CoverNote June 2023 issue

Taking broking to the next level

Responding to change and standing out from the crowd

New Zealand's professional association representing the interests of insurance brokers, risk managers and consumers.

IBANZ gives strength and support to Members enabling them to better meet their challenges and opportunities.

We achieve this through staying involved with Government activity and legislative reform impacting the insurance industry, and more specifically fire and general brokers and their clients.

We focus on providing high quality presenters who speak on a variety of fire and general and business topics under our Continuing Professional Development (CPD) offering to support Members deepen their knowledge and broaden their skills.

The IBANZ Code of Professional Conduct provides the public with assurance that Members act in a professional and ethical manner. It includes a disciplinary and complaints committee to review concerns that may arise.

Ph: 09 306 1732

www.ibanz.co.nz

Welcome to the winter edition

There will be some who fall into the high-risk category who wish to remain and repair or rebuild due to financial pressures or a strong connection to or history with the property. Alternatively, there may be others who will want to be moved out but fall into the lower or managed risk categories where remediation is considered sufficient.

There also remains the crucial need for central government and councils to ensure that lessons are learned. Most builds rely on investment to fund them which in turn requires insurance to be in place.

As we have been saying for some time, future consents need to be issued for appropriate use and structures when considering risks and improvements the land is subject to as well as previous experience and future expectations.

In the lead up to the new financial advice regime coming fully into force in March this year, IBANZ revamped its professional status levels available to its members and the evaluation criteria which includes qualifications, experience and an ongoing commitment to continuing professional development.

May has seen a continuation of this year’s wet and wild weather for many communities. It was also the month in which Cyclone Recovery Minister Hon Grant Robertson announced the three categories (summarised below) under which impacted properties will be assessed in terms of future weather-related risk:

Low Risk – repair to previous state is all that is required to manage future severe weather event risk. This means that once any flood protection near the property is repaired, the home can be rebuilt at the same site.

Managed Risk – community or property-level interventions will manage future severe weather event risk. This could include the raising of nearby stop banks, improving drainage or raising the property.

High Risk – areas in the high risk category are not safe to live in because of the unacceptable risk of future flooding and loss of life. Homes in these areas should not be rebuilt on their current sites.

Communities will be consulted as part of the review before any final decisions about the categories of properties are made. Those in the low risk category in Hawkes Bay have been told to expect local engagement by the end of May. Engagement with individuals and communities in the managed and high risk categories is set to begin early June.

If previous experience with these types of consultations and issues is any indication, it will be impossible to meet the expectations of everyone affected.

In our lead story, we explore these evolved professional status levels, the role of a broker and expectations that their clients should have of the service and advice a broker provides.

To support the new financial advice regime, we have included the need for those who hold an IBANZ professional status and provide financial advice to clients to undertake at least one hour of conduct and ethics focussed professional development annually.

There are four different statuses available for various roles and responsibilities from those in administration, claims and support to brokers including chartered statuses for those who can demonstrate leadership activities.

We also highlight the importance of building long term, professional client/broker relationships. Trust, tailored advice and acting in the clients’ bests interests are critical factors in navigating the increasingly complex world of insurance, particularly given the ongoing challenges presented by the weather and the economic cycle.

While many will not be looking forward to the colder than usual temperatures forecasters seem to be promising this winter, let us hope the weather provides the predicted respite from the rain.

Keep safe.

Melanie Gorham CEO, IBANZ

Features

16.

22. NZ government delivers extra $25 million to cyclone-affected businesses

29. Opinion

How the courts interpret insurance policies

8. Floods, landslips, cyclones and locusts!

18. Summer of storms causes 402% spike in insurance claims

24. One-third of summer weather claims settled by April

30. Why young people should choose broking

42. Survey reveals 31% of New Zealanders don’t know insurance coverage details

12. Summer weather damage bill more than $9 billion: Treasury

20. Suncorp introduces new leave for gender affirmation

26. Court of Appeal rules on exclusion for losses caused by "pollution or contamination"

32. 2022's most stolen cars as theft claims soar by 43%

CoverNote is the official publication of IBANZ and is distributed FREE on a quarterly basis (March, June, September, December) to members throughout New Zealand and associated companies. Additional copies are available at a cost of $7.50 per copy, or 12 month (4 issues) subscriptions at $30.00, inclusive of postage and packaging. The articles or opinions featured within this magazine are not necessarily the opinions of the publishers or IBANZ, and they do not accept responsibility for the content of articles featured within the publication. No part of this publication may be reproduced without the written permission of the publisher. The publishers do not accept responsibility for loss or damage to unsolicited photographs or manuscripts.

IBANZ enquiries should be made to: Melanie Gorham, Chief Executive, IBANZ. Email: mel@ibanz.co.nz

IBANZ National Office located at: Unit 4D, 2B William Pickering Drive, Rosedale, Auckland 0632 PO Box 302504, North Harbour, Auckland 0751 Telephone 09-306-1732. Website: www.ibanz.co.nz

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Advertising Deadlines:

Bookings 10th of the month prior to publication, material 15th of the month prior to publication.

3. AIG names new regional boss

Christchurch airport chair joins IAG board

AIG names new regional boss

American International Group announced the appointment of Chris Colahan as regional president for AIG Asia Pacific.

Colahan reports to Jon Hancock, Chief Executive Officer of AIG’s International General Insurance business.

Colahan has over 20 years of insurance industry experience, most recently as president of Berkshire Hathaway Specialty Insurance in the UK and Europe.

Prior to that, he was President of BHSI Australasia. He previously served as RSA Asia's Regional CEO and as CEO of RSA Asia's Hong Kong and Singapore operations.

“We are fortunate to have someone with Chris’ industry experience and vast knowledge of the Asia Pacific marketplace join AIG,” said Hancock. “Asia Pacific is an important market for our general insurance business, and with Chris’ leadership, we expect to expand our business and capabilities, deepen relationships with distribution partners and clients, and continue to demonstrate our risk management expertise.”

Colahan replaces Steven Barnett, who is leaving the US insurance group.

“It is a privilege to join AIG, an industry leader with

world-class capabilities,” said Colahan. “I look forward to working with the talented group of colleagues throughout the region and more broadly across the company. AIG is known for delivering excellence in everything it does and I am confident we will successfully execute on the Asia Pacific strategy with precision and a focus on quality outcomes.”

The Future is now

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Taking broking to the next level

IBANZ has revamped its professional status accreditations to raise standards in the industry, writes

As the insurance industry continues to evolve, it’s vital that New Zealand brokers keep up with the latest developments and standards and demonstrate their professionalism.

IBANZ has long recognised the need to support its members with these obligations by offering professional status levels to independently acknowledge qualifications, experience and capability. Once a status has been awarded, members can use the designated post-nominal to differentiate themselves from their peers.

In the lead up to the new financial advice regime coming fully into force in March this year, IBANZ revamped its status levels and requirements to ensure it was keeping pace. All existing status holders were reviewed to ensure they continued to meet the evaluation criteria.

As a fire and general broker, gaining accreditation through IBANZ has always been a sign of commitment to industry excellence. This has been taken to the next level through the PQIB (Professional Qualified Insurance Broker) or CQIB (Chartered Qualified Insurance Broker) levels, which are the new leading standards.

Helen Gilby

For PQIB or CQIB, brokers must hold the NZ Certificate in Financial Services (Level 5) or equivalent and, of the annual minimum of 15 hours of continuing professional development (CPD), one must relate to conduct and ethics standards.

IBANZ has continued to include a Chartered Insurance Broker (CIB) status for members who do not provide advice to retail clients so do not have to hold a Level 5 Certificate.

Those in administration, claims and support roles can apply for the Professional Insurance Administrators (PIA) status.

With rigorous industry standards, the levels are designed to showcase professionalism in the industry and give clients confidence. The new accreditations will make it easier to understand the level of experience and knowledge an IBANZ broker brings to their professional relationship.

Responding to change

Strong broker-client relationships have never been more important. As the industry responds to a period of regulatory changes and market challenges posed by the summer’s natural catastrophes, clients know the insurance market is changing.

Great advice is more valuable than ever, and the new accreditations will showcase its worth.

IBANZ is committed to supporting members in their client relationships, driving professionalism, and highlighting the sector’s vital role in protecting people.

“There can be a tendency for the public to treat insurance as transactional, with cost as the most important factor, rather than treating their insurance and ultimately the broker they use as a long-term business relationship,” says Simon Moss, general manager of IBANZ.

The new certifications aim to give people confidence when dealing with a broker.

“The general public needs to be able to trust their broker and the advice they’re being given,” Moss says. “Our new professional status offerings are designed to make it easier for the general public to understand the level of experience and knowledge a PQIB or CQIB accredited broker has, to give them an additional level of reassurance.”

Brokers holding a PQIB or CQIB must demonstrate continuing professional development each year, recording a minimum of 15 hours of professional development training. IBANZ has offered three targeted topics this year, focused on conduct and ethics, as part of its CPD offering.

Before acknowledging a professional status level for an individual member, IBANZ will assess a combination of criteria, including professional experience, qualifications achieved, CPD planned and completed. The terms and criteria are explained in the IBANZ Membership and Professional Status Guidelines.

Standing out from the crowd

Insurance is a competitive market, and brokers need to stand out from the crowd. Client confidence in broker professionalism is essential.

The new status levels provide an instant point of difference, communicating to clients the level of

experience a member brings to their business relationship.

IBANZ is committed to lifting the profile of brokers and how their expertise can make a difference to clients when considering and purchasing cover and managing claims.

Moss adds: “We want to promote the importance of building a longer-term business relationship with their broker. Part of promoting this shift in perspective among clients and consumers is helping people understand exactly how much experience and knowledge our highest qualified brokers actually have, and the value that brings when managing a client’s insurance, at all stages of their insurance cycle”.

The modern insurance market has a comprehensive range of insurance products to suit clients and their specific needs. By being a Professional Qualified Insurance Broker (PQIB), Chartered Qualified Insurance Broker (CQIB), or Chartered Insurance Broker (CIB), advisers can demonstrate their expertise and experience to guide clients through any challenge.

IBANZ works with industry-recognised experts to offer its members a programme of continuing professional development designed to support the role of insurance brokers and their ongoing client relationships.

The updated professional status levels are a natural extension of the current IBANZ range of professional development that can help brokers stay up to date with industry trends and best practices.

Investing in a professional status is another way for brokers to communicate they are staying informed about industry changes, ethics and conduct and can deliver the best possible outcomes for clients.

IBANZ offers the professional status levels to plainly communicate the expertise and experience of its members. They will give clients more information about a broker’s background and skills, and demonstrate commitment to high standards.

IBANZ sees the accreditations as a vital step to professionalising the sector and enabling the public to understand more about the industry’s work.

“We want the public to see insurance brokers as real professionals, with their best interests at the core of their business. Robust accreditation processes are a way for us to do that, as an industry,” Moss adds.

The new accreditations sit alongside the current benefits of being an IBANZ member, including a host of resources and support services, such as access to best practice guides and regular updates on industry or proposed legislative changes.

The statuses, and IBANZ’s ongoing support, are designed to prepare the industry for the future and navigate an increasingly complex world.

IBANZ strongly encourages members to work towards and apply for their appropriate status levels, starting with PIA as a minimum.

By meeting the rigorous standards set by IBANZ, members have the opportunity to differentiate themselves in the market and provide assurance to clients. The new status levels are the next step in taking the industry to the next level as the broking market looks forward to an exciting decade ahead.

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

*TNS Intermediated Survey Dec 21

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.

Floods, landslips, cyclones and locusts!

Whenasked about the magnitude 6.3 earthquake that rocked the central North Island on 15 February this year, the Prime Minister, Chris Hipkins, said that he was looking out the window for a plague of locusts.

Hipkins’ reaction was understandable. The earthquake followed unprecedented rainfall that caused substantial damage in the Auckland region, followed by Cyclone Gabrielle shortly afterwards, which itself caused extensive flooding and other damage in a widespread area including the Hawke’s Bay, Northland, Gisborne, Bay of Plenty and Waikato regions. Geonet, in reporting the earthquake, offered a more restrained observation, saying that it was “a difficult time for the North Island”.

It was also a difficult time for insurers, who calculate reserves and arrange reinsurance based on assumptions that do not factor in multiple major loss events in quick succession.

The summer’s extreme weather will have significant ramifications for the insurance market, write Andrew Horne and Nick Frith, partners, MinterEllisonRuddWatts

Auckland Anniversary floods

The Auckland Anniversary weekend floods were unprecedented. A reported 24.5 centimetres of rain –nearly a quarter of a metre – fell in the 24 hours between the Friday and Saturday. This was well above Auckland’s previous record for rainfall in one day, which was 16.1 centimetres of rain recorded on a day in 1985. 24.5 centimetres exceeded the normal rainfall that would be expected in a typical three-month summer.

The resulting flooding caused substantial damage. The Minister of Finance, Grant Robertson, told reporters that, in terms of insurance, it would be the biggest nonearthquake event that New Zealand had ever experienced. The Guardian newspaper in the UK reported that some insurers were describing it as the biggest climate event in the city’s history. Tim Grafton, head of the Insurance Council, was reported as saying that the insurance industry expected the cost to insurers to exceed NZD1 billion.

As well as losses covered by private insurance, Toka Tū Ake EQC (EQC) will receive claims for land damage where landslips were caused by the flooding. EQC provides limited cover for damage to residential land. This extends to the land under an insured home and outbuildings, within eight metres of the home and outbuildings, and under or supporting the main accessway (but not the driveway surfacing), up to 60 metres from the home.

Some owners of clifftop houses suffered high-profile losses of land which collapsed many metres below, in many cases robbing the owners of lawns and other features, but in some cases undermining the foundations of the houses and making them unsafe. Claims for damage to land through landslip may be made to EQC, provided the land is in the covered areas. In many cases, the land lost will not be within the areas that are covered under the Act, so the owner will be uninsured. Even where there is cover, it will be limited to the market value of the land that has been lost (and indemnity value of land structures, such as bridges and retaining walls), and will not likely take account of the much-reduced desirability of the property as a whole, once a part has been lost to landslip.

In addition to private insured losses, Waka Kotahi NZ Transport Agency estimated that the damage to roads from the Anniversary weekend flooding may cost NZD1 billion to repair.

Cyclone Gabrielle

These costs do not include the cost of claims from Cyclone Gabrielle, which Grafton said included around 30,000 claims so far. Grant Robertson has suggested that the total cost of the cyclone damage could be around NZD13 billion, although much of that would not be insured.

The total losses to insurers from both events may be comparable to those that resulted from the Kaikoura earthquake in 2016, which gave rise to more than NZD1.8 billion in insurance claims, including around NZD1 billion for building claims in Wellington. They will be less, however, than the losses from claims arising from the Canterbury earthquakes, which cost private insurers around NZD21 billion and EQC around NZD10 billion.

Legal claims that may result from the flooding and cyclone damage

Those affected by the Auckland floods and Cyclone Gabrielle, including insurers, are beginning to consider the civil liability claims that could arise from these events. Our firm recently spoke to the NZ Herald about the types of claims that could potentially be made.

News articles have raised the possibility of claims arising from the damage caused by forestry slash (i.e. detritus such as branches) when it impacted bridges and other structures in the flooding, which has resulted in the Government’s announcement of a Ministerial inquiry. We discuss slash claims below, but they are by no means the only liability claims that could have an impact on the insurance industry. Other possibilities include:

• Claims against councils, possibly asserting that they negligently failed to provide or maintain appropriate drainage, or that they negligently approved earthworks and other works that exacerbated natural flooding problems.

• Claims against professional service providers, such as architects, engineers and geotechnical engineers.

• Claims against neighbouring landowners for failing to resolve hazards or making changes that exacerbated flooding.

• Claims against EQC for land damage.

• Claims against private insurers for flood and

related damage

Forestry slash

The prospect of forestry slash claims is attracting increasing media attention.

In principle, claims in negligence or nuisance may be available to property owners who have suffered slash damage. Claimants would need to establish, among other things, that:

• The relevant damage was caused by slash from an identifiable source, or at least a finite number of identifiable sources (i.e. forestry companies).

• The owner of the slash had a duty of care to downstream property owners to prevent the escape of slash in a severe weather event and that the resulting damage was foreseeable (for negligence) or that the build up of slash and its escape was caused by a non-natural use of the land (for nuisance).

There may be difficulties in identifying the source of damage-causing slash. However, that is not necessarily a barrier to claims. The High Court Rules allow plaintiffs to sue several defendants on the basis that they do not know which caused the relevant damage. One of the issues in the proceeding will be the identification of the correct defendant.

Potential plaintiffs may band together to create a representative (class) action if a sufficient number suffered damage likely caused by the same landowner’s slash, or an identifiable group of landowners’ slash. A variation on that theme might be a staged class action where multiple potential defendants are sued, first for

a declaration as to the cause of damage and other preliminary issues, and second for individual claimants to prove loss. A similar model was to be adopted in the Ross v Southern Response litigation. Yet further variation might well be insurers collating subrogated claims covered under their policies and prosecuting those claims in group form.

These claims will likely engage landowners’ public liability insurance (if held) and may also result in shareholder claims if slash was not managed as required.

Aside from civil claims, there may also be prosecutions for breach of consent requirements to clear slash. Those claims may engage landowners’ statutory liability policies.

Claims against councils

Councils may be sued for a failure to act when forestry companies breach their obligations to manage slash. Councils may also be subject to claims arising from consenting decisions. Properties built in flood-prone areas may be subject to scrutiny in terms of the steps required to mitigate flood risk.

Litigation may also flow from any council decisions around ‘red zones’ prohibiting rebuilding in certain floodprone areas.

Claims against professional service providers and others

Catastrophic events tend to increase the risk of claims against professional service providers. This is primarily because the magnitude and extent of the loss unearths potential defects that would not have been identified if the event had not occurred.

Insureds who find that they are not covered to the extent they expected (or now expect) may look to their insurance brokers for answers.

Claims could also arise against builders, architects, engineers and geotechnical engineers who designed or approved buildings that were susceptible to flooding or cliff collapses.

Claims may also be made against neighbouring landowners for failing to resolve hazards or making changes that exacerbated flooding.

Where buildings have sold recently, claims could be made against vendors or estate agents if relevant misrepresentations were made.

Solicitors may be found liable for failing to identify relevant details such as flood risk warnings in LIMs. Property

owners could take action, as could lenders who relied upon solicitors

Effects upon insurers

Unsurprisingly, these events are having an effect upon the New Zealand insurance market. That impact is likely to deepen if the claims discussed eventuate.

Insurance premiums are tipped to rise. One reason for this is that insurers’ apprehension of a risk often increases once that risk has eventuated. Mel Gorham, Chief Executive of the Insurance Brokers Association, is reported as saying that insurance rates could be in for a re-think as the extent of the damage from the flooding is revealed, and that even before this event, insurers were looking with greater scrutiny at flood risk.

Another reason is that multiple, large claims in quick succession drain insurers’ reserves, and insurers may have to replenish them. This may be achieved by seeking funding from shareholders or external funders or, in the case of large group insurers, by transferring funds from other parts of the business. In the longer term, premiums will likely rise to fund the replenishment of reserves, but that does not solve the immediate need.

Furthermore, some insurers may take the view that it is prudent to obtain additional or amended reinsurance with a lower deductible. This will likely increase the demand for reinsurance with relatively low deductibles, at least for a time. It will also increase insurer’s costs, as the lower deductibles will come with higher reinsurance premiums which are likely to flow through to customers.

It is also likely that there will be wider flow-on effects which will affect insurers along with others. The cost of labour and materials in the construction industry is likely to rise as a large stream of work becomes available for the repairs of flood and cyclone damage. Subject to policy limits, this will increase costs for insurers as they fund repair and replacement works. It may also increase business interruption insurance payments, where insureds are unable to arrange repairs to business premises in a timely manner because of the shortage of skills and materials.

The significance to insurers of the Auckland Anniversary weekend floods and the further damage caused by Cyclone Gabrielle is therefore potentially broader than the immediate cost in terms of reductions in reserves and increased premiums. Longer term reinsurance costs will likely rise, as will costs, and the risk of a wave of liability claims that engage defence costs cover.

Summer weather damage bill more than $9 billion: Treasury

The Auckland floods and Cyclone Gabrielle caused between $9 billion and $14.5 billion of asset damage, according to Treasury estimates.

According to official forecasts, residential property damage will range between $2 billion and $3.5 billion, business property damage will range between $2 billion and $3 billion, and public infrastructure damage will range between $5 billion and $7.5 billion.

The estimates include the costs of both insured and uninsured damage, and Prime Minister Chris Hipkins ruled out a cyclone levy to help pay for uninsured damage.

According to the Treasury, damage to transportation

infrastructure such as roads and bridges, as well as water infrastructure, would account for a large portion of the government's repair bill.

The Treasury noted that, in addition to the cost of repairing physical infrastructure, the cyclone and flood would result in lost economic output.

It stated that primary industries would bear the brunt of the costs, some of which would still be ongoing.

It estimated that crop and other agricultural production losses would cost $400 million to $600 million in the first half of this year, with "persistent losses" of about $100 million per year as a result of longer-term damage to orchards.

For businesses looking at switching to electric vehicles, there’s a lot to consider. Range? Home Charging? Can they install chargers in the company car park? What will it mean for business cover? Will staff need training?

There’s a lot to think about, but our EV Fleet Guide is here to help provide peace of mind for your clients as they make the change.

Shanna Crosson: NZI Claims Champion

Meet Shanna Crosson, one of NZI’s claims champions during the wild weather

Christchurch

mum-of-one, Shanna, has been in the insurance industry for two decades. After a short career as a fitness trainer, she joined State Insurance in 2000 and has been with NZI since 2010. This November marks an impressive 23 years within the insurance industry – a milestone that doesn’t surprise her.

“I’ve always worked in claims and I love it! Working with customers’ claims can be challenging, but also extremely rewarding, especially when customers walk away happy,” she says.

“NZI has proved a fast-paced and interesting place to work. There’s

never a dull moment in the claims department, that’s for sure.”

Here to help in times of need

It was just after Cyclone Gabrielle hit Aotearoa in mid-February that Shanna put her hand up to help local brokers in Gisborne with urgent requests from their customers. She also took the opportunity to assist with insurance claims at the Community Hub in Wairoa. It was here that Shanna met one customer whose experience of the cyclone really struck a chord.

“She was a lady in her seventies who had part of her home badly flooded. She was completely

HUMANS of

overwhelmed – her husband couldn’t deal with the insurance side of things – so I went to her home with her, and basically got stuck in, boots and all.

“The Wairoa River had breached along one side, flowing as high as some deer fencing in areas. It was shocking to see the damage the floods had left behind. My elderly customer had never seen anything like this in her lifetime – not to mention go through an insurance claim like this.”

Shanna explains how the lady’s bedroom was badly affected by flood waters. It had already been stripped and cleared out by the time she arrived, but there was still a lot of silt under the floorboards.

“She needed help with her contents’ loss, so I made a draft list of contents that needed replacing, and gave her some help on how to make a claim. She had some bags of personal items that were completely ruined, so I put them outside for the Council to collect. It was just a simple act, but she was so appreciative as her husband was not at home that day.”

Like many weather-related claims this year, Shanna was able to give this customer an initial lump sum to cover costs already incurred, and replace contents as needed. Shanna said the customer appreciated this payment and was relieved for the assistance during such a stressful time.

“I also kept her Australian-based daughter updated with progress. That helped take some of the stress away from her, and no doubt her daughter too,” Shanna explains.

A community coming together

Throughout Hawke’s Bay, like other parts of Aotearoa, communities came together to help those in need. With mud and silt ceiling-high in some homes and businesses, power disconnected for weeks, and no running water, Shanna says she was more than happy to play a part in bringing a sense of normality to Gisborne’s grief-stricken community.

“Customers visiting us at the Community Hub were so grateful to

discuss their claims face to face. I think it made their experience more personal. You could see people calm down as soon as they got to speak to us. It’s that human touch, which is so important during a disaster of this scale.”

The future and being prepared

Shanna says after a natural disaster like an earthquake, or a weather event such as we’ve seen this year, it puts things into perspective.

“It makes us realise that,

my muscle cars. I loved going to the Rangiora show in January where I got to see many different classics from around New Zealand. I especially enjoyed seeing the Charger (an American sports car).

“My favourite muscle cars are the classic Fords and Dodges, and one day I would like an old 60’s pickup truck and Charger in my collection.”

Shanna says it’s a passion that has been passed down from her grandfather. In fact,

unfortunately, we will continue to have these weather events, and how important it is to be as prepared as possible.

“I’ve been in this insurance game a long time, but the devastation Gabrielle left was a real eye-opener and a shock. I didn’t expect to see the carnage that was left behind in the Hawke’s Bay region.”

Taking time to enjoy the good things in life

Fast-forward to June, 2023 already feels like a whirlwind for Shanna. She says she’s still working as hard as ever on customers’ claims, but making time to enjoy some of her favourite hobbies such as tramping and playing the ukulele with her son.

Another hobby of Shanna’s is American muscle cars: “I’m really into

this car enthusiast has his English cream-coloured Wolseley (pictured) in the garage: “It hasn’t been driven since the 1990s, so my goal is to get it up and running again, which is a work in progress,” she says with a laugh.

“It’s so special to me because my grandfather picked me and my mum up in it from Greymouth hospital after I was born.”

Shanna says she has a positive outlook for the rest of this year: “It’s been very busy at work, but I always try and put myself in my customers’ shoes and do the best I can. And, to do a good job for my customers, I know I need to look after my own wellbeing, so spending quality time with my son and enjoying our favourite hobbies together is equally important.”

Shanna's grandfather's English cream-coloured Wolsley.

Christchurch airport chair joins IAG board

IAGNew Zealand has appointed Catherine Drayton as a non-executive board member.

Drayton is chair of Christchurch International Airport, Guardians of NZ Superannuation, Mint Innovation, and Connexa, and a board member for Genesis Energy.

She also holds various director and trustee roles with Southern Cross.

IAG NZ chair Simon Allen said: “We are extremely pleased to have someone of Catherine’s calibre join us. The depth of experience she brings from across a wide range of sectors, as well as her practical executive experience, will be a valuable addition to the board.”

Drayton, who has a background in assurance and advisory work, has also held governance roles for organisations including the Canterbury Earthquake Recovery Authority.

She joined the IAG board on May 19.

As Drayton joined the board, Wendy Lai resigned as an independent non-executive director.

Allen added: “On behalf of the board, I would like to thank Wendy for her invaluable contribution. We have benefited from her deep expertise across strategy and operations, and we wish her well.”

Summer of storms causes 402% spike in insurance claims

New Zealand’s stormy summer resulted in five times more insurance claims than last year, according to AMI, State and NZI Insurance’s latest Wild Weather Tracker.

The IAG brands received 41,596 weather-related claims between 1 September 2022 and 28 February 2023, compared to 8,293 claims during the same period last year, according to The Tracker, which collects data on weather-related claims every six months.

Of those claims, 23,497 were for the North Island floods and 14,396 were for Cyclone Gabrielle.

Claims from the two storms continue to climb. As of 2 May, AMI, State and NZI customers have lodged 25,000 claims for the North Island floods and 21,000 for Cyclone Gabrielle.

Amanda Whiting, CEO of AMI, State and NZI, said the weather events had resulted in a surge of claims nationwide.

“Those two events alone have generated more

weather-related claims than what we received for the whole country, for the previous two and a half years. The impact these storms have had on our country is profound,” Whiting said.

A nationwide survey conducted alongside the Tracker found that New Zealanders’ concerns about weather events are at record highs. 83% of respondents are now concerned about storms, compared to 45% before the recent summer weather.

The upper North Island saw the greatest increase in concern, rising from 44% pre-storm to 86% post-storm, closely followed by the lower North Island, which rose from 46% to 86%.

Despite weather warnings, only 64% of people in the upper North Island and 35% of those in the lower North Island were prepared for either storm.

Those who didn't prepare said it was either because they didn't think they'd be affected or because the events weren't in their area.

Whiting added: “What we saw this summer was a stark reminder that storms are traumatising events that put people’s lives at risk.

“However, the survey gave a sense that people felt they wouldn’t personally be impacted, which - as we can see from the claims numbers - is simply not true.

“These events are not only becoming more frequent, but they are also impacting more people, some repeatedly, and the level of property damage is significant. Clearly, our climate is changing, and our future weather patterns will be different to what we have seen in the past.”

Calls for change

In August of last year, AMI, State, and NZI Insurance presented a three-step plan to the government, urging immediate action to keep people safe from the effects of climate change.

“That plan is more relevant than ever,” said Whiting.

“It’s important to identify the most flood-prone locations across New Zealand, agree to stop building in these

places, and to invest in flood protection infrastructure.

“The events of the summer dramatically emphasise what we all knew from the recent flooding in Nelson, Westport and Tairāwhiti - that it is vital we make more progress in this work to keep people and communities safe.

“Inaction won’t just result in higher insurance costs, but in the further loss of lives and livelihoods and in the fear and trauma of loss in communities across the country.

“We want to keep insurance available and affordable for all. But ultimately, we need to reduce the risk and impact of flooding. We are actively working with government and other key stakeholders, and we are ready to play our part.

“In the meantime, we will continue to support our customers by working through the huge volume of claims from this summer’s events. We are moving at pace, but some claims are complex to resolve, especially where there has been extensive land damage, as these are often reliant on the involvement of a range of technical experts and councils,” Whiting added.

Suncorp introduces new leave for gender affirmation

Suncorp New Zealand will offer new leave entitlements for employees undergoing gender affirmation.

The company is providing six weeks of paid gender affirmation leave and up to 12 months of unpaid leave, giving employees time to affirm their gender, Suncorp said in a statement.

The gender affirming process can include telling friends and colleagues about the change, legally changing names and/or gender markers on identification documents, and/or undergoing surgery and hormone therapy.

Catherine Dixon, Suncorp New Zealand executive general manager for people and culture, said the insurer wanted to support employees and create a more supportive environment.

“Providing this leave entitlement is the best way that we can offer support with what is often a complex process for people which can involve a variety of different steps over a period of time.

"We want our people who are working towards affirming their gender to be able to take time to go to appointments, speak with their family if they need to, and to have the space they need to get to where they want to be in their gender affirmation journey.

“In addition to this, we know that transgender and non-binary people face a raft of different societal challenges in comparison to cis-gendered populations, making it more important that we ensure that these employees don’t feel like they have to leave their jobs in order to have the time to undertake these changes.”

Scott Jensen, the New Zealand lead for Suncorp’s LGBTIQ+ focused employee resource group, Amplify, said the new leave entitlement was a positive step.

“I’m really hopeful that this new leave entitlement will make people more comfortable sharing their true selves with their colleagues.

“The more work the business does to support LGBTIQ+ employees in this way, the more we are able to continue to attract a diverse range of talent, reflective of all the communities we see outside of the office.”

NZ government delivers extra $25 million to cyclone-affected businesses

The New Zealand government has approved an additional $25 million in relief funds for businesses impacted by Cyclone Gabrielle.

In April, the New Zealand government approved an additional $50 million in short-term support for NZ businesses awaiting insurance payouts.

Finance minister and cyclone recovery head Grant Robertson said the government would prioritise cyclone-affected businesses with the help of local agencies.

“Demand for grants has been strong, with applications to the local providers managing the funding exceeding the $50 million allocated. Based on the most recent assessment an additional $22 million is required to meet the additional demand, with around 5,800 applications received,” Robertson said.

With the additional funding, more businesses

will be supported for up to $40,000 each.

According to Robertson, this funding will be distributed among the regions in accordance with the most recent data available, with ministers ensuring that it is concentrated in those where there is the greatest need.

“We are committed to helping people and businesses recover from the cyclone. The way we do that … as we shift from the response to recovery phase will change. We will continue to closely monitor the needs of local communities and work with local agencies, iwi and councils as we move from response to the recovery and rebuild from these extreme weather events,” Robertson said.

The Cyclone Taskforce is working with insurers to determine areas at high risk of flooding, and the government is reviewing the possibility of managed retreat in Cyclone-hit regions.

One-third of summer weather claims settled by April

claims for the Auckland Anniversary Weekend flooding and Cyclone Gabrielle stood at 96,586 claims worth $2.47 billion as of early April, according to the Insurance Council of New Zealand.

CombinedBy April, insurers paid out over 33,000 claims, accounting for 34% of total claims. At the end of March, insurers had contributed $396 million to local communities, or just over $9.5 million per day.

"While insurers have made a good start on settling claims, it’s important to remain realistic about the rate of settlement from now on," said Insurance Council of New Zealand Te Kāhui Inihua o Aotearoa chief executive, Tim Grafton.

"Many motor and contents claims are straightforward to settle, re-lining house can take months, full rebuilds over a year. The most complex claims, typically with land issues, can take longer still. Insurers are in this for the long haul."

The two climate disasters have now surpassed the 45,000 claims worth $2.27 billion for the Kaikoura earthquake and are worth more than 80% of all general insurance claims paid across Aotearoa New Zealand last year ($3.077 billion).

A good start has been made on settling the more straightforward motor and contents claims, the ICNZ said.

Insurers are also making progress with flooddamaged homes that are now undergoing the stripout, dry-out, re-line, and re-decoration process.

For the Auckland Anniversary Weekend event, 7,305 claims were settled out of 51,936 claims. Payouts as of April 4 totalled just over $248 million out of $1.308 billion (19%).

6,819 claims for Cyclone Gabrielle have been settled out of 44,650 total claims (15.3%), for a total payout of just over $147 million out of $1.155 billion (12.7%). In April, Hawke's Bay accounted for 14,707 (32.9%) of the 44,650 Gabrielle claims, but nearly $593 million (51.3%) of the claims by value.

Insurers are also focusing on the larger, more complex, and expensive claims that will take longer to settle.

"There is typically a small proportion of high value claims that require a lot of work to settle," added Grafton.

"These can be complex and time consuming to deal with and it’s important to be transparent with everybody about that. Insurers are in this for the long haul and will stand by their customers until the job is done.”

Court of Appeal rules

on insurance policy wording,

Brian Leighton (Garages) Ltd (BLG) operated a workshop and 24-hour petrol station in East Yorkshire.

In June 2014, a sharp object pierced a section of pipe which connected an underground fuel tank to six of BLG’s forecourt fuel pumps. The resulting fuel leak caused such extensive damage to BLG’s premises that it was at risk of catching fire or exploding and the business had to be closed.

Allianz insured BLG under a Motor Trade policy. Allianz declined cover on the basis that the policy excluded damage “caused by pollution or contamination”. Allianz sought to have the question of cover determined via summary judgment. The High Court agreed that the

damage was excluded. BLG appealed, arguing that, while the effect of the leak was pollution or contamination, the cause of the damage was the sharp object which punctured the pipe.

The policy

The policy wording covered Damage to Property Insured by any cause not excluded. Damage was defined as “accidental loss, destruction or damage to Property Insured”. It was common ground that Property Insured was damaged by the leak.

The policy excluded:

“Damage caused by pollution or contamination, but we will pay for Damage to the Property Insured not otherwise excluded, caused by:

A UK case provides helpful guidance

writes Zoë Bowden, senior associate, MinterEllisonRuddWatts

on exclusion for losses caused by “pollution or contamination”

a) pollution or contamination which itself results from a Specified Event

b) any Specified Event which itself results from pollution or contamination.”

The definition of Specified Event included fire, explosion, flood and the escape of water from a tank or pipe.

The Court of Appeal’s decision

The key issue was whether the words “caused by”, as used in the exclusion, should be taken to refer to a proximate cause test. By a 2-1 majority, the Court found that they did. The exclusion only operated where the pollution or contamination was the proximate cause of the damage.

BCL submitted that the exclusion ought to be narrowly interpreted, such that it would not bite where something other than the pollution or contamination was the proximate cause of the damage. Allianz argued that “caused by” meant something looser than proximate cause so that any claim where pollution or contamination formed part of the causative chain would be excluded, regardless of the immediacy or remoteness of the cause. Allianz contended that a wider interpretation was consistent with the write back in the exclusion’s sub-clauses a. and b., which it said operated to provide cover for fuel leaks arising from Specified Events, but not otherwise.

A majority of the Court of Appeal agreed with BCL, finding that the exclusion’s application turned

on whether or not pollution or contamination was the proximate cause of the damage. The Court noted that the usual requirement to establish proximate cause is based on the parties’ presumed intentions, which could be displaced if the policy provided otherwise. This would typically be achieved by using words such as “directly or indirectly” in policy wordings.

The Court found that this was not the case here –the parties’ presumed common intention was that the exclusion applied to pollution or contamination where it was the proximate cause of the damage. The exclusion was not triggered where the pollution or contamination was merely the result of some other insured cause.

The dissent

Males LJ dissented from the majority and found that the wording of the exclusion, when read as a whole, displaced the presumption that the words “caused by” referred to damage proximately caused by pollution or contamination. In reaching this view, the Hon. Lord Justice focussed on the effect of the write back of cover in subclauses a. and b., as they formed part of the exclusion as a whole. He did not agree that the write back clauses were themselves concerned with proximate cause –rather they were there to ensure that any Specified Event which is caused by or causes pollution or contamination would be covered, regardless of whether the pollution or contamination or the Specified Event was the proximate cause of the damage.

Other observations

Across the three judgments, the Court made some other relevant findings and observations, including:

• The parties’ intentions in entering the contract – in determining the question of indemnity, the Court had regard to the fact that a fuel leak from pipes would be “amongst the most obvious risks” for a business of BLG’s size and kind to require and seek cover for.

• The meaning of proximate cause – the Court confirmed that the proximate cause of a loss is not necessarily the most recent or least remote cause, but rather that which is proximate to efficiency, being the dominant, effective, or efficient cause. The Court also affirmed the long-established principle applying to concurrent proximate causes that was established in Wayne Tank, whereby if one proximate cause is covered and the other is excluded, the exclusion prevails.

• Brokers’ understanding of insurance terms – the Court held that brokers are to be taken to be familiar with the basic insurance principle of proximate cause, and the language used in policies which reflects or modifies it. The fact that many policies contained ‘terms of art’, shaped by consistent judicial authority, did not deter the Court from finding that the words “caused by” had “historically and uniformly been interpreted in this context as importing the concept of proximate cause”, and that this was the meaning that ought to be given to the words in this case.

• Reconciling exclusions and write backs of cover –Popplewell LJ held that the presumption that “caused by” denotes proximate cause would survive in this

case, unless the wording of the write back could not be reconciled with it. However, Males LJ (dissenting) and Nugee LJ (majority) disagreed and found that the relevant question was whether the exclusion, when read as a whole “would demonstrate to the reasonable reader to whom it is addressed an intention to displace the general rule. That intention may be demonstrated, even if it is possible to give some meaning to the write-back provisions which does not render them redundant”. Males LJ considered that, as a matter of ordinary language, and despite a ‘pedantic lawyer’ reaching the view that the pollution or contamination was not the proximate cause of damage, the relevant damage was caused by pollution or contamination.

• Using wording from other, optional, sections of the policy as an interpretative aid – two of the three judges expressly warned against reading into the use of different wording, such as “directly or indirectly caused by”, elsewhere in the policy wording. While it is orthodox to have regard to contrasting wording to determine the meaning of that wording within the same contract, no reliance should be placed on wording used in other sections of the policy that are optional, and which may not have been reviewed by the relevant insured.

• The application of the contra proferentem rule – there was no room for an argument that the exclusion ought to be construed narrowly against the insurer. This was because the wording of the insuring clause as “any cause not excluded” meant that the exclusions defined part of the scope of cover and ought not to be interpreted as an exemption from liability for cover which would otherwise exist.

Our view

This case provides helpful guidance on the doctrine of proximate cause. Like the UK, the use of “caused by” in insurance policies governed by New Zealand law is generally held to require the identification of a single proximate cause of the relevant loss. The principle of proximate cause is also codified in marine insurance by section 55 of the Marine Insurance Act 1908 which provides “an insurer is liable for any loss proximately caused by a peril insured against.”

However, the doctrine of proximate cause may be displaced or varied in New Zealand insurance contracts using clear wording to the contrary. It is critical that both insurers and brokers pay careful regard to the use of the precise wording of exclusions in determining the applicable standard of causation. As was the case here, imposing a proximate cause test could have the effect of introducing uncertainty and complexity in relation to exclusions.

Brokers should also be mindful of the risk of a court finding, as the majority did in this case, that they ought to be aware of the precise meaning of terms commonly used in insurance contracts that have had judicial consideration. The Court found that this would extend to language that both reflects, and modifies, the basic insurance principle of proximate causation.

How the courts interpret insurance policies

Contractlaw is central to the world of commerce. Traders rely on contract law to keep parties to their promises. Contract law forms part of what is generally referred to as the rule of law. Without contract law, the world of commerce as we know it, would not exist.

Insurance policies are contracts governed by the same contract law but with a few variations to allow for some unique features of insurance, such as the imbalance of knowledge between the parties. This leads to the duty of disclosure, which only applies to insurance contracts.

Insurers sell contracts that transfer defined risks faced by the insured to the insurer. This transference of risk is intangible and only exists as words in the contract. In this sense, the insurance policy is everything. A drafting error could be potentially serious for an insurer. Contract law will keep the insurer to its promise.

At claim time, disputes may arise about the drafting of the contract. This is usually in the context of whether the background facts come within the transference of risk in the contract or not. Drafting an insurance policy is perilous as it is difficult to foresee every factual eventuality under the sun.

When a dispute becomes serious, well-meaning claims handlers often go back to the underwriter and ask what his or her underwriting intention was. They use this as a way of determining the dispute. Is this how a Court will determine the dispute? The answer is a very firm no. The purpose of this article is to explain why.

How will a Court determine a contract interpretation dispute? The legal answer to this is a quote from a relatively recent insurance case that went all the way to the Supreme Court of New Zealand (New Zealand’s highest court). The Supreme Court of New Zealand summarised the proper approach in Firm PI 1 Limited v Zurich Australian Insurance Limited [2015] NZLR 432.as follows:

[60] …. It is sufficient to say that the proper approach is an objective one, the aim being to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.

[63] While context is a necessary element of the interpretive process and the focus is on interpreting the document rather than particular words, the text

remains centrally important. If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.

In summary, the exercise is an objective one based primarily on the words used in the contract and their context. What one or more of the parties to the contract subjectively intended is largely irrelevant. This is why the claims handler’s enquiry to the underwriter referred to above misses the mark.

The reason why a subjective approach is undesirable and would lead to great uncertainty in the law is as follows: once a dispute has arisen, each party to the dispute is likely to frame their intention in a way that suits the outcome that each party desires from the dispute. It will be fruitless for a Court to base its decision-making on this subjective approach. How will the Court determine which intention to believe?

Seeking the underwriter’s intention does have a useful business purpose, however. If after applying the proper approach to interpretation set out above, the outcome is not what the underwriter intended, then something has gone wrong with the drafting and the insurer needs to amend its policy wording as soon as it can to make sure that for the future the subjective intention is reflected in an objective interpretation of the words used.

Please contact us if you require any further information.

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

Why young people should choose broking

The

to

to

Thebroking sector is in need of new blood right now. The old guard is quickly retiring, which leaves the door open to a new generation with the desire to succeed. In the past, the industry has faced challenges attracting young people into the industry, and most people I’ve spoken to over the years have fallen into the sector by accident.

It doesn’t have to be this way. There are so many great things about the industry, we should be shouting from the rooftops about them. The more we can sell our industry to young people, the healthier our profession will be in the future.

So why should a young person consider broking? There are numerous aspects to being a broker that makes the role truly dynamic.

Insurance is often seen by outsiders as dull and boring, but in my 45-plus years in the business, I can assure you that it certainly is not.

You can work your way up in a broking house to handle some of New Zealand’s largest corporations. Alternatively, you can work with smaller New Zealand companies if you want to.

You can choose what type of company or organisation you’d like to work with as your client base. You will provide your clients with good honest advice in order to provide them with protection from financial loss. You’ll be liaising with your clients directly, by phone, email or with face-toface meetings (which, incidentally, clients still really like).

Your clients trust you and rely on your advice. It’s an industry built on friendships and personal relationships. The people are fantastic.

While there are recognised and required formal qualifications for you to achieve, most of what you learn about being a successful broker will be experiential. You’ll work alongside other experienced brokers in your organisation who will provide guidance and mentoring.

industry needs

do more

attract young people, writes Nick Cressey

Broking businesses range from smaller operations of, say, three to five staff, through to medium-sized broking houses and ultimately large international companies employing hundreds of staff within New Zealand and thousands internationally.

You’ll also have the opportunity to specialise in certain niche aspects of client bases - for example: aviation; marine; “high risk”; heavy transport; professional indemnity; liability; offshore markets (e.g. Lloyd’s of London); complex claims; policy wordings; new business — the list is extensive.

The financial rewards can be significant for those prepared to work hard, to learn and absorb all aspects of the complex insurance business.

So, being a broker provides some of the best negotiating skills, technical skills, challenges, satisfaction and enjoyment that could be achieved in any profession.

Is insurance broking the best job ever? In my opinion, yes!

If you know a young person who would suit the profession or a bright student unsure about their career path, tell them about the broking industry.

Young people — if you think this profession might be for you, cast your eyes around, have a think about what would suit your aspirations, and go for it! You won’t regret it.

For further information about becoming a broker, contact Mel Gorham at IBANZ.

Nick Cressey is a former underwriter, broker & IBANZ Life Member

2022's most stolen cars as theft claims soar by 43%

TheToyota Aqua has replaced the Mazda Demio as the most frequently stolen vehicle in the country, according to AMI, as car theft claims skyrocketed in 2022.

Despite only comprising 1.47% of the nation's fleet, the Aqua, also known as the Toyota Prius C, was responsible for 11% of AMI's vehicle theft claims in 2022.

The Toyota Aqua has surpassed the Mazda Demio, which is now the second most stolen vehicle, closely followed by the Nissan Tiida. The Mazda Atenza (Mazda 6), Toyota MarkX, Toyota Vitz, Subaru Legacy, Toyota Corolla, Subaru Impreza, and Mazda Familia round out the top ten.

An interesting entry into the top 10 is the Toyota MarkX, with theft claims surging in recent years from 21 claims in 2020 to 441 claims in 2022, an increase of 2000% in just three years.

The theft claims surged to new highs in 2022, up 43% from the previous year, and this pattern is reflected in the rest of the AMI data. This is a growing trend, despite a Covid-related dip in 2020, the firm said.

Wayne Tippet, AMI’s executive general manager for claims, said rising thefts made it more important to review insurance details.

“Across New Zealand, we received 8,492 claims for vehicle thefts in 2022, up 43% on the year before, and up 54% from 2019.

“There are some things you can do to make your car less attractive to thieves, such as locking it, removing any valuables, and parking offstreet or in a busy, well-lit area. Immobilisers are good, but if your car doesn’t have one installed, steering locks are effective deterrents too.

“I’d also urge people to check the sum insured on their insurance policy is up to date. Second hand cars are generally holding their value better than they used to, due to supply chain delays, parts shortages, and other factors,” Tippet added.

“So, if the worst happens and your car is stolen and written off, you want to make sure that your sum insured is at an appropriate level for your car.”

With almost 3,000 claims for vehicle theft in the past year, Auckland significantly outpaced second-place Canterbury, which had 1,214 claims.

Recovery rates remain high, with 94% of all Aquas recovered, 93% of Demios recovered, and 91% of Vitzes recovered, indicating that the majority of cars are stolen for joyrides.

“Virtually all of these cars are recovered, so it’s likely they’re being stolen for joy rides or to commit other crimes, such as burglaries,” Tippet added.

Communication goes both ways

In December 2020, Mike* asked his insurance adviser to arrange cover for a new car (“car A”) under his business insurance policy. The adviser replied asking Mike to confirm some details. Mike did not reply to the email, but said that he phoned the adviser the next day to answer the questions. The adviser had no recollection or evidence of this call. The adviser did not put any cover in place for car A.

Mike said that car A was run off the road by another driver in July 2021 and that he contacted his adviser about the accident. The adviser told him to repair the car and send the bill to the at-fault party. The adviser’s company said they had no record of receiving information about this incident. Mike said he ordered approximately $3,000 worth of parts, which became unusable when the car flooded while in his driveway. Mike said that the car flooded due to being left in the driveway and leaves accumulating in the drains.

Mike arranged insurance for a replacement car in October 2021 (“car B”). The adviser confirmed that the car had been added to the business’s insurance. In March 2022 car B and some personal items, including his phone and the only car key for car A, were stolen. Mike reported the theft to the adviser’s company.

In April 2022, the adviser told Mike that the premiums for car B had not been paid, and that they would need to be paid before the claim could be investigated. Upon reviewing the invoices and policy for car B, Mike realised that the car was insured for $18,000 instead of the $24,000 that he believed they had agreed to.

In May 2022, Mike purchased a replacement car (“car C”) and told the adviser. Soon after, Mike discovered that car A was in fact not insured. Mike told the insurer he was dissatisfied with the overall situation, particularly the delay in informing him that car A was not insured. Mike also asked the adviser to confirm that car C was insured. The adviser replied with attached invoices for insurance for both car A and car C, and asked Mike how he would like to pay. Mike told the adviser that he would need to consider whether car A was worth insuring but asked for car C to be added to the business plan.

The adviser’s company replied to Mike’s various complaints, including the delay in informing him car A was uninsured and car B being insured for less than he believed, in June 2022. Among other things, the adviser’s company confirmed that both cars A and C were now insured. Mike was unhappy with the adviser’s company’s response and complained to FSCL.

After the complaint, the adviser emailed Mike asking him to pay the monthly premiums payments for cars A and C. In August, the adviser told Mike that he would assume that he no longer required cover if he did not reply by the following day. Mike said that he replied in time, but the adviser’s company said that he replied one day late. The adviser attempted to resurrect the cancelled insurance, but the insurer declined

due to a 12-month stand-down policy for any client whose insurance is cancelled due to non-payment. The adviser organised insurance through a different insurer.

Dispute Car a

Mike said he asked the adviser to insure vehicle A, and the adviser was at fault for not insuring the vehicle. The adviser delayed in telling him that car A was not insured, causing further loss due to the unused car parts and the damage to the car while it was parked at his house.

The adviser’s company said that car A was not added to the insurance plan because Mike had not provided the requested information. Further, they said Mike should have noticed his car was not insured when he did not pay any premiums. The adviser’s company also said they had no information about car A being run of the road and had not advised Mike to purchase the car parts. Finally, they said that the damage that occurred in the driveway was unlikely to be covered by insurance because it was most likely gradual damage.

Car B

Mike wanted car B to be insured for $24,000, and he said that the adviser had made an error in insuring the vehicle for $18,000. Mike was also unhappy that the premiums for car B had not automatically been added to Mike’s business insurance arrangement, causing the premiums to not be paid.

The advising company did not agree with Mike’s recollection of the sum insured, saying Mike agreed to $18,000 being closer to market value. Further, they said that premiums for car B were not added to the business arrangement because the business did not activate a link included on the invoice.

Car C

Mike said that the insurance for vehicle C being cancelled from inception for non-payment was the adviser’s company’s fault because he had replied before the deadline. Mike said that the adviser cancelling the insurance resulted in him having a “bad debtor flag”, which would affect his future insurance.

The adviser’s company said that their records showed Mike responded after the deadline, and that they had given Mike adequate notice before cancelling his insurance. They also noted that they had organised insurance for Mike through a different insurer, so Mike had not suffered any loss. Finally, the company said that no “bad debtor flag” existed for Mike.

Review Car a

There was insufficient evidence that Mike had replied to the adviser’s questions about car A. As Mike’s phone was stolen with car B, he could not prove the phone call. However, the adviser was subject to a statutory obligation to exercise the care, diligence, and skill that a reasonable financial adviser would exercise in the same

circumstances. We considered the adviser should have followed-up with Mike when he did not reply to the email about car A.

There was insufficient evidence of any insurable loss arising from Mike being run off the road. It seemed inherently unlikely that Mike, who said he believed the car was insured, would have accepted a solution from his adviser that did not include an insurance claim. It was more likely that Mike did not phone the adviser. Further, Mike could not produce evidence of purchasing the car parts. FSCL did not have sufficient evidence of any loss that would have been covered by insurance.

The delay in telling Mike that car A was not insured did not cause any loss. If Mike was not clearing away the leaves, blockages (and flooding) was foreseeable. The damage to the car while in the driveway was unlikely to be covered by insurance, due to the damage occurring over time.

Car B

FSCL found that the adviser’s company should have done more to draw Mike’s attention to the relevant link he needed to click to include car B’s premiums on the business arrangement. FSCL again found that the adviser should have followed-up with Mike. However, this did not cause Mike a financial loss, as the premium needed to be paid. Although it was stressful to discover that the premium needed to be paid urgently, this did not warrant a payment for non-financial loss.

The difference in the insured value was not crucial and no finding was required, as the claim had been settled and Mike did not advise of any shortfall.

Car C

There appeared to be an unexplained delay between Mike’s instructions to add car C to the insurance plan and the adviser’s reply email. However, this was not what caused cancellation of the cover. The cover appeared to be cancelled due to Mike not returning the completed proposal in time. If Mike wished to pursue this element of his complaint, he would need to explain the discrepancy in email timestamps provided by himself and the adviser.

Resolution

FSCL said that Mike should discontinue his complaint. Although the adviser could have followed up with Mike on various issues, he did not cause Mike financial or significant non-financial loss. Mike did not reply to FSCL’s preliminary decision, so FSCL closed its case file.

Insights for consumers and participants

This complaint illustrates communication failures by both the consumer, for not responding to their adviser’s questions, and the adviser, for not following up when he did not receive a reply from the client.

Grieving son duped on TradeMe

MrP held third party, fire and theft cover on his motorhome. In 2021, Mr P died and his son, Mr G, received his motorhome.

Mr G changed the registration of the motorhome into his name. He also listed the motorhome on TradeMe, and it was purchased for $35,000 using the “Buy now” function. The buyer sent him a screenshot of an online transaction as proof of payment, and the motorhome was collected later that evening.

The following morning, Mr G had still not received the payment and realised the screenshot was a fake.

Mr G made a claim to the insurer. The insurer declined the claim, because there was no cover for the motorhome at the time of the loss, because the policy was not in Mr G’s name. It also said the loss was not covered under the policy, because the loss was the proceeds of the sale, not the motorhome.

Mr G complained, because he believed the loss was not the proceeds of the sale but, rather, the theft of the motorhome, and that it should be considered an accidental loss.

The IFSO Scheme found that Mr G voluntarily gave the motorhome to the buyer. This meant that the motorhome was not stolen and, therefore, the loss was not caused by “theft”. Because ownership had been transferred to the buyer, the buyer became the new owner.

The IFSO Scheme believed the evidence indicated the loss was the proceeds of the sale; however, even if the loss was the motorhome, the loss was not caused by “fire, theft or illegal conversion”.

This meant there was no cover under the policy and the insurer was able to decline the claim. Complaint not upheld.

Consumers have obligations to take care of their property under insurance policies. It is not theft if you invite someone into your home, or allow them to take something, and it won’t be covered.

Reasonable care clash QUESTION

I have had a motor vehicle claim declined due to the driver breaching the reasonable care condition of the policy.

The policy states -

2.4

Reasonable care

The Insured must take all reasonable steps to protect the insured vehicle from loss and to avoid liability

The circumstances of the claim are that the driver dropped his cellphone into the passenger footwell, he

CROSSLEY GATES

These policies are designed to insure negligent driving short of recklessness. A one-off transgression, even when it is a breach of the

Think of person who fails to give way at a give way sign and collides with a car legally passing by. This

attempted to retrieve it and in doing so drove off the road.

The insurer has therefore declined the claim by applying the reasonable care condition above.

I understand that using a cellphone whilst driving is breaking the law, would the insurer stance be the same if the driver had been reaching for something else?

Do you think this is a reasonable and fair application of the policy condition?

Are there any legal cases to challenge the insurer's decision?

is a traffic offence but this does not give the insurer the right to decline the claim. The driver was simply negligent - nothing more.

Assuming this is the first claim under these circumstances, it is unlikely to breach the reasonable care condition because it is just negligent, not reckless.

Do you have a question for our experts?

Sub-limit vs general limit QUESTION

We have a claim accepted for defective workmanship. In order for the workmanship to be rectified the homeowner needs to vacate the property and go into temporary accommodation.

The combined cost of rectifying the works and the temporary accommodation looks likely to exceed the defective workmanship sub-limit.

The temporary accommodation is not a direct cost of the workmanship remediation. Should these costs be considered under the general limit of indemnity rather than in the workmanship sub-limit?

The insurer is claiming as the workmanship extension is a write back up to a certain amount, and the loss would otherwise be excluded under the workmanship and insured products exclusions that the total claim is capped at the sub-limit. Do we have a case to argue that it should be paid separately?

CROSSLEY GATES

I would consider the claimant's temporary accommodation to be a result of the workmanship remediation so the insurer would be correct in including within the DW sub-limit under the policy.

Contract works, excess payment and recovery

We are seeing more and more construction contracts with high standard excesses [$100,000 plus]

Who generally pays this excess or what mechanism is used to determine who pays it?

This is particularly relevant to the Natural Disaster excess of course but what about a fire, theft, accidental damage excess if this is now $100,000?

CROSSLEY GATES

The excess represents part of a loss or liability that is not insured under a policy. As the party suffering that loss or liabiilty has no insurance cover to that extent, that party suffers that loss or liability personally in the first instance. In some cases there may be an ability to pursue a liable party for the amount of the excess.

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

Pet dog damage QUESTION

Just loading a new claim with an insurer for where a pet dog has damaged the client's glasses by chewing them.

The policy notes the following regarding pet damage:

“Household pets: we won’t cover loss caused by any pets scratching, chewing, tearing, or soiling. This exclusion only applies if you don’t live in your home.”

The client is renting currently so it seems at first glance that coverage will be denied as the client is not living in a home that they own.

However could the following legislation be a factor in this claim?

ILRA 1977 section 11 - Certain exclusions forbidden

I believe section 11 is potentially available to the insured in relation to this exclusion.

The exclusion only applies in circumstances where the insured doesn't live in his or her home as defined. This seems to be a restriction for underwriting purposes and so satisfies the first limb of section 11.

Section 11 of the Insurance Law Reform Act 1977 provides that an insurer must accept a claim which falls within a policy exclusion if the exclusion was inserted because of an increased risk of loss occurring in the excluded circumstance, but the circumstance did not cause or contribute to the loss which is the subject of the claim.

Would be interested to understand if the exclusion is applicable as it would seem to be that risk factor is the individual dog rather than if they were living in an owner occupied home.

And therefore given the risk is the individual dog then on the balance of probabilities the dog may still have chewed the glasses if they were in an owner occupied home and not a rental property.

In order for section 11 to save the claim, the insured must satisfy the second limb. This requires the insured to prove (not the insurer) that on the balance of probabilities (more likely than not) the excluded circumstance (not living at a home as defined) did NOT cause or contribute towards the loss.

Do you have a question for our experts?

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

CROSSLEY GATES

Survey reveals 31% of New Zealanders don’t know insurance coverage details

nationwide survey conducted by AMI, State and NZI has revealed a significant portion of New Zealanders don’t know what their insurance would cover.

AAnationwide

The survey, conducted by market research agency Ipsos on having the right amount of

Zealanders were not confident

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

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

Karen Scard Administration & Accounts Manager

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

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

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

Abbott Group

Abraham & Associates Ltd

Adams Trimmer Insurance 1992 Ltd

Advance Insurance Services Ltd

Affiliated Insurance Brokers Ltd

AIB Group Insurance Ltd

AIM Associates Ltd

Albany Insurance Services Ltd

Albany Insurance Canterbury Ltd

Amicus Brokers Ltd

Allied Financial Advisors Limited

Aon New Zealand

Apex General Ltd

Austinsure Ltd

Avon Insurance Brokers

Baileys Insurance Limited

Bay Insurance Brokers Ltd

BMS Risk Solutions Limited

Bridges Insurance Services Limited

BrokerWeb Risk Services Limited

Builtin Insurance Brokers Limited

Cambridge Insurance Brokers Ltd

Capital Risk Solutions Limited

Cartwrights Ltd

Certus Insurance Brokers NZ Ltd

Coast Insurance

Commercial & Rural Insurance Brokers Ltd

Crème Insurance

Crombie Lockwood (NZ) Ltd

Dawson Insurance Brokers (Rotorua) Ltd

Emerre & Hathaway Insurances Limited

FG Insurance Services

Frank Risk Management

FundAGroup Insurance Brokers Limited

Grayson & Associates Ltd

Gregan & Company Ltd

GSI Insurance Brokers

GYB Insurance Brokers Ltd

Hazlett Insurance Brokers Ltd

Honan Insurance Group (NZ) Ltd

Hood Insurance Brokers NZ Ltd

Hurford Parker Insurance Brokers Ltd

Hutchison Rodway Ltd

ICIB Limited

Ingerson Insurances Ltd

Insurance Advisernet NZ Ltd

Insurance Brokers Alliance Ltd

Christchurch

Christchurch

Whangarei

Paeroa

Wellington

Lower Hutt

Auckland

Auckland

Christchurch

Christchurch

Christchurch

Auckland

Auckland

Auckland

Christchurch

Auckland

Tauranga

Christchurch

Hamilton

Auckland

Tauranga

Cambridge

Wellington

Ashburton

Auckland

Whangaparaoa

Alexandra

Auckland

Auckland

Rotorua

Gisborne

Gisborne

Hamilton

Auckland

Auckland

Papakura

Waitakere

Lower Hutt

Christchurch

Auckland

Auckland

Hastings

Auckland

Auckland

Wellington

Auckland

Invercargill

Insurance Design Limited

Insurance People (Fire & General) Limited

Insure 247 Ltd

JRI Limited

Lockton Companies NZ Limited Partnership

Malcolm Flowers Insurances Ltd

Marsh Ltd

McDonald Everest Insurance Brokers Ltd

Multisure Ltd

MW Insurance

Nelson Marlborough Insurance Brokers Ltd (NIB)

Neville Newcomb Insurance Brokers Ltd

Northco Insurance Brokers Ltd

Northcrest Insurance Brokers Ltd

O'Connor Warren Insurance Brokers

OFS Insurance Brokers Ltd

Omni Fire & General Ltd

Paramount Insurance Agencies Ltd

Partridge Advisory Limited

Paterson & Co NZ Ltd

Penberthy Insurance Ltd

PIC Insurance Brokers Ltd

Prestige Insurance Broker Services Ltd

Primesure Brokers Ltd

Property and Commercial Insurance Brokers

Provincial Insurance Brokers Limited

PSC Connect NZ Limited

RMA General Ltd

Rothbury Group Ltd

Runacres Insurance Ltd

SHARE

Sit & Blake Limited

South Pacific Insurance Brokers Ltd

Sweeney Townsend Insurance Brokers Limited

Thames Valley Insurance Ltd

The Advisers for insurance

Thorner General Insurances Ltd

Towes Insurance Brokers Ltd

Vercoe Insurance Brokers Ltd

Vision Insurance (S.I.) Ltd

Wallace McLean Ltd

Wanganui Insurance Brokers Ltd

Wealthpoint General Limited

Willis Towers Watson

Wealthpoint General Limited

Willis Towers Watson

Warkworth

Auckland

Auckland

New Plymouth

Auckland

Taupo

Auckland

New Plymouth

Auckland

Auckland

Nelson

Auckland

Masterton

Auckland

Tauranga

Dunedin

Auckland

Auckland

Auckland

Auckland

Auckland

Manukau

Auckland

Auckland

Feilding

Masterton

Auckland

Warkworth

Auckland

Christchurch

Auckland

Auckland

Auckland

Rotorua

Thames

New Plymouth

Upper Hutt

Te Aroha

Morrinsville

Ashburton

Auckland

Wanganui

Auckland

Auckland

Auckland

Auckland

CALENDAR OF EVENTS

JUNE 2023

June 7th | TOPIC: Brokers Fiduciary Duties (Conduct and Ethics Topic)

PRESENTER: Michael Robertson

Insurance brokers have fiduciary duties, which are legal and ethical obligations they must fulfill in their interactions with clients. The fiduciary duties of an insurance broker in New Zealand typically include their duty of care, disclosure of information, avoid conflicts of interest and others. Michael Robertson will discuss the fiduciary duties of insurance brokers, and what this means in practice.

June 15th | TOPIC: Gross Profit: Don't get it wrong

PRESENTER: Mark Anderson

This session will cover the importance of gross profit when putting a business interruption programme together.

June 14th | TOPIC: Effective Apologies

PRESENTER: Karen Stevens

Mistakes and misunderstandings happen. What happens next can make or break relationships. Karen Stevens, Insurance & Financial Services Ombudsman, will discuss the power of a good apology, what makes a good apology and examples when a complaint has been resolved with an effective apology.

June 21st | TOPIC: Increase your Online Credibility and Visibility

PRESENTER: Leanne Coste

Your online credibility and visibility is more important than ever so that people can find you online. Showing up online and having a consistent, cohesive message is key to people trusting you enough to take the next step in the buying process. In this webinar you’ll learn how to get seen online and create trust so that you can attract more online engagement and sales.

JULY 2023

July 6th | TOPIC: Cyber Insurance - Understanding the Proposal Form and Questionnaires

PRESENTER: Daniel Watson - (Vertech)

Daniel Watson will use his 28 years of IT experience to explain some of the technical terms and acronyms used by insurers on their Cyber Insurance proposal forms.

July 13th | TOPIC: Clients requiring extra care

PRESENTER: Stephanie Newton

In this webinar Stephanie will share FSCL’s insights on ways to both recognise when a client may be vulnerable, and ways that brokers can ensure they’re appropriately providing extra care when it’s needed.”

July 20th | TOPIC: Contract Works

PRESENTER: Peter Ziegler

Based on Peter Ziegler’s experience, he will be discussing some of the policy consideration questions that may arise in Contract Works claims as well as create awareness of the insurance clauses and claims processes associated with Contract Works claims.

July 12th | TOPIC: Vulnerability and the Advisers Response

PRESENTER: Andrew Gunn and Karen Stevens

More details to come.

July 19th | TOPIC: Time Saving Online Tools to increase your productivity

PRESENTER: Leanne Coste

This webinar covers digital tools for better reporting and visibility of your business, saving time, better business efficiency and reducing costs.

July 26th | TOPIC: BI Importance of Cover

PRESENTER: Mark Anderson

This webinar covers digital tools for better reporting and visibility of your business, saving time, better business efficiency and reducing costs.

ALL WEBINARS START AT 10.30am UNLESS OTHERWISE STATED

AUGUST 2023

August 9th | Vulnerable Clients - Who Are They and What Are My Responsibilities?

PRESENTER: Virginia Douglas

In this learning session, we will examine the topic of clients in vulnerable circumstances. This session aims to share our understanding of the causes of vulnerability, your role in supporting them and things you can put in place to help you demonstrate you are assisting these customers to have good outcomes.

August 10th | A Round-up of recent complaints

PRESENTER: Susan Taylor

Susan will do a round-up of recent complaints about insurance brokers, looking at cases FSCL has investigated and resolved over the past year, and the lessons learned from the complaints investigated. Susan will also discuss some recent insurer complaints that will be of interest to brokers.

August 15th | TOPIC: Significant Breaches of the Fair Insurance Code

PRESENTER: Claire Benjamin & Andrew Gunn

The Fair Insurance Code is a code of conduct developed by Insurance Council of New Zealand (ICNZ), which sets out the standard of service member companies must provide to their customers. These Code obligations are in addition to those imposed by the law. Independent dispute resolution schemes, such as the IFSO Scheme, apply the Code in practice..

August 16th | TOPIC: Sale and acquisition of businesses and associated insurance issues

PRESENTER: Tom Pasley

This webinar will look at insurance issues that arise in the context of the sale and acquisition of businesses (and differences in terms of mode of sale such as share versus asset sales) including practical steps that should be taken.

August 17th | TOPIC: Insurance for Commercial Property 101

PRESENTER: Craig Robertson

An introduction to the policies required by a commercial property owner and things to be aware of under Material Damage, Rents, Liability from claims scenarios to demonstrate how being aware of them and providing appropriate advice would benefit the property owner.

August 23rd | TOPIC: BI Common Problems

PRESENTER: Mark Anderson

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

August 22nd | TOPIC: Time Management for Insurance and Risk Professionals

PRESENTER: Clifton Warren

Top professionals understand that time is money and how you spend your time determines how successful you are. It takes a deep level of motivation and discipline to focus on the right activities, working proactively with your top priority top clients, meeting prospective clients, following up with existing prospects and balancing client and prospects demands.

August 24th | TOPIC: Don’t Get Hacked

PRESENTER: Steve Mayo-Smith

Just how secure are you and ready to defend yourself and the business you work for against the increasing rate and sophistication of cyber-attacks? Understanding what to look for and what not to click on or trust is vital. This session will provide you with an understanding of the types of threats and intrusion techniques and the do’s and don’ts of protection.

August 29th | TOPIC: Business Risk Analysis

PRESENTER: Trevor Slater

In this session an easy-to-understand business risk model and process will be explained which can be applied to any business or personal goals.  It will show you how to identify risks, assess their impact and likelihood and how to respond to those risks.

August 30th | TOPIC: Successful Email Marketing Part One

PRESENTER: Debbie Mayo-Smith

Communicating well and regularly through this channel (email) using online newsletters and emails is a perfect, economical, easy and smart way to communicate.

August 31st | TOPIC: Marine 101

PRESENTER: Pauline Davies

Marine insurance is the oldest form of insurance in the world, with its principles being formed over centuries and largely adopted by the other insurance sectors. Yet, it remains an area that is often not well understood, made worse by the wide range of activity that it covers.