355 andrew@ifso.nz

Angi Mann

Contract Compliance and Learning and Development Specialist Auckland Mob: 021 293 1724 factnz2012@gmail.com

Gary Young

Auckland Mob: 027 543 0650 gary@ibanz.co.nz

Staff Mel Gorham

Sylvia Heywood

Chief Executive IBANZ DDI: 09 306 1734 Mob: 021 0852 5568 mel@ibanz.co.nz

Academic Manager Professional IQ College DDI: 09 306 1737 sylvia@professionaliq.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

Marianne Taljaard

Student Liaison Manager DDI: 09 600 5710 marianne@ professionaliq.co.nz

Gary Young

Interim CEO Professional IQ College DDI: 09 306 1736 Mob: 027 543 0650 gary@ibanz.co.nz

IBANZ Physical address:

Mailing address:

Toll free: 0800 306 173

www.ibanz.co.nz

Unit 4D, 2B William Pickering Drive, Rosedale, Auckland 0632

44

September 2021

PO Box 302504, North Harbour, Auckland 0751

WANT YOUR VERY OWN COPY OF COVERNOTE?

September 2021

Each issue of CoverNote Climate cha prompts risk-bange sed is packed with vital pricing revolutio n information, news, commentry and advice for the insurance industry from experts within the industry. To keep abreast of all the issues affecting New Zealand’s insurance broking industry just email info@ibanz.co.nz www.ibanz.co.nz

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, Auckland.

IBANZ CORPORATE COMPANY LIST

Abbott Group

Christchurch

JRI Limited

New Plymouth

Adams Trimmer Insurance 1992 Ltd

Whangarei

Luxor Insurance Brokers Ltd

Auckland

Advance Insurance Services Ltd

Paeroa

Malcolm Flowers Insurances Ltd

Taupo

Affiliated Insurance Brokers Ltd

Wellington

Marsh Ltd

Auckland

AIB Group Insurance Ltd

Lower Hutt

Matt Jensen Insurance Brokers Ltd

Taupo

AIM Associates Ltd

Auckland

McDonald Everest Insurance Brokers Ltd

New Plymouth

Albany Insurance Services Ltd

Albany Village

Moneybox GI Limited

Wellington

Amicus Brokers Ltd

Christchurch

Multisure Ltd

Auckland

Aon New Zealand

Auckland

MW Insurance

Auckland

Apex General Ltd

Auckland

National Credit Insurance (Brokers) NZ Ltd

Auckland

Atlas Insurance Brokers Ltd

Christchurch

Nelson Marlborough Insurance Brokers Ltd (NIB) Nelson

Austinsure Ltd

North Shore City

Neville Newcomb Insurance Brokers Ltd

Auckland

Avon Insurance Brokers

Christchurch

Northco Insurance Brokers Ltd

Masterton

Baileys Insurance Brokers Ltd

Auckland

Northcrest Insurance Brokers Ltd

Auckland

Bay Insurance Brokers Ltd

Tauranga

O'Connor Warren Insurance Brokers

Tauranga

Bridges Insurance Services Limited

Hamilton

OFS Insurance Brokers Ltd

Dunedin

Broker Direct Services Ltd

Christchurch

Omni Fire & General Ltd

Auckland

BrokerWeb Risk Services Limited

Auckland

Paramount Insurance Agencies Ltd

Auckland

Builtin Insurance Brokers Limited

Tauranga

Partridge Advisory Limited

Auckland

Cambridge Insurance Brokers Ltd

Cambridge

Paterson & Co NZ Ltd

Auckland

Capital Risk Solutions Limited

Wellington

Penberthy Insurance Ltd

Auckland

Cartwrights Ltd

Ashburton

PIC Insurance Brokers Ltd

Manukau

Certus Insurance Brokers NZ Ltd

Auckland

Primesure Brokers Ltd

Auckland

Coast Insurance

Whangaparaoa

Property and Commercial Insurance Brokers

Feilding

Commercial & Rural Insurance Brokers Ltd

Alexandra

Protekt Insurance Brokers 2008 Ltd

Auckland

Crombie Lockwood (NZ) Ltd

Auckland

Provincial Insurance Brokers Limited

Masterton

Dawson Insurance Brokers (Rotorua) Ltd

Rotorua

PSC Connect NZ Limited

Auckland

Emerre & Hathaway Insurances Limited

Gisborne

River City Insurance Brokers 2000 Ltd

Wanganui

Frank Risk Management

Hamilton

RMA General Ltd

Warkworth

FundAGroup Insurance Brokers Limited

Auckland

Rothbury Group Ltd

Auckland

Grayson & Associates Ltd

Auckland

Runacres Insurance Ltd

Christchurch

Gregan & Company Ltd

Papakura

SHARE

Auckland

GSI Insurance Brokers

Waitakere

Sit & Blake Limited

Auckland

GYB Insurance Brokers Ltd

Lower Hutt

South Pacific Insurance Brokers Ltd

Auckland

Hazlett Insurance Brokers Ltd

Christchurch

Sweeney Townsend & Associates Ltd

Rotorua

Honan Insurance Group (NZ) Ltd

Auckland

Thames Valley Insurance Ltd

Thames

Hood Insurance Brokers NZ Ltd

Auckland

The Advisers for insurance

New Plymouth

Hurford Parker Insurance Brokers Ltd

Hastings

Thorner General Insurances Ltd

Upper Hutt

Hutchison Rodway Ltd

Auckland

Towes Insurance Brokers Ltd

Te Aroha

ICIB Limited

Auckland

Trevor Strong Ins Ltd

Auckland

ILG Insurance Brokers

North Shore City

Trevor Sutcliffe Insurance Ltd

Hamilton

Ingerson Insurances Ltd

Wellington

Vercoe Insurance Brokers Ltd

Morrinsville

Insurance Advisernet NZ Ltd

Auckland

Vision Insurance (S.I.) Ltd

Ashburton

Insurance Brokers Alliance Ltd

Invercargill

Wallace McLean Ltd

Auckland

Insurance Design Limited

Warkworth

Wanganui Insurance Brokers Ltd

Wanganui

Insurance People (Fire & General) Limited

Auckland

Willis Towers Watson

Auckland

Insure 247 Ltd

Auckland

www.covernote.co.nz

45

We’d like say a big thank you to our broker partners for your business over the last 20 years.

Here’s to the next 20.

Back in 2001, we opened our doors with a vision to become New Zealand’s leading liability insurance provider.

We achieved that goal, and two decades on, we’re still proud and privileged to help you help protect your client’s businesses from the unexpected. Cheers to that!

Get in touch. We’d love to hear from you.

veroliability.co.nz

New Zealand’s leading liability insurer