INSURANCEBUSINESSONLINE.COM.AU ISSUE 2.6
THE YEAR
AHEAD The outlook for 2014
BROKER NETWORKS SQUARE OFF WHO IS THE TRUE BROKER CHAMPION
DUAL PERSONALITY DAMIEN COATES ON THE FRAUD THAT ROCKED INSURANCE
CATASTROPHE PLANNING TACKLING NATURAL DISASTERS THE SMART WAY
CONTENTS / 2.6
16
COVER STORY
The year ahead Predictions for 2014, as told by insurance industry leaders
NEWS ROUND-UP 6 | The big five The biggest stories to impact brokers 8 | News analysis Is it time for the boomers to make way for Gen Y?
12
FEATURE
The big interview Damien Coates, Dual
FEATURES
42
BROKING INTELLIGENCE
Content marketing How it can add value to your business
12 | Damien Coates Dual’s prodigal son on the fraud and the future 24 | The big fight Roll up, roll up. Who is the heavyweight champion of the broking world? 30 | Shifting gears Change is accelerating in the commercial motor space. Find out how you can benefit 38 | Coping with catastrophe Practical advice on how to manage when the worst happens
BROKING INTELLIGENCE 42 | Content marketing How it can add value to your business 46 | Client relationships: how to drive sales Building lasting partnerships that profit
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48 | The (r)evolution of management Why you must engage your team on a whole new level
INSURANCE INSIDERS 36 | Profile Crowe Horwath’s up-and-comer Ben Spokes reveals all 51 | Favourite things David Porteous, Brooklyn Underwriting 52 | Social life Charting the beginning of the silly season 56 | The final word Why no one has grasped just how disruptive digital really is
DAILY INVESTIGATIONS NOW ONLINE: Mergers and IPOs Technological transformation The latest movers and shakers insurancebusiness online.com.au
EDITOR’S LETTER / 2.6
WHAT LIES AHEAD
Kevin Eddy
Perhaps it’s aging, perhaps it’s simply the increasing speed and complexity of modern business life, but the years seem to pass faster and faster. It’s difficult to believe that 2013 is almost a memory, and that 2014 is about to arrive. Still, as we hurtle towards the end of the year, December – and the inevitable advent of seasonal get-togethers – is often a time for reflection and review of the months gone by, as well as an opportunity to look ahead. For the insurance industry, that future brings challenges. The turn of the calendar too often marks natural disasters in Australia – indeed, the bushfires that afflicted New South Wales in October and November marked an early start to this most difficult of seasons. However, that future also brings opportunities, thanks to technological, societal and cultural change. That’s the clear message in this issue’s cover feature, which canvasses commentators from around the industry to tell us what they think lies ahead. Elsewhere, Damien Coates talks post-fraud life at Dual, Chinwe Akomah asks which broker network is the heavyweight champion of the world, and we take a look at the seismic changes about to transform commercial motor. Add to that the usual mix of business strategy advice, news, behind-the-scenes insights and opinion, and it’s another packed issue to see you through your New Year celebrations. See you in 2014! Kevin Eddy, editor, Insurance Business
COPY & FEATURES EDITOR Kevin Eddy CHIEF REPORTER Chinwe Akomah CONTRIBUTORS Darren Trott, Nikki Heald, Peter Bowman, Therese S. Kinal PRODUCTION EDITORS Roslyn Meredith, Danielle Chenery
ART & PRODUCTION DESIGNER Jonathan Phillips
SALES & MARKETING GENERAL MANAGER Peter Smith COMMERCIAL DEVELOPMENT MANAGER Ben Lawless COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Anna Farah TRAFFIC MANAGER Abby Cayanan
CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley MANAGING DIRECTOR Claire Preen CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR – AUSTRALIA & NEW ZEALAND Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Kevin Eddy tel: +61 2 8437 4793 kevin.eddy@keymedia.com.au Advertising enquiries Commercial Development Manager Ben Lawless tel: +61 2 8437 4766 ben.lawless@keymedia.com.au General Manager Peter Smith tel: +61 2 8437 4740 peter.smith@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Singapore, Auckland, Manila, Toronto, Denver insurancebusinessonline.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Insurance Business magazine can accept no responsibility for loss
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Contact the editor:
kevin.eddy@keymedia.com.au 4 | JANUARY 2014
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NEWS / ROUND-UP
THE BIG
FIVE
The biggest news from insurancebusinessonline.com.au ZURICH CLEARED OVER CFO SUICIDE Zurich Insurance Group has been cleared of subjecting the late CFO Pierre Wauthier to any undue or inappropriate stress, according to two independent investigations conducted under Swiss Financial Market Supervisory Authority (FINMA). Waulthier committed suicide in his Switzerland home in August. Days later, group chairman Josef Ackermann quit the company, stating that the family of the firm’s late finance chief felt he should shoulder some of the responsibility for the executive’s apparent suicide. The investigations imply that Ackermann and the company are not to blame for Wauthier’s death. Following the suicide, FINMA began two investigations, the first to determine whether Pierre Wauthier had been subjected to any “undue pressure” and the second to review if the financial figures had been appropriately presented. “We are still deeply saddened by the loss of Pierre Wauthier and we are unable to explain the motivation behind his tragic decision. FINMA’s investigation was conducted with Zurich’s full support and cooperation,” said Tom de Swaan, chairman at Zurich. FINMA is said to have also directed the group’s auditors to conduct additional procedures regarding Zurich’s financial statements, and this investigation found no irregularities with regard to financial reporting, which complies with regulatory and accounting requirements.
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BY THE NUMBERS
1,041
The number of claims lodged across the industry as a result of the NSW bushfires at the end of October, with losses estimated at $145m. Source: Insurance Council of Australia
$27m
The net loss reported by Willis in the third quarter of 2013, as a result of ‘early extinguishment of debt’ Source: Willis
CALLIDEN AND WA REACH HOME INDEMNITY AGREEMENT Calliden Insurance Limited has reached an agreement with the Western Australian Government for a quota share reinsurance arrangement to provide home indemnity insurance. Insurance Business previously reported that Calliden and QBE, the only two providers of home indemnity insurance in WA, were reviewing their positions in the WA home indemnity insurance market after receiving the Economic Regulation Authority’s final report on the market. Calliden and the WA Government have now agreed the terms of a reinsurance arrangement that will see Calliden continue to provide HII to the WA market. The initiative will be supported by the state of Western Australia through its Department of Commerce (DOCWA) providing a 100% quota share reinsurance arrangement to Calliden. Intermediaries and clients will continue to be serviced by the Calliden home indemnity insurance team and Calliden will continue to operate subject to its existing underwriting guidelines. Calliden Group CEO, Nick Kirk said: “Calliden is pleased to be working with the WA Government in relation to home indemnity insurance and to be able to provide continued support to its intermediary partners in WA.”
SHAREHOLDERS SLAM IAG PAY PACKETS IAG has been forced to defend the remuneration packages of its senior management after a shareholder branded them “outrageous” at the annual general meeting. CEO and MD Mike Wilkins received a total actual remuneration of $6.1m for the year ended 30 June 2013, while chief risk officer Justin Breheney pocketed $4.9m. The same report states “modest” increases in fixed remuneration for executives for the year ended 30 June 2013, paid in September 2012, increased on average 2%, compared to a 3% to a 3.5% increase for general employees. Michael Perry, a member of the Australian Shareholders’ Association, said: “I still feel the overall balance of your remuneration arrangements, particularly the CEO’s, are too slanted to the short term. After all the CEO’s job is a long-term strategic job and the rewards should come in the long term. IAG chairman Brian Schwartz AM assured Perry remuneration packages were subject to strict criteria.
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BY THE NUMBERS
OVERSEAS INSURERS TARGET AUSTRALIA
MGA OPENS FIRST OVERSEAS OFFICE
While insurance professionals clamour to buy shares in newly-listed Steadfast, Chinese insurers are increasingly investing in Australia’s lucrative real estate sector thanks to regulations limiting domestic investment and new laws encouraging overseas business. China’s share of foreign direct investment in Australia tripled between 2007 and 2012, underpinned by a strong interest in real estate, according to Coliiers International. The firm suggests that real estate is a lucrative market insurance professionals closer to home should also tap into. Major Chinese insurance companies have been seeking offshore investment opportunities since the Insurance Regulatory Commission lifted its restrictions on them last October. Chinese regulations limiting the quantity of property purchased domestically, combined with the Chinese Government’s new laws encouraging offshore investment, have resulted in record activity by Chinese investors in the Australian market. “In 2012, Chinese outbound property investments around the world set a new record of around US$4bn, a trend that is continuing into 2013,” said Malcom Tyson, state CEO, NSW for Colliers International.
National insurance broking firm MGA Insurance Brokers is opening a new office in the developing market of Cambodia. The new office, in Cambodia’s capital, Phnom Penh, is the first overseas branch for MGA and will become the base for its future Asian operations. MGA claims it is the second overseas brokerage to establish an office in Phnom Penh. The Cambodian operation is being set up as a joint venture with two local brokers, Chantol Seng and Sophat Meas. “We believe there are significant opportunities for growth in Cambodia and the neighbouring countries of Laos and Myanmar,” said MGA’s Chairman, John George, who last year was awarded a Special Medal for services to the Cambodian community by the Cambodian Prime Minister, Hun Sen. “Cambodia has a number of special economic zones where international businesses are setting up to take advantage of the relatively low cost base. Domestically, a lot of new businesses are also being established. Banks financing these developments are demanding insurance cover such as fire and property as a condition for funding, while third party motor insurance is also expected to become compulsory in Cambodia in the next few years.
195
The number of disputes lodged with the Financial Ombudsman Service that involved insurance brokers in 2012/13 Source: Financial Ombudsman Service
THE BIGGEST DISASTERS OF THE PAST 15 YEARS – AND THE CLAIMS COST
(US and Gulf of ‘KRW’ Mexico, 2005) $8bn Trade Center attack World (US, 2001) $3bn Sandy (US, 2012) $2.5bn Superstorm floods Thailand (Thailand, 2011) $2.2bn Ike (Gulf of Mexico, 2008) $2.1bn Cyclone earthquake and tsunami, (Japan, 2011) $1.95bn Japan Rita (Gulf of Mexico, 2005) $1.5bn Cyclone earthquake Chile (Chile, 2010) $1.4bn earthquake (New Zealand, 2011) $1.4bn Christchurch Wilma (US, 2005) $1bn Cyclone
Source: Lloyds of London, NIBA Convention 2013. All costs in US dollars
JANUARY 2014 | 7
NEWS / ANALYSIS
The generation gap The insurance industry is often characterised as one staffed by grey-haired men – but is this true? If so, how can insurance secure the next generation of brokers? Ask a handful of teenagers what their career aspirations are, and more than likely you’ll hear the answers “actor”, “teacher” and “lawyer” – but you would be hard pushed to find a youngster who aspires to be an insurance broker. The industry has, almost since its inception, laboured with public perception – as both a service and a career path. People are more likely to associate the industry with a rejected claim than a fulfilling vocation. Yet it’s not necessarily the dearth of glitz, glamour and action that’s turning away potential new recruits – it’s the lack of awareness that insurance can be a worthwhile profession.
EDUCATION VS NETWORKING This is something Young Insurance Professionals (YIPs) Australia and New Zealand, which has more than 2,000 members, recognises. “Insurance is not an automatic career of choice among the general public, particularly school-leavers. They do not have much knowledge of insurance as a concept, let alone as an industry or a career option,” says YIPs president Sampath Soysa. He says the industry is fully aware of the issue but focuses too heavily on recruitment and retention methods that do not, in isolation, appeal to the younger audience. Soysa stresses that while such initiatives are still important, not enough attention is paid to “intangible” methods such as
8 | JANUARY 2014
business networking events. “Business networking is where the insurance industry has flourished. A lot of the people in senior management positions have stayed in the industry because of the relationships they formed over the years. A lot of organisations are losing sight of that.” Broker champion Kate Fairley, 25, recently completed a law degree at Deakin University. During her time there she attended graduate career fairs where a whole raft of industries including airline companies, retailers, financial services firms and associations were represented – but not one insurance company was present at any of them. “The reason people know about graduate programs at companies like Ernst & Young and retailers like Coles is because they market themselves,” she says. “There is a perception that the industry lacks the resources to promote itself to young people because brokers are small and independent, but they can target students finishing their BCEs.” Shane Moore is the managing director of brokerage TradeRisk at just 34, but he started his career at an NRMA call centre 10 years ago. Moore says there are plenty of young people working in insurance call centres, but they are not given the opportunity to advance their careers. “I worked with plenty of motivated young people. The problem was that we were given no career path. Most people who left moved sideways to other call centres, often in banking, rather than moving up within the insurance industry.” John Elliott, 31, takes a rather different view – he says the industry is getting younger, and he is proof of that. He set up Elliott Insurance Brokers when he was just 26. Elliott is convinced more young and passionate professionals will come up through the cracks to fill the gaps, all over Australia, left by company directors who have opted to sell into cluster groups.
NEWS / ANALYSIS
“There is a new pool of talent coming through the ranks that is cocky, impatient, innovative, hungry and reckless. It’s going to make for an exciting 10 years for our industry and I feel a younger generation of brokers.”
WHERE ART THOU AT THE CAREER FAYRE? National Insurance Brokers Association (NIBA) CEO Dallas Booth says more insurance companies are targeting career fairs, and this approach may be working. “The industry as a whole has long recognised that it needs to do more to promote insurance as a viable, attractive career,” Booth says, “and there is a significant desire in our membership base for NIBA to be active in the area. A number of our members are active in promoting the value of a career in broking at regional careers fairs, and we are currently looking at ways in which we can better support their endeavours to take this message to a younger audience.” Soysa thinks the best approach is a collaborative one. “We need NIBA, ICA, Steadfast, Austbrokers, ANZIIF and YIPs to look at how it can be done on a shared costs and contribution basis, rather than each company doing their own thing, which is fragmenting the narrow presentation of the industry.”
How old are insurance brokers?
16–21 22–27 28–35
19.5%
36–45 46–55
24.5%
56–65
12.4%
65+ NO ANSWER
3.9% 22.9%
13.6%
0.8% 2.4%
Source: NIBA 2013 Communications Survey
10 | JANUARY 2014
He also highlights attracting school-leavers. “Underwriters tend to look at graduates, but that is a little late because by then they have completed degrees which broadly target a certain profession. By targeting graduates, you are targeting a narrower pool of potential recruits. A career in insurance would be an afterthought. “We have been looking at career fairs and presentations for school-leavers as they raise the profile of the industry among students before they go to university. They can then plan their courses and decide if they need to go university at all [to pursue their chosen careers].”
LOOKING FOR A CHANGE However, even targeting people in their late twenties to early thirties can yield positive results, Soysa adds. “People will change careers three or four times in their lives. We are already finding people in their late twenties/early thirties who are completely looking for a change. They have a wealth of life experience and qualifications from other sectors which are useful and compatible with different areas of insurance, but as an industry we aren’t positioned to look for those people or offer them a transition into the insurance industry.” The best way to do this, Soysa advises, is by inviting those outside insurance, who are looking for a career change, to industry networking events. “Engage your wider non-insurance network of friends and family,” he says. With broker networks keen to boost their membership count, some suggest they, too, can play a role. “Cluster groups need access to the thousands of insurance call centre workers, get the high achievers along to tailored industry events and perhaps even placements within their broker offices,” Moore explains. “If I was offered such an opportunity a decade ago, I would have jumped at it.” The industry may have some way to go before insurance becomes as popular a profession as law, and it may never be as attractive as acting; however, as Booth highlights, regardless of how insurance professionals enter the industry, what is clear is they have no desire to leave. “The vast majority of brokers are passionate about what they do and extremely proud of the industry they work in,” he says. “That shows in the amount of people that stay in the profession, regardless of how they entered it in the first place.”
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JANUARY 2014 | 11
THE BIG INTERVIEW / DAMIEN COATES
OPPORTUNITY
FROM ADVERSITY
Dual’s Damien Coates was all set to return to Australian shores full-time this October. However, the revelation of a $17m fraud threw a spanner into those plans. He tells Insurance Business about the impact of the crime and how Dual is bouncing back
Insurance Business: First up, tell us about yourself – how did you end up leading Dual? Damien Coates: When I finished high school I wanted to go into sales. However, my father advised me to go to university and get an accountancy degree. “If you want to get ahead in business, you have to understand the balance sheet,” he said. So I started with FAI as an accountant in internal audit, did my degree in an accounting and marketing major at night for six years. From there, I moved into the underwriting of professional indemnity [PI] and D&O insurance, and worked my way through the ranks, first at FAI, then MMI. I set up MMI’s PI and D&O team, then went to AIG who within 12 months moved me offshore to run their financial lines business in the UK. I did that for four years before meeting David Howden from Hyperion, who convinced me to come and set up Dual. In 2004, just after the birth of my first child, we flew back to Australia to set up a business from scratch. In the nine years since then, we’ve built up a business that writes $140m in premium for Asia-Pacific, with seven offices, four countries, employing 90-odd people, focusing on speciality lines mid-market. It’s been a good journey. 12 | JANUARY 2014
IB: You’ve been commuting back and forth between London and Sydney as part of the global CEO role you were doing – what fuelled your full-time return to Australia earlier this year? DC: When David asked me to take on the global CEO role, I said I’d do it temporarily because the CEO needed to be located in the UK and I was only willing to commute there for a couple of years. We agreed that I would take it on, but work on succession planning from day one. It was on that basis, three months later, that we appointed former Zurich CEO Shane Doyle to be the deputy CEO. So the plan was already set for me to come back to Asia-Pacific this October; however, it was the fraud in June that brought everything forward. Part of our crisis management response was for me to step down as CEO immediately to focus on Asia-Pacific. IB: The details of the fraud are fairly well known by now, but can you talk us through it from your perspective? DC: First, I want to highlight that there has been no theft of policyholders’ money: we’ve recovered all the money, our binders have been renewed, and we’ve had the full support of brokers throughout the affair. Saying that, it was really a tragic set of circumstances, involving a trusted person who had been involved in our organisation since the beginning. Our claims process had previously been outsourced, but a while back we brought it inhouse. She was the logical person to hire as we and the insurers thought a lot of her and she was a workaholic. However, when the fraudster was setting up the claims processes, she inserted a couple of illogical ones – weaknesses in the controls. We’ve commenced civil proceedings against the fraudster. When they conclude, we will pass the file on to the police and the matter will be taken from there.
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“I never thought it would happen to us. I now don’t know if I could sleep at night knowing we’re insuring property and liability risks, but not a crime exposure”
JANUARY 2014 | 13
THE BIG INTERVIEW / DAMIEN COATES
“The trend that disturbs me is that of brokers acquiring underwriting agencies. That is not a healthy development: it has the potential to cloud the independence of agencies” IB: What subsequent changes have you made to the business? DC: After we discovered the fraud, we commissioned Ernst & Young to carry out a complete review of our control environment under the supervision of the Hyperion board, as well as ASIC and Lloyds. We discovered no major weaknesses. Following that review, we were very pleased that our binding arrangements were renewed with all of our existing insurers from 1 October. That’s the ultimate clean bill of health. IB: What lessons did you learn from the fraud? DC: The main takeaways were realising the benefits of proactive crisis management: we put a very clear crisis management plan in place to handle this using external PR firms, and were very open and transparent in how we communicate in the market. We’ve never tried to hide anything – we’ve got out there on the front foot and told everyone the situation as it was, with regular updates. The other thing – and this is where there’s opportunity through adversity – is the recognition of how important crime insurance is, and how few companies have it. If our ultimate parent, Hyperion, hadn’t purchased crime insurance and an event like this happened, then we would have received a significant balance sheet hit. What’s become clear – and I’ve spoken to all of the CEOs of the major brokers – is that outside of the ASX 50, less than 5% of clients are purchasing crime insurance. The reason? No one thinks it will happen to them. I never thought it would happen to us. I now don’t know if I could sleep at night knowing we’re insuring property and liability risks but not a crime exposure. We have an obligation to develop crime insurance so that it’s available for companies beyond SMEs through to the ASX 50. 14 | JANUARY 2014
IB: What other new products are in the pipeline? DC: The insurance market is very strong at developing solutions for property and bodily injury exposure – things you can touch and feel. It’s the economic loss side that has been more difficult to grapple with. Management liability was the first big step: bundling a bunch of economic loss exposures such as employment practices liability, statutory liability, crime and traditional D&O under one policy. We’ve seen significant growth in the number of SMEs purchasing that insurance. However, there’s a huge gap between the SMEs and the ASX 50. That revolves around crime insurance, as we’ve discussed, statutory liability insurance, and cyber risk. Management liability cover should only really be for companies with turnover up to $100m. Above that you should be looking at standalone policies. The reality is that, other than D&O, few companies are buying those standalone. There’s a new opportunity for the industry to deal with those significant exposures; new revenue streams for the market and brokers. IB: Can you tell us about statutory liability cover? DC: Statutory liability insurance is without a doubt our worst-performing clause on management liability. The occupational health and safety harmonisation laws have created huge exposure on entities, as a result of the 1,500 pieces of legislation that entities have to comply with. That’s a P&L/balance sheet exposure, and very few companies purchase separate statutory liability cover – partly because there are really only two insurers and underwriters offering that product. Hence, I think there’s been a lack of supply, coupled with a lack of knowledge of the need for the product. Now I think brokers are acutely aware of what they’ve seen through management liability that there are companies beyond the SME sector who have a statutory liability exposure. The defence costs coupled with fines can create exposures of over a million dollars. They’re P&L hits for any company. IB: You also mentioned standalone cyber insurance policies? DC: Sometime next year, the legislation is likely to come into effect for mandatory breach notification in Australia. If you look at the development of the product in the US, Spain and Germany,
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there’s been a massive increase in the development of cyber liability insurance, largely following the development of the legislative environment. Australia – which often follows America in these trends – will develop to be a significant market. I look at a company like us. If the internet goes down, our ability to transact with brokers is brought to a standstill. Any business operating in a paperless environment that relies on an internet line – I can’t see how anyone wouldn’t purchase a cyber liability product for peace of mind. The sooner brokers are creating awareness of the risk and the insurance available, the better. IB: In a broader sense, what are the big challenges and opportunities for underwriting agencies? DC: Underwriting agencies have become a mainstream part of the market; $18bn of commercial insurance is placed through underwriting agencies. Why? It’s because agencies can respond to client needs quickly. As larger insurers become more process-driven and siloed – as they need to be, as part of their control environments – greater opportunity will be there for entrepreneurial businesses that can mobilise their business to respond to an opportunity in the marketplace. Progressive mainstream insurers recognise there are things underwriting agencies can do that they can’t; in particular the incubation of new products and specialty niche classes. There is also a recognition that high-quality underwriters want to operate in an agency environment, where they can enjoy the creativity and flexibility that goes with that environment, and are looking at that as a serious career path. Agencies enable underwriters to have equity in a business in a way that you can’t with an insurer. Ultimately, underwriting agencies are measured on one thing and one thing only: are they making underwriting profitability for their capacity providers? As long as that continues to be the case, then agencies have a strong opportunity in the market. IB: Do you think we’ll see more consolidation happening with underwriting agencies? DC: Invariably we will see an increase in M&A as brokers rationalise the number of markets they’re dealing with. I see a great opportunity. The large brokers may have relationships with their big five insurers, but they’ll also be trying to rationalise the
vast number of suppliers they place a small amount of business with. The trend that disturbs me is that of brokers acquiring underwriting agencies. That is not a healthy development: it has the potential to cloud the independence of agencies. An underwriting agency is a business that’s managed by underwriters, rather than a broker binder, which is inherently a different proposition. Quite often the poor underwriting performance of broker binders is a completely different scenario to underwriters. The scenario where brokers are buying underwriting agencies to gain control and maximise their margins in a transaction ultimately potentially reduces the independence of underwriting agencies – and potentially the underwriting profitability of agencies.
JANUARY 2014 | 15
COVER FEATURE / 2014 AND BEYOND
16 | JANUARY 2014
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THE YEAR
AHEAD 2013 was a year of ups and downs for the insurance industry, but what lies ahead? Insurance Business asked industry leaders to consult their crystal balls and tell us what they found.
JANUARY 2014 | 17
COVER FEATURE / 2014 AND BEYOND
NOEL CONDON
CEO, AIG AUSTRALIA AND HEAD OF COUNTRY OPERATIONS, AIG AUSTRALASIA What has been the highlight of 2013? The highlight for AIG has been ensuring a new level of service for our brokers and clients through the introduction of our market-leading large limit capacity of up to $1.5 billion for high value commercial property. This innovative offering has really cemented our leading status in the property sector and ensured a consistent approach to our service offering globally.
Name one thing you’d like to see happen in the market next year? Brokers and insurers would benefit tremendously from more government infrastructure investment, following the peak of mining and resource-based project investment this year. AIG launched an infrastructure practice team this year including property, energy, marine and environmental impairment insurance (to name a few) to specifically cater to the needs of this sector. I would love to see the demand continuing at the same pace in 2014.
Are there any sectors you expect to see thrive or decline? I expect to see increased business potential for brokers in the property, energy and financial lines sectors next year.
JOHN NAGLE
CHIEF EXECUTIVE, LUMLEY INSURANCE What has been the highlight of 2013? How our operating model and systems have delivered consistent service improvement outcomes for us.
What do you think will be the three biggest issues for insurance in the coming year? Talent: there’s been a recognition of the talent shortage for some time: I don’t think it’s getting any better in the short term, and could even get worse in the longer term with all the outsourcing that’s going on. At the moment, there are lots of bodies but not much talent. Commoditisation: more products are being bundled and/or going on software platforms. That’s not a problem in itself, but the true complexity of some clients’ risks are getting lost in the desire for speed of transaction. Getting the right balance between understanding the client’s true exposure with their desire to get quick terms and turnaround will be critical.
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If the recent uptake of AIG’s large limit capacity product is anything to go by then the high value commercial property market and infrastructure projects will continue to increase in 2014. Brokers will also undoubtedly receive more enquiries from clients regarding cyber insurance solutions as awareness about coverage gaps in standard policies increases among organisations.
What’s your number one piece of advice for brokers for the next 12 months? I would like to see brokers get more involved with us in the claims process. A broker that takes on a more collaborative approach to the claims paying process will have a more comprehensive understanding about the client’s needs and behaviours, positioning them as a more engaged and proactive business partner in not only the client’s mind, but the insurer’s too. After taking out three awards for our claims service in Australia this year, this is one area we are really passionate about.
Who’s your company or individual to watch in 2014? Jared King, our head of broker and client management. Since joining AIG in July last year, Jared has been instrumental in executing profitable growth strategies while further refining our best practices in broker and client management.
Excess global capacity: there’s more and more capacity coming into the reinsurance market. The question is how the industry adjusts. There’s plenty of room for that capacity – if you just look at Australia, where the average household is 25% underinsured, everyone will be scrambling around for more capacity anyway if there’s a sudden rush of sanity.
Name one thing you’d like to see happen in the market next year? Commission disclosure – my personal crusade. It’s going to come. Consumerism and statutory oversight will lead to product disclosure, whether it’s tomorrow or five years away. I don’t see anyone in the industry taking a leadership role. I would have thought, given everything else that comes our way, it’s much better to lead on this than have it forced upon us.
Who’s your company or individual to watch in 2014? Daniel Fogarty – today Australia, tomorrow the world?
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MICHAEL GOTTLIEB
KATE FAIRLEY
MANAGING DIRECTOR, MEGA CAPITAL
FOUNDER, GET INFORMED What has been the highlight of 2013?
What has been the highlight of 2013? We have had several highlights, but the one that was most significant is welcoming Steadfast as a cornerstone investor in our business. Not far behind is being named the 2013 Insurance Business Brokerage of the Year.
Name one thing you’d like to see happen in the market next year? Acceleration of clients willing to buy online.
What are your targets and objectives for 2014? Mega Capital to consolidate and grow its position as a specialist professional risks broker BizCover to continue to revolutionise the distribution of commercial insurance products
Are there any sectors you expect to see thrive? It’s likely the insurance market will follow the economy. Therefore, sectors that thrive economically will provide opportunities to the insurance market.
What do you think will be the breakout product next year? With The Privacy Amendment – Enhancing Privacy Protection Act 2012 coming into effect on 12 March 2014, cyber insurance will have a free kick. But it will require brokers to educate their clients on the risks so will likely be a slower take up than it should be.
Where will interest rates be at the end of 2014? 0-2% 2-4%
20%
60%
20%
4-6%
Launching Get Informed and the warm reception I’ve received from the early adopters.
What do you think will be the three biggest issues for insurance in the coming year? We’re about to get hit hard by another media rampage. The bushfire season has already started where, again, people won’t have adequate insurance, or they will be caught out by fine print in direct insurer policy wordings. Every declined claim damages our reputation so we need to get ahead of this.
Name one thing you’d like to see happen in the market next year? A shift with brokers stepping up a notch in terms of consumer awareness. Just because people are already occupying a certain space doesn’t mean we can’t put our hat in the ring.
What are your targets and objectives for 2014? To get our cause featured on mainstream TV. There are so many Australians holding worthless pieces of paper in their filing cabinets, we need to publicise this.
Are there any sectors you expect to see thrive or decline? I believe the aged care and the health sector will continue to grow in line with our shifting conscience towards healthier lifestyles.
What do you think will be the breakout product next year? I’m actually keen to see how Zurich’s travel add-on will go. Most people would say cyber liability, which is definitely true, but with its progressive thinking, I wouldn’t be surprised if Zurich holds its position next year as insurer of choice.
What’s your number one piece of advice for brokers for the next 12 months? Don’t be afraid to sell your service. Be professional, be proud. You offer products that offer true value to your clients, never be ashamed of that and don’t be afraid to offer them when people are in need.
JANUARY 2014 | 19
COVER FEATURE / 2014 AND BEYOND
DANIEL FOGARTY
Who will win?
What has been the highlight of 2013?
NRL Grand Final The favourites: Melbourne Storm, South Sydney Rabbitohs The other guys: Manly Sea Eagles
CEO, ZURICH
Zurich being awarded Insurance Business Insurer of the Year and NIBA General Insurer of the Year.
What do you think will be the three biggest issues for insurance in the coming year? Continuing to manage catastrophe risk. Even before the 2013/14 summer started, we have had bushfires and hailstorms. Managing the risk of potential future events will continue to be a big issue for the industry. Secondly, the impact on the market from the changing landscape of the broking industry, following the changes in 2013, such as various senior executive changes in the broking industry and the Steadfast IPO. Thirdly, industry image. As an industry, we need to work to improve the general public’s understanding of insurance, what we do and the key role we play.
Name one thing you’d like to see happen in the market next year? I’d like to see more small businesses recognise the importance of having business interruption insurance as we experience more extreme weather events, and protect themselves properly.
What are your targets and objectives for 2014? Our target is to continue to bring the best of Zurich locally and globally to brokers. While we have won awards in 2013, we know we have more to do to keep improving our market value proposition. I also plan to continue to focus on attracting and developing talent to our industry. With the breadth of roles that insurance offers, there’s a place for many different skills and people in our industry.
Are there any sectors you expect to see thrive or decline? I expect more use of cross-border insurance products as the world slowly emerges out of the GFC and Australian companies increase their cross border trading and investment. Zurich is well placed to assist a range of companies with their international insurance needs.
What do you think will be the breakout product next year? We know cyber risk and security remains an evolving area of the market, and marine logistics will continue to make waves.
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AFL grand final The favourites: Essendon Bombers, Hawthorn Hawks The other guys: Fremantle Dockers, Richmond Tigers, Sydney Swans Soccer World Cup The favourites: Brazil The other guys: Argentina, England (always dreaming), Spain
ROB WHELAN
CEO, INSURANCE COUNCIL OF AUSTRALIA Name one thing you’d like to see happen in the market next year? Greater understanding by consumers and small businesses of the importance of insurance to their lives, and much less non-insurance and underinsurance. The ICA’s Understand Insurance initiative, which was launched in late November, steers consumers and small business owners through the entire insurance process and provides easy-to-understand materials to help them make better decisions. The Understand Insurance website highlights the role brokers play and includes a testimonial video that demonstrates the interaction between the client, the broker and the insurer, and the positive outcomes that can be achieved. NIBA CEO Dallas Booth, who features in a video, and his staff have been very supportive of this project.
What are your targets and objectives for 2014? Our primary goal is to build on the achievements of the past couple of years, in particular the advances made in highlighting the importance of mitigation in flood-prone regions and the role of creating resilient communities. We will work cooperatively with the new federal government and the responsible minister, Senator Arthur Sinodinos, on various issues as they arise, including insurance affordability.
Are there any sectors you expect to see thrive or decline? Financial services and health care will thrive.
What’s your number one piece of advice for brokers for the next 12 months? Brokers and direct insurers play a critical role in the economy, and both need to work collaboratively to educate their clients and customers about insurance.
Who’s your company or individual to watch in 2014? I won’t comment on an individual company, but I think many of the new, smaller, direct insurers are proving to be savvy marketers, changing how the industry competes and, as a result, are keeping the better-established companies on their toes. This heightened competition is good for the overall industry, though we need to be careful about selling on price alone rather than on the value and benefits of the products.
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JANUARY 2014 | 21
COVER FEATURE / 2014 AND BEYOND
CAMERON SKEWS
GENERAL MANAGER OF SALES AND MARKETING, ANZIIF What do you think will be the three biggest issues for insurance in 2014? I think the three biggest issues will centre around distribution, big data and how it is used, and the increasing level of offshore service centres. I am interested in how privacy will relate to the management of information about customers, especially in relation to some of the large direct GI companies who have access also to a great deal of retail and consumer purchasing through their other arms (Coles etc).
Name one thing you’d like to see happen in the market next year? I would love to see a pushback from the industry against selling products, particularly personal lines products, on price alone. The industry has done itself damage in this way, and while I understand it from a marketing and customer acquisition point of view, in the long term, it is damaging to have complex and vital products reduced to one figure. I believe this is responsible for a significant portion of the underinsurance in this country.
What are your targets and objectives for 2014? The Institute has a number of goals and objectives for 2014. Through membership services and our soon-to-be launched new website we are going to provide a more tailored and vital service to members and the industry. We are witnessing a change within a lot of the large insurance companies around how they approach training and development and I think we will be working a lot more closely, assisting them to technically train their staff to the highest standards and to gain the best results for their organisations. It is also the Institute’s 130th birthday and we have a lot to celebrate with the industry about our combined history and the achievements won in that time.
What are you most looking forward to away from the office in 2014? "I am really looking forward to exploring this country as much as possible, given I moved in only six months back and haven’t seen much yet" - Dipak Sahoo
DIPAK SAHOO
DIRECTOR AND INSURANCE PRACTICE LEADER, ANZ, CAPGEMINI What has been the highlight of 2013? 2013 has been a year of regulatory reforms for Australian insurers. The superannuation reforms, FoFA and its impact and general insurance industry reforms, to name a few, have kept the insurance industry on the edge through most of 2013. Apart from this, general insurance companies have used a relatively event-free year to consolidate their core operations by investing in core technology platforms.
Name one thing you’d like to see happen in the market next year? I would like to see more and more insurers moving away from the legacy platform and investing in core technology transformation. Legacy systems are the biggest bottleneck in the growth of the sector. This is preventing insurers in adopting digital channel(s) seamlessly, changing their operating model to cater to the market need and regulatory changes and, above all, preventing them from being a data-driven business, which is at the core of the insurance business. I would like to see more insurers move from a B2B/B2C mindset to a B2Me mindset.
What are your targets and objectives for 2014? My personal target is to help the industry in the core technology transformation space by making it easier, affordable and risk-free as much as possible. We are making this happen by investing heavily in bringing preconfigured industry leading systems to the insurers, hosting it and supporting it. I am also keen to bring some of the global best practices in the areas of digital transformation and analytics from our experience in mature markets like US and Europe to Australia.
What do you think will be the breakout product next year?
"Spending time with family and friends and getting down to the beach as often as I can" - Daniel Fogarty
Telematics will be something to look out for, if not next year at least in the next one to two years. I personally feel it will help insurers price their premium correctly and incentivise their customers for good driving behaviour.
"My daughter successfully completing Year 12 and my son graduating Uni" - John Nagle
What’s your number one piece of advice for brokers for the next 12 months?
"A trip to the US with the family" - Noel Condon
"The World Cup and Keith Jarrett (pianist) touring a country relatively near me" - Cameron Skews
22 | JANUARY 2014
Know your customers and service them well. This can only be enabled by data and effective use of the data available. In a B2Me environment, brokers should invest heavily in the areas of CRM and analytics.
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AL DART
CONTINGENCY UNDERWRITER, BEAZLEY AUSTRALIA What do you think will be the three biggest issues for insurance in the coming year? From a contingency perspective, the largest issue is the deteriorating and unpredictable weather conditions, and the flow-on effects these weather conditions have on clients and brokers. Another key issue is challenging the perception among event organisers and small business that contingency insurance is expensive. Contingency has come a long way with pricing and today is much more affordable due to the availability of enriched weather data and insurers’ ability to structure tailored cover to suit the event type and client appetite. Finally, the general trend of offshoring is a major issue for event organisers when it comes to the greater level of exposure faced and the increased levels of complexity in understanding and securing adequate cover to protect what are invariably large budgets.
What are your targets and objectives for 2014? My target is to continue to educate brokers and their clients on how contingency insurance is different to other types of insurance, and to promote innovation in terms of products, services and delivery in the insurance sector.
Are there any sectors you expect to see thrive or decline? Over the next few years we are expecting growth in the prize indemnity insurance sector from small businesses. I think the idea of being able to offer customers a large cash award without physically having to have the cash is appealing to both businesses and their customers, particularly with smaller businesses who have limited budgets for marketing and promotions and most are seeking differentiation in an increasingly tough economy.
What’s your number one piece of advice for brokers for the next 12 months? Don’t be afraid to offer new and different products to your clients. Often they will thank you for it and if you ever get stuck, it is your market’s job to assist in finding a solution.
JANUARY 2014 | 23
FEATURE / BROKER NETWORKS
THE
BIG
FIGHT Roll up, roll up. The two heavyweight champions of the broking world are weighing in and lacing up their gloves – but who will win out? And are there up-and-coming challengers nipping at their heels? Chinwe Akomah investigates
24 | JANUARY 2014
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When boxing legend Muhammad Ali took to the ring to fight heavyweight champion Joe Frazier, it was billed as one of the greatest fights in the history of the sport. In a match dubbed the “Thrilla in Manila”, the arch-rivals were at the peak of their physical condition and careers, and each was well aware of his opponent’s success. While they had a quiet respect for each other, they also each had a strong desire to come out as the ultimate victor. After 14 unrelenting rounds, Ali was victorious; still, despite the win, the fighters are considered equals. Even Ali has commented on the efforts of his opponent. Swap the boxing gloves with books on business and the mouthguards with market share, and that
1975 fight could easily be the (cordial) broker network battle between Steadfast and Austbrokers. Both players say competition is always welcome. However, while Austbrokers has been listed for a while, Steadfast only made its entry onto the public stage on 2 August 2013 – which made comparisons rather woolly. Now that both players are in the heavyweight division, which one has the brighter future? Is one network destined to knock out the other? And are there nimbler competitors itching to move up from the lower leagues to challenge the dominant pair? Read on to find out how they stack up.
JANUARY 2014 | 25
FEATURE / BROKER NETWORKS
The heavyweights STEADFAST Founded: 1996 Number of members: 62 equity brokers, 280 broker members, four underwriting agencies and two ancillary businesses Gross written premium: $4bn Listed or private? Listed on August 2013, opening with a share price of $1.15 and a market capitalisation of $576m. The market capitalisation was $851.5m on 18 October 2013
Brokers on Steadfast Equity brokerage Consolidated Insurances director Jeff Forbes “Consolidated Insurances was new to the broking world in 2010 and initially formed a relationship with the Council of Queensland Insurance Brokers. Through our affiliation there, we found unexpected levels of professional support and assistance from Steadfast brokers who engaged us in ways to improve and expand our business. “For us, this encouragement cemented our decision of where we should be, as the Steadfast community was one we wanted to be involved in. It was one of our best business decisions we’ve made, and looking back I wonder how we managed without Steadfast’s resources in our first two years of operation.”
Value proposition Steadfast CEO and managing director Robert Kelly
“[Steadfast] has co-ownership in a diverse group of brokers with aligned values, and has multiple growth opportunities including organic growth and acquisitions to boost revenue, and back office savings and broker consolidation to improve margins. Steadfast cross-sells products and services within the Steadfast network ...”. [Taken from Steadfast prospectus]
Steadfast on Steadfast CEO and managing director Robert Kelly “We started out as a cohesive network of brokers who came together to gain economies of scale in their back office and service provision to their clients. “As brokers became older and younger brokers wanted to come through, we felt we needed a pathway for succession, so we went from a network to a listed entity, which is now a consolidator of brokers, and that was a decision taken by our shareholders, for our shareholders. “We invented the ‘model broker’ in the late 1990s and that was a best-in-class system which facilitates advice for brokers’ clients, and we have built on that.”
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Analysts on Steadfast Chris Stott, Wilson Asset Management “It is one of the largest general insurance broking networks in Australia, but it has to cope with the cyclical nature of the industry – the challenge is how they grow through all market environments. “Steadfast has a very strong management team and I expect that they will continue to grow by acquiring insurance brokers in the industry.” Stewart Oldfield, Wilson HTM Investment Group “Steadfast is a wonderful community of brokers. I anticipate efficiencies will emerge in back-office products. Its challenge now is to support clients with quality products and have an expanding range of services.”
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AUSTBROKERS Founded: 1985 Number of brokers: 47, including the Austbrokers financial services business Gross written premium: $1.7bn (of base premium) Listed or private? Listed in November 2005 with market capitalisation of $100m and a share price of $2. Current market capitalisation is $633m as of June 2013 Value proposition Austbrokers operates an owner-driver equity-based model, partnering with brokers’ local expertise. It provides a range of support services and expertise to facilitate growing businesses through marketing and business development support. Back-end support services leverage scale, reduce costs and leave brokers to focus on supporting their clients. Support services include robust IT systems, compliance, HR advice, leveraged group initiatives, product development, administrative support and risk management. Austbrokers is built on a partnership culture, rewarding insurers for their support by providing superior profitable growth opportunities and reduced costs of transacting business.
Austbrokers on Austbrokers CEO and managing director Mark Searles “Austbrokers is the largest and fastest-growing equity-based broking group in Australia, delivering consistently superior returns for all stakeholders, including brokers, underwriters and clients.”
Brokers on Austbrokers
Equity member JMD Ross Insurance Brokers director Sandy Ross “JMD became an Austbrokers partner in 1994. JMD Ross was looking for a business partner familiar with the insurance industry, and Austbrokers as a cornerstone shareholder has assisted in providing financial stability to our business that is both significant and welcome.”
Analysts on Austbrokers Oldfield: “Austbrokers has an excellent record. Going forward I see increased earnings from its agency business. Its challenge will be high multiples of earnings being paid for acquisitions.”
Austbrokers CEO and managing director Mark Searles
Stott: “Austbrokers has a well-regarded management team. It is highly successful and has a proven track record in a listing environment, buying and integrating firms and making them accretive for shareholders. “Austbrokers also has to deal with the cyclical nature of the general insurance market. There may come a point in the future where further consolidation is not possible based on competition concerns. I don’t see that being an issue in the near term.”
STOTT’S STATS: STEADFAST VS AUSTBROKERS STEADFAST
AUSTBROKERS
CEO and board leadership experience
8/10
9/10 “Austbrokers listed some years ago now. Steadfast has been listed for just a few months”
Size
8/10
8/10
Diversity of book of business
8/10
8/10
24/30
25/30
TOTAL
JANUARY 2014 | 27
FEATURE / BROKER NETWORKS
The middleweights IBNA Founded: 1994 Number of member brokers: 77 Gross written premium: $1.3bn Listed or private: Private
IBNA chairman Gary Gribbin
Gary Gribbin, chairman “Our value proposition includes market-leading insurance products focused on the core business lines of SME brokers; access to excellent group purchasing platforms in respect of IT equipment, telephony and communications; a rebate of overriding commission which remains at 70% of flows received from principal insurance company and premium funding partners. Our objective is to increase the rebate to members to 80% in the relatively near future.
INSURANCE ADVISERNET
Founded: 1996 Number of members: 144 corporate authorised representative (AR) practices in Australia; 28 broking practices in New Zealand Gross written premium: $440m Listed or private: Private Managing director Adrian Kitchin
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“IBNA members enjoy a raft of benefits which are genuinely valuable and meaningful to an SME broking business. “IBNA brokers remain independent in terms of their operations and strategic direction. We do not seek to direct our members; our hallmark is encouragement and persuasion – based upon the solid business case benefits our members enjoy – so we do not seek to command and control member businesses in any manner.”
Adrian Kitchin, managing director “Insurance Advisernet is widely regarded as being the number one AR network of choice for good reason. We are dynamic, entrepreneurial, well resourced, and have one of the most professional groups of insurance advisers in the market. “We are highly selective in terms of our recruitment, extremely professional in terms of the training and support we provide our advisers, and enjoy excellent relationships with our partner insurers.”
“Insurance Advisernet is widely regarded as being the number one AR network of choice for good reason”
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INSIGHT INSURANCE Founded: 1991 Number of broker members: 51 Gross written premium: $200m Listed or private: Private
Chairman David Hosking
David Hosking, chairman “We don’t tell our members how or where to do business. We don’t want to own them. They can continue to be small-business people while we provide them with support. Insight is not in the business of being in business. We are in the business of supporting our members. “We are probably the easiest group to join and the cheapest. We partner with insurers and provide our members with access to products and policy wordings. We also have access to professional development and educational resources.”
WESTCOURT Founded: 1982 Number of members: 73 corporate ARs and 108 individual ARs Gross written premium: $100m Listed or private: Private
Managing director Jeff Hollands
Jeff Hollands, managing director “Westcourt very much has a focus on its ARs. They are our clients and the company works very hard to provide a level of service that assists our ARs in the running of their businesses. We understand that our people are self-employed business people. The other thing that sets us apart is that we have a section of the company that provides assistance when ARs wish to go on leave or are ill. AR Broker Services has a full-time qualified broker who will assist with anything from broking, claims; in fact, AR Broker Services can run the whole business for the ARs so they can go on leave knowing that their business is being looked after.”
AR member Trade Risk managing director Shane Moore “Aside from the general benefits of outsourcing our back-office functions, an important factor for us was the ability to build the Trade Risk brand. We didn’t want to operate under someone else’s brand or be forced into co-branding, and Westcourt gives us the freedom to build and market our brand in the way that we choose.”
JANUARY 2014 | 29
FEATURE / COMMERCIAL MOTOR
The commercial motor sector is on the cusp of dramatic change as a result of technological innovation and cultural shifts. Kevin Eddy explores what the future holds
SHIFTING 30 | JANUARY 2014
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T
There’s an enduring stereotype of the long-distance driver: something of a cowboy, hauling road trains at high speeds across the desert roads of Australia, stopping for no one and nothing. It’s a stereotype that has attracted many into the industry, but also one that carries negative connotations with it: of reckless driving behaviour, of pressure from superiors to get the cargo wherever it’s going on time, no matter the cost, and of costly crashes (in terms of dollars and of lives). Indeed, insurer NTI’s Major Accident Investigations Report 2013 revealed that, out of 461 crashes in 2011 where the quantum of the claim exceeded a nominal value of $50,000, one quarter were due to inappropriate speed, nearly one fifth due to driver error, and 12% due to fatigue. However, things are changing. New technology promises to give operators greater visibility over their drivers, while a growing awareness of the importance of organisation culture means that companies are strengthening the ties that bind. But what do these changes mean for the world of insurance and the brokers who sell it?
GEARS JANUARY 2014 | 31
FEATURE / COMMERCIAL MOTOR
“You can have a rollover at 20km/h and the truck could still be a write-off” Tony Clark, NTI STUCK IN NEUTRAL
TELEMATICS THE AMERICAN WAY The US provides a useful blueprint for how the Australian use of telematics could develop, especially in relation to charging for insurance cover by the mile, and the challenges it could face. Telematics technology has been available in the US for several years, with industry experts predicting that usage-based insurance is “poised for rapid growth”, with 20% of all vehicle insurance in the US expected to incorporate some form of usage-based insurance within five years, according to the US National Association of Insurance Commissioners. Several large insurance carriers in the US offer commercial usage-based programs, including Liberty Mutual and The Hartford. However, widespread development has been stymied by several roadblocks, such as the costs and headaches of installing telematics devices in large fleets, and a series of patents held by Progressive Casualty Insurance Company. Progressive’s patents, which are currently being disputed, have made it difficult for other insurers to develop usage-based insurance programs without apparently
32 | JANUARY 2014
infringing on Progressive’s intellectual property rights. Insurers face other obstacles as well. A lack of industry-wide standards makes it difficult to compare data collected by the many different types of telematics devices/systems on the market today. That, in turn, makes it difficult to assess risk and price premiums confidently. Even so, US commentators such as Jeff Stempora, founder and CEO of Advanced Insurance Products & Services, are confident that “the floodgates will open” and commercial usage-based insurance will be widely adopted. “The insurance industry is always trying to find new ways to differentiate itself and provide more value, and one way is to underwrite risk more accurately,” says Stempora, a 28-year industry veteran. “In the past, we didn’t have good predictive factors or good data, especially on the commercial side, to do underwriting – or more sophisticated underwriting – and pricing. And now, with telematics, that has all changed.”
The Australian commercial motor industry has been stuck on idle for some time due to cost pressures, says Lumley CEO John Nagle – and that’s been exacerbating some long-running problems, particularly around vehicle maintenance. “The margin the transport industry is achieving is restricting their ability to invest in equipment and training,” says Nagle. NTI’s Tony Clark agrees that operators are under pressure due to economic conditions, but says that operators are doing their best to improve matters, with support from insurers like NTI. “There is pressure on costs, and that can impact things like vehicle maintenance,” says Clark. “The challenge is to identify those issues and work with them on risk management alongside brokers. Given that’s all we do, we can help identify and create a positive outcome.” Clark says that a lot of the risk mitigation work NTI has been carrying out with operators revolves around fire prevention through better maintenance. “In our most recent research, non-impact fires accounted for 12.1% of the 461 reported losses, with the average fire loss of $170,129. That basically comes down to truck maintenance. In response, we’ve created an awareness campaign – Operation Fire – highlighting the need to review maintenance, particularly if an operator has starting doing longer runs, taken on new contracts, or if vehicles have seen a change in use.”
HOW’S MY DRIVING? A potentially bigger issue than maintenance, however, is that of driver training and experience. Nagle and Clark both agree that resolving this is critical to the future of commercial motor. “The average age of drivers is late forties,” says Clark. “The industry is trying to attract drivers, but ensuring they have experience in driving different configurations, and how long you can spend bringing them up to speed, is always a dilemma – especially if you’re growing or have taken on a new contract.”
FEATURE / COMMERCIAL MOTOR
“Would you feel happy giving a red P-plater the keys to whatever vehicle without the proper support or induction?” John Nagle, Lumley Insurance Nagle is even more scathing, saying that “we’re constantly being asked to accept 21-year-olds driving quarter-million-dollar rigs because that’s all the company can find”. “Driver experience and the lack of supply of experienced drivers has been a problem for five years now, and doesn’t seem to be getting any better,” he comments. Because margins are squeezed, argues Nagle, operators are often hard-pushed to integrate new hires gently: “It’s a case of ‘here are the keys, give us a call when you get there’. Would you feel happy giving a red P-plater the keys to whatever vehicle without the proper support or induction?”
CULTURE SHOCK Resolving the issues of driver management is being tackled in two interlinked ways: by better embedding safe driving practices through workplace culture; and by the increased use of in-vehicle telematics black boxes to monitor driving. Clark comments that NTI has been working closely with operators to educate drivers on issues 34 | JANUARY 2014
such as inappropriate speed. While this does include speeding, he stresses that it’s equally about the right behaviour, even in low-speed situations. “It could be about going around a roundabout at the right speed, or dealing with the wrong camber on the road appropriately. You can have a rollover at 20km/h and the truck could still be a write-off,” he says. Nagle points to the importance of strong induction programs for drivers, proper vehicle setup and strong governance programs in embedding good driver behaviour. That’s a view shared by Dr Sharon Newnham of the Monash University Accident Research Centre, who is chief investigator on a three-year research project investigating the prevalence of work-related traffic injuries and how they are impacted by workplace practices and cultures. The project is being carried out in partnership with Vero. “There are actually no current statistics to enumerate the problem – the first stage of the research is to find that out,” says Newnham. “The second stage will be identifying the organisational determinants associated with road traffic injury. Most research in this space focuses on drivers; however, our research will move beyond the individual, to look at the work group supervisors and the impact of management structures.” While it’s early days on this project, Newnham’s previous research suggests that the role of a driver’s immediate supervisor is absolutely critical to embedding safe driving behaviour. “A lot of my past research has identified the role of the work group supervisor as being critical in influencing value given to safety in an organisation,” she adds. “One study we carried out looked at the role of communication between supervisors and driver. We created an intervention designed to increase safety discussions, and monitored whether increase in discussion led to better driver behaviour over three months. It did.” Senior management, meanwhile, has a responsibility to ensure that supervisors can carry out their role in ensuring safer driving. “My ‘hypothesis’ would be that while the supervisor plays a critical role as a gatekeeper, organisations have a responsibility to ensure that supervisors are aware of their roles and responsibilities as a safety manager.”
BIG BROTHER IS WATCHING YOU The use of in-vehicle telematics devices is also making it easier to monitor driver behaviour and
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correct bad habits. Telematics devices transmit data reflecting driver behaviour and vehicle usage to a central location. While there has been significant speculation about this technology being used to calculate insurance premiums in a ‘pay-as-you-drive’ fashion similar to the US (see boxout), Australian commentators are more excited about the scope to use the information gathered to improve safety and vehicle efficiency. “Telematics isn’t all about insurance; it’s about running a better fleet,” says Nagle. “You get data around operational issues – poor driving habits that are causing increased wear, deterioration of your vehicle. It’s not just an insurance solution; it’s also a conversation about better driving performance and educating drivers on the behaviour that you want.” Clark agrees that telematics will be a game changer, but highlights that only “the top 10%” of operators are making use of it thus far, with concerns about cost, privacy and opening up commercially sensitive information putting some operators off. However, he expects its use to become more widespread in the coming years. “A high proportion of operators will adopt telematics as it becomes cheaper and more accessible. It will be a way for operators to differentiate themselves to contract owners. If companies wish to work with an insurance company on the basis of telematics, that will become an option.” Clark also highlights that it’s critical for operators to consider what they want from telematics, and to put in systems to analyse the data. “Do you want to use telematics to monitor drivers, to change behaviour, and/or to improve profitability through better fuel or tyre usage?” he asks. “If it’s about truck use, safety and reliability, that’s probably where the change will come from, rather than an insurance push.” Newnham says that telematics can play a critical
Data points that can be collected by in-vehicle telematics devices include:
Engine RPM Engine-idle time Fuel consumption Hard braking Miles driven Trip start and stop times
Rapid acceleration Trip start and stop locations Seatbelt use Streets taken Time of crash Velocity
PAY AS YOU DRIVE? Telematics has also made its first major inroads into Australian personal car insurance with QBE’s launch of Australia’s first insurance product to use in-car telematics technology. Insurance Box uses a small plug-in car device with sensors to measure driving habits, and from this information it calculates a ‘driver safety score’ (DriveScore). This then influences the insurance premium, with safer drivers paying lower premiums – rather than these being determined by age, sex and postcode. “Insurance Box focuses on how you drive. If you’re a good driver, whether you’re 18 or 80, you should be rewarded for that. Why should you subsidise those who aren’t?” says Frank Peppard, founder of Insurance Box. Data collected by Insurance Box can assist with a claim by providing an accurate account of what happened in a collision, and the GPS functionality in the Insurance Box device can also help to locate a stolen vehicle. In addition, drivers receive insights and advice through an online portal and SMS to improve their driving habits and potentially save even more money. Tim Plant, general executive manager of QBE Australia, says that as an insurer the more data QBE can obtain, the more accurate it can be in assessing risks. “Through Insurance Box we not only have the ability to encourage our customers to become safer drivers, but to reward safe driving behaviour through lower premiums,” says Plant.
role in helping supervisors have greater visibility over driver behaviour – better enabling them to fulfil their roles as guardians of driver safety. “In many other organisations, a supervisor can directly monitor employee behaviour, but to date that’s been impossible where drivers are concerned,” she says. “Telematics can provide monitoring of road safety behaviours and improve safety-related visibility. You can give drivers feedback based on real driving behaviours – even create safe driving KPIs. The challenge for organisations is that you need someone who can analyse that data before you can use it.”
CHANGE IS COMING Commercial motor is about to enter a major period of change, concludes Clark. “Technology will be key in the future – it will be a real competitive advantage,” says Clark. “When you’ve been doing this for 40 years, to look out five to 10 years in advance and think about how much change the industry is about to undergo and how you can take advantage of that – it’s a really exciting time.” JANUARY 2014 | 35
PROFILE / BEN SPOKES
How to superplease your clients Up-and-coming elite broker Ben Spokes reveals the secrets to his success Insurance Business: Why did you become an insurance broker? Ben Spokes: I started work in the agricultural industry as an agronomist, qualifying with a Bachelor of Agricultural Science with Honours. I was working for Wesfarmers when they expanded all services into one office, including insurance, and while introducing the GI adviser to all my farming clients, I started to form an interest in what he did. Through a football connection I was then approached to make a move into the insurance industry, and I was at a stage in life that I was ready for a new challenge so made the change. I haven’t looked back for the past eight years.
IB: Tell us about your business. Do you concentrate on any particular insurance lines or industries? BS: General insurance has only been a service offering for three years at Crowe Horwath (previously WHK). Based in Colac, where I and my family are from, I mostly service the Western Victorian region. More recently I started servicing other Crowe Horwath firms around Australia. We have a diverse range of service lines, from our core accounting and business services to lending broking, risk insurance and financial advice. Focusing on the SME sector, we work with all industry sectors. I provide the full spectrum of general insurance services to all our clients but probably focus more on commercial and agribusiness due to our client base.
IB: What is unique about your business? BS: Our ability to provide a one-stop36 | JANUARY 2014
shop service from the one location. We pride ourselves on identifying client opportunities and benefits from other service lines. Our philosophy is all about getting the best result for the client. We want to make sure we continue to be known as the most expert advisers and best service providers in the market.
IB: How has the industry changed since you took up insurance broking? BS: Since FSRA was introduced, compliance has become the focus of our business, as it should be to provide assurance and quality control for our clients. The advent of flood cover and increasing premiums resulting from natural disasters have shaped the market-place and seen premium hikes. It’s also been interesting to watch the ebb and flow of insurers in and out of certain industry sectors.
IB: How do you see it evolving over the next decade or so? BS: I believe we are going to see insurers become very selective, with only three or four major players in the domestic market. It will become very competitive.
IB: What’s the most important thing a broker can do to develop their business? BS: Undoubtedly, form relationships with key external referrers and become a trusted adviser. Your clients need to have confidence that you will go the extra mile,
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have their genuine interests at heart.
new, very successful general insurance practice from scratch. It’s been very rewarding so far and continues to grow and develop, so plenty of challenges which I enjoy.
IB: What do you think is the biggest challenge facing insurance brokers at the moment? BS: The domestic insurance market – home and contents.
IB: What has been the highlight of your career? BS: Being acknowledged as an Elite Insurance Broker by Insurance Business (thank you!) and starting a
IB: What keeps you motivated? BS: No hesitation – my clients. Working with them and developing relationships, and meeting new people every day. I try and ‘superplease’ a client each day. Whether it’s writing new business and saving the client money or having a claim paid, any outcome that makes my client happy m a k e s me happy.
“I believe we are going to see insurers become very selective, with only three or four major players in the domestic market” JANUARY 2014 | 37
FEATURE / NATURAL DISASTERS
COPING WITH CATASTROPHE: A PRACTICAL GUIDE As the Australian ‘disaster season’ enters its peak, Insurance Business asks how brokers and insurers can ensure they aren’t overwhelmed.
38 | JANUARY 2014
T
The insurance industry knows better than most just how destructive the Australian summer can be. Over the past few years, the continent has been battered by bigger and more destructive catastropes in the form of cyclones, floods and bushfire. Indeed, this year’s ‘disaster season’ struck even earlier than usual, with the outbreak of fires across NSW and especially in the Blue Mountains region. The damage, disruption and loss of life caused only highlighted the importance of the insurance industry being ready to act at a moment’s notice – and being able to help clients when everything seems lost. Preparing your business, acting rapidly and sensitively during a crisis, and picking up the pieces afterwards are all critical factors. Here’s what you should be thinking about doing.
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SAVE WHAT YOU CAN: EXPERT FLOOD AND FIRE RECOVERY TIPS FOR CLIENTS FIRST STEPS
Turn off water, gas and electrical mains if safe to do so Notify emergency officials (fire brigade, gas or electricity suppliers) of the extent of the damage Contact insurance broker and/or insurer Create a secure salvage area that is clean and dry to store undamaged items Seal damaged windows with plastic sheeting Photograph and/or document items before moving them ELECTRONIC MEDIA
Avoid scratching surfaces If wet and contaminated, rinse dirty audio/video/ computer tapes while still wound and air dry using blotting material (call a professional to assist with recovery) CDs and DVDs to be removed from covers and rinsed. Air dry vertically ARTWORK AND FURNITURE
Remove carefully from frames if possible. Keep photos and paintings horizontal and picture side up, elevate with nothing touching the surface. Avoid direct sunlight. Allow furniture surfaces to dry naturally and then dry vacuum. Do not sit on or rub surfaces if smoke damaged PAPER AND BOOKS
Remove staples and fasteners to prevent rust spots and air dry as individual sheets Do not unfold or separate individual wet sheets Hold books closed if rinsing is necessary and stand book up with pages open. Allow to air dry. If books or paper are extremely wet and unlikely to dry within 48 hours, wrap in freezer or waxed paper and freeze spine down Source: Steamatic
BEFORE “Be prepared”, goes the Scout motto – and it’s one that all parts of the insurance industry should take to heart. One of the major issues the insurance industry faces when confronted with a crisis is being overwhelmed, particularly with claims. This can be even more difficult to manage if a business is itself affected by a catastrophe. Ensuring your business can operate in disaster conditions and can cope with a sudden increase in volume, before the worst happens, is crucial. First, you should ensure your business has a robust catastrophe response plan in place in the leadup to ‘event season’. Vero executive manager of claims services Donna Stewart says this should be reviewed every year. “A response plan should incorporate measures for different scales of crisis – city-size, regional – and client priorities and challenges in different areas,” says Stewart. “It should also ensure you can tap into enough resources to handle increase in volume to avoid service delays and backlogs.” Setting up solutions to handle a large influx of calls and claims are also important. Ways of doing this can include bulk e-mail filing, dedicated web forms or other easily-scalable systems. Stewart also suggests insurers and brokers alike should be reaching out to external parties to ensure they’re prepared too. “You should ensure your supply chain is ready to respond quickly in case of a disaster – whether that’s assessors, builders or other key parties,” she says. Making contact with back-up or national suppliers is also wise, in case local suppliers’ operations are affected by fire or flood and are unable to operate. Ensuring your clients are ready is the most important aspect of preparation for brokers.
JANUARY 2014 | 39
FEATURE / SOCIAL MEDIA
DURING
“Review clients’ cover well in advance of disaster season,” says Stewart. “Business interruption is one of the most important coverages for businesses, especially in areas like those affected by the NSW bushfires, because it can take such a long time for things to be accessible again and for businesses to operate again.” She adds that client communication in the leadup to summer is also critical. “Have client communications ready to go – preevent, during event and immediately post event. Ensure clients have escape plans and disaster kits. Ask businesses if their records are backed up and/or stored where they won’t be damaged. Advise them to have plans in place to protect machinery – even if it’s just loading plants onto the back of a truck or a ute and getting it out of there.” Finally, brokers should also ensure they take their own advice, and make sure their own businesses can operate throughout a disaster. It’s essential you can support your clients through this difficult time – even if you’re reduced to working from a smartphone.
TO-DO LIST
Update/create catastrophe response plan Ensure network of suppliers is prepared for action – including back up suppliers Review cover with clients, especially those at greater risk Draft client communications Help clients with escape plans, disaster kits and business protection plans How will I manage claims? Check with insurers Make sure I can still operate from a mobile phone if need be
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When the worst happens, insurance professionals are often among the first on the scene (after the emergency services). You have a critical role to play not just in assessing the damage and kickstarting recovery, but also in helping those affected to start the healing process. “Being on the ground with insured customers, in the immediate aftermath of a catastrophic event, is probably the most rewarding activity you can undertake in the insurance industry,” says Darren Trott, executive general manager of Claim Central. First and foremost, insurance professionals – regardless of whether you’re from an insurer, a brokerage or a loss adjuster – should be there to listen to survivors’ stories. “I’ve heard many incredible tales of survival, along with heartbreaking tragedies. You’ll be taken on an emotional rollercoaster ride, but it’s important to understand what customers have been through,” says Trott. “Take the time to absorb what has happened to your customer and think about what you, and the organisation you represent, can do.” Trott adds you should also have access to adequate safety equipment, including asbestos suits, sunscreen and even insect repellent. It’s also essential to start collecting information about the extent and type of damage as soon as possible, particularly taking photographs of damaged items. However, restoration and recovery specialists Steamatic CEO Oliver Threlfall says clients shouldn’t assume everything is lost straightaway. “Even if it looks like a pile of rubble, you don’t necessarily need to call in the Bobcats just yet. You’ll be surprised at how much you can save,” says Threlfall. “You tend to see a lot of insureds waiting, thinking they have to wait for the adjuster or the insurer. However, they are obliged to mitigate the loss, so they should be proactive. It’s useful to know what can and can’t be saved, he adds, and the best solution is to call experts like Steamatic.
TO DO LIST
Check in with all clients personally ASAP as soon as it’s safe Make sure they’re taking photos of damage Investigate workplace counselling/support – government agencies? Refer clients to recovery specialists to see what can be saved
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AFTER Once the immediate response is over, it’s equally important to make sure clients are still cared for as life starts to get back to normal. “Many customers feel let down after the initial claims response,” says Claim Central’s Trott. “Customers are very accommodating and understand the wider community has also been affected, but they don’t like being let down. Don’t make promises you can’t keep and deliver on those you make. Wherever possible, you should provide anticipated and realistic timeframes and highlight potential obstacles that might arise. Trott recommends going one step further, however. “Work out how you can adapt your process to fit the specific needs of your individual customer, rather than making them stick to a rigid regime,” he says. “The mainstream media has already jumped on the negative story of one insurer requiring receipts and photographs for contents totally destroyed in the recent NSW fires.” Finally, brokers should ensure they take
ownership of the claims process, rather than leaving it all to the insurer. “Catastrophe survivors usually remember the name and face of the person who first provided assistance to them,” remarks Trott. “Invariably, something will go off-track during the claim and the customer will reach out to these individuals. I’ve continued to check in with many customers and monitored the progress of their claims, intervening when something has gone off the rails and taking ownership of the issue until it’s been resolved. “Stick with it full circle and you’ll have a customer for life.”
TO DO LIST
Follow up with survivors about claim progress, chase up as necessary Review response to the disaster, and build in improvements to next catastrophe plan update Take a few days off!
JANUARY 2014 | 41
BUSINESS STRATEGY / CONTENT MARKETING
CONTENT
MARKETING HERE TO STAY Content marketing might be the latest marketing buzzword, but what does it mean and, more importantly, can it add value to your advice business? One thing for certain is that, for the foreseeable future, content marketing is here to stay. Peter Bowman explains all 42 | JANUARY 2014
Content marketing involves creating and sharing content in order to promote your business, retain existing clients and attract new ones. The content you create is stored on your website, which acts as your online shopfront. You share your content by adding website links on your social media pages. So how is content marketing different to traditional marketing? Traditionally, most services used a mix of television, newspaper, radio and telephone directory advertising. This provided people with the ability to find you and make an appointment. When you think about it, this is really one-way communication – your business sending a message to the marketplace. If they are satisfied with you, they may tell their friends about you and make a referral.
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Content marketing, however, is more like twoway communication. People have the opportunity to interact with you and share your content with their own connections.
WHY SHOULD YOU CARE? There are six reasons why you might consider adding content marketing to the marketing activities of your business:
TRADITIONAL MARKETING VS CONTENT MARKETING CREATE AND PLACE YOUR MESSAGES
NEWS
ACTIONS TAKEN BY POTENTIAL CLIENTS
Contact you to make an appointment Potential to tell their friends about you by verbal referral
1
The sharable nature of social media makes content marketing highly believable when it is shared and liked by your followers. Prospective clients are more likely to trust a referral from a friend than to trust an advertisement. Therefore, content marketing provides a great way to introduce your expertise to people who you don’t do business with yet. In some ways, it’s the modern version of a referral – it’s a virtual handshake.
Contact you to make an appointment Potential to tell their friends about you by verbal referral PLUS ONLINE THEY CAN
2
Traditional advertising is seen by many consumers as an interruption to their television viewing, radio listening or newspaper reading. Content marketing, given that it’s ‘news you can use’ or ‘entertainment’, is more likely to engage consumers than interrupt and annoy them.
3
If you’re not on social media, you are likely to be seen as old-fashioned. Once upon a time a business needed a fax number and a website just to be considered credible. The same can now be said for Facebook and LinkedIn company pages.
4
Tomorrow’s clients live with social media. Teenagers today don’t know what life is like without the internet. And although it’s medically possible, many don’t think they can live without a Facebook update or a tweet. The point here is that the internet has changed the way we communicate and interact, not only with each other but also with businesses. If you don’t embrace change like this, you’re likely to be limiting your business’s longevity.
5
Content marketing is highly measurable. With inbuilt metrics within social media tools and Google Analytics for your website, you can see how widely your content is shared and what this marketing effort and cost is bringing to your business. Accountability in marketing is always a good thing, and content marketing allows you to assess the cost of a new client clearly.
Follow you Like you Comment on and ask questions about your content Share your content with their friends
6
The more content you have, the more credibility you have with search engines like Google. Content marketing can help improve your Google rating. More and more people are going online to search for assistance rather than looking through the telephone directory.
SO WHAT CONTENT SHOULD YOU CREATE? Creating sharable content is the key challenge of effective content marketing. Sharable is the key word here. Sharable content identifies a problem, helps solve a problem, entertains, or is a combination of all three. By sharing this kind of content, you have the opportunity to be seen as the ‘go to’ person for help within your community on your area of expertise. Effective content marketers avoid straight selling. They do this as straight selling is likely to be seen as ‘spam’ by an audience and they are likely to switch off. The type of content you can create is really only limited by your imagination and marketing budget. JANUARY 2014 | 43
BUSINESS STRATEGY / CONTENT MARKETING
Typically, though, content marketers produce things like:
Fact sheets Did you know... blog articles White papers Case studies How-to guides and e-books Interviews Podcasts YouTube videos Video-recorded seminars
WHICH SOCIAL MEDIA CHANNELS SHOULD SHARE YOUR CONTENT? There are new social media channels popping up every day, but the most popular ones are Facebook, LinkedIn, Twitter, Instagram, Google+ and Pinterest. It makes sense from a content marketing perspective to create pages on the social media channels where your existing and ideal clients are. It also makes sense to have a personal LinkedIn profile so your professional network can connect to you online.
WHAT DOES IT COST? In traditional advertising (radio, newspaper, television and telephone directories) there are usually two costs: the cost to create the advertisement and the cost of the advertising space itself. With content marketing, there is only the cost of creating the content, as all of the popular social media channels are free.
HOW DO YOU MAKE THE DECISION TO EMBRACE CONTENT MARKETING? Using the principles from my book, Service 7, here are seven questions you should ask yourself before jumping head first into content marketing:
1 Peter Bowman is a private marketing consultant for AM WEEK, and is the author of Service 7, a book that helps professional advisers market their firms more effectively.
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Can it add value to our business? How you define value will depend on your business. But for most it comes down to client satisfaction, business income and profitability. If you don’t believe content marketing can add value on these measures and your own, then perhaps it is not right for you.
2
Does it help us understand our clients better? Understanding your clients and meeting their needs is certainly a key to success in any service. By connecting with them online, not only can they follow you, but you can also keep up to date with
what’s going on in their world in a non-intrusive manner.
3
Does it help us tell our story better and build our reputation? Content marketing may allow you to tell your story better over time. Articles and fact sheets can demonstrate your expertise and opinion leadership. YouTube videos are great at helping explain complex matters and sharing personal messages where traditional face-to-face communication usually works better.
4
Can it help us attract new clients? As with assessing all business development decisions where you intend to make an investment of time and money, it’s prudent to ask yourself how effective this effort might be. If no one is using the telephone directory or reading the newspaper any more, then ask yourself if content marketing offers a way to connect with prospects and potential clients.
5
Will it help us deliver better customer service? Not only might you be able to attract new clients with content marketing, but also to service them better. Perhaps there are frequently asked questions or difficult issues you can share insight on. Or perhaps you can offer tax time reminders as part of your content marketing, so you are delivering part of your service online too. Remember, content marketing is two-way communication.
6
Can it help us enhance our service design? Content marketing has the ability to change the way you deliver your services. Perhaps it’s time to create an online service capability that might include an introductory client fact page and a welcome video.
7
Will it help us create the future, or is it just change for the sake of change? As with all innovation it’s important that you’re confident you are making changes in your business because it makes sense to do so. It’s also likely your competitors are considering content marketing too. Given the increasingly online nature of the world we live in, content marketing isn’t going to go away. As with all marketing initiatives, however, it’s important that you take some time to create your goals, plan your messages, select your channels and assess the results to ensure your content marketing strategy is working for the betterment of your business.
BUSINESS STRATEGY / RELATIONSHIPS
CLIENT RELATIONSHIPS HOW TO DRIVE SALES While you may have all the skills, experience, knowledge and expertise in the world, if you can’t get your relationship marketing strategy right, you’re never going to see exponential growth in your business. Nikki Heald explains
S
So you think you’re pretty savvy technically, right? You know all your stuff and have spent years acquiring skills and experience. Additionally, you know your product inside out, back to front. You believe you are the technical guru. Unfortunately, however, you can’t seem to hit your sales targets and don’t understand what’s going wrong… Welcome to the world of relationship marketing – a process whereby sales are increased via the relationships you have created with others. Technical is out; rapport is in! At a time when competition for clients is intensifying and profits are shrinking, building effective alliances has never been more vital. The reality is that business is not business – business is personal and people do business with people they like.
HUMAN NATURE Unfortunately, not everyone we meet in business will instantly warm to us. Human nature is such that people can be indifferent, inconsistent and unpredictable. Diversities in personality, viewpoint and needs come into play, and rolling out a generic ‘client relationship strategy’ simply won’t work. Successful sales professionals realise that their results are achieved due to a willingness to adapt 46 | JANUARY 2014
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10 CLIENT RELATIONSHIP TIPS 1. Invest time, energy and commitment in getting to know your client: It won’t happen overnight.
to their prospects. They individualise their approach to client interactions and build unique connections. They research, ask questions and observe to gain insight. They realise clients are not driven or motivated by the same things. Effective salespeople forego taking shortcuts and recognise that outdated selling tips such as ‘always be closing’ are no longer applicable. All too often, opportunities are lost due to assumptions made or jumping in with the hard sell. Today’s clients are seeking a business partner who assists them with the right solution and responds to their needs. If we think about it, the very heart of the sales process should be underpinned by wanting success for our clients, rather than success for ourselves. The underlying goal should be to understand their challenges, create solutions and add value wherever possible. So how do relationships influence the sales process?
2. Be determined to focus on your client: Remember, it’s about them, not you. 3. Adapt your communication style to suit: A one-size-fits-all approach won’t cut it. 4. Find out their interests and hobbies: Create a database to store the information you learn. 5. Say ‘thank you’ in a tangible way: You don’t have to go to great lengths or expense to do this.
6. Keep in touch regularly: Look for reasons to keep yourself at the forefront of their mind. 7. Generate ideas: Be creative with solutions and provide unique options. 8. Design a shared goal and ask for their opinion: Work together to construct a collaborative alliance. 9. Don’t sell on price: Focus on explaining your value and the outcomes you generate. 10. Invest in ‘interpersonal skill’ staff training: Your employees should understand the importance of complementing their technical ability with connection ability.
targeted specifically at implementing and boosting client engagement.
THE STAGES OF ENGAGEMENT
BETTER AND BETTER
The cycle of sales can be attributed to various stages of engagement identified as follows. Clients are most likely to buy from you when in the moderate and high-trust zones – when rapport and credibility have been firmly established. However, time and patience must be observed in progressing through the initial stages. No one likes to be rushed into anything! Each interaction you have with a client, no matter how small, contributes to solidifying and cementing the relationship. Making your clients feel valued and important is essential to a solid foundation and future business prospects. Let potential or prospective clients feel as though they have chosen you, rather than feeling ‘sold’ to. Think about how you and your team currently interact with clients in your business: • What tools do you presently have in place? Is there room for improvement? • Could you try something different or learn new strategies to nurture alliances? Perhaps it’s time to take a different approach
The interesting thing about all relationships, including those in business, is that, once established, they have the potential to get better and better. The challenge is to ensure this occurs. Ongoing contact and maintenance should form part of your overall relationship management plan to ensure that clients feel a genuine, rather than token, connection with you. See the ‘10 client relationship tips’ box above for some tips that may assist you in building better and more effective relationships. Remember, once you have built solid relationships, those alliances instinctively want you to succeed and are more than happy to refer or recommend you to others. Additionally, some clients are willing to pay more for a product or service if they feel they have a personal connection in place. The decision to focus your energy on a relationship with your client is an unlimited method for increasing sales and capturing new opportunities.
Nikki Heald is a corporate trainer, presenter, businesswoman, founder of Corptraining and co-author of Views On The Way To The Top. Head to corptraining.com.au for more information.
JANUARY 2014 | 47
FEATURE / BUSINESS STRATEGY
THE (R)EV
OF MANAG If you want innovation and growth, you need to engage your people on a whole new level, argues Therese S. Kinal Management is in need of a revolution. And not just one on glossy academic paper, but one that actually changes how organisations think and act. Despite the inspirational stories we read about companies like Zappos, Innocent Drinks and Google, the truth is that most of us are using outdated management practices and failing to get the most out of our people. Not convinced? Consider this: 65% of people are unhappy at work (Right Management, Manpower Group, 2012 online survey) Only 14% understand their company’s strategy (Smither, J.W., and London, M. (2009). Performance management: putting research into action) 75% are seeking jobs as we speak (Jobvite’s Social Job Seeker Survey, 2012)
Today’s leaders face increased complexity and ambiguity, and employees and customers alike are demanding engagement, transparency and responsibility. One billion people are now on Facebook, and 500 million tweets get sent every day. Customers don’t want to be sold to. They want to connect with brands and play a role in the development, sales and marketing of products. 48 | JANUARY 2014
If we ever thought we had ‘control’, it’s definitely gone now. All of this presents a new challenge for how we think about and practise management and how we develop leaders that can excel in this brave new world. But before we look at the future, let’s take a look in the rear-view mirror and see how we got to where we are today:
1910S–1940S: MANAGEMENT AS SCIENCE ‘Management as science’ was developed in the early 20th century and focused on increasing productivity and efficiency through standardisation, division of labour, centralisation and hierarchy. A very ‘top down’ management style with strict control over people and processes dominated across industries.
1950S–1960S: FUNCTIONAL ORGANISATIONS Due to growing and more complex organisations, the 1950s and 1960s saw the emergence of functional organisations and the human resource movement. Managers began to understand the human factor in production and productivity, and
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OLUTION EMENT tools such as goal setting, performance reviews and job descriptions were born.
1970S: STRATEGIC PLANNING In the 1970s we changed our focus from measuring function to resource allocation and tools such as Strategic Planning (GE), Growth Share Matrix (BCG) and SWOT were used to formalise strategic planning processes. After several decades of ‘best practice’ and ‘one size fits all’ solutions, academics began developing contingency theories.
1980S: COMPETITIVE ADVANTAGE As the business environment grew increasingly competitive and connected, and with a blooming management consultancy industry, competitive advantage became a priority for organisations in the 1980s. Tools such as Total Quality Management (TQM), Six Sigma and Lean were used to measure processes and improve productivity. Employees were more involved in collecting data, but decisions were still made at the top, and goals were used to manage people and maintain control.
1990S: PROCESS OPTIMISATION Benchmarking and business process re-engineering became popular in the 1990s, and by the middle of
the decade, 60% of Fortune 500 companies claimed to have plans for or had already initiated such projects. TQM, Six Sigma and Lean remained popular, and a more holistic, organisation-wide approach and strategy implementation took the stage, with tools such as Strategy Maps and Balanced Scorecards.
2000S: BIG DATA Largely driven by the consulting industry under the banner of ‘Big Data’, organisations in the 2000s started to focus on using technology for growth and value creation. Meanwhile, oversaturation of existing market space led to concepts such as Blue Ocean Strategy and Value Innovation.
A WHOLE NEW LEVEL After a century of trying to control people, processes and information, we have come to a point in organisational history where we need to recognise that what worked before just simply isn’t enough anymore. Traditional management is fine if you want compliance, but if you want innovation and growth, you need to engage your people on a whole new level. JANUARY 2014 | 49
FEATURE / BUSINESS STRATEGY
We need to recognise that what worked before just simply isn’t enough anymore
In our research, we looked specifically at the evolution of the management approach and the approach to innovation/problem solving, and at how these would develop in the future (see graph, ‘The evolution of management’):
two go together, and that having happy and productive workforces is not about team-building exercises or lucrative benefit packages but about creating a working environment that offers purpose, mastery, challenge and autonomy, which in turn creates more business value than the traditional approach. Recently, Steve Denning wrote about the management revolution that’s already happening at Forbes.com. In the article, he discusses organisations like Apple, Zara and Whole Foods that have successfully forged ahead despite the increasingly challenging environment: “None of these organizations has arrived at any final state or equilibrium: in each case, management practices continue to evolve. Nor are any of these organizations perfect, as they have to cope with a context that is filled with contradictions. Their virtue lies in the creative energy with which they are pioneering new ways of adding value”. Steve makes some excellent points about the need to constantly reinvent ourselves, but I’m not sure if the revolution is already happening. In fact, I think it might be more of an evolution. And herein lies the problem. We need a revolution, not an evolution. We are armed with tons of research that supports a more holistic, human way of doing business. It is up to us to stop simply following best practice and translate our know-how into how we develop leaders and organisations that are more agile, innovative and purpose-driven… and, in doing so, breed the pioneers and market leaders of tomorrow.
1. Management approach: the style of top management, ranging from: a. Control (ie your boss tells you what to do and how to do it); to b. Set goals (ie your boss sets goals and expectations, but you have more freedom with regard to how you achieve them); to c. Inspire (ie your boss gives you scope and freedom to innovate on both the what and the how) 2. Approach to innovation/problem solving: how leaders solve strategic problems and develop new products and services. This ranges from: a. Top down (ie solutions are created and come from the top); to b. Top down with bottom-up data (ie the rest of the organisation contributes information and experiences, but solutions are still created at the top); to c. Participatory (ie solutions are created collaboratively, and throughout the organisational levels)
Organisations of the future are neither consensus driven nor top down. They aren’t dictatorships, nor are they anarchies. They’re not merely occupied with increasing shareholder value or making their people happy. Leaders of the future know that the
50 | JANUARY 2014
MANAGEMENT APPROACH
Top down w/ bottom-up Participatory data
Control
Top down
Therese S. Kinal is the CEO and co-founder of Unleash, a disruptive innovator in the management education and consulting industry. She is the co-author of Unleashing: The Future of Work, and she writes, runs workshops and works with clients on a range of management issues.
INNOVATION/PROBLEM SOLVING
THE EVOLUTION OF MANAGEMENT Set goals
Inspire
Unleashing Big data Competitive advantage
Process optimisation
Strategic planning Functional organisation Management as science
1910–1950
1960
1970
1980
1990
2000
2013 ->
Source and copyright: UNLEASH SPP LTD. For more information, go to unleashteam.com
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Favourite things... David Porteous, Brooklyn Underwriting Surfing, spiced rum and sponsored tourism all figure high on the Brooklyn supremo’s hit list Place to be: “Attempting to body surf at Manly Beach,” says David. “There is no better feeling in the world than being smashed around by the Pacific Ocean.” Drink: “Having been caught up in the spiced-rum revolution, I am somewhat partial to a Sailor Jerry and Dry with fresh lime. An absolute must on that long summery afternoon.”
Book: David picks The Gruffalo as his literature of choice. “He’s a cheeky little bloke that mouse, and he makes me laugh. Plus, I have two young sons.”
Celebrity: Clive Palmer. “I figure politicians and eccentric billionaires count as ‘celebrities’ these days.” Food: “The buffalo mozzarella and prosciutto at Via Napoli in Lane Cove is an unexpected gem,” he says. “Worth the trip to the leafy North Shore of Sydney.” Music: “Acoustic guitar has got me toe-tapping,” says David. “Have a listen to a Rockhampton band called Busby Marou or a Scottish chap named Paolo Nutini. Cruisey, all-round good stuff.”
Vacation spot: The Huon Valley in Tasmania is David’s escape destination of choice. “Great food. Great wine. Great fishing. Golfing. Fresh air. It’s amazing what peace and quiet can do for the soul.” Sport: “AFL, hands down – it must be the best live sport in the world!” says David. He also comments that his wife claims it’s the most attractive sport as well, for very different reasons. Movie: “Intouchables – a French film made in 2012. It’s based on a true story about a wealthy Parisian quadriplegic and his new carer. A gift of a movie.”
Best thing about working in insurance: “Being a ‘sponsored’ tourist around Australia and other places in the world,” he says. “This industry has taken me to all parts of this great country, and to the UK, the USA and Asia. And I get paid to do it – talk about lucky!”
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SOCIAL LIFE
Insurance advisers from across Australia flocked to NSW’s Hunter Valley in October to learn, network and celebrate with their peers at the 2013 annual Resilium Adviser Conference. The attending advisers experienced a variety of educational, inspirational and social events, including speeches from Suncorp CEO commercial insurance Anthony Day, Resilium managing director Gerard McDermott and international speaker Chris Helder. Next year’s Resilium Adviser Conference will be held in Port Douglas, Queensland.
SOCIAL LIFE
On 10 October, some 40 brokers attended Calliden’s Victorian launch of its ISR Mark IV Modified Property and General Liability insurance products. Brokers were treated to an evening of drinks and canapés at the Woolshed Pub in the Docklands, a beautifully preserved heritage building converted from a historic wool storage facility.
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SOCIAL LIFE
On Wednesday 6 November, Mike Kerner, Zurich’s global CEO general insurance, made a whirlwind trip to Sydney to help the company celebrate its NIBA General Insurer of the Year win with broker partners. A broker cocktail function was held at Zurich’s Blue Street, North Sydney, building where brokers had the opportunity to congratulate Zurich and welcome Mike on his first visit to Australia as global CEO general insurance.
SOCIAL LIFE
The UAC Adelaide Expo took place on 19 September. The event, at a new venue, the Adelaide InterContinental Hotel, was a great success, with 50 exhibitors and about 200 brokers coming through. The event also featured a members’ happy hour the previous evening.
For more pictures from all of these events and more, visit www.insurancebusinessonline.com.au/industry-events. JANUARY 2014 | 55
THE LAST WORD
Another one BITES THE DUST Digital disruption is changing the world around us – but has the insurance industry really grasped the extent of the impact?
T
Darren Trott is executive general manager of Claim Central, and Insurance Business’s regular columnist
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The topic of technological change and its impact on the insurance industry is a hot one. We continue to read articles about the need to get ahead of the curve and ‘embrace the change’, yet it seems so hard to actually do something about it. Why? I remember the days when only senior managers were given access to the internet. It was thought that staff members could not be trusted to use it for business purposes. Would you believe this was only 15 years ago? Even in today’s world, many companies won’t allow employees to access social media, such as Facebook, despite its power to put their products and services before a potential audience of millions. I know of one brokerage that doesn’t even allow staff to access mobile phones, for any reason, during office hours. Will the last disgruntled employee please blow out the candles when you leave? Disruptive technologies have transformed many industries. A decade and a half ago, three young guys developed the Napster mp3 file-sharing network. Within three years Napster had over 80 million users and seriously threatened the major music industry distribution companies, who responded with legal action rather than embracing the technology. This disruptive technology was ultimately the forerunner to iTunes, which has since become one of the world’s largest distributors of music, movies and television; and many of those traditional music and movie companies no longer exist. There are other examples, too. When was the last time you purchased a roll of Kodak film, or popped into a Borders bookstore? My local video store is long gone, replaced by a DVD vending machine in the supermarket. Did I mention I can also buy my car insurance while doing the grocery shopping? Advances in technology are providing an environment in which actuaries, risk modellers, insurers, reinsurers, brokers and supply-chain providers have access to more data than at any time
in history. If you need to know how many galvanized-iron roofing nails were used in the aftermath of Cyclone Yasi, and the actual labour costs of hammering them into new roofs, by specific street location and house number, I can give this to you in less than two minutes. The trick is accessing and extracting this data. Most insurers still struggle with legacy mainframe systems, which have become expensive to maintain and make insurers slow to respond to innovation. Their mentality has been “we must build it ourselves” or “go find one system which does everything”. Eventually this leads to other cost-cutting measures, such as centralisation or offshoring entire sections of their business. I find myself scratching my head and asking, “Why do something your customers don’t like when there are alternatives out there?” A truly customer-centric business carefully analyses customers’ wants and needs and then sources business processes and systems to make that happen. But you don’t need to invent it or build it yourself. Your restaurant doesn’t farm its own beef, or grow its own lettuce and tomatoes. It assembles the right ingredients, in the right order, and delivers a personalised customer experience. Sadly, there are many players in our industry still trying to make customers squeeze into their antiquated processes. How many times have you heard: “But our procedures require this form to be completed”? A rethink is needed, and it’s needed now. It’s time to embrace technological advances in social media, mobile applications, analytics and cloud storage and become part of the revolution. Combining these key components, in a unique way to suit your customers’ needs, might be the difference between future success and future redundancy. On that note, I’m off to pick up a copy of the Trading Post from the newsagent. Oops. Hang on. Another one bites the dust.