CoverNote December 2022

December 2022 2022

A challenging and rewarding year

A wonderful welcome to the 2022 Christmas Edition!

In an effort to improve fair conduct of insurers and banks towards consumers, we have seen the introduction of the Financial Markets Conduct of Institutions Act (also known as CoFI).

insurance exemptions under unfair contract terms and treatment of knowledge held by intermediaries and insureds.

With what seemed the longawaited announcement in September of a return to normality, this year has been a busy one.

Regardless of the continuing climate and economic challenges, and the amount of change in front of our sector, our lead story highlights the resilience of our members.

Their ability to adapt to the evolving environment while continuing to put clients first underscores the value that independent financial advice offers.

Whether introducing new procedures, achieving the necessary qualifications, or ensuring compliance is followed and documented, committed brokers never lose sight of who really matters – the client.

We have seen an extraordinary amount of government consultation on legislation impacting clients and the insurance industry.

Due to the amount and the pace of consultation, we have not always been able to meaningfully engage with all that we would like to, my following comments summarise some of the work IBANZ has been involved in this year.

The FMA, at the industry’s request, fronted a number of forums for insurers, banks and intermediaries involved in intermediated distribution. We were particularly focused on the issues created by the duplication of conduct oversight for Financial Advice Provider (FAP) intermediaries under CoFI and the Financial Services Legislation Amendment Act (FSLAA). FMA guidance on the outcome of these is eagerly awaited.

The Fire and Emergency NZ levy review continues, which followed a philosophy of mini consultations this year. Next year will see the need for further engagement from stakeholders including the insurance sector with consultation on levy modelling due.

Levies paid for by policyholders and collected for the government by the insurance industry account for 95.9% or $604 million of Fire and Emergency total revenue to 30 June 2021.

This year saw the Insurance Contracts Law Review (ICLR) finally come back on the table although it seems likely that progress in 2023 will be halted by the election. The Bill seeks to impose duties on licensed insurers to ensure that consumer insurance contracts are worded in a clear, concise, and effective manner.

It also considers things such as lower duties of disclosure on consumers and imposing tight reporting deadlines on claims made policies to significantly reduce the protection there is currently if a claim is late notified. The Bill also considers

In its current form, the Bill seems to benefit insurers more than expected, but we hope that our submission will help deliver more balance for insureds.

The EQC is undergoing a refresh via the Natural Hazards Insurance Bill, which continues to provide natural disaster insurance for residential homes. Those insured or renewed from October 2022 will be covered by the EQC for up to the first $300,000.

As the EQC is not a licensed insurer, there is disappointingly no requirement for the cover to be presented in a clear, concise, and effective manner and it is not subject to CoFI requirements relating to fair conduct.

You will recall from our September edition that the potential for retreat from flood insurance is being looked at as part of the National Adaptation Plan.

With FSLAA now in place, the FMA recently consulted on regulatory returns for FAP intermediaries.

The extent and amount of information being sought in the draft consultation was surprising. Much of it did not appear to relate to regulated activities, or was very prescriptive in the manner of collection. We are hopeful that the submissions received by the FMA will highlight these issues.

As we very much look forward to relaxing and recharging over the summer break, I wish you, your family, and friends a safe festive season, and the very best that 2023 can offer.

Keep safe.

Melanie Gorham CEO, IBANZ

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

Aon revenue steady in Q3

Aon recorded flat revenues of $2.69 billion in the three months to September 30, down slightly from $2.70 billion last year.

The international broking giant told investors that net income attributable to shareholders had increased to $408 million, compared to a loss of $900 million over the same period last year.

Total operating expenses dropped 40% year-on-year over the quarter, to $2.1 billion, due to a $1.0 billion ‘termination fee’ from the breakdown of its mega-merger with Willis Towers Watson.

Organic revenue rose by 5% yearon-year due to robust retention, new business generation and management of its renewal book portfolio, it said.

The company said double-digit growth in Latin America, UK, and Asia reflected a strong retail brokerage market, solid growth in core property & casualty, and positive global exposures and pricing.

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2022: a challenging and rewarding year

The past year has been tough but rewarding, and brokers are excited about the future, writes Angela Cuming.

The past year has marked a significant shift for the broking sector. The insurance industry has grappled with several challenges, including pandemic impacts, disruptive technologies, and climate-related risks.

The industry also saw an increase in claims and extreme weather events, contributing to shrinking capacity and rising premiums.

The long-awaited Insurance Contracts Bill was released, which proposes fundamental changes

to the duty of disclosure, and the Government announced an increase to the EQC building cap.

And in one of the most significant changes to the market, brokers had to adapt to new FSLAA regulations, marking a significant new era for the insurance industry and the advisors who work within it.

Adapting to FSLAA regulation

Following a Covid-related delay, new rules and regulations for financial advisers and insurance

brokers came into effect on March 2021, along with requirements to disclose more information to clients.

Claire Holt, a financial adviser at SHARE, says her brokerage adapted “really well” to the changes.

“It’s great to be part of an industry that puts our clients first and foremost, in the way we do business,” she says.

“Apart from there being changes to the documents we use, this is all about putting our clients first and ensuring clients understand their insurances, which is something we’ve always had as a core focus.”

Updating qualifications to Level 5 wasn’t too hard, and having a workforce which is continually learning is only a good thing for our industry,” says Holt.

“We are continually looking at ways to ensure that we not only comply with the regulation but keep our focus on what really matters — the client.”

Anthony Jones, general manager of operations for the Abbott Group,

says the company’s adviser and broker teams already followed an advice process before the FSLAA regulations, so the way they work had not changed substantially.

“What has changed is the layer of compliance-related documentation that supports our policies, processes and procedures, and the fine-tuning required to ensure we continue to meet our obligations under the new regime,” he says.

“The other big change, of course, is the qualification requirement for our financial advisers. Fortunately, our team welcome the introduction of an industry-specific qualification and recognise it benefits them as individuals in terms of their professional development, as well as our clients.”

How the pandemic changed things

Like so many things, the Covid-19 pandemic had an effect on the industry, with many brokers switching to remote working during lockdowns. Now, as 2022 draws to a close, flexible work arrangements are here to stay,

at least for some firms.

“The pandemic has definitely changed the options available to us in terms of the flexibility of where we can work,” says Holt. “We can not only work from home, but Teams meetings are still a good option for time-saving as well, as they allow us to connect and collaborate. It’s enabled us to explore avenues to work smarter, has given us more of a balance with our families, and more flexibility in terms of working from home around family schedules. It’s only a good thing.”

Clients' needs haven’t changed too much, although many businesses are being hit by supply chain issues, inflation and a very tight labour market, says Holt.

Mark Reid, chief executive for the Abbott Group, says the lessons from the pandemic have been “positive overall”.

“Prior to the nationwide lockdown in 2020, our teams worked by default in the office during business hours, visiting clients at their premises,” he says.

“Working more flexibly has become part of the way we work now, and we are currently trialling policies to provide our team and clients with the best experience.”

The key for the Abbott Group is offering a range of work options, recognising that some of their team, and teams within teams, prefer to work from a shared office/team environment, says Reid.

“This is because they find face-toface enhances a learning culture and positively impacts on team culture overall and others found working from home during lockdown very isolating or had difficulty switching off.

“So, for all of those reasons around work/life balance, fostering teams and our culture, we need to balance flexible work needs and wants across the group to deliver on our employer of choice goal.”

The FAP licence deadline looms

March 2023 is looming — the key deadline by which brokers need a Financial Advice Provider (FAP)

licence to be compliant under FSLAA.

There’s been a two-year transitional period in place since March 2021, so has that given the industry enough time to prepare?

No, says Holt, who says some advisers are planning their exit.

“In terms of the industry being prepared, no, I don’t think some of the industry is prepared for the new FSLAA regulatory regime. As a result, we are seeing a few advisers planning their exit the industry before the March 2023 deadline,” she says.

The year ahead

It’s been a busy year with many challenges, so what are brokers looking forward to for the year ahead?

“It’s definitely been a very busy couple of years, especially with the new FLSAA regulations coinciding with significant Covid-related challenges,” says Reid.

“At Abbott Group, we’re looking forward to getting back onto a more business-as-usual footing, albeit with our full FAP licence, a team of qualified advisers, and a more robust

Holt, financial adviser at SHARE

In better news, SHARE is “definitely prepared” for the new FSLAA regulatory regime and has been for a while now, she says.

“We are on track to have all brokers and support staff complete their qualifications by March 2023, and our full licence is already in place.

“We only see this as an opportunity for growth at SHARE and are gearing up for this growth both in terms of preparing systems, but also thinking strategically around staffing to ensure that we can accommodate the growth.”

The Abbott Group’s full FAP licence was granted by the FMA in June 2022, and Jones says they have comfortably met licensing obligations within the two-year transitional period.

“We’ve had very strong support from Steadfast New Zealand throughout this process, and the benefits of a strong, proactive broker network have been clear to Steadfast members throughout New Zealand,” he says.

“I think time will tell how well members of our industry are prepared. Our focus has always been on what we need to do and how best to do it, not only to ensure our compliance with the new regime, but also to do the right thing by our clients.”

compliance programme in place.”

He says that clients will continue to be the priority in the year ahead.

“There are clear signs of economic headwinds to come, and it’s our role as insurance specialists, as their trusted advisers, to help clients navigate the challenges they face while best protecting their position and future goals.

“As always, communication will be key, and we’ll be encouraging clients to keep us up to speed so we can provide the greatest value and support to them if and when times get tough. Outcomes are typically better when you can work in partnership with clients and front-foot any issues as they arise.”

Over at SHARE, the team is “hugely positive” about the year ahead, says Holt.

“There are so many opportunities within our business networks that we are looking forward to embracing. We’re excited about growing our team to accommodate the natural growth in the market and taking advantage of the opportunities out there.

"We’re also excited about the technology platforms that we have access to via our Steadfast partner, which enhance and speed up the way we do business.”

Claire

It’s great to be part of an industry that puts our clients first and foremost, in the way we do business.

Changes in New Zealand's insurance market

The past 10 years have seen significant changes in the New Zealand insurance market. These changes are largely positive, but give rise to issues that need to be managed.

On the broking side, the first indication of major change came with the move towards consolidation in the industry with the 2014 purchase of Crombie Lockwood by New York Stock Exchange listed broker Arthur J. Gallagher & Co. That resulted in five brokerages with global reach: Marsh, Aon, JLT, WTW and Crombie Lockwood. Fast forward to 2019 and Marsh’s 2019

merger with JLT reduced that number to four. That very nearly reduced to three with Aon’s proposed takeover of WTW in 2020.

By 2021, the market had consolidated further with two large international brokerages, Marsh/ JLT and Aon. WTW remained in the mix, with Crombie Lockwood staying locally focussed, albeit with international connections via Gallagher. Other New Zealand brokerages, such as PIC and Rothbury, retained largely New Zealand or Australasian networks.

Two new global players then

joined the New Zealand market in 2021 – Lockton in March and Howden close behind in September. Lockton’s entire New Zealand team joined from WTW during 2021 and Howden’s genesis was similar, with most of its New Zealand team coming across from Marsh. Both are significant international brokers, albeit start-ups in New Zealand. Lockton describes itself as the world’s largest privatelyowned insurance brokerage with over 100 offices worldwide. Howden also has a global footprint “with offices in 45 countries as well as a network of partners which increases our reach to 95 territories worldwide”.

Nick Frith, partner, MinterEllisonRuddWatts, presents his current outlook on the insurance market.

Anecdotally, both Lockton and Howden established New Zealand offices to better respond to global pitches involving international clients’ New Zealand businesses. They certainly bring a more international flavour to the market, but it remains to be seen whether the nimble outpost model will thrive. Competition may benefit clients as new brokers attempt to establish themselves with a minimum viable business, although personnel movement in the market gives rise to heightened legal risk as the incumbents defend their positions. There will need to be an increased focus on restraints

of trade and a need for care when safeguarding confidential information gained in former roles. These issues could come to the fore in the near future as the new entrants work to solidify their positions in the market.

On the underwriting side, despite a continuing tough global market, there is word of an increase in offshore capacity via managing agents such as Delta Underwriting. Furthering this trend, Dual, a sister company of Howden Broking, purchased International Underwriting Agencies or IUA. And Pen Underwriting, which writes business covering some

insureds with New Zealand operations, is a subsidiary of Gallagher. Munich Re is also reportedly increasing its primary insurance offering, a further expansion from its traditional focus on reinsurance.

As brokers are branching out into underwriting, they are reporting more capacity in the global underwriting market. This is good news for insureds, but New Zealand-based policyholders need to be aware of the nuances of offshore cover. One potential advantage is that policy proceeds are less likely to be subject to an asserted charge in favour of claimants under the Law Reform Act 1936. Where that can be established clearly, insureds may decide to structure their insurance arrangements to omit separate defence costs cover.

Less helpfully, enforcement of a foreign policy can prove more challenging if a policy dispute arises, with truly offshore cover often subject to dispute resolution forums outside New Zealand. This may affect enforcement through the courts and also access to regulators and statutory dispute resolution forums such as the Insurance and Financial Services Ombudsman in New Zealand. Insureds and their brokers should therefore look for governing law and jurisdiction clauses that require claim disputes to be resolved in New Zealand under New Zealand law.

Another issue of which insureds should be aware is that New Zealand levies, such as Fire and Emergency NZ levies, may be payable upon policies that insure assets in New Zealand notwithstanding that they are arranged by overseas brokers with foreign insurers. Overseas brokers and insurers may not be aware of the regulatory regime in New Zealand and the penalties for noncompliance are substantial.

These developments in the broking and insurance industries will produce opportunities for clients as a result of changes and developments in the way that many policies are arranged and underwritten. However, these changes are not always without risk, and insureds and their advisers will need to be aware of the possible consequences.

Nelson, August 2022. Flooding damages properties and destroys infrastructure. Photo: NZME.

When talking about the weather isn’t just making polite conversation

New Zealanders are unprepared for wild weather, despite increasing storms and property damage, says NZI’s executive general manager Garry Taylor.

New Zealand’s weather is a topic that has recently turned from polite conversation to a much more urgent discussion around the need to take action to keep New Zealanders safe.

Part of our mission at NZI is to provide New Zealand businesses with peace of mind so they can focus on getting on with business. One of the ways we do this is through NZI’s Wild Weather Tracker - a six-monthly analysis of our weather-related claims data (in conjunction with AMI and State).

With costs increasing across the construction industry, weather-related events on the rise, and customers seeing the resulting increase in the amount they pay for insurance, our report offers insights, commentary, and advice that you can pass on to your clients to help them plan for and minimise damage to their business.

You can download the Wild Weather Tracker from our website and read on for some of my key takeaways.

What our data tells us

Our latest edition tells us that severe weather in New Zealand is becoming more frequent and causing more damage to people’s homes and businesses, with a staggering 13,587 weather-related claims in the past six months alone, up 34% from the same time last year.

Between March and August 2022:

• we recorded 11 significant weather events

• Auckland suffered most of the property damage, with 37% of all weather-related claims

• house policies made up most weather-related claims (8,710), followed by contents (1,971), and commercial policies (1,851).

We also asked New Zealanders what they thought about our weather and changing climate, and if they were prepared for a storm.

• 82% believe wild weather is increasing in frequency and severity

• 71% agree climate change is a key contributor to wild weather

• 69% of people are concerned about the potential impacts of wild weather

• 40% have taken precautions to prepare for wild weather in the past six months

• 42% are either not at all prepared or only a little prepared for a storm.

As we were pulling together this second issue of our Wild Weather Tracker, our teams were responding to the flooding and devastation in Nelson, Tasman and Marlborough.

The aftermath of this event showed a huge amount of resilience from the local community and emergency responders, working together to clear away the debris, as well as by our claims and service teams, who helped customers lodge claims, find alternative accommodation, and arrange property assessments.

To date, NZI, AMI, and State have received 1,716 claims for this weather event alone and are in the process of paying out around $20 million to customers.

That won’t happen where I live

And before you think ‘that will never happen where I live’, remember that Auckland, too, suffered a major storm in March which flooded homes and businesses, with rain that lasted several days and resulted in 4,799 claims.

And Canterbury made up 10% of all weatherrelated claims in our latest report, while Wellington contributed for 8%.

Unfortunately, ‘wild weather’ is a topic that is becoming increasingly relevant to us all, regardless of where we live.

Climate change is having a very real and immediate impact

Our data paints a clear picture that despite New Zealanders being concerned and increasingly impacted by climate change, little is being done at an individual, community or government level to help mitigate its effects.

Climate change is a critical issue for our country and it’s having a very real and immediate impact on the lives of New Zealanders, as well as businesses. As recently as a few months ago, RAL Ruapehu Alpine Lifts went into voluntary administration amid a challenging few years of poor weather conditions, including a third year in a row of warm winters, and the Covid-19 pandemic. Unfortunately, I think examples like this will only become more frequent as we see our climate continue to change.

Protecting our communities from flooding

In the short term, one of the most important things that we can do is ensure people are not placed in harm’s way, so they do not suffer the loss and disruption caused by a major event. That means we need to

stop building in flood prone locations, so the problem doesn’t get worse.

Currently, development and investment decisions are leading to more people living and working in flood prone locations, where they face growing risks due to the impacts of our changing climate.

Reducing the impacts of flooding is a large and complex challenge, but not an impossible one. There are practical, concrete actions we can take which will lead to a real reduction in the flood risk faced by some of New Zealand’s most exposed communities.

In August, IAG – which NZI is a division of - called for three practical, collaborative steps to be taken which will lead to a real reduction in the flood risk faced by some of New Zealand’s most exposed communities.

I encourage you to read more about our three-step plan, outlined on page 6 of the Wild Weather Tracker.

What your clients can do to prepare

Another insight the Tracker reveals is that despite high levels of concern,

awareness, and property damage, people and businesses generally aren’t taking steps to prepare.

This could be because people don’t know how to prepare, or simply hope it won’t happen to them.

It’s important to remember these storms can impact businesses just as much as homes, and there are several things business owners can do to reduce loss from flooding.

Reducing loss from surface flooding

KNOW THE RISK:

• It’s unlikely customer’s stormwater infrastructure has been designed to carry away the amount of water that drops during an unprecedented heavy rain event. Water will flow downhill, and even shallow flooding can cause significant damage and interruption to their business.

• Customers should find out where their site’s overland flow paths are (the tracks that water would take if the stormwater system gets overwhelmed) to see where the water is likely to collect.

• Auckland Council has a handy guide on how to recognise these and other local authorities should have similar resources.

ONCE YOU KNOW YOUR RISK, CONTROL IT – reduce the impact of surface flooding and protect your customer’s assets. Your clients can do this by:

• cleaning and clearing stormwater grates, gutters, culverts and drains.

• keeping overland flow paths free of obstructions. This allows the system to move water away from your site.

• making sure critical plant and machinery, stock and inventory is away from flood prone areas or elevated off the ground. It’s also worth considering whether they’d be able to access these things during a flood, or whether it’s worth relocating them.

NZI has a range of resources available, and we can work with you to help your clients plan and prepare for interruption to their business. To find out more visit the Risk Solutions area of our website.

Cyber-Risk Oversight: Key Principles and Practical Guidance for Corporate Boards in APAC

Cybersecurity is the fastest growing, and perhaps most dangerous, threat facing organisations today. Boards are increasingly focused on addressing these threats.

AIG’s cyber-risk handbook includes a range of key principles and toolkits along with a series of questions to ask to ensure your organisation is addressing its unique cyber-risks strategically. It’s a simple and coherent framework that can improve cyber-risk management and help create a culture of security.

Go to AIG.co.nz to download your copy.

Insurance products and services are provided by AIG Insurance New Zealand Limited, a subsidiary of American International Group, Inc. For additional information, please visit our website at www.aig.co.nz.

Cyber-Risk Oversight

Reserve Bank seeks feedback on insurance governance

The Reserve Bank of New Zealand has begun a public consultation on governance and supervisory processes in the insurance sector.

The consultation, which will run until February, is the last of four topic-specific consultations making up the Reserve Bank’s review of the Insurance (Prudential Supervision) Act 2010 (IPSA).

The RBNZ said the review would examine whether IPSA remains fit for purpose more than a decade after coming into law. The legislation aims to promote soundness and efficiency within the industry.

The central bank and regulator is looking for feedback on governance and risk management for insurers; accountability for directors, appointed actuaries and other key officers; supervisory oversight of major restructuring transactions; and provisions for data gathering and information disclosure to support its insurance supervision operations.

A so-called “omnibus” consultation will follow in 2023, outlining the RBNZ’s planned changes for the sector.

The omnibus consultation will set out all of RBNZ’s proposed changes to IPSA.

Christian Hawkesby, RBNZ deputy governor and general manager for financial stability, said the proposed changes would “help to underpin the more proactive and intensive approach to supervision that we have been developing in recent years across the sectors we regulate”.

“We are proposing to introduce a series of standards that will set out our expectations for insurers’ governance arrangements and risk management practices in a way that is clearer, more detailed and more enforceable,” he added.

Vero is taking support for brokers and advisers to another level.

We are committed to helping our broker and adviser partners succeed, now and in the future.

We know that ongoing industry education is an area of increasing importance for the insurance industry – in fact research shows

48%* of brokers and advisers are actively seeking this. For more information on our future focused set of initiatives, tools, insights and content check out vero.co.nz/overandabove or ask your Vero contact for more details.

Ex-Tower exec appointed AA chief executive

AA Insurance has appointed Michelle James as its new chief executive, hiring its new boss from Tower.

James joins in February, having held a role in the Tower executive leadership team. She has spent six years at the insurance group, holding executive portfolios including strategy, customer experience, and transformation.

Most recently, James led Tower’s direct and digital business.

AA Insurance chair Doug McTaggart said: “Michelle is a highly experienced senior executive with a proven track record in delivering innovative customer experiences in a range of sectors on both sides of the Tasman.

“The appointment of Michelle will enable AA Insurance to build on its outstanding reputation as a trusted insurer committed to going above and beyond for its customers, people and communities.”

James added: “I am excited to step into this role at such a pivotal time for the insurance industry. I look forward to working with the AA Insurance team to build on its success and contribute further to an industry that plays such a critical role in the lives and well-being of New Zealanders.”

James takes over from Chris Curtin, who earlier this year announced his retirement after holding the CEO role for 28 years.

The AA board thanked Simon Hobbs for taking on the role of acting CEO of the business. Hobbs returns to the position of general manager of operations in February.

Confidence is everything.

Tightrope walking is simple. There’s only one blatantly obvious thing to worry about. If you’re in business there are a million things to worry about.

So it’s reassuring for you and your customers to know you have the support of New Zealand’s largest, most experienced business insurance company.

NZI have always been here to help when things go wrong, but also to reduce the chance of that happening in the first place.

We value our broker relationships and know that by working closely together we can take away some of those worries – and help businesses move ahead with confidence.

Peace of mind for NZ business

Unstoppable passion and unlimited drive

Meet Loren Greig, NZI’s Senior Business Development Manager (BDM) and first recipient of the Jeremy Bold Outstanding Performance Award.

2009 was the year Loren Greig’s passion for the insurance industry was ignited. Originally from New Plymouth, Loren made her way down to the windy capital city to begin her first role with NZI as sales support.

Since then, Loren has been thriving. Having a knack for supporting brokers and building great relationships, Loren has found success in a variety of broker-facing roles, eventually working her way up to her current

role as Senior Business Development Manager for the Wellington region.

“Before joining NZI, I was working at a fast-food restaurant and was looking for opportunities to grow and build a career. Joining the industry has opened so many doors for me and I’m incredibly thankful for everything I’ve learned and for the great experiences I’ve had so far.

“What I enjoy most about my role is interacting with brokers, building great relationships and getting to

HUMANS of

know my brokers and their customers’ needs. I like being there for them and being their first point of contact when they need something sorted. I’m super passionate about that.”

Keeping passion for learning alive at NZI

In November 2021, Jeremy Bold (JB), a key member of the NZI team, sadly passed away. He was a close friend and colleague to many at NZI, and a well-respected member of the wider industry.

As a way of honouring his memory, NZI introduced the JB Outstanding Performance Award. The annual award is designed to recognise outstanding performance and to develop NZI’s emerging leaders –something JB was very passionate about – by awarding them with funds to go towards their professional development and matching them with an experienced mentor.

Loren was selected as this year’s recipient after being nominated for her collaborative approach, strong internal and external relationships, leading performance, and futurefocused ideas.

“Winning the award was a real surprise and I feel humbled to have received it. It’s a great way to keep JB’s passion for learning alive amongst our teams. He was a very cool guy, admired by many in the industry, so it’s very touching to be the first award recipient.”

Receiving this award was extra special for Loren, as JB was instrumental in the launch of NZI’s Electric Vehicle (EV) Early Adopters Programme, which will see the company’s entire fleet transition to EV and hybrid vehicles. Loren was in fact NZI’s very first EV early adopter, choosing to swap her vehicle for an EV earlier than needed, and has been a strong internal sponsor ever since.

“I absolutely love my EV; I’ve been converted. Going electric is the best move and I’m excited to be part of our carbon reduction journey. I’m quite outspoken about the benefits –smoother rides, less road noise and

easy home and public charging. I’d encourage everyone to give it a go.”

Insurance all around

Loren’s partner, Mark, is also in the insurance industry and works on the other side of the fence in a broking house.

“We understand each other’s worlds which is very nice, and this includes mutual understanding on our work priorities and how no day is the same.

“I’m always quick to pick up my phone rather than hiding behind emails, and I’m regularly out and about visiting local brokers face to face. That makes a real difference and it’s what I love.”

When she’s not working, Loren likes to go for scenic walks with her partner around different parts of the country – and they now have a new furry best friend to join them.

“We recently got a goldendoodle puppy – Bella – our little fluffy bundle of joy. She is five months old, and I love taking her out on our walks, even though it means we need to go a little slower at times. She’ll learn to keep up, I’m sure!”

Up for a challenge

Loren is the first to say yes to a new challenge. As a yearly tradition,

she even sets herself a personal challenge to read a certain number of books. The number keeps getting bumped up each year as she beats her own goals and wants to further improve her record.

“Growing up I was into highland dancing for about 12 years and did that competitively for many years. I’m very competitive and I like winning (who doesn’t!) – that’s my motivation and what drives me to be good at what I do. I like to deliver.””

Winning the JB Outstanding Performance Award has given Loren the extra push she needed to keep growing her passion and pursuing her professional career.

“I’m very excited about having a mentor – I’ve never had one. I’m also looking forward to doing some further studies to complement my ANZIIF papers, as well as continuing to focus on what I love doing the most, which is supporting brokers and their customers.

“My team keeps telling me I need to move to a leader-type role because it would suit me, maybe I’ll have to start listening! This opportunity is going to help open more doors for me and give me greater direction on what I’d like to do next.”

Loren with her partner Mark and puppy Bella.

STOP

selling cyber insurance for your clients’ technology or cyber security.

That’s like selling them Motor Insurance to stop road accidents.

And speaking of Motor cover, probably the most basic thing you sell your clients, they still need to have roadworthy vehicles (warranted) with proven maintenance for brakes, tyres, etc and there has to be an authorised operator (Licensed Driver).

If something as basic as CMV cover has risk management requirements you can easily see why something as complex as cyber and technology security requires a wide range of measures to be put in place before it is even possible to place a meaningful Cyber Insurance cover.

A cyber insurance policy should only form part of an overall risk management strategy and come at the end of such a strategy. Insurance

by Daniel Lowe, Vero Liability

is risk transference which within a strong risk management framework should occur post risk identification, risk measurement and assessment, risk mitigation and risk acceptance.

Well spent dollars on prevention and detection can be significantly less than the costs of remediation and restoration in the event of a claim. Even a minor cybersecurity incident can have significant financial, reputational and operational impacts on a business. As a result, cybersecurity maturity needs to form part of any risk management audit process.

Off the back of digital transformations, rushed delivery of work from home capabilities which widen attack surfaces, current geopolitical tensions, ever increasing

sophistications of attacks, and emerging technologies which will bring new and unknown cyber threat exposures, the need for a strong and resilient cybersecurity posture has never been more important.

If digital assets are important to your client and/or their stakeholders then by that definition alone it is just as valuable to an attacker. Be certain they will find a way to leverage those critical assets to extract financial gain from your client. Business leaders can easily understand their physical assets and be across how those physical assets are risk managed but too often those same levels of protections are not being used to secure the digital environments. In the digital environment some of the basic hygiene controls, which in many cases are inexpensive and feasible

measures, are not in place.

Compared to the physical environment there is often:

• No alarm (intrusion detection system);

• No alarm monitoring service (managed security service);

• No safe for valuables (segregation);

• No CCTV (incident logging);

• No building surveys (cybersecurity audits);

• No staff initiation and ongoing development training (staff user awareness training);

• No fire evacuation trials (Testing response plans for cyber specific scenarios);

• No inspection and testing of emergency generators

(testing of backups for completeness and preparedness);

• No key card plus pin code for building access (two factor authentication); and

• No ongoing building maintenance undertaken (software updates and replacing legacy systems). Many digital environments are full of cracks for water ingress to occur.

Yet without these protections for digital asset security the first port of call might be a cyber-insurance policy. How would obtaining MD/BI insurances go in a similar situation?

Without more efforts in education and lifting the overall cybersecurity standards of NZ businesses at some

point cyber insurance will only be available and affordable to the few at the same time as every business is only becoming more reliant on digital assets.

While as an underwriter I’m not a financial advisor and therefore can’t provide financial advice it is my recommendation to the industry that rather than just selling an insurance solution (which doesn’t cover everything) lets work together to better understand the digital assets and associated cyber risks of the specific business and use our position within the risk management framework to lift the cybersecurity education of all stakeholders. For many organisations perhaps the allocation of capital into a specialised cybersecurity professional to undertake a pre loss audit (and the client implementing any key recommendations) is the best first step towards evaluating and understanding cyber risk. Cybersecurity professionals will be able to provide new insights into how vulnerable a client’s digital assets are and be up to speed with the current cybersecurity trends to best posture the organisation to close the gap on such vulnerabilities. While the upfront costs of risk investigation and risk mitigation can seem expensive this investment may well save the business significant costs in the long run. A business can’t protect against a threat for which they don’t know that they are susceptible. A proactive cybersecurity strategy and prevention investment can assist an organisation to prosper in an ever evolving, complex and challenging cybersecurity landscape. At the end of the day, it is easier to protect an organisation when cyber security is at the forefront of every digital transformation or technological advancement rather than trying to patch a system where security has been overlooked in the development lifecycle.

In time an independent cybersecurity audit may well be a prerequisite for access to cyber insurance and those that can demonstrate cyber resilience being at the forefront of their digital journeys will be best positioned should cyber insurance capacity be limited in the future.

Howden acquires Gallagher Bassett’s NZ personal injury arm

Global insurance broker Howden has acquired the personal injury business of claims administrator

Gallagher Bassett New Zealand.

The acquisition by Howden Care New Zealand, Howden’s local workplace claims management rehabilitation and wellbeing business, will close in December, subject to regulatory clearance.

Howden Care already has experience in employee health and claims management services in New Zealand, including for employers in the ACC Accredited Employer Programme.

Howden said the deal reinforced its

ability “to provide localised services and support for clients with large diverse workforces and operations”.

It follows Howden’s acquisition of Auckland broker Wallace McLean in August, as the UK-based group grows its presence in the AsiaPacific market. The group is seeking to become an end-to-end TPA and insurance provider.

Cliff McCord, chief executive of Howden Care New Zealand said: “The opportunity to work with a talented team of people and some of this country's most iconic clients is very exciting. Our combined knowledge and leading technology will see a major shift in the service offering we

will bring to the market.”

Matt Bacon, chief executive of Howden Pacific, added: "Gallagher Bassett’s New Zealand Personal Injury division is a stand-out business in its sector and is a strong addition to our Howden Care and Broking businesses.

“Both businesses share complementary cultures, and both are passionate about delivering the very best outcomes for our clients, and their people. With this acquisition, and the recent acquisition of Wallace McLean, Howden New Zealand will be a leading end-to-end TPA and insurance broker capable of supporting all of our clients, whatever their needs.”

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Lloyd Kavanagh, Maria Collett-Bevan and Sarah Jones, MinterEllisonRuddWatts, outline what the Insurance Contracts Bill will mean for underwriters.

The Insurance Contracts Bill (Bill) released for consultation on 24 February 2022, proposes to make insurance contracts subject to the unfair contract terms regime under the Fair Trading Act 1986 (FTA) (UCT regime). If introduced, this will have a profound impact on the insurance industry.

How the Bill will do this, however, is not yet finalised. The Ministry of Business, Innovation and Employment (MBIE), having consulted on how best to apply the regime to insurance contracts, is yet to confirm how insurance contracts will be subject to the regime.

UCT regime basics

The Commerce Commission may apply to the Court for a declaration

that a term in a contract is unfair.

If a Court makes such a declaration, from that time the business must not include the term (unless done in a way that complies with the Court’s decision) or attempt to apply, enforce or rely on it.

Which contracts are affected?

The UCT regime applies to standard form, consumer contracts and small trade contracts.

STANDARD FORM

Standard form contracts are typically contracts with standard terms and conditions that are presented to customers with little real opportunity for negotiation or consideration. We expect that many insurance contracts are standard form.

CONSUMER CONTRACT

In the context of insurance, consumer contract means a policy with a person who enters into the policy for personal, domestic or household use.

SMALL TRADE CONTRACT

A contract will be a small trade contract if:

• each party is engaged in trade;

• it is not a consumer contract; and

• it does not comprise part of a ‘trading relationship’ that exceeds the ‘annual value threshold’ of NZD250,000 (including GST, if applicable) per annum for goods, services or an interest in land when the relationship first arises. In the context of an insurance policy, that’s potentially the case if the annual premium is NZD250,000 or less.

We also note that small trade contracts will not be subject to the regime if entered into before 16 August 2022 (unless renewed or varied on or after that date). When is a term unfair?

A term can be declared to be unfair where:

• reliance on the term would cause a significant imbalance in rights between each of the parties;

• the term is not necessary to protect the legitimate interests of the party who is relying on it; and

• one party would suffer detriment if the term was to be relied upon.

The extent to which the term is transparent and the context of the contract as a whole must also be taken into account.

Certain terms are exempt from the UCT regime. These are terms that:

• define the main subject matter of the contract;

• set the upfront price payable under the contract, to the extent that the price term is transparent; or

• are required or expressly permitted by any enactment.

The carve out for insurers

The UCT regime currently includes exceptions for insurance contract terms, including the subject or risk insured against, the sum insured, exclusions to liability, the basis on which claims may be settled, payment of premiums, the duty of utmost good faith, and disclosure requirements.

The original rationale for these insurance-specific exceptions was to apply the generic “main subject matter” and “upfront price” exceptions, meaning that the terms which relate to these aspects of an insurance contract are not subject to the UCT regime. However, the insurance-specific exceptions effectively carve out insurance contracts from the UCT regime. What does the Bill propose?

The Bill proposes to make insurance contracts subject to the UCT regime by removing the insurance specific exemptions in the FTA and clarifying how the generic exemptions apply to insurance contracts.

MBIE has not yet decided how the UCT regime will apply to insurers. The Bill sets out two options for consultation, which we have set out in the table to the right.

Two options for consultation

OPTION A:

The Narrow Interpretation

Defines the main subject matter of insurance contracts in narrow terms (clause 171 of the Bill). This means that the main subject matter exception would apply only to the thing insured, the terms that set out the sum insured, and terms that set the quantum of the excess.

OPTION B:

The Broad Interpretation

Defines the main subject matter of insurance contracts in broad terms (clause 172 of the Bill).

This would mean that the policy limitations and exclusions that affect the scope of cover would be considered part of the main subject matter and therefore excluded from being declared unfair.

Our view

We understand that the inclusion of insurance contracts within the UCT regime has been the subject

of great opposition in the industry. However, MBIE, in the consultation for the Bill, presented two options which both make insurance contracts subject to the UCT regime. Further, in its submission in the consultation process, the Commerce Commission (the regulator for the UCT regime) advocated for insurance contracts to be subject to the regime.

In addition, it should not be ignored that other jurisdictions (including Australia and the United Kingdom) have introduced amendments to make insurance contracts subject to their unfair contract regimes.

Insurers should, therefore, prepare themselves for a Bill to be introduced which contains either the Narrow Interpretation or the Broad Interpretation. It is difficult to predict which option MBIE will opt for, at this stage. It is clear that the Narrow Interpretation provides greater protection for consumers.

However, the Broad Interpretation provides greater certainty for insurers. If we look to overseas jurisdictions, however, the legislation favours consumer protection. For example, the Australian UCT regime uses the Narrow Interpretation; the United Kingdom UCT regime does not provide for any special treatment of insurance contracts at all –they are simply subject to the UCT regime.

MBIE is currently considering submissions on the draft Bill. Ideally, we would like to see a Bill that accommodates the insurance industry’s need for certainty – in particular the need for certainty of any exclusions from the scope of cover. There will be significant costs and disadvantages for insurers arising from inclusion within the regime, in particular if exclusion clauses are brought within the regime. Further, the Bill needs to take into account the raft of incoming legislation affecting insurers (such as the Financial Markets (Conduct of Institutions) Amendment Act 2022).

Therefore, a large lead-in period should be built into the commencement of the proposed Bill so that insurers have adequate time to prepare for these substantial changes.

What the Financial Markets (Conduct of Institutions) Act 2022 means for brokers

The Financial Markets (Conduct of Institutions) Act

2022 became law on June 29. However, the practical impact of it on intermediaries could not be assessed at the time as key regulations under it had not been drafted.

The Ministry of Business Innovation & Employment recently released an exposure draft of these key regulations as part of its consultation process.

Recap

The above Act requires all intermediaries to comply with these regulations when all of the following apply:

• They pay incentives to their employees or agents (or another intermediary), and

• They are involved in the sale of an insurance policy, and

• That sale is to a consumer.

The Act defines a consumer as a policyholder who enters into the contract wholly or predominantly for personal, domestic, or household purposes. Where there is a dispute about this, the onus is on the intermediary to prove that this was not the case.

The Act defines an incentive very widely; it expressly includes traditional linear commissions common in the insurance industry e.g., a 10% commission on every policy sold.

Proposed regulations

The proposed regulations then narrow all this.

They prohibit a ‘prohibited incentive’ as defined. The definition adds a constraint to the Act’s definition of incentive and limits it to incentives based on a target or other threshold that relates to volume or value of insurance policies sold. The regulations give the following example of a prohibited incentive:

The employee of a life insurer is offered a $1,000 bonus for selling 100 life policies in a 3-month period.

Consequences for intermediaries

We see the following consequences for intermediaries:

1. The definition does not apply to any linear commissions, regardless of amount. This is emphasised by an example in the regulations of a non-prohibited commission, which is stated to be a 5% commission for each life policy sold. So long as the commission payment is only payable on a per policy basis, it is linear and exempt.

2. The definition does not apply to the commission an underwriter pays to an underwriting agent. This is primarily because the underwriter neither ‘arranges’ nor gives ‘regulated financial advice’ in relation to its insurance policies (see the definition of ‘involved’ at section 446SA (3) of the Act, that forms part of the definition of ‘intermediary’.

3. Where the definition does apply, it makes no difference that the prohibited incentive forms part of a larger group of incentives that are exempt. The prohibited incentive remains prohibited without affecting the exempt incentives.

4. The prohibition may apply to some profit share agreements depending on how they are formulated. If they are a set mathematical formula applying traditional insurance ratios regardless of the volume or value of policies sold, they are probably exempt because there is no target. However, if they set a target related to volume or value of policies sold before any profit share is payable, they are probably prohibited.

We can see from the above that the rationale behind the regulations is to prohibit incentives that reward reaching a target or threshold. This conflicts with the duties to the customer to look after the customer’s interests.

We conclude by noting the strange way this regime has been drafted. Why have an Act that expressly includes linear commissions, only to have regulations then expressly exclude them from the ‘prohibited incentives’ the Act regulates. It seems the Act was passed before a final policy decision had been made about linear commissions.

Please contact us if you require any further information.

Frank Rose cgates@keegan.co.nz frose@keegan.co.nz

Crossley Gates

The loss adjuster’s perspective

Philip

van Zyl,

chief executive officer of Sedgwick

New

Zealand

,

shares his thoughts on the challenges facing the insurance sector.

What are the biggest challenges facing loss adjusting and the wider insurance sector right now?

Staff resourcing appears to be the perennial challenge that loss adjusters face, as do insurers and brokers. Whether we are recruiting general adjusters for domestic losses, or specialists for major commercial work, it is tough to find good people with the requisite skills and temperament. We staff up for ‘business-as-usual’, but then need to stretch our resource when disaster strikes.

The acceleration of climate change, delivering more frequent and intensive weather events over larger geographical areas, presents logistical challenges and impacts our capacity and capability.

Having extra skilled resource for deployment is, therefore, essential. The ability to scale up resource at short notice to meet demand is a key factor in our readiness and response planning across New Zealand. Having the right resource, in the right place, at the right time, is crucial to our comprehensive service offering. How can technology help with capacity issues?

Technology is a vital element of our response strategy. Our staff need to be well trained in the use of technology that is ‘fit for purpose’, to deliver service that provides speedy resolution for our insurer clients, brokers and their customers. We are well versed in the application of smartphones and tablets to carry out virtual assessments, and we employ drones to circumvent issues of restricted or remote access. Tools such as satellite imagery and 3D scanning of damage are also part of the “technology basket”.

The proper use of tools saves precious resource, which can then be redeployed to help customers requiring greater support. Technology can save time and is more cost effective. As we have seen benefits of technology in how we deliver services to clients and customers, we remain committed to our ongoing investment in technology to further improve efficiencies and enhance the customer journey.

What are you doing to keep ahead of the current challenges?

We are focusing on ways that Sedgwick in New Zealand can support the broader insurance industry, particularly in responding to the unusual demands that accompany large scale events. We have invested in flexible trained resources and have enhanced our systems to identify vulnerable customers at the very first contact.

With our border now open, we have access to Sedgwick international’s global resources, who use the same claim management system wherever they work in the world. Our New Zealand-wide coverage enables us to respond quickly and efficiently wherever losses occur, and our branch network is ably supported by building and engineering specialists in the major and complex loss team and Sedgwick building consultancy.

How can the industry adapt to a challenging environment, with more frequent and damaging catastrophes?

We believe in the power of partnership to create an environment where we can develop innovative solutions to overcome the challenges we face with the everincreasing threat of climate related events. Developing strategies to handle the impact of climate change will require closer collaboration from all stakeholders to design and implement systems that strengthen resilience in the New Zealand claims sector.

We regularly speak to insurers about planning for disaster response, but it might be very useful to bring brokers into a three-way conversation, so the customer’s voice is heard more clearly.

Technology in the claim space, readiness and resilience, staffing and culture, data and reporting, are just some of the important topics trending at the moment in New Zealand property insurance. If we work together, we can enhance customer experience, and show that ‘caring counts’.

Do you expect the claims environment to improve?

How can the industry deal with challenges and build upon its customer-centric approach?

We need to set realistic expectations for all concerned and simplify processes wherever possible. Regular engagement and closer collaboration between all stakeholders will ensure the industry continues to build on its customer-centric focus, helping New Zealanders in their hour of need.

Extreme weather claims mount

Claims

data released by the Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa (ICNZ) revealed that mid-August’s extreme weather resulted in 3,165 general insurance claims with a provisional value of $47.98 million.

The Nelson Tasman District accounted for 1,248 private insurer claims with a provisional value of $21.64 million, while the rest of Aotearoa New Zealand (including Marlborough), saw 1,917 claims valued at $26.35 million.

"This was a devastating event for communities in Nelson and the Marlborough Sounds in particular that will take a long time to recover from," said ICNZ chief executive Tim Grafton.

"It has been more difficult for some by the time taken to deal safely and methodically with the event. In a hillside area of Nelson, this is necessitating extensive geotechnical work to ensure the land has stopped moving. This is now being followed up with site specific damage assessments."

"Once all the assessments are safely completed, the final claims data for August’s event will likely be higher", Grafton added. "This is a difficult time for all involved and yet another reminder of the urgency with which incoming councils must deal with building resilience to climate change."

ICNZ also released final claims data for 9-14 June floods. Preliminary figures of 3,146 claims valued at $15.45 million have been finalised at 3,552 claims worth $20.34m.

As of October 12, the running total for general insurance losses for extreme weather events in has reached $298 million, according to ICNZ, excluding costs met by EQC, councils and the NZ Transport Agency.

2022 IANZ Awards

Awesome to catch up with so many colleagues at our professional development days in Auckland, Wellington & Queenstown.

The best bit – celebrating the winners of the 2022 IANZ Awards. Well-deserved and well done to all of you.

insuranceadvisernet.co.nz

Which cars are most likely to be stolen in NZ?

New research from AMI Insurance has revealed that cars owned by younger people are at greatest risk of being stolen.

Research published earlier this year revealed that the most commonly stolen cars in NZ were:

Mazda Demio

Mazda Atenza (also known as Mazda6)

According to AMI’s claims data, young drivers have their cars stolen at a rate approximately three times higher than the general population.

Over the past three years, 26% of AMI’s theft claims were for cars owned by drivers under 25 years, even though they make up less than 10% of AMI’s customers.

AMI executive general manager for claims, Wayne Tippet, said young drivers tended to drive smaller and older cars, the perfect target for opportunistic thieves.

“Compared to the rest of the population, younger drivers are more likely to drive an older, second-hand car that won’t break the budget – an older Mazda Demio or Suzuki Swift are both good examples.

Young people were more likely to drive older cars: the average age of cars driven by insured young drivers was 16 years, with most vehicles registered in 2005-2007.

AMI aims to help young people build financial resilience by making it easier for them to get insurance.

“With a tighter budget than most, young people won’t always have the spare cash to replace a stolen car, and that can be a major roadblock to simple things like getting to work or study, or seeing friends.

“If you’re driving something with quite a few years under its belt, I strongly recommend taking extra precautions to prevent it being stolen and consider getting an immobiliser installed.

AMI said the likelihood of a car being stolen was “far greater” if a driver was under 25.

“Unfortunately, that also makes young drivers more susceptible to theft. Many older, imported vehicles lack security features such as car alarms and immobilisers which deter thieves from attempting to steal a car in the first place,” he said.

According to AMI, the five cars most popular with young drivers were the Mazda Axela, Toyota Corolla, Suzuki Swift, Mazda Demio, and Subaru Legacy.

Two of those – the Mazda Demio and the Subaru Legacy – also featured on AMI’s list of New Zealand’s top 10 stolen cars.

A steering wheel lock is another effective and affordable option that will help deter thieves.

“And of course, car insurance is there to help you absorb the financial hit if the worst happens and help you get back behind the wheel as fast as possible.”

AMI has partnered with Fleetcoach to offer an online driver education course that eligible AMI young driver customers can complete to qualify for $250 off their vehicle policy excess.

“We’re hoping this will encourage more young people to take up insurance, and to know that we’re on their side in case things go wrong,” says Mr Tippet.

Mobile phone claims cost revealed

Damaged and lost mobile phones cost New Zealanders an average of $13.5 million every year, according to State Insurance.

State has received 35,899 contents insurance claims for mobile phones over the past two and half years – adding up to an average of 33 every day.

According to State’s claims data, they are the item New Zealanders are most likely to make a contents insurance claim for.

State’s executive general manager for claims, Wayne Tippet, said the figures underlined the need to protect smartphones.

“We’ve encountered just about every scenario under the sun that has led to someone making a claim for their phone,” he said. “Whether it’s dropping it in a porta-loo at a music festival, driving off with it perched on your car roof, or being swarmed by a pack of vicious seagulls – there are a million different ways you can find yourself suddenly phoneless.

“But the costs of having to repair or replace a phone can quickly add up, and if you can avoid it, you should. Investing in a quality, water-resistant and shock-proof case will help protect your phone from most avoidable accidents.”

A nationwide survey conducted by State and Ipsos found that

New Zealanders tended to own phones valued between $1,000 - $1,600. However, only 43% had them insured under a contents insurance policy.

The same survey found that 35% of respondents had repaired or replaced their phone at least twice in the past five years, and 8% at least three times.

Tippet adds, “If you have a comprehensive contents insurance policy, you’ll be covered for any sudden or accidental loss to your phone – for example, if you accidentally jump into the sea with it still in your pocket.

“Your insurance will cover the cost of either replacing the phone or repairing it, helping you to absorb the financial hit and get back on your feet as quickly as possible.

“However, every insurer is different, so it's important you read the details of your policy to understand exactly what you’re covered for.”

According to the State-Ipsos survey, Gen-Zers were most likely to find themselves phoneless. A total of 62% of 18–24-year-olds have had to repair or replace a mobile phone in the past five years due to damage, loss, or theft, State said.

ICNZ calls for local leaders to prioritise climate change

Ahead of October’s local government elections, the Insurance Council of New Zealand called on mayors, councillors and community board members to prioritise climate resilience, as environmental risks grow.

ICNZ chief executive Tim Grafton said climate events already cost communities millions of dollars each year, impacting health and wellbeing. He told local bodies to bolster their climate defences, with severe weather expected to become more frequent in the decades to come.

"Investing in measures to reduce climate risks will have widespread benefits for communities and will help support the affordability of insurance the length and breadth of the motu," said Grafton. "Incoming councils must understand the risks facing their communities and put in place proportionate and timely measures to manage them."

It follows the publication of the NZSeaRise tool earlier this year, which highlighted the parts of New Zealand at greatest risk from climate change. For every home at direct risk as a consequence of rising sea levels, a further ten are at risk from floods following extreme rainfall, the ICNZ noted.

"Our communities face multiple climate-related risks,” Grafton said. All incoming councils must act to address these if they are to maintain the viability of their communities over the medium to long terms. I hope that both electors and those they elect approach climate change as if the future of their communities depends upon it being taken seriously; because it does."

Pre-existing damage?

There is a difference between a sudden event and preexisting damage. Insurers will cover a sudden event that meets the policy’s terms and conditions, but they are not obliged to pay for damage that happened before the policy started.

In January 2020, Mr S made a claim for water damage to his house, which occurred when his washing machine overflowed after he was arrested. He said the police wouldn’t let him turn it off and, by the time he was released 2 days later, the house had flooded.

When the insurer’s loss adjuster visited the house 9 days after the flood, there was water damage to carpet, skirtings and wall linings throughout the house. It was noted that repairs would be difficult due to the condition of the house, its pre-existing damage and lack of maintenance.

The insurer accepted the claim in December 2020 and offered Mr S $7,504.77. Mr S rejected the offer

in March 2021 and provided a quote from a builder for $40,190.95 to repair the house.

Mr S’s builder told the insurer that the quote was based on the damage he could see. He said he could not provide a breakdown, because he could not say what damage was from the washing machine flood and what damage was not, because he had viewed the damage 14 months after the flood.

The insurer declined to pay Mr S $40,190.95. It said there was considerable pre-existing damage to the house and Mr S had told it there was unrepaired earthquake damage.

Mr S complained the insurer did not properly assess the damage, which “far exceeded the value [the insurer] allowed for”.

The IFSO Scheme found the settlement offer was fair and reasonable and the insurer was not required to make any further payments to Mr S.

The important difference between payment waivers and insurance

In March 2020, Tawera* borrowed $16,000 to buy a new family car. Alongside the loan, Tawera purchased a health waiver that was intended to help him if he was unable to make his loan repayments due to sickness, hospitalisation, or terminal illness. If Tawera made a successful claim, up to $125 per week would be waived from his loan repayments.

In late 2021 and early 2022, Tawera was unable to work on four occasions due to sickness. In March 2022, he submitted health waiver claims to cover these periods. The lender accepted the claims. They confirmed they would waive three and a half weeks of loan repayments, totalling $437.50.

Tawera then contacted the lender and asked them to pay him the $437.50. The lender refused, so Tawera complained to FSCL.

Dispute

Tawera thought the lender should pay the $437.50 directly to him. He said he was struggling financially after being off work, and really needed the money.

The lender explained that the health waiver did not operate like a normal insurance policy that would pay out money. Instead, the benefit of making

INSIGHTS FOR CONSUMERS

It is important for consumers to understand the difference between payment waivers and insurance policies. A successful claim on a waiver will not generally result in any money being paid to a consumer, rather the waiver covers the loan payments by paying them directly to the lender.

a successful claim was that the lender would waive the payments that Tawera was otherwise required to make.

Although this was the normal position, Tawera had already made three of the four payments that were now being waived. This was because three of the periods of sickness Tawera was claiming for were in the past. This meant Tawera’s loan account was in credit by $255.50 after the waiver had been applied. The lender agreed to transfer this to him, but Tawera remained unhappy they would not release the full amount of his claim.

Review

FSCL reviewed the health waiver terms and conditions. These confirmed that the benefit of making a successful claim was that loan payments would be waived. This meant FSCL could not say the lender should pay the full claim amount directly to Tawera. Overall, FSCL was satisfied the lender had correctly followed the waiver terms and had acted reasonably in transferring Tawera the credit balance.

Resolution

FSCL recommended Tawera discontinue his complaint. He did not respond, so FSCL closed its file.

GIB theft leads to insurer dispute

We have a client who had $60,000 of GIB stolen from a commercial construction site. The claim for the GIB was settled after a few months while the loss was adjusted. However, the client has asked for a claim to be made for the costs of the site security guards and a portable security camera system immediately hired after the loss up until claim settlement to help prevent further loss. These costs total around $15,000.

The policy covers "Protection Costs" up to $10,000 with a $1,000 excess:

8. Protection costs

We will pay for Protection Costs being costs, reasonably incurred by the Insured for the purpose of,

CROSSLEY GATES

The costs must be reasonably incurred (an objective test) to fight or control the cause of the loss. The cause of the loss was burglary.

Whether costs are reasonably incurred is largely a factual test based on all the background circumstances. It seems from what the insurer says that the thieves gained access by breaking a fence. The fence was temporarily repaired the next day.

Whether this was enough to fight and control the cause, or more was required, will depend on many factors:

and for damage directly resulting from, fighting or controlling any cause of Loss that involves or threatens to involve Property Insured.

There are no other exclusions or limits to this coverage. The insurer is noting that it is not the intent of the policy to cover these types of costs, and also it was not reasonable to incur these costs, as the client had fencing temporarily repaired within a day, which negated any increase in risk of the site being hit again.

Given the wording is very open, should these costs be covered as being reasonable given the increased criminal activity targeting the construction sector?

- The thieves wanted the GIB. The shortage of GIB is public knowledge. Was there any more GIB left on site for the thieves to steal subsequently?

- Did the repair of the fence reinstate its full level of security?

- Was a higher level of security reasonably required given this level was obviously insufficient to stop the GIB being stolen?

It is not possible to give a definitive answer as a great deal more information would be required, but hopefully, this gives you a feel for the issues.

question

Do you have a

for our experts?

What is considered a ‘fee’? QUESTION

We have had a PI claim declined on the basis that the compensation awarded against our client is considered by the insurer to be fees, which are excluded under a "refund of fees" exclusion.

The compensation (awarded in a Disputes Tribunal hearing) was for the return of a deposit paid to the insured by their client for the design & construction of a cabin in their backyard.

The deposit covered a range of things, including staff wages, materials purchased for the job, a sales commission and a flat fee to the architect (as a subcontractor to the insured).

CROSSLEY GATES

The primary dictionary definition of the word 'fee' is":

a charge or payment for professional services: a doctor's fee.

Assuming the word is not specially defined in the policy, I suggest that on the face of it a deposit for a design and construct contract with a building contractor (presumably) does not come fully within that definition.

Car crash claim

My client is insistent that their full cover should cover the damage to their other vehicle, (which has TPFT) when they reversed the fully covered vehicle into the one with TPFT (which was stationery).

The insurer has confirmed the vehicle with TPFT only has cover for section 2 claims and does not meet the criteria for any Section 1 claims.

Can the client claim under the fully covered vehicle?

CROSSLEY GATES

The insurer is correct. Assuming the full cover policy does not cover the stationary vehicle, how can it ever directly respond to a claim for damage to that vehicle (as opposed to a claim for being liable for damage to that vehicle)?

It sounds like the driver of the fully covered policy was negligent. Is your client the owner of the stationary vehicle as well? If not the owner of that vehicle can hold your client liable for the damage to it, and your client can lodge a claim under Section 2 of his policy for that liability.

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

Is it correct to say this is considered a "fee"?

The insurer has said: "On the basis that the sum refunded reflects the sums charged/on charged to the claimant, we consider these to be fees."

Thanks!

QUESTION

Fork lift confusion

We are having a number of conversations relating to public liability and how it would respond to fork lifts and reach trucks when they do not have loads on the forks.

One point of view is that if there is nothing on the forks then the item is not being used as a "tool". Therefore the vehicle’s exclusion of the public liability policy would apply. This means that unless the item is insured on a motor policy there would be no liability cover.

The other argument is that, at some stage, the forklift has to be empty during the process, so how can it be classed as not being used as "tool"? Therefore the liability policy responds and the item is insured on the MD cover.

Are there any legal or claims precedents anyone is aware of that could help with how best to cover the liability aspect?

The cover for mobile mechanical plant usually expressly provides cover for both loading and unloading and for the bringing to or removal of a load, and for the use of the vehicle as mobile mechanical plant generally.

Therefore, so long as it isn't being used for

some purpose unrelated to these (such as merely transporting a person from A to B which has nothing to do with what it is designed for) the cover under the PL Policy should apply, I suggest.

I am not aware of any cases about the application of this extension, but I agree it can be troublesome.

The difference between occurrence/ damage and damages/loss

We have a situation where an insured (the builder) was building a house in 2019-2020 and a subcontractor (now out of business) accidentally oiled a bamboo panelled ceiling incorrectly. This has led to damage to the bamboo panels. They attempted to remediate the issue at the time and it appeared to be successful. However, over time, some areas have become more noticeable to the homeowners and they want it replaced now.

A contract works claim was not lodged and would likely fail for "faulty workmanship".

CROSSLEY GATES CROSSLEY GATES

Legal liability at law can only arise in two ways:

1. When a competent court enters judgment against a party, and

2. When a party formally agrees it is legally liable, usually by way of a settlement agreement.

QUESTION QUESTION

The GL insurer is saying that at the time of the damage, it was still a first-party loss, which is not covered by a GL policy. However, the third party has most definitely suffered a loss now (since the contract was completed and paid for after the remediation efforts were performed).

Is it a correct interpretation to say that because at the time the damage occurred there was no third party loss, even though there is now, the claim should be declined? A claim was not notified in 2020 as the remediation was deemed successful at that time.

Before this, legal liability is only alleged.

You are correct that a GL policy is triggered by accidental damage occurring during the period of insurance. Legal liability at law does not usually arise at that point, but later (if at all) by one of the two ways referred to above.

IAG highlights climate dangers

Property damage claims from bad weather are up a third on last year, according to insurer IAG.

The insurance group released its latest Wild Weather Tracker analysing the six months from March to August this year compared to the same time period last year.

According to the underwriter, there were more than 13,000 claims from the 11 significant storms over the past six months, which was one fewer large event than the previous year.

New Zealand’s biggest city, Auckland, accounted for 37% of the damage, Canterbury 10%, and Wellington 8%.

IAG also provided an update on damage experienced during August’s storms in the Nelson/Tasman/Marlborough region.

It said it was set to pay out more than $20 million to more than 1700 customers.

IAG said the lack of action on climate change left the nation at risk.

Dr Bruce Buckley, IAG’s chief meteorologist, said NZ was susceptible to the cumulative effects of rising sea levels, warmer seas, and tropical weather systems affected by rising temperatures.

"Warmer air holds more water,” Buckley said.

"Right now, there are tropical moisture sources that can hold 20% more water in the air than what we typically saw a generation ago. So, the August floods in Nelson Tasman are a classic example of warmer tropical seas feeding greater quantities of moisture into extremely damaging, heavy rainbands."

While in the past, tropical cyclones would weaken before they reached NZ, warmer sea temperatures meant more severe systems would get closer to Aotearoa, Buckley added.

Poll reveals climate attitudes

IAG also revealed the results of its latest nationwide survey on climate change. The group found that 71% kiwis agreed that climate change was a contributor to wild weather.

The survey also found:

• 82% of people believe wild weather is increasing in frequency and severity

• 69% of people are concerned about the potential impacts of wild weather

• 40% have taken precautions to prepare for wild weather in the past six months

• 42% are either not at all prepared or only a little prepared for a storm.

Professional College

Professional Development

Demand for supported courses lifts as March 16 deadline approaches

Tim Larkin, Director of Professional IQ College

Professional IQ College has seen a steady lift in the demand for its accelerated courses for Core Knowledge, General Insurance, Life Disability & Health and Residential Property Lending since they were launched a few months ago.

“Those advisers whose work schedules have not yet let them complete the qualifications, are now turning to providers like Professional IQ College to provide them with additional support so that they can complete the required NZQA qualifications while maintaining their busy practices,” says Professional IQ’s director, Tim Larkin.

Learners enrolling in the accelerated courses are benefiting from a better understanding of the structure and nature of the assessments and the responses required. For experienced advisers, this means that they are able to quickly apply their experience and knowledge to completing the course. The main benefit is the time efficiencies of this method of learning and allowing advisers to continue to support their clients.

“As clients start to wind down for Christmas and take summer holidays, the traditionally slower period for advisers provides a perfect opportunity to use this time to complete any outstanding training with Professional IQ’s accelerated courses,” says Tim.

It is for this reason that Professional IQ College has scheduled intakes for Core Knowledge starting on 16 November and has courses in General Insurance, Life Disability & Health, and Residential Property all starting in January 2023 for completion ahead of the deadline.

The accelerated courses are supported by a two hour webinar session each week. Where organisations have sufficient demand, classes can be tailored for that organisation, or the weekly webinars swapped out for face-to-face sessions.

If you have any queries, just email Devon at devon@professionaliq.co.nz or call her on 021332078

Roger Abel (Vice President)

Rothbury Group Limited

PO Box 1596

Shortland Street Auckland 1140 Mob: 021 952 230 roger.abel@rothbury.co.nz

Duane Duggan

(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

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

IBANZ

Mel Gorham

Chief Executive IBANZ

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

Tony Bridgman (President)

Executive Director

Marsh Ltd

PO Box 2221

Auckland 1140 Tel: 09 928 3015 Mob: 021 873 399 tony.j.bridgman@marsh.com

Kate Henderson

Pacific Practice Leader

Willis New Zealand Ltd

PO Box 369

Shortland Street Auckland Tel: 09 358 3319 Mobile: 021 909 379 kate.henderson@wtwco.com

James Shearing

Director

Affiliated Insurance Brokers Ltd

PO Box 22221 Khandallah, Wellington 6441 Tel: 04 479 8451 Mob: 027 2460046 james@affiliated.nz

Neil Cousins Broker Services Manager

Steadfast NZ Ltd

PO Box 180

Shortland Street Auckland 1140 Tel: 09 309 7942 Mob: 021 377 942 neilc@steadfastnz.nz

Samuel Kerr Insurance Broker

SHARE

PO Box 305415

Triton Plaza

Auckland 0757

Tel: 09 476 1670 Mob: 021 980 435 sam.kerr@sharenz.com

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

Jo Mason (Vice President) CEO

NZ Brokers Management Ltd

PO Box 334012

Sunnynook, North Shore City Auckland 0743 Tel: 09 869 2785 jom@nzbrokers.co.nz

Simon Moss

General Manager

DDI: 09 306 1733 Mob: 027 270 5774 simon@ibanz.co.nz

Karen Scard

Administration & Accounts Manager

DDI: 09 306 1738 karen@ibanz.co.nz

Physical address: Unit 4D, 2B William Pickering Drive, Rosedale, Auckland 0632 Toll free: 0800 306 173 www.ibanz.co.nz

Mailing address: PO Box 302504, North Harbour, Auckland 0751

LegalName Location

Abbott Group Christchurch

Abraham & Associates Ltd Christchurch

Adams Trimmer Insurance 1992 Ltd Whangarei

Advance Insurance Services Ltd Paeroa

Affiliated Insurance Brokers Ltd Wellington

AIB Group Insurance Ltd Lower Hutt

AIM Associates Ltd Auckland

Albany Insurance Services Ltd Albany Village

Amicus Brokers Ltd Christchurch

Aon New Zealand Auckland

Apex General Ltd Auckland

Atlas Insurance Brokers Ltd Christchurch

Austinsure Ltd North Shore City

Avon Insurance Brokers Christchurch

Baileys Insurance Brokers Ltd Auckland

Bay Insurance Brokers Ltd Tauranga

BMS Risk Solutions Limited Christchurch

Bridges Insurance Services Limited Hamilton

BrokerWeb Risk Services Limited Auckland

Builtin Insurance Brokers Limited Tauranga

Cambridge Insurance Brokers Ltd Cambridge

Capital Risk Solutions Limited Wellington

Cartwrights Ltd Ashburton

Certus Insurance Brokers NZ Ltd Auckland

Coast Insurance Whangaparaoa

Commercial & Rural Insurance Brokers Ltd Alexandra

Crème Insurance Auckland

Crombie Lockwood (NZ) Ltd Auckland

Dawson Insurance Brokers (Rotorua) Ltd Rotorua

Emerre & Hathaway Insurances Limited Gisborne

FG Insurance Services Gisborne

Frank Risk Management Hamilton

FundAGroup Insurance Brokers Limited Auckland

Grayson & Associates Ltd Auckland

Gregan & Company Ltd Papakura

GSI Insurance Brokers Waitakere

GYB Insurance Brokers Ltd Lower Hutt

Hazlett Insurance Brokers Ltd Christchurch

Honan Insurance Group (NZ) Ltd Auckland

Hood Insurance Brokers NZ Ltd Auckland

Hurford Parker Insurance Brokers Ltd Hastings

Hutchison Rodway Ltd Auckland

ICIB Limited Auckland

Ingerson Insurances Ltd Wellington

Insurance Advisernet NZ Ltd Auckland

Insurance Brokers Alliance Ltd Invercargill

Insurance Design Limited Warkworth Insurance People (Fire & General) Limited Auckland

Insure 247 Ltd Auckland

JRI Limited New Plymouth

Lockton Companies NZ Limited Partnership Auckland

Malcolm Flowers Insurances Ltd Taupo Marsh Ltd Auckland

McDonald Everest Insurance Brokers Ltd New Plymouth Moneybox GI Limited Wellington Multisure Ltd Auckland

MW Insurance Auckland

Nelson Marlborough Insurance Brokers Ltd (NIB) Nelson

Neville Newcomb Insurance Brokers Ltd Auckland

Northco Insurance Brokers Ltd Masterton

Northcrest Insurance Brokers Ltd Auckland

O'Connor Warren Insurance Brokers Tauranga

OFS Insurance Brokers Ltd Dunedin

Omni Fire & General Ltd Auckland

Paramount Insurance Agencies Ltd Auckland

Partridge Advisory Limited Auckland

Paterson & Co NZ Ltd Auckland

Penberthy Insurance Ltd Auckland

PIC Insurance Brokers Ltd Manukau

Prestige Insurance Broker Services Ltd Auckland

Primesure Brokers Ltd Auckland

Property and Commercial Insurance Brokers Feilding

Provincial Insurance Brokers Limited Masterton

PSC Connect NZ Limited Auckland

RMA General Ltd Warkworth

Rothbury Group Ltd Auckland Runacres Insurance Ltd Christchurch

SHARE Auckland

Sit & Blake Limited Auckland

South Pacific Insurance Brokers Ltd Auckland

Sweeney Townsend Insurance Brokers Limited Rotorua

Thames Valley Insurance Ltd Thames

The Advisers for insurance New Plymouth

Thorner General Insurances Ltd Upper Hutt

Towes Insurance Brokers Ltd Te Aroha

Trevor Sutcliffe Insurance Ltd Hamilton

Vercoe Insurance Brokers Ltd Morrinsville

Vision Insurance (S.I.) Ltd Ashburton

Wallace McLean Ltd Auckland

Wanganui Insurance Brokers Ltd Wanganui

Wealthpoint General Limited Auckland

Willis Towers Watson Auckland