Insurance Business 4.03 by Key Media

insurancebusinessonline.com.au Issue 4.3

ORIGINAL PIONEERS CHRIS MACKINNON SHARES LLOYD’S LOCAL VISION

WHERE DO WE GO FROM HERE? PREPARING BROKERS TO MEET TOMORROW’S CHALLENGES

TAKE OFF AIG ON USING UNMANNED AERIAL VEHICLES IN INSURANCE

PETER EASTWOOD Global CEO talks Berkshire Hathaway's plans for Australia

S R E R U S N I N BROKERS O VEALED RATED, RANKED AND RE RS RE SU IN P TO ’S LIA AUSTRA

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JUNE 2015

CONNECT WITH US Got a story, suggestion or just want to find out some more information?

CONTENTS

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BROKERS ON

INSURERS

FEATURES

BROKERS ON INSURERS

COVER STORY

Australia’s best insurers ranked, rated, and revealed

Report co-author suggests review of regulatory framework for the financial system

10 Analysis

How could Google impact on the insurance industry in Australia?

FEATURES 44 Valuing strata protection

Helping your clients secure the best coverage

46 Essential protection for income earners

BROKING INTELLIGENCE

Global CEO Peter Eastwood talks Berkshire Hathaway Specialty Insurance’s arrival in Australia FEATURES

THE BIG INTERVIEW

06 Round-up

Taking up income protection insurance

EXPANDING HORIZONS

FEATURES

NEWS

TAKE OFF

The use of unmanned aerial vehicles in insurance has arrived

48 Client service excellence – with more than a smile Keeping your clients happy and on your books

50 5 ways to make your web (re)design easier

Ensuring your online presence appeals to prospective clients

52 Statistics

Recent mergers and acquisition activity in the industry

Lloyd’s Chris Mackinnon talks about Australia’s role in the global Vision 2025 strategy

INSURANCE INSIDERS 54 Career path

32 2

FEATURES

WHERE DO WE GO FROM HERE?

How should we educate the broker of tomorrow?

IAG Commercial’s Jen Mitchell on why she loves working in insurance

56 Favourite things

DUAL’s Asia Pacific CEO Damien Coates

INSURANCEBUSINESSONLINE.COM.AU

CHECK IT OUT ONLINE

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We’ve got Australia

COVERED.

(And the rest of the world too.) It’s our strong international heritage that gives us invaluable knowledge and experience, to help your clients’ businesses take on upcoming challenges. To learn how we can help to protect your clients in Australia and virtually anywhere they do business, visit www.aig.com.au today. Bring on tomorrow Insurance Products issued in Australia by AIG Australia Limited ABN 93 004 727 753 AFSL 381686. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. For additional information, please visit our website at www.AIG.com.au.

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EDITOR’S LETTER

www.insurancebusinessonline.com.au JUNE 2O15 EDITORIAL

Opportunities

he 17th Annual Steadfast Convention in Adelaide was definitely an occasion not to be missed. There was some great thought leadership in the sessions, some very worthy award winners were announced, and there was an impressive show of creativity from the exhibitors. (Special mention must be made of DUAL, whose 1950s-themed American diner was a standout!) Gary Pert, CEO of the Collingwood Football Club, was in attendance not just to confirm via show of hands that he heads the AFL’s most hated club, but to speak to one of the most talked-about subjects in general insurance right now – change. Talking through the strategy that took Collingwood from the bottom rungs of the competition ladder to a premiership win and 80,000 members, Pert didn’t shy away from the difficulty of the process. Ultimately, though, the club has reaped the rewards of those efforts. Embracing change was the vehicle by which an ailing club turned its fortunes around. It’s a challenging time for the industry but, as many leaders are saying, the competitive environment also offers opportunities for brokers to demonstrate their value proposition to consumers. What technological developments have the ability to bring about is astonishing, but is the experience of a face-to-face interaction something they will ever be able to replicate? Consumers are ready and waiting to be convinced of the indispensability of expert advice on insurance. In this issue of Insurance Business, we acknowledge the insurers who’ve been ranked by brokers as the best of the best for the year that’s been. Insurers have been assessed using 11 performance indicators. In both 2013 and 2014, Zurich took top honours. Have they made it a hat-trick in 2015, or has a competitor crept up to take pole position? All is revealed in our Brokers on Insurers feature. Additionally, I recently had the opportunity to catch up with two very senior industry figures – Berkshire Hathaway Specialty Insurance’s global president and CEO, Peter Eastwood, and Lloyd’s general representative in Australia, Chris Mackinnon. Both were incredibly interesting conversations, the highlights of which can be found on subsequent pages. Elsewhere, we look at broker education in Australia and the use of unmanned aerial vehicles in insurance, and, this month, we’ve also introduced a new feature, ‘Career path’. Each issue, it will provide a snapshot of the career highlights of a senior leader in general insurance. We hope you enjoy it. We look forward to bringing you even more in the new financial year.

Tim Garratt, editor

SALES & MARKETING

Editor Tim Garratt

General Manager Peter Smith

Journalist Jordan Lynn

Commercial Development Manager Sophie Knight

Production Editors Roslyn Meredith, Carolin Wun

CONTRIBUTORS Nikki Heald, Maggie Crowley

ART & PRODUCTION Design Manager Daniel Williams Designers Joenel Salvador, Marla Morelos Traffic Coordinator Lou Gonzales

Marketing & Communications Manager Lisa Narroway

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 tim.garratt@keymedia.com.au

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ADVERTISING ENQUIRIES

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NEWS

ROUND-UP

Time to consider efficiencies in regulatory framework, says report co-author THE AUSTRALIAN co-author of a recently released report has suggested it’s time APRA reviewed its regulatory framework for the financial system, in order to identify potential efficiencies. Rob Curtis, KPMG Australia executive director and global insurance regulatory lead, told Insurance Business, “Perhaps now is the time to take stock and review the suite of requirements – both around risk and capital – that APRA has, to see whether there can be any efficiencies gained from it. There probably can be.” Curtis’ view adheres to KPMG’s submissions to the Financial System Inquiry last year. Its final submission in August expressed the view that “Regulatory requirements … carry a risk of imposing efficiency costs on financial institutions and reducing the overall efficiency, responsiveness and dynamism of the financial system. We believe

in order to effectively understand the cost and benefit equation of regulatory proposals, much better information on the actual cost of the regulatory change is required”. The submission went on to recommend that regulations be subject to “comprehensive, industry-wide review at regular intervals” and suggested the process could be used to inform a review of regulations by assessing costs against the benefits of particular regulatory initiatives. “This process could then be used to assess the scope for possible scaling back of some regulatory initiatives, removal of unnecessary duplication and recalibration of regulatory requirements where appropriate, while still ensuring that regulation remains effective in meeting statutory objectives,” the document said. In its earlier submission to the inquiry in March 2014, KPMG also recommended a review of the appropriateness of capital requirements

for insurers, drawing attention to the fact that APRA’s capital requirements were significantly higher than those in other jurisdictions, potentially placing local firms at a competitive disadvantage internationally. “You would think there would be scope to gain some efficiencies in the system,” said Curtis. “We look forward to that debate, and clearly general insurers should be part of that process.” Curtis has co-authored KPMG’s fifth edition of its Evolving Insurance Regulation – The Journey Begins report series, which focuses on the continued development of the global insurance regulatory landscape. One of the key issues the report raises is the implication of Australian insurers being classified as ‘domestic systemically important insurers’ (D-SIIs). Curtis describes a D-SII as an organisation whose insolvency or failure would potentially disrupt the wider macro economy in Australia. He said D-SII classification could apply to not only our largest domestic insurers but also players heavily dominant in a particular state and those who underwrite particularly niche lines of business. “These insurers may be required to hold higher levels of capital in addition to undertaking recovery and resolution plans, in line with the approach for the banking sector, which focused on the need for higher loss absorbency and recapitalisation capacity,” Curtis said. Another of the report’s key insights is regulators’ heightened interest in companies’ risk management culture. “APRA is ahead of its other global supervisory counterparts in mandating a formalised Chief Risk Officer role and this will continue to have cost and resourcing implications for Australian insurers,” Curtis said. “As part of these measures, Boards are now required to form a view regarding risk culture within their organisations to ensure alignment with the risk appetite strategy and the broader risk management conducted throughout the entity. “This is a considerable step-change for most insurance boards which must now be able to demonstrate that all staff understand and abide by the risk management framework relevant to their areas of responsibility.”

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Good use of mobile apps could be key to engaging new customers EMBRACING MOBILE technology has the potential to help businesses expand their customer bases, according to a senior executive of one of the world’s largest independent software companies. Vic Mankotia, vice president of solution sales for CA Technologies in the Asia-Pacific and Japan, spoke to Insurance Business about the possibility of expanding customer bases through applications. “It’s not going to be about putting more feet on the ground. It’s not going to be hiring more [brokers],” he said. “I think more and more it will be, ‘How do we now engage our new customer acquisitions through new form factors?’ ” But with the increasing need for insurance companies to keep up with mobile technology, Mankotia stressed the importance of ensuring that applications developed offer an optimal experience to customers. “People don’t want a

replica of your [website] on an application. They want a richer, cleaner, quicker experience.” He said the window in which to impress with an application was extremely small. “Less than three seconds is what it takes for people to abandon applications,” Mankotia said. A recent study, conducted by Vanson Bourne on behalf of CA Technologies and involving 1,425 senior IT decision-makers worldwide (including 100 in Australia), sought to obtain clearer insight into Australian businesses’ approaches to IT security. Among its key findings, it revealed that 45% of Australian enterprises identified ‘improving mobile customer experience’ as their top security priority. Additionally, it found that 40% of Australian organisations are now spending between 20% and 40% of their IT budgets on security and, on average, that spend will increase 31% in three years. And with an increase in information shared

across a variety of platforms, Maknotia said the need for tighter security also increased. “The application is extremely powerful today. The amount of information being shared from different devices, via cloud services and social media, has to be a managed affair. It no longer can be something which is overlooked.” On addressing security, Mankotia reinforced the need to focus both on external threats and those that come from within. “An insider threat does not come from anybody and everybody,” he said, and mentioned ‘privileged users’, being those with access to sensitive records and important system controls. He recommended monitoring of system activity by ‘privileged users’. He explained, “If I suddenly saw somebody on my staff access the payroll, that alert would normally come to the IT administrator.” He said this could assist in shutting down access where appropriate, and that, in the event of an attack, recording of those activities could assist with forensic, recovery and investigative activities.

THE SURVEY CA Technologies’ survey revealed new security priorities coming to the forefront. These included: data breach protection (44%), improving compliance and audit (40%) and protecting cloud applications and data (34%).

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NEWS

ROUND-UP

Brokers converge on city of churches for Steadfast Convention ONE OF the biggest events on the industry’s calendar is done and dusted for another year, following four action-packed days on the banks of the River Torrens. In April, the impressive Adelaide Convention Centre was the stage for the 17th Annual Steadfast Convention. Among the highlights for 2015, highly respected industry leader Professor Allan Manning, managing director of the LMI Group, examined one of insurance’s biggest issues in his session, ‘Is advice or price the best value proposition for tomorrow’s broker?’ Straight off the bat, he told attendees, “To me, advice is the way to go. It’s a no-brainer.” Discussing the changing landscape brought about by the entry into the market of the likes of supermarkets, banks and aggregators, Manning said, “Whether you are a reinsurer, an insurer, an underwriting agency, a broker, every part of our business is under enormous challenge and change, and we should all be looking at the way that we do our business.” Talking about overemphasis on price, Manning said, “There’s an old saying that says, ‘Turnover is vanity, profit is sanity and cash is king’, and we tend to forget this quite often,

particularly in this mad race with declining premiums and everyone trying to get market share. We’ve got to remember, at the end of the day we’ve got to have a sustainable product where we’re making a profit.” He described it as “smart business sense” for brokers to move away from a price model. He also urged brokers to change their conversations with clients. “One of the problems for us, as an industry, is that we’ve been focusing on price for so long we keep going to our customers and just talking about price,” he said. “Our clients … don’t know about risk mitigation [and] underinsurance. They don’t know much about insurance at all. So if they’re only focusing on price, we really can’t have that intelligent conversation with them about that issue of protection.” Suncorp’s Anthony Day, CEO of commercial insurance, provided another highlight of Steadfast 2015 with his presentation, ‘The insurance industry … are we ready for tomorrow?’ Day’s focus was on how data is changing the dynamics of the industry. He opined that data will shape the industry of the future. But in outlining the threat posed by digital disruptors, Day called for brokers to realise the

opportunities that exist for them. “The unique relationship brokers have with customers is what the disruptors of every industry are looking for,” he said. “Your ability to have constant interactions with your customers during a 12-month period, being trusted, having a deep knowledge of the customer, being an extension of their business … this is basically what the digital world is trying to achieve … The innovation space is about identifying unique characteristics of each customer and identifying their needs to be fulfilled.” Day emphasised the importance of brokers catering to the needs and behaviours of all four generations currently a part of the Australian workforce. He warned, “The insurer or broker who doesn’t respond to the variety of customer needs will become irrelevant. Agility is required.” Day concluded by saying, “It’s challenging, but equally, there are many opportunities for those who seize the day. Winners of the future in this industry are those who are going to seek change, not hold on to the past. I truly believe those who review their business model constantly with customer needs and behaviours at the front of their mind will succeed.”

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THE FORUM

INSURANCE INDUSTRY LOSES ACCOMPLISHED LEADERS In May, the general insurance industry in Australia lost two of its senior leaders. Steve Ball, chairman of JLT Australia and former NIBA president, suffered a heart attack on May 15 in London, where he had just attended the JLT Group and Thistle Underwriting Services Conferences. On the same day, Brian Coppin, Ball’s predecessor as JLT chairman, passed away in Perth after a lengthy battle with illness. In a statement, the company said, “Between them, Steve and Brian came to represent the heart and soul of JLT Australia. “Steve was very much the ‘Heart’ of our company, in his kindness and unquestioning support for all staff, especially young colleagues whom he enjoyed mentoring as much as his real job.

ALEX DAMON ON 19/05/2015 10:34:28 AM

“So sorry to hear of Steve’s passing. I worked with him at Jardines in the early 80s and he was a really straight down-to-earth and fun guy. Way too young.” JEFF SMITH ON 19/05/2015 11:32:58 AM

“This news is so unbelievably sad and I feel for his wife and family. “Like most of us around Steve’s vintage, we grew up in the Industry with Steve and, whilst I never actually worked with him, I knew him well and we did some training of younger people together for the Institute when Bob McPherson was there. I also shared some NIBA time with him. “Steve was always a competitor however was always absolutely of the highest integrity and very much from the old school of ethics. He always had a smile for you and was never too busy to say g’day and have a beer and a punt. “He will be deeply missed. “RIP Steve.”

“Brian was very much the ‘Soul’ of JLT in his continual championing of our Client First mission. His dedication and loyalty to the business over so many years has been inspiring.” NIBA’s CEO, Dallas Booth, described Ball’s passing as “a great loss” to the Australian insurance industry. “Steve worked tirelessly for many years to enhance the professionalism of brokers, and made an immense contribution to NIBA for more than a decade. We will miss Steve greatly, and our thoughts are with [his wife] Maureen and their two children at this time.” Members of the insurance community also took the opportunity to pay tribute to Ball in the Insurance Business online forum.

PHIL MCGUIRE ON 19/05/2015 1:01:46 PM

“Extremely saddened to hear the news and felt for Steve’s family and JLT. I had the pleasure of working with Steve at Lumley in the mid-seventies and to say that it was fun was an understatement. The days were so alive with humour that the boss sat a few of us, (Steve included) outside his office so he could keep an eye on us. Steve always kept us laughing with his quick wit. This with his good nature and kindness continued throughout his working life. What a wonderful contribution to the industry. Steve will be missed by all who knew him but certainly the better for it. It was a privilege to know him. Rest in peace my friend.”

HAVE YOUR SAY ON INSURANCEBUSINESSONLINE.COM.AU

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NEWS

ANALYSIS

Google eyed Over the past decade, the multinational technology behemoth has changed the world. How much noise will Google make in the insurance space? IN RECENT times, much discussion has occurred around the question of how significantly Google endeavours could impact on the insurance industry, both locally and abroad. Google has already ventured into the comparison website market overseas. How likely is it that they’ll introduce a similar site in Australia? And what other plays could they make in the insurance space? Google launched its first car insurance comparison site, Google Compare, in the UK in September 2012 after it bought existing site BeatThatQuote.com for £37.7m (A$75.18m).

already-established car insurance comparison site that offers quotes to customers in 49 of 51 US markets. The partnership gives Google Compare users the benefit of an increased number of quotes as a result of the relationships Compare.com has with a large number of insurance companies. Andrew Rose, CEO of Compare.com, spoke to Insurance Business about the partnership with Google. On how it came about, Rose tells us: “As Google bought BeatThatQuote.com in the UK … we made it known to them that, should they ever want to come to the US,

“There’s a lot of scope for the industry to transform and for players to disintermediate parts of what the big players dominate at the moment” Don Johnstone, Deloitte Australia “That certainly took industry participants by surprise,” says Scott Guse, an audit partner for KPMG Australia in the insurance field. “They certainly weren’t expecting the likes of Google to actually start their own comparison website.” In March 2015, the launch of Google Compare Auto Insurance in the US state of California was announced, and given its earlier forays into comparison sites and the wellpublicised driverless car project, that announcement was far more widely anticipated. Shortly thereafter, it was revealed the technology giant had partnered with Compare.com, an

we’d be interested in having conversations about synergies that might exist, and that conversation ultimately led to the relationship that exists today.”

Expansion Only two months after announcing its California site, Google Compare announced its expansion into Texas, Illinois and Pennsylvania. It’s said they’re currently licensed to sell car insurance in 26 US states. How quickly they’ll move right across the country remains to be seen. But Guse says, “Google doesn’t do anything by halves. If

they make a decision, they will go into it and make the most of it. “It won’t take them long to expand across the whole of the US and then up into Canada. And then I would’ve thought the next step would be some of the European markets, which are ripe for comparison websites.” In considering the likelihood of Google Compare establishing an Australian presence in the near future, Guse highlights the differing levels of success that comparison websites have experienced in the UK and Australia. “Google obviously started up in the UK because the comparison websites over there are all the rage,” he says. “That’s how a very large percentage of insurance is sold in the UK market. “That is not the case in Australia. The major insurance companies – Suncorp, IAG, Allianz and QBE – have not allowed their products to be sold on comparison websites, and I cannot see that changing in the foreseeable future. As long as the majors hold their ground, I personally don’t see Google being a company that would race here to set up operations. I think there are much more powerful markets for them to explore and expand into before… Australia.” Rick Shaw, actuaries and consultants insurance partner at Deloitte Australia, agrees

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INSURANCE COMPARISON WEBSITES IN AUSTRALIA

Q: When you purchased or renewed your current policy, did you use an online comparison website for home insurance? 56% No – I did not use an 34% Yes – I used an online comparison online comparison website website 10% Can’t recall

Source: ASIC – Insuring your home: Consumers’ experiences buying home insurance

that insurance comparison websites haven’t fared as well in Australia as in other markets because of the lack of larger player participation. “That entrée into the market, which I think is the most suitable for Google, is not really available in the Australian market,” he says.

Beyond comparison But comparison websites are far from the end of the story. Speculation is rife about other conceivable entry points into the insurance

is a key to picking better risks … Smart data will enable Google to pinpoint exactly what is a good risk and what isn’t.” So perhaps it’s Google’s ability to sell its data to existing industry players, allowing it to be harnessed as a method of better pricing risk, which represents the company’s real goldmine in insurance. Don Johnstone, a director of Deloitte Australia, thinks that even within the comparison space, Google may look at other opportunities.

“Google doesn’t do anything by halves. If they make a decision, they will go into it and make the most of it” Scott Guse, KPMG market for Google. Shaw comments on the potential value of Google’s data to insurance companies. “Insurance is … a business where you sell the product before you know what it’s going to cost. And data is very much king in insurance, because there are two basic ways of making money in insurance… having lower expenses, or picking better risks. And data

“Google could also be an aggregator for the claims management of insurance. So if you get a claim, you then can go to an aggregator site and shop around for a repair shop to fix your car. There are all sorts of innovative possibilities.” Johnstone adds: “The whole insurance value chain is more unbundled in the UK than it is in Australia. So there’s a lot of scope for the industry

to transform and for players to disintermediate parts of what the big players dominate at the moment. The claims side is a key part.” Guse looks to recent activity of the Alibaba Group, a Chinese e-commerce company, as an example of another move Google could make. “Only about six months ago, [Alibaba] started to take strategic stakes in some local insurance companies in China,” he explains. But he adds that they “haven’t publicly come out and said what their intention is”. He also cites a development in the Netherlands. “In 2013, a company called Aegon launched a new product called Kroodle, and the only place that you can buy Kroodle insurance is through Facebook … If that’s successful, without a doubt, you could start to see Facebook trying to leverage that model and roll that out around the globe.” And in addition to the above-mentioned players, there’s a great deal of conversation around the impact of any decision by online distribution giant Amazon to seriously pursue an insurance sales route. Time will tell whether Google will manifest in the insurance industry in Australia, be it in the guise of Google Compare or exploiting another kind of opportunity. But as Andrew Rose wisely advises, “watching what’s happening across the oceans is not a bad thing”.

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COVER STORY

PETER EASTWOOD

EXPANDING HORIZONS

Peter Eastwood, global president and chief executive officer of Berkshire Hathaway Specialty Insurance, talks to Tim Garratt about the company’s long-anticipated arrival in Australia – the next step in what he describes as a ‘decades-long journey’ for the business THE BERKSHIRE Hathaway name has long been synonymous with success in global business. It’s a name inextricably linked with investor and business magnate Warren Buffett, who, at 84, continues to serve as chairman, CEO and president of holding company Berkshire Hathaway Incorporated. According to its 2014 annual report, total revenue for Berkshire Hathaway Inc and its subsidiaries last year came in at approximately US$194.7bn (A$248.8bn). Forbes magazine, in its most recent ranking of the world’s biggest public companies, had the Nebraska-based group placed at number five.

“We’re here to build a primary property and casualty business, and one of the things that we’re focused on doing is putting a meaningful amount of product into the marketplace as quickly as we can” And while 60 subsidiaries involved in a variety of industries have contributed to these staggering results, 27% of Berkshire Hathaway Inc’s net earnings are the underwriting and investment profits of its insurance operations. The group has played in the insurance space since 1940.

A rapidly growing business of the Berkshire Hathaway family is Berkshire Hathaway Specialty Insurance (BHSI), a company launched on 29 April 2013. With its global headquarters in Boston, Massachusetts, BHSI is principally focused on commercial lines and has grown exponentially within a very short time. “We’ve gone from four people on the team to 569 people today,” says BHSI’s global president and CEO, Peter Eastwood. “From a geographic standpoint, we initially launched the business in the United States, and we have since entered five other countries.” Those five other countries are Canada, Singapore, Hong Kong, New Zealand and Australia. The Australian insurance industry has anticipated the arrival of BHSI for some time. It’s entry into the local market was finally confirmed on 26 April, when it announced it had received its insurance licence from APRA to begin providing all lines of general business in Australia. Immediately, BHSI began offering property, casualty, financial lines and marine cargo insurance to Australian clients. BHSI’s emergence in Australia is a substantial event in itself for the general insurance industry. It goes without saying that this is an entry into the market that stands out from most. Far from an unknown entity, BHSI begins business locally bringing with it the Berkshire Hathaway legacy, built up over 75 years in North America’s insurance space. Additionally, interest in and respect for the brand is heightened by the reverence in which a sizeable portion of the community holds Buffett, described

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COVER STORY

PETER EASTWOOD

BERKSHIRE HATHAWAY SPECIALTY INSURANCE On 26 April 2015, BHSI announced its approval to provide all lines of general business in Australia BHSI currently offers property, casualty, financial lines and marine cargo insurance in Australia Its Australian office is located in Sydney The company is a subsidiary of Berkshire Hathaway Incorporated, founded on 29 April 2013 It already operates in the US, Canada, Singapore and Hong Kong, with underwriting and service teams in each market. It is currently seeking its insurance licence in New Zealand The local leadership team includes: • Frank Costigan: CFO and COO, Australasia (former CFO of direct insurance at IAG) • Susan Donaldson, head of claims, Australia (former national financial lines claims manager at Zurich) • Andrew Spurr, head of casualty, Australia (former liabilities manager at AIG) • Craig Taylor, head of property, Australia (former property manager for Australasia at HDI-Gerling) as the most successful investor of the 20th century and named in 2012 as one of the world’s most influential people by Time magazine. Industry pundits will watch BHSI’s moves over the coming months, trying to get a sense of how great an impact the behemoth can and will have in Australia. What do its new local operations mean for the general insurance landscape? And how much competition do they represent for the bigger end of town?

Beginnings Speaking to Insurance Business, Eastwood emphasised that BHSI’s strategy is very much long term. “In the world of Berkshire Hathaway, long term I would describe as ‘forever’. We effectively don’t have a finish line,” he says. “Everything that gets done in this organisation has a long-term perspective around it. We’re here to build a long-term, focused, diverse

(both by product line and geography)… principally commercial property and casualty insurance business.” Eastwood was one of the four founding members of BHSI who launched the company in 2013. “I’ve been in the property and casualty insurance business for 24 years,” he says. “I started my career at AIG in New York City in September 1991 after graduating from college. I worked for AIG for just shy of 22 years.” Immediately prior to joining BHSI, Eastwood had oversight of AIG’s property and casualty insurance businesses across the Americas and was then presented with the opportunity to join Berkshire Hathaway and build BHSI. Speaking about the business’ objectives, he says: “We’re here to build a primary property and casualty business, and one of the things that we’re focused on doing is putting a meaningful amount of product into the marketplace as quickly as we can, in satisfaction of our customers’ needs. My belief is that when customers and brokers think about strategic insurance company partners, they are turning to those [insurance companies] who can satisfy most, if not all, of what the need of that customer is. Our objective is to be able to satisfy that need. “We’ve actually launched six different commercial businesses, and there’s meaningful amounts of product that sit underneath each of the six broad categories. We’ve put a lot of product into the marketplace quickly.”

Expansion As to the countries in which BHSI decides to establish operations, Eastwood says the criteria are two-fold. Firstly, he says it looks for countries where it sees opportunities to write business that adds value to a country’s indigenous risks and exposures. Secondly, he cites the importance of catering to the needs of multinational customers. “I would describe us as building an international company that has global capabilities… There are customers that have exposures that cross borders. So where there’s a need for us to satisfy that multinational customer’s needs, and particularly where there’s a need for a locally admitted policy, we want to be in a place to have a network to do that.” Eastwood says BHSI had an interest in the Asia-Pacific region early on, given its growth potential. He sees the Australia industry as having no shortage of high-calibre performers. “I’ve experienced it as being a marketplace that has an exceptional level of insurance industry talent,” he says. Eastwood has high praise for Chris Colahan, BHSI’s recently appointed president, Australasia, who will lead the

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Australian and New Zealand businesses from Sydney. “Chris is an exceptionally talented individual, having joined us just a handful of months ago from RSA (Royal & Sun Alliance), where he was the chief executive of RSA’s business in Asia. In a very short period of time, he’s been able to put together terrific teams in both Australia and New Zealand, validating my belief that it’s a marketplace with great industry talent. We’ve been able to [build those teams] by pulling from the local marketplace, as opposed to bringing people in from other geographies. “To be honest, that’s a very important criteria for me in terms of where it is we think about launching our business and the order of priorities for us in terms of the way we launch. Amongst other things, it’s making sure that we’ve got the right person to lead it and the right people on the

with property, casualty, financial lines and marine cargo capabilities, and Eastwood says that, over the short term, it will continue to expand on those capabilities. “I’ll put the expansion of capabilities into a ‘stay tuned’ category as we think about acquiring more people onto the platform and creating more connectivity and developing distribution relationships that get us into other areas, but the marketplace should absolutely expect to see us in other product lines beyond the ones that we’re in today.” He also indicates an intention to ultimately serve a highly diverse range of Australian customers. “Our initial launch in Australia… is principally in the larger account segment,” Eastwood says. “Over time… what the market will see is us moving into other market segments as well, perhaps as far down as the SME space and positioning the

“We haven’t thought about essentially timing the insurance cycle and launching the business in a highly opportunistic way, but we’re building the business and positioning it for success over the long term” team who know the local marketplace and can generate a positive underwriting return for the organisation.” Eastwood says market conditions haven’t been factored into the timing of BHSI’s launches into new international markets. “We think about this as a long-term play,” he explains. “We haven’t thought about essentially timing the insurance cycle and launching the business in a highly opportunistic way, but we’re building the business and positioning it for success over the long term.” He says BHSI has some particularly key characteristics that position it well for success in Australia, along with the other international markets in which it has a presence. “We’ve got a very large and very strong risk-taking balance sheet, in fact the largest balance sheet in the insurance industry globally. It’s got wonderful financial strength ratings; we’ve got a brand that represents some very positive things… and we’re part of a larger organisation – Berkshire Hathaway – that really knows and values the insurance business.”

The focus Currently, BHSI’s business in Australia is exclusively dealing in commercial lines. It’s launched into the marketplace

business to offer products and services to the full spectrum of the customer base in the Australian market.” Describing what we can expect from BHSI in Australia, Eastwood says, like its other businesses around the globe, it will be a “solution-oriented organisation”. “Our underwriters go into the marketplace every day, thinking about the opportunities that our broker partners are presenting to us, with the objective of finding a solution, and finding a way to say ‘yes’, and not thinking about approaching the business from a rigidly defined risk appetite standpoint where, effectively, a box has been built and we [don’t] step outside of the box.” Eastwood stresses the importance of his BHSI team consistently moving swiftly. He says, “I want to make sure that the decision-making… is done at a rapid pace, and that involves us hiring very talented people and then empowering them locally in their engagement with both brokers and customers to be able to make decisions. “My belief is that if we take the very large balance sheet that we have, if we’re solution-oriented and we put real pace behind delivering a solution back to the broker and ultimately to that broker’s client, that combination… is a winning formula.”

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COVER STORY

PETER EASTWOOD

MEET CHRIS COLAHAN, BHSI’S PRESIDENT OF AUSTRALASIA Chris has returned to Australia to lead BHSI’s Australian and New Zealand operations after spending almost 10 years working at Royal & Sun Alliance (RSA) Insurance across Asia. Having begun his career in Australia at Westpac, Colahan went on to undertake six roles at RSA in five countries. Most recently, he served as RSA’s regional CEO for Asia, based in Singapore, and, prior to that appointment, he was RSA’s CEO in Hong Kong. At the time BHSI announced its approval to offer general insurance in Australia, Colahan expressed his excitement at being able to bring the Berkshire Hathaway brand to his home country and the Australian insurance marketplace. Peter Eastwood describes Colahan as “an exceptionally talented individual” who has firmly validated his belief that Australia is a marketplace with great insurance industry talent. Colahan tells Insurance Business: “Starting up a business within the Berkshire Hathaway group, bringing the great Berkshire Hathaway brand to Australia, was such a compelling opportunity I would have gone anywhere in the world to be a part of it. The fact that this opportunity has brought my family and I back home to Australia makes it even better. “This is just the beginning… our team and our product line will continue to expand. We look forward to providing solutions-oriented underwriting, with stellar financial strength, that will serve this market well for decades to come.”

“We’ve got a very large and very strong risktaking balance sheet, in fact the largest balance sheet in the insurance industry globally” Eastwood also nominates accuracy as being essential to BHSI’s execution of its vision. He elaborates that this involves “making sure that everything we deliver is what we promised we would deliver, and making sure there’s a high degree of accuracy with it”. “What I’m certainly hoping for is that brokers and customers will think to turn to us for, pretty broadly, what their needs are.” Eastwood is confident about the results that his new Australasian team can achieve. “I’d like to see our underwriters being first to quote, and I think being first to quote in a highly competitive marketplace is a demonstration of leadership. Again, I think we’ve hired a wonderful, highly talented team, and that team will have the ability, in a pretty unencumbered way… to move with some real pace, and

there’s no reason why we shouldn’t be out of the gates providing our brokers and prospective and existing customers with quotes sooner than the rest of the marketplace and leading the market.”

Times ahead Casting his mind forwards, Eastwood identifies profitability and profitable growth as being the greatest challenge for the global insurance industry now and in the foreseeable future. “We’ve got an external environment where the supplydemand equation really isn’t in favour of the seller,” he says. “We’ve got high levels of competition in the business, and so those who are best at underwriting and at executing on their strategy are the ones who will win. “You’ve obviously got a somewhat long-standing low interest rate environment as well, and so companies’ ability to get meaningful investment returns [is] muted. “One of the most important things for us – and, I think, for the success of our business – is to have, as an overarching guiding principle, simplicity… keeping things as simple as we can, in terms of the way decisions are made, in terms of the way that reporting relationships exist in the organisation, in terms of policy forms, [and] in terms of the way that claims are handled. If we keep simplicity in mind at all times, I think in a complex world we’ve got a chance to differentiate ourselves.”

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2015

PROUDLY SPONSORED BY

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Making the Top 10 will put you among an elite group of brokerages ranked on criteria including premium income, client retention, policies written and number of new clients during the 2014/15 ďŹ nancial year, as well as nonďŹ nancial criteria.

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SUBMISSIONS CLOSE FRIDAY 21 August

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4:08 PM

FEATURE

BROKERS ON INSURERS

BROKERS ON

INSURERS Australia’s best insurers ranked, rated, and revealed The results of Insurance Business’ third annual Brokers on Insurers Survey are in. Scoring Australia’s top insurers across 11 categories that matter to you as brokers, the 2015 survey asks and answers the all-important question: who are Australia’s best insurers? WHICH INSURER offers an experience to brokers, against which all of their competitors should be benchmarked? Which insurer is best in class for its BDM support? And when taking into account all key aspects of their business, which insurer comes up trumps? The time to reveal the answer to those questions has arrived, as we share the results of Insurance Business’ Brokers on Insurers Survey 2015. In this the survey’s third year, we once again asked brokers to rate nine insurers across 11 categories, and to tell us what it is they consider key when it comes to their dealings with those insurers.

How have insurers fared in brokers’ eyes in 2015? And how do the ranks they’ve achieved compare to the results of the previous two years? It’s time to find out who’s at the top of the ladder for turnaround times on claims, who’s ruling the roost when it comes to their range of products, and whose overall service level is the most outstanding. And, above all else, who is the Insurance Business Insurer of the Year for 2015? We invite you to turn the page to see all of the results.

Tim Garratt Editor, Insurance Business

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FEATURE

BROKERS ON INSURERS

WHAT BROKERS WANT WHAT’S IMPORTANT TO BROKERS: THE TOP FIVE

Claims turnaround times 4.84 Overall service level 4.71 New business turnaround times 4.67 Premium stability 4.42 BDM support 4.15 0

Note: Categories were individually scored between 1 and 5, where 5 equates to ‘very important’ It probably goes without saying that brokers want to have good relationships with their insurers. Insurance is a relationship business, after all. But it’s no less true in 2015 than it ever has been before. Responses to the Insurance Business Brokers on Insurers Survey 2015 tell us that brokers still highly value those who place importance on good, old-fashioned personalised service. One respondent to the survey told us, “Regardless of the overall opinion of the insurance company, it is the staff who make a lasting impression with brokers and who are responsible for building strong, working relationships that generate business.” Another told us, “Service delivery [is] more important than flash proposal forms or additional products. Do the basics right.” In this year’s survey, when it came to telling us what was most important to them, brokers ranked the same five items as last year in precisely the same order. That top five list comprises: claims turnarounds; overall service; new business turnarounds; premium stability; and BDM support.

An overall desire to have timely and efficient interactions with insurers couldn’t be clearer. And when an insurer has demonstrated a willingness to go the extra mile, brokers have been forthcoming in sharing those experiences with us. One respondent told us, “In arranging cover for a commercial property owner, one of our BDMs required a survey, but cover was needed urgently for a next day settlement. The property was over two hours from our office. It was, however, on the route home the BDM was going to take. “So that night, he … checked out the property … and confirmed the next morning he could write it.” Another respondent was impressed by a BDM’s willingness to join the respondent in visiting the client and ‘sealing the deal’. Not only do brokers appreciate insurers recognising their value through a commitment to timely and efficient communication, but also through promoting the value of their advice to the wider community. “Some insurers are doing more to promote brokers in the general community, which is heartening,” one respondent commented. “If we can all make a concerted effort to raise the profile of insurance and brokers from the realm of ‘another bill’ and ‘used car salesman’, it will benefit the whole industry greatly in this fast changing world.” It’s also important for insurers to show their respect for brokers at the smaller end of town. “A couple of insurers have really placed value on my business even though it’s small, and they’ve made a big effort to help me win some accounts,” one respondent reported. “This has meant I’ve tried to give them more business in return.” And what advice did our respondents offer to insurers for the times ahead? “Insurers need to continue their focus, working with brokers as a viable distribution channel. Insurers that do this are reaping far greater rewards than those not doing this,” opined one respondent, while another told us, “Insurers should stop discussing [the] soft market and when it will harden and address the reality that this is our market, and to respond accordingly.”

The other side While brokers responding to our 2015 survey had no hesitation in sharing with us the best of their experiences

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with insurers over the past 12 months, they similarly had no qualms about letting us know when an experience with an insurer just didn’t cut it. Among a range of complaints, brokers shared stories of slow and drawn-out claims processes, poor communication, and a lack of local staff support, sometimes attributed to an insurer’s decision to offshore particular roles. Additionally, brokers expressed frustration with insurers at reduced commission and bypassing brokers and selling direct. “Claims management teams have been pretty poor over recent times and are becoming frustrating for us, as brokers, and our clients,” one respondent told us. “I don’t know if they are understaffed or, worse, don’t understand claims and policy covers, but it [reflects poorly] on us as we are recommending these products to clients.” Along similar lines, another broker told us of having experienced “Horrendous service and response times, particularly in relation to new business quotes and claims”. One respondent commented that, in a particular instance, an insurer made claiming so difficult that “I subsequently lost that business”. And another survey participant said, “I have had a few difficult claims in the past year and I feel like the indecisiveness has hurt my customer relationship.” Survey responses continued to reinforce that high-quality service is of paramount importance to brokers. Citing the worst thing an insurer had done for their business in the past 12 months, one respondent offered that the provider “Treated us as just a number”; another complained about an insurer not responding to queries “in a timely manner”, and a third was frustrated by a specific insurer’s failure to “spend time with us and get to know our business”. Similarly, another respondent reported that an insurer had “Told us they do not have time to come and see us when we give them $700,000 a year in premium”. Surely, it’s a must for any business relationship to include proportionate amounts of give and take? A complaint not unique to the insurance industry, but important nonetheless, is perceived bias towards brokers and clients domiciled in major capital cities. “We don’t see enough of the insurers in the regional areas. [They’re] very metro-focused,” said one respondent. Do insurers need to re-think the level of attention they give to those in regional areas – a demographic that makes up

WHAT’S IMPORTANT TO BROKERS: THE NEXT SIX

Product range 4.09 Online platforms 4.08 Product innovation 4.00 Commission structure 3.94 Training & development 3.73 Insurer brand recognition 3.57 0

Note: Categories were individually scored between 1 and 5, where 5 equates to ‘very important’

approximately one-third of the Australian population? And while an overreliance on technology will never be a plus in a relationship business, do insurers need to prioritise a serious investment in more intuitive, userfriendly online platforms? Complaints Insurance Business received in the survey results extended to an insurer reported as having “Implemented poor online systems, making the broking end far more difficult and problematic”. In this increasingly competitive environment, insurers, as much as brokers, should be cognisant of what exactly constitutes their competitive edge. What is their point of difference that will entice brokers and their clients alike? What can be accomplished and how expeditiously can it be achieved? How can they make life easier for all involved? As one respondent reminded us, if an insurer is unable or unwilling to take on a challenging ask, that business can simply be taken elsewhere.

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FEATURE

BROKERS ON INSURERS TURNAROUND TIMES (CLAIMS) There was nothing equivocal about the message brokers provided us again this year. Turnaround times for claims represent the acid test for insurers. A broker’s lasting impression of an insurer will chiefly be shaped by the efficiency and expertise exhibited during the process of handling their clients’ claims. As one respondent put it, “A claim is where the insurer should shine and make life easy for brokers, and assure the broker that they have made the right decision to support that insurer”. And in the words of another, “Claims service [is] always at the top of our list of requirements”. This year, Chubb has shot up to take out the gold medal for claims turnaround times. Having ranked best in class in this category back in 2013, Chubb last year slipped down the ladder to number five, but has reclaimed the prime position in 2015. One respondent commented, “Personally, [I] have found Chubb to excel in claims handling, going above and beyond the other underwriters.” Continuing its climb up the ranks is CGU. Last year, CGU was awarded the bronze medal but has managed to pull off silver in 2015. One broker reported CGU as

INSURER

RANKING 2014

MOVEMENT

RANKING 2015

Chubb

CGU

Allianz

Vero

Zurich

–

3.73

CGU

3.46

Allianz

3.40

Industry average: 3.25

Improved

59.5%

HAVE TURNAROUND TIMES ON CLAIMS IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

Worsened

40.5%

4 5

BROKERS SPEAK… ON CLAIMS TURNAROUND TIMES SERVICE “Claims service is imperative, as it is the most tangible part of an insurance policy. Insurers’ response times, flexibility and negotiation is improving.” ONLINE PORTALS “Technology advancements and new systems have improved this.” OFFSHORING “With companies centralising claims and outsourcing offshore, it is generally poor across the industry.” CLAIMS EXPERTISE “It seems that many companies do not have enough qualified staff to cope with claims.”

Chubb

having paid claims “exceptionally quickly”, while another described their response on fire claims as “excellent”. Rounding out the list of medallists is last year’s gold winner, Allianz. Despite its shift downwards, one respondent described the insurer as remaining one of the “shining lights” when it comes to claim turnaround times. Once again, a majority of brokers (59.5%) reported that claim turnaround times have improved across the board in the past year, a slight increase on the 56% who told us the same in 2014’s survey. More than anything, brokers want their dealings with insurers to be defined by fast and efficient claims handling. The challenge for insurers is to ensure they’re implementing the processes that will most effectively afford their broker partners that experience, because when things fall short, it’s the broker who feels the brunt of a client’s dissatisfaction.

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OVERALL SERVICE LEVEL CGU has scored top marks for their overall service level in 2015, moving up from the runner-up position they occupied in 2014. On their heels was Allianz, another insurer who’s moved on the ladder in the right direction. A survey respondent commented that “Service does not appear to be a key factor for most insurers. Allianz still do it better than the rest”. The majority of participating brokers (58%) noted an improvement in overall level of service in the last 12 months, though the comments they offered suggested that improvement was slight. A number of participants were concerned about decreasing staff numbers and reduced levels of expertise. “The general level of insurance knowledge is reducing,” said one respondent. While some thought better overall service levels had been prompted by the increasingly competitive marketplace, one broker suggested better service would help some players to stand out: “The market is soft and everyone wants to write business, including brokers. Therefore … good service is a selling point and of major importance.”

HAS OVERALL SERVICE IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

CGU

3.46

Allianz

3.34

Vero

3.29

Worsened Improved

Industry average: 3.15

INSURER

RANKING 2014

MOVEMENT

Allianz

Vero

Chubb

Zurich

HAVE NEW BUSINESS TURNAROUND TIMES IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

TURNAROUND TIMES (NEW BUSINESS) IAG pick up their second gold medal for turnaround times, very closely followed by Vero and Zurich. One survey respondent identified all three of the medallists in having improved turnaround times during the past 12 months. However, in drilling down into survey responses, it was evident that while almost two-thirds of respondents didn’t believe times had worsened, many saw it as a case of more of the same rather than there being any improvement. Others were quick to attribute any improvement to the current market climate. One broker opined, “It appears that turnaround for new business has been increasing simply, I think, due to a softer market and insurers trying to get that extra slice of pie”. ‘Similarly, another broker said, “As there is large capacity in the market, underwriters have budgets so everyone is keen to write new business and therefore turnaround time has improved due to hunger to get market share.” Regardless of whether or not new business turnaround times have improved, the importance of efficiency to brokers in this respect is crystal clear, and therefore it’s an aspect of insurers’ business to which they should be paying considerable ongoing attention.

42%

RANKING 2015

CGU

58%

CGU

3.45

Vero

3.42

Zurich

3.40

Worsened

Industry average: 3.25

Improved

64% INSURER

RANKING 2014

MOVEMENT

36%

RANKING 2015

CGU

Vero

Zurich

Chubb

–

Allianz

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FEATURE

BROKERS ON INSURERS HAS PREMIUM STABILITY IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

Worsened Improved

64%

36%

HAVE NEW BUSINESS TURNAROUND TIMES IMPROVED OR WORSENED OVER THE LAST 12 MONTHS?

Improved

45%

Worsened

55%

PREMIUM STABILITY When it came to voting on whether premium stability has improved or worsened in the last 12 months, the overall result was strikingly similar to last year, with close to two-thirds of respondents indicating they’d observed some improvement. Many saw premium stability in recent times as symptomatic of the soft market. Conversely, others cited the current conditions as causing more instability in rates. Some respondents indicated having seen more stability on the commercial than the domestic side, while others suggested significant differences between rates for new business and renewals. Others responded that it varies between insurers. And that brings us to the medallists in this category. CGU adds another gold medal to their 2015 tally, having achieved bronze last year. Chubb found itself outside the top five in 2014, but they’ve shot right up to take out silver in this survey. And Allianz is our bronze medal recipient for 2015.

CGU

3.38

Chubb

3.34

Allianz

3.30

Industry average: 3.21 INSURER

RANKING 2014

MOVEMENT

RANKING 2015

CGU

Chubb

–

Allianz

Vero

–

ACE

–

New entry

BDM SUPPORT BDM support affords insurers another avenue to set themselves apart from competitors, and comments from survey respondents suggest there’s much room for improvement in this department. Last year’s top five secured the highest ranks once again, though the order has somewhat changed. CGU improve on last year’s bronze medal with a first place finish, Vero remains steady at two and Allianz nudges itself up onto the medallists’ podium with bronze. Survey respondents expressed concern about removal of real authority from BDMs, essentially making their roles, as one broker described, “just a postal service”. Another broker expressed concern about the limited ability of BDMs to make decisions, adding, “They are more and more just a conduit to the underwriting service team and can actually delay responses and turnaround times.” Alongside the issue of limited authority, some respondents were critical of insurer moves to centralise offices and reduce the number of BDM roles within their organisations. On the other side, one broker who felt BDM support had improved said that more frequent visits has assisted their business, facilitating more effective discussion of issues that had arisen.

CGU

3.38

Vero

3.33

Allianz

3.30

Industry average: 2.90

INSURER

RANKING 2014

MOVEMENT

RANKING 2015

CGU

Vero

Allianz

QBE

Zurich

1 –

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PRODUCT RANGE While good relationships with insurers are a hugely important part of the equation, companies also need to offer products that will provide their clients the right protection. In a close race, CGU receives their second consecutive gold medal for their product range. Allianz takes home silver while QBE has been awarded the bronze. Sitting just outside our top 3 is Vero, who only narrowly missed a medal. Broker feedback certainly tells us that brokers are keen to be kept in the loop about new products in insurers’ suites, and to be apprised of what those new offerings entail. Among the responses we received, one broker told us, “I feel there has been more of a commitment made to improve products and service.” And it won’t be of any surprise to report that brokers also value flexibility in product structure. One respondent praised the efforts of a particular underwriter who worked with them and their client to provide an affordable and effective travel insurance product for a large group of individuals with pre-existing medical conditions. The message is clear: build the products and they will come!

CGU

3.73

Allianz

3.65

QBE

3.61

Industry average: 3.33 INSURER

RANKING 2014

MOVEMENT

RANKING 2015

CGU

Allianz

QBE

Vero

Zurich

–

4 5

ONLINE PLATFORMS Back in February, Austagencies’ Alex Green questioned the impact technology has had on the insurance industry, despite the obviously rapid advances. He said brokers need to ‘pull stumps’ on systems that aren’t user-friendly. A well-designed online platform will make life easier for the broker, representing a true efficiency in their daily workflow. One industry leader told Insurance Business late last year that, in a digital world, customer experience expectations are not set by competitors, but by best-in-class service providers such as Google and Apple. Perhaps this should also become a key pillar in designing effective online platforms for brokers. For the third year in a row, Zurich leads the pack as the broker’s choice for online platforms. CGU has earned a silver medal and Vero the bronze. We’re already well aware of how vital a smooth and efficient transactional experience is to brokers. We expect experiences with online platforms to be quick and hassle free, regardless of the nature of our transaction. Clunky and counterintuitive offerings don’t cut it in this day in age, when so many tools are available to avoid that scenario. Insurers need to keep focused on the fact that any online platform designed and rolled out needs to have the ability to consistently facilitate the desired experience.

Zurich

3.57

CGU

3.49

Vero

3.42

Industry average: 2.99

INSURER

RANKING 2014

MOVEMENT

RANKING 2015

Zurich

CGU

Vero

Allianz

QBE

–

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FEATURE

BROKERS ON INSURERS PRODUCT INNOVATION Zurich secures its second gold medal for 2015 with a first place ranking for product innovation. Chubb was nowhere to be found in last year’s top five, but has surged up the ladder to take out silver. And CGU finds itself with bronze, precisely the result it achieved in 2014. While product innovation currently ranks at the lower end of the scale of importance for brokers (eighth), the competitive climate might see it surging up in the ranks in years to come. The ‘innovate to compete’ message Lloyd’s chairman, John Nelson, delivered in Auckland in February seems to be gaining momentum. The market continues to become more fiercely competitive, and there’s no sign it will relent any time soon. But in an age of rapid change, the industry will be challenged by new and emerging risks that will require their own insurance solutions. Those that can most effectively and expeditiously respond to the changing risk climate, creating the products to address those new risks, will surely garner greater favour with brokers. And it will be the true innovators who will succeed in accomplishing that.

Zurich

3.35

Chubb

3.32

CGU

3.22

Industry average: 3.09 INSURER

RANKING 2014

MOVEMENT

RANKING 2015

Zurich

Chubb

–

CGU

Vero

QBE

–

1 2

–

COMMISSION STRUCTURE The insurance commission structure rankings give CGU its sixth gold medal for 2015. Allianz has secured the silver spot for the second year in a row, and Zurich brings home the bronze after last year’s gold win. QBE is up next in fourth place, and AIG rounds out the top five. It may rank lower on the importance scale (ninth), but past survey results have shown that downward movement in commission structures can have a significant impact on attitudes to an insurer’s brand. Asked what the worst thing an insurer had done for their business, or a client, in the past 12 months, a number of survey respondents mentioned reduced commissions. As is the case with workers in any industry, being

BROKERS SPEAK… ON BDM SERVICE ON SEEING LESS BDMS “More insurers are cutting back on their resourcing in this area and forcing brokers to deal with a team and not a specific individual. As such, it’s difficult to speak to decision-makers at times.” “We only have a couple that consistently visit and some are impossible to even contact.” “See them less in regional areas.” “Not much personal service – BDMs seem to be confined to the office more.”

CGU

3.52

Allianz

3.46

Zurich

3.45

Industry average: 3.28 INSURER

RANKING 2014

MOVEMENT

RANKING 2015

CGU

Allianz

Zurich

QBE

AIG

–

1 –

valued is important to insurance brokers, and commission rates can certainly go a long way to shaping a broker’s attitude as to just how much value an insurer places on their business.

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TRAINING AND DEVELOPMENT It might rank second to last on the importance scale, but the survey responses tell us that quality training offerings facilitated by insurers are well appreciated by the broking community. Some respondents to the survey even cited training sessions as the best thing an insurer had done for their business in the past 12 months. One respondent was impressed by a particular insurer’s two-day training program, describing the offering as “imaginative”. The fact is that brokers are required to undertake continuing professional development. This offers insurers the chance to provide valuable education to brokers that better equip them to deal with the changing industry, to progress their careers and to expand their knowledge of available products, which ultimately can benefit the insurer, the broker and the client. It was an exceptionally tight race, but Zurich has made it three-for-three as the highest ranked insurer for training and development. And, again for the third year in a row, Vero has taken silver, though this year it’s sharing its metal with CGU (last year’s Bronze recipient).

Zurich

3.06

Vero

3.04

CGU

3.04

Industry average: 2.66

INSURER

RANKING 2014

MOVEMENT

RANKING 2015

Zurich

–

Vero

–

CGU

QBE

–

Allianz

–

BRAND RECOGNITION Probably the most unsurprising result to come from the survey is Allianz’s first place finish for brand recognition. Only a handful of Australians (if that!) would remain completely oblivious to the ‘Ahhh-Allianz’ moments in what has been an extensive and highly visible national advertising campaign. Allianz is now following up its ‘Ahhh-Allianz’ successes with the equally inescapable ‘Because it matters’ campaign, which launched in December 2014. It’s little wonder Allianz has pulled off three successive wins in this category! QBE is this year’s runner-up. Recently, the insurance giant has been reinforcing its ‘100% commitment’ positioning with a campaign that encompasses TV, outof-home, radio and digital. It also continues its principal sponsorship of the Sydney Swans, and it has a major partner sponsorship with the Sydney Roosters until the end of the 2018 NRL season. CGU has taken the bronze medal, probably owing to its continuation of the ‘See it Through’ brand story, which involved a new national campaign announced at the end of last year. Certainly popular with the broking community, the campaign highlights the value of having the right insurance advice.

Allianz

4.11

QBE

4.02

CGU

4.00

Industry average: 3.42

INSURER

RANKING 2014

MOVEMENT

RANKING 2015

Allianz

QBE

CGU

Zurich

–

Vero

–

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FEATURE

BROKERS ON INSURERS

INSURER OF THE YEAR The final scores have been tallied and the results are in. Based on a record 478 survey responses, Insurance Business is excited to announce that CGU is our Insurer of the Year for 2015. It has been a big year for CGU and its parent company, IAG Ltd. Completing its acquisition of Wesfarmers’ underwriting businesses, IAG welcomed the Lumley and WFI brands to the family. Speaking to Insurance Business late in 2014, thenchief executive of commercial insurance for IAG, Peter Harmer, was excited about the transaction and the opportunities that lay ahead for the group. “In an increasingly difficult and commoditised world, it’s more important than ever that we support our brokers in being able to establish the value that advice represents to customers,” he told us. And promoting the value of the broker’s advice is precisely what CGU has done, via its Australian-first national advertising campaign launched late last year. CGU’s overall first place ranking was a result of its strong performance across all 11 categories. Not only did the insurer earn a medal in all categories (winning six golds, three silver and two bronze), but it also managed a first place finish in four of the top five categories as ranked by brokers. Now that’s an impressive result!

Our overall silver winner for 2015 is Allianz. The insurer is the second of our medal winners to manage a move up the ladder, bettering the bronze medals received in both 2013 and 2014. Two-time gold medallist Zurich picks up the final spot on the medallists’ podium this year, only just shy of Allianz’s final score. Outside of the top three spots, it continued to be a tight race, with Vero and QBE ranking fourth and fifth respectively. Insurance Business extends its congratulations to our top-ranked insurers and all of the medal winners across the 11 categories surveyed. The close race this survey has become should serve as a reminder of the opportunities for all in the insurer space to continue improving their broking propositions, taking into account a wide variety of factors. The challenge now for insurers is to work to charge ahead of CGU in 2016, in order to be able to wear the crown of the Brokers on Insurers Insurer of the Year.

INSURER

RANKING 2014

MOVEMENT

RANKING 2015

CGU

Allianz

Zurich

Vero

–

QBE

–

METHODOLOGY

Allianz

CGU

3.37

3.46 Industry average: 3.14

Zurich

3.33

How did we come up with the final Brokers on Insurers results? Using our online newsletter and Twitter, we asked brokers to rate the performance of nine of Australia’s insurers: ACE, AIG, Allianz, CGU, Chubb, QBE, Vero, XL Catlin and Zurich. A record 478 respondents rated these insurers between one (very poor) and five (very good) over 11 categories, which were: claims turnaround times;new business turnaround times; brand recognition; BDM support; training & development; online platforms; commission structure; product innovation; product range; overall service level; and premium stability. Broker respondents also rated the importance of each of these categories to them. An average score was then generated for each insurer in each category, and an overall average was calculated based on each insurer’s performance across the 11 categories. Brokers were also asked a number of questions about how insurers had performed in the most important areas, and for their best and worst experiences with insurers.

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STAYING BROKER-FOCUSED “At the end of the day we can kid ourselves and say we’re improving, but whether we’re improving or not will be determined by our partners” Ben Bessell, chief executive, IAG Commercial Insurance

BEN BESSELL, chief executive of IAG Commercial Insurance, is thrilled CGU has emerged victorious in the Brokers on Insurers Insurer of the Year survey. “It’s fantastic. We’re very excited to win the award,” he tells Insurance Business. “We’re very proud to be associated with the award, and it’s a great testament to the team and the work they’ve put in not just over the last 12 months, but over the last number of years.” Bessell describes the broker channel as extremely important to CGU. “The CGU heritage is based on relationships with brokers and intermediaries … We’ve got a long history working with brokers, but I think it’s important that we remember we need to make sure we complement the work that they do for their customers, and provide value and insights using our scale and opportunities that we have.” He reports that CGU has received a wealth of good feedback about its recent advertising campaign, promoting the value of the right advice. “I think it certainly reached the target audience and I think it’s done a great job in reinforcing that message that we’re committed to supporting brokers and the importance of advice.” Discussing CGU’s six gold medals across the survey categories, Bessell would like to think the result is a refl ection of CGU’s focus in recent years on providing consistent levels of service. He says, “I think consistency is really important. Providing localised service is really important, and having underwriters and sales staff as close to our partners and customers as possible, and … providing our staff with tools … to make quick turnarounds [and] quick decisions.” Looking ahead, Bessell and his team will continue working on the integration of the Wesfarmers insurance business into IAG Commercial Insurance. He’s also excited about how CGU can help brokers benefit from the insurer’s strong focus on risk mitigation. “We think that we have the expertise at our disposal within CGU to provide more tailored risk management advice that

would complement the work of a broker, and therefore provide added value to their customers.” There’s also the development opportunities that CGU offers its partners through its Platinum Leadership Network, looking to arm brokers with skills that can be taken back into their businesses. Additionally, Bessell mentions the group’s intention to enhance its role in the digital space, which as he explains, involves “Providing a more contemporary environment to transact where that makes sense … I think having a great digital strategy and working with our partners to make sure we identify customers who need that … is really important.” Bessell stresses the importance to CGU engaging in an ongoing dialogue with its brokers and partners, taking feedback onboard and effecting changes where necessary. “At the end of the day we can kid ourselves and say we’re improving, but whether we’re improving or not will be determined by our partners,” he says. “So it’s really important that we continue to seek feedback, such as awards like this, to help reinforce what’s working well, but also use it as an opportunity to make changes where required.”

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PEOPLE

THE BIG INTERVIEW

ORIGINAL PIONEERS Lloyd’s new local leader, Chris Mackinnon, tells Insurance Business about Australia’s role in helping the world’s largest insurance market achieve its Vision 2025 objectives CHRIS MACKINNON may be new to Lloyd’s top job in Australia, but his history with the specialist insurance market is extensive. In fact, his career in insurance began with Lloyd’s in London almost three decades ago. “I guess the reality is I’ve never actually left Lloyd’s,” he tells Insurance Business. “Whilst I started out my career in broking in the marine market in Lloyd’s in the late eighties, since then I’ve always had an active involvement with the Lloyd’s market from Australia or even back in the UK.” On top of that, Mackinnon comes from a family who’ve been in insurance for five generations. “I grew up with Lloyd’s around the breakfast table; on my way to school in the mornings,” he says. Mackinnon became Lloyd’s general representative in Australia in early February, replacing Adrian Humphreys. Previously, he was the CEO of Gow Gates Insurance Brokers, one of the country’s largest privately owned insurance groups. He says it was an experience he thoroughly enjoyed. “The diversity of the product lines and the client base that we had there really gave me the opportunity to look at the industry across all different facets, which was a great eye-opener for me. Anything from racehorses to racecourses

to chemical manufacturing, through to EPS sandwich panelling … getting a totally different oversight of the real Australian market … has been invaluable for me, to be honest, since coming into this role.” Mackinnon’s initial months in Lloyd’s Sydney office have been hectic. During his first three days on the job, global chairman John Nelson was in town. “It actually was a fantastic

exciting time. In 2014, Lloyd’s businesses in Australia collectively wrote $2.3bn in GWP. Lloyd’s is the fifth largest insurance entity in Australia. In its Annual Report for 2014, Lloyd’s announced a pre-tax global profit of £3.2bn (A$6.38bn), with a return on capital of 14.7%. Comparing the Lloyd’s market in the late ’80s to now, Mackinnon describes its evolution over that time as a “quantum shift”.

“I like to think that Lloyd’s is positioned to create solutions to problems that people don’t know they’ve got yet” opportunity for me to spend time with him, spend time with our key stakeholders in Australia, and get a real sense of his perspective on the market modernisation program in Vision 2025,” Mackinnon says. “We met with a lot of different people to get a sense of what’s going on in the markets. It gave me a good framework to understand what it is I need to do going forward.” Mackinnon has returned to Lloyd’s at an

“It’s a whole different world,” he says. “Everything is so much tighter and more controlled and well organised now than it ever has been in the past. “Ninety per cent of the capital at Lloyd’s is now corporate, and the 10% private names capital is predominantly built in through limited liability vehicles. So there’s a fundamental shift in the capital provision behind Lloyd’s. We’ve got globalisation of capital … there’s a

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PEOPLE

THE BIG INTERVIEW

lot of diversity coming into the market. “I think the other big change … is the fact that 27 years ago Lloyd’s was quite comfortable sitting in London waiting for the business to come to London. Obviously, one of the key pillars [of Vision 2025] is global expansion of the brand, and that is absolutely critical in the emerging markets and the evolving markets for us to have that physical presence and physical profile … It’s the way we have to move forward. We have to be in these markets in order to capture the opportunity.” Talking about Australia’s role in assisting Lloyd’s to achieve its global expansion objective in Vision 2025, Mackinnon says we’re being used as an example of what can be achieved. “We’re one of the most mature markets that Lloyd’s has in the world. We’ve been taking business from Australia into the London market for about 150 years. We’ve had a coverholder model up and running since the early seventies. We’re very established in terms of our market. “Having said that, we’re working very closely with Asia-Pac. We work directly with the guys in Singapore, and they are right at the forefront of opening up emerging markets through China, Malaysia, Indonesia, Korea, and even into India as well. A lot of the lessons that we have learned over the years in Australia are being used to the advantage of the region, not just from the Australian perspective.” There are eight key priorities in the Vision 2025 strategy and, according to Mackinnon, Australia is leading the way on a number of them. “Market modernisation is obviously a key pillar to what we’re trying to achieve, and that’s not just technology. It’s about the whole way we transact business and distribute product. We’re piloting, at the moment, a project called ‘Project Tomorrow’, which is effectively a straight-through processing capability so that coverholders, remotely around the world, can enter data onto their systems and have it immediately converted and translated into multiple syndicate systems. It’ll improve the efficiency and the speed of transactions, it’ll improve the market oversight, it’ll give syndicates real-time access to data that their coverholders

are writing around the world, and we’ve been piloting that project with one of the Australian coverholders, with a huge team of people involved with developing the technology to make it work. “Australians are an innovative bunch on any given day of the week. We have 113 coverholders here, and a significant majority of them are pioneers and innovators in terms of product and distribution and the way they do things. The support that we provide to them and the lessons we learn from them, again, is a key pillar of the innovation strategy of Vision 2025 – keep Lloyd’s ahead of the game in terms of how we develop new product in a very rapidly changing marketplace.” On where significant opportunities for innovation currently lie, Mackinnon cites cyber, supply chain and reputational risk, but adds: “Whilst those are emerging risks and they continue to emerge in terms of the threat they pose to the market, there are constantly changes with potential risks that are occurring. Solar flares … [don’t] get a lot of press, but … the emerging risks team in London are doing a lot of work on understanding the potential implications. Solar flares have the potential to bring down a GPS network. A decent-sized solar flare could actually cause aircraft not to be able to find airports and ships not to be able to find ports. So there’s a whole team at Lloyd’s who specialise in understanding what the real threats are as they emerge in the world.” Mackinnon reflects on Nelson’s speech in Auckland in February, in which he shared the statistic from a London Market Group study that only 10% of the corporate risk map is covered by insurance. “That means that 90% is not. Those are the kind of areas that we are constantly looking at to try and guide the market and/or provide some thought leadership to the market … The way I like to look at it is I like to think that Lloyd’s is positioned to create solutions to problems that people don’t know they’ve got yet.” Technological developments drive a significant amount of innovation. Mackinnon believes that one of the most interesting and exciting opportunities to use technology in insurance

LLOYD’S AUSTRALIA: FAST FACTS

1860 was the year Lloyd’s began writing risks in Australia

#1 largest provider of insurance products written exclusively via brokers

67% of ASX 100 companies are insured by Lloyd’s

113 independent insurance agents are authorised to write business on behalf of Lloyd’s syndicates

8 syndicate service companies in Australia

$426M is the estimated amount of net claims Lloyd’s paid out after several weeks of severe flooding in and around Bowen Basin – the most expensive natural disaster in Australia’s recent history

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PEOPLE

THE BIG INTERVIEW

comes via its use in risk mitigation strategies. He explains: “That is really to use technologies such as flood mapping, risk mapping, predictive technologies that are able to manage the kind of environment that we have here in Australia … Even technologies around improving building standards.” But while technological developments have significant implications for the insurance industry, he also says: “I don’t think we should ever get away from the fact that we are a people business and that people communicate better than machines. I think that that’s an important part of what we look to do within Lloyd’s as well. It’s the specialty expertise that we bring to the table that we think is where the value is. If we can use technology to allow people to spend more time communicating and less time handling data, that’s got to be a good thing.” There continues to be a wealth of discussion around the challenges brokers face because of increasing consumer willingness to transact online for insurance, but Mackinnon says they shouldn’t be threatened. “I think if a broker is threatened by the advent of online aggregationtype sites, I’m not convinced they’re doing their job properly. I think that brokers, by their very nature, are an advisory service. They should be listening to their clients, and they do. Brokers are fantastic in this country. They’re really, really well organised. But the critical part of any broking role is actually to listen to your clients and then help them to innovate solutions

that are bespoke to their particular need. “Yes, products get commoditised. Mature products will always be commoditised. But you can’t buy cover for drone insurance online. You can’t buy cover for complex cyber threat online or solar flares online … Brokers need to … focus on … covering those 90% of areas that the

“Brokers are at the heart of the Lloyd’s distribution model. We’re a broker market. I’d like to spend some time on that” corporate risk map doesn’t cover … Things change, and we have to adapt to that market, and I think that that’s an important role that the brokers have to play – to keep communicating with the clients, keep understanding and listening to what it is that they need to transfer in terms of risk.” Looking ahead, Mackinnon says Lloyd’s will keep a close eye on policy terms and conditions. “It’s imperative to us to maintain the underwriting discipline that coverage provided must be riskrated,” he says. “We want to avoid situations where

CHRIS MACKINNON ON CHANGING PUBLIC PERCEPTION OF INSURANCE Chris Mackinnon thinks it’s time the insurance industry stopped selling itself short and began promoting the positive impact of the work it does every day in the community. “Generally, you only ever hear about the insurance industry when there’s a problem or when there’s a natural disaster and some nasty insurer refuses to pay up,” he says. “I think we can do a lot more to actually promote the consequences of what we, as an industry, do and the fact that we keep the wheels of industry turning and, without us, it wouldn’t happen.” Mackinnon advocates a marketing strategy that “switches the approach around from selling product to selling result … We’re in the business of promises to pay and helping to rebuild and sustain livelihoods and people’s businesses. So why don’t we tell people?”

we’re just throwing in extra cover without really understanding what the potential threat is of that risk, or without getting proper premium consideration for that risk. An example of that would be on professional indemnity policies, where people are generally throwing in cyber extensions. It’s a civil liability form with a cyber extension, which basically means you’re covering any civil liability arising out of a cyber issue. You could be issuing a 12-month policy that is potentially going to cover a risk that doesn’t yet exist because the evolution of cyber threat is so much faster than the evolution of cyber product. “There is a real risk that insurers are going to start copping very large losses on cyber exposure that they never contemplated at the time they took the risk on and rated the risk. Those kinds of things concern us.” As to Lloyd’s Australia’s priorities in the time ahead, Mackinnon says one of his key aims is to have proper oversight around the claims process and how it’s handled, in order to ensure consumers receive what’s been promised in a timely fashion. Another key priority is implementing a broker relationship management program. “My predecessors have done an amazing job of building a framework of regulatory compliance and oversight. They’ve built a great framework around coverholder modelling and building the coverholder network. One of the things I’d like to focus on is building the relationship and the strategy with brokers in Australia. “Brokers are at the heart of the Lloyd’s distribution model. We’re a broker market. I’d like to spend some time on that.” On increasing competition, Mackinnon says, “We’ve been doing what we do for over 150 years here … In more recent times, we’re very focused on maintaining underwriting discipline, market oversight, sensible decision-making and riskrating. Competition doesn’t change that. “I think that there’s plenty of room for competition, and it’s really up to individuals and companies and underwriters and syndicates to demonstrate their unique offering through innovating and through product specialisation and being experts in their field.”

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FEATURE

UNMANNED AERIAL VEHICLES

Take off Already used for military and various civil purposes, unmanned aerial vehicles are about to be deployed by major insurers in the US TALK AROUND potential utilisation of unmanned aerial vehicles (UAVs), or ‘drones’, by insurance providers is hardly new. The impact of UAVs on insurance was recently examined in a white paper by global law firm Reed Smith. Industry chatter about the technology has been focused both on how UAVs could improve the claims process, and the opportunities and challenges for the industry related to coverage of drone risks. But now the first steps have been taken towards applying the use of UAV technology in insurance. In April, three major insurers were granted approval by the US Federal Aviation Administration (FAA) to operate small UAVs to conduct specified types of insurance inspections. Among the insurers granted approval was AIG, who have also been permitted to implement a research and development program to explore potential further ways to utilise UAVs for insurance purposes. “AIG is committed to continuous improvement and innovation in providing better, faster, and safer risk and claims assessments to our customers,” says Eric Martinez, executive vice president of global claims and operations. “Leveraging cutting-edge technologies like UAVs can enhance our ability to assess and mitigate risks to better help our customers and their communities prepare for and rebuild after a catastrophic event.”

Approach Asked about the period over which the insurer has been exploring the use of these aircraft, Martinez says AIG has been following the

evolution of UAV technology for some time and began conducting test flights towards the end of 2014. The insurer says UAVs could potentially help accelerate surveys of disaster areas by providing high-resolution images for faster claims handling, risk assessment and payments. It also says UAVs could quickly and safely reach areas that may be dangerous or inaccessible for manual inspection, and provider richer information about properties, structures and claim events. Martinez says AIG already has substantial experience of underwriting special insurance coverage for UAV owners and operators. “We have a deep understanding of the issues affecting safe use of UAVs and the importance of thorough planning for both normal operations and for contingencies that might affect the safety of the flight,” he says. “We want to bring all of the benefits of this new technology to our customers and adopt best practices for operating safely in a commercial setting. “Previously, we either wouldn’t have had

access to this information, would have had to wait, or in some cases collect it with hands-on methods. Those include ladders, safety lines and cherry pickers. UAVs can capture imagery quickly, safely and from multiple angles. They can be used to inspect areas that are inaccessible or dangerous for people. UAVs are tools which we want to use to better serve our customers.”

Skies ahead Having been granted the FAA exemption,

THE FUTURE Is a whole new meaning about to be ascribed to the phrase ‘fast-tracked delivery’? According to the UK’s Guardian newspaper, Amazon and Google have signed agreements with NASA to test their delivery drone systems at NASA’s Ames Research Centre in Silicon Valley. A future of books and DVDs delivered door-to-door by drones appears to be in sight!

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UNMANNED AERIAL VEHICLES According to the US Federal Aviation Administration (FAA), unmanned aerial vehicles (UAVs) can have a wingspan as large as a jetliner or smaller than a radiocontrolled aeroplane. The US FAA says UAV operations can potentially range from ground level to above 50,000ft, depending on the specific type of aircraft.

“We want to bring all of the benefits of this new technology to our customers and adopt best practices for operating safely in a commercial setting” Martinez says the insurer will begin operating UAVs in controlled settings to survey properties after natural disasters, and for risk management purposes. “Operations will only be conducted over private or controlled-access property with permission from property owners and/or local authorities.” He says permissions will be obtained prior to each flight. “AIG’s intent is to operate a program which follows applicable privacy laws and respects the privacy of the communities where we operate; we will abide by all federal and local regulations,” Martinez says. He adds: “Our goal is to use the UAVs to augment our knowledge and assist the adjusters and claims handlers.”

AIG has established an international UAV research and development program in New Zealand. It says the flights it has conducted have provided valuable insights on technology, flight operations and image collection techniques, which will be incorporated into AIG’s global UAV strategy. Martinez says AIG is in the early stages of getting insights from the research already undertaken in New Zealand. He says the insurer will share its insights “in due course as we work with proper regulatory agencies and for the benefit of our customers”. Martinez had no comment as to when the use of UAV flights by the insurer might expand globally.

In May 2015, the FAA announced that international news network CNN would be exploring how UAVs might be safely used for newsgathering purposes in populated areas. Other organisations will be looking into the use of UAVs for agricultural and rail transport purposes. According to the Association for Unmanned Vehicle Systems International, the integration of commercial drones into the American airspace will boost the US economy by over US$13bn in the first three years. It’s expected that between 2015 and 2025, commercial drones will add more than US$80bn to the US economy. In Australia, use of UAVs is governed by Part 101 of the Civil Aviation Safety Regulations 1998 (Cth).

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FEATURE

EDUCATING BROKERS

WHERE DO WE GO FROM HERE? The commercial world is changing. How should the education of brokers change in order to effectively respond?

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IN APRIL, Martin McAvenna, general manager of Austbroker and IBNA Member Services (AIMS), gave a speech in Barcelona that’s since generated a considerable amount of industry conversation. The comments prompting a discussion centred on insurance broker education, and the need for content and delivery to evolve in order to best equip brokers to deal with tomorrow’s world. “One of the things that framed what I had to say about this was automation,” McAvenna tells Insurance Business. “We’re changing the way we transact business … We’ve socialised and normalised behaviour which says to the consumer with the computer in front of them, ‘I can do this for myself ’. That was my starting point: that we all believe we can do it for ourselves. “The consequences of this in the insurance industry have not yet arrived fully, but there’s no doubt that there’s some reduction in the number of broker transactions, particularly among SMEs and micro SMEs.” McAvenna attributes that reduction to the availability of attractive online applications, their speed, and the perception of online transactions as cheaper. “Insurance is at risk of being perceived as just another commodity, and it’s been easy over the last 10 years to buy it for yourself … It seems to me it’s time to reconsider what we’re educating brokers with.”

“Brokers need … the tools and the training to do that. They can be the best salesperson in the world, but if they’re not selling the client the right product, they’re useless … The bit that really needs to be ramped up, I think, is technical training. “This generation has got a great thirst for knowledge … They want good-quality education. They’re demanding it.” Talking about the industry’s two main broker education providers, the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the National Insurance Brokers Association (NIBA), McAvenna says, “It seems to me that both providers have a serious contribution to make … There is undoubtedly a conversation within the insurance industry

Focus on insurance!

right now for a unified process, and that seems to me where both of them have something to contribute – to what this might be.” But McAvenna also believes it’s vital to have outsiders involved in the process of ensuring that broker education aligns with the changing business world. “You need to bring in some new thinking, because there is such change going on in commercial transactions generally … Insurance, by its very nature, is a group that thinks in a similar way about a lot of subjects. It needs somebody to say, ‘Why aren’t you doing this? Why aren’t you doing that?’ ”

Professor Allan Manning, managing director of the LMI Group, says education programs need to focus on training that arms brokers with the expertise that facilitates providing their clients with the right advice. He’s concerned about a lack of focus in education on insurance itself, and too much emphasis on bookkeeping, management, sales and compliance. “The insurance broker’s role is so very important. So much is at risk if you get it wrong,” Manning says. “You’ve got to become an expert and show your value to your customer on advice.

As well as consultation with persons external to the industry, McAvenna says he ideally sees broker education being delivered by a single provider and recognising the changing commercial landscape. “Change is here, and it affects our business, and although the evidence at this stage of this change is not huge, it’s there. It’s happening and it’s increased over the last two to three years measurably to, for example, go direct. And what that says to me is that customers are therefore not seeing a value in risk being assessed, understood and dealt with, rather they just buy those commodities.”

The providers’ perspective So what do ANZIIF and NIBA have to say when it comes to their broker education offerings

“Insurance is at risk of being perceived as just another commodity, and it’s been easy over the last 10 years to buy it for yourself … It seems to me it’s time to reconsider what we’re educating brokers with” Martin McAvenna, AIMS and the obstacles that tomorrow’s broker will need to overcome? Anton Barnett-Harris, ANZIIF’s general manager of education, events and international, says that with increasingly rapid changes in the broking business, it will be critical for brokers to be adaptable and able to learn. “In many ways – environmentally, legally, economically, technologically – we have no idea what the world will look like, but brokers will need to be able to keep pace and respond to changes through ongoing learning and continuous professional development,” he says.

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FEATURE

EDUCATING BROKERS

“The volume of information a broker takes in is already enormous – that will grow even more,” he adds. “There are hundreds of products on the market, combined with an ever-increasing number of risks. This means that brokers will have to be incredibly good at getting to know and understand their client, their client’s needs, the context in which a client takes out insurance, and how that relates to the myriad of insurance options available.”

Like McAvenna, Barnett-Harris identifies the need for brokers to be able to add value and communicate that value to their clients, as more and more customers opt for online. “Consumers demand access to services anytime, anywhere, and only technology can help us with that,” he says. “This means that brokers have to embrace technology and really consider how they can provide greater access to consumers for their services.”

“No matter how many education providers, the important question is whether brokers are receiving top-quality education” Anton Barnett-Harris, ANZIIF SHOULD A BACHELOR’S DEGREE BE A MANDATORY QUALIFICATION FOR BROKERS? Responding to the recent Treasury consultation paper regarding the professional, ethical and education standards in the financial services industry, NIBA has prepared a submission rejecting the idea of a new framework for broker education and training. In the 18-page submission, NIBA questions the applicability and relevance of a number of recommendations the report has made based on issues that ha ve arisen with respect to financial planners and investment and superannuation advisers. It reads: “At no point is consideration given to whether any equivalent issues have arisen in relation to general insurance brokers that would justify such significant changes. In NIBA’s view there are no such equivalent issues in relation to general insurance brokers that would justify such changes.” Focusing specifically on education and training standards, the submission highlights the lack of evidence of deficiencies in the existing education and training programs of NIBA College and ANZIIF. “NIBA firmly believes the current framework for education and training of insurance brokers is relevant and appropriate.” The submission goes on to reject the notion that a bachelor’s degree should be mandated as a minimum education requirement for broking. It adds: “Indeed, NIBA is not aware of any degree course which would be regarded as relevant for the purposes of acting as an insurance broker, or for giving advice in relation to risk assessment, risk management, risk funding and insurance, and insurance matters generally.” The submission claims that, should a degree become the minimum qualification for brokers, NIBA expects the majority of brokers would need to complete further study at a potential combined total cost to brokers of over $30m. NIBA argues that existing training and qualifications are both adequate and appropriate, and emphasises that they are under constant review to ensure relevancy, currency and accuracy. NIBA has requested an opportunity to discuss the matters raised in the submission with Treasury in detail.

Barnett-Harris also mentions big data and its ability to provide underwriters with greater insight into risk. “As a result, underwriters will require more detail from brokers around what they are insuring and who they are insuring, so brokers will need to have greater understanding of a client’s business and profile, and so on. Brokers will need to be equipped to ask more questions and relay more information, as well as understanding how this information will affect the client.” Barnett-Harris says ANZIIF is busy building new programs embracing a number of key changes. Specifically, he mentions using technology to enhance learning and new scenario and case study-based assessment. He also says ANZIIF is currently collaborating with broking leaders to develop a new education offering that will sit next to their traditional learning program. “This is a range of more concentrated learning opportunities that focus on a particular area of need, and these can then be brought together to comprise a full qualification,” he says. “This change addresses the need for faster and more focused skills acquisition, and recognises the time demands on broking professionals. He adds: “The focus is always on giving brokers world-class knowledge and skills – we work with industry experts and business leaders to ensure this happens.” All of ANZIIF’s education is industry-led, Barnett-Harris says, in order to ensure its education equips brokers to tackle new and emerging challenges. Emilie Webster, NIBA’s technical and training manager, sees the biggest challenge for brokers going forward as being able to be on call essentially 24/7, as consumers are now accustomed to having their needs immediately satisfied. She thinks employing up-to-date technology in websites and having apps available for clients will be important, and that a broad skill set encompassing product knowledge as well as management and business skills is the best way to set up a broker for the world of the not-too-distant future.

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On NIBA’s education, Webster says, “Our courses are reviewed by current practitioners. They tell us what’s relevant in their broking houses so that we can address that with practical exercises and activities, and so that we’re arming their staff with the skills that they’re going to need in the workforce in broking.” Responding to the suggestion that there should ideally be a single provider of broker education, she highlights that while there are two main providers, other entities also offer education to brokers in Australia. “There is lots of competition out there,” says Webster. “Competition is healthy. You take any aspect of business. If there’s not competition, where’s the choice? Where’s the choice in product or how it’s delivered, the choice in back-up service support? “I believe with education there’s certainly not one shoe fits all.” Barnett-Harris shares that view. He adds: “No matter how many education providers, the important question is whether brokers are receiving top-quality education. ANZIIF is not only an internationally acclaimed insurance education provider but we receive exceptional feedback from industry, have a highly accomplished alumni, and have relationships with major universities – all this speaks to the quality of education we offer and serves to motivate us to continually improve our work too.”

The future? Discussion will no doubt continue as to how future brokers can and should be prepared for the challenges that await them in the changing industry. Whether it continues to be the domain of multiple providers or eventually becomes the responsibility of a single entity, high-quality education offerings will remain a crucial cog in the general insurance industry, and those facilitators should remain constantly engaged with the players so that content can be benchmarked against the ever-changing needs of the workforce.

WHAT SKILLS DO YOU THINK IT WILL BE ESSENTIAL FOR THE INSURANCE BROKERS OF TOMORROW TO POSSESS? Insurance Business asked brokers to share their thoughts on education.

Karina Rodríguez Díaz

Ben Schindler

There are a number of core skills that will become increasingly essential for the insurance broker of the future. In addition to having a clear understanding of how their client operates, they need to have a solid insight into what they require and the solutions that are available to them. As well as having a solid grasp of local market conditions, there is a need for upcoming insurance brokers to increasingly grasp the evolving global marketplace, acknowledging the risks that may impact their client and how to mitigate them. In order to address these specific risks, they must also identify global trends and developments affecting the insurance sector and think about how they can implement them into their respective local markets. Lastly, they need to utilise the technology available to them. An example of this is Aon’s Connect hub. It is an online destination that aims to facilitate more informed conversations about risk amongst the Australian business community.

Skills for the insurance broker of tomorrow will become more heavily focused on the analytical aspect of an insured exposure. The broker must be inquisitive, knowledgeable, innovative, and provide meaningful solutions to exposures faced by the re/insured, as the simple placing of business becomes further commoditised. With the ever-increasing power of information and how it is used, it is critical for the broker of today/tomorrow to be able to harness that information to provide meaningful advice and expert opinion. The face-to-face component of how we do business will still thrive; however, a keen ability to drill into and analyse critical information to uncover the most important solutions for the client is intrinsically linked to the success of the insurance broker of today and tomorrow.

Placement manager, crisis management Aon Risk Solutions

Partner JLT Re

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9/06/2015 2:58:02 PM

FEATURE

STRATA INSURANCE

VALUING STRATA PROTECTION Jesse Borthwick and Gordon Bell of Longitude Insurance share their thoughts on the current strata insurance market

THE CURRENT strata insurance market in Australia is “more open than ever”, according to Jesse Borthwick, managing director of Longitude Insurance. He tells Insurance Business the market’s continuing to soften and he doesn’t see that changing any time soon. Borthwick says that while the strata market constitutes less than 5% of the broader Australian insurance market, new specialist and nonspecialist players are continuing to appear. “The impact of this greater choice has led to what I’d call a reduction in that base offering from a number of those players,” Borthwick says. “Some of that might just be simply new players who don’t understand the market fully, don’t understand the full requirements of the space, participating in and [not] seeing certain things that we would automatically put into a policy that gives protection.” On the upside, Borthwick sees more strata specialists in the market as a win for clients. “New specialists … that are purely focused on the strata market are actually improving the product range.” Gordon Bell, Longitude’s general manager, believes it’s important for specialists in the space to form their own underwriting and claims teams. “If you put each of these key disciplines into a generic insurance environment, you’ll quickly find out that it doesn’t work with the good brokers out there or the good managers,” Bell says. “We’ve certainly very quickly got a specialist claims team together, and I think any specialist who deals Australia-wide in strata has to do that. You can’t outsource specialist work.”

Above the law Borthwick is clear that continuously changing legislative requirements don’t dictate the way Longitude, or any specialist strata player at the top of their game, designs its products. For those players, it’s all about staying ahead of and above the legal developments. “When you say how important and how crucial is it to meet individual state legislative requirements, I would say [it’s] absolutely imperative, but that’s just the entry point. That’s just walking in the door.” He tells us that a broker looking for effective protection for their client won’t settle for a product that trumpets legislative compliance as a selling point. “A broker trying to do the best thing by their client … wouldn’t be happy with just the minimum standard … because things like the minimum standard in most states, for example, don’t give any loss of rent cover or temporary accommodation cover. They focus on all the common property. They don’t necessarily focus on any individual lot owner’s needs or lot occupier’s needs. “For me to say I’ve got a compliant product or a product that meets legislative requirements, I could be giving very little genuine benefits to the individual owners and their broad sweeping needs. That said, as a group of products, historically we’ve offered something that’s well above minimum standard, well above legislative requirements. We have encompassing clauses to try and pick up any new legislation changes that will give us time to ensure that if we have relatively sweeping changes that might come through … we’ve got time to ensure that we’re

still meeting the requirements of our clients. He also says, “Big events can and will happen, and we know, in this space, one of the biggest difficulties is ensuring that buildings are sufficiently insured to protect the building’s rebuilding and future rebuilding and associated cost needs.” Borthwick says he thinks underinsurance is a common problem in strata because insufficient consideration is paid to the peripheral expenses

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the multipartite relationship that needs to exist when organising a client’s coverage. “The client isn’t just a group of owners. It’s all the parties that participate, so we are talking about a manager as well,” he says. “The way a manager manages and the quality of the process [by which] they look after a building can have a huge impact …” “You cannot do this business without fully integrated servicing and/or a relationship with the strata manager. They are the administrators of these buildings. They are the ones that know them better than anyone else. We absolutely respect the role that they play in this, and a broker has to be integrated with that. They’re the ones that will inevitably provide the majority of the information.” He says brokers who succeed in forging strong working relationships with strata managers are generally able to organise sophisticated cover for their clients for what can conceivably be complex buildings. Borthwick also strongly rejects the notion of strata insurance as a ‘monoclass’ or

some things go on, we need to know about them’. “Certain brokers in this space have been very successful. They do form business relationships or alliances with managers, and they’re actually able to understand and interpret this space quite well.”

Valuing coverage Gordon Bell says: “We’ve dedicated an enormous amount of time and effort to raise the bar in the strata industry and provide brokers and strata managers with what we like to call smarter strata solutions. What does this mean? It means we are constantly reviewing gaps in the market cover and responding. A prime example of this is our recent policy upgrade, which was launched quickly and effectively off the back of broker feedback.” Adding to this, Borthwick is critical of any overemphasis on price, citing the substantial difference in coverage that can result from a client choosing to save as little as $20 per unit per year. “It seems crazy that you would worry about $20 a unit when we’re actually talking

“You cannot do this business without fully integrated servicing and/or a relationship with the strata manager”

that lot owners can incur when decisions on coverage are made. Additionally, he estimates that approximately 70% of initial documents for all new business opportunities Longitude sees contain errors, which he attributes to brokers having not been able to obtain all relevant information about a building.

Knowing the parties Borthwick stresses the importance of recognising

‘commoditisable’ product. Longitude sells its products exclusively through brokers, and Borthwick is a strong advocate of the adviser’s crucial role in organising strata protection. “You’re talking about a complex package policy for multiinterest, multi-diversified buildings that can have lots of things going on with them. With legislation, I think there’s something like over 5,000 potential fines that a committee member could [incur] personally … You’ve got volunteers who may never have been a director of a company in their lives sitting and making crucial decisions on everyone’s single largest financial investment.” He says strong communication between all parties with an interest in the transaction is paramount. “That is the one thing that everyone dealing in the space needs to do better: to have really good, structured, open communication. And it could be around just simply saying, ‘When

about your single most exposed financial position. How much is that on a mortgage? People refinance their mortgages all the time, which would add more than $20 per annum.” He pushes for people to appreciate the real value gained from premium-quality strata products. “It’s about looking after your mate and protecting your mate … and we want to do that in the most ethical, fair and reasonable financial way we can, but we also don’t want people to be cheap. I really do believe that that’s where we need to push some of this conversation sometimes. I really think that we do get really focused on ‘that person has ripped me off ’ or ‘I could’ve saved $1,000’. Well you could have saved $1,000, but what in the big scheme does it [matter] if you did or if you don’t? Someone’s got your back when [things go wrong]. That’s really important.”

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9/06/2015 2:58:44 PM

FEATURE

INCOME PROTECTION

Essential protection for income earners Aaron Stokeld, general manager of sales and operations at Windsor Income Protection, talks about what he believes is one of the most important forms of insurance In association with

IT’S ARGUABLY one of the most important insurance products available to an individual. Yet research indicates that how widely it’s taken up far from corresponds accordingly. Income protection offers exactly what it says on the box – a policy that pays benefits should the insured be unable to continue to earn their ordinary income. In reality, it’s a policy protecting not just an individual but those financially dependent on an insured person. “I believe it’s one of the more important types of insurance,” says Aaron Stokeld of Windsor Income Protection. He likens the failure to have income protection to leaving a money-making machine in the garage uninsured. Stokeld agrees the importance of income protection is not well appreciated by Australians, and highlights the potential severity of the consequences that can arise from lack of protection. “I’m led to believe that the average

Australian has about two to two and a half weeks of savings in accounts at any one time. So if there is a loss of any income, the significance of that can be dire. With the lack of savings, you’ve got a mortgage and other bills associated with normal living.” A lack of income protection can ultimately result in an injured individual and their dependants losing their home and financial independence. It’s hardly an overstatement or verging into melodramatic territory to describe the potential consequences of a lack of protection

as catastrophic. And the financial burdens often come on top of stresses ordinarily associated with treatment and rehabilitation programs, which can themselves be traumatic. The experts will tell you that income protection is a product which should be on the radar of anyone reliant on their income for daily living – anyone with bills, mortgages, rent to pay; those looking for additional security for themselves and their family, and those who want to be able to maintain their lifestyle regardless of what the future may have in store. Should

“The average Australian has about two to two and a half weeks of savings in accounts at any one time. So if there is a loss of any income, the significance of that can be dire”

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someone be rendered totally or partially disabled, income protection can offer them up to 75% of their salary. Stokeld says once a person has grasped a basic understanding of income protection, they need to understand the intricacies of the different types of products available and the terminology frequently associated with these products. He adds: “Some products have an arduous level of underwriting that you need to go through, whereas others don’t. There’s the exclusions that people need to be certainly aware of that often come up in the fine print, which people gloss over. There are offsets, how it can often form part of enterprise agreement arrangements, [and] how it works in conjunction with workers’ comp.” Stokeld warns those considering transacting for income protection online to make sure they do their research first. “Certainly have a basic understanding of what you’re considering purchasing … reading the fine print and understanding what’s covered, understanding what your eligibility criteria are around levels of cover but, more importantly, what you are covered for ... It may seem on the surface to be a well-rounded product, and some of them are. But it’s often [a case of] you get what you pay

HOW IMPORTANT ARE LIFE-RELATED INSURANCES?

for. So I would encourage people to certainly do their research.” As to the kinds of questions people should be asking before making a decision to buy a particular product, Stokeld says these include: What am I covered for? What are the exclusions? What are the limitations? Can you explain to me a ‘waiting period’? What does it mean by ‘benefit period’? Am I better to have an agreed-value product versus an indemnity-style arrangement or product? Alternatively, do I have enough coverage through my superannuation fund or industry fund [which often a lot of members do], and is that an adequate amount of insurance? As with all products, the ‘best’ product is dependent on the unique needs of an individual, Stokeld says. And, ideally, income protection should be purchased as part of an insurance suite. That suite should include coverage for death, total and permanent disablement and trauma. The saying often goes that while many people believe they can’t afford particular coverage, the reality is they can’t afford the risks associated with going without it. Perhaps at some point in the not-too-distant future, income protection will rank alongside car and home and contents policies as ‘must have’ coverage to minimise the consequences of unforeseen events.

INSURANCE HELD BY INCOME

IMPORTANT OR VERY IMPORTANT

UNDER $40K– OVER $40K $90K $90K

One or more insurance types

79%

One or more insurance types

29%

53%

63%

Life cover

76%

Life cover

24%

40%

53%

Total and permanent disability insurance

81%

Total and permanent disability insurance

19%

36%

Income protection

77%

Income protection

22%

37%

Critical illness

81%

Critical illness

10%

16%

26%

Source: TAL survey, undertaken online by Galaxy Research with 1,266 Australians

WINDSOR INCOME PROTECTION Windsor Income Protection is an Australianowned and based underwriting agency that targets the group income protection market sector specialising in income protection insurance, superannuation funds, employers and unions. The clear strengths of our organisation include product innovation (three-time winner of best insurance within superannuation) and our robust claims set-up where the onus is on servicing the member via claims management principles rather than claims servicing, proactive communication channels, and utilising technology by alerting members via SMS of claim payments. Windsor Income Protection, through its consultative approach, has achieved major innovation for the market, and more importantly its clients, through: • coverage for all insured persons – no occupations or employment categories excluded, including part-time and casual workers • ease of fulfilment – removal of the requirements for medical underwriting • benefit levels above industry standard: – up to 100% of salary plus a superannuation benefit – up to $100k per month maximum benefit – flexible periods – waiting periods as short as 14 days; benefit periods of one to five years – loyalty benefits, based on years of cover Our focus is to provide a positive customer experience through: • a sustainable tailored product solution for our clients • claims authority and expertise, utilising technology to improve communication and therefore the claimant’s experience • trusted account and relationship management

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9/06/2015 2:59:16 PM

BUSINESS STRATEGY

CLIENT SERVICE

CLIENT SERVICE EXCELLENCE – WITH MORE THAN A SMILE Clients are more demanding – and more fickle – than ever before. One false move on your part, and they’re gone. Nikki Heald reveals how to keep them happy, and keep them on your books!

SO, YOU think you’re a great service provider? You always make sure you smile and have a pleasant demeanour. A friendly disposition and a smile are certainly important; however, in today’s competitive market a smile is just not enough. The way we treat our clients is emerging as a critical differentiator for brokers and can provide a competitive advantage. Today’s clients are savvy, less loyal and more demanding. They realise they have a choice and that you are not the only broker to choose from. Additionally, client awareness around service standards has also increased. Good, ordinary and average is simply not good enough. It’s about providing an experience for your client that makes them want to come back, as opposed to being forced or compelled to come back. So, what is service excellence? Exceptional client service is about going beyond what is realistically expected. It’s about surprising – and often delighting – your clients; turning

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them into enthusiastic referral sources who disappointment. From a client’s perspective, will stick with you not only because you do it’s the little promises you keep that matter great work but because of the value you bring. most. Returning a phone call, providing As brokers, imagine if you could get existing information, or simply getting to know them clients to tell others about the on a personal basis can value you offer? The beauty of DID YOU KNOW? significantly impact on the word-of-mouth referrals is that relationship. they save on marketing costs, Providing great service is cold-calling and the time taken really about consistency, and to network. realistically, that’s not too 68% of clients will walk due to difficult for you or your team Great service is not just rude or discourteous service, to achieve. For leaders, it is about doing your job but without any prior warning. vital to clearly communicate about establishing an emotional It’s not safe to work on the to your employees the service connection with your clients. premise that no news is behaviours that are expected It’s about value-adding and good news. finding ways to be unique. with both internal and It’s about getting to know external clients. Explain to them and being heartfelt. your team why service Research suggests that emotion excellence matters, not only influences purchasing decisions for the company or client six times as much as rationale. but also for the personal It costs five times as much to satisfaction experienced in So, if something or someone win a new client as to retain making others feel valued. makes us feel good, we are more an existing one. Remember to inclined to buy. Remember, So, what are some simple nurture these alliances too. people do business with people things you can do to enhance they like. service excellence? Unfortunately, many businesses believe Be responsive that delivering exceptional service will cost Speed is everything, so try to reply to your them too much in staff time, training clients as soon as you can and keep them in the or developing service standards and and informed. Procrastination doesn’t help procedures. These in-focused organisations anyone, and you’re going to have to respond are only concerned with company profit and sooner or later. May as well do it now! cutting costs, and little thought is given to how to keep clients happy. Additionally, in Take time to listen these organisations staff recognition and Avoid speaking, and really listen to what retention is low, which significantly impacts they’re saying. It’s important you understand on growth and profit. Training yourself or what your clients are communicating to you. your team on how to deliver standout service That way, you will be able to successfully meet is an investment that will reap significant their needs and provide the right solution. personal satisfaction and reward. Realistically, bad service is actually more Do what you say you’re going to do costly to your brokerage than the time taken One of the biggest gripes in business today is to provide great service. Poor service that people simply don’t do what they say influences more than just a negative customer they’re going to do. If you say you’re going experience – it reduces revenue and drives to do something, then do it! It enhances up costs. It damages public perception, your professionalism and personal brand, credibility and market reputation. As we all and demonstrates you value your client. know, a dissatisfied client is more likely to spread the word about a poor service Know your stuff experience than a positive one. Nowadays, Your client’s perception is that you are the unhappy clients will take to social media paid expert. That’s why they’ve come to you platforms to spread the word about their

Today’s clients are savvy, less loyal, and more demanding. They realise they have a choice and that you are not the only broker to choose from to handle their financial affairs. So be sure to keep your skills up to date, and be on top of the game in your profession. Unfortunately, if you convey a lack of knowledge, then you risk ruining your credibility.

Give a little If a client asks you to do something that really won’t cost you a lot in time or money, then treat it as an opportunity to go the extra mile. By doing so, you not only have a contented and indebted client but someone who is more than happy to refer to you. Finally, within the financial services profession brokers really should view their book of clients as their most valuable asset and develop a plan around taking good care of them. Most importantly, develop long-lasting personal relationships by keeping in touch regularly, both in good times and in bad. As brokers, you’re not just selling a product but providing expert advice that can significantly impact on people’s livelihood and circumstances. So, if you haven’t given much thought to your service levels, then perhaps it’s time to conduct an audit. Remember, if you don’t bother to make the client feel valued, respected and important, then you can be sure your competitors will!

Nikki Heald is the managing director of Corptraining. Visit www.corptraining.com.au.

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9/06/2015 2:59:42 PM

FEATURESTRATEGY / BROKER EDUCATION BUSINESS

WEB REDESIGN

5 WAYS TO MAKE YOUR WEB (RE)DESIGN EASIER The numbers don’t lie, and if they’re saying your website has failed to connect with buyers, it probably has, says Maggie Crowley

BROKERS OFTEN talk about being unhappy with their existing websites. While it’s not realistic to redesign your brokerage’s website annually, gaining pace in the tech world makes every website a constant work in progress. Taking on a new website project may not sound like a walk in the park, but a site redesign can have a lasting positive impact on any brokerage. How do you know when it’s time for a complete overhaul of your site? Here are three telltale signs: LOW TRAFFIC AND CONVERSIONS Numbers don’t lie. The biggest reason to give your website a refresh is when no one is using it. Best practice is to track and measure numbers on a monthly basis using Google Analytics. If you notice a drop in traffic or stagnant numbers over the course of at least one quarter, looks like it’s time to try something new. IT’S NOT A PROPER (OR REALISTIC OR POSITIVE) REPRESENTATION OF YOUR BROKERAGE Prospects who have never met you can gain an impression of the brokerage based on its

website – in less than three seconds. Your website is the only member of your team working 24/7 to promote and advocate your brokerage … Does it send a positive message to your target audience? If you don’t even like the way it looks, chances are neither do consumers.

The biggest obstacle brokers run into when tackling a website redesign is a general lack of focus and direction. As a result, they usually aren’t prepared to make decisions about the site, and generally that leads to a delay in the process.

“The biggest obstacle brokers run into when tackling a website redesign is a general lack of focus and direction” IT’S NOT RELEVANT IN 2015 While I’m not suggesting a complete website redesign is necessary every year, consider some of the major changes in technology in the past five years: more people access the internet from a mobile device than a desktop computer, Flash animations are no longer a ‘thing’, and Google is the new Yellow Pages. If it’s time for a website redesign, the best way to get ready is to do a little prep work. Many brokers find web design quite daunting and complicated, and with good reason. It can be challenging to assemble the necessities to get started, but with the right people on the job it’s not nearly as difficult a challenge as it may seem.

Start by taking a step back and looking at the big picture. What are you trying to achieve? A strong plan now will make for a smooth process along the way. If you’re considering a new website in the near future, begin by planning now. Consider these ideas in order to streamline your upcoming web design project.

Do some research Take a critical look at websites you love (and loathe) to help you figure out what you want your website to be like. Are there certain colours you find appealing online? Start by doing a Google search of other financial websites to analyse the landscape.

2015 50 | FEBRUARY www.insurancebusinessonline.com.au

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MPAMAGAZINE.COM.AU

A well-designed website is one of the most effective marketing tools you’ve got – make the most of it by keeping it fresh, up to date and easy to use provide contact information, that requires different kinds of information than a website where clients will be engaged and regularly logging in. Determining how you want to use your website should be part of the cornerstone of your brokerage’s marketing plan.

Having a good idea of what you want the site to look like will help your web design team produce a site that matches your expectations. Find several different layouts that you’re comfortable with. What types of navigation do you like best? These are all questions the team building your website will ask. Make the design process easier by answering these questions on your own first.

Hire a photographer High-quality photos of real people (as opposed to stock images) are one of the best touches you can add to your website. Web visitors are more inclined to trust companies that provide a personal touch by showing who is operating behind the company. Highlighting pictures of your team (highnet-worth individuals love working with teams) throughout the site is a powerful way to engage an audience of potential prospects. Doing this in advance ensures that the images will be ready to go when your web design process begins.

Write content Ready-to-go content is often the number-one element that delays the website creation process. Whether you’re writing your site’s content in-house or working with a copywriter or marketing, definitely start in advance. Have some content prepared before you commence the process. This will ensure that the design team will be able to deliver your website quickly and efficiently. What are the essentials? An up-to-date biography (this should be updated every three to five years) and information about your company, team members and your services are all useful to have readily available.

Determine functionality What should your website achieve? Ideally, who will be visiting your website? What should they do when they get there? It is worth brainstorming and setting goals so you have a clear direction for your site. If you want your website to act as an online business card to validate your brokerage and

Be prepared to spend a little time on it There’s no way around it: your web design project will require time. In order to get a website that is reflective of your brokerage, assign someone from your team to lead the project, but expect everyone to get involved at some point. The goal of any great web design team is to make the production process as seamless and easy for you as possible. However, in the end, it is your website, and it needs your input. A website redesign can be a daunting task, but partnering with a good web design firm can make the process a lot easier (and even fun!). Remember, a well-designed website is one of the most effective marketing tools you’ve got – make the most of it by keeping it fresh, up to date and easy to use.

Maggie Crowley (@crowleymaggie) is the marketing coordinator for Advisor Websites, where she manages the company’s online presence and educates financial services professionals on how to maximise the potential of a strong web presence. Connect with her on twitter @advisorwebsite, or visit her online at www.advisorwebsites.com.

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STATISTICS

More mergers ahead? The industry’s recent wave of mergers and acquisitions shows no signs of ebbing in 2015 MERGERS AND acquisitions played a big part in the insurance industry in 2014. There were eight deals worth more than $1bn as sectors contracted across the industry. The final quarter of the year saw several key moves, and industry experts expect the pace of 2014 to flow through into 2015. While much of the consolidation was focused on the reinsurance space, there was increased activity across the broker business

$11bn

PartnerRe and AXIS Capital amalgamate in a mammoth deal

and in general insurance. The Deloitte 2015 M&A Outlook notes that 2015 should bring “continued acceleration of activity in the insurance M&A market”. Companies should be prepared for entreaties by private equity firms looking to invest in insurance, other new entrants to the market from both home and abroad, and a changing regulatory landscape that could affect M&A activity.

$1.9bn

$4.2bn

$1.8bn

ReinsuranceRe Holdings acquires Platinum Underwriters in Nov 2014

Irish-based XL Group acquires Catlin to create one of the largest players on the Lloyd’s market

Fairfax Financial buys UK specialty insurer Brit in Feb 2015

Sources: Mondaq, Wall Street Journal, PartnerRe, Deloitte 2015 M&A Outlook

Increased activity isn’t limited to the broking sector – reinsurance is a burgeoning M&A market, and major industry players expect this to continue

“Global reinsurers have seen the future, and it requires greater scale … for reinsurers, the game seems likely to remain ‘eat or get eaten’ ” – Standard & Poor’s RatingsDirect

“We believe that the consolidation of reinsurance and a diversification of these organisations into primary specialty insurance (with a particular emphasis on obtaining access to the Lloyd’s market) may be a sea-changing event for the industry” – Deloitte 2015 M&A Outlook

BROKERAGE BUYOUTS AN UNEVEN TREND In terms of volume, the broking sector saw its second-highest number of deals (321) in 2014, but deals within the sector are difficult to predict 400 350 300 Number of deals

REINSURANCE SEES BIG M&A ACTIVITY

250 200 150 100 50 0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Source: Deloitte 2015 M&A Outlook

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TOP THREE DEALMAKERS With so much activity in the broking sector throughout the year, the top three saw major deals both at home and abroad

BROKER NETWORKS CONTINUE TO BRANCH OUT Australian broker networks are continuing their growth phase, with Singapore the next stop for many

$290m

60%

MACS

AJG

HUB International 28 deals

AssuredPartners 23 deals

AVERAGE BROKERAGE DEAL VALUE DROPS Even as the number of deals in the broking sector moved up in 2014, the value of those deals took a drop, on average, compared with the previous 12 months

$76

Arthur J Gallagher made waves in the Australian market earlier this year with the acquisition of Instrat Insurance Brokers and Blue Holdings Group

$107

Austbrokers announced the purchase of 60% of leading workplace rehabilitation firm Altius Group for $13.6m in January

$3.4

Australian insurance group Honan Insurance announced the acquisition of Singaporean broker MACS Insurance Brokers, which could signal the start of Australian expansion in Asia

Arthur J Gallagher 38 deals

$3.0

Steadfast announced their largest acquisition to date with the purchase of QBEâ&#x20AC;&#x2122;s agency businesses in March

2013

2014

2013

2014

Aggregate value of deals ($ billions)

Average deal value ($ millions)

YOY: +13%

YOY: -29%

Source: Deloitte 2015 M&A Outlook

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PEOPLE

CAREER PATH

REAPING THE BENEFITS OF INSURANCE Jen Mitchell, executive general manager of claims at IAG Commercial, is passionate about using her leadership role to help the community 2015 & BEYOND

RAISING AWARENESS AND CREATING OPPORTUNITIES Mitchell recently undertook a secondment to an indigenous community. She’s put her team through indigenous cultural awareness training and is committed to hiring 25 indigenous people in her team per year. Mitchell is also determined to take action to see greater recognition of those in the armed forces and emergency services.

2014

Mitchell was proud of her team’s response to last year’s LEARNS Lindt Café siege in Sydney. As the siege occurred, she and FROM her team were attending an offsite workshop. Mitchell DIFFICULT TIMES says that once the team had information about the welfare of their Sydney colleagues, “we just grabbed a piece of flipchart paper and started writing up the learnings about what we’d do differently next time, and the person facilitating the workshop said it was like watching a really well-choreographed dance”.

“I don’t think we do enough for the people who serve our country” 2014

2013

TEAM MAKES A DIFFERENCE Mitchell loves working with her colleagues, who’ll take action for no other reason than it being the right thing to do. Two years ago, while she was head of workers’ comp at CGU, Mitchell’s NSW team was dealing with a catastrophically injured man in his ’20s, who was confined to a wheelchair and living in a nursing home where his quality of life was, as Mitchell describes it, “just nothing”. Mitchell’s team managed to have the injured man relocated to another facility, which provides residents with significant opportunities to interact with the local community. “The only way that we can tell that it’s changed this guy’s life is that he sits up a little bit straighter in his chair.”

Mitchell began her career as a solicitor and then spent two decades in HR. While she was working as HR director at law firm Blake Dawson, the company received a best employer for women award. “It was very early days for organisations trying to make their workplaces easier for women to work in … we were pretty proud of that [award] at the time.”

BECOMES IAG COMMERCIAL’S EXECUTIVE GENERAL MANAGER, CLAIMS Mitchell speaks well of all her former bosses but describes Peter Harmer, to whom she reported until March 2015, as “an extraordinary human being”. “I’m not someone who’s ever going to wear a navy suit, and he’s created an environment where it’s absolutely safe to be yourself … and I think he opened my eyes to what I can achieve outside of insurance.”

2004 ENTERS INSURANCE

PRE 2004

PRE-INSURANCE CAREER

Exposure to the workers’ compensation industry, while working in HR, ignited Mitchell’s interest in insurance. “Throughout my whole career, I’ve had jobs that were either roles where you felt as though you were making a positive contribution to society, or they were purely business acumen roles. It was when I got into the workers’ comp industry I thought, ‘This is actually a nice mix of the two’.”

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REACHING NEW HEIGHTS IN STRATA INSURANCE QUS and AIG have partnered together to deliver superior value and stronger support to strata insurance brokers.

This new partnership with AIG enables QUS to provide even stronger support to the Australian broker market, through an increase in risk capacity and location appetite. For more information on our new product enhancements or for full details regarding this switch, visit www.qus.com.au.

1300 814 011 www.qus.com.au AFSL 321877

In Australia, products and services are written or provided by AIG Australia Limited ABN 93 004 727 753 AFSL 381 686. Not all products and services are available in all jurisdictions and are subject to actual policy language and underwriter discretion.

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PEOPLE

FAVOURITE THINGS

DAMIEN COATES

CEO, DUAL Asia Pacific, and deputy CEO, DUAL International Normally, he’s flat out leading DUAL’s Asia Pacific business from strength to strength, but what does Damien Coates get up to when insurance isn’t on his mind? Favourite book: Who Moved My Cheese? – When we set up DUAL 11 years ago it was on the basis of trying to challenge historic market dynamics, and the only way you can do this is to embrace change and see it as a positive rather than a threat. So early on someone gave me this book that a) explained this in a simple way and b) at 50 pages was short enough that my limited attention span could digest. We now give it to everyone who joins DUAL to help them adapt and be ready for the pace.

What’s on your playlist? Powderfinger, Pearl Jam, and then loads of stuff my kids put on it.

Best day you’ve had working in insurance: I think celebrating DUAL’s 10th anniversary last year – every day I have watched the company grow from a start-up to the $110m business it is today, and taking the time to stop and look back to celebrate this amazing achievement was humbling and something I won’t forget.

Best thing about working in the insurance industry: It’s a great industry where to get ahead you have to use your brain and have a personality. I’ve met some of my very best mates along the way, so it’s not true what they say about insurance being boring!

Favourite sport: Absolutely anything ... I would watch marbles on a Sunday with a beer in hand.

Favourite holiday spot: We have a rural property in the Blue Mountains called Hartley House with all sorts of animals and plenty of land for bush walks, motorbike riding, or just soccer and cricket with the kids. It is the only place in the world where I truly switch off, and whilst I love the insurance industry I also truly love Hartley House as it allows me to not think about the insurance industry!

Favourite indulgence: Adventure! Whether it be running marathons, hiking mountains, cycling, or any other outdoor activity, I find adventure is great for your overall health as it helps manage stress and clear your head, plus all the physical benefits, of course. Having said that, I do enjoy a couple of cold beers from time to time! Favourite advice: Go to work and work hard, but make sure you have some fun along the way.

Favourite film: I spend a lot of time on planes so I should have seen everything, but I always go for the oldies – a random selection from Shawshank Redemption to Wall Street to National Lampoon’s Vacation (yes, the Chevy Chase movies!).

Strangest insurance coverage you’ve come across/offer: Cyber insurance – I struggle to sync my phone with a computer, so one day I hope to actually understand what it covers! Lucky I have a team who gets it.

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