Insurance Business 5.02 by Key Media

insurancebusinessonline.com.au

GOING BACK TO BASICS

Issue 5.2

The concept of peer-to-peer insurance

CAREERS IN INSURANCE

Making jobseekers aware of what insurance can offer

VIEW FROM THE TOP

Current D&O risk and regulation trends

JOHN FRENCH

CEO talks about leading the new Chubb

ELITE BROKERS 2016 Searching for the best insurance brokers in Australia OFC and spine_COVER 3 SUBBED.indd 1

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APRIL 2016

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CONTENTS

twitter.com/InsuranceBiz_au www.facebook.com/pages/ Insurance-Business-Australia

UPFRONT 04 Head to head

Will telematics take off in 2016?

06 Statistics

BROKERS 2016

COVER STORY

FEATURES

GOING BACK TO BASICS

Peer-to-peer insurance start-ups are popping up worldwide. Should the industry here be concerned?

12 News analysis

What can the industry do better when it comes to natural disasters?

14 Intelligence

Premium funder and bank join forces to provide industry-first offering

16 Insurer update

Survey highlights need for traditional insurers to focus on Gen Y

FEATURES

OPENING EYES TO INSURANCE Industry educator launches initiative to draw jobseekers to insurance

FEATURES 38 View from the top

Wotton + Kearney’s Patrick Boardman and Dean Pinto talk D&O trends

44 Broker insight

The local arm of a global broker that has a success story spanning five decades

50 Protecting the goods

What to look for in marine cargo coverage

52 CGU brings best doctors to country customers

John French on bringing the best of ACE and Chubb together for brokers and clients

Bringing competition to statutory schemes

18 Technology update

For the fourth consecutive year, Insurance Business ranks Australia’s top insurance brokers

BUILDING THE NEW CHUBB

08 Opinion

The growing threat of challenger brands to our biggest insurers

ELITE BROKER 2016

PEOPLE

Cyber risk is top of mind

Insurer’s efforts to better protect rural customers and their businesses

FEATURES

PROGRESSING WITH TECHNOLOGY

Ensuring appropriate protection for IT service providers

PEOPLE 54 Career path

XL Catlin’s Steve Gibbs recalls his path from law to insurance

56 Other life

Darren Trott – an industry rock star

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UPFRONT

EDITORIAL

www.insurancebusinessonline.com.au APRIL 2O16

Understanding SME opportunities

he 2016 Vero SME Insurance Index represents valuable reading for brokers. Analysing the attitudes and thoughts of more than 1,500 SME owners across Australia, the Index endeavours to arm brokers who serve – or could potentially serve – that space with insights to assist them to build strategies to drive real growth in their businesses. A key highlight of the 2016 Index is its identification of deficiencies in SME owners’ knowledge of their own insurance needs. Of all respondents surveyed, 32% cited ‘being unable to trade’ as something about which they were very concerned. But of those respondents, 80% reported not having business interruption insurance. Additionally, barely a week now goes by without reports of cyber attacks against businesses of varying sizes across the world. One in four Index respondents identified ‘cyber attacks’ as being of significant concern to them, but a staggering 91% of those business owners said they hadn’t purchased cyber insurance. The data suggests a sizeable portion of SME businesses may be underinsured, and evidences opportunities for brokers to demonstrate value by stepping in to educate business owners about their unique coverage requirements. The Index indicates not only the existence of that need, but also that SME owners are ready

It’s not just insurance needs for which many surveyed participants are prepared to turn to brokers and waiting for brokers to fulfil that role. And it’s not just insurance needs for which many surveyed participants are prepared to turn to brokers. Forty-three percent of respondents said they’d like a risk analysis of their business undertaken, while 38% would like updates and information on general business risks. As Suncorp’s Anthony Pagano has said, these findings are indicia of brokers having a role to play as trusted advisers to clients. Many SME owners see their brokers serving functions beyond their insurance distribution responsibilities. The Index indicates brokers who take on that role will ultimately reap the rewards, as it suggests highly satisfied clients of brokers are more willing to pay more for better service, advice and cover. Brokers interested in more thoroughly reviewing the report can access it at www.vero.com.au/smeindex. In this increasingly competitive marketplace, it’s buoying to see such compelling evidence of the growth opportunities for brokers targeting the important SME sector.

Tim Garratt, editor

EDITORIAL Editor Tim Garratt News Editor Jordan Lynn Journalist Donald Horne Production Editors Roslyn Meredith, Moira Daniels

CONTRIBUTORS Chris McHugh Patrick Boardman Dean Pinto

ART & PRODUCTION Design Manager Daniel Williams Designer Joenel Salvador

SALES & MARKETING General Manager Peter Smith Commercial Development Manager Sophie Knight 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

Traffic Coordinator Lou Gonzales

EDITORIAL ENQUIRIES tim.garratt@keymedia.com.au

SUBSCRIPTION ENQUIRIES

subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

sophie.knight@keymedia.com.au peter.smith@keymedia.com.au

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UPFRONT

HEAD TO HEAD

Will telematics take off in 2016? The technology has yet to be widely embraced in Australia. Will this be the year?

Paul Miller

Leann Yuen

Claire Rawlins

General Manager, Asia-Pacific SSP

Partner, Financial Services KPMG

Group Executive, Digital & Technology IAG

Momentum is picking up – we have three projects going this month with insurers. And there are already solutions out there from QBE and Suncorp. We think that there is a tremendous opportunity for insurers to gain more profitable business, and that eventually the technology will be seen as an essential offering to be a serious contender in car insurance. The smartphone approach offers the ability for insurers to form a more regular connection with their policyholders and offers a new approach to forge customer loyalty. We think the technology is a natural to extend to commercial and fleet and could be extended to other forms of transportation. It will give brokers new competitive offerings, but potentially make fleet insurance ‘stickier’, i.e. depending on the technology used, it may be more difficult to swap insurers.

Telematics is already being used extensively by general insurers around the globe and will do so in the next few years in Australia. Advantages are legion – telematics can instantaneously tell an insurer where and how a policyholder drives, and a life or health insurer how much exercise the policyholder undertakes and how well they sleep. Given the widespread usage of smartphones, the incremental cost for general insurers can be just the development of an application (App) that automatically detects when you are driving. And for consumers, the benefits will include price – careful drivers who don’t use their vehicles during rush hours or late at night will get reduced premiums, while healthier individuals will gain in the life sector. They should also see the handling of claims moving from being reactive for insurers to pro-active. Privacy concerns about technology still exist – but my guess is that the benefits will increasingly override these.

We’re picking telematics, and in particular, autonomous vehicles, as one of the big trends to watch in 2016. Last year we saw the first autonomous vehicles take to the road in South Australia, and as a member of the Australian Driverless Vehicle Initiative, we’re excited to see the industry make new advances in the year ahead. We’re predicting more entrants into the category, new devices for retrofitting existing vehicles and emerging insurance models to cater for changing vehicle requirements. While we won’t see autonomous vehicles take over our streets in 2016, technology experts are predicting scale in the next three to five years. Watch this space.

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UPFRONT

STATISTICS

CYBER RISK IS TOP OF MIND

THE RISK IS REAL A majority (58%) also indicated that their organisations were spending more on IT security than they were 12 months ago. A majority of respondents to both the Board Survey and CIO Survey considered that their organisations had an adequate or detailed understanding of their exposure to the risk of cyber attacks, while 58% of CIO Survey respondents reported being ‘somewhat satisfied’ or ‘very satisfied’ with their organisations’ current capability to prevent and respond to cyber attacks.

While awareness is increasing, how effectively are businesses responding to the cyber threat? THE WORLD Economic Forum ranks cyber attacks as a top-five risk in terms of combined likelihood and impact worldwide. But while MinterEllison’s Perspectives on Cyber Risk report shows there is significant awareness of, and concern about, cyber risk among its survey respondents, that isn’t reflected in practical measures being adopted to mitigate the risk. One survey was distributed to company chairmen, directors and CEOs (Board Survey) and

54%

47%

do not regularly assess their customers’ cyber risk profile

do not regularly audit their suppliers’ IT security practices

a second to CIOs, general counsel and other riskrelated managers (CIO Survey). Among board members, 60% saw cyber risk as being more of a risk than it was 12 months ago; 54% ranked it as a medium risk (that is, outside the top five risks); and a further 29% ranked it as a high risk. Nearly 40% of CIOs reported a cyber attack compromising their organisations’ systems or data in the past 12 months, and 8% reported more than five attacks.

43%

40%

of organisations surveyed do not have cyber risk cover

view reputational damage as the greatest exposure from a cyber attack

WHERE DOES CYBER RISK RANK ON YOUR ORGANISATION’S CORPORATE RISK REGISTER? (BOARD SURVEY) High

29%

Medium

54%

Low

16%

Source: Perspectives on Cyber Risk, January 2016, MinterEllison

INSURANCE NOT EMBRACED

ENTERPRISE-WIDE CHALLENGE

Only 25% of respondents confirmed their organisation held specialist cyber risk insurance. A further 32% were unsure of whether cyber risk was addressed in their existing insurance arrangements.

While the IT department is viewed by 59% of respondents to the Board Survey as having principal responsibility for cyber risk management, compliance and review activities, the qualitative responses to the CIO Survey suggest that organisations are increasingly treating cyber risk as an enterprise-wide challenge. Who in your organisation is principally responsible for its cyber risk management, compliance and review activities? 60%

Does your organisation have cyber risk insurance? Yes

59%

50% 40%

25%

30%

43%

20%

18%

15%

10%

32%

Unsure

10%

0% 20%

30%

40%

50%

Finance

Legal

Risk

Other

Source: Perspectives on Cyber Risk, January 2016, MinterEllison

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HOW MANY TIMES HAS YOUR ORGANISATION BEEN SUBJECT TO A CYBER ATTACK IN THE PAST 12 MONTHS THAT HAS COMPROMISED ITS SYSTEMS OR DATA? (CIO SURVEY)

WHAT LEVEL OF UNDERSTANDING DOES YOUR ORGANISATION HAVE OF ITS EXPOSURE TO THE RISK OF CYBER ATTACK? (CIO SURVEY)

40%

6% 24%

BOARD

30%

41%

CIO 53%

71% 20% Detailed

Adequate

None

TO WHAT EXTENT DO YOU CONSIDER THAT THE BOARD IS ADEQUATELY INFORMED OF, AND KEPT APPRAISED OF, CYBER RISK ISSUES? (BOARD SURVEY)

10%

Fully

15%

Adequate

63%

Not at all

22%

0% More than 5

1–5 times

None

Unsure

10%

20%

30%

40%

50%

60%

70%

Source: Perspectives on Cyber Risk, January 2016, MinterEllison

SATISFACTION GUARANTEED?

SUPPLY CHAIN RISK

Despite apparent satisfaction, over half (58%) of respondents to the CIO Survey were either unsure as to whether, or were not satisfied that, their organisation’s systems or data were appropriately segmented to mitigate the risk of a cyber attack.

Only 28% of respondents to the CIO Survey reported that they regularly audited their suppliers’ IT security practices. Similarly, only 20% of respondents indicated that they regularly audited their customers’ IT security practices.

How satisfied are you with your organisation’s current capability to prevent and respond to cyber attacks? (CIO Survey) 50%

48.1%

How satisfied are you with your organisation’s current capability to prevent and respond to cyber attacks? (Board Survey)

40%

39.2% 30%

24.7% 14.3%

10.4%

10% 2.6%

YES

45.6%

20%

Very unsatisfied

Does your organisation regularly audit your suppliers’ IT security practices (at least annually)?

28% NO

47%

15.2%

UNSURE

Somewhat unsatisfied

Neutral

Somewhat satisfied

Very satisfied

Source: Perspectives on Cyber Risk, January 2016, MinterEllison

24%

Unsatisfied

Neutral

Satisfied Source: Perspectives on Cyber Risk, January 2016, MinterEllison

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UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? ibo@keymedia.com.au

BRINGING COMPETITION TO STATUTORY SCHEMES Benefits beckon for customers, brokers and the economy, says Suncorpâ&#x20AC;&#x2122;s Chris McHugh THE DECADES-LONG debate over public versus private-sector underwriting of statutory insurance schemes may have reached a tipping point. The South Australian Compulsory Third Party (CTP) scheme will move from

a government monopoly to competitive underwriting on 1 July 2016. This is the first time such a transition has happened in Australia for over 25 years. The logic, benefits and speed and ease of that transition clearly demonstrates it should not be the last.

The benefits of introducing competitive underwriting for non-catastrophic injuries are substantial and widespread. Competition means customers are able to choose their insurer. If their experience with an insurer is poor, they are able to respond by taking their business elsewhere. Insurers will work hard to attract and retain customers, and make every effort to protect their reputation with the community. These competitive-market dynamics translate into lower prices, better products and improved customer service. This has been demonstrated by the introduction of competition in the ACTâ&#x20AC;&#x2122;s CTP market.

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UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? ibo@keymedia.com.au

“Competition means customers are able to choose their insurer. If their experience with an insurer is poor, they are able to respond by taking their business elsewhere” When Suncorp entered in 2014, ACT motorists had never experienced a CTP price cut. Now they have had several. Suncorp’s GIO brand has reduced the price for private passenger vehicles three times in the ACT, for a combined total premium cut of $40.30. Importantly, the improved customer service that a competitive market brings extends to claims management. This means injured people can experience a faster rehabilitation, which helps them, their family and their employer. The productivity improvements of a faster return-to-work following an accident extend beyond the individual and accumulate to have a positive effect on the economy as a whole. In 2014, Suncorp commissioned PwC to model the macro-economic impact of transitioning publicly-underwritten statutory schemes to competitive underwriting, and the results where remarkable. PwC found that, principally due to more efficient use of capital and faster return-to-work rates, such a transition would significantly increase Gross State Product (GSP), productivity, employment and government revenue. Over a 10-year period, transitioning the South Australian CTP has the potential to increase GSP by $308m and government revenue by $67m.

If the New South Wales Workers Compensation scheme were to transition to competitive underwriting, PwC calculates the potential GSP uplift to be $3,067m and the increased tax revenue to be $615m over 10 years. State governments that act as statutory insurance underwriters have large amounts of capital tied up in these schemes. A transition to competitive underwriting releases this capital, allowing it to be invested in the core business of government. The South Australian Government has been able to release over $1.3bn by ending their CTP underwriting monopoly. They also collected an additional $260m in licence fees from insurers for initial marketshare allocation. Ending their monopoly on underwriting CTP insurance is certainly assisting the South Australian Government’s budget position. This opportunity is available to many other Australian jurisdictions. Australia’s state and territory governments currently underwrite the majority of the nation’s Workers Compensation and CTP schemes – a combined annual premium of over $10bn. Public underwriting of these schemes presents an inherent conflict of interest because the government is the regulator of the scheme, and they are operating the insurance business that is being regulated.

A lack of oversight by the Australian Prudential Regulation Authority (APRA) means publicly-underwritten schemes can fall into deficit as governments respond to electoral pressure to reduce premiums and increase benefits to unsustainable levels. This occurred in the NSW CTP scheme in the 1980s and more recently in the NSW Workers Compensation scheme when it recorded a deficit of $4.1bn in 2011, resulting in controversial benefit reform by the NSW Government in 2012. In the private sector, however, insurers are required to remain ‘fully funded’, meaning they must maintain sufficient reserves to pay all future claims so that injured people can be confident they will receive their full entitlements. Australia’s personal injury insurance landscape represents a significant microeconomic reform opportunity that can increase productivity, provide customer choice and increase the speed of rehabilitation for injured people. Workers Compensation insurance – where the vast majority of premiums continue to be underwritten by governments – has particular significance for insurance brokers due to the higher levels of involvement brokers have in competitive schemes. Greater engagement between brokers, employers and insurers in the area of Workers Compensation can improve operational risk management, making workplaces safer and more productive. Transitioning the South Australian CTP scheme to competitive underwriting is an important milestone. As the community benefits of this reform begin to flow, more schemes may follow.

Chris McHugh is the executive general manager, Personal Injury Portfolio and Products, for Suncorp Insurance.

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UPFRONT

NEWS ANALYSIS

DOING DISASTERS BETTER As natural catastrophes continue to make headlines across the country, what can the insurance industry and other interested parties do better when it comes to disasters? WHETHER IT be bush fires or cyclones, hail storms or high winds, natural disasters are becoming an ever-increasing part of Australian life. As the country continues to grapple with the impact of natural disasters from the tropical north to the arid west and everywhere in between, what can government, businesses and communities do to manage this impact? Any discussion on how the country can be better placed to deal with disasters starts long before disaster strikes. David Sinai, head of property treaty underwriting at Swiss Re, noted the importance of mitigation and preparation at a recent briefing organised by the Australian Science Media Centre. “The most important steps to recovery should happen well before the disaster strikes by building resilience,” Sinai said. The Northern Australia Insurance Premiums Taskforce agreed with this assessment, and have released their long-awaited report which pointed a path towards mitigation as the best way to help those at risk of cyclones in Northern Australia. “Mitigation to reduce the risk of damage from cyclones is the only way to reduce premiums on a sustainable basis,” the report states. “It was widely considered by stakeholders

that encouraging mitigation should be part of any Government response to the rise in insurance premiums.” Speaking on the release of the report at the Insurance Council of Australia Annual Forum, minister for small business and assistant treasurer Kelly O’Dwyer said it was “essential to encourage mitigation” in Northern Australia. “Mitigation spending is something that is not always valued until there is a dire need for it, and it is something that governments and households often put aside in favour of funding

of IAG, called on the industry, government and those in the community to work together to bolster disaster defences. “We have a social obligation to do more to help people and communities feel safer and to recover more quickly from natural disasters,” Harmer said, “and it’s in the national interest for government and businesses to work together

“We have a social obligation to do more to help people and communities feel safer and to recover more quickly from natural disasters” Peter Harmer, CEO and managing director, IAG more immediately useful assets,” O’Dwyer said. It is not just the north of the country that can benefit from an increase in mitigation spending, as communities across Australia face a variety of risk. Peter Harmer, CEO and managing director

with our communities to achieve this by focusing more on prevention. “This means investing more up front in openly sharing data, building resilient infrastructure and creating stronger and betterprepared communities.”

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DISASTERS BY THE NUMBERS The total annual cost of natural disasters in Australia is expected to increase from $9bn to $33bn by 2050. Insurance losses due to cyclones in Northern Australia over the past 20 years have totalled $2.4bn, which is around $115m on average per year. In 2011, Cyclone Yasi caused $1.2bn in losses related to residential properties in Northern Australia. Long-term future losses from cyclones in Northern Australia are expected to be around $285m per year. It is estimated that the current cyclone premium pool for home, contents and strata insurance in Northern Australia is around $480m per year. Insurance companies estimate that mitigation actions could reduce premiums for some properties by up to 20%. Mitigation is not a silver bullet for the problems posed by natural disasters, as there are often underlying issues that linger on years after disaster strikes. Jessica Tearne, psychologist and senior research official at Telethon Kids Institute, noted that the psychological impact of natural disasters can have a lasting impact on communities.

What next for Australian communities threatened by disaster? While the government won’t release its response to the Taskforce report until later in the year, O’Dwyer gave some clues as to what each stakeholder can do to help those at risk. “State governments can contribute by strengthening building standards to reduce the

“The Taskforce’s report notes that the only way to get sustainably lower premiums is by reducing the vulnerability of property to the risk of damage” Kelly O’Dwyer, minister for small business and assistant treasurer “We don’t often talk about the psychological factors after disaster; we are focused on the practical – and there are huge economic and social costs associated with the psychological fallout from disaster that can have big impacts on our communities.”

prospect of cyclone damage being inflicted on buildings. For local governments, undertaking public works on such things as water management and flood protection infrastructure would assist in reducing cyclone-related flood damage to property,” O’Dwyer continued.

Sources: The Economic Cost of the Social Impact of Natural Disasters – Australian Business Roundtable for Disaster Resilience and Safer Communities; Northern Australia Insurance Premiums Taskforce Final Report

“Homeowners can also contribute to mitigation by making some basic changes, often at little cost. Small actions such as securing the garden shed, putting away the shade sail and storing the outdoor furniture where it won’t become a flying missile in a storm can all contribute to reducing damage. “The insurers can contribute to reducing the cost of premiums by recognising the reduction in risk from this mitigation work. They can also look at the design of policies to allow a greater excess for cyclone damage, so that the insured is being rewarded for assuming more of the cyclone risk while having a more limited excess for other events such as fire and theft.” The reality of Australian life means the threat of disaster constantly lingers just around the corner. With an increased focus by all stakeholders on mitigation, it is hoped that while the country may continue to face the threat, we will be ready to meet the challenge.

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Zurich

Macquarie Life

Zurich strengthened its life insurance offering with the purchase of Macquarie Group’s Life business

Coverforce

Reliance Insurance Brokers (RIB)

Coverforce purchased a 66% stake in RIB, marking the eighth acquisition in five years for the Australian business

ZURICH UPS LIFE PRESENCE WITH MACQUARIE ACQUISITION

Zurich announced in early March that it had reached an agreement with Macquarie Group to purchase the company’s life insurance business. The Swiss insurer will transfer all Macquarie customers and staff to its business, with no changes made to policyholder terms and conditions of coverage. “Our growth ambitions in the Asia-Pacific region are underpinned by a strategy which drives value from our balanced portfolio of growth and mature markets and leverages our distinctive capabilities across the region,” Colin Morgan, Zurich’s Asia-Pacific Global Life CEO, said of the deal. “This acquisition accelerates that strategy.”

QIDUCIA UNDERWRITING TO HELP IMPROVE BROKER PROFITS

Qiducia Underwriting has launched in the owner-builder market in a bid to improve broker profits. The business, part of Guild Insurance, will introduce state-of-the-art practices that could increase profitability for brokers working in the owner-builder sector. Maha Raslan, head of underwriting at Qiducia, said the new underwriter was making a simple promise to brokers. “Our promise to brokers and ARs is simple; sustaining growth and profitability in non-renewable business requires low-operational touch, fast quote and bind processing,” Raslan said.

VERO UNVEILS NEW COMBINED IT POLICY

COVERFORCE SECURES EIGHTH ACQUISITION IN FIVE YEARS

Coverforce Insurance Broking secured its eighth acquisition in five years with the purchase of a 66% stake in Reliance Insurance Brokers (RIB). The deal will see Jim Malady continue to operate the RIB business, with Coverforce providing financial and administrative backing. Jim Angelis, CEO of Coverforce, praised Malady for his work at RIB and told Insurance Business that the integration process should run smoothly. “We like the business as it is; we will just support it with growth initiatives, administrative services and financial support for, possibly, further acquisitions, and any other sort of growth opportunities that come up for that business,” Angelis said.

In February, Vero unveiled a new ’userfriendly’ combined policy tailored to the IT sector in a bid to simplify an often-complex cover. The combined policy, called iTech, combines professional indemnity insurance with public and products liability, and covers common risks faced by the IT industry. Vero’s national manager of professional and financial risks, Steven Lau, said the product would help iron out issues in a complex category of coverage. “The iTech product is designed to provide much more clarity for brokers and customers,” Lau said.

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PREMIUM FUNDING AND ST. GEORGE BANK ANNOUNCE INDUSTRYFIRST PRODUCT

Premium Funding and St. George Bank have joined forces to offer an Australiafirst product. Called Acquisition Finance, the product can be used by brokers to help grow their businesses through M&As. The product provides capital for brokers, and director of Premium Funding Ross Hayward told Insurance Business it would help boost growth. “The product is designed to leverage off the value of a broker’s business,” Hayward said. “Instead of requiring bricks and mortar as security, St.George and Premium Funding allow brokers to harness the future cash flows of the business to access debt.”

FAIRFAX MEDIA LAUNCHES FIRST INSURANCE OFFERING

Media giant Fairfax, owner of the Sydney Morning Herald, the Australian Financial Review and other titles, has made its entry into the insurance space with the launch of a new travel insurance product. Backed by ACE, the new venture is named Traveller Insure. It will look to leverage off the success of the business’s travel expertise and will join other brands on CompareTravelInsurance.com.au. Sue Bennett, general manager of travel at Fairfax, said: “From an editorial background we have expert knowledge in the holidays that people want insured.”

TRAVEL WITH JANE WILL TARGET FEMALE TRAVELLERS

Insuretech firm Insured By Us has launched its first insurance provider with a travel insurance business aimed specifically at women. Director Ben Webster of Travel with Jane said the female market offered key growth opportunities. “Two thirds of our travel policies are purchased by women, but insurance, as with most financial products, is overwhelmingly geared towards male consumers,” Webster said. Insured By Us provides the platform for both Woolworths and Real Travel insurance. “Engaging Australia’s female travellers is a key business growth opportunity for us.”

PEOPLE NAME

LEAVING

JOINING

NEW POSITION

Nick Cunningham

n.a.

Elantis Premium Funding

CEO

Melanie Schulties

AIG

Zurich

National directors & officers product manager

Mark Cocks

n.a.

Zurich

Senior underwriter, corporate institutions

Steven Ord

ACE

Zurich

Executive general manager, commercial

Jonathan Moss

n.a.

Zurich

NSW commercial state manager

Tony Barber

n.a.

Willis Towers Watson

Regional head of Australasia

Anthony Day

n.a.

Suncorp

CEO, insurance

Colin Fagen

n.a.

QBE

Group COO

Perry O’Leary

n.a.

Chubb

Global Broker Unit (GBU) NSW and strategic distribution adviser, Australia and New Zealand

Jon Longmore

n.a.

Chubb

Independent Broker Unit (IBU) manager NSW

Liam Burrell

n.a.

Chubb

GBU manager, Vic

Robert Pearson

n.a.

Chubb

IBU manager, Vic

Yiota Zammit

n.a.

Chubb

Alternate distribution manager, Australia and New Zealand

Paul Martin

n.a.

Chubb

GBU manager, Qld

Pat O'Neill

n.a.

Chubb

IBU manager, Qld

WILLIS TOWERS WATSON ANNOUNCES AUSSIE LEADER

Willis Towers Watson announced in February that Tony Barber would lead the business in Australasia. Barber, former chairman and CEO of Willis Australasia, will lead the new entity as it looks to use the multibillion-dollar business merger to take on the biggest players in the market. “It allows us to have a much broader discussion, a much deeper discussion,” Barber said of the merger. “It allows us to compete directly with Marsh Mercer and Aon Hewitt because you are looking at similar skill sets there.”

ANTHONY DAY TAKES TOP SPOT AT SUNCORP INSURANCE

Industry veteran Anthony Day is the new CEO for Suncorp’s insurance business, as part of a group revamp. Day now has accountability for product development and pricing, capital and reinsurance, claims management and operational delivery for personal, commercial and life insurance services – one of 10 executive changes made in February. “This is the logical next step in achieving the group’s ‘One Company. Many Brands’ strategy, and enables the business to meet the needs of its nine million customers while building a more resilient organisation,” Michael Cameron, Suncorp Group CEO, said of the changes.

www.insurancebusinessonline.com.au

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UPFRONT

INSURER UPDATE NEWS BRIEFS IAG names new chairman

IAG has announced that Elizabeth Bryan is the new chairman of its board of directors following the retirement of Brian Schwartz. Schwartz served as chairman for seven years and was a member of the board for 11 years. Bryan took over the role on 31 March. She also chairs the company’s people and remuneration committee and is a member of its risk and nomination committees. In addition to her IAG role, Bryan is also chairman of Virgin Australia and a director of Westpac.

ACE division ceases writing new business

Combined Insurance ceased writing new business in New Zealand on 25 February and in Australia on 22 April. The company, which is a division of ACE Insurance in Australia, says the move comes after a detailed review of its business operations and growth prospects. The insurer says the change will not affect existing policyholders, who will continue to receive customer service and have their claims, policy change requests and renewals dealt with. The decision to cease new policy sales comes as ACE and Chubb finalise their multibillion-dollar merger.

Zurich to slash 8,000 jobs

Zurich is set to cut 8,000 roles across its international business following a drop in business operating profit of 37%. The Swiss global insurer will accelerate its efficiency program in light of its “disappointing result”. Zurich chairman and CEO ad interim Tom de Swaan said the group aimed to exceed the cost savings target for 2016 of US$300m (A$391.47m).

He said Zurich could achieve groupwide cost savings of over US$1bn (A$1.3bn) by the end of 2018.

QBE appoints Lloyd’s veteran

Global insurer QBE has appointed Lloyd’s veteran Rolf Tolle as a non-executive director. Tolle, who joined the QBE board on 11 March, has several years of experience in specialist insurance and reinsurance businesses and has held senior positions in a number of global companies in the industry. At Lloyd’s, Tolle was the first-ever franchise performance director for the business and helped the market’s resurgence in his seven years in the position. He was also among the handful of recipients of the Silver Medal for Services to Lloyd’s.

Gen Re to close Aussie office

Gen Re, a subsidiary of Berkshire Hathaway, is set to close its office in Melbourne as well as five other global offices as part of its business reorganisation. The international player is discontinuing its P&C operations in Melbourne and Hong Kong; Seattle, Washington; St Paul, Minnesota; Charlotte, North Carolina; and Riga, Latvia. The closing offices will be integrated into teams in larger locations to “facilitate a more robust delivery of services to our clients”, the company said. Gen Re also said it remained committed to the markets facing closures despite the business changes.

Insurance giants losing profits, market share Major insurers could face $3.8bn in losses as challenger brands continue growth in a tough market Australia’s leading insurers are losing their share in the market, which has been described as the “toughest” in recent memory and the “most competitive” in 40 years. According to the forecast of analysts at Macquarie Bank, the biggest insurers are losing their market share to banks and challenger insurers – a trend that is expected to continue over the next three years. Macquarie analysts predict that, in the next three years, challenger brands could take 13% of the general insurance market while banks could reach 10%. “This equates to about $3.8bn of GWP flowing away from IAG, Suncorp and QBE by full-year 2018,” Macquarie told clients, according to The Australian. Macquarie said several challenger brands were already stealing the market positions of major players. The most successful challenger is Youi Australia, which has seen its share of the home and personal motor market grow to 2.6%, up from 2.2% a year earlier and from 1.6% two years ago. While challengers like Youi have reported recent growth, the top insurers have struggled lately, with IAG and Suncorp suffering declines in their half-yearly profits. “After discussions with industry participants, we conclude all carriers with traditional offerings are struggling to grow, with challenger brands and banks winning share,” Macquarie said. IAG has announced that its first half-year

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insurance profit for 2016 fell from $693m to $610m, while GWP dropped from $5.6bn to $5.5bn. Net profit after tax hit $466m, compared to $579m at half-year 2015. “In our commercial businesses we are prudently maintaining our underwriting discipline in the most competitive conditions in almost four decades,” said IAG managing director and CEO Peter Harmer.

“Carriers with traditional offerings are struggling to grow, with challenger brands and banks winning share” Suncorp has also reported that group net profit after tax and net profit after tax for its general insurance business for the six months to 31 December 2015 have decreased by $101m and $122m respectively. QBE has announced that its GWP for half-year 2015 took a 7% dip for the group overall, with GWP in Australia and New Zealand sinking by 14%. “I think I can say without a doubt that this is the toughest marketplace I can remember,” QBE chairman Marty Becker said in his message to shareholders. “Increasing globalisation has seen new capital entering the insurance market seeking a profitable home and consequently dragging down prices.”

Q&A

M&A in 2016 Roger Brown Executive director ERNST & YOUNG

Daryn Saretzki Mergers and integrations partner ERNST & YOUNG

Fast fact Roger Brown has over two decades of experience in the finance sector. He joined EY in 1998 and is now the company’s transaction advisory services executive director. Daryn Saretzki is an experienced merger and integration management consultant who joined EY in 2006

In terms of M&A activity, how would you assess 2015 and what could be learned from last year? 2015 was a strong year for insurance M&A in Australia, with a range of deals in different subsectors and of different sizes. From a buyer perspective, we saw demand both locally and offshore for well-priced, well-packaged Australian insurance businesses across the life, GI and distribution sectors. From a vendor perspective, optimisation of ROE was a key driver. Historically, even efficient insurance manufacturing businesses have operated below the average ROE target of large Australian financial institutions. Selling and redeploying capital into higher-earning growth opportunities was a repeating theme in 2015. Reacting to opportunistic offers was also a key feature of the market. In EY’s recent Financial Services Global Corporate Divestment Study, 53% of respondents said the trigger for their recent sale process was opportunistic – including unsolicited approaches by a buyer. Differences in valuation expectations were behind some of the deals that did not complete or are moving slowly.

What is your outlook for the Australian industry this year? Do you see insurers continuing to pursue outbound and inbound M&A? The success of sale processes in 2015, particularly the NAB/Nippon Life transaction, will encourage vendors to bring assets to the market. Our Corporate Divestment Study indicated 49% of respondents are planning a divestment within the next two years. We expect to see continued and growing interest from offshore players into Australia, in particular from Asia. The relatively low value of the Australian dollar against the Renminbi, Yen, US dollar and pound provides added value to offshore investors. On the other hand, there has been little outbound investment from Australian insurers and large financial institutions in the last two years. While we have seen some small strategic acquisitions in Asia, with the exception of IAG, none of the Australian insurers have signalled an intent for outbound insurance investment.

What are the biggest challenges for M&A in 2016? The key challenges for insurance M&A in 2016 will include assessing the potential impact of the Life Insurance Framework on distribution trends and assessing the industry’s ability to reprice key products, such as disability income. Meeting vendor price expectations for insurance distribution businesses may also continue to be a challenge.

What acquisition alternatives should insurers explore? Locally, we have seen a number of insurers reorient their businesses. Insurance is now being seen as an ecosystem, and organisations are actively considering the best ways to partner with others. This could include distribution via bank assurance partnerships, acquiring IT capabilities through the acquisition of insurance service firms, setting up venture funds to invest in emerging fintech opportunities, and establishing strategic alliances.

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UPFRONT

TECHNOLOGY UPDATE

GEN Y TO DISRUPT INDUSTRY Report says dissatisfied tech-savvy Gen Ys are more likely to buy insurance from tech-based entrants

of Gen Y customers have positive experiences with their insurers, compared to 55.4% of older consumers. The report, which surveyed 15,000 customers in 30 countries, said the lower scores of Gen Y consumers highlighted the need for insurers to better understand the behaviours and expectations of this customer segment.

“Over time, [Gen Y consumers] will become the industry’s core customers, influencing older generations”

Mobile and digitally interactive Gen Y consumers are threatening to change the way insurers deal with customers. The Capgemini 2016 World Insurance Report found that Gen Y customers – due to their level of comfort with technology – are more likely to buy insurance from non-traditional insurers, with 23.4% keen to get insurance from a technology company. There aren’t many ‘insurtech’ or tech-based entrants in Australia, but the country may be the next logical destination for these players

NEWS BRIEFS

following their success in other parts of the world, according to Dipak Sahoo, Capgemini Australia’s insurance practice leader. “Aussie insurers need to be aware of global insurtech companies. The next destination after they have proved their model in more mature markets will be mature markets in APAC.” According to the report, traditional insurers have not been able to satisfy Gen Y customers’ high expectations and strong preference for digital and social media. Globally, only 33.9%

Google shuts down insurance business

Search engine titan Google has shut down its online comparison service for car and travel insurance, credit cards and mortgages in the US and the UK a year after its launch. The company told its partners in late February of its plans to terminate Google Compare on 23 March. The tech giant said the service had not achieved the success it hoped for. Google said it would instead focus more intently on AdWords and future innovations that would enable the company to provide fresh, comprehensive answers to Google users.

“Comprised of tech-savvy individuals born between 1981 and 2000, Gen-Y customers have yet to fully embrace a wide range of insurance products. Over time, however, they will become the industry’s core customers, influencing older generations and making it imperative for insurance firms to better understand and address their needs now,” the report said. The report found that unlike older customers, Gen Y consumers embrace all channels. “It is critical for insurers to provide them a consistent all channel experience across both traditional and non-traditional channels. Also, insurers need to work with their traditional channels like brokers to make sure the B2B2C model provides the same rich experience as their B2C model,” the report said.

IT, data security top business concerns

A new survey by leading recruitment firm Robert Half found that 28% of CFOs and financial directors across all Australian companies ranked IT and data security as their primary business concerns in 2016. The research also discovered that SMEs had become an increasingly attractive target for hackers since they use fewer data protection tools compared to large companies. The global firm said all companies must take a protective approach to IT security, as a data security breach could lead to extreme financial and reputational costs.

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Q&A

Telematics: 2016 and beyond Paul Miller General manager, Asia Pacific SSP

Fast fact Paul Miller has over 30 years of consulting experience covering both technology and business, with clients spanning multiple industries, particularly insurance. He joined insurance technology vendor SSP as general manager in 2011

Do you think telematics will have an impact on the Australian industry in 2016? Momentum is picking up – we have three projects going live in the next month with insurers. And there are already solutions out there from QBE and Suncorp. We think that there is a tremendous opportunity for insurers to gain more profitable business, and that eventually the technology will be seen as an essential offering to be a serious contender in car insurance. The smartphone approach offers the ability for insurers to form a more regular connection with their policyholders and offers a new approach to forge customer loyalty.

In what ways could telematics impact on insurance over the coming years? Is this about more than just car insurance? Being able to write competitively priced but profitable business in previously tough segments (eg young drivers), with so much greater insight into individual driver behaviour. Cherry-picking profitable customers from competitors. Forging greater customer loyalty by providing added value on a digital platform. We think the technology is a natural to extend to commercial and fleet and could be extended to other forms of transportation. We’re already talking to customers about home sensors for monitoring moisture, temperature and other factors that could impact on claims experience over time. As sensors continue to become cheaper and more prevalent, we could see

Finance sector target in data breach scenarios

Businesses in the financial industry are the targeted victims in 10 of the 18 data breach scenarios identified by the first-ever Verizon Data Breach Digest. The report probed 1,175 cyber security cases over the past three years, detailing 18 real-world data breach scenarios and the tactics and techniques used. The finance sector was the targeted victim in the following scenarios: financial pretexting, digital extortion, insider threat, partner, peripheral tampering, logic switch, SQL injection, CMS compromise, backdoor access and credential theft.

the technology extended to other physical assets – plant, agriculture.

What challenges and opportunities does telematics present for the insurance industry, and specifically brokers? The local industry is still building their knowledge base to better understand how they truly integrate the technology into their product. QBE’s Insurance Box is the leader in this space, having first-mover advantage in the country. There are challenges to integrate the technology into the rigid and outdated legacy systems that many insurers use to process their business. This is definitely a barrier to adoption by insurers. Brokers, too, have integration and learning curve challenges, and in many cases have less resources to execute. They will have to become familiar with the offerings and understand the value they provide for their customers. Telematics is not all about pay as you go, but it is an aspect and will challenge broker billing systems.

Fleet insurance is a ripe market for telematics. What effect could the technology have on brokers that play in this space? It will give brokers new competitive offerings but potentially make fleet insurance ‘stickier’, ie depending on the technology used, it may be more difficult to swap insurers. Still, if it gives the end customer a better product it should also be better for the brokers.

Uber sparks state insurance shake-up

NSW will review its compulsory third-party insurance scheme as ride-sharing services like Uber continue to shake up the transport sector. The Minister for Innovation and Better Regulation in NSW, Victor Dominello, has announced a CTP review in the point-topoint transport sector to clarify price and regulatory disparities that currently exist between taxis, hire cars and ride-share services. Dominello hopes the review will increase fairness in the sector given a tenfold disparity in the CTP that taxi drivers and private vehicles pay in the state.

80% of businesses lack cyber insurance

Businesses see cyber security as vital to their organisations, but the majority do not take it seriously enough, according to a new report by the UK’s Barclays and the Institute of Directors. The study, which polled nearly 1,000 members of the Institute, showed that only around 57% of business leaders had a formal cyber security strategy. The report also found that only 20% of businesses held cyber insurance and just 28% of cyber attack victims reported the incidents to the authorities.

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PEOPLE

THE BIG INTERVIEW

BUILDING THE NEW CHUBB John French, Chubb’s Australia and New Zealand country president, talks about combining the best of two worlds

IT WAS 1 July 2015 when it was announced that ACE Ltd would acquire The Chubb Corporation. This year, on 14 January, the completion of the acquisition was announced. ACE had paid approximately US$29.5bn (A$38.55bn) in cash and stock for Chubb. That transaction – said to be the biggest ever acquisition for the insurance industry in the US – resulted in the creation of the world’s largest publicly traded property and casualty insurer, which comes together under the Chubb name. “Our passion for underwriting, along with our industry-leading claims, risk engineering and loss control services and substantially increased data, distinguish the new Chubb as we pursue new, profitable growth opportunities in both developed and developing markets around the world,” Evan G. Greenberg, Chubb Ltd’s chairman and CEO, said in a statement in January announcing completion of the transaction.

The story so far On 1 April, the legacy ACE and legacy Chubb businesses in Australia commenced operations together. John French, previously ACE’s country president for Australia and New Zealand, is the man now heading up the new Chubb in both countries. The company is the sixth largest

general insurer in Australia. French tells Insurance Business the integration of ACE and Chubb in Australia has “progressed well”. “We began collaborating when the global transaction closed on 14 January and have been working together closely since then,” he says. “On 1 April, we commenced operating under a new single management structure with quality leadership from both legacy organisations. “We are seeing close collaboration across our operations, from product harmonisation processes to new efficiencies which will enable underwriters to spend more time in the market with brokers.” French has chalked up more than 25 years in the insurance industry. Much of that time has been spent with ACE, which he joined as a business development manager in Sydney

in 1997. Since that time, he’s been Australian general manager and then gone on to serve as country president of ACE in Singapore, Thailand, Hong Kong, Taiwan and Macau, returning to Sydney to head up the insurer’s Australian and New Zealand operations in March 2014. French speaks highly of the people he’s worked with over the past two years. “During my time as country president for Australia and New Zealand, I’ve been lucky to work with a very talented team of professionals,” he says. “We have focused on underwriting excellence, broker relationships, bringing quality risk management solutions to market and offering an outstanding claims service.” Insurance Business asked French why the decision was made to adopt the Chubb name globally.

“Legacy ACE and legacy Chubb are two great underwriting companies that share a passion for production innovation and outstanding client service. Together as Chubb we are bringing the best of both organisations to service the market”

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PEOPLE

THE BIG INTERVIEW ACE AND CHUBB TRANSACTION TIMELINE

April 1, 2016

John French announces that legacy ACE and legacy Chubb are now structured as one team, operating under a single management structure

January 14, 2016

ACE announces its completion of the Chubb acquisition and that the transaction has resulted in the creation of the world’s largest publicly traded property and casualty insurer

January 13, 2016

ACE announces it’s received all regulatory approvals needed to close Chubb acquisition

November 20, 2015

ACE announces key leaders to be appointed in Asia Pacific on completion of Chubb acquisition, including John French as Australia and New Zealand country president

October 22, 2015

At a special meeting, ACE shareholders approve acquisition of Chubb

July 1, 2015

ACE Ltd and Chubb Corporation announce the approval of an agreement for ACE to acquire Chubb

“This is an acknowledgment of the distinctiveness and strength of the Chubb brand,” he says. “Chubb is a unique name with 130 years of heritage. It stands for excellence, quality and service.”

The new Chubb So, what can Australian brokers and their clients expect from the new Chubb? French says that they’re bringing a “fresh and vibrant” brand to market. “Chubb has specialist expertise in underwriting complex risks and excellence in claims,” he says. “We’ve structured our distribution to provide local underwriting service for both global and independent brokers. Backed by AA- financial strength and our global network, our local team has a compelling offering for intermediaries and clients.” French speaks further about what the new combined company means for customers. “Legacy ACE and legacy Chubb are two great underwriting companies that share a passion for production innovation and outstanding client service. Together as Chubb we are bringing the best of both organisations to service the market,” French says. “For distribution partners we are offering

enhanced products backed by exceptional financial strength and security for clients. “Across a diverse range of intermediaries that operate in the Australian and New Zealand markets, we will be better equipped to assist in the growth of businesses with a broad product offering in a number of specialty and traditional product areas.” French cites a number of examples. “We now have a significantly increased capacity within our property ISR portfolio, our capabilities within construction have been enhanced, and our environmental liability solutions will be available across a far wider distribution network.” He continues: “Our financial lines business has dramatically increased in size, as has our accident and health business and our personal lines portfolio. In each of these areas we are now in a stronger position to work with brokers in meeting the insurance needs of clients.” French says the combination of ACE and Chubb enhances the organisation’s capabilities to deliver on its strategy of providing quality products and services to ensure customers are properly protected. “Our independent broking partners will see a vastly enhanced product suite with significant strength in general property,

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“The focus is on bringing best of breed products and services to market while also ensuring we adopt the best practices from the two legacy companies” casualty construction and environmental in addition to existing financial lines and package capabilities they currently enjoy through the legacy Chubb business. This will be delivered through a dedicated underwriting team in each state,” he says. “For our large and global broker partners, a dedicated team in each state will continue to focus on delivering a customised service, from small SME facilities to tailored large multinational programs. “Ultimately, for Chubb, this is about providing our distribution partners with the products and service they need to grow their businesses as we aim to create growth and value right throughout the distribution chain.”

The year ahead Looking forward, as ANZ head of the new Chubb, what will French’s and his team’s focus be for 2016? “This is a growth story. We have taken

the opportunity to integrate two highly talented and motivated teams. We will now implement a dynamic and long term strategy, distributing our expanded product through a broader network of distribution partners,” he says. “The focus is on bringing best of breed products and services to market while also ensuring we adopt the best practices from the two legacy companies.” Talking product lines and emerging risks, where does French see significant opportunities for the new Chubb to make its mark in Australia in the near future? “We have particular strength in large account property and casualty,” he tells Insurance Business. “We continue to build capacity and capability in each of these products. Through investment in data analytics and portfolio management, we are looking forward to continuing to provide clients the best there is to offer in this space.

“In relation to emerging risks, we are addressing particular needs with custom industry solutions such as healthcare, life sciences, technology and renewable energy. “We are also well positioned to provide cyber insurance coverage as boards increasingly see this as a critical element within company risk management programs.” Last year, before the acquisition was announced, Chubb was the gold medal recipient for its claims turnaround times in Insurance Business’ 2015 Brokers on Insurers survey. Is there anything currently happening within the combined company – in terms of technology or otherwise – aimed at enhancing the claims process for brokers and their clients? “Technology is obviously part of any efficient claims service, and we have a program in place to leverage the best components of the legacy organisations across the united business,” French says. “However, Chubb’s excellence in claims is derived from our people and our culture. It takes talented professionals with the right expertise to deliver to the standards required and I’m very confident in the team we have in place.” Needless to say, there should be plenty for brokers to stay abreast of this year as the new Chubb’s brand-building journey continues.

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FEATURES

ELITE BROKERS 2016

Insurance Business ranks and celebrates the best of the best WELCOME TO the 2016 Insurance Business Elite Brokers list. This year marks the fourth occasion on which Insurance Business has set out to rate and rank Australia’s insurance brokers and name those who are at the top of their game. We’ve continued to receive positive feedback about the flow-on effects for those

who have secured a place in one – or more – of our previous lists. It’s been the experience of a number of entrants that endorsement as an Elite Broker has resulted in recognition from both industry colleagues and clients, and has also served as a valuable business development and marketing tool. Insurance brokers continue to do excellent work for the wider community, and it’s our

privilege to be able to recognise a small handful of those high achievers here. We’d like to offer a sincere thank you to everyone who applied to be a part of the Elite Brokers 2016 rankings, and we look forward to continuing this now highly anticipated tradition in 2017. Tim Garratt, editor, Insurance Business

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THE TOP 30 RANK NAME

COMPANY

1 Russell Bresland

IAA Bresland Consultants Pty Ltd

2 David Powell

Elliott Insurance Brokers

=3 David Summers

Markey Group

=3 Victor Dabrowski

Securitex Financial Services Pty Ltd

5 Tate Harris

allinsure

6 Peter Chamberlain

allinsure

7 Luke Phillips

Gardian Insurance Services

8 Dale Hansen

Austbrokers Coast to Coast Pty Ltd

9 Bonni Gordon

Global Risks Pty Ltd (AR of Westcourt General Insurance)

10 Jaron Bresland

IAA Bresland Consultants Pty Ltd

11 Ken Dixon

Dixon Insurance Services Pty Ltd (AR of Westcourt General Insurance)

12 Karen Hardy

ACME Insurance Brokers

13 Daniel Johnson

Insurance House

14 Zara Mends

National Credit Insurance (Brokers) Pty Ltd

15 David Coe

Northwest Insurance

16 Kelli Dabelstein

North Queensland Insurance Brokers Pty Ltd

17 John Craven

MGA Insurance Brokers

=18 David Clarke

Elliott Insurance Brokers

=18 Kay Jackson

Simplex Insurance Solutions

20 Vishal Kapoor

McLardy McShane Insurance & Financial Services

21 Shane Moore

Trade Risk (AR of Westcourt General Insurance)

22 Daniel Webber

Webber Insurance Services (AR of Westcourt General Insurance)

23 Tim Cooper

Challenge Insurance Services

24 Karen Frazer

Shield Trade Credit Pty Ltd

25 Prudence Chang

National Credit Insurance (Brokers) Pty Ltd

26 Roxanne Heibloem 27 Shane Crowley

Roxanne Insurance Brokers (AR of Westcourt General Insurance) Able Insurance Services NT (AR of Westcourt General Insurance)

28 Vanessa Davis

B&L Financial Group (AR of Westcourt General Insurance)

29 Karlo Abrenio

Megalines Insurance & Risk Advisers (AR of Westcourt General Insurance)

30 Adam Pile

Your Risk Adviser/Truckers Insurance HQ

METHODOLOGY The Insurance Business Elite Brokers ranking system is an objective means of ranking the best-performing insurance brokers in the country – not just those with the biggest portfolios or the largest clients. Each broker was required to supply their own details to Insurance Business to be eligible, along with details of a contact who could verify those figures. In total, there were eight criteria, covering: • Number of policies written • Total revenue • Revenue per policy • Number of clients • New clients • New client revenue • Client retention Each broker was ranked in each of these measurements and the sum of all of their rankings was calculated. The brokers were then placed in order, with whoever had the lowest overall score ranking first in the list, and so on (think of it as a golf score, where having higher rankings in each section means you have a lower total score).

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FEATURES

ELITE BROKERS 2016

OPPORTUNITIES FOR ELITE BROKERS IN 2016 In Vero’s recently released 2016 SME Insurance Index, more than two thirds of business owners surveyed reported being satisfied with their dealings with their brokers.

Business owners surveyed in Vero’s 2016 SME Insurance Index also revealed their greatest business concerns, and a substantial number of them reported a lack of coverage for some of the greatest insurable risks they were concerned about. The role that brokers can play in educating business owners about the need for coverage is clear. While none of the top three risks in the list below are insurable, there are an abundance of insurable risks occupying the spaces beneath, representing opportunities for brokers to potentially grow their books of business and become truly elite brokers.

% OF RESPONDENTS ‘VERY CONCERNED’

20%

68%

Dissatisfied (score 0 to 4/10) Neutral (score 5/10) Somewhat satisfied (score 6 to 7/10) Satisfied (score 8 to 10/10) Source: Vero 2016 SME Insurance Index

(gave score of 8 to 10/10)

Increase in costs

Economic downturn

Competitive activity increase

Being unable to trade

Equipment failure/ breakdown

Adverse publicity

Adverse regulatory change

Workplace accidents

Political instability

Cyber attack

Being sued

Natural/other disasters

Employee negligence

Attracting/ retaining staff

Theft

Employee fraud

Source: Vero 2016 SME Insurance Index

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Of particular interest was a discernible correlation between the level of satisfaction and the depth of the service provided by surveyed clientsâ&#x20AC;&#x2122; brokers. The Index reports that, generally, the brokers with highly satisfied clients provided service extending beyond the basics. More specifically, it found that brokers with highly satisfied clients were far more likely to provide an in-depth analysis of all of the options available to those clients, and to provide information on changes to insurance and/or regulatory requirements.

Provide me with in-depth information and analysis on all the options available to me

76% 40% Provide me with information on changes to insurance or regulatory requirements

83% 53% Manage claims process

86% 57% Provide me with general information on insurance that may affect me in the future

81% 55% Advocate on my behalf to insurance companies

81% 55% Highly satisfied broker clients (score 10/10)

Least satisfied broker clients (score 0 to 6/10)

Source: Vero 2016 SME Insurance Index

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FEATURES

ELITE BROKERS 2016 JARON BRESLAND

IAA Bresland Consultants Pty Ltd

Jaron Bresland is excited to be part of the Insurance Business Elite Brokers Top 10 list for 2016. “It is an amazing honour and is certainly a career highlight to date,” he says. But he tells Insurance Business he can’t take all the credit. “We have an exceptional team here at Bresland Consultants and receive great support from [Insurance Advisernet] who give us the tools to grow.” Bresland’s focus includes not-for-profit organisations. “I travel far and wide seeing clients, ranging from remote communities in the Kimberleys to all around the Central Wheatbelt. There is no part of WA that Bresland Consultants will not or does not visit.” Bresland believes succeeding as a broker in the current market is about service, advice and knowledge.

“The market we are in dictates that we need to be at the top of our game to succeed. I am always available 24/7 to my clients. New clients usually laugh when I mention this, but they soon find out that it wasn’t just a pitch for their business,” he says. Bresland also raises the importance of being mentored. “Having a mentor is invaluable, no matter how many years’ experience you have, as we all keep learning every day; I am just lucky I have Russell [Bresland] to bounce off as 40 years of experience cannot be taught.” Asked to single out his greatest highlight as a broker in the past year, Bresland says: “It would have to be my growth and client retention over the past 12 months in this difficult market. It shows that service still very much counts in this digital age.” Congratulations to Jaron Bresland!

BONNI GORDON

Global Risks Pty Ltd (AR of Westcourt General Insurance)

What does Bonni Gordon think it takes to succeed as a broker in this increasingly competitive market? “I think to succeed one must adhere to your principles, and mine have not changed since I entered the industry – namely to be advicedriven, show attention to detail, remain customer-focused, and always transact

“The shop window of any brokerage is claims, and ultimately you are judged on how claims are handled and settled, and this invariably comes down to product and insurer.” Commenting on the challenges brokers face today, Gordon mentions technology: “How to combine age-old traditions, on which I have based my modus operandi thus far, together

“The shop window of any brokerage is claims, and ultimately you are judged on how claims are handled and settled” business in utmost good faith,” she says. “One has to understand, listen, assess, be able to negotiate, and arrange programs that are tailored to the specific needs of the insured. If you are not sure, call in an expert to assist you. Your client will respect you more.” Gordon adds: “Don’t rest on your laurels. Whilst one has to be competitive, it is important to keep in mind not all products and insurers are the same. If you explain these differences, your client can make an informed decision. 28

with new disruptive platforms is a constantly evolving challenge which one has to embrace.” And what’s ahead in the coming year? Gordon says: “We have been selected as one of only 25 brokers in Australia to have access to a market-leading product available to the industry we are targeting for the first time in Australia from an APRA-approved insurer. We believe that being one of very few brokers selected consolidates our position in the market as a responsive, dedicated, clientfocused broker.”

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“We are faced with significant challenges every day; however, these challenges often turn into wonderful opportunities with our clients” DALE HANSEN

Austbrokers Coast to Coast Pty Ltd

Dale Hansen has twice been named an Austbrokers’ High Achiever. He spends a substantial amount of his own time lecturing and training not-for-profit organisations in the areas of insurance, risk management and corporate governance, and Insurance Business is told that he also mentors young brokers. On learning of the news of his making the Insurance Business Elite Brokers Top 10, Hansen described the recognition as “very humbling”. “The award feels like a reward for all the hard work that has been put in,” he says. Talking about his own focus as a broker, Hansen says: “My client portfolio is represented by a significant number of predominantly corporate clients, a lot of whom are in the transport industry, particularly in the carriage of dangerous goods. We specialise in the liability and financial lines space.” And what does Hansen think it takes to succeed in the current market climate? “It requires a much greater level of service,”

he says. “A holistic approach to understanding the client’s business and a commitment to providing a total risk management solution for all clients.” Reflecting on industry challenges, Hansen says: “I believe the greatest challenge for all brokers is to remain focused on their clients’ business and to remain relevant in the current climate. “We are faced with significant challenges every day; however, these challenges often turn into wonderful opportunities with our clients.” Insurance Business asked Hansen to single out a broking highlight from recent times. “The highlight for me as a broker, during the last year, was to see how readily my clients have embraced the holistic approach to risk management,” he responds. “They are no longer focusing on price but rather [on] the quality of both the policy and the superior service they are receiving.” Congratulations to Dale Hansen on this latest achievement!

07 LUKE PHILLIPS

Gardian Insurance Services

This marks Luke Phillips’ third consecutive appearance on the Insurance Business Elite Brokers list. He is the managing director of Mackay-based Gardian Insurance Services, a business that recently celebrated its tenth birthday. Phillips is focused on growing Gardian’s AR network and is described by one colleague as a broker who works very hard for new business. The same colleague also says Phillips is determined to continue his climb up the Elite Brokers’ ladder. So where will he find himself in 2017? Congratulations to Luke Phillips on once again ranking in the Insurance Business Elite Brokers list. www.insurancebusinessonline.com.au

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FEATURES

ELITE BROKERS 2016

service offering. As always, maintaining strong relationships with insurers is a key factor in ensuring that we get the best outcome for everyone involved.” Talking about the greatest challenges in recent times, Chamberlain mentions the constantly evolving business landscape.

“No matter what, the relationships we build through advice and client service will always be a priority”

PETER CHAMBERLAIN allinsure

Peter Chamberlain, director of ACT-based allinsure, is a familiar face in the Insurance Business Elite Brokers list, and described it as an “absolute honour” to have received the recognition once again this year. Chamberlain manages large professional and corporate enterprises, as well as largescale construction and property accounts. He tells Insurance Business about the importance of building strong relationships. “No matter what, the relationships we build

through advice and client service will always be a priority. With an increase in clients turning to online providers and aggregators to purchase insurance, we as an industry really need to work on demonstrating the value in using a broker.” He adds: “Having a strong support network with our business partners and, in particular, Insurance Advisernet, gives us access to some fantastic additional benefits that we can provide to our clients as part of our overall

TATE HARRIS allinsure

05 30

It’s been a busy time for Tate Harris, a member of Peter Chamberlain’s allinsure team. In recent times, he’s mentored two new advisers through the Tier 1 program, and was recently accepted into Insurance Advisernet’s inaugural IA Academy for elite young brokers. And now, for the second consecutive year, Harris has found himself ranked in the Insurance Business Top 10 Elite Brokers list. “To be ranked in last year’s list was so unbelievable; I didn’t think I would be able to back it up for 2016,” he tells Insurance Business. So, what does it take to be successful as a broker today, in Harris’s view?

“As we all know, the market and local business environment is constantly changing. Ensuring we keep moving with these changes and tailoring our approach to both broking as well as our clients’ needs is always a challenge.” Turning the discussion to times ahead, Chamberlain talks about plans in store to mark a significant milestone for the business. “With allinsure turning 10 in 2017, we will be looking to make a real impact in the industry through expanding our base operations in Canberra, in addition to plans to move into the Melbourne market. “We will continue to invest heavily in training and development of the team to ensure we can provide the best service and advice possible, as well as focusing on giving back to our local community.” “I believe that it is a combination of demonstrating the value of a broker through [the] right advice, claims management and building strong and trusting relationships with both clients and insurers. We also really need to focus on each client and their individual needs – if we try to fit them all into an existing profile simply based on their industry, we lose our value.” And what’s on the horizon for Harris? “Continuing with my personal development in management as well as the development of the team will be a huge focus over the next year,” he says. “The IA Academy later this year will really allow me to concentrate on business management, assisting me in connecting with clients on another level. We’ve got some really exciting things in the pipeline for allinsure, and I can’t wait to get started.”

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DAVID SUMMERS Markey Group

David Summers is another broker who is no stranger to the Insurance Business Elite Brokers list. An industry veteran of 13 years, he’s ranked in the Top 10 in every one of these lists. Summers is the senior broker in a team of three broking staff based in Newcastle, NSW. When asked about the focus of his portfolio, he says, “Everything and anyone”, adding that he targets industries in which he feels his team can make a positive difference. “Our focus is dependent on insurers and

“Our focus is dependent on insurers and their products … [I]f we find a product with a competitive edge, this then becomes our industry of focus” their products – as I said last year, if we find a product with a competitive edge, this then becomes our industry of focus.” In the increasingly competitive market, what does Summers think it takes to succeed as a broker? “Knowing what the client really wants [and] knowing who you work for” is his response. Summers is thankful that the past year has not seen any substantial challenges arise for him as a broker. “Thankfully, this year has seen more opportunity than challenges,” he tells Insurance Business. On the other side of the coin, what has been Summers’ greatest highlight as a broker over the past year? “Self-growth,” he says, adding: “Actually, realising what it was that I was doing that made our services so highly sought after.” So, what’s next on the cards for this Elite Broker? “Ambitious growth targets,” Summers says. “I am determined to grow nationally, so I am focused on trialling new marketing techniques and reaching as many people as possible.”

03 VICTOR DABROWSKI Securitex Financial Services Pty Ltd

Joining David Summers as equal third place holder is SA’s Victor Dabrowski. “I am absolutely humbled to make the Top 10 Elite Brokers,” he tells Insurance Business. “This certainly is a great reward for a year of hard work.” Talking about his portfolio, Dabrowski says, “My clients are mainly self-employed business people, so the product lines are mainly business packs and ISRs.” On succeeding in the business today, he says, “you have to be a total professional, keep up your education/product knowledge, [and] provide tailored solutions to each client. “Provide a high level of service and look after clients when they have a claim.” What does Dabrowski cite as his greatest challenge of the last year? “The greatest challenge has been time management; with all the referrals received throughout the year, just doing the surveys, discussing insurance options, quoting and delivering solutions in a timely manner can be difficult to achieve.” Right now, Dabrowski says he’s mentoring two new entrants to the insurance industry to assist him with his workload and in servicing the business’s client base. www.insurancebusinessonline.com.au

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FEATURES

ELITE BROKERS 2016

DAVID POWELL

Elliott Insurance Brokers

WA-based broker David Powell describes his ranking in the Top 10 Elite Brokers list for 2016 as “a fantastic honour” and thanks CEO John Elliott for encouraging him to nominate this year. “I recognise that I could not have achieved this without the tireless efforts and support of the Elliott Insurance team and our great customers who we value so very much,” he tells Insurance Business. Powell manages a variety of top-tier clients, ranging from larger SMEs to multinational companies. “We have a broad focus and quite a large spread of clients across most industries, including manufacturing, construction [and] mining,” he says. Talking about succeeding in today’s tough climate, Powell says he believes companies don’t succeed because they don’t focus on delivering sustainable, cost-effective outcomes for clients. “We have had a very successful year in new business, and with more and more businesses price isn’t coming into [the] equation. Additionally, we are utilising the softening market to have clients improve the level of cover they hold and types of policies they are purchasing,” he says. “We are having conversations about contract reviews, business interruption, and how claims preparation costs work, and how we can facilitate a team of expert services as part of our offering, and we are finding clients haven’t been having these conversations with their broker, or brokers haven’t been listening to their clients enough.” Powell says there are too many ‘price-driven’ brokers in the market. “As an industry, we need to value the service and the offerings we provide to our clients more than just a price without significant consideration and discussion about appropriateness of cover to the client.” 32

01 RUSSELL BRESLAND

IAA Bresland Consultants Pty Ltd

In the top spot in the Insurance Business Elite Brokers list for 2016 is WA’s Russell Bresland, a man with over four decades of experience in the insurance industry. “This is a very important award for us and gives us the confidence to know we are making an impact in the market and being rewarded for the hard work,” Bresland says. So, what does he think it takes to succeed in today’s market? “At the end of the day, it is the level of service and professionalism you give to your clients and the insurers. We do not actively market our business, and the bulk of our business comes from referral business,” he says.

“At the end of the day, it is the level of service and professionalism you give to your clients and the insurers” What does Bresland cite as his greatest highlight as a broker over the past 12 months? “Picking up a very large account purely on the ability to sell the benefits of dealing with us, and it had nothing to do with price,” he says. “It was more of what we can offer in terms of service and knowledge.” The question now is, what’s next for Bresland and the business? “[I’m] determined to continue growing as we have over the past six years and looking to maybe take the pedal off the gas in 2020, if the correct succession plan is in place! “Out in the market there is so much business that is poorly handled and not serviced as it should be that we see the year ahead producing many opportunities.” Congratulations to Russell Bresland on taking top honours in 2016!

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FEATURES

PEER-TO-PEER INSURANCE

GOING BACK TO BASICS Innovators have set their sights on simplifying insurance by adopting new peer-to-peer business models. Who are the key players and does the Australian industry need to pay attention? DISCUSSION OF the sharing economy has taken up considerable column space in recent times. PricewaterhouseCoopers estimates the five main sharing sectors (peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing and music video streaming) will potentially generate global revenues of US$335bn (A$439bn) by 2025. Today, PwC says revenue generated is around US$15bn (A$19.67bn). One sharing economy sector still very much in its infancy is peer-to-peer insurance. But Amy Gibbs, digital communications and content strategy manager at ANZIIF, says popularity of the concept is increasing. “When it takes off, it will likely happen much quicker than we expect,” she says. “P2P insurance is not about a new technology threatening an industry but about people demanding an industry that gives them what they believe they deserve. Consumers expect different things in 2016, and technology now allows them the power to get what they want or go elsewhere.”

The current crop in P2P On 24 March, Germany’s high-profile P2P player, Friendsurance, announced it had collected US$15.3m (A$20.26m) from investors in its latest round of financing. Tim Kunde, Friendsurance’s co-founder and managing director, says the organisation intends to use that fresh capital to grow further in

Germany and expand internationally. He says the first expansion target for 2016 is Australia, and expansion opportunities for other markets are currently being considered. Friendsurance is one of the players Gibbs has been keeping a close eye on. “Friendsurance and Guevara are ones that I watch keenly,” she says. “They have interesting models and appear to have put a lot of thought into them, plus they get the marketing/consumer angle, which is crucial.” Friendsurance, founded in Germany in 2010, operates as an independent insurance broker. It describes its mission as to make insurance easier and more affordable for customers, and to reduce the number of fraudulent claims. “Our idea is inspired by insurance in its original form, when people got together in small groups … and supported each other in case of damage,” Tim Kunde, Friendsurance’s co-founder and managing director, tells Insurance Business. “This was easy and efficient but also limited in the extent of coverage. Today, big insurance

“P2P insurance is not about a new technology threatening an industry but about people demanding an industry that gives them what they believe they deserve” Amy Gibbs, ANZIIF

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Janis Meyer-Plath, Sebastian Herfurth and Tim Kunde of Friendsurance companies can carry claims of any amount, but marketing, administration and fraud cause remarkable costs. “Against this background, we developed an insurance concept that again [creates] smaller groups within bigger insurance societies and rewards remaining claimless within [these groups] with annual cashbacks.” Friendsurance customers with the same insurance type form small groups online. Part of

their insurance premium is paid into a cashback pool, and part of it is provided to the group’s insurer (or reinsurer). When small claims are made, customers are reimbursed from the general fund. Larger claims still go through the insurer. Groups that have no claims during a year receive a cashback bonus the following January. Friendsurance says its claims-free bonus is available for private liability, home contents and legal expenses insurance.

“So far, more than 80% of users received some of their insurance fees back,” says Kunde. “In the property insurance line, the average cashback was 33% of the paid insurance fees.” Kunde reports that, in 2015, Friendsurance engaged 75,000 new customers. “Today, we have a six-digit number of customers, 70 insurance partners, 15 copycats and 80 employees.” Over in the UK, start-up Guevara has received

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FEATURES

PEER-TO-PEER INSURANCE considerable attention since its London launch in June 2014. Focused on car insurance, Guevara also groups customers together, allowing them to choose to be pooled with either family and friends, or with customers with similar risks. Premiums are put towards covering the group, and at the end of a year, funds remaining after any claims and Guevara’s fee go towards reducing group members’ premiums for the following year. In the two days immediately after its launch, Guevara sold more than £100,000 (A$186,366) in premiums. Bought By Many is also making waves in the UK, although it doesn’t describe its innovative insurance operation as having a P2P model. Rather, it says it’s adopted a ‘group buying’ model. “I guess our peer-to-peer is that people share information and they share buying power. They don’t share risk-taking,” says David Woodfield, the company’s head of partnerships. Bought By Many was founded in 2012 by Steven Mendel, a financial services industry veteran, and Guy Farley, whose background is in software development. “The company now has 30 people here in the UK, with [over] 145,000 members,” says Woodfield. Bought By Many’s remit is to assist individuals to find insurance for the things in life “that are out of the ordinary”. “[Customers] usually have something about them that means they have a particular insurance need,” Woodfield explains. “We say [that] that something could fall into two categories. It can be … something about them that makes it difficult to find insurance. It might be a medical condition … but it could also be something about the things they’re trying to insure. Perhaps they’ve got a car with modifications or perhaps they’ve got a home that is non-standard in its construction. “The other category is a passion,” he continues. “People might not have a particular problem getting the cover, but there’s something they feel really passionately about, and we find that can be something like a pet, something that they really love … Something that they really want to make sure is safe and protected.

“So people find groups on our site that are relevant to them because of that passion … they click and join it, and once they’re within that group they get access to a better insurance deal. They can choose to click, at any moment, from that group through to the insurer and buy a policy ... This is where the peer-to-peer stops because they buy on an individual basis in their own name, as usual, from that insurer, with absolutely no difference … except they get a better deal in some way. That better deal sometimes is price. Sometimes, we work with the insurer to change the cover to make it more appropriate to that group.” Illustrating that latter function, Woodfield discusses the company’s role in facilitating the world’s first insurance policy for pug dogs. “Early on in our history, we built a group of pug owners,” he says. “We understood from them that their problems were about theft of their animals. Believe it or not, there’s a phenomenon called ‘pug napping’. “A pug can be incredibly valuable … [and] the most expensive pet insurance policy you could

buy in the UK would only ever pay you £500 [A$931].” So Bought By Many took the group’s concerns to an underwriter. “The limit on that [policy] was quadrupled up to £2,000 [A$3,727] and the group was satisfied that it had a policy that was the world’s first pug insurance policy. That’s a demonstration of what we can achieve when we have that group in one place with a voice – able to express their opinion and make it very clear what their needs are, what their problems with the insurance market are – and an underwriter that’s willing to listen.” Woodfield reports a positive response to Bought By Many from consumers. “We started out with this idea of group buying and we never intended to be a protagonist or a campaigner, if you like. But because of our business model, where people get a better deal, slowly consumers basically decided … we were on their side. “They saw us as someone who was helping them out with problems in the insurance market. That’s gathered some momentum and now we’re

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in the position of being something of a consumer advocate.” But Woodfield adds the company’s not yet a household name. “We’ve done no mainstream advertising,” he says. “We just let that word grow essentially by modern word of mouth – through social networks. “We’ve had a good reaction from insurers, who like the ability to work with us on very specific pools of risk at the [part] of the market they might find hard to access usually. Increasingly, they’re also liking the insight we gather, and the information and feedback we get from customers.” So, what’s next for Bought By Many? “The strapline of the company is ‘Insurance made social’. Everything we do in the next couple of years will be about that,” Woodfield says. Part of that will involve Bought By Many giving customers access to information it’s gathered about its groups. “If you join the group for home insurance for people who are horse riders, let’s say … you might be interested to know that 75% of people in your group have bought with insurer X. Equally, if you have a specific medical condition, you might be interested to know that people with the same condition as you have had successful purchasing and claims experiences [with particular] insurers.” Last July, Bought By Many partnered with Ping An Insurance, China’s second-largest insurance company, to create several new travel insurance offerings for the Chinese market. Woodfield says the company will continue exploring opportunities abroad and he’d be surprised if it didn’t have a presence in another country by the end of 2016. “We have a list of around 15 countries where insurers have expressed an interest in working

with us, which is fantastic. We in no way have the capacity to work in 15 countries. So right now we’re in the process of working through with those insurers which are the right markets to work in, and which are the right insurers to work with.” Woodfield advises that Australia is one of the countries in the mix.

New kid on the block 2016 will also see the launch of a new American organisation, Lemonade – a company claiming it will be the world’s first P2P insurance carrier. Currently, little is known about the finer details of Lemonade’s operation, but its imminent launch has many watching on in anticipation. Founded by Shai Wininger (co-founder of online jobs marketplace Fiverr) and Daniel Schreiber (former president of Powermat), the company has announced it’s applied to be a licensed insurer in New York so will be able to underwrite and offer policies itself, as opposed to adopting a broker model. It’s hired a number of executives with experience at large insurers and has secured reinsurance deals with Berkshire Hathaway, XL Catlin and Hiscox. American venture capital firm Sequoia Capital recently invested US$13m (A$17.07m) in a seed round for Lemonade. “With reinsurers backing them and industry insiders running it, they have a great chance,” says Gibbs. “But whether they truly understand the consumer expectations of those who would use a P2P insurer remains to be seen.” Across the Tasman, former Marsh actuary Chris Logan opened PeerCover for business last year. It offers crowdfunded cover for a customer’s excesses on their policies. But Logan tells Insurance Business that, while generating substantial interest internationally,

“We are taking a step-by-step approach to disrupting the insurance industry. Our vision is to make insurance more customer-friendly” Tim Kunde, FRIENDSURANCE

PeerCover hasn’t achieved the level of local interest he’d expected. “I … thought, ‘Just put it out there and see if people like it or if they want to change it’, and the market said, ‘No, we’re not interested’, and I think that’s fine,” says Logan. “You have to give them what they want, and what I was offering was not what they wanted. So it didn’t work. That’s fine; that’s how these things work.”

P2P in Australia With Friendsurance set to arrive on our shores some time in the near future, the question now is how successful the concept of P2P insurance will prove to be in Australia. “I think Australian insurers have a small window of time to be the ones leading the P2P revolution in insurance before smaller start-ups manage to carve their way in.” Finity Consulting principal Graeme Adams raises the issue of regulation. “I’m not sure whether it’s clear in APRA’s mind how they’d go about regulating this insurance,” he says. “Will it be insurance at all, or is it just a way in which friends come together and agree to a payout in the event of a catastrophe? I’m not too sure as to what degree you’ll see a formal response from a regulator in relation to peer-to-peer … I think it’s something that needs to be tested in the Australian marketplace.” Gibbs encourages the local insurance community to sit up and take notice. “There is a huge opportunity for the industry to get ahead of, or partner with, the tech start-ups in this area,” she says. “There’s no question in my mind that they have to adapt, be it in small consumer-friendly or larger business model disruption ways. That will be harder for established companies. Tech companies, by their nature, will be better at it. “I think it’s an incredibly exciting time to be in insurance, though I understand why it’s also a very unnerving time for companies who have been doing business in the same way for hundreds of years. Those that can embrace innovation and consumer-centric models will benefit and cement their place in the ‘new industry’. They absolutely need to be starting now though.”

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FEATURES

D&O LIABILITY INSURANCE

VIEW FROM THE TOP: CURRENT D&O RISK AND REGULATION TRENDS Wotton + Kearney’s Patrick Boardman and Dean Pinto examine the evolving D&O landscape

In association with

DIRECTORS AND OFFICERS (D&OS) have ever-increasing duties and obligations resulting in ever-increasing liability exposure, including fines, penalties and damages. D&Os need to ensure that indemnities from the company and their D&O insurer extend to those exposures. D&O insurers need to ensure the wording and pricing of their policies account for these everincreasing exposures. This article looks at topical issues arising out of those exposures.

The continued rise of cyber Cyber risk appears in the top three risks in any management risks survey, which is unsurprising given that a significant percentage of companies say they have been affected by some form of cyber incident in the last 12 months. D&Os have two principal areas of cyber risk exposure: 1. Claims by shareholders (either on their own behalf for losses arising from a reduction in share price following a cyber incident, or on behalf of the company via a derivative action for losses incurred by the company by reason of the D&O’s negligence); and/or 2. Claims by customers as victims of any breach of privacy/data incident. In the US, high-profile shareholder claims have alleged: 1. A breach of fiduciary duty and duty of care by D&Os in not taking sufficient steps to protect their company from a cyber attack, particularly if they knew of the inadequacies of its systems or should have known;

2. Wasting of corporate assets by exposing the company to investigations and other censure; 3. Misleading representations as to the company’s cyber and privacy protection systems and/or in respect of their subsequent breach; and 4. Unjust enrichment of D&Os for effectively being paid while not doing their jobs properly.

It is not difficult to see how such actions could be brought against D&Os in Australia, particularly given our strict liability misrepresentation laws which require no intent to mislead or deceive, and our consumer-friendly class action regime and plethora of litigation funders. Conversely, customers whose data/privacy has been breached have had difficulty bringing

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SNAPSHOT OF CURRENT TRENDS Cyber risks Regulatory risks – including corporate culture and bribery Increasing obligations under model OH&S provisions regarding workplace safety for employees and contractors Increasing liability for pollution incidents and contamination under environmental protection legislation The ability of insurance policies to pay fines and penalties. There is increasing pressure for Australian OH&S legislation to mirror New Zealand in prohibiting the payment of fines, as it removes the deterrent and punitive basis of fines The substantial rise of class actions by shareholders and investors over the past five years – these claims are now very much part of the corporate risk landscape Increasing bad debt provisioning by banks tends to indicate that Australia’s harsh insolvent trading laws will come into play claims because of the need to establish actual (rather than theoretical) loss arising from the cyber breach. Class actions in the US have failed on that basis. In the UK, however, the courts have recently allowed an individual to claim compensation even if they have suffered no financial loss, which will undoubtedly be utilised in future claims involving cyber matters, such as the recent TalkTalk incident. In Australia, there are two proposed pieces of legislation that would increase D&Os’ cyber exposure: 1. Federal legislation creating mandatory reporting obligations within 24 hours of a cyber breach. While the obligations are proposed to be on the entity only, it has to be expected that consequential obligations could ultimately flow through to the D&Os; and 2. The NSW legislative committee recently proposed that NSW “take the lead” and create a statutory tort for serious invasions of privacy which would alleviate the need to prove actual

loss. While the chances of this occurring may be slim, it clearly evidences a legislative intention to progress this area of law, which should be acknowledged by all D&Os and their insurers in managing future liabilities. D&Os have to be fully appreciative of cyber risks affecting their business, and create, monitor, adhere to and update relevant applicable procedures and safeguards. Currently, D&O insurers provide automatic cover for D&Os’ cyber liability; however, with the increasing risk it remains to be seen whether that will continue.

Regulatory risks Regulatory risks are also high on any list of management concerns. Australia has very active regulatory bodies with extreme investigative powers in which D&Os have no right to silence and no right against self-incrimination. It is therefore imperative that examinees have their own independent legal representation and are fully prepared for such examinations. This can create significant cost exposures for the firm/ individual, and logistical problems if multiple people are examined, particularly if located in different countries, which has occurred in a number of bribery investigations Wotton + Kearney is involved with. We are seeing an increasing prevalence of investigations within the finance industry, particularly by ASIC, and these are now extended to the corporate culture of an organisation. Culture is the realm of D&Os and will encapsulate the company’s recruitment, training, HR, remuneration, compliance and enforcement policies. Corporate culture is now also a trigger for liability under the new bribery accounting legislation, and there must also be the potential for it to be utilised in other industries. Bribery and corruption are also now at the forefront of the regulator’s investigations. ICAC is extremely active on domestic corruption and ASIC and the DPP are eager to show that Australia has zero tolerance for bribery. Australian law is currently confined to the bribery of foreign officials; however, recent strengthening of bribery laws now make deliberately or recklessly falsify accounting records an offence, which avoids the difficulty of having to prove

money actually changed hands. Further developments are proposed, including deferred prosecution agreements where US-style plea bargains would be accepted, which encourage companies to self-report bribery issues and make prosecutions easier. Australian law still lags behind the US and UK bribery legislation; however, D&Os may still find themselves subject to such jurisdictions if they do business in the UK or if there is some ‘minimum contact’ with the US.

Looking ahead Given the increasing exposures, it will not be sufficient for D&Os to establish appropriate procedures without showing constant assessment, enforcement and updating. Bad debt provisioning is on the rise and Australia has one of the most stringent insolvent trading regimes in the world, in which the mere suspicion of insolvency can create liability. Interestingly, the government has mooted insolvency protection like the US ‘Chapter 11’. Each and every corporate collapse is now reviewed by a litany of corporate failure professionals and litigation funders to determine whether any claim against D&Os can be made. Section 596 of the Corporations Act (Cth) 2001 examinations of D&Os now appear to be a norm rather than the previous exception. It is therefore vital for D&Os to be prepared for examinations and that they have appropriate insurance cover to pay for such costs, in the absence of any company indemnity by reason of the company’s collapse. D&O insurers should be aware that an insolvency exclusion is not sufficient to exclude liabilities arising from a corporate collapse. One issue that is still to be determined with certainty is the risk that insurance funds could be frozen by reason of a statutory charge.1 It is therefore encouraging to see the NSW attorney general reviewing the abolition of the statutory charge. Until that occurs, D&Os should ensure cover is available to them if a statutory charge occurs. 1 Section 6 of the Law Reform (Miscellaneous Provisions) Act 1946.

Patrick Boardman (partner) Dean Pinto (senior associate)

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FEATURES

CAREERS IN INSURANCE

OPENING EYES TO INSURANCE The industry’s chief education provider has launched an initiative it hopes will heighten jobseeker awareness of the exciting careers insurance can offer IT’S A challenge that continues to confront the global insurance industry. As the next generation of leaders enters the workforce, conversation continues as to how best to attract top talent. How does the industry put itself in the mix when young jobseekers make career decisions? And how does the industry hang onto high calibre new recruits? On 25 February, the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) launched its Careers in Insurance initiative, its own endeavour to try to ensure work in the industry is on the radars of young Australians. Careers in Insurance was developed in partnership with the National Insurance Brokers Association (NIBA) and the industry through ANZIIF’s Corporate Supporter Program. The launch kicked off with ANZIIF unveiling a new website that helps young people to learn about the roles on offer in insurance and the diverse career paths that one may take. “The website is just one component of Careers in Insurance but it serves an important function,” says Meg Brideson, ANZIIF’s general manager – marketing and insights. “When we engage with young people… we want them to be able to explore the industry. The website supports that because you can discover the roles you could work in, use the personality function to find where you’d fit, and find practical tips and advice on how to get into insurance.

“Importantly, the site is also designed to connect young people and the industry, whether it be for work experience, internships, graduate positions or simply entry level positions where no experience is necessary.” Brideson says it’s all about engaging young jobseekers “in a world where all things are possible”. “ ‘Go anywhere. Do anything.’ is our slogan for the program and perfectly captures what insurance offers those working in it,” she says. Jobseekers can upload their CV directly to the website, which can then be sent to recruitment teams. “This functionality was popular at the university careers fairs, as we have made it incredibly easy for them to access the opportunities that exist,” Brideson says. A job board can link students and jobseekers with potential employees. “Given the demographic we are targeting, we also have a full social media campaign designed to engage with young people in a way that is relevant,” Brideson adds. “We have also created school and university presentation

“When we speak with young people about the opportunities in the industry and the careers that are available, they immediately want to know what they need to do to become part of it” Meg Brideson, ANZIIF

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BEFORE YOU JOINED INSURANCE, WHAT WAS YOUR LEVEL OF VISIBILITY OF THE INDUSTRY?

5.8% 18.2% 43%

33.1% High visibility

Minimal visibility

Invisible

Some visibility

Source: ANZIIF research on the attraction and retention of under 35s in insurance

guides so that anyone from the industry can get involved and talk about careers in insurance.”

Improving visibility The launch of this initiative follows research ANZIIF conducted in February with under 35s in the industry. In that research, 76.1% of respondents said that, before joining the industry, insurance either had no, or minimal, visibility, and 62.7% said they ‘fell into’ insurance. But there is some good news, Brideson tells Insurance Business. “Based on our initial research and working at our first careers fair, where we met hundreds of young people and graduates, we have not seen a negative attitude to working in insurance. “What we have seen is incredible

enthusiasm and amazement as they learn about how dynamic and important the industry is. The problem is not an attitude towards insurance but rather the industry’s lack of visibility. When we speak with young people about the opportunities in the industry and the careers that are available, they immediately want to know what they need to do to become part of it.” Brideson also raises some particularly interesting early findings to emerge from the research. “While the data is still being analysed, there are really positive and healthy signs that young people are engaged with insurance and love working in this industry,” she says. “Of particular note is that 80% of under 35s believe they will still be working in insurance in five years’ time and 86.7% would recommend it as a great industry to join.”

Corporate support A major corporate supporter of ANZIIF’s Careers in Insurance is QBE. “I think it’s a great initiative, and we’ve very happy to support it,” says Sally Kincaid, chief human resources officer for QBE’s Australian

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FEATURES

CAREERS IN INSURANCE and New Zealand operations. “We have recently asked our employees what they love about their jobs and the variety and opportunities feature highly. However, for graduates or people looking from the outside in, it’s really up to us in the insurance sector to help people understand what those opportunities and benefits are,” she says. “From our experience, when you do articulate that well through your employment value proposition, you don’t have a problem attracting young people to the insurance sector. We are always oversubscribed when we’re on campus for our graduate recruitment program.” Kincaid says other industries are currently doing a better job of branding themselves and the opportunities they’re presenting therefore look more exciting than those available in insurance. “We’ve also seen an emphasis on social conscience coming through with the grads that we meet,” she adds. “Frankly, I think that’s a real opportunity for insurance because the whole sector is based on being there for people in their moment of need… I think we’ve got an opportunity to really play to that aspect of why insurance even exists.”

Kincaid also believes grads tend to opt for sectors already well advanced and mature in their thinking around how technology can drive innovation in those sectors. “If you look at the kind of environments that they want to join, they want to join a disrupted, highly challenging environment and they don’t see traditional insurance in that sort of light.”

“That’s probably the real beauty of our program, in that grads get to experience a variety of business lines at QBE before they make a decision about where they would like to launch their career,” Kincaid says. “For example, a grad might move through claims and to sales and distribution, being supported by a manager and mentor who can help them make a decision on what role they

“If you look at the kind of environments that [grads] want to join, they want to join a disrupted, highly challenging environment and they don’t see traditional insurance in that sort of light” Sally Kincaid, QBE In its own efforts to provide industry newcomers a positive introduction to insurance, QBE runs an 18-month graduate program that rotates participants through the business.

may be best suited to after the rotation program.” The QBE Graduate Program also offers participants six weeks of volunteering opportunities, and soft skills and personal

YIPS’ NETWORK CONTINUES TO GROW The Young Insurance Professionals (YIPs) Australia and New Zealand is continuing to grow its Australasian presence, with a new branch now operating in Christchurch. “Auckland has had a successful branch for a while now, and it’s great that we can replicate it down here,” says Jamie Simpson, a Crombie Lockwood broker and YIPs’ branch president for Christchurch. Over 80 people recently attended the inaugural Christchurch function, and according to Simpson, there’s much more in the pipeline. “We’re planning professional development seminars, we’re looking at a breakfast on public speaking and also a function to catch up with other young people in the industry,” he says.

“We’ve been very grateful that there’s an existing structure in place that does a very good job and provides good assistance and support… We’re looking to replicate that as best we can, and hopefully meet the excellent standards that are in place already.” YIPs’ founder and Australasian president, Sampath Soysa, says the YIPs network now has around 5,700 members. In July, it will celebrate its fifth birthday, with each of its branches holding their own celebrations. “Hopefully, we’ll be well over 6,000 members by that point as well,” he tells Insurance Business. Talking about the value new industry entrants receive after joining the YIPs networks, Soysa says they become connected to a truly Trans-Tasman community of people of similar age and industry experience.

“YIPs offers a mix of educational events, particularly ones that aren’t being done by NIBA or ANZIIF. So less on technical skills-based training, and more on wider industry issues, products, career and leadership themes… Plus we’ve always got a mixture of business networking and business development opportunities… at those educational events and also at dedicated functions.” Soysa says recent updates to YIPs’ website allow young industry participants to more easily enhance their own insurance knowledge. “There’s a history of insurance section that’s now been added, thanks to Professor Allan Manning from the LMI Group. He’s contributed his considerable knowledge of the history of the industry,” he says.

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development training. Additionally, there are ultimately potential opportunities for local QBE employees to work internationally within the business. “When you’re in your twenties, the opportunity to live and work overseas is often very attractive. By joining our grad program, that’s certainly a possibility for our people in their career at QBE.” And according to Kincaid, it’s not just about younger generations for QBE. There’s also a concerted effort to make sure the organisation represents the diversity in the wider community. Last year, the insurer was recognised at the Australian HR Awards not only as an Employer of Choice, but as winner of the Best Diversity and Inclusion Program Award. “When you have a wider group of backgrounds and experience at the decisionmaking table, it brings a level of innovation and new thought processes that we think add a great deal to the environment of QBE, and also help create business solutions to meet customers’ needs.”

A team effort Brideson says ANZIIF will continue its

HOW DID YOU JOIN THE INDUSTRY?

62.7%

Fell into it Family member or friend Proactively chose Only job I could get

20.4% 9.6% 7.3% Source: ANZIIF research on the attraction and retention of under 35s in insurance

involvement at various university open days and high school career nights. “Based on the enthusiasm of young people to our presence at our first careers fair, we need to get more involved in these,” she says. Discussing ongoing industry support of Careers in Insurance, she says there are a number of ways people can get involved. “The most obvious is to become a Corporate Supporter. To keep this program invigorated and to ensure the ongoing presence at universities and schools, the program needs to be funded,” she says. “We are also looking for volunteers

who can engage with young people at universities and high schools, and we have had incredibly passionate, driven professionals already join us at our first events. “The industry can also support Careers in Insurance by getting engaged through social media – share your photos and stories, share the website with family and friends to increase their exposure. All of this will help to make it a career option for your children and their friends.” The Careers in Insurance website can be found at http://www.careersininsurance. com.au.

“As well as that, we’ve got a significantly expanded offering on overseas careers in insurance, and… if you’re planning to work overseas, how to do that in a positive and constructive way with your current employer, and also how to work with organisations to get over to, particularly, Asia and the United Kingdom, and then potentially come back with additional skills.” Soysa emphasises that YIPs remains keen to participate in a wider industry discussion about attracting young people to insurance. “We’re doing our best to keep growing and supporting younger people in insurance wherever we can in the meantime.” Young insurance professionals interested in joining the network can do so for free on YIPs’ own website: http://yips.org.au/

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FEATURES

BROKER INSIGHT

LOCKTON COMPANIES AUSTRALIA CEO Adam Rhodes talks about the local operations of a global business that’s amassed almost half a century of industry experience IB: Can you talk about your own involvement with Lockton Companies Australia? Adam Rhodes: I have had a relationship with Lockton since 2007 when it acquired the Alexander Forbes business and needed an independent partner in Australia. In 2012 we set up Lockton Australia as a stand-alone business and I have been CEO since day one.

IB: How significant a part of Lockton’s global business is its Australian arm? AR: The world is a small place. Globalisation is now part of everyday life. Australia has many leading companies that operate on the global stage as well as being an important marketplace for overseas companies to operate in. Asia is the fastest-growing region worldwide and Australia sits on its doorstep. It is therefore very important, both strategically and operationally, for Lockton to be able to cater to the needs of its clients in this region, and we have established ourselves as a key part of the Lockton global family.

IB: What are the key areas in which Lockton has been able to make a strong impact on the local market? AR: The economy, particularly the resources sector, is tough, and the competitive landscape among brokers is self-defeating and perplexing. The one thing that doesn’t change is the need of clients to have the best possible advice and service in an increasingly complex and volatile risk environment. We have focused on providing innovative

solutions to help our clients navigate tough and uncertain times. This has be done through things like relieving balance sheet pressure by the use of surety bonds, structuring leveraged portfolio arrangements to sustainably reduce cost and add value, and focusing on our role as trusted advisers.

IB: Lockton’s goal is to be the best place to do business and the best place to work. How have you achieved both of those aims in Australia? AR: Lockton does not operate on a hierarchal model that promotes people away from clients. The people who produce and service clients are the most important people in our business. The role of management is to help them be the best they can be to make their clients’ business better.

IB: In addition to what it offers as a broker, Lockton also offers a number of other services. Why do you think it’s important for a broker to offer these kinds of additional services? AR: A lot of people spruik that technology is going to disrupt the insurance broking industry.

To the extent that you are merely a transactional player looking only at price as the relevant factor, that may be true. But a broker who understands and demonstrates their role is an advisory role and that the right transaction is an outcome, not a goal, will not only stop the current ‘race to the bottom’ but, more importantly, add real and tangible value to clients to help them better understand and manage risk.

IB: How did Lockton’s partnership with Origin Insurance Brokers come about? AR: About a year ago, I had the privilege of meeting David Liddiard OAM, a former NRL premiership player who has dedicated his post-football life to working with companies to increase cultural awareness and help to close the gap between Indigenous and non-Indigenous Australians. David and I both realised that the insurance industry is in a unique and powerful position to make a real difference to this major social and political issue. Every company and business in Australia buys insurance, which is something like an $80bn industry in Australia. Yet the industry is relatively blinkered to the underlying causes of racial inequality in this country, much

HOW DOES LCA DISTINGUISH ITSELF FROM ITS COMPETITORS? AR: We are the only Australian broker that I know of that is both a major global player yet locally owned and managed. In the case of the Australian business, that means that local management are free to determine and execute the strategy that is right for our clients. There are no global headcount freezes or other edicts that must be adhered to. We simply do what is best for our clients and our people.

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FAST FACTS

Areas of insurance expertise: Construction Corporate Employee benefits Executive advice Financial and professional risks Health and aged care Marine Media Mining and services to mining Risk profiling

“We have focused on providing innovative solutions to help our clients navigate tough and uncertain times” less how it can help change the stereotypical paradigm that is part of the answer to closing the gap. So we helped David establish and run Origin Insurance Brokers, the first Aboriginal brokerage in Australia that will compete directly in the corporate space to offer clients three unique opportunities. First, as a Supply Nation certified supplier, Origin helps clients to use insurance premiums to contribute to Indigenous procurement targets set down by the Commonwealth Government under its mandatory Indigenous Procurement Policy. Secondly, we were able to obtain the agreement of several of the leading insurers in Australia to contribute to the Origin Leadership Fund. The Fund provides postgraduate scholarships

to help create a generation of Indigenous business leaders who are much better equipped to understand what is needed to close the gap and to act as role models for young Indigenous people who have never had the chance for career pathways in the corporate sector. Thirdly, by demonstrating that an Aboriginal broker can compete effectively for corporate business, the industry can change stereotypes, increase talent diversity and create shared value for its clients and the community.

IB: Can you talk about anything that’s in the pipeline for 2016 and beyond? AR: Innovation, shared value and offering a

Trade credit Performance bonds Transport and logistics Workers’ compensation

Year founded in Australia: 2012 Offices: Lockton Australia’s headquarters is in Perth, with additional offices located in Sydney, Melbourne and Darwin Number of employees: 62 Other info: Lockton Companies is a top 10 global broker (as at July 2015), and in 2016 has marked its 50th consecutive year of revenue growth

clear point of differentiation in the industry.

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IT LIABILITY INSURANCE

PROGRESSING WITH TECHNOLOGY It’s expected that technology providers will provide their corporate customers with cutting-edge business solutions. What’s paramount in ensuring those providers’ insurance coverage is similarly current? INFORMATION TECHNOLOGY is one of the fastest-growing sectors of the Australian economy, and its rate of change is even more rapid. According to UK market research company Technavio, the IT spending market in Australia is set to reach $73.33bn in 2019 – an almost $20bn increase on its 2014 value. Much of the industry’s growth is owed to the ever-increasing desire of businesses to achieve greater operational efficiencies and cut costs. Insurance protection for IT companies is therefore more important than ever. It’s imperative that businesses can secure coverage that, as much as is possible, safeguards against the unique risks associated with the provision of IT products and services. “The technology space is constantly evolving, with exposures changing continuously in line with legislation change,” says Declan Rye, director of London Australia Underwriting. “Legislation is often playing catch-up with the most innovative technology, and this presents a fairly unique and challenging underwriting backdrop.” Rye cites the example of privacy legislation. “The Australian privacy laws are mid-reform, and hence the privacy exposure taken on at inception of a policy may look very different six months into the same policy period. “There are obviously also many areas of technology that haven’t been legislated for as yet, and these areas will continue to evolve as does legislation to react to innovation.”

The must-haves So, what are the exposures it’s essential for IT businesses to have protection against in 2016? “Today’s IT policy should be broad enough to protect the insured against any unexpected legal situation, civil or legal liability, accusations of breach of contract, and intellectual property infringement,” Rye says. Protection against claims arising from unintentional infringement of IP rights is essential. “When an insured, in carrying out its professional services, has access to their clients’ IP – be it software, a service, or application – it can lead to allegations against the insured of using the IP to their own benefit, whether it be through provision of services or sale of products, and it’s usually unintentional,” Rye tells Insurance Business. “This is an area where claims are prevalent, particularly if there is US exposure.” While it’s uncommon for tech companies to find themselves the subject of claims arising

In association with

from unintentional defamation, it’s important that their IT liability coverage includes that protection. “Hotspots in this area are chat rooms [and] social media platforms generally,” Rye says. “Whilst a technology company may enable conversation in this context (by merely giving users the ability to post comments), not as many fully appreciate that they can be held responsible, legally, for the users’ comments made [on] such platforms. “There are some jurisdictions … where a ‘mere conduit’ (of comments) argument will help, but not all jurisdictions take the same view. It’s a bit like a restaurant owner being sued because a customer of the restaurant defamed a celebrity whilst eating dinner in that restaurant.” Coverage extending to breach of contract claims is also a must, Rye says. “Clients need to be made aware of their exposure where a contract stipulates strict performance and outcomes, particularly where

“Legislation is often playing catch-up with the most innovative technology, and this presents a fairly unique and challenging underwriting backdrop” Declan Rye, LONDON AUSTRALIA UNDERWRITING

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THE LEGALITIES OF LIMITATION CLAUSES Can companies absolve themselves of responsibility for cyber attacks? Last November, a Hong Kong-based toy company, VTech, suffered a database breach affecting more than 6.3 million of its customers around the world. Since the attack, VTech has updated its terms and conditions with one section now reading: “You acknowledge and agree that any information you send or receive during your use of the site may not be secure and may be intercepted or later acquired by unauthorised parties.” A number of security experts have since criticised VTech’s revised terms and conditions, and questions have been raised as to whether such limitation of liability clauses would stand up if tested in court.

there is potential for their role to change midterm but those changes are not reflected in the written contract,” he explains. Rye says contractual liability causes headaches for a number of IT firms. “It’s worth brokers encouraging their IT clients to pay particular attention to contracts where the expected outcome changes mid-job, and to make sure that this change is reflected in the written contract, which can be updated by both parties.” He adds that it’s important for businesses to have cover extending to liability under contract to pay liquidated damages. In any business, employee dishonesty and fraud can impact on IT companies, and Rye

stresses that coverage to protect against such loss or damage is also crucial. “Sometimes, in the world of IT companies, the programmers understand more intimately their own code than their superiors and clients do. Personal gain in that context can be even greater, and whilst IT employees are no more fraudulent than in any other profession, if their dishonesty can go undetected for longer (as, for example, it may be hidden in line 28,670 of 40,000 lines of code) this can present problems. “Unravelling such dishonesty can be costly too, hence the importance of cover in this area.” Additionally, Rye raises the need for policies to provide automatic cover for newly acquired

entities. He also mentions the significant crossborder issues that can arise in technology litigation. “Technology, unlike more traditional professional solutions, is often exported to other countries and continents, so companies can sometimes fall foul of differing legal systems and approaches to consumer protection,” he says. “Globally, more and more collaboration is coming into play to try to standardise the legal position for truly global solutions such as technology, but in the interim such complexities will remain. “Also, in the world of technology, outsourcing and subcontracting is fairly common, and so it’s important that a Tech PI solution offers the insured protection not just for their own actions but for those of a subcontractor too, as ultimately they will probably be held legally responsible for these.”

IT liability and cyber risk Tech providers must constantly grapple with the potential vulnerability to cyber attacks of the software and systems they provide; these attacks can obviously lead to data theft, loss of

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FEATURES

IT LIABILITY INSURANCE customers and business income. “ ‘Privacy by design’ is a phrase used more and more commonly, implying that at the design phase technology companies should be building in data privacy to their products and solutions,” says Rye. “Data is the new commodity, and the power of big data, when harnessed correctly, can be impressive, but of course collecting large volumes of data through technology applications, products and services is by no means without risk, and consumers are becoming aware of that.” Rye therefore strongly recommends that IT participants consider taking up cyber coverage together with their IT liability insurance. And popular new data storage methods, such as cloud solutions, also raise issues for tech providers to consider. “Worldwide information security legislation is changing,” he says. “In the EU … data laws used to state that the perceived holder of the data would be responsible for said data, [but] new legislation will make the data storage provider responsible.”

The broker The question is, where should brokers begin in their efforts to ensure IT clients have proper protection? Rye says the conversation should start with the broker ensuring the client provides full disclosure of their business activities. “The broker needs to be certain that the underwriter is aware and understands the full scope of the insured’s activities due to the sometimes complex and fast-moving nature of the tech industry,” he says. Making sure they go the extra mile to properly understand a client’s business – and the full range of its activities – is paramount for IT brokers. That includes understanding the extent of a business’s international reach. “Where the insured has overseas operations, domiciled or not, [the broker] needs to confirm the policy will respond. Are there local regulatory issues in play, and is the insurer licensed to write business within the particular territory?” Rye emphasises the importance of brokers

paying special attention to policy wording, ensuring a product will actually provide the required coverage. “[Brokers] should make sure that coverage isn’t given under the heads of cover section, only to be removed or significantly restricted in the exclusion section of the policy wording. This does happen! “In a similar vein … attention needs to be paid to sublimits – just granting the cover in name doesn’t mean a great deal when that particular head of cover is dramatically sublimited.” Rye also talks about establishing the extent of the geographical risk footprint. “Where data storage is concerned, there could be a considerable overseas exposure depending on the storage locations and locations of clients who access the data. Even if the jurisdiction coverage is limited, the broker should be looking for expansive geographical coverage as a standard feature.” Is there anything else brokers’ IT clients can do to assist in reducing their exposures? Rye returns to the issue of potential contractual liability in situations where a project successfully completes but goal posts have moved mid-project and resulted in

outcomes departing from those originally envisaged. Emphasising the importance of changes being reflected in the written contract, he says: “To this end, it’s important for the client to have internal procedures in place so that the changes are recognised and then reported to the correct internal individual or department to be further actioned.” Even the structural clarity of an IT business can affect the extent of loss or damage for which that business is ultimately liable. “A clear reporting structure is essential to not only recognise a potential failure in the provision of services or potential confusion as to what defines a satisfactory outcome in any particular project, but to also provide a framework of internal disclosure and subsequent action,” Rye explains. “The earlier any such issue is discovered, the better the chance of finding an amicable solution. Insurers actually want to know about potential claims as early as possible – we don’t like big surprises!” There’s no doubt the IT technology industry will remain as Rye describes – fast-moving and complex. Similarly, there’s no doubt the need for brokers to be on top of their clients’ evolving insurance needs will remain pivotal.

LONDON AUSTRALIA UNDERWRITING Since the company was established in 2005, London Australia Underwriting (LAUW) has been providing brokers and clients with innovative products backed by first-class security. Underwriting on behalf of an expansive stable of Lloyd’s of London syndicates, our policyholders can sleep easy in the knowledge that they are protected by the strongest chain of security available in today’s global insurance market. Having now been established for a number of years, LAUW has firmly cemented its position at the head of the marketplace with a wide choice of innovative products backed up by one of the most experienced underwriting teams in the market. LAUW’s underwriting personnel and portfolio managers all boast significant experience in the financial lines sector in the local Australian marketplace. LAUW’s model focuses on innovation and service. While maintaining a consistent open market presence, LAUW can also target specific business sectors, applying a stringent risk selection criterion that ultimately delivers superior and sustainable underwriting results. This in turn benefits brokers and their clients with fair and timely claims settlements and consistent pricing. With an ever-expanding product range the company is constantly on the lookout for new opportunities, relationships and strategic partners. Any broker wishing to establish a trading arrangement with LAUW is strongly advised to contact the management team. All contact details are available at LAUW.com.au.

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IB_BOI_

WHAT DO BROKERS WANT? Look out for the June issue of Insurance Business for the results of the Brokers on Insurers survey. Which insurer will come out on top?

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H u - ent rry ries c lo se Frida y 15 April 2016 .

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FEATURES

MARINE CARGO INSURANCE

PROTECTING THE GOODS What should brokers be looking for from insurers providing marine cargo coverage? What factors should remain at the forefront in the decisionmaking process? In association with

LAST AUGUST, a container storage station at the Chinese port of Tianjin was the site of a number of serious explosions. As a result of those explosions, 173 people were killed and a further 800 were injured. Along with the significant loss of life, it’s been reported that insured losses incurred as a consequence of these events could run as high as US$6bn (A$7.88bn). Reflecting on the Tianjin incident, Kai Brüggemann, HDI Global SE’s marine underwriting manager for Asia Pacific, says there are lessons the marine cargo insurance sector can take from the 2015 event. As well as reinforcing the complexity of these types of insurance claims, Brüggemann says

it demonstrates the market’s need to pay more attention to accumulation control. “That’s not new,” he says. “We discussed this after the tsunami in Japan, we discussed the topic after the Thailand floods, we discussed it after the Christchurch earthquake and the Queensland floods. But I think people tend to quickly forget things once the dust has settled and the smoke has cleared.” As Brüggemann tells Insurance Business, it’s events on the scale of Tianjin

that bring home the need for accumulation risks to not only be fully understood but also adequately addressed in the calculation of premiums. “I think the industry has to not only have accumulation control in place but also relay this accumulation control into underwriting decisions,” he says. “If you know your exposure, it’s only half of your game. You then need to know what level of exposure you want to have in these areas, and then translate these into your underwriting decisions.” Brüggemann also questions the extent to which those who suffered losses as a result of the Tianjin incident will be able to recover those losses. “Of course, we do not have an official number, but I think it’s fairly limited,” he says. In a discussion around the marine cargo insurance market in 2016, Brüggemann raises the factors he thinks will separate the best insurers in the space from the rest. He says in today’s soft market climate, where so much attention is fixed on offering consumers the lowest premium, brokers should be looking for insurers who are firmly focused on quality, in terms of both

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product and services offered to the client. “The key moment where you have to prove that you’re worthy, as an insurer, of the money the client has paid, is when the claims come in,” Brüggemann says. But while strong performance in a claim situation is paramount, other services can ensure clients receive the very best experience possible from an insurer, and ultimately more effectively minimise their losses. Risk consulting is part of the service HDI Global provides its clients, which includes assisting in risk identification and assessment, and in implementing loss prevention strategies. Brüggemann talks about the substantial impact these types of services can have in reducing losses, including through analysis of situations that have led to repeated claims by a client. He cites the example of one client, a car importer, who often had cars arrive at their destination with slightly scratched roofs. The insurer’s loss prevention team then closely examined the importer’s supply chain. What it found was that the cars, imported by rail, travelled under a bridge and the roofs of the top tier of cars would come into contact with that bridge structure. Obviously, identification of the issue meant further claims of that nature could be avoided. Brüggemann emphasises the need for clients to properly understand their supply chains so that risks are appropriately identified. Marine cargo insurance coverage can extend to supply chain risks. “This option has always been available in marine insurance,” he says. “We’ve always had products which cover that. You can include almost all incidents that relate to the supply chain, but you must be able to identify

“We try to focus on our value-add services and make sure the brokers get to know all the key people involved in managing the account over the long term” Kai Brüggemann, HDI Global SE your supply chain. We need to be able to better understand the supply chain and identify additional risk triggers beyond cargo losses, which can be included in marine insurance.” And with a more thorough understanding of the supply chain comes the ability to devise solutions to reduce or altogether eliminate some of the risks that arise. It’s another point at which risk mitigation or loss prevention services can effectively assist an insured. Brüggemann also says it’s important for brokers to have the chance to personally get to know the team of people who may ultimately be working for their clients. “Previously, people thought you only needed to get to know the underwriter,” he says. But today that’s not the case. “We try to focus on our value-add services and make sure the brokers get to know all the key people involved in managing the account over the long term – ‘this is our claims guy’, ‘this is our risk engineering guy’, ‘this is our international network’. That’s what you’re really selling. It’s important for the broker to get to know these people. “This is market engagement on a different level – promoting our differentiated services, which brokers are really appreciating.” And according to Brüggemann, marine cargo insurers looking to stay ahead should also be looking for long-term partnerships with insureds, which will encompass long-term risk strategies that produce a ‘win’ for all – the client, the broker and the insurer. “You cannot measure a successful relationship with a client over only one year. We consider that it can really only be judged after about three years when you’ve had a chance to demonstrate your commitment and

ABOUT HDI GLOBAL SE As an industrial lines insurer, HDI Global SE meets the needs of industrial and corporate customers with insurance solutions that are specifically tailored to their requirements. In addition to HDI’s prominent position in the German and broader European market, the company also has operations in more than 130 countries through foreign branch offices, subsidiary and peer companies, and network partners. The company is thus able to offer its customers local policies for their global operations, which ensure that the established service and insurance protection is extended for all covered risks worldwide. HDI Global SE is a company in the Talanx Group and manages the Industrial Lines Division within the group. More than 3,000 employees in this division generated gross written premiums of approximately EUR4bn in the year 2014. The rating agency Standard & Poor’s has given the Talanx Primary Group a financial strength rating of A+/stable (strong). Talanx AG is listed on the Frankfurt Stock Exchange in the MDAX as well as on the stock exchanges in Hanover and Warsaw (ISIN: DE000TLX1005; German Securities Code: TLX100; Polish Securities Code: TNX). For additional information please go to: www.hdi.global

abilities,” Brüggemann says. Talking about times ahead, he refers to growth opportunities HDI Global sees in marine. “We still think that there are a lot of wellmanaged risks and a lot of good clients, which we are seeking, and we’re still exploring niches in which we can grow. “We want to be a partner for the long term.”

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FEATURES

INSURER PARTNERSHIP

CGU BRINGS BEST DOCTORS TO COUNTRY CUSTOMERS Matthew Bennett talks about the insurer’s new partnership aimed at facilitating access to first-class medical advice for its rural customers FOR RESIDENTS of rural Australia, specialist medical care is often more difficult to access and more costly than for those living in urban areas. “A lot of the traditional rural medical infrastructure has actually been taken out of regional areas,” says Matthew Bennett, national manager of distribution strategy for IAG’s Australian Business division.

“It’s either been put into a regional hub, which can sometimes be hundreds of kilometres away from local communities, or it’s actually been taken to metropolitan areas, which are even further. It can be very difficult for our rural customers to be able to leave their businesses for the length of time [required] to get the medical advice they need because, a lot of the

time, the business is completely reliant on them. “So unless they’ve lost a leg, they are absolutely loath to come off their properties for medical advice. “We also find that our rural customers usually have a significant part to play in the community, in terms of associations [and] volunteering… And when they have medical

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“We think insurance plays one part in making our communities safe, but there are a lot of other things we can bring to the table” Matthew Bennett, IAG

issues that stop them from involving themselves in the community, [it] can have a downstream impact.” Eighteen months ago, Bennett kicked off a Rural Insights Strategy Project with the goal of better understanding CGU’s rural customers. “We knew anecdotally that the rural market was changing significantly,” he says. “Out of that project, we found one of the key things that was impacting our rural customers was a lack of availability of medical infrastructure and medical advice for those remote farmers throughout the country.” As a result of the project, CGU has now partnered with Best Doctors, a leading specialist medical treatment and advice service. The aim is to assist rural customers to obtain world-class medical care, regardless of their geography. Best Doctors was founded in 1989 by Harvard Medical School physicians and says it serves more than 30 million members in countries around the globe. “Best Doctors covers more than 430 subspecialities of medicine, and offers second

opinions and treatment plans to customers,” Bennett says. Other benefits of the service include answering medical questions, putting customers in touch with a local Best Doctors provider, and assistance in finding general practitioners and specialists. “All of the health specialists that sit on their panel are actually peer-nominated, and they only use the top one or two per cent of that panel. So often, you’re getting access to the world’s leading specialists in a field.” Explaining how it works, Bennett says: “Once you give authority for Best Doctors to act on your behalf, they will pull together all of your medical history from all the different… doctors that you’ve dealt with. They’ll then package that up into your medical history… and they will then direct that to the most suitable person internationally to review the initial diagnosis that you got and also the treatment plan.” Bennett says, according to Best Doctors’ statistics, diagnoses are changed in about 35% of cases and treatment plans are changed approximately 65% of the time. “A lot of people think the local doctors who give the preliminary diagnoses mustn’t be happy to engage in this process because it’s testing their initial diagnoses,” he says. “That actually couldn’t be further from the truth. We’re seeing a lot of doctors actually encourage people to get secondary diagnoses because they want to make sure that they’re doing the right thing for their [patients].” All CGU rural customers who have an existing CountryPak policy have access to the Best Doctors service. “Not only does the policyholder have access, [but] their whole family has access,” Bennett explains. “That can be up to their grandparents

[and] down to their children. We provide cover for the whole of their family, which leads to a lot of peace of mind for them. “We also offer this to all of our brokers and authorised representatives.” Additionally, the service is also available to CGU’s employees. Bennett describes the feedback received so far from CGU’s broking partners as ‘outstanding’. “In terms of customers, we’ve recently had a customer who used Best Doctors to get a second medical opinion on their existing diagnosis for their daughter, who had a hip injury. The second opinion confirmed the diagnosis was sound and supported the treatment plan. “So we got feedback on that that it actually provided them with a greater deal of peace of mind and gave them a lot of confidence in the initial doctor’s diagnosis.” Bennett confirms the partnership is indicative of a heightened focus by CGU and its parent company, IAG, on more holistic client solutions. “Our purpose statement is to make your world a safer place. So we’re absolutely looking beyond insurance solutions. “There are a lot of adjacent services that we’re trying to build into our traditional insurance solutions because we think insurance plays one part in making our communities safe, but there are a lot of other things we can bring to the table. “This is just the first of a number of different initiatives that you’ll find coming out over the next year or so. In terms of the rural market, we’re actually looking at building out an insurance solution that rewards farmers for implementing long-term sustainable farming practices.” Those looking for more information on Best Doctors should visit http://cgu.askbestdoctors. com/

www.insurancebusinessonline.com.au

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PEOPLE

CAREER PATH

STEVE GIBBS

As head of Asia Pacific Claims, Gibbs has drawn upon his early days as a ‘Clubbie’ to nurture a culture of teamwork and a high level of service for his clients 2016 AND BEYOND As Head of Asia Pacific claims, Steve is charged with delivering on the XL Catlin claims promise of providing the same uncompromisingly high levels of service to clients, wherever and whenever required. “Having children puts everything else into perspective and I love spending my time with them. They have also taught me patience, to stop and have fun and how to manage competing interests – all very useful for my current role.”

2002

MOVES TO LONDON Steve left Perth and joined Reynolds Porter Chamberlain (RPC) in London. “Working as a lawyer in RPC sharpened my technical knowledge of insurance and litigation to a new level… It was a pressured environment but exciting at the same time. It also gave me my first window into the London insurance market.”

1998 LANDS A PURPOSEFUL CAREER Steve’s first job as an articled clerk at Jackson McDonald in Perth provided him a variety of work experiences. One day he could be looking at a Contractors All Risks Policy in relation to a loss at a remote construction site in the northwest, and the next day he would be speaking with experts on the design of children’s playground equipment.

Growing up in Perth, Gibbs wanted to be a lawyer. His parents instilled in him the importance of studying hard early in the year and sustaining his efforts through the end. To Gibbs, it was a valuable lesson that good planning and thorough preparation can raise your game to deliver outside your comfort zone.

2004-2007 A CAREER IN CLAIMS An initial six-month stint in Catlin’s (now XL Catlin) London office became a permanent position. “I realised lawyers are generally brought into a dispute when all options for a constructive resolution had been exhausted and that good claims teams had the opportunity to manage the same complex and significant issues but in a far more constructive environment.”

2000 LIFE PARTNER “I can be a bit risk averse and ruminative before taking action. My wife, Renee, is proactive, embraces change, confident in taking risks and therefore much more of a go-getter. Over time, she has been the catalyst for me to grab a number of opportunities when I might otherwise have sat back and assessed the situation until the opportunity had moved on.”

1994 SAVING LIVES

1991

LAW AND ORDER

In his late teens, Steve became a ‘Clubbie’ and put the earlier lessons of hard work and training to good use when he competed at state and national levels.

“When the psychology of a team is in a good place, the team performs a lot better and is more resilient to pressure when compared to another team which may comprise of more talented individuals”

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PEOPLE

OTHER LIFE

IT’S A LONG WAY TO THE TOP Darren Trott, national business development manager at Crawford & Co, plays in four rock bands DARREN TROTT’S passion for claims innovation and customer service is equally matched by his love of rock n roll music. Throughout his 30-year career in the insurance

TELL US ABOUT YOUR OTHER LIFE E-mail ibo@keymedia.com.au

industry, Darren has moonlighted in rock bands based in Adelaide, Sydney and Melbourne. Like most musicians, Darren first formed a garage band during his teenage years and, as a self-confessed ‘Countdown’ kid, his early musical influences include many classic Australian and international bands. Darren’s trio, Third Best Friend, released an EP of original songs last year, featuring his son Jeremy on bass guitar, with Darren handling lead vocals and guitar. The EP gained airplay around the country and an album is due for release this year. A multi-instrumentalist, Darren also plays bass guitar in Gradual; he’s the drummer in Who AU (the Australian Who Tribute Show) and he recently joined HouseWreckers, a power blues trio, taking on lead guitar and vocal duties. A suit and tie by day, black jeans and t-shirt by night, it’s a long way to the top if you wanna rock and roll!

4 callings

singer, guitarist, bass player and drummer

5:44

the time length of his YouTube version of ‘Volcanic Blues’

EP of original songs from a forthcoming album

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