JUN/JUL 2015 - Insurance News (the magazine)

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THE FEELING’S MUTUAL New approaches in the North Queensland insurance opera AGENT OF CHANGE Why broker education needs a revolutionary overhaul FAREWELL BALLIE The industry pays tribute to one of its very best SOFT MARKET BROKING 10 tips from veterans on surviving and thriving

BERKSHIRE HATHAWAY ARRIVES

Cashed up and doing business: Chris Colahan is leading the American giant’s move into the Australasian insurance market

June/July 2015

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Contents 6 Newsmakers » 10 Berkshire Hathaway: cashed up and confident » Warren Buffett’s legendary company has entered the local insurance market, and its commercial insurance operation is aiming high. Very high…

60 Choking hazard » The global death toll from air pollution is growing, and communities are increasingly looking for someone to blame.

67 Life and work in Hong Kong » Meet three very different Australian insurance professionals who call Hong Kong home.

18 Seeking mutual satisfaction » The Federal Government’s insurance taskforce will consider a mutual insurer and a reinsurance-style pool for disaster-prone north Queensland.

20 Capital connections »

lawNEWS 74 A fair share? »

Guy Carpenter’s Tony Gallagher says the local reinsurance industry’s growing appetite for alternative capital will change the way insurers address risk.

27 A farewell to Ballie » Steve Ball’s untimely death brings the industry together in tribute.

28 Broking in a soft market »

The High Court has made a landmark ruling on proportionate liability that will apply to a wide range of professional groups.

companyNEWS 76 Mover and shaker » NTI rolls out a new mobile plant and equipment product.

Your 10-point guide to surviving the current cycle.

30 From Russia with ransom » These days, broker Alan Wilson’s advice to clients on the benefits of cyber cover comes from bitter experience.

34 A unifying force » IAG’s Donna Walker is focused on bringing people together while championing diversity.

38 Expanding into Asia » The Underwriting Agencies Council aims for growth in an ambitious new five-year plan.

40 Destination success » National Transport Insurance has won a truckload of awards, and nobody ever wants to leave. So what’s its secret?

peopleNEWS 78 84 86 88 94 96

AIMS delegates say hola to Barcelona » Brokers celebrate with Axis » Girls just get to have fun on AHI Ladies’ Day » Steadfast convention kicks off with a bang » Allianz scores with Adelaide Oval event » Loincloths and a onesie – AILA YPs’ wild night out »

98 maglog »

46 The sinking of Cerno » The merger of Stream and Cerno appeared to be a perfect fit. But one brought with it a fatal legacy.

52 Agent of change » Harsh realities demand a new era of education for brokers, says Martin McAvenna.

June/July 2015

Cover: Chris Colahan, Australasian President, Berkshire Hathaway Specialty Insurance.

Image: Kym Thomson

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newsmakers at

insuranceNEWS.com.au is a free weekly online news service for the general insurance industry. The website has more than 22,200 subscribers.

In April and May we published 340 articles online. These were made up as follows:

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Local Corporate Regulatory & Government Financial Services The Professional International Analysis Breaking News

Some 18,250 news articles – including 183 breaking news bulletins – have been published since we started in 2001. All articles can be accessed through our archives.

Access to articles and other services provided by insuranceNEWS.com.au is free.

Down down, rates are down Reinsurance rates will face downward pressure for the rest of the year as capital continues to flow into the market, according to Willis Re’s latest market report.

The Willis Group’s reinsurance arm says global reinsurance capital stands at $US425 billion and rising supply has been compounded by three years of low catastrophe losses.

Willis Re Global Chief Executive John Cavanagh says the market is being squeezed from all directions, “with underwriting and investment conditions compounded by the oversupply of capital”.

The six-monthly reinsurance report finds the major reinsurers are returning capital to shareholders, such as through large special dividends.

Some are also investing in insurance-linked securities and alternative funds to remain relevant in a highly competitive market.

More pressure on reinsurance rates as capital keeps pouring in, 11 May

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Understanding wind, rain and hail More research on the combined effects of hail size, wind speed and rain could be of major benefit to property insurers in pricing and modelling, a new report on last November’s Brisbane hailstorm says.

It would also allow for better material design and economic cost-benefit modelling, according to the paper from the Cyclone Testing Station at James Cook University in Townsville.

“The amount of damage and the payout of the whole Brisbane storm was huge, of a magnitude greater than Cyclone Marcia for insurance payouts,” testing station director David Henderson told insuranceNEWS.com.au.

The Insurance Council of Australia has estimated claims from Cyclone Marcia in February at $412 million and claims from the Brisbane hailstorm at $804 million.

“You have wind, hail and rain and they

are all combined in these events,” Dr Henderson said.

“The levels of damage we can expect from that combination depend on the different portions of those different elements. We need more research to look at overall risks and what we can do to mitigate those risks.”

Newer windows showed much greater resistance than older ones in the hailstorm, the report says.

This may be due to a number of factors, including the smaller size of older, stiffer panes, newer glass having more “give” and the effects of silicon seals compared with putty.

More than 2800 properties were damaged, 80% of them houses. Of the affected properties, about 92% suffered minor damage, 7% moderate and 1% severe.

Brisbane damage ‘shows need for hailstorm study’, 20 April

A new classification system for Australian motorcycle thefts reveals motor scooters are a favourite target. Scooters accounted for 19% of motorbike thefts last year, followed by off-road dirt bikes (17%) and onroad sports bikes (13%), according to National Motor Vehicle Theft Reduction Council (NMVTRC) data.

Scooters were the most popular short-term theft target (28%), with dirt bikes the most common profit-motivated theft target (22%).

NMVTRC Executive Director Ray Carroll says the biggest theft targets are not big, expensive motorcycles “but relatively low-value scooters. They’re easier to steal and in many cases it’s kids stealing other kids’ bikes or opportunistic thieves placing a scooter in the back of their ute.”

Improved data shows crooks’ focus on scooters, 25 May

New man in Suncorp’s hot seat The appointment of former banker Michael Cameron as Suncorp’s new Group Chief Executive is creating speculation from industry pundits over the future direction of the listed company and its “one company, many brands” strategy.

Mr Cameron, the Chief Executive of listed property group GPT Group, will take over from Patrick Snowball in October.

Mr Snowball has been Suncorp Chief Executive for six years. Although he had been expected to step down and return to the UK by the end of the year, Mr Cameron’s appointment was not expected by industry insiders.

Most had expected Personal Insurance Chief

insuranceNEWS

Executive Mark Milliner or Suncorp Bank Chief Executive John Nesbitt to succeed Mr Snowball.

Mr Cameron’s role at GPT – a position he had held for six years – seems an unusual stepping stone to the top job at Suncorp, but he has a substantial background in banking and financial services, as well as being on the board of Suncorp for three years.

And he is not entirely unfamiliar with the sector. He is a former financial controller at MLC Life and General Manager finance at Australian Eagle Life.

At a teleconference for journalists and investment analysts announcing the succession, Mr Cameron said his “personal view, just from a

June/July 2015

philosophical perspective, is that chief executive roles are about leadership as opposed to an area of specialisation”.

But it’s in the critical area of insurance that the new chief executive’s career experience becomes problematic.

Insurance inexperience no barrier to new Suncorp CEO, 20 April

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Reuters

Bushfires: bigger and more of them Bushfire losses have grown in frequency and size in the past decade, according to a Swiss Re report on emerging risks.

The warning comes at the same time as forecasters warn of a developing El Nino climate system, which includes in its effects a hotter and dryer period in southeastern Australia.

Swiss Re says 90% of global insurance losses resulting from bushfires have been incurred since 2002, with the recent class action settlement over the Black Saturday disaster in Victoria showing how severe losses can be.

“From a (re)insurance perspective, this implies [bushfires] have a high potential to be underestimated with respect to frequency and severity in the coming years,” the reinsurer says.

There may be a “significant impact” on casualty cover if fires are started or exacerbated through negligence, such as insufficient maintenance of power lines, as was alleged in the $494 million Black Saturday case.

Lloyd’s data shows fire accounted for $US7.9 billion of insured losses in the US from 2002-11, up from $US1.7 billion in the previous decade.

Bushfire losses largely comprise casualty claims (52% of losses), property (40%) and marine (9%).

Swiss Re warns of increasing bushfire threat, 25 May

Ace silent over Combined scam International insurer Ace has refused to comment as the storm over allegations of mis-selling at its wholly owned subsidiary Combined Insurance continues.

Combined insiders allege agents systematically duped customers, including vulnerable Australians, to maximise commissions.

Fairfax Media reported people were sold policies they did not need and information such as medical histories was deliberately omitted.

According to whistleblowers, agents also engaged in “tombstoning”, where dead or imaginary clients were signed up and initial premiums paid by the agents because the commissions were worth more.

Fairfax Media says NSW Police – along with the Australian Securities and Investments Commission – is investigating the allegations.

It reports Combined has sacked four members of staff, with further action expected.

Ace keeps quiet as Combined storm rages, 11 May

Total insurance claims for catastrophes which have hit Australia since last November have now reached $3.42 billion, according to the Insurance Council of Australia (ICA).

Claims for the severe New South Wales storms which hit Sydney and surrounding areas in April have reached $801.7 million, an ICA spokesman told insuranceNEWS.com.au. About 119,935 claims have been lodged for the NSW storms, with 78% of them for domestic losses such as residential property and contents.

The Sydney hailstorm on Anzac Day resulted in 14,239 claims worth $389.8 million being lodged with insurers. About 78% of the total is for commercial losses, because the storm hit mainly semiindustrial areas.

Severe storms which hit southeast Queensland early last month generated $360.2 million in insurance losses, from 27,825 claims, 80% of them for domestic losses and the rest commercial.

Insurance losses for the Brisbane hailstorm last November are still the most costly of the six most recent catastrophes. About 121,195 claims have been lodged for $1.35 billion, 62% of them for domestic losses.

The second-biggest event remains February’s Tropical Cyclone Marcia, which has generated 36,483 claims worth $518.09 million, with about 64% of them for domestic losses and the rest for commer-

insuranceNEWS

Reuters

Cats claw insurers

cial claims, mostly in Queensland.

Last month ICA declared last month’s southeast Queensland storms the fifth catastrophe this calendar year, following the Anzac Day hailstorm in Sydney, NSW storms in April, Cyclone Marcia in February and the SA bushfires in January.

The highest number of catastrophes in a calendar year is 2011, when eight catastrophes cost the insurance industry a total of $4.9 billion.

Catastrophe claims reach $3.42 billion in nine months, 1 June June/July 2015

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How brokers can defeat digital disruptors

Suncorp Commercial Insurance Chief Executive Anthony Day has challenged brokers to “go on the attack” in the face of technological change and greater competition.

“The opportunity is for all of us to change our business model and adapt to the rapidly changing customer of the future,” he told last week’s Steadfast Convention.

Mr Day told brokers they should capitalise on their capabilities.

“The unique relationship brokers have with customers

is what all the disrupters in every industry are looking for.”

He says brokers’ ability for constant interaction with customers “not just once a year”, being trusted and having deep knowledge of clients are what the digital world is trying to achieve.

Digital disruptors such as Google and Amazon are working to identify the characteristics and needs of each customer, but brokers are ideally positioned to meet customers’ needs because they know their clients.

“In the past the focus was on products but now the focus has to be on customer interaction.”

Mr Day says demographics, technology, changing lifestyles and buying preferences are creating a more splintered range of customers.

Companies that do not cater to the preferences and behaviours of Baby Boomers and generations X and Y and soon Z “will simply become irrelevant”. He urges the industry to use the fresh

thinking of its employees, including that of the four generations in the workplace.

Australia’s stable economy is attracting increased capital and competition to the insurance market “and there are disruptors looking for industries and environments like ours”.

Customers have access to large amounts of information but are also suffering “information overload”, particularly if they are time-poor SME business owners.

“This is your opportunity to help,” Mr Day said.

“Your knowledge and experience is the best selling tool you have. Don’t underestimate that.”

Mr Day says there will also be opportunities to innovate, and brokers are ideally positioned for this because the best innovations are based on understanding customer needs.

A rallying cry for brokers, 27 April

El Nino grows up The El Nino climatic effect continues to strengthen and will last at least into the Australian spring, according to the Bureau of Meteorology’s latest update.

“Oceanic and atmospheric indictors show a clear El Nino signal,” the bureau said. “Sea surface temperatures in the tropical Pacific Ocean have exceeded El Nino thresholds for nearly two months, supported by warmer than average waters below the surface.”

Publisher/editor: TERRY McMULLAN McMullan Conway Communications Pty Ltd Tel: + 61 3 9499 5538 Fax: +61 3 9499 5535 Email: publisher@insurancenews.com.au Advertising: NAOMI CONWAY McMullan Conway Communications Pty Ltd Tel: +61 3 9499 5538 Fax: +61 3 9499 5535 Email: naomi@mccmedia.com.au Artwork delivery to: McMullan Conway Communications Pty Ltd PO Box 116, Ivanhoe VIC 3079 Australia or Level 1, 120 Upper Heidelberg Road, Ivanhoe VIC 3079 (COURIERS ONLY) Email: naomi@mccmedia.com.au

El Nino is usually associated with belowaverage rainfall in eastern Australia and above-average temperatures in the south, leading to an increased risk of bushfire and drought.

The effects can be exacerbated by a positive Indian Ocean Dipole (IOD), which is currently neutral, Three out of five international models indicate a positive IOD is likely later this year.

There’s a remarkable transition taking place in Australian insurance at present, thanks to the increasing speed of the digital revolution and the influx of new capital enticing new entrants into the market.

Some of our articles this month are based around developments in the wider insurance environment that affect us locally. A couple of examples: • The arrival of Berkshire Hathaway Specialty Insurance into the Australian market. The company has very deep pockets and an aspiration to be a major global player, and will over time cause real headaches to its established competitors.

• The call for the two major institutions providing broker education to heed signs of new types of competition in distribution – particularly based around technology – and start devising education programs that will help brokers survive.

• Guy Carpenter regional chief Tony Gallagher believes the influx of alternative capital into reinsurance will change the way the insurance industry does business.

In this issue we also look in depth at the demise of loss adjuster Cerno. Pulling all the facts together, it’s possible to see that the company was probably doomed from the start. It’s just a terrible shame that it did so much damage to so many people as it foundered.

And we have published a 10-point advice article for brokers heading into their very first soft market. As one veteran broker remarked, anyone who joined the industry since the early years of the century hasn’t experienced a really soft market. And this is predicted to be a long one.

There’s plenty in this issue to entertain, educate, intrigue and even touch you. Enjoy.

El Nino ‘gaining strength’, 1 June

Terry McMullan

subscriPtion enquiries: www.insurancenews.com.au/subscribe Email: admin@insurancenews.com.au contributions: We welcome all material that is relevant to the Australasian and regional risk insurance industry, including all aspects of risk management.

Please contact the Editor, +61 3 9499 5538.

Printing: Printgraphics, 14 Hardner Road, Mt Waverley VIC 3149, Australia www.insurancenews.com.au/magazine

A McMullan Conway production

ISSN 1837-4972

8

From the

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Berkshire Hathaway: cashed up and confident Warren Buffett’s legendary company has entered the local insurance market, and its commercial insurance operation is aiming high. Very high…

By Terry McMullan

AT A TIME WHERE INSURERS ARE bracing for one of the most difficult markets in decades, with investments at rock bottom and premium incomes falling, why would an operator as canny as Ajit Jain set up a new global insurance company?

The most logical answer is that the 63year-old head of Berkshire Hathaway Reinsurance is following his global peers by diversifying into general insurance as reinsurance earnings fall.

But being Berkshire Hathaway, there’s a unique twist.

Jain’s global insurance company, Berkshire Hathaway Specialty Insurance (BHSI), is intended to be a market leader in its own right rather than an optional form of revenue to dabble in while the reinsurance sector sorts itself out.

Chairman and Chief Executive Warren Buffett predicts BHSI will be “a major asset for Berkshire, one that will generate volume in the billions within a few years”.

Launched into the US market in 2013, the new company has entered the tough and competitive Australian commercial insurance after establishing roots in Canada, Singapore and Hong Kong.

BHSI is based in Boston. Its President is Peter Eastwood, a former president and chief executive of AIG’s massive Americas Region.

Buffett says BHSI is “already writing a substantial amount of business with many Fortune 500 companies and with smaller operations as well”.

The arrival of Berkshire Hathaway in the Australian and New Zealand markets on May 1 10

marked the beginning of an even more intense competition for business in the Australian midmarket and above.

With the parent company’s brand and its massive capital reserves, plus efficient new systems, it will be a tough competitor. It has already made its presence felt with some astute hirings of key specialists from insurance companies in Australia and New Zealand.

The lure of the Berkshire Hathaway brand will doubtless appeal to local brokers and clients. As Buffett noted in his annual newsletter to shareholders, “we were instantly accepted by both major insurance brokers and corporate risk managers throughout America”.

“These professionals recognise that no other insurer can match the financial strength of Berkshire, which guarantees that legitimate claims arising many years in the future will be paid promptly and fully.”

The company’s global progress has been swift, but if the new BHSI operations in Australia and New Zealand are anything to go by, it’s nevertheless impressively thorough.

At present BHSI Australasia is being run from the parent company’s offices in central Sydney, although President Chris Colahan says BHSI will move into its own Sydney CBD space in July.

Colahan, who hails from the Gold Coast, isn’t well known in the Australian insurance market, but at the age of 33 he has had more experience than most executives in pulling together ambitious projects and making them work.

He featured in the June/July 2014 ediinsuranceNEWS

June/July 2015

tion of Insurance News as the Chief Executive of RSA’s insurance operations in China, Hong Kong and Singapore.

Colahan started at the British insurer in 2005 during a backpacking tour of Europe.

With a law degree and some corporate experience gained through Westpac, his progress through the ranks at RSA was meteoric.

He gained a reputation as a fix-it specialist for the group, overhauling operations in Singapore and Hong Kong before landing the key Singapore-based Asia post in 2012 at the age of 30.

“These professionals recognise that no other insurer can match the financial strength of Berkshire.”

The invitation to join Berkshire Hathaway came at an opportune time, with RSA deciding to sell its Asian assets for £284 million after suffering large losses in its European operations. It’s understood Colahan headed up the team negotiating the sale of the Asia assets.

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BHSI Australasia President Chris Colahan: more experience than most in pulling projects together

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Buffett’s brief: create the world’s leading P&C insurance company Terry McMullan speaks to BHSI Australasia President Chris Colahan

Chris Colahan: what’s just as important to me is the fact that we operate in a company where bureaucracy isn’t encouraged

What’s the rationale behind setting up BHSI? The business started in April 2013 with Peter Eastwood, Dave Fields, Dave Bresnahan and Sanjay Godhwani joining together to build the company. The brief they were given by Warren Buffett was to create a “forever business”, and to make it the world’s leading property and casualty insurance company globally.

There’s no other company in the world that can talk with that level of ambition, or for that matter which takes that long-term view of things. When I got that call and I was asked to participate in building the company – well, that’s a call that you take. It’s an exciting journey to be a part of.

So that’s the brief: to create the world’s leading P&C insurance company. We’ve been at it now for more than two years globally.

How has it gone so far?

So far we have hired nearly 600 people globally, and in 2014 we made an underwriting profit, which given it was our second full year of operation I think is extremely good going.

How liberal are the parameters you’re allowed to do business in?

Well, the brief is we can enter any product line in any geography where we see an opportunity for Berkshire Hathaway to make 12

float and generate an underwriting profit.

And the bigger the opportunity the better, because it plays to our brand and it plays to the strength of our balance sheet.

The more float we can generate, the better.

The Australian commercial insurance market is regarded as the most competitive on the planet, and right now it’s got some significant revenue challenges. So what’s the attraction in coming to this part of the world?

The starting point is that Australia is a great market, and it’s a big one. If you look at the whole Asia-Pacific region, it’s one of the biggest. It’s got a history of being profitable and generating good returns for all players.

We see that as being attractive over the long term.

It’s at a challenging state right now, for sure. We’re at the back of a few years of fairly significant rate reductions, but we’re going into this market with our eyes wide open to the challenges.

Over the longer term the market will revert to its mean of being a very good, strong, large and profitable market.

It also benefits from the fact that it’s well regulated. The [Australian Prudential Regulation Authority] is regarded as a great regulator that ensures the insurers who operate here operate to a high standard.

That fits well for a company like Berkshire Hathaway. insuranceNEWS

June/July 2015

How long do you think it’s going to take for the market to recover?

That’s the multi-multi-million-dollar question. And it’s not just Australia, it’s the whole world insurance market and the global capital flows that are driving the soft rating conditions in almost all product lines in almost all markets.

I think for us as a new entrant – and for me as the manager of an insurance company – we need to be prepared for this soft market to continue for many years to come.

You do see it as that serious?

Yeah, I think so. We’re all going to need to look at our operating models and the way that we do business to be sure it’s fit for purpose for operating in these softer rating environments.

Berkshire Hathaway is providing you with some enormous advantages, obviously, via its capital reserves.

That’s true; we’ve got some very strong features to come to the market with. Firstly, we have the brand. Berkshire Hathaway is a very well recognised brand, and it stands for integrity, trust, doing the right thing. They’re characteristics that will be very helpful for us entering the market as an insurance company.

As you say, the second thing we have going for us is the balance sheet and the capital that sits behind us. The National Indemnity Group that BHSI is a subsidiary of has more than $US200 billion of assets and

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Quiet giant BHSI’s sister company is already a significant player in the local industry BerkSHIre HATHAWAy’S NeW operating licence may open up additional opportunities for partner company Berkshire Hathaway Insurance Australia, which operates through the investment giant’s National Indemnity Insurance.

It supplies significant amounts of reinsurance to a number in Australian insurers, and last November was named as the underwriter of Broker Direct, Steadfast’s new direct personal lines initiative which offers retail insurance products through brokers.

Chief executive Australia and New Zealand Blair Nicholls says the local business generated by his arm of the company is actually over 50% more than that of Swiss re or Munich re.

The company has pulled off a series of business coups in the Asia-Pacific region in recent years, taking on some massive catastrophe and retro risks.

Included in the deals written in 2012/13 were a $NZ500 million program for the New Zealand earthquake Commission, and the whole of New Zealand insurer AMI’s $NZ1.4 billion catastrophe program.

Suncorp, which was recovering from a series of flood, cyclone and earthquake losses in 2012, was provided with a three-year $US800 million line on its main program, all of its New Zealand buy-down protection and a $US300 million premium quota share on its Queensland homeowners book.

Berkshire Hathaway Insurance also took a major chunk of IAG’s $5 billion reinsurance program, and in January 2013 signed a deal to write 15% of a range of QBe’s programs, including its $US1.3 billion global cat treaty and its global aggregate cover.

Mr Nicholls worked at QBe for 18 years, most recently as chief actuarial officer and head of reinsurance. He joined Berkshire Hathaway in 2012.

He says Berkshire Hathaway Insurance prefers to keep its business activities low-key – a practice followed by most of its competitors.

14

We want to create simplicity wherever possible, because that in turn creates a great environment for our people to work in

more than $US120 billion of policyholders’ surplus funds.

What’s just as important for me is the fact that we operate in a company where bureaucracy isn’t encouraged. We want to create simplicity wherever possible, because that in turn creates a great environment for our people to work in and gives us a chance to do great things for our customers.

With so few constraints you’re going to be extremely competitive from the start.

That’s the intention, but we’re not in a rush.

It’s much more important for us to do this properly than to do it quickly.

If we do this right, I think we’ve got a real opportunity to build one of the leading P&C players in the Australian market. We want to do great things for our customers and our distribution partners and using the brand and the balance sheet to build a market-leading team.

Nevertheless, you’re going to encounter resistance from companies that know how to be very strong competitors.

Yeah, that’s one of the challenges we face in the Australian market. There are some extremely well run companies already in operation here.

I hope that with the brand, the balance sheet, recruiting a market-leading team and creating an environment and culture that mean we can do brilliant things for our cusinsuranceNEWS

June/July 2015

tomers… I think that will mean we can be a bit different and we can make ourselves stand out.

“There are some extremely well run companies already in operation here.”

You say you’ll do it one step at a time.

Does that mean you’re beginning with a restricted range of products?

Yes, and over time we’ll build on that. We’ve started by launching in property, casualty, financial lines and marine cargo. We’ll look to build out the product offering if and when it makes sense.

To start with we’re playing in the large corporate space, but we’d look to move into the mid-market/SME commercial space, and potentially into personal lines in the future – if and when that makes sense.

That’s very much the journey that we’ve been on in the US. We started with property, casualty and financial lines. We’re now doing surety, we’re doing homeowners, we’re doing travel insurance, we’re doing healthcare services. They’re all products that we’ll have available to us to write in Australia as the opportunities arise.

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You know your business inside out. You know your markets, your customers, your competitors. Above all, you know the risks facing your business. At Swiss Re Corporate Solutions, we have the capabilities and the financial strength to meet the risk transfer needs of businesses worldwide. But that’s only half the story.

Whether your risk is basic or complex, whether the solution is off-the-shelf or highly customised, we believe that there’s only one way to arrive at the right solution. And that’s to work together and combine your experience with our expertise and your strengths with our skills. Long-term relationships bring long-term benefits. We’re smarter together. swissre.com/corporatesolutions Swiss Re Corporate Solutions offers the above products through carriers that are allowed to operate in the relevant type of insurance or reinsurance in individual jurisdictions. Availability of products varies by jurisdiction. This communication is not intended as a solicitation to purchase (re)insurance. © Swiss Re 2015. All rights reserved.

INMAG JUN 15_page layouts 3/06/2015 4:36 pm Page 16

Chris Colahan poses with senior staff, from left, Head of Power, Energy and Mining Daniel Cole, Head of Human Resources Anne O’Keefe, Directors and Officers Manager Ryan Thomas, Professional Indemnity Manager Matthew Clarke, Head of Claims Susan Donaldson and Senior Underwriter, Power, Energy and Mining Luke Fox

I would’ve gone anywhere in the world to take this job

Brokers are going to be a very important part of your distribution strategy. How do you see yourself selling this concept to brokers?

Will you keep your operation centralised in Sydney, or will it expand across the country?

We’re not encumbered by legacy portfolios or legacy IT systems, so we can build a market-leading proposition from scratch.

We should also be able to achieve one of the lowest operating expense spaces in the market, which will give us the opportunity to provide really great value products to our distribution partners and our end customers.

Our hope is that brokers will respond really well to those things. They’ve responded very well where BHSI opened in other parts of the world so far, and we’re hopeful that that will be the case here too.

We’ve only been in business a little over a month, and we’re very pleased with the start we’ve made. It’s exceeded our expectations.

As far as brokers go, it’s working out very well. We’ve met up with all the large and medium-sized companies. For the amount of time we’ve actually been trading, the response from brokers has been excellent.

Will you be interested in buying agencies or even other companies to encourage more rapid growth?

We’ve got a very open mind about all the opportunities that might be there for us in 16

the market, but our starting point will be to build capabilities ourselves.

We have bought a business in the US, but we want to build rather than buy.

We think that by being a start-up we’ve also got the opportunity to build the gold standard.

You’ve attracted some high-calibre specialists already.

I have to say I’m very impressed by the professionalism of the market overall, and particularly of the people that we’ve met.

One of the benefits of this brand is that we’ve had loads of people reach out to us about opportunities that might be here. I feel very lucky to have been able to pick the best of a very impressive bunch.

Some might say people have been attracted by the money.

Well, Berkshire Hathaway is the perfect alignment for people who are looking to take the next step in their career. But the people we’ve hired so far – and I’d include myself in this – look at it as being a once-in-a-lifetime opportunity to do a startup within one of the largest companies in the world.

Because of that we haven’t had to pay above market rate. People are excited by the immediate opportunity of building something from scratch and the future opportunity of what we might be able to do together. insuranceNEWS

June/July 2015

To start with we’ll be operating out of Sydney and Auckland, and we’ll open an office in Melbourne in the second quarter. We’ll look pretty closely at other territories as well.

The brief from Warren for the group is to write any products in any geography where it makes sense for us.

How many staff are you going to need in Australia?

We now have 32 people across Australia and New Zealand, 24 of them here in Australia.

That’s mainly been concentrated around hiring the senior team up to now.

We’ve also just employed another senior executive, with Tony Bainbridge, the former Asia Pacific regional head of healthcare at AIG, joining us as Head of Healthcare.

Both the Australian and New Zealand operations will be run with a very flat structure, with an Australasia Region team made up of me and Cam McLisky, our Country Manager for New Zealand, along with our chief financial officer, our chief risk officer and our human resources director. And that’s it.

This role has also brought you and your family home after 10 years away.

I would’ve gone anywhere in the world to take this job. The wonderful thing for my family and me is that it meant coming back * to Australia and living in Sydney.

INMAG JUN 15_page layouts 3/06/2015 2:49 pm Page 17

We’ve got Australia

COVERED.

(And (And the the rest rest o off the the world world ttoo.) oo.)

It ’s our strong international heritage that gives us invaluable knowledge and It’s experience, to help your clients’ businesses take on upcoming challenges. o learn how we can help to protect your clients in Australia and virtually To T anywhere they do business, visit www .aig.com.au today. today. Bring on tomorrow www.aig.com.au IInsurance nsurance Products Produc ts iissued ssued iin n Australia A u s t r a li a b byy A AIG IG Australia Aus tralia LLimited im i t e d A ABN BN 9 93 30 004 04 7 727 27 7 753 53 A AFSL FS L 3 381686.

81686. A Allll p products roduc ts and and sservices e r v ic e s a are re w written r it te n or or provided p ro v i d e d b byy subsidiaries subsidiaries or or affiliates a f f ili a t e s o off A American merican International I n t e r n a t io n al G Group, roup, IInc. nc. Products Produc ts or or services s e r v ic e s m may ay n not ot be be available available iin n all all countries, countries, and and coverage coverage iiss subject subjec t tto oa actual c tual policy polic y llanguage. a n g u a g e. F For or a additional dditional iinformation, nformation, please please visit visit our our w website e b sit e a att w www.AIG.com.au. w w. A IG.com.au.

INMAG JUN 15_page layouts 3/06/2015 2:49 pm Page 18

The Federal Government’s insurance taskforce will consider a mutual insurer and a reinsurance-style pool for disaster-prone north Queensland

By Jan McCallum

A SOLUTION TO INSURANCE affordability issues in north Queensland was never going to happen overnight, but after a series of false starts positive moves are under way.

The Northern Australia Insurance Premiums Taskforce set up by the Federal Government now has a reference panel appointed and must suggest solutions in a final report by November.

Insurers are working on their own initiatives for customers, based around resilience but focused on lowering the cost of insurance. Suncorp has developed initiatives to cover people on low incomes and small body corporates, and CGU has saved unit-owners more than $1 million after initiating a program of strata inspections.

The Government is giving serious consideration to establishing a mutual insurer for the region and to a governmentunderwritten disaster pool along the lines of the Australian Reinsurance Pool Corporation (ARPC), which was established to handle terrorism claims.

Federal MP Warren Entsch, whose electorate covers Cairns and the areas north, supports the mutual option, saying it will need government support at the establishment stage but could then become self-sufficient – “an asset owned by the policy18

holders of northern Australia”.

Brokers in the region are less confident. They question whether north Queensland has the population to sustain its own mutual or pool.

Innisfail-based Rivers Insurance Group director Doug Olsen believes any pooling arrangement must draw premiums from a wider policyholder base than the north.

petitive market “but it has to be done as a ‘nation project’, not just focused on cyclone cover”.

It could cover cyclones, floods and bushfires, so claims are paid for losses outside Queensland.

Mr Olsen compares this with the ARPC, in which commercial customers pay for terrorism cover. He says he has never known a client complain about having to pay the terrorism levy.

“A mutual could attract more insurers to the region and create a more competitive market but it has to be done as a ‘nation project’, not just focused on cyclone cover.”

“There are 1 million people north of Rockhampton and close to 50% of them would be children, which suggests the population is not big enough to drive a successful pool,” Mr Olsen told Insurance News.

He says a mutual could attract more insurers to the region and create a more cominsuranceNEWS

Graham Koch, director of Koch Insurance Brokers in Cairns, says north Queensland policyholders contribute to the ARPC, but any terrorism loss is far more likely in Sydney or Melbourne.

Therefore, policyholders in his region are contributing to indemnifying others’ risk.

He also favours an ARPCJune/July 2015

type arrangement that captures a levy from across the nation.

Successive federal governments have taken dividends from the ARPC, but Mr Koch says any north Queenslandfocused pool should be left alone to build up.

“There has to be a better way, but I can only see the market ever improving through legislative change,” he tells Insurance News. “Our economy runs on insurance and it’s too important to be left to market forces.”

Insurers maintain premiums will not fall without serious initiatives to address risk.

Suncorp Personal Insurance’s Executive General Manager Customer Product and Pricing Lisa Harrison says her company’s Protecting the North strategy, launched in May, has a good mix of mitigation and competition – “two factors that are proven to drive down premiums”.

The project, which requires government funding, is based on documenting self-mitigation work undertaken on older homes and offering a review of premiums, addressing the longstanding complaint that insurers do not reward propertyowners who act to reduce risk.

Ms Harrison tells Insurance News work such as roof strapping, bracing on roller doors and roof

INMAG JUN 15_page layouts 3/06/2015 2:49 pm Page 19

Assistant Treasurer Josh Frydenberg: set a tight schedule for the taskforce

shutters is proven to reduce loss, and Suncorp is working with James Cook University to design a possible retrofitting program to strengthen older homes against cyclones.

“Suncorp understands insurance affordability is an issue in north Queensland and is committed to doing all it can to address these pressures and help north Queenslanders,” she says.

The insurer has also developed a direct strata insurance product for properties of up to 10 units and a policy for low income-earners, with contents cover from $4 a week.

CGU continues to work with the owners of strata properties and has cut premiums to 75% of the 390 properties and more than 7000 owners it provided a specialist building consultant to review their risk and resilience.

The saving so far is $1.4 million and the surveyors have given 17% of properties recommendations to improve resilience, which shows what can be done.

The insurers have helped reduce premiums and make cover more widely available, and the industry has generally welcomed the taskforce’s establishment, unlike previous federal government initiatives.

The widely criticised north Queensland comparison website has gone live, with several insurers listed and sometimes,

but not always, their premiums.

The Government has used establishment of the taskforce to quietly defer its move to allow unauthorised foreign insurers (UFIs) into the market, presumably after heeding criticism from insurers and brokers that the proposal would not help north Queensland and would weaken consumer protection. The taskforce will not consider UFIs.

Campaigning MP Warren Entsch: a mutual insurer would need government support at the establishment stage

this is being given serious consideration, with Regis’ Chief Operating Officer Gerald Ewing appointed to the taskforce’s reference panel.

He joins consumer and Queensland representatives along with Insurance Council of Australia (ICA) Chief Executive Rob Whelan and National Insurance Brokers Association Chief Executive Dallas Booth.

“The Government has used establishment of the taskforce to quietly defer its move to allow unauthorised foreign insurers into the market.”

The decision to drop the UFIs option was announced at the end of a media statement from Mr Entsch. A similar statement from Assistant Treasurer Josh Frydenberg did not carry the information.

Regis Mutual Management, backed by Willis Re, has raised the possibility of a mutual, and insuranceNEWS

ARPC Chairman Joan Fitzpatrick brings reinsurance pool knowledge to the table.

Mr Frydenberg has charged the taskforce with undertaking a thorough evaluation of options to reduce consumer premiums and “the likely cost and risks associated with using the Commonwealth balance sheet” June/July 2015

to lower premiums, and to examine how the Government’s role can be gradually reduced over time.

The taskforce has a fairly tight schedule for producing an interim report before its final November deadline.

Cairns-based Optimus1 Insurance Brokers director Barry Koch tells Insurance News home and contents premiums in the region are levelling out, “but it’s nothing to get excited about”.

Some policies are renewing at about the same prices and some owners are getting reductions, he says.

“We need more competition up here; we need [more] insurers to come into the market.”

Mr Koch questions how long it might take for a governmentbased solution to be established.

The Abbott Government has a policy to develop northern Australia, and Mr Frydenberg told the ICA regulatory seminar in February that high premiums have made insurance in north Queensland a public policy issue.

There are signs of improvement arising from insurer initiatives, but it will take government intervention – and most probably some hefty financial contributions – to significantly bring down premiums.

And even if that is possible, it will still take many more * months to achieve.

19

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Capital connections Guy Carpenter’s Tony Gallagher says the local reinsurance industry’s growing appetite for alternative capital will change the way insurers address risk

By Michelle Hannen

20

insuranceNEWS

June/July 2015

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ALTERNATIVE CAPITAL IS HERE TO STAY AND IT WILL CHANGE the way the insurance industry does business.

That’s the message from Tony Gallagher, the Pacific Region Chief Executive of leading reinsurance broker Guy Carpenter. He says that while alternative capital – largely in the form of pension fund investment – “hasn’t entered a great deal in Australia at this stage, it’s on the coast, it’s there”.

“The alternative capital is sitting there ready to go. The questions that many people ask are, ‘is it a market that’s come and a market that will go? When losses occur, will it walk out the door?’

I don’t think so.

“It’s had a period now where it’s been operating, and paying losses, and so the insurance companies are becoming a little more comfortable in the way it operates and a little more comfortable in terms of their ability to use it.

“The reinsurers are in there already [using alternate capital], the Australian fund managers are investing in it, and one of the domestic [insurers] has dipped its toe in the water.

In some of the aggregate covers it buys it is using some capital markets.”

With the traditional reinsurers also cashed up and over-capitalised, the smorgasbord of risk transfer options bodes well for buyers at the upcoming July 1 Australian reinsurance renewals.

Mr Gallagher, who has oversight

insuranceNEWS

for Guy Carpenter’s Australian and New Zealand operations, confirms that’s the case.

“There’s a lot of capital in the market, and a lot of capital looking for homes, and subsequently there’s a lot of competition.

That will inevitably lead to price reductions, and broader terms.”

The past year has not been loss-free, with events such as the Brisbane hailstorm, Tropical Cyclone Marcia and the recent Sydney storms, but Mr Gallagher says that those losses have been “within the normal range”.

“Retentions [by insurers] are at a level where a lot of it is retained. It’s been frequency, not severity, and it’s been within net retentions and low levels.”

He says the capital influx into the market has changed it to such an extent that a major event in the region – think the Christchurch earthquake – would have a lesser impact on rates if it occurred tomorrow, as the alternative capital waiting in the wings would come flooding in.

If you needed further evidence that the alternative capital juggernaut is here to stay, Mr Gallagher says that it has piqued interest of the Australian Prudential Regulation Authority (APRA).

“APRA and the insurance companies are both looking at it and my expectation is in the next two to three years, it will start to become more commonplace.”

While the current situation seems to be a bit of a free-for-all, Mr Gallagher believes that in time the market will settle down, once alternative capital providers begin to find their niches.

“When you’re in a reinsurance company you tend to have a product or a range of products that you want to write,” he tells Insurance News.

“And every reinsurance company is slightly different. I think as time goes on, the interests [of alternative capital providers] will probably become a little bit narrower.”

Large reinsurance companies may have scale, but they also have a large cost base. Capital providers are not encumbered by the same cost base, which will allow them to exercise their major advantage over more traditional reinsurance – inherent flexibility and an ability to provide tailor-made solutions to the market.

But flexibility with the use of capital is not the only thing alternative capital brings to the table. Mr Gallagher says its ability to provide truly tailor-made, individualised solutions could bring about a sea change in both the reinsurance and primary markets. This could ultimately lead to the elimination of the collective, pool-based approach to risk on which the industry was founded.

June/July 2015

21

INMAG JUN 15_page layouts 3/06/2015 3:36 pm Page 22

“Ultimately from the consumer right through to the capital, the connection is becoming more transparent. I think the insurance and reinsurance industries are becoming increasingly relevant to consumers.”

NEW ZEAlAND-BoRN MR GAllAGHER STUDIED CoMMERCE AT the University of Canterbury before completing an MBA at Edinburgh University in Scotland, looking at strategic alliances in the airline industry. His plans to join the aviation industry changed following a “random lunch” in london with a Gen Re executive, which culminated in a job offer.

“I had no idea about reinsurance at all,” he recalls. “But I looked at it and thought, ‘I’ll give it a go’. Gen Re’s a great company, with a really good reputation. So I went for it.”

After originally joining Gen Re in london as a property facultative underwriter, Mr Gallagher worked in a range of roles before being transferred to Japan.

Seven years with Gen Re in Australia followed that assignment, where he most recently served as client services manager for treaty in Australia and New Zealand, before joining Guy Carpenter in his current role in 2013.

Although his reinsurance career has been accidental, Mr Gallagher says he does not regret the turn of events that have led him to this point in life. “I find it fascinating. It’s a great business, and I think the evolution of it is just making it more interesting.”

In his down time, Mr Gallagher enjoys sport, playing golf and tennis with his wife, two sons and daughter. With all three children business-minded he says he wouldn't discourage them if they were interested in a career in reinsurance.

“I think it would give them as much as it has given me, if not more, in the future.”

22

“As we grow our understanding of risk we can then tailor-make reinsurance to a particular event or series of events, or particular issue,” he says. “The traditional reinsurance market has changed, but the capital markets will make it change more.

“Capital markets are very good at doing that, and the capital markets will drive change within the traditional markets. It’s always difficult to change from within – but when someone changes from without, you change from within.”

Segmentation has already begun to creep into the industry, such as separating the better drivers from the worse drivers, and has been mooted as a potential solution to the flood risk problem in Australia.

“Now as our understanding becomes greater, the segmentation becomes even greater. So can you tailor-make products for particular groups? I think that will occur.

“And on the back end of that, reinsurance will reflect that too.”

Real-time data – which is not the same as Big Data, Mr Gallagher says – has a role to play when it comes to the industry’s ability to segment the market.

“Big Data, to me, is looking backwards. Real-time data, which I think is even more important, is looking forward. Big Data will tell me that we’ve had a flood in area A in the past 10 years; real-time data will say it will never happen again because the river’s changed course, or the land’s higher.”

“Potentially all these [high-risk] properties could go to an insurance or reinsurance scheme, where they have a high return because the profile is far more severe. So you package these up and look potentially for funds that would be interested in doing that.”

But Mr Gallagher says addressing the social change needed to get to that point might be the bigger challenge.

“It’s moving from this to that, which will take time. Can we get there? The answer is certainly yes, we can.

“Ultimately from the consumer right through to the capital, the connection is becoming more transparent. I think the insurance and reinsurance industries are becoming increasingly relevant to consumers.”

While the alternative capital providers are primarily interested in property catastrophe reinsurance, Mr Gallagher says major changes are also afoot in the casualty reinsurance market.

In September last year Guy Carpenter launched its GC ForCas casualty catastrophe model in the United States. Mr Gallagher describes it as a “catastrophe-modelling platform to help clients in terms of understanding hazard analysis within their portfolios”.

He confirms the GC ForCas model will soon be made available to Australian and New Zealand-based clients.

insuranceNEWS

June/July 2015

INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 23

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the emerging risk we thought would occur has occurred: Guy Carpenter’s tony Gallagher

“Casualty cat really is in the frontier of trying to deal with these large casualty events. At the moment insurance companies would quantify that. “Really what we’re trying to do with our model is to get an independent view of [a risk], and then work with our clients to understand whether they can hold that risk or whether they need to place it externally.�

Mr Gallagher says the casualty market is “dynamic� as insurers and reinsurers try to create products to keep up with societal changes.

He cites drones and driverless cars as the new frontiers, and says cyber cover is a product whose time has arrived. “The emerging risk we thought would occur has occurred.

The insurance solution, and behind that the reinsurance solution, will come. “It’s the same in terms of casualty. It’s exciting.�

Much as the insurers and reinsurers are facing major changes, it seems reinsurance brokers have already begun down that road.

Mr Gallagher, who joined Guy Carpenter from direct reinsurer Gen Re two and a half years ago, tells Insurance News his new view from the other side of the fence is that “within a reinsurance company, you have a range of products that you look to offer; within a reinsurance broking organisation there are a range of solutions�.

As well as that fundamental difference reinsurance broking has transformed itself in recent years from risk placement to – in Guy Carpenter’s case – a three-pronged model that consists of placement, strategic advisory and capital solutions. “We partner with our clients to help them grow their business and use capital efficiently,� he says. “Reinsurance is a capital tool ultimately, and insurance companies understand that. It’s a way to diversify their portfolio and manage volatility, but it’s a capital vehicle as well. “Reinsurance is using someone else’s capital to write business.

Traditionally [insurers] used quota share when they first started up, and they’d do that to be able to write business. “Then it sort of moved on, but it’s going back now, and asking, ‘what is the best use of this capital?’ “So the view from insurance companies to reinsurance companies is changing. And that’s where Guy Carpenter globally and locally is changing its approach, too.�

In light of the views of new capital, and the new view of capital, change in the reinsurance industry should be considered * the new norm.

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INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 25

NEW PURPOSE BUILT COVER FOR THE LABOUR HIRE MARKET

WHO IS SURA LABOUR HIRE?

SURA SURA L Labour abour Hire Hire iiss tthe he p purpose urpose built built sspecialist pecialist a agency gency for for L Labour abour Hire Hire a and nd Recruitment Recruitment industries industries iin nA Australia. ustralia. F Formerly ormerly kn known own a ass Lawsons Lawsons Underwriting Underwriting Australasia Australasia L Limited imited ((Lawsons), Lawsons), this this change change will will b be e effective effective ffrom rom 1st 1st M May ay 2015.

2015.

SURA L abour Hire Hire w ill continue continue to to provide provide tthe he ssame ame e SURA Labour will exceptional xceptional sservice ervice you you h have ave c come ome tto oe expect xpect over over tthe he pa past st 6 6½ ½ years years w with ith the the ssame ame professional professional personnel personnel you’ve you’ve come come tto o kn know. ow.

COVERAGE C OVERAGE

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liability — Public Public an and dp products roducts liability Professional indemnity indemnity — Professional Directors an do f ficers liliability ability — Directors and officers Commercial legal legal p rotection iinsurance nsurance ((CLPI) CLPI) — Commercial protection Statutor y fines fines a nd p enalties — Statutory and penalties mployment p ractices liliability ability ((EPL) EPL) —E Employment practices — Ta xa udit Tax audit —H ost e mployer liability liability ((worker worker tto ow orker).

Host employer worker).

—R Recruitment ecruitment firms collar ollar and white hite collar) collar) firms – (both (both blue blue c and w —L Labour blue collar abour hire hire both both b lue collar collar and and white white c ollar including including but not Factory workers; but n ot limited limited to: to: Mining; Mining; Construction; Construction; F actor y w orkers; Farms; Drivers Farms; Hospitality; Hospitality; Engineering; Engineering; D rivers and and Welding.

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INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 26

INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 27

A farewell to Ballie Steve Ball’s untimely death brings the industry together in tribute

By Terry McMullan

STEVE BALL CERTAINLY NEVER WOULD have stopped to think about it, but he was one of the most highly regarded people working in the Australian insurance industry.

At his funeral in Sydney late last month, more than 900 mourners paid tribute to a man who had achieved much and touched so many.

Mr Ball, who was Chairman of JLT Australia, died of a heart attack on May 15 while on a visit to the UK. He was 59.

While JLT Group Deputy Chief Executive Mark Drummond-Brady flew from London to attend, Mr Ball’s funeral was a virtual who’s who of the Australian insurance industry.

Regarded as an honest and wise man with a genuine interest in helping people, “Ballie” was a man with some very big loves. His wife Maureen and children Angus and Katie came an easy first, but he kept some passion in reserve for the insurance industry and golf.

So it was perhaps apt that the end, tragic as it was, should come on a golf course.

“If I were to start telling Ballie golf stories we would be here until [next week], although it will be of interest to people who knew him well that the last hole he played was the par 3 12th,” JLT Australia Chief Executive Leo Demer said in his tribute.

“He hit the ball wide of the green but then somehow managed to get close to the pin… and sank the putt for a par.”

Born and raised in the Sydney suburb of Kogarah, Mr Ball began work at insurer Edward Lumley and Sons in 1971.

In an interview with this writer in 2005, Mr Ball said he was, “like most teenagers of that time, lured more by the rewards than any altruistic motives”.

He learned the ropes under “the unselfish guidance of a string of Lumley advisers”, working in country New South Wales, then London and the Middle East.

The example of the mentoring he received in his early career never left him.

Mr Demer noted this in his tribute, saying Mr Ball’s contribution to JLT was outstanding “not simply for the incredible success he brought the group in financial

terms, but for the support and wise counsel he has given to all the senior people, as well as the younger people who he spent a great deal of time mentoring and assisting along the way”.

“Many of the emails received over the past week have been from past and present employees who wished to express their sense of loss and also gratitude for him having kick-started their careers.

“As most people know, Ballie was very passionate about helping young people make a mark in the industry.”

After 11 years with Edward Lumley and Sons, Mr Ball returned to Sydney in 1982 and joined broker Jardine Glanville, which had just begun an expansion drive that would see it develop into JLT. Mr Demer recalled that the acquisition of Australian Insurance Brokers in 1984 – its founder and long-serving JLT director Brian Coppin died in Perth after a long illness on the same day as Mr Ball – “gave Ballie an opportunity to shine on a bigger stage”.

“Over the next 20 or more years he fulfilled the roles of manager of commercial and domestic insurances (which he christened Comdom), NSW manager, national head of affinity and schemes and following our restructuring into four operating divisions in 2010 the position of managing director of enterprise solutions.”

He was appointed Chairman of JLT Australia in 2013.

“As I have written in other tributes to Ballie, he was the ‘heart’ of JLT,” Mr Demer said. “It’s very easy to forget your responsibility to staff when the pressure is on to hit financial targets, but Ballie never let us forget the human side of the decisions we had to make.

“I know the lessons learned will stay with us when we invoke the ‘what would Ballie say?’ test to measures we may be considering.”

Dr Peter Cooper, Westmead Children’s Hospital Director of Cystic Fibrosis, told of Mr Ball’s organisation over 12 years of an annual charity golf day that has raised more insuranceNEWS

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than $1.5 million to aid research into the disease, a major cause of death in young people.

In our 2005 interview Mr Ball told me: “The mindset in Australia is that being a volunteer is a good thing. The Australian preparedness to volunteer has always staggered me.”

He was a director of NIBA for 12 years and was president in 2004-06. He also served for 10 years as chairman of the national education committee, eight as chairman of the professional indemnity committee and 10 as a director on the finance committee.

Before joining the NIBA board he was a member of the Australian and New Zealand Institute of Insurance and Finance NSW education committee for 11 years, and was president of the NSW branch in 1999.

He was made NSW qualified practising insurance broker of the year in 1997, and was awarded the Lex McKeown Trophy by NIBA in 2008 for services to the association and broking.

It’s not inaccurate to state with certainty that Mr Ball’s sudden death shocked many people across the Australian insurance industry. Within days a website – Raise a glass to Ballie – had been created to allow people to share their pictures and reminiscences.

Mr Demer said JLT was flooded with messages of condolence from across the industry, including a note from Lloyd’s Chairman John Nelson, who said he had “thoroughly enjoyed meeting Stephen in Sydney in February. I know he was held in the highest regard.”

As the mourners stepped out into the open air and crowded the steps of St Mary’s Church in North Sydney, Mrs Ball remained there to greet friends and family, all mixed together.

It was an extraordinary occasion, seeing so many of the industry’s most powerful figures crowded together on a grey afternoon to farewell a person they genuinely liked, trusted and respected.

Steve Ball will be long remembered, and * always fondly.

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Broking in a soft market: Your 10-point guide to surviving the current cycle THE INSURANCE CYCLE HAS dominated the industry’s pricing and marketing practices for many years.

Premiums have traditionally followed the cycle up and down as investment returns rise and fall in line with the normal economic cycle.

Insurers’ risk appetite rises as premium income exceeds claims. They compete more aggressively for market share by adjusting premiums down.

Then, as their combined operating ratios rise and investment income falls, premiums rise again, with higher-risk clients the first to feel the pinch.

This time it’s a bit different.

Institutional investors and pension funds have reacted to a prolonged slump in global economic conditions by investing tens of billions of dollars in reinsurance.

The result has been inevitable: the reinsurance sector has become highly competitive and rates are falling. That’s good news for insurers in one way, but not in another. Because like everyone else, their investment income has also dropped.

Insurers are now caught in a delicate balancing act between staying competitive and staying profitable, while taking advantage of investors’ greater interest in insurance.

It’s a situation that is expected to result in more consolidation in global and national insurance and reinsurance markets as smaller operators feel the squeeze most and seek greater scale through mergers. In Australia in particular, where the market is still seen as buoyant, more foreign insurers are moving into the market to compete aggressively with the locals.

What does that mean for the mainstream insurance broker? Insurers’ renewed competition for market share is driven mainly by price, and that means brokers will earn less from commissions.

The last “soft” market was shortly after the turn of the century, and the period of this latest market softening is predicted by commentators to be a long one. Many younger brokers have never experienced a soft market.

How can brokers maintain income levels in an environment where falling commissions and other insurer-linked income are rapidly becoming a new fact of life? It’s time for a masterclass from some of the older hands on how to survive and thrive in a soft market. Here’s 10 points.

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1.

Stay close to your clients and prove your worth

Even in the best of times little is more important than servicing and maintaining relationships with your clients, but it’s particularly crucial in a soft market. Offering exceptional customer service means clients are less likely to focus on price, while keeping the lines of communication open allows brokers to identify areas where they can upsell additional covers or risk management services. “Stay close to your client” is the advice of BJS Insurance Brokers Managing Director Bill de Vos, who has been through at least three soft markets. Insurance Advisernet General Manager, Operations, Drue Castanelli says brokers should position themselves as risk advisers rather than simply as insurance providers to ensure they are viewed as an integral part of clients’ business. “Your clients should see that you provide important professional advice, much the same as their accountant.” He says clients only have reason to seek out alternative options and shop around if they are not getting perceived value from their broker.

2.

Focus on insurer quality, not price

Austbrokers Managing Director Mark Searles says that those brokers that are wholly focused on price will go backwards in a soft market, but those with an entrepreneurial spirit will find alternative ways of suceeding. Similarly, Mr de Vos says price is often the last thing discussed with clients. “While it’s about price in a soft market, we talk to our clients about everything other than that. If you talk about price, price, price they will see it as a commodity they can get for less.” He says that while a soft market may result in “great deals from insurers chasing market share”, he cautions against sacrificing quality for price. “We want to make sure we maintain the quality of our panels, that is very important. It’s always easy to charge less but the quality of the insurer is important when it comes to getting difficult claims paid.”

Mr Castanelli agrees that “ongoing continuity with an insurer can never be underestimated”.

He says continuity assists clients to manage their insurance spend and, therefore, cashflow, and puts them in a much stronger position in the event of a severe loss or series of losses. “The insurer is far more receptive to working with you and your client when there is a strong history of continuity.”

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3.

Look for new sources of income from existing clients

When new clients are in short supply, upselling to the one you already have is the easiest and most cost-effective way for brokers to generate new income and growth. Mr Searles says that while broker income derived from commissions is down, he is seeing brokers pull in income from new sources. As a consequence, Austbrokers’ saw a 4% increase in new business in the first half of the year. Mr Castenelli says an uninsured risks review can help to identify potential new areas of coverage that the insurance market may have developed covers for since the last review. East West Insurance Brokers Managing Director Greg Rynenberg says brokers should look to cross-sell new products such as cyber insurance, while offering premium funding to more clients is another good revenue generator. He says business-owners are looking for ways to maximise their own cashflow because they are nervous about the economy; most welcome any option to streamline insurance payments.

“We send out premium funding quotations to just about every client.” He says brokers can demonstrate their value to clients by designing a funding arrangement based around the client’s needs, such as tailored to a business with seasonal income movements. “Organic growth is very hard, and looking for new business is getting harder and harder,” he says. “You need to think about how to maximise your earnings from your client base.”

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4.

Review client exposures and reinvest premium savings

5.

Be creative about seeking out new business

7.

A soft market can be a good time to put in the legwork that will bear fruit when market conditions improve. A thorough review of a client’s current business may identify changes in business practice that have led to coverage gaps or insufficient coverage limits. “Exposures that clients face change frequently as their business matures or grows,” Mr Castanelli says. And he is encouraging clients to reinvest premium savings in ways that will improve their risk going forward.

“Consider discussing options with your client to obtain independent risk surveys to cater for risk improvements,” he says. “And get insurance valuations to ensure the adequacy of sums insured.” Mr de Vos agrees that now is the time to be telling clients they can use savings from lower premiums to buy higher levels of cover and to review indemnity levels and sub-limits on property.

Many brokers don’t have much of a budget for marketing, so in a soft market, more than ever, it’s imperative to work every new business lead available. United Insurance Group Managing Director Anthony Zambelli says that with the uncertain state of the general economy, there are fewer new business start-ups, making new clients even harder to come by. Mr Zambelli says he always asks clients whether there is someone they can refer him to. A referral very often leads to a new business win.

“When you get referrals in our market you win a lot of them,” he says. Many of his referrals also come from other professionals who act in an advisory capacity to businesses, such as accountants and lawyers.

Ensuring you network both with clients and with other professionals is vital in establishing these connections.

Other options for new business growth include exploiting expertise within your organisation and capitalising on any niches in which you have a strong position.

If your income is commission-based, a soft market might give food for thought regarding moving to a fee-based model. Fee-based brokers can more predictably and accurately forecast and plan around income and spending and are more insulated from insurance cycles. Charging a fee also makes the spend on brokerage more predictable for clients and increases transparency, allowing clients to judge the value of advice by separating the cost of brokerage from the cost of insurance cover. Fees carry the added benefit of putting brokers on a similar professional footing to accountants, lawyers and other business advisers.

But fee-based brokerages can miss out on the considerable upside available on commission uplifts when the market begins to improve, so to ensure the fee set is commensurate for the work done, whatever the market conditions. Mr Castanelli advises brokers to conduct an accurate and scientific calculation when determining fees.

“Ensure you have the scope of services you provide to your clients up to date, consider tracking the hours spent managing each client across all areas as not all clients are profitable, and work out what your hourly rate is based on hours available. Include all overheads such as office costs, staff costs and all other outgoings,” he says.

8. of strength in numbers

Consider the advantages

If you’ve been considering joining a cluster group, a soft market may provide the moment of truth needed to make the leap. Mr Zambelli, a Steadfast member, says he would not have started his brokerage without aligning with one of the cluster groups.

“There’s strength in numbers,” he adds, citing better access to insurers, centralisation and outsourcing of back-office administration, and help with training and compliance as just some of the advantages that cluster groups can provide. That maximises the amount of time staff can spend on sales leads and client servicing.

9.

Take charge of your fate and control your internal costs

It might go without saying, but a soft market may not be the best time for brokerages to invest in new equipment or premises. But while such plans may need to be shelved, given the prolonged nature of the current soft market that may not be enough.

Enhancing business efficiencies, controlling spending and implementing cost-cutting measures can all help, but tread carefully as drastic cuts could cost clients and put further pressure on income. Mr Zambelli says many brokers, particularly smaller ones, don't have a lot of fat to cut. But implementing efficient back-office systems and streamlining procedures can help to ensure the administration side of the business is under control. That helps to free up your sales team to maximise their sales time.

6. especially the younger ones Train your staff,

A soft market will be a new experience for younger brokers.

“Chances are that unless you have been broking for 18 to 20 years, you will not have encountered a soft market before,” Mr Castanelli says. “And if you have been broking for less than 15 years, you will most probably have not seen an insurer collapse, either.” There are many lessons younger brokers can learn from the more experienced brokers within their organisations who have been through several market cycles. They should seek out veteran brokers for information on how to manage both client and insurer expectations during a soft market. Mr de Vos says BJS is actively working with its younger professionals on the challenges of the market and strategies they can use. It is also undertaking extensive training with staff on sums insured, loss of profits and indemnity so brokers can have a more informed discussion with clients.

Consider the switch from commission to fees

10.

Consider the opportunities that a soft market presents

A prolonged soft market can be akin to survival of the fittest, and not all may survive. Broking firms with ambitions to grow should keep an eye out for those under distress who may be seeking a merger or wanting to be acquired, and in doing so could pay much less for the same business than they would in a hard market. But Mr Zambelli warns would-be acquirers to look carefully at their targets. “You’ve got to look at why they’re in strife,” he says. Is the business simply badly managed or are there underlying problems that could come back to bite the acquirer?

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From Russia with ransom These days, broker Alan Wilson’s advice to clients on the benefits of cyber cover comes from bitter experience

By Andy Swales

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THE RUSSIAN MAFIA, FRENCH BANK accounts, Interpol, killer viruses, a six-figure ransom demand and a clock ticking ominously down towards zero...

It all sounds like the ingredients of a Hollywood thriller, just another day at the office for all-action movie stars such as Liam Neeson and Jason Statham. But for an insurance broker in country Victoria, such dramatic extremes have posed a rather more unexpected challenge.

Alan Wilson’s brush with international cyber crime began a couple of days after Christmas, when a member of his staff opened an email claiming to be from her bank.

She clicked on an attached zip file, her monitor faded to black, and then a message appeared on her screen.

“It said: ‘This is a ransom, please pay €500,000’ to a bank account that is in France... then a timer started ticking backwards: six days, 23 hours, 59 minutes, 59 seconds.

“We were all just standing around, looking at it, thinking, ‘Who’s played a joke on us?’”

But, as Alan Wilson Insurance Brokers soon discovered, this was no laughing matter. When every other screen in the Traralgon office’s network went blank, an emergency call was placed to the company’s IT contractors, who were on Christmas leave.

“They logged into our system remotely and the first thing they said is, ‘Oh, gosh, you’d better get out’,” Managing Director Mr Wilson tells Insurance News. “So we shut our systems down.

“We’d received a ransom virus... from the Russian mafia.”

Mr Wilson says he upgrades 50% of the company’s software and hardware every year, and always has the latest anti-virus technology. But he was left powerless after one ill-advised click.

“Our IT people dragged the manager of the company and one of his senior techs

Crooks with a conscience?

Not really, but ill-gotten gains are going to do some good about the time that alan Wilson’s brokerage was being held to ransom by the russian mafia, another group of international cyber criminals were apparently intent on showering him with money.

Mr Wilson is treasurer of the Gippsland emergency relief Fund, a community organisation that makes aid payments to victims of disasters such as bushfires. the fund receives donations from businesses and individuals, and has a website where people can make such payments.

Victorians are a generous bunch, but when the fund received a glut of small payments amounting to more than $60,000, Mr Wilson smelled a rat.

It turned out the fund had been the recipient of a “robin Hood gesture”.

Mr Wilson says when criminal gangs in europe steal credit card numbers, they use the details to make payments to charity accounts, to ensure the cards are still active. “they’ve got a conscience, these criminal gangs. they look around the world for charitable organisations they can give the money to, to test the credit cards. they just happened to pick on the Gippsland emergency relief Fund.”

Mr Wilson says the payments “started with one cent, five cents, depositing in our bank account through naB, 10 cents, 50 cents, a dollar, $10, $50, $100...

“If they get through to $100, the

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credit card gets a tick.” the gang then starts using the numbers for their own, somewhat less philanthropic, purposes – leaving the charity with a huge pile of ill-gotten gains. “the bank couldn’t stop it for me,” Mr Wilson says. “In a period of four months I got $62,000 into the bank account – thousands and thousands of entries. “you can imagine the number of one-cent entries. We had a pile of [bank statements] about 40cm high, doublesided paper, and then we just stopped printing.”

Mr Wilson moved the fund to another bank account to stop the flow of money.

“We went through all the $100 entries and told the bank to find out about these and see if they could pay some of them back.”

He says the larger sums can be returned. “But how can I send back a cent to someone in europe? you can’t do it.

“I managed to give back $22,000.

I’ve still got more than $40,000 sitting in our bank account that has been donated by criminal elements.” the fund is now examining the tax implications of keeping and using the money for the greater good.

“My attitude is we’re going to keep it and give it to the public,” Mr Wilson says. “For the next disaster, that’s the money I’m going to use.”

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“I had no computer. The only thing I had was a phone and a fax machine. Normally everything is done electronically, online.

What happens with all that information?

Our screens were all black.”

Broker Alan Wilson: a Christmas crisis with two glimmers of hope

back from leave, so they weren’t too impressed with me. But once they were at it they said, ‘This is really serious.’”

They couldn’t get to the root of the problem. But even as the festive cheer was fading fast, there were two glimmers of hope.

One was the brokerage’s IT back-up system. “The fortunate part is, we had mirrored back-up drives and our back-up system ran a 15-day rotation, so it meant... all we’d lost was 15 days’ work,” Mr Wilson says.

“Most people don’t run 15-day back-ups.”

The second source of comfort was a Chubb cyber-insurance policy held via Steadfast. “We reported it to our insurers and we had to get a set of forensic IT people out of Sydney.

“They were all on leave. You can imagine the cost of these people on their ordinary time, but this was the Christmas holidays, when they were away.

“It’s horrendously expensive per hour.

Our techs and their techs were working together on this thing, and they were basically working 24/7.”

What they found was a brand new virus – “and there was no anti-virus. So what they had to do was study the virus, develop an anti-virus... and then check to see what data had been affected.”

In the meantime, the brokerage found itself effectively “banned by the internet”.

The virus infiltrated the company’s email software and tried to forward itself to the company’s contacts list.

When Mr Wilson reported the breach to his insurers, they severed electronic links with the brokerage, to stop the virus reaching them. His bank did the same.

“If I wanted any money, I had to write an old-fashioned cheque and go visit the bank.

For wages, I had to write cheques out. It was like doing business 20 years ago.

“If a client rang up asking for a quote, I had no computer. The only thing I had was a 32

phone and a fax machine. Normally everything is done electronically, online.

“If someone rings up and says, ‘I’ve got a claim,’ how do I know they’re a client? How do I know what they’ve got insured?

“You’ve got 5000-6000 clients and I don’t know how many thousands of policies. What happens with all that information? Our screens were all black.”

Mr Wilson alerted the police, with his case passed along from local, to state, to federal officers and finally Interpol. They told him not to pay the ransom – even if he did, no “cure” would be forthcoming – but that was all.

The only thing the police could tell him, once they’d tracked the French bank account down through the Federal Police and Interpol, was that they knew the account was linked with Russia. “It’s the Russian mafia.”

Mr Wilson learned that “ransoms range from €3000 to €500,000 depending which virus you’ve got, and they just keep sending them out to everyone. That [virus I had] will now be fixed, and there’ll be a new one.

“What the police said is [the criminal gangs] are using computer-skilled kids to write viruses.

“I couldn’t do any business at all,” Mr Wilson says. “We sent all the staff home, apart from two people. We had a receptionist there and another person as back-up.

“I was here in the premises all the time, but I couldn’t do a damn thing. There’s only so much cleaning you can do.”

It was two weeks before the IT experts had the company up and running again.

And a fortnight is a long time in business.

On the total cost of the attack, he says he would “hazard a guess at $200,000. You’ve got two weeks of no productivity and you’ve sent your staff home – 15 people all gone home.

“Through the holiday period you’ve got a team of technicians here. There were three people down here and I think four or five in insuranceNEWS

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Sydney – forensic people working 24/7 while they all should have been on holidays.

“What are they going to charge? They’re not going to do that for 50 bucks an hour.”

The brokerage’s cyber cover paid for the technicians, and “we didn’t even see the bill”.

They say whatever doesn’t kill you makes you stronger – and with the crisis now behind him, it is a sentiment Mr Wilson can appreciate.

“At the end of the day, we were fairly well protected and we didn’t lose anything except a lot of downtime. We had to explain things to clients and I lost money sending people home, but we were pretty fortunate with what we had and the back-up systems our [IT] guys set up.

“They worked really, really well. But it’s a real lesson. What happens if we didn’t have cyber insurance?”

He says the attack “tested our system. I’m quite confident now when asked the question, ‘Will your system work?’ Well, I know it works.

“But how many brokers have a 15-day rotational system on their back-up?

“We learned a lot, and our IT people said we weren’t the first [victims] and we certainly won’t be the last.”

Mr Wilson is now a vocal advocate for businesses establishing strong defences against the growing cyber threat. He has spoken at industry events such as the recent Steadfast conference in Adelaide about the need for back-up systems, appropriate insurance cover and more secure working practices.

“I don’t think people understand it until they get hit with it, or see someone get hit with it,” he tells Insurance News. “I’ve spoken to a few business groups about it.

“What I tell them is to watch what you’re doing – make sure you’ve got proper back-ups, check your IT – and check your emails!” *

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When you need us most, we’re at our best.

Call us on 1800 618 700 or visit acchealth.com.au

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A unifying force IAG’s Donna Walker is focused on bringing people together while championing diversity

By Michelle Hannen

IF YOU FOLLOW THE OLD STEREOTYPE that actuaries are introverts and not particularly good with people, Donna Walker will surprise you.

“I’ve had a common theme in all the things that I do, which is people,” she tells Insurance News. “I like leading people and I genuinely believe that insurance is a people business.

“It’s about relationships, it’s about helping people in times of need, and every interaction that brokers and we as insurers have with endpoint customers is a moment of truth.”

We joke that it’s precisely because she likes people so much that she left actuarial work behind but, stereotypes aside, Ms Walker credits her actuarial training for arming her with the ability to think laterally.

It's a skill that has been well utilised during her 16-year career at IAG. “I’m very thankful for my actuarial background because it teaches you to look at things differently before you make assumptions. It teaches you how to look at things from a holistic viewpoint, and to look at things with a variety of different lenses.”

That finely tuned outlook has been with Ms Walker as she moved through the upper ranks of CGU since arriving in 1999. She has served as head actuary, general manager technical services, general manager claims and chief actuary.

Her people and actuarial skills, plus the breadth of her experience at IAG’s commercial arm, are being drawn upon in her latest challenge. She took up her current role as IAG’s Executive General Manager Broker Business in August last year. The move was part of a shake-up of the insurer’s commercial leadership team following regulatory approval of its acquisition of Wesfarmers general insurance business.

Ms Walker has been tasked with bringing together the CGU and Lumley brands and explaining the changes to brokers.

“The acquisition went through at July 1, 34

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and for the next three months we spent a period of time looking at the business, looking at what worked and what didn’t,” she tells Insurance News. “We made the decision very early on that in the broker market we wouldn’t have those two brands going head to head, and that the CGU brand would prevail.

“There is incredible value in the Lumley brand in its own right, so we will position that and use it more in the agency space going forward. What that looks like and how it manifests, we’re still working through.”

Similarly, after creating a new leadership structure in the initial months following the acquisition, the focus has now turned to bringing the broader broking teams together, Ms Walker says.

“A core part of our CGU proposition is to have local knowledge, local expertise and state-based teams, where we have decisionmaking as close as we possibly can to the brokers in those markets while at the same time providing a national consistency for how our brokers and partners experience the CGU brand.

“Now it’s about bringing the teams together, co-locating them and leveraging that culture about what it looks like and what it feels like to be part of the largest intermediated insurer.

“And how do we actually bring not just the people together, but also the strength of their expertise?”

The response from brokers so far has been positive, Ms Walker says.

“What’s been really pleasing for us in the feedback from brokers is that we haven’t missed a beat. I dare say our competitors would be hoping that we would take our focus away from our partners, and it’s a credit to all our people that we have remained focused on providing great service.

“They’re thinking about the broker experience in dealing with the transition from CGU and Lumley, and more importantly, they’re focusing on how we help

brokers in a market that is not easy at the moment.”

A “best of both worlds” approach to products and wordings, and the migration of the first policies from the Lumley book into the CGU book – which began in recent weeks – are the next priorities.

“It’s a big milestone for us in a lot of respects, but it’s just part of the broader proposition that we’ve got our people working on.”

And Ms Walker confidently says the market should expect big things to come from the largest commercial insurer in Australia.

“A great thing about CGU and Lumley coming together is there’s a scale opportunity for us. Our size gives us a market-leading

means in the corporate and mid-market space. What are the risks that CGU historically might not have written, and where does that fit now with our risk appetite?

“We have an ability to look at volatility a little bit differently than we have in the past, and what that might mean in terms of our overall value proposition to brokers, and even our IAG shareholders,” Ms Walker says.

“We’re still working through what that looks like, but we want to have those conversations with our brokers – to say, ‘what are you thinking about, why wouldn’t you give us a go?’ Given our new size and scale, maybe we would consider [new risks] because we have a large capital base.”

The support to brokers also extends to IAG’s use of data. Ms Walker says that with

“What are the risks that CGU historically might not have written, and where does that fit now with our risk appetite?” position by size, but what we want to be is market-leading by thought leadership.”

She says questions being asked internally include what it actually means to be the largest insurer, and what it means not just in size but in market leadership?

“Where do we want to play, how do we want to play, how do we think differently from just being CGU plus Lumley, but being something that takes us to the next level?”

The organisation’s risk appetite is one area that will evolve, Ms Walker says.

“We are larger in size, and that means our risk appetite is able to grow and be quite different. So we’re looking at what that insuranceNEWS

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the broker channel being squeezed from a number of angles, IAG is looking at the various ways it can help brokers.

“My business is actually about supporting brokers in being relevant. Brokers do a pretty good job themselves in that space, but how do we, as CGU, support the broker value proposition?

“We bring a lot of data to the table, and product innovation. We’ve invested heavily in data and customer insights and understanding some of the levers that we can pull.”

In one such initiative, IAG has analysed its current business customers who haven’t bought business interruption insurance or 35

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Delivering a need from a social perspective: IAG’s Donna Walker

increased their sum insured over the past three years.

“By providing this data to our brokers, they will be able to work with those customers to help them better understand their risk and ensure the right coverage. All these things are ways of cementing the value of advice from a broker perspective, and also helping support the broker to grow their book, so that we can grow in partnership with them.”

IAG is also investing in helping train the next generation of broking leaders.

“There is a new leadership stream coming through, and one of the things that we are actively supporting is a leadership program that we run with some of our key brokers.”

Ms Walker says that involves “helping future leaders in the broking space think about things a little bit differently, and challenging them about how they run their business and also giving them some challenges about how we might do things differently in the industry”.

“You need that difference in thinking in any industry, and I think it’s important we continue to bring new thinking into the insurance industry. How we can attract talent, the way that we conduct our business, the products that we write, the way we think about risk…

“We need fresh thinking to continually come in and evolve.”

Diversity – both of thinking and experience – is another subject close to Ms Walker’s heart. Aside from her day job, she is also Chair of IAG’s Diversity and Inclusion Action Group.

“I know men get sick of hearing about the gender play, but why is it that in this industry all our senior leaders are men? More women graduate with better marks from university, so why do we cut ourselves off from half the population who are bright, innovative thinkers by not creating the appropriate 36

career paths and opportunities for women?”

She describes the recent appointment of CommInsure Managing Director Helen Troup to the board of the Insurance Council of Australia as a “great step forward”, but says that much more needs to be done.

Addressing issues such as the childcare imbalance and the tendency for women to underestimate their abilities – which manifests in less women applying for senior roles – is paramount, Ms Walker says.

So, too, is addressing the pigeonholing of women into claims, human resources, administration and support roles.

“The Diversity and Inclusion Action Group is a way within our own organisation that we can look at how we support women, and help them with some of the barriers that exist in organisations that prevent them from actually achieving those senior ranks.”

Ms Walker says the issue is “not actually just about gender. It’s about diversity of thinking to be a strong, sustainable industry.

“Diversity of thinking means you bring all perspectives to the table, whether it’s male, female, old, young – different views from overseas or Australia. Bring that eclectic thinking and we will end up with a much stronger industry than we would with just one type of thought process and decision making.”

Much as she is aiming to dispel stereotypes around gender, she also takes the opportunity to correct the stereotype of actuaries.

“I worked with some great people when I worked on the actuarial side who were innovative, who asked questions and were curious, and said what would happen if, how could we, and how might we?

“They’re the things that I think we need in our industry. We need people who are questioning and probing, and who actually think about what could we do, rather than just ask, why can’t we do this?” * Much like Ms Walker herself. insuranceNEWS

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LIKE MANY PEOPLE IN THIS industry, Donna Walker admits she “fell into insurance”.

After a childhood learning about business firsthand through her family’s shop in country Victoria, Ms Walker studied statistics at Melbourne University.

It was a chance meeting at a careers day that led her down the actuarial path and a range of business roles – as well as a stint lecturing at her alma mater in actuarial studies before she joined CGU in 1999.

“When I first came into general insurance, I had a three-year plan.

I was going to use it as a way to get into the health sector,” she says.

But fate intervened.

“The things that I aspired to in the health sector were giving something back, doing something that resonated more strongly from a community perspective and actually drove some good for people. I found all that in the general insurance space.

“Many years later I’m still here, because it’s a great industry. It delivers a need from a social perspective. It’s got great career paths, it’s interesting, it’s dynamic, it’s challenging.”

Not that she is all about work.

Married with a step-daughter, it is clear Ms Walker considers family time precious.

“I do try and take four weeks leave a year in a block, because I think you come back a better person for it. There is something about getting out and broadening your horizons.

“You have one life, and it’s just about where you choose to spend your time, and I make those choices very consciously.”

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W HAT IS HE S ECRET TO TO WHAT IS T THE SECRET M CCABES’ M ULTI-AWARD MCCABES’ MULTI-AWARD W INNING INSURANCE INSURANCE PRACTICE? PRACTICE? WINNING McCabes’ McCabes’ multi-award m u lti - a w a r d w winning inning iinsurance nsur ance team team iiss committed providing committed to to p roviding sspecialist pecialist services ser vices to to insurers, insurers, intermediaries, intermediaries, iinsurance nsur ance pools p o ol s a and nd iinsureds. n s ur e d s .

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Expanding into Asia The Underwriting Agencies Council aims for growth in an ambitious new five-year plan UAC Chairman Heath Amber: aiming to be the resource of choice for underwriting agencies

By Leo D’Angelo Fisher

THE UNDERWRITING AGENCIES COUNCIL (UAC) has set itself a bold five-year expansion program to become an Asia-Pacific member organisation.

Formed in 1998 by the heads of six Australian underwriting agencies, the council has grown into a member services organisation with 96 underwriting agency members in Australia and New Zealand.

As part of its Strategic Plan 2020 UAC will target the markets of Singapore, Vietnam, Cambodia, Myanmar and Hong Kong.

The aim will be to promote business opportunities for its Australian and New Zealand members and to attract new members from the region.

UAC Chairman Heath Amber, a director of Millennium Underwriting Agencies, says the council has evolved from an issues-driven organisation to one whose focus is on providing underwriting agencies with “resources, advice, education programs and business support services”.

In February, when work on the plan began, UAC had already identified New Zealand as an important market for expansion. It held its inaugural New Zealand expo in Auckland as part of a push to establish a foothold in the country.

The expo attracted 17 exhibitors and about 250 visitors and confirmed that New Zealand is a market that can be developed.

Now Asia beckons.

“The global insurance platform continues to grow and become more accessible. The UAC board is carefully charting broader market access to assist members into the future.

“The UAC journey is on the cusp of yet another new phase, with expansion opportunities emerging,” Mr Amber tells Insurance News.

He insists that the goals for expansion are “achievable, measurable and realistic”.

The plan states that the aim of UAC is to be “the resource of choice” for the under38

writing agency sector. It commits to assisting agency members to grow their businesses by “fostering a dynamic marketplace between underwriters and brokers”.

But it’s to Australia’s north that UAC believes it can “extend the value of the broker-underwriter marketplace throughout the Asia-Pacific region by providing valuable member services, deep industry expertise and industry representation”.

To this end, UAC’s “roadmap” sets out four strategic goals: • Foster the geographic growth of UAC; • Promote strong and resilient relationships with UAC stakeholders; • Maximise the value of UAC to members; • Bolster UAC’s viability through targeted internal resourcing in the areas of finance, systems, people and intellectual property.

Agency Chief Executive) Lyndon Turner, UAC associate director and Lloyd’s Australia Country Manager Chris Mackinnon, and UAC General Manager William Legge.

Mr Legge also plans to visit Cambodia, Vietnam, Myanmar and Hong Kong over the next 12 months, most likely accompanied by agency heads with an interest in pursuing business in those countries.

“Vietnam is probably a market of choice if you’re a [financial services] membership organisation,” he tells Insurance News. “It’s a highly developed, pretty advanced country.

“We have done a reasonable amount of work in Myanmar, including holding discussions with finance, broking and insurance associations. But there’s more to be done.”

Mr Legge says he is mindful of not wanting UAC to be seen as “an all-conquering force moving in on Asia”.

“The council has evolved from an issuesdriven organisation to one whose focus is on providing underwriting agencies with resources, advice, education programs and business support services.”

UAC is mindful that such ambitious goals can fritter away to nothing, so a “board level governance process” is being set up to ensure the plan “remains front of mind in UAC activity”.

The council has eight board members and two associate members. Two directors will be allocated responsibility for overseeing each of the expansion plan’s goals.

The Asia offensive will start with a threeday visit to Singapore in July by UAC Deputy Chairman (and Nautilus Marine Insurance insuranceNEWS

June/July 2015

“This is about developing opportunities for our members and for UAC. We’re not seeking to colonise these countries. We will be working closely with potential stakeholders who are already there.

“We know it’s going to be a long journey.”

The council is confident it will be welcomed by governments in its target countries because of its strong code of conduct and strict eligibility criteria for membership.

“From the point of view of governments,

INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 39

our structure and code of conduct will be most attractive – it’s what regulators are looking for,” Mr Legge says.

“Both Australia and New Zealand are well respected in the Asia-Pacific region. We should be taking advantage of that goodwill.

“But we will also be emphasising that there are benefits we can offer those countries.”

Although expansion into Asia is “very much on our horizon”, Mr Legge stresses that Australia and New Zealand remain UAC’s principal membership base, and there are plans to expand that local base.

UAC is “very keen” to develop a foothold in north Queensland, where the insurance market is dogged by high premiums and restrictive policies caused by the region’s susceptibility to cyclones.

Associate director Greg Thompson, the Brisbane-based UAA Regional Manager North, is leading the drive to develop membership in the area.

New Zealand also remains a priority. Mr Legge will visit Wellington, Christchurch and Auckland in July to spruik the benefits of UAC membership.

At the time of going to press UAC was also preparing to announce the appointment of a New Zealand-based associate director.

Despite the ambitious agenda for growth – UAC insists it does not have a membership target in its five-year plan – Mr Legge says the council has no plans to “create a vast empire”.

He says resources will be strengthened to match the extra activities, but modestly.

Mr Legge is currently the council’s sole executive, and he anticipates that at some point he will adopt the title of chief executive. That’s as grand as it gets, though – by 2020 he expects to have no more than five direct reports.

“There won’t be a cast of thousands,” he tells Insurance News. “Empires can be selfdestructive.

“When you surround yourself with minions, that’s when things grind to a halt.” *

insuranceNEWS

June/July 2015

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Destination success National Transport Insurance has won a truckload of awards, and nobody ever wants to leave. So what’s its secret?

By John Deex

MANY COMPANIES TALK THE talk about investing in people, but not many can walk the walk quite so convincingly. Marketleading heavy motor insurer National Transport Insurance (NTI) seems to be different.

Workers are happy, staff turnover is low and the awards just keep on coming.

Recent accolades include small-medium general insurer of the year, and claims service provider of the year – both for the second year running.

Added to the haul were best of the best, and employer of the year titles from the Aon Hewitt Best Employers Awards.

And the trophies are backed up with real results.

NTI continues to outperform the market, a trend that will only be enhanced by the recent takeover of Lumley’s heavy motor portfolio following its takeover by IAG, which owns 50% of NTI through its subsidiary company CGU. The other partner is Suncorp.

So how does NTI do it?

Tony Clark, who took over as Chief Executive six years ago, started his tenure by focusing on service as the company’s differentiator.

“We really wanted to turn around the perception of heavy motor insurers finding a way to say no rather than finding a 40

way to say yes in a claims situation,” he tells Insurance News.

“And I suppose, not coincidentally, our mission even back then talked about a culture that inspires effort, nurtures talent and rewards success.

“You can’t really deliver unless you focus on customer needs, and also your own people.”

An early assessment of customer requirements led to a series of initiatives such as a lifetime guarantee on truck repairs, which had never previously been offered in the truck space.

Then there was NTI’s Accident Assist, the first 24/7 call centre for trucks, which included a trauma counselling service.

“When a truck driver is in a major incident, normally the damage is to the car involved and the people,” Mr Clark says.

“They see things that are very, very traumatic and that’s where we came up with trauma counselling for truck drivers.

“Through the call centre they can have the availability of a nurse and a qualified counsellor to help them through that initial stage.

“It’s surprising how many drivers actually use that. The idea is to protect them until the normal processes of a company kick in.” insuranceNEWS

NTI has focused on proactive claims management through its premium repairer network.

Premium repairers are authorised to start stripping a vehicle immediately, get the right parts and return the truck to the road quickly.

“Independent studies have found we get trucks back on the road 27% faster than our competitors because of our proactive approach to managing the accident,” Mr Clark tells Insurance News.

“It’s all about getting the trucker back on the road, because it’s business – he’s losing money if he’s not on the road.”

Listening to feedback, and acting on it, is crucial to the NTI philosophy.

It uses relationshipstrengthening company MirrorWave to measure its service to brokers.

Feedback from more than 500 brokers is analysed, and the reports are distributed throughout NTI. “Last year we had the highest rating we’ve ever had, at 8.3 out of 10,” Mr Clark says.

“We follow up and make sure the feedback is acted upon. That’s part of the reason why we’ve been named mid-size insurer of the year two years in a row.”

June/July 2015

No wrong turns and no going back: NTI Chief Executive Tony Clark

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“You can’t really deliver unless you focus on customer needs, and also your own people.”

But NTI takes it further, insisting you can’t improve service delivery without focusing on your own people, too.

It first took part in the Aon Hewitt Best Employers survey in 2007, when it achieved a fairly average 63% rating. The result was similar the following year.

“We were going along OK, but we needed to make this part of our business,” Mr Clark says.

“We needed to think about what we were doing well and could continue to do well, but also what we were doing poorly and how we could better manage that. We asked our leaders to get honest feedback from their people.

“That is confronting for leaders, but we asked them to take responsibility and be accountable for where their teams were at.

“And we asked our teams to take responsibility as well, so again, even the leaders don’t shoulder everything. It’s for the entire team to take responsibility for how we do things in the workplace.

“That was the real power of how we used the survey – actually using it to become the best employer of the best people.”

Recruitment has been targeted to ensure people fit the

back: k

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June/July 2015

success profile of a particular role.

Initial training focuses on empowerment before determining appropriate career development pathways, with strong support for further training.

Key performance indicators are in place around people management, driving strong feedback on leadership.

Absenteeism and turnover are below the industry averages.

“All this information is being used positively to create honest conversations with our leaders and our people, and encouraging them to be involved in the discussion about where NTI is at and where NTI is going in the future,” Mr Clark says.

“Our leadership effectiveness in the latest Hewitt survey was at 90%, which is best practice as far as that survey goes.

All of this is combined – the customer facets, the people facets – to give you a year where you are winning these awards.

“But it’s not really about the awards – they just occurred.

We are on this journey and we know we are going to trip and make mistakes, but we are going to continue and do the best we can to engage with our people and keep them involved in the development of NTI.” 41

INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 42

“People know they have permission to go outside the strict rules and guidelines and really try to fulfil the needs of people wherever they can.”

A crucial aspect is recognising those within the company who have gone above and beyond.

“One of our repair managers organised a truck that had been involved in a fatality to be repaired quickly and brought back to the widow’s house,” Mr Clark says.

“He made a follow-up phone call a couple of days later to make sure everything was OK, was the truck back?

“She said, ‘Yes, but I just don’t know what to do with it.’

He, off his own bat, organised for the truck to be picked up, sold and the money deposited into her account, without asking anyone.

“That’s about empowerment, permission to do things, and just a great result for that person, who was so appreciative when she wrote a letter.

“I try to get people to let me know about things that have gone above and beyond, and you tell stories about what people have done, and hopefully that creates a behaviour.

“People know they have permission to go outside the strict rules and guidelines and really try to fulfil the needs of people wherever they can.

“We take a lot of pride in it, and I’m amazed at what some of our people have done.”

42

You can’t improve service delivery without focusing on your own people: Tony Clark in NTI’s Brisbane headquarters

Another way NTI aims to differentiate itself is by becoming embedded in the transport industry.

It has an involvement in almost every major transport association, is a foundation sponsor of the Australian Trucking Association and has a representative on the board of TruckSafe.

It also publishes its detailed Major Accident Investigation Report every two years.

“We call ourselves Australia’s No.1 truck insurer. If you’re Australia’s No.1 truck insurer there are a whole lot of behaviours you should exhibit, and one of them is about influencing the safety agenda.

“It’s the stuff we do in repair shops, working with them to improve their productivity and safety and processes, it’s the work we do with the recovery industry.

“We believe even though the rest of the market might get a benefit out of that, we need to be pushing the agenda as far as innovation in those industries goes.”

NTI’s focus on people and service does not just lead to awards, it brings strong performance too. And its unusual ownership as a Vero-CGU joint venture only serves to inspire further success.

“We only exist if we can do this better than our shareinsuranceNEWS

Bumps in the road?

There may be challenging times ahead for the heavy motor sector, but NTI Chief Executive Tony Clark believes the future also holds great opportunity.

“Truck sales are flat at best on last year, but with the slowdown of the mining industry, the question is whether other parts of the economy can pick up those sales,” he tells Insurance News.

“You’re seeing growth in the building sector with new homes, so can that capacity, which was formerly in mining – and mining was only ever 8% of truck freight – be picked up by other industries?”

Mr Clark says insurance pricing reflects fewer truck movements with the slowdown in the economy, plus improved frequency of accidents.

But it is hard to see the downward trend continuing, he says.

“We’ve had claims slowing down, that’s flowed through premiums for over 12 months now and it’s reaching that equilibrium point again where we would expect the pricing to be maintained, probably some marginal increases if there is a uptick in the economy.”

And the future for truck insurers – any insurers, come to that – will be very interesting indeed.

“Like everyone else, we’re focusing on data,” Mr Clark says.

“Rather than calling it Big Data, [it is] different ways of collecting and looking at data.”

Major transport operations already use telematics quite effectively, he says, but one challenge is how telematics works in the non-fleet area.

“Do people want it? Do people want insurers monitoring that?

That’s a real question that hasn’t been answered as yet.

“As the cost of all of that technology comes down, that will make it more viable, but again, do people want insurers to have that information?”

Mr Clark believes new technology is set to make trucks much safer.

“Certainly the first step will be warning systems. Second step, active assistance-type technology, third step the vehicle being more in control than the driver, and then moving to the driver being a passive operator.

“But there’s a lot of technology needs to happen before you get there. You have the challenges of how the technology can be interfered with, the cost of it. It’s a big call and it will be interesting to see how people react.

“We need to understand what our position is in a changing world and how we add value to the customer.”

June/July 2015

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insuranceNEWS

holders and others in the market, so it keeps you very focused as a business,” Mr Clark says.

He highlights an 8% growth in insured items in the past year. “We continue to outperform the market while working in a tough business environment.

“All this work we’ve done with the customer and with our people, getting the awards, continuing to meet our shareholders’ benchmarks and outperform the market – it’s not coincidental that if you do engage people and you do have great service that the awards and the performance fall out the other end.”

So how does NTI do it? By having a plan and sticking to it.

By listening to clients and staff, and responding. By focusing on service and making sure every person, at every level of the company, understands the mission. By empowering people and telling stories of achievement to create a positive culture and tradition.

And, judging by Mr Clark’s final comment, by adding a healthy dose of humility, too.

“It’s amazing what we’ve got to work on,” he says. * June/July 2015

2014: Small-medium general insurer of the year (Australian Insurance Industry Awards) Claims service provider of the year (Australian Insurance Industry Awards) Best of the best (Aon Hewitt Best Employers Awards) Best employer (Aon Hewitt Best Employers Awards) Sue Ronai Memorial Excellence in Claims Award (presented to NTI’s Victoria and Tasmania claims team by Austbrokers Phillips)

2013: Small-medium general insurer of the year (Australian Insurance Industry Awards) Claims service provider of the year (Australian Insurance Industry Awards)

INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 45

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The sinking of Cerno The merger of Stream and Cerno appeared to be a perfect fit.

But one brought with it a fatal legacy

By John Deex IN 2013 STREAM GROUP EXECUTIVES could see such a bright future heading into the long-awaited partnership with Cerno.

The Queensland-based claims service provider’s innovative approach and slick systems, combined with the loss adjuster’s specialist expertise and national footprint, would be a winning combination.

Admittedly Cerno had issues – both operationally and culturally. It was, according to staff who worked there, overweight and uncertain of its future direction.

Chugging along like a heavy-duty steamer from a bygone age, Cerno showed it was not responsive enough to negotiate the treacherous seas and changing currents of modern business.

But the Stream team had the ideas, determination and technology – not to mention the capital – to turn it around.

Or so they thought.

Just a few short weeks after the merger was finalised, Cerno was sinking, dragging dozens of casualties down with it.

More than $13 million of funds had been ploughed into Cerno by Stream, but it still wasn’t enough to keep it afloat. The 46

former loss adjusting behemoth was wound up, with many creditors left unpaid.

Stream’s General Manager Group Business Services Bryce Hatton tells Insurance News the two businesses were well matched, but a combination of unforeseen issues hit it hard.

“Stream had the IT systems and processes to run transactional claims and catastrophe events well, while Cerno had strong expertise and regional spread,” he says.

“It made sense to bring the two functions together to provide a customised approach to a wider range of claims.

“Also, it would give Stream a national distribution spread in addition to our New Zealand and UK operations.”

The timing of the merger was unfortunate, says Mr Hatton. The reason? It happened at the start of one of the most benign claims environments for many years.

And without claims, loss adjusters don't function.

“It wasn’t a good basis to start the merger of two claims organisations,” Mr Hatton says.

He agrees the impact of some issues within Cerno was underestimated at the start, and the operational performance was inconsistent. These factors led to client losses.

“It meant the business was needing to restructure major costs while also trying to change the way it did business, which is a lot to handle at the same time.”

The killer blow was an inability to come to an agreement late last year with Cerno’s debt-holders, forcing the company into voluntary administration in February.

Stream Chairman Christian Bernecker told Insurance News at the time a “stalemate” insuranceNEWS

June/July 2015

with a number of the former Cerno shareholders had forced Cerno’s directors to take the action.

Some of those shareholders contributed significant amounts of money – some their entire life savings – to keep Cerno afloat following the merger of loss adjusters MYI and Freemans in 2009.

They became debt-holders of Cerno Ltd, and Mr Bernecker said the intention had been that Cerno would repay these debts swiftly after the merger was completed.

“But Cerno never had the financial capacity to do so, due to its poor financial performance.”

Mr Hatton says some of the debt-holders resisted any attempts at settlement by Stream following its merger with Cerno earlier this year.

He emphasises that Cerno’s financial problems “came a long time before Stream got involved”.

“The Cerno board was trying to get further financial support to maintain operations, but one particular debt-holder continued to push legal action. And that meant potential financiers wouldn’t provide support.

“So there was no option but to place Cerno into voluntary administration. The directors were legally bound to do so.”

The administrators, Pilot Partners, recommended Cerno be liquidated, and this was confirmed at a creditors’ meeting in March.

Mr Hatton says many of the debt-holders who rejected negotiation now work for competitor companies.

“What seems to have been conveniently forgotten is that Stream contributed millions

INMAG JUN 15_page layouts 3/06/2015 2:50 pm Page 47

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September 2009

July 2011

April 2013

April 2014

June 2014

February 2015

Freemans and McLarens Young International merge to form MYI Freemans

MYI Freemans is renamed Cerno – meaning “resolve and determine” in Latin

Cerno partners with Stream, which invests $3 million via a share placement offer

Stream lists on the Australian Securities Exchange

Stream and Cerno begin merger talks

Merger of Stream and Cerno completed

to Cerno in good faith, to build what we believed would be a fantastic business for its clients and staff,” he tells Insurance News.

“Even after the voluntary administration, Stream has paid out hundreds of thousands of dollars to employees and suppliers, which it had no legal obligation to do.”

The administrator’s report details Cerno’s declining revenue over a number of years, with significant net losses incurred – the largest being $12.47 million last year.

Turning the loss adjuster around had not been possible, says the report, in part due to its “poor culture”.

This is a view shared by others who witnessed the debacle at close quarters.

One source tells Insurance News that Cerno had been doomed since the merger of Freemans Australia and McLarens Young Australia in 2009.

The merger was “a classic M&A failure”, he says. “The two cultures were never truly aligned.

The failure of the business was inevitable and it had nothing to do with Stream.”

The source, who declined to be named for this article, says there was too much reliance on certain insurers, and there was also a series of management failures.

Another Cerno source spoken to by Insurance News agrees.

“The McLarens/Freemans merger was going to fail from day one,” he tells Insurance News.

“We sort of fell apart – self-destructed more than anything.

“Insurers had a lack of confidence in our ability to produce the quality of work that they wanted. We were held out by insurers as an example of what they didn’t want.

“We started on a downward spiral and never recovered.

“Nothing that Stream did brought us down.”

So what now? Can anything be salvaged from the wreck?

48

Stream’s financial performance has taken a major hit – recording a loss of more than $8 million in the first half of this financial year – but it still believes the future is bright.

“Stream now has a broad range of claims services across Australia, New Zealand and the UK and can focus on solving the problems of our clients,” Mr Hatton says.

“We provide 24/7 support in Australia supported by our UK and New Zealand operations.

“Loss adjusting is just one service we offer, ensuring we can provide a customised solution for each client and significant scale to respond to a catastrophe.”

“The merger was a classic M&A failure.

The two cultures were never truly aligned.”

Being the only ASX-listed claims service provider in the industry brings significant levels of governance and access to capital, and Stream intends to make it possible for staff to share in the ownership further down the track.

“We are in a better position now than before the merger,” Mr Hatton says.

“While the final outcome with Cerno was not what anyone envisaged, our focus is now on putting the past behind us and leveraging the geography and skillsets we have retained to focus on our clients.”

There is no doubt that Cerno was impacted by a wider change sweeping the loss adjusting sector.

“The big thing that all loss adjusting firms must face is that insurers are moving to handle insuranceNEWS

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February 2015

March 2015

W

A creditors’ Cerno placed meeting accepts into voluntary the administrator’s administration following failure to recommendation agree terms with that Cerno should be liquidated debt-holders

more and more transactional claims in-house, and the technology is more and more available to achieve that,” Mr Hatton says.

“They want to do a lot more of the smaller stuff themselves.”

However, Mr Hatton believes this need not be a problem if service-providers adapt and support insurers rather than try to resist changes in methods and systems.

“Claims service providers should be looking to move towards a more ‘triaged’ approach to claims to ensure they only work on claims they can 100% add value to.

“The industry also needs to focus on diversification of settlement. We believe processes need to be settlement-agnostic so the right outcome can be achieved for the insurer and their client, rather than forcing some claims down sub-optimal routes.”

So Cerno has sunk, but Stream sails on, navigating its way to what will hopefully be a brighter place.

The future growth of the company will be far from easy, because the experience has clearly left its mark on the industry.

Stream has had to apologise to shareholders for its performance in the 2014/15 financial year, and there has been a psychological impact, too.

Sources have told Insurance News the firm seems bruised and beaten-down. As Mr Hatton sees it, Stream tried to be innovative and help reshape the industry.

But perhaps Stream’s luck is finally turning. The recent spate of catastrophes in east coast population centres has led to a surge in claims, and it’s understood Stream, alongside other firms, is very busy.

Cerno failed despite, and not because of, Stream’s intervention, and its failure stands as a chilling warning to the loss adjusting sector.

Unprecedented upheaval is happening, so it’s time to innovate and adapt – or join * Cerno on the seabed.

R

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AGENT O

CHAN Harsh realities demand a new era of education for brokers, says Martin McAvenna

By Terry McMullan MOST SPEECHES FROM PEOPLE APPROACHING the end of long and successful careers tend to lean towards sentimentality – the challenges overcome, targets achieved, the helpful people met along the way. A valedictory address from Martin McAvenna was never going to be like that, and so it has proved.

The General Manager of Austbrokers & IBNA Member Services (AIMS), who retires on June 30 after a 40-year career in insurance, is one of the deep thinkers in an industry where deep thought is too often lost to the incessant demands of the insurance market.

So no one should have been surprised when his welcoming speech to delegates at the AIMS Conference in Barcelona in April contained a message that reverberated all the way back to Australia, rattling the windows of the various interests in the field of broker education.

Mr McAvenna’s speech laid out the way globalisation and technology are changing the world, and how consumers are willing participants in bypassing the roles of long-established “traditional” businesses like insurance intermediaries.

That led to questions about brokers’ ability to face the developing realities of disintermediation and what the industry is doing to provide meaningful education programs to equip brokers to survive and thrive in a completely new environment.

And Mr McAvenna challenged the delivery and focus of that education by the two bodies most involved in providing it – the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the National Insurance Brokers Association (NIBA).

Describing the competing courses for brokers provided by the two organisations as inefficient, duplicative and inconsistent, he challenged them to 52

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T OF

ANGE work together, to take a different perspective and to even “bring in some outsiders” to shape future broker education.

“If our industry makes the educational choice to be broader and more rigorous and more than vocational training, we can shape the outcome,” he told the AIMS audience.

“If we react rather than choose, the outcome will be shaped for us by our customers and the markets.”

The speech was reported by Insurance News in its weekly online bulletin a few days later, and it was a topic for discussion at the Steadfast Convention in Adelaide that followed the AIMS event.

A surprising number of brokers wrote to Insurance News supporting Mr McAvenna’s call, and privately owned broker training company Gold Seal has now joined the fray, calling for an end to the focus on minimum standards of training.

ANZIIF and NIBA have been relatively quiet in their own response, although it is understood the two bodies have been engaging in closed-door discussions.

NOT A BAD OUTCOME FOR AN ADELAIDE-BORN and raised professional who has spent his career believing that brokers require a diverse skillset to thrive in a fast-changing world.

Mr McAvenna had his first contact with broking in London in 1969, when he joined Stenhouse. He had worked briefly for an underwriter in Australia, but broking became his focus once he realised who some of the clients were.

“I discovered that they had among other clients people like the Rolling Stones and some well-known authors. I thought, ‘Oh, this is much more interesting than the other stuff I’d been doing. So I stayed with them for a while.”

Having learned some broking basics he undertook an overland drive from London to Johannesburg, and after a number of adventures and incidents took up with Stenhouse in South Africa.

He arrived back in Sydney in 1973 as a fully rounded broker.

“The overseas experience was a pretty good introduction to lots of things, but the one thing it did persuade me was that broking was something that could attract my interest because of its wide variety and

the sort of skills you needed to have,” he tells Insurance News.

He defines those skills as “a sense of curiosity, the ability to improvise, to understand what the policy wordings will do and what they won’t do, and an understanding that you relate to customers and the market in a different way than an underwriting office does”.

“When I started, broking appealed to my sense of creativity, and it still does.”

He began working for Stenhouse in Sydney before moving to Willis and then to Frank B Hall, “which became part of Aon. So I went full circle, because Stenhouse was one of the early companies to merge into what became Aon. “From Aon I did a number of years of consulting work. I worked in underwriting agencies for the first time with Trevor McWhirter, who’s a good friend. And that was bought by Austbrokers Holdings and put me into Austagencies.”

He became Executive Director of Austagencies, also serving on the Underwriting Agencies Council board and later as chairman from February 2008 until October 2009, when he resigned to become General Manager of AIMS. His six years running AIMS has been, according to IBNA Chairman Garry Gribbin, “a period of terrific progress, where Martin has worked with us to build a truly exceptional business partnership – something that is unique in our industry and very, very effective”.

The AIMS joint venture was formed in 2007, bringing together the shared equity model of Austbrokers with the IBNA structure of independently owned brokerages. With entirely different cultures, did Mr McAvenna experience difficulties in sitting between the two?

“There certainly were some early challenges,” he concedes. “I think the key to running AIMS is to be sure that you’re giving both members equal service.

“You put them together and you suddenly increase your profile, your buying power in the market and in particular your ability to negotiate terms, conditions, remuneration and so on.

“In my opinion the whole thing about cluster groups is they need nurturing. The brokers are bloody insuranceNEWS

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“When I see what some of our major insurance partners are doing, and the investment they’re putting into the transaction of insurance, it tells me the battle for distribution is on.”

good at what they do, it’s their money and they are ace at relationships.

“The balancing act is letting brokers be what they are, and yet seeking to introduce new systems and management disciplines that can enhance their bottom line and investment companies’ bottom lines.”

But will systems and disciplines, combined with the ever-increasing pressure of regulation, destroy the entrepreneurial heart of broking? Mr McAvenna doubts it.

“There’s always going to be room for the entrepreneur in insurance distribution, whether they’re an authorised rep, a self-owned broker, an underwriting agency who services brokers like brokers have to service clients.”

But he does see hurdles ahead for brokers, and that’s what’s at the heart of his argument for a better broker education system.

“When I see what some of our major insurance partners and competitors are doing, and the investment they’re putting into the transaction of insurance, it tells me the battle for distribution is on.

“Insurance companies largely are running a number of differing brand strategies. Some of them involve brokers, some of them don’t. But as I was saying in Barcelona, digitisation and globalisation is changing how the underwriters themselves work as well.

“It seems to me that systemising just so you can process wordings and billing and all that stuff, is a sowhat issue.

“The real issue is this: if digitisation and globalisation can supplant relationships, that’s where the risks lie for brokers. And we know from the research that’s been done that brokers are beginning to lose market share.”

Mr McAvenna says insurers and brokers are perfecting policy wordings and service standards for high volume business insurance transactions, but in the process they are “dumbing up” insurance.

“There’s a temptation with high volume transactions to turn the businesses of insureds into generic business descriptions, and leave out the stuff they do.

“Because at the heart of insurance broking is actually understanding the activities and the insurance protection clients need, or can get or can’t get, or what the risk management is.

“I also said in Barcelona that real brokers are deal54

doers – they’re innately curious, they’re smart.”

Mr McAvenna says insurers’ growing competition with brokers “is not absolute, but they’ve got to do what they’ve got to do, as do brokers”.

“That’s why brokers have authorised reps and underwriting agencies. And it’s one of the things that makes this situation so interesting.

“But I am still of the mindset that this business is about risk and how we treat it. And the trick is going to be to control the risk and insurance interface.”

As for the emerging threat of the direct online commercial market, where savvy operators with little or no insurance knowledge instead use big mainframes and tonnes of data to transfer risk, Mr McAvenna says people are increasingly mentally “rewired” to accept this as the new normal.

“A business owner who’s got the drive and the gumption to start a business is used to doing lots of stuff online. These are intelligent well-educated people, and they can see a whole range of benefits, and it looks fine to them.

“I’m sure it is fine in the majority of cases, but in my opinion it nevertheless does not adequately address the risks these people face and the consequences. You need training for that. So the [emerging direct insurance operation] doesn’t deal with that, and it doesn’t deal with the claims.”

He sees a total revamping of broker education as a necessity, not an option.

“Insurance education at its fundamentals is not exactly rigorous.

“To give you an example: digitisation now means if you are researching legal precedents for a major trial, or for a tax law or whatever, you can do it in seconds now, whereas it used to take months.

“Our business is no different to the law or anybody else who is doing complex tasks. Which leads me to asking, what is the education we have available showing us?

“It’s not enough to do what we’ve always done, and achieving what we have to achieve in a new world of competition will require a different sort of training. It’s not only academic – although of course that’s part of it – it’s also about what is it to be a broker.”

Mr McAvenna’s argument is that brokers are increasingly dealing with highly qualified businessinsuranceNEWS

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“It comes back to how we can upskill the next generation of insurance brokers so their thought processes can deal with the rewiring of brains that’s going on in business throughout the world.”

The new General Manager of AIMS is Glenn Schultz, who was most recently executive general manager wholesale broking for underwriting agency Quanta.

He is pictured above during a familiarisation tour of the AIMS office in North Sydney with Martin McAvenna, who will retire from the general manager position on June 30.

Mr Schultz has more than 35 years’ experience in insurance and reinsurance broking, and was most recently an executive director of the Coverforce Group, the parent company of Quanta.

Before joining Coverforce in 2012 he spent nine years at Aon Risk Services managing market placement and product design and development.

He has also held senior roles with JLT as chief executive Lloyd Thompson Australia, Sedgwick and John C Lloyd Reinsurance.

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people, and for advice to mean much, something more than a diploma in broking is required.

“I think it will require goodwill throughout the industry and on the part of those who are offering this training, to find a way of bringing it together. It will also require bringing into the mix external people – from outside the industry.

“It will require thinking about the way education is provided. Like these Massive Open Online Courses being developed by places like Melbourne University, Princeton and Yale – all the great universities of the world.

“It will offer training in academic disciplines which I can access sitting here in North Sydney, or you can in Melbourne or somebody in Perth or Jakarta can.

Where you get the benefit of that – let’s call it academic rigour – on your desktop.

“It comes back to how we can upskill the next generation of insurance brokers so their thought processes can deal with the rewiring of brains that’s going on in business throughout the world.

“Because what we sell is an intellectual product. It’s not like selling a tonne of iron ore at $58.

“That’s where I’m trying to go with this. I suppose I quite deliberately put up my hand and said I’d play a role in this if there is one.”

Mr McAvenna agrees that NIBA’s involvement in broker training was once important, “but I think we’ve reached a stage where NIBA and ANZIIF need to reach a compact about how they’re going to do this”.

“It only needs one supplier and the emphasis needs to be different to what it is now.

“Things have to change because everything is changing – and it’s necessary on the grounds of efficiency and content, anyway.

“I think what NIBA does with its lobbying is very important. I think their representation of us as an industry, as one body, is very important.

“But nothing stays the same forever. I’m sorry, that’s such an awful cliche, but it’s true. Our underwriting partners are doing things differently, and what’s more, they’ve got the capital and they’re developing the systems.

“I’m simply saying they’re doing things differently now because they can, and brokers have to do things differently because really, there is no alternative.” * insuranceNEWS

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What he said: Why the industry must develop the skills for brokers and others to keep them relevant in a very different future This is an edited and abridged transcript of Martin McAvenna’s speech to the AIMS Conference opening session in Barcelona in April THE ACCELERATION OF CHANGE HAS BEEN made possible by an unprecedented combination of two things: globalisation and digitisation. And they are changing the rules for the way we live now.

Some small examples: When AIMS started in July 2007, iPhones and Androids did not exist. There wasn’t an iPad or Galaxy in sight until our 2011 conference at the Gold Coast.

Now it’s a pretty safe bet there aren’t too many people here today who haven’t got at least one of those gorgeous gadgets and constant companions. They are universal, they are mobile and they are behavioural change agents.

As Phillip Adams recently wrote, “We have replaced thought with Googling and our memory with Wikipedia.”

Rewiring of our brains is rewiring our behaviour. Time for a holiday? Try Airbnb, with 800,000 listings in 33,000 cities and 192 countries. You can have direct contact with the owner and check out the accommodation online.

Need a taxi? Call Uber instead. It’s faster, more direct, clean, self-regulated.

Communications, mail, transport, accommodation – it’s all legacy business.

Fundamental stuff; well regulated certainty models. Now we all have the tools to push them aside, and we are gleefully doing just that.

We have socialised and normalised new personal and business behaviour, which has given us almost radical freedom of choice in less than 10 years.

We have paid for this privilege, of course.

Privacy is a massively devalued currency today.

But long established, well regulated, legacy business… does that sound familiar?

We brokers are the direct descendants of a business model that is literally centuries old.

And the game-changers aren’t just outside; they’re inside, sitting in our homes and places of business.

Global capital flows right now are washing into insurance capital markets. The Australian insurance industry is sound, well capitalised and well regulated. Insurance actually represents around 2% of Australia’s GDP. What happens when the new actors – global companies which have more money than the average nation – decide that insurance on a global scale seems like a good idea?

What if these characters decide to decode the complex products that are our stock in trade? What happens when their big capital and big data are applied to risk and insurance?

58

They have the scale to become borderless, unregulated carriers.

Mix all of that with consumers and businesses who are already buying worldwide, who are already empowered to do it for themselves.

The insurance broking sector is already noticing the effect. Recent survey work in the SME client sector by Vero shows how much brokers’ customer base is changing its purchasing habits.

In just two years the use of brokers by SME and micro-SME businesses has declined by 11%. That's 44% as at December 2014. It also means that 56% of SMEs did not use a broker. You don’t need a weatherman to know which way this wind blows.

This buyer behaviour is demonstrably linked to strong technology offerings, good products, slick presentation, ease of use. And price.

In the traditional direct interface between the broking industry and our clients, a process of disintermediation is beginning.

In addition, the backroom interface – the process jobs – are being exported by insurers and broker groups to low-cost regimes.

Our two shareholders Austbrokers and IBNA are deeply engaged in systems and process projects designed to lift the bar for client service, and of course, reduce frictional costs – as they must.

The cumulative effect of all this change will, I suggest, reshape the broking business model – the way we represent ourselves to our client base and represent them to the insurance market.

In a way, what we see is a microcosm of the general changes in society we see around us. The age of disruption is here.

Think about this: These disruptive tools which are now fundamental to our business transactions today did not exist when AIMS was formed in 2007.

We brokers say we are the translators and facilitators of risk and insurance. That may be how we choose to think about ourselves, but some customers are not necessarily hearing the same message.

In the age of disruption the technical skillset will be different. The methodology and application of analytics will be more complex.

The expectations of service will also be very different.

In a disrupted landscape, emotional intelligence and how to deliver on it will

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June/July 2015

become much more prominent in the brokerclient relationship. The accidental insurance employee will become less common.

Our offer will have to be re-articulated if we are to continue to hold on to our preferred advisory position.

I believe the business of insurance broking will need a new compact with professional education.

The education of our professionals – right across the general insurance industry, broking, underwriting and distribution – is approaching its event horizon.

So why are there two professional organisations, NIBA and ANZIIF, competing in this space in the Australian market?

If the programs from our professional bodies fulfill perceived current needs, are they sufficient in a disrupted future?

Indeed, are they adequate now for those who are starting out on their insurance careers?

It is not efficient. It is certainly duplicative.

It is not consistent.

This is not about preferring one group over another. It is about taking the best of both groups.

Bring in some outsiders, take a different perspective.

Time is on our side, but not for long.

If our industry makes the educational choice to be broader and more rigorous, and more than vocational training, we can shape the outcome.

If we react rather than choose, the outcome will be shaped us by our customers and the markets.

Over the course of a lifetime in this business I have learned that successful insurance brokers, like computers, come preloaded with a certain range of software.

I’d list that pre-loaded software as energy, enthusiasm, a sense of curiosity, a nose for the deal and pragmatism.

Brokers develop their professional capability with a blend of native intelligence – street smarts – and learned experience. Plus a certain level of formal industry studies for professional accreditation.

In their present form the divergent formats for industry education will not be enough for the age of disruption.

Here’s the big positive: never underestimate brokers in the pursuit of their business objectives. Their talents are already present, but the tools they need will be different, more complex. And it is our choice.

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Choking hazard The global death toll from air pollution is growing, and communities are increasingly looking for someone to blame

By Andy Swales

WHEN ECONOMISTS GAZE into their crystal balls, they invariably see nations such as China and India continuing their march to become powerhouses of global production.

But it is a vision shrouded in smog.

As emerging countries grow on the back of surging manufacturing and primary resource industries, the skies above them have become increasingly toxic, with terrible consequences for the people below.

Last year’s Swiss Re report on emerging risks flags “air pollution as a mortality driver” as a high-impact threat over a timeframe of three years and more.

“In China... scientists have recently warned that air pollution in some areas is now so heavy that impacts on human health have become visible,” the report says.

“This is a major public health issue: the overall impact of air pollution on mortality is comparable to smoking and may reduce average life expectancy by three to five years.”

The report says air pollution has been linked to chronic obstructive pulmonary disease, 60

while the World Health Organisation (WHO) recently found evidence that exposure to outdoor air pollution “causes lung cancer and increases the risk of bladder cancer”.

WHO says about 3.7 million people died from exposure to ambient – or outdoor – air pollution in 2012, up from 1.3 million in 2008 (although the rise is partly attributed to changes in research methodology).

Low and middle-income countries in the western Pacific (including China) and southeast Asia (including India) bore the brunt, with 1.67 million and 936,000 deaths respectively.

WHO figures for 2008-12 show the eastern Mediterranean – a WHO region that takes in the Middle East to central Asia – and southeast Asia to be the most polluted regions, with the western Pacific also far above the global average.

Delhi in India and Karachi in Pakistan are among the worst cities.

Swiss Re says one potential impact of the rising death toll in such regions may be an “increase in litigation against polluters, car manufacturers insuranceNEWS

and energy companies”.

Head of Emerging Risk Management Reto Schneider tells Insurance News the warning signs are there for big business.

“Currently, we have observed an increasing number of complaints, or claims, from those affected by air pollution against governments, requesting control and reduction of air pollution, and consequently an increased number of fines against the polluters violating legal emissions standards.

“Numerous countries and regions offer internet-based platforms to report air pollution complaints. By [the] nature of diffuse air pollution, which is, generally speaking, hard to allocate to one single source, we have not seen any specific developments on liability claims.”

He says energy companies and car manufacturers are well aware of the threat, “however, recent court cases have been turned down”.

The report says other smogrelated issues for developing nations include business interruption from such events as closed airports and highways, and hotel-bound tourists – both June/July 2015

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“This is a major public health issue: the overall impact of air pollution on mortality is comparable to smoking and may reduce average life expectancy by three to five years.�

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News Ltd

Threat unmasked: Brendan Cooper and sisters Rachel and Victoria were among thousands affected by poor air quality following the Hazelwood open-cut mine fire in Victoria

Particulate matter (PM10 ) levels by region, for the last available year in the period 2008–2012

250 PM 10 [ug/m3]

of which have created problems in Beijing recently.

There are also major implications for life and health insurers.

By comparison with many emerging regions – and despite its record as a high-per-capita polluter – Australia is a breath of fresh air, its cities rating far below the global average for air pollution.

Chris Dardaneliotis, Chief Executive of specialist underwriting agency Sterling, tells Insurance News he does not see litigation over illnesses caused by air pollution proving “a huge drama” here.

“When you’re looking at developing countries... the key examples are China and India.

Yes, it is an issue, especially because they rely on fossil fuels.

“I believe China is looking at making it mandatory that a number of businesses have a formal type of environmental impairment liability cover.

“It is definitely an issue in those areas, but when you’re talking about Australia or New Zealand, I can’t see it being too much of an issue.”

However, accidents can – and all too often do – happen.

Mr Dardaneliotis says most environmental impairment liability policies “will provide some sort of cover for sudden, accidental pollution. The third party affected by the pollution arising from such a circumstance would need to link the injury or damage [to] that pollution event.”

The Hazelwood open-cut mine fire in February and March last year is a good example of sudden, accidental pollution.

Many nearby residents complained of respiratory and other health problems, which led to calls for legal action against the mine owner, French energy giant GDF Suez. Law firm Slater & Gordon investigated the possibility of a class action, but this

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128 87 78

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50 0

49 26

Africa

America LMI Eastern Europe LMI Mediterranean LMI

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HI

PM10: Fine particulate matter of 10 microns or less. LMI: low and middle-income. HI: high-income.

PM10 values are regional urban population-weighted Source: World Health Organisation

appears to have stalled.

Mr Dardaneliotis says businesses are increasingly aware of the threat posed by accidental spills and poisonous leaks.

But this has yet to translate into a major spike in take-up of environmental liability policies.

“They’re definitely more aware about environmental exposures, but does that mean there will be a 5-10% growth in policy count? No. The policy count is growing but very, very slowly.”

Ace Regional Manager insuranceNEWS

Asia-Pacific and Far East, Environmental Risk Kane Bennett concurs.

He tells Insurance News some companies are taking steps to mitigate their risk, but “many are not”.

“Companies must do more than simply try to comply with regulations,” Mr Bennett says.

“They must ensure they are aware of the stakeholders who could be affected by their operations, and they must invest in the appropriate tools to manage their exposures when their June/July 2015

World

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Particulate matter (PM10 ) levels for selected cities by region, for the last available year in the period 2008–2012

350 300

PM 10 [ug/m3]

250 200 150 100

Europe LMI

Auckland Melbourne Hiroshima Singapore Seoul

Doha

Eastern Eastern Mediterranean Mediterranean LMI HI

København Paris Lisboa Roma Warszawa Bangkok Colombo Kathmandu Dhaka Delhi Manila Shanghai Hà Noi Beijing Ulaanbaatar

America HI

Abu Dhabi Moscow Bucuresti Belgrad Ankara Sofia

America LMI

Jeddah

Africa

Vancouver Washington Montevideo Puente Alto Santiago Beirut Tehran Amman Cairo Karachi Muscat

San Jose Buenos Aires Caracas Rio de Janeiro Mexico City

0

Port Louis Cape Town Pretoria Accra Dakar

50

South-East Asia

Western Pacific HI

Europe HI

Western Pacific LMI

PM10: Fine particulate matter of 10 microns or less. LMI: low and middle-income. HI: high-income.

Source: World Health Organisation

stakeholders do not feel they are being well protected.”

Regarding the global threat of litigation against manufacturers such as car-makers, Mr Dardaneliotis is doubtful.

“Provided the products that generate pollution – motor vehicles, for example – meet environmental laws in terms of emissions, then arguably where’s the negligence by the car manufacturer?

“It comes down to governmental exposure, where the government has failed either collectively or individually to set benchmarks.”

If a business does find itself in court over the effects of ongoing, everyday emissions, pollution insurance is unlikely to provide a backstop.

Dr Schneider says pollution arising from “the normal operation of the business is traditionally not in the scope of environmental liability insurance”.

In terms of managing risks from “normal” pollution, the onus is firmly on governments and regulators.

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“Air pollution related to the undisrupted operation of the business should be captured with the setting of legal emissions standards based on scientific knowledge, and not be subject to liability insurance,” Dr Schneider says.

In Delhi, a new air quality index has been introduced, and the Government has reportedly proposed innovations such as “bicycle day” on Sundays and switching off streetlights when the moon is full.

In April, Munich Re Head of Corporate Climate Centre Ernst Rauch warned that, in the run-up to December’s United Nations climate change conference in Paris, carbon dioxide emissions-reduction pledges from China, the European Union and the US have made it “apparent that the steps announced by these states will not suffice to reach the goal of the international community: capping global warming at 2 degrees”.

Mr Rauch says if no binding

“Air pollution related to the undisrupted operation of the business should be captured with the setting of legal emissions standards.”

insuranceNEWS

2agreement to contain warming is made in Paris, there are other avenues, such as multilateral agreement between leading emitters including the US, China, India and the EU, committing them to responsibilities outside the UN process.

Will consensus be reached and serious action taken?

Judging by the world’s record so far, we probably shouldn’t hold our breath.

Or, on second thoughts, * perhaps we should.

June/July 2015

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Life and work in HONG KONG Meet three very different Australian insurance professionals who call Hong kong home

SOMe 90,000 AUSTrALIANS CALL HONG kONG HOMe. MANy Of them are Hong kong citizens who have taken out Australian citizenship in case things get rough and they need a bolthole.

But thousands are born-and-bred Australians who love living and working in the middle of this crowded metropolis of more than 7 million suspended somewhere between Mainland China and the West.

The pace of life here is frantic and non-stop. Business is conducted on a basis of Western methods and traditional Chinese culture, where trust and face-to-face contact is every bit as important as the end result.

And insurance is very big business in Hong kong. All the major insurers are here, drawn by its business-friendly policies, the volume of business generated by the city and its massive port, or the ease of access to other Asian countries. Around 35,000 people work in the insurance industry, although personal lines market penetration is low.

Talk to an insurance professional in Hong kong of any ethnicity and they’ll work alongside, do business with or at the very least know an Australian insurance person.

During a brief visit to the city Insurance News seemed to find Australian insurance professionals everywhere.

We selected three whose stories are quite different, but whose insights are similar. They admit you need flexibility and a certain adventurousness to get all you can get out of Hong kong, but there are many offsetting advantages.

The population density is 6300 people per square kilometre, and they advise new arrivals to take their time adjusting to life here. Most Australian residents we spoke to admitted it took a few months to get into the swing of a city that simply never stops.

Hong kong has plenty of challenges for Australians used to wide

insuranceNEWS

open spaces and clean air – the city’s air is badly polluted from the industries in neighbouring cities in China – but some wonderful places are close by, on the many islands around Hong kong or in countries that are only a few hours’ flight away.

And like most large cities, the infrastructure works – it has to. Public transport is the normal way of getting around, and trains, ferries, buses and taxis are quick, efficient and cheap.

And it’s easy to get home on leave. flights to and from Australia are frequent, and the major southeastern cities are a non-stop flight of eight or nine hours away. Perth is slightly closer, and has the advantage of being in the same time zone – so no jetlag!

Our interview subjects on the following pages illustrate just how “international” a career in insurance can be, and their advice on how to approach working overseas repeats what we’ve already been told in previous interviews with Australians in New york, London and Singapore: • Make sure your bosses know your ambitions to work overseas; • Hone your skills or specialise to make your resume more attractive for an overseas posting; • And be adaptable – working in foreign posts isn’t all plain sailing.

Insurance News has found Australian insurance professionals are respected wherever they are, for their relaxed manner, work skills and high standard of general and industry education.

Hong kong is in many ways a more challenging place to live than other financial centres like its archrival Singapore, London or New york.

But the Australian insurance specialists we met in Hong kong accept the bad points as part of the experience. Instead they embrace the excitement and sheer difference of life in a powerhouse of commerce and culture.

June/July 2015

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It’s not just what you know…

This Australian expat has spent most of his insurance career overseas

Dylan Bryant, Lloyd’s General Representative and Country Manager, Hong Kong DYLAN BRYANT’S CAREER IS TESTIMONY to many of the values that successful insurance managers carry with them: professionalism, a willingness to adapt to new circumstances and a talent for networking.

Since April last year he has been Lloyd’s General Representative in Hong Kong, responsible for a crucial market. Not bad for a man who 15 years ago was working for Zurich in a Sydney call centre.

Born in the national capital and raised in the New South Wales seaside town of Port Stephens, he describes starting an insurance career as “something you had to find out by accident”.

The call centre job was a part-time gig that helped pay his way while he studied for a commerce degree at the Australian National University. He remembers the call centre as a great place to learn the value of total customer service, where going the extra yard for a customer adds to the individual’s job satisfaction.

“The Zurich office was 300 metres from the apartment, so it was a great job for me, and I learned plenty,” he says.

He believes his insurance grounding in that call centre was crucial to the successful international career that followed – a career that has seen him work in many places, but never his homeland.

“I think something’s being lost as call

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centres fade away,” he tells Insurance News.

“It’s an ideal training ground, and something we should have used more.”

On graduation he decided he wanted to work overseas and – if he could – stay in insurance. So why not start at the top? He’d been given the email address of a contact in London who just happened to be the head of Zurich’s capital markets business.

The phone interview that followed was positive, so at the age of 23 Dylan found himself working as an underwriter in Zurich’s Corporate Solutions Group in London. Armed with a three-year visa (the acquisition of which is a story in itself) he was immediately immersed in a team working alongside experienced specialist underwriters.

“It laid the foundation of my career,” he says. “I learned from some great people, and without them I’d never have got past square one.”

Within a couple of years his international career as an underwriter was about to get another boost.

Dylan emphasises the important role networking plays in any corporate environment, and he has a perfect example: just over two years after starting work in London, colleagues in Zurich’s New York office were looking for a senior underwriter to add to their team. They remembered the smart and friendly Australian they’d met at various company events and gave him a call.

That led to five fruitful and fun-filled

insuranceNEWS

June/July 2015

years in the US market – four and a half of them in New York and three months in Chicago. He worked as an alternative risk underwriter – a highly specialized role he describes as requiring “generalist experience applied to specific needs”.

“I’d advise anyone wanting to succeed in underwriting to specialise,” he says.

“There’s not a lot of luck involved in any of this. You have to build your skillset and keep honing it.”

The US experience was followed by a move to Asia. “It was late 2008, AIG was teetering on the brink, the US economy was tanking and a colleague from my London days invited me to move to Hong Kong.

“Winter was approaching in North America – moving was an easy decision.”

The Hong Kong posting as regional business manager, Asia-Pacific allowed Dylan to build on his experience in structuring solutions for large corporates while adding relationship management and business development responsibilities.

He obviously did it well, because three years later he became Zurich’s regional head of international, handling all aspects of customer relationships, distribution and marketing in the Asia-Pacific region.

In April last year, some five years after arriving in Hong Kong, Dylan left Zurich to join Lloyd’s as its Hong Kong General Representative. He’s one of a number of old Zurich hands in senior roles at the London-based market, including Chief

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Executive Inga Beale and Director of Global Markets Vincent Vandendael.

“You tend to find yourself running into the same people in your career,” he says.

Now aged 37, he finds representing Lloyd’s in the bustling financial centre both challenging and rewarding.

“There’s always someone wanting to do something different. My ‘customers’ are coverholders, brokers and clients. It’s important to know how to respond to each of those groups. It’s fascinating work.”

“I’ve been 15 years in the insurance industry and I love it.”

Life in Hong Kong after six years hasn’t lost any of its magic, either. “It’s the longest I’ve lived anywhere in my career.”

Home is a small island accessible by ferry. He lives there with his Costa Rican wife Andrea and two-year-old daughter. Far from the Hong Kong stereotype of tall buildings and tiny apartments, they enjoy a house and garden. There are no cars on the island.

Members of Dylan’s family visit them there, and he gets home to Australia for regular visits. But a permanent return to Australia is a distant prospect.

“It’s close to my heart, but there’s no tug to return permanently,” he says. “I’ve really never worked there, after all. Our interests are a bit more skewed towards North America.

“I guess after all this time you tend to see Australia more as a safety net. It’s always going to be there when you need it.”

insuranceNEWS

June/July 2015

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How Mark Kopec became Strong Earth Warrior Immersed in the busiest place on the planet, he and his family have thrived Mark Kopec, Head of Travel for Asia Pacific, Zurich THE KOPEC FAMILY – MARK, WIFE Janelle, three kids, a cat and a dog – arrived from Australia nearly three years ago.

Hailing from the outlying Melbourne suburb of Mt Eliza, which has a population density of 27 people per square kilometre, they decided (well, no one asked the animals) to immerse themselves in everything Hong Kong has to offer.

They chose to live in Mong Kok, which is one of the most crowded places on earth with a population density of 130,000 people per square kilometre. The Guinness Book of World Records says Mong Kok is the busiest place in the world.

“We decided that if we were going to go overseas to work, we needed to fulfill three elements,” says Mark.

“One was cultural – we wanted a balance between immersion into a new culture without losing the sense of where we are from.

“The second was the experience of working in a regional headquarters; and the third was to gain experiences and knowledge that we could take back to Australia with us.”

The balance aspect hasn’t been a problem. It’s not difficult to meet Australians in the local insurance industry, or for that matter anywhere else.

Australians abound in Hong Kong.

So while Mark’s three children aged 11, 10 and 8 are all learning Mandarin – the language of China rather than the Cantonese more common in Hong Kong – the Australian influence in their lives remains strong. For example, there are five Auskick clubs and more than 300 70

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June/July 2015

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children playing in junior AFL teams in Hong Kong.

The Kopec children go to an Australian school, which follows the New South Wales education curriculum and even aligns with the NSW school year.

Living with three kids, a dog and a cat in Mong Kok (it means “crowded corner”) changes the way they do things, Mark tells Insurance News.

“You have to have a high degree of flexibility and plan out your life, because you usually can’t just walk into a restaurant, for example. You have to be on your toes all the time.

“As a family we’ve been on a steep learning curve. We’ve learned to be more adaptable. We’ve had to learn new things as we go along.”

Professionally, the move to Hong Kong to work in a regional management role has been “an amazing experience”.

Many people move into insurance and learn their skills in-house. Others – like Mark – end up in insurance because their skills and experience are needed and can be adapted.

Born and raised in Melbourne, Mark worked in engineering product improvement before joining Allianz offshoot Mondial Assistance in Brisbane, succeeding in a complex business development role that brought him to the attention of AIG. He joined the insurer in Melbourne in 2007, working in the accident and health area as travel insurance manager, winning promotion within seven months to regional travel product manager for Australasia and then, in 2011, as general manager leisure travel.

In 2012 an offer to join Zurich as Head of Travel, Asia Pacific, proved irresistible.

While Mark started working in the role in insuranceNEWS

June/July 2015

Zurich’s Melbourne office, the job necessitated a move to the regional centre in Hong Kong – a move the entire family embraced and which he says was made easy

by Zurich’s support personnel.

While 30% of his time is spent in travelling – his role gives him responsibility for Zurich’s travel insurance business in Japan, Hong Kong, Australia, Malaysia, Singapore, Taiwan, Indonesia and New Zealand – Mark says that’s part of what makes the job so fulfilling.

His work brings him into contact with a wide range of industries such as travel companies, banks, health groups and airlines. It is, he says, “an environment where you can make a difference”.

“And working in an office within a global company has its own rewards.

There’s a huge diversity of nationalities, and I have daily exposure to some of the most senior people in the region. These guys are very accessible.”

Eventually he and his close-knit family will return to Australia, “and we’ll take a lot of good things back with us”.

In the meantime he has an enviable bilingual business card, with the Mandarin symbols spelling out an equivalent sound for his name. Translated back, Mark Kopec becomes “Strong Earth Warrior”.

His advice to anyone wanting to work overseas is simple enough. “The concept of the expatriate is changing. You have to think about being mobile to build your career further.

“Be proactive in making it happen, and don’t think about massive paychecks, because that’s really not what it’s about.

“Working in foreign places is an investment in your career and your future, personally as well as professionally.”

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Seizing the opportunities Michael Lewis’ career has expanded a long way from where he started

Michael Lewis, Practice Leader – Asia, Marsh Risk Consulting NOT MANY PEOPLE GO INTO A profession or trade thinking their skills might just be perfect for a future career in insurance, but that’s insurance for you. An industry that covers so many facets of everyday life needs to draw people from an amazing variety of skillsets. Michael Lewis is a good example.

He’s a sports scientist and exercise physiologist who moved into rehabilitation work on graduation from Sydney University in 2001.

That led to work on insurance claims and injury rehabilitation for workers’ compensation, and a transition to advising on injury management for Allianz in Sydney.

After a period as a national account manager, he moved across to Marsh.

“That’s how it’s been,” he tells Insurance News. “My insurance grounding was in claims and injury management in workers’ comp, and things just moved on and up from there.”

Michael has now worked for Marsh for more than nine years, three of them in Hong Kong. Working for a company with such a global focus, he and his wife Aimee 72

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June/July 2015

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had always thought about a posting to the UK or US. But when he was offered a job developing workforce strategies in the Hong Kong office, the opportunities it offered were too good to ignore.

The main emphasis of his work in north Asia is workers’ compensation, and unlike the highly regulated and service-saturated Australian market there’s not much competition. “So there are opportunities to grow quickly if the right business plan is in place.”

His role has now broadened to co-lead the Marsh Risk Consulting practice in Asia, which takes in Japan, South Korea, Taiwan, China and Hong Kong, which he says gives him “much more freedom to think outside the box than in the Australian market”.

He says Marsh has more than 60 specialists from many different backgrounds consulting to companies across the region.

“We have a vast array of engineers, a seismologist, mathematicians, actuaries… the breadth of skills in the risk consulting team is so much wider than you’d find in any other industry.”

While Michael travels extensively, he and Aimee have settled happily into life in Hong Kong.

He admits it took a while to adapt to the frenetic pace of the city, but says they have no regrets about making the move.

“The first three months were overwhelming, but after six months we’d settled into life and work here. It’s certainly broadened our horizons.”

They have two dogs – “a Chinese mongrel and a toy poodle, both rescue dogs” – and a busy social life. The seemingly permanent grey sky – a result of emissions from coal-fired power stations, traffic and tens of thousands of factories in China's Pearl River Delta – can be countered with plenty of recreational hiking around sparsely populated parts of Hong Kong.

And the more crowded life that is inevitable in Hong Kong is countered by the fact that it’s a very efficient place to live and work.

“Everything works the way it should,” Michael says. “You can travel across the whole country in an hour. Taxis are plentiful and cheap, and residents get angry if a train is four minutes late. They should try commuting by train in Sydney.

“It’s a fantastic city. They might call New York the city that never sleeps, but Hong Kong beats New York hands-down. Any time insuranceNEWS

June/July 2015

of the day or night it’s like Friday night in any other city.”

He finds some Australians’ reluctance to progress their careers by working in Asia frustrating, and challenges ambitious insurance professionals to “look at what they want to get out of working in insurance”.

“You can get captivated on Australia as the be all and end all, but this region is where it’s really happening and where you’ll gain experience you couldn’t get anywhere else.”

Like so many expatriates interviewed by Insurance News, Michael advises Australians wanting to work overseas to talk to their bosses about their ambitions.

His managers said they would need up to 12-18 months to find him overseas opportunities, and urged him to research and make his own case also.

For the future, he’s confident that when the time comes to move to another post, it will be one where he can capitalise on the experience he has gained in Australia and Asia. There is no shortage of possibilities.

“When you come right down to it, it will all depend on what the organisation wants me to do.”

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lawNEWS

A fair share?

The High Court has made a landmark ruling on proportionate liability that will apply to a wide range of professional groups

By Jan McCallum

A HIGH COURT RULING ON proportionate liability has increased the risk of professional people with insurance being targeted for damages.

The case of Selig v Wealthsure is also bad news for insurers. Claim amounts are likely to increase and QBE has been saddled with the costs of two appeals after it decided to fight the case.

The ruling has clarified how proportionate liability may be applied, or how loss might be apportioned among multiple defendants.

Insurance lawyers say the practical outcome is that plaintiffs will sue defendants with “deep pockets”, such as advisers who carry professional indemnity insurance.

One says plaintiff lawyers are sending out newsletters to clients stating they can use the decision to get around proportionate liability provisions in the law.

The decision may affect financial planners the most, but will also apply to other professionals dealing in financial products, in takeovers and stock exchange listings, and in land transactions, where real estate agents, valuers and surveyors may be affected. Accountants, trustees and insurance brokers could also be caught.

Proportionate liability allows a court to divide a loss among a group of people or companies being sued.

It was introduced to the Corporations Act to prevent people targeting defendants with insurance rather than the party that may have caused more of the loss, because it was recognised there would be an impact on insurance premiums.

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Proportionate liability applies only in cases of misleading and deceptive conduct, so in these cases defendants and their insurers can argue they should pay only a share of any damages awarded, rather than the full amount.

In practice it has been argued that if apportionable and non-apportionable claims all give rise to the same loss, then the defendant’s liability can be apportioned.

The High Court ruling confirms that proportionate liability may only apply to misleading and deceptive conduct.

Neovest Ponzi scheme collapsed.

The Seligs sued QBEinsured Wealthsure and Mr Bertram, and other parties, citing breaches of the Corporations Act and Australian Securities and Investments Corporation (ASIC) Act. The scheme promoter, Neovest directors and partners of a law firm were joined to the proceedings.

In April 2013 the Federal Court awarded the Seligs $1.76 million against Wealthsure, Mr Bertram and others. It made findings against some of the parties but did not enter a

“Insurance lawyers say the practical outcome is that plaintiffs will sue defendants with deep pockets, such as advisers who carry professional indemnity insurance.”

People seeking damages for other breaches of the law can argue the insured party should pay the full amount of their loss for that breach.

This is particularly relevant when some of the defendants have gone broke.

The case first went to the Federal Court after Mr and Mrs Selig invested $450,000 in a business called Neovest on the recommendation of their Wealthsure authorised representative David Bertram, only to lose their investment when the insuranceNEWS

judgement against them because they had either gone into bankruptcy or liquidation.

Wealthsure and Mr Bertram argued their liability should be limited to a proportion of the total loss because others had contributed to it.

The Seligs argued proportionate liability applied only to the misleading and deceptive conduct part of their claim, and the court agreed.

This meant Mr Bertram and Wealthsure were liable for all the loss from other breaches of June/July 2015

the Corporations and ASIC acts.

QBE, as insurer of Mr Bertram and Wealthsure, appealed to the Full Federal Court and it overturned the decision, saying that if various breaches of the law cause the same damage, it becomes one apportionable claim.

About the same time another Full Court of the Federal Court made an opposite ruling in the case of ABN Amro Bank v Bathurst Regional Council, a long-running case over complex investments sold to local councils that involved a number of parties.

The Seligs went to the High Court and its unanimous decision has settled the issue from two conflicting judgements.

Andrew Sharpe, Head of Professional Indemnity at law firm McCabes, says by clarifying how proportionate liability applies, the High Court has narrowed its application.

The judgement “brings resolution to an issue that has caused significant debate and uncertainty in the legal profession and the courts”, he tells Insurance News.

Insurers will find it difficult to be certain if proportionate liability applies across a range of circumstances arising in a claim, particularly against professionals or directors and officers.

These claims might involve unconscionable conduct under the Australian Consumer Law, the giving of a takeover document or expert report in the document that contains a misleading or deceptive statement, or inducing persons to deal in a financial product, involving knowledge or recklessness.

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cies cover the client for these types of claim, but insurers face higher payouts.

“Insurers will need to be aware that the quantum of the claims that they have been experiencing in some of these lines is likely to be greater as a result of this decision than it perhaps has been,” Mr Sharpe says.

He says proportionate liability has had a big impact on reducing damages, particularly in cases where some of the parties are unable to pay.

These are most common in actions against financial planners where the underlying investment company has gone broke, as was the case with the Seligs.

Much of the comment following the High Court decision has focused on what it means for financial advisers, but Mr Sharpe says a much wider group of professionals and company executives and directors will be affected.

The case is also significant for insurers, because the High Court ordered QBE to pay the costs of the Federal Court and High Court appeals. These will exceed the policy limit.

Although QBE insured Mr Bertram and Wealthsure, it was a “non-party” to the proceedings.

The High Court says that about the time the Federal Court appeal was filed, Mr Bertram was declared bankrupt and Wealthsure could not have paid the judgement against it.

QBE had asserted its entitlement to conduct the Federal Court appeal on behalf of Mr Bertram and Wealthsure, both of which no longer had any interest in the outcome of the litigation.

“The insurer acted for itself in seeking to better its position,” the court says.

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company NEWS

QBE took a chance that if it won the liability would be reduced to 60% of the judgement sum, as the Federal Court had found at the first trial.

The insurer had incurred legal costs of about $1.35 million by then, and the policy limit was $3 million per claim, including costs and expenses.

The High Court assumed a reasonable proportion of the balance under the policy had been eroded and says “there is likely to be a significant shortfall” in the amount the Seligs will be able to recover.

Holman Webb Lawyers partner John Van de Poll says the order for QBE to pay the costs falls outside the scope of the policy and is an addition rather than an amount contained within the policy limits.

“It is a landmark decision insurers should be conscious of, especially when the conduct of the litigation might erode the indemnity available,” he says.

“Insurers cannot always rely on the limits of a particular policy to protect them against excessive costs orders.”

Mr Van de Poll tells Insurance News the relatively low indemnity limit of the QBE policy may have focused the court’s attention on the likely outcome for the Seligs.

Most policies now start at about $10 million, so that may limit the application of the judgement, because policy funds will not be eroded so quickly.

But he says the strength of the High Court’s comments on the costs order “will inevitably lead to an increasing acceptance by courts of the ability to make orders of this kind against non* parties”.

insuranceNEWS

Mover and shaker: NTI rolls out a new mobile plant and equipment product LUMLEY INSURANCE HAD A SIGNIFICANT BUSINESS IN its heavy motor and mobile plant and equipment portfolios, and this has opened up a range of new opportunities for onetime rival National Transport Insurance (NTI).

IAG, which bought Lumley when it purchased Wesfarmers’ insurance business in December 2013, is a 50% owner of NTI with Suncorp.

It announced in April that it would transfer the portfolios to NTI, opening up a major new market opportunity for Australia’s leading heavy motor insurer.

NTI now has its sights set on being the number one in mobile plant and equipment, too.

With many years’ experience, it had already been covering some of the biggest names in the sector. But the Lumley transfer has given NTI access to fresh resources and expertise, and the outcome is the launch of Yellow Cover, a market leading policy that takes the best from both businesses.

It features an expanded team of experts across the country, and the award-winning NTI Accident Assist program.

It comes with a comprehensive network of expert recovery operators and a lifetime guarantee on all authorised repairs.

NTI General Manager Sales and Distribution Mike Edmonds says key Lumley staff will join with NTI employees on Yellow Cover, and NTI hopes the team’s combination of experience and industry connections will quickly turn the new brand into a serious competitor.

Yellow Cover marks an increased focus in the mobile plant and equipment space.

“With more than 40 years of experience in heavy motor insurance, NTI has proven itself as a reliable and innovative specialist,” he tells Insurance News.

“The transfer of the Lumley portfolio has given us the opportunity to expand our capability in the mobile plant and equipment market with a new leading policy and the recruitment of expertise from Lumley.

“With our local experts across the country and our awardwinning claims services, we’re aiming to be the leader across the mobile plant and equipment market.”

CGU and Vero have jointly owned and operated NTI since 2007.

The joint venture agreement stipulates that policy types such as heavy motor and mobile plant should be under* written and managed by NTI. June/July 2015

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AIMS delegates say hola to Barcelona THe AusTrALIAN INsurANCe INdusTry descended on Barcelona and London in April for a series of conferences involving the members of the Austbrokers & IBNA Member services (AIMs) group.

About 450 AIMs members met in the Catalan capital, where General Manager Martin McAvenna explained the conference theme of “Possibilities” and fired up debate back in Australia with a speech criticising insurance broker education as inadequate and in need of radical reform.

Topics covered at the conference included new risks such as cyber crime, opportunities for business growth and how to build successful partnerships.

Other presentations – such as the address by former British M15 head Baroness eliza Manningham-Fuller, who returned to the uK immediately after her speech “to help my husband with the lambing” – were more intriguing. she spoke on terrorism and the use of intelligence to combat it (the problem, she says, “isn’t the lack of information; it’s the fact

that there’s just an enormous amount of intelligence to go through”).

Another was raffaello d’Andrea, an engineering professor at the swiss Federal Institute of Technology in Zurich, who demonstrated how a small cube packed with electronics could “learn” in about 30 seconds how to leap on to one corner and balance there. He specialises in robotics, and is one of the dynamic forces behind Kiva, a company revolutionising warehousing with robots.

For many brokers a highlight was the discussion panel of local insurance brokers organised by Zurich Insurance Group. Their issues – lack of recognition of the work they do, recruiting problems, a soft market, competition and systems – were very similar to the challenges being faced by their Australian counterparts.

There was also time for delegates to savour the many delights of historic Barcelona, with guided tours of the fabulous creations of Barcelona architect Antoni Gaudi, and a dinner at the national museum of Catalan art.

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Austbrokers members’ pre-AIMs conference included a detour to London. When Barcelona was first discussed as a venue, Austbrokers’ Chief executive Mark searles decided it would be a good opportunity to take brokers to visit the London market.

The result was a professional learning day with 10 senior Lloyd’s executives, followed by a cocktail reception for the 120 visitors in the market’s historic banqueting suite, hosted by Lloyd’s Chairman John Nelson.

IBNA also dovetailed its members’ meeting with Barcelona, with its brokers meeting there before the main event.

The highlight of their meeting was social: a traditional spanish feast at the stunning 19th century mansion Finca Mas solers south of Barcelona, with 250 brokers, their partners and invited industry guests present.

After a fantastic conference in one of the world’s great cities, AIMs will return to Australia next year, with the royal Pines resort on the Gold Coast welcoming delegates in April.

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Ebix mobile solutions allow you greater access to information within your Ebix systems. Retrieve key client and policy information securely wherever you are, easily. Stay informed.

An all new range coming soon.

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Stay informed.

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5,310 {TRUE STORIES}

RESTFUL NIGHTS.

INCLUDING THE SUNDAY ONE OF HIS

SEMIS ROLLED OVER. W

e’ve all had those late night calls where the time itself dictates some uneasiness. When Steve Fieldus, Managing Director of Transforce Bulk Haulage, picked up the phone at 9.30pm that Sunday night, his worries were confirmed.

“One of our drivers was on a narrow, rough stretch of road that had received a massive downpour not long before he got there”, relates Steve. “He dropped a wheel off the bitumen; the ground was so soft, the next thing he knew he was over and in the table drain.” The driver was OK – that was the main thing.

9.35pm. Steve makes one call to NTI and the Accident Assist team swing into action. A nurse calls the driver for a long-range double check and a comforting chat. While this is happening a tow truck and recovery crew are dispatched to the site and the local authorities are notified.

“My driver wanted to stay with the truck until it was removed, so the tow truck driver sat with him all night”, recalls Steve. “You can’t get much better than that.”

11.00pm. In the coming days NTI will keep Steve informed of every step of the repair process, but for now, it’s back to bed for an early Monday start. “I could relax and go to sleep because I knew NTI had everything covered.”

Steve’s been with NTI since the first day he started his business over 14 years (5,130 nights) ago. Perhaps that’s why he gets the kind of sleep that most transport operators only dream of.

Visit truestories.nti.com.au

AUSTRALIA’S NO 1 TRUCK INSURER

Insurance products are provided by National Transport Insurance. NTI Limited (ABN 84 000 746 109) (AFSL 237246) is the Manager for National Transport Insurance, an equal-partner joint venture of CGU Insurance Limited (ABN 27 004 478 371) (AFSL 238291) and AAI Limited trading as Vero Insurance (ABN 48 005 297 807) (AFSL 230859). Each insurer is only responsible for its 50% share of the policy.

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Brokers celebrate with Axis Around 80 brokers enjoyed cocktails and networking as guests of Axis specialty in sydney last month.

Chief executive david smith welcomed guests to sydney’s Park Hyatt hotel and thanked his company’s broker partners for their ongoing support.

Many brokers used the opportunity to discuss the changing world of insurance, with Axis National Manager Professional and Financial Lines Tony Hynes and NsW state Manager and Head of Professional Indemnity Mary-Catherine Thomas there to add the Axis perspective. during the evening Mr smith proposed a toast to the memory of the late steve Ball, the Chairman of JLT Australia.

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peopleNEWS Girls just get to have fun on AHI Ladies’ Day For once the women didn’t have to share the limelight with their male counterparts at the Accident & Health International Ladies’ day in sydney.

Female newcomers to the AHI family were given a warm welcome and appreciation was shown for company stalwarts at the event, held since 2005 to honour the achievements of women.

More than 100 insurance brokers, underwriters and administration professionals gathered at slide, a chic cabaret lounge housed in a 1920s Art deco former bank building near Hyde Park, for the occasion on March 5.

New friendships were forged and longtime contacts took the opportunity to catch up over canapés and cocktails.

For entertainment, the women were treated to a Cirque du soleil-style performance featuring aerial acrobats and a contortionist.

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“

IT IS CRITICAL FOR SOUTH AUSTRALIAN “EMPLOYERS TO UNDERSTAND THE IMPACT THE

NEW CHANGES WILL HAVE ON THEIR BUSINESS. Declan Collins General Manager Employers Mutual SA

A NEW ERA IN WORKERS COMPENSATION FOR SOUTH AUSTRALIA From 1 July 2015, businesses and insurance brokers will experience a new era of workers compensation with the most significant service reforms to the South Australian Scheme in the past 25 years.

From the beginning Employers Mutual recognised the value and potential of the service reforms to really make a difference to the way workers compensation is managed in South Australia.

The implementation of the Return To Work Act 2014 will deliver an improved service model from Employers Mutual and ReturnToWorkSA (formerly WorkCoverSA) for the benefit of both employers and injured workers.

We anticipated the changes early and have been busy rebuilding our service model and piloting mobile case management since last November. In co-operation with ReturnToWorkSA we believe we have created an approach to service that is the most innovative in Australia.

PERSONALISED APPROACH TO WORKERS COMPENSATION Employers have the ability to influence their premium payments As well as a fundamental shift from the previous Scheme, through the provision of suitable employment to their injured Employers Mutual’s new approach and services have been designed to provide a personal approach to claims management. workers, which will make income support payments their only claims cost.

Early intervention We’re going mobile Focus on delivering more timely and effective early intervention With a fleet of Mobile Claims Specialists we’re providing services to employers and injured workers to reduce the cost employers and injured workers with face to face support, and a and impact of workplace injuries. team who oversee the return to work process from end to end.

Working collaboratively with employers, injured workers, and Simpler, reduced premiums treating doctors, our specialists understand the challenges, and South Australian employers have long been burdened with the provide injury management support, education and increased highest average premium rates in the country. Under the new return to work assistance.

Scheme, many employers will enjoy a reduction in premium, with the average 2015/16 premium rate dropping from 2.75% to 1.95% (+WHS fee) – representing the lowest average premium WE’RE MAKING CHANGE EASY rate experienced by employers in the Scheme’s history.

At Employers Mutual, we are here to help you understand the Cap on income payments changes ahead, and to help your clients reduce their costs to business and help people get their lives back.

The new Scheme will also place a cap on the payment of income support payments to 104 weeks, with access to reasonable medical expenses continuing for 12 months after the cessation of income support entitlements. Seriously injured workers are entitled to income support until retirement age (or otherwise discontinued in accordance with the Return to Work Act 2014), with medical support for lifetime.

Insurance_News_150525.indd 1 Insurance_News_150529.indd

For more information about South Australian Workers Compensation Scheme Reform, contact: Employers Mutual Client Services T t & D TFSWJDFT!FNQMPZFSTNVUVBMTB DPN BV FOR MORE INFORMATION visit employersmutual.com.au/SASchemeReform

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peopleNEWS

Steadfast convention kicks off with a bang sPeCTACuLAr FIreWOrKs LAuNCHed THe 17th steadfast Convention in Adelaide in April, and the explosions of bright light continued over the following few days as the evergrowing company celebrated its confidence in itself and its future.

With well over 2000 delegates, the group can easily claim the title of “largest gathering of insurance professionals in Australasia”.

A massive exhibition area at the Adelaide Convention Centre swallowed up the delegates. With so many attending the event, the exhibition area was a central place for exhibitors to interact with the very large contingent of steadfast brokers.

Notable this year was the increasing

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number of steadfast-owned underwriting agencies, which now represent a significant part of the company’s revenue base.

The breakout sessions, first trialled last year, were once again a big success. A wide selection of speakers made presentations in the various breakout rooms, with most sessions packed out.

Nissan Motor sport director rick Kelly and sean dobson from Brisbane roar made presentations, with other team members on hand to make such sessions special.

And, of course, there was the usual wide offering of specialist presenters to talk to delegates about growing their businesses, being more efficient and how to grasp new opportunities.

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The Grand Finale dinner featured chanteuse ricki Lee, with cover band Popcorn playing for the rest of the night keeping late-night revellers on their toes.

A highlight of the traditional convention grand finale dinner was the raffle, which raised a record amount of more than $200,000 for Heart Kids sA and NT. It was a particularly pleasing result for long-time convention organiser Greg stewart, whose granddaughter needed hospitalisation for heart problems when she was an infant.

Brisbane will host the 18th National steadfast Convention from April 16-19 at the Brisbane Convention & exhibition Centre.

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LIABILITY

ASBESTOS

PROFESSIONAL INDEMNITY

CYBER

RECALL AVIATION

MANAGEMENT LIABILITY

We W are true ea re staying tru e tto o our our statement statement off “ “adding value” business. o adding valu e” to your b usiness.

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Allianz scores with Adelaide Oval event Allianz Australia chose the famous Adelaide Oval as the location for its steadfast signature event, coinciding with the 17th annual steadfast Convention in April.

The event was held for 50 steadfast brokers who are part of the Allianz Blue eagle loyalty program. Chief General Manager Broker & Agency division david Hosking opened the evening.

The brokers joined 30 members of the One Allianz team for an evening of good old-fashioned fun, playing popular arcade-style games such as pinball, daytona racing, air hockey, Buck Hunter, King of the Hammer, dragon Punch boxing, table tennis and a grab for cash.

Armed with their own scorecard, brokers competed against each other to be named the “Games champion”.

First place was taken out by Liz Wooden of scott & Broad Clark Pacific; second place went to simon Fanning of BJs Insurance Group; third place was a team effort from the husband-andwife team of Belinda and Allister scott, also of BJs. The winners’ names were screened on the Adelaide Oval scoreboard.

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GT Insurance, working with you to protect all your clients’ vehicles GT Insurance accommodates many classes of insurance for heavy transport operators, not just motor vehicle insurance, and provide a range of additional options to ensure your clients have the right cover for their business.

From our 24-hour GT Accident Assist to our efficient claims management processing—GT Insurance helps get businesses back on the road, safer and sooner. And we’re backed 100% by Allianz underwriting security, giving both you and your client complete peace of mind.

Try our online system for quick and efficient quotes.

Visit www.gtins.com.au

Better heavy motor and transport insurance solutions are available for your clients. To learn more, call your local GT Insurance branch today.

Sydney 02 9966 8820

Newcastle 02 4920 8698

Albury 02 6023 5308

Melbourne 03 8623 2666

Brisbane 07 3210 0666

Townsville 07 4779 5178

Perth 08 9324 1963

Adelaide 08 8232 7645

Darwin 08 8981 7510

Global Transport & Automotive Insurance Solutions Pty Ltd ABN 93 069 048 255 AFSL 240714 trading as GT Insurance as agent for the insurer Allianz Australia Insurance Limited ABN 15 000 122 850 AFSL 234708.

We do not provide advice on this insurance based on any consideration of your objectives, financial situation or needs. Before making a decision, please consider the relevant Product Disclosure Statement or Policy Wording available from your broker or intermediary.

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Loincloths and a onesie – AILA YPs’ wild night out A QBe claims specialist dressed in a loincloth to suit the wild jungle theme of the evening braved the sydney cold in May to take out the best-dressed male costume for the young Professionals Network event, hosted by the Australian Insurance Law Association (AILA).

The $150 restaurant voucher prize was won by Melbournebased QBe claims graduate Christopher Kelly, who came dressed as Tarzan.

Polina Jessop from Queensland-based loss adjusters and event sponsor ACdC Testing won the prize for best-dressed female guest, wearing a leopard-print “onesie”.

Held in May at the Ivy sunroom in the sydney CBd, the event’s jungle theme, “Into the Wild”, was chosen to suit the room’s décor, according to committee member Min yang.

The 400 guests were greeted by a lookalike of uK adventurer Bear Grylls. Guests were entertained by a dJ and a photo booth, where funny costumes such as panda and gorilla hats helped them to get into the party spirit.

The event sold out fast in two weeks and the next event for the AILA young Professionals, which hosts two events a year, will be held in september or October.

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IT’S NOT ALWAYS EASY SAYING WHAT you think. For example, my throwaway line in the last issue about the relevance of the NIBA Convention has landed me in what is known around this place as “an exchange of emails”.

NIBA Chief Executive Dallas Booth says very politely that I’m wrong – everyone says that – and wants me to pitch up at this year’s convention to see how things have changed.

I certainly didn't mean to offend Big Dallas, although I suppose suggesting NIBA’s annual do is no longer the industry centerpiece event it used to be wasn’t going to get past him without a lawyerly riposte.

The NIBA Convention will be held in Melbourne September on 6 to 8.

Unfortunately a few broker mates and I will be fishing in Queensland at that time, but hopefully this free plug will make up for my slur and my absence. I’ll be there in spirit, Dallas.

Mr Publisher fancies himself as a bit of a wit (he’s half right), so I suppose we can forgive him breaking the habit of a lifetime and asking a question from the floor at the AIMS Conference in Barcelona.

Baroness Eliza Manningham-Buller is one of those wonderful women only the English produce whose private school accent and straightforward manner can give you a feeling that stepping out of line may result in your head finding itself removed from your neck.

Until recently the Baroness ran Britain’s MI5, and legend has it that the character of M played by Judy Dench in recent James Bond movies was modelled on her. So Mr Publisher was taking a risk when he stuck his hand up and commented that Bond had done a terrible job protecting her in his latest movie, in which M is killed off.

Cue laughs from the audience and a

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long thoughtful look at his neck from the baroness. Her response: “I met Dame Judy Dench at a cocktail party recently and told her that if any of my people had ever got me stuck in a remote Scottish farmhouse surrounded by an army of terrorists they wouldn’t be working for me for very long.”

A well-known member of the industry who shall remain nameless has had two road accidents in the past 25 years – both in the same city within a few blocks of each other, and neither being his fault.

Both times he was heading home from a function hosted by the same insurer, which coincidentally on both occasions has also been his vehicle insurer. And both times the phone conversation with a claims person has gone like this: “Had you been drinking before the accident?” Yes. “How much had you had to drink?” Two glasses of champagne and two glasses of light beer.

“Is there anybody who was with you who can confirm the amount you had to drink?”

And both times he has been able to reply: “Yes, your chief executive.”

On the subject of booze, we were talking the other day to Warren Hutcheon, the Chief Executive of Ansvar. Being owned by an Anglican Church charity, Ansvar once used to ban alcohol. In fact, it insisted that staff refrain completely from the demon drink.

Not these days, says Warren, although that doesn’t mean his staff have suddenly discovered hedonism. The Ansvar operation is as cautiously worldly about booze as any other insurer.

Apparently in days gone by Ansvar only insured people who followed the path of sobriety, to the point that loss adjusters

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were required to look for any booze on the premises before signing off on a claim.

“Sorry your house burned down, mate, but under the terms of the policy the whisky I found under your bed can’t be considered as good for your rheumatism.”

If you’re a broker and comparing Ansvar’s thoroughly modern policies against those of the capitalist persuasion, it might help to know that 100% of its profits are given away to worthy causes.

Rugby union, the game they allegedly play in Heaven, has always had a disproportionately large following among the insurance industry. So it’s no surprise that a match between a touring Lloyd’s team and a Sydney Northern Suburbs invitational side at Mosman last month attracted 350 spectators.

Lloyd’s Rugby Club was established in the 1920s, apparently to play an annual match against the London Stock Exchange.

As you might expect from a team made up of Lloyd’s brokers, the Lloyd’s side was, like any English international rugby side, beefy and intimidating.

And there were enough Poms to make up two teams, but they were only able to defeat the local scratch side 14-12. The term “invitational” usually means “bring your gear and you’ll get a game”.

As insuranceNEWS.com.au reported, Sterling Insurance Chief Executive Chris Dardaneliotis pulled on his boots for the first time in 23 years and survived the whole game with a few cuts and bruises to show what a great time he had.

A swag of money was raised for charity, the spectators celebrated liberally throughout and a great time was had by all.

That’s the two sides in the picture sent to us by Mark Dixon of Berkshire Hathaway Specialty Insurance. Plenty of beef there; not much intimidation, though.

AIB 8588

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AN ADVISER CAN GET JUST AS MUCH OUT OF A CLAIM AS A CUSTOMER.

Leo Di Paolo has been an insurance adviser for 39 years, 13 of them to Sonter’s Fern Nursery.

So when the nursery was destroyed in the 2013 Blue Mountains’ bushfires, Leo knew he could rely on CGU to help its owner, David Sonter, see it through. As Leo said, “Seeing a claim settled - that’s the most important and rewarding part of my job.” To find out how CGU can help you with your customers, speak to your CGU Business Development Manager today or visit www.cgu.com.au Insurance issued by CGU Insurance Limited ABN 27 004 478 371 AFSL 23829. This is general advice only and your client should consider their personal circumstances and the relevant Product Disclosure Statement available from www.cgu.com.au before purchasing any insurance product.