insurancebusinessonline.com.au Issue 3.4
s of e c a f e h T t h g i r b s ’ a Australi future e insuranc
GOING GLOBAL ZURICH'S KAI DWYER TALKS INTERNATIONAL BUSINESS
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EASING THE LOAD FUNDING TO PREVENT PREMIUM PAIN
TESTING THE FOUNDATIONS CONSTRUCTION UNDERWRITERS DIG IN
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CONTENTS / 3.4
16 COVER FEATURE
YOUNG GUNS 2014 A line-up of young talent that proves the industry is in safe hands
NEWS ROUND-UP 6 | Viewpoint Brokers have their say on the market’s biggest news stories 8 | News analysis Dissecting the medical sector as a new research boom looms
FEATURES 12 | The big interview: Kai Dwyer Zurich’s international expert on why companies expanding abroad need good insurance brokers 32 | Easing the load The case for increasing your use of premium funding services is only getting stronger 34 | Testing the foundations Leading construction underwriters dig in for a long-haul test of their business models
40 | Finding a forum Wotton + Kearney sheds light on dispute forum outcomes in financial services
BROKING INTELLIGENCE 42 | Change management Re-engineering your business to ensure success in changing times 50 | Exit planning Planning to sell? There are ways for you to get more for your business 52 | Stats The latest statistics on business and social media
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FEATURE
Sunny in Queensland Queensland insurance broker Rick Davis on building a business, diversification, and premium pain
INSURANCE INSIDERS
46
Blogging for business How to turn a blog into a real boon for your insurance broking business
54 | Social life UAC and NIBA hit Brisbane in this snapshot special 55 | Favourite things Calliden’s Nick Kirk on forgetting those frogs 56 | The last word A claims ‘lucky dip’
issue
3.4
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EDITOR’S LETTER / 3.4
A BRIGHT FUTURE
Ben Abbott
There are often questions raised at the highest levels of the insurance industry over whether enough is being done to attract, cultivate and support young talent for the future. In fact, ANZIIF, the ICA, NIBA and Zurich only recently got together to launch a major survey, which sought to identify skills shortages, and hiring and staff retention trends. In this issue, Insurance Business goes to the market in an attempt to identify some of the future leading lights of the industry. In our Young Guns feature (see page 16), we essentially ask the question: is the industry producing the talent it will require in years ahead? And we can assure you, the future is bright. Hailing from the ranks of the market’s brokerages, insurers, underwriters and advisers, the stand-out insurance industry performers on our list are not only set to shape the industry in years to come; though young, they have already started doing so. And more than any other industry I have reported on in the past – including related financial services professions such as financial planning and mortgage broking – this is an industry that truly embraces its young people, and, more importantly, those young people are embracing the future. We all know the old adage that insurance is something people ‘fall into’ rather than choose. However, our Young Guns are certain to cast off the vestiges of this refrain. For these proud and passionate advocates of insurance, the industry is very much a promising choice. Look no further than this list for inspiration and assurance – the industry is in safe hands. Ben Abbott, editor, Insurance Business
COPY & FEATURES EDITOR Ben Abbott CHIEF REPORTER Chinwe Akomah CONTRIBUTORS Kevin Eddy, Darren Trott PRODUCTION EDITORS Roslyn Meredith, Moira Daniels, Richard Wood
ART & PRODUCTION DESIGNER Joenel Salvador DESIGN MANAGER Daniel Williams
SALES & MARKETING GENERAL MANAGER Peter Smith COMMERCIAL DEVELOPMENT MANAGER Sophie Knight COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Alex Carr TRAFFIC MANAGER Abby Cayanan
CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Ben Abbott tel: +61 2 8437 4721 ben.abbott@keymedia.com.au Advertising enquiries Commercial Development Manager Sophie Knight tel: +61 2 8437 4733 sophie.knight@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 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
CONNECT
Contact the editor:
ben.abbott@keymedia.com.au
Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry
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NEWS / ROUND-UP
BY THE NUMBERS
18.3%
IAG’s expected FY14 insurance margin
$10.8m
The amount of money insurers have agreed to refund to policyholders from the overcollection of the Victorian Fire Service Levy
10%
YOUNG GUN LANDS ‘WORLD FIRST’ LLOYD’S FACILITY Elliott Insurance Brokers’ head of special risks David Clarke has secured a unique Lloyd’s facility that is said to possess a breadth and combination of cover never before seen. The Insurance Business Young Gun, who is an authorised representative of Elliott Insurance Brokers, is a special risks expert and currently a committee member of Subsea Energy Australia, in addition to being involved in the Australian Oil & Gas expo. In a significant win for his business, Clarke has successfully secured a facility that is a hybrid broadform energy and marine liability policy, a ‘world first’ combination of cover, and positions the Australian insurance industry as a global leader in the sector. Combining covers that include wreck removal liability, salvors compensation and charters liability into a broadform public liability policy, Clarke says the new facility also includes automatic contractual liability cover, principals indemnity, waiver of subrogation and professional services liability (advice in relation to which is given with no fee). Commenting on the facility, Clarke says he is “very excited” to be able to provide the unique combination
What could be insured? • SUBSEA WELDING/DRILLING • RECOVERY OF AIRCRAFT
The percentage of motorists opting to use Suncorp to purchase compulsory third-party insurance in ACT since its entry into the market last year
54
The number of member companies that have joined the ICA
• SHIP CONSTRUCTION • PIPELINE FABRICATION • WELL MAINTENANCE • OIL AND GAS EXPLORATION • OFFSHORE PROJECT MANAGEMENT • SUBSEA ENGINEERS • DIVING CONTRACTORS
of cover, which has a wide range of applications for clients in the sector. “We can insure everything from subsea welding/ drilling, recovery of an aircraft like the MH370, ship construction, pipeline fabrication, well maintenance, oil and gas exploration, offshore project management, subsea engineers, diving contractors and more,” Clarke says.
FOR OUR FULL LIST OF YOUNG GUNS, TURN TO PAGE 16
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THE FORUM
BROKERS CAN FIGHT BACK AGAINST GROWING AGGREGATOR PRESENCE The Financial System Inquiry’s interim report exposed insurers’ reluctance to share product information with aggregators, and in a bid to build sustainable relationships the inquiry has suggested aggregators should use automated processes to obtain quotes from general insurance websites, or develop representative
consumer categories based on key consumer characteristics. But where does that leave brokers, who also provide an intermediated service? Industry professionals say the rise of the aggregator provides opportunities for insurers and brokers to work together more closely.
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“From my experience in Australia and UK, with personal and small business, consumers mainly use aggregators as an alternative to shopping around when buying direct. Consumer contracts are with the insurer, not the aggregator. Most consumers don’t even remember which aggregator they used. “Brokers in Australia and overseas are already working this to their advantage by providing a broking type service through on-line facilities. Insurers should work with brokers to deliver this.”
“Given that aggregators will live on the web and feed on certain key words then perhaps the adviser side of the industry needs to have a collective web-based response to those same key words. At the end of the day the consumers using the aggregators are not looking for an adviser they are searching for cheaper insurance. We need to play the same word game and respond with ‘cheap home insurance – what you should know’.”
“It seems to me that while brokers have regulation that we always have to act in the client’s best interests, these aggregator systems do not have that same duty. Aggregators still rely on the client to read everything and not receive personal advice for their situation, and then when a claim occurs, they are on their own.”
VIEWPOINT
WOULD INSURERS DELEGATING SETTLEMENT AUTHORITY TO BROKERS IMPROVE THE CLAIMS PROCESS?
No
46%
Would insurers delegating settlement authority to brokers improve the claims process? Will make no difference
8%
Total votes: 85
Yes
46%
“It would only work for a very limited range of claim types, but could work very well. At Trade Risk our most common claim is for a tradesperson’s tools. We can easily show proof of ownership as well as quotes for replacement of tools, and obtain the police report confirming there has been forced entry. In this case there is virtually no grey area, and with most being worth only a few thousand dollars there is no reason why we shouldn’t be able to quickly settle these claims using our own expertise. In my opinion, if an insurer doesn’t trust a broker to settle a very basic claim, they shouldn’t trust them to write the policy in the first place.” Shane Moore, Managing director Trade Risk, AR of Westcourt General
“With my previous background within Elders Insurance, the answer is yes. Allowing our office to pay claims up to $10,000 under the Elders banner when I was the local franchise owner from 2002 to 2007 certainly streamlined the process. One client had a claim on her fridge and was living out of town. We received the claim around 9.30am, obtained two quotes to replace the fridge from local suppliers, and had the fridge delivered to the client by 2pm the same day. The client was extremely happy and grateful. However, it requires extra work for brokers, extra staff may be required, and there may be more compliance issues. Unless the insurer agrees to pay an overriding commission for that service, it sometimes just does not seem attractive enough.” David Coe, Northwest Insurance Brokers
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NEWS / ANALYSIS
DISSECTING THE MEDICAL SECTOR The medical sector may seem like a complicated and litigious environment to play in, but it is set to provide an array of revenue streams for brokers. Chinwe Akomah reports Federal Government plans to establish a medical research future fund (MRFF), which is set to grow to $20bn by 2020, could create new areas of business for brokers, according to industry experts. Although the federal government has disclosed little on the fund and it is dependent on passing an unpredictable Senate, Chubb Insurance Company of Australia’s Asia Pacific zone life science specialist, Travis McIntosh, says if a reasonable portion of the fund is made available for discoveries, this could lead to more pharmaceutical and medical research. In turn, this could see more development companies and clinical trials in Australia. They will all need appropriate insurance, he says. “Assuming the appropriate investments are made to foster and support commercialisation of early stage research discoveries, there could be increased activity in insurance classes such as clinical trials liability, product liability, professional indemnity and intellectual property protection,” McIntosh says. “Other classes such as property and marine transit could also benefit.” Brokers versed in malpractice and business interruption could also profit from this sector. Aon Risk Solutions’ health practice group leader in Australia, Kenneth Corcoran, notes that increased
“There are currently only a few genuine specialists so there is room for those who are willing to take the plunge into this fascinating industry segment” Travis McIntosh, Chubb Insurance
funding will mean more research activity and research centres will need tailored business interruption. Corcoran explains that research centres are particularly vulnerable to losses from damage or destruction to premises. For example, a research centre could lose years of results from painstaking experiments with animals if a fire happened to destroy the facility. “The expected financial return from that experiment could be delayed or lost, combined with significant costs in re-establishing the experiment. Careful analysis of loss of revenue, adequacy of indemnity periods and policy endorsements is essential.” Like McIntosh, Corcoran believes increased research activity will mean more clinical trials, however this could lead to the potential for errors and omissions, and as such it is vital that these entities have tailored professional indemnity and malpractice policies. Parmia Insurance Brokers’ Danny Gumm said the medical sector could present other related opportunities for brokers. He says new procedures will create new businesses in manufacturing, marketing, distribution and retail, which will need adequate insurance. “Insurance products would need to be tailored to meet the specific risk-management requirements of each new product and the true value of a professional broker’s skills will be required to meet these needs – a generic product is unlikely to provide a solution.”
DIAGNOSING POTENTIAL ISSUES The medical research – like the broader medical sector – can be a delicate and litigious field to play in. To ensure new products and procedures are fit for purpose they must be trialled, but if that goes wrong, it can land parties in hot water.
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NEWS / ANALYSIS
Five clinical trials in Australia Clinical trials are set to increase in number with the potential creation of a $20bn medical research fund. These are some of the clinical trials underway in Australia. PRE-DIABETES University of Sydney: exercise and liver fat reduction in pre-diabetes: moving beyond weight loss Trial: whether high-intensity/low energy expenditure aerobic exercise can treat fatty liver ALCOHOL MISUSE Queensland University of Technology: a phone-delivered motivational intervention for alcohol misuse, incorporating use of electronic devices to set reminders Trial: if a mobile phone app that uses tailored imagery can help alcohol misusers cope when alcohol control is under threat SPINAL PROBLEMS Curtin University University: the effect of sleep posture on spinal symptoms Trial: studying the effects of sleep posture on spinal pain and stiffness and sleep quality OBESITY Curtin University: the effect of fibre supplementation on the frequency of eating occasions Trial: investigating whether a viscous fibre supplement effects the frequency of eating in overweight adults ITCHING Wollongong Hospital: does evening primrose oil improve pruritus (Itching) in a dialysis population? Trial: whether primrose evening oil can offer dialysis patients relief from itching Source: Australian Clinical Trials
One of the worst cases of this is the 2006 ‘Elephant Man’ trial: six young and healthy people tested an anti-inflammatory drug at a research facility in a London hospital, but within minutes of being injected, their heads had swollen like a balloon and they all suffered from organ failure. One test subject – Ryan Wilson – had the most severe injuries: Wilson, then 23, was in a coma for two weeks. He lost all his toes and the tops of some of his fingers, and cannot walk unaided. As a
result of his suffering, Wilson was awarded more than £2m ($3.6m) in compensation. Although the other men recovered somewhat, they are at risk of developing cancers or auto-immune diseases. Cases like this instil a sense of caution in underwriters. Gumm says insurers may not want to provide cover for new procedures and drugs immediately. Instead, they want “water to pass under the bridge before offering full protection for new products”, and even then coverage may be limited or difficult to obtain initially. Something else to consider is that research centres could present significant general liability risks. Corcoran says an escape of bacteria could have devastating effects on the human populace or environment.
SYMPTOMS OF SUCCESS Despite the uncertain risks, McIntosh points out that those prepared to put in the work and develop the expertise can gain a key competitive advantage to service this industry segment. For brokers considering the medical sector, he advises them to attend events held by local industry associations. “Not only do they provide networking opportunities but they are also a great source of information on topics ranging from challenges faced by the industry to the application of new technologies in development.” McIntosh also suggests researching online materials provided by regulators such as the Australian Therapeutic Goods Administration or the US Food and Drug Administration, and partnering up with experienced insurance carriers. And it may not be as hard as some brokers think to get a foot in the door: experts say the Australian insurance industry has a plethora of underwriters who are prepared for the medical research boom. “Through a combination of local players and underwriting agencies, the specialised products needed by the industry are available,” McIntosh says. Turning to distribution, he adds: “There are currently only a few genuine specialists so there is room for those who are willing to take the plunge into this fascinating industry segment.” Gumm also believes Australia has the required expertise: “Australia already has a reputation for leading the world when it comes to medical research, and the professional insurance advisers have moved along to meet the needs of this industry in the past, and I am sure that this will also continue in the future.”
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THE BIG INTERVIEW / KAI DWYER
GLOBAL VISION
Zurich’s Kai Dwyer knows a thing or two about the insurance challenges clients face as they expand abroad. As he tells Insurance Business, global expansion presents an opportunity for brokers to demonstrate value – that is, if they ask the right questions
Kai Dwyer is no stranger to the international insurance business. After all, at various stages of his career he’s worked in jurisdictions as diverse as the Middle East, Switzerland, Hong Kong, Canada, the UK and Australia and New Zealand. And all of them – as he knows intimately – harbour differences that can be critical to brokers and their clients. “Insurance conceptually is the same around the world, but how it is applied in every market is very different,” Dwyer explains. “The key to international business is to ask that question of the customer at the outset: ask them how they want their insurance to work for them.” From his vantage point as head of international sales and distribution at Zurich Financial Services since May this year, Dwyer is able to see how the global insurance marketplace is evolving. Insurance Business sat down with him to ask how he thought brokers could adapt their offering to capitalise on the increasing wanderlust of Australian SMEs and smaller corporates. Insurance Business: Why did you decide to take on this new international challenge? Kai Dwyer: I’ve always had a predisposition – a
leaning – towards international business. It has always been something I have been interested in, ever since I first got into insurance. It is just that the area of international commerce has always intrigued me. I also happen to believe that Zurich does a lot of good things, but there are few things we do as well as we do international business. Our international business story and proposition is easy to sell. It is a very, very compelling and powerful story about how we make a real difference to our customers beyond just giving them a transaction. IB: What have been some of the most interesting things about the role? KD: The most interesting thing we are spending time on is the emerging demands of the large SMEs and smaller corporates who are expanding more and more internationally and haven’t really historically been able to access the capabilities, benefits and the solutions that were built by international insurers like Zurich for very large corporates. All of the research indicates there is a significant growth – there is a bulge – in smaller corporates that are now active in multiple countries and multiple markets. The latest research shows that Australian
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“All of the research indicates there is a significant growth – there is a bulge – in smaller corporates that are now active in multiple countries and multiple markets” companies are active in over 120 countries around the world now, and it shows significant interest in continued expansion way over and above what you would expect, based on normal GDP activity. We think that this is a strong emerging segment, but it is one that will create its own set of unique challenges in terms of how we respond to that. We can’t just force down our existing proposition into the middlemarket segment; we need to be creative and evolve our solutions specifically for that area. IB: What are the risks for these SMEs and corporates as they expand overseas? KD: I don’t think the risks that come out of their business activity are necessarily that different to what we already know today. At the end of the day,
physical risks that your assets are exposed to are no different in one country than another, other than to the extent that natural hazards intervene in a different way. Those aren’t the unknowns. It is more about navigating the complexities of how insurance works in that country, what the regulations are, what the tax obligations are, what the customs are for servicing an insurance contract. All of those things actually do change. Insurance conceptually is the same around the world, but how it is applied in every market is very different. Being able to administer the needs of an insurance contract is where you get some of the biggest differences. And that is really just a part of what the broker’s job is: to really understand the customer’s business in the first place, and to design the right solution.
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THE BIG INTERVIEW / KAI DWYER
IB: Are insurance brokers meeting these client needs as they increasingly expand overseas? KD: I think we have very good brokers in Australia, and I think they understand some of these things are very complex. I think that, if I am a broker, I am probably aware of the fact that insurance works differently in Brazil; that the tax laws are different, and that I might need to find someone who can help me with that. But I might not necessarily have easy access to all of the tools and resources that help me solve that problem. So, in a way, brokers are sometimes dealing with known unknowns; they know that things are different, but they don’t necessarily have a lot of clarity around how they are different and what the best advice is.
IB: Are insurance brokers potentially leaving clients exposed in any way? KD: I wouldn’t want to say they have been leaving their clients exposed; that’s not really what this is about. It’s about whether they have the best solution that they could put in place for the client. I don’t think a broker would knowingly leave a client exposed. But what they might have are different types of solutions in place, depending on the customer and the countries that are at stake. You might say to a customer, “I can’t service you in that country; I recommend you buy a local policy there and then I’ll put a policy in place for you in Australia”. That is still insurance, and it is compliant. But is it the most efficient, the most effective way to
A new type of customer Zurich has for a long time been recognised as a leading provider when it comes to servicing the international insurance needs of ‘household name’ corporates of large sizes. However, the burgeoning activities of smaller corporates abroad require a completely different proposition – and that’s just what Kai Dwyer has been charged with delivering. “We are in a reasonably pioneering space in some respects.” Dwyer explains. “What we have now is infrastructure that works fantastically for the likes of BHP or Rio Tinto or similarsized companies, but it could be too cumbersome and too complex even for a mid-sized company who doesn’t have the benefit of a buyer who is a sophisticated risk manager with lots of experience. We need to simplify that so it works equally well for that customer.” The end goal, in Dwyer’s eyes, is clear: insurance that works, everywhere. “I see it as being something where a mid-sized, small corporate business in Australia can go to their trusted insurance broker and be confident that they are going to – at least as far as their insurance needs are concerned – be able to have a completely trustworthy solution in place on the ground that can be delivered and serviced by the broker,” he says. “They won’t have to worry about translating policies, or figuring out if cover they have in Australia is the same. It is about making sure that stuff is seamless and simple and happens without them having to worry about it.” But the task is not quite as easy as it sounds. Though some of the fundamentals of the proposition are the same as for
larger multinational corporations, Dwyer says mid-market customers have different needs – and, of course, different budgets. “In the international space, you can’t simply transplant what you have into a different market space and expect it to work in the same way,” he says. Dwyer says it will come down to the way the international product is built, how it is serviced on the ground and how it is distributed to clients in a ‘fit for purpose’ package.
“In the international space, you can’t simply transplant what you have into a different market space and expect it to work in the same way” And brokers who are able to provide international solutions will be taking a lot of complexity away from their clients, argues Dwyer, who says mid-market customers nominate this as one of the key challenges they face in their activities around the globe today. “While they don’t talk about insurance particularly, they do talk about the fact that navigating regulatory complexities and tax, and all of those things, are their biggest challenge. And insurance creates its own challenges for those reasons.”
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give the customer confidence and control of their insurance? Maybe not. The key to international business is to ask that question of the customer at the outset: ask them how they want their insurance to work for them. They have risks in all these places around the world, but what are their expectations if something goes wrong? IB: What are some of the factors at play when brokers look for the right solution? KD: I think it depends very much on who the broker is talking to and who the broker is. But what we do know is that the ability to respond to the very specific needs that customers have in very specific geographic territories is massively dependent on what your own footprint is. There is also the possibility brokers might be choosing to buy insurance on a local Australian master policy only that provides non-admitted cover. And there are insurers who are happy to provide cover on that basis. We don’t necessarily have a view on whether that is the right solution or not, but what we do say is the important thing is to ask the customer about their service expectations, so the right solution is determined by those questions. IB: Can you give us an example of what you mean by the right questions? KD: When you ask a customer, for example, “If you have a claim in Italy or the UK or Argentina, how would you want that to be serviced, and what are your expectations? What is the nature of your investment and how would you want your insurance to respond?” If the client says, “If I have assets there and there is a loss, I want somebody on the ground to go and look at the claim, and I want someone on the ground to be able to talk to my local management and negotiate the claim, and I want to have the claim paid locally because I need to have the balance sheet of my subsidiary in Argentina made good”, well that then automatically determines what the correct solution is for insuring that business. In that case, the response might not be, “Let’s just issue a policy in Australia that includes Argentina”, because you might not be able to provide the services the customer expects. And we all know that it is at claims time that insurance really goes to work. It’s not a question of how easy it was to buy a policy. It is, “When I really needed a policy to work for me, did it do its job?”
Risk and reward IB: What keeps you personally engaged with the insurance industry? KD: If you think about insurance from the standpoint of the purpose it fulfils – what gets us out of bed in the morning and makes us feel that we are making a contribution – this industry enables so much and that’s extremely rewarding. It is very satisfying to know that your customers can go about their business and do the things that they need to do, and look after their employees, and expand their businesses and invest in new infrastructure, and all of those things can happen only because you do what you do. That’s our role. And if you link that to the individual rewards that I have had over 30 years, it’s a fantastic balance sheet if you like. I wish we could be more successful and more unified as an industry in getting that message across. But we are poor at it – and I am not unique in saying that.
IB: Are there growing opportunities for brokers in the international market? KD: I think there is a growth opportunity. I think that the international business space presents a wonderful opportunity to decommoditise the work that a broker does. Because a broker that looks for the right conversation with the customer and is in a position to be able to say, “If this is how you expect your insurance to respond to your business needs, then this is what I recommend to you”, is demonstrating that they understand what those needs are, is explaining there are different options available, and is making a recommendation on which one might work best. I think that is by definition selling value. IB: Does the broking proposition need to adapt in any way to the changing global landscape? KD: This is a really big strategic issue for the industry. I am extremely confident about the future of Australian insurance brokers. I believe that Australian businesses are very well served by a very good body of professional brokers, and our experiences at Zurich with Australian brokers across the spectrum have been overwhelmingly positive. But the world is changing and we need to adapt. The industry we work in has to adapt, just as our customers – the people who buy our products – are adapting their own businesses. I can’t say what distribution will look like in five years or 10 years’ time. But what I can say is, if you look at the elements of the value chain that the broker fulfils and whether they will remain important, yes I believe they are important today and they will remain just as important in the future.
“The key to international business is to ask that question of the customer at the outset: ask them how they want their insurance to work for them”
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SPECIAL REPORT / YOUNG GUNS
Meet the young stars who are making waves in the Australian insurance industry
W
elcome to the Insurance Business annual Young Guns report. We asked you to nominate young insurance professionals from the country’s leading brokerages, insurers, underwriters and advisers who were already making a name for themselves within their own organisations and the wider insurance community. The result? An impressive list of rising stars aged 35 or under, all of whom are enthusiastically embracing insurance careers and are set to shape the future of Australia’s insurance landscape. Want to find inspiration, faith and hope for the future of insurance? Look no further than our 2014 Young Guns, and find an industry well and truly in safe hands. 16 | AUGUST 2014
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Vanessa Morton General manager and director Gary Morton Insurance Brokers Vanessa Morton may only have been an insurance broker for three short years, but she is certainly no stranger to the industry and has already made her mark. Commencing her career with Allianz in 2002, Morton rose to become national sales and development manager and was responsible for creating and implementing the now-infamous ‘Blue Eagle’ loyalty scheme. Launching into insurance broking with her parents in 2011, she is currently busy with all aspects of growing a small but thriving Sydney brokerage, which has a turnover of $5m and is growing at 10% a year. However, Morton’s aspirations do not stop with her own business, for which she says she has ‘‘strong aspirations for growth and development’’. Current chair of NIBA’s NSW Young Professionals Committee and a member since 2005, Morton’s achievements have included developing NIBA’s mentoring program in 2007, and she currently mentors one broker a year. She is also involved in Women on Boards and is developing her board capabilities.
Tim Cooper Founder and CEO Challenge Insurance Services Entrepreneur Tim Cooper is not one to say no to an opportunity. When Elliott Australia Group CEO John Elliott gave him a chance to grow his own book of business and take it on as an AR, he grew the book by 270% over three years on his own, culminating in the launch of his own Challenge Insurance Services brand. With targets that include growing the business organically by 100% a year for the first three years, Cooper is a champion of the power of effort, saying that great effort is given to everything the business does, and his results stem from this. He also recognises the motivating power of being an entrepreneurship, with a model that will include empowering other young insurance professionals to take a stake in their own financial future by providing ownership opportunities, a move he says will replicate his own opportunities. Recognised in the Insurance Business 2013 Top 30 Brokers list, and a former participant in QBE’s leadership program for young insurance professionals, ‘eQuip’, Cooper has said that “being a broker isn’t enough”. Instead, he is taking broking further by building partnerships among service providers peripheral to the broking industry, and runs an advisory program bringing insurance advisory services to groups of business owners and the public; a walking, talking advocate of broking while developing his business.
Victor Casper Senior underwriter – commercial property, AIG AIG’s Victor Casper is part of a new generation of younger property market underwriters leading the way in the corporate and major account market segments. Having relocated to Sydney last year to manage, underwrite and lead some of the largest and most significant accounts in AIG’s property portfolio, Casper has been identified as a future leader within AIG, and is known for a sound technical knowledge and range of experience, bridging the gap between junior and less experienced underwriters and more seasoned veterans. Though only 31, Casper’s breadth of experience should not be underestimated. Having worked
in Brisbane, Melbourne and Sydney, he was selected to attend AIG’s inaugural global property underwriter exchange program in the USA, and its inaugural major accounts practice university in Singapore. Casper was also nominated in March this year to participate in the ‘Leading Others’ leadership program within AIG, and was the only participant from Australia to be invited to be part of AIG’s Asia-Pacific Future Leaders Forum, a program for exceptional talent within the organisation. He is described as proactive, collaborative and communicative and goes above and beyond for clients, and he aims to give back by mentoring and training colleagues.
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SPECIAL REPORT / YOUNG GUNS
Shaun Pang
Luke Wiblin Distribution manager, Australian intermediaries QBE Born into an insurance family rather than falling into the industry, distribution manager for QBE’s Australian intermediaries business Luke Wiblin has grown up with a passion for insurance. Working his way through the general insurance branch of Mercantile Mutual, Wiblin has risen through a number of different roles to become responsible for QBE’s team of business relationship managers throughout NSW and the ACT. He is something of a rainmaker, having been involved in a number of initiatives that have led to business success, and has secured large deals through the development of strong broker relationships. For example, Wiblin was successful in identifying and converting a large industry association into a profitable and growing facility for QBE. More broadly, he has led his team to maintain important relationships and exceed profitability and growth targets in extremely tough market conditions. Wiblin is said to be passionate about the intermediated sector of the industry, and aims to become a leader in this space. He is a current member of the QBE Leadership Academy Mid-Level Manager Program, which is designed to help QBE staff become leaders and build their skills and knowledge to address new challenges and deliver superior results for customers. He is also involved in encouraging and influencing young talent to join the insurance industry and, with three young children under three, is said to lead by example. He is already considered a ‘trusted adviser’ by many intermediary partners.
Senior account executive (construction) Marsh Melbourne-based construction specialist Shaun Pang has been recognised early at Marsh as a future leader within the firm. Named one of 10 ‘knowledge managers’ for the group’s large global construction practice in 2012, at 31 Pang services many of the company’s largest accounts, including several multinational corporations, and regularly acts on the placement and maintenance of insurance programs for major construction projects. With a reputation for technical excellence, particularly in regard to his contract review performance, he earned the officer title of assistant vice president in 2012. In 2014, he was selected for the talent development program for emerging leaders, collectively known as ‘Generation M’.
Madeeha Zali Underwriter, professional risks Brooklyn Underwriting Madeeha Zali – or ‘Maddie’ to her peers – has her eyes set on being recognised as a leading specialist professional lines underwriter by brokers across Australia, and she is already well on her way. A trained psychologist who fell in love with insurance at Brooklyn in 2012, Zali is now underwriting five different products, including specialist and broad lines of PI cover, and manages to find time to undertake additional tasks such as new business development with brokers Australiawide and help with the ongoing improvement of Brooklyn’s online capabilities and systems. Pegged as part of a new breed of ‘tech-savvy’ young professionals, Zali was voted Brooklyn’s Employee of the Year in 2014, with achievements including exceeding her annual budget and demonstrating her exceptional relationship-building skills by organising a successful broker function – Brooklyn’s Ladies High Tea – in May of this year. She is said to love the challenge and dynamics of the insurance industry, and provides confirmation to younger colleagues that great things are possible for those who apply themselves.
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Megan Sheehan
Gemma Gould
Underwriter and Hobart office manager Lawsons Underwriting Australia Megan Sheehan has seen her responsibilities at Lawsons Underwriting Australia grow rapidly since launching its Hobart office in 2008, to the point where she is now seen as the ‘go to’ person in the company for a range of underwriting and management matters. With a broad and varied remit that includes underwriting, as well as taking a hands-on role in the day-to-day running of the company, Sheehan has overseen a period of growth in the Hobart office, which has now become the largest in the company. Sheehan is increasingly involved in the management and direction of the business, while taking time to be a role model for younger staff.
Senior broker MGA Insurance Brokers The youngest QPIB Fellow in Australia at the age of 31, MGA Insurance Brokers’ Gemma Gould boasts a strong interest in developing young insurance industry talent, in addition to her challenging senior broker role at MGA Insurance Brokers in Sydney, where she looks after SME clients. Gould has recently authored a book, BreakThru Brokin: Unleash the Broker Within, in which she aims to provide ‘BreakThru’ strategies for young insurance brokers entering the industry, to help them build successful insurance broking careers. The recipient of the 2011 NIBA/CGU CPIB Scholarship, and a NIBA National Education Committee member, Gould is passionate about young people. She is engaged in her local community as a youth mentor through her involvement with the Max Potential Program, an initiative of Clubs NSW, and she received corporate sponsorship from Castle Hill RSL for a position in the program. Gould’s present goal is to successfully release her book, BreakThru Brokin, into the marketplace. The book is available from breakthrubrokin. com.au.
Milan Jankovic Broker Austbrokers Canberra Recently progressing into his first fully fledged insurance broking role at the helm of his own team, Austbrokers Canberra’s Milan Jankovic has quickly made his mark, with efforts that have seen his portfolio grow by 20% over the past six months, representing 10% of the entire Austbrokers Canberra business. Predominantly focusing on the construction industry, Jankovic works closely with the Master Builders Association (ACT). He has a reputation for consistently reaching portfolio budgets (his portfolio worth $650,000 in commission and fee income exceeded budget by $120,000) and doing particularly well with new business, with successful appointments to over 30 clients in recent times. His ‘‘affable’’ demeanour has also made him very accessible to clients, and he has impressed Austbrokers with his customer service as well as broking skills and knowledge. Jankovic is a regular attendee at NIBA YP events and has been a nominee in the Allianz Young Eagle Program.
Matthew O’Rourke Commercial broker Austbrokers Coast to Coast Having transitioned from a claims officer role into a commercial broking role 12 months ago, 22-year-old Matthew O’Rourke already boasts the highest number of individual clients – 520 – within the brokerage. Managing a commercial portfolio of SME and midmarket clients and specialising in the farming industry, he is said to be adept at building strong relationships and working proactively for clients to gain suitable products for all types of farming industries, while capitalising on leads in the sector. With a portfolio that began at $120,000 in June 2013, O’Rourke has exceeded budget and growth expectations, with 70% growth to approx. $210,000 over 12 months.
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Chaice Evans Business consultant, commercial insurance underwriting operations TIO ‘‘Driven and determined’’, Chaice Evans commenced with TIO’s claims division in 2011, quickly establishing himself as an ‘‘outstanding customer-oriented’’ individual within the business. Progressing through TIO’s personal lines business, he now works as an insurance underwriter and business consultant within the commercial underwriting operations team, where his portfolio covers service to clients and brokers on the spectrum of commercial insurance products, from commercial vehicle through to broadform liability. Though relatively new to the industry, Evans’ ‘‘enthusiasm and passion’’ have seen him adapt quickly to the requirements of the business, and he is said to productively challenge the way things are done to create better outcomes for the business. He has already held various roles on cross-organisation committees and is often called upon to be a subject matter expert on organisational projects. Evans’ passion for the insurance industry has led to him assisting with the launch of the first Young Insurance Professionals branch in the NT. He is now the branch’s communications officer and sits on its committee, in addition his day-to-day TIO role. Evans has a dedication to customer service, which he hopes to one day make the centre of a role as a CEO of an insurance company.
Anna Heyligers Account director, Milne Alexander A high achiever at Milne Alexander, Anna Heyligers became a partner of the business in 2012, and hasn’t looked back since. Managing its broking division in NSW across corporate, SME/commercial and personal lines – which means heading and managing a team of 10 staff with varying levels of experience – Heyligers’ duties include being responsible for efficiencies within the business, and the company’s overall client service delivery. Heyligers is a very highly rated broker, and she has a reputation for placing a strong onus on career development and education of the team members under her. While she is currently focused on developing her management skills in business and technical skills in insurance and risk management, she is also dedicated to making time to mentor, support and grow people within her own business and the insurance industry. She may be known to many as one of the ‘faces’ of the Allianz Blue Eagles program recently.
Avi Tatarka Sales and marketing manager Scott Winton Insurance Brokers A regular on the Insurance Business Elite Brokers list, Avi Tatarka of Scott Winton Insurance Brokers plays a central role within the brokerage as sales and marketing manager and on the board of management team, in addition to managing accounts worth over $2.7m in total premium. Tatarka oversees all marketing areas of the business, from strategy to execution, as well as the organisation of all company events. This marketing role involves implementing procedures for building portfolios with all staff. In recognition of his standing in the industry, Tatarka was selected to participate in QBE’s eQuip program in 2014, which aims to develop broader capabilities of Australia’s next generation of industry leaders. The industry can expect to hear more of Avi Tatarka in the future. He is being groomed to take over the management of Scott Winton from his father, Ron Tatarka, the 2014 Insurance Business Elite Broker of the Year.
Jennnifer Nixon Claims executive, OAMPS Claims Jennifer Nixon manages a portfolio of claims at OAMPS, where she supports a number of the business’s Ballarat and Melbourne insurance brokers. Working closely as their claims advocate to ensure prompt claims settlement from underwriting partners, Nixon regularly achieves strong informal and formal feedback from clients and brokers. She is already demonstrating her interest in development within the business by taking on a role as a ‘net advocacy champion’ within its Melbourne hub, which involves actively promoting net advocacy through a series of communications with the team she works in. Nixon is also known for recommending how OAMPS can improve its processes and behaviours so that it can keep helping clients in their time of need.
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SPECIAL REPORT / YOUNG GUNS
Daniel Gordon
Damon Edwards
Alison Brough Relationship specialist, broker distribution Vero Joining Vero in 2010, relationship specialist Alison Brough is a key member of the insurer’s broker distribution team, working closely with major insurance broking groups. Viewed very much as a rising star at Suncorp, Brough is said to have wanted an opportunity to work directly with brokers, and has thrived in the fast-paced, diverse role she moved into in 2013, which sees her coming to grips with broker challenges, developing national offers and portfolio transfers, and coordinating training and conference programs. In addition, Brough also works with many other areas of Vero’s business, including its BDM team, underwriters, claims team, and marketing and technology teams to ensure a coordinated outcome is reached. Said to be extremely customer-focused for both B2B and B2C customers across various industries, Brough has taken on the additional responsibility of managing Vero’s involvement and sponsorship in the Warren Tickle Young Professional Broker award program, and she is an active NIBA NSW Young Professional Committee member. She was recently, for example, involved in the NIBA YP Presentation Skills Course sponsored by Vero.
Branch manager Adroit Insurance Group (Ballarat) Damon Edwards is being seen as a future leader within the Adroit Group, and his current responsibilities in managing the Ballarat branch include ensuring the ongoing retention of key accounts. Employed at Garden State Insurance Brokers for over 10 years, Edwards progressed through positions that included general manager and senior account executive, where he has developed wide-ranging exposure, from handling claims and personal lines products to marketing large accounts, including ISRs and complex liability policies. At Adroit, his day sees him managing the daily operations and staff of the branch to ensure the smooth running of the business operations, and leading strategic planning for the branch. He is a well-known face in the industry, having been a committee member of ANZIIF’s Ballarat Chapter from 2005 to 2010, and president in 2007, and he was one of four brokers selected from Victoria as a part of the Allianz Young Eagle program in 2012. With a strong focus on assisting others to achieve their potential, working with and advocating for those new to the industry, Edwards has volunteered his time to run intra-company training sessions for emerging brokers within the Adroit Group on both the technical side of products as well as the soft skills required to be an insurance broker. He promotes insurance broking more widely to school leavers at career information evenings and by writing a quarterly article for the Ballarat Courier, which provides insurance information to the community.
Broking manager Austbrokers Coast to Coast (corporate) Daniel Gordon oversees six general insurance brokers and one life insurance broker while managing and growing a book worth $460,000, made up predominantly of corporate clients. A champion of a culture based on integrity, diversity, morals and outcomes, Gordon is said to be on track to becoming a director of the business, having demonstrated impressive growth results, such as increasing fees and income in his first year by 50% and then by another 50% in his second year. He has a reputation for engaging clientele with professional advice based on needs and outcomes as opposed to price, and has developed a ‘personal brand’ in the industry, which management of the business say clients respect and look forward to when doing business with him. Gordon was previously nominated for the Allianz Blue Eagle Award.
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Stephanie Bainat Senior associate Moray & Agnew A senior associate at Moray & Agnew who has set her sights on partnership, Stephanie Bainat is a broadly experienced general insurance lawyer the industry is sure to see more of in future. Specialising in professional indemnity law, Bainat is particularly skilled in representing barristers in claims against them, and is a respected adviser to clients who have an in-depth understanding of the law and yet are themselves the target of litigious action. Her achievements include achieving win/win outcomes in a number of major cases, as well as advising government contractors in matters such as personal injury cases. Bainat is said to understand both the rigours and rewards of choosing a career in the legal profession, including the impetus to ‘stay on top of everything’. However, while appreciating the need to be highly organised, the value of prioritising effectively and the ability to cut through and work around obstacles, as a mother who works part-time at the firm, Bainat is also an ambassador for work-life balance. She hopes that working towards her goals will encourage other young lawyers to follow their ambitions for partnership and achieve the rewards that brings, while not having to sacrifice everything else in their lives.
Samantha Forkas Account executive Willis New Willis recruit Samantha Forkas is already impressing industry colleagues at the young age of 23. Fast-tracking her career progression, Forkas has moved quickly from a first role out of school as an administrative assistant at PSC Horsell in 2009, to joining Willis’s commercial team as a client-facing account manager in June this year, having taken some
Shane Moore Managing director Trade Risk, AR of Westcourt General Founder and managing director of Trade Risk Shane Moore has grown the business from scratch into one of Australia’s leading firms specialising in insurance for tradespeople. Refusing to be deterred by experts in the insurance industry who warned him against the strategy, Moore – without using any debt or an existing book of clients – instead chose to utilise digital marketing to target a particular niche, and single-handedly made it a success. Though it began as a single broker operation, Moore has grown the business to a team of six, with a book of over 2,000 clients from every state and territory in Australia. As a result, he is now focused on improving his management skills, to become a better manager of his people and his business. The insurance profession can expect to see more of Moore in future, with expectations he may be able to replicate his success in other niches outside of building and construction. Moore has already been an inspiration to other business operators in the industry, through a demonstration of his commitment to invest in websites and digital marketing to achieve success, which Moore sees as a big part of the future of the industry, especially when it comes to fighting off the challenge of the direct market.
intervening steps as an assistant broker at PSC Horsell and an assistant account manager role specialising in construction at Planned Cover. Known as a ‘star student’ at NIBA who takes ‘education very seriously’, Forkas is already a NIBA QPIB, was awarded NIBA’s Frank Earl Scholarship in 2014, and was also selected as a finalist for the 2014 NIBA QBE Student of the Year Award. She is an active participant in the industry, through her involvement in NIBA College’s coaching program, and is responsible for arranging NIBA young professional training workshops through the YP committee. She also manages to successfully balance the demands of professional life with motherhood. AUGUST 2014 | 23
SPECIAL REPORT / YOUNG GUNS
Denver Van Gramberg Manager, marketing & distribution Brooklyn Underwriting Denver Van Gramberg would be known to many brokers nationwide, having taken on the role of managing and selling Brooklyn Underwriting’s brand, the sales and marketing of the group’s products, and the promotion of its online system and distribution channels. With a proven ability to build relationships across the Australian broker and insurer markets, Van Gramberg has made a significant and easily recognisable contribution to the organisation’s achievement of over 35% growth in three consecutive financial years. An energetic and assertive professional who is contributing to innovation at the group, he has engaged with clients across all states, territories, and regional centres in Australia, conducting meetings and presentations at the executive level and managing the relationships with over 650 licensed brokers. He is seen as having played a crucial role in Brooklyn’s Underwriting Agency of the Year wins in both 2012 and 2013. Personally passionate about the insurance industry, Van Gramberg has contributed to it through Brooklyn’s ‘NEXT’ event aimed at young professionals, with guests including Dr John Hewson, rugby stars such as Chris Lawrence, and Sydney FC’s Terry McFlynn. He was also on the committee that helped raise over $100,000 for KidsXpress through participation in the industry-wide KidsXpress Charity Cricket Shield.
Jessica Mitchell Underwriting technical manager, SME Zurich Jessica Mitchell’s ability to adapt well to change, learn from others and her personal desire to always challenge herself are impressing the management ranks at Zurich. As underwriting technical manager, SME, Mitchell is responsible for the overall technical ability and development of a team of 50 underwriters through establishing and driving an internal technical education program. Said to be deeply committed to improving the customer experience by driving efficiency of business rules and improving underwriting guidelines, Mitchell recently led a project to assist Zurich’s Malaysia office in developing an SME business insurance proposition, and was involved in the implementation of Zurich’s Xpress Underwriting Centre, in addition to managing and leading a comprehensive review of SME underwriting guidelines to improve business processes and underwriting rules. She completed Zurich’s Horizon Leadership Program in 2013, and is seen as a future leader within the business. Mitchell is also passionate about developing future talent, and shows her community spirit in The Smith Family’s mentoring program, where she offers regular support and direction to students to help guide their studies and career prospects.
David Clarke AR and head of special risks Elliott Insurance Brokers With ambitions of being the ‘go to’ insurance broker for the subsea and offshore industry, David Clarke has made a stellar start to his career as an AR and head of special risks at Elliott Insurance Brokers. Having kickstarted his business by creating a six-figure business in just six months, Clarke has been quick to secure clients all over Australia and in the UK, including high-level advisory work with multinational and global businesses. In a landmark achievement, he has recently been successful in securing a first-of-its-kind Lloyd’s facility, which combines a ‘world first’ range of covers for the marine, energy and offshore industries. A committee member of Subsea Energy Australia and also involved in the Australian Oil & Gas expo, Clarke plans to roll out a formal high-level advisory service offering for large corporates and multinationals, expand the strategic partner model, and implement a complex risks wholesale broker service. NIBA awarded Clarke the 2013 Young Professional Broker of the Year Award.
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SPECIAL REPORT / YOUNG GUNS
Sarah Kempton Account executive OAMPS Insurance Brokers (Darwin) Previously working as an underwriter for IAG Group in New Zealand, Sarah Kempton’s first year and a half in insurance broking in Darwin has been a resounding success, having quickly built a rapport with her clients and gained a strong knowledge of commercial products. Kempton manages a large commercial portfolio of
Hamish McDonald Nye Southern region manager, DUAL Australia Hamish McDonald Nye has achieved a remarkably quick ascent from a role as senior account executive at Aon Risk Services to southern region manager at DUAL Australia in just 18 months. Starting at DUAL as a senior underwriter for corporate financial lines, McDonald Nye joined DUAL at the start of a tumultuous period, which included a restructure of the portfolio, a large fraud, and the resignation of the MD and the southern region manager. Despite the challenges, he wrote more new business than any
SME business clients, and has already demonstrated a strong desire to further develop her skills, a willingness to mentor and train other staff, and great leadership and mediation skills. OAMPS nationally recognised her contribution to the business with a Values Award at a recent Melbourne luncheon. Kempton already sees herself moving into a senior account management role in the near future, and is working with the business’ senior team to gain the knowledge and skills required to take her career to the next level, which will include further study. She helped launch Young Insurance Professionals in the NT and has taken on the role of president.
other underwriter at DUAL, and was rewarded for this success, relationships, leadership skills and ability with consecutive promotions to financial lines manager, then to southern region manager. Having been nominated for the Warren Tickle award during his former broking career, some of his achievements then – such as the broking of several large and complex placements, including the negotiation of the D&O program for Fosters – are his career highlights to date. He now oversees the running of the Melbourne office and plans to continue to grow a sustainable and profitable business.
Lizzie Carver NSW casualty manager ACE Insurance Joining ACE in 2011 after gaining significant experience at Allianz Cornhill, Lizzie Carver quickly established herself in Australia as an expert underwriter of liability risks, specialising in public and products liability and large multinational general liability programs. Promoted from casualty underwriter to NSW casualty manager in 2013, she has demonstrated a genuine flair for leadership ever since, successfully overseeing growth in the NSW casualty portfolio, including contributing personally with a number of significant new business wins in 2013 and 2014. Renowned in the ACE office for her ‘I love insurance’ coffee mug, Carver is dedicated and enthusiastic about the insurance industry. She has been a member of the NSW YIPs committee since its inception in early 2012 and became NSW treasurer in 2014. In fact, she was integral to the organisation’s early success and played a leading role in facilitating the partnership between ACE and YIPs that resulted in ACE becoming a new national sponsor for the organisation this year. Carver is said to be working hard to improve the image of the insurance industry through her work with YIPs, in addition to managing ACE’s portfolio of NSW casualty clients and a team of three underwriters.
Raisa Conchin Partner, Wotton + Kearney Raisa Conchin has been a fast riser. Promoted to special counsel at Wotton + Kearney in July 2013 and moving to Brisbane to help establish its office there, her performance meant she was promoted to partner only a year later, eight years after her admission. At 32, Raisa Conchin is now a key member of the Brisbane leadership team, assisting managing partner Paul Spezza with running the office. With a specialty in professional indemnity, including claims against valuers, financial planners, accountants, stockbrokers and mortgage brokers, Conchin has particular responsibility for building the Brisbane financial lines practice. Recent matters include representing a director in a $60m class action under a D&O policy, representing a valuer on a $25m commercial property claim, and advising an insurer on indemnity for fraud claims by over 100 clients against a financial planner. Now co-head of the firm’s financial lines focus group, Conchin has set her sights on growing the firm’s practice presence in Queensland, and is an active member of the YIPs Queensland branch.
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Prudence Chang
Madeline Barra
Senior new business development manager National Credit Insurance Brokers A regular on the Insurance Business Elite Brokers list, Prudence Chang manages the largest budget at National Credit Insurance Brokers. Having set her sights on the goal of becoming the youngest person at NCI to achieve all three internal sales awards – the NCI Executive Team Sales Achiever of the Year, the NCI Sales Person of the Year, and the NCI Most $ Value of the Year, Chang went about doing just that – not once, but twice. In addition to placing new trade credit insurance policies and impressing both insurers and clients, Chang spends a lot of her own time mentoring other trade credit brokers, and also mentors young general brokers to achieve better sales results for their own companies. She is said to look for ways to invest in the industry, and motivates younger brokers to achieve their very best. She is a networking dynamo, and is expected to continue to shine brightly in the industry.
Jodie Barrett Senior broker relationship manager, distribution Lumley Insurance Promoted to senior broker relationship manager in mid-2013, Lumley Insurance’s Jodie Barrett – a former insurance broker – plays a key role in helping insurance brokers identify and win new corporate accounts. Having completed the Wesfarmers Emerging Leader Program – a high-profile internal program developed exclusively for staff with high potential – Barrett is already demonstrating her talents, playing an integral part in developing a process to quantify new clients at Lumley. This new process helps business relationship managers have more meaningful conversations with their clients and meet their needs, and has already led to an increase in pipeline ‘strike rate’ in her region – she exceeded budget by 200% in March. Seeing insurance as a ‘‘great and giving’’ community, Barrett hopes to one day be a leader in the field, and to help new insurance professionals grow in an industry she says offers ‘‘fantastic opportunities to young people’’.
Shane Brady Account manager Sear Insurance Brokers Winner of the NIBA Young Insurance Professional of the Year Award for Vic/ Tas this year, Shane Brady is also a national finalist for the Warren Tickle Memorial Award. Managing a diverse portfolio of commercial clients across Australia and New Zealand, his achievements include management of a large total loss fire claim in 2012; management of 12 flood claims in the 2011 Brisbane flood; and the successful placement of a large multinational ISR, liability and marine program. With a reputation for integrity, leadership and going ‘above and beyond what is expected’, Brady has also, in conjunction with his director, developed an online procedural compliance system to help Sear comply with their regulatory requirements.
Account executive North Queensland Insurance Brokers Winner of the Peter McCarthy Memorial Award as CQIB’s Young Professional for 2014, Madeline Barra has made the journey from receptionist to account executive in just five years. At 23, she manages an account consisting of a wide range of business and domestic insurances totalling $1.5m in premium. Barra managed a host of Cyclone Yasi claims to settlement through sheer “dedication and perseverance”, and lobbied her local Federal Parliament representative on behalf of the insurance industry, in an effort to obtain fair property premiums for customers. With the support of CQIB, Barra is establishing a Young Professionals group in North Queensland.
John Elliott CEO, Elliott Australia Group As CEO of Elliott Australia Group, John Elliott is in charge of the direction and growth strategy of this fast-growing business, which has set itself a target of acquiring a massive 50,000 new clients by 2017, after 3,000% growth during the last six years. Though this target would involve an escalation in the client acquisition rate from 15 per day to 50 per day by mid-next year, Elliott has already overseen growth from seven clients per day in mid-2014, and with his track record the industry should watch his future growth with interest. Along with his team, John has achieved several breakthroughs in online insurance, including Australia’s first online comparison service for home insurance which resulted in nearly 30,000 quoting opportunities. In addition, he has developed Australia’s first site offering workers’ compensation information and placement for every state in Australia and fully automated online products for his clients. Elliott’s goals extend to assisting those around him, with the hope of turning 10 of his ARs into millionaires in five years. With his focus on new talent development and technology, as well as a belief in the opportunities available in the industry, he is said to hope the insurance industry will be different by the time he leaves it. AUGUST 2014 | 27
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FEATURE / ON THE ROAD
It’s always sunny in
QUEENSLAND Rick Davis has been at the coalface of the Central and Northern Queensland insurance industry for more than three decades. He talks to Kevin Eddy about the challenges and opportunities the region faces
The Bruce Highway is not only the major artery for the eastern spine of Queensland, but the journey up its 1,700km length highlights the diversity of the state’s geography and economy. The temperate climes and tourist beaches of Brisbane and the Sunshine Coast may characterise the southern end of the highway, but the landscape soon transforms into sub-tropical sugar and mining country before entering the tropical north. It’s a visceral reminder of Queensland’s unique challenges and opportunities. Around the mid-point of the Bruce, 300km north of Rockhampton and 30km south of Mackay, lies the town of Sarina. It’s a classic Central Queensland country town, with a bush ridge to the west, beaches to the east and a sugar refinery overlooking the main street. It also harbours something that’s becoming a rare sight in modern-day Australia: a high street insurance broker.
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FEATURE / ON THE ROAD
Sarina Insurance and Financial Services has only been an authorised representative of Ausure for five years, but director Rick Davis has more than 30 years’ experience insuring the Sarina region and beyond, having joined SGIO (later Suncorp) as an agent in 1983. He, his wife Barbara and his team have seen both the insurance and economic landscape transform over the years – and provided insurance business with a view of Central and North Queensland’s future that only someone at the coalface can provide.
PREMIUM PAIN The big issue in this part of Queensland is rocketing premiums in the wake of natural disasters such as the 2012 floods and Cyclone Yasi, especially for rural properties. Davis says a typical home and contents policy with an annual premium of $1,500 three to four years ago has more than doubled in cost, with premiums coming in at $3,500 to $4,000 per year.
“One ray of sunlight on the horizon is that premiums seem to have stabilised this year, with many renewals flat and some even reducing” A DIFFERENT TYPE OF DIVERSIFICATION While many insurance brokers are looking at providing additional services to diversify their income, Rick Davis is taking a different approach. He’s becoming a landlord. Earlier this year, he purchased a vacant arcade in Sarina with the aim of making it the town’s financial hub (dubbed ‘Arcade on Broad’). A quarter of a million dollars and several months later, Sarina Insurance moved into state-of-the-art offices, with further tenants set to follow. “Arcade on Broad is 230 square metres of lettable office space with its own conference centre,” explains Davis. “We’re marketing it as a business centre for Sarina. Our ideal tenants are accountants, solicitors, real estate agents and mortgage brokers.” While Davis is planning that the venture will provide an independent income stream, he’s also expecting that the businesses within the hub will all benefit from their proximity to each other. “The aim is to create a referral hub and network of businesses to make it easy to meeting client’s needs,” he adds. “After all, referral is the cheapest form of advertising.”
Understandably, clients are looking for alternatives and cheap quotes from direct insurers are proving tempting. “We saw huge increases in 2012-13, and 2013-14 wasn’t good either,” says Davis. “Farmers are ringing up exasperated with our renewal premium of $10,000, especially when they can get a phone quote from a direct insurer of $1,200.” Davis’ concern is that clients accept insufficient coverage to cut costs. Worse, he fears clients risk their premium increasing significantly on renewal or not being renewed at all. He’s seen this happen already. “The client comes back to us, expecting to get a quote of around $10,000,” he continues. “However, they’ve usually broken the continuity with their previous insurer, so when they step back in they’ve lost the grandfathering discount and their premium is 20% higher again.” Davis bends over backwards to find an acceptable balance between price and coverage to keep clients covered. “We work with them to find ways [to reduce the premium], such as taking out parts of the cover. Some people want to take out contents entirely – I tell them I can’t let them do it, it exposes them too much,” says Davis. “I then look at excesses, payment plans and so on – whatever we can do within the policy. “Insurers do understand the problem. For example, Vero used to only allow a maximum excess of $2,000 on a home, but are changing their policies to allow excesses up to $10,000 to make it more affordable. However, they’re still playing ‘catch up’ from the recent natural disasters.” One ray of sunlight on the horizon is that premiums seem to have stabilised this year, with many renewals flat and some even reducing. Davis hopes this is a ‘new normal’, but warns that another large natural disaster could start the whole cycle off again.
BUSTING THE BOOM The other headwind facing central and northern Queensland is the downturn in the mining and resources sector. “Contractor packages are remaining stable in terms of volume and premiums, but we’ve got a lot of clients who have been earning big dollars and whose budgets have been pulled tight,” says Davis. “Self-employed diesel fitters were charging mines or contractors $90 an hour, and they’re now being forced to accept $67ph.” Davis suggests that there may be an element of
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over-correction in the slowdown, but that the industry is facing a new normal that’s not as lucrative as the last few years. “They’re still digging the coal from the ground and need the equipment fixed, but I can’t see it going back to the halcyon days,” he says. “A couple of years ago, any old idiot could get a job at the mines and get paid $200,000 a year. Now, the miners who are good and do their job are still there: the idiots, the cowboys, those without a good work ethic or who aren’t good tradespeople – they’re gone or are working for much less money. The good guys are still in demand because they’re specialists.”
UNTIL THE COWS COME HOME The outlook is also uncertain for Central and Northern Queensland’s other big economic driver, agriculture. Farms are doing more with less, says Davis. “Most will say income is stable, but production costs have gone through the roof – chiefly fuel, fertiliser and wages,” he says. “They’ll complain about insurance costs until the cows come home, but in the grand scheme of things it’s not a big impost. Paying $150,000 for fertiliser which was $30,000 five years ago, is a much bigger dent in the wallet.” Davis also highlights a longer-term issue for agriculture – succession planning. “Twenty years ago, dad would retire at 60 or 70, buy a house in Mackay or on the Gold Coast, and the son would be virtually given the farm,” says Davies. “Nowadays, many farmers are working into their late 70s. We have one client who’s 81, still farming every day. He says he still enjoys it, but I think he has to work because there’s no one else to do it.” The issue of succession planning is one that occupies the minds of many older insurance brokers – Davis included. “When I retire in another five or 10 years, it would be good to hand on the business to have some young turk who will keep it going in Sarina,” he says. “We could sell to anybody, especially at the moment, but I’d hate to sell this to someone who I felt would move the whole business out of town after 12 months. That would be a real loss to the community.”
COMMUNITY SERVICE The importance of personal connection permeates every aspect of the business – regardless of whether his clients are next-door neighbours or at the other
RICK AND BARBARA’S TOP TIPS
1
“If you want clients to act on something quickly, write them a handwritten note. Nine times out of 10 they’ll respond, whereas they’re less likely to if it’s in a letter or email.”
2
“If clients are keen to drop elements of cover to reduce the premium, document it in file notes to protect yourself if the worst happens.”
3
“We urge all business clients to take business interruption cover. It’s only a couple of hundred dollars and can save a business if it’s unable to trade due to natural disaster.”
“A lot of people – clients and business – are shopping around the direct insurers”
end of the Bruce Highway. “We pride ourselves on service. I think every broker would say that, but we’ve been very successful in gaining renewals from larger brokers over the last few years. That’s down to the personal attention we give each and every client,” he says. “After all, all you’re selling with insurance is a promise. It’s a piece of paper or an email saying we promise to love and cherish you forever and ever – it’s like a marriage certificate. Until it’s tested, it’s just words and paper. “We have to make sure the words and paper have the strongest meaning possible – even if that’s tempered by the budget of the client.”
Kevin Eddy is editor-at-large of Insurance Business
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FEATURE / PREMIUM FUNDING
Easing the load The case for increased broker utilisation of insurance premium funding remains strong, and as Attvest Finance managing director Johan Steyn tells Insurance Business, brokers and clients alike are set to benefit from renewed competition and future growth
In association with
Over the last five years, Attvest Finance managing director Johan Steyn has been a first-hand witness to the gradual growth in the Australian market’s use of insurance premium funding. As awareness of the product has spread, premium funding’s share of commercial insurance premium volumes has increased from 20% to about a third of the market today. And Steyn says there is more of this growth to come. “We are still trailing overseas markets,” Steyn explains. “With the UK running at roughly 40%, and the US at 60%, there is still room for improvement in the use of the product.” Until recently, the Australian market hadn’t seen a new competitor in the premium funding market for the last 10 years. Instead, it had become used to a trend of consolidation, epitomised by the merger of Macquarie Premium Funding and Pacific Premium Funding at the end of 2012. More recently, the sale of Wesfarmers’ premium funding business to Arthur J. Gallagher represented a significant change in ownership in the market. However, it is not all one-way. Since the launch of the Hollard-backed Attvest Finance in June, Steyn says the market is set to benefit from more choice and independence.
PREMIUM PAIN PROTECTION The value of premium funding to clients is well understood by insurance brokers – rather than paying a hefty annual premium in one lump sum, clients can spread their premium payments over more manageable instalments. In doing so, they improve their cash flow position, and in most cases premium funding does not require any additional security. However, premium funding may also be saving clients from unnecessary risk. “Where the affordability of a single annual premium is an issue, by allowing the client to make use of premium funding you ensure they are comprehensively insured; they do not opt out of certain insurances and put themselves in a position of being underinsured,” Steyn says. Though insurers are increasingly marketing policies direct to commercial clients – some of them with pay-by-the-month options – these may also be inferior to premium funding. “That might be suitable for a limited number of clients, but what premium funding will always offer is the advantage of going through an insurance broker for a basket of optimum insurance products from various insurance providers, and still having one single payment.”
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Johan Steyn, MD, Attvest Finance
This choice of policy also brings with it more control over overall insurance spend.
A GROWING MARKET There are a number of factors contributing to the growth of premium funding. As the market has matured, awareness of the product offering has grown, and ease of use has improved. Economic conditions have also assisted product uptake, as have industry regulatory changes. “In the downward-spiralling economy we have been in in recent years, the use of the product increases – the less cash available to customers, the more likely they are to opt for it,” Steyn says. “I also believe improvements in the regulatory environ ment within the insurance industry have made use of the product much easier; the regulatory issues we had have been removed, so the risk has reduced and funders have simplified and streamlined the product.” However, two thirds of commercial insurance clients are still opting to pay premiums with cash, and clients are for the moment benefiting from falling – not rising – premiums. “This market is influenced strongly by insurance premiums, and we aren’t expecting any increases in premiums in the foreseeable future because of the competition in the insurance market. That will limit the growth in insurance premium funding,” Steyn says.
LEVERAGING INDEPENDENCE Attvest Finance has already set its sights on gaining 10% of the premium funding market within three years, and will do so not by waiting for insurance premium inflation to drive more clients into its arms, but instead by offering a competitive proposition. “I think the key will be to partner with our insurance brokers to grow the use of the product,” Steyn says. Attvest has a natural advantage here. While Steyn admits that not much differentiates premium funders when it comes to product (with any new innovation adopted by competitors within months), there is something Attvest has which many today do not: independence, and a major shareholding by management. Following the merger of Macquarie and Pacific Premium Funding, Attvest is looking to capitalise on the growing need for a non-aligned premium funder. Steyn says that while he believes the market is well served by good insurance premium funding
Johan Steyn is the co-founder and managing director of Attvest Finance. Johan began his career as an auditor at Deloitte in South Africa. As a chartered accountant he gained commercial experience in large multinational Johan Steyn corporations and also held the position of treasury manager of one of the largest stainless steel manufacturers in the world. He emigrated from South Africa to Australia in 2009 before he joined Centrepoint Alliance Premium Funding. As COO he was instrumental in a turnaround in both organisational culture and revenues. Johan has initiated and overseen the adoption of new technology that was critical to the organisation remaining competitive in the market. Johan also happens to be a handy tennis player and a passionate golfer.
providers, further consolidation will favour Attvest. “I think as the insurance market changes, and as cluster groups become more noticeable over time, our proposition might become stronger in future.”
UNDERSTANDING THE UNIQUE When it comes to insurance brokers, Attvest Finance knows one thing: every broker has a unique business, and their premium funding needs have to be individually understood. “Our whole strategy with brokers is to provide a unique relationship and to identify the needs of the broker. We want to understand that need and provide our product accordingly.” Steyn says that, for brokers, premium funding is really a means of facilitating payment, and the revenue generated will always be only a small part of their overall business. For that reason, operational execution, service, and understanding the needs of different businesses will be critical for a new player, and that goes for brokers and their clients. “I think what will differentiate us is our ability to find a customised solution,” Steyn says. “In some instances it is not easy; some clients may have their funding declined by other funders, but by being flexible we have means to still continue to fund that client.” In the end, a bespoke approach may be necessary for success. “In the insurance premium market, margins are very small, so you need to get it right to be profitable,” Steyn says.
“This market is influenced strongly by insurance premiums, and we aren’t expecting any increases in premiums in the foreseeable future because of the competition in the insurance market” AUGUST 2014 | 33
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FEATURE / CONSTRUCTION
Testing the
FOUNDATIONS A steady construction market buoyed by renewed economic optimism will not shield underwriters from tough times ahead, as competition and lower pricing tests the sustainability of business models over the long haul. Ben Abbott reports.
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From his office overlooking Wynyard Park in the heart of Sydney’s CBD, MECON Insurance Group chief executive Glenn Ross cannot see any new construction activity with his own eyes. However, from his position at the helm of the 10year old underwriter specialising in construction, he certainly has his fingers on the pulse – and that pulse is steady. “There’s a very positive vibe in the market at the moment,” Ross tells Insurance Business. “I think construction generally follows the economy of the country; it is doing that now and the economic outlook for the next 12 to 24-month stretch is good. So I am optimistic.” Though the market might look good, underwriters like MECON are still facing tough conditions for the foreseeable future. With growth in competition in the market in recent years and pressure on pricing, the stalwarts of the construction insurance space are having to prove the resilience of their businesses, and innovate to keep costs under control.
MARKET MATTERS Available market is a crucial element of the profitability equation for construction underwriters, and MECON’s Ross says things are definitely improving. He refers to the inflow of more private money into Sydney, singling out Barangaroo and Meriton Apartments developments as examples – each of these not too far from where he sits. “The media is talking it up too; there are very,
very few media articles now saying it is going backwards, which is different from the case two months ago.” Indeed, media attitudes are being buoyed by figures such as those from the Victorian Building Authority, which showed the value of building permit activity in April 2014 was the highest total on record for any month at $2.37bn, $500m more than the previous record. Four of seven building use categories (domestic homes, commercial, retail and public buildings) all achieved double-digit growth compared with the same period last year, while hospital and healthcare made a triple-digit gain on the same time last year. However, overall the market for underwriters can only be said to be steady, despite a renewed focus on the building of infrastructure at a federal and state level. Liberty International Underwriters senior vice president and chief underwriting officer – construction, Alan Dawes, says while the current value of construction activity is near all-time highs, it is tapering off, and as the construction of megaprojects in mining and energy winds down into the operational phase, the volume of new work is steady but not increasing. “Although there is certainly more planned activity in the large civil infrastructure space we need to be aware that the construction insurance market is driven by a combination of residential, commercial and industrial construction and is also serviced by various construction-related product
THE LEGAL VIEW Moray & Agnew’s Melbourne managing partner Bill Papastergiadis has seen the firm’s front-end construction legal practice booming in recent times. “The transaction market is at a high-end of the cycle; there are a lot of planning permits being issued for brownfield developments and residential high-rise construction projects.” Papastergiadis says in terms of brownfield sites, insurers are just now starting to adapt their policies to account for a lot of unknowns in terms of pollution and conditions. “We are seeing some insurers offering a number of policies that take on environmental cover, for things like asbestos, petrochemicals and other contaminants.” Bill Papastergiadis, Law firms such as Moray & Agnew have seen contracts begin to impose significant liability managing partner, on builders themselves in recent times. On the PI side of this equation, policies are being Moray & Agnew tailored to deal with some of these risks, though they are managed very closely. Though disputes are not as busy as transactional work at present, Papastergiadis says that there have been a lot of disputes fermenting around PI exposures, driven by defects to works and associated claims made against the relevant insurance professionals. Papastergiadis says the good news for insurance brokers is that broking houses are being increasingly used even during the tender stage of construction projects. “What happens is when builders are asked to tender for a project, they are looking to work out how much of the contract they can get cover for, and are using brokers to get a detailed analysis,” he says.
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FEATURE / CONSTRUCTION
“Using an online system without comparing covers is dangerous in my view – and a little antibroker as well. The covers that are offered online are generic – and a lot of the brokers are searching online for the lowest costs” Glenn Ross, MECON Winsure lines,” Dawes says. “Since none of these areas are showing any signs of stellar growth in the immediate or near future, we can only assume, at best, that the overall status quo for the construction insurance industry is being maintained.”
GETTING COMPETITIVE Since about 2009 during the GFC fallout, Australia has seen a number of new competitors in the construction arena, and to date this has showed no signs of letting up. “At that time, Australia was starting a period of unprecedented growth in new projects and this attracted certain ‘new’ markets that were looking to replace and replenish current premiums resulting from post-GFC market downturn, while also giving
them greater global spread,” Liberty International Underwriters’ Dawes says. “Coupled with this, existing local insurance markets have also seen a large increase in their underwriting capacity.” MECON Winsure’s Ross has also seen this trend develop. “There is a mixture of Lloyd’s and local insurance paper coming into new agencies. Some of them I would term professional agents – that’s all they do – while others are brokers that are turning their hands to an agency, which can turn out to be a bit of a mixed bag.” Ross says it is “debatable” whether the market has benefitted a lot from these new players coming in, though he does note some potential improvements for brokers and clients. “They’re not introducing anything particularly different. They are the same old things really: reasonably-priced, well-serviced paper. But it is keeping pricing low, which is a benefit for brokers and their clients, I suppose. The agencies also generally set a high service standard, so that can put pressure on the mainstream insurers,” he says. However, the result is serious pricing pressure for providers. “Pricing is as low as I have ever seen it at the moment,” Ross says. This is only set to continue. “As the volume and size of new projects diminishes, the market faces significant pricing pressure,” Dawes says. MECON has been able to boost profitability through some reduction in expenses, via the increased use of e-systems to transact business – an area which it has pioneered. However, profitability more broadly is harder to gauge. “While many major insurers reported healthy profits in the latest reporting season, it is unclear how these are made up,” Dawes says. “Many have large personal and commercial lines books, and absent any catastrophe activity in the last 12 months have fared well. The individual
What’s in store for non-residential construction? The market
Why?
2014
2015
After growth of 7.1% p.a. in 2013, the total value of engineering and commercial construction work is expected to fall by 3.6% p.a. in 2014, followed by a slower decline of 1.8% p.a. in 2015.
The decline will be driven by falls in resource-related construction as mining investment winds back, moderated by continued growth in telco investment, firmer commercial activity and a pick-up in 2015 in transport infrastructure.
Total infrastructure construction will turn down by 4.6% p.a. as major transport construction projects wind up and flood reconstruction work in Queensland slows. The value of mining sector work is expected to contract by 7.7% p.a.
A 3.5% p.a. increase in turnover from commercial construction activity is expected due to an increase in private sector building, while mining construction work will taper by a further 12.5%
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FEATURE / CONSTRUCTION
corporate lines, such as construction, may not report results publically, and can often be swallowed into a catch-all first-party treaty.” Dawes says that it is evident that, on the back of poor claims results, some insurers are withdrawing from certain sectors of the market, though these withdrawals are not of a big enough scale to precipitate significant market change. In the case of his own business, Dawes says consistency is vital to weather the competition. “LIU has always had a consistent approach to underwriting and this helps us manage the current market conditions. We assess each risk individually and underwrite accordingly. Our model has not changed significantly over the last 12 months.”
COST AND CREATIVITY Conditions have forced innovation in service and product, and MECON, for one, has pursued online transactions since pioneering this in the Australian insurance market. “We had the first online quotation system, or web-based online quotation system in Australia. It has been around in various forms for a long time, and is in its latest iteration now.” MECON built it for SMEs specifically, and Ross
says you still mainly see online offerings in the commercial and residential straightforward construction of building space. “Ours will do civil works and other things, and we also have contractors plant online now as well.” “At the smaller end of project insurance, as well as associated annual covers, the online channels are well established and operate very effectively,” says Dawes. However, for larger projects – with values above $100m – Dawes says online channels are generally not suitable and a tailored, project specific approach is required. “We don’t see this changing for the larger projects and consider underwriter and broker involvement to be critical in ensuring appropriate insurance programs are put in place.” Ross agrees, saying that while reducing expenses, going online for insurance has pitfalls. “Using an online system without comparing covers is dangerous in my view – and a little antibroker as well,” he says. “Essentially, the covers that are offered online are generic – they are not tailored – and a lot of the brokers are searching online for the lowest costs. So, without that policy comparison
BROKERS CRUCIAL AMID OWNER-BUILDER SHAKE-UP Looming changes to legislation in the NSW owner-builder market are set to hit insurers in the sector, and brokers could be key to ensuring clients keep abreast of the changes. After concerns existing state home warranty insurance schemes were not meeting the needs of consumers, the NSW government Philip Graf, AOBIS has scrapped a statutory requirement for owner-builders to purchase the insurance, in a change set to come into force later this year. Home warranty insurance is designed to cover the purchaser of a property for defects in workmanship, in the event of the death, disappearance or bankruptcy of the original owner-builder. Australian Owner Builder Insurance Services (AOBIS) managing director Philip Graf says that the changes – which are coming in tandem with revisions to the regime at the same time in Victoria – are likely to “have a bit of a hit” on the business, though AOBIS is meeting the changes with innovative additions to its product range in coming months. “It’s amazing that the changes are being trumpeted as increases to consumer protection, when that is what is actually reducing for people who will be buying owner-builder houses,” Graf told Insurance Business. “The fact is, owner-builders are probably going to feel an impact on the price of their asset because there is no home warranty in place.” Graf says that, because owner-builders are ‘one-off’ insurance buyers, they are only likely to realise this problem when they go to
sell their house. “There are probably 50,000 to 60,000 of them in NSW at the moment, and I’m tipping none of them actually know this has happened. The consultation has been with builder groups rather than with anyone else.” In terms of renovations and construction insurance for owner builders, Graf said brokers can play a crucial role in educating clients to know what is and what is not covered, including ensuring that the existing house is covered during any renovation. “A problem in the renovations market is the fact that, once you get over a certain dollar value for a home policy, you haven’t got any insurance. We know a lot of owner-builders will insure new work, while not accounting for the existing property, because they think that it is covered by their house and contents insurer, but it’s not. It’s up to the brokers to educate them that it’s not covered, and that they do need to cover the existing house with a renovation policy.” Graf says a lot of insurance brokers often only deal with one or two owner-builders a month, and as a result, are not specialists in the requirements of these customers. However, he added that this can be as easy as asking the client an extra question and that AOBIS was there to assist with the knowledge that brokers may require in this market. Graf has revealed that in partnership with Calliden, it will soon be adding home contents to its suite of owner-builder construction insurance covers for new and existing homes. Until now, owner builders were often in a quandary over what to do with their home contents while work was being done to their properties, amid fears they could be damaged.
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backup, there’s your danger. Lowest cost doesn’t necessarily equate to the best cover,” Ross says. However, one advantage of MECON’s online system is an ability for brokers to manipulate excesses and deductibles to shift premiums. “The reason for that is our system is using the same one our underwriters use,” he says.
in keeping up to speed on the market, and it is probably not an area to dabble in or attempt to traverse without commitment. “There is a danger in going online, as opposed to knowing what you are doing – doing the comparison and doing the full work up - so unless the brokers are prepared to put the capital into raising that level
“Undercutting rates on service fees and premiums delivers inconsistent and sometimes unrealistic expectations across the board and may leave clients wondering why there are large pricing discrepancies year-to-year for essentially the same service or product” Alan Dawes, Liberty International Underwriters Product innovation is also an area that can assist amidst the competition – though it is difficult for providers to be unique. “Most of the new entrants will offer the same sort of thing, or a variation on a theme, and the reason for that is that behind everything there is a treaty somewhere, provided by a reinsurer, and they all have a set regimen,” Ross says. MECON’s recently launched ‘Cover Advantage Endorsement’ is an exception – but one that has been hard won, he explains. “We are relying on our track record, our risk acceptance, and our results over the last 10 years have allowed us to have our reinsurance relaxed behind the scenes to allow us to do that.” The new endorsement effectively removes selected exclusions (at the insureds option) that would otherwise apply to defeat a claim. In doing so, the client incurs an increased deductible and the indemnity (under both liability and material damage sections of the policy) would be capped at a lower limit for that claim event.
SPECIALISATION AND BROKERS Glenn Ross was a construction broker for 10 years, and as a result, understands that not many brokers can afford to specialise in the area, beyond the small sector of the market that already does so. “It’s not something many are exposed to a lot,” he says. As a result, brokers are often in need of support
of experience, they would be exposing their PI probably.” According to Ross, the role of the broker in this sector hasn’t changed. “It’s about knowing your client – and knowing your client means knowing their business as well – and through a series of lectures I’ve been doing on contractual liability, I can see that is a bit of a mixed bag,” Ross says. “There are brokers out there who don’t understand the contractual obligations those clients might have – they don’t necessarily understand the jargon used in construction contracts – but they still successfully broke. They’d be more successful if they become more intimate with the client’s occupation at its grass roots.”
TESTING TIMES Dawes says brokers – just like underwriters - are challenged by the competitive market conditions. “Undercutting rates on service fees and premiums delivers inconsistent and sometimes, unrealistic expectations across the board and may leave clients wondering why there are large pricing discrepancies year-to-year for essentially the same service or product,” he says. “Until there is a market shifting event or a reduction in available capacity, the market is likely to continue to test the longevity of the various business models in play. Consistency and reliability in both underwriting and broking will be the key to success.”
Alan Dawes is senior vice president and chief underwriting officer, construction, Liberty International Underwriters
Glenn Ross is CEO, MECON Insurance Group
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FEATURE / FINANCIAL SERVICES
Finding your forum In association with
Insurers should take note of differences in the outcomes of similar disputes in different forums, write Wotton + Kearney’s Heidi Nash-Smith and Jack Geng
Insurers of financial service providers (FSPs) may take some comfort from the recent decision of the Federal Court of Australia in Dennis v Chambers Investment Planners Pty Ltd in which the Court found that the FSP’s recommendations to Mr Dennis to invest in agricultural managed investment schemes were appropriate and made on a reasonable basis. Many FSPs will have too often received an adverse Determination from the Financial Ombudsman Service (FOS) concerning the appropriateness of agri-investments – particularly where there are high levels of gearing. In this article, we compare the Court’s approach in Dennis with FOS’ approach in a Determination against the same FSP concerning similar recommendations to invest in agricultural products. There are some key differences in the Court’s approach which may reinforce the view held by insurers that FSPs get a fairer go in court than at FOS.
THE DECISION Dennis’ claim included the following allegations: 1 The FSP owed a duty to provide Dennis with advice as to “the most suitable investments”; and 2 There was no reasonable basis for the FSP’s advice because: a. The recommendations were not appropriate for a ‘balanced’ investor; b. The fact find was not sufficiently detailed to capture Dennis’ actual personal circumstances and financial objectives; and c. Because of the FSP’s inadequate record keeping, there was insufficient evidence to establish that its recommendations were made on a reasonable basis. The Court rejected Dennis’ allegations. Relevantly, the Judge found: 1 Given Dennis’ investment objectives, and contrary
to the initial fact find, Dennis was a ‘growthorientated’ investor; 2 The FSP did not have any obligation to advise Dennis on “the most suitable investments”; and 3 The advice was provided on a reasonable basis because it met Dennis’ investment objectives and ‘growth-orientated’ profile.
RISK PROFILE The Court relied on expert evidence to assess Dennis’ risk profile. Based on that evidence, the Judge found that Dennis was actually a ‘growthorientated’ investor throughout the advisor relationship and not ‘balanced’ per the fact find. The Judge viewed the appropriateness of all recommended investments in light of that profile. The Judge did not accept Dennis’ criticism that no fact finds were subsequently prepared to preface the change in his profile to ‘growth-orientated’ or that there was no record of the advisor discussing the significance of the change. By then, the advisor had been advising Dennis for five years and “had developed an appreciation of his client’s circumstances and appetite for risk”. The lack of documents evidencing the reassessment did not prove fatal. In contrast, FOS determined that it was unreasonable for the FSP to assess the Applicants as ‘balanced’ investors and that this in itself showed that the FSP had failed to properly enquire into the Applicants’ circumstances. FOS found that the risk profile questionnaire contained inconsistent answers and there was no evidence to show that the FSP had otherwise discussed the Applicants’ risk tolerance with them. FOS did not make its own enquiry into the Applicants’ actual risk profile.
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SNAPSHOT Dennis
FOS Dispute 241767
Borrow approximately $2.8m over nine years to invest about $3.4m in agriinvestments, shares, capital protected equity funds and a property
Borrow to invest:
GEARING?
About half of the agri-investments financed 100% by loans
100% investment loans
RISK PROFILE
Balanced (1999) and growth-orientated (2004)
Balanced
ADVICE
• $300,000 in a capital protected share portfolio • $151,000 in two agri-investments
MOST SUITABLE INVESTMENTS? The Court rejected the submission that the FSP had any higher obligation to advise Dennis regarding the “most suitable investments”. The Judge found the FSP was only required to have a reasonable basis for the advice. This is consistent with the applicable legislation and the approach taken by FOS.
REASONABLE BASIS The Court found that “Mr Dennis has not shown that the initial plan lacked a reasonable basis or that, in preparing it, the respondents breached their duties to him”. The Court considered the recommendations to invest in agri-business were not beyond the range of suitable investments for a ‘growth-orientated’ investor in Dennis’ circumstances since he was able to obtain: 1 Significant tax benefits from the investments; and 2 Potential long-term returns via agricultural production. In contrast, FOS determined the recommended agri-investments were high risk, primarily because of the levels of gearing. FOS noted that “borrowing to invest is generally considered to be a high-risk approach to investing”. Given the lack of explanation provided to the Applicants about the borrowing structure or its risks, FOS considered that “the recommended investments were too risky for the Applicants, whether they were regarded as balanced or more cautious investors”.
RECORD KEEPING The key point of distinction between the approaches
taken by the Court and FOS relates to recordkeeping and the availability of contemporaneous evidence to support the FSP’s position. In Dennis, the Judge accepted that the FSP did not meet the Financial Planners Association best practice guidelines for recordkeeping, but did not consider this to be fatal to the FSP’s defence. The “question falling for determination is not whether those rules were complied with, but whether the statutory reasonable basis requirement” was met. FOS takes a stringent approach to poor recordkeeping. There, the onus is on the FSP to keep detailed records of oral advice, otherwise the presumption is against the FSP. The lack of records in the FOS Dispute meant the FSP was not able to establish, to FOS’ satisfaction, that it had had detailed discussions about the investor’s attitude to risk. In the absence of that evidence, FOS determined that “it was unreasonable for the advisor to assess the Applicants as balanced investors”.
“Although the FOS process tends to be more cost effective, this has to be balanced against the significant risks that remain for FSPs” LESSONS? The facts of these two cases are not identical and so it cannot be said that the results reflect the forum of the dispute as opposed to the merits. However, it is necessary to consider the appropriate forum for financial planning claims. There are reasons why a determination by FOS may not be appropriate, such as its jurisdictional limits and that there is no scope within FOS’ terms of reference for an FSP to join third parties or to otherwise bring cross claims. Although the FOS process tends to be more cost effective, this has to be balanced against the significant risks that remain for FSPs in a forum that only has to have regard to the law and where the rules of evidence do not apply. These factors mean that investors will continue to initiate claims in FOS, where the presumption is in their favour. After all, if they are not successful they can subsequently have their day in court.
Heidi Nash-Smith is a partner in Wotton + Kearney’s Sydney office. Her practice focuses on PI and D&O claims, with her core area of expertise being financial services litigation, in particular the defence of claims arising from allegedly negligent financial planning advice. Jack Geng is an associate in Wotton + Kearney’s Sydney office.
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BUSINESS STRATEGY / BUSINESS RE-ENGINEERING
Change or die
5 ways to keep your business relevant Even the greatest and most successful brands and businesses need to adapt and change in order to stay relevant, or else face obsolescence. It’s about anticipating, preparing for and embracing change when needed, and Michael McQueen reveals how to do it
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In the early 1930s, with the world in the grip of economic depression, a Danish widowed father of four had a vision. Despite the grim fiscal outlook, Ole Kirk Christiansen purchased a small toy shop in the town of Billund and launched a modest business with the name Leg Godt (Danish for ‘play well’). Christiansen was a pioneer from the outset – his being the first toy business to embrace a new technology called plastic. Within a few short years Lego, as the company was now affectionately known, had become the toy of choice for children worldwide. In the years that followed, Lego evolved and grew. From simple plastic blocks to the release of playsets and the invention of the little yellow man, the company innovated its way to the position of undisputed leader in children’s play. Until the late 1980s that is. As new generations of children began opting for video games rather than plastic playsets, Lego was faced with a dilemma. The company began an 11year loss-making stretch – losing $500m in just two years at their worst point. By the late 1990s, the casual observer may have been justified in predicting that Lego had run its course and was a dead brand walking. And yet, the story was far from finished. Recognising the need to embrace the digital age, Lego’s strategy was informed by the old adage: if you can’t beat them, join them. Lego entered a series of licensing arrangements with well-known movie franchises such as Star Wars, Batman and Indiana Jones to create their own co-branded video games. Buoyed by the success of this new direction, Lego expanded their digital offering with the 2010 release of a massively multiplayer online game (MMOG) Lego Universe. More recently, they have developed smartphone apps which allow users to build Lego shapes while sitting on the bus. There is little doubt that Lego today is more powerful, profitable and relevant than ever – the recent release of their blockbuster movie is testament to this. In contrast, Lego’s one-time rival Meccano has faded into obscurity.
WHAT CAN WE LEARN FROM LEGO? So, what can other brands and businesses learn from this story of adaptation and re-invention? I would suggest that in order to win the battle to stay relevant over time, organisations and leaders must consistently be willing to do the following:
1
Re-calibrate. While an appetite for change is critical to staying ahead of the curve, it is important to discern which fundamentals in an organisation should never change. Just as it is necessary to determine which walls are loadbearing when renovating a house, leaders must identify the non-negotiable values, principles and purpose which must never change. Tamper with these ‘load bearing’ fundamentals and everything may come crashing down. Before embarking on any change agenda, it is vital to first re-calibrate an organisation with its core DNA and allow this to be a guidepost for strategy and a touchstone for decision-making. In the case of Lego, the company’s leadership never lost sight of Lego’s core purpose of inspiring play, creativity and imagination amidst their digital reinvention.
2
Re-fresh. Any gardener knows that regular pruning is necessary to maintain the health and vitality of a garden. In the same way, organisations require regular pruning of initiatives, traditions and even people who are inhibiting future growth. While pruning can be painful and even disruptive in the short term, it is nonetheless critically important. Consider how Sony CEO Kazuo Hirai has embarked on a series of necessary pruning initiatives recently. In the face of $6.4bn loss for 2012 and a dramatic downgrade of Sony’s credit rating, Hirai recognised that he would need to act quickly to turn around his ailing tech-giant’s fortunes. His first step was to end Sony’s decade-long marriage with Swedish mobile phone company, Ericsson. Next, Hirai spun off any Sony-owned non-core companies, dramatically streamlined manufacturing processes and cut Sony’s global workforce by roughly 10,000 employees.
3
Re-frame. We were all raised to believe the lie that great minds think alike. Nothing could be further from the truth! The greatest and most creative minds have always thought very differently from their peers and the prevailing wisdom of their era. Being able to view the world from a different frame of reference is in fact the key to innovation and invention. Leaders must pay particularly close attention to the views and perspectives of those who have fresh
“Just as it is necessary to determine which walls are loadbearing when renovating a house, leaders must identify the nonnegotiable values, principles and purpose which must never change”
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BUSINESS STRATEGY / BUSINESS RE-ENGINEERING
eyes in an organisation – often owing to their lack of experience. Such fresh eyes have no trouble thinking outside the box and seeing creative alternatives to the status quo because they have no idea what the ‘box’ even looks like yet.
We were all raised to believe the lie that great minds think alike. Nothing could be further from the truth! The greatest and most creative minds have always thought very differently from their peers
SHAKY TIMES: 10 ENDANGERED BRANDS Every year, 24/7 Wall St, which provides critical online analysis and commentary for US equity investors, identifies 10 brands sold in the US that it predicts will disappear within a year’s time. Among the selection criteria are: declining sales and losses; disclosures by the parent of the brand that it might go out of business; rising costs that are unlikely to be recouped through higher prices; companies that have lost the great majority of their customers. For 2014 this list includes:
4
Re-engineer. Keeping pace with change will require leaders and organisations to continually re-engineer their internal systems and processes. Too often, being ‘in a groove’ can easily turn into a rut and simply repeating the habits that have worked in the past can set you on a collision course with inefficiency and irrelevance. Speaking to this point, chief executive of electrical retailer GameStop, Paul Raines, said it well: “In order to survive, a company’s internal rate of change has to be greater than the external rate of change.”
5
Michael McQueen is a leading business commentator and four-time bestselling author. His most recent book “Winning the Battle for Relevance” explores the critical importance of re-inventing an organisation or brand before you are forced to. For more information, visit www. MichaelMcQueen.net
Re-position. As times and needs evolve, so must the positioning of businesses and brands. This could mean developing new products and services, tapping into new markets, or completely overhauling a brand’s messaging. To see a brilliant example of a re-positioned brand, look no further than 160-year-old glass manufacturer, Corning. In 1908, half of Corning’s revenue came from making glass bulbs. Over time, the Corning brand extended beyond these roots and became known for its high quality cook- and kitchen-ware. Today, however, many of Corning’s most lucrative products are ones that didn’t exist 10 years ago. The company now specialises in cathode-ray tubes, fibre optics for high definition TVs, and laser technology that enables mobile phones to be fitted with micro projectors.
Corning is a great example of a company rich in tradition and history that has stayed relevant by not being afraid to embrace new products and services as times have changed. Setting a brand or organisation up for enduring relevance involves a principle that every experienced surfer understands well. In order to catch the perfect wave, a good surfer knows the importance of keeping their eyes firmly on the horizon. While a wave is still forming a long way off in the distance, surfers know that this is the time to move – to paddle out and get in position. Move too late or not at all and you’ll simply get washed up as the wave crashes over you. In much the same way, winning the battle for relevance is about anticipating, preparing for and embracing change – no matter how uncomfortable or confronting it may be. As Charles Darwin once observed, “It is not the strongest that survive, nor the most intelligent. Rather,” he said, “it is those who are most responsive to change.”
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SOCIAL MEDIA / BLOGGING
BLOGGING FOR
BUSINESS
Insurance brokers are more comfortable reading balance sheets than writing blogs, but the latter is increasingly key to generating organic leads on the web, writes industry expert Maggie Crowley
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A great website isn’t really that great if no one visits and uses it. One key indicator of performance is the amount of traffic and engagement it receives. I get a lot of questions from brokers asking how to create a website that really maximises its potential. My answer? Blogging. One of the most effective (and economical) ways to increase the number of people visiting and using your website is through financial blogging. On average, we know that about 90 per cent of the traffic an insurance broker’s website receives can be broken down into two groups: prospective clients who visit your site to learn more about your firm and your services and; existing clients who want to access their account information and get updates on your firm. From a web marketing perspective, your website can—and should—cater to both of these groups. A blog gives you the ability to maintain client relationships while answering questions and nurturing prospective clients. Just to be clear, here’s a quick definition of what a blog really is according to Oxford Dictionaries: ‘A personal website or web page on which an individual records opinions, links to other sites., etc. on a regular basis.’ Simply put, a blog is a section of any website that’s updated with valuable information on a regular basis. The most successful financial blogs offer a variety of content (articles, video clips, images, infographics, white papers, etc.) that is targeted towards a specific audience. Maintaining a financial blog requires the time and effort necessary to publish original content, but the rewards of blogging offer advisors a pretty hefty return on the investment. From a marketing perspective, there are two primary benefits. The first and, arguably most important, reward of blogging is all about Search Engine Optimisation (SEO). By now, you’ve probably heard of the term – at its core, SEO is the process of improving the visibility of a website in a search engine’s results. The earlier and more frequently a site appears in the search results list, the more visitors it will receive from the search engine’s users. SEO isn’t that big of a deal until you consider the number of people who turn to Google for help when making a buying decision. Google in Canada, for example, pegs that number at upwards of 86 per cent. Canadians seeking a new broker begin
looking for more information online first. Search engines such as Google really love the fresh and original content that is published on a blog, websites with a blog regularly rank higher on a search results page. What does that mean for you as a broker? Basically, blogging is a great tool to help the people who are looking for you online (ie, potential clients) find you. Besides the technical side of SEO and creating fresh content for your website, blogging allows brokers to connect with their clients and prospects and build a unique rapport that is incredibly costand time efficient. Financial blogging provides a platform for you to position yourself as an expert in the industry. Picture this financial advice scenario: an adviser who specialises in creating retirement plans publishes a blog article entitled, ‘Six steps to a worryfree retirement’. A well-crafted, informative article will answer reader’s retirement questions and, the advisor who authored this post automatically becomes an expert in the eyes of the reader. The impact on website traffic is remarkable for businesses who blog. According to Hubspot, companies that blog receive 55 per cent more website visitors. The results don’t stop there; Hubspot also reports that 57 per cent of those companies have acquired actual paying clients from their blog. Although the benefits are tangible, the majority of insurance and advice businesses have yet to take advantage of a financial blog. Last year, Canadian website developer Advisor
WHERE DO ADVISERS GET CUSTOMERS?
Q. Has your company ever acquired a customer using a lead from the following sources? (*graph illustrates ‘Yes’ responses) 80% 70% 60%
Banking/financial advice services
50%
Marketing agency
40%
Other professional consultants
30% 20% 10% 0%
Blog
Google+
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Websites ran a poll with WealthManagement. com and asked questions about financial web marketing. The results reveal a huge opportunity: Only 5 per cent of financial advisers are blogging for business. Ready to start your financial blog? Based on trial and error from my own blogging experience, here are four ideas to make sure every piece of content you publish on your blog is successful: Maggie Crowley is the Vancouver-based marketing coordinator for AdvisorWebsites.com, a global leader in website software for financial services. She educates industry professionals on how to maximize the potential of a strong web presence.
IRRESISTIBLE TITLE There is a saying that those who write for an online audience should spend 10 per cent of their time writing the body of an article and 90 per cent of their time creating the perfect, irresistible title. While I don’t necessarily agree with that theory (if the title is that great, surely readers will be disappointed with the actual writing, right?), it does get the point across: the title is important. A few tips for creating an irresistible title: • Use action words • Explain what the article is about • Know your audience
CREATE QUALITY CONTENT Quality content is 100 per cent based around your audience. Write with your readers in mind. Get into the mind of your readers: what are their problems, what do they do for fun, what’s interesting to them, and mostly, how can you help? As an adviser, use your blog to share your knowledge and expertise. The internet provides a world of opportunity to present yourself as a thought leader in the insurance broking
community. Use this to your benefit by explaining current events or answering frequently asked questions.
BE REAL Online readers generally appreciate not being sold to. Be real, speak from the heart and don’t be afraid to show flaws. Another tip? Instead of talking about your audience, talk to them. The easiest way to do this is to use words such as ‘you’, ‘we’ and ‘me’. If you treat writing more like a conversation than a textbook, readers are more likely to enjoy the experience. And actually read it.
SHARE ON SOCIAL Don’t assume that your ideal target audience is reading your blog just because you are publishing awesome blog content. First, you need to let them know that your blog exists. Don’t be shy about spreading the word – especially if your blog is new. By using a tool such as Hootsuite, you can streamline your social media efforts. Hootsuite offers a free service that allows insurance brokers to create and schedule social media posts in advance.
MEASURE YOUR SUCCESS Measuring the number of views your blog receives can be really insightful. Here’s the simple truth: Tracking the performance of your financial blog is vital to identifying whether it’s actually doing its job of generating traffic to your website. If not, then you know it’s time to make some changes. Two of the most important metrics that determine the success of your blog are individual post views and traffic sources.
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BUSINESS STRATEGY / EXIT PLANNING
Exit
planning
Get the best price for your brokerage When it comes to maximising business value and sale price, size does matter, argues Craig West
For many SMEs, succession and exit is the proverbial elephant in the room. And, irrespective of the countless books, seminars and newspaper columns devoted to the subject, business owners continue to ignore the basic principle that their enterprise needs to be prepared for sale well in advance in order to maximise value, price and successful exodus of the principals. Like all things in life, there is a series or sequence of steps that must be adhered to in order to ensure a business is valuable, attractive and saleable. The following factors have a heavy influence on the value of a business for sale, and owners need to ask themselves these key questions to determine the sale readiness of their businesses:
BUSINESS SIZE Is the size of my business ‘right’ for my industry or market in order to maximise sale value? Simply put, size does matter! There is plenty of research that supports the fact that businesses with a turnover of $5m or more nearly always sell at higher multiples than their smaller counterparts. While I am not in favour of growth for growth’s
sake, designing your business to grow to at least this level of turnover will maximise its value. Achieving the scale required might include making acquisitions of complementary businesses/ opportunities, opening in other states, or looking for baby boomer business owners ‘desperate’ to exit and retire. Interestingly, the research clearly shows that the top two outcomes baby boomers look for in a successful exit are not about the dollars; rather, they want assurance the business will continue after the exit (legacy) and that the new owner will look after the staff.
BUSINESS MODEL Clarity and sense of purpose and belonging are the next important factors. Are the business owner and all the members of the team on the same page in terms of their understanding of the business model? Does every aspect of the business actually match the business model? Is it a boutique or scale business and, even more importantly, is every aspect of the operation – customer service, online presence, the people employed, the pricing strategy, office location (even its layout and fittings) and marketing materials – all aligned to ensure they reflect the business model? This is further supported by a key finding in a Pitcher Partners 2013 survey that the overall price was rated less important than continuity of the business and ongoing jobs for employees, with 69% of respondents believing continuity of the business was important before they engaged in succession planning, and 89% afterwards. I met a financial adviser recently who told me he looked after high net wealth individual clients, was extremely good at what he did and as a result charged a premium. When he gave me a business card on very flimsy paper that looked like it had been printed as cheaply as possible, it clearly highlighted a misalignment within his business model.
REVENUE The ease of reading and understanding business revenue is the next factor that has a significant bearing on sale price. Is it an annuity-style income based on long-term contracts, or does it depend on continually deriving new sales? Put simply, recurring revenue is worth more.
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Businesses with clients on long-term retainers, extended contracts, or some type of residual income trail are far more attractive and valuable than those that need to make sales continually, every day, week and month. Astute buyers will carefully examine the sales system/process (especially to identify if it is based on a key salesperson’s skill and networks) and the supporting marketing strategy and infrastructure.
SALES AND MARKETING Sales and marketing that run independently are vital for a business and need to be able to generate new business, leads, enquiries and ultimately sales without relying on either the owner or a key person’s skill and sales ability.
SYSTEMS Businesses that are systemised and have a documented operational process will have a distinct advantage over similar operations that are on the market. Systems save time, effort and money because they are far simpler to run, less stressful and generally far less risky, and, as a consequence, these businesses are also more valuable. The potential that they are performing well is greater, the level of specialised skills needed to run them is reduced, and the lower risk is always more valuable.
EMPLOYEES Positively engaged, motivated employees who are incentivised to perform and work are also an immense asset for any business. Incentive plans that reward based on perfor mance can easily be adapted to an employee share ownership plan. This simple strategy substantially reduces one of the key risks for buyers: employees exiting the business after the owner has left. It also provides a strong incentive for perfor mance, and employees’ financial wellbeing (at least part of it) is closely matched to that of the owner. Employees with the same mindset as the business owner result in better performing, more profitable businesses with everyone sharing the benefits.
RISK MANAGEMENT Far too many SMEs unwisely regard risk manage ment and compliance as something only large
businesses need to worry about. Corporate governance and compliance are often ignored by business owners; they fail to see that it adds considerable value as reduced risk can provide a source of the right type of buyers for the business. In our experience, we often see deals fall over at due diligence stage when the buyer really investigates the substance behind the business. Those with poorly prepared accounts, badly documented processes and little or no governance structures often fail to meet this hurdle.
OWNER DEPENDENCE It is the reliance of the business on the owner that can often be the deal breaker. Can the principal take time away from the business for a holiday? A potential buyer needs to see that the business is able to operate efficiently and effectively without the owner’s involvement. It reaffirms to a prospective buyer that many of the above operational attributes are in place and functioning properly.
START EARLY Ideally, business succession should start the first day a business opens its doors and then evolve continuously until it is time for the owner to leave. However, in the real world business owners get caught up in the day-to-day demands of running a business and pay little attention to succession and exit until they are on the eve of retirement. Others postpone exit planning because the task seems too difficult or it is avoided because of the emotional issues involved. For many owners, it can be quite stressful to relinquish control of what has been one of their greatest achievements in life. Family-owned businesses have special needs, some of which can impact on family harmony and relationships. However, irrespective of the barrier or emotional roadblock, business succession is important to all businesses regardless of size, market share or ownership and is not a process that can wait to the last minute to be implemented. The sooner owners acknowledge the need to implement an exit and succession strategy, the better their prospects are for maximising value, sale price and a comfortable exit following a lifetime of work and endeavour.
Craig West is a strategic accountant who has over 20 years’ experience advising business owners. He has written four books on employee incentives, succession planning, asset protection and exit strategies. Craig is the president of the Australian chapter of the Exit Planning Institute and in March 2014 was appointed executive chairman of the SME Association of Australia. Visit www.successionplus. com.au.
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STATS GLOBAL INDUSTRY
INSURANCE
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BUSINESS AND SOCIAL MEDIA
Do you have a social media presence? A recent Yellow Social Media Report, produced by the Yellow Pages, is a leading indicator of how businesses – large and small – are adapting to the new media and marketing landscape. It showed, for example, that four out of five SMEs are ‘blindly’ investing in social media, and are missing opportunities for growth PERCENTAGE OF BUSINESSES THAT HAVE A SOCIAL MEDIA PRESENCE SMALL BUSINESS
2014
MEDIUM BUSINESS
2014
SMALL BUSINESSES WHO HAVE A SOCIAL MEDIA STRATEGY LARGE BUSINESS
2014
36% 48% 77% 2013
2013
2013
30% 47% 79% 2012
2012
2012
27% 34% 79%
24% Of the 36% of small businesses that have a social media presence, only 24% of these have a social media strategy
DID YOU KNOW? VICTORIA HAS THE LOWEST NUMBER OF SME WITH A SOCIAL MEDIA PRESENCE
AVERAGE YEARLY SOCIAL MEDIA SPEND
PERCENTAGE OF MARKETING BUDGET
12% Medium $4,560 Small
$33,050 Large
$38,800 Medium
6% Large
16% Small
DID YOU KNOW? QUEENSLAND HAS THE HIGHEST NUMBER OF SME INVESTORS IN SOCIAL MEDIA
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IB206_U
www.insurancebusinessonline.com.au
Insurance Business is the independent voice for the insurance industry, encompassing news analysis, expert opinion, exclusive interviews and business strategy advice for today’s sophisticated insurance brokers and advice professionals.
KNOW ANYONE WHO SHOULD BE READING INSURANCE BUSINESS?
INSURANCEBUSINESSONLINE.COM.AU ISSUE 2.6
THE YEAR
AHEAD The outlook for 2014
BROKER NETWORKS SQUARE OFF WHO IS THE TRUE CHAMPION FOR BROKERS?
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DUAL PERSONALITY DAMIEN COATES ON THE FRAUD THAT ROCKED INSURANCE
CATASTROPHE PLANNING TACKLING NATURAL DISASTERS THE SMART WAY
• In-depth analysis of the latest issues affecting insurance brokers • Expert columnists addressing aspects that impact your business • Exclusive interviews with the industry’s most important players • Our own rundowns of Australia’s best brokerages and insurers • Analysis of insurance industry reports and research findings • The latest changes in insurance legislation and what you need to do next • Industry photography of the key figureheads and insurance events
Insurance Business magazine is free to all Australian insurance brokers and those within the insurance industry who deal with brokers directly. So if you know someone who should be added to our distribution list, advise them to please call us on (02) 8437 4731 or subscribe for free online at www.insurancebusinessonline.com.au Insurance Business is proudly brought to you by Key Media
21/11/2013 11:18:02 5/08/2014 3:07:34 PMAM
UAC-NIBA BRISBANE EXPO
SOCIAL LIFE
UAC and NIBA’s Brisbane expo hosted 63 exhibitors and a total of 325 people for lunch in late July. Brokers were inspired by the tale of guest speaker and former Navy clearance diver Paul de Gelder, who was forced to ‘improvise, adapt and overcome’ after a shark attack in Sydney Harbour left him without one of his legs and a hand. His current mantra? ‘Patience, perseverance and determination’. The expo was preceded by a NIBA Young Professionals breakfast, where Adrian Humphreys spoke about Lloyd’s’ role in Australia.
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Favourite things... Nick Kirk, CEO, Calliden Group
At the helm of Calliden Group since 2004, CEO Nick Kirk has learned that when you start a new business, you have to ‘kiss a lot of frogs before you find the princess’. So when it comes to his spare time, how does he take his mind off those frogs?
Vacation spot: I have only been there twice, but New York is a place that I could go back to again and again.
Book: Technically I guess it is three – the Sword of Honour Trilogy by Evelyn Waugh. Once I start it, I cannot put it down.
Best thing about working in insurance: Without a doubt the fact that it is an international business which provides multiple opportunities.
Sport: Football (soccer)
Movie: Godfather II. I can get totally immersed in the story.
Place to be: be Sydney – lower north shore. It is the best place to live that I have found. You have all the benefits of the city plus views and it still feels like living in a village.
Food: I enjoy food - and am lucky enough to have eaten at lots of really good restaurants - but nothing beats egg and chips.
Music: Night Nurse by Gregory Isaacs. It transports me back to when I was (much) younger and living in London. AUGUST 2014 | 55
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THE LAST WORD
The claims ‘lucky dip’ The insurance industry can do better than ‘a job half done’ on claims, with Claim Central’s Darren Trott saying the current ‘lucky dip’ faced by insurance brokers can be replaced by a state of play where ‘everyone’s a winner’
“We’re missing consistent, predictable claim outcomes”
Darren Trott is executive general manager of Claim Central
I’ve been reflecting upon the results of the 2014 Brokers on Insurers Survey published in the last edition of Insurance Business and comparing them against last year’s findings. My attention was obviously drawn to those results and remarks relating to claims service. It seems brokers considered the turnaround times for claims as the single most critical insurer service area. At this point I experienced a sense of deja vu. Wasn’t this the same ‘number one’ issue identified in last year’s survey? I’m not surprised it remains at the top of the list, as we all understand the significance of claim duration and the direct and immediate impact it has on customer satisfaction. The feeling of deja vu continued. Over half of the survey respondents believed claim turnaround times had improved, but once again, almost half believed times had actually worsened.
A LUCKY DIP So why do these polarised viewpoints continue? I’d like to suggest a couple of reasons. There are plenty of examples where the claim outcome has been tremendous, for all stakeholders. Everyone has been on the same page; the right information has been provided up front; the claim has been decided quickly and paid promptly. This happens at times with every insurer, across all classes of business. As an industry, we get it right some of the time. At the other end of the scale, horror stories continue where apparently simple, straightforward claims take weeks, or months, without resolution. Emotions run high. Claims staff dig their heels in. Tempers flare as brokers attempt to escalate their concerns to someone who’ll listen. Unhappy customers move their insurance program away from the broker and insurer, because they feel they’ve been put through the ringer. As an industry, we get it really wrong some of the time, too.
We’re missing consistent, predictable claim outcomes. At the moment, it’s really a bit of a claims ‘lucky dip’. If you’re lucky, you’ll get the right claims person, in the right team, in the right state, engaging the right loss adjuster/builder/repairer, making the right decision. You’ll get the opposite if you’re unlucky.
EVERYONE’S A WINNER Taking the time to analyse and understand which components make up those successful claim outcomes, building them into the DNA of a claims team culture, supported by efficient and flexible systems and processes, and monitoring and measuring them, helps to drive more consistency. Equally, learning from the claim service disasters and putting in place measures to ensure no repetition is just as important. Most insurers now have claims account manager roles, being the conduit between the broker and the broader claims operation. They are also the eyes and ears of the insurer, helping to resolve problems and gathering feedback on the effectiveness of the claims service delivery. I believe these roles can, and should, play a major role in influencing positive change in the claims environment, both internally and externally. However, I’d suggest the claims account manager shouldn’t take the Insurance Business gold, silver or bronze award and wave it in the broker’s face, trumpeting the virtues of the company’s superior claims service. This is particularly ineffective when the broker is one of the ‘other half’, who has cold hard evidence to show where your company’s claims service has actually deteriorated. Until there is consistently superior service delivery across the entire claims operation, the job is only half done. We mustn’t stop listening. Let’s turn the ‘lucky dip’ into ‘everyone’s a winner’.
56 | AUGUST 2014
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