Insurance Business 3.02 by Key Media

insurancebusinessonline.com.au Issue 3.2

BROKERS 2014

Australia’s top insurance brokers revealed v

FACING THE MUSIC HOW TO INSURE A MUSIC FESTIVAL

PROFESSIONAL PRACTICE THE GROWTH PROSPECTS FOR PROFESSIONAL INDEMNITY INSURANCE

RICHARD ENTHOVEN THE HOLLARD CHIEF SPEAKS OUT

CONTENTS / 3.2

FEATURES

BROKING INTELLIGENCE

Know your customer Every customer is different – but knowing how to deal with a few common personality types can boost your business

NEWS ROUND-UP 6 | News analysis What Arthur J Gallagher‘s Wesfarmers deal means for local brokers 8 | News analysis How the insurance industry is helping protect the vulnerable

26 | How to insure a music festival What to do if a promoter lands on your doorstep looking for cover 30 | Action stations Class actions aren’t just a matter for the major insurers – they can drag in your clients too 32 | The professionals Four PI experts gather around the table to talk turkey 38 | Full speed ahead What should a broker look for in a marine underwriter in today’s competitive and rapidly changing market?

BROKING INTELLIGENCE 42 | Leading on thin ice What are the correlations between leading a team of 18 strangers into Antarctica and heading a successful business? 46 | Rewiring the brain for change Why do team members find change difficult? It’s all in the mind 50 | Stats Insights from the Macquarie Insurance Broking Benchmarking Report

FEATURE

The big interview Hollard’s CEO on why he’s focusing on the Antipodean business he started 15 years ago

INSURANCE INSIDERS 52 | Social life Steadfast and more besides in our snapshot special 55 | Favourite things Declan Rye, London Australia Underwriting 56 | The final word Is the duty of utmost good faith dead and buried?

16 COVER FEATURE

ELITE BROKERS 2014 Australia’s top insurance brokers ranked and revealed

BROKERS 2014 2 | MAY 2014

issue

3.2

EDITOR’S LETTER / 3.2

ABOVE THE PARAPET

Kevin Eddy

Insurance brokers aren’t famed for shouting their achievements from the rooftops – far from it. In fact, brokers are among the most humble of professionals, preferring to let their results speak for them. Perhaps that’s why Insurance Business was told that our Elite Brokers ranking “would never work” by several people when we launched it last year – and why, even when we published Australia’s first ever ranking of the top brokers in the country, people told us it was a one-off, and we’d never be able to do it again. Well, we’re delighted to present the second Elite Brokers ranking, and equally pleased to say that the response to the survey this year was significantly higher than it was last year. Brokers’ achievements deserve to be celebrated, and we’d like to thank everyone who nominated themselves or their colleagues this year. Did industry veteran Ron Tatarka retain his throne as Australia’s number one broker? Turn to page 16 to find out. Elsewhere, Richard Enthoven explains why he’s turning his full focus back on Australia; we quiz a panel of experts on professional indemnity; and Paul Howard lays out how to insure a music festival. Add to that the usual mix of business strategy advice, news, behind-the-scenes insights and opinion, and it’s another packed issue. On a final note, this will be my last issue as editor of Insurance Business. I’ve vastly enjoyed getting under the skin of the industry and adding a fresh voice to the world of insurance, but it’s time for me to tick a few items off the bucket list and travel the Great Southern Land. However, I’ll still be penning regular missives for Insurance Business from the road, and I’ll be leaving you in the very safe hands of our new editor, Ben Abbott. See you out there!

COPY & FEATURES EDITOR Kevin Eddy CHIEF REPORTER Chinwe Akomah CONTRIBUTORS Andrew Mair, Sonia McDonald, Rachael Robertson PRODUCTION EDITOR Roslyn Meredith SUB-EDITOR Sarah Friggieri

ART & PRODUCTION DESIGNER Joenel Salvador DESIGN MANAGER Daniel Williams

SALES & MARKETING GENERAL MANAGER Peter Smith COMMERCIAL DEVELOPMENT MANAGER Sophie Knight COMMUNICATIONS MANAGER Lisa Narroway MARKETING EXECUTIVE Alex Carr TRAFFIC MANAGER Abby Cayanan

CORPORATE CHIEF EXECUTIVE OFFICER Mike Shipley CHIEF OPERATING OFFICER George Walmsley MANAGING DIRECTOR Justin Kennedy CHIEF INFORMATION OFFICER Colin Chan HUMAN RESOURCES MANAGER Julia Bookallil Editorial enquiries Ben Abbott tel: +61 2 8437 4721 ben.abbott@keymedia.com.au Advertising enquiries Commercial Development Manager Sophie Knight tel: +61 2 8437 4733 sophie.knight@keymedia.com.au General Manager Peter Smith tel: +61 2 8437 4740 peter.smith@keymedia.com.au Subscriptions tel: +61 2 8437 4731 • fax: +61 2 9439 4599 subscriptions@keymedia.com.au Key Media keymedia.com.au Key Media Pty Ltd, Regional head office, Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 Offices in Auckland, Manila, Toronto, Denver insurancebusinessonline.com.au Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Insurance Business magazine can accept no responsibility for loss

Kevin Eddy, editor, Insurance Business

CONNECT

Contact the editor:

kevin.eddy@keymedia.com.au 4 | MAY 2014

Printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry

NEWS / ANALYSIS

NEW KID ON THE BLOCK

Arthur J. Gallagher appears to have ended Wesfarmers’ involvement in the insurance industry – but what will AJG’s newfound local scale mean for local brokers?

THE DATA: ARTHUR J. GALLAGHER IN AUSTRALIA OPERATIONAL FOOTPRINT (1)

Arthur J. Gallagher will soon be the proud owner of a significant regional insurance broking footprint, thanks to its deal with Wesfarmers. Here’s what will change hands in the deal.

4 1

7 UK & Ireland Offices: 5 Employees: ~200 Brokers: ~60

Number of offices

DIVERSE SET OF INDUSTRY SEGMENTS FY 2013 (%) 5%

Sports and Recreation Hospitality Retail

6% 12%

Other 46%

J. Patrick Gallagher, Jr., chairman, president and CEO of AJG

6 | MAY 2014

13%

Transport

Construction

12%

and is expected to proceed some time later this year after clearing the regulatory hurdles – gives AJG much-needed scale, and the broking market a stronger competitor. So what does it mean for brokers in Australia? “It’s exciting for the Australian insurance industry that a company as well run as Gallagher wants to invest here,” said Steadfast CEO and managing director Robert Kelly. Having just completed its own Tasmanian hub and taken a stake in Nautilus Marine Insurance, Steadfast’s Kelly said AJG was a “great addition to the broking market”. “We think it is great. It stabilises the industry by having a strong player in it,” he says.

8 6

New Zealand Offices: 23 Employees: ~700 Brokers: ~315

It was the deal that will put an end to Wesfarmers’ involvement in Australian insurance. Following the previously-announced ACCCapproved sale of its underwriting operations to IAG, Wesfarmers announced US-based broker and risk management consultancy Arthur J. Gallagher & Co would soon take the reins of its broking and premium funding operations. The deal – which is still subject to approval by the Foreign Investment Review Board here in Australia

“We will have a tremendous platform for growth as we expand throughout Australasia”

Australia Offices: 26 Employees: ~800 Brokers: ~345

Professional Services

FOCUSED ON CORPORATE AND SME CLIENTS FY 2013 (%) Personal Lines 5%

Commercial Clients

11%

SME

21%

40%

Micro-SME

23% Corporate Clients

(1) Includes insurance broking and premium funding offices, in addition, premium funding loan products are sold from mobile locations in New South Wales and Queensland.

INSURANCEBUSINESSONLINE.COM.AU

Brokers expect that the OAMPS Insurance Broking group, which currently maintains a 5% market share, will thrive under new foreign owners with newfound local scale. “OAMPS has been and will continue to be a large contributor and performer in the Australian broking market,” said Elliott Insurance Brokers director John Elliott. “As far as I can see the ultimate ownership will have minimal effect on their consistent performance.” The same goes for the New Zealand business Crombie Lockwood, which is a competitor that boasts more muscle in that market, with a more significant market share of 23%. The sale – for a huge $1,010m - also included local premium funding business Lumley Finance, and Wesfarmers’ UK operations, which also carried the OAMPS brand name. Essentially, AJG has achieved its goal, which president and CEO J. Patrick Gallagher summed up as “a tremendous platform for growth as we expand throughout Australasia”. And a strong platform it is: the group has achieved immediate growth in its multinational mid-market client base, as well as a significantly expanded branch network, with 26 offices in Australia and 23 in New Zealand. AJG also has strong brand name recognition locally. If AJG is able to embrace cross-selling opportunities across the newly-combined network, drive longer-term operational efficiencies through a consolidated platform, and leverage its international expertise to complement and expand specialised niche practice groups, it could – as it has promised – shake up the services on offer to mid-market clients.

AJG’S INTERNATIONAL BUSINESS

20%

RISK MANAGEMENT

80%

BROKERAGE

THE BUSINESSES AND THE BRANDS

OAMPS Insurance Brokers

Founded in 1977, OAMPS is an insurance brokerage with ~5% market share in Australia, offering personal, microSME, SME commercial and corporate insurance services.

Crombie Lockwood

Founded in 1978, Crombie Lockwood is one of the largest New Zealand insurance brokers with ~23% market share. Offers personal, SME, commercial and corporate broking services.

OAMPS UK Group

Founded in 1985, OAMPS UK is based in London and is a specialised insurance provider offering general broking, London markets and specialty petrochemical sector focused insurance services as well as environmental consultancy services.

Lumley Finance

Founded in 1988, Lumley Finance is a supplier of premium funding products in Australia and New Zealand.

“The focus on middle-market clients aligns well with our global client base and will provide us opportunities to bring our full range of services to their existing clients and prospects,” Gallagher said.

BOWING OUT A WINNER Sources close to the deal have said that it made perfect sense for Wesfarmers to shed its interest in the insurance industry, which was not a core business for the group. The AJG deal – which will fetch $1,010m plus $150m to repay funding of the premium funding operations – will net a pre-tax profit on sale of $310m-350m. When put together with its late-2013 decision to offload its underwriting arm to IAG, Wesfarmers is expected to reap pre-tax proceeds of close to $3bn. With broking such a competitive sector and Wesfarmers unlikely to have gained scale without major acquisitions, offloading to AJG and IAG to leverage made sense. And, by all accounts, it was certainly a win for Wesfarmers. “The value we got for both businesses is ahead of what brokers would have thought the value was,” Wesfarmers managing director Richard Godyer told Insurance Business. “The two buyers IAG and AJG are good owners. It is a good outcome for our teams. It is an appropriate time to exit based on the value our shareholders will receive for the underwriting and broking businesses. There were some aspects to those businesses where scale can deliver benefits in reinsurance and other areas and the new owners will have those benefits.

MAY 2014 | 7

NEWS / ANALYSIS

PROTECTING THE

VULNERABLE

Institutional abuse is a delicate topic and one which is rarely linked with insurance. However, the industry is playing a key role in helping protect the vulnerable. Chinwe Akomah investigates Over the last few years reports of abuse of vulnerable people in faith, care, community and education sectors – both nationally and internationally – have reached a fever pitch, with the stigma and silence attached to the topic waning. However, given the sensitivity of the issue, it is not always clear what impact it is having on the insurance industry, how it affects brokers, and how they can protect themselves, their clients and the vulnerable people their clients work with.

IMPACT ON INSURANCE Deirdre Blythe, acting CEO, CFO and executive director of Ansvar, specialist insurance provider to the care, community, education, faith and heritage sectors, said the diminishing stigma attached to the “painful” issue has increased the likelihood of a claim. “It has prompted clients to look at their policies more closely to establish whether they have appropriate cover,” she added, “and has raised awareness that policies do have limitations and clients may not be fully protected for claims of this nature. “Further, it has also prompted insurers to raise claim reserves in attempts to best cater for greater 8 | MAY 2014

numbers of claims that may be on the horizon as a result of more public awareness of personal rights.” Some insurance classes are more likely to be impacted by cases of institutional abuse than others. Public liability and professional indemnity covers are most likely to be activated in these cases, explained Blythe, and directors’ and officers’ policies may also be affected if cover is provided for breaches of individual directors’ or officers’ duty of care. Employers’ liability insurance may be activated as public awareness of rights associated with employee harassment, bullying or abuse grows. John Van de Poll, partner at Holman Webb Lawyers’ Insurance Group, said the inquiries into abuse cases have changed how readily companies can call upon their insurance policies in the event of a claim. He noted that insurers have been “quick to exclude defence costs cover in particular for insureds with any exposure [to sectors which work with vulnerable people]” due to the inquiries that have taken place and the publicity surrounding them. Most policies will also exclude molestation entirely in respect of liability for damages but coverage will often be

NEWS / ANALYSIS

Overall we think the impact of the inquiries will be very positive – it brings this issue to the forefront and forces organisations to focus on it as being a real risk that can no longer be ignored

10 | MAY 2014

able to be negotiated for defence costs cover. The impact institutional molestation has on insurance premiums is less clear. While specific exposure and cover may attract an additional premium, it does not necessarily set in motion premium hikes. Ansvar’s premiums, for example, have remained stable. They say that they have not yet seen an influx of claims to justify an increase.

VIGILANCE AND ADVICE Brokers are often at the coalface of insurance and are therefore the first port of call for an organisation with the aforementioned exposures. It is crucial that they protect themselves. Van de Poll said the best way to do that is by brokers doing what they do best – giving thorough advice. “Diligent advice to their clients about exclusions from cover [is the best way brokers can protect themselves], especially when changing insurers. Although a cheaper premium might be achievable, this may often be at the expense of important coverage for the insured.” Blythe advised brokers to swot up on their customers’ business models and be vigilant for any contact with vulnerable people. “Watch for any circumstances where one-to-one meetings are common,” she added. “Be mindful of policy conditions and ensure necessary endorsements are requested to prevent any gaps in cover.” Brokers can also play a key role in the risk management practices of their clients. Organisations that work closely with vulnerable people are now more than ever required to provide greater detail about the activities and programs they undertake; and rigorous reference checks, criminal record checks – and further investigation if they work with children – are a must for insurers like Ansvar. “We will not offer cover for sexual abuse to organisations that do not have solid risk management practices in place or where the protection of those who are potentially vulnerable is secondary,” Blythe said. However, she concedes it is not without its challenges as it is not always possible to be entirely sure that companies are carrying out risk management practices to the fullest. Insurers are increasingly educating their clients on risk management. Ansvar provides free on-site risk surveys and follow-up reports, as well as

providing instruction guides and templates. There are concerns that brokers are not fully aware of the issues surrounding such cover. For example, Ansvar noted, some insurers will offer sexual abuse cover to large organisations but not to smaller community groups. Additionally, some cover is made on a claims-made or occurrence basis. With a claims-made policy, the insured will only have protection if they maintain their claims-made policy with an adequate retroactive date. Brokers also risk coming undone if they fail to check that their client’s cover is continuous and that there is no molestation exclusion for defence costs. “Insureds should be notified of that gap in cover,” said Van de Poll. “This is particularly important when changing insurers to make sure that retroactive dates and other terms and conditions remain consistent so that there are no gaps in cover. Regard should be had for example to defence costs cover where policies will often limit their operation to events that occur after the retroactive date.”

GOVERNMENT INTERVENTION The national Royal Commission into Institutional Responses to Child Sexual Abuse, appointed in January last year, is conducting several inquiries into instances of abuse across the country. It will prepare an interim report by 30 June 2014, and a final report by the end of 2015, subject to the commissioners’ advice in the interim report. The Parliament of Victoria’s Family and Community Development Committee, in November, delivered a report to the Victorian Government on its inquiry into the Handling of Child Abuse by Religious and other Non-Governmental Organisations. The Government is to publish a response by mid-May. Blythe said the inquiries have served to raise public awareness, and could encourage organisations to ensure they are adequately protected. The inquires could also influence the insurance industry: insurers may further change their underwriting approaches such as tightening up guidelines. There could also be some rate movement; and higher claims notification as members of the public come forward with past offences. She added: “Overall we think the impact of the inquiries will be very positive – it brings this issue to the forefront and forces organisations to focus on it as being a real risk that can no longer be ignored.”

THE BIG INTERVIEW / RICHARD ENTHOVEN

FOCUSING ON THE FUTURE

After seven years as managing director of Hollard Australia and chairman of the South African operation, Richard Enthoven is going back to focusing entirely on the Antipodean business he started 15 years ago. He explains the life-changing decision to Chinwe Akomah Insurance Business: Tell us about your background and career, and how you got to where you are today. Richard Enthoven: After I finished my master’s degree at the London School of Economics, I worked for AIG in South America and Progressive Insurance in the US. I moved to Australia in 1998 and set up a small insurance agency in 1999, and that little business has grown into what is today Hollard in Australia. IB: Could you tell us the story of Hollard Australia’s development? RE: It was just a little insurance agency at first and it grew into Hollard. It wasn’t even called Hollard in the early days. It was a very unstrategic decision made on an opportunistic basis. I thought I saw a gap in the market for non-traditional distributors of insurance to get into the insurance market. Our first client in Australia was Amway. We facilitated their entry into the life insurance market in 1999. Since then we have looked for non-traditional forms of distribution. Never in my wildest dreams did I imagine we would have the presence in Australia that we have today. IB: You recently abdicated your role as Hollard South Africa chairman. What led to that decision? RE: For the past seven years I’ve had two roles – I have been the MD of the Australian business and 12 | MAY 2014

the chairman of the South African companies. I came to a view last year that I was not able to give the kind of commitment to our South African operation that the role of chairman required and that it needed a locally based chairman. Furthermore, I have three young and wonderful kids and the travelling was becoming increasingly arduous. So we commenced a handover process that has gone seamlessly. I am energised by the opportunity to focus much more of my time and effort on the Australian market. IB: What does 2014 hold for Hollard Australia? RE: Today, Hollard has nearly 1,000 staff and circa 800,000 policyholders. We have an amazing footprint. The question is, where to from here? We have spent a lot of time thinking about that and the simple answer is: We will do more of what we are doing and hopefully do it even better – we will keep supporting our partners to grow their businesses, we will keep growing our direct-to-the-consumer businesses and focus on Woolworths becoming a major player in the insurance marketplace. We will support and underwrite a number of insurance entrepreneurs who will start new insurance initiatives over the course of this year. IB: Can you tell us more about the telematics offering Hollard is to launch in Australia? RE: We have been doing telematics as a group for

INSURANCEBUSINESSONLINE.COM.AU

seven years. We have developed a significant amount of intellectual property [IP] about how to use telematics in motor insurance underwriting and we intend to leverage that IP in the Australian marketplace in due course. We have people working on this exact question right now. The IP applies equally to both personal and commercial lines. IB: Hollard has worked in partnership with Woolworths, providing it with an insurance offering for almost three years. The general insurance industry has been quite vocal about their concerns regarding retailers entering the insurance market and competing on price. How do you respond to that? RE: Brokers play a hugely important role in the broker market and offer a valuable service to their clients, which is nominal advice and good counsel, and that is an incredibly important aspect of the financial services landscape that needs to be honoured and supported. However, there is also a space for insurance companies to deal directly with the consumer, particularly for products that are increasingly commoditised and where price is a major part of the purchasing decision. The direct and intermediated markets can work well together, and there is no need for one to be viewed as more superior or more valuable than the other. IB: You’ve mentioned that we are on the precipice of a new wave of underwriting start-ups. How do you think the landscape will change in the coming months? RE: Over the past few years we have seen a wave of corporatisation, which is effectively entrepreneurial businesses being bought by the large insurance corporates and being incorporated into their standard processes. That wave of consolidation has created space for specialists, for people willing to out-execute non-specialists in their chosen niches. I am very confident that we will see the next wave of insurance start-ups take place in the next 12 to 18 months – we are speaking to a number of them already. These things tend to move in cycles and we are at the point of the cycle where there is clearly a space and opportunity for people to live the dream of being an entrepreneur.

MAY 2014 | 13

THE BIG INTERVIEW / RICHARD ENTHOVEN

IB: What are the biggest changes you have seen in the insurance industry since you started Hollard in Australia? RE: Only three of the top 10 insurance companies from 15 years ago exist in the same form they did back then. Seven of the 10 have either merged, demutualised or been sold. There has been an incredible transformation and consolidation of the marketplace, and that is a trend that has played into our hands and allowed us to prosper.

“I personally think that the Woolworths Insurance initiative has more potential to shake up the market than any other I have seen. I am focused like a laser on making it happen” The second big trend is changes in distribution. Fifteen years ago, the primary form of engaging with customers was retail branches. The insurance industry converted that infrastructure into call centres, and those centres have seen their traffic go online with breathtaking speed. We are now seeing that online traffic go mobile, so how we engage with customers has changed dramatically in 15 years, and how we distribute products has too. The most significant force for change in the insurance market will be the entrance of major retailers – not just Coles and Woolworths but the likes of Amazon, Google and Apple too. They have an incredible ability to leverage the footprints, customer bases and analytics and their phenomenal retail acumen to become major players in the insurance industry. I personally think that the Woolworths Insurance initiative has more potential to shake up the market than any other I have seen. I am focused like a laser on making it happen. IB: Late last year, ASIC rapped Hollard’s knuckles because of its funeral insurance advertisement. Did Hollard understand ASIC’s concerns regarding its advertisement of funeral insurance? RE: About 18 months ago, ASIC communicated to us that they were concerned with some aspects of 14 | MAY 2014

funeral insurance advertising across the industry, and we engaged with them very proactively. In fact, we were the first insurer to actively do so. We listened to them and worked with them to change our advertising to deal with their concerns. We also used that as an opportunity to revisit the product and ensure that it was appropriate for its target market. We made changes to the product for both new and existing customers to make the product more relevant to its target market and better value for consumers. ASIC was very pleased with the decisions we made, not just in terms of the advertising but going above and beyond their concerns to look at product as well. IB: At an ANZIIF breakfast briefing late last year, you said social media is “uniquely ill-suited” to insurance. Can you elaborate on that? RE: I love social media, especially Twitter. Social media is a phenomenal way for us to engage with our customers, so I am not against social media at all. In fact, it is one of my missions to make social media work for insurance. However, as an industry, we need to accept that when things go well in our engagement with consumers, that is what they expect, and so that tends not to attract a lot of interest on social media. When things go badly, it is hugely emotional for people and therefore social media represents a wonderful way to express that emotion and galvanise support around that emotion, and that is what I mean when I say the structural dynamics of our industry are ill-suited to social media. That does not mean we should not embrace social media, because that would be putting our head in the sand, but social media is a unique challenge for our industry and one that will require a lot of thought and hard work. At Hollard, we view social media as another way to engage with our customers, and we treat it no differently to someone calling our call centre. We have also created teams of people dedicated to social media. They live and breathe social media and manage our presence and customer engagement in the digital space. For those customers who prefer to be serviced using social media, it is hugely rewarding. While that is a limited number at this stage, it would be foolish to think that number will not grow over time.

E BROKE T I L

SPECIAL REPORT / ELITE BROKERS 2014

2014

Australia’s

BROKERS 2014 Australia’s top insurance brokers ranked and celebrated, with interviews with the best of the best 16 | MAY 2014

E BROKE LIT

2014

THE TOP 30 Rank

Name

Company

Change from 2013 rank

Ron Tatarka

Scott Winton Insurance Brokers

Simon Althaus

Scott Winton Insurance Brokers

Andrew Faber

Sodalitas Pty Ltd (AR for MGA Insurance Brokers)

David Summers Victor Dabrowski

Markey Insurance Brokers Securitex Financial Services Pty Ltd

Stuart Prendergast

National Credit Insurance

New entry

Rank

Name

Company

Change from 2013 rank

Warwick Andison

Intertrade Insurance Services Pty Ltd (AR for Westcourt General Insurance)

New entry

John G Duncan Jnr

JMD Ross Insurance Brokers Pty Ltd

New entry

Karen Hardy

Acme Insurance Brokers

Zara Mends

National Credit Insurance

New entry

Rami Fahmy

Nsure (AR for Westcourt General Insurance)

New entry

David Verryt

Reliance Partners

David Clarke

Elliott Insurance Brokers

Avi Tatarka Sharon Pyne

Scott Winton Insurance Brokers Parmia Insurance

Andrew Bourke

Brecknock Insurance Brokers Pty Ltd

Ben Spokes

Crowe Horwath Insurance Brokers

Russell Bresland

IAA – Bresland Consultants Pty Ltd

Jenny Fulker

IC Frith & Associates (WA)

New entry

Ken Dixon

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

New entry

John Craven

AR with MGA Insurance Brokers

Kay Jackson

Simplex Insurance Solutions

Vanessa Davis

Karlo Abrenio

B & L Financial Group (AR for Westcourt General Insurance) Megalines Insurance and Risk Advisers (AR for Westcourt General Insurance)

Terry Watson

National Credit Insurance

New entry

Luke Phillips

Westcourt General Insurance Brokers

New entry

Daniel Robey

GSA Insurance Brokers Pty Ltd

New entry

Prudence Chang

National Credit Insurance

Kirsten Winefield

Capital Insurance Brokers Pty Ltd

Bunmi Ajayi

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

New entry

David Coe

Northwest Insurance

Robert Cooper

Cooper Professional Risks Pty Ltd t/as CPR Insurance Services

New entry

New entry New entry New entry

Total revenue generated by the Top 30 Elite Brokers in 2013

$23.9M Total number of policies written or renewed by the Top 30 Elite Brokers in 2013

33,684

Total number of clients serviced by the Top 30 Elite Brokers in 2013

25,534

METHODOLOGY Insurance Business objectively ranked the best-performing insurance brokers in the country. Each broker was required to supply details to Insurance Business, along with a contact who could verify those figures. They were then ranked across eight criteria, covering number of policies written, total revenue, revenue per policy, number of clients, new clients, new client revenue, and client retention. The sum of all of their rankings resulted in the Elite Brokers list.

MAY 2014 | 17

SPECIAL REPORT / ELITE BROKERS 2014

Welcome to the 2014 Insurance Business Elite Brokers special report. Like our inaugural ranking last year, this year’s research has rated and ranked Australia’s insurance brokers to find the person worthy of the title ‘Australia’s Top Broker’. It’s not just about the biggest portfolio, though: our unique ‘handicap’ methodology means we can measure brokers large and small on a level playing field to find the nation’s best performer. As the second edition of the ranking, we expected to receive more entries, but we were overwhelmed by the response from brokers this year. Thanks to all who put themselves forward for consideration. So, without further ado, who is the best broker in Australia? Read on to find out. Kevin Eddy, editor, Insurance Business

Nsure director Rami Fahmy may be a new entrant to the Top 30, but he’s no stranger to Insurance Business – or the media in general. We originally featured Fahmy in an article in late 2012 after he appeared on the cover of Men’s Fitness magazine. As any fitness enthusiast knows, success is all about setting and achieving goals, and Fahmy also applies this approach to his professional life. Rami Fahmy “I’ve been really deliberate with my DIRECTOR, NSURE GENERAL goals, and two weeks before the Elite INSURANCE ADVISORS (AR FOR Brokers survey period was opened, I had WESTCOURT GENERAL INSURANCE) put down that we would achieve an

“It’s not uncommon for us to walk into an account paying $6,000 and walk away with them paying $50,000” SUCCESS SECRETS • Set clear goals and strategies to achieve them. • Education, education, education: never stop learning. • Provide a thorough, expert service. • Enable clients to do business by taking away the fear.

18 | MAY 2014

award this year,” he says. “I’m ecstatic – it really shows the power of setting yourself a goal.” Fahmy, 31, emphasises that providing a personalised, boutique service – particularly around strata, property, ISR, manufacturing and construction risks – has been the key factor in Nsure’s success. “A big portion of our activity is around the SME space: we specialise in pitching around the $50,000–$100,000 premium level and giving them the kind of service that you’d normally need to be spending $250,000 with Aon or Marsh to get.” Fahmy’s break in insurance broking came in 2007, when he starting working for his father with a

goal of writing a policy a day. Never one to rest on his laurels, the younger Fahmy soon struck out as an authorised representative in his own right, and within a year had folded his father’s portfolio into Nsure. Fahmy adds that careful selection of third-party referrers has helped him generate high-quality leads for new clients, and that giving prospective clients a full-solution approach from the outset also helps create a mutually beneficial relationship for the long term. “We always present to clients and always have a meeting where we ensure we really understand their needs and ensure we haven’t missed anything. When we go into a client, we also have a growth plan for them – we’ll have 10 policies we’ve quoted on. While they may not be looking for that, we’ll already have that bookmarked for the following year. It’s not uncommon for us to walk into an account paying $6,000 and walk away with them paying $50,000.” Fahmy’s come a long way in a short time but is already working towards his next goal, and training is the key. “Every month we’re spending a huge amount of money on training and staff development – both technical and relationship skills. Every month I’m learning and training, reading policy wordings. I’m putting in the hard work to constantly keep improving my expertise.”

WHAT’S NEXT? “This year is all about growth. It’s about training and developing staff, and growing the team. We’re growing very quickly, and I’d like to be recognised as a large insurance broker at the forefront of innovation in customer service delivery.”

E BROKE LIT

2014

Zara Mends

BRANCH MANAGER, NATIONAL CREDIT INSURANCE

The first of trade credit insurance specialist NCI’s SUCCESS SECRETS entrants in the Top 10, • Learn about your and one of four NCI clients’ business successes and brokers in the Top 30, challenges. Zara Mends is no • Tailor solutions to stranger to accolades, clients, rather than having been named NCI’s trying to fit clients Service Person of the into existing Year in 2008 and 2012. solutions. She oversees a port• Make conversations folio worth $3.3m in about advice, not income, and a staff of transactions. seven, as NCI’s Brisbane • Be willing and branch manager. She prepared to adapt attributes her storming and invest in staff training and 2013 – in which she retention. didn’t lose a single client, despite a challenging economic environment – to the support of her team. “I am very fortunate to have a great team of people to work with, including a supportive management group and inspirational mentor,” says Mends. “The real key is the people you have working with you ... day in, day out. It is impossible to achieve real success without a solid team, and I am grateful to have this.” Mentoring some of those newer team members has also been a key part of Mends’ year. “My highlight for the last year would have to be witnessing and being involved in the development of some new and junior members of our Queensland team,” she says. She also highlights the importance of tailoring solutions to clients, not the other way around. “Be involved and informed on your client’s business successes and challenges. It is important to ensure you are tailoring your advice and service to individual client needs rather than trying to have your client fit into what you already provide or do for other clients,” says Mends. “Create a relationship with your customer that is advice-driven rather than simply a renewal negotiation or transaction.”

You’d expect last year’s number three broker to be a little miffed that they’d been demoted to number eight, but Acme Insurance principal and Tully native Karen Hardy is actually rather pleased. “I’m really pleased that I got pipped. I think it’s wonderful that the competition is getting fiercer. There’s a lot of people doing good work out there, and the more we hear from them, the more we can learn from them.” Hardy comments that 2013 was a tough but busy year, not least due to Far North Queensland’s economic woes over recent years. “We were basically flat stick! Insurance is a good indicator of the general economy – when things are tight they try and cut the stuffing out of it. The downturn definitely did affect us in that people were getting rid of all the bells and whistles, but the fact that we’ve been able to maintain what we have is very pleasing. “Future revenue will only be increased by improved economic conditions and consumer confidence – or if Red Bull starts being sold by the keg!” Even though Hardy has slid down the list, she’s still the top-ranked woman on the Top 30 list (which this year features eight women compared to seven on the 2013 list). We asked Hardy her thoughts on women in insurance. “We’re seeing a lot of younger women coming into the industry, which I think is fantastic. I think consumers actually trust women more. We’re also very protective of our clients, and our clients appreciate that!” We’re seeing more and more women start their own microbusinesses, and it’s great to see more women starting their own brokerages.

WHAT’S NEXT? “World domination!”

08 Karen Hardy

ACME INSURANCE

SUCCESS SECRETS • Be honest – talk to your clients and help them manage their risk. • Tailor packages to suit their budget. Many clients can self-insure for minor stuff, but it’s stuff like property losses and business interruption that they need. • Junk the jargon – make sure clients understand risks by explaining them in plain English.

Average revenue generated by a Top 30 broker in 2013

$796,733 Average number of new clients picked up by a Top 30 broker in 2013

156

MAY 2014 | 19

SPECIAL REPORT / ELITE BROKERS 2014

John G Duncan

DIRECTOR AND CEO, JMD ROSS

“Price doesn’t sell insurance. What sells insurance is the coverage offered and the promise in the policy wording to pay what’s offered in the case of a claim”

20 | MAY 2014

A second-generation insurance broker, John G SUCCESS SECRETS Duncan is described by • Listen to what the his staff as “the rock of client wants. our broking firm” and • Understand the nuts “the most thorough, speand bolts of your cialised, knowledgeable clients’ businesses and industries. broker I have ever seen”. He is also a recognised • Focus on coverage, service and offering specialist in professional advice, not just price. indemnity insurance and • Be available 24/7 a member of the AIMS – be high-touch, not Professional Indemnity low-touch. Committee. While he has reined in his portfolio management to devote more time to his CEO role, Duncan still handles a sizeable portfolio himself, and loves the challenge of accessing and protecting his clients, insurance exposures, and managing a medium-sized brokerage. “As a kid I used to pull things apart ... I loved discovering how things work. With my clients, especially the manufacturing ones, I love to find out how they make widgets and understanding their business. My primary focus is understanding what the client does, because once I know that I can provide advice to the business.” That philosophy has stood the firm in good stead when competing for business, with JMD Ross securing some major accounts in 2013. “The reason for that is the knowledge we’ve brought to the table and our service offering. Whilst price is an important component, we tend to focus on coverage and service.” Duncan says 2013 has seen the emergence of ‘enthusiasm’ in the economy, especially in the construction industry on the eastern seaboard. Like many, though, a challenge he faces is succession. “There is a ‘new wave’ of young brokers coming through ... I’d like to think members of our team would be keen to buy into the business, but they’re young; a lot of them have families. We need to find creative ways to finance them into a shareholding in the business.”

A 33-year veteran of the insurance industry, Intertrade supremo Warwick Andison saw a cracking 2013, with the firm growing more than 10% over 2012. He puts that down to his personal touch. “We do life and general insurance, and I often pick up general clients through the life business (and vice versa),” says Andison. “I also pick up a lot of work through referrals and personal networking. Myself and another staff member both belong to a business networking group called Business International, and we’re networking every Thursday morning from 6.30 until 9am. That’s helped us.” He argues that a personal touch needs to return to the “online-dominated” insurance world too. “I come from an age where you’d talk to the underwriter first about new business,” he says. “It’s becoming a bit too impersonal in some areas, and we could do with reopening lines of communication. That sort of relationship is developing with the underwriting agencies, and the big [insurers] are missing out.” Asking for referrals is also essential, he adds – as is sending a small gift to thank clients for a referral. While the biggest challenge he’s faced has been “finding enough hours in the day”, he attributes success to the help of his team as well as the compliance support provided by Westcourt under its AR model, which frees Warwick and his team up to advise clients.

WHAT’S NEXT? “Growth. We are aiming to double in size within 18 months, and are looking to do that through bringing on more staff as well as acquisition. That will also involve me working ‘on the business’ rather than working in it. Watch this space!”

SUCCESS SECRETS • Listen to your clients – don’t have preconceived ideas of what your client needs. • If you’re doing a good job for your clients, ask them for referrals.

Warwick Andison

INTERTRADE INSURANCE SERVICES PTY LTD (AR FOR WESTCOURT GENERAL INSURANCE)

SPECIAL REPORT / ELITE BROKERS 2014

Occupying the number five spot is National Credit Insurance’s NSW state manager, Stuart Prendergast. Prendergast, who was NCI’s youngest ever state manager when he was appointed in 2009, manages a team of more than 20 people as well as looking after a portfolio of key accounts. In 2013, a landmark year for the company, Prendergast was “batting a thousand” and achieving 100% renewal retention despite a competitive market. “NCI is the largest broker in the market, so there’s a big target on our back – we’re under constant threat from the competition,” he says. “Not having a single account lapse was a great achievement, not least because it sets the standard here that my team can see and follow, both in the way I go about things and delivering service to clients.” Prendergast sees a lot of upside in the trade credit insurance market too, suggesting there’s plenty of room to grow. “The market penetration isn’t quite what we’d like it to be, but there is a lot of appetite in the market from people who are aware of trade credit insurance. That may be as a result of uncertainty in regard to bad debts. We’re seeing that appetite in construction, electronics and retail in particular. What would Prendergast change about the insurance industry? Stuart Prendergast “I’d change the perNSW STATE MANAGER, ception about insurance. NATIONAL CREDIT INSURANCE I’ve been with NCI 15

“The perception that insurers are in the business of denying claims is an absolute fallacy” SUCCESS SECRETS • Build relationships with decisionmakers. • Be proactive, not reactive – see problems coming. • Plan ahead.

22 | MAY 2014

years and I can’t count the number of times I’ve seen an employer give a client the benefit of the doubt in a claim. The perception that insurers are in the business of denying claims is an absolute fallacy.

WHAT’S NEXT? “I’m studying for an MBA, so I’m hoping to have that finished by 2016. I’m also keen to develop the next generation of NCI here in Sydney over the next few months and years.”

David Summers MARKEY INSURANCE BROKERS

SUCCESS SECRETS • Differentiate yourself from the pack – ask for referrals and make cold calls yourself. Make yourself available when others aren’t. • Work with insurers at targeting risks together. • Sell on product, not price. If you win an account on price, you will lose it on price. • Only offer your clients what you yourself would be happy to take. Treat your clients with the same service and standards you yourself would like to be treated with.

That’s right – the competition at the top end of the market was so close that two brokers tied for the number four spot. First up is last year’s number six man, David Summers, although this ambitious young gun has his sights set on higher prizes, commenting that there’s “still room for improvement”. (He confided that he’s gunning for the number one spot.) While 2013 was a banner year for Summers, his biggest highlight wasn’t work related at all: it was the birth of his daughter, Evita. “Hands down, Evita’s birth was the highlight of my life,” he says. “I seem to actually get more work done in a day now! Everything has more purpose.” Even so, Summers is still a self-confessed workaholic, admitting he’s available to clients 24/7. But he’s quick to divert the credit for his success to his colleagues. “I can’t say it’s my success alone as the management of a portfolio of this size would be impossible without the amazing people at Markey’s. Stephen and Simmone Markey have created a support network which includes our processing team, our domestic team, our claims team, our accounting team and my internal broker of six years, Ruthanne Murdoch. Without any of these people none of this would be possible.” When asked what he’d change about insurance, he’s in no doubt that direct market placement is a scourge on the perception of the industry. “I’m sick of all the advertising for all these two-bit [direct] insurance companies,” he says. “Whilst it doesn’t really affect our business clients, it does paint our industry in a bad light. When the things go wrong for the consumer who has taken the cheap and nasty policy with zero advice, they take their ill feelings out on the entire insurance industry.”

E BROKE LIT

2014

Victor Dabrowski

SECURITEX FINANCIAL SERVICES

Holding joint fourth position is Adelaide’s Victor Dabrowski of Securitex Financial Services, who freely admits he’s never “worked as hard in his life” as he did in 2013. A big chunk of that business came down to taking just one phone call, too. “You never know where business is going to come from,” says Dabrowski. “I was in Canberra for a conference ... My phone rang and it was a friend of a client of mine. He had experienced a fire in one of his shopping centres on Sunday morning, and was looking for advice for a clean-up crew. “I asked, ‘Why aren’t you ringing your broker?’, to which he said, ‘I have – 19 times. He’s not answering’,” says Dabrowski. “I gave him details of a cleaner, and he asked me to get in touch when I got back .... “[When] I sat down in his office, he pushed a pile of files towards me. ‘I’ve sacked my broker of 17 years,’ he said, ‘I want you to look after me and my clients’.” That wasn’t the only client Dabrowski picked up who was dissatisfied with their broker. “Everybody runs their business differently, but complacency can set in, especially if a client has been with you for years,” he says. “If you don’t SUCCESS SECRETS make yourself relevant, • Answer the phone. if you’re purely sending You never know out renewals, somewho’s on the other where along the line end or where it’s they’ll say they’ve had going to lead you. enough and will go else• Handle claims. By where.”

WHAT’S NEXT? “It would be nice to get the number one mantle ... But even a hat-trick of being in the Top 30 Elite Brokers would be fantastic. It’s not just good for my ego, but also for everyone in the organisation and for clients.”

taking the pain away from the claims process, you cement the relationship and become indispensable. • Provide a high level of service – it adds hours to your day, but the alternative is your business going into decline.

Andrew Faber MANAGER, SODALITAS (AR FOR MGA INSURANCE BROKERS)

SUCCESS SECRETS • Deliver the best service possible at all times – at the end of every conversation your client should walk away feeling good. • Look within your own portfolio to find growth – if you service your clients well, you’ll retain them, and you’ll get natural growth through referrals.

MGA-authorised representative Andrew Faber is one of the rising stars of the insurance industry, who’s not only succeeding in business but playing a key role in developing the next generation of broking through his role as vice chairperson of the NSW NIBA Young Professionals Committee. A sterling 2013 has seen him improve his ranking on the Elite Brokers list from fourth last year to a podium spot today. He highlights his joint venture with accountancy firm Bell Partners as a good lead generation tool, as well as the work he’s done with trade associations around the country. However, Faber maintains that servicing his existing portfolio is critical to his success, saying that “if you look after your existing clients, new business will automatically follow on from that”. “When any company goes through rapid growth, the challenge is ensuring existing customers are well looked after. Most people look at new business as exciting and existing clients as a bit stale and unglamorous. But if you don’t look after those clients, it doesn’t matter how much business you get in the front door, because it’ll just walk out the back.” Faber takes a proactive approach to ensuring no client falls through the cracks. “We’ve implemented a renewal process that ensures all clients get personalised contact. That’s to ensure clients feel like they’re cared about, and not just a number. It’s all about personal service and personal advice,” he says.

WHAT’S NEXT? “We’re growing; I’m looking for more staff to come into the business. We want to continue the growth we’ve already seen. In five years’ time, I’d love to be running a medium-sized brokerage in Sydney through the MGA network, and that’s what we’re moving towards.”

Total number of new clients picked up by the Top 30 Elite Brokers in 2013

4,683

Average number of clients a Top 30 broker services

851

Average number of policies written or renewed by a Top 30 broker in 2013

1,129 MAY 2014 | 23

SPECIAL REPORT / ELITE BROKERS 2014

Simon Althaus NSW STATE MANAGER, SCOTT WINTON INSURANCE BROKERS

SUCCESS SECRETS • Know and recognise your own strengths and those of your colleagues, as what can be achieved as a team is far greater that what an individual can achieve on his or her own, no matter how experienced or talented the individual is. • Overservice your clients. If you don’t, you will lose them to your competitors. • Broker every renewal policy with the same vigour and thoroughness as when quoting or placing a ‘new business’ policy. If you want to survive and grow in this industry, you cannot afford to be complacent.

24 | MAY 2014

Simon Althaus is a 17-year veteran of Scott Winton Insurance Brokers, and currently holds the key post of NSW state manager. Last year has seen him continue to expand his client base in the tough and competitive Sydney market. Like several other brokers in the Elite Brokers ranking, he highlights the economic environment as a key challenge over the last year. “Retail consumer spending has been on the decline over the past years for various contributing reasons, causing retailers to struggle to meet their (gross) rental obligations to their property owners,” says Althaus. “This has placed the difficult task on the property owners, and on retailers themselves, to reduce their larger outgoings and/or costs of doing business. There is immense pressure and higher expectations on brokers to negotiate extremely competitive premiums with insurers, while at the same time having the onus to ensure that the current comprehensive levels of cover are not at all being compromised.” Althaus adds that insurers could do more to support brokers. “Now more than ever, insurers need to rally behind insurance brokers and to lead the way in educating both the private and commercial sectors of the vital professional role that insurance brokers play in relation to the sourcing and placement of one’s insurance requirements,” he says. “Insurance is no less important and in my opinion is the ‘oxygen’ of one’s business operation. One should engage an insurance broker to seek reliable advice and arrange the placement of their insurance requirements – just as one seeks legal advice from a solicitor, or tax advice from an accountant.” Althaus isn’t the only representative from Scott Winton in the Top 10. Read on to find out who from the firm has taken out the number one slot.

WHAT’S NEXT? “This recognition will definitely propel me to continue to grow from strength to strength, through remaining committed to this continuously evolving industry, while drawing on the experience gained over the past 17 years in the insurance broking sector.”

Ron Tatarka

MANAGING DIRECTOR, SCOTT WINTON INSURANCE BROKERS

For the second year in SUCCESS SECRETS a row, the man who • Don’t focus on price; founded Scott Winton rather, focus on your Insurance Brokers 22 clients’ needs. years ago has taken out • Offer something the coveted Insurance different to everyone Broker of the Year title. else, whether that’s products Ever humble, howor services. ever, Tatarka attributes • Anticipate your his success to the outclients’ needs, and standing work of the always be available entire team at Scott to meet these needs. Winton. “Broking is a team effort and each member of the team has a unique contribution to make,” he says. “The ongoing support of both insurers and clients also adds to the phenomenal success of the company.” Tatarka retains the top spot despite 2013 being “a much harder year” than 2012, in his view. He says 2013 was “much more competitive”. “There was a downturn in pricing – the insureds were the winners there. You had to write more business to keep the bottom line going. We spent a lot of time with clients prior to renewal date, keeping them abreast of changes happening in the insurance industry, and looking at improvements we could make to policies mid-term rather than waiting until the renewal date.” Tatarka’s portfolio and the business in general was also buoyed by a “dramatic increase” in referrals through existing clients. He also highlights the introduction of the firm’s own property owners’ wording, designed in conjunction with LMI’s Alan Manning, as a part of the business that has grown significantly.

FEATURE / ENTERTAINMENT

How to insure a

MUSIC FESTIVAL From boutique events to giant touring shows, the music festival is a staple getaway for Aussies young and old. Kevin Eddy spoke to Paul Howard about what to do if a promoter lands on your doorstep looking for cover

26 | MAY 2014

The world of the music festival has changed significantly since the days of Woodstock and the first Glastonbury festival. Long gone are the loosely organised hippie gatherings with security handled by Hells Angels. Nowadays, the music festival is more often a slickly arranged corporate event, which requires equally slickly arranged risk management and insurance cover to match. While the boom in festivals of the last few years is receding, smaller ‘boutique’ festivals continue to thrive – the events brokers are most likely to get involved in. Paul Howard, Arena Underwriting’s general

INSURANCEBUSINESSONLINE.COM.AU

manager, has provided policies for hundreds of events over the years, from tiny bush festivals for a few hundred people to Australia’s largest touring shows. Here are his top tips for making sure any event is fully covered:

KNOW YOUR CLIENT

First and foremost, brokers should carry out due diligence on prospective promoters, particularly their track record. Many of the worst promoters have been weeded out as the festival market has contracted over the last couple of years, says Howard, but that doesn’t mean brokers should be complacent. “Look at their history – and not just in the last year or two, but over the last 10–15 years,” he says. “Promoters can easily rebadge themselves, like any other business.”

THE VENUE

The size of the venue is also critical, especially in relation to crowd numbers, says Howard. “Is the venue a suitable size for anticipated crowd numbers?” he asks. “You should also investigate whether the venue is an indoor or an outdoor venue, and whether it’s an urban or a regional location. These will create different risk management challenges for the event.” The contract between the promoter and the venue should also be checked in case of ‘hold harmless’ agreements. “A ‘hold harmless’ agreement requires the promoter to assume responsibility for

any incident that arises during use of the venue, essentially assuming liability for other parties,” adds Howard. “That’s something we specifically exclude from our policies – we won’t indemnify other parties due to their negligence. These agreements are becoming less common, however.”

THE RISK MANAGEMENT PLAN

“Before we go too far with events with a reasonable number of people – say 2,000 upwards – we take a good look at their risk management plan,” says Howard. “Even small community events bring risk. If there’s no plan, that’s when alarm bells should ring.” Howard highlights a few key elements that should be considered for a music festival. “First, are there enough security and crowd control measures in place to deal with the clientele? What controls do they have in place to ensure aggregate numbers of the crowd aren’t going to one stage at the same time? Do they have barriers to prevent crowd crushing, and a plan to control numbers going in and out?” he asks. “Adequate first aid facilities should also be in place.” Howard recommends checking the contract between bands and the promoter for behaviour stipulations. “For example, it’s often laid down that bands shouldn’t encourage people to crowd-surf or to surge to the front,” says Howard. “A condition we put on major festivals is to require signage next to the

It’s not just in the arena that promoters need to consider the risks that come with large numbers of people who may not be in full control of their faculties

MAY 2014 | 27

FEATURE / ENTERTAINMENT

KEY ELEMENTS TO ADDRESS IN A RISK MANAGEMENT PLAN • Venue capacity – not oversold or lower than expected attendance • Crowd control – avoiding crushing, surging, stage invasions, as well as ensuring crowds are dispersed effectively • Measures to prevent and deal with drugs and alcohol and criminal activity • Ensuring work environment is safe for workers

• Measures to deal with event cancellation, artist cancellation or other changes • Effective access for mobility-impaired attendees • Issues associated with bump in/bump out processes, such as damage to venue infrastructure • Potential issues with local authorities, police and other stakeholders

Policing usage of drugs and alcohol is also a major consideration, especially preventing attendees from bringing alcohol and drugs into a venue stages stating banned behaviour. In fact, that’s a requirement that most venues carry out now as a matter of course.” Policing usage of drugs and alcohol is also a major consideration, especially preventing attendees from bringing alcohol and drugs into a venue. However, Howard cautions that it’s not just about wielding an iron fist – promoters also need to consider the health and safety of attendees. “A few years ago, there was a major claim involving a girl who was carrying several Ecstasy tablets,” says Howard. “She was just about to enter when saw she saw the sniffer dogs at the entry gate, so she took all the pills at once, with the obvious consequences. Now, it’s best practice to have warnings on variable message boards before you go in that you’ll be searched for drugs.” Keeping people hydrated is also a big consideration, especially at events held at the height of summer.

CAMPING AND OTHER ISSUES

It’s not just in the arena that promoters need to consider the risks that come with large numbers of people who may not be in full control of their faculties. “We see a lot of country festivals that involve camping, and that’s actually a big risk,” says Howard. “For example, it’s important to have an allocated 28 | MAY 2014

area for people to camp where there’s not going to be vehicles moving around, as otherwise people can get run over when sleeping in their tents.” Promoters and brokers should also consider the potential risk of fires, as well as the impact on local flora and fauna. Adequate toilet and shower facilities should also be supplied, especially in the bush where access to these may be limited. A further risk can be presented by waterways, especially if there’s a dam on the property on which the festival is being staged. “On a hot day, with a few drinks inside you, a dip can seem pretty tempting, and that can be a big issue if there is a couple of thousand people on site,” says Howard. “The organiser may need to put in place measures to stop people jumping in the water, such as warning signs that there’s no supervision and swimming is done at attendees’ own risk. It may even need to fence off the waterway entirely.”

EXTERNAL PROVIDERS

Finally, brokers should also ensure that thirdparty suppliers are adequately covered, and that there are no gaps in cover which could cost the promoter dear. “The promoter basically subcontracts everything out: amusement providers, AV, pyrotechnics, rigging, staging, stallholders and so on,” says Howard. “We effectively only cover the promoter as the organiser of the event. We can extend policies to cover stallholders, although we normally don’t cover product liability, just the public liability. Everything else should be covered off by suppliers’ own policies. Brokers need to ensure there are no holes.” Even so, Howard cautions that the promoter still carries a vicarious liability, so may become involved in any action if, for example, staging fails and injures attendees. However, most promoter-focused policies will cover the defence costs if needed. Ultimately, creating a thorough and well-thoughtout risk management plan tailored to the event is the most important thing a promoter and broker can do to ensure the success of a music festival. “Every event is different and carries different risks,” says Howard. “That’s why we’ve got to ask a lot of questions about what’s going on and what the promoter is doing. It’s often worth bringing on board an experienced risk consultant to put together the risk management plan, especially if the event is likely to be of any significant size.”

FEATURE / CLASS ACTIONS

ACTION ST

In association with

Class actions aren’t just a matter for the major insurers – they can drag in your clients too. Patrick Boardman investigates the legal ins and outs The growing number of litigation funders and class action law firms means that the threat of a class action, which 20 years ago was largely confined to a small number of major insureds, is now a real risk for medium-large companies and their directors/officers. Australia has one of the most liberal class action regimes in the world. Australia also effectively has some strict liability offences which are utilised in a substantial proportion of class actions. For example, for a statement to be ‘misleading or deceptive’ all that is required is that the statement be materially incorrect or misleading. No intention to mislead or deceive is required. In addition, a failure to disclose relevant information immediately, in breach of continuous disclosure obligations, can trigger an entitlement to compensation. Again, the breach and right to compensation does not require any intention to deliberately withhold disclosure of the information.

Class actions can be categorised into five particular types: 1. Shareholder/investor class actions 2. Product liability class actions 3. Disaster class actions 4. Consumer class actions 5. Financial advice/mis-selling class actions

The consumer class actions have the potential to affect the most insureds. As evidenced by the recent bank fees class actions, claimants do not have to have incurred substantial losses in order to justify a class action, so long as there are sufficient numbers to make it worth the funder’s and/or lawyers’ while. This class action model can be rolled out to most businesses, whatever their size, as also occurred in the class action against Cash Converters. Notably, this model could extend to any mass breach of the new Privacy Act 30 | MAY 2014

obligations which came into force on 12 March 2014. The US has shown that breaches of privacy obligations can be fertile ground for class actions. A class action can be a devastating occurrence for a company and its directors/officers. It usually arises following a significant adverse event which compounds the multitude of problems that have to be addressed. It is therefore critical that a company has a disaster plan for a class action, including managing the inherent conflicts that can arise if, for example, the entire board is sued.

RECENT DEVELOPMENTS There have been a number of important recent legal developments in the class action field which are worthy of note.

Litigation funding This is a very topical issue, as it is arguably the biggest driver of a multi-billion industry and yet, in its current form, is unregulated and unlicensed, notwithstanding the vast sums of money and the competing interest involved. Recently, Maurice Blackburn Lawyers sought to establish its own connected litigation funding arm, however that application (in the equine flu class action) was withdrawn with questions being raised about conflicts and the ability of a law firm to be both a funder and a solicitor on the record. It has to be expected that a similar application will be made again, sometime in the future. More worrying for insurers and insureds alike was a recent application by International Litigation Funding Partners Pte Ltd to be appointed the litigation funder for the entire shareholder class in the Leighton class action, rather than merely for those that had signed a funding agreement. As the funder for an

INSURANCEBUSINESSONLINE.COM.AU

ATIONS entire class it would mean that: • Smaller quantum claims would likely be more appealing to funders, as the entire class would be signed up; and • The quantum of the potential settlement value of a claim would likely increase, as the entire class would have to factor in their 30–40% commission to the funder (which is after the Applicants’ legal costs are deducted).

Settlements Any settlement of any class action has to be approved by the court. Recently the courts (and ASIC) have shown an increased willingness to interfere with agreed settlements and the amount paid in respect of the applicants’ costs.

Availability of insurance The availability of insurance is still not certain following the New Zealand Supreme Court decision in Bridgecorp. Although the Australian position currently stands with the NSW Court of Appeal decision in Chubb v Moore, that decision will, at some stage, be appealed to the High Court. The recent special leave application that was to be heard on 14 March 2014 did not occur and is unlikely to proceed, however there is no guarantee that the High Court (or a Court of Appeal outside NSW) will not follow the NZ reasoning. To counter such risks it is important that insureds obtain adequate cover, including adequate limits and separate costs and/or side A only cover.

Commonality

The ability of claims to proceed by way of class action has recently been challenged. While Australia has very liberal class action laws, it is still possible (although the bar is very high) to challenge whether the class of claims have the necessary commonality to proceed as a class action. Insureds and brokers should check the retention wording. In a recent decision the court held that each claim in a class action was a separate claim which could not be aggregated under the retention clause because there were insufficient common features. Accordingly, a separate excess was payable in respect of each claim. While such an argument could also go directly to the issue of whether there was sufficient commonality for the matter to proceed by way of class action, insureds and insurers should check their retention wording to see that it properly provides for aggregation of such claims. A significant policy excess per claim could negate all effective cover, as occurred in the Lloyds TSB case in the UK.

Patrick Boardman is a partner at Wotton + Kearney. He has worked in insurance litigation in the UK and Australia since being admitted in 1990. He has extensive experience and expertise in the areas of Directors & Officers, Professional Indemnity, Investment Managers and Fidelity.

Security

Individual reliance

In recent cases unfunded litigants were ordered to pay security for costs. The courts have also considered whether insurers in subrogated recovery actions that are part of a class action should also provide security for costs.

The extent to which individual reliance has to be established in shareholder class actions has still to be determined. There is a current challenge in the US to the ‘fraud on the market’ theory which has been adopted in shareholder class actions in the US but not yet accepted here. In the recent Timbercorp case (which was dismissed for other reasons) the trial judge held that the Applicants had not established that they had relied on the relevant offending material.

The ability to defend and/or challenge a class action is hampered by the absence of any discovery obligation by group members although limited discovery/ particulars can be obtained from a select few for the purposes of settlement. It is important that insureds are fully insured and prepared for any claim, as the potential for that to be a class action is ever increasing.

Discovery obligations

MAY 2014 | 31

FEATURE / PROFESSIONAL INDEMNITY

The

PROFESS Professional indemnity is a core part of many brokers’ portfolios, and one that’s set to grow as Australia changes to a service economy. Insurance Business gets four PI experts around the table to talk turkey

What are the big issues for professional indemnity insurance at present? James Stringer: Expansion of cover is a significant issue, with clients seeking to transfer business risk that would originally have been their business risk. Increasingly, clients are looking for almost quasi-financial guarantee covers; this is something we, and most professional indemnity insurers, would struggle with, particularly in the building, construction and engineering sector. We’re in a highly competitive market too. While that’s good, everyone’s looking for an edge, so coverages are expanding. Coupled with that, increased competition is putting downward pressure on, which is not necessarily a good 32 | MAY 2014

long-term mix. Ultimately, it does leave the industry challenged as to what the focus of our insurance should be – whether it’s just professional indemnity or whether it should expand into other areas, such as those quasi-financial risks or the transfer of business risks. And, of course, charging adequate premium for the exposure. Glenn Ross: An overabundance of markets writing this product has created an extremely competitive rating environment, resulting in rates that are marginal against risk being assumed. That minimises returns for this class of business. Gary Gribbin: The economy continues to be sluggish in terms of growth, and this continues to affect business activity and start-ups.

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SIONALS However, the legal environment remains stable and poses no threat at present. Rather, we need to ensure clients utilise appropriate terms of engagement and are encouraged to improve their risk-management practices. The industry continues its drive to distribute these products online. This pushes more responsibility onto brokers and homogenises what has traditionally been a fairly complicated product. It becomes more important to transact with an underwriter that can actually underwrite, apply common sense and make decisions. Requirements on the insured in relation to waiver of subrogation or contractual liability extensions must also be a consideration. Brokers must be able to provide assistance to their clients in this area, even if it is just to push back against requirements. Rob Collyer: One of the big issues is education. With so many younger people joining our industry now, there is a great need for education and training. With an abundance of capacity in the market and so many players distributing this capacity, it is

important the new generations understand risk exposures and not just rely on price. The online versus manual debate continues to rage. It is important that any markets that offer an online capability to purchase PI insurance also back this up with underwriters available to offer expert advice and discuss the needs of the client. Still, it is an ever-changing and exciting market, with new products such as cyber liability set to provide brokers with new opportunities but also provide a challenge in understanding the risk and being able to market this to their clients. What do you see as the main growth opportunities, particularly sectors? Gary Gribbin: Health, allied health, aged care and home services all continue to experience growth. There is also continued expansion for occupations that can be considered to be professional. It is becoming more common that anyone who provides any sort of design, advice or specification, whether they charge a fee or not, is considered a professional. This is also contributing to market growth.

MAY 2014 | 33â&#x20AC;&#x201A;â&#x20AC;&#x201A;

FEATURE / PROFESSIONAL INDEMNITY

THE ELEVATOR PITCH: WHY SHOULD BROKERS/CLIENTS CHOOSE YOUR PI PRODUCT INSTEAD OF OTHERS? Glenn Ross: The coverage offered by our very recently upgraded wording is as broad in coverage as it is easy to understand. Our pricing within the niches we tend to target is certainly competitive. Our underwriters are very knowledgeable, easily accessed and customer-service focused. Gary Gribbin: There are a number of benefits to the ProRisk product suite,

including: • Products supported by excellent service and the ability to talk to an underwriter; • Local claims handling by the specialist ProRisk in-house claims team; • Technical assistance provided through the policy process; • Multi-year run-off cover available on ProRisk policies, available up to seven years; • Consistent and stable pricing; • Large capacity of up to $20m, and • The financial security of our products and a proven history of good performance.

Rob Collyer: We have tailored our PI products to each industry to ensure the cover

meets the requirements of the client. Specific products are available for niche areas such as trainers, resources professionals and design and construction professionals. We have an experienced team of underwriters and product experts to answer all your questions. We provide the brokers with access to our online quoting tool, which allows the user to quote, bind and issue documents in a quick and seamless manner. Brooklyn is all about ‘making you the expert’, so we have recently redesigned our website to provide the brokers with the tools needed to be able to market and sell professional indemnity insurance too.

James Stringer: Well, they’re pretty much best in class! Zurich’s policies are clear,

concise, provide the client with certainty of cover, and they provide a number of benefits that aren’t in our competitors’ cover. For example, we provide latearising extensions cover, which means if you buy a policy now and we bring out a new policy form in six months with additional coverage enhancements as standard, you have the right to request that additional cover at no additional charge. Also, we have an extension where if we can resolve a matter without the cost of legal expenses, we will halve the client’s deductible on a number of our policies, up to a capped amount. If we can resolve something without lawyers, we feel it’s only fair to share that saving with the customer. The other key benefit is that we can arrange international insurance programs. If you’re an insured headquarter in Australia and have a subsidiary in China, we can issue a master policy in Australia, and through Zurich or our partners in China, we can issue a local policy in China as well. We can do that in well over 150 countries.

34 | MAY 2014

James Stringer: Everyone’s pretty focused on the security and privacy sector (aka cyber). The privacy legislation has recently changed, for good reason, but it is still an uninsured area for many businesses. The government hasn’t publicised it as well as they might have, and the Privacy Commissioner has warned they will be taking a ‘big stick’ approach: If there’s a breach, clients will be exposed. That will grow, both in Australia and overseas. Even in the short time that’s been actively sought by clients, we’ve seen a lot of growth. Glenn Ross: Because rates are being pressured down, growth opportunities are available to agencies concentrating on niche areas – whether that is providing combined covers or targeting risks other markets ignore, perhaps through a lack of understanding. Rob Collyer: There are three core growth areas from our perspective: 1. The mining and resources industry: While there is a lot of talk about the ‘boom’ subsiding, there is still a large proportion of professionals involved in the resources industry who are only covered for general public and property liability exposures. Engineers, surveyors, architects, geologists, mineralogists and metallurgists, together with surrounding business services such as OH&S consultants, management consultants, business strategists and environmental consultants, all present a great opportunity for brokers to target. 2. The real-estate industry: Changes to regulations mean all licensees must hold professional indemnity insurance as a condition of their licence. This encompasses real-estate agents, stock and station agents, business agents, strata and community managing agents, and on-site residential property managers. The minimum requirement for NSW real-estate agents is now $1m any one claim and $3m in aggregate. 3. Multimedia: With online subscriptions and digital advertising outstripping traditional print media, the need for an all-encompassing multimedia PI cover is escalating. With the emergence of the digital age, cyber policies have become the

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flavour of the month, but brokers must not forget there are great opportunities in the traditional multimedia space as well. Are there any challenges facing the PI space at present? James Stringer: It’s the same challenges that the industry has always faced, really – increased competition, expansions of cover and increasing claims. As an industry, when the economy slows, you tend to see more PI claims, such as after the GFC. There are more disputes – not necessarily claims, but frictional losses. Overcapacity is also a big challenge. Last time I looked, there were more than 60 PI insurers in Australia. It’s a small market, with as many insurers represented as in larger markets like that of North America. You’d question whether the Australian market is big enough to sustain in the longer term the number of insurers in it. Still, I don’t think we’ll see rationalisation because there’s a lot of capital out there seeking a return, and the insurance industry tends to provide a better return than the bond rate. Another challenge is government regulations affecting the professions. The previous government was very proud of how many pieces of legislation they passed. But more legislation means more compliance for business, which means more opportunities to get something wrong. Glenn Ross: If rates become unsustainable and/or the PI market profitability becomes too marginal for its underwriters in the agency space, the markets will inevitably reduce and risk/rate pricing will increase. This will present challenges for some binder holders. Gary Gribbin: Key challenges from my perspective include: • Maintaining reasonable profitability (return on capital) in a competitive market; • Developing and attracting good-quality staff, and • Improving risk selection.

Rob Collyer: Insurers have been hit hard in recent years by valuers, financial planners and property developers. As a result, capacity has been reduced or withdrawn completely. These continue to be the areas where the market has not yet found an ideal solution that works for all parties. It will be an interesting space to watch over the next 12 months. What should brokers be talking to their clients about in regards to PI? Glenn Ross: Pricing has been at its lowest for a number of years now. Clients have become accustomed to this type of insurance being priced considerably lower than was the case five or more years hence. Brokers need to be alerting clients to the possibility that rate/pricing increases could happen as the soft market turns. Having said this, the overabundance of capacity in this sector will likely see a slow rate rise, rather an accelerated one. James Stringer: Brokers should be talking to their clients about raising their limits. Professional indemnity insurance is comparatively cheap, especially when you consider the price it was after

Because rates are being pressured down, growth opportunities are available to agencies concentrating on niche areas – whether that is providing combined covers or targeting risks other markets ignore, perhaps through a lack of understanding. Glenn Ross MAY 2014 | 35

FEATURE / PROFESSIONAL INDEMNITY

Pay attention to service contract clauses, and in particular whom the liability is passed on to, plus minimum requirements for PI cover. Ensure risk-management procedures are in place to reduce any PI exposure, and ensure clients have the adequate level of PI cover! Rob Collyer

The panellists

James Stringer Acting head of financial lines at Zurich Glenn Ross Managing director at MECON Winsure Gary Gribbin Underwriting director at ProRisk Rob Collyer Underwriting manager for professional risks at Brooklyn Underwriting

36 | MAY 2014

the HIH crisis, when insurance was probably five times dearer than it is today. The claims are getting bigger and the legal environment is getting more litigious, so $1m, $2m or $5m may not be adequate for clients. They may want to consider limits of $10m to be relatively safe if theyâ&#x20AC;&#x2122;re a small business, depending on their profession. Also, I would be talking to them about taking out a security and privacy (cyber) policy if they have potential exposure under the new privacy legislation. Gary Gribbin: Brokers should be talking risk management, risk management and more risk management to clients! They should also make it clear to their clients what the â&#x20AC;&#x2DC;claims madeâ&#x20AC;&#x2122; basis is, how it operates and what it means to them, and also making them aware of claims-made issues. Other things to discuss include cyber insurance extensions, the benefits of placing professional indemnity and public liability with the same insurer, if there are any grey areas such as IT and recruitment, and protecting continuity of cover with the same insurer if possible.

Rob Collyer: Pay attention to service contract clauses, and in particular whom the liability is passed on to, plus the minimum requirements for professional indemnity cover. Ensure risk-management procedures are in place to reduce any PI exposure, and ensure clients have the adequate level of PI cover!

FEATURE / MARINE INSURANCE

FULL SPEED

AHEAD What should a broker look for in a marine underwriter in today’s competitive and rapidly changing market? Insurance Business investigates brought to you by

Like the ocean, the marine underwriting market never stands still – and ensuring you obtain the right solution for your clients is critical. With the complexity of many commercial marine arrangements only increasing, and certain parts of the market becoming even more price-competitive, choosing the most appropriate underwriter for your clients’ needs is more important than ever.

But what are the key attributes of a good marine underwriter, and are they the same as they were 12 months ago? Insurance Business caught up with market leviathan Zurich’s new head of marine and industry

veteran Matthew O’Sullivan to find out.

THE SEASCAPE Australia is often seen as one of the most ultracompetitive markets for marine insurance when it comes to price, says O’Sullivan – but that only applies to the very top end of the market. “The key characteristic of the Australian market is that there’s a high proportion of business that falls under a facility umbrella, so brokers have a unique opportunity where they have very broad facilities that we and our competitors operate in. This takes up a lot of less-complicated risk. “Outside that you have a corporate, more complex area which is a much smaller premium pool, with more players trying to access that business – internationals (US), Lloyd’s, other companies not operating on the facilities. That’s where the market really sees the excessive competition – in the corporate end of town.” O’Sullivan suggests that obtaining comprehensive coverage is the key driver for a large proportion of the market – and that market is growing. “Business is becoming ever more complex, with more Australian businesses exporting to overseas markets and manufacturing for the domestic market overseas,” he says. “Southeast Asia is an area that lends itself to that sort of outsourcing, and as more countries open up, this will become more common. We’re already seeing the lower end of the midmarket take this up, albeit perhaps not SMEs in large numbers – yet.” With this growing number of relatively inexperienced clients venturing into the marine space, the focus is therefore likely to fall on aspects of service such as underwriting and claims expertise, product and process innovation, and the ability to operate globally. These, he argues, are what brokers should look for in an underwriter partner.

EXPERTISE O’Sullivan rates an underwriter’s technical expertise as most important. “The underwriter needs to have a thorough understanding and experience of the type of business the broker is bringing to it – at a corporate level, of course,” he comments. “It should be a knowledgeable sounding board.” That expertise should also extend to claims management, he adds. As marine claims can be both complex and geographically challenging, it’s 38 | MAY 2014

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MATTHEW O’SULLIVAN, HEAD OF MARINE, PROPERTY AND ENGINEERING LINES – CORPORATE essential that claims functions act quickly and can access global resources if required. “Insurance is all about claims payment. The product is only realised when we pay a claim. How we react in a time of need from an insured point of view is critical,” says O’Sullivan. “In marine claims, the claims department needs to operate in a quick and professional manner, as you’re often looking at recoveries and actions against other parties as part of the first stage in the claim, unlike property or liability.”

INNOVATION Innovation should also be part of an underwriter’s DNA, argues O’Sullivan – both in terms of process and product. He tackles product first. “Brokers need to provide broad, seamless solutions, and we need to provide new products to fulfil that,” he says. “One example from Zurich is in logistics. This sector has not really been handled very uniformly by the market, and has generally made do with standard products that aren’t ideal. Instead, we’ve made an all-encompassing one-stopshop product tailored for logistics companies.” Process innovation, meanwhile, is all about making the delivery of more straightforward business more efficient. O’Sullivan admits that this doesn’t find favour with all stakeholders. “There’s a big push internationally for the commoditisation of marine business. That’s not always seen as positive, and the stalwarts of the industry say marine needs to be treated differently,” he comments. “But, for homogeneous business, the fewer hands that touch a transaction, the cheaper it’ll be, so putting that business through cost-efficient fast-flow systems makes sense. We try to minimise the cost.” There are also significant advantages to placing that homogeneous business through online fastflow platforms. “Brokers and customers want rapid, if not immediate, decisions. We have to move with that,” he says. “After all, being one of the first brokers to respond to a client is often critical to success in securing that deal.” Even so, O’Sullivan agrees that there’s a substantial tranche of marine covers that will always be underwritten in the traditional fashion. “A big part of marine won’t fall within that, whether it’s marine liability, logistics, more complex cargo, hull – all of them would have a difficult time in a fast-flow environment. But there definitely is a segment that will fit, such as smaller SME cargo

Matthew O’Sullivan joined Zurich Australia in January 2014 as Head of Marine, Property and Engineering Lines - Corporate and is responsible for its Australian and New Zealand portfolios. Prior to this role, Matthew was Head of Marine & Energy for Asia Pacific at Aon Benfield, where he oversaw the treaty and facultative business for the Asia Pacific markets – Australia, China, Japan, Korea and South East Asia. He has also held other roles with Munich Reinsurance in Australia and Benfield in Singapore (which later merged with Aon Re). Matthew has published a number of articles and has presented at key

industry events, including the 2006 and 2010 International Union of Marine Insurers (IUMI) Conferences in Tokyo and Zurich. He has served as Chairman of the ANZIIF Marine Discussion Group; Member of the ICA Marine Standing Committee, and ICA Delegate to International Union of Marine Insurers from 1997 to 2003 Matthew has a Bachelor of Economics degree from the University of Sydney (1991) and a Masters of Business Administration from the Macquarie Graduate School of Management, Macquarie University (2001). He is a Fellow of the Australian & New Zealand Institute of Insurance and Finance.

business and carrier business,” he says.

GLOBAL REACH Finally, O’Sullivan highlights that a truly global reach is essential to ensure seamless coverage, no matter where clients’ goods may be in the world. “Marine is probably the only truly international line of business,” says O’Sullivan. “Access to global expertise is really important for both claims management and policy issuance. It’s even useful just for access to information. For example, if your client is sending goods from Perth to central Europe, we can access our colleagues in Europe and ask about a certain route. “They can then comment on coverage due to certain perils or whatever. That kind of insight is only obtainable from a global network.”

PRICE These attributes may be important, but doesn’t it all ultimately come down to the dollar figure at the end of the day – especially when you’re dealing with major contracts where even a 3% difference is worth thousands of dollars? O’Sullivan agrees that price will always be a consideration, but disputes whether it’s in the top three reasons to choose an underwriter. “There will always be times when brokers tell us an account is price-sensitive, and we’re realistic enough to understand that’s often the case,” he says. “But the international nature of marine insurance and its complexity means brokers are more interested in knowing their clients are fully covered,” concludes O’Sullivan.

MAY 2014 | 39

BUSINESS STRATEGY / CUSTOMER SEGMENTATION

KNOW YOUR

CUSTOMER

Every customer is different – but knowing how to deal with a few personality types can boost your business. Andrew Mair explains Do you know how your customers think? Do they pore over every detail to get the best-value coverage? Or do they want you to handle everything without any hassles? Every customer is different and brokers must know how they operate in order to provide the best level of service. The 2014 Vero SME Index has uncovered some crucial clues for brokers about how their customers think when purchasing their insurance. This year’s SME Index was the biggest yet, with more than 1,500 business owners and decisionmakers from all over Australia involved. The survey encompassed a wide and varied range of industries and business sizes, so the data collected was representative of general attitudes in this important sector. Overall, the findings indicate a strong satisfaction with brokers among those who currently use their services. They also detail a considerable intention to consider the future use of a broker among those SMEs who currently buy their business insurance directly. These are encouraging results for brokers – especially those with plans to grow their businesses. However, in order to make the most of these opportunities, brokers must understand that business owners approach insurance in different ways. The Index identified four distinct audience segments within the broader SME sector. Each has its own set of attitudes towards insurance. Each differs from the others in the importance they place on insurance in their business lives. Each has its own level of involvement in the whole process of buying their business insurance. To make them a little easier to talk about, the SME Index gives each of these groups a descriptive name that begins to define their personalities. The way that ‘Outsourcers’ buy insurance, for example, couldn’t be 40 | MAY 2014

more different from that of the ‘Value Hunters’, and the ‘Thoughtful Buyers’ behave quite differently from the ‘Uninvolved Buyers’. Understanding the differences will prove invaluable to brokers. After all, their target market is made up of these different personalities. To reach them effectively, you have to understand exactly what makes each of them tick. This is really going to be helpful in brokers’ campaigns to retain their clients and to build their businesses by attracting new clients. So what have we found out about each of these customer segments? Vero analysed their differences on a couple of major measures: 1 How important do they think insurance is to their businesses? 2 How involved do they become in the insurance purchase process? Their answers to these two vital questions helped position each client segment in the overall marketplace.

OUTSOURCERS The Outsourcers don’t think they have the time and, importantly, the expertise to manage their insurance themselves. Making up about 20% of SMEs, they believe it’s important to get their insurance right, so they opt to employ the services of experts – 85% of them use insurance brokers. Outsourcers are quick to ask your opinion and advice on insurance issues and will talk about how vital it is that their insurance is right for their business. They talk about the complexity of their insurance needs and they really want you to understand the details of their business. Interestingly, they tend to be older business decision-makers, with a skew to the 50-plus age group.

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THOUGHTFUL BUYERS In contrast, the Thoughtful Buyers are much more involved in their choice of business insurance. They share the belief that insurance is very important to them, but speak confidently about insurance and will put detailed questions to you using a lot of insurance jargon. This segment, which also makes up about 20% of the SME market, typically demonstrates a lot of knowledge about different policies and even policy wordings. Insurance is so important to them that they have learnt the detail. They have a slight skew towards females and tend to be a little more mature than the average, although they are less likely to have educational qualifications. Neither of these first two segments needs to be motivated about their business’s insurance requirements, as they share a higher than normal belief in its importance. The real difference between them is where they go to find the answers to their questions. While one prefers the expert advice of a third party, the other goes out of their way to find as many details about their insurance options as possible.

UNINVOLVED BUYERS On the other hand, our third segment, the Uninvolved Buyers, are neither involved in the purchase decision nor care too much about insurance at all. To this group, it’s simply a matter of how quickly you can solve their insurance matter and let them get back to what they were doing. Uninvolved Buyers won’t bother you with too many questions because they are basically not interested in knowing any of the details surrounding their insurance. This segment is generally unaware or unconcerned about the various risks their business could be facing and are quite reluctant to talk about them. They’ll say: “You’re the expert – just fix it”, and leave all the details to you. To this group, business insurance is a necessary evil. The quicker you can solve their problems and make the whole issue disappear, the happier they will feel. By default, more than half of this large segment (30% of SMEs) uses brokers. They are more likely to be males and many of them have little training.

VALUE HUNTERS We have called the fourth and final personality style the Value Hunters. This group will ask you the price of their insurance very early in the conversation, but that is not their only consideration. They also need to

be assured about the quality of the products they are being asked to consider. Core to their thinking is their lack of trust in insurance companies – and brokers, for that matter – which possibly explains why only 40% of this segment currently uses broker services. Making up the final 30% of the SME market, the Value Hunters are quite involved in the purchase decision process but, at the same time, business insurance is not so important to them. Their primary motivation is to make sure they are getting the best bang for their buck. That is why they will tell you that they are getting multiple quotes. They also ask a lot of tough questions. This group is more likely to be tertiary educated and tend to be a little younger. They can exhibit a cynical or distrusting manner.

UNDERSTANDING THE SEGMENTS The importance of understanding the differences between these SME clusters cannot be overstated. As brokers, your focus is to maintain and build on your client base – and that involves marketing. Marketing begins with an in-depth understanding of who your clients are. While this is relatively easy with your current clients – after all, you deal with them all the time and know their businesses – it is much harder to understand the motivations behind potential clients. What are their priorities? What are they looking for? What are the key questions they are looking to answer? The psychographic profiles described in the SME Index can help point out who you could be targeting and how you should be talking to them. Recognising individuals in each segment type partly comes down to your personal intuition, but the SME Index does describe quite a few characteristics of each personality type, which should make it easier to identify which category that person belongs to.

Andrew Mair is the executive general manager for commercial insurance distribution at Suncorp.

BUSINESS STRATEGY / LEADERSHIP

LEADING

ON THIN ICE

Photo: Peter Nink

Strange as it may seem, there are correlations between leading a team of 18 strangers into the wilderness of Antarctica for a year and heading a successful business. Rachael Robertson reveals the leadership lessons sheâ&#x20AC;&#x2122;s taking to the business community

42 | MAY 2014

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Antarctica is just like any other workplace in the world – except we lived together, around the clock, for a year. So the interpersonal pressure was intense. We had a very diverse team from various backgrounds – engineers, scientists, IT, trades – and my job was to shape these individuals into a highperforming team because our lives depended on our teamwork. I didn’t recruit the team; in fact, I first met them in pre-departure training. Because of the incredible diversity of this expedition and the enormous pressure of living together for so long in such extreme conditions, it was unrealistic to think we’d live in perfect harmony. I didn’t expect everyone to love each other or, for that matter, to even necessarily like all 17 other people, but I did expect they’d show respect towards each other. Respect trumps harmony. We treated each other with the utmost professionalism, acknowledged very honestly and publicly that we were all different, and showed respect – for professional ability, personal space, individual opinions and idiosyncrasies. In high-pressure environments that rely on collaboration, you need a strong foundation of mutual respect. Harmony will follow. Like most workplaces, we also had business cycles. Summer [November to February] was a time of extraordinary activity, with 120 people living on station, delivering 22 science projects and a comprehensive construction and maintenance program. Project reporting, risk management and compliance were front of mind. When things are frenetic and major goals are achieved, it usually means working long hours, but it’s easier for people to stay energised and motivated. When things quieten down, it’s a lot more challenging for leaders to inspire. From February to November, the 18 of us were on our own, with no sense of urgency or burning platform, but we still had work to do. Every workplace has small, seemingly irrelevant issues that impact morale and productivity. In Antarctica, it was a bacon war – should it be cooked soft or crispy? In some offices it’s dirty tea rooms, or people arriving late for meetings, or texting while someone is presenting. They appear to be small things but

they are nearly always a sign of a deeper issue around respect. Managers need to deal with these behaviours expediently. Our bacon war turned out to be a dispute between two teams whose relationship had broken down due to a lack of respect being shown; it manifested itself in the bacon war. Take care of the little things.

TRUE LEADERSHIP True leadership is about creating more leaders, not more followers. It’s about inspiring people to take up a challenge, to keep going when things are tough and to know exactly how they contribute to business outcomes.

CRISIS MANAGEMENT In early December we had a plane crash. The landing gear failed and it stranded four of my people 500km away, with no way to fly the plane home. I had 116 people back on station watching me, worrying about the safety of their colleagues and picking up cues about the issue from my reaction and my behaviour. I knew my immediate priority was to manage the search-and-rescue for these four people, but I also needed to lead. I had to ensure the other 116 people were informed, confident and optimistic, and that we continued to deliver our work’s program. There were four important rules I followed to effectively lead through this crisis:

1 2 3 4

Visibility I had to be seen about the place so people could ask me questions and be confident with our emergency response. My initial reaction was to hole up in my office and manage the search-and-rescue, but I realised it wasn’t enough to be leading; I needed to be seen to be leading. Composure My body language needed to build confidence and optimism. I had to be calm and poised.

Choose your words I spoke about a retrieval, not a rescue; an incident, not an accident. I had concerns but I wasn’t worried. Concern and worry are different words and they create a very different response. Communicate I sent out regular updates, every few hours, to inform people about the situation. If you don’t provide regular information during a crisis or a change, people fill in the gaps themselves. Often these gap fillers are worse than the reality.

MAY 2014 | 43

BUSINESS STRATEGY / LEADERSHIP

I’ve worked with many incredible leaders, but most recently one person who really inspired me was Guy Russo, CEO at Kmart. Guy has a great strategic mind and, importantly, he can articulate and communicate the steps needed to implement the strategy. It’s no good coming up with the best action plan in the world if you can’t engender support for it and your people don’t understand it. At the start of the Kmart turnaround I watched Guy address 400 store managers and tell them: “This is who we are, this is who we are not.” His clarity around the brand was very strong, and it showed courage to address these key staff, in person, and tell them – very clearly, with no ambiguity – “This is the future of Kmart”. Tough decisions were made to delete certain product lines, but Guy stood front and centre and explained the rationale very simply and professionally.

Photo: Peter Nink

SETTING THE EXAMPLE

44 | MAY 2014

Leading in Antarctica was a stark reminder of the scrutiny of leadership. We are being watched the whole time, and everything a leader says carries extra volume and gravitas by virtue of their authority. For an entire year, I was under intense scrutiny – where I sat for meals, who I greeted in the morning, what time I left the party, even when I chose to wear a hairclip because my hair was hanging in my eyes (no hairdressers for a year!). It was all noticed. It came home to me that, as leaders, our behaviour is often interpreted in ways we cannot imagine. I was very conscious of this and relied on my self-awareness to monitor and manage my own behaviour at all times. I also made sure my decisionmaking was consistent and transparent. I would also never deride or ridicule the staff at head office, my peers at the other stations or other members of our expedition team, as this type of contempt is unprofessional and breeds dysfunction. Any organisation that has silos needs to take a long, hard look at the behaviour of their senior management. I’ve seen contagion in teams where one person spreads their negativity and dysfunction to the rest of the team. These people can be demoralising and exhausting. But the most important thing a leader can do is manage this behaviour before it spreads.

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YOUR OWN ANTARCTIC WINTER Every business has periods of time where work is just work. Capital expenditure is curtailed, there are no big projects on the horizon – it’s all just business as usual. This is the Antarctic winter. Similarly, many projects have long lead times, years and years. The launch is exciting, the project completion or product launch is fantastic, but often the time in between is plain hard work with incremental progress. Just like Antarctica, the leaders need to keep people inspired through this period. I used three simple tools to keep us motivated, connected and effective:

The rule of no triangles The practice of only having direct conversations built respect within my team and resulted in very high performance. We had a simple rule that went: “I don’t speak to you about him, you don’t speak to me about her.” No triangles – go directly to the source. It’s a powerful tool that reduces conflict and clarifies accountability. It also shuts down ‘answer shopping’; that is, people who keep asking the same question and go over people’s heads, or around people, until they get the answer they want. During the Antarctic winter, when interpersonal pressure increases and the focus turns from the work to the people, it’s even more crucial to have no triangles. Personal conflicts are magnified in quieter periods, unlike the heady times where we often overlook or put aside another person’s annoying behaviour. During these times, open and direct conversations are even more critical.

Find a reason to celebrate Recognise milestones and important moments. If you don’t have one readily apparent, create one. Find a reason. In Antarctica, we celebrated big events but also the smaller successes, such as a month without a power blackout, significant scientific data collection or uninterrupted internet access with a fully functioning

These people try to gather numbers, and you ignore this behaviour at your peril.

EXPERIENTIAL LEARNING People have told me this expedition was like 20 years of CEO experience truncated into 12 months. I dealt with every issue you could imagine – and some you can’t – but the difference was, I had no choice. I simply couldn’t ignore emerging issues, or delegate to someone else, or even take the weekend to consider my options. The buck stopped with me and I had to find ways to deal with things. Sometimes I got it right, other times I got it wrong. The value of experiential learning comes in the reflection; that is, what did I learn there? What worked? What didn’t? Because I had no one to talk to or discuss options with, I decided to keep a journal. The journal

server. Usually it was just a notice on the whiteboard in the dining hall, but it was important to find the time to stop and celebrate, because these moments create momentum. They give a sense of progress, moving forward and getting closer to our outcomes. During long projects, or even times when it’s business as usual, an inspiring leader will find a reason to stop and salute even small accomplishments. Whether it’s with an event, a reward or a simple thank you, the acknowledgement and recognition will reaffirm their purpose and demonstrate progress – two of the most important motivational domains.

Check in on people As you receive reports and updates on projects, take a moment to check in on people and ask: “Are you OK?” Not the project, not the tasks, but you – the person. People respond with commitment and loyalty when they know both they and their contribution are valued. To show people they are valued, check how they are travelling. Make it spontaneous and often. These moments will also create momentum. As Maya Angelou put it so succinctly: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

became the best leadership development I’ve ever had. As each new challenge presented itself, I’d capture my thoughts and ideas and decide what to do. Afterwards, I’d go back to the journal and reflect on how things panned out. The discipline of reflecting on your performance and behaviour as the leader builds self-awareness. It’s like standing on a balcony, looking down and watching yourself. The best way leaders can develop their ability is to honestly and critically evaluate themselves and their performance, every single day. We learn by doing new things. New experiences – secondments, higher duties, relocations – are opportunities to learn and add new skills to your leadership toolbox. I’d take on almost any opportunity to develop my leadership, even if it didn’t turn out, because I would rather regret what I did do than regret what I didn’t.

Rachael Robertson is the author of Leading on the Edge, $29.95, published by Wiley and available at bookstores across the country and through Rachael’s website rachaelrobertson. com.au.

MAY 2014 | 45

BUSINESS STRATEGY / CHANGE MANAGEMENT

CHANGE MANAGEMENT REWIRING THE BRAIN FOR CHANGE

In business, itâ&#x20AC;&#x2122;s vital to change with the times. But team members often find change hard, or resist it, even when it might be good for them. Why? The answers can be found in the brain itself, and Sonia McDonald reveals that it is possible to teach an old dog new tricks 46 | MAY 2014

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As leaders, we are constantly driving and facilitating change, yet research in this area has demonstrated that 70% of change initiatives fail. Why? How can we make change easier and more successful? The neuroscience of change, and understanding how the brain functions, is vital to managing and coping with change.

BRAINS ARE WIRED FOR SURVIVAL The brain functions as a survival tool by helping us avoid danger. A part of the brain called the amygdala helps monitor our responses and tells us when to run from danger or towards safety. It also tells us when to step towards a benefit or away from a threat. When change is happening around us in our society, relationships and workplaces, we can feel threatened, and that activates our amygdala. We feel outside our comfort zone, triggering fear and anxiety.

Understanding how the brain functions is vital to managing and coping with change While this is good for our safety, it does come at a cost. When our brain is in safety mode, protecting us from a perceived threat, it cannot function well as a problem-solver or creativity generator. In the workplace, the fear of change causes people to rely on tried and true routines, rather than create new strategies to move forward. In effect, the brain shuts down the part that is really needed at that time. Basically, the amygdala of your brain has been hijacked, and this is not the best time to make an important decision. Now you see why 70% of change initiatives fail. By understanding how the brain works, we can manage change resistance and develop strategies to maximise change potential. In addition, it gives us insights into how people learn, engage and remember, as well as manage emotions.

BRAINS ARE LAZY Considering that the brain weighs about 1.5kg and absorbs about 20% of the body’s energy, the brain is not particularly energy-efficient and is actually pretty lazy. The brain prefers comfy habits, as these require a lot less energy. It doesn’t really like to learn new habits or ways of doing things, as this takes effort. The design of the brain is not always helpful. The part of the brain that is responsible for thinking and high-order processing (the prefrontal cortex) requires a lot more energy to function than the part of the brain that deals with emotion (the limbic system). That means it’s a lot harder for us to cope with change than to return to our tried and true habits. How can we break habits and form new ones? In his book The Brain That Changes Itself, Dr Norman Doidge tells us that the brain can be changed by our thoughts and actions. They physically alter the structure of the brain itself, which in turn changes the way it functions. This is the most important breakthrough in neuroscience in four centuries. This ability of the brain to change and make new connections, rewire itself and even grow new brain cells as a result of experience is called neuroplasticity. Change is about forming new wiring, habits and behaviours. So yes, we can teach an old dog new tricks! How can we harness neuroplasticity of change? By tapping in to the emotions…

Often our behaviour is controlled by emotion rather than common sense

BRAINS ARE AFFECTED BY EMOTION We know that often our behaviour is controlled by emotion rather than common sense. What that tells us is that the limbic system in the brain has some control over the information that is passed on to the cortex, which controls our decisionmaking system. In other words, our thoughts and actions are skewed by the emotion we are feeling. You’ve heard of rose-coloured glasses, the phenomenon that makes certain things look better than they really are? That’s an example of the limbic system influencing our beliefs and perceptions. When people are afraid, as they usually are at the thought of change, our limbic systems colour our perceptions with threat and fear. People only see the negative side of change because that is all their

MAY 2014 | 47

BUSINESS STRATEGY / CHANGE MANAGEMENT

Change is about forming new wiring, habits and behaviours

Sonia McDonald is the director of LeadershipHQ. Visit leadershiphq.com.au or, to contact Sonia directly, email sonia@ leadershiphq.com.au.

48 | MAY 2014

brain permits. If the change is brought about for positive reasons, people will accept it and be ready to involve themselves in making change happen.

MAKING THE BRAIN WORK FOR YOU So we know that our brains are wired for survival, that they are lazy and will take the easiest thought out of there, and that every thought is coloured by emotion. We also know that actions and thoughts can change the physical structure of the brain. How can we use that knowledge to make the brain lead us towards supporting change rather than running away from it? There are two key solutions. First, you can use neuroplasticity to your advantage and provide opportunities for people to develop new thoughts and practise new behaviours, thereby rewiring the brain. Or you can make the limbic system work for you by creating positives around change, especially to reinforce behaviour and thought changes. We need to build organisational change systems that capture the important role of emotions in determining behaviour, particularly in the contexts of engagement, commitment, resistance and cooperation. What that means in the

workplace is that every small step forward needs to be acknowledged. Change leaders are essentially helping people develop new connections within their brains. Our role should involve creating opportunities and interventions that give people the chance to trial new behaviours in a safe environment. We should allow them to take the â&#x20AC;&#x2DC;riskâ&#x20AC;&#x2122; of doing something uncomfortably new and succeeding at it. The more fun we can build into the experience, the more people will become involved in it. Positive reinforcement is essential to help embed the new thoughts and behaviours and to show the limbic system that this change is nothing to fear. The more often we can encourage people to repeat the new actions, the more comfortable their brains will allow them to feel. When people are comfortable, their high-order thought processes resume functioning and their creativity and decision-making skills start firing again. If you are leading change in your organisation, you can create the right atmosphere for change by building a safe and positive environment for your team and identifying ways to acknowledge and reward new actions and behaviours.

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JANUARY 2014 | 11

Macquarie’s latest insurance broking benchmarking research surveyed 201 insurance broking businesses across the country, including firms of all sizes, from every state and territory, and from regional and metropolitan areas. It uncovered some fascinating insights into today’s brokers – and what tomorrow’s might look like... Source for all data: Macquarie Insurance Broking Benchmarking Report 2013

A TYPICAL BROKERAGE IN 2013

Broking staff

Non-broking staff

47%

79%

$166,710 $10.75M Median revenue per staff member

Median GWP

WHAT ARE THE BIGGEST THREATS TO BUSINESS?

One or two principals

QLD 73% NSW 47%

33%

Direct online sales from insurance companies

None

33%

Industry consolidation

9% Increased regulation

10 staff

28%

Losing key staff to competitors

59% NSW 20%

Other

STATS GLOBAL INDUSTRY

INSURANCE

THE MACQUARIE INSURANCE BROKING BENCHMARKING REPORT 2013

STATS

WHAT IS DRIVING PROFIT? 80%

68% 57%

25%

VIC 20% QLD 55% 30%

23% 17% 16%

58% 55%

32%

31%

19%

18% 18%

10%

Business/ client base acquisitions 2011

Negotiating improved terms with insurers

Hardening of premiums

Cost reduction

Increased premium funding revenue

Improved economic conditions

Improved efficiency

New client growth

2013

WHERE WILL YOU BE INVESTING YOUR CAPITAL IN THE NEXT THREE YEARS?

Website

59% VIC 69%

Practice management system

16%

Customer relationship management system

Software integration

No investment planned

Other

33%

14%

30%

8% MAY 2014 | 51

SOCIAL LIFE

THE 2014 STEADFAST CONVENTION March saw the Steadfast party arrive in Melbourne, with a sizeable swathe of the Australian insurance world taking over the Crowne Plaza for four days of sessions, networking and events. Highlights included NYC coming to St Kilda for Brooklyn Underwriting’s do for brokers; QBE’s VIP Dinner featuring Australian singer/songwriter Michael Paynter; HWA Insurance Brokers’ Richard Alford being presented with a truck wine rack by GT Insurance, and Westcourt hobnobbing with Norton 360 Racing drivers Michael Caruso and James Moffat.

ICA’S REGULATORY UPDATE The Insurance Council’s annual Regulatory Update brings insurers together with industry experts and related professionals to hear about what the year ahead holds for the general insurance industry. This year’s event was held at the Hilton Sydney on Friday 28 February. Highlights included presentations by KPMG

partner Bernard Salt on the demographic environment facing Australian insurers and Australian Financial Review’s political editor Laura Tingle on the political situation following the recent change of government and the implications for the financial services sector. Delegates also heard from former Assistant Treasurer Arthur Sinodinos and Shadow Treasurer Chris Bowen.

SOCIAL LIFE

MECON WINSURE UPS THE FEAR FACTOR From The Italian Job to Fear Factor, the MECON Winsure 2013 Team Building event was an action-packed day held in Manly. It all started in true Italian Job style, with pizza flipping, tomato squishing and stealthy paparazzi attempts - not to mention the full team costumes and scooting around in Mini Coopers! The afternoon of Fear Factor took it up another notch, where snake charming lead to eating undesirables and the hilarious finale of ‘What’s in the box?’, where cockroaches, worms, jelly, crickets and Scrabble-playing eels were the stars of the show. With the day winding down at Criniti’s, everybody couldn’t help but wonder what’s in store for them next year.

UAC SYDNEY EXPO The Underwriting Agencies Council’s biggest Sydney expo took place on 13 March. There were 55 exhibitors at the expo, which was followed by lunch with guest speaker Tim Reid, who produces the Small Business Big Marketing podcast.

MAY 2014 | 53

SOCIAL LIFE

LAWYERS GET ON THEIR BIKES On Monday 17 March, a team of cyclists and support crew – including 11 from Wotton + Kearney – took to the road for a 495km bike ride from Dubbo to Wagga Wagga, all in aid of NSW children’s charity Royal Far West. The riders took just three days to reach their destination, stopping along the way at some of the RFW support spots, while the RFW Care Bus, a mobile medical facility, went to schools to promote health initiatives to children and their families. The Ride for Country Kids was not only an amazing feat in terms of the distance covered by the cyclists, but also in terms of the fundraising efforts. With final amounts raised at the events held at each overnight stop still to be added, the total already stands at over $120,000 – more than double the original goal of $50,000!

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Favourite things... Declan Rye, London Australia Underwriting It might be hard to believe, but Arsenal Football Club isn’t Declan Rye’s only obsession. Read on to find out what else he loves Place to be: I still thoroughly enjoy my trips back to London, and it is especially enjoyable to catch up with all my old mates from the Lloyd’s market. However, Sydney is very much home now, and when the sun is out, there are not many better places to be. Drink: The first chilled glass of Stella Artois after tearing up (literally) Roseville golf course. There are a couple of us from the market who play there, and to be totally honest, nine holes is usually a struggle.

Food: Being from the UK, it has to be Indian. In joint second, I would put seafood and steak. What else is left? Celebrity: The late Tommy Cooper. “I’m on a whisky diet – last week I lost three days!” Music: Somewhere between Led Zeppelin (played very loud) and Hawkwind – although there are plenty of other artists, both past and present, whose songs I enjoy listening to, like the great Bob Marley’s ‘Crazy Baldheads’.

Vacation spot: Trisara in Phuket. We are regular visitors to Thailand and recently spent a week at Trisara, which was the perfect antidote to what I would call ‘normal life’ back in the insurance market. I would thoroughly recommend it to anyone.

Best thing about working in insurance: In my humble opinion, the best thing about working in insurance is the opportunity it provides to anyone who is prepared to back themselves and put in the effort. A combination of common sense, ambition and drive will get you far.

Book: Shantaram by Gregory David Roberts. It really is a mesmerising novel – escapism at its very best.

Sport: Football (soccer). I grew up following Arsenal Football Club and still follow them closely. The A-League is also showing a lot of potential and would appear to be moving in the right direction. Such a great sport for the youngsters, as it teaches them the importance of teamwork, skill and technique, as well as providing a good source of exercise.

Movie: Apocalypse Now. A masterpiece directed by Francis Ford Coppola. The making of this movie is almost as epic as the movie itself. MAY 2014 | 55

THE LAST WORD

Faith, hope and insurance Do insurers and brokers always hold high the ‘duty of utmost good faith’ when it comes to insurance claims? Darren Trott from Claims Central answers the question

It’s about being full and frank, acting with integrity and fairness

56 | MAY 2014

When I started working in the insurance industry many years ago, the concept of the ‘duty of utmost good faith’ was drummed into me during staff training sessions. To recap, the duty of utmost good faith is central and pivotal to the contract of insurance, requiring both parties to exercise the highest degree of integrity towards each other. It’s about being full and frank, acting with integrity and fairness, and considering the interests of the insured as well as those of the insurer – which can become more challenging when a claim is made. In recent times, I’ve witnessed a number of claim examples where I’d suggest the insurer, or the broker, or even the insured, may have trampled all over these principles in one way or another. For example, the duty of utmost good faith requires an insurer to manage and process claims efficiently and without undue delay. How many examples of undue delay do you imagine are out there in our industry right now? I’ve seen claim examples where the delay was measured not in days or weeks, but months. They were uncontentious claims, with the supporting evidence already supplied or investigative work completed. They required a claims person to make a decision – approve or decline. That’s all. The duty also requires an insurer to decline claims only with reasonable evidence or reasonable belief that the claim should be declined. Again, recent examples suggest there has been a failure on the part of the insurer to adhere to this requirement. These include unjustified or unwarranted suspicion as to the legitimacy of the claim. Worse still, settling a claim for a lower amount, for no other reason than the knowledge the insured customer desperately needs the money, is likely to constitute bad faith. Declining a claim in the first instance, for no other

reason than using it as a strategy to create a dispute and subsequently settle for a smaller amount, is another example of bad faith. I’d even question the practice of cash settlement in some circumstances, such as where an insured customer specifically requests their damaged property be repaired. In a recent case, the insurer, upon receiving the repair quote for a damaged rental property, ignored the customer’s preference for repairs, didn’t consult with neither the broker nor the insured, issued a cheque and closed the claim file, leaving the insured literally out in the cold. Cash settlement in these circumstances conveniently bypasses the insurer’s obligations to guarantee repairs for life. Surely this doesn’t demonstrate the duty of utmost good faith? Brokers also have an important role to play when it comes to a claim. A broker’s actions will usually be viewed as the actions of the insured, requiring the broker to exercise the duty of utmost good faith towards the insurer as well. Leaving out information likely to be relevant to the claim determination or refusing to assist an insurer in a recovery action are likely to result in a breach of the duty. One of the best ways to reduce the risk of breaching the duty is to adopt total transparency in the claim process. This means sharing all information, all expert and loss adjuster reports, all repair quotations and the like, so no party is being disadvantaged and has the opportunity to consider all of the information before making a decision. I know I keep banging the transparency drum, but that’s because I’ve seen how it can significantly reduce claim delays. Once you have all parties on the same page, understanding and respecting each other’s positions, you’ll usually find a satisfactory claim outcome for all parties involved.

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