Weather events hit Suncorp NZ profit

Suncorp New Zealand saw profits drop by 34.9% in the six months to December due to a sharp increase in severe weather events.

Post-tax profit fell to $84 million in the half-year due to a series of flood events and declining investment income, and “adverse” market conditions.

The insurer, whose NZ operations include Vero Insurance and AA Insurance, was hit by a series of weather events in the second half of last year.

Chief executive Jimmy Higgins said the underlying business displayed growth, despite the weather-related losses.

“New Zealand experienced a number of flood and storm events in the second half of 2021, including the severe storm that affected Westport and all of central New Zealand in July, and flooding in west Auckland in August,” Higgins said.

According to Higgins, three weather events in July, August, and September resulted in $52 million in claims. Total weather-related claims hit $72 million, a 41.2% increase on the corresponding period in 2020.

“We’re experiencing rising input costs to both premiums and claims as well as disruptions in global market conditions that are significantly affecting investment returns. But we continue to focus on supporting New Zealanders and Kiwi businesses through difficult times.”

Higgins said Suncorp NZ had provided more than $1 million in support to businesses in need during the floods.

“In the past six months, we’ve provided close to $1m in support to customers who have suffered financial hardship,” he says. “We’ve been there supporting our customers following major weather events and also donated $150,000 to community organisations in Auckland and Northland to support communities affected by the Delta lockdown.”

Higgins said delivering customer value remains a strategic focus for the business, despite potential economic headwinds.

“We’re seeing good growth across all our lines of business because our customers know we will be there to support them now and in the longterm,” he added.

Suncorp’s NZ general insurance business delivered a net profit after tax of $78 million, down 22% on the last half of 2020.

It said intermediated and direct channels showed strong customer growth, with revenue up 14%.

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Conviction causes confusion

Abusiness owner runs a small construction company. As their business grew they contacted an insurance adviser to take out public liability insurance. The adviser sent through the policy documents, invoice and a form requesting further information about them and their business. The business owner paid for the insurance but did not return the form asking for further information.

Six months later, the person was driving a large truck towing a small digger when they drove into a deep gully. The accident caused significant damage to the truck and digger causing $60,000 worth of damage.

The person made a claim with the insurance adviser who, with help from the insurance underwriters, investigated the claim. A private investigator was hired to report on the circumstances of the crash and assist with obtaining the person’s traffic and criminal conviction history.

As part of the investigation, a number of traffic and criminal convictions, along with insolvencies in the person’s name were found to have not been disclosed, either at the start of the policy or at the time of the claim. The driving offences were extensive and included 6 losses of licence for demerit points in the last 5 years and over $25,000 in unpaid fines dating back several years.

Based on this newfound information, the insurance underwriter decided to void the person’s policy from its very start. That is, the policy was deemed to have never existed at all. All the premiums the person had paid were refunded. Dispute

The person said that the insurance adviser failed to inform them that she needed to disclose her traffic or criminal convictions, previous bankruptcies, liquidations, or receiverships at the time they purchased the insurance. They said that they never asked for this information, nor did they receive the form requesting further information.

The insurance adviser acknowledged that no questions were asked in the initial phone call about their criminal history but showed evidence that he had sent the person a copy of the application form to check that all the information, including information about previous convictions, was correct. The insurance adviser argued that

INSIGHTS FOR CONSUMERS

The Fair Insurance Code 2020, which encourages good conduct and professionalism in the insurance industry, gives examples of material information that insurers may need to know. The examples include: • any criminal convictions, unless you have a statutory right not to disclose them

• any previous refusal by an insurance company to insure you • any previous claims, including any claims that were declined by an insurance company Any current or previous bankruptcy, receivership or liquidation. The law does not currently distinguish between ‘an innocent mistake’ and a deliberate attempt to mislead an insurer. Therefore, it is important to be completely truthful when you complete an application for insurance.

The duty to give information is not limited to the questions on the application form.

if he had known about the previous convictions and bankruptcies he wouldn’t have been able to find insurance for her.

The person complained to FSCL about the insurance adviser’s advice and the voiding of the insurance policy. Review

Insurance contracts are contracts of good faith. ‘Good faith’ means that both parties (the insurer and the insured) are obliged to observe and honour the contract (policy) conditions. Any information (or disclosure) an insured exchanges with the insurance company must be truthful to the best of their knowledge.

As the insured, the customer’s ‘duty of disclosure’ was to tell the insurer about any relevant information (the insurance industry calls this ‘material facts’) that could affect the insurer’s assessment of the risk they are taking in insuring her property. If the insurer thinks the customer did not disclose some material facts, they can invalidate her policy and deny her insurance claim (as the insurance company eventually did).

The insurance underwriter said that they considered both the person’s criminal and traffic convictions and bankruptcies to be material information. They said that if they had been advised of these at the start of the policy, they would have declined to provide insurance.

FSCL decided that the customer did not disclose material facts. Even if they had declared their convictions and insolvencies, FSCL was satisfied that the customer would not have been able to obtain insurance cover with any insurer. Resolution

FSCL accepted that the insurance adviser failed to ask the customer the relevant questions about previous convictions when she took out the policy, which would have been best practice, but did not believe that this affected the outcome of the claim. FSCL accepted that the nondisclosures would have still been discovered when the claim was lodged.

FSCL also considered that the insurance underwriter was correct in voiding the policy from its commencement, as the customer failed to declare material information when they took out the policy.

Aviation scam leads to dispute

Abusiness owner runs an aviation engineering business and needed a rare engine part for a helicopter he was working on. He found and purchased the part from a USA supplier. The person transferred $28,000 into the supplier’s bank account, believing that the part would be shipped to New Zealand. Two weeks passed and, as there was no sign of the part, the person emailed the supplier.

The supplier assured the person that the issue was being investigated and they were testing the part to make sure it was satisfactory before shipping it. As time passed it became apparent that this was not the case. Eventually the communication broke down and it became clear that the person had been defrauded by the supplier company.

The business owner made an insurance claim under the crime section of his business insurance policy. Even though the insurance company accepted that the customer was a victim of fraud, they declined the claim on the basis that the customer had received an invoice, with the part to be shipped when the invoice was paid.

The insurance company concluded this meant a ‘credit arrangement’ was entered into. Within the terms of the insurance policy, an exclusion clause stipulated that if the loss arose because of a default under a credit arrangement, the claim would not be paid.

The insured did not accept this offer and he complained to FSCL. Dispute

The insurer said that the supplier company rendered an invoice for the engine part which was to be shipped in return for payment, and this was a ‘credit arrangement’ for the purposes of the exclusion clause. The supplier company defaulted under this credit arrangement in that the part did not arrive.

The insurance company also said that the policy exclusion was intended to exclude cover for such a default, whether or not an invoice is genuine.

The customer said that there was no genuine ‘credit arrangement’, as

INSIGHTS FOR CONSUMERS

Transactions made internationally are inherently risky because the seller and the buyer are geographically separated. This can cause challenges for the buyer in assessing the sellers’ ability and willingness to fulfil the order, and their trustworthiness.

If clients have fallen victim of fraud, report the scam to Netsafe, who can advise you on what to do next. This complaint is a good reminder for insurers to ensure they carefully consider exclusion clause wording before declining claims and make sure they are applying the exclusion correctly. Although there are often subtle differences in the way exclusion clauses are worded, those subtleties can be the difference between a claim being paid or not.

the supplier company never intended to supply the part.

The business owner considered the supplier company’s invoice was fake or dishonest and was not a normal business credit arrangement. He had suffered a loss as a result of a crime, which he was insured for.

The customer felt that, if the claim was covered under the policy, it should be paid in its entirety. Review

The invoice was only one element of the deception. In this case, the fraud also involved email exchanges, fake websites, social engineering and phone calls.

The key issue for FSCL to determine was whether the person entered into a credit arrangement and, if a credit arrangement was entered into, whether a default occurred.

FSCL agreed that a credit arrangement for the purposes of the exclusion clause never existed. To start with, the ordinary meaning of a credit arrangement suggests that goods or services will be supplied before payment, based on the trust that payment will be made in the future. In this case the business owner had paid for the part in full before it was supplied.

FSCL considered that the policy definition of Credit Arrangement, which used terms such as ‘’extension of credit or hire purchase, loan, lease or rental agreement… otherwise evidence of debt…’, was consistent with the ordinary meaning of ‘’credit arrangement”.

In this case, the fraudster sent their invoice for payment and the scam company told the business owner that they required payment before the part would be supplied. Therefore, no Credit Arrangement had been entered into.

FSCL found that the claim should be paid in full, minus any excess. Resolution

The insurer accepted FSCL view and agreed to pay the claim. The client was very happy with this outcome and used the money from the claim to buy the part from a legitimate company and finish his work on the helicopter.