October/November 2021 - Insurance News (Magazine)

R U OK? Yes, but no

The 2021 Insurance News Wellness Survey measures how we’re all coping with COVID restrictions

October/November 2021

Monday 27 September 2021 Tender Ref: SW0572021, Provision of Insurance Services Solomon Water (SW) invites sealed tenders from eligible Insurance Companies or Insurance brokers to meet the requirements of this Tender. The Services shall be procured using the Procurement Procedures specified in the SW Procurement and Contract Management Manual.

Insurance Companies or brokers in the Solomon Islands and Internationally are welcome to respond.

The Services required include but not limited to: ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪

Workers Compensation Public Liability – General Machine breakdown Motor Vehicles Comprehensive Fire & Extraneous Perils Shipping Insurance (Marine Cargo) Health Care (including medical evacuation) Directors & Officers Insurance Loss of Business Burglary Contractor all Risks Insurance

Tenderers may obtain further information from, and inspect and acquire a printed or electronic set of Tender documents, at: Solomon Water (SW) Commonwealth Avenue Honiara Solomon Islands

Attention: Hudson Molia Email: hmolia@solomonwater.com.sb

All completed responses must be delivered to Solomon Water, appropriately marked and addressed to: SW0572021 – Provision of Insurance Broking Services Secretary SW Tender Evaluation Committee Solomon Water Commonwealth Avenue Honiara Or submitted through email to: procurement@solomonwater.com.sb on or before 2pm, 26 October 2021.

Contents 4 Newsmakers 8 Focused and future-ready

Axa XL has a new local chief, and refreshed growth ambitions for Australia

14 Are we ok?

Yes, and no. Our Wellness Survey finds insurance industry people expressing a range of emotions as the realities of the pandemic restrictions bite

23 Broking in the time of COVID

Brokers in locked-down Victoria and NSW say they’ve been robbed of meaningful connection with their clients. So much has changed, but they see it all as a passing phase

28 Heading in the right direction

Sue Houghton likes what she sees at QBE, with the new Australia Pacific unit chief putting listening top of her agenda

30 Running out of time

The IPCC’s Sixth Assessment Report on climate change confirms many impacts of global warming are locked in. The battle now is to avoid an even worse future

37 The insurance mix is changing

50 A fresh approach

Independent brokerage Honan has positioned itself as a unique challenger in the corporate market, powered by a young and diverse workforce

54 The October blitz begins

Of all the regulatory changes starting this month, new rules governing the design and distribution of products will have the most significant impact

61 Sure thing

In a disaster-prone area of Australia where many insurers have retreated, a smaller competitor says it’s doing well

companyNEWS 65 Expanded offering:

ShieldCover adds personal accident to new quoting portal

65 50 and counting

Cowden set to celebrate milestone

peopleNEWS 66 maglog

Property’s share of the premium pool is rising, bringing with it more complexity and volatility

40 Stepping forward

Incoming NIBA chief Philip Kewin is taking up the reins as brokers enter a period that will define their futures

45 Building back better

The construction market has seen capacity withdrawn and prices surging amid challenges in both material damage and liability

R U OK? Yes, but no

The 2021 Insurance News Wellness Survey measures how we’re all coping with COVID restrictions

October/November 2021

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BI TEST CASE HEARINGS CONCLUDE Lawyers put forward final arguments to conclude eight days of hearings in the Insurance Council of Australia second business interruption test case related to COVID-19 cover.

Justice Jayne Jagot last month reserved her decision.

Appeals are already expected and are set to be expedited to a hearing in November.

Insurer legal teams reiterated that health data identifying individual cases of COVID-19 had not shown “outbreaks” in areas around insureds’ premises, causal links with government orders had not been established and policies have exclusions

that apply to the virus.

Senior Counsel Edward Muston, appearing for Allianz and Guild Insurance, said in the case of an Adelaide stage clothing business, state government orders had not directed it to stop or scale back operations and the decision to close was made by the businesswoman.

Senior Counsel David Williams for Swiss Re said “an outbreak and an occurrence are not the same thing” and, in the case of a claim by a beauty salon in Marrickville Sydney, government pandemic responses were not taken as a result of “an outbreak either at the

situation or within a 5km radius of it”.

Mr Williams also pointed to a policy emphasis on property damage and the recent Federal Court decision against The Star Entertainment Group in relation to similar wordings.

The second test case consists of nine small business claims lodged with the Australian Financial Complaints Authority as part of its dispute resolution process. Insurers involved are Allianz, Chubb, Guild Insurance, IAG and Swiss Re. A case involving QBE has also been heard at the same 0 time.

There is a message to Australian banks, “ superannuation funds and insurers: if you support the objective of net zero, do not walk away from the very sectors of our economy that will need investment to successfully transition.

”

Federal Treasurer Josh Frydenberg, in a speech to Australian Industry Group members.

AON NAMES NEW CHIEF Aon MD for Specialties Jennifer Richards, pictured, became CEO Australia on October 1, replacing James Baum who is taking up a new role in London as UK Head of Commercial Risk.

Mr Baum took on the CEO position in March 2018, rising up the ranks after joining from Marsh in 2005.

A spokeswoman for the broker confirmed Ms Richards is set to be the first woman to manage its Australia business.

Ms Richards has been with Aon for the past 10 years and is a member of Aon’s AsiaPacific Global Leadership Team and Diversity & Inclusion Council.

“Her extensive experience across broking, M&A and leading complex clients means she is ideally placed to succeed [Mr Baum],” Aon said.

Before Aon, she held a variety of senior management roles at AIG where she was responsible for their M&A, private 0 equity and real estate practices.

LA NINA THREATENS SWIFT RETURN The chances of a flood-inducing La Nina weather system forming this year have risen, just six months after the last such event came to an end.

The Bureau of Meteorology says recent cooling in the tropical Pacific Ocean means there is a 50% chance of a La Nina forming, which is about double the normal likelihood.

“La Nina events increase the chances of above-average rainfall for northern and eastern Australia during spring and summer,” the Bureau says.

A negative Indian Ocean

Dipole (IOD), which can also increase rainfall, has weakened but the Bureau says the pattern of sea surface temperatures in the Indian Ocean remains likely to influence Australian rainfall over the coming months.

“Models suggest this weak negative IOD pattern could persist at borderline levels through October before easing further.”

The last La Nina started in September last year and continued until March this year, when major flooding hit NSW and 0 Queensland.

VERO STRIKES MANSFIELD GOLD, AGAIN The Gold Mansfield Award for overall excellence in claims handling has been presented to Vero for a second straight year, while other winners were Allianz Australia, Zurich and NTI. Vero also took out the SME Property and Casualty category at the online event, which was hosted by co-founders LMI Group.

“We’ve invested a lot of time over the past year on continuing to improve our claims management, building on a platform of fairness and transparency with our brokers and clients,” Vero Head of Commercial Property and Specialty Claims Luke Whenman said.

Vero has improved its OneTouch settlement rates and reduced the average duration

of an SME claim and has built a major loss model that partners with specialist suppliers to help brokers and their clients navigate complex claims, he says.

The Personal Lines category was won by Allianz for the second year in a row, Corporate Property and Casualty was taken out by Zurich Insurance Australia and the Specialty award went to NTI. The awards, which are in their fifth year, are named after the English Lord Chief Justice who introduced the concept of utmost good faith to insurance – a concept that is written into Australian law.

The awards are sponsored by Steadfast 0 and icare.

IDA LEAVES VAST LOSSES Hurricane Ida onshore and offshore insured losses could reach $US25-35 billion, catastrophe modelling firm RMS estimates.

The estimate includes National Flood Insurance Program losses in Alabama, Florida, Louisiana and Mississippi of $US2.34 billion and offshore platform, rig and pipeline losses of $US700 million to $US1.5 billion.

“Ida was truly a multi-faceted event in terms of hazard and loss impacts,” RMS North Atlantic Hurricane Models Senior Product Manager Jeff Waters said.

“From a wind perspective, this storm

was a design level event, where observed wind speeds often exceeded speeds that buildings have been designed to withstand, particularly in the hardest hit areas in southern Louisiana.”

Ida made landfall near Port Fourchon on August 29 as a category 4 hurricane, producing sustained winds of 150 miles per hour (241 km/h), according to the National Hurricane Centre.

The hurricane caused extensive damage in Gulf of Mexico states before bringing torrential rain and flooding to other parts of the country as it travelled to the northeast. 0

EARTHQUAKE ROCKS VICTORIA Insurers have received 9850 claims after the largest earthquake to ever strike Victoria took Australians by surprise last month, the Insurance Council of Australia (ICA) says.

Estimated losses have grown to $147 million, but the bulk of the claims are not significant structural issues and insurers have indicated they do not expect to incur major costs.

ICA has not declared the event a catastrophe.

Home, commercial property and business interruption insurance policies generally cover damage caused by an earthquake.

While too early to accurately estimate potential costs, Suncorp CEO Steve Johnston says the quake is unlikely to trigger major cover.

“We don’t expect it to be a big event from an insurance perspective but it’s a timely reminder of the value of the product we offer and the peace of mind it provides,” Mr Johnston said.

Early lodgements were made up almost entirely of home building claims in Victoria for minor damage such as fallen cornices and damage to plaster and render, ICA said after the quake, which struck around 9.15am on September 22, causing walls to shake and windows to rattle across metropolitan Melbourne and well beyond.

It measured 5.9 on the Richter scale, with the epicentre at Victoria’s Mansfield around 40km south of Mount Buller. The size of the quake, combined with the geology, means it was felt hundreds of kilometres away from the epicentre from Sydney to Hobart and west to Adelaide. 0

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From the

PUBLISHER

INSURANCE NEWS APPOINTS PARTNERSHIPS MANAGER Emma Hingston, pictured, has been appointed Partnerships Manager at Insurance News.

Insurance News Publisher Terry McMullan says Ms Hingston is “a highly experienced marketing professional who will help us to maximise the benefits we offer insurance industry companies and our market-leading readership”.

Ms Hingston previously held senior marketing roles at Seven West Media, Mail Online, and Network 10.

“At Insurance News we are already planning expanded editorial services, and Emma will play a key role in identifying opportunities and developing new ways to interact with our advertisers,” Mr McMullan said.

Ms Hingston started in the newly created role last month following the departure of former advertising manager Madison Seymour, who is now National Broker Account Manager at 0 Johns Lyng Group.

INSURTECH LEADER STEPS IN The board of Insurtech Australia has named Simone Dossetor as its new CEO, as co-founder and current chief Rita Yates departs to pursue new challenges in innovation.

Ms Dossetor has more than 20 years’ experience in the insurance industry, most recently as COO at Munich Re in Australia where she spent almost seven years.

She has served on the Insurtech Australia board since February last year, has been a Non-Executive Director

of the Australian and New Zealand Institute of Insurance and Finance for three years, and previously held roles at Calliden, Deloitte and the Trowbridge Group, now part of Finity.

Ms Yates accepted the CEO role in early 2019 after co-founding Insurtech Australia in October 2017 for the benefit of members and partners across Australia, with a vision to create a world leading insurtech 0 ecosystem.

The long-term human cost of the COVID pandemic restrictions will probably take quite a long time to understand, but we are already seeing some of the short-term impacts.

On R U OK? Day on September 13 we published our inaugural Insurance News Wellness Survey, which was intended to capture in as simple a form as possible subscribers’ personal experiences of life under the pandemic.

About 820 subscribers responded, and we would like to thank them for their willingness to share so openly their emotions, positive and negative. You’ll find a full report on the survey inside, including a sampling of people’s thoughts and a statistical summary of responses to our questions.

For most survey respondents – particularly those in Victoria and New South Wales who have worked and lived through long periods in lockdown and isolation – reactions range from ecstatic embraces of the “work from home” concept to loneliness and a sense of dislocation. For those living alone, or solo parents and families living in smaller homes, the lockdown experience has undoubtedly left scars.

That may explain why 28% of the Insurance News Wellness Survey respondents admitted to seeking, or considering seeking, mental health advice from a medical expert while they were in lockdown. On any statistical measure, the size of that common response should be cause for concern.

Most of the survey responses came from Victoria and New South Wales – the states with the longest lockdowns and the largest insurance workforces. Brokers responded to the survey in force, with a trend in their comments suggesting there has been a clash of issues caused by the lockdowns.

For example, some brokers say insurance companies are almost impossible to contact, the hard market is making things tough and underwriters aren’t underwriting. Meanwhile, a significant number of insurance company respondents say productivity is way down and their workloads have increased since working from home came into effect. A correlation, perhaps?

There’s a huge amount to learn from the survey, and we don’t doubt the psychologists will find it a valuable addition to any formal study of how Australia’s workforce has begun to emerge from lockdown into a future that’s uncertain but – everyone hopes – full of promise.

Terry McMullan

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ISSN 1837-4972

Focused and future-ready Axa XL has a new local chief, and refreshed growth ambitions for Australia

By John Deex

G

iant global insurer Axa XL’s commitment to Australia hasn’t faltered – but like many of its peers it’s gone through a period of remediation as the market hardened and catastrophes piled up.

Now it’s looking ahead with optimism, with new local leadership in place and greater recognition within the Axa Group.

After a recent change, Australia reports into the Asia-Pacific and Europe business unit, and it’s the third largest country within that unit in terms of gross written premium, behind France and Germany.

Last year former Australia country head Robin Johnson left the business, and regional leader APAC Craig Langham is also moving on.

Former head of claims APAC Catherine Carlyon has now taken control of local operations, starting on August 1 as Country Manager Australia.

Ms Carlyon believes her strong claims background and international experience stands her in good stead, and she sees a wealth of opportunity ahead.

The local operation, with its 170-strong team, is critical to Axa XL’s multi-national programs, but there’s a strong producing office too.

“Our most significant lines are property casualty and financial lines, but we’ve got a growing presence in the marine business here,” she tells Insurance News.

“And then a whole suite of specialty lines, including things like political risk and trade credit, fine arts, business continuity and other crisis management lines.

“We have started to offer things like parametric insurance, where we’re able to pull in products that have originally started elsewhere within Axa, but we’re able

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to offer them now within Australia.”

Axa XL also owns the Brooklyn Underwriting agency, and provides capacity for other agencies too, giving access to the SME market above and beyond its traditional corporate focus.

Following several years of rapid growth with a “top line focus”, Ms Carlyon describes the current insurance environment as “challenging”, even though the hard market “is possibly tapering a bit”.

There has been significant remediation within the property and financial lines portfolios, and Axa XL also withdrew from its private client ultra-high-net worth business, but now the company is in a position to move forwards.

“It has been challenging – whether it’s bushfire, hailstorm, COVID with the non-damage business interruption test cases ongoing, the class action environment, tightening regulations, all of that.

“It’s been tough conditions but we focused on making changes to those product lines – probably not too dissimilar to many of our peers as well.”

Ms Carlyon does not shy away from tough decisions, with delivering on profit and loss now her responsibility. But she notes that neither brokers nor customers like uncertainty.

“P&L is my remit and we will have to continue to look at making sure that we’re driving that going forward.

“But one of the things that I’m also very aware of is that nobody likes any surprises.

“It’s important that we build out real partnerships with our brokers and make sure that whatever we’re

Optimistic outlook: Axa XL’s Catherine Carlyon

doing we’re talking about it – that we’re operating in a way that puts our joint customer first.

“Ultimately, I think that’s how we’re going to get success in the longer term.”

With most remediation now completed, there are new opportunities for growth in many areas.

“I would say, with both property and financial lines, we’ve done the bulk of the hard work to get the portfolio where it needs to be,” Ms Carlyon says.

“Financial lines is one of the areas where we’ve really come through what I think has been a hard remediation cycle for everybody. We have a lot more confidence in terms of where we’re at.

“So we’re not looking at retreating.”

In marine, Axa XL’s relatively small portfolio is packed with potential.

“That’s an area we’d like to see grow out within the market. The Brooklyn branding for us is also an area where we’re looking to grow because that brand focuses more on our SME market space.

“When we look at our portfolio candidly, we’ve been doing some work to make sure that we’re reducing the volatility and increasing profitability. In order to balance those pieces out, the portfolio growth in that SME space makes sense for us.”

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“If all of the decisions went against insurers…

I don’t think we’d have much of an industry left.”

Cyber is also a product where Axa XL sees growth, although Ms Carlyon notes that it’s “under a lot of scrutiny”.

Some Australian politicians are urging insurers to stop reimbursing companies for ransomware payments, to prevent funding criminal enterprises.

Axa France, which is a separate division to Axa XL within the Axa Group, announced earlier this year it will stop offering ransomware coverage when underwriting new cyber policies.

Axa XL continues to offer ransomware reimbursement as part of broader cyber policies, but the company says it will “monitor the evolving regulatory environment”.

While cyber is not one of Axa XL’s most significant lines in Australia, it has specialists within the team and sees a strong future for the product, despite rising claims and the ongoing scrutiny.

“We’ve had a project internally recently that’s been looking at the policies and limits on what we have within the cyber space,” Ms Carlyon says. “[The scrutiny] is something that we’ve been focused on as well, to make sure our cyber offering is fit for purpose and that we’re approaching it with the right ethical view.”

Parametric insurance – where cover responds to a pre-agreed weather trigger, such as wind speed – is something Axa XL can offer by tapping into support from Axa Climate and the broader Axa Group.

“It’s a pretty small portfolio for us in Australia,” Ms Carlyon says.

“But as we have more extremes in terms of climate, I think it’s a good product offering to have out there.

“I see that there’s growth – in terms of how much growth, that’s going to be an interesting one to see – but I definitely think it’s a valuable product to have.”

Ms Carlyon says the hard market is affecting Axa XL’s larger corporate clients but, in contrast to the SME space, it’s less about affordability and more about the structure of insurance and risk management programs.

She says there’s a growing tendency to use captive insurance companies – whereby a parent company sets up an insurance company to provide coverage for itself.

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“With the larger corporate clients it’s about trying to craft creative solutions. I mentioned things like captives and looking at how the insurance programs are structured. That’s something that we work with our brokers and clients on as well.

“We have to make sure that we offer products that make sense to our clients at the end of the day.

Otherwise, they’re no help to anybody.”

While Ms Carlyon believes her company, and industry, has responded well to the COVID-19 pandemic, she accepts that the business interruption court battles don’t look good from a consumer’s perspective.

Axa XL has some exposure to the issues being fought out in the second industry test case, so the upcoming Federal Court ruling – which will almost certainly be appealed – will have an impact.

“I think the industry has done well coming together and making sure that we’ve been sharing experiences and taking the approach that makes sense. We are striving to try to make sure that we’re ending in the right spot for our clients.

“But if I take a step back, as an industry, I would say we could do better.

“If all of the decisions went against insurers, including some of the issues that have been looked at outside of the test cases on some of the more significant cases, I don’t think we’d have much of an industry left.

“But it feels like it’s taken us too long. It’s difficult because it’s tied up with the courts and the court timeline.

There are things that are out of our control and it’s a very complex question that’s being unpicked.

“Sometimes I feel like insurance is an easy target for people to push things towards, or to blame. But I do think possibly there are some lessons learned along the way, to think about what we could do better.”

Another concern around COVID is the impact it has on access to talent. With borders still closed, Ms Carlyon says “good talent is hard to come by”.

“You just have to be in our office and listen to the number of English accents to know how much of the insurance talent gets imported from elsewhere,” she says.

“Being less movement internationally, it has played a part and it has increased the competition for talent.

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“There is a generation that’s retiring or about to retire. I think we’re starting to rally around a little bit pulling some of the younger generation but we’ve got a bit of a gap in the middle section.”

Axa XL has been a key supporter of the Lloyd’s organised Dive In Festival, and Ms Carlyon is keen to push the importance of inclusion.

Because if a company is genuinely inclusive, she believes diversity will follow.

“When I look at our gender diversity, we probably mirror what happens in the rest of our industry, in that we do have quite a good gender diversity when you look at the overall population, but the higher up you get in the organisation that gender diversity is not so equal.

“But, for me, the most important thing is inclusion.

On the back of the first Dive In event that we had here, I was one of the people that started our inclusion committee in Australia.

“And it was actually important for me that we didn’t focus just on gender. And when we talk about gender, we don’t just talk about women.

“I would much rather talk about what some of the underlying issues are and what we can do to move things forward – whether it’s flexible working, parental leave, and making sure that we’re approaching this with that inclusive mindset rather than putting the focus solely on women, which can be divisive.”

Ms Carlyon sees her ability to promote the Australian business and its potential enhanced by the structural changes that accompanied her appointment.

A “conscious uncoupling” of Australia from Asia, as she puts it, and the fact that it now reports directly into the business unit, gives it a clearer voice.

“That gives us the ability to internally share the position of the company in Australia, to really give them a better understanding of where we are.

“That’s one of the things that I really do see that we get as a benefit from reporting directly into the business unit.

“There’s no question or any doubt of the company’s commitment to Australia as a geography and 0 a jurisdiction.”

Bees and biodiversity Ms Carlyon – like so many others – came to insurance in a round-about way but in Axa XL finds herself at a company that shares her passion for the environment.

Axa Chief Executive Thomas Buberl has been a trail-blazer with the company’s climate strategy and strict protocols outlawing cover for new coal projects.

Ms Carlyon, who hails from Bristol in the UK, studied biology at university but then joined KPMG as a trainee chartered accountant.

She specialised in financial services and came to Sydney in 1999, where she met her husband. Then it was on to Chicago and London, and XL Group, as it was then, became a key client before offering her a job in 2006.

But she never lost interest in the natural world.

“I’m very proud of the climate stance that we take, and I’m very supportive of it,” she tells Insurance News.

“I think it’s important that we hold ourselves accountable going forward and I’m quite passionate about making sure, for example, that we retain biodiversity. I keep bees in my back garden.

“So, I’m fully supportive of our stance that we have on climate change. It’s something that within Axa XL we’re going to be asked to take more of a local ownership of going forward as well, to make sure that we’re taking our group policies and group stance and converting that into something that really makes sense for our local market.”

As for coal mining and associated industries, Ms Carlyon understands the frustration at not being able to

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Bee happy: Ms Carlyon has a passion for biodiversity

access finance or insurance.

And she says it can sometimes be complex as to where an insurer draws the line.

“We have quite a strict internal referral process on that to make sure that we are applying the right mindset to underwriting risks,” she says.

“Everybody has a unique perspective and it’s an issue I know that the coal mining industry is grappling with.

“But our stance as an insurance company is to protect what matters and to move the world forward.

“I’m comfortable with and proud of that.”

Why award-winning claims matter

We’d like to thank our broker partners for their feedback, we are very proud to have received gold for Overall Claims Excellence at the prestigious 2021 Mansfield Awards for the second year running. It’s a great reflection of the focus and dedication the Vero team has on delivering claims excellence. But most importantly, it means we are supporting our brokers and their clients when they need us most.

Our claims support includes Vero OneTouch* and dedicated locally based claims officers, giving you confidence when recommending Vero to your valued clients.

Creating positive claims experiences is extremely important to us, and we look forward to continuing to support our brokers and their clients.

vero.com.au/broker/claims

The Mansfield Awards winners are decided on by a survey completed by brokers, who share their experiences on insurers’ claims handling. This is coupled with supporting data from Australian Securities & Investments Commission (ASIC) and Australian Financial Complaints Authority (AFCA).*The OneTouch claims process applies only to Vero Small to Medium Business up to $10,000. Time-frames quoted are based on the assumption that all supporting information and payment details are provided at the initial claim lodgement.

Insurer is AAI Limited (ABN 48 005 297 807) trading as Vero Insurance. Read the PDS before buying this insurance. TMD is also available. Go to vero.com.au for a copy.

THE INSURANCE NEWS WELLNESS SURVEY

Are we ok?

Yes, and no.

Our Wellness Survey finds insurance industry people expressing a range of emotions as the realities of the pandemic restrictions bite

I

n September Insurance News set out to gauge the mental health and wellness of insurance industry people who are dealing with the many challenges thrown up by the COVID-19 pandemic. While we had published a range of articles about the human impact of the pandemic restrictions, we wanted to

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find out how people in the insurance industry specifically are coping.

No matter which state or territory they work in, or whether or not they have experienced lengthy lockdowns, insurance industry people and their peers in other industries have all been exposed to the dislocations of working from home, or in half-empty offices while wearing masks, or maintaining careful separation from colleagues and strangers alike.

But most important is the direct impact on people.

What has been the human cost of a massive unpredicted and uncertain change in the way we work, coupled with hygiene, lockdowns, home-schooling, isolation, loneliness and uncertainty about the future?

That’s what Insurance News set out to find out on R U OK? Day, September 13, launching our inaugural Wellness Survey. Readers were invited to anonymously provide feedback on how they were feeling and coping, support systems, the good and the bad. More than 820 responded – a large enough sample of our 30,000 subscribers to draw some interesting and important information.

What we have found overall is that for some respondents the changes to their working life have refreshed their lives, brought them closer to their families and shown them the unexpected possibilities and work/life options that technology makes possible.

But for others – particularly parents with small children in confined spaces, solo parents and people living alone or far from friends – the experience has been stressful and demanding.

THE INSURANCE NEWS WELLNESS SURVEY

Workload and productivity My current workload is manageable I am able to maintain a good work-life balance I have been able to keep within my usual working hours I continue to be able to maintain my levels of productivity while working from home I am given opportunities to be flexible in my work to suit my home life and current circumstances I can balance working from home along with childcare/home-schooling where necessary I have, or have been given the necessary office equipment to work effectively from home I have a dedicated area at home where I can work comfortably, ergonomically, and undisturbed Strongly agree Disagree

Agree Strongly disagree

Neither agree/disagree N/A

But even the positive commenters had criticisms While much of the feedback was positive, there when it came to the drawbacks of working from home. were also some disturbing findings. about Probably I am concerned my the A standout bugbear is the loss of long-established most alarming wasmental the discovery that around 28% of health and/or wellbeing norms, with comments ranging from finding it hard to the Insurance News Wellness Survey respondents said contact employees to not enough attention being paid to they were seeking, or had considered seeking, mental I have experienced anxiety the ergonomics of their home ofiice. health advice from a medicalduring expert they were thewhile pandemic “Using smaller laptop screens affects my eyes.” in lockdown.

“I am getting headaches and neck pain due to not Just under half said they were concerned about have experienced feelings of having the proper equipment at my desk space.” their mental health orI wellbeing, and almost two-thirds isolation during the pandemic “Life goes on as normal in terms of deliverables said they have had experienced anxiety during the but it’s more difficult due to constraints on time, lack pandemic. of availability of key staff, time taken in meetings.”

“Staff taking less leave trying to keep up I have are experienced stress about my workload or with balancing workloads, my work/home lifethe during the pandemic For brokers especially, the lockdowns and closed increased and continued uncertainborders have been difficult to live with, hindering their ty is tiring and creates anxiety about the future and ability to meet clients and forcing meetings on to Zoom whether it is possible toIhave our previous freedoms am aware of the support or phone. In a hard market it’s even more frustrating. back again.” available to me if I need it Brokers’ frustrations illustrate what a tough challenge Many of the comments begin by saying the industry insurers have in keeping a diverse workforce happy has done well overall, pivoting quickly and impressivehave considered mental and catering to the needs of brokers, customers and ly toI am the seeking COVID or emergency.

Some seeking made the point that health advice (medical/expert) during lockdown large workforces. insurance lends itself to work from home set-ups and “Some insurers are using the current working is fortunate not to have suffered widespread COVIDStrongly agree Agree Neither agree/disagree circumstances as an excuse for poor turnaround be related job losses. it with claims or disagree underwriting.”

“I am grateful that the insurance industry isDisagree Strongly N/A “It has been extremely difficult to even contact able to work remotely and I continue to generate an insurers. They hide behind their automated quoting income, while there are so many people who aren’t systems without picking up the phone.” able to work currently.”

“There is a perception that a reasonable section insurance industry positive has been a frontrunMy“The company has demonstrated awareness about mental and wellbeing of the insurance workforce who are working from ner.” – A comment from ahealth respondent who also home spend more time in front of Netflix instead of praised his employer’s mental health webinars, providing service to their customers.”

Zoom wine tastings and comedy shows, which “make think more could be done to “A lot of people have lost motivation and the me very proud to beIin such a supportive industry”. support my mental health and wellbeing

Support is available and my company has clear

insuranceNEWS

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15

I continue to be able to maintain my levels of

productivity while WELLNESS working from home THE INSURANCE NEWS SURVEY I am given opportunities to be flexible in my work to suit my home life and current circumstances I can balance working from home along with childcare/home-schooling where necessary

28% of the Insurance News Wellness Survey respondents said they were seeking, or had considered seeking, mental health advice from a medical expert while they were in lockdown.

I have, or have been given the necessary office equipment to work effectively from home I have a dedicated area at home where I can work comfortably, ergonomically, and undisturbed Strongly agree Disagree

Agree

Neither agree/disagree

Agree

Neither agree/disagree

How disagree I am feeling Strongly N/A

I am concerned about my mental health and/or wellbeing I have experienced anxiety during the pandemic I have experienced feelings of isolation during the pandemic I have experienced stress about my workload or balancing my work/home life during the pandemic I am aware of the support available to me if I need it I am seeking or have considered seeking mental health advice (medical/expert) during lockdown Strongly agree Disagree

Strongly disagree

N/A

Asked whether they would like to retain some level energy to get things done with any sense of urgency.” of remote working even after it is safe to return to the While the vast majority of those surveyed want My company has demonstrated positive awareness office, 80% agreed they would like that, with less than a hybrid remote-office about mental health and wellbeing mix in the future, feedback 4% disagreeing. on working from home exclusively generated a very “The industry has handled it exceedingly well. mixed response.

There is a greater acceptance and acknowledgement “I love it and prefer it to an office hands down.”

I think more could be done to that people have a family life and it’s ok to ‘bring a and horrible idea for two working parents and support my mental “It’s health wellbeing this to work’. The industry has continued to meet young kids. It simply doesn’t work.” client needs and be supportive.”

“Working remotely is neither desirable nor susAlmost 80% agreed they were given the necessary tainable and culture will suffer in the long run.”

Support is available and my company has clear equipment to work effectively from home and had a Loneliness and Groundhog Day syndrome – where procedures for dealing with issues from home workingevery or feeling overwhelmed dedicated area for work. Some 42% said they have not day feels like the previous five weeks – also takes kept within the usual working hours and 22% admitted its toll on people living on their own. “Lonely” was a their productivity has declined since they started workpoignant single-word response from a young female I would like to retain some level ofin home working ing from home. working underwriting. even after it is safe to return to the More than half said support was made available to More than halfoffice of the respondents said they have members of staff and that their company had clear proexperienced stress about their workload or about balcedures dealing with issues that arose from working ancing work and home life. Strongly agree Agree Neither for agree/disagree from home or feeling overwhelmed by the impact of the “It is okay to cry if you are overwhelmed. The Disagree COVIDN/A crisis. pressure builds up and anything will setStrongly you off disagree into Mercer Marsh Benefits Pacific Head Sarah Brown a mini-meltdown. Starting working at 7.30am and says the mental health of employees has emerged from finishing at 5pm, with only an hour access outside, the pandemic as a risk requiring C-suite attention, with does take its toll.” feelings of anxiety and loneliness higher than ever.

“I find it difficult to get excited about much. I That is reflected in comments in our survey like this have also been drinking heavily which I realise is a one: problem and now stopped.”

“There is no clear separation between work and “My business is being smashed because clients personal time, it all becomes blurred after a while. are closing their doors left, right and centre. Things Back to back video meetings and calls are mentally are in a dark place.”

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I have experienced stress about my workload or balancing my work/home life during the pandemic THE INSURANCE NEWS WELLNESS SURVEY I am aware of the support available to me if I need it I am seeking or have considered seeking mental health advice (medical/expert) during lockdown agree Company/industryStrongly support Disagree

Agree

Neither agree/disagree

Strongly disagree

N/A

My company has demonstrated positive awareness about mental health and wellbeing

I think more could be done to support my mental health and wellbeing

Support is available and my company has clear procedures for dealing with issues from home working or feeling overwhelmed

I would like to retain some level of home working even after it is safe to return to the office

Strongly agree Disagree

Agree

and physically draining. It becomes very difficult to assess whether a team member is coping during the WFH scenario.”

Ms Brown says health and wellbeing has become “an urgent financial imperative” for organisations and there is a growing need to offer wellbeing programs amid a “cost containment crisis”. Both human resources specialists and risk managers will be grappling to understand root issues and successful interventions over the coming weeks, months and years.

Insurance News survey’s open-ended comment section attracted reems of feedback and unpacked the minutiae of thinking behind the survey answers, exposing a surprising coexistence of opposing viewpoints.

“Only positives have come. This time has allowed a very traditional industry to reassess how to view flexibility and technology,” said one.

“I cannot work at home. There are too many distractions and it is very lonely,” said another.

If there was one thing that united any sub-group of the Insurance News Wellness Survey, it was the parents of school-age children. Home schooling, they all agreed, is draining.

“I am working from 6am to 6pm every day.

They interrupt me constantly. I have to stop them fighting, keep them fed, and ignore them for large portions of the day.”

“Absolutely dreadful with kids off school – balanced life out the window.”

“With 20 hours of my week dedicated to home schooling, this is challenging.”

“There could be more support offered by organisations to those directly impacted by home-schooling…to lower productivity expectations.”

“I have let my children’s schooling slip. I know

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Neither agree/disagree

Strongly disagree

N/A

I am not giving them my whole self.”

There was much appreciative feedback regarding insurance industry employers’ efforts to maintain their people’s wellbeing, although there were criticisms from a few that it has been “lip service only”.

“A lot of colleagues that I talk to within the industry seem to be getting good support from their employer which is encouraging.”

“My company has been fantastic, very open with allowing staff to work to the hours that suit their situation, allowing us to take leave if we need to, and understand that work output may reduce. We have support services/webinars to support positive mental health. I can’t speak more highly.”

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“I am a foreigner and I am very impressed. My company has gone above and beyond to support us and I am so thankful for that.”

But some companies aren’t trying hard enough, their employees say.

“They need to lead by example, not say one thing but demand another”.

“The ever-increasing workload contradicts the concern/offer to help.”

“Managerial concern for the staff’s wellbeing is at best wafer thin, don’t scratch it.”

“I enjoy working from home, but the workload has doubled and I am working longer hours for no extra pay.”

“There is a never-ending abundance of feel-good statements. At the very same time there is the same demand of production, new business, upselling,

pushing sales to make budget and bonus as there was pre-pandemic, and it’s demanded by the same executives and supported by the very same HR departments.”

“I hear all the right words being said, but when it comes down to it I still have to get my work done and no-one will do it if I don’t.”

“More pressure to be doing more with less – systems, tools, capacity, more unknowns.”

Some of our survey respondents suggested the pandemic has forced the insurance industry to quickly move into a new era that was going to happen anyway.

The best example: “It needed a global pandemic to give the industry the kick to the guts it needed to employ work from home initiatives. Remote working should be 0 the operational norm, not a privilege.”

WHAT YOU HAD TO SAY The Insurance News Wellness Survey is anonymous and left plenty of space for respondents to say what they think, rather than just tick boxes (although they did that too). Here’s a random selection of those thoughts.

This has worked tremendously well for me. My productivity has been greater during lockdown, I can continue working remotely indefinitely with great satisfaction.

I will work full time from home moving forward. If my employer does not facilitate this I will leave.

Some staff appear to be taking advantage of working from home. Often we cannot get insurers on the phone.

Brokers are being ignored .

It will be a tough call as to whether management are confident they can manage remote workers.

Senior managers seem to infer that everyone should have more free time but in reality most people are working longer.

Service standards have slipped dramatically, it would appear people need to go back to an office to be fully functional.

The insurance companies have really stepped up. It’s been business as usual with very little disruption.

As far as mental health and productivity, I don’t believe anyone is performing exceptionally well in this area.

Working from home is so much more productive.

However, the boss is completely against it and under no circumstances will it be considered.

Far more productive and suitable to work from home.

Hours wasted every day spent travelling in peak hour in Sydney are no longer necessary. This outdated routine of 9-5, five days a week really doesn’t suit too many people.

It is harder to stay connected with team mates, it is important that we re-establish our regular office days once restrictions are removed.

Feels like staff aren’t trusted to remain efficient.

I feel really flummoxed about how to balance full-time work when there is no childcare.

I love working from home. I achieve so much during the day. The company is positive, supportive and flexible.

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October/November 2021

My productivity and motivation levels are great.

There is still a sizeable contingent that are demonstrating trust issues and micromanagement and think our staff cannot be trusted and are not engaged.

It has reduced my travel by two hours per day and I am starting one hour earlier each day. Doing everything on Zoom means I am more productive. A hybrid model will be the most appropriate model going forward.

This has been a well-needed push into the modern way of living.

I am more productive, it is quieter and there are less distractions. I firmly believe an element of working from home aids in my mental wellbeing.

The insurance industry has relied upon remote working as an excuse to be slack in responding to broker enquiries.

What about the personal cost involved – power, heating, immediate additional expenses in setting up a home office?

Entire teams of people have become uncontactable.

I absolutely love working from home, my portfolio is up to date. I get scared getting off the train and going to the car park at night and it saves me money.

The challenge will be getting people back into the office.

It saves travel time but I like working in the office as I feel more professional.

Sometimes a lot of proactiveness is required to stay connected but the fatigue can be a block in making that contact.

Working from home is the new norm. No more public transport, smog-laden cities, dirty offices and wasted transport time.

I would like to see discussions around a four-day working week.

I am more productive and less stressed and anxious working from home.

We do not have to attend the office five days a week.

That has become old-school thinking. The pandemic has proved that.

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Ups and downs: Andrew Arcuri says COVID has been a rollercoaster

Broking in the time of COVID Brokers in locked-down Victoria and NSW say they’ve been robbed of meaningful connection with their clients. So much has changed, but they see it all as a passing phase

By Miranda Maxwell

D

eflated is a word I hear quite regularly,” says Melbourne broker Andrew Arcuri. He shares the feeling of millions of east coast Australians whose lives in lockdown have seemed empty and interminable.

Mr Arcuri, the Managing Director of AT Arcuri & Associates, is describing day-to-day life for brokers working under suffocating stay-at-home orders, border closures and other restrictions on movement and personal freedoms.

His team has only been together in the office twice since March last year. And while the vaccination drive is providing a light at the end of the COVID tunnel, Mr Arcuri says confidence about the finish line is fragile.

“There is light but we are not there yet,” he tells Insurance News. “People can see it but I don’t know if everyone is feeling it.

“The last 18 months has been a rollercoaster. There are periods where people have been down, periods where they have been a lot better. At the moment there is hope.”

He says true confidence won’t return until there is real certainty that states won’t impose more lockdowns. It could take until spring next year “to fully see everybody feeling free in the sunshine”. ”It may not be until mid-next year that everyone is feeling confident enough to expand services and build things up.

“If the industry as a whole is not growing, then the supporting industries around it can’t. So until such a time as the economy rolls back out and people have confidence to grow and restaurants have confidence that they can order food or open up that second location, and people with their side hustles feel confident they can expand…

“Everyone is in a holding pattern. Once we get to a point where there is confidence that we are not going to get another lockdown, I am sure they will start investing again.”

Business at Mr Arcuri’s brokerage is “holding up”. His team members stay in touch via regular virtual meetings, but he says frustration levels are higher than they were in previous lockdowns.

“Clients and underwriters have shown understanding that things are a lot harder working from home – so far,” he says. “At the moment clients are accepting of it, but I am waiting for that pendulum to swing. We are a service industry and the service needs to be met.”

Mr Arcuri has many commercial property owner clients who he says are “feeling the pinch”, and he has been kept busy finding cover for vacant properties. “Some industries are doing really well out of the pandemic and some are gone.”

The COVID challenges are being dealt with at the same time as clients with

hard-to-place risks face a risk-averse market – with premium rises that are “tough to explain”.

“The market is a lot tighter now,” Mr Arcuri says. “It doesn’t help when insurers are exiting markets. It just means that whoever is left can charge what they want.”

He has avoided blowback about premium rises and exclusions by avoiding generalisations.

“Let’s talk about your policy, what works with your policy and how you react. That comes back to the insurance broker’s role, which is to provide specific advice as opposed to general advice.”

The times may be tough, but Arma Insurance Brokers at Maitland in NSW’s Hunter Valley has done pretty nicely, thank you. The brokerage, which is part of the Community Broker Network, has gross written premium of around $10 million a year and has grown about 18% in the past 12 months.

But while Managing Director Amanda Morris says things are going along quite well, that’s not the case with many clients.

“We are having some hard conversations with clients that are suffering financially, and with the uncertainty of what’s happening in the future,” she tells Insurance News.

“There is no clear goalpost so it makes it really difficult for them to plan. That’s

insuranceNEWS

October/November 2021

23

Missing out: younger professionals are losing learning opportunities, warns Anthony Barbara

the hardest part.”

The 10 members of the Arma team are working from home, using Zoom not just for keeping in touch with clients and Ms Morris, but also to share morning and afternoon teas, and even lunches, with each other.

“We could pretty much work in Tahiti if we wanted to,” says Ms Morris, who admits keeping the team’s morale up has sometimes been a challenge. “Your team is like your family. I am passionate about looking after them and making sure there is connection between them.”

While payments through Jobkeeper and Jobseeker last year sheltered Arma’s clients – “it was basically a hibernation” – this time around they are more exposed. But she says there is now an acceptance of pandemic exclusions – a stark contrast to last year, when many clients called asking why business interruption insurance didn’t cover COVID. “We have already been through that disappointment last year,” Ms Morris says.

“The cafes and restaurants and pubs have already been through the realisation that the insurance isn’t triggering, so they’re not expecting it this time.”

But the pandemic challenges have taught clients to pay attention to their insurance cover. “They are really good at taking the advice now,” she says. “I don’t think the panic is there anymore. Last year we were not used to this and a lot of the clients panicked. This time it is a discussion.”

She says clients are now actively reviewing their cover and working out changed risk exposures as a result of lockdowns.

“It is a lot more work for the brokers because we are having discussions with clients that we wouldn’t normally have

24 insuranceNEWS

October/November 2021

during the year. They are different discussions. The environment has changed.”

Arma has a healthy farm portfolio and it’s farmers Ms Morris feels have most missed the face-to-face interaction when dealing with their broker.

“These farmers, and many of them are older, they don’t buy into the whole hype of what’s happening. They’re a different breed – they just say ‘get on with it’. We have personal relationships with many of our farm clients. We are always out on the farms, eating scones and all that fun stuff.

“Now they are isolated. Sometimes their family are in Sydney and they can’t see them, and they can’t see us.”

Ms Morris says her brokerage’s culture, policies and procedures of service have held it in good stead throughout the pandemic. She recommends always staying positive, seeing the goodness in life on a daily basis and practising gratitude.

“That is the main advice that I have been giving to clients. It is not even about insurance when they ring – it is about people and about talking to a fellow human being.”

Sydney-based Anthony Barbara is the Managing Director at AJB Insurance Solutions, which he established in 2010. For him, the coronavirus lockdowns mean he hasn’t seen members of his extended family for far too long, and he misses his mother’s cooking. But it’s not all gloom. He can easily fill the days by working hard, walking his dog and doing things around the house.

It’s much tougher for the younger members of his staff, he says, especially those who are new to the industry. “They are missing the interaction and guidance they need.”

But Mr Barbara accepts that lockdowns affect everybody differently. “Working completely autonomously is difficult for some people.”

AJB specialises in gymnasium and hospitality, and he says many clients “wanted to cancel everything” last year. The brokerage also experienced an influx of clients calling for advice, premium relief and extensions of payment terms.

“We were talking a lot of people off the ledge, so to speak,” he says. “We did a lot of talking, trying to relax clients and educate them so they wouldn’t cancel their policies. We had to find ways of maybe reducing their premiums, really going through the whole thing and discussing all of that.”

This year is “a mixed bag” and the AJB team tries to stay positive and offer

Hard conversations: Amanda Morris fears farmers are isolated

Family time: Shane Brady says being at home is great, but productivity suffers

solutions to customers and be upbeat. Mr Barbara says the focus on positivity has “improved the overall mood”.

Mr Barbara is a Community Broker Network authorised representative, and he is passionate about sharing industry knowledge. While he’s “definitely pro” about flexible working hours and workplaces, he says the industry needs to be careful its younger members aren’t sacrificing learning opportunities.

“When I started in the industry at 19 I learned from all the seniors around me, by listening, asking questions, making mistakes.

“If everyone is working from home we are going to lose a lot of that experience being passed on. The things I learned that put me in this position I’m in today I did not learn from online courses – I learned from people.”

Shane Brady, joint venture partner at Dandenong-based McLardy McShane South East, describes lockdown fatigue, Zoom cameos from his toddler and brokerages being robbed of meaningful connection with clients.

“Being Victorian, the lockdowns for us have been more of a compounding effect.

We are up to lockdown number six now, which has been extended three times, so I suppose Victoria, more than anywhere else, is feeling triple the pain.

“The whole lockdown fatigue, it just grinds everybody down. It has been a bit

26 insuranceNEWS

October/November 2021

of a struggle.”

Mr Brady has a child under two and a baby due around about now, and is appreciative of the family time he has gained from working from home. His toddler is “absolutely loving it”.

“It is bittersweet. The whole lockdown situation is just so taxing and there is so much collateral damage in lots of areas, but one positive I can take out of it is that I get to spend a lot of quality time I would not have otherwise with the little man.”

“Him running around means that yes, productivity takes a bit of a dive,” Mr Brady says. “That is the situation we are all in.”

He says the main downside with working from home is the loss of the personalised client service he is able to provide.

He misses meeting prospective clients and having that “real human connection”.

“Before, we were constantly out on the road, catching up with insurers, always doing something different. That social aspect of what we do has been taken from us. It’s tough having to connect meaningfully with clients and having to rely solely on Zoom and Microsoft Teams. That is the main drawback.”

The brokerage has a specialist manufacturing and technology offer which Mr Brady says has come through the mess of the past 18 months fairly unscathed. Extra staff have had to be assigned to deal with the expansion.

Manufacturing is “still absolutely

alive and well” and even thriving in some areas, he says.

For example, a cosmetic and skincare manufacturing client was able to pivot the business at the start of the pandemic to sell facemasks and hand sanitiser, almost tripling their business over the past 18 months. A supplier of toilet paper to major supermarkets has also experienced a boom in business.

“It has been a bit of a mixed bag,” Mr Brady says. “Some clients are going really well, some are just plodding along and some have gone down slightly but not a lot.

“We have a lot of loyal and happy clients who are happy to refer new businesses to us, so we are in a pretty fortunate situation where our business is growing exponentially despite Victoria being pretty bleak at the moment.”

Mr Brady says some of the lessons learned through the pandemic will remain once communities are open again. “If the pandemic has taught us anything it is that there are lots of other ways to properly communicate other than a stock standard email.”

While he agrees things would have been far more challenging if Zoom and phone chats hadn’t been possible, he says they are “still no match for face to face”.

“As soon as we can, our main priority is to get back to being out and about meeting with our clients. Being able to sit down with them and build relationships and rapport – that’s what broking is all about.”

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Heading in the right direction Sue Houghton likes what she sees at QBE, with the new Australia Pacific unit chief putting listening top of her agenda

By Bernice Han Leading by example: Sue Houghton

N

ew QBE Australia Pacific Chief Executive Sue Houghton has been busy familiarising herself with the business since August, when she formally took up the role.

Ms Houghton started in QBE’s head office a month before Andrew Horton took over as Group Chief Executive from Richard Pryce, who has been overseeing the insurer on an interim basis since the departure of Pat Regan.

In her first media interview since taking up the new job, Ms Houghton tells Insurance News what she has seen and learned about the company in the short time she has been there leaves her in no doubt the business is heading into a bright future.

“It’s an exciting time to join QBE,” she says. “The business is at an exciting ‘tipping point’ with Andrew Horton joining.”

She says a lot of momentum has already been achieved, “and I feel like the business is ready to pursue its next phase of growth”.

“I’m looking forward to being part of this journey. It’s a huge privilege to be taking on this role.”

The performance of the Australia Pacific division is vital to the far-flung group’s collective health. QBE is the fourth-largest player in the Australian insurance market, with Australia Pacific one of three regional business units.

The division achieved a strong June half, significantly increasing its pre-tax insurance profit to $US230 million from $US25 million in the previous corresponding period. Gross written premium improved 18% as the average renewal

28 insuranceNEWS

October/November 2021

premium rate rose 7.7% from 5.5%.

Ms Houghton says she will be prioritising a few key areas as she looks to build on the division’s results and strengths.

Much of it will involve “listening to our customers, brokers, partners and people to gain a thorough understanding of the business inside and out”.

“Taking the time to listen will provide me with a really strong sense as to what is working well, and where opportunities may exist.

“I also want to get very clear on what the key areas of focus are for our strategy, and to understand what’s needed for QBE to take it to the next level and really deliver for our customers.”

Ms Houghton says as the division’s leader she is in a “privileged” position where she is able to motivate people and give them pride and purpose in what they do.

“I highly value empathy and engagement as leadership traits and aim to lead by example,” she says.

“Importantly, we need to be really confident we’re all heading in the same direction.

Having a clear strategy and communicating well is key to uniting people around a common goal.”

Ms Houghton, who is also President of the Insurance Council of Australia, was most recently Insurance Head at Westpac insurance. She led the lenders’ mortgage insurance, general insurance and life units at the bank, which has since sold the businesses.

She has also held senior leadership and management roles at Wesfarmers

Insurance, IAG and Gallagher in Australia.

She has joined QBE at a time when the challenges and opportunities facing the insurance industry locally and internationally are considerable, with climate change and geo-political shifts impacting the global order.

Ms Houghton says many significant longterm macro-changes need to be factored into insurers’ business plans, along with the “emerging impacts” of the pandemic.

“These are major issues that will impact all insurers, which we need to face up to,” Ms Houghton says. “They also provide opportunities to look at things differently and see how we can make a difference in these areas.”

She says COVID-19 has “changed the world”, presenting it with “a lot of unknowns”.

“One of the lasting impacts of the pandemic will be how it has changed the way we all work, with the permanence of hybrid working,” Ms Houghton says.

“Companies will need to continue to look at flexibility and how we come together to collaborate, including when we need different spaces and environments to conduct our work and maximise productivity.”

Employee wellbeing is a related area of importance in the wake of the pandemic, and Ms Houghton says “it’s critical in this new world to ensure the wellbeing of our people is front and centre”.

“We’re living in dynamic times with a lot going on. Therefore it’s important to ensure we don’t underestimate how this can impact on people’s mental health.”

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Running out of time The IPCC’s Sixth Assessment Report on climate change confirms many impacts of global warming are locked in.

The battle now is to avoid an even worse future

By Andy Swales

T

he latest report from the United Nations’ cohort of leading climate scientists makes unsurprisingly grim reading for the world. To sum up the Intergovernmental Panel on Climate Change’s (IPCC) most indepth examination to date: the planet is heating at an unprecedented rate, humans are certainly to blame and the best we can do is act immediately on carbon emissions to limit the damage.

The key word there is “limit”, because the impacts are already upon us.

And having watched vast areas of the south-east burn in 2019-20, Australians – barring, it often seems, some in Canberra’s corridors of power – know that only too well.

Roshanka Ranasinghe, a climate change expert at IHE Delft Institute for Water Education and Deltares in the Netherlands, and co-ordinating lead author of the IPCC report’s regional chapter on Australasia, tells Insurance News Australia “is already facing several climate change-related hazards”.

“There is high confidence that, over the

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next 30 years, several climatic impact drivers assessed in this report will change noticeably all over Australia.”

The report finds greenhouse gas emissions from human activities are responsible for about 1.1 degrees of warming since the industrial revolution, and over the next 20 years we are expected to reach or exceed 1.5 degrees – the limit targeted by world leaders in the Paris climate accord of 2016.

“Stabilising the climate will require strong, rapid and sustained reductions in greenhouse gas emissions, and reaching net zero carbon dioxide emissions. Limiting other greenhouse gases and air pollutants, especially methane, could have benefits both for health and the climate,” IPCC climatologist Panmao Zhai says.

Without such action, we can forget about limiting warming to 1.5 or even 2 degrees.

Emeritus Professor Will Steffen, a climate scientist at the Australian National University who contributed to five previous IPCC assessments and special reports, tells

Insurance News he was “somewhat surprised by the direct and forceful nature” of the Sixth Assessment Report.

“It didn’t leave any doubt about what the science is saying, and it didn’t shy away from some difficult issues, like breaching the 1.5-degree goal and providing more evidence for the high-end risks of climate change if we don’t rapidly and deeply reduce our emissions.”

The report’s detailed analysis of impacts in Australasia shows land areas have already warmed by about 1.4 degrees in Australia and 1.1 degrees in New Zealand since 1910. Heat extremes have increased, cold extremes have decreased, and these trends are projected to continue.

“Australia has significant vulnerability to changes in temperature and precipitation projected for the next 50 to 100 years… because it already has extensive arid and semi-arid areas and lies largely in the tropics and subtropics,” the IPCC report says.

Relative sea level has risen at a greater

rate than the global average in recent decades, with sandy shorelines retreating in many locations, the report finds. Relative sea level rise is projected to continue in this century and beyond, contributing to increased coastal flooding and shoreline retreat along sandy coasts.

That probably means more scenes like those recently at Wamberal Beach in New South Wales, with beachfront homes teetering on the brink as the ocean eats away at the land on which they were built.

The frequency of extreme fire weather days has increased, the report finds, and since 1950 the bushfire season has become longer at many locations.

The intensity, frequency and duration of fire weather events are projected to increase throughout Australia, meaning the conditions will be ripe for a repeat – or worse – of the Black Summer of 2019-20, which resulted in 30,000 insurance claims worth about $2.4 billion.

Heavy rainfall and river floods are projected to increase, and while the frequency of tropical cyclones is predicted to drop, those that do form are expected to be more severe, which could “have serious implications for storm surge heights, wind damage and flooding”.

“If they were to travel further poleward [as some research has suggested] they would be more likely to impact on coastal regions in the southwest of Western Australia, southern Queensland, and the northern NSW coastal region, as well as northern parts of New Zealand,” the report says.

That could mean more damage to

supposedly low- or medium-risk communities that are not built to resist the strongest winds, like when Cyclone Seroja hit Kalbarri in Western Australia this year, causing more than $280 million of insured losses.

Professor Steffen says the report paints a “sobering picture of worsening extreme weather for Australia that is already locked in for the next couple of decades”. Some of the other impacts he flags include hotter and more frequent heatwaves, both on the land and in coastal waters, and further increases in drought in the south-east and the south-west.

“We can’t avoid these worsening conditions over the next couple of decades, so we’ll need to learn how to cope with them.”

The extent to which the natural catastrophe threat grows depends on the level of warming we experience.

For example, an IPCC rain map predicts parts of Australia will experience one-day maximum rainfall rises of up to about 10% under 1.5 degrees of warming. At 4 degrees, swathes of the north and northwest are forecast to endure 30-40% rises. At 1.5 degrees of global warming, annual maximum temperatures for much of Australia would rise by up to about 3 degrees; at 4 degrees global warming, annual maximums in Australia climb by up to 6 degrees.

In a recent analysis for The Conversation, economists Andrew Wait and Kieron Meagher warned 1.5 degrees of warming would double the frequency of droughts from once every 10 years to once every five, while 2 degrees would make them 2.5 times more frequent.

Professor Ranasinghe says that compared to a 1.5-degree world “in a 2-degree world we have high confidence in seeing more pronounced and more widespread increases in climatic impact drivers such as mean temperature, extreme heat, fire weather, relative sea level rise, coastal flooding and coastal erosion, and medium confidence in seeing such changes in several other drivers throughout Australia.”

Professor Steffen says extreme weather events will not necessarily change linearly with the temperature rise. “A doubling of the temperature rise from 1 degree to 2 degrees above the pre-industrial level will lead to more than a doubling of the frequency and intensity of many of these events.”

And he warns of “tipping elements” that could further accelerate the intensity of extreme weather and lock in other worsening conditions for centuries to come.

“Sea level rise and coastal erosion is a good example,” he says. “Sea level rise is already accelerating and if large polar ice sheets such as Greenland and west Antarctica cross tipping points beyond which their melting becomes irreversible, we will ultimately experience many metres of sea level rise.

“The rate could increase to as much as two metres per century, which would be devastating for much of Australia’s coastal infrastructure and threaten the viability of our economy.

“To put it bluntly, letting sea-level rise – and other aspects of climate change – get out of our control would become an existential threat to the viability of contemporary

Burning issue: fire weather will occur more frequently in Australia as the planet warms

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“The [insurance] industry should be right out in front demanding rapid and deep reductions in emissions.

Otherwise, you may not have an industry by mid-century.” societies, including ours.”

On a sliding scale that ends in societal collapse, where might Australia’s insurance industry find itself?

The IPCC report states that, according to Insurance Council of Australia (ICA) data, “major climatic catastrophe insurance losses from 1970 through 1996 averaged $208 million a year. Of these losses, nearly half were from tropical cyclones; one-quarter were from hail. Other flooding and storm damage accounted for most of the rest; losses from fire were less than 10% of the total.”

In July, ICA Chief Executive Andrew Hall told a parliamentary inquiry that over the past three years, insurers have paid out more than $7.4 billion in natural disaster claims, with more than $5.6 billion paid out since the 2019 bushfires.

After the IPCC report was published in August, Finity Principal Rade Musulin told Insurance News the findings “should not significantly change strategy or pricing in the near term because … clear trends have been observed in extreme weather for some time”.

But even if climate change is “priced in” and efforts to adapt through flood defences, stricter planning regulations and so on are further stepped up, at some point in the medium or long term, something’s got to give.

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Australia has already seen entire communities deemed effectively uninsurable, while underinsurance is a recurring problem whenever disaster strikes.

“I see insurers withdrawing from certain areas, or [from] offering covers for certain risks, elsewhere in the world in recent decades, and this will probably become more widespread in the decades ahead, especially if appropriate risk-informed adaptation measures are not put in place in the next two decades … some localities may become unattractive for insurers to provide cover, at least at premia that are affordable to the average Australian,” says Professor Ranasinghe, who is also the IHE Delft Institute’s Chair on Climate Change Impacts and Coastal Risk, partly supported by global insurer Axa’s Research Fund.

He says while adaptation is a “necessary but temporary fix, deep and sustained cuts in greenhouse gas emissions is the long game that we have to win”.

Australia is widely considered a laggard on emissions action and targets. While many other nations have committed to hitting net zero by at least 2050, Prime Minister Scott Morrison has, at the time of writing, refused to join them.

Could it be time, then, for the insurance industry, which has long accepted the reality of climate change, to push government for

action on emissions with as much fervour as it has – with some success – lobbied for investment in measures such as flood defences and cyclone mitigation?

Professor Ranasinghe says it is time for the insurance sector to throw its considerable weight behind emissions reduction.

“As the report shows, we are already locked into changes in some climatic impact drivers for centuries, for example, those connected with sea level rise…so adaptation is a must to limit or avoid damage. But if there are no reductions in greenhouse gas emissions by the big [emissions] contributors, then we could ostensibly reach a place where further adaptation might become unfeasible.”

Professor Steffen agrees the industry should “absolutely” be part of the drive for lower emissions.

“The insurance industry has a very strong interest in limiting the rate and magnitude of climate change to levels that we might be able to cope with, and the only way to do that is to rapidly reduce our greenhouse gas emissions and hit net zero well before 2050, preferably around 2035 to 2040.

“The industry should be right out in front demanding rapid and deep reductions in emissions. Otherwise, you may not have an industry by mid-century.”

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Steering towards a safer future Why Zurich backs a key report’s recommendations to tackle transport industry issues

Two years ago a Senate inquiry was launched into the importance of a viable, safe, sustainable and efficient road transport industry.

Now the Sterle report – named after Rural and Regional Affairs and Transport References Committee Chairman Glenn Sterle – has been published, highlighting a range of concerns requiring immediate attention.

The report says the heavy vehicle sector is one of the most dangerous in Australia, with 180 deaths a year and crashes causing annual economic losses of $27 billion.

The industry is crucial – without it the nation would grind to a halt – but the report says it’s facing a safety crisis and “catastrophic” problems that are getting worse.

“This inquiry has clearly demonstrated the need for immediate government intervention to change the operation, practice and, safety culture of an industry that the entire country relies on,” the report says.

The committee’s central recommendation is the establishment of a “central powerful independent body to regulate, promote, fund and support all parts of the sector”.

Other recommendations tackle issues such as pay and conditions, standards enforcement, barriers to young drivers, and the role of technology in safety.

Zurich Australia, which is one of the largest heavy motor insurers in the Australian market, says insurers play a “pivotal role” in keeping the road transport industry moving, because it’s “the backbone of the national economy”.

And the best way for any insurer to keep trucks and vans on the move is by getting damaged vehicles back on the road as soon as possible.

National Underwriting Manager Motor Craig Sandy says the road transport industry “helps ensure that goods located at ports and airports can be delivered to their destinations in a safe and timely manner”, and that swift action to get vehicles back on the road after a crash is essential.

“That is one of our main objectives,” he says.

“For example, when a truck is involved in a crash it is crucial that our claims process is efficient and robust to ensure that vehicles are repaired and back on the road as soon as possible.”

Mr Sandy says Zurich’s Heavy Motor Accident Assist program makes it easier for drivers and operators to lodge claims quickly, get vehicles back on the road and minimise impact to productivity.

The insurer is supportive of the Sterle inquiry’s recommendations, and has procedures and processes already in place to improve safety and benefit driver, client and insurer.

Preventing crashes in the first place is vital, with the Zurich Resilience Solutions (ZRS) team in particular helping customers develop better risk management programs.

“The team consists of many experienced risk engineers who are dedicated to the road transport industry,” Mr Sandy says.

“We can help customers reduce incident rates through better driver behaviour with the introduction of telematics, and better monitoring of telemetry data which ultimately not only helps incident rates but helps improve safety and lowers operational costs.

“For example, improved driver behaviour improves fuel efficiency, which is the biggest cost for any transport company. Improved incident rates will reduce the insurance spend.

“The margins in the road transport industry are skinny, and we can certainly help keep transport operators financially viable.

“There are many ways where insurers like Zurich are assisting, and we will continue to work closely with operators into the future.”

Reducing risk ZRS Principal Risk Engineer Peter Johansson says the Sterle report’s focus on a safe and sustainable transport industry resonates with the insurer.

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“For Zurich, the safe and sustainable elements translate directly into insurable (heavy road transport operations) and affordable (insurance),” he says.

positive influence on the overall risk rating of heavy road transport operators, and in turn result in more insurable risks and affordable insurance premiums.

He says as truck fleets progress in risk management from “out of control” to “in control”, it cuts losses and helps operators move from claims-rated to risk-rated for insurance premium pricing.

Talking tech

This is when Zurich’s Risk Grading methodology kicks in. The grading enables rating of the motor fleet risk (via 26 risk factors through the pathways of Drivers, Journeys, Vehicles and Management) into bands of Poor, Fair, Good or Excellent, with insurance premium price loading for Poor and Fair and discounting for Good and Excellent ratings.

“But most importantly, the risk grading framework enables us to further support our clients via risk grading benchmarking and risk improvement support services,” Mr Johansson says.

“So whether it’s low-hanging fruit or high-level refinement, we can clearly identify risk improvement opportunities and support deployment of controls.”

Mr Johansson says nearly all the Sterle report recommendations are touchpoints on the grading system.

He says if the recommendations are implemented either in part or full, they will have a

Technology is a key theme in the report, with associated recommendations focusing on an education and awareness campaign on the benefits of telematics devices, and ensuring legislative and regulatory systems are prepared for the emergence of automation.

Zurich says safety and loss control technologies (as opposed to pure service, efficiency or compliance technologies) adopted by heavy road transport operators have a positive influence on 11 of the 26 risk factors in its grading system.

“The fleets that adopt these technologies across their operations typically grade as Good to Excellent which means insurance premium discounts,” Mr Johansson says.

“Our ZRS team works cohesively with technology providers (many are business partners) to further assist in enabling these technologies to better support our clients in their fleet performance management systems. That’s how we deliver many loss reductions, including crashes and claims.”

Future workforce The report tackles the issue of barriers to recruiting the next generation of truck drivers, including high insurance premiums.

Recommendations in this area include the development of a national apprenticeship scheme and incentive programs for businesses.

Zurich says that from a risk exposure perspective, it has never viewed the problem as being age-related “but more of an issue to do with inadequate driver competence and assessment standards”.

“Where a clear competency-based development roadmap is established for younger employees, Zurich already waives the under-25 excess,” Mr Johansson says.

“A good example of such a program is the VTA Academy Driver Cadetship (https://vta. com.au/academy-courses/driver-cadetship/), where Zurich will reduce insurance premiums and restrictions for drivers undergoing the program.

“This is a major step forward for the industry as previously higher premiums and excess fees have made it unviable to train younger drivers.”

The insurance mix is changing Property’s share of the premium pool is rising, bringing with it more complexity and volatility

By Wendy Pugh

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echnology advances and climate change over the next two decades are set to drive a global premium pool rebalancing away from motor and toward property, leading to a more complex risk landscape in catastrophe-prone countries such as Australia.

A Swiss Re Institute report looking at property and casualty (P&C) insurance through to 2040 forecasts the global premium pool will more than double from 2020 levels to $US4.3 trillion, with far-reaching changes in the mix.

Property will almost triple to $US1.3 trillion and increase its share to 29% of the pool.

Motor – the high-volume low-risk mainstay for decades – will almost double to $US1.4 trillion, but its share of the total risk pool will decline to 32% from 42%.

“We didn’t look at which point there would be a crossover in terms of property being even more important than motor, but it won’t be too long after 2040,” Swiss Re Group Chief Economist Jerome Haegeli tells Insurance News.

“If you think about what that shift means, it means more risk in the system. And I think for the insurance industry this means also more complexity to handle.”

Motor risk is more easily calculated than property, which is assessed by a rising number of models, and the distinction is becoming more apparent in the context of a changing climate. Rebalancing from one to the other means this is by no means a simple substitution.

“With the global portfolio shifting from lower-risk motor insurance to higher-risk lines, P&C insurance business will become more volatile,” Swiss Re Head of Global Reinsurance Gianfranco Lot told a presentation of the Sigma report findings last month.

“At the same time, risk modelling will become more complex, which will lead to higher capital requirements and an increased demand for reinsurance.”

Economic development is the dominant driver of growth in both lines in the outlook, with gross domestic product (GDP) expansion also subject to climate change uncertainties.

In motor, safety technology developments will temper that growth as advances introduced into car fleets are expected to reduce accident frequency and claims costs and slow premium gains.

Property, on the other hand, will be fuelled by climate change impacts, while urbanisation is expected to be an additional contributing factor to the expanding pool.

Swiss Re Sigma’s assumptions reflect Paris Agreement commitments to limit temperature increases to around 1.5 degrees Celsius, but deteriorating climate-related risks could further accelerate property premium trends.

The Intergovernmental Panel on Climate Change Special Report, released in August, notes a significant risk that temperatures could exceed the 1.5 degrees target by the 2040 timeframe that Swiss Re has adopted for its analysis.

“If you have a more severe outcome on the climate front, then as an industry we will always be able to price it, but prices would then reflect the risk,” Dr Haegeli says. “And it is in no-one’s interest that the risk will increase to such an extent that it becomes extremely expensive.”

Swiss Re’s study includes an estimate that climate risks specifically will increase the property pool by 33‒41%, generating up to $US183 billion of new premiums globally.

But average weather-related property catastrophe losses in advanced markets could increase 30-63%.

For Australia, there’s a potential impact of around 50%, while for China, the UK, France and Germany the

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Predicting unpredictability: Swiss Re’s Jerome Haegeli

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“It is super important that today’s economic rebound is accompanied by a sustainable recovery and also a sustainable insurance system.”

increases could be as much as 90-120%.

Climate impacts have so far shown up particularly in more intense “secondary perils”, where the risks are less well understood and which globally include wildfires and severe convective storms generating hail and flooding.

“Better modelling of secondary perils including wildfires, definitely is super-important,” Dr Haegeli tells Insurance News. “Wildfires, particularly before 2016, were about 2% of total natcat losses. Since then they have risen by around a factor of six.”

The issue is critical for Australia, which faces an outsized bushfire risk with an expected 100% loss increase. For catastrophe-related floods the increase could be 55% and for tropical cyclones up to 26%.

Dr Haegeli says Australia accounted for 4.3% of the global catastrophe loss burden last year, or $US3.5 billion in volume terms.

“That outstrips by far Australia’s contribution to the global insurance premium pool of 2.5%, which means Australia is exposed disproportionately to global natural catastrophes,” he says. “The good news is that Australia has a very robust insurance market.”

The increase in the total property and casualty premium pool to 2040 includes gains in liability, where premiums are expected to rise to $US583 billion from $US214 billion last year, as social inflation pushes up the frequency of large verdicts and settlements, especially in the US. Swiss Re’s report, released ahead of the online Rendez-Vous de Septembre, is also a call for action that urges the insurance sector and governments to work together in the face of the transformational changes taking place in the economy, society and in technology.

It says the industry can provide compensation for damage to property resulting from extreme weather events, but a framework to encourage investment in green infrastructure, as well as upgrading zoning and building standards, is equally important to ensure the continuing insurability of risks.

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Swiss Re warns global warming is a risk for economic growth rates, especially in emerging economies, which reinforces the need for policy action on carbon pricing as well as greater transparency and accountability in the private and public sectors.

The report calls for institutions to disclose roadmaps on how they intend to reach the Paris and 2050 net zero targets.

Dr Haegeli says GDP growth rates shouldn’t obscure the reality that economic resilience – the capacity to absorb new shocks – is weaker today than before COVID-19. And back then it was weaker than before the Global Financial Crisis.

“Economies globally are rebounding because we have seen the worst recession of our lifetimes last year, but let’s don’t mistake a rebound with a real structural recovery,” he says. “More is needed to have a sustainable recovery; and a sustainable recovery still is a marathon and not a sprint.”

He argues that government actions and spending should be more effectively targeted, rather than adding to measures that have seen the “zombification” of markets and real economies.

“We need more economic policies to tackle climate change,” he says. “We shouldn’t just be focused on monetary policy, with the focus we have seen in the last 10-15 years in fearing deflation.

“It is super important that today’s economic rebound is accompanied by a sustainable recovery and also a sustainable insurance system.”

Dr Haegeli says the Swiss Re Sigma P&C outlook makes an important contribution by quantifying the risks so they can be better anticipated and more widely understood. It also highlights that there is no time to wait in taking action.

It makes clear that the shifting scenarios for the property and motor markets present more risks and opportunities in underwriting and investment, and that the insurance sector globally has much to offer.

“For the insurance industry, we are part of the solution, and if you are part of the solution you have so much upside,” Dr Haegeli says.

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Underlining expertise: new NIBA chief Philip Kewin

Stepping forward Incoming NIBA chief Philip Kewin is taking up the reins as brokers enter a period that will define their futures

By Wendy Pugh

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ears are changing at the National Insurance Brokers Association (NIBA) as two priorities critical for the future of general insurance advice dominate the agenda for the next year, with a new chief executive stepping in.

Philip Kewin, who previously led the Association of Financial Advisers (AFA), is taking over from Dallas Booth as NIBA gets set to deliver a long-awaited update to the brokers’ code of practice and to deal with the Federal Government’s review of broker commissions.

Mr Kewin has more than 35 years’ experience in financial services, mainly in life insurance and financial advice. He has worked at Mercantile Mutual, owned a financial advisory business, and held roles at Zurich including general manager retail life and investments.

He says brokers are well placed to set standards in a practical and pragmatic way and to demonstrate the value they deliver over the next year. That’s close to the position financial advisers found themselves in a few years ago when laws were imposed after self-regulation in the sector was deemed to have failed.

“I think that is one of the most significant differences,” he tells Insurance News. “We do have an opportunity, as an industry, as a profession, to set those standards ourselves and to, where possible, take control of our own destiny.”

Mr Kewin emphasises the values of integrity and honesty, and says he will take an open-minded and collaborative approach on coming aboard at NIBA. “I believe we work best when supporting each other and approaching things objectively,” he said. “That said, if there is something that is worth fighting for on behalf of brokers, I won’t take a backward step.”

Mr Kewin takes up the reins on November 1

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following a handover period with Mr Booth, who has held the position for the past decade and who will remain connected with broking through ongoing involvement in the insurance sector.

Mr Booth’s time at NIBA has been dominated by the need to put the brokers’ case to numerous government and regulatory reviews that have swept up the general insurance intermediary business – none of which uncovered serious problems.

Most recently NIBA has been busy with outcomes from the Hayne royal commission, although again the inquiry didn’t uncover any poor consumer outcomes from brokers. A resulting flood of regulation took effect from October 5, following some delays caused by the COVID-19 pandemic.

The regulatory action slowed progress updating the 2014 version of NIBA’s code of practice after a review which started in 2018, while developments elsewhere such as completion of the Insurance Council of Australia’s (ICA) code revamp have been monitored and taken into account.

The Insurance Brokers Code Compliance Committee annual review last year criticised the delays and a lack of transparency in the code’s development, warning of a “serious erosion of consumer confidence” in NIBA and the industry.

The association is conscious of time passing, but Mr Booth says the document can only be released when the consultations and final processes are completed.

“It has taken longer than we had hoped it would take, but this is important work and it is going to be an important statement of commitment to professionalism and integrity in insurance broking,” he says.

The new version was due to be released at the NIBA Convention this month, but that event has been pushed back to February due to COVID-19 restrictions and a new launch date is being finalised.

Despite background environment changes, which include developments in the way codes reflect community and stakeholder expectations, Mr Booth says the existing 2014 version provides a strong base from which to build.

“It is still, I would argue, easily the best broking code in the world,” Mr Booth says. “It is a big statement, but I am prepared to have a debate with anybody about that.”

He says that while cases of poor behaviour can emerge, and are addressed, systemic issues are not an issue, the broking culture is overwhelmingly positive and members are committed to working in the interests of clients.

“I hear them talking about it when you go to the pub, and when you are having a glass of wine at an industry function. That is what brokers talk about – how to look after clients. That is the culture of insurance broking in Australia.”

Mr Kewin says the new code should be a document

members feel they own, that is empowering, and that allows them to be proactive in taking control of their own futures and in ensuring high standards.

“We can’t afford to be complacent, and that is why we need to set down a code and establish ourselves as the trusted advisers in the community,” he says.

“It sets in place the values and the practices that we see would give government, regulators and consumers the confidence that we are capable of self-regulating, as opposed to having additional regulations thrust upon us.”

The upcoming government financial services advice and remuneration review will also require the group to be proactive in taking on regulatory and consumer concerns.

Commissioner Kenneth Hayne recommended a review of measures to improve the quality of financial advice in the planning sector by June 30 next year, but no later than the end of 2022. Another recommendation added that the review should examine whether a general insurance exemption to the ban on conflicted remuneration remains justified.

Financial Services Minister Jane Hume has since said that a separate planned review of the Life Insurance Framework, which caps commissions paid to advisers, will be rolled in as well.

Treasury will conduct the process, but there’s a likelihood progress will be disrupted as a result a federal election due by May, pushing outcomes into the second half of next year.

Mr Booth says the royal commission did not hear evidence of poor client outcomes driven by badly designed remuneration structures in broking, but took the opportunity to revisit the exemption.

“The point I want to emphasise is that the royal commissioner did not recommend the banning of general insurance commissions. He simply said, the question should be asked: ‘is the carve-out for general insurance still valid?’.”

Nevertheless, since the Hayne inquiry the Australian Competition and Consumer Commission (ACCC) and the Australian Small Business and Family Enterprise Ombudsman have recommended in separate inquiry reports the banning of broker “conflicted remuneration”.

Mr Booth says neither report identifies serious issues in terms of broker remuneration producing adverse outcomes, and they fail to demonstrate what would happen if commissions were abolished, and what if any benefits would really be achieved.

“Neither the small business ombudsman’s report or the ACCC report did, and we can argue – and I think we will argue to the remuneration review – that if you change this there is a really good chance the community will be worse off,” he says.

Conversely, a review of SME insurance affordability and availability undertaken by John Trowbridge for

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Still involved: outgoing chief executive Dallas Booth

ICA finds commissions should continue, but with improved transparency and disclosure.

NIBA has commissioned and released a Deloitte Access Economics report on the economic value of insurance broking to support its arguments. Mr Kewin says it’s important to liaise with politicians before they participate in policy discussions, to ensure they appreciate the value of brokers to consumers, the economy and society.

“I think we have done a good job of communicating that, but that is where we are going to be asking our members to play a bigger role in actually building a relationship with their local MPs and senators so they can actually understand the role of brokers, and the value, a lot better,” he says.

“It is going to be extremely important that it’s understood what brokers do, how they do it, how they are remunerated and how that remuneration structure actually works for the client.”

The risk otherwise is that issues are debated in party rooms by decision-makers with little understanding of brokers and no relationships to tap into that offer direct experience and information on the subject.

Insurers have also gone on the front foot amid calls for more government action on affordability and availability, with the Trowbridge report making 13 recommendations, including closer collaborative processes to assist industry sectors with solutions.

ICA is establishing a “Business Advisory Council” that will be chaired by Mr Booth and have representation from groups such as the Australian Chamber of Commerce and Industry. NIBA and the Underwriting Agencies Council will participate as required while also separately working with ICA on issues.

“I think there is a really important role, and an opportunity, for NIBA and its members to support the process, and certainly also a tremendous opportunity for the Insurance Council through this business advisory group, with the support of insurers, to try and address some of the core issues of risk and insurance that are in the community at the moment and see where we can come up with some really good solutions,” Mr Booth says.

Over coming months NIBA will monitor the operation of the October 5 reforms which aim to boost buyer protections, and will keep a close watch for any

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unintended consequences.

Preparations have been made more difficult by the last-minute release of some regulatory guidance, but the Australian Securities and Investments Commission has said it will take a “reasonable approach” and take account of “best efforts”.

The brokers’ peak body also has an eye to the big picture in looking ahead, holding a webinar on outcomes from the Future of Broking in 2025 strategic project that focuses on how businesses can remain viable and strong into the future.

Objectives include increasing levels of professionalism and enhancing brokers’ positions as trusted risk advisers to clients. The strategy highlights their role as partners to underwriters and capital providers and as advisers to government on insurance and risks facing communities.

Mr Kewin says the future lies in the relationship and technical expertise side of broking and advice, with technology increasingly taking over more transactional tasks and processes.

“That is one of the key things that we are trying to communicate,” he says. “Any value you are placing on transactions that are replaceable by technology, you need to be very wary of, because that is not necessarily where your value is.

“The value is in communication with clients, in understanding their needs, and helping them navigate through the process if there is a claim. They are the important things, but anything that can be replaced by technology – if that is where you place your value – then that is a threat to your business.”

Mr Kewin is still getting to know the broking sector at an in-depth level, but says there is a different dynamic compared to financial advice, and a collegiate environment. Pandemic restrictions and virtual meetings have everyone looking forward to getting together in person and as a community, with challenges across the industry to be addressed.

“The more that we are able to work together collectively the better outcomes there will be from an insurer’s perspective, from a broker’s perspective,” he says.

“I think that is critical, and that is one of the things that I have observed. There seems to be a very strong appetite to work together to get better outcomes.”

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Through the roof: construction premiums are still rising

Building back better The construction market has seen capacity withdrawn and prices surging amid challenges in both material damage and liability

By Wendy Pugh

W

ith natural disasters, flammable cladding, building defect problems, rising worker injury costs and a pandemic, the construction market has undergone a fair amount of recalibration in recent months.

Underwriters have stepped back from areas seen as unattractive and some have withdrawn altogether while pricing has responded sharply after being in the doldrums in an extended iteration of the insurance cycle.

Willis Towers Watson Regional Construction Leader Australasia Iain Drennan says construction globally has experienced challenges, but the local market has seen heightened pressures in response to the plentiful capacity and low prices that had prevailed for so long.

“I would say the shift to remediate portfolios in Australia has been sharper than in other parts of the world, but that is a function of how competitive local premiums had become in Australia,” Mr Drennan told Insurance News.

Prices are still on the rise, with a Willis Towers Watson mid-year update pointing to Australasia primary construction liability rate gains of 30-60%, annual builders risk/contractors all risks increases of 15-25%

and primary design and construct professional indemnity gains of 40-80%.

Globally, an unprecedented number of insurers have exited the construction market since the dynamics started changing a couple of years ago, taking with them close to $US1 billion in capacity, international broker Marsh says.

Underwriting control has been shifted from regional branches to head offices, leading to greater alignment between regions, while annual discussions have often become more testing.

“Although insurers’ own treaty renewals have generally gone smoothly in 2021, there is more pressure to manage policy limits and extensions. Coverage and deductible levels have also come under the spotlight across all regions.”

In Australia, Lloyd’s underwriters have pulled back in the past couple of years following a focus on remediating underperforming portfolios, while other insurers also reassessed.

On the material damage side, natural perils and water damage have been a focus, while harder-toplace catastrophe-exposed risks and challenging engineering projects have taken the brunt of larger

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“Premiums are showing no sign of stabilising in the short-term as insurers are seeking to return to a profitable market.”

premium increases.

But it’s the liability and casualty side of the market that is presenting some of the greatest challenges, local brokers and insurers say.

Worker-to-worker insurance, which includes injuries affecting sub-contractors and hired labour, has particularly seen increased claim sizes and rising premiums, while professional indemnity remains challenging.

Bovill Risk & Insurance Consultants Chief Executive Chris Bovill says material damage and liability premiums are rising, with some rate increases of up to 50% on the liability side. Worker-to-worker excesses are also increasing due to large losses on long-tail claims.

“Premiums are showing no sign of stabilising in the short-term as insurers are seeking to return to a profitable market,” Mr Bovill tells Insurance News.

He says many insurers are reducing design and construct professional indemnity capacity, with a number reducing maximum limits from $10 million to $5 million. Cladding exclusions are commonly applied, with varying levels of cover.

“Insurers that continue to offer terms for this profession have applied consistent premium rates over the last year within a 10% rate increase,” he says. “Though the actual premiums applied by different insurers are quite diverse, where one insurer can be multiples of the premium offered elsewhere for the same client.”

Insurers are paying closer attention to the type of projects and total project values than in previous years and are being more selective.

Rising worker-to-worker losses reflect legal system and workers’ compensation dynamics, multiple parties, the level of construction activity and the increasing use over years of third-party labour on sites.

Underwriting agency Mecon Insurance Chief Executive Glenn Ross says tort reforms dating from 2002 to curb an increase in bodily injury claims going through the courts have not prevented escalating issues in the current worker-to-worker environment.

“The situation hasn’t got any better; in fact it has got worse because compounding it you’ve got inflation and legal costs that have all increased over that period of time, so we are having a crunch again,” he tells Insurance News.

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“Worker-to-worker claims are typically late-reported and the claim when we actually see it is far larger than it was when it was just a workers’ comp claim.”

Injured contractors or labour hire workers who receive payments through their employer’s workers’ compensation cover may also seek damages through the courts for negligence on the part of other companies at sites.

At the same time, workers’ compensation providers are also seeking to recover costs from parties found to be culpable.

Mr Ross says NSW compulsory third party (CTP) motor scheme reforms have addressed rising injury costs in that area, and wider change is needed. The CTP reforms introduced a no-fault scheme that keeps all but the most serious injuries out of courts.

“Construction sites are very dynamic places, the same as a road,” Mr Ross says. “There is a correlation between the two. Nobody goes out to deliberately cause a car accident, just as nobody deliberately sets out to injure anybody on a construction site. Yet there is always somebody looking to blame somebody else.”

Governments and regulators are focused at the moment on flammable cladding and building defects as they fix past failings and aim to restore confidence in new residential and commercial projects. Repercussions are still being felt after the fire at Melbourne’s Lacrosse apartment building and cracking at Sydney’s Opal Tower raised the alarm on wider problems.

NSW has introduced the Design and Building Practitioners Act and regulations and other measures to stop “dodgy builders and developers” and provide peace of mind for property buyers. The moves to lift standards have been broadly welcomed, but there are insurance impacts.

Changes include the requirement that a residential apartment builder must declare their work has been constructed in accordance with the Building Code of Australia, which Mr Ross points out effectively makes the builder a certifier, with ramifications for professional indemnity markets.

Requirements that builders should be “adequately insured” take effect from 2023, giving a two-year transition period, while an exemption is available in certain circumstances where cover can’t be found.

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“Lockdowns, travel restrictions, access to domestic and overseas staff, longer lead times, and increased costs of materials all have a flow-on impact on insurance coverage.”

The Insurance Council of Australia (ICA) flagged concerns in a submission ahead of the regulations coming into force.

“We do not envisage the development of new insurance products which would cater to the certification process for a building by a builder,” CEO Andrew Hall said. “While builders’ warranty insurance covers this type of activity, it has not been successful or adequate in terms of the amount of compensation required.”

NSW has also introduced a 2% building bond for defects, and the state is looking at further reforms. An advisory panel will report early next year on decennial liability insurance to potentially cover new building defects for up to 10 years. The concept derives from the 1800s Napoleonic Civil Code of France and is used in a number of countries.

Agile Underwriting Services Head of Construction Simon Garske says decennial cover could change the dynamics of the construction insurance industry in Australia and the firm is closely watching developments.

“We understand one measure being contemplated, if decennial insurance is introduced, is removing the 2% bond,” Mr Garske tells Insurance News. “This could motivate developers and project managers to buy decennial insurance and increase confidence for people buying apartments off the plan.”

Victoria is also reviewing building regulations and has released a paper that discusses the potential for “project-based insurance”, which could include decennial liability or inherent defects insurance. A scheme in the UK operates on a no-fault basis where parties don’t have to prove negligence.

Agile, which has entered the construction market against the tide, is not participating initially on the liability side, given the challenging environment and with the industry grappling with worker-to-worker exposures. It is taking a careful approach to fully understand the risks it is covering.

Mr Garske, who has worked with Munich Re, Allied World and FM Global, says as a new player Agile is coming into the market at the perfect time, and believes that with a focus on responsible, technical underwriting it can participate profitably.

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“The market was soft for more than 15 years, during which time rates continued to fall and policy covers became extremely broad,” he says. “That trend is being reversed and – given some underwriters have exited or continue to impose tighter guidelines on the business they’ll write – there is scope for additional capacity.”

The construction industry has benefitted from an Australian building boom and largely continued to operate amid the COVID-19 pandemic, but has still experienced its share of lockdown disruptions and other impacts that have driven up costs and caused project delays.

“Lockdowns, travel restrictions, access to domestic and overseas staff, longer lead times, and increased costs of materials all have a flow-on impact on insurance coverage,” Mr Garske says. “Some insurers won’t provide automatic extensions on delayed projects, particularly where a project exceeds original cost estimates.”

Marsh says COVID-19 and communicable disease exclusions are now the norm across construction.

Cessation of work clauses, which provide cover in “tools down” situations, have also had time periods reduced.

Looking ahead, Agile says emerging construction issues include difficulty in finding cover for renewable energy construction projects, including solar farms and battery storage facilities.

“Some solar farms are in unsuitable locations and inadequately engineered; battery storage facilities are still prototypes and the fire risk needs to be better understood,” Mr Garske says. “Many battery storage plants have caught fire.”

Construction market conditions are expected to remain challenging for a while yet as insurers maintain caution in assessing Australian material damage and liability risks, but positive signs are emerging.

Willis Towers Watson’s Mr Drennan says a plateauing in rates is likely, first in material damage next year followed by other lines. This reflects insurers’ focus in moving toward the technical levels they have targeted.

“Our feeling across our portfolio is we are starting to see that mountain climbed.”

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A fresh approach Independent brokerage Honan has positioned itself as a unique challenger in the corporate market, powered by a young and diverse workforce

By John Deex

Confident challenger: Honan’s Andrew Fluitsma

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H

onan isn’t an international broker with massive global operations, but there’s more than a hint of that top-end confidence in the way it has accrued an impressive collection of ASX 100 and 200 clients.

Chief Executive Andrew Fluitsma admits the Melbourne-based brokerage “hasn’t beaten our chest” about its successful push into the tightly held corporate market. But now is a good time to talk about the achievements built on a rebranding and overhaul that have seen Honan flourish on a wave of youthful energy and innovation.

The rebranding exercise has seen Honan adopt a more modern image, that allows it to capitalise on what Mr Fluitsma describes as “a whole new set of rules and a whole new set of values”.

“We didn’t want to become just a small version of an international brokerage,” he tells Insurance News. “We wanted to become a unique, very special challenger brand that represented something different.”

Honan’s 260 employees are very much key to its more outgoing and confident identity.

“We hired with a view to people that had that growth mindset,” Mr Fluitsma says.

“Our average age is 29, and we’re 55% female. That’s reflected in our executive leadership as well. I’m 40, and I’m the old guy.”

One of the values adopted by Honan is challenging the normal ways to approach insurance problems, and then to celebrate those challenges and speak up – “to talk and make noise. That’s what we want to do. “[Innovative ideas] don’t come up in a business like ours unless you have that diversity of thought, the challenging age group from a demographic that likes to challenge and likes to speak.

“It’s not one individual sitting in a corner office who’s going to be the hero coming up with the ideas. We don’t incentivise single sales people. We do it as a team.”

While Honan intends to retain that challenger mentality as a core part of its culture, it’s got genuine scale too.

Formed in Melbourne in 1964 by Geoff Honan, the father of current Executive Chairman Damien Honan, the business now has a presence across Australia as well as offices in Auckland, Singapore and Kuala Lumpur. It is also part of the Worldwide Broker Network.

“Honan has gone past $400 million across its general insurance business, heading towards $500 million, with Employee Benefits the fastest growing part of our business,” Mr Fluitsma says.

“If you think of $400 million, that is easily the largest independently held insurance brokerage in Asia Pacific.”

Significant size and profile is necessary to broke at

the corporate end of insurance, and he sees the company’s success working with large institutional listed and private businesses as a matter of some pride.

“We’re really proud of that, but I think our trajectory is probably not as well known as it could be in the marketplace,” he says.

“We’ve invested significantly in the back end – legal compliance, technology and people and culture. Now we’re at a point where we’re highly scalable.

“But we don’t want to be the traditional risk management-style broker that brings out all this literature that is targeted at risk managers and insurance people.

We want to focus on CFOs and sophisticated buyers.

“We want to make it clear. We want to make it simple. We want to make it sophisticated and we want to make it Honan.”

That seems to be a successful combination, with a client retention rate of 98.4% in a market that Mr Fluitsma describes as “incredibly challenging”.

Honan’s corporate focus is supplemented by a strong presence in strata, a real estate and landlord facility, and value-added services in workplace risk, workers’ compensation, risk engineering, risk accounting, and claims management.

And through its Singapore licence, Honan is providing wholesale insurance to other brokers including Steadfast and Austbrokers, and facultative reinsurance.

Honan has powerful backing – a fact underscored by the decision last year to partner with US private equity firm TA Associates. It’s a $US30 billion fund, and gives Honan access to more than just finance.

“We tap into something that they’ve got called the Strategic Resource Group, which is 30 people based out of London who are data scientists, data analytics people, and finance people,” Mr Fluitsma says.

“What that’s done is taken our aspirations around data analytics from ‘this is what we think we want to do conceptually’, to executing it.”

The business is aided during the hard market by a service timetable model called RISE – Risk Insurance Service Excellence – which gets rolled out to all clients.

“It’s all about transparency,” Mr Fluitsma says. “Our retention rate is so high because we’ve been able to say, ‘look, this is where it’s going’.”

Strong thought leadership channels keep clients and the broader business community informed, he says.

“The one thing that I can’t stand is the opportunistic nature of some brokers out there to say, ‘well, there’s a 400% increase, I’ll drop this on the client at the death, and then they’ve got no choice – I’ll take the money.’

“It’s very short-sighted, but we’ve seen a lot of that.

We’ve won a lot of new business because we see it as our job to educate.

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“There’s no reason why we can’t be challenging to be the best insurance firm, not only in Australia but Asia Pacific. And that’s absolutely where we want to be.”

“If we can’t bring those best-in-the-market terms, we’re not doing our job. But if we haven’t given the transparency and the runway to understand why, then again, we haven’t done our job.”

On directors’ and officers’ insurance, which has seen huge premium increases over recent years, Mr Fluitsma says tough decisions are having to be made, particularly for listed businesses with Side C cover for securities class actions.

“They are challenging conversations. Once upon a time, in a soft market, we just said, ‘Buy as much insurance as possible [because] it’s the cheapest form of risk management’.

“Now, it’s a conversation six months out, where you say, ‘well, we need to look at what we should retain and what we should buy. Should you even be buying Side C?’ “Now, are we looking at a balance sheet protection instrument or we have to actually increase those retentions to say, ‘You guys need to take some responsibility here.’

“It’s no longer the cheapest form of risk management. It’s a catastrophe instrument.”

Cyber is also rising to the top of client boardroom priorities, and there’s the traditional problem sectors such as food and beverage businesses using expanded polystyrene panels.

But the hard market will also be a learning experience, Mr Fluitsma says.

“They’re hard conversations, but we’re going to come out of the other end with every single broker in here having worked through a really hard market, and that’s just going to make us all a lot better.

“I think it’ll make everyone in the industry a lot better because we haven’t seen a really hard market for 20 years.”

Another industry challenge is the upcoming debate on broker remuneration, with a Hayne-recommended review set to start soon.

Mr Fluitsma welcomes the scrutiny, saying Honan is “heavily fee-based”, which brings sustainability and transparency.

“I believe that there needs to be a fair price for work done, but I totally agree that there needs to be a complete overhaul of transparency,” he says.

“We have looked at a lot of [brokerages] from

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the acquisition point of view and walked away from them because their average commission rates are unsustainable.

“So, there is an issue with the lower end, and it has to be addressed. We’re all for that. But we’re also very much for being paid for the work that we’re doing. And that’s where the practical and common sense position will land.

“The intermediary is not going to die. It’s just going to correct and be transparent to a point of sustainability.”

Brokers need to believe in themselves and understand the work they are doing has genuine value, Mr Fluitsma says.

“I think a lot of the time brokers don’t actually think that. That to me is part of the problem.

“A lot of brokers are out there thinking, ‘I’m sneakily taking 20 points, and I got away with it.’

“Let’s be transparent. Let’s be confident enough to say, ‘I deserve X amount of money for the work that I’ve done and here’s the reasons why.’

“We put a scope of fees to every single client. So, we actually break down what we’re doing and what we’re getting paid for. I think that’s quite unique.”

Honan’s growth and transformation has been significant over the past five years, but Mr Fluitsma wants the next five years to be even more so.

Competition for acquisitions is fierce, but he says Honan is looking for a specific type of partner and plenty of opportunities remain.

“We’re positioning ourselves so differently [and] there’s a bunch of firms that just align with us.

“Granted that market is not going to be as big, but there are a bunch of them there that will join us.”

He says spending time in the US has made it clear to him just how significant independent brokerages can become.

“We want to continue with the same DNA, the same brand, the same challenging philosophy, the same challenge of thought, and we absolutely want to grow.

“There’s no reason why we cannot be a top five in Australia, if we’re not already.

“There’s no reason why we can’t be challenging to be the best insurance firm, not only in Australia but Asia Pacific. And that’s absolutely where we want to be.

“So we set the challenge to our people, and they’re running pretty hard with it.”

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The October blitz begins Of all the regulatory changes starting this month, new rules governing the design and distribution of products will have the most significant impact

By Bernice Han

T

his month regulatory reforms have picked up the pace following a pause to allow the general insurance industry and wider financial services sector to focus on pandemic challenges.

No more. Now the industry must include regulatory reform among the imperative issues it’s already facing – climate change impacts, climbing claims and financial woes, to name a few.

Relevant to the general insurance industry: • The commencement on October 1 of strengthened breach reporting rules, followed four days later by the introduction of product design and distribution obligations (DDO) laws, hawking prohibitions, a deferred sales model for add-on insurance and a new disclosure duty for consumer contracts.

• New standards and guidelines relating to complaints handling and internal dispute resolution processes started on October 5, after the release last year of a new regulatory guide, RG 271, from the Australian Securities and Investments Commission (ASIC).

The raft of measures stemming from the Hayne royal commission also reflects work already underway before the government-appointed inquiry into financial services sector misconduct proceeded in 2018 and concluded with a final report in February the following year.

The reforms usher in an era of more stringent governance to protect consumers, carrying harsher

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penalties for non-compliance.

Significant resources have been put in by the industry in preparation for the changes. These include reviewing underwriting criteria, overhauling back-end support systems and staff retraining.

The Insurance Council of Australia (ICA) has been working closely with its members to support them in navigating the “once-in-a-generation regulatory reforms”, the most significant of which commence early this month, a spokesman told Insurance News.

“The aim has been to support members’ understanding of the reforms and the expectations set by regulators.”

In terms of industry-wide impact, insurance experts and lawyers agree the DDO regime presents the biggest shake-up for insurers, brokers and other intermediaries.

Recommended by the 2014 Financial System Inquiry and supported by the Hayne royal commission, it requires insurers and distribution partners to ensure products are designed to meet the needs of consumers and are delivered to the consumers for whom they are intended.

The DDO rules apply for the entire life cycle of a product.

“This is not a set-and-forget duty,” Finity Principal Raj Kanhai told Insurance News. “It’s ongoing monitoring and compliance obligations.”

Two important new acronyms: DDO: Design and Distribution Obligations require insurers and distribution partners to ensure products are designed to meet the needs of consumers and are delivered to the consumers they are intended for.

TMD: Target Market Determination. A document that must accompany every product setting out its target market, distribution conditions, and information related to review and monitoring.

If an insurer wants to sell a particular product, it must first establish there is an appropriate market for it. In other words, if the conditions for sale set by ASIC are not met, the product should not exist.

Every product must be accompanied by a target market determination (TMD) document which sets out the target market, distribution conditions, and information related to review and monitoring.

Insurers must also specify in the TMD the distribution conditions and restrictions that make it likely that the consumers who acquire the product are in the target market.

Under the DDO regime, it is also the duty of insurers, brokers or intermediary partners to consider distribution methods and factors that could affect whether consumers receive a financial product that is likely to be consistent with their likely objectives, financial situation and needs.

The DDO laws complement powers granted in 2019 to ASIC giving it the discretion to ban a product if there is a risk of significant consumer harm. The regulator exercised its product intervention power that year to ban a lending model in the short-term credit industry.

Mathew Kaley, Principal at law firm McCabes, says DDO readiness has required a “significant amount of work” from the industry and the October 5 start date is very important.

“The consequences of not being ready are that the

insurer would need to cease retail product distribution conduct,” he told Insurance News.

“If a target market determination is required but not in place, the insurer, and potentially it’s distributors, will be in breach on October 5 if they continue to sell the product.”

On the positive side, Mr Kaley says that “where the DDO is properly implemented, it should materially improve insurers’ ability to meet customer expectations and positive claims outcomes”.

The DDO regime may seem draconian but other jurisdictions such as the UK and European Union already have similar laws in place to protect consumers.

Avryl Lattin, Partner at law firm Clyde and Co, says the additional requirements for TMDs and reporting obligations on distributors will see a sharp focus on making sure that products are directed at the intended customer base.

“The regulators have long sought the power to prevent poorly designed products from being marketed, rather than just dealing with the consequences after the fact,” she told Insurance News.

Wotton + Kearney Partner and Financial Lines Practice Leader Cain Jackson says the DDO laws will involve a “shift in mindset” for some insurers because it has “added a ‘product governance’ dimension” to their existing obligations.

On products that may fall foul of DDO rules, he says

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the array of class actions directed at add-on insurance highlights the types of areas which could be targeted under the new regime.

“Low claims ratios and the sale of numerous insurance products to a generic market as part of a one-sizefits-all sales process are likely to raise red flags,” he said.

The significance of the overall reform package creates what Mr Jackson describes as “an obvious tension”. Insurers aim to generate profits from the sale of insurance.

“Selling insurance which produces low claims ratios is, on one view, good business,” Mr Jackson said.

“However, this (DDO) legislation seeks to temper the pursuit of profit with, in essence, a fitness for purpose requirement.

“There is a natural tension between the two – equally legitimate – objectives.

“Insurers will now need to navigate their way through that sometimes difficult balancing exercise, particularly where products arguably perform ‘too well’.”

In the most extreme cases, some products may be withdrawn completely or customers refused cover either because DDO criteria are not met or insurers and distributors prefer to err on the side of caution.

Finity’s Mr Kanhai says the amount of effort the industry has invested to be DDO-ready is massive.

“It’s across all retail products, and there are lots of them, and lots of insurers have multiple policy wordings that they distribute through different intermediaries and through different channels.”

The National Insurance Brokers Association has been providing support to its members ahead of the array of changes taking place in October. Outgoing Chief

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Executive Dallas Booth says there’s been a “massive amount” of work involved, particularly at the larger brokerages.

In relation to the other changes in October, Ms Lattin of Clyde & Co says the introduction of a deferred sales model for add-ons and anti-hawking provisions will have a substantial impact on a number of existing “established” distribution channels in respect of specific product lines.

“We have seen early indications that there will be distribution channels and product lines which insurers are likely to abandon given the restrictions and the cost of compliance,” Ms Lattin said.

Mr Kaley of McCabes says the rules attached to the deferred sales model, which puts a four-day pause on the sale of add-on insurance, may have led to a rethink by some insurers as to whether it still remains worthwhile to sell the affected products.

“It has been reasonably challenging to apply the model to some distribution channels, and there are also some areas of uncertainty about how it will work in different contexts,” he told Insurance News.

Where that is the case, he expects some insurers will have chosen to withdraw from the channel, rather than implement the model.

“Implementation of the model is also likely to prompt a change in consumer behaviour,” Mr Kaley said. “Some customers will not wait for the deferral period to pass, for instance, but will instead purchase from another insurer directly. It will be interesting to see what happens in this space.”

Ahead of its implementation, Treasury has finalised the model’s list of regulations to prevent high-pressure sales tactics.

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Business-related add-on insurance products where the premium exceeds $1000 are exempted. Other product classes that do not fall under the deferred sales regime include compulsory third party for motor vehicles, third party property, fire and theft for vehicles and vessels, comprehensive cover for cars and vessels, insurance sold within super, transport and delivery, travel insurance, home building, home and contents and landlord insurance.

Looking beyond October, the biggest change for the industry will come on January 1, when claims handling and settling services for insurance products will begin to be regulated as a financial service under the Corporations Act. While ASIC has given the industry a one-year transition period, Mr Kaley says preparations are still ongoing, with less than three months before the laws set in.

These include reviewing of internal systems and processes as well as contracts with third party providers.

The review of processes for oversight of third party providers is also still continuing.

Gallagher Bassett Partnership Manager John White says the reforms should provide better outcomes for consumers. He says insurers are already adapting to the new pace and cultural shift that comes from the implementation of these reforms.

Finity says the scale of regulatory changes is the biggest in two decades since the collapse in 2001 of HIH Insurance.

The corporate failure of the insurer – among the largest in the country at that time when it went into liquidation – led to several far-reaching reforms following a royal commission.

“One of the things we can say is insurance is a highly regulated industry, and it is not going to go back the other way,” Mr Kanhai said. “Although it can feel like regulatory activity is akin to a pendulum, the general 0 trend is that it mostly goes in one direction.”

The regulatory changes taking place in October build on earlier reforms that have already been implemented, such as the application in April of unfair contract terms to insurance contracts.

Here is a snapshot of the measures that are commencing in October:

financial products and update bans to take account of technological changes. ASIC has confirmed that where add-on insurance is exempt from the deferred sales model regime, the hawking arrangements will apply, and offerors must then consider whether the product is “reasonably” within the scope of the consumer’s consent.

Deferred sales model for add-on insurance There will be a four-day pause on sale of add-on products after a customer has entered into a commitment to acquire the main item or service.

Duty to take reasonable care not to make a misrepresentation The new duty for consumer insurance contracts shifts the onus to insurers to obtain all necessary information to assess insurability and the premium calculation. This means that consumers will no longer have to surmise what information may be required by insurers, as is currently the case under the Insurance Contracts Act. Internal dispute resolution regulatory guide (RG) 271 RG271 explains what financial firms must do to have a compliant internal dispute resolution system in place that meets ASIC’s standards and requirements. The standards and requirements highlighted in this guide are enforceable.

October 1 Strengthened breach reporting Australian Financial Services licensees need new processes in place for notification to ASIC of deemed significant breaches, to cover investigations that may need to be notified (need process for identifying), identifying and notifying gross negligence and serious fraud. Failure to notify is an offence.

October 5 Product design and distribution obligations Target market determinations must be in place and published. Products that usually require a product disclosure statement will be affected by the new regime.

Hawking prohibitions The laws extend strengthened prohibitions across

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Sure thing In a disaster-prone area of Australia where many insurers have retreated, a smaller competitor says it’s doing well

By John Deex Speaking up for Queenslanders: Bradley Heath

N

orth Queensland can be a difficult place to write home and strata insurance, with some major providers either not willing to operate there or quoting eye-watering premiums that some residents simply cannot afford.

It’s understandable. The area is uniquely exposed to cyclone risk, as well as the floods and fires Australia is renowned for.

But that’s little consolation to homeowners, who either have to pay significant sums – up to $30,000 a year in some cases – to insure their major asset or play the cyclone lottery every disaster season.

Into this environment in 2019 stepped Sure Insurance, an underwriting agency backed by Liberty Mutual Insurance Company to specifically service the north Queensland market and promising significant savings for customers.

Two years on its Managing Director Bradley Heath says many ambitions have been achieved, and Sure is in the market for the long term.

To be clear, Sure is still a relatively small player, with single-digit percentage market share. But it says it’s growing fast and has taken on an advocacy role for north Queenslanders that goes beyond business profits.

It’s insuring some 30,000 residences from Hervey Bay to Cape York and expects to triple that figure over the next few years.

Having started by offering home and contents direct, it has now moved into the broker channel, and offers strata too.

Sure says independent analysis by actuarial firm Finity shows it saves customers an average of $1900 per year and that overall it’s saved the regional Queensland economy about $20 million.

That’s a big claim, but Mr Heath believes 10 years as RACQ Insurance chief executive has given him critical insight into the area’s issues and possible solutions.

He says there was a “market crisis” and Sure believed it could help, measuring its success in terms of “how many people we’re giving a better deal to”.

“Of course, we need to measure dollars, we need to be viable, we need to be solvent, and we need to have a solid business; but at the end of the day we’re doing what insurance always set out to do and that is help people,” Mr Heath tells Insurance News.

“We’re very happy with our growth, and very happy with what the trajectory looks like.

“The brand is now clearly very well recognised [in north Queensland]. In terms

of the impact on the market, it’s been considerable.

“The brokers have taken us on as well.

I mean, they’ve lost brands up there and they’ve seen massive price rises through some of our competitors. That’s their strategy and there’s nothing wrong with that. But brokers have embraced us and customers have embraced us.”

So how is Sure able to provide cheaper cover? Insurers criticised about high prices in the region point back to the underlying risk, and various official inquiries have supported that view.

Sure can work in such a difficult market because, frankly, it’s nowhere near as big as its competitors and it focuses solely on the north Queensland market. Being smaller it’s also lean and flexible and can use technology to build its share of the market. Mr Heath says it’s about data – and, more importantly, how that data is used.

Sure says it has highly relevant product features, and it can ask specific risk-related questions that can lead to lower premiums.

Those “highly relevant features” include 18 months temporary accommodation, as opposed to the more common 12 months, and there’s no excess on frozen food losses. It also covers pool water replacement

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Regional focus: Michael Boucher

following a storm or flood.

Sure’s General Manager Michael Boucher, who previously spent 13 years at RAA Insurance in South Australia, says the regional focus brings advantages over national insurers with national products.

“We’ve got significant rating factors that focus on mitigation and significant discounts, some of the biggest discounts in the market. “[National players] are not going to ask if you have cyclone shutters in Tasmania or in South Australia, but we certainly ask those questions up north. We correspondingly give those mitigation measures discounts and focus heavily on that.”

Mr Boucher takes particular pride in the fact that 10% of Sure’s new business comes from customers who have not held insurance in the past 12 months, which helps to tackle the region’s growing underinsurance and non-insurance problems.

Mr Heath says that despite looking after consumers through sharp pricing, “the numbers are stacking up” for the company.

But Sure is so new it hasn’t yet experienced the massive challenges that come with the major natural catastrophes the region is notorious for. Mr Heath accepts that caution, and concedes a major catastrophe could affect his company’s pricing.

But he’s highly confident Sure will come

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into its own when disaster strikes, with arrangements in place to upscale quickly and meet the challenges through an in-house claims service he says consistently delivers.

“Michael and I…have both been claims managers for big brands. We’ve both managed events. It’s not a mystery. It’s not a ‘make it up as you go along’ thing. We are ready. The only way we can prove it is when it actually happens.”

Mr Heath believes long-term and shortterm measures are required to tackle the region’s risk exposure, especially to flood, and that while insurers should be on the front line suggesting solutions, it’s up to governments to implement them.

“We just don’t see a plan,” he tells Insurance News.

“Federal and state and local governments have got to combine to all do their bit.

That’s what we’d like to see – a bit of a national think tank.

“Why aren’t we seeing action on town planning? I mean, is it so hard to understand that you shouldn’t build houses on a highrisk floodplain. Let’s do something now.”

The Federal Government’s much-debated cyclone reinsurance pool may help, but it’s far from clear how it will operate, and whether it will actually produce any savings.

Sure has concerns that if the pool is mandatory, it could even disadvantage

some consumers.

“We think that insurers should be prohibited from ever charging more than the pool price,” Mr Heath says. “But if the insurer wants to charge less, then they should be allowed to do so and keep the risk themselves.

“Thus a policyholder that’s getting a very good price with either Sure or any other insurer should not face an increase merely because there might be a decision to make the pool participation mandatory.

“We don’t think it should be mandatory.”

Sure has been asked to look at entering other cyclone-prone regional markets, but for the time being its focus remains squarely on north Queensland. It says Liberty is in it for the long term, and there’s lots still to achieve in the region.

“The opportunity for Sure is where we think the market crisis is, and we believe we can do it better than the incumbents,” Mr Heath says.

“That’s the key strategy. That’s where Sure was born – a market crisis. We believed we could do it better, and we did.

“There are other options open to us down the track. But in the short to medium term, we still haven’t got to the end of our capacity and capability in our current zone.

“You never say never to anything, but our focus is on the area that we know so well.”

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Expanded offering: ShieldCover adds personal accident to new quoting portal Brisbane-based underwriting agency ShieldCover has added Personal Accident and Sickness to its new online quoting portal, giving broking partners instant access to arrange cover for clients.

Liability products for Blue Collar, Hospitality, Property Owners, and Small Retailers are also available on the system.

ShieldCover says the decision to add the product to the portal is part of the agency’s goal of easing the process of quoting and providing fuller coverage for their broking partners with clients in the trades, retail, and commercial industries.

For brokers who have not quoted with the agency, there will be step-by-step instructions to guide them through the process.

Brokers who have used the platform previously can easily log in and start a new quote.

“Moving the Personal Accident & Sickness quoting experience online has been in the plan for quite some time now,” ShieldCover Chief Executive Greg Rynenberg told Insurance News.

“The team at ShieldCover has worked closely with our internal development team to perfect this portal and bring it to life.

“We are very excited to improve the quoting experience for our broking partners.

“This new portal will be a game-changer in our ability to offer more efficient and reliable service, to be there for our broking partners and their clients when they need us most.”

The underwriting agency is a division of East West Insurance Brokers and formerly traded as Ryno Underwriting until last year, when it rebranded in October as ShieldCover.

The change separates the agency from Ryno Insurance, which will continue to focus on the enthusiast motoring and transport sector while ShieldCover will focus exclusively on servicing the broker market.

Founder and MD Greg Rynenberg said last year the agency model is “receiving a fresh new look” to establish itself as a more prominent market player.

“With Ryno Insurance and Ryno Underwriting both continuing to grow in two different markets with two different audiences, it makes sense to give Ryno Underwriting an independent brand,” Mr Rynenberg said.

“While the ShieldCover brand is a little different, the agency is not being reinvented – rather, revitalised.”

ShieldCover specialises in liability products for blue collar, hospitality, property owners and small retailers. It is a Lloyd’s coverholder and a member of 0 the Underwriting Agencies Council.

50 and counting: Cowden set to celebrate milestone Broker Cowden will celebrate its 50th anniversary next year, achieving a significant milestone in its corporate history.

Established in 1972 by Colin Cowden, the Perthbased business has expanded nationally with offices in Adelaide, Melbourne and Sydney.

The brokerage offers a range of commercial, liability and personal insurance solutions. It also has a Cowden Insurance Brokers Workplace Risk Division providing specialist safety management and workers’ compensation solutions to Australian businesses.

In changes aimed at strengthening the business, Mr Cowden will become Executive Chairman with the appointment of Alan Tokeley as Chief Executive.

Mr Tokeley, who started in the role on October 11,

has spent the last 15 years as AIG’s State Manager of WA and the NT. Cowden says he has been extensively involved in insurance markets in Australia and New Zealand, and had previously spent many years as a broker.

“He will bring to Cowden his proven management skills and broad insurance experience,” Cowden said.

“His appointment comes at a crucial time in the business of Cowden with [Mr Cowden] taking the Executive Chair role.”

Cowden says the executive changes will provide Mr Tokeley “the opportunity to lead and guide the long term professional staff through this upcoming stage of embedding Cowden as a truly Australian owned and operated insurance broking business providing qual0 ity service to their clients across Australia”.

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maglog >

A

t the back end of Insurance News magazine, you might just like to take a break and let your mind absorb something that isn’t news, interviews, articles and pictures. Take a few minutes to appreciate the weirdness of ordinary things. Like, for instance, pandemics and vaccination.

Next time someone raises the subject of vaccination with you – and there’s going to be a debate if your views differ – you can divert any argument by saying “Did you know…?” and tell them one of the following yarns. You might also leave people wondering how having a vaccine in 2021 got to be such a big deal.

So let’s drift back in time to 18th Century England, where smallpox was laying waste to the island kingdom and Europe. At this time smallpox killed around 30% of infected adults and 80% of infants. Survivors would carry disfiguring scars for the rest of their lives, but they would also be immune to catching smallpox again.

Also at this time, a practice common in the strange worlds of Asia and Africa became known in Europe.

Inoculation involved taking the pus from the lesions of someone suffering smallpox and scratching it into the skin of a healthy person.

Recipients would normally get a mild case of the disease, but some would develop full-blown smallpox and, being immune but still carriers, pass it on. What was needed was not just inoculation, but mass vaccination.

It was already known that milkmaids were immune to smallpox, instead contracting a much milder skin infection called cowpox. (Incidentally, “vaccination” is derived from the Latin word vaccinia, or cowpox.)

An English country doctor named Edward Jenner took the knowledge, developed a vaccine from cowpox and ensured the world got to hear about it. He refused to earn a penny from his work, which saved millions of people from death or disfigurement.

The experiment he embarked on in 1797 to prove the method worked had a rather informal tone. Jenner took matter from a cowpox lesion on a milkmaid’s arm and scratched it into the skin of an eight-year-old boy named James Phipps.

Luckily for poor little Jim the experiment was

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By Sam Pentecost Contributor

successful, and after a mild bout of illness he recovered and Jenner inoculated him with matter from a smallpox blister. James did not develop smallpox, and he did not carry the virus.

In 1979 smallpox was officially declared eradicated from Planet Earth.

We now turn to the first mass vaccination campaign conducted by George Washington – he of the Glorious Revolution and the first president of the United States.

The American colonists were aware of the wonderful qualities of cowpox before Jenner formalised its treatment, and Washington used it to good effect in 1777 during the War of Independence.

Shortly before the Battle of Saratoga which is credited with flipping the war in favour of the colonists, Washington faced a dilemma. Smallpox was crippling his army, causing many more deaths than the army incurred in battle.

While most British soldiers were immune (cowpox again) 75% of the colonial army wasn’t. Working in great secrecy with few surgeons and no experience, Washington conducted the first mass inoculation of an army – a risky move that enabled the Americans to win at Saratoga and eventually claim victory in the War of Independence.

Here’s some more bits to drop into the conversation and reveal the depth of your knowledge: The “Spanish flu” epidemic of 1918-19, which killed around 50 million people – and 15,000 Australians – wasn’t actually Spanish at all.

The pandemic broke out near the end of World War I, when wartime censors suppressed bad news. But Spain was neutral in the war, so freely reported the outbreak, accidentally creating a false impression that it was the epicentre. No one actually knows where the virus began.

And finally: The word “influenza” comes from 15th Century Italy, where upper respiratory infections were considered to be “influenced” by the stars.

Now you know.

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