Insurance Business 7.05 by Key Media

insurancebusinessonline.com.au Issue 7.05

BOOST YOUR CYBER KNOWLEDGE How to stay on top of a complex market that’s constantly evolving

RISK MANAGEMENT AND #METOO

Help clients navigate the new exposures the movement has brought to light

MARINE INSURANCE IN THE 21st CENTURY Inside the emerging risks that are shaking up one of the oldest lines of business

DIGITAL LEADERSHIP

Chubb chief digital officer Sean Ringsted on blending tech innovation with the human touch

TOP 10 BROKERAGES 2018 Which brokerages made the cut as Australia’s best?

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ISSUE 7.05

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

CONTENTS

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UPFRONT 02 Editorial

New threats are disrupting even the most traditional lines of insurance

04 Statistics

Are women still running into a glass ceiling in insurance?

06 Head to head

FEATURES

SETTING SAIL FOR SAFER WATERS

SPECIAL REPORT

The centuries-old marine insurance sector is currently facing a host of modern challenges

08 News analysis

iXledger introduces a pioneering blockchain insurance product

FEATURES

PEOPLE

THE LOCAL ADVANTAGE

Comprehensive cyber risk management is essential for SMEs

10 Intelligence

Insurance Business spotlights 10 brokerages that have set themselves apart from the rest of the pack

Sean Ringsted, Chubb’s chief digital officer, discusses how the insurer is innovating without losing sight of the human element

07 Opinion

The #MeToo movement is exposing businesses to a host of new risks

TOP 10 BROKERAGES 2018

OUT IN FRONT

A look at the biggest risks facing cities worldwide

McLardy McShane has built a thriving brokerage by taking a regional approach to insurance

12 Insurer update

An advocacy group sounds the alarm on discount health insurance plans

14 Underwriting agencies update

The Grenfell Tower fire continues to raise questions for Australian underwriters

FEATURES 42 Updating the specs of cyber insurance

Awareness around cyber insurance is growing – so how can brokers capitalise on it?

PEOPLE 46 Career path

Peter Bailey has brought a startup mentality to multinational insurers FEATURES

DELIVERING ON A PROMISE

How one underwriter is tackling the complex area of accident and health claims

48 Other life

Talking sport with Sportscover CEO Simon Allatson

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UPFRONT

EDITORIAL

The only constant is change

rom cyber attacks to terrorism to climate change, the ‘staid’ insurance industry has had to deal with plenty of modern and unconventional risks in recent years. For proof of this evolution, you need look no further than what is often seen as the most traditional insurance segment of all: marine. Widely regarded as the earliest developed form of insurance, marine can trace its roots as far back as medieval times, though the first true marine market was established at Edward Lloyd’s coffee house. Today, however, marine insurance looks remarkably different as an array of new threats have emerged, from the extreme weather that has hit the so-called ‘new Bermuda Triangle’ (made up of the South China, Indochina, Indonesia and Philippines maritime regions) to the opening of new shipping routes as the polar ice caps melt and wildfires threaten the West Coast of the US and Canada.

The balance between the benefits and threats of new technology is tough for businesses to manage – presenting opportunity for insurance brokers New threats are emerging beyond the oceans, too. Shipping companies are being forced to ramp up their cyber defences in light of the NotPetya ransomware attack, which struck global shipping giant Maersk last year. Modern technology might be making ships more efficient, but it’s also adding risks. “As we have more technology on board, we still have to look at what happens if that technology fails, either through a loss of power or a voltage spike on board through the generators, or through an outside influence from a cyber attack or a jamming of signals,” Andrew Kinsey, senior marine risk consultant at Allianz Global Corporate & Specialty, told IB. The balance between the benefits and threats of new technology is tough for firms to manage – presenting an opportunity for insurance brokers who are true experts in the field to become a trusted advisor to their clients by educating them on these developments and on methods to mitigate their risk exposure. Successful brokers know they can’t afford to stand still and rely on traditional approaches anymore, even in this seemingly conventional sector. Indeed, the message to the insurance industry at large is clear: The only constant now is change. The team at Insurance Business

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EDITORIAL Managing Editor Paul Lucas Journalists Alicja Grzadkowska, Lucy Hook, Jordan Lynn, Bethan Moorcraft, Ryan Smith News Writers Lyle Adriano, Krizzel Canlas, Terry Gangcuangco, Mina Martin, Gabriel Olano Staff Writers Hannah Go, Tom Goodwin, Libby MacDonald, Joe Rosengarten, Heather Turner Copy Editor Clare Alexander

CONTRIBUTORS Shawn Ram

ART & PRODUCTION Designer Joenel Salvador Production Manager Alicia Chin Traffic Coordinator Freya Demegelio

SALES & MARKETING General Manager Peter Smith Commercial Development Manager Sophie Knight Marketing & Communications Manager Michelle Lam

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Editorial Enquiries tom.goodwin@keymedia.com Subscription Enquiries subscriptions@keymedia.com.au Advertising Enquiries sophie.knight@keymedia.com.au peter.smith@keymedia.com.au Key Media Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Singapore, Toronto, Manila, Bengaluru

Insurance Business America is part of an international family of B2B publications and websites for the insurance industry Insurance Business America cathy.masek@keymedia.com T +1 720 316 0151 Insurance Business Canada john.mackenzie@kmimedia.ca T +1 416 644 874O Insurance Business NZ peter.smith@keymedia.com.au T +61 2 8437 47OO Insurance Business UK nathan.beach@keymedia.com T +44 20 7193 0935 Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.

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UPFRONT

STATISTICS

Risk city

NEW YORK

The cost of being unprepared for catastrophic events is high for cities Cities are a hallmark of modern life: More than half the world’s population lives in a city, a dramatic increase from the 13% who did so at the start of the 20th century. By 2050, it’s estimated that two-thirds of people around the globe will be living in cities. The concentration of people brings efficiency and prosperity, but with it comes an increased vulnerability to the impact of cata-

$14.8bn

strophic events. For its latest City Risk Index, Lloyd’s looked at the GDP cities around the world could potentially lose if exposed to an event such as a pandemic, hurricane or market crash. Five of the top 10 cities most at risk are in Asia Pacific, and while no Australian cities made the top 10, Lloyd’s highlighted their exposure to threats such as drought, cyber attacks and a market crash.

LOS ANGELES

$11.6bn

CITIES WITH THE MOST TO LOSE

1.4m

Daily population increase across the world’s cities

80%

Proportion of global GDP that cities account for

$103.3bn

The cities with the highest exposure to risk have a combined total of US$126.8bn of GDP at stake, or almost a quarter of the US$546.5bn at risk across the globe. Lloyd’s estimates that if cities were able to improve their resilience, global GDP exposure would drop by US$73.4bn.

$123bn

Potential annual GDP losses due to man-made threats

Potential annual GDP losses due to extreme weather events Source: Lloyd’s City Risk Index 2018; all figures in US$

RISKIEST REGIONS

THE BIGGEST THREATS

Cities in Asia represent a disproportionate level of the global GDP at risk, largely due to their exposure to weather events and their status as emerging economic powerhouses.

Despite the growing severity of extreme weather events, man-made threats such as cyber attacks and market crashes account for around 60% of cities’ total GDP risk. A potential market crash is the biggest threat worldwide, exposing cities to losses of more than US$100bn on an annual basis. $120bn

PERCENTAGE OF GLOBAL GDP AT RISK 8% ($45bn)

44% ($241bn)

13% ($70bn)

Asia Middle East and Africa North America Europe Latin America

$100bn $80bn $60bn $40bn $20bn $103.3bn

$80bn

$62.6bn

$47.1bn

$42.9bn

$37.2bn

$36.5bn

Market crash

Interstate conflict

Tropical windstorm

Human pandemic

Flood

Civil conflict

Cyber attack

$34bn

$20.3bn

$18bn

17% ($93bn)

18% ($97bn) Source: Lloyd’s City Risk Index 2018; all figures in US$

Earthquake Commodity price shock

Sovereign default

Source: Lloyd’s City Risk Index 2018; all figures in US$

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ISTANBUL

SHANGHAI

$12.7bn

$8.5bn

OSAKA

$12.4bn

LONDON

$8.4bn

TOKYO

$24.3bn TAIPEI

BAGHDAD

$7.9bn MANILA

$12.9bn

$13.3bn

Source: Lloyd’s City Risk Index 2018; all figures in US$

MOST VULNERABLE AUSTRALIAN CITIES

REGIONAL EXPOSURES

According to Lloyd’s, Asia Pacific has a whopping US$241.28bn worth of GDP at risk annually. While Australian cities are less risky than many others in the region, the country’s major population centres still have a combined US$7.35bn worth of GDP at stake each year.

Natural catastrophes represent some of the biggest risks in the Asia Pacific region. Lloyd’s estimates that improved resilience would reduce the region’s exposure by $34bn annually.

$2.5bn

TROPICAL WINDSTORM

$59.14bn

$2bn

MARKET CRASH

$1.5bn

$33.98bn

INTERSTATE CONFLICT

$1bn

$32.14bn

HUMAN PANDEMIC

$500m $2.36bn

$2.09bn

$1.12bn

$96m

$58m

Sydney

Melbourne

Brisbane

Perth

Adelaide

$24m

$0 Canberra

Source: Lloyd’s City Risk Index 2018; all figures in US$

$22.58bn FLOOD

$15.95bn Source: Lloyd’s City Risk Index 2018; all figures in US$

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UPFRONT

HEAD TO HEAD

Is there still a glass ceiling in insurance? Despite a predominately female workforce, only a fraction of the industry’s high-level positions are filled by women

Connie Germano

Head of specialty casualty Everest Insurance “I focus on diversity and inclusion in the workplace in general, rather than the specific topic of the glass ceiling. The positive financial impact for diverse companies has been researched and well documented. Attracting, developing, mentoring, sponsoring and retaining the next generation of global leaders at all levels must be a priority – and it is gaining focus among boards and other governing bodies. Given the higher returns that diversity is expected to bring, it is better to invest now, as the momentum created ... will help diverse companies progress more rapidly than their less diverse competition.”

Allison Hunt

Partner Wotton + Kearney “The glass ceiling has cracked, but not shattered. Remarkable women have progressed to senior ranks across the insurance industry; however, they are the exception, not the norm. Women are the minority at the senior management level, and insurance has a large pay gap. For an industry that has so much to gain from diversity, it’s a dismal picture. The good news is that there’s a growing level of awareness of these gaps, and initiatives are in place to support positive change. I look forward to the day that a woman in a senior position in insurance is no longer an anomaly.”

Angus Kench

National president Australian Insurance Law Association “Purely on current numbers, yes. However, that doesn’t recognise the changes in the pipeline. The industry is a reflection of the significant cultural and societal changes underway, and those associations and companies that are utilising and helping drive these changes will be the survivors in the longer term. The goal is high-performing teams. The team should reflect the customers, so diversity is key in any high-performing team. It’s no good just having diversity, though. Diversity must be well managed; that is complex and takes time and effort. No simple quick-fix target or quota will help.”

IT’S MALE AT THE TOP When it comes to gender diversity in the insurance industry, “there is absolutely always more we could be doing,” says Lisbeth Ree, HR director for Gallagher’s Australia and New Zealand arm – which holds the distinction of being the only top-tier brokerage in the region with a female CEO. According to the Workplace Gender Equality Agency, women dominate the insurance industry from a numerical perspective, filling 55% of industry jobs worldwide. Yet an overall picture of unequal pay and an under-representation in the C-suite remains – only 12% of top management positions are filled by women. “The term ‘glass ceiling’ was first studied in the 1980s, and I think it is very sad that we are still referencing this term,” says Niki Kesoglou, global head of diversity and inclusion at QBE. “Unfortunately, it still exists in insurance.”

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UPFRONT

OPINION

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

Don’t be the one One out of every five businesses will fall victim to a cyber attack. Not being part of that statistic, writes Shawn Ram, requires confronting the risk that goes along with embracing technology IT’S HAPPENED more often than I can count. People – from the guy who cuts my hair to the CPA I meet at a party – hear that I work in cyber insurance, and they proceed to ask me how they can protect themselves. I end up talking about cybersecurity a lot. At my last doctor’s appointment, I noticed that my physician had transitioned from paper patient files to a cloud-based record management system. After proudly showing off his new iPad, my doctor proceeded to ask me about cybersecurity. I was glad he did – security considerations aren’t always front of mind when adopting new technologies, yet it’s essential that businesses understand the implications that come with increased connectivity. As a society, we’re going through a significant period of change. The machine age is giving way to the information age – and we’re just at the beginning. Technology can be a real asset in the workplace. However, it also presents a real catch-22 for businesses. To thrive and remain competitive, businesses today must embrace and adopt technology. But with the adoption of technology comes new risk exposures – and these risks can be existential, particularly as a business’s operations become ever more dependent on technology. The reality is that technological risks are the most pervasive risks facing small businesses, and they are increasingly among the more severe risks exposures. It’s easy to think that your business is too small to be impacted, but in actuality, it is estimated

that one out of every five small and mediumsized businesses will fall victim to cyber attack; of these, 60% will shut down within six months. Failure to treat cybersecurity and technological risk as a risk management problem can be costly. According to IBM, the average cost of a data breach is over US$1m, and the potential loss exposures can be diverse, from

that SME clients that are increasing their technology footprint take the following steps: Check your contracts. Make sure you understand the limitations and liability with technology providers, and don’t be afraid to push back on those limitations. Duplicate data and create redundancies within your own internal systems. Even the best technology can and will fail. Make sure you’re following best practices, including using two-factor authentication, encryption and data segregation. Where risk cannot be mitigated, it should be transferred. Explore what your existing insurance policies cover to determine what you need from a cyber insurance policy. Make sure your cyber coverage fits your business’s specific needs and risk exposures. For example, if you don’t accept credit cards, you shouldn’t be paying for coverage for

“Security considerations aren’t always front of mind when adopting new technologies, yet it’s essential that businesses understand the implications of increased connectivity” data theft and income loss as a result of business interruption to privacy liability, reputational harm, and even property damage or bodily harm. Cybersecurity isn’t a problem that will be solved by technology alone. This is because, at its core, it is fundamentally a risk management problem. To address the risks that come with technological innovation, companies are left with three choices: accept the risk, mitigate the risk or transfer the risk. At Coalition, this is our mantra, and it’s a framework we use regularly to help SMEs understand the importance of risk transfer and cyber insurance in the context of a cohesive risk management strategy. We recommend

PCI fines and penalties. Your cyber policy can and should be configured so that you’re paying only for what you really need. It’s not possible to completely eliminate risk, which is why it’s so essential for businesses to find the right balance of risk acceptance, risk mitigation and risk transfer. As with most things, a proactive and informed approach is the key to success.

Shawn Ram is head of insurance at Coalition. He previously led the national technology industry practices at Aon Risk Solutions and Crystal & Company.

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UPFRONT

NEWS ANALYSIS

#MeToo opens up new risks As the #MeToo movement seeks to establish a culture of corporate accountability, organisations are facing an increased need for better risk management and more robust EPL coverage

THE #METOO movement has dominated international headlines since the hashtag first went viral last October, and it brings with it some significant business risks and insurance implications. Workplace issues such as bullying, discrimination and harassment have come under the microscope, presenting a far more significant concern to organisations than they did just a year ago. Companies today face both employment and reputational risk as a result of these issues, says Eleni Petros, employment practices liability insurance practice leader at Marsh. While employment-related issues have traditionally been seen as the responsibility of HR, the increased awareness in

same way that cyber risk isn’t just about the IT department, it’s about the board too, this is another example of that.” The #MeToo movement has already produced litigation, particularly in the US, including some high-profile examples that have involved significant financial damage. The Weinstein Company, whose disgraced ex-chairman Harvey Weinstein has been accused by more than 70 women of numerous counts of sexual harassment and assault, filed for bankruptcy in March as a result of the scandal. In that light, employment practices liability [EPL] insurance is becoming increasingly important and is already seeing

“We are seeing more of an interest in EPL coverage … because defending these claims can be extremely costly” Eleni Petros, Marsh society means they are quickly climbing the risk agenda. “#MeToo is more than just an employment risk for companies – it’s also a risk facing boards,” Petros says. “This is no longer just an HR issue … it’s one of the many risks that a company needs to consider. In the

a growth in demand, Petros says. “We are seeing more of an interest in that coverage from companies than we used to,” she says, “and I think the reason for that is because defending these claims can be extremely costly for companies.” While the claims environment for EPL

has been benign in recent years, that is slowly changing. As a result, underwriters are beginning to take a closer look at companies seeking EPL cover to make sure they’re fostering the right kind of culture. “From talking to underwriters … I definitely think that when they’re looking at EPL insurance, they will put more scrutiny on the kinds of questions they ask companies and will place more emphasis on the training programs that are in place at these firms,” Petros says. That includes evidence that a company has diversity and inclusion policies in place and provides unconscious bias training to employees. “If you have a situation where the culture isn’t right top-down,” Petros says, “then the danger for boards and directors is that the claims against them will be ‘you knew this conduct existed and you did nothing about it.’” Reputational crises are increasingly a

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#METOO BY THE NUMBERS

30%

Value a company could lose, depending on its preparedness and behaviour during a crisis

57%

Board members who say they haven’t discussed sexism at work or the impact of the #MeToo movement

12m

Facebook posts that included the #MeToo hashtag during a 24-hour period in October 2017 threat to businesses in the post-#MeToo era as well. Thanks to social media, an incident inside a company can become a viral sensation overnight – and can directly impact that company’s bottom line. Recent research from Aon uncovered that the direct impact of reputation-

20% or lose up to 30%, depending on their risk preparedness and behaviour in the immediate aftermath of a crisis. This points to a need for companies to carefully manage their risk in this area. A significant gender pay gap, for instance, could severely damage an employer’s

“Savvy companies that develop and use a robust risk management framework … can often see a net gain in value post-event” Randy Nornes, Aon related events on a company’s stock price has doubled since the introduction of social media. In times of crisis, investors often use information about a company shared on social media to reassess their expectations of future cash flow. Ultimately, Aon found, companies could boost their value by up to

brand and reputation, Petros says, potentially leading to disgruntled shareholders claiming that senior management failed to properly manage reputational risk. “It will raise scrutiny,” she says. “If companies have a massive gender pay gap, I think there will be questions raised by employees

329

Number of high-profile executives and employees accused of misdeeds in the six months after the #MeToo hashtag went viral Sources: Aon, Boardlist, Temin & Co., CBS News

as to whether they are being paid the same amount of money as the person next to them.” And although reputational risk continues to weigh on corporate executives as one of their leading concerns, says Randy Nornes, enterprise client leader at Aon, risk management tools have evolved, allowing companies to better meet this risk head-on. “Savvy companies that develop and use a robust risk management framework can not only better navigate reputation events, but can often see a net gain in value post-event,” Nornes says.

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Allianz

Servicios Compartidos Multiasistencia

The insurer's purchase of the European repair-in-kind services company is expected to close this autumn

Bankia

Cajamurcia Vida and Caja Granada Vida

Along with the sale of its share in life insurance firm Pelayo Vida, the €203m transaction marks Aviva's exit from the Spanish market

Gallagher

Milne Alexander

Milne Alexander specialises in the transport, manufacturing and aquaculture industries

JLT Employee Benefits

Moola

The digital saving and investment service will become a core offering on Benpal, JLT's rewards and benefits platform

nib

QBE

QBE is unloading its Australian travel insurance arm in a deal worth around $25m

SHC Insurance

Savill Hicks

Ensurance Limited is selling its Australian retail broker business to former directors Stefan Hicks and Brett Graves

CUA launches initiatives for Indigenous communities

CUA is rolling out a number of new initiatives to help members manage and grow their finances, including a partnership with First Nations Foundation [FNF], a charity seeking economic freedom for First Australians, to provide Indigenous communities access to financial services. With CUA’s support, FNF has so far trained more than 1,000 Indigenous Australians in financial literacy and run an award-winning Indigenous superannuation event, which successfully located $4.7m in lost superannuation for more than 750 indigenous people.

Gallagher secures further growth with purchase of Milne Alexander

Brokerage giant Gallagher has confirmed its latest acquisition, adding heritage firm Milne Alexander to its ever-expanding network. With locations in NSW, Queensland and South Australia, Milne Alexander manages a diverse portfolio of SME, mid-market and corporate clients, specialising in transport, manufacturing and aquaculture, as well as tailored solutions for Australian ski resorts. According to Paul Harvey, Gallagher’s managing director of specialisms, the company is in regular conversations with potential merger partners and was able to identify a strong cultural fit with Milne Alexander. “There was a natural alignment between Milne Alexander and Gallagher on a number of fronts, in particular the ‘family feel’ culture which exists in both businesses and how that translates into a personalised client experience,” Harvey said.

Willis Towers Watson releases digital captive tool

Captive Quantified, the latest release in Willis Towers Watson’s interconnected suite of quantification models, is a web-based interactive tool that automates due diligence and financial analysis to allow businesses to assess the value of forming a captive insurance company versus buying traditional insurance or retaining risk. The tool also enables organisations to identify the best combination of risks to include in a captive and to find the best domicile for its unique needs, as well as perform live and interactive stress testing by changing assumptions and test scenarios.

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PEOPLE iXledger introduces blockchain insurance

Insurtech company iXledger has announced the launch of an industry-first blockchain insurance product, which aids blockchain entrepreneurs and investors by providing the insurance quotes and risk assessment scores necessary for placement with underwriters. “The aim is to make insurance accessible to blockchain companies, and to facilitate the acquisition of insurance as a prerequisite for a successful funding and operation,” said iXledger CEO Ingemar Svensson.

icare pilots RecoveryPlus to aid injured workers

NSW-based insurance and care provider icare has launched a new initiative to assist injured workers in their return to work. icare piloted RecoveryPlus in Sydney in August to provide workers with hand, knee and shoulder injuries a new style of coordinated care via the introduction of a local clinical care coordinator. The care coordinator manages the delivery of the worker’s treatment plan and coordinates with the worker’s support before, during and after a medical intervention to improve approval times and help them quickly get the care they need.

AXA secures exclusive travel insurance deal

AXA Insurance has partnered with Singapore-based airline Scoot to provide travel insurance to millions of flyers when they book online. Known as Scootsurance, the offering provides coverage against trip interruptions and cancellations, travel delays and missed connections, accidental death and permanent disablement, baggage losses, and terrorism. Other features include emergency medical repatriation, hospital visitation benefit and fast-track claims service. Currently available for tickets originating in Singapore, Scootsurance will be rolled out progressively to other countries.

NAME

LEAVING

JOINING

NEW POSITION

Karen Allen

Howden UK Group

Endeavour Insurance Services

CEO designate and group managing director

David Campbell

TAL Life

MetLife Australia

COO

Andrew Dell

NAB

QBE

Global CISO

Chris Downer

N/A

XL Innovate

Principal

Tyson Johnston

N/A

Pacific Life Re

Head of client strategy and solutions

Geoff Lloyd

Perpetual

MLC

CEO

Dr Signe Michel

N/A

Hyperion Insurance Group

Non-executive director

Jonathan Moss

Zurich

XL Catlin

Portfolio solutions manager, Australia

Kevin Richards

N/A

Marsh

Global head of cyber risk consulting

Luc Reuter

Chubb

Tokio Marine HCC

Head of surety

Jeremy Wall

N/A

Willis Towers Watson

Head of global Finex

Minico Xia

N/A

Pacific Life Re

Group insurance director

NAB’s MLC arm names new head

A new chief executive will take the helm at National Australia Bank’s soon-to-be-divested wealth unit, amid growing regulatory pressure on wealth management firms following a string of scandals. Former Perpetual boss Geoff Lloyd has been named CEO of NAB’s MLC business as the Big Four bank seeks to divest its wealth arm by the end of next year, potentially in a new sharemarket listing. Lloyd, who left the Australian investment and trustee group in June after a six-year run as CEO, will begin his new role in September and will work closely with NAB chief Andrew Thorburn on the divestment of MLC.

Endeavour announces CEO designate

Lloyd’s broker and delegated authority specialist Endeavour Insurance Services has announced the appointment of Karen Allen as its CEO designate. Allen has spent nearly 20 years as a broker in the Lloyd’s market, specializing in international specialty casualty insurance. She will join Endeavour in October from Howden UK Group, where she served as director for international. In addition to becoming CEO designate, Allen will also take the role of group managing director, assuming responsibility for the combined operations of SSL Endeavour, following Endeavour’s merger with fellow Lloyd’s and independent specialist marine broker SSL Insurance.

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UPFRONT

INSURER UPDATE

Health discount plans a bad deal? One group is speaking out against the government’s plan to offer cheap health insurance to young people

the government’s Private Health Insurance Legislation Amendment Bill at a Senate committee hearing in August. The bill, which is still being debated in the Senate, doesn’t give specifics on how the age-based discounts would work, but it appears health funds would be able to offer 2% annual discounts for five years maximum, which would be phased out when the policyholder reaches age 40.

“Cost cannot be looked at in isolation”

Consumer advocacy group Choice has urged the federal government to scrap its plan to allow health insurance companies to offer discounts to people aged 18 to 29, arguing that the move will lead to health funds luring young adults into buying poor-value policies. Under the Turnbull government’s proposed overhaul of private health insurance announced last year, health funds would be allowed to give discounts of up to 10% on

NEWS BRIEFS

hospital cover to people aged 18 to 29 to make premiums more affordable. “While the cost of private health insurance is one of the top concerns that needs to be addressed, cost cannot be looked at in isolation,” Choice’s Katinka Day told the Sydney Morning Herald. “Discounted private health insurance cover isn’t worth it if you don’t need the cover in the first place.” The consumer group presented its view on

Millions willing to consider switching insurers

More than a million holders of risk and life insurance policies considered changing companies between June 2017 and June 2018, according to market research firm Roy Morgan. The firm found that 242,000 policyholders switched to a new insurer, while 766,000 approached other insurers before renewing with their existing one. In total, 10.8% of the market at least considered a switch, which Roy Morgan concluded indicates a lack of brand loyalty in the Australian market.

Day believes the age-based discount is unlikely to improve health insurance take-up among young Australians. “If existing incentives for young people to take up [insurance] are not proving to be successful, an age-based premium discount for hospital is likely to be no different,” she said. However, Private Healthcare Australia [PHA] said its research found a “pent-up demand” for health insurance among those under 30. A separate analysis estimated that the discounts would attract an additional 300,000 people aged 25 to 29 into the system. “It is completely untrue to suggest people in this age group do not benefit from insurance,” PHA CEO Rachel David told the Sydney Morning Herald. “The most frequent claims are for the treatment of accidents and sporting injuries in men … There can be a considerable delay in getting treatment in the public system – an issue if you need to get to work.”

Is the yacht market sinking Lloyd’s syndicates?

A recent report by Superyacht News suggests there’s trouble ahead in the yacht insurance market for Lloyd’s syndicates, which sources say have been weighed down by a loss ratio that might not be viable. Brit Global Specialty’s Lloyd’s Syndicate 2987, for instance, has reportedly pulled out of the yacht insurance business. Lloyd’s of London previously warned loss-making marine syndicates that they must address their woes and come up with remediation plans.

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Q&A

Steven Hamilton General manager – client services FLEETSURE

Years in the industry 10+ Fast fact Fleetsure is one of Australia’s leading specialist providers of insurance for commercial and heavy motor fleets

Stay in the driver’s seat amid premium increases What are some of the factors that can lead to rises in premiums in commercial fleet insurance? Premium increases can be due to a variety of reasons. Some will be specific to an individual account, such as fleet growth or a less favourable loss history, while others will be market-wide, such as regulatory changes, wider market performance, natural disasters or infrastructure changes. In general, the market has seen a hardening over the last few years, and accordingly, premiums are seeing an increase. Many brokers, particularly those who are younger or have less experience in the industry, will be faced with the prospect of delivering premium increases to their clients for the first time. Price isn’t everything, but brokers can be sure it will receive more attention from the insurance buyer in the current market.

What tips do you have for brokers preparing for difficult meetings? Some increases are easy enough to explain – accountspecific increases due to loss ratio performance, vehicle acquisitions and the like are obvious. In most cases, the client will be expecting them. What can be trickier to justify are the increases driven by factors such as insurers exiting the market or your business no longer being prepared to write accounts that are underpriced. These conversations should be

Airbag recall leads to “insurance headache” warning

Drivers could be facing an “insurance headache” following a nationwide airbag recall, according to the Federal Chamber of Automotive Industries [FCAI]. Nearly 2m Australians still need to check whether they have a faulty Takata airbag installed, the FCAI revealed in a recent awareness campaign. FCAI cautioned that in addition to safety concerns, drivers with faulty airbags run the risk of not being paid for any insurance claims if they ignore the recall.

TravelCard launches in Australia

approached tactfully but firmly. Renewal reports will need to be more detailed, offering greater substance than in the soft renewal years. When presenting renewal terms to clients, brokers should consider showing not only last year’s premiums, but include premium levels back to four, five or even six years ago. Additionally, providing clients with their loss history records at early prerenewal meetings will help in setting premium level expectations. Most businesspeople understand that pricing of commercial motor is heavily weighted on the client’s loss history. Ultimately, a sensible view of commercial motor prices will help the client understand their increases. For example, clients will understand – but may not consider until it’s pointed out – that a commercial work vehicle on the road 40 hours a week has significantly more exposure, and therefore requires much greater premium levels than a private vehicle.

Any final tips for brokers? Transparency is crucial. Taking a ‘no secrets, no surprises’ approach is vital in client communications. Alert clients of challenges they may face on renewal pricing as soon as possible. A fear of the client seeking alternative terms from your competition is understandable, but it’s a far less risky approach than delivering bad news at the last minute.

Innovative travel insurer TravelCard has officially launched in Australia, offering the country’s first ‘realtime travel insurance’, which differentiates itself by paying claims in a matter of minutes, compared to the industry average of 45 days. “This is literally the first realtime travel insurance – nobody in this market is doing this at the moment,” said TravelCard CEO Michael Tauber. “We are all about revolutionising the travel insurance marketplace here in Australia.”

ASIC report takes insurance sector to task

A new ASIC report has taken the life insurance industry to task over the way life insurance products are sold in Australia, raising numerous concerns about business practices, including highpressure sales tactics, unnecessary addons, poor claims processes and consumer misunderstandings around the nature of cover provided. “People are being sold products they don’t want, can’t afford or don’t perform as they expected,” said ASIC chair James Shipton.

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UPFRONT

UNDERWRITING AGENCIES UPDATE NEWS BRIEFS Canopius and Anvil partner on credit and political risk

Global specialty lines insurer Canopius has teamed up with UK-based credit and political risk managing general agent Anvil Underwriting, which will underwrite credit insurance, contract frustration and political risks on its behalf. The deal, which went into effect in early September, will allow Canopius to provide policy limits of up to US$25m and tenor of up to 10 years for contract frustration, as well as a maximum of US$15m and seven years for trade and non-trade credit risk.

SURA helps drive 2018 growth for AUB Group

Australia-based insurance giant AUB Group has announced strong FY18 results, driven primarily by organic growth across all operating areas, including specialist underwriting agency SURA. AUB Group posted a 10.3% jump in adjusted net profit after tax, which climbed to $44.6m from the previous year’s $40.4m. The group’s Australian broking business reported an 8.7% rise in profit contribution to the tune of $35.5m, while SURA posted an 11% rise in profit contribution, ending the year at $13.9m.

Lloyd’s agencies say yes to insurance-linked securities

Lloyd’s of London managing agents appear to be sold on the idea behind insurance-linked securities [ILS]. A survey by the Lloyd’s Market Association [LMA] found that not only do 80% of polled agencies want to see ILS products become a permanent fixture in the insurance market, 100% believe such deals will widen to cover more risks – including cyber and legacy

business – in the next three years. “This research shows that market participants are extremely supportive of increasing the use of ILS generally, and doing so at Lloyd’s in particular,” said Ken Curtis, the LMA’s director of finance and risk.

StarStone launches casualty consortium in Australia

Global specialty insurer StarStone has launched a new casualty consortium for the Australian and New Zealand markets. StarStone Underwriting Australia will underwrite the new facility on behalf of a consortium of Lloyd’s syndicates. StarStone is supporting the consortium with a 20% lead line; equal shares from its four Lloyd’s syndicate partners will provide the remaining capacity. It will initially offer $50m capacity and focus on middlemarket casualty risks not usually underwritten in London. Claims support will be provided through StarStone’s established claims network in Australia and New Zealand.

Australian SMEs need to consider kidnap and ransom risk

Kidnap and extortion might sound like the plot of an action-packed blockbuster, but one industry expert has warned that it’s a very real risk to Australian businesses – and not just the big corporates. Anita Lane, owner and director of Solution Underwriting Agency, urges all companies to consider purchasing specialist insurance before sending an employee into high-risk regions such as South and Central America, the Middle East and Africa. “It tends to be one of those ‘it won’t happen to me’ or ‘that just happens in the movies’ kind of risk,” Lane said. “It may not happen in Australia, but once an employee leaves Australian shores, the exposures are real.”

Cladding calamity tests the industry The Grenfell Tower fire has sparked conversations around the role of insurance in updating standards In the wake of the disastrous Grenfell Tower fire last year in London, questions have arisen around the standards of cladding in buildings worldwide. The case appears likely to serve as a test for Australian underwriters, as further research has highlighted just how many Australian buildings are equipped with the same or similar flammable cladding. Shortly after the fire, the Insurance Council of Australia [ICA] submitted a statement to a Senate inquiry into faulty cladding, warning that insurance premiums could significantly rise unless governments do something about developers using cheaper, substandard building materials. ICA pointed out that the current system, where builders are allowed to choose and pay a private certifier to sign off on building safety, is potentially dangerous, advising of the need for “an independent specification and plan review process, including an inspection regime scheduled to coincide with critical stages of construction development”. But in the year since, has enough been done by the government to develop a national standard? Speaking to the Queensland Association of Fire Investigators, Steve Burton, CEO of Brisbane-based Ferm Engineering, noted that, despite the formation of a national taskforce, responses have not been uniform across the country. He added that governments

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have been slow to react, and there has been no “firm action” from the fire engineering industry. However, he did note that Australia is entering a “new era of awareness”, which is helping ensure buildings are safer. His firm has partnered with underwriting agency ICPS Australia and the Queensland University of

audits and product specifications – however, he stressed that products must be tested to find out how quickly a material burns because supplier information is often “inadequate or unavailable”. Brad Nicholls, managing director of ICPS Australia, said the insurance industry can

“Brokers and underwriters have a vital role to play in helping insureds get risk assessments on buildings that may be problematic” Technology’s Science and Engineering Faculty to establish a reliable testing regime. Burton also called on building owners to identify and quantify aluminium composite panels [ACPs], conduct detailed risk assessments, and implement effective mitigation and rectification measures. This starts with

help drive greater awareness of ACP while also supporting building owners through the often tricky rectification process. “Brokers and underwriters have a vital role to play in helping insureds get risk assessments on buildings that may be problematic,” Nicholls told Insurance Business, adding that the part-

nership’s newly established testing regime is a simple way to ascertain whether mitigation or rectification is required. Burton noted that for underwriters, the options are to decline coverage for potentially vulnerable buildings, to add exclusion clauses or to increase premiums. He added that ACP could prompt building owners to seek new underwriting markets and create a “new playing field” of shared risk and mitigation.

Insurance Business is the leading business magazine for insurance brokers and advice professionals. • • • • •

Aspirational cover stories Best-practice profiles and case studies Interviews with global industry leaders Business strategy content Special reports

Find out more and subscribe at www.insurancebusinessmag.com

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PEOPLE

THE BIG INTERVIEW

OUT IN FRONT Chubb chief digital officer Sean Ringsted shares his insight on how to strike a balance between investing in technology and calling on the human touch

INSURANCE WASN’T Sean Ringsted’s original calling. But while studying biochemistry on the way to academia’s upper echelons, he had a realisation that made him change his career path altogether. “I reached a point in doing my post-doc that I figured I wasn’t going to be the best researcher,” he says. “I looked around and went into the insurance industry as a trainee actuary in London.” From there, his work took him around the world, first to the US and then to a small insurance startup in Bermuda, which was acquired by ACE in 1998. Ringsted, who’s been Chubb’s chief digital officer since last February, says his time at the startup set him up for his future position. “We were probably one of the first true insurtechs,” he explains. “We were very small, we were very agile, we were very nimble, and we put technology right into the hands of underwriting. So, 20 years later, we’re back full circle.” While at ACE, Ringsted served in many roles: first on the reinsurance side as the senior vice president and chief actuary for ACE Tempest Re from 1998 to 2002, and then as executive VP and chief risk officer for the next two years. He was named chief risk officer of ACE Group in 2008 and executive VP in 2014, just prior to the company’s acquisition of Chubb in 2016.

Digital footprint During his career, Ringsted has had a front-row seat to ACE’s evolution. “We set out with a strategy around underwriting,” he says. “Just seeing the strategy play out in the day-to-day execution as we built out a portfolio of different products – in part through

think it a challenge to put together two very large organisations – you’ve got two different cultures and philosophies – but the success was really underpinned by a shared philosophy and love of underwriting.” Two years after the merger, a key part of Ringsted’s work is making the combined

“Customers are much more demanding. They have an expectation when they’re transacting digitally, and they have an expectation around their customer experience. We have to be able to respond to that” acquisition, in part through organic growth – has been incredibly satisfying. In today’s age, where everything is ‘now’ and transactional, to step back and take the long-term view and be part of something that’s played out over the long term has been very meaningful.” One standout moment for Ringsted was being part of the team charged with combining ACE and Chubb’s operations following the merger – a difficult job because of the sheer scale and size of the two organisations and their systems. “We’ve accomplished something that I take a lot of pride in,” he says. “You might

company’s footprint more digitally integrated. Throughout his career, he’s spent a lot of time on the data and analytics side of the business, which has been core in helping Chubb take the next digital step. “We’re working on a number of fronts, as you might expect – thinking about our front end, the product and the service that we provide to the clients, and the customer experience and making that more digital,” he says. “Internally, it’s around how we can use some of these new tools and data to make smarter and more effective underwriting and claims decisions, and to make sure that people are

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PROFILE Name: Sean Ringsted Title: Chief digital officer and chief risk officer Company: Chubb Based in: New York City Years in the industry: 26 Fast fact: Ringsted was voted Chief Risk Officer of the Year by his industry peers in 2013

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PEOPLE

THE BIG INTERVIEW

doing the right tasks as effectively as possible.” With a company as large as Chubb, putting everyone on the same digital page can be arduous, but even more of a challenge, Ringsted says, is figuring out what’s working and what isn’t and directing resources to the right projects. Nonetheless, the company’s size has actually made it easier to find solutions. “If you’re thinking about trying to change a large organisation such as Chubb, I think [size] is actually a strength for us,” Ringsted says. “Our size and the products we have and

“Customers are much more demanding,” he says. “They have an expectation when they’re transacting digitally, and they have an expectation around their customer experience. We have to be able to respond to that, and if you are providing information to an agent or a broker, we want that to be as efficient as possible.” However, he also stresses the importance of having real people on the ground during natural catastrophes, and being able to respond quickly to customers impacted by the disasters. “We can have all the tools and data in place,

“I think we’re really well placed to succeed, [and] we will thrive as a company of the digital age. We’re going to be there to serve our customers with products and services to meet their needs as they go about their lives in the digital economy” the geographies we have give us a lot of opportunities and options to effectively experiment and try out new ideas and products.” A discussion around digital integration wouldn’t be complete without addressing the cyber attacks that have long been an area of concern for the industry. A recent report from the Office of the Australian Information Commissioner revealed that it had logged 242 notifications under the Notifiable Data Breaches scheme from the beginning of April to the end of June. Chubb has a heightened awareness of these events, and the insurer has solid infrastructure and data breach tools in place to help defend it against cybercriminals.

Customers first When it comes to leading a digital transformation, Ringsted also places a high priority on the consumer and their needs.

but having somebody there at that time of need is just incredibly important,” Ringsted says. Chubb will continue investing in innovation – the insurer spends US$1bn annually on technology – and using digital tools to become an ‘in your pocket’ risk manager and advisor to consumers and businesses alike. Ringsted says Chubb’s goal is to eventually evolve from a repair/replace model to a predict/prevent service provider. And he’s optimistic that the company will continue leading the digital way in the insurance industry while staying connected to its clients. “I think we’re really well placed to succeed, [and] we will thrive as a company of the digital age,” he says. “We’re going to be there to serve our customers with products and services to meet their needs as they go about their lives in the digital economy. All that will be done with a human touch where we need it.”

INSIDE CHUBB

HISTORY Chubb was founded in 1882 when Thomas Caldecot Chubb and his son opened a marine underwriting business in New York City

BACK AT HOME Chubb has been in Australia for almost 100 years, and today has five offices and more than 600 staff

NEW ERA ACE acquired Chubb in January 2016, forming the world’s largest publicly traded P&C insurer

HEAVYWEIGHT As of the end of 2017, Chubb had US$167bn in assets

PERFORMANCE The insurer has an AA (very strong) rating from Standard & Poor’s and an A++ (superior) rating from A.M. Best

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SPECIAL REPORT

TOP 10 BROKERAGES 2018

TOP 10 BROKERAGES 2018 For the sixth year in a row, Insurance Business set out to find the nation’s top-performing brokerages. Tom Goodwin reports on what this year’s best brokerages are doing right WELCOME TO Insurance Business’ annual Top 10 Brokerages list. The brokerages that made this year’s Top 10 have reached an impressive pinnacle – one that’s a testament to the quality of staff within their organisations. The methodology for determining the top 10 is deliberately aimed at ensuring brokerages across the spectrum can be included. Rather than looking at revenue alone or sheer number of brokers, Insurance Business looks at a more qualitative set of data to truly find the top brokerages in the country. Additionally, given the fluctuating state of the insurance market over the last few years, this special report presents vital stats from past instalments of the Top 10 Brokerages to illustrate just how much things have changed. As might be expected, some areas have seen stronger performance than others. The number of policies written, in particular, has dropped drastically since 2013. Growth has also fluctu-

ated considerably, though it’s pleasing to see that brokerages are still growing. Most areas remain a powerful testament to the strength of the Australian insurance industry. Client retention remains high from year to year. Revenue has also risen, along with average new revenue and revenue per broker. Clients might not be lodging as many policies, but they appear to be willing to pay a premium with their increased selectiveness. As with any other industry, insurance is trend-driven. Certain policies go in and out of fashion, or their nature shifts due to prevailing societal currents. Similarly, new technology has and will continue to exercise a significant impact on the industry as a whole. One need look no further than the increasing importance of cyber insurance – a field scarcely discussed 20 years ago, but one now increasingly necessary. Though cyber insurance will continue to evolve and change over time – as does every

discipline of insurance – it seems hard to imagine a future without it in some form. Technology is something brokerages must embrace, too. More sophisticated technology has enabled far greater accuracy when assessing potential exposures. Similarly, the sheer volume of business that’s able to be conducted far outstrips that of previous generations. Brokers working today are fortunate to have such tools at their hands. Looking forward to 2019 and beyond, it is readily apparent that there will be a number of significant challenges for Australian brokerages. There’s no doubt that there has been a general hardening of the Australian insurance market, which has been driven by numerous factors. Some are connected to wider economic circumstances, while others are driven by legislation, shifting markets and increased exposures in unanticipated areas. Professional indemnity is also moving to

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THE METHODOLOGY

TOP 10 BROKERAGES 2018 1

Insure 247

Dunk Insurance

Action Insurance Brokers

Dixon Insurance Services

Total revenue

McLardy McShane

Policies written

SRG Group

Revenue per broker

Austbrokers Coast to Coast

Policies per broker

8 10 9

IPS Insurance Brokers Oracle Group (Australia) Elliott Insurance Brokers Pty Ltd

Oracle Group (Australia)

The Insurance Business Top 10 Brokerages ranking is an objective means of ranking the top-performing brokerages in the country across eight businesscritical criteria, including:

New clients per broker New revenue per broker Company growth Client retention As in previous years, each brokerage that entered was required to supply its own details for the 2017–18 financial year. Brokerages were ranked according to each of the above criteria, and all of the rankings were then added together. Akin to a golf score, those brokerages with the lowest overall scores achieved the highest rankings. The Insurance Business ranking system means businesses are rewarded for business per broker rather than critical mass, which ensures that the very best brokerages are singled out. the forefront for many organisations. As Australia becomes an increasingly litigious society, it’s crucial for organisations to protect themselves. Brokerages can provide key advice in this area, helping guard clients against undesirable financial loss and potentially even more damaging reputational loss. Perhaps most significant will be the outcome of the royal commission (still ongoing at the time of writing), which will publish its prelim-

WHO’S NUMBER ONE? Since 2013, a couple of brokerages (Mega Capital and BizCover) have taken repeat honours. Insure 247 climbed up the ranks – from number four in 2016 and number two last year – to claim the top spot for the first time this year.

2013

Mega Capital

2014

Mega Capital

2015

2016

BizCover

2017

BizCover

2018

inary report at the end of September. The findings will undoubtedly be of interest, and the full report – due by February 2019 – will give many brokerages pause for thought. There are undoubtedly challenges ahead in the coming years, but there are also many reasons to be optimistic about the future of insurance in Australia. The royal commission, for example, presents the industry as a whole with the opportunity to right previous wrongs

allinsure

(CAR of Insurance Advisernet Australia)

Insure 247

and to rehabilitate its image in the public’s eye. Similarly, a hardening market does not mean a stagnant market. Technology and legislation will shift again, presenting brokers with new, unforeseen opportunities. The insurance market is nothing if not innovative. Congratulations to all of the brokerages in this year’s Top 10 – your achievements should be a source of considerable pride, both now and into the future.

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SPECIAL REPORT

TOP 10 BROKERAGES 2018 10

ORACLE GROUP

The Oracle Group is a national brokerage that provides progressive insurance solutions for its clients. Taking a broad approach to risk review, Oracle Group’s specialists share their knowledge with clients in several sectors, including PI, transport, agriculture and trade credit. This range of experience helps to bridge a network of connections and offer clients more effective commercial guidance. Consumer appetites are evolving – technology trends have heightened the speed at which business is transacted. Change management is always a difficult task; expecting change to be constant rather than an inconvenience encourages agility within a business. Through

“We are mindful of our direction for the future. It takes a lot of effort to maintain expectation of service while evolving efficiently as a company” these shifts, Oracle’s core value offerings have not changed. As the company evolves, it is working towards a balance between traditional methods to promote personal relationships whilst embracing improved methods to allow clients to secure efficient insurance placement. Flexible working environments, participation in community events and encouragement to

develop personal opportunities are some ways Oracle gets the best out of its growing team. “We are mindful of our direction for the future,” says Brent Campbell, deputy managing director of Oracle Group. “It takes a lot of effort to maintain expectation of service while evolving efficiently as a company. I’m extremely proud of the collective effort by our group.”

NEW REVENUE JUMPS Brokers have been excelling at generating new revenue – the combined average new revenue per broker across all Top 10 Brokerages grew by a whopping 41% over the past year.

$3.5m $3m $2.5m $2m $1.5m $1m $500k

2013

2014

2015

2016

2017

2018

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ELLIOTT INSURANCE BROKERS

Elliott Insurance Brokers prides itself on the diversity of its client base – the brokerage specialises in everything from creating and embracing new technology to place its scheme business for contractors through to handling complex risks in mining, construction and professional exposure. The past year has been a significant one for Elliott Insurance Brokers. In February, Garth Krasinski took over as CEO from founder and

owner John Elliott. To have a new CEO who has risen through the ranks of the company is something Elliott Insurance is extremely proud of. With new leadership comes new ideas and new directions. This is consistent with the company’s ethos: since day one, there has been a strong emphasis on ensuring that staff think outside the box, rather than simply trying to replicate past successes,

There [is] a strong emphasis on ensuring that staff think outside the box, rather than simply trying to replicate past successes 8

while still maintaining a strong company culture. After all, the people are ultimately what make a business. By aligning its team around common values, Elliott Insurance has created an environment where staff are not only happy to come to work each day, but are also thriving and focused.

IPS INSURANCE BROKERS evolving its systems, processes, and plans, IPS Insurance Brokers integrates technology wherever possible. Even small changes – from using specific apps to reviewing different CRMs – are integral to keeping up with an ever-changing insurance market.

“We believe in creating a workplace that is supportive and flexible to each of our members’ needs” IPS Insurance Brokers is one of four divisions in the IPS Group. Servicing clients on a multi-faceted basis through each division – insurance broking, financial planning, accounting and finance broking – IPS Group offers an end-to-end approach to managing clients’ risks and financial needs. The group’s client demographics range from construction

to emerging technology risks, with a predominantly SME portfolio. Importantly, IPS Insurance Brokers remains committed to embracing change. In a rapidly evolving world, technology is at the forefront of driving success, and those businesses that don’t embrace it will be left behind. By constantly educating, analysing, and

“Being open to feedback is fundamental in creating a successful environment,” says Frank Cusmano, director of IPS Insurance Brokers. “No two people are the same, so we believe in creating a workplace that is supportive and flexible to each of our members’ needs. This has a really positive impact on productivity, morale and culture.”

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SPECIAL REPORT

TOP 10 BROKERAGES 2018 7

AUSTBROKERS COAST TO COAST

Technology has changed the face of insurance by enabling swifter policy development from start to finish, serving as a tremendous boon for brokers. But Dale Hansen, CEO of Austbrokers Coast to Coast, is adamant that technology should never replace the human element in the insurance business. “We have a total commitment to oldfashioned customer service – we listen to our customers and are able to tailor solutions that best suit their business,” Hansen says. “We don’t commoditise our customers or the products we offer.”

“We have a total commitment to old-fashioned customer service ... We don’t commoditise our customers or the products we offer” It’s an approach that has paid off. Highlights this year for Austbrokers Coast to Coast include being named Brokerage of the Year (6–20 Staff ) at the inaugural Insurance Business Awards and being named one of three finalists by ANZIIF for Best Small Insurance Brokerage

for 2018 (following on from wins in both 2016 and 2017). Additionally, Austbrokers Coast to Coast took great pride in having one of its brokers, Aimee Williams, highly commended at the Insurance Business Awards for Young Gun of the Year – Independent (1–19 Staff ).

TOTAL REVENUE DROPS A look at the combined total revenue across all Top 10 Brokerages reveals some ups and downs, but an overall downward trend.

$150m $120m $90m $60m $30m $0 2013

2014

2015

2016

2017

2018

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SRG GROUP

SRG Group is a progressive business, founded on being recognised as refreshingly different. With a next-generation ethos, the organisation’s mission is quite simple – to make insurance easy. Accordingly, SRG Group has made two main principles its focus: sustainability and relevance. While the organisation does operate in

traditional markets, managing the insurance programs for SMEs through to corporate businesses, it is also committed to ensuring its long-term sustainability by creating niches within the business. Bikesure (high-end bicycle insurance), Prosport Cover (professional athlete insurance) and a sport and events insurance division have

“[This] is a testament to [the] team, who have worked tirelessly over the past few years through tight economic and soft market conditions”

created blue ocean opportunities for SRG Group. Additionally, SRG Group has established specialties in the workers’ compensation (including seafarers), IT, technology and not-for-profit sectors. “To be named in the Top 10 Brokerages is a privilege, considering the quality of businesses in our profession,” says Rod Fitzgerald, managing director of SRG Group. “It is a testament to my team, who have worked tirelessly over the past few years, through tight economic and soft market conditions. Their ability to adapt and continue to add value to our clients has now been recognised by this award.”

REVENUE PER BROKER SOARS While total revenue per brokerage has generally dropped, the average revenue per broker across the Top 10 Brokerages has largely risen – particularly in the past 12 months.

2013: $5,414,626

2016: $6,836,164

2014: $5,381,517

2017: $6,706,945

2015: $5,647,998

2018: $7,269,881

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SPECIAL REPORT

TOP 10 BROKERAGES 2018 MCLARDY MCSHANE

The McLardy McShane Group is different, successful and growing fast. The company is built around driving a culture that supports what’s most important in life, trying to make its people proud and inclusive in what they are building – and, perhaps most importantly, ensure lots of fun is had along the way “We believe in our motto – ‘expect more from

insurance’,” says CEO Don McLardy. “We want our staff, clients and suppliers to expect and receive more from us.” The McLardy McShane Group consists of 12 branches across Victoria, Sydney and regional NSW. It also licenses more than 38 corporate authorised representative businesses, spanning Victoria, NSW and Queensland. In addition to

“We want our staff, clients and suppliers to expect and receive more from us”

its own general insurance operations, McLardy McShane continues to provide its clients with additional services via its own specialist divisions, including life and wealth, mortgage and finance, and premium funding. “Our team is built by people with shared values and a common goal to nurture lasting relationships,” McLardy says. “Our positive culture attracts like-minded people who believe business is built on trust and respect. In turn, our culture expels oppositional forces that hold our business back.”

GROWTH MODERATES Brokerages aren’t growing quite as fast as they were a few years ago, but they are still growing. While the year-on-year median growth rate across the Top 10 Brokerages has been sliding downward since 2014, it remains well above 100%.

200%

160%

120% 2013

2014

2015

2016

2017

2018

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DIXON INSURANCE

Dixon Insurance spans an incredibly broad palette of industries. Across heavy motor, motor fleet, manufacturing, engineering business, mining, primary production, luxury cars and day-to-day domestic risks, it’s a remarkable balancing act. Dixon also partners with M Club Australia to provide specialised insurance for genuine BMW M Series vehicles. These close relationships didn’t develop overnight; Dixon Insurance spends the time to get to know its clients and their risks, which enables a better working relationship when managing a client’s insurance program.

“The advice we provide – and our clients’ trust in that advice – is the cornerstone of our existence” “The advice we provide – and our clients’ trust in that advice – is the cornerstone of our existence,” says Ken Dixon, director of Dixon Insurance. “We provide insurance in every class of risk, but we are privileged to have built significant relationships in the harder-to-place arenas.” For Dixon Insurance, this is more than just a mission statement – it’s a crucial part of the

way its brokers conduct business every day. Old-school service, integrity and honour cannot be lost on customers. This attitude extends outside of the office, too. Serving as sponsor for several of its clients’ charitable initiatives, Dixon sees its role as one that doesn’t just provide insurance to a community, but also enhances the wider community by its existence.

IMPRESSIVE CLIENT RETENTION It’s hardly surprising that for Australia’s 10 best brokerages, the median client retention rate has hovered near 100% for the past six years.

2013: 99% 2014: 99.4% 2015: 100% 2013: 100% 2014: 100% 2015: 100%

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SPECIAL REPORT

TOP 10 BROKERAGES 2018 ACTION INSURANCE BROKERS

With an unapologetic focus on SME clients, Action provides an industry-wide service for general insurance and risk management across all products. As the organisation has grown,

It is Action’s team that has devised, designed and built its new internal rules, not upper management

Just under two years ago, Action Insurance Brokers set out on a new corporate and cultural journey with its entire team, setting numerous goals around driving business and cultural change. It’s crucial to have a vision that the whole team buys into – as such, it is Action’s team that has devised, designed and built its new

internal rules, not upper management. This culture of managing from the bottom up is a key feature of the organisation’s success. Team members, regardless of position, must feel they have the right – and the responsibility – to provide constructive criticism, helping to encourage a culture where the focus is always on the client.

Action has expanded its expertise into the midmarket and corporate sectors. Additionally, the brokerage offers numerous schemes with specialities in entertainment and events, construction, service stations, security industry, fire protection, tyre fitters, and a number of other niche industries. Action is celebrating its 25th anniversary in 2018, and inclusion among IB’s Top 10 Brokerages serves as a reminder that the organisation is on the right path.

HALF AS MANY POLICIES WRITTEN Over the past six years, the combined total of policies written across all Top 10 Brokerages has dropped by more than 60%.

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DUNK INSURANCE

achieve this recognition and serves as great motivation to keep striving to provide even better service to our customers.” A major highlight for Dunk Insurance in 2018 was James Dunk being named the NIBA

“Our brokerage gets the best out of our staff by creating and maintaining an environment of happiness” Providing general insurance products and advice to a broad range of occupations, Dunk Insurance is focused on the regional areas of NSW. Core to the business is a consistent insistence on ethics and moral values. Additionally, Dunk Insurance is driven by a deep conviction that the business has a social

responsibility to foster the personal development and wellbeing of its staff. “We are very good listeners, and our brokerage gets the best out of our staff by creating and maintaining an environment of happiness,” says managing director John Dunk. “It obviously makes us feel extremely proud to

NSW/ACT Broker of the Year, following in the footsteps of his father, John, who won the same award in 2017. Additional highlights include the purchase of another broking business in Bathurst and the expansion of Dunk Insurance’s network to include West Wyalong, Temora, Wagga Wagga, Wauchope, Goulburn, Dubbo, Narromine, Drummoyne and Circular Quay.

CLIENT UPS AND DOWNS The average number of new clients per broker has fallen off sharply since last year – but the increased new revenue per broker suggests that clients are paying more for coverage.

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SPECIAL REPORT

TOP 10 BROKERAGES 2018 1

INSURE 247

Insure 247 prides itself on being at the front of the insurtech movement, while also providing a seamless, customer-friendly process. Gone are the days of filing cabinets – Insure 247 has adopted a cloud-based client management system, designed specifically to create a great customer experience and provide the team with access to Big Data. It’s crucial that the team understands the complexities of the heavily regulated insurance environment while still having access to the data they need to help clients with their coverage. Developed and customised under the supervision of CEO Stephen Sloan, this provides Insure 247 with a unique competitive edge.

“Customers today ... are opportunity-rich and time-poor, so our clients need and expect a service that works for them” “Customers today don’t have days weeks or months to sort out insurance,” says Adam Sloan, general manager for Australia and New Zealand. “They’re opportunity-rich and timepoor, so our clients need and expect a service that works for them.” Insure 247 has realised a number of milestone accomplishments in 2018. The brokerage has

extended its reach to New Zealand, where it is planning to implement the same systems and customer experience that have come to define the Australian branch. The company was also a finalist for Broker of the Year (More Than 20 Staff ) at the Insurance Business Awards and was recognised by Salesforce as one of its Salesforce Success Stories.

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Maria Perry Austcover Australian Broker of the Year - 2018

Friday 3 May 2019 The Star Sydney www.ibawards.com.au

Nominations open 5 November

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FEATURES

SECTOR FOCUS: MARINE INSURANCE

Setting sail for safer waters

Marine insurance is a technical area impacted by banking and finance arrangements, international carriage conventions, and specialist insurance law and regulations. Tom Goodwin spoke to Zurich Insurance’s Iain Sharples to find out more

MARINE INSURANCE is a field that sometimes manages to sail under cover of dark, rarely spotted from the shore by its landlocked brethren. But in spite of its niche nature, marine insurance is a remarkably complex field, requiring deep, specialist

“Traditionally, there has been a lack of understanding from the public around the role that shipping plays in moving goods around the globe,” says Iain Sharples, national manager of marine and transport liability at Zurich Insurance. “But fortu-

“Recent years have seen much more public recognition that transport is a key part of any country’s infrastructure planning” Iain Sharples, Zurich Insurance knowledge from its practitioners. It also covers a far broader range than many may initially realise, spanning everything from goods being transported through to port operator’s liability insurance.

nately, recent years have seen much more public recognition that transport is a key part of any country’s infrastructure planning.” The temptation – and trend – across the insurance industry as a whole has been to

make insurance transactions as quick and straightforward as possible. It’s an understandable approach from both the consumer and insurer perspective; using existing platforms and other IT solutions to streamline processes can make for a smoother transaction for all parties. Yet it’s less cut-and-dried when it comes to marine insurance. Sharples staunchly believes that human judgement in marine insurance can’t be underestimated. The people underwriting the risk have to possess an intimate knowledge of their chosen subject matter. “There is a real danger that if we lose marine knowledge and expertise, the ability of companies to purchase and arrange movement of cargo could become affected,” Sharples says. “The transport chain and all the parties involved rely on marine insurance to function.” For example, when a major terminal operator or logistics company needs to finance the takeover or commissioning of a new facility, finance companies won’t provide backing without the right insurance in place. As many brokers know, insurance can be one of the last things a client thinks of when these deals are being done, so insurers have to be able to move quickly. “Knowing what you are doing as an underwriter means you can ask the crucial questions and make decisions to enable the client to complete the deal,” Sharples says.

Bearing the brunt of exposure Marine insurance involves numerous exposures across the different types of operation involved in the transport chain – freight forwarders, logistics operators, warehouse and distribution, stevedores, cargo handling facilities, and port authorities, to name a few. Additionally, many of the companies involved in the freight process are at the cutting edge of modern freight handling, so

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ABOUT ZURICH AUSTRALIA insurers need to be aware of how cover must evolve to adapt to this change. The right underwriter will be able to identify early whether cargo, carriers or liability coverage is best suited, and will assist in putting in place the right clauses and extensions. On the other end, the right claims handler will be able to analyse the claim correctly and promptly. “You have to be confident that the insurer – or, more to the point, the people working for that insurer – has enough experience and training to identify what is required by the broker and customer,” Sharples says. Longevity in the field is also an important factor to consider, as it speaks to the insurer’s experience within the field. Zurich has been involved in the insurance of freight

Zurich’s general insurance business in Australia and New Zealand is known for its strong risk management, excellence in claims handling and intermediary-focused distribution strategy. Locally, Zurich offers insurance solutions to small and medium-sized enterprises, large corporations, and multinational companies. Globally, Zurich Insurance Group is a leading multi-line insurer with about 53,000 employees. It provides a range of general and life insurance products in more than 200 countries and territories.

forwarders liability for more than 30 years, working in conjunction with partner Midas Insurance Brokers. Freight forwarders present a number of challenges for insurers; they produce legally tricky and technical claims, which necessitate the support of an insurer that has a detailed understanding of the potential exposures. “We work in a litigious environment, and both longevity and commitment to the partnership are crucial to providing the

best possible advice and guidance,” says George Midas, managing director of Midas Insurance. “You need a combination of experience in underwriting, claims and a legal team that tailors specifically – possibly uniquely – to the needs of the client.” But as with any insurance, people usually only recognise the need for it when something goes wrong. The July 2018 loss of containers from the ship YM Efficiency off the coast of Newcastle highlighted this

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SECTOR FOCUS: MARINE INSURANCE

WHO IS IAIN SHARPLES? Iain Sharples joined Zurich Australia in April 2016 as the national manager for transport and marine liability. Prior to Zurich, Sharples spent more than 20 years at Thomas Miller, first as a senior claims executive and then as senior underwriter for Australasia, handling a range of marine accounts, including shipping lines, stevedores, logistics operators, terminal operators, ports and freight forwarders.

SEA TRANSPORT IN AUSTRALIA Australia currently relies on sea transport for 99% of its exports In 2015–16, nearly 1.6bn tonnes of cargo moved across Australian wharves During the same period, Australia’s international sea freight was valued at more than $420bn Australia’s top international trading partners (based on value of sea freight) include China, Japan, South Korea, Singapore and the US Source: Department of Infrastructure, Regional Development and Cities

clearly. Sharples stresses the importance of choosing a marine insurer that will make good on its policies as soon as possible. “Zurich was the first insurer to pay a cargo claim arising from that loss, because if the container and cargo are gone, there’s no point messing around delaying payment,” he says. “Whatever the investigations bring out down the track in terms of why the containers were lost, the insured party just needs its cargo loss paid so a replacement shipment can be arranged.”

Emerging challenges As with any industry, marine insurance continues to undergo evolution. Marine liability in particular keeps growing as

notable example was the March 2018 fire on the Maersk Honam, in which a single fire killed five crew members and damaged or destroyed millions of dollars’ worth of cargo. Additionally, the industry has been affected in a similar fashion to the general liability market in terms of workers’ compensation recovery claims. The transport industry makes heavy use of labour hire, so the increased frequency and average value of bodily injury worker-to-worker claims remains a concern. Last but not least, marine insurance is being challenged by the development of IT solutions for transport, which are pushing the boundaries of consumer expectations about delivery times. Amazon and eBay are

“You need a combination of experience in underwriting, claims and a legal team who tailors specifically – possibly uniquely – to the needs of the client” George Midas, Midas Insurance brokers realise that companies involved in the transport chain have specific needs that don’t always fit standard insurance policies. A common example is a trucking company that has moved into warehousing and has developed into being a third-party or fourthparty logistics operator. “In a situation like this, the exposures cut across marine carriers, general liability, ISR, PI and statutory liability,” Sharples says. “A single policy designed to cover these exposures can be attractive, so you need experts in place to help ensure that all avenues are appropriately covered.” New challenges are also emerging; already, the impact of larger ships on accumulation of risk is becoming apparent. One

some of the most obvious examples; marine insurers will need to keep meeting the transport insurance needs of these companies while negotiating the exposure that comes about as a result of increased speed. Nonetheless, Sharples remains optimistic. As the freight market continues to grow in Australia and worldwide, the need for marine insurance will also keep pace. “I know many consider marine a niche area of insurance, but the ability to offer expertise and knowledge in such a specific area is an opportunity to assist brokers,” he says. “And the days of marine insurance being the realm of ‘the hairy old sea dogs’ at the back of the office are in the past. We’re a much more diverse industry now.”

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FEATURES

BROKERAGE INSIGHT

The local advantage McLardy McShane co-founder Don McLardy tells Insurance Business how his firm has found success by focusing on regional opportunities and always putting people first

SINCE BEGINNING life as an authorised representative of Insurance Advisernet, McLardy McShane Insurance & Financial Services has sought to forge its own path in the insurance world – one that’s built around people, rather than profits. This approach is evidenced by the firm’s heavy focus on branches in regional areas around Victoria and NSW, along with authorised representatives to service other areas of the country. Seven years after making the split from Insurance Advisernet, McLardy McShane’s community-minded move seems ingenious. Yet like many innovations, it was born out of necessity. When co-founders Don McLardy and Mike McShane first broke from Advisernet, they were bound by a non-compete clause. But the pair had experience working in regional areas around Victoria, thanks to time spent together at Oamps (now Gallagher), so a regional focus seemed like the best bet. “To start with, we just focused on building regional branches, while working in conjunction with locals to ensure there was authentic community investment,” McLardy says. It proved a natural fit. Word of mouth began to spread; because both McLardy and McShane had already worked in insurance for close to two decades prior to their new company’s

formation, they were both already well known in the industry. “Virtually all of our staff and clientele have come to us by referral,” McLardy says. “People knew us, and I guess they liked us.” The non-compete clause has long since lapsed, and McLardy McShane now has 37 authorised representatives around the country, in addition to 12 branches in Victoria and NSW. The future looks promising, too: The company plans to open a number of new branches in Western Australia and Queensland over the next 12 months. McLardy McShane’s success is not a fluke; it rests upon a number of core values that help endear the firm to the communities it works in. Having witnessed a remarkable amount of change during his lengthy stint in the industry, McLardy feels the main functions of insurance

providers remain much the same as they always have. Technology has changed and shifted, and the world has changed with it, yet the fundamentals of the business endure. “Nothing’s really changed in terms of what we need to deliver,” McLardy says. “The big change has been in how it gets delivered. Everyone’s aware technology is vital, and we work hard to establish the best possible internal processes.” Yet processes alone don’t make a business, so the firm’s embrace of technology has not been at the expense of its core values. In particular, McLardy McShane maintains a resolutely old-school approach when it comes to client interactions. “We still very much believe that the client/ broker relationship is a really valuable one,” McLardy says. “Technology can’t replace real

MCLARDY MCSHANE’S REGIONAL FOCUS “We don’t do go into regional areas and say, ‘We’d like to be here’,” Don McLardy says of his firm’s philosophy behind establishing regional branches. “Rather, if we come across a good person, we build the business around them. So it’s always people first with us – we’d love to be all over Australia, but we won’t go to a new area unless we can find a good person who fits in with our company culture and the structure we’ve already got, while also serving the local community.”

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From left: Don McLardy, Neale Daniher, Jan Daniher and Mike

“There are a lot of good insurance brokers out there who want to run their own race but need the support of a bigger company ... We can provide that” one-on-one advice, and we know our client base wants to talk to someone who can steer them in the right direction – someone they know and trust with all their assets.” McLardy sees this approach as key to the firm’s continued expansion and success. As a business that deliberately aims to avoid being profit-driven, giving back to the communities it is present in remains a paramount priority. “We’re not about growth just for growth’s sake,” McLardy says. “There are a lot of good insurance brokers out there who want to run their own race but need the support of a bigger

company while still being able to retain their identity. We can provide that.” These tactics are aimed at rebuilding small business in regional areas, enabling them to flourish through high-quality insurance products. McLardy McShane branches are intended to be at least 50% owned and operated by locals – working with and alongside the community, rather than dominating it. “We want to be about people who own part of the business with us, and we give back to the communities we operate in,” McLardy says, “and hopefully have a lot of fun on the way.”

FAST FACTS: MCLARDY MCSHANE Area of focus: SMEs, particularly in local communities Year founded: 2008 Headquarters: Richmond, Victoria Branches: 12 branches and joint ventures, six other specialised joint ventures, 37 authorised representatives, and four associated companies Leadership: Don McLardy, CEO; Mike McShane, director

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FEATURES

SECTOR FOCUS: ACCIDENT AND HEALTH

Delivering on a promise Insurance Business spoke to Accident and Health International’s Renato Foenander to find out how the underwriter is making a difference to clients at claim time

WHEN SOMEONE has suffered an injury, the last thing they want to worry about is whether they’re covered by their insurance. In times of crisis, people are looking for immediate assistance, not reams of paperwork or additional red tape. Yet the public perception is that insurers rarely pay a claim or that clients have to jump through hoops to get their claim paid out. The industry’s image is in need of rehabilitation in the public eye, and it’s something Renato Foenander, claims manager with Accident and Health International, is eager to see change. “We’re tasked with protecting our customers’ health, family and livelihood,” Foenander says. “In our line of business,

the claim is where the customer promise is delivered.” The good news is that the statistics are actually on the insurance industry’s side. According to recent information released by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission, 84% of total and permanent disability claims and 87% of trauma claims are paid out in the first instance. It’s evident that – in most cases, at least – the issues around the industry are imagebased, rather than process-based. Steps have already been taken to redress this issue. For example, the General Insurance Code of Practice outlines the minimum

ABOUT ACCIDENT AND HEALTH INTERNATIONAL Accident & Health International [AHI] is a specialist underwriting agency that provides general and tailored personal accident, medical and travel insurance in Australia and abroad. Since its inception in March 1998, AAHI has become one of Australia’s largest and best accident and health underwriters, as voted by NIBA and Insurance Business. AHI has insured more than a million people and paid more than $400m in claims. For more information, visit acchealth.com.au.

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standards of service that customers should expect from insurers. Yet in an age where technology and social media alike have enabled easier access to insurers, minimum standards are rarely enough. One only needs to scroll through the Facebook or Twitter feeds of any large insurance organisation to see the vitriol that can follow in the wake of an improperly handled incident. Customers understandably – and not unreasonably – expect more. Immediate responses and fast turnaround times should be the minimum, not the gold standard. It’s this approach that AHI strives for. In 2017, the company processed more than 1,500 personal accident and sickness claims, with payments totalling more than $11m. Travel was an even bigger market. During his years in the industry, Foenander has noticed that the average age of travellers is increasing, particularly as retirees aim to spend more time enjoying the fruits of their years of labour. Some of the key cost drivers were loss of deposits, medical expenses and claims for baggage. “These trends are compounded by 20 years of increasing hospital and medical expenses, which consistently exceed normal inflation,” Foenander says. “Should the adverse and unfortunate happen whilst an insured is travelling, you can nearly always expect an expensive claim.” It all adds up to a not-inconsiderable sum: in 2017, AHI processed nearly 8,000 travel-related claims, with payments exceeding more than $24m.

The human touch While many insurers are turning to technology as a primary means of meeting consumer demands, AHI still places heavy emphasis on the human touch, using technology to enhance the person-to-person experience, not replace it.

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“Humans are key to underpinning your technology and driving positive outcomes for the policyholder,” Foenander says. “Technology can never be taught how to care and understand. AHI enables its people to access decision-makers in all areas of the business.” Foenander stresses that the AHI ethos is always aimed at exceeding base standards and customer expectations. Trust between the policyholder, broker and underwriter is essential, and it can be easily broken. If this culture isn’t ingrained into staff, business will be lost quickly. In the field of accident and health, this is even more crucial, as the policies and risks being covered – as well as the

Additionally, AHI holds regular consultations with clients and key industry groups alike to discuss insurance requirements. These aren’t just for show; they are directly geared at preparing for and assessing future trends in the market. “For example, extensive research into our customer expectations showed offering adjacent services was high on our customers’ agenda,” Foenander explains. “In particular, many employer groups told us of their desire for integrated personal injury claims and workers’ compensation management reporting.” This led AHI to recently enter into a joint claims service offering with EML, an

“We’re tasked with protecting our customers’ health, family and livelihood. In our line of business, the claim is where the customer promise is delivered” Renato Foenander, Accident and Health International claims that arise – are all highly complex. “It’s vital to have an empathetic and proactive claims culture, where the team approaches every claim with a view to settling it as quickly and efficiently as possible,” Foenander says.

Exceeding expectations As an organisation that’s been in operation for two decades, AHI counts its knowledge of the accident and health market and its deep understanding of clients as important differentiators. To ensure it remains competitive, the company periodically reviews its policy wordings to ensure they are up-to-date and comprehensive, in line with – or frequently exceeding – the wider market.

organisation with an established reputation in managing workers’ compensation claims. EML has been an agent for Worksafe Victoria for two years, and since the start of 2018 has been the single claims agent for WorkCover. AHI will still manage and process the large majority of its claims in-house, but its personal accident and claims management team will draw on EML’s processes and network to help improve outcomes for claimants, Foenander explains. “This partnership is really about us leveraging some of the best practice of statutory claims processes in a non-statutory environment,” he says. “It will result in alignment between the reporting processes for workand non-work-related injuries.”

PERSONAL ACCIDENT AND SICKNESS: THE BIG PICTURE

AHI managed 1,500 personal accident and sickness claims in 2017

The same year, the company paid out a total of $11m in personal accident and sickness claims

Cardiac- and cancer-related claims comprise the majority of AHI’s illness claims

These issues often result in employees being off work for anywhere from 29 weeks to two years

According to the Australian Heart Foundation, cardiac issues are the most expensive to treat, costing the Australian economy $6.8bn in 2017–18

While the majority of claims generally involve a simple dollar transfer, more complex claims often require the input of multiple stakeholders to achieve a successful outcome. “In personal accident claims, you could be dealing with the claimant, return-towork coordinators, rehabilitation providers,

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SECTOR FOCUS: ACCIDENT AND HEALTH

CONNECTING THE DOTS FOR POLICYHOLDERS

“Technology can never be taught how to care and understand. AHI enables its people to access decision-makers in all areas of the business” Renato Foenander, Accident and Health International independent medical specialists and employers,” Foenander says. “By bundling the personal accident and workers’ compensation claims with EML injury management processes, organisations can both save time and receive a far better understanding of their risk exposure.” Having said that, Foenander emphasises that access to decision-makers will always remain a core value proposition for AHI

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clients. The ultimate beneficiary of this alignment, he says, will be those who have suffered from a non-work-related accident or illness. “The ability for organisations to have one group managing personal accident and workers’ compensation claims enables a clearer picture of risk,” he says. “This data can be used to drive proactive solutions for worker health and safety.”

2016 AHI launches online hospital TeleHealth, powered by Docto, giving customers access to a doctor via video call 2017 AHI partners with medical advisory firm Best Doctors to offer policyholders access to more than 50,000 medical specialists who can provide a medical diagnosis or a second opinion 2018 AHI partners with leading claims management agent EML to help manage Group Personal Accident claims

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FEATURES

SECTOR FOCUS: CYBER

Updating the specs of cyber insurance As cyber attacks ramp up around the world, cyber insurance is becoming more crucial than ever – and insurers are racing to keep up with the latest developments 42

CYBER INSURANCE is a rapidly evolving field – and one that’s proving to be increasingly necessary in the modern business landscape. Events such as the spate of ransomware attacks in 2017 have helped shine a light on its increasing importance. Additionally, recent changes to Australian and EU legislation have brought in mandatory data breach reporting laws with stiff penalties for those who fail to comply. Whereas institutions might have previously been able to hide behind the pretence of impregnability, this is no longer the case. It’s an oft-repeated cliché, but it’s increasingly evident that businesses must prepare for when a cyber attack or breach occurs, rather than if one might occur. Cyber insurance is an important tool in businesses’ lines

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of defence, yet in spite of a greater recognition of the necessity of protection, there is still a great deal of confusion surrounding the topic. “The discussion between an insured and an insurer is often quite limited,” says Mark Doepel, partner at Sparke Helmore Lawyers. “The two speak to each other at the time when the policy is finalised and then hope that they never have a second discussion when a claim is made.” This situation, Doepel says, is unsustainable. Rather, cyber insurance should present an opportunity for an ongoing dialogue between the insured and the insurer for the entire life cycle of the risk. Part of the reason this dialogue is not more heavily pursued by both parties is simply because cyber insurance is itself a relatively new field; prospective insureds are not always aware of key questions that should be raised until it’s too late. “Insured parties should at least be asking:

THE CYBER STRATEGY EQUATION Mark Doepel believes that a business’s cyber strategy can be efficiently broken down to a simple equation:

Internal Resilience + Insurance = Cyber Strategy “Your internal resilience is composed of your internal IT systems, your internal training, your support and dialogue between the IT department and C-Suite, and the HR group,” he explains. “Then you add your insurance package. Together, this should provide you with your corporate strategy in terms of dealing with online risks – but you need them both to create a complete strategy.”

that the client has an active risk management procedure in place.

Protection for everyone One of the most common misconceptions surrounding cyber insurance – and cybersecurity in general – is that it is solely the domain of larger organisations. But Colin Pausey, a

“Cyber threats aren’t just someone shutting down the Australian Census – they could potentially reach as far as someone turning off the traffic lights in the Sydney CBD” Mark Doepel, Sparke Helmore Lawyers what benefits and services do I get during the period of pre-breach? What assistance do I get in triaging any breach which may occur? And what follow-up services are part and parcel of the policy?” Doepel advises. There are definite benefits to fostering this conversation from the insurer’s perspective as well. The more active dialogue there is between an insured and the insurer before a breach, the more comfort an insurer can have

consultant at Sparke Helmore Lawyers, is adamant that this is no longer the case. “In the early days of cyber insurance, there were some extremely complex proposals in the market,” he says. “That was very off-putting – why would a small business fill out a proposal with 30 or 40 questions? But I think insurers themselves now have a better grasp on what’s a relevant question.” Of course, insurance policies aren’t protec-

tion in themselves – they are supplementary to having an effective cyber strategy in place as well (see the box above). “Small businesses can protect themselves as well,” Pausey says. “The Australian Cyber Security Centre has published the Essential Eight, which is a list of strategies to help prevent various cyber threats. If a small business follows those basics, makes sure they patch and uses proper authorisations, they can also create internal resilience.” Though cyber insurance remains a distinct field from professional indemnity insurance, it seems likely that there will be greater overlap between the two in the near future. Obviously data loss is problematic, but the reputational damage that can occur as the result of a breach can also be devastating, as it can severely undermine consumer confidence. Mandatory reporting of data breaches is on the forefront of legislation, and other aspects might follow. For example, one cannot practice as a health professional without the relevant insurance in Australia; it seems entirely likely that this might eventually apply to certain digital service providers, too.

Future risks The world of insurance is built on the backbone of data – the more historical data the insurer has at hand, the better the policy that

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SECTOR FOCUS: CYBER

ABOUT SPARKE HELMORE LAWYERS Sparke Helmore Lawyers takes a clientfirst approach to everything. The firm has more than 800 people working from nine offices across Australia, serving the needs of the insurance, government, financial services, technology, mining, construction and property sectors. Sparke Helmore’s expertise spans corporate to construction, workplace to insurance, IP to IPOs, mining to manufacturing and property to procurement. For more information, visit sparke.com.au.

“The risk that you’re insuring on January 1 may be completely different by December, which is a key problem confronting insurers at the moment” Colin Pausey, Sparke Helmore Lawyers can be constructed. But because cyber insurance is not yet established as a mature market, much of the data is still being compiled. And in cyber insurance, risks can change far more rapidly than in other fields. “Even within a short policy period of, say, one year, the actual nature of the risk can change drastically,” Pausey says. “The risk that you’re insuring on January 1 may be completely different by December, which is a key problem confronting insurers at the moment.” The full impact of these factors on the market remains to be seen. However, it’s inevitable that both cybersecurity and cyber insurance policies will continue to evolve. New tech innovations will also help prevent or catch fraud; blockchain has presented a means of time-stamping files in order to provide

evidence of unwanted access or interference from outsiders, for example. Still, there are threats that have not been widely considered, particularly in relation to the Internet of Things. In the US, concerns have already been raised around the possibility of internet-enabled medical devices being targeted by ransomware. “Potential incidents like this feed into the dialogue around the connectivity of devices in the world we live in,” Doepel says. “Cyber threats aren’t just someone shutting down the Australian Census – they could potentially reach as far as someone turning off the traffic lights in the Sydney CBD.”

Managing expectations As might be expected, insurers and brokerages alike have taken a broad range of stances

on the increased presence of cyber insurance in the Australian market. Some are markedly keen to get involved at primary layers, while some are only willing to engage at an excess layer. Larger businesses have proved particularly divisive. Although larger companies are likely to have a more resilient IT strategy, theoretically reducing the chances of a major incident, they also hold the opportunity for some of the highest severity claims. “To top this off, you also have some underwriters who’ve decided that they don’t fully understand all of the risks involved and are simply taking a ‘wait and see’ approach to cyber insurance,” Doepel says. Additionally, certain insurers are already establishing themselves as being able and willing to pay out on cyber claims. Prospective customers will be able to leverage this data to determine which insurer they choose to provide their cyber insurance. There are also potentially interesting coverage cases emerging that are likely to set precedents in the coming years, particularly in regard to educating clients on what measures to take to respond to shifting threats. Given all this, the next five to 10 years should prove to be a fascinating time in the field of cyber insurance.

www.insurancebusinessonline.com.au

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PEOPLE

CAREER PATH

LEAP OF FAITH

Peter Bailey is no stranger to broadening his horizons and learning from the inevitable challenges that brings Bailey credits the four years he spent as an actuarial analyst at the beginning of his career with setting up him for his next three decades in insurance “Being an actuary is fascinating, but I realised that I didn’t get to go out to lunch very often. Actuaries are often treated as number-crunchers with no social skills. I get a lot of energy from people; I was looking for something beyond numbers”

1988

CRUNCHES NUMBERS

1996 GETS A TASTE OF STARTUP LIFE Headhunted by QBE to start its professional liability division, Bailey sampled what would be his first startup experience of many “We worked six and a half days a week to get things ready for launch, and then we did a national roadshow. We had a very successful launch, and that gave me itchy feet. I was approached to take my skills to London and help launch a financial lines division over there”

2005 JOINS CALLIDEN With a lingering passion for startups, Bailey leapt at the chance to join Calliden Group as underwriting director as it rose from the ashes of other companies “It gave me a chance to be a generalist and an energising and engaging opportunity to be part of. It was a very fun and very stressful time. We generated $200m in premiums”

2014 FOCUSES ON SMEs The final piece of Bailey’s career puzzle fell into place when he was approached by AIG, which was aiming for a bigger footprint in the SME space

“I love challenging conventional wisdom; it’s an educational process. AIG does not have the DNA for SME – in order to create infrastructure, I had to change the DNA” 46

1992 SWITCHES GEARS At a crossroads in his career, Bailey decided to make the move into underwriting – only to find that his first non-actuarial post wasn’t too far outside his wheelhouse after all “I had to cram the night before the interview. I already had a deep interest in publicly listed companies and had already learned to read a profit and loss statement, so to get into an underwriting role in financial lines was the most natural transition because I had the basic skills already”

2001 RETURNS TO OZ His tour of duty in London ended when Bailey – now accompanied by a wife and two children – seized the opportunity to return to Sydney for a head-office post “Coming back to head office was another learning opportunity for me. It was extraordinarily demanding but took me out of the market. I missed that market engagement”

2010 GENERATES GROWTH When Dual was looking to expand both its products and geography, the underwriter tapped Bailey’s startup experience, bringing him on as managing director “Not everything you do as a startup is going to be successful; you have to be agile and set up a structure that can pivot. You can’t get stuck in a rigid thought process. In the time I was there, we doubled the business to just under $100m”

www.insurancebusinessonline.com.au

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PEOPLE

OTHER LIFE

TELL US ABOUT YOUR OTHER LIFE Email ibo@keymedia.com.au

In his days as a rugby prop forward, Allatson played half a season with a dislocated shoulder

Minutes it took Allatson to run a half marathon (his personal best time)

Typical number of days Allatson’s family spends on their annual ski trip

Years Allatson spent playing rugby in his youth

PLAY ON From his days as a rugby player to his current role as CEO of Sportscover, Simon Allatson’s life has always been intertwined with sport SPORT HAS been an integral part of Simon Allatson’s life since he signed on with the Northbourne Griffins under-7s rugby side in 1968. In fact, Allatson, the CEO of underwriting agency Sportscover, credits his insurance career in part to his involvement in rugby, which first introduced him to the managerial side of sport at age 16, when he was tapped to become

treasurer of his rugby club. Allatson’s rugby career ultimately gave way to the more solitary pursuit of the triathlon – a pastime that required him to sacrifice the camaraderie of the rugby field, but brought a fierce desire to better past performances. These days, Allatson has moderated his activities to fit with his role as a father and husband

– family walks, annual ski trips and serving as the cheering section for his daughter’s netball and rowing pursuits – but he continues to make physical exertion part of his life. “There’s nothing like exercise to relieve the stresses of the day, give you some time to reflect and blow the cobwebs out,” he says.

www.insurancebusinessonline.com.au

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