OCT/NOV 2011 - Insurance News (the magazine)

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INSURERS PONDER OFFSHORE OPTION

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WHAT STEADFAST DID NEXT…

KIDS AND A CAREER You really can succeed at both in the insurance industry. Melinda Howes and six other professional women tell how October/November 2011

MEET QBE’S NEW AUSTRALIA BOSS

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General Insurance Life Insurance Investments

There’s a new top dog in electronic delivery

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Now introducing Strata

Zurich Z urich launches launches S Strata trata on Z.streamXpress o nZ .streamX Xp press Z.streamXpress is all about investing Z.streamXpress investing in solutions for brokers brokers and puts Zurich at technology’s technology’ ology’s cutting edge.

With With the launch of Strata, take advantage of added business bu usiness opportunites, now at yourr finger tips. Choose Z.streamXpress; Z streamXpress; fast, Z.str fast seamless amless & convenient.

For more more details visit www www.zurich.com.au/brokers .zu urich.com.au/brokers

Here Her e to help your world

LLBAT-004946-2011 BAT-004946-2011

ZZU12225 U12225

IN IN

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Innovation drives performance (The good news is that we’ve just been rewarded for both)

Winning the 20 2011 11 Aus Australian tralian Insurance Insurance Industry Industry A Awards wards ffor or Innovation In nnovation and Claims Service Servic ervice Pr Provider ovider Ye ear is a sstrong trong affirmation for for our o innovation innovation lled ed sstrategy. trategy e . A strategy strategy which iss driving service service of the Year excellence and ultimat ely, positiv e resolution. resolution. Visit c cerno.co erno.co excellence ultimately, positive

Claims Ser Service vice Provider Provider of the Y Year ear ar Innovation of the he Y ear Year

Positive o Resolution

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Contents 6 Newsmakers » 10 What Steadfast did next... » The giant broker group is focused on a sharemarket float, an IT revolution and a branding blitz. And that’s just for starters.

14 Home or away? »

It’s cheaper, but not necessarily customer-friendly.

Australian insurers step warily into the uncertain world of offshoring.

18 Fire funding tax gets a reprieve »

Victoria’s rural policyholders take a $416 million sting as brigades spend up big.

21 No change, but still lots of change » Colin Fagen is a steady hand on the reins at QBE Australia.

27 PNG grows up »

Resources riches are driving prosperity and the nation’s insurance industry.

30 Kids and a career »

Meet some working mothers who’ve found balance and fulfillment as parents and professionals in the insurance industry.

45 Tough times in trade credit »

When business is bad, these experts know about it first – and they’ve rarely seen it as bad as it is right now.

50 UAC goes for growth through partnership » Underwriting agents set their professional sights higher with the aid of strategic sponsors.

52 Tragedy behind a claim »

The failure of a dodgy insurer failure leads to a plea for special payment.

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55 Some new cases to ponder » Recent court decisions provide some important points for insurers.

58 10 years later, ‘a stroke of good fortune’ » An insurer gets away free from an HIH-related claim it would normally have had to pay.

59 The yacht that keeled over »

How a simple product liability case became a battle over costs.

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65 WinBEAT gets an extreme makeover » A major upgrade gives the biggest broker system an efficiency boost.

peopleNEWS 66 69 70 72

74 76 79 80

APIG’s conference packs it all in » People power wins Vero debate » AILA speeds up networking opportunities » Sportscover celebrates 25 years with a night for winners » Record numbers flood CC11 » Zurich forums examine white-collar crime » Marine experts gather for special gala night » UAC’s Adelaide expo gains momentum »

82 maglog »

62 Insurance on the go »

New technologies are pushing insurers into a new age of customer service, says a Telstra survey.

October/November 2011

Cover image: Ray Lawler

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newsmakers at

John Cloney (above) has long been admired as an insurance leader who tended to call a spade a spade, and his low-key retirement in July last year disappointed many of his industry admirers. So his naming as the inaugural winner of the Lifetime Achievement Award at the annual Australian Insurance Industry awards in Sydney was warmly received.

The award recognises significant contributions by individuals towards promoting, advancing or improving industry standards, and the irrepressible Cloney earned it for his leadership during his term as chief executive of QBE from 1981 to 1998 and as chairman until his retirement.

Allianz Australia was the choice for General Insurance Company of the Year, and Marsh won the Large/International Broker of the Year award for the fourth consecutive year.

Steadfast Executive Chairman Robert Kelly was named the Insurance Leader of the Year and loss adjuster Cerno took home awards for innovation and claims service.

Other award winners (with the receivers of trophies pictured below) were: Small broker: Simplex Insurance Solutions; Medium broker: Australian Reliance and IBL Limited; Law firm/practitioner: Minter Ellison; Life insurance company: CommInsure; Service provider to the insurance industry: Finity Consulting; Service to the community: Specialised Broking Associates; Underwriting agency: Accident & Health International.

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New Zealand insurers are resting a little easier after the country’s High Court decided the Earthquake Commission (EQC) must cover households for every earthquake event rather than treat them as one insurable event.

The ruling could add hundreds of millions of dollars to the EQC’s liability.

Before the first quake it held more than $NZ6 billion in reserves, but Standard & Poor’s says this will fall to around $NZ2.5 billion, with net exposure to all the events of around $NZ3.5 billion.

The EQC has $NZ2.5 billion reinsurance cover in place, and has announced it’s selling $NZ3.1 billion of government bonds.

About 110,000 homes have multiple claims and the court was asked to rule whether the EQC’s $NZ100,000 of residential building cover applied to each event or in aggregate.

The ruling reduces the bill for the private insurers, whose coverage for damage starts above the EQC allowance.

Reuters

Easing quake insurers’ pain

More than a year after the first quake on September 4, Insurance Council of New Zealand President John Lyon says continuing aftershocks are complicating the reconstruction. The insurers say there’s not much they can do about speeding up repairs until the land stops shaking – and that can includes land zoned green.

There will have to be a

“significant period where there is no event” before insurers regain confidence to deploy capital in the zone.

A green zoning generally means the land is suitable for houses to be repaired or rebuilt, but Lyon says insurers don’t yet know the full extent of such damage as liquefaction.

He says there’s “a lot which is outside the control of insurers”.

$100 million for a bit of China IAG surprised the market in August with a $100 million strategic investment in Chinese general insurer Bohai Property Insurance.

The 20% “strategic interest” adds one more step to IAG’s growing Asian footprint. It means the group has significant stakes in the two largest and most dynamic countries in Asia –

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China and India (where it has a joint venture with the State Bank of India) – to add to its established businesses in Malaysia and Thailand.

Bohai is based in the northeastern city of Taijin, the centre of an economic development area that generates about 30% of China’s national gross domestic product and has a

October/November 2011

premium pool of about $18 billion.

It’s all very positive compared with IAG’s continuing horror run with UK subsidiary Equity Red Star, which continues to bleed money, losing $181 million in the last financial year. This was at least better than the $355 million lost in 2009/10.

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Figure this

Woolworths checks in We’ve been speculating on a move into insurance by giant supermarket chain Woolworths since December 2005, and it took until last month to make the possibility a reality.

Woolworths is partnering with Hollard Insurance and Swiss Re to offer pet insurance – an increasingly popular market niche – and simple life insurance.

This tentative toe-dip into a pool being stirred up by rival retailer Coles won’t last for long, with Hollard Managing Director Richard Enthoven (right) saying they’ll be followed by a “full set of end-to-end products that suits the Woolworths client base”.

While Coles is pushing its way into a share of the motor insurance market with fat discounts, Woolworths says their emphasis “will be on value more than price”.

Hollard will underwrite Woolworths’ general insurance products and also provide distribution and call centre services, while Swiss Re will provide reinsurance support and underwrite the life products.

Enthoven says the Woolworths partnership “is the single largest untapped insurance opportunity in Australia”.

392 MILLION

Amount in dollars of Suncorp’s after-tax profit for 2010/11

673 MILLION

Amount in US dollars of QBE’s after-tax profit for the half-year to June 30

250 MILLION

Amount in dollars of IAG’s net profit for 2010/11

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QBE makes it 10 NIBA awards in a row Spending 10 years on top of a very competitive game is a considerable accomplishment, but QBE sometimes makes it look all too easy.

The insurer collected its 10th consecutive General Insurer of the Year Award at the National Insurance Brokers Association (NIBA) annual convention in Sydney on September 18.

The award, which is open only to insurers operating in the broker market, is judged by broker members of NIBA on 10 service and product factors. Allianz and CGU were the other finalists for the award.

West Australian broker Luke Goss won the Warren Tickle Memorial Award for the insurance broking sector’s most

BILLION

outstanding young professional.

Goss, 29, is the WA State Manager for Blue Broking, and won a trip for two to London with spending money, provided by long-time award sponsor Vero.

He and four other state finalists were judged at a personal development workshop in Sydney.

And respected Sydney broker Steve

Lardner was awarded the Lex McKeown Trophy for services to broking and the association.

Lardner, the Director of Broking Operations at Aon Australia, has served on the NIBA board since 2005. He is the association’s immediate past president and also chaired two convention committees.

Snowball changes course Since July 2009 Suncorp Group Chief Executive Patrick Snowball (left) has been adamant he’ll be out of here when his contract expires on August 31, 2013. Except now he’s changed his mind. That’s not a trait the former army tanker is renowned for, but nevertheless he now plans to stay in the role until at least 2015.

Maybe it’s the balmy weather, or the absence of top-level financial services posts in a gloomy London, or maybe it’s just because he’s enjoying turning that big fat corporation around and making it grow. As Chairman John Storey puts it, Snowball and his executives have made Suncorp “a far stronger organisation with a significant de-risked business model and a clear strategic direction”.

Whatever the reason, his new contract also comes with a rise in base pay to $2.55 million a year, with a new performance-based bonus set at 125% of his base salary, plus share options. insuranceNEWS

October/November 2011

Amount in NZ dollars to strengthen all unreinforced masonry buildings in New Zealand

1.5 BILLION

Value in NZ dollars of all 3867 unreinforced masonry buildings in New Zealand

70

BILLION Cost in US dollars of global insured losses in first half of 2011

35.9 BILLION

Amount in dollars of all claims paid in Australia by insurers in 2010/11

6

BILLION

Maximum insured cost in US dollars of claims on United States insurers from Hurricane Irene 7

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Reuters

newsmakers at

Savage seas batter a pier in Ocean City, Maryland as Hurricane Irene took a steady and destructive cruise along the east coast of the United States and up into Canada in late August.

Estimates of the total insured damage cost range from $US1.5 billion to $US6 billion. Around 60% of the insurance losses are expected from New York, New Jersey and Connecticut, with two-thirds personal lines claims.

These totals exclude the likely liability of the governmentoperated National Flood Insurance Program (NFIP), which is already more than $US18 billion in debt.

Industry observers say the losses from Hurricane Irene alone aren’t significant enough to set off a rise in premium rates.

The major ratings agencies tend to agree, saying reinsurers are well capitalised. Fitch says the market might turn if a huge disaster costs the industry around $US75 billion, which might cause capital markets to take fright and abandon insurance. But then a hit that size isn’t likely, it says.

A NOTE FROM THE PUBLISHER In the last edition of Insurance News we published an article on Institute of Actuaries Australia Chief Executive Melinda Howes, who mentioned in passing her unusual commuting and child-minding arrangements. That started a newsroom discussion about how many successful women in the insurance industry – or for that matter any industry – juggle demanding jobs and the demands of raising children.

The results of our research are in this issue – the compelling stories of seven women at different stages of their insurance careers and the solutions they arrived at. What becomes immediately obvious is that each had to accept some form of compromise to mix children and career.

Some of those compromises have been tough, and none of these women would have been able to mix home and work so successfully without some form of support. This ranges from husbands prepared to step outside the sort of norms their fathers lived by, to supportive extended family, to the employment of nannies. One size definitely does not fit all.

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

In August we welcomed aboard our 17,000th subscriber to insuranceNEWS.com.au, the weekly online partner publication of this magazine. In the previous six months the site has averaged 18,945 unique visitors each month, and on present trends we expect to have hosted well over 100,000 unique visitors by the end of this year.

The magazine is also thriving, with subscriptions now well over 7200. Thanks for your continuing support.

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

I S S N 1 8 3 7 -4 9 7 2

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There are hilarious incidents and also some thoughtful reflections on the raw realities of mixing motherhood and business, but the broad smiles on all our subjects’ faces really says it all.

The most consistent message from each of our participants is that what makes it all possible is employers’ preparedness to also accept some compromises.

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October/November 2011

Material in insuranceNEWS (the magazine) is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without the consent of the copyright holders.

The content of articles appearing in this magazine do not necessarily reflect the views of the Publisher. All statements made are based on information that is believed to be reliable and accurate, but no liability is accepted for any fault or omission. We also accept no responsibility or liability for any matter published in this magazine that reflects personal opinion.

Printed on FSC paper stock using vegetable based inks by a printer with ISO14001 Environmental Management System Certification.

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Steadfast’s Robert Kelly: aiming to give Steadfast members an opportunity to get good value for their businesses

What Steadfast did next...

The giant broker group is focused on a sharemarket float, an IT revolution and a branding blitz. And that’s just for starters

By Michelle Hannen 10

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AS AUSTRALIA’S LARGEST BROKER CLUSTER GROUP, Steadfast has been making its mark on the local insurance industry for the past 15 years. Not usually known for understatement, Steadfast Executive Chairman Robert Kelly describes the organisation as “in transition”, and he’s not kidding.

The next year could be the most significant in Steadfast’s short but impressive history, with a radical development plan involving listing on the Australian Securities Exchange (ASX), a brand repositioning and transacting all its business with insurers electronically.

Mr Kelly says the driver behind the public listing is the need to create an exit strategy for a membership of ageing brokers.

“How do we leverage past the traditional two times commission and fee income, into a more appropriate vehicle to allow people to exit their businesses?” he asks.

The listing will enable member brokers to sell a percentage of their business into a listed Steadfast, with their stake in the listed entity determined by “the amount of profit that they want to allocate to the public company”.

“So if somebody’s making $100 and sells us 25%, then $25 of that profit which goes into the public company will be reflected in shares.”

He says there will be no minimum investment required.

In terms of an exit pathway, selling to the group isn’t the only option. Mr Kelly says for brokerages with younger owners the listing will enable them to free up some funds to acquire other brokers within the group.

“We’re very happy for them to sell some equity to us, and then to build their businesses within.”

The listing may also create opportunities for younger staff members to step up and acquire a stake in the businesses they’re employed in. “We’ll look to encourage the older people to encourage the younger people to actually take some equity and give them a pathway for that equity,” Mr Kelly told Insurance News.

If a Steadfast broker doesn’t want their business involved in a listed Steadfast, Mr Kelly says they will have the option of remaining a shareholder in the current, unlisted public company, Steadfast Group Limited, which will continue to operate alongside the listed entity.

Under the Steadfast plan, they will be able to “choose at any time to put their hand up” and sell part, or all, of their business into the listed company.

“But if they choose not to come in in the beginning, then they’re in the same position as selling to Austbrokers,” Mr Kelly says. “But candidly, our shares at the beginning will be at par issuing value. So if you were thinking about an exit strategy, you might be inclined to come in and ride the arbitrage.”

Mr Kelly says Steadfast’s shareholders are overwhelmingly in support of the listing strategy – indeed 93% of them voted in favour of the move at the group’s Melbourne convention in April. Of its 275 broker members, 206 currently have their accounts undergoing a due diligence process in preparation for the listing.

Steadfast is aiming to become a publicly listed company next year.

So what form will a Steadfast listing take? Mr Kelly says the company has identified three potential options: a standalone initial public offering (IPO); a reverse takeover of an already-listed company; or a merger.

For the latter options, potential targets have been identified, but Mr Kelly declined to reveal them to Insurance News.

“In broad terms they will be businesses that we may be able to buy services from in order to run our broking businesses,” he says. “In one particular case, there may be some cross-opportunities between the two businesses.”

And the other, he says, “would allow us to merge some other businesses which have parallel operating structures – although not in the insurance industry – to the way we do business now”.

Mr Kelly says the driver behind options other than a stand-alone IPO is to ensure a listed Steadfast is in the $150 million capital range. But beyond that, the ultimate form of listing will depend on whichever is of the most benefit to Steadfast’s shareholders.

“We’re doing this not to create a profit for a private equity company, not to make a profit for the board, but to give the shareholders – who’ve put most of their lives into their businesses – every opportunity to get good value for their business and to ride a share arbitrage as the market re-rates the shares.”

In the past, both QBE and Allianz have expressed interest in possibly taking a minority stake in Steadfast – as they have with Austbrokers – and Mr Kelly says insurer shareholders have not been ruled out. “The door’s open and there may even be the odd knock right at this moment,” he says, declining to reveal more.

He says once Steadfast has finalised the form its listing will take, “we will talk in detail to our strategic partners. We value their input and I’m sure at that stage, independently, they’ll all come back to us with their perception of which way we’re going and how they may like to participate or not participate.

“We would always look at our strategic partners in terms of being valuable participants in any share register.”

QBE may consider a stake in a publicly listed Steadfast, but it has yet to back the cluster group’s move to develop its Steadfast Virtual Underwriter (SVU) electronic transaction platform.

Mr Kelly says seven other insurers are supporting the SVU, and he hopes that in time QBE will change its mind.

“They still believe that the SVU is an aggregator model based on the experience of aggregator models in the UK market,” he says. “I think as the SVU product becomes more well known and the benefits to the broking fraternity and to the insurance provider become better understood, the position about it being just an aggregator model will change.”

Mr Kelly says the decision has not affected business between Steadfast members and QBE. “They’re still our largest supplier of product to the group, and we have a very strong and personal relationship with their senior management.”

Mr Kelly told Insurance News that after its listing on the ASX, Steadfast will “eventually do electronically transacted business only via the SVU”.

The SVU currently has 13 professional indemnity

Steadfast in numbers Number of brokerages: 275 / Number of offices: 417 / Premium income 2009/10: $2.8 billion insuranceNEWS

October/November 2011

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And what’s next for Robert Kelly?

The industry strongman has a preferred successor, but he’s not hanging up his spurs yet

Robert Kelly is often described as larger than life and typically has a take-no-prisoners approach to business, which he thought hadn’t won him a lot of friends over the course of his career. So he says he was “humbled” by being named Insurance Leader of the Year at the 2011 Australian Insurance Industry awards in Sydney in August.

“I’ve worked very strongly for the shareholders in this organisation since we started, and one would think that when you have that position that maybe you don’t make too many friends,” he reflects.

“I was hesitant to think that I would get that award on the basis that I’ve had to drive this organisation to be where it is.”

He says not only was the win humbling, but so was the audience reaction.

“I felt a great deal of warmth from the people there, both competitors and suppliers.”

But Mr Kelly was brought down to earth by the reaction of his three-year-old granddaughter Louella. “She said to me, ‘Did you win a trophy?’ And I said, ‘Yes darling, I did.’ She said, ‘That’s not a trophy, it doesn’t have things on the side of it.’ Then she walked out of the room and never mentioned it again.”

While the award was recognition of his services to the insurance industry, Steadfast’s first shareholder and company secretary can foresee a future “on a yacht somewhere” and away from the organisation he

providers, seven industrial special risks providers, five liability providers and two business pack providers transacting full cycle business. Mr Kelly says another two business pack providers will be added by the end of this year, with another three scheduled to come online by the end of the first quarter of 2012.

He says the current low number of business pack providers is the reason SVU turnover “is not as attractive… as what we envisaged”.

“I think when you can get five to seven quotes on business pack that we become very powerful.”

Steadfast is also moving forward with plans to adopt Trusted Choice as a new market positioning after shareholders voted in favour of the idea at the April convention.

Trusted Choice has been used as a slogan by the Independent Insurance Brokers & Agents of America for many years, and Steadfast has trademarked the name for use in the Australian market.

Mr Kelly says the idea behind Trusted Choice is to show a “commitment to excellence”, and sell on service rather than price.

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helped found in 1996 – eventually.

“The success of any business is that it gets better and stronger when you leave it, and that’s how I intend to leave Steadfast, on a pathway to be better,” he says.

“The worst possible thing for me would be when I exit this business that it went backwards. I won’t allow that to happen, so the people who come in will be better than me and take it further than I have.”

Steadfast recently appointed former Employers Mutual Managing Director Cameron McCullagh as Executive Director of Strategic Directions, primarily to help Steadfast with its listing.

But Mr Kelly says that in the longer term Mr McCullagh “can take over parts of the business and allow me the ability to work on other parts of the business”.

With an impressive CV which covers involvement in accounting, funds management, outsourcing, research and a retailer cluster group, Mr McCullagh is a strong addition to the Steadfast executive team.

But Mr Kelly cautions he has not yet put a timeframe around his exit.

“Part of the agreement with Cameron when he came in to run the IPO project was my commitment to stay with the business,” Mr Kelly says.

He adds that after Steadfast is in a public format, it will be the decision of its independent board as to who to appoint as its next leader and a decision about what role he is best suited to undertake on behalf of the new entity.

But the company will not be retiring its current branding as The Strength.

“The brokers will use on their websites Steadfast The Strength and then up on the right corner, the Trusted Choice.

“The Strength shows we have the clout. Trusted Choice says we actually will do what we say.” He says that will involve working closely with the client to understand risks, placement advice and only dealing with insurers that abide by the same ethical and policy requirements.

A budget of almost $1 million has been approved by Steadfast’s shareholders and board for a campaign to raise awareness of the new branding, which will begin next year and be launched at the annual convention on the Gold Coast.

Mr Kelly says revamping the current Steadfast website will be a primary part of the campaign as well as updating customer relationship management tools and the websites of its shareholder companies.

With a full agenda for the rest of 2011 and 2012, what Steadfast will do next is anyone’s guess. But industry watchers can rest assured the organisation will remain both controversial and intriguing as its transition continues.

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October/November 2011

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Home or away?

Reuters

By Michelle Hannen

A call centre in Bangalore: but can they empathise with Australian customers?

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October/November 2011

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It’s cheaper, but not necessarily customer-friendly.

Australian insurers step warily into the uncertain world of offshoring OFFSHORING. THE VERY WORD SENDS a shiver down the spine of most insurance company employees. Images of nameless call centres in India come to mind, and of job losses in the local operations of general insurers. Industry executives, on the other hand, see an opportunity to reduce overheads in a competitive insurance market, and improve returns to shareholders, but not one that comes without its risks.

The public relations and community backlash, stirred up by a vocal union movement and tabloid newspapers, can make offshoring a hard sell, and is perhaps the reason why local insurers have been slow to dip their collective toes into the offshoring waters, compared to their international counterparts.

But evidence suggests the trend is slowly on the rise in the local insurance market, and could become one of the major industry developments over the next five years.

Compared to the banking sector, which has offshored more than 5500 positions since 2007, insurance has been a relatively slow starter.

ANZ led the way in bank offshoring, with NAB and Westpac not too far behind. The Indian city of Bangalore has been the main beneficiary, with Manila in the Philippines also a major regional offshoring hub.

Finance Sector Union (FSU) National Communications and Campaigns Officer Leanne Shingles says that, to date, the banks have focused on sending IT and backoffice roles such as payroll, human resources and processing offshore, although she adds that ANZ has also sent some customer-facing roles offshore, with the relocation of some call centre functions to New Zealand.

In the insurance industry, Suncorp has offshored 288 back-office, payroll, IT and credit risk roles to India since 2007, according to the FSU. It’s currently using two Indian-based service providers, Genpact and World Network Services (WNS), to help map business processes in insurance and finance to identify opportunities for further offshoring following a recent exploratory trip to India by senior Suncorp executives.

Sources say the exercise could result in Suncorp sending a further 1000-2000 jobs offshore, leading to savings of $10-$50 million a year. This time claims roles are in the frame, marking the first time an Australian financial services company has looked to offshore a significant number of customerfacing positions.

Suncorp has been tight-lipped on its intentions, with a spokesman telling Insurance News it is “too early to say whether this ex-

ploratory process will result in any changes to the way we do things”.

“We are always looking for ways to improve and simplify what we do. This typically involves consideration of a range of options including… partnering opportunities where we believe a service could be provided more efficiently by an external provider than we can do it ourselves.”

Ms Shingles says that while the offshoring of back-office jobs – which experience in the banking sector has shown can slow down processes, and create duplication and the need for work to be re-done – is no less important, the offshoring of customer-facing roles is a significant development.

A recent FSU public survey into banking practices found that around 90% of consumers oppose sending banking jobs offshore, and Ms Shingles says she expects the results would be similar for the insurance sector.

“When members of the public find out they are dealing with someone offshore they are very against it,” she told Insurance News.

At present companies do not have to disclose to customers where the operation they are dealing with is based, but the FSU is pushing for mandatory disclosure of call centre locations and a requirement for companies to seek written consent to transfer customer’s personal information offshore.

The campaign is backed by independent senator Nick Xenophon, who has drafted a Consumer Right to Know Bill, which is expected to be introduced into this session of Parliament.

Claims staff were on the front line when the catastrophic floods hit Queensland and Victoria earlier this year, inundated with calls from emotional policyholders under great personal stress.

Ms Shingles says it is difficult to see how foreign workers would be able to grasp the scale of such a catastrophe and empathise with customers, as well as understand the local geography and cultural idiosyncrasies.

“It’s a huge concern that companies such as Suncorp are considering this,” she says. “It’s really difficult to see how this is going to improve customer service.”

IAG is playing a wait-and-see game. A spokesman told Insurance News the company currently has no plans to offshore backoffice functions which are carried out inhouse, but hasn’t closed the door on the possibility.

“However, some of our businesses do access external IT support in areas such as IT systems maintenance and enhancements.”

But he says IAG has ruled out offshoring core insurance functions. “IAG is insuranceNEWS

October/November 2011

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committed to ensuring its profitability and providing value for its customers and shareholders. We’re continually reviewing our operations to ensure we are functioning as efficiently as possible.

“We have a philosophy of not outsourcing activity which goes to our core competencies, such as underwriting and claims management or activity which is customer-facing, such as sales and claims assessment.”

When questioned about its offshoring intentions, QBE Global Underwriting Operations Chief Executive John Neal, who is heading up an IT and operations transformation program at the insurer, avoids a direct answer but says the company will look to capitalise on the different capabilities it has in its offices around the world.

“On the outsourcing question we’ve got a huge advantage in that we employ people in 49 countries, so it’s really about leveraging the capability we’ve got around the globe in terms of that shared services model to ensure we’ve got the best talent in 16

Page 16

the best locations to support the business,” Mr Neal told Insurance News.

The transformation program which is underway in Europe and the Americas is forecast to deliver the insurer savings of $US20 million in 2012, and net annualised benefits of around $US200 million by 2014.

QBE Group Chief Executive Frank O’Halloran says it will be extended to procurement, claims management and shared services, with its initial focus in Australia on streamlining its IT operations.

He adds that ultimately, QBE wants to drive inefficiency out of its business without destroying its profitability or customer focus.

To that end, QBE recently cut around 200 positions from its Australian IT operations after implementing a new operating model. It is also looking to recruit a new chief information officer who will report into Asia rather than locally. That prompted speculation that some of the IT jobs may be moved to QBE’s operations in the Philippines.

The UK insurance industry has been world-leading in the area of offshoring, and insuranceNEWS

October/November 2011

Suncorp Chief Executive Patrick Snowball is no stranger to implementing huge offshoring programs.

He oversaw the offshoring of around 4000 positions – including claims jobs – to India when he was running UK insurer Aviva between 2003 and 2007.

Aviva was not the only UK insurer to jump into offshoring in the early 2000s, but it was certainly the first and the boldest. In 2008, Aviva took things a step further by selling its offshore operations to their Indian operator, WNS, and entering into a master services agreement with WNS to continue to provide outsourced services to its businesses through to 2016.

The UK’s Chartered Insurance Institute (CII) says that the recent recession has reduced the incentive to offshore as the British economy has become more costcompetitive and the Government has come under increasing pressure to retain jobs locally.

A survey conducted by the CII in 2009 found that around 40% of insurers had some form of outsourcing in place. About a quarter felt that outsourcing had been an important initiative for improving claims performance over the previous three years, but only 5% felt that this would continue to be the case in future.

Interestingly, around 15% said that inhousing was important now, with a further 10% adding that it would be in the next three years.

In line with that trend, Chartis UK announced a review of its outsourcing arrangements for property and motor claims in 2010, with a view to bringing as much as possible back in-house.

Executive Director of Regional Claims for UK and Ireland Steve Agutter says: “I felt that we should own the core claimshandling and the customer outcomes ourselves. That’s the product the customer’s buying.”

Mr Agutter says Chartis found regulatory demands also added to the difficulty and expense of managing outsourced business.

Axa UK has also announced a review of its outsourcing arrangements. Claims Director David Williams says direct contact with customers “is something that you shouldn’t give up. Claims is a massive opportunity. It can really damage your reputation if it’s done badly.”

Mr Williams says following-up complaints is harder when an outsourcing provider is involved.

“It always seems to be that the claims that go badly wrong are the ones that are outsourced.”

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Reuters

Fire funding tax gets a reprieve

Victoria’s rural policyholders take a $416 million sting as brigades spend up big

By Jan McCallum VICTORIAN BROKERS thought the end of the state’s fire services levy was in sight when a Liberal-National coalition government was elected and promised to abide by the defeated Labor government’s decision to heed the bushfires royal commission recommendation for the levy to be dropped.

But the insurance industry, 18

which will contribute $416 million to the Country Fire Authority (CFA) this financial year through the tax on premiums, will have to wait until 2013 for the levy to be dropped in favour of a property-based charge.

The delay and a 30% increase the fire services levy (FSL) have caused outrage insuranceNEWS

among country brokers, who had been telling clients the levy would be abolished from July next year.

Shepparton-based Ben Goodall, General Manager of Griffiths Goodall Insurance Brokers, has had to tell a client paying $300,000 in FSL that the tax on his premium will rise by another $90,000 – “nearly a October/November 2011

Above: a CFA firetruck ready for action: the Victorian Government will build 65 fire stations and buy 101 new firetrucks as it prepares to move to a property-based levy system

Reuters

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$100,000 increase on their insurance costs without a rate increase”.

Farmers will cop a large increase because their premiums have risen by up to 25% this year, and Mr Goodall says his manufacturing clients outside metropolitan Melbourne are also carrying the cost of a rise in the CFA budget – yet most of them are a low fire risk because of the amount of risk management they undertake to get insurance.

The outraged reaction in regional Victoria is also so strong because a coalition government which had long campaigned for an end to the FSL has implemented the delay and allowed the increase in the levy from 65% to 85% of the base premium.

Brokers who have contacted Insurance News are questioning whether the Government is really committed to abolishing the levy.

The answer is an emphatic yes from Deputy Premier and Emergency Services Minister Peter Ryan, who represents a rural electorate.

“It will be done – end of story,” he told Insurance News.

Mr Ryan says the previous Labor state government committed to abolishing the levy in its final days – actually a month before the November 27 election – without taking any action to organise the changeover, so the coalition came into government with the task of making it happen.

It has since released a consultation paper on how a property-based levy could work, with the most likely option being collection by local councils. Mr Ryan says the change will be revenue-neutral.

He rejects brokers’ allegations that the increase in the collection from $309 million last year to $416 million this year is a last grab from insurance customers before the levy is changed, saying that is a “statement in ignorance”.

The Government has committed to spending almost $1 billion to implement the recommendations of the Bushfires Royal Commission, called after Victoria’s devastating 2009 bushfires.

“It has got to be funded,” Mr Ryan says.

The CFA has had a significant increase in its budget, with the Government committing to the construction of 65 new fire 20

11:08 AM

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stations and 101 new firefighting vehicles, as well as investment in early warning systems.

The royal commission recommended the FSL be replaced by a property-based levy, noting that people who do not insure or who underinsure avoid contributing to the funding of the fire services yet get the same protection as people who are funding the services through their insurance.

the state’s consolidated fund.

LMI Group Managing Director Allan Manning, a longtime campaigner against the FSL system, says the cost of the CFA’s new plant and equipment should be spread over a number of years rather than hitting insurance policyholders for a benefit the entire rural community will obtain.

“It seems to me they have been slugged for this in one hit before it goes to local government,” he says.

It calculated that a property levy would reduce the cost of insurance to a country business by 45% and by 24% for a house.

A spokesman for Victorian Treasurer Kim Wells says there has not been a delay in dropping the levy, because the transition process for the changeover will begin in July next year and it will take a year to phase in as policies come up for renewal.

She told Insurance News that FSL rates “have returned to their 2009 levels” and the increase reflects the rise in funding for the CFA. The CFA has a budget of $536.8 million this year, of which insurance companies will contribute $416 million while $120.8 million will come from

“They are getting the insurance industry to pay for these long-term investments while it is still our baby so they can impose a lower property tax in two years.”

Dr Manning has calculated that a regional business paying a $1000 premium will pay more than $2238 due to the levy. The base premium will comprise 45%, FSL 38%, GST 8% and stamp duty 9%.

“This is a most inequitable tax,” he says.

Mr Ryan agrees. He says the FSL should have been abolished years ago and he has spent more than a decade campaigning for a fairer system.

A rates-based system operates in all states except Victoria, New South Wales and Tasmania.

insuranceNEWS

October/November 2011

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No change, but still lots of change Colin Fagen is a steady hand on the reins at QBE Australia

By Terry McMullan insuranceNEWS

October/November 2011

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THE APPOINTMENT IN JULY OF COLIN Fagen as QBE’s new Australian operations chief executive wasn’t much of a surprise, given that he has spent the past 10 or so years carving out a reputation in the market as a straight-shooter and a loyal company man.

His move into the job was announced

by Group Chief Executive Frank O’Halloran, who revealed that the Australia Asia Pacific division was to be split up again into two divisions – a move that saw long-serving executive Vince McLenaghan leave the company.

Mr O’Halloran used a sporting analogy to explain why Fagen was in and McLenaghan was out, pointing out that good sporting teams “have to change players every now and again to stay at the top of the ladder”.

“That’s not saying that Vince wasn’t performing, just that we felt we needed to have a chief executive of Australian operations and Colin Fagen is an outstanding individual. He deserved to get an opportunity to run Australia.”

Mr Fagen’s appointment has been well received. At 44, the softly spoken Sydneysider with an MBA and commerce degree is bringing a fresh outlook to QBE’s mature Australian business, where growth is more likely to come from bolt-on acquisitions than a spectacular multi-billion dollar takeover.

He’s advocating a “steady as she goes” approach, with no sharp strategic switches.

In an interview with Insurance News last month, he said he’ll be “focusing on the core parts of the business – the profitability of individual portfolios and profitability of different regions”.

“Our strategy at this point is not to withdraw from any areas or withdraw from any products,” he says. “However, we will price them rationally, so if we need to increase rates we will do that.”

Page 22

It’s increasingly obvious that the move to bring the Asia-Pacific and Australia divisions under one managerial roof needed to be revisited. And it’s equally clear that John Neal, who was appointed QBE’s Global Underwriting Chief Executive a few months after the two divisions were united, saw opportunity in splitting them again.

“We’re looking for more growth out of Asia and in doing that we want the focus not to be split between the businesses, so John Neal in his new role can have more direct impact on both Australia and Asia,” Mr Fagen says. “We’ll still work with our Asian business, but it just won’t be done through the direct reporting line.

“I don’t see [the split] diminishing any of the co-ordination or co-operation that we have with our Asian businesses. In fact there’s opportunity to increase that even more.”

For now Mr Fagen is lining up the Australian division’s challenges and working out how to deal with them. And there are quite a few looming issues, although in typical QBE fix-it fashion he ticks off the solutions that are in train even as he scopes the problems.

The interview covered many industry issues, but his comments tend to centre on areas that he sees as needing careful attention: pricing of risks in an uneasy environment, dealing with external pressures that may impact on insurers’ ability to operate profitably, and staying on top in markets QBE wants to be in.

“Short term we have to ensure we’re pricing our business rationally and taking into account changes in catastrophe activity and interest rates,” he says.

Will acquisitions play any part in his growth strategy over the next couple of years? Mr Fagen says there are “some small opportunities in the market at this point”.

“There is still a bit of a differential between renewal rates and new business rates, and when new business rates are down our preferred strategy is for acquisition.

I think there will be some small opportunities in the market over the next 18 months to two years.

“After the results of the past year or two, it’s right at this stage of the cycle that there’s the potential for more opportunities for acquisition if organisations don’t price appropriately.”

Pricing appropriately can also involve not entering a market at all, and QBE appears to be emulating some of its competitors in shying away from regions where the risks are no longer attractive.

“I think that all the catastrophe-exposed risks – property, householders, etc – are the products that insurers are most worried about,” he says. “Obviously that ties in with the geography of Queensland, and our analysis also suggests that there’s been a reasonable frequency of catastrophe activity in Victoria as well.

“So they’re the two geographies that probably are attracting most of our attention at the moment.

“The interesting thing just this quarter is that we’ve got a movement in the discount rate, and what does that do to the fundamentals of other classes? There are some workers’ comp markets, for example, that would now be very fine with respect to their underlying results.”

He says the balance won’t be easy to maintain if the coming summer is anything at all like the last one. This could lead to a more abrupt change in pricing risks.

“We’ve developed the belief that if we appropriately price now and lose a little bit of business as a result, that’s still a lower risk than underpricing and wearing a large loss later.”

Online platforms: Being able to differentiate from competitors is a vital consideration With a string of new transaction platforms coming into play over the next year, QBE is sticking to its strategy “to deliver a difference that goes beyond competitive pricing”, Mr Fagen says. “We believe service is an important issue, as are the cost structures that feed through to our claims, underwriting and sales areas,” he told Insurance News. “They can’t be funded in a pure price competition model.”

He says QBE needs to carefully assess new technologies emerging in the market

22

against the requirements of its differentiation strategy.

“We’re different, and we believe that we can compete through being different. So we need to carefully consider anything that may diminish this position.

“Some technologies place a large number of players in a comparative model, which can diminish differentiation and create pure price competition.”

Mr Fagen says the QBE stance has been to partner with some newer technologies – “but not all”.

insuranceNEWS

October/November 2011

His reasoning is simple. “Some [platforms] will create relative price competition and diminish relationship and service.

“A structural characteristic to take into account is the number of insurers accessing [a platform] and the treatment of renewal portfolios.”

Mr Fagen says as far as QBE is concerned, the ability of a platform to allow product differentiation is of vital importance.

“We have taken these factors into account when making a decision on partnerships where comparator models are used.”

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“Rates do need to move, and some of these movements need to be double figures in the catastrophe-exposed portfolios and in certain regions.”

Colin Fagen: brokers lose credibility when predicted rate rises don’t happen

insuranceNEWS

October/November 2011

He agrees the peaks and troughs that premiums go through in the course of the cycle are sometimes a source of disillusionment to commercial clients in particular. But he believes the frequency and the size of the peaks and troughs have reduced in recent years.

“I think individual portfolios will still move significantly in short timeframes occasionally, which is where we do get criticism from consumers who are unable to budget or plan for a significant increase.”

It’s where irrational pricing can lead that concerns him more, however. He says dropping rates which are “against the fundamentals or not moving with the fundamentals” is more disturbing, “and there is a risk of that happening right now”.

“Our observation at present is that rates do need to move, and some of these movements need to be double figures in the catastrophe-exposed portfolios and in certain regions.

“That’s where you get a lot of criticism, and sometimes the criticism is fair. How many other products have the variability that our product has from year to year, or over three to five-year periods?

“There’s not too many other products going down [in price] regularly and then having to go up again by the same amount.

You can understand how consumers get confused.

“And most of the fundamentals have got worse in the last year in discount rates as well as the catastrophe activity, so there should be an increase. And then on top of that you’ve got your reinsurance rate changes, which also point to an increase.”

Brokers believe premiums should be rising, and Mr Fagen concedes they lose credibility with their clients when the market stays flat despite their predictions.

“But equally brokers and underwriters lose credibility with their clients if the client is ambushed on a large rate increase.”

Another factor that he’s warily considering at present is the increased level of government intervention and regulation for the industry. As he sees it, there’s a regulatory cycle and an insurance cycle, and the two are on the rise at the same time.

“If you have a look at the cycle over 10 to 20 years, we insurers are looking to increase rates or make changes at the same time as the input from government is on the rise.

“We’re in an even more difficult position in that it’s a hung parliament at the federal level, and state governments are changing at the same time. That makes us a relatively soft target for governments, even when we’re doing the right thing 99.9% of the time.”

Mr Fagen sees falling interest rates and rising post-catastrophe premium rates sparking questions from politicians about 23

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whether the market is being rational in its pricing or merely opportunistic.

“It’s a balance between meeting the regulatory expectations, the customer expectations and the individual consumer and shareholder expectations, and ensuring that they’re balanced through this period.”

He’s relatively relaxed about the impending introduction of a standard definition of flood, but warns it’s not going to be the silver bullet that so many people expect it to be.

“It’s a small part of the whole issue, and it’s important that we actually work with regulators and come up with a common and a shared methodology over flood.

“I’m not sure if we’ve got to that stage but I think we’re heading towards trying to have a shared answer on this, but the answer is shared with various levels of government who have to look at their building regulations and building codes and where they allow building to occur.”

And he’s wary of increasing levels of bureaucracy being formed to deal with an issue that essentially requires physical solutions like better levels of flood risk information and mitigation projects.

“I think it’s important that we actually do look for objectives that help promote a vibrant insurance market so there can be competition.

“But it’s also important that we don’t subsidise parts of the community which shouldn’t be subsidised, because that keeps replicating the problem.

“What worries us about the discussions and debates around flood is that mitigation is probably the most effective tool in this; it meets community needs and expectations.

So we need to ensure that we don’t lose focus on what will actually fix the problem – and it’s not more red tape and more bureaucracy.”

The series of catastrophes last summer which led to bitter criticism of the insurers – QBE prominent among them – frustrates many in the industry, including Mr Fagen.

“The industry does exceptional work in so many areas. However flood is an area of non-coverage for a lot of insurers,” he says. “I worry consumers now think that we don’t pay claims, which is simply not true.”

He says the issue is not so much about trying to ramp up how the industry deals with the public at times of catastrophes. He believes the industry needs to present a more consistent and positive message to the community and governments all the time.

“We’ll always be criticised for a very small proportion of claims, but the pure volume of work that was coming through at that point in time is quickly forgotten “But if you’re sitting there with your house under water you’re probably not par24

insuranceNEWS

October/November 2011

ticularly concerned with how the insurance companies feel.”

He agrees the sheer volume of claims last summer hampered the industry’s ability to work efficiently, which illustrated the need for companies to meet the peaks and troughs quickly.

“I think every player in the industry was caught on that, so we do need to ensure we improve methods to quickly make decisions at the early stages so claims are triaged well.

“We also need to have the authority out there to make decisions, but then there’s the flow-through effect, so the next stage is coordinating loss adjusters and knowing how much work the adjusters actually have. And then we need builders to be more transparent on how much work they’ve got.

“If you don’t have transparency through that service chain you have unforeseen issues. I think understanding accurately at all stages what backlogs exist is vital so we can all adjust our resources and advise our customers.

“Insurers are comfortable at being nimble in this area, but not all ser vice providers want to say that they’ve got too much work.”

Mr Fagen says it’s easily forgotten that dealing with claims is insurers’ core function, yet when catastrophes happen governments feel the need to get involved.

“It actually slows us down in some instances. They feel the need to be involved and unfortunately it coincides with a time when our claims teams are already being stretched.

“So we have to build a position for the community as being the trusted adviser to governments in such instances, so that when a catastrophe happens they’re listening to the experts and not wasting scarce resources.”

QBE is also concentrating on the future, and apart from extensive recruitment and mentoring programs within the company, it is spending considerable amounts helping brokers build their expertise and resilience.

Mr Fagen points out that new distribution channels are forming and QBE is merely helping its preferred market sales medium to “survive through change”.

“We’re in it for the long term so we need to ensure the brokers actually go through this next stage of market change. In some areas where brokers just don’t have the funds or the economies of scale, there will be some natural consolidation.

“We believe in the intermediary market, and we’re ensuring brokers remain strong as they come through that next stage of development. We don’t wish to change our distribution strategy, so it’s important that our distribution chain remains in a position of strength, as does QBE.”

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PNG grows up Guria Kapi

Resources riches are driving prosperity and the nation’s insurance industry

By Jan McCallum Port Moresby’s central business district

PAPUA NEW GUINEA IS A VIBRANT market for insurers. The economy is growing by around 9% a year and an increasing middle class wants to protect the wealth it is accumulating.

The number of insurance players in the country has halved in the past 20 years as companies have merged and consolidated. The general insurance market is now dominated by five insurers [see panel next page] and the Chairman of the Papua New Guinea Insurance Council, Wayne Dorgan, says rapid economic growth is creating a growing group of younger, well-educated Papua New Guineans who are buying insurance for the first time.

The industry writes nearly K500 million ($220 million) of premiums every year but estimates only around 27% of commercial properties are insured, so sees plenty of room for growth.

Liquefied natural gas (LNG) projects planned for PNG also have the potential to bring billions into the country. ExxonMobil is already halfway through building the first LNG project, costing some $US16.5 billion, and two more are in the pipeline.

The benefit of the giant investments to local insurers was, at first, expected to be indirect. Although PNG has an admitted market and PNG-domiciled risk has to be written locally, the LNG groups negotiated blanket exemptions from having to buy insurance onshore.

The insurance industry was the only industry to be exempted when the resources agreements were being signed, as it was as-

sumed the project owners would have to look abroad to cover such large risks.

However, Mr Dorgan says some of the risk earmarked to be written offshore has come back to PNG. “The LNG people realised the capacity of the market here to write risk was far more sophisticated than realised,” he says.

Many offshore insurers did not have PNG written into their reinsurance treaties and could not apply the same risk standards as in Australia and New Zealand. They also realised that claims would have to be paid locally and so they needed an insurer with a local office.

“Even with the blanket exemption in place it was far better to insure locally because there was capacity here,” he says.

The PNG insurance industry also has a public image that would be envied in Australia after the recent disasters here. Mr Dorgan, who is the Managing Director of locally owned insurer Pacific MMI, says PNG’s industry has a positive image in the community.

“We are seen as having a very competitive market here.”

The country’s mining and energy industries are also increasing the wealth of landowner groups, who are earning substantial amounts from the use of their land for resource projects (97% of land is in traditional ownership, leaving just 3% for the government and freehold ownership). Mr Dorgan says some projects are paying hundreds of thousands of kina (K1 = $0.45) in royalties and other forms of compensation, which PNG nationals are using to set up businesses. insuranceNEWS

6:00 PM

October/November 2011

About 10% of the market is domestic insurance, of which half would be negotiated directly with an insurer and half through an intermediary.

Building and contents cover is normally sold separately, with the bank taking care of the building insurance and the individual arranging contents cover, often through a broker.

Theft is a major insurance problem. The insurance loss of the PNG householder differs greatly from the Australian experience of theft, where a burglar will be looking for electrical goods and cash. In PNG a thief might take only 15-20% of a home’s contents, the really resaleable items.

At the microfinance level, savings and loans entities are growing rapidly around the country and provide an opportunity for the insurance industry to reach people in villages, many of whom are moving out of poverty due to the activity generated by these microfinance projects.

Mr Dorgan says the idea of insurance is alien to Melanesian culture where the wantok system, which cements loyalty between people who share kinship or common language – important in a country with 812 separate languages – means people support each other.

But he says the insurance industry sees the microfinance initiatives as a way to create new distribution networks and educate people about insurance, even if it may not immediately lead to a policy being written.

PNG sits on the Pacific Rim of Fire, which brings its own risks. It does suffer 27

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“Parents are always trying to encourage their children and give them a better education and opportunities than they had themselves.”

– Wayne Dorgan

Above left: an accommodation building in Madang following a fire. The brigade isn’t always as reliable as suburban Australia’s. Above right: it looks peaceful but it’s not. This is Lae Eriku earlier this year, where a commercial premises is on fire and it and surrounding businesses are being looted

Toksave* PNG’s insurance market has 11 general insurers, one stateowned compulsory third party vehicle insurer (MVIC Ltd), four life companies, three life brokers, six general insurance brokers, four loss adjusters and one reinsurer.

The five insurers who dominate the general market are QBE, Pacific MMI, Chartis, Tower and Mitsui Sumitomo.

Some general insurers also provide life cover.

Life insurers are regulated by the Reserve Bank of PNG and the general market by the Office of the Insurance Commissioner.

Of PNG’s 6.6 million people, only 13% live in urban areas and 40% are aged under 15.

1 kina is worth 45 Australian cents. *information

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earthquake loss and Mr Dorgan says although most buildings have been built to Australian standards with earthquake risk factored into the construction, not all buildings are up to date. Insurers have to cherry-pick their risk to ensure they have a balanced portfolio.

The last major insured disaster was the eruption of a volcano on New Britain Island in 1994, which destroyed 70% of the town of Rabaul. The insurance loss then was estimated at $US120 million, and Mr Dorgan says Papua New Guineans are still paying for it through the reinsurance premiums.

Although PNG has suffered more natural disasters since, they have tended to occur in remote areas with minimal insurance cover.

He says the Government is working hard to address law and order issues. While PNG has what Mr Dorgan says are “very good laws”, the challenge tends to be maintaining order and enforcing the laws.

Risks that might not occur in Australia include opportunistic crime, where if a car runs off the road it could be pilfered.

Insurers also have to factor in the risk of the fire brigade being delayed in reaching a fire, or finding inadequate water supply when they arrive. Underwriters writing fire cover will usually assume a total loss due to a number of contributing factors including failure of the fire service to attend.

Motor vehicle cover is very expensive and around three times the cost of insuring a car in Australia. However, health insurance is half the cost when compared to Australia.

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tion providing primary care is very, very low because the wages are low,” Mr Dorgan says.

While it costs only K10, or about $4.50, to visit a doctor, health cover varies widely if the insured wants repatriation to Australia or Asia. Health insurance is a growing sector of the PNG industry and one where there is strong marketing.

“Health and life insurance are very important to PNG people and a lot of money is spent in this direction,” Mr Dorgan says.

While the insurance industry in PNG may seem a long way removed from Australia, it does share some similar problems. For example, Mr Dorgan names recruitment as the industry’s biggest challenge. It is a continual effort to attract and retain staff when competition in a growing economy is strong and young people have many opportunities.

Local businesses are also competing against the oil and gas industry, which can offer graduate programs and the possibility of a posting to an overseas office.

The PNG Insurance Council does a considerable amount of work in public education and visits schools and institutions such as the University of Papua New Guinea to explain insurance and encourage young people to consider the industry as a career.

“One of the great things about PNG is that parents are always trying to encourage their children and give them a better education and opportunities than they had themselves,” Mr Dorgan says.

“We are starting to see the fruits of that labour with a fairly highly educated middle class coming through.”

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Kids and a career

GOLDA MEIR, THE GREATEST prime minister Israel ever had and a mother of two, once tried to define women’s dilemma over their children and their careers.

“At work, you think of the children you have left at home.

At home, you think of the work you've left unfinished. Such a struggle is unleashed within yourself! Your heart is rent.”

Nothing much has changed, yet so much has changed.

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Today most mothers work in some business capacity.

Some reach professional heights thought unattainable just 30 years ago. Other women work just to bring in money for the family. Whatever drives them, the interests of their children remain central to mothers’ thinking. And as with the long-departed Golda Meir, the conflict between the needs of their children and the insuranceNEWS

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mother’s need for career success and professional recognition can sometimes still rend the heart.

Not so many years ago women had the unpalatable choice of children or career; they couldn’t have both. It was a situation in which those who chose family first found themselves spurned for promotion, while if they chose a career their chances of

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Meet some working mothers who’ve found balance and fulfillment as parents and professionals in the insurance industry Profiles by Tania Martin

nurturing a family were severely compromised.

In very few cases did women as recently as 20 years ago achieve both. If they did succeed in balancing family and career, it was inevitably because they had a support network to fall back on. If it wasn’t the wealth to hire domestic help, it was supportive relatives or a partner prepared to ignore the stereo-

typical “husband” role.

In the following pages we introduce some remarkable Australian insurance professionals who have learned to successfully balance family and career. They’re just a few of the hundreds of thousands of Australian women who make juggling home and work commitments look easy.

What you’ll learn from our subjects’ stories is that the insuranceNEWS

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juggling act isn’t easy, that sacrifices still have to be made, and that support – from supportive employers in particular – is essential.

You’ll also come to see that for women, professional success still requires uncompromising commitment; but compromise is also required from others to make professional and parental success possible.

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Fiona Phillips National Manager Claims Operations CGU Insurance, Melbourne Child: Sophie, 2½

IT’S THE CUDDLES AT THE END OF A HARD day from two-year-old Sophie that reinforces Fiona Phillips’ decision to juggle her family and career.

While the 39-year-old National Manager Claims Operations at CGU admits motherhood had never been a “huge burning desire” until she met the right man (and now husband Peter) that she realised she could have both career and a family.

“We really wanted to have children, but there was also a bit of concern about how I could do both – have a career and a child,” she says. “It’s not only about juggling your career, but being a parent is about providing emotional, physical, and spiritual support as well as financial stability.

“I had Sophie the day before I turned 37, so I felt I was in a position to offer that support.”

Fiona says one of the key factors for any woman when making the decision to mix children and a career is flexibility and the support of a good employer.

“I had been with [CGU] long enough that

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I had a history of delivery and a good reputation behind me, which made it a bit easier for me to be able to exit for a period of time and still be confident I had something to fall back on.”

Fiona took six months’ maternity leave and returned to work while still breastfeeding. But she says CGU provides a parents’ room that gives mothers the opportunity to express their milk when needed.

“I used to book the room twice a day and I would joke about planning my calendar around it,” she says.

One of her immediate challenges was the adjustment to sharing attention between work and Sophie, but working from home two days a week initially helped.

She says there is no doubt being a mum and a career woman can pull you in two different directions.

“But it’s about adjusting, and at the end of the day you are adding another layer to your life that you didn’t have before. You just need to make it work.”

Fiona admits she put additional pressure on

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herself with feelings of guilt over leaving Sophie at home, but husband Peter is there to look after her.

“Peter works part-time but I still felt like I was not providing the right level of care,” she says.

“But it works both ways – if you’re at home you still feel guilty for not being in the office to be there for your staff.”

Eventually Fiona accepted that the pressure she was putting herself under was both natural and unnecessary.

Fiona says she loves her work in claims, but having Sophie has taught her not to take herself too seriously. “Being a parent puts so many things into perspective. What we stress about in our personal and professional lives just doesn’t seem to matter when children are around.”

And she says she now understands it makes no difference whether you work 50 or 60 hours a week, the same amount of work is always there.

“Having children gives you a better

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Kay Jackson Director Simplex Insurance Solutions, Ballarat Children: Tayla, 10 and Ben, 8

PLANNING FOR THE BIRTH OF HER FIRST child while working in a high-pressure job as an insurance broker was tough enough, but when Kay Jackson’s first baby arrived nine weeks early she came to the startling realisation that mothers can’t control everything.

Despite planning to have a few weeks off prior to the birth of daughter Tayla, now 10, she went straight from the office to the hospital.

Baby Tayla spent the first 72 hours fighting for her life. Kay checked out of the hospital and found solace in the most unexpected of places – the office – concentrating on anything other than the precarious precipice on which her baby’s life was balanced.

“It was an escape from reality and I worked 10 times better, blacking out anything else,” she says. “It gave me relief – it kept me sane.”

Kay went through a similar experience two

“What we stress about in our personal and professional lives just doesn’t seem to matter when children are around.” balance of life outside of work. The challenge is realising someone else is in control of your life now, and her needs are much greater than mine.”

And although she feels some attitudes about working parents and the need for employers to be more flexible have changed, more change is still needed.

But she did find it disconcerting to “cop criticism” from her mothers’ group for returning to work. However, her husband also cops criticism for being a stay-at-home dad, so “society still has a long way to go before they shift that attitude”.

Fiona concedes there are still pockets of people – generally older people – who find it hard to accept the prospect of mothers mixing career and family. But that is changing.

“We are now seeing the younger generations coming through into senior roles with different attitudes, because they may have grown up with working mums,” she says.

“So I think we are now seeing attitudes starting to turn.”

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Kerrie Challenor State Manager, Queensland Lumley Insurance, Brisbane Children: Rebecca, 23 and Ellie, 17

years later with the birth of her son, Ben, now 8, who was born five weeks premature.

“All my kids were in a big hurry.”

However, in the end her ability to return to work at all came down to having the right support network in place – her mum and her husband David.

She says the ability to manage a career and family relies on the support of flexible and understanding people.

“My mother was amazing looking after the kids while I worked and later on with my own businesses I could come and go as I pleased or work from home – whatever we needed,” she says.

Her husband David, a concreter, does his bit with the kids’ after-school activities and prepares the evening meal each night.

“I wouldn’t be able to do it without a partner willing to help out domestically, and the kids would miss out on after-school sports or other activities because I wouldn’t have the ability to get it all done in a day on my own,” Kay says.

Despite having an understanding and supportive boss when her children were small, Kay decided to go into partnership with another broker several years later while pregnant with her second child.

However, the partnership folded and in 2005 Kay decided to go solo and open up her own brokerage, which today has nine staff – all women.

Kay is also a director of Insight Insurance Brokers Association, and says people tend to assume that because she’s a mum she won’t be able to attend industry functions. But anything is possible as long as you have a great support network and manage your time carefully. “[Time management] is the one critical part of being a working mum because every minute is so precious,” Kay says.

While she loves her work, she admits motherhood brought with it a distinct change in priorities. She encourages her staff who have children to take the afternoon off if there is a sports day or other important school activity to attend.

And while there are still some in the industry who believe that office hours should be nine to five, she says most companies are moving with the times and providing more flexible working arrangements for parents.

Kay also believes her skills as a mother have helped her to become an even better insurance broker.

“I am more disciplined and I empathise better with people,” she says. “In myself I am a lot softer. Before I was quite black and white, but as a mum you become more compassionate and understanding.

It does bring out a different side of your nature.

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SOMETIMES YOU DON’T REALISE HOW MUCH you’re achieved until you look back – and then you realise how tough it was at times.

Kerrie Challenor has achieved a great deal in both parenting and career, and she says she wouldn’t change a moment of the experience.

Looking at the two young women she has raised, she doesn’t believe they have suffered because of her career.

“I have shared with them a strong work ethic that in time will provide them with a solid platform for their choices in life,” Kerrie says.

“And it can’t have been all that bad as Bec has chosen a career in insurance broking. She’s following in my footsteps.”

They’re big footprints. Kerrie, 48, has been a marine underwriter, an international broker and a recruiter. She’s been working for Lumley since 1999.

And although motherhood was a surprise package for Kerrie, as she believed she “wasn’t particularly maternal”, she says it’s been worth all the hard work.

“I was focussed on having a career, but when I married the girls’ father I inherited a

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stepdaughter and was as surprised as everyone else when I took to motherhood so easily.

“It then became a really simple decision to have my own children. And what a fantastic decision that was – they are the joy of my life.”

The children’s father was an insurance broker, so Kerrie found the transition from home back to work quite relaxed. “I missed it when I wasn’t working.”

But divorce came when the children were young, and things got more difficult. Kerrie says she didn’t always manage parenting and work as well as she wanted, and being a single parent with long hours and travel was hard on her and the girls.

“But I always had a couple of rules I never compromised on.”

Always being home for birthdays was key for Kerrie, as was never missing a school event or a sporting final. And while she might have missed a few school play performances – which parent hasn’t? – she was always there for opening night.

The Challenor girls learned early the art

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“I’ve always been able to be there for my girls, and having supportive and understanding managers has given me the ability to occasionally leave the office early and work from home when I’ve needed to.”

of being very organised, with a diary an essential tool to book in everyone’s important dates.

“Mostly I had fabulous nannies reminding me daily what was happening,” Kerrie says.

“But the one area that got me was the bottom of Ellie’s school bag, which aside from dead sandwiches often had important notes that needed attention.

“And unless the nanny was on top of it I would often be reduced to a teary mess at 11pm, realising I had to produce an outfit or be somewhere the next day which always appeared impossible at the time!

Kerrie says although she faced enormous pressures managing career and family, “if it’s something you love you just have to make it work”.

And she considers herself one of the lucky ones, with plenty of support from her parents and a succession of reliable nannies.

One period between nannies involved picking up children before 6pm, making dinner, doing homework and projects, bathing the children and getting them into bed at a

reasonable time. “It was an absolute nightmare.

Women who do that every day are the ones to be admired – they are the real heroes of parenting. With a nanny I had it quite a bit easier by comparison.

Kerrie says one of the biggest challenges has been the feelings of isolation from her daughters’ day-to-day lives – not being there when they got home from school and needing a shoulder to cry on or advice.

“It’s just not the same over the phone,” she says. “By the time I had five minutes to spare the crying was done and dusted with the nanny, and even though the girls are grown up now this still challenges me.”

Apart from having a nanny to handle the day-to-day activities, having an understanding boss was the key to managing full-time work and single parenting.

“I’ve always been able to be there for my girls, and having supportive and understanding managers has given me the ability to occasionally leave the office early and work from home when I’ve needed to.”

Kerrie says employers now see staff as an

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investment and realise that if time, effort and money has gone into developing skills and talent, why wouldn’t you be flexible in managing that investment?

“It simply makes sense,” Kerry says. “ I also believe that nowadays more men are getting involved in day-to-day childcare, so while most care still lies with the mum we are seeing more of a balance.”

And like many working mothers who manage staff, she believes motherhood has made her a better manager. “There is nothing the staff can throw at you which is worse than what you deal with at home with two teenage daughters. As a mum you are a counsellor, leader, negotiator, operations manager and a salesperson.”

She says the best part of being a mum is seeing your children succeed, regardless of whether it’s something critically important or just having fun.

“Some of my most rewarding times have been watching my girls conquer a musical instrument or singing on stage in front of a crowd or overcoming their fears.”

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Rose Jenner Systems Administrator SRS Underwriting Agency, Brisbane Child: Matthew, 8 months

ROSE JENNER HAD TWO THINGS THAT once would have been against her achieving her dream of a family: a ticking biological clock and a successful career. Not too many years ago, she would have had to decide on one or the other, because she most likely couldn’t have had both.

Now juggling life as a mother and a successful career woman, the SRS Underwriting Agency’s Systems Administrator says it wouldn’t have been possible without an understanding employer.

Rose had been in the insurance industry for more than 13 years when she started seriously thinking about motherhood. “For me it wasn’t a very difficult decision, I’m 37 and it was going to be now or never.”

She joined the insurance industry in 1996 as an office assistant on a temporary basis, but worked her way up the ladder at HIH to senior underwriting assistant before it collapsed in 2001.

After that she spent three years in London before returning home. She has been working at SRS Underwriting for the past seven years as Administration and Compliance Manager.

She’s effusive in her praise of the way that SRS has treated her. She believes the insurance industry is moving forward quickly to make

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motherhood so much easier for women, working with them to negotiate their return to work.

Rose says the willingness of the SRS managers to be flexible for her has enabled her to stay in the workforce while ensuring her baby son Matthew has everything he needs.

“They have been phenomenal in the way they’ve worked around my needs,” she says. “Without that it would have been very difficult.”

Although still officially on maternity leave, Rose has been working from home for the past few months and loving every moment of it.

So much so that she is less keen to return to work full-time, because she wants to spend as much time with Matthew during his formative years as possible.

“I was offered my old job back, but I didn’t want to leave Matthew to go back into the office,” Rose says.

SRS worked with her to come up with a workable solution that ended in the offer of a job working from home as a contractor.

“I now have a very good balance between being a mummy and still being involved in something I always enjoyed and have worked so hard at,” she says. “It’s a good mix between

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my pre-mummy and new-mummy life.”

However, apart from an understanding employer there’s also a supportive partner – fiancée Ian Brown, who Rose says does his fair share of the work around the house.

“I don’t think I’d be able to do it all without him,” she says.

Rose believes the arrangement she’s working under now is the only way she could think of returning to her career. “It recognises that while I’m a mum I also still have 15 years’ industry experience under my belt and a lot to offer.

“It benefitted both of us to come up with a workable solution. I think I would have made the decision to finish up work if we hadn’t made this arrangement, because Matthew is my top priority.”

Rose says working from home is the best of both worlds, although spending time with her son and maintaining her career are not without challenges – but none are unassailable and the emotional rewards are tremendous.

Motherhood has also helped her deal with clients, because she now has much more patience. And when things do stress her, her baby son quickly lightens her mood. “Every time Matthew smiles I just fall in love all over again.”

October/November 2011

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“For all this to work you have to be a reliable worker and have the trust of a good employer.”

Sam Hemer Central Processing Unit Administration Manager MGA Insurance Brokers, Adelaide Children: Thomas, 12 and Adam, 9 RUNNING A NATIONAL NETWORK FROM your home office is something that wouldn’t have even been a considered a possibility for the insurance industry 20 years ago. But MGA has a policy of providing opportunities for young mothers, and Sam Hemer agrees she wouldn’t be able to work without the flexibility she is allowed.

The 40-year-old mother of two says the industry has come a long way since she started in 1990, especially with employers looking at ways to retain talented women rather than hustling them out the door when they become pregnant.

Sam’s story is familiar. She “fell into insurance” as a broker assistant at Hogg Robertson (now part of Aon) after attending business college, then moved to MGA in 1998.

When she started a family in 1999, “my career had to go on hold and I was just lucky it’s the type of job you can step back into”.

Mothers in 1999 didn’t have the luxury of taking 12 months off to be with their babies.

“Back then there wasn’t the option of having paid maternity leave and three months is all I could afford to take off,” she says.

Sam admits returning to work full-time was difficult, but with a good routine, an under-

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standing boss and the support of family and friends it was possible.

“It’s always a bit of a juggling act, especially when they are young and there are a lot of sleepless nights; you still have to get up and go to work the next day,” she says. “That’s the hardest part.”

It was a different story when Sam decided to extend her family further with her second son Adam, now 9. This time MGA offered her the chance to work from home.

Sam was appointed to manage MGA’s central processing unit, which has grown since 2002 from a few young mothers working from home to as many as 15.

They provide invoicing and data processing services to MGA brokers across Australia. Sam allocates the work.

“This gives me and the other women in the unit the opportunity to be able to continue our careers as well as being mums,” she says.

While working from home means a smaller pay packet, Sam believes she couldn’t buy what she gets from the arrangement.

“For all this to work you have to be a reliable worker and have the trust of a good employer,” she says. “Especially when you have to give an hour’s notice that you need to take

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your child to the doctor. Sometimes you just can’t plan ahead for these things.”

She believes the shift to allowing women an opportunity to work from home shows that companies are starting to realise that retaining good staff requires a degree of flexibility.

“Being able to work from home means I am still able to go to school sports days or school plays – you don’t have to miss out.”

She says being a mother has taught her the power of persuasion and given her better negotiation skills, which are not only useful skill as a parent but in her job.

Despite the challenges of the competing forces of motherhood and a career, Sam admits she wouldn’t have it any other way.

But she also admits that without the support of her husband Adrian and their extended network, none of this would be possible.

“I am lucky to work for a really good company because I would have struggled to work full-time in an office. I wouldn’t have been happy, but I would still have done it.

“Having this unit also gives options to women who are in their mid-20s and who have just got married. When they worry about how they are going to cope with paying for a mortgage and bringing up a family, they know there is a way.”

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Fiona Manoa Business Development Manager for Broker Relationships – Northern Region Vero Insurance, Brisbane Children: Kobe, 10, Rhys, 8, Troy, 5 and Hope, 2

“You have to look at the big picture and make sure you’re not taking too much work home because then you get stressed, and no one is going to be happy.”

STARTING A CAREER FROM SCRATCH with two toddlers in tow can’t have been easy, but Fiona Manoa decided she wanted to do something for herself. And although she did it the opposite way to most career women – becoming a mother first before pursuing a career – she still faced the same sort of challenges.

The 35-year-old mother of four says her family has always been her number one priority – but Suncorp has made it possible for her to also have a career plan.

She grew up in a family retail business in Brisbane, and there was always an expectation that she would carve out a career in that sector. But in 2004 she decided to take a risk and move away from the family business, applying instead for a job on the banking side of the Suncorp organisation.

But she found herself being offered a job as an insurance teller.

“When I found out it was an insurance position I thought I would just go with it,” she says. “I love it now.”

While managing the wants and needs of four young children can be a full-time job in

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Melinda Howes Chief Executive Institute of Actuaries Australia, Sydney Children: Jordan, 9 and Zoe, 6 itself, Fiona was determined to have a career as well as a family. Two years after joining Suncorp she moved from a frontline job into underwriting.

Shortly after moving she took some time off to have her son, Troy, now 5, and later added daughter Hope, now 2.

Earlier this year she was promoted to Business Development Manager for Broker Relationships in Suncorp’s northern region – proof if any was needed that she’s no corporate passenger.

But like all the other mothers in this series, Fiona couldn’t work full-time and look after her children on her own.

In her case the support comes from her husband Alvin, who cares for the children by day and works at night.

Despite this Fiona says there are still times when the kids need to go to day-care because neither parent is available.

That’s not a situation she likes, “but at least my children are independent and are always happy to play with someone else’s toys”.

Fiona says there are also a few months of the year when Alvin can’t take the kids to various activities during the day – and that’s when a supportive company and an understanding boss really matter.

“Having a good working relationship with your boss is definitely a plus in this situation.

“My boss is fantastic. We have a really good relationship, so I know when one of the kids is sick or I have to pick one up from school my manager is approachable.”

Fiona believes the level of success she has reached couldn’t have been achieved working for the family business – especially when there would rarely be anyone able to cover her work when family commitments intervened.

She says that thanks to this work flexibility she’s been able to watch her children grow into individuals without missing out on being there to guide their development.

The most critical part about running any business or family is support from “your husband, extended community or wherever you can get it”.

“And you have to look at the big picture and make sure you’re not taking too much work home because then you get stressed, and no one is going to be happy.

“For me it’s about understanding what’s in your control and being able to work with that.”

Fiona says being a corporate mum takes a lot of planning and organisation, but for her “making a positive impact regardless if you win or lose – it’s all worth it in the end”.

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BREASTFEEDING AND BUSINESS DON’T generally sit comfortably together as concepts.

Melinda Howes well remembers once having to rush from a meeting room full of men with what she laughingly describes as “exploding boobs”.

Try doing that while maintaining a cool professional outlook in a high-powered job.

She recalls how the challenge of expressing her milk following the birth of her first child created some interesting moments for her colleagues. When she started back in a full-time job her first child, Jordan, was just four-and-ahalf months old and still breastfeeding.

Melinda believes this was one of the most

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challenging parts of returning to work, even if her employer at the time was family-friendly.

She once had to take baby Jordan, who is now 9, to an actuarial studies class she was teaching that was full of 20-something men.

During the class nature intervened when Jordan got hungry.

“I had a towel covering me, but you should have seen their faces – they were so embarrassed,” she says. “But they coped.”

Melinda had been working in the insurance industry for about nine years when she and her husband Geoff Peck decided to start a family.

“It was something I had always known I

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“The younger generation is coming through, and many want to travel before having children.

Companies need to adjust.”

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was going to do, but it just came down to timing in the end. Rationally there is never a good time financially or career-wise, but we both wanted kids.”

However, it took Melinda and Geoff three years of IVF treatment to finally get their family started. It was much the same with her daughter, Zoe, 6.

“We were one of the 25% of couples who have nothing wrong with them but just can’t get pregnant for no apparent reason,” she says. “It could have been stress.

“It must have been a bit of an epidemic where I worked at the time, because we would go for IVF treatment and there would be a number of my colleagues in the waiting room.”

Although she planned on taking 12 months’ maternity leave following Jordan’s birth, BT Financial Group offered her a job she couldn’t refuse. And so she hired a nanny and rejoined the commercial world as BT’s director of superannuation and retirement products.

While it was difficult juggling her career and new baby, Jordan was at the stage in his development where Melinda felt comfortable leaving him with a nanny.

However, a few years later she decided to take a sabbatical from her career to raise Jordan and welcome daughter Zoe into the world.

“I planned to be a mum for a while, but I still ended up doing some consulting work from home,” she says. “It helped to keep me sane.”

Part-time work is always a possibility for mothers with young children, but Melinda warns there can be additional pressure to prove yourself if colleagues don’t take you seriously as a part-timer.

“You might be working four days a week,

but you’re running your own team and have the same key performance indicators as your male colleagues who work five days a week,” she says.

These days the financial services sector is changing its attitude, thanks mainly to Generation Y employees demanding more flexible working arrangements.

“It’s not just mums that want this flexibility,” she says. “The younger generation is coming through, and many want to travel before having children. Companies need to adjust.

“Also, Baby Boomers want to work less as they enter retirement age – it’s just not women in their 20s and 30s.”

Although most working mothers will tell you their dual roles wouldn’t be possible without the support of their partners, in Melinda’s case it would be a virtual impossibility.

She lives more than 950km from her office in Sydney, spending Monday to Thursday away from the children while Geoff holds down the fort at their home on the far north coast of New South Wales. When she’s home during the week, he’s in Sydney working.

She dreads the possibility of a sick child while she’s so far away, and planning around the children’s school and after-school activities needs more than a little attention to detail. “I have to plan my diary a month ahead; it’s a very good project management skill to have.”

She works from home on Fridays, and relishes the opportunity to spend free time with Jordan and Zoe. Watching her babies grow has been a phenomenal experience, and the fascination has remained as they’ve grown. “It’s fantastic watching the way their brains work and how creative they are becoming.”

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Tough times in trade credit When business is bad, these experts know about it first – and they’ve rarely seen it as bad as it is right now

By Jan McCallum

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THE DEBATE ABOUT THE DOWNTURN IN MANUfacturing has come as no surprise to the trade credit insurance industry, which is warning of tougher times ahead.

“Business conditions are just terrible,” says Kirk Cheesman, Managing Director of QBE-owned trade credit specialist National Credit Insurance (Brokers).

He says trade credit insurers see the signs early, when clients start reporting they are having problems being paid. It’s the same at trade credit insurer Atradius, whose Australia/New Zealand Managing Director David Huey is seeing businesses managing cashflow by pushing out payments by an extra five to 10 days.

“They are using their suppliers like a bank,” he says.

June was the second-worst month on record for insolvencies since records began in 1990, and Mr Huey says rising delinquencies are an indicator of an increase in claims.

“Claims are still contained to the point where we can keep premiums reasonable, but it is a nervous time because of the rise in delinquencies,” he says.

tighter, because people aren’t employing as many staff.

People in the business services sector believe it will get worse before there is any improvement.”

He says the Federal Government’s stimulus of 2009 kept many businesses going but that has been spent and conditions are still tough.

He has also noticed the Australian Taxation Office (ATO) is acting on outstanding taxes. The ATO and banks became more lenient around 2009 when businesses were squeezed by the global financial crisis, but it is now widely believed that both are tightening up and the ATO is starting to move against bad debts.

“A recession normally sifts out people who cannot survive, but a lot more have bumbled through in the last couple of years and now are facing reality.”

Trade credit insurance is most widely identified with exports and agencies such as the Federal Government-owned Export Finance and Insurance Corporation, because a company’s lenders may insist that exports are insured.

But Mr Huey says the product has become more widely understood and accepted in Australia following the

Total trade credit claims outstanding 1999-2011 900 850 800 750 700 650

Number of Claims

600 550 500 450 400 350 300 250 200

Jan-11

May-11

Sep-10

Jan-10

May-10

Sep-09

Jan-09

May-09

Sep-08

Jan-08

May-08

Sep-07

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May-07

Sep-06

Jan-06

May-06

Sep-05

Jan-05

May-05

Sep-04

Jan-04

May-04

Sep-03

Jan-03

May-03

Sep-02

Jan-02

May-02

Sep-01

Jan-01

May-01

Sep-00

Jan-00

May-00

Sep-99

Jan-99

100

May-99

150

Period

Trade credit rollercoaster: NCI's claims from January 1999 to May this year follow the course of the economy

Although the basic purpose of trade credit insurance is to insure against debtor default, both Mr Huey and Mr Cheesman say clients also use the service as a research tool, to tap the credit insurers’ databases on likely risks they face trading here and abroad.

“We get to see some unique data for credit insurance purposes,” he told Insurance News. “People have to estimate their turnover for the next year, and at the moment clients are estimating significant reductions in income because of the slowdown in the economy.

“Because the market is so slow, people are doing things at cost. There is not a lot of margin and there is a lot of competition.”

He says businesses in the building industry are complaining about not enough work on their books and some companies have staff on a four-day week. The retail sector is also experiencing tough conditions.

Job losses at major companies are also flowing down to smaller suppliers.

“This news is starting to creep into the marketplace,” Mr Cheesman says. “The employer market is going to get 46

global financial crisis, and businesses that have been burnt by a bad debt are more likely to know about it.

Mr Cheesman says credit insurance is seen as essential in many European business sectors but here banks are prepared to take more risk.

He says local companies that trade with the Australian arm of a foreign corporation are becoming more aware of the risk from a foreign parent exposed to global factors such as the recession in the US or debt crises in some European countries.

In Australia, the building industry, retail and media are frequent trade credit insurance buyers, along with transport companies and wine exporters. It is seen as essential in industries such as the media that operate on fine margins and which see the insurance as a way to protect profits.

Mr Cheesman says companies also use it to reduce provisions against bad debts and while expanding sales. “If you can say to your bankers, ‘we have these debtors secured at 90% against our credit insurance policy’, they may acknowledge the additional security and provide more funding.”

Trade receivables are the largest asset of most busi-

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Natural N atural D Disaster isaster D Deductible eductible B Buy uy D Down own Following tthe Following he rrecent ecent flfloods, oods, c cyclones yclones a and nd earthquakes, e arthquakes, iinsurers nsurers h have ave ssubstantially ubstantially iincreased ncreased deductibles deductibles o on n tthese hese iinsurable nsurable e vents. iaAgency’s iaAgency’s n atural d isaster b uy-down events. natural disaster buy-down p roduct allows allows yyour our c lient tto ob uy d own ttheir heir product client buy down d eductibles o nn atural d isasters tto om aintainable deductibles on natural disasters maintainable llevels. evels.

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“We have had instances where clients have said a debtor has gone broke and they need to claim, and if the insurance does not pay within 30 days they will be broke themselves.

We managed to get the claims paid in time.” nesses and their most liquid asset, yet Mr Cheesman finds owners tend to underestimate the risk of bad debt.

Businesses required to have insurance on a building worth $5 million might quibble about insuring $20 million of receivables, but he says there is a greater chance of a debtor becoming insolvent than of the building burning down.

“We have had instances where clients have said a debtor has gone broke and they need to claim, and if the insurance does not pay within 30 days they will be broke themselves. We managed to get the claims paid in time.”

The difficult trading environment also means that a looming insolvency can be hard to spot.

Mr Huey says insurers have many cases of claimants telling them they are not worried about a particular debtor because they have traded with the firm for years and have a long-standing relationship with the owner.

He points out that if a debtor becomes insolvent the client will be dealing with a liquidator with whom they have no personal relationship.

The Australian Institute of Company Directors continues to lobby for changes to insolvency laws, which it believes discourage businesses from trying to trade out of

48

difficulties, and Mr Cheesman agrees that the insolvency system encourages business-owners to raise the white flag earlier.

He says this makes it harder to pick up warning signs such as a customer asking for a repayment plan.

“We have so many people claim under their policy who say the debtor has been a client for 20 years and always paid on time.”

NCI grades a client’s debt to see where the risk lies and then assesses the impact of a bad debt, a process Mr Cheesman describes as the “what ifs?”

He often points out to clients’ financial officers that if one of their top 18 debtors goes broke the loss will likely wipe out a year’s profit.

Financial officers can find the impartial grading assessment useful, but it can also mean telling clients news they do not want to hear – such as when they have landed a major contract and “we say that company is a really bad risk, we have three other people reporting them overdue and another company taking collection action against them”.

Mr Cheesman says there are so few insurers working in trade credit insurance because it is highly specialised, with

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QBE, Atradius, Coface and Euler Hermes the best-known names.

About half of the Atradius book is insurance for exports, and although trade credit may be a bank requirement for an exporter, Mr Huey says companies wanting to export also use it for researching foreign markets and potential customers.

“We have underwriters in these places and they can tell you about the buyers.”

He says credit insurers also advise on different business practices, such as where standard payment terms might be 75 days instead of 30, and they have collections agents to chase debts in foreign countries.

Clients will also use trade credit insurers to gain access to information on the database. Often clients will ring and check whether a customer is a good risk before goods are shipped. Small and medium-sized businesses use the service because there might be only a few large companies in their industry.

“An SME selling into one big company does not have a lot of power to get intelligence but we will very often have 20 customers selling into that same company,” Mr Huey says.

If Atradius picks up a problem “we can ring the buyer and talk to them”.

Sharing market intelligence requires close liaison between insurer, broker and client, but Mr Cheesman says some people see it as too much work. “But if you are not keeping an eye on your debtors you may get a big surprise one day. We speak to our clients almost daily, giving alerts on the client base. We become part of their credit team.”

Businesses can choose their level of cover, such as by deciding the size of the excess they are prepared to accept.

NCI will want to see estimated sales turnover, and Mr Cheesman says the cost can be just 0.2% of insurable turnover.

The insurers also manage the life cycle of the debt.

Some will cover the cost of collection and the firms do follow a debt through to winding up a debtor. The rules for a claim differ between insurers, but typically an act of insolvency has to occur.

Mr Huey says more work is being done earlier these days, with efforts made to collect a debt before a claim has to be lodged.

“We work very closely with the customer to try to make sure it is a last resort rather than just paying out claims.

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UAC’s Damien Coates: sponsorships came on a first come first served basis

UAC goes for growth through partnership Underwriting agents set their professional sights higher with the aid of strategic sponsors THE UNDERWRITING AGENCIES Council (UAC) now has all the ingredients in place to develop a full-service trade association following the appointment of three strategic partners.

Lloyd’s, Vero and Hollard Insurance have joined the UAC sponsorship program to help the organisation increase its ability to deliver its three-year strategic plan.

UAC Chairman Damien Coates says the financial support offered by the three companies allows the council to move forward.

“We need significant resources to provide the broad range of services that will help our members and their staff develop skills and grow their businesses,” he told Insurance News.

He says the increase in funding made possible by the sponsorships “is the key to making it all work”.

“We’re a small association which had few resources, but together we’re a significant part of the industry with premium income of around $2.5 billion.

“If you look at other industry bodies or cluster groups, funding comes from a 1% contribution, but we weren’t able to access that level of funding.

50

“So the money to make our strategic plan work had to come from somewhere, and we’re delighted with the partners we’ve selected.”

Mr Coates says the sponsor selection involved a “transparent first come first served process”.

“We talked to a lot of insurers about investing in UAC’s development. We offered no specific commitments, beyond saying we would ensure members are aware of sponsors’ positive engagement and support.

“The selection of Lloyd’s was a no-brainer because Lloyd’s is a major player in the underwriting agency sector and closer relationships with organisations like UAC is a part of their own threeyear strategic plan.”

He says UAC didn’t try to evaluate one insurer over another. “But Vero and Hollard were enthusiastic from the start, and they were first in with offers of support. Interestingly, they bring different but complementary offerings to the table.

“We’ve ended up with a global insurer, a large domestic insurer and an entrepreneurial company with a strong investment record.”

UAC’s three-year plan includes further development of insuranceNEWS

the broker-focused expos it holds around Australia, in co-operation with the National Insurance Brokers Association (NIBA); professional development; providing a broad range of supply and advisory services to members; and representing the interests of underwriting agencies.

Mr Coates says professional development days held in Melbourne and Sydney this year have attracted more than 190 members and their staff, and more are planned in conjunction with the Australian and New Zealand Institute of Insurance and Finance.

He says a major milestone was reached with the appointment of William Legge as UAC’s first full-time general manager to drive the council’s strategy.

While the new relationship with Vero and Hollard initially raised some concern – there were questions about insurers’ motives in wanting to be involved – Mr Coates says most insurers have a vested interest in improving underwriting agencies’ visibility and professional standards.

“Many of the major insurers see underwriting agencies as part of a key growth strategy for their own businesses,” he says. “They

see them as an incubator for new or speciality lines products or an avenue for product and market testing.”

Suncorp Executive General Manager Intermediated Distribution Andrew Mair says Vero is supporting UAC for the same reason it supports NIBA: “They’re a group with a significant share of the market. Brokers are using underwriting agencies and we support what brokers support.”

Mr Mair says Suncorp operates eight underwriting agencies, “and I’m looking forward to us being able to help UAC develop further”.

Hollard Business Partners Chief Executive Richard Heilig told Insurance News the UAC partnership “has the potential to deliver on a number of mutual benefits including a shared interest in legislation and regulations affecting agencies”.

Hollard already has 12 underwriting agency partners, and Mr Heilig says the company “is excited to work with UAC to further develop business acumen as a driver to success, enhancing member services and ensuring agencies prosper as the market evolves”.

October/November 2011

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Tragedy behind a claim The failure of a dodgy insurer leads to a plea for special payment

By Jan McCallum THE CONSEQUENCES OF A FOREIGN International Unity and reported that they same time as HIH Insurance collapsed and insurer going broke nearly 10 years ago lived in Melbourne – the other was based in believes this may have contributed to IUI have reached federal parliamentarians, with the UK. Its registered company address was not being shut down until 2004. the Government being asked to make an in the suburb of Wheelers Hill and its prin“Overall it is a very sad and sorry state “act of grace” payment to a disabled man. cipal place of business was at 30 Collins of affairs,” he says.

Luke Quintano, 33, suffered brain Street, Melbourne.

Act of grace payments are made at the damage when he was shot during a brawl at In June 2004, two months after discretion of the finance minister and are a Sydney nightclub in December 2002 and Mr Quintano sued the nightclub, the intended to compensate people in special now needs full-time care.

Australian Securities and Investments circumstances, such as when the action or Mr Quintano sued the nightclub owner Commission (ASIC) received orders from inaction of the Government has directly for negligence, but the club’s insurer had the Federal Court to wind up and appoint resulted in a loss. gone broke before his case was settled. The a liquidator to IUI and its local agent after The Department of Finance website settlement is now worth notes a payment is “genaround $4 million. erally an avenue of last The shooting led to a resort and is used only string of legal cases, inwhere there is no other volving the nightclub, its viable avenue to provide security company and redress”. broker and two Lloyd’s Mr Dennis told syndicates.

Insurance News that But given the insurer, Mr Quintano has had International Unity a sympathetic response Insurance (IUI), has from Federal parliamenbeen wound up, there tarians. is no money to compenCourt documents sate Mr Quintano. state that the nightclub, IUI was registered Skelseys, at Carramar in in the Solomon Islands Sydney’s southwest, was between 2001 and 2002, described as a place of but the Controller of “last resort” or “place Insurance there canyou go to when there is celled its registration and nowhere else to go”. advised the Australian The nightclub is Prudential Regulation no longer operating but Authority (APRA). the owner sued its In March 2002 the broker, Prestige Australian regulator told Insurance Brokers, alScene of the crime: a "nIghtclub of last resort" covered by an insurer of last resort IUI to direct its adminisleging negligence in trators and brokers in placing the public liaAustralia not to accept or renew contracts complaints from Australian policyholders bility risk with an unregistered overseas of insurance, and issued a public warning that more than $1 million of insurance insurer and failing to advise of the risks. about the insurer a month later. claims and policy refunds had not been This case was dropped in 2008 when APRA said IUI “has represented to conpaid. the owner of the nightclub died and the The claims related to policies accepted sumers that it is a licensed general insurer business went into liquidation. before March 2002 and included prestige in the Solomon Islands, and that it has subBy this time, Prestige had sued motor vehicle insurance and cover for the stantial capital to support any claims under Queensland broker Cameron Group, which hospitality and hotel industry. insurance policies it enters into”. specialised in hard-to-place risk and which ASIC alleged that both IUI General and “International Unity Insurance is no by 2008 was no longer operating.

IUI Australia were insolvent and IUI longer registered as an insurer in the It had also claimed on its professional General did not have funds to meet all exSolomon Islands; moreover it has declined indemnity policy from two Lloyd’s syndiisting claims. to allow APRA to have its capital backing cates, but they declined indemnity, citing It noted IUI General claimed to have independently verified.” exclusions in the policy relating to the inreinsurance with companies in Serbia, APRA warned consumers about dealing solvency of an insurer, and in 2008 the Bosnia and Herzegovina but said “these with unauthorised foreign insurers and caucourt found in their favour. transactions were sham transactions”.

Mr Quintano’s case was decided in tioned IUI that it might be in breach of the Lawyer Bruce Dennis of Sydney-based 2009.

Insurance Act. Dennis & Co, representing Mr Quintano, Mr Dennis says Mr Quintano’s claim In April 2002 insuranceNEWS.com.au tracked down three of the four directors of notes that APRA was dealing with IUI at the seems to be the only major claim on IUI. 52

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Some new cases to ponder Recent court decisions provide some important points for insurers

By John Wilkinson

SO FAR THIS HAS BEEN AN UNUSUALLY CHALLENGING YEAR for the Australian insurance industry, and according to two leading insurance lawyers there are still plenty of new challenges to come.

While the issues surrounding the devastating floods of last summer have dominated much of the industry’s attention this year – they’ll take time to get through the legal process – the courts across Australia are still making decisions of significance to the insurance industry.

Insurance News asked Clayton Utz Partner Fred Hawke and Allens Arthur Robinson Partner Oscar Shub to outline some recent cases they see as important to the industry. Here’s their comments:

Directors’ and officers’ Insurers will be considering the issues surrounding the Centro Properties Group case, which reached an intriguing conclusion in the Federal Court in Sydney last month.

In 2007 Centro became a victim of the global financial crisis with a growing loan book and falling property values. In that year’s accounts, the Centro board misclassified a number of loans and the Australian Securities and Investments Commission (ASIC) claimed they had breached sections 180 and 344 of the Corporations Act. The regulator argued the accounts had these loans stated as being non-current liabilities when in fact they were current.

ASIC also argued the Centro board had not ensured the chief executive and chief financial officer had provided a declaration of compliance required by section 295A of the Act. In their defence, the Centro directors argued they could not be expected to know the liabilities in question were current liabilities within the meaning of the relevant accounting standards. They also argued there had been changes in the accounting standards and the documentation was complex.

Justice John Middleton dismissed the directors' arguments, insuranceNEWS

saying the accounting standards were “straightforward” and the complexity of the documentation was irrelevant.

He said the directors knew the borrowings were maturing in the short term, and a basic understanding of the meaning of “current liability” should have led them to ask why the borrowings had not been classified accordingly.

Mr Hawke says the court appeared to say that it was not laying down a general financial literacy standard for directors.

“The court found that what was involved was a very large liability which, on a basic understanding of the meaning of ‘current liability’, should have been disclosed as such in the accounts. It’s clear that the court did believe that a certain level of financial literacy is an essential qualification for directors.”

Mr Hawke says that in the long term this is likely to be a significant issue for directors.

“Where does one draw the line between basic accounting conventions – which directors are expected to understand – and the more arcane aspects of the accounting standards?”

This will cause some concern for D&O insurers as well, as they have to decide how much a director can be expected to understand when looking at the company accounts.

“The case might be a one-off and the facts may be so unusual that the decision is not really of concern to other boards not facing similar circumstances,” Mr Hawke says. “But realistically the minimum standards expected of directors have continued to evolve.

“The court’s comments about the responsibility of directors to look critically at financial statements and to understand basic accounting standards must be taken on board by insurers.”

On September 1 Justice Middleton fined Centro’s chief executive $30,000 and disqualified the chief financial officer from managing companies for two years. The six non-executive directors escaped penalty, Justice Middleton saying that the imposition of greater penalties “would not bring about a greater benefit for October/November 2011

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society or the corporate world, and would otherwise be unfair and inappropriate”.

Another case involving director responsibilities centred on former rugby league star and company director Jarrod McCracken.

A creditor of Mr McCracken’s company used a little-known section of the Corporations Act to sue for damages, claiming a breach of duties by the rugby star in his role as a director. The Queensland Supreme Court in Townsville used section 1324 of the Act to award the creditor $1.5 million in damages.

This section says a court can, on the application of ASIC or a person affected by the conduct, grant an injunction to prevent a person from contravening the Act. It also says the court can “order that person to pay damages to any other person”.

Mr Hawke says although the section has been part of company law for many years, it has rarely been used in litigation.

“This [decision] is saying if a director breaches his duty towards the company by placing it in a position where the company can’t meet an obligation, then the court can make a judgement against a director. This has serious implications for D&O insurers.”

Mr Hawke says the long-held belief was that directors owed no duty to creditors, although they may be personally liable for insolvent trading and that action is brought by the liquidator.

“Unsecured creditors have otherwise been held to have no interest in the company’s assets and no standing to bring proceedings directly against directors regarding their management of the company.

“While not actually holding that directors owe a duty to creditors, the court’s application of section 1324 in the McCracken case could considerably dilute the effect of that principle.”

Mr Hawke says this interpretation of section 1324 is being appealed to establish the legal understanding of the clause.

“If the original decision stands, the implications go beyond an increase in the legal liabilities of directors.

“Directors who are ordered to pay damages to creditors, shareholders or other third parties for breach of statutory duties owed to the company may not be covered by their company's D&O insurance.”

Mr Hawke says section 199B prevents companies from paying D&O premiums to cover liabilities arising from improper use of directors’ knowledge or position, or wilful breaches of duty in relation to the company.

If the breach identified for the purposes of section 1324 involved any of those elements, the insurance may not respond.

“Almost all policies expressly exclude such liabilities to enable 56

insuranceNEWS

the company to pay the premium without the risk of the policy being invalidated by section 199B. “In some instances, absence of insurance may mean that the director is not worth suing, but that may be small compensation for the threat of extended liability to a whole new pool of claimants.”

Disclosure Mr Shub says a recent Queensland Supreme Court decision has demonstrated that people who are uncertain about what to disclose or withhold from their insurers should err on the side of full disclosure and let the insurer decide what’s relevant.

The case hinged around a motor policy where one of the drivers covered had a serious accident while under the influence of alcohol. The insurer declined the claim because drink-driving was an exclusion on the policy.

The husband had filled out the application form, but only disclosed his wife had once been disqualified from driving for drink-drinking offences. In fact, there had been an earlier conviction for the same offence.

The insured argued the duty of disclosure was limited to a fiveyear or, alternatively, a three-year period, and as a result he had no obligation to disclose the earlier conviction.

The court rejected the insured’s arguments, saying failure to disclose the first conviction amounted to a misrepresentation and breached the duty of disclosure. As a result the insurer was allowed to reduce its liability.

“The case highlighted the need for brokers to make sure the obligations of disclosure are met,” Mr Shub says. “They should make sure the client is also aware of the obligations and consequences of pertinent facts being omitted.

“The insured is in an even worse position where, as in this case, the court finds that it has tailored its responses to proposal form questions to keep a pertinent fact from an insurer. It also highlighted that personal lines insurance has no different obligations of disclosure than commercial lines.”

For insurers, it is important to ask the relevant questions to obtain full disclosure before writing the policy.

“Insurers cannot and should not rely on general questions to obtain disclosure,” he said “They can ask any questions they feel are reasonable or necessary to discover any issues that would have an impact on their liability.”

The case has now gone to appeal in the Full Federal Court.

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lawNEWS

“Directors who are ordered to pay damages to creditors, shareholders or other third parties for breach of statutory duties owed to the company may not be covered by their company’s D&O insurance.”

Exclusions The Queensland Court of Appeal recently narrowed the scope of – or ability to rely on – section 54 of the Insurance Contracts Act, which forgives acts or omissions by the insured in complying with the policy.

The case followed an aircraft accident in which the pilot was killed and his passenger, his wife, was seriously injured. The aircraft was owned by Triple C Furniture & Electrical, and they were employees of the company.

The wife subsequently launched proceedings against the company claiming damages for personal injury, alleging Triple C was liable for the actions of her husband having operated the aircraft negligently. She was awarded damages of $846,030.

The company’s insurer declined to indemnify Triple C on the basis that the circumstances of the accident fell within an exclusion which said the policy would not operate while the aircraft was being flown in breach of aviation regulations requiring the pilot to satisfactorily complete a mandatory flight review within two years of any proposed flight.

This review ensured the pilot was competent to operate the aircraft, and the husband hadn’t undertaken this review in the required period.

Triple C sought to rely on section 54 to prevent the insurer from refusing to pay a claim that is the result of the act or omission of the insured or some other person.

The court found the lack of a flight test did not constitute the type of “omission” contemplated by section 54.

“The exclusion in this case was the need for the flight test to be undertaken within two years of the fatal flight,” the Appeal Court said. “It had not been undertaken and should not have allowed the insured to rely on section 54 to assist.”

Mr Shub says the case has been a valuable lesson on section 54, and compared this exclusion clause to a car insurer not being expected to pay claims under a motor vehicle policy for somebody who didn’t have a licence.

“The exclusion goes to the question of capability, as it assumes that the review will show that the insured has a level of competence to perform the operation – in this case flying the aircraft.

“The main implication of this decision is that a valid exclusion in a policy may limit the court’s ability to assist insureds under section 54.

“The case also requires an omission to be something solely in the control of the insured. If acts of a third party are also required – such as an examiner or licensing authority – section 54 may not apply.”

The floods Cases around claims by flood victims will take some time to make it into the courts, but Mr Hawke says there will possibly be some debate over the decision by some insurers to make ex-gratia payments as a result of community, media and political pressure.

“The question will be whether their reinsurers see these payments meeting the requirements of the insurers’ contract with them,” he says.

“I would be looking closely to make sure the payment was genuinely in respect of a valid insurance claim, or was ex-gratia being paid for business reasons.”

Mr Hawke says the payment of excluded claims could be challenged, but it’s a complex issue.

“The reinsurers will want to see how many covered claim payments are really that.”

YOU’LL BE SURPRISED AT THE SIZE OF OUR APPETITE. CGU business and office insurance is now more competitive in meeting the insurance needs of larger business across different industries and multiple covers. Try us next time you think about insurance for your larger customers. Talk to your CGU Business Development Manager or visit cgu.com.au today.

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lawNEWS

10 years later, ‘a stroke of good fortune’ An insurer gets away free from an HIH-related claim it would normally have had to pay

By Jan McCallum A JUDGE HAS TAKEN A GENTLE SWIPE AT INSURance companies in a High Court decision dismissing an appeal by the administrator of HIH Claims Support Ltd (HCSL), which was set up to assist claimants stranded by the collapse of HIH in 2001.

HCSL’s failure to have SGIC – an IAG company now operating as Insurance Australia Limited (IAL) – contribute to a liability claim was a victory for the insurer.

But Justice John Heydon, in a commentary included in the ruling by five judges, nevertheless noted the unusual nature of the case and the fortunate position IAL found itself in.

He said that the Federal Govern-ment’s rescue package for HIH saved IAL from liability for the claim.

He said HIH wanted to pay the claim but was unable to do so, whereas IAL could pay but didn’t want to.

Justice Heydon says that where two insurers insured someone and one went broke, the second would normally have to indemnify the insured completely.

But in this case, the Federal Government’s rescue package had saved IAL from “a just obligation to share the burden with HIH”.

“The liquidation of HIH, instead of leaving the respondent [IAL] to bear the whole burden, has relieved it of the whole burden,” he said.

“The litigation exemplifies the teachings of ordinary litigious experience that insurers who are able to meet the liabilities which they have agreed to meet are often unwilling to do so, while those who are willing to meet them are often not able to do so.”

The case dates back to the 1998 Melbourne Grand Prix, when Ronald Steele was contracted to erect scaffolding for the race.

Mr Steele had a general liability policy with HIH, and the Grand Prix Corporation had a policy with SGIC General Insurance which covered the grand prix’s contractors and sub-contractors.

When part of the scaffolding collapsed and destroyed a large video screen, the screen company successfully sued Mr Steele.

HIH had already paid $80,000 for legal costs under his policy before the insurer collapsed in 2001 and then, under the HIH rescue package negotiated by the Federal Government, the HCSL administrator took on the claim.

HIH had already started proceedings against SGIC, claiming a contribution towards its costs under the grand prix’s policy.

The High Court judgement says SGIC was asked in 2000 to admit that Mr Steele was insured under its policy, but evidently did not do so. It then denied that the policy responded, citing exclusions.

The case, which started in the Victorian Supreme Court before going to the High Court, focused on whether SGIC’s liability was substantially equivalent to HIH’s obligation and whether HCSL had the same ob58

ligation to Mr Steele as HIH because it “effectively stood in the shoes of HIH”.

The appeal to the High Court by HCSL argued that both SGIC and HCSL had “co-ordinate” or equivalent liability towards Mr Steele.

HCSL said SGIC should not escape liability to contribute because HIH had collapsed while IAL argued it had never shared a common burden with HCSL. The High Court agreed that HCSL and IAL did not have the same obligations and dismissed the appeal.

Justice Heydon notes a striking feature of the case was the determination of IAL to resist indemnifying Mr Steele on its policy “despite its stroke of good fortune to be found in the Federal Government’s intervention”.

“Insurers who are able to meet the liabilities which they have agreed to meet are often unwilling to do so, while those who are willing to meet them are often not able to do so.”

– High Court Justice John Heydon

He says IAL “does not now dispute the proposition that if HIH had not gone into liquidation but had indemnified Mr Steele, it would have been liable to make contribution to HIH”.

Justice Heydon says the circumstances that led to the case are “certainly novel”.

If Mr Steele had claimed against the SGIC policy first and been indemnified, IAL could not then have called on HCSL to contribute.

Although HSCL wanted a contribution from SGIC, if the situation had been reversed SGIC could not have claimed a contribution from HCSL, because Mr Steele’s policy was not with the support scheme and HCSL was not an insurer.

Justice Heydon says the appeal by HCSL should not succeed unless this mutuality difficulty could be overcome.

Despite lengthy debate, it could not be resolved.

HCSL had argued that if it lost, IAL would get a “windfall” but the reverse applied if IAL had paid under the SGIC policy.

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The yacht that keeled over How a simple product liability case became a battle over costs

By Rebecca Hosking, a senior associate at Wotton & Kearney

Reuters

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High seas drama and courtroom argument: Skandia leans over after its canting keel jammed.

Shortly after it broke off

MAJOR ENGINEERING PTY Ltd (Major) took out liability insurance with CGU that covered product and public liability. The policy also provided “additional benefits”, which included cover in respect of defence legal costs the company might incur.

Major supplied hydraulic cylinders to be fitted to the racing yacht Skandia, which was owned by Timelink Pacific.

During the December 2004 Sydney to Hobart Yacht race, Skandia capsized about 150km off the east coast of Tasmania, after its canting keel became jammed to starboard and broke off, causing the yacht to roll over.

The yacht’s skipper, Grant Wharington, told media the boat “landed hard” off a large rogue wave and the impact bent both the hydraulic rams controlling the canting keel.

The keel then came loose and swung to one side, laying the boat on its side. The 16 crew members took to the life rafts, and were rescued shortly after. The boat was later recovered upside-down but still afloat.

Timelink sued Major, alleging the cylinders “were inadequately specified, were not properly manufactured and… not fit for purpose”. There were also allegations of failure to design them properly.

Major contended that the 60

cylinders were manufactured and supplied in accordance with Timelink’s specifications.

The crux of the claim was ultimately whether the cylinders failed when subjected to a compression force less than 262N (Newton metres, a measure of torque), which was the force specified by Timelink.

Major sought indemnity from CGU in relation to the Timelink claim. CGU declined indemnity, relying on policy exclusions relating to: • “Liability caused by or arising out of… the rendering of professional advice or service”; and/or • “Liability caused by or arising out of… making or formulating a design or specification within the domain of the engineering profession”.

The Timelink claim was particularly protracted, because Timelink was successful at the initial trial.

Major appealed, and as a result the case was sent back to the trial judge to consider whether the cylinders had failed when subjected to a static force of less than 262N. The trial judge again found in favour of Timelink. Major appealed again, and on appeal its view was upheld.

The Court of Appeal said there was no basis for the trial judge’s finding that the cylinders had failed when subjected to a static force of less than 262N. insuranceNEWS

In defending the Timelink claim, Major incurred costs of $1.026 million net of costs recovered from Timelink.

Major then sought to recover these costs from CGU under the costs extension, but CGU denied liability to pay defence costs by reason of the exclusions.

In determining whether Major was entitled to indemnity under the costs extension or whether the exclusions applied, the court was required to consider the true nature of the claim.

The court agreed with CGU’s submissions that the Timelink claim essentially arose from “product suitability” rather than product liability, as there had been no complaint about a defect in the product itself.

CGU argued that the policy was directed at covering liability arising from unknown defects in Major’s products.

It did not extend, and expressly excluded, liability arising out of other such circumstances such as “the rendering of professional advice or services”, or the “making and formulation of a design or specification within the domain of engineering”.

CGU’s submissions were accepted and Major’s claim was dismissed.

On appeal the court held that the purpose of the “addiOctober/November 2011

tional benefits” extension was to provide cover to a policyholder for costs in a case where the policyholder has incurred a legal liability, where it was public or product liability… “and in a case where it has had a claim made against it” and “the claim is one in respect of which indemnity would be available under the policy if it were successful”.

As the Timelink claim had failed, Major had to persuade the court that had the Timelink claim succeeded it “would have resulted in a liability in respect of which Major would have been entitled to indemnity under the policy”.

The court characterised Timelink’s claim as a “simple breach of a contract to supply hydraulic cylinders which met particular specifications”.

In relation to a clause which excluded “liability caused by or arising out of… the rendering of professional advice or service” the court: • Held that the “service” provided to Major was the performance of its contract to supply the cylinders. It rejected CGU’s submission that “professional service” should be given a broad meaning to include the supply of a product which did not meet its contractual specifications.

• Considered Major’s business description in the policy, which included manufacture

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25th ADVERT BLEED.pdf 14/09/2011 2:36:07 PM

AFP

Sportscover would like to recognise and thank all our clients, brokers and staff who have helped contribute to our sucess for the past 25 years of insuring sport.

and sales of hydraulic equipment, and identified the risks the policy covered to enable it to adopt a “businesslike” and purposive interpretation.

• Stated that any ambiguity in the terms of the policy was to be construed in Major’s favour, in accordance with the contra proferentem rule.

[This rule provides that an ambiguous contract term will be construed against the party that imposed its inclusion in the contract. The interpretation will therefore favour the party that did not insist on its inclusion.]

The court said that if the clause allowed the exclusion of indemnity for the supply of defective hydraulic cylinders by a business – one of whose specific objects known to the insurer was the supply of such equipment – “the purpose of the policy would be severely compromised”.

Another exclusion clause excluded “liability caused by or arising out of… making or formulating a design or specification within the domain of the… engineering profession”.

The court found that despite early references to the design issue in the pleadings, the facts of the Timelink claim showed that Major was never engaged to design the cylinders.

It also found that this exclusion clause did not apply,

C as CGU could not establish that Major’s notional liability to M Timelink was related to design.

Therefore, “it could not beY sensibly concluded that this lia-CM bility was caused by or arose out of any performance or MY failure to perform the makingCY or formulating of a design or CMY specification”.

The Court of Appeal foundK that the exclusion clauses relied upon by CGU had no application, and that CGU was therefore liable for Major’s costs of defending the Timelink claim.

This case illustrates an issue which arises quite often, namely: in what circumstances can an insured recover its costs of a successful defence where the insurer has relied on policy exclusions?

The costs extension is only operative if the insured can show that if the claim had succeeded, there would have been a recovery under the policy.

The court showed itself willing to make an assessment of an “as if ” position.

This case accentuates the difficulties faced by insurers in cases where indemnity is in issue and the policyholder remains responsible for litigation potentially resulting in extensive costs.

These are costs which the insurer cannot control, and yet it can ultimately be found liable.

insuranceNEWS

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Insurance on the go New technologies are pushing insurers into a new age of customer service, says a Telstra survey

IF C Channel hannel Rapid C Rapid Channel hannel Enablement E nablement Legacy systems Legacy systems sslow low yyour our business b usiness gr growth. owth.

A llack ack o gility o ften off a agility often iimpacts mpacts new new b usiness business o pportunities. LLet et u elp opportunities. uss h help \\RX EHFRPH PRUH ÀH[LEOH RX EHFRPH PRUH ÀH[LEOH Q uickly llaunch aunch new new Quickly p roducts an d cchannels, hannels, products and D QG H[WHQG \ G \R RXU H[LVWLQJ DQG H[WHQG \RXU H[LVWLQJ Channel. hannel. ssystems ystems with with IF C Target T arget Harlosh Harlosh puts puts you y ou iin nc control. ontrol.

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BY 2015, ABOUT 4.5 MILLION AUSTRALIAN internet users, or 34% of the market, are expected to be connecting to the web via their mobile telephone devices only.

Experts warn Australian insurance companies need to catch up quickly if they want to leverage consumers’ increasing use of social media and smartphones to capture new markets.

A Telstra report commissioned by the Financial Services Council (FSC) shows insurers must offer simpler, personally customised policies to capitalise on the increasing use of mobile technology.

FSC Chief Executive John Brogden says the report comes at a time when the success and continued growth of Australian insurance is becoming critical to the local economy.

“Australia has a chronic underinsurance problem and anything that makes it easier for Australians to access insurance is a benefit,” Mr Brogden says.

The report, “Mobile Innovation – the Next Frontier for Growth and Productivity for Insurers”, shows mobile devices such as smartphones and tablets are already used to search for information about insurance and could be used more often in underwriting and claims if applications were developed for them.

Rocky Scopelliti, Telstra Enterprise & Government’s National Manager for Industry Development, says the report is a “vital step forward” for the insurance sector.

He interviewed chief executives and information officers from 14 insurance companies for the report and found they were concerned about innovative mobile technologies and new distribution models.

However, his research indicates Australian insurers need to speed up their deployment of new technologies. In the US, 10 general insurers and 11 life insurers already offer some kind of service via mobile devices.

“Life insurers have not looked at mobile applications as marketing opportunities… and they are not quickly investing in or investigating mobile applications,” he says.

The research shows consumers are insuranceNEWS

October/November 2011

moving faster than the insurers, with many people using smartphones and laptops to search for information about their insurance policies.

“Mobile innovation really is the next frontier, and our research shows 17% of consumers are already using wireless devices despite it not being offered by their insurer,” he says.

“That means one in five are using smartphones to engage their insurers’ online channels. Insurers have done a great job developing online channels but they now need to carry that through into the use of mobile devices.

“As penetration of mobile web-based technologies increases, the use of these devices in interactions with insurers is expected to grow.”

Mr Scopelliti’s study also used data from an online Roy Morgan poll of more than 42,000 people, which looked at how consumers prefer to purchase or research insurance policies.

The Roy Morgan research revealed a 5% increase in the number of new policies purchased online last year.

The trend towards buying insurance online was most dominant in covering vehicles, whereas consumers preferred to buy their household building and contents cover via call centres.

Mr Scopelliti suggests the additional complexity and involvement of purchasing home insurance meant that people still need assistance with the process.

“Furthermore, household insurance policies may need greater clarification and may be inherently more complex than vehicle insurance, especially in light of recent catastrophic events such as the Queensland floods,” he says.

“For example there is still ambiguity in the industry regarding the definition of flood damage.”

The frequency of catastrophic events has increased alarmingly in the past five years, with nine of the Australia’s 15 largest claims events since 1967 occurring since 2006.

Total annual claims from catastrophes has averaged $2 billion since 2006, com-

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“More than 50% of general insurance consumers obtained a competitive quote at their last renewal.” pared with an average of $600 million since 1970.

In that time, general and life insurance levels have remained flat, with life insurance stalled at only 20%. There are opportunities and lessons for life insurers from this situation.

The research shows there is dissatisfaction with insurers and more than 50% of general insurance consumers obtained a competitive quote at their last renewal.

“Overall satisfaction levels have been on a gradual decline since 2007 and that may have been another factor that has encouraged customers to shop around,” he says.

Rice Warner Actuaries estimate that underinsurance costs taxpayers about $394 million a year because governments have to make extra payments to support uninsured people who are affected by floods and bushfires.

The dissatisfaction with mainstream insurers has coincided with a number of new entrants into the personal lines market.

“Declining satisfaction, coupled with more efficient means of searching, may ex64

plain the sharp increase since April 2010 of consumers searching for both renewals and new services,” the report says.

Websites such as iSelect and infochoice are also widely used by consumers who are trying to find competitive deals.

As part of the survey, a new model for selling insurance to the mobile generation was offered, centred around five key concepts, including tailoring insurance to individual behaviour and lifestyle and providing tools that help keep policies up to date.

It also examined ways to use applications to make it easier to apply for cover and for better access to claims, enquiries and payments using mobile technology.

Mr Scopelliti says it’s not surprising that insurance, which is adaptable to individual needs and lifestyles, received the strongest approval rating from the survey’s participants.

The results showed that customers are 40% more likely to be satisfied with tailored products for motor insurance, for example. insuranceNEWS

October/November 2011

Some 41% of participants were more likely to renew and recommend the service, and 34% said they would switch insurers for this service.

Mr Scopelliti believes this kind of innovation is already happening with the introduction of specialist online niche insurers, and says tailoring policies to customers’ lifestyles could go a long way towards reducing uninsured rates.

“We found there was a greater potential to deliver greater growth and loyalty to consumers as the potential benefits of providing greater convenience, personalisation and fairer premiums,” he says.

The technology already exists to provide such easy-use services, and by using telematic programs insurers can even monitor the real-time behaviour of drivers to accurately customise their cover.

He says in some instances mobile technology can also be used to alert customers of the dangers of parking in certain risky areas and giving them safer alternatives.

“These technologies can add value.”

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companyNEWS

WinBEAT gets an extreme makeover A major upgrade gives the biggest broker system an efficiency boost EBI X A US T R A LI A I S M A K I NG LI FE EA S I ER FO R brokers with the long-anticipated release of its WinBEAT4 application, bringing the industry’s most popular back-office system up to speed with the latest technologies.

It’s a milestone likely to please the more than 5000 users who log into the system every day. It’s certainly been a thrill for Ebix Divisional General Manager Kiersten Lethbridge, who is now seeing the first installation discs heading out to brokers.

With so many users, changing the industry’s dominant broker system was never going to be easy.

It has taken more than two years of testing and development work to move the system from the old Visual Basic 6 platform to a Microsoft.Net-based technology.

While WinBEAT has been around in one form or another since the 1980s, Ebix is working hard to streamline the system to be compatible with the evolving technological solutions now on the market.

That’s why the new system has been designed to be continuously updated online. Ms Lethbridge says Ebix is already working on cloud solutions and mobile applications.

“It’s a complete technology shift and the product has been rewritten from the ground up,” she told Insurance News.

WinBEAT4 simplifies how brokers find and use information, and promises to make processing faster and more efficient.

Ms Lethbridge says the simplification of navigation is one of the key developments in this improved version, along with a redesigned user interface, new processing options and extended e-commerce support.

“WinBEAT4 has been a great opportunity to look at and evaluate our product and the user interface,” she says. “We

have made it more efficient and easier to use, as well as more in line with current design principles.”

Ebix also engaged a user experience consultant to help in the redesign process, challenging the team to make the product even better.

Ms Lethbridge says WinBEAT4 also responds to users’ suggestions. One example is the new ability to have multiple tabs open at once rather than having them clustered behind each other out of sight.

“Tools are now available to make an online presence affordable to any broker.”

“Tools are now available to make an online presence affordable to any broker,” she says.

WinBEAT4 was rolled out across the country in a series of demonstration workshops, which were followed over the past two months by training sessions for users.

Ms Lethbridge says the response to the new improved version of the program has already been “really promising, with brokers expressing their appreciation of the more efficient and accessible functions”.

“It’s been a lot of hard work, but we’re very pleased that we’ve been getting such a positive response from brokers during our workshops.”

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peopleNEWS

L APIG’s conference packs it all in It’s amazing how much you can cram into a day if you really try. Just ask the capacity audience at the Australian Professional Indemnity Group’s (APIG) annual seminar and dinner in Sydney.

Around 280 delegates from across the industry attended the event at the Dockside function centre at Cockle Bay Wharf, for a day full of presentations and panel discussions on a range of issues, including how natural disasters are affecting the professional indemnity, directors’ and officers’ and financial lines markets, consumer protection and emerging risks and trends.

And then, to finish off another successful conference in style, more than 400 professionals and partners attended the annual APIG gala dinner, where retired CGU National Professional Risks Product and Underwriting Manager Robert Beaton was crowned the inaugural APIG Frank Earl Award winner.

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No matter where opportunity takes you, Chartis will be at your side, with cutting-edge insurance solutions. Last year alone, we launched our business pack, corporate travel and suite of management liability insurance solutions on Transact via Sunrise Exchange, our online broking platform. This year we’ll continue to innovate, to help keep you moving forward.

Learn more at www.chartisinsurance.com.au

All products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language.

For additional information, please visit our website at www.chartisinsurance.com.au

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peopleNEWS

People power wins Vero debate Suncorp Executive General Manager Intermediated Distribution Andrew Mair has evened up the Great Insurance Debate score, taking out the last two rounds at Vero’s Melbourne and Sydney expos in August.

Some 400 brokers attended the expo at Melbourne’s Crown Casino, while 350 flocked to the Sydney event at the Hilton Hotel.

They weren’t there just for the debate, of course. The expo allows Vero to discuss new products and features with brokers, and to provide some professional development input. A team led by Mr Mair’s boss, Chief Executive Commercial Insurance Anthony Day, had been winning the argument at other Vero expos around Australia, so he was happy to get some runs on the board. Not that anyone’s competitive…

The Melbourne and Sydney events also featured researcher Ross Cameron speaking about the need for brokers to better understand the SME market. Other sessions looked at the importance of a broker’s personal presentation, how first impressions are vital when dealing with clients, and how managers can get the best out of their teams – just like Mr Mair did.

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peopleNEWS AILA speeds up networking opportunities Young professionals had to think quickly on their feet in August at another successful Australian Insurance Law Association “luminary” night.

More than 60 experienced industry professionals, ranging from chief executives to directors and managing partners, took part in the “speed networking” event.

There to meet them at the Establishment Restaurant in Sydney were 64 young professionals. The venue was divided into eight tables to allow for a progressive dinner arrangement.

During the three-course meal young professionals moved to different tables to meet as many senior executives as possible.

Guest speaker and former Australian Wallabies player Richard Harry also regaled the crowd with stories of his rugby days – which included being in the team that won four Bledisloe Cups, a Tri-Nations Trophy and the 1999 World Cup.

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2989 SR

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“OUR 16 YEAR ASSOCIATION WITH LLOYD’S PROVIDES SRS WITH A TWO-FOLD BENEFIT. It gives brokers confidence in our brand and its longevity, plus it gives confidence to our supporters at Lloyd’s that we are a reliable representative in the Australian market who is here for the long haul.

These key benefits, combined with highly experienced SRS staff in Australia and a highly skilled stable of claims managers, allow our underwriters to accommodate an extensive list of risks and occupation classes when Public or Products Liability cover is required.”

Paul Lynam CEO, SRS Underwriting Agency Ability. Reliability. Consistency.

SRS Delivers.

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peopleNEWS

Sportscover celebrates 25 years with a night for winners Australia’s gold medal-winning sporting achievements never fail to capture hearts across the nation, so it’s not surprising that Sportscover is using those momentous occasions to mark its 25th anniversary.

People from across the worlds of insurance and sport attended a gala dinner celebration in September at the Melbourne Cricket Ground, which featured a countdown of the country’s 25 most celebrated sporting moments.

The night also featured guest appearances by gold medal-winning sporting heroes like Danielle Roche, a member of the Hockeyroos’ 1996 team at the Atlanta Olympics; fellow hockey player Travis Brooks, one of the stars of the men’s team at the 2004 Athens Olympics; and basketballer Hollie Grima, who won gold at the 2006 world championships with the Australian women’s basketball team.

Former Socceroo John Aloisi relived the moment when he kicked the deciding goal against Uruguay to put Australia through to the 2006 soccer World Cup.

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product range expands NOW COVERING CONSTRUCTION! Mobius Underwriting Australasia is an established player in the Australian commercial insurance market.

Our binding authority agreement with substantial capacity from Lloyd’s syndicates offers brokers unparalleled access. We have a 100% broker focus.

We’ve extended our product capability to cover construction all risk and engineering all risk insurances. And we now offer capacity for New Zealand-based property and construction risks. Our niche product range includes deductible buy-down coverage for wind and earthquake perils.

Talk to Mobius today about our ability to partner with you to provide the best protection for your clients.

O

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Contact

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Chief Executive Officer Tim Higgins Direct: 02 9249 4885 Mobile: 0416 136 526 Email: tim.higgins@mobiusund.com.au

Level 11, 56 Clarence St, Sydney, NSW, Australia 2000 Phone: 02 9249 4880 Fax: 02 9249 4840 Mobius Underwriting is a fully owned entity of SLE Holdings Pty Ltd (AFSL 237268)

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peopleNEWS

Record numbers flood CC11 The rising number and severity of natural catastrophes was (logically) a big talking point at the annual Claims Convention in Sydney in August. CC11 was organised by the Australasian Institute of Chartered Loss Adjusters (AICLA) and the Australian and New Zealand Institute of Insurance and Finance.

The spate of catastrophes in the past year – and the many implications and lessons for claims professionals – proved a major drawcard for the annual event.

More than 270 delegates and 30 exhibitors made CC11 one of the largest claims conferences yet, with delegates from across Asia, Australia and New Zealand.

The Westin Sydney played host over the two days to a record number of New Zealand-based loss

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adjusters and insurance company personnel.

It was an ideal opportunity for the claims experts to discuss their recent experiences, with a range of relevant and challenging speakers in conference sessions ensuring lessons were passed on.

At the same time, there was plenty of networking and swapping of views in the exhibition area and at functions like the gala convention dinner.

New Zealand loss adjusters scooped the pool when it came to academic achievement, winning two of three annual awards presented by AICLA. Phillip Barnard of Cunningham Lindsay NZ was awarded the Diploma Prize, while Peter Bakker of Wellington-based TPA Godfrey received the Syd McDonald Young Adjuster Award.

Brisbane adjuster Tina Bayer of Crawford & Company took home the Charles Buchanan award.

insuranceNEWS

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peopleNEWS

HERE’S THE NEXT EXCITING INSTALMENT IN INSURANCE: INSTALMENT PAYMENTS. CGU’s instalment billing option will enable you to retain more customers who prefer to pay by instalments. The value to you is the ability to automate an administration fee. It’s perfect for Home insurance, Landlord’s insurance, Private and Commercial Motor insurance. For more details talk to your CGU Business Development Manager or visit cgu.com.au

CGU

The insurer is CGU Insurance Limited ABN 27 004 478 371 AFSL 238291. This is general advice only and does not take into account your client’s individual objectives, financial situation or needs. When making decisions about the product you and your client should consider your client’s personal CGU0055/TPH/IN circumstances and the product disclosure statement available from CGU at www.cgu.com.au

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peopleNEWS

Zurich forums examine white-collar crime Brokers and industry professionals were out in force for Zurich’s financial lines forums in Melbourne and Sydney, where discussion this year centred on concerns over white-collar crime and how increasing class action suits are putting pressure on directors’ and officers’ insurance.

More than 75 attended the Sydney event at the Hilton, while the inaugural Melbourne event at the Westin Hotel attracted more than 55 delegates.

The events were aimed at specialist financial lines brokers and addressed the emerging trends in D&O insurance and claims-handling.

This year’s forums included a presentation by Zurich’s Global Chief Underwriting Officer Paul Schiavone and a panel session conducted

by Australia General Insurance Chief Executive Shane Doyle.

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new_adv

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INSURANCE SOLUTIONS ON DEMAND

On demand solutions by Ebix Introducing Ebix iClose the next generation of e-commerce business solutions.

Developed after a thorough analysis of current facilities and research into industry technologies and standards.

Designed to bridge the gap between brokers and insurers, iClose streamlines ZRUNÀRZ DQG HOLPLQDWHV GRXEOH KDQGOLQJ

Current functionality will address areas such as: Negotiated Placements Claims Accounting iClose provides a secure, cost effective e-commerce platform that compliments existing market facilities such as Sunrise Exchange and Online Quoting.

To learn more about iClose On Demand Solutions contact 02 8467 3000 or email sales@ebix.com.au

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peopleNEWS

Marine experts gather for special gala night Sydney’s Marine Discussion Group usually spends its time sharing knowledge about the esoteric world of marine insurance, except for one special night when wine, food and great company dominate at its annual insurance industry gala dinner.

The QBE-sponsored event at GPO Sydney in July attracted about 200 people from across the insurance industry, including brokers, underwriters and marine surveyors.

The marinos’ night of nights kicked off with a cocktail party followed by a three-course meal and entertainment provided by MC Steve “the Sandman” Abbott.

Connect with the right people for trade credit solutions.

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To find out how all this can benefit you and your clients, visit www.nci.com.au, email info@nci.com.au or telephone 1300 654 500 (Aust) and 0800 442 556 (NZ)

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National Credit Insurance (Brokers) Pty Ltd ABN 68 008 090 702 AFS Licence No 233817 Adelaide | Melbourne | Sydney | Brisbane | Perth | Auckland | Wellington insuranceNEWS

October/November 2011

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peopleNEWS

UAC’s Adelaide expo gains momentum Underwriting agencies are getting more attention from brokers these days as the threat of a hardening market and tougher underwriting terms from local insurers loom. That’s the theory of South Australian brokers who converged in record numbers on Adelaide Zoo in August for the Underwriting Agencies Council expo.

Sponsored by Vero Insurance, the event attracted a record 35 exhibitors – up from 25 on the previous year – and more than 200 brokers from around Adelaide.

The day ended with a lunch featuring John Lynch, the Chief Executive of the Royal Flying Doctor Service, who spoke about managing the risks of one of the world’s largest aeromedical operations.

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Host Employer Liability Policy (HELP) Protect your Public Liability from workers’ compensation subrogation claims. Quarantine this risk via our SIMPLE HELP cover featuring a standard $5,000 excess.

HELP can be taken out by the Host Employer direct or by the Labour Hire Company/Contractor on behalf of their client. No more GREY areas.

HELP provides an alternative BLACK and WHITE insurance solution.

This policy is recognised as the industry leader and is the only “complete” liability cover, specifically tailored for the labour hire, recruitment and group training industries.

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Specialised Liability Solutions (SLS) We are a Lloyds cover holder specialising in difficult to place liability.

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maglog » THIS IS ONE WORLD TRADE CENTRE in New York City, a building that when completed in January 2013 will be the tallest in the United States. Once dubbed the Freedom Tower, it will nevertheless be a symbolic monument to the innocents killed in the terrorist attacks of September 11, 2001.

The official death toll from the September 11 attack – including the 10 terrorists who flew two Boeings into the towers – is 2762. Eleven of the dead were Australians; two were New Zealanders.

The insurance industry toll was alarmingly high. Marsh lost 295 staff and 60 contractors; Aon lost 176.

Smaller insurance industry operations also lost staff.

The 10th anniversary commemorations by Aon and Marsh last month in New York and around the world demonstrate just how raw the wounds still are for so many.

The September 11 victims are officially remembered by two glass reflecting pools set on the exact locations of the two destroyed towers.

The new building’s central stairwell, lifts and emergency systems are surrounded by 91cm reinforced concrete walls. The windows at the lower levels are designed to withstand a truck bomb. The steel frame can hold together even when part of it is damaged.

If that seems like just a little paranoid, it’s worth noting the city’s police chief, Ray Kelly, has described One World Trade Centre as “the nation's number one terrorist target”.

At commemoration ceremonies in New York on September 11 this year, President Barak Obama spoke of the years since 2011, and the ways that one cataclysmic event changed so much. The fact that his words were entirely focused on the United States perspective were understandable but disappointing, because the impact of the 9/11 tragedy is global and far-reaching. It hasn’t all been about political mayhem, savage wars and so many lost and shattered lives. insuranceNEWS

October/November 2011

Terry McMullan Publisher

Take the impact on the insurance industry. The Geneva Association, the global insurance industry’s most influential thinktank, recently published a series of papers examining the impact of 9/11 on the industry.

The distinguished authors find the global system of risk transfer and diversification through reinsurance performed well after 9/11, despite it being one of the biggest – and least expected – insured losses in history.

The cost was successfully absorbed, mainly by European companies, even though there wasn’t a single premium dollar set aside to cover such an event.

The global reinsurance industry’s capital base was restored quickly, with the influx of new startup reinsurers prompting the reinsurance giants to adopt a more flexible and disciplined business model based on “cycle management”. This has led to a smoothing of both pricing and capacity peaks and troughs – and the cycle transitions in the past 10 years have indeed been far more gentle than previously.

There’s also a greater understanding of the limits of market-driven insurance.

That has led to the formation of publicprivate partnerships like the Australian Reinsurance Pool Corporation, where the public and private sector act together to cover difficult risks.

Reinsurers are also more aware of the need to prepare for the “unthinkable” event.

In addition to enhancing traditional capabilities such as accumulation control and risk-based pricing, many reinsurance companies and intermediaries are now placing more emphasis on qualitative scenario analysis and planning.

And it’s also worth remembering that the protracted and occasionally quite ugly litigation over the World Trade Centre’s insurance claims led to a much greater recognition of the importance of contract certainty – now regarded as a cornerstone of the way the global industry conducts itself.

While such achievements are no consolation to the families and friends of those insurance professionals whose lives were cut short in the September 11 attacks, there is some slight satisfaction in knowing that one industry, at least, has absorbed the impact and worked out what to do next time the unthinkable happens.

The insurance industry, at least, learned from 9/11.

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New Motorpack

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My role is to outsmart the opposition.

Wherever you work, be it in an office or on a field, there are key roles to play and goals to achieve. For Vero it’s about working together to help brokers efficiently meet their clients’ needs. Whether it’s technology-enabled solutions via e2 and VeroCentral for simple risks or direct contact with underwriting specialists for mid-to-complex risks, Vero provides brokers with a range of service options.

My role is to provide brokers with a range of service options.

To find out how Vero can help you meet your clients’ needs, speak to your Business Development Manager or visit www.vero.com.au

Our role is to partner with brokers.

Vero Insurance Limited ABN 48 005 297 807

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